Half-year Report

RNS Number : 9434F

Montanaro European Smaller C.TstPLC

20 November 2020

 

Montanaro European Smaller Companies Trust Plc

LEI:  213800CWSC5B8BG3RS21

Unaudited Half-Yearly Report for the Six Months Ended 30 September 2020

The Board of Montanaro European Smaller Companies Trust plc (the "Company") announces the unaudited half-yearly results of the Company for the six months ended 30 September 2020.

 Highlights   (unaudited)

  for the six months ended 30 September 2020

Performance

CapitalReturns%(2)	6 Month	1 year	3 year	5 year	10 year	MAM*
Ordinary share price	59.4	37.2	73.3	171.3	249.8	339.4
Net Asset Value('NAV')**	49.9	31.1	58.3	151.6	210.0	319.7
Benchmark(Composite)(1)**	33.4	8.2	4.6	65.8	125.6	146.6

Total Returns%(2)	6 Month	1 year	3 year	5 year	10 year	MAM*
Ordinary share price	60.2	38.8	77.8	185.4	294.2	424.5
NAV**	51.5	31.9	62.1	163.6	250.6	394.4
Benchmark(Composite)(1)**	34.9	9.7	10.3	81.2	171.3	221.8

Sources: Morningstar Direct, Association of Investment Companies ('AIC'), Montanaro Asset Management.

	Asat 30September 2020	As at 30 September 2019	12 month % change	As at 31 March 2020 (Audited)	6 month % change
Ordinary share price	1,402.5p	1,022.5p	37.4%	880.0p	59.4%
NAV per Ordinaryshare**	1,434.6p	1,094.1p	31.1%	956.9p	49.9%
DiscounttoNAV(2)	2.2%	6.5%	-	8.0%	-
Gross assets**(£'000s)	249,140	191,889	29.8%	168,932	47.5%
Net assets**(£'000s)	240,068	183,079	31.1%	160,123	49.9%
Market capitalisation**(£'000s)	234,600	171,098	37.1%	147,253	59.4%
Netgearingemployed(2)	0.6%	0.7%	-	5.8%	-

	6monthsended 30 S eptember 2020	6monthsended 30 September 2019	12 month % change	12 months ended 31 March 2020 (Audited)	6 month % change
Revenue return per Ordinaryshare	2.5p	11.7p	-78.6%	11.9p	-79.1%
Dividend per Ordinaryshare	2.0p	2.0p		9.25p
Ongoingcharges(annualised)(2)	1.2%	1.2%	-	1.2%
Portfolio turnover (rolling twelve months)**	12%	16%		14%

*From 5 September 2006, when Montanaro Asset Management Limited ('MAM') was appointed as Investment Manager.

**Details provided in the Glossary below

(1) From 5 September 2006, the benchmark was the MSCI Europe SmallCap Index. The benchmark was changed on 1 June 2009 to the MSCIEurope SmallCap (ex UK) Index (in sterling terms)

(2) Refer to Alternative Performance Measures below

Chairman ' s Statement

 

Performance The first six months of the financial year has seen your company recover strongly from the Covid-19 related market meltdown. The net asset value of your company rose by 49.9% to 1,434.6p per share thus outperforming the Benchmark (MSCI Europe SmallCap (ex UK) index), which rose by 33.4%. Shareholders also benefited from a narrowing of the discount from 8% to 2%. As a result, the share price of the Company rose by 59.4% during the period, providing a total return of 60.2%. Another period of strong absolute and relative performance. This builds upon the outstanding medium and longer term performance record with your Trust being the best performing European Investment Trust over the 3 and 5 year time periods.

Earnings and Dividends In the 2020 Annual Report we highlighted that it was very likely that income from your investee companies would decline from the high levels seen in the previous year, given the global economic uncertainty brought about by the Covid-19 pandemic as well as the political pressure to limit such distributions in light of the government support schemes that were put in place. This has proved to be the case and revenue earnings per share for the period were 2.5p (2019: 11.7p). Despite this reduction in income we remain confident in the long-term prospects of your investee companies. In addition, the Company sits on a substantial revenue reserve which is available for distribution and which the Board can use to smooth short-term income volatility. As such, the Board has declared an unchanged interim dividend of 2.0p per Ordinary Share (2019: 2.0p per share) payable on 4 January 2021 to shareholders on the register on 4 December 2020.

Borrowings At the end of the period, the Company had gearing, net of cash, of 0.6% compared to 5.8% at 31 March 2020.

Treasury Shares No shares were issued from treasury during the first six months of the financial year, however, in the weeks following the period end, the Company issued 215,000 shares from treasury at a premium to the NAV per share, in accordance with its stated treasury shares policy which is disclosed on page 24 oftheCompany'sAnnualReportfortheyearended31March 2020. At the time of writing, 500,000 shares remained in treasury.

