Interim Management Statement

Montanaro UK Smaller Companies Investment Trust PLC

Interim Management Statement - 3 months to 31 December 2008

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 looks to achieve its objective and to diversify risk by investing
in a portfolio of 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 2008, this was any company below £1.1
billion in size. The Manager looks to focus 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 weightings for 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 for 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 of which £5m is currently drawn down. The Board
has agreed to limit borrowings to 25% of shareholders' funds.

Benchmark

FTSE SmallCap (excluding Investment Companies)

Net Asset Value Total Return Performance

                    3 months      1 year     3 years   5 years       Launch
                                                                           
MUSCIT              (18.80%)    (33.07%)    (19.97%)    34.82%      131.28%
                                                                           
Benchmark           (26.55%)    (48.32%)    (47.88%)  (29.89%)       36.60%


Performance Summary (capital only)

                        As at 31           As at 30        Movement
                    December 2008    September 2008                
                                                                   
Gross assets           74,008,771        91,624,095         -19.23%
                                                                   
Net asset value            205.34            255.33         -19.58%
per share                                                          
                                                                   
Share price                145.50            205.75         -29.28%
                                                                   
Discount                   29.14%            19.42%                
                                                                   
Actual Gearing              7.51%             5.85%                
                                                                   
Net Gearing                -1.98%             2.61%                

Period Review

The fourth quarter of 2008 proved to be the most challenging period for UK
equity markets in recent history. The severity of the current banking crisis
became readily apparent as Governments on both sides of the Atlantic stepped in
to try to shore up bank balance sheets.

Uncertainty surrounding the banks' ability to provide credit, coupled with
deepening concern over the depth and duration of the recession drove the FTSE
UK Smaller Companies Index (excluding investment companies) down 27% over the
three months under review. Over the year our benchmark endured its worst ever
annual return, falling 48%.

MUSCIT's consistent and conservative investment approach continued to be
rewarded as it delivered relative outperformance of almost 8% in the last
quarter. However, any sense of achievement was rather hollow as assets fell by
just under 20%.

In this volatile environment that is shrouded in uncertainty there can be no
substitute for profits and cash. Our focus on cash generative businesses with
sound balance sheets, supported by secure financing arrangements, continues to
help our performance.

Over the last three months the strongest contributors to performance were
A.G.Barr (Food and Beverages) and Eaga (Support Services, with focus on
domestic energy efficiency). Both display defensive characteristics that should
ensure their businesses will display resilience in 2009. The former enjoys some
security from the consumer downturn as a function of the low ticket cost for
its range of carbonate drinks, while the latter enjoys excellent visibility
thanks to its participation in a range of Government programmes.

Unsurprisingly in this market environment there have been some dramatic moves
downwards in the last three months. The most painful to the portfolio has been
the 50% slide in the share price of Latchways, who design and assemble safety
equipment for the construction market. The company fell foul of the FTSE's
revised liquidity requirements and was removed from the FTSE AllShare in
December. In thin markets, the effect of the Index trackers' selling was
considerable. We used the weakness as an opportunity to add to the Trust's
position.

As we enter 2009 the Trust remains geared, although £5 million is currently
drawn down the Company has cash of £6.2m.The Board recently took the decision
to reduce this banking facility with ING from £25 million to £15 million, a
level considered more appropriate for a Company of our size following recent
market falls.

Material Events

As detailed in previous statements, VAT is no longer payable on management
fees. The Company has been pursuing a claim from HM Revenue and Customs for the
VAT previously paid on management services and the associated interest. On 30
October 2008 the Company announced that its claim for VAT previously paid on
management fees had been successful and it received £1,133,016, which will be
split between revenue and capital on the same basis it was originally
accounted.

On 15 December 2008 the Company received £180,693 which represented the balance
on the outstanding interest element, which will be allocated to the revenue
reserve. The Board is pleased to have resolved these claims in a timely and
efficient manner.

On the 10th December 2008 the Company cancelled the 1,828,000 shares that were
held in Treasury. There are currently no shares held in Treasury.

Top Ten Holdings as at 31 December 2008

Company                  Sector                          % of total portfolio  
                                                                               
Dignity                  General Retailers                                  3.6
                                                                               
Dechra Pharmaceuticals   Pharmaceuticals & Biotechnology                    3.4
                                                                               
Hargreaves Services      Support Services                                   3.1
                                                                               
Fisher (J) & Sons        Industrial Transportation                          2.8
                                                                               
Genus                    Pharmaceuticals & Biotechnology                    2.7
                                                                               
Wilmington Group         Media                                              2.7
                                                                               
BPP Holdings             Support Services                                   2.7
                                                                               
Chloride Group           Electronic & Electrical                            2.6
                         Equipment                                             
                                                                               
Eaga Plc                 Support Services                                   2.3
                                                                               
Ricardo                  Support Services                                   2.3
                                                                               
                                                                           28.2

Sector Breakdown

Sector                               % of total     % of market
                                      portfolio                
                                                               
Aerospace & Defence                        5.0%            1.9%
                                                               
Beverages                                  2.0%            0.0%
                                                               
Chemicals                                  4.4%            0.4%
                                                               
Construction & Materials                   2.1%            3.5%
                                                               
Electronic & Electrical                    8.3%            3.4%
Equipment                                                      
                                                               
Food & Drug Retailers                      1.1%            0.4%
                                                               
Food Producers                             1.3%            3.8%
                                                               
General Financial                          7.2%            7.9%
                                                               
General Retailers                          7.4%            2.3%
                                                               
Health Care Equipment &                    5.3%            4.1%
Services                                                       
                                                               
Household Goods                            0.0%            4.0%
                                                               
Industrial Engineering                     4.1%            5.2%
                                                               
Industrial Transportation                  2.8%            2.4%
                                                               
Leisure Goods                              0.9%            0.5%
                                                               
Life & Nonlife Insurance                   0.0%            2.3%
                                                               
Media                                      3.4%            5.0%
                                                               
Mining                                     0.0%            2.7%
                                                               
Other                                      4.2%            3.5%
                                                               
Oil & Gas Producers                        2.2%            2.9%
                                                               
Pharmaceuticals &                          6.1%            5.6%
Biotechnology                                                  
                                                               
Real Estate                                0.5%           11.0%
                                                               
Software & Computer Services               6.2%            6.3%
                                                               
Support Services                          22.7%           13.5%
                                                               
Technology Hardware & Telecoms             0.0%            4.1%
                                                               
Travel & Leisure                           2.8%            3.3%
                                                               
                                         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.