Interim Management Statement

Montanaro UK Smaller Companies Investment Trust

Interim Management Statement - 4 months to 31 July 2007

Investment Objective

The Montanaro UK Smaller Companies Investment Trust PLC ("MUSCIT") was launched
in March 1995 and is listed on the London Stock Exchange. Initial investments
may be made in UK companies with a market capitalisation lower than the largest
constituent of the Hoare Govett Smaller Companies Index ("the HGSC") which
represents the smallest 10% by value of the UK stock market. Investments may be
held if they rise above the HGSC.

The investment policy remains to focus on the "smaller" end of the quoted UK
small companies market. The benchmark is the FTSE SmallCap (excluding
investment companies) Index ("SmallCap"). The investment objective is capital
growth.

Benchmark

FTSE SmallCap (excluding Investment Companies)

Net Asset Value Total Return Performance

                    4 months      1 year     3 years   5 years       Launch
                                                                           
MUSCIT               (0.1 %)      27.8 %     108.5 %   132.8 %      287.7 %
                                                                           
Benchmark            (2.3 %)      18.7 %      63.0 %   108.3 %      223.3 %


Performance Summary

                    As at 31 July    As at 31 March        Movement
                             2007              2007                
                                                                   
Gross assets         139,803,416       140,939,797          (0.8 %)
                                                                   
Net asset value            361.9             366.3          (1.2 %)
per share                                                          
                                                                   
Share price                305.5             311.0          (1.8 %)
                                                                   
Discount                 (15.6 %)          (15.1 %)                
                                                                   
Net gearing              108.2 %           108.1 %                 

Period Review

The first four months of the financial year have seen MUSCIT deliver out
performance of 2.2%. The Fund was helped by positive results during the period,
which led to a number of earning's upgrades. These helped drive share price
performance of NCC Group and Domino's Pizza, which were two of the Company's
top performers in the period.

As we predicted the wave of M&A activity has continued. Datamonitor, the
company's largest holding at the start of the financial year, was taken over by
Informa. While the company went out at a small premium, we were satisfied that
the valuation was full and fair.

Some of the proceeds from this disposal have been re-invested in two recent
IPOs: Eaga, a provider of residential energy efficiency solutions, and
Superglass, an insulation manufacturer. In our view these two companies are
both set to benefit from the Government's commitment to reduce household carbon
emissions and also improve the quality of the nation's housing stock.

It has been a challenging period for interest rate sensitive stocks. Real
Estate has been particularly weak in 2007. While the Company has been running
an underweight position in this sector for some time, it has served as a drag
on overall performance.

Material Events

Following approval by shareholders at the Annual General Meeting on 27 July
2007, a final dividend of 2.65p was paid on 10 August 2007 to shareholders on
the register on 15 June 2007.

The Directors are aware of the European Court of Justice's judgement in the AIC
/Claverhouse test case whereby VAT has been deemed not chargeable on investment
management fees paid by investment trusts. The Board is awaiting clarification
of the impact of this on the Company as the judgement may be subject to appeal.
In the meantime the Company will continue to pay VAT as before and it could
still be some time into the future before this changes.

Top Ten Holdings as at 31July 2007

Company               Sector                              % of total portfolio
                                                                              
Fisher(J) & Sons      Industrial Transportation                            2.8
                                                                              
WSP Group             Support Services                                     2.6
                                                                              
Genus                 Pharmaceuticals & Biotechnology                      2.5
                                                                              
Chloride Group        Electronic & Electrical Equipment                    2.5
                                                                              
Scott Wilson Group    Support Services                                     2.4
                                                                              
RPS Group             Support Services                                     2.4
                                                                              
Care UK               Health Care Equipment & Services                     2.3
                                                                              
Phoenix IT            Software & Computer Services                         2.3
                                                                              
Wilmington Group      Media                                                2.2
                                                                              
White Young Green     Support Services                                     2.1

Sector Breakdown

Sector                                                    % of total portfolio
                                                                              
Aerospace & Defence                                                        2.4
                                                                              
Beverages                                                                  0.9
                                                                              
Chemicals                                                                  3.0
                                                                              
Constructions & Materials                                                  1.2
                                                                              
Electronic & Electrical Equipment                                          7.5
                                                                              
Food Producers                                                             1.4
                                                                              
General Financial                                                          4.6
                                                                              
General Retailers                                                          3.7
                                                                              
Health Care Equipment & Services                                           5.4
                                                                              
Industrial Engineering                                                     7.7
                                                                              
Industrial Transportation                                                  2.8
                                                                              
Leisure Goods                                                              1.5
                                                                              
Media                                                                      4.3
                                                                              
Oil & Gas Producers                                                        1.7
                                                                              
Oil Equipment Services & Distribution                                      2.3
                                                                              
Pharmaceuticals & Biotechnology                                            4.4
                                                                              
Real Estate                                                                4.7
                                                                              
Software & Computer Services                                              11.2
                                                                              
Support Services                                                          26.0
                                                                              
Travel & Leisure                                                           3.3

This interim management statement and up to date NAV and Share Price are
available at www.montanaro.co.uk. With effect from 20 August 2007, the Company
will release its announcement of its NAV on a daily basis.