The Board The Board consists solely of independent Non-Executive Directors with a good balance of skills, experience, diversity and knowledge of the Company and its business. We are fortunate to have welcomed Gordon Neilly to the Board in September 2020. Gordon has a wealth of experience and expertise in investment management and he is already making an important contribution to Board discussions. Following Gordon's appointment Merryn Somerset Webb will retire from the Board at the end of the calendar year having completed 9 years of service. I would like to thank Merryn for her outstanding contribution and commitment to the Board. We will miss her wise counsel.

Outlook If 2020 has taught us anything it should be the folly of making bold predictions about future events. But uncertainty, disruption, change and even crises bring opportunities as well as risks for long-term investors. The Manager continues to select only the highest quality companies in Europe for inclusion in your portfolio. Their focus is on identifying the structural growth drivers that make it possible for these companies to be significantly larger than they are today over a period of years, as opposed to trying to take advantage of short-term fads. This approach has yielded a strong NAV performance not only in the year to date, but over several years and we believe it is an effective way to deliver attractive long-term returns irrespective of future global economic conditions. We are pleased that the combination of the Manager's disciplined investment approach and the robust NAV performance is being recognised by the market, with the shares having mostly traded at a premium since the end of the interim period under review. We are pleased that the Trust won the Citywire 'Best European Equities Trust' Award in November 2020. In spite of the strong rebound in markets there remains considerable uncertainty about the ongoing impact of the Covid-19 virus. In addition, it would be remiss not to highlight the extraordinary run that "growth" style investing (which your company follows) has had relative to "value" investing and that at some stage this may reverse. The Board believes that the risk of this is best mitigated by sticking to investing only in quality companies and having a long-term investment horizon.

R M CURLING Chairman 19 November 2020

Portfolio Summary

Twenty Largest Holdings

As at 30 September 2020

Holding	Country	Value £'000	% of investment portfolio	% of net assets
Sartorius Stedim	France	10,676	4.4%	4 .5%
Fortnox	Sweden	9,299	3.9%	3.9%
VZ Holding	Switzerland	7,759	3.2%	3.2%
Tecan	Switzerland	7,731	3.2%	3.2%
Thule	Sweden	7,669	3.2%	3.2%
Hypoport	Germany	7,281	3.0%	3.0%
Esker	France	7,265	3.0%	3.0%
Atoss	Germany	7,185	3.0%	3.0%
MIPS	Sweden	6,903	2.9%	2.9%
NCAB	Sweden	6,896	2.9%	2.9%
SimCorp	Denmark	6,639	2.8%	2.8%
Vitrolife	Sweden	6,341	2.6%	2.6%
IMCD	Netherlands	5,531	2.3%	2.3%
Belimo Holdings	Switzerland	5,406	2.2%	2.3%
Reply	Italy	5,351	2.2%	2.2%
Nolato	Sweden	5,260	2.2%	2.2%
Avanza	Sweden	5,059	2.1%	2.1%
Mensch Und Maschine	Germany	4,935	2.1%	2.1%
CTS Eventim	Germany	4,895	2.0%	2.0%
Rational	Germany	4,816	2.0%	2.0%
Twenty Largest Holdings		132,897	55.2%	55.4%

A full portfolio listing is available on request from the Manager.

Geographical Analysis

As at 30 September 2020

Country	% of investment portfolio
Sweden	26%
Germany	22%
Switzerland	11%
Italy	11%
France	9%
Norway	8%
Netherlands	5%
Denmark	5%
Spain	3%
Belgium	1%

Source: Montanaro Asset Management Limited

Sector Analysis

As at 30 September 2020

Sector	% of investment portfolio
Information Technology	31%
Healthcare	20%
Industrials	19%
Financials	11%
Consumer Discretionary	8%
Consumer Staples	5%
Communications	2%
Energy	1%
Materials	1%
Real Estate	1%

Source: Montanaro Asset Management Limited

Interim Management Report

The important events that have occurred during the period under review and the key factors influencing the financial statements are set out in the Chairman's Statement above.

StatementofPrincipalRisksandUncertainties: Most of the principal risks that could threaten the Company's objective, strategy, future returns and solvency are market related and comparable to those of other investment trusts investing primarily in quoted securities. The principal risks faced by the Company are investment and strategic, gearing, financial, discount volatility, regulatory, operational and manager risks. These risks, including the impact of the Covid-19 pandemic on the market and the Company's business operations, and the way in which they are mitigated, are described in more detail under the heading 'Principal and Emerging Risks and Uncertainties and Risk Mitigation' within the Business Model and Strategy section on pages 12 to 14 of the Company's Annual Report for the year ended 31 March 2020. The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remaining six months of the Company's financial year. The Directors have ensured that all risks will be kept under review at every meeting as the implications of Covid-19 continue to emerge.

Related party transactions: Related party transactions are disclosed in note 14 below. There have been no material changes in the related party transactions described in the last annual report.

