AGM Proposals

Montanaro UK Smlr Cos Inv Tst PLC
4 July 2001



4 July 2001

Montanaro UK Smaller Companies Investment Trust plc

The Company has posted to shareholders a circular detailing proposed
amendments to the fixed investment management fee and performance fee payable
to Montanaro Investment Managers Limited, the Company's investment manager.


As the proposed amendments constitute a related party transaction pursuant to
the Listing Rules of the UK Listing Authority, they are conditional on the
approval of shareholders at the Company's forthcoming annual general meeting,
to be held on 31 July 2001.


It is proposed to increase the Investment Manager's fixed investment
management fee from monthly instalments of 1/12 of 0.5 per cent of the
Company's gross assets as at close of business on the last business day of
each month to monthly instalments of 1/12 of 1 per cent of the Company's gross
assets.


It is also proposed that the Investment Manager's entitlement to a performance
fee should be amended by the introduction of a performance 'hurdle' and a
'high water mark' so that a performance fee is only payable in respect of any
financial year of the Company in the event that the Company's net asset value
('NAV') as at the end of that financial year (i) is not less than the NAV of
the Company as at the end of the immediately preceding financial year of the
Company in respect of which the Investment Manager was entitled to a
performance fee and (ii) has outperformed the Company's benchmark, currently
the FTSE SmallCap (excluding investment companies) Index, during that
financial year by at least 2 per cent. The maximum performance fee currently
payable in respect of any financial year is 0.5 per cent of the Company's
gross assets as at the end of that financial year. No change is presently
proposed to be made to this maximum.


If the changes proposed to be made to the Investment Manager's fixed
investment management fee and performance fee had applied in respect of the
financial year of the Company to 31 March 2001, the total fixed investment
management fee in respect of that financial year would have been £1,024,000,
in comparison to the total fixed investment management fee actually paid in
respect of that financial year of £512,000. The performance fee in respect of
that financial year would have been nil, in comparison to the performance fee
actually payable in respect of that financial year of £487,000. Accordingly
the total fees payable to the Investment Manager in the financial year to 31
March 2001 were £999,000, whereas, had the changes now proposed to the fixed
investment management fee and performance fee been applied, the total fees
payable would have been £1,024,000.


The changes described above to the Investment Manager's fixed investment
management fee and performance fee are being proposed in view of the long-term
outperformance of the Company and the Investment Manager's increased resources
and in order to bring those fees in line with the management and performance
fees payable by investment trusts with a similar investment policy to that of
the Company. The Directors further believe that it is desirable to align the
interests of shareholders with that of the Investment Manager.