Tender Offer

F&C Smaller Companies PLC
14 November 2005


Not for distribution in Australia, Canada, Japan, New Zealand, or the United
States


F&C Smaller Companies PLC (the 'Company')


Circular in relation to a Tender Offer to purchase up to 35 per cent of the
Company's Shares at a 5 per cent.  discount to Tender NAV, a further share buy
back authority and a change of name


Introduction



The Company has today posted a Circular to Shareholders which sets out details
of the proposals for a Tender Offer by JPMorgan Cazenove, under which
Shareholders (other than Restricted Shareholders) may tender Shares at 95 per
cent. of the Tender NAV as at the Calculation Date.



A summary of the Proposals is as follows:



- a Tender Offer for up to 35 per cent. of the Company's Shares at a discount of
  5 per cent. to the Tender NAV;

- an estimated uplift for those NOT tendering of 2.1 per cent.* on the estimated
  NAV following implementation of the Proposals;

- authority sought for share buy-back powers, which will be used actively to
  keep the discount level close to the tender level;

- Shareholders representing 23.09 per cent. of the Company's issued share
  capital have signed irrevocable undertakings or letters of intent to support 
  the Proposals;

- a resolution to change the name of the Company to F&C Global Smaller Companies
  PLC to reflect the Company's global mandate.



Gerry Grimstone, Chairman of the Company commented: 'The Company has performed
well and delivered good returns for shareholders in recent years. These
proposals will benefit both existing and prospective shareholders. They should
ensure that investors have confidence that the discount will remain narrow in
the future.'



Background



The Board has become aware that certain Shareholders wish to realise their
investment. The Board has set the tender level to take into account a reasonable
estimate of the costs of realisation of the Company's investment portfolio
whilst ensuring that continuing Shareholders are not prejudiced and receive an
NAV uplift. The Tender NAV will exclude current period revenue (being net
revenue accrued since 1 May 2005) and will value the Debenture Stock at fair
value.  Terms used in this announcement shall have the same meaning as in the
Circular.



None of the Directors will be tendering their Shares in the Tender Offer



In addition to the authority required to implement the Tender Offer, the Board
is also seeking authority to repurchase up to 14.99 per cent. of the issued
share capital of the Company following completion of the Tender Offer. Going
forward the Board intends to use these powers actively so as to ensure, as far
as possible, that the discount to NAV at which the Shares trade remains close to
the tender level. The Board is also putting forward proposals to change the name
of the Company to 'F&C Global Smaller Companies PLC' in order to better align
the name with the existing investment objective.



Investment background, outlook and trends



Smaller company shares have performed well in recent years on a worldwide basis.
The Manager is able to choose from a very wide pool of potential investments in
smaller companies from around the globe. This strategy has proved successful
over recent periods measured against the benchmark index used until the start of
the current financial year, the Extended HGSC Index, as shown by the figures
below.



Total return percentage changes over stated periods to 31 October 2005


                                                         1 year              3 years              5 years

Company Share price                                        41.9                141.1                 40.7

NAV**                                                      27.7                104.5                 26.3

Extended HGSC Index                                        23.9                 95.1                 24.9



Source: F&C Management Limited/Datastream



The Company adopted a new blended benchmark index with effect from 1 May 2005
which is calculated from the returns on the HGSC Index (40 per cent.) and the
MSCI World Small Cap (ex UK) Index (60 per cent.). This benchmark index has
risen by 18.3 per cent. in the period from 1 May 2005 to 31 October 2005 and the
Share price has risen by 23.9 per cent. in the same period (both on a total
return basis).



Smaller companies are in general terms more leveraged to economic growth, and
have therefore benefited commensurately from the strength of the world economy
over the last few years. In the Manager's opinion, the greater inherent
potential for growth that small market capitalisation companies possess compared
to larger companies is valued more highly at times of low inflation and interest
rates, and there has been a re-rating of the small company sector.