Going concern: As stated in Note 13 to the condensed financial statements, the Directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Directors'   Responsibility   Statement in respect of the Half-Yearly Report

We   confirm   that   to   the   best of our knowledge:

•	the condensed set of f inancial statements havebeenpreparedinaccordancewith IAS34'InterimFinancialReporting'andgiveatrueandfairviewoftheassets,liabilities, financialpositionandprofitorlossoftheCompany;
•	the Interim Management Reportincludesafair reviewoftheinformationrequiredbytheDisclosureGuidanceandTransparencyRule ('DTR')4.2.7R,beinganindicationofimportanteventsthathaveoccurredduringthefirstsixmonthsofthefinancialyearandtheirimpactonthefinancialstatements;
•	the Statement of Principal Risks and UncertaintiesshownaboveisafairreviewoftheinformationrequiredbyDTR 4.2.7R; and
•	the Chairman's Statement, together with the condensed set of financial statements, include afairreviewoftheinformationrequiredbyDTR4.2.8R,beingrelatedpartytransactionsthathavetakenplaceinthefirstsixmonthsofthefinancialyearandthathavemateriallyaffectedthefinancialpositionorperformanceoftheCompanyduringthe period,andanychangesintherelatedpartytransactionsdescribedinthelastAnnualReportthatcoulddoso.
	TheHalf-YearlyReportandAccountswereapprovedbytheBoardandtheaboveresponsibility statementwassignedonitsbehalfby:
	R M CURLING Chairman
	19 November 2020

Condensed   Statement   of   Comprehensive   Income   (unaudited)

for the six months ended 30 September 2020

		Six months to 30 September 2020			Six months to 30 September 2019			Year to 31 March 2020 (Audited)
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains (losses) on investments held at fair value		-	81,738	81,738	-	13,742	13,742	-	(8,126)	(8,126)
Exchange gains/(losses)		-	(337)	(337)	-	15	15		(211)	(211)
Revenue
Investment income		1,209	-	1,209	2,799	-	2,699	3,497	-	3,497
Total income		1,209	81,401	82,610	2,799	13,757		3,497	(8,337)	(4,840)
Expenditure
Management expenses		(335)	(622)	(957)	(279)	(518)	(797)	(564)	(1,047)	(1,611)
Other expenses		(303)	-	(303)	(308)	-	(308)	(595)	-	(595)
Total expenditure		(638)	(622)	(1,260)	(587)	(518)	(1,105)	(1,159)	(1,047)	(2,206)
Profit before finance costs and tax		571	80,779	81,350	2,212	13,239	15,451	2,338	(9,384)	(7,046)
Finance costs		(36)	(43)	(79)	(23)	(43)	(66)	(48)	(85)	(133)
Profit before tax		535	80,736	81,271	2,189	13,196	15,385	2,290	(9,469)	(7,179)
Tax		(113)	-	(113)	(234)	-	(234)	(291)	-	(291)
Total comprehensive income		422	80,736	81,158	1,955	13,196	15,151	1,999	(9,469)	(7,470)
Return per share		2.5p	482.5p	485.0p	11.7p	78.9p	90.5p	11.9p	(56.6p)	(44.7p)

ThetotalcolumnofthisstatementrepresentstheCompany'sIncomeStatementand Statement of Comprehensive Income, prepared in accordancewithInternationalFinancial ReportingStandards.

Thesupplementaryrevenuereturnandcapitalreturncolumnsarebothpreparedunder guidancepublishedbytheAIC.

Allrevenueandcapitalitemsintheabovestatementderivefromcontinuingoperations.Nooperationswereacquiredordiscontinuedduringtheperiod.

Condensed   Balance   Sheet   (unaudited)

as at 30 September 2020

	Notes	As at 30 September 2020 £'000	As at 30 September 2019 £'000	As at 31March2020 (Audited) £'000
Non-current assets
Investments held at fair value through profit and loss		241,298	183,843	169,018
Current assets
Trade and other receivables		559	841	615
Cash and cash equivalents		7,712	7,596	405
		8,271	8,437	1,020
Total assets		249,569	192,280	170,038
Current liabilities
Trade and other payables		(429)	(391)	(222)
Interest-bearing bank loans		-	-	(884)
		(429)	(391)	(1,106)
Non-current liabilities
Interest-bearing bank loans		(9,072)	(8,810)	(8,809)
Total liabilities		(9,501)	(9,201)	(9,915)
Net assets		240,068	183,079	160,123
Capital and reserves
Called-up share capital		8,724	8,724	8,724
Share premium account		5,283	5,283	5,283
Capital redemption reserve		2,212	2,212	2,212
Capital reserve		220,377	162,306	139,641
Revenue reserve		3,472	4,554	4,263
Shareholders' funds		240,068	183,079	160,123
NAV per share		1,434.7p	1,094.1p	956.9p

Condensed   Statement   of   Changes   in   Equity   (unaudited)

for the six months ended 30 September 2020

	Share capital £'000	Share premium account £'000	Capital redemptionreserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
Balance at 1April2020	8,724	5,283	2,212	139,641	4,263	160,123
Total comprehensive income	-	-	-	80,736	422	81,158
Dividends paid	-	-	-	-	(1,213)	(1,213)
Balance at 30 September 2020	8,724	5,283	2,212	220,377	3,472	240,068

for the six months ended 30 September 2019 (unaudited)

