Interim Management Statement

Montanaro European Smaller C.TstPLC
20 July 2007




Montanaro European Smaller Companies Trust plc

Interim Management Statement

For the Three Month Period From 1 April 2007 to 30 June 2007


Investment Objective


Montanaro European Smaller Companies Trust plc aims to achieve capital growth by
investing principally in European quoted smaller companies.


Performance Summary

                                      As at              As at
                                    30 June      31 March 2007
                                       2007                             Movement
Capital Return                                                                              

Net asset value (000s)              £81,069            £74,447              8.9%
Net asset value per share            464.6p             426.7p              8.9%
MSCI Europe Small Cap Index           167.8              163.5              2.6%
Share price                          445.5p             404.0p             10.3%
Discount                               4.1%               5.3%
Net gearing                            7.5%               5.2%




Review for the Period

Quarterly Review:

The Consumer Price Index in the UK fell from its peak of 3.1% in March 2007 to
2.5% in May.  Nonetheless, on 5 July 2007 the Bank of England increased interest
rates by 0.25% to 5.75%.  Earlier, on 8 March 2007, the European Central Bank
had increased rates to 3.75%.

It is likely that interest rates in the UK and on the Continent will rise
further.  Certainly, increasing inflation is a factor but rising rates are
mainly due to economic strength.  Year on year GDP growth in the Eurozone was
3.1% for the first quarter of 2007, three times more than in the US.  The
unemployment rate for May was 7.0%, the lowest ever.  The Eurozone is performing
well.

Partly due to expectations of higher UK interest rates, sterling has been
strong.  Against the US dollar, it sailed through the symbolic $2 that was last
seen in 1992 on the eve of Black Monday, to a 26-year high.    This is a long
way from the low in 1985 of $1.1.  On the other hand, it stood at $2.40 in 1981
when interest rates stood at 17%.


Best / Worst Performers:

The front runners were Palfinger (Austrian cranes) which confirmed that life for
them is pretty good at the moment; Poyry, (Finnish consulting engineer) which
surprised markets with a significant increase in earnings forecasts; and OMX
(the Swedish Stock Exchange) which received the long-awaited take-over approach
by NASDAQ.

In a good quarter, there were few disappointments. DTZ (UK property consultant)
suffered along with the property sector in reaction to rising interest rates (a
sector where we are 50% underweight); YIT (Finnish & Russian house builder)
which similarly suffered as sentiment became more cautious; and Carnegie
(Swedish stockbroker & asset manager) which announced an unexpected loss due to
unauthorised activity by some traders.


Dividend:

Following approval by shareholders at the Annual General Meeting on 26 June
2007, a final dividend for the year ended 31 March 2007, of 2.25p per share, was
paid on 6 July 2007 to shareholders on the register on 8 June 2007.



Top Ten Holdings as at 30 June 2007

                                                                   Percentage of
                                                                    total assets


Company                                          Country

Palfinger                                        Austria                     3.2
Poyry                                            Finland                     3.0
Arcadis                                          Netherlands                 2.3
Nokian Tyres                                     Finland                     2.3
Sweco                                            Sweden                      2.2
YIT                                              Finland                     2.1
Frigoglass                                       Greece                      2.1
Belimo                                           Switzerland                 2.0
Fuchs Petrolub                                   Germany                     2.0
Kci Konecranes                                   Finland                     1.9

Total                                                                       23.1




Geographical Analysis as at 30 June 2007

                                                                   Percentage of
                                                                    total assets


Country

UK                                                                          19.5
Finland                                                                     14.6
Sweden                                                                      11.2
Netherlands                                                                  6.8
France                                                                       6.3
Germany                                                                      5.9
Austria                                                                      5.1
Norway                                                                       5.0
Greece                                                                       3.9
Ireland                                                                      3.4
Italy                                                                        2.9
Belgium                                                                      2.0
Switzerland                                                                  2.0
Spain                                                                        1.8
Poland                                                                       1.2
Malta                                                                        1.1
Czech Republic                                                               0.9
Iceland                                                                      0.8
Denmark                                                                      0.6
Liquidity                                                                    5.0

Total                                                                      100.0




Sector Distribution as at 30 June 2007

                                                                   Percentage of
                                                                    total assets

Country

Oil & Gas                                                                   10.7
Basic Materials                                                              2.9
Industrials                                                                 43.9
Consumer Goods                                                               8.1
Health Care                                                                  9.1
Consumer Services                                                            7.0
Financials                                                                  10.9
Technology                                                                   2.4
Liquidity                                                                    5.0

Total                                                                      100.0



The Board is not aware of any significant events or transactions which have
occurred since 30 June 2007 and the date of publication of this statement which
would have a material impact on the financial position of the Company.


Daily and Key Information

Further information regarding the Company, including monthly factsheets, can be
found at the Manager's website: www.montanaro.co.uk.



For further information please contact:

Charles Montanaro
Montanaro Investment Managers Limited
Tel: [phone]





                      This information is provided by RNS
            The company news service from the London Stock Exchange