Tender Offer

Foreign & Colonial U.S.Smllr.Co PLC
01 November 2002

Foreign & Colonial U.S. Smaller Companies PLC


The Board of Foreign & Colonial U.S. Smaller Companies PLC (the 'Company')
announces that it has today posted a circular to Shareholders giving details of
the Tender Offer and Matching Facility which was announced on 2 October 2002.


Tender Offer and Matching Facility


In June 1999 the Board announced its commitment to put forward proposals to
enable Shareholders to realise their investment in the Company prior to the AGM
in 2002 at a price which fairly reflected the then net asset value. With the
publication of the preliminary results on 2 October 2002, the Board announced
that, in addition to proposing a vote to continue the Company as an investment
trust, they would be writing to Shareholders to set out details of proposals for
a Tender Offer by Cazenove (the Company's financial adviser), under which
Shareholders (other than Overseas Shareholders) may tender Shares at 93% of Net
Asset Value as at the Calculation Date. The Board has been advised that, for the
purposes of these realisation proposals, the Net Asset Value should be
discounted by an amount equal to a reasonable estimate of the costs of
realisation of the Company's asset portfolio and furthermore that these costs
are likely to account for approximately 7% of the Net Asset Value of the Company
on the Calculation Date. Accordingly, the Tender Price incorporates this level
of discount. This will fulfil the obligations of the Company to provide a means
of exit for Shareholders at a price that fairly reflects the Net Asset Value of
the Company.


Concurrently with the Tender Offer, the Company is arranging for Cazenove to
operate a share purchase Matching Facility, which will enable Shareholders
wishing to increase their investment in the Company to buy Shares tendered at
the same price as the Tender Offer (without paying a dealing commission).


If, after taking account of Shares which would have been purchased through the
Matching Facility, the number of Shares to be repurchased by the Company from
Cazenove is in excess of 15,934,670 Shares (representing 50% of the existing
issued share capital as at 30 October 2002), then the Tender Offer and Matching
Facility will not proceed and the Board will put proposals to Shareholders for
the winding up of the Company.


Shareholders should note that none of the Directors will be tendering his Shares
in the Tender Offer.


Investment Background and Outlook


The US smaller company sector contains a large universe of quoted companies.
Over 2,600 US public companies have a market capitalisation of between US$100
million and US$3 billion. This sector has performed well in recent years
compared to the major US equity indices. In the three years to 30 September
2002, the Company's benchmark, the Russell 2000 Index of smaller companies, fell
11.2% in Sterling terms, compared to Sterling adjusted falls of 33.4% for the
Standard & Poor's Composite Index and 55.3% for the Nasdaq Composite Index.


The Company has outperformed its benchmark index, and since the formation of the
Company in March 1993, the Net Asset Value has risen by 135.3% whereas the
Russell 2000 Index gained 92.5% in Sterling terms.


The Manager believes that the much better performance of US smaller companies
compared with larger companies reflects a favourable background for the sector
and should lead to superior performance in the future and thatfrom a cyclical
perspective, smaller companies benefit to a greater extent than larger companies
from lower interest rates since they are more leveraged to economic growth. In
addition, as their financial resources are generally more limited than those of
large companies, lower debt costs help them disproportionately. The Manager
believes that valuations are less expensive than those of large companies. At
the end of September the price-to-book and price-to-market capitalisation
valuations of the Russell 2000 Index were 0.6 and 0.7 relative to the Standard &
Poor's Composite Index according to Prudential Financial. These ratios are 23%
and 17% respectively below the 22-year average and 46% and 38%, respectively
below the 1983 peak (the last peak in relative valuation of smaller companies).


The Manager expects that US smaller companies will show faster growth in profits
next year and that, overall, a background of low interest rates and gradual
economic recover will benefit the sector. The Board and the Manager believe that
in the current financial year the Company's portfolio is well placed to benefit
from an improvement in market conditions.


Tender Offer

The Tender Offer is being made by Cazenove for up to 15,934,670 existing Shares.
If, after taking account of Shares which would have been purchased through the
Matching Facility, the number of Shares to be repurchased by the Company is in
excess of 15,934,670, then the Tender Offer and Matching Facility will not
proceed and the Board will put proposals to Shareholders for the winding up of
the Company. Shares will be acquired at a discount of 7% to the Net Asset Value
per Share at the Calculation Date. Shareholders will each be able to tender all
or any part of their holding of Shares, which will be purchased by Cazenove
under the Tender Offer.