	Share capital £'000	Share premium account £'000	Capital redemptionreserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
Balance at 1April2019	8,724	5,283	2,212	149,110	3,812	169,141
Total comprehensive income	-	-	-	13,196	1,955	15,151
Dividends paid	-	-	-	-	(1,213)	(1,213)
Balance at 30 September 2019	8,724	5,283	2,212	162,306	4,554	183,079

for the year ended 31 March 2020 (Audited)

	Share c apital £'000	Share premium account £'000	Capital redemptionreserve £'000	Capital Reserve £'000	Revenue reserve £'000	Total £'000
Balance at 1April2019	8,724	5,283	2,212	149,110	3,812	169,141
Total comprehensive income	-	-	-	(9,469)	1,999	(7,470)
Dividends paid					(1,548)	(1,548)
Balance at 31 March 2020	8,724	5,283	2,212	139,641	4,263	160,123

Condensed   Statement   of   Cash   Flows   (unaudited)

for the six months ended 30 September 2020

	Six months to 30 September 2020 £'000	Six months to 30 September 2019 £'000	Year to31   March 2020 (Audited) £'000
Net cash inflow (outflow) from operating activities	9,595	1,148	(6,259)
Cash outflow from financing activities	(2,168)	(1,264)	(835)
	7,427	(116)	(7,094)
Exchange gains	120	269	56
Increase/(decrease) in cash and cash equivalents	7,307	153	(7,038)
Reconciliation of profit before finance costs and tax to net cash inflow from operating activities
Profit before finance costs and tax	81,350	15,451	(7,046)
Gains on investments held at fair value	(81,738)	(13,742)	8,126
Exchange (gains)	337	(15)	211
Withholding tax	(113)	(297)	(291)
Purchases of investments	(24,897)	(13,901)	(33,739)
Sales of investments	34,415	13,575	26,361
Changes in working capital and other non-cash items	241	77	419
Net cash inflow from operating activities	9,595	1,148	(6,259)

N otes   to   the   Accounts   (unaudited )

1.	Thecondensed unauditedfinancialstatementshavebeenpreparedinaccordancewith InternationalFinancialReportingStandard('IFRS')IAS34'InterimFinancialReporting'andtheaccountingpoliciessetoutinthestatutoryaccountsoftheCompanyfortheyearended31March2020.Thecondensedfinancialstatementsdonotincludeallof theinformationrequiredforacompletesetofIFRSfinancialstatementsandshouldbe readinconjunctionwiththefinancialstatementsoftheCompanyfortheyearended 31March2020,whichwerepreparedunderfullIFRSrequirements.
2.	Earnings for the first sixmonthsshouldnotbetakenasaguidetotheresultsforthe fullyear.
3.	Income for the periodisderivedfrom:

	Six months to 30 September 2020 £'000	Six months to 30 September 2019 £'000	Year ended 31 March 2020 (Audited) £'000
Overseas dividend income	1,200	2,799	3,472
Other Income	9	-	25
Total	1,209	2,799	3,497

4.	Management fee:

	Six months to 30 September 2020 £'000			Six months to 30 September 2019 £'000			Year ended 31 March 2020 (Audited) £'000
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee	335	622	957	270	502	772	546	1,015	1,561
AIFM fee	9	16	25	9	16	25	18	32	50
	344	638	982	279	518	797	564	1,047	1,611

	MAMreceivesaninvestmentmanagementfeeof0.9%perannumoftheCompany'smarketcapitalisation(payablemonthlyinarrears).
	MAMisalsoentitledtoafeeof£50,000perannumforactingastheCompany's AlternativeInvestmentFundManager("AIFM").
5.	Earnings perOrdinaryShareisbasedonaweightedaverageof16,733,260OrdinarySharesinissueduringtheperiod(yearended31March 2020: 16,733,260andsix monthsended30September 2019: 16,733,260),excludingthosesharesboughtbackandheldintreasury.
6.	Theinterimdividendrelatingtotheyearended31March2020of2.0pperOrdinary Sharewillbepaidon4January2021toshareholdersontheregisteron4December 2020.InaccordancewithIFRS,thisdividendhasnotbeenrecognisedinthesefinancial statements.Theex-dividenddateforthispaymentis3December2020.
	Afinaldividendrelatingtotheyearended31March2020of7.25pperOrdinaryShare waspaidduringthesixmonthsto30September2020andamountedto£1,213,000.
7.	Investments at Fair Value Through Profit and Loss:

	30 September 2020 £'000	30 September 2019 £'000	31 March 2020 £'000 (Audited)
Opening book cost	121,712	107,172	107,172
Holding gains	47,163	62,656	62,656
Opening fair value	168,875	169,828	169,828
Purchases at cost	24,897	14,060	33,739
Sales - proceeds	(34,352)	(13,787)	(26,423)
-gainsonsales	14,248	4,789	7,224
Holding gains (losses)	67,630	8,953	(15,350)
Closing fair value	241,298	183,843	169,018
Closing book cost	126,505	112,234	121,712
Holding gains	114,793	71,609	47,306
Closing valuation	241,298	183,843	169.018