The Manager believes that while smaller stocks have performed very strongly in
recent times, they continue to offer good potential for capital appreciation.
The world economy is still growing, driven by the emergence of a major world
force in China, and by continuing resilience in the US in particular. The Board
believes that the Manager, with its team of specialist small company investment
managers will be able to take advantage of the many opportunities to continue to
secure good returns in the future for Shareholders.



Benefits of the Proposals



The Board believes that the Proposals will provide the following benefits:



• for Shareholders who remain invested, an estimated 2.1 per cent.*
uplift on the estimated Net Asset Value per Share following implementation of
the Proposals;



• an opportunity for Shareholders (other than Restricted Shareholders)
to realise a proportion, and possibly all, of their investment at a price close
to Net Asset Value;



• a share buy back authority which the Board anticipates using actively
and so expects the discount level to remain close to the level at which the
Tender Offer is conducted; and



• a more balanced Shareholder base for the long term.



Tender Offer



The Tender Offer is being made to Shareholders (other than Restricted
Shareholders) by JPMorgan Cazenove for up to 29,548,778 Shares representing 35
per cent. of the Company's issued share capital. Any Shares tendered will be
cancelled. Additional key points of the Tender Offer are as follows:



• Shareholders (other than Restricted Shareholders) will be able to
decide whether to continue their investment in the Company or to tender some or
all of their Shares within the overall limit of the Tender Offer;



• The Tender Price will be the price per Share which represents 95 per
cent. of the Tender NAV as at the Calculation Date. The Tender NAV will exclude
current period revenue, include accumulated undistributed revenue reserves and
value the Debenture Stock at fair value. Assuming a Calculation Date as at the
close of business on 9 November 2005, the Tender NAV would have been 364.87p
(compared to a Share price of 341.75p) resulting in a Tender Price of 346.63p;
and



• Implementation of the Tender Offer will require approval by
Shareholders at an Extraordinary General Meeting which has been convened for
10.30 a.m. on 9 December 2005.



Shareholders will therefore be entitled to have up to 35 per cent. of their
respective holdings purchased under the Tender Offer. Shareholders will be able
to tender additional Shares but such tenders will only be satisfied, on a pro
rata basis, to the extent that other Shareholders tender less than their Basic
Entitlement.



The Tender Offer will be implemented by means of on-market purchases by JPMorgan
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. The Company
is also able to draw on its bank facility.



Shareholders who wish to remain invested in the Company should not complete or
return a Tender Form. Shareholders who tender their Shares in the Tender Offer
should note that they will not be entitled to receive the interim dividend for
the six month period ending 31 October 2005. The dividend is expected to be paid
in January 2006.



Share buy-back policy



The Board is now seeking to renew the share buy back authority to repurchase up
to 14.99 per cent. of the issued share capital of the Company following
completion of the Tender Offer. The Board expects to use these powers actively
and to renew the authority as and when appropriate. The Board therefore expects,
in normal market conditions, the discount level to remain close to the level at
which the Tender Offer is conducted. The Directors intend to use the facility
with the objective of enhancing Shareholder value.



Any repurchases pursuant to this authority will be at a price permitted by the
Listing Rules which currently provide that the maximum price that may be paid is
the higher of (i) 105 per cent. of the average of the market values of the
Shares for the five Business Days immediately preceding the date of the relevant
purchase; (ii) the price of the last independent trade; and (iii) the highest
current independent bid. In addition, Shares will only be repurchased at prices
below the Net Asset Value per Share, which should have the effect of increasing
the Net Asset Value per Share for remaining Shareholders.



Any Shares repurchased will be held in treasury or cancelled.



Change of name



For some time the Board has been considering the need to change the Company's
name in order that Shareholders are fully aware of the Company's global remit.
The Board is therefore proposing that the name of the Company be changed to 'F&C
Global Smaller Companies PLC'.  Shareholders should note that the Company's
investment objective of investing around the globe in markets, sectors and
companies that will generate long-term growth in capital and income will remain
unchanged.



Gearing



The Board and the Manager believe that gearing through the use of borrowings is
an integral part of the Company's investment policy. Accordingly the Board and
the Manager agree the appropriate level and timing of gearing on an on-going
basis, and the Manager implements this policy.