The Tender Offer will be implemented by means of on-market purchases by
Cazenove, which will, as principal, purchase the Shares tendered and then sell
them to the Company. All Shares acquired by the Company will be cancelled. The
repurchase of Shares by the Company will be funded from the Company's cash
resources and by the sale of investments in the Company's portfolio between the
Record Date and the Calculation Date or if appropriate from short term
borrowings. It is likely that these sales will result in a larger than normal
turnover within the portfolio which may, in turn, affect the level of the Net
Asset Value.


Matching Facility

The Directors are aware that certain Shareholders may wish to increase their
investment in the Company. Accordingly, concurrently with the Tender Offer the
Directors have arranged for Cazenove to operate a Matching Facility for
purchases of Shares. Under the Matching Facility, Shareholders (other than
Overseas Shareholders) will be able to purchase Shares at the Tender Price to
the extent that there are Shares available to be so purchased through valid
tenders. Shares tendered will first be bought under this facility and, if not
sold through the Matching Facility, then bought by the Company under the Tender
Offer.


Shareholders will be responsible for the payment of stamp duty on any Shares
purchased through the Matching Facility, in the ordinary way.


Extraordinary General Meeting

The implementation of the Tender Offer requires the approval of Shareholders. A
notice convening an Extraordinary General Meeting of the Companywhich is to be
held at 3.30p.m. on 4 December 2002. At this meeting, a special resolution will
be proposed to approve the terms of the Tender Offer.


Annual General Meeting

A notice convening the Annual General Meeting of the Company, which is to be
held immediately after the Extraordinary General Meeting at 3.35 p.m. on 4
December 2002 has also been given.


Resolutions 1 to 3 cover the regular business dealt with at each annual general
meeting and include the adoption of the annual report and accounts and the
re-appointment of certain directors and the auditors. Resolutions 4 and 5 deal
with the Share buybacks and Share Issues.


In addition to the ordinary business of the meeting, Resolution 6 proposes the
continuation of the Company as an investment trust in accordance with the
Company's Articles of Association. The Directors believe that the Company
provides a cost-effective means of investing in the US smaller company sector
and, given the good track record of the Manager, have no hesitation in
recommending Shareholders to vote in favour of the continuation of the Company.


The Board committed in 1999 that, in addition to enabling Shareholders to
realise their investment in the Company prior to the AGM in 2002 at a price
which fairly reflected the then Net Asset Value, similar proposals would be put
to Shareholders at three yearly intervals thereafter. The Board considers, after
discussion with certain Shareholders, that this is an unnecessary costly
exercise, and that it is appropriate instead, to put forward a resolution that
the Company continue as an investment trust at the annual general meeting in
2005 and every three years thereafter. Resolution 7 proposes altering the
Articles of Association to adopt this change. This will have the effect of
continuing the life of the Company as an investment trust at least until the
annual general meeting in 2005.


Resolution 8 proposes that the name of the Company be changed to 'F&C US Smaller
Companies PLC' to reflect the change of name of the Manager.


Expected Timetable
                                                                                                                    2002

Latest time and date for receipt of Tender Forms (including Purchase                               5.00pm on 18 November
Form)

Record Date for Tender Offer                                                            Close of business on 18 November

Latest time and date for receipt of Forms of Direction for the                                     3.30pm on 30 November
Extraordinary and Annual General Meetings

Latest time and date for receipt of Forms of Proxy for the                                          3.30pm on 2 December
Extraordinary and Annual General Meetings

Extraordinary General Meeting                                                                       3.30pm on 4 December

Annual General Meeting                                                                              3.35pm on 4 December

Calculation Date for Tender Price                                                                             5 December

Tender Price and result of Tender Offer and Matching Facility                     by the close of business on 6 December
announced

Settlement of Tender Offer and Matching Facility                                                             11 December

CREST accounts credited with unsold uncertificated Shares                                                    11 December

Balance certificates in respect of unsold certificated Shares or                                          by 20 December
Shares acquired under the Matching Facility despatched


Enquiries


Robert Siddles   02076288000

F&C Management Limited



Angus Gordon Lennox  02075882828

Cazenove & Co. Ltd



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