8.	Interest-Bearing BankLoans:

	30 September 2020 £'000	30 September 2019 £'000	31 March 2020 £'000 (Audited)
Opening balance	8,572	8,572	8,572
Amortisation of set-up costs	5	5	10
Non-cash foreign currency movements	495	233	227
	9,072	8,810	8,809

	TheCompany'sfixedrateloanfacilitiestotaling £ 25 million matured on13September 2018.TheCompanyrefinanced £ 10 million by entering into afiveyearsecuredloanatafixedrateof 1.33% perannumwithINGBankN.V.('ING').Thisloanwillmatureon 13September2023.TheCompany'sotherfixedrateloantotaling £ 15 million was repaid. TheCompanyhasalsoenteredintoafiveyearsecuredrevolvingloanfacility withING,for£15millionwhichwillalsomatureon13September2023.
	Asat30September2020,noamountsweredrawndownunderthesefacilities.
	Under the bank covenants relating to these facilities, the Company is to ensure that at all times the total borrowings of the Company donotexceed40%oftheAdjusted NAV (asdefinedinthefacilityagreements)andthattheAdjusted NAV doesnotfallbelow £45million.TheCompanymetallcovenantconditionsduringtheperiod. Thefairvalueofthefixedrateloansisshowinnote10.
9.	The NAV per Ordinary Share was based on 16,733,260 Ordinary Shares in issue at the end of the period (31 March 2020: 16,733,260 and 30 September 2019: 16,733,260), excluding those shares bought back and held in treasury. As at 30 September 2020, there were 715,000 Ordinary Shares held in treasury (31 March 2020: 715,000 and 30 September 2019: 715,000).
10.	TheCompanyheldthefollowingcategoriesoffinancialinstrumentsattheperiodend:

	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
30 September 2020
Investments	241,298	-	-	241,298
Loans		(9,072)		(9,072)
30 September 2019
Investments	183,843	-	-	183,843
Loans	-	(8,810)	-	(8,831)
31 March 2020 (Audited)
Investments	169,018	-	-	169,018
Loans	-	(8,809)	-	(8,809)

	Thetableaboveprovidesananalysisoffinancialinstrumentsbasedonthefairvalue hierarchydescribedbelowandwhichreflectsthereliabilityandsignificanceofthe informationusedtomeasuretheirfairvalue.Thelevelsaredeterminedbythelowestsignificantapplicableinput:
	Level 1reflectsfinancialinstrumentsquotedinanactivemarket.
	Level 2reflectsfinancialinstrumentswhosefairvalueisevidencedbycomparisonwith otherobservablecurrentmarkettransactionsinthesameinstrumentorbasedonavaluationtechniquewhosevariablesincludeonlyobservablemarketdata.
	Level 3reflectsfinancialinstrumentswhosefairvalueisdeterminedinwholeorinpartusingavaluationtechniquebasedonassumptionsthatarenotsupportedbyprices fromobservablemarkettransactionsinthesameinstrumentandnotbasedonavailableobservablemarketdata.
	Therewerenotransfersbetweenlevelsduringtheperiodended30September2020(yearended31March2020andperiodended30September 2019: None).
	Listed investments held (seenote7)arevaluedatfairvaluethroughprofitorloss.For listedsecuritiesthisiseitherbidpriceorthelasttradedpricedependingontheconventionoftheexchangeonwhichtheinvestmentislisted.ThefairvalueoftheloansiscalculatedusingadiscountedcashflowtechniquebasedonrelevantcurrentinterestratescomparedtotheirvalueasstatedontheBalanceSheetatamortisedcostof£9,072,000 (31March2020:£8,809,000and30September2019:£8,810,000).Thefair valueofallotherfinancialassetsandliabilitiesisrepresentedbytheircarryingvaluein theBalanceSheetshownabove.
	Other aspects of the Company's financial risk management objectives and policies are consistent with those disclosed in the financial statements, asatandfortheyearended, 31March2020.
11.	Rates of exchange (to Sterling):

	30 September 2020 £'000	30 September 2019 £'000	31 March 2020 £'000 (Audited)
Danish Krone	8.20	8.44	8.44
Euro	1.10	1.13	1.13
Norwegian Krone	12.10	11.19	13.02
Swedish Krona	11.57	12.12	12.28
Swiss Franc	1.19	1.23	1.20