The Company has in issue a £10 million 11.5 per cent. Debenture Stock with a
fair value as at 9 November 2005 of £13,872,700, and also has a bank facility in
place to borrow on a short term basis. As at 9 November 2005 the Company had no
short term borrowings or overdrafts.



It has been the Board's policy that effective gearing (defined as prior charges
at balance sheet value, less cash net of investment debtors and creditors and
fixed interest stocks, as a percentage of net assets) should not exceed 20 per
cent. This continues to be the Board's policy, and therefore the Manager will be
undertaking sales of investments to fund the Tender Offer.



Management arrangements



The Manager provides investment management, marketing and general administrative
services to the Company for a quarterly fee of 0.105 per cent. based upon a
three year historic average of the value of the funds under management.
Following successful completion of the Tender Offer, the Board will be reviewing
the fee arrangements with the Manager going forward.



Restricted Shareholders and other Overseas Shareholders



The Tender Offer is not available to Shareholders and Participants who are
resident in, or citizens of, Restricted Territories.  Overseas Shareholders
should note that they should satisfy themselves that they have fully observed
any applicable legal requirements under the laws of the relevant jurisdiction if
they execute a Tender Form or a Savings Scheme Tender Form.



Extraordinary General Meeting



The implementation of the Tender Offer requires the approval of Shareholders. An
Extraordinary General Meeting of the Company is to be held at 10.30 a.m. on 9
December 2005. The quorum requirement for the Extraordinary General Meeting is
not less than three Shareholders present in person or by proxy (or, in the case
of a corporation, by a duly appointed representative).



The resolutions to be proposed are:



•   Resolution 1 to grant authority to the Company to repurchase up to
14.99 per cent. of its own Shares following completion of the Tender Offer;



•   Resolution 2 to grant authority to the Company to purchase up to 35
per cent. of the Shares from JPMorgan Cazenove under the Tender Offer; and



•   Resolution 3 to change the name of the Company.



The Resolutions will be proposed as special resolutions.





Shareholders' intentions



Shareholders representing 23.09 per cent. of the Company's issued share capital
have signed irrevocable undertakings or letters of intent to support the
Proposals.



The Directors intend to retain their Shares in the Company.


*Based on fixed legal and advisory costs of the Proposals estimated at £0.55
 million, as well as stamp duty and commission the Company shall pay in buying
 back Shares under the Tender Offer.



**The NAV at 31 October 2005 is as announced to the London Stock Exchange on 1
  November 2005.  The NAVs have been calculated in accordance with the Company's
  accounting policies as set out in the last audited accounts for the year ended
  30 April 2005, including the Debenture Stock being valued at nominal value.



Expected Timetable


All references are to UK time unless otherwise indicated


Latest time and date for receipt of Savings Scheme      5.00 p.m. on 1 December
Tender Forms

Latest time and date for receipt of Forms of Direction  10.30 a.m. on 5 December
and Forms of Proxy for Shareholders on the New Zealand

Branch Register for the Extraordinary General Meeting
Latest time and date for receipt of Tender Forms        3.00 p.m. on 5 December

Record Date for Tender Offer                            Close of business on 5 December

Calculation Date for Tender Price                       7 December

Latest time and date for receipt of Forms of Proxy for  10.30 a.m. on 7 December
the Extraordinary General Meeting

Extraordinary General Meeting                           10.30 a.m. on 9 December

Tender Price and result of Tender Offer announced       by the close of business on 9 December

Cheques despatched in respect of proceeds of Tender     in the week commencing 12 December
Offer and balance certificates despatched in respect of
unsold certificated Shares

CREST accounts credited with proceeds of Tender Offer   14 December
and unsold uncertificated Shares



Enquiries


Gerry Grimstone                                                     07808 159059
Chairman, F&C Smaller Companies PLC


Peter Ewins                                                        020 7628 8000
F&C Asset Management plc


Angus Gordon Lennox                                                020 7588 2828
JPMorgan Cazenove Limited



                      This information is provided by RNS
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