Interim Management Statement

Montanaro UK Smaller Companies Investment Trust PLC

Interim Management Statement - 3 months to 30 June 2009

Investment Objective

MUSCIT's investment objective is capital appreciation (rather than income)
achieved by investing in small quoted companies listed on the London Stock
Exchange or traded on the Alternative Investment Market ("AIM") and to achieve
relative outperformance of its benchmark, the FTSE SmallCap (excluding
investment companies) Index ("SmallCap").

No unquoted investments are permitted.

Investment Policy

The Company seeks to achieve its investment objective by investing in a
portfolio of quoted UK Smaller Companies. At the time of initial investment, a
potential investee company must be profitable and smaller than the largest
constituent of the HGSC Index, which represents the smallest 10% of the UK
Stock Market by value. At the start of 2009, this was any company below £911
million in size. The Manager focuses on the smaller end of this Index.

In order to manage risk the Manager will normally limit any one holding to a
maximum of 5% of the Company's investments. The portfolio weightings of every
stock are closely monitored to ensure they reflect the underlying liquidity of
the particular company. The Company's AIM exposure is also closely monitored by
the Board and is limited to 30% of total investments with Board approval required 
for exposure to be above 25%.

The Manager is focused on identifying high quality niche companies operating in
growth markets. This typically leads the Manager to invest in companies that
enjoy high barriers to entry, a sustainable competitive advantage and strong
management teams. The portfolio is therefore constructed on a "bottom up" basis
and there are no sectoral constraints placed on the Manager.

The Board, in consultation with the Manager, is responsible for determining the
gearing strategy of the Company. Gearing is used to enhance returns when the
timing is considered appropriate. The Company currently has a credit facility
of £15 million through ING Bank. The Board has agreed to limit borrowings to
25% of shareholders' funds.

Benchmark

FTSE SmallCap (excluding Investment Companies)

Net Asset Value Performance

                    3 months      1 year     3 years   5 years       Launch
                                                                           
MUSCIT                 18.9%     (23.7%)     (21.9%)     29.1%       127.5%
(excluding                                                                 
current period                                                             
revenue)                                                                   
                                                                           
Benchmark              31.0%     (24.2%)     (42.6%)   (27.4%)        11.6%


Performance Summary (capital only)

                   As at 30 June    As at 31 March         Movement
                             2009              2009                
                                                                   
Gross Assets          £83,242,764       £70,717,523           17.7%
                                                                   
Net asset value           226.11p           195.94p           15.4%
per share                                                          
                                                                   
Share price               196.50p           153.00p           28.4%
                                                                   
Discount                    13.1%             21.9%                
                                                                   
Actual Gearing              6.46%             8.08%                
                                                                   
Net Gearing                 3.76%           (1.89)%                

Period Review

The first three months of the Company's new financial year saw strong absolute
returns, with the NAV increasing 15%. Following the extreme monetary and fiscal
responses by governments and data suggesting that the macro economic
environment was no longer deteriorating as fast as had been feared, investors
discounted the risk of genuine deflation and the market's risk appetite
increased. The prime beneficiary within equities was the FTSE SmallCap, which
outperformed the FTSE AllShare by almost 22% in the period under review.

The quarter's performance was all largely captured in April when our benchmark
rose 31%. It proved a remarkable month with MUSCIT enjoying its strongest
absolute returns in its 14 year life (up 17%), while also suffering its worst
ever month of relative performance (down 14%). While it was very pleasing to
deliver a quarter of positive absolute returns for the first time since Q2
2007, the relative performance was disappointing, if not surprising.

Our benchmark was driven by a rapid revaluation of some of the most
operationally and financially challenged companies that had suffered most over
the past eighteen months. These types of companies do not meet the Montanaro
selection criteria, given that they are typically cyclical businesses, with
severe balance sheet problems to resolve. This trend, which has been described
as the "dash to trash", was also seen in the early stages of the bull market in
2003. We believe that history may well repeat itself and the spotlight will
move to focus on the higher quality, growth companies. With this in mind we are
very comfortable maintaining our focus on high quality, profitable companies
with good business models and sound balance sheets.

The strongest performer within the portfolio was BPP. The education specialist
was acquired by a US listed player at a 70% premium to the prevailing share
price. The portfolio also benefited from takeover approaches for Lok'n Store
(Support Services) and Venture Productions (Energy). After a very quiet twelve
months, the return of M&A activity suggests that markets are stabilising and
that confidence is returning to the market. If this trend continues it will
help to improve sentiment and underpin share prices.

Against a backdrop of improving macro newsflow, stabilising trading
environments and increasing levels of M&A we have been gradually increasing our
geared position. At present the Trust has £5m drawn down from its £15m facility
with ING and is currently 4% geared.

Dan Harlow

Montanaro Investment Managers Limited

Top Ten Holdings as at 30 June 2009

Company                  Sector                            % of total portfolio  
                                                                               
Dechra Pharmaceuticals   Pharmaceuticals & Biotechnology                    3.2
                                                                               
Dignity                  General Retailers                                  3.2
                                                                               
BPP Holdings             Support Services                                   2.8
                                                                               
Fisher (J) & Sons        Industrial Transportation                          2.7
                                                                               
Hargreaves Services      Support Services                                   2.5
                                                                               
Mothercare               General Retailers                                  2.5
                                                                               
Latchways                Support Services                                   2.4
                                                                               
Chloride Group           Electronic & Electrical                            2.3
                         Equipment                                             
                                                                               
Ricardo                  Support Services                                   2.2
                                                                               
NCC Group                Software & Computer Services                       2.1
                                                                               
                                                                           25.9

Sector Breakdown

Sector                                       % of total   % of market 
                                              portfolio                       
                                                                    
Aerospace & Defence                                 4.2          1.8
                                                                    
Beverages                                           1.6          0.0
                                                                    
Chemicals                                           5.2          1.4
                                                                    
Construction & Materials                            2.9          3.9
                                                                    
Electronic & Electrical Equipment                   7.1          2.2
                                                                    
Food & Drug Retailers                               1.6          0.3
                                                                    
Food Producers                                      2.9          2.7
                                                                    
General Financial                                   6.5          7.3
                                                                    
General Retailers                                   8.2          5.7
                                                                    
Health Care Equipment & Services                    5.3          3.6
                                                                    
Household Goods                                     0.0          1.4
                                                                    
Industrial Engineering                              3.4          4.8
                                                                    
Industrial Transportation                           3.7          3.3
                                                                    
Leisure Goods                                       0.0          0.5
                                                                    
Life & Nonlife Insurance                            0.0          2.4
                                                                    
Media                                               2.0          5.9
                                                                    
Mining                                              0.0          2.9
                                                                    
Oil & Gas Producers                                 3.0          2.0
                                                                    
Other                                               0.0          2.8
                                                                    
Pharmaceuticals & Biotechnology                     4.8          4.2
                                                                    
Real Estate                                         3.1         14.5
                                                                    
Software & Computer Services                        7.3          5.8
                                                                    
Support Services                                   21.3         12.6
                                                                    
Technology, Hardware and Equipment                  0.0          3.0
                                                                    
Travel & Leisure                                    5.9          5.0
                                                                    
                                                  100.0        100.0

This Interim Management Statement and up to date NAV and Share Price are
available at the Company's website www.montanarouksmaller.co.uk.