12.	TheBoardhasconsideredtherequirementsofIFRS8'OperatingSegments'.TheBoardisoftheviewthattheCompanyisengagedinasinglesegmentofbusiness,of investinginEuropeanquotedsmallercompanies,andthatthereforetheCompanyhas onlyasingleoperatingsegment.TheBoardofDirectors,asawhole,hasbeenidentifiedasconstitutingthechiefoperatingdecisionmakeroftheCompany.ThekeymeasureofperformanceusedbytheBoardtoassesstheCompany'sperformanceisthetotalreturnontheCompany'snetassetvalue,ascalculatedunderIFRS,andthereforenoreconciliationisrequiredbetweenthemeasureofprofitorlossusedbythe Boardandthatcontainedinthefinancialstatements.
13.	Going Concern: In assessing the going concernbasisofaccounting,theDirectorshavehadregardto theguidanceissuedbytheFinancialReportingCouncilandhaveundertakenarigorous reviewoftheCompany'sabilitytocontinueasagoingconcern.TheyhaveconsideredthecurrentcashpositionoftheCompany,theavailabilityoftheborrowingfacilitiesto13September2023,compliancewiththeircovenants,theCompany'sotherliabilities andforecastrevenues.TheDirectorshavealsotakenintoaccounttheCompany'sinvestment policy,whichissubjecttoregularBoardmonitoringprocessesandis designedtoensurethattheCompanyisinvestedmainlyinliquid,listedsecurities.TheCompanyretainstitletoallassetsheldbyitscustodianandhasfinancialcovenants, relatingtoitsbankborrowingswithwhichitcompliedduringtheperiod.
	TheDirectorsbelieve,inlightofthecontrolsandreviewprocessesnotedaboveandbearinginmindthenatureoftheCompany'sbusinessandassetsandliabilities,thatthe Companyhasadequateresourcestocontinueinoperationalexistenceforaperiodofat leasttwelvemonthsfromthedateofapprovaloftheaccounts.Forthisreason,theycontinuetoadoptthegoingconcernbasisinpreparingtheaccounts.
14.	Related Parties: The following are considered related parties: the Board of Directors. The Directors of the Company received fees for their services and dividends from their shareholdings in the Company as outlined below.
	The amount charged by the Manager during the period was £957,000 (six months to 30 September 2019: £797,000; year to 31 March 2020: £1,611,000). At 30 September 2020, the amount due to the Manager, included in creditors, was £356,000. The existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, under the AIC SORP, the Manager is not considered to be a related party.
	Directors' Emoluments At 30 September 2020, the Board consisted of four non-executive Directors. All Directors are considered to be independent of the Manager. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £35,000, the Chair of the Audit Committee receives an annual fee of £30,000 and non-executive Directors receive £25,000 per annum.
	At 30 September 2020, the amount outstanding in respect of Directors' fees was £nil (31 March 2020: £nil).
	At 30 September 2020, the interests of the Directors in the ordinary shares of the Company were as follows:
		As at 30 September 2020 No. of shares	As at 31 March 2020  No. of shares
	R M Curling	10,000	10,000
	G J Neilly*	4,895	N/A
	C A Roxburgh**	6,421	6,182
	M R Somerset Webb	4,114	4,095
	*Mr Neilly was appointed to the Board on 21 September 2020, but has been a shareholder for many years.
	** Includes 214 shares held by Ms Roxburgh's spouse.
	There were no changes in the Directors' interests between 30 September 2020 and the date of this report .
15.	These are not statutory accounts in terms of Section 434 of the Companies Act 2006 and have not beenauditedorreviewedbytheCompany'sAuditor.Theinformationfortheyearended31March2020hasbeenextractedfromthelatestpublishedfinancialstatementsandwhichhavebeenfiledwiththeRegistrarofCompanies.TheAuditor'sreportonthoseaccountswasnotqualified,didnotincludeareferencetoanymatterstowhichtheauditordrewattentionbywayofemphasiswithoutqualifyingthereportanddidnotcontainstatementsundersection498(2)or(3) oftheCompaniesAct2006.Nostatutoryaccountsinrespectofanyperiodafter31March2020havebeenreportedonbytheCompany'sAuditorordeliveredtothe Registrar ofCompanies.
16.	Post Balance Sheet events
	Since 31 March 2020, the Company has issued 215,000 Ordinary Shares from treasury, owing to demand in the market. The total consideration for these issuances is £3,109,725. Following these issuances, as at 19 November 2020, the Company has 16,948,260 shares in issue (excluding the remaining 500,000 shares held in treasury).

Alternative Performance Measures ("APMs")

TheCompanyusesthefollowingAPMs:

Capital Return - NAV and Share Price Returns Capital returns measure the effectofanyriseorfallinthesharepriceorNAV,excludingany dividendspaid.Asat30September2020,the6month NAV CapitalReturnwas49.9%,andthe6monthOrdinarysharepriceCapitalReturnwas59.4%,asshownintheHighlights above.

Total Return - NAV and Share Price Returns Total returns measure the effectofanyriseorfallinthesharepriceorNAV,plusdividends paidwhicharereinvestedattheprevailing NAV orsharepriceontheex-dividenddate.Asat 30September2020,the6month NAV Total Returnwas51.5%,andthe6monthOrdinaryshareprice Total Returnwas60.2%,asshowninthe Highlights above.

Discount or Premium to NAV If the share price of anInvestmentTrustislessthanits NAV pershare,thesharesaretradingatadiscount.IfthesharepriceisgreaterthantheNAVpershare,thesharesaretradingatapremium.

Asat30September2020,the NAV persharewas 1,434.66pandthesharepricewas 1,402.50p . The discount is therefore calculated at 2.2 % asshowninthehighlightsabove.

Net gearing employed Unlike open-endedinvestmentcompanies,InvestmentTrustshavetheabilitytoborrowtoinvest.ThistermisusedtodescribethelevelofborrowingsthatanInvestmentTrusthasundertaken,andisstatedasapercentageofshareholders'funds.Thehigherthelevelofborrowings,thehigherthegearingratio.

Net gearing is calculated astotaldebt,netofcashandcashequivalents,asapercentageof thetotalshareholders'funds.

Asat30September2020,interestbearingbankloanswere(£9,072,000),cashandcashequivalentswere£7,712,000andnetassetswere£240,068,000.Asat30September2020,Gearing wasthereforeequalto 0.6%asshownintheHighlightsabove.

Ongoing charges (expressed as a percentage) OngoingchargesaretheCompany'srevenue andcapitalexpenses(excludingfinancecostsandcertainnon-recurringitems)expressed asapercentageoftheaveragedailynetassetsoftheCompanyduringthe period.

Ongoing charges calculation

		Six months to 30 September 2020 £'000	Six months to 30 September 2019 £'000	31 March 2020 £'000 (Audited)
Total expenditure		1,339	1,105	2,206
Less negative interest		(79)	(26)	(34)
Less non-recurring costs		-	-	-
Total	(a)	1,260	1,079	2,172
Average daily net assets	(b)	216,742	184,753	184,174
Ongoing charges (c =a/b)*	(c)	1.2%	1.2%	1.2%

* 30 September 2020 and 30 September 2019 figures annualised for comparison (c = (a/b) x 2).

Glossary of terms
AIFMD Alternative Investment Fund ManagersDirective.IssuedbytheEuropeanParliamentin2012and2013,theDirectiverequiresthatallinvestmentvehiclesintheEuropeanUnion,includingInvestmentTrusts,must,witheffectfrom22July2014,appointaDepositaryandanAIFM.TheBoardofDirectorsofanInvestment Trust, nevertheless,remainsfullyresponsibleforall aspectsoftheCompany'sstrategy,operationsandcompliancewithregulations.
AIC TheAssociationofInvestmentCompaniesisthetradebodyforClosed-endInvestment Companies(www.theaic.co.uk).
Benchmark This is ameasureagainstwhichanInvestment Trust's performanceiscompared.ThebenchmarkoftheCompanyistheMSCIEuropeSmallCap(exUK)Index(capitalreturninSterlingterms).TheindexaveragestheperformanceofadefinedselectionofcompanieslistedinEuropeansmallercompanystockmarketsandgivesanindicationofhowthosemarketshaveperformedinanyperiod.
Closed-end Investment Company Acompany,includinganInvestment Trust, withafixedissuedordinarysharecapitalwhich istradedonanexchangeatapricenotnecessarilyrelatedtothe NAV ofthecompanyandwheresharescanonlybeissuedorboughtbackbythecompanyincertaincircumstances. Thiscontrastswithanopen-endedinvestmentcompany,whichhasunitsnottradedonanexchangebutissuedorboughtbackfrominvestorsatapricedirectlyrelatedtotheNAV.
Custodian Aspecialisedfinancialinstitutionresponsibleforsafeguarding,worldwide,thelistedsecuritiesandcertaincashassetsoftheCompany,aswellastheincomearisingtherefrom, throughprovisionofcustodial,settlementandassociatedservices.TheCompany's CustodianisBankofNew York MellonSA/NV.
Depositary Under AIFMD rulesapplyingfrom22July2014,theCompanymustappointaDepositary, whosedutiesinrespectofinvestments,cashandsimilarassetsinclude:safekeeping; verificationofownershipandvaluation;andcashmonitoring.TheDepositaryhasstrictliabilityforlossofanyinvestmentsorotherassetswhereithassafekeepingduties.TheDepositary'soversightdutiesinclude,butarenotlimited to, oversightofsharebuybacks, dividendpaymentsandadherencetoinvestmentlimits.TheCompany'sDepositaryisTheBankofNew York Mellon(International)Limited.
Dividend Theincomefromaninvestment.SomeInvestmentTrustspaydividendsonaquarterlyormonthlybasis.MontanaroEuropeanSmallerCompaniesTrustplccurrentlypaysdividends twicea year.
Gearing Gearing is calculated astotalliabilitieslesscurrentassetsdividedbynetassets.
Gross assets Gross assets are calculated astotalassetslesscurrentliabilities.
IFRS International Financial ReportingStandards.
Investment Manager TheCompany'sinvestmentmanagerisMontanaroAssetManagementLimited.
Investment Trust AClosed-endInvestmentCompanywhichsatisfiestherequirementsofSection1158ofthe Corporation Tax Act2010.Companieswhichmeetthesecriteriaareexemptfromhavingto paytaxonthecapitalgainstheyrealisefromsalesoftheinvestmentswithintheirportfolios.
Leverage AsdefinedundertheAIFMDrules,LeverageisanymethodbywhichtheexposureofanAIFisincreasedthroughborrowingofcashorsecuritiesorleverageembeddedinderivativepositions.LeverageisbroadlyequivalenttoGearing,butisexpressedasaratiobetween theassets(excludingborrowings)andthenetassets(aftertakingaccountofborrowings). Underthegrossmethod,exposurerepresentsthesumoftheCompany'spositionsafter deductionofcashandcashequivalents,withouttakingaccountofanyhedgingornetting arrangements.Underthecommitmentmethod,exposureiscalculatedwithoutthe deductionofcashandcashequivalentsandaftercertainhedgingandnettingpositionsareoffsetagainsteach other.
Marked to Market Accounting for the fair value of anassetorliabilitythatcanchangeovertimeandreflectsitscurrentmarketvalueratherthanitsbookcost.
Market Capitalisation Thestockmarketvalueofacompanyasdeterminedbymultiplyingthenumberofsharesin issue,excludingthosesharesheldintreasury,bythemarketpriceoftheshares
N AV per OrdinaryShare This is calculated asthenetassetsofanInvestmentTrustdividedbythenumberofshares inissue,excludingthosesharesheldintreasury.
Net Assets (or Shareholders' Funds) This is calculated asthevalueoftheinvestmentsandotherassetsofanInvestment Trust, pluscashanddebtors,lessborrowingsandanyothercreditors.Itrepresentstheunderlying valueofanInvestmentTrustatapointintime.
Net Gearing Net gearing is calculated astotaldebt,netofcashandcashequivalents,asapercentageof thetotalshareholders'funds.
Ordinary Shares ThemaintypeofequitycapitalissuedbyconventionalInvestmentTrusts.Shareholdersare entitledtotheirshareofbothincome,intheformofdividendspaidbytheInvestment Trust, andanycapitalgrowth.MontanaroEuropeanSmallerCompaniesTrustplchasonly OrdinarySharesinissue.
Portfolio Turnover Calculated using the total purchases plus the salesproceedsdividedbytwoasapercentageoftheaveragetotalinvestmentsatfairvalueduringthe year.
Related Party Transactions Under the Listing Rules, the Manager is regarded as a related party of the Company.
Share Price Thevalueofashareatapointintimeasquotedonastockexchange.ThesharesofMontanaroEuropeanSmallerCompaniesTrustplcarequotedontheMainMarketoftheLondonStockExchange.
SORP Statement of RecommendedPractice"FinancialStatementsofInvestmentTrustCompaniesandVentureCapitalTrusts"issuedbytheAIC.
Total Assets This is calculated asthevalueoftheinvestmentsandotherassetsofanInvestment Trust,pluscashanddebtors.
Shareholder Information The Board has decided it will no longer post a hard copy of its Half-Yearly Report to shareholders. This is not a legal requirement and the Board believes that reducing the number of hard copy documents sent by post will deliver cost savings to the Company in terms of administration, printing and postage costs.  The reduced use of paper will also have environmental benefits.
Directors and Advisers
Registered Office 16 Charlotte Square Edinburgh EH2 4DF	Depositary THEBANKOFNEWYORKMELLON(INTERNATIONAL)LIMITED OneCanada SquareLondonE145AL
Registered in Scotland No. SC074677
AninvestmentcompanyasdefinedunderSection833oftheCompaniesAct2006.	Custodian BANK OFNEWYORKMELLONSA/NV OneCanada SquareLondonE145AL
Directors RMCurling (Chairman) CARoxburgh MRSomersetWebb G J Neilly
Investment Manager and Alternative InvestmentFund Manager ('AIFM') MONTANARO ASSETMANAGEMENTLIMITED 53 Threadneedle Street London EC2R 8AR Tel: [phone] Fax:[phone] Email: [e-mail] www.montanaro.co.uk	Registrar EQUINITI LIMITED AspectHouse, SpencerRoad,Lancing West Sussex BN996DA Registrar's Shareholder Helpline Tel: [phone]* *Lines are open 9.00am to 5.00pm, Monday to Friday,excluding public holidays in England and Wales.
Administrator LINK ALTERNATIVE FUND ADMINISTRATORS LIMITED BeaufortHouse 51 New NorthRoad,ExeterEX44EP	Stockbroker CENKOS SECURITIES PLC 6.7.8 Tokenhouse Y ard London EC2R 7AS
Company Secretary LINK COMPANY MATTERS LIMITED 65GreshamStreetLondonEC2V7NQ Tel: [phone] Contact:  [e-mail]	Auditor ERNST &YOUNGLLP Atria One 144 Morrison Street Edinburgh EH3 8EX
Solicitor DICKSON MINTO W.S. 16 Charlotte Square   Edinburgh EH2 4DF	Website https://montanaro.co.uk/trust/montanaro-european-smaller-companies-trust/
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.
For further information, please contact:
Montanaro Asset Management Limited
Tel: [phone]

 

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