Interim Results

Montanaro European Smaller C.TstPLC
16 November 2006


MONTANARO EUROPEAN SMALLER COMPANIES TRUST PLC

Date:   16 November 2006

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006

Investment Objective

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

Financial Highlights

•     Share price increased by 7.6% reflecting a narrowing of the discount to
      4.3%
•     Net asset value per share decreased by 2.9%
•     Interim dividend of 1.75p per share


CHAIRMAN'S STATEMENT

At the Company's Annual General Meeting held on 4 September 2006, shareholders
approved the proposal to broaden the Company's investment policy to permit
investment in Continental European quoted smaller companies and to amend its
investment objective accordingly. Shareholders also approved the proposal to
change the Company's name to 'Montanaro European Smaller Companies Trust plc'.
Montanaro Investment Managers Limited ('Montanaro') were appointed as the
Company's  Investment Managers.

It is pleasing to report a re-rating of the shares during the period under
review, with the share price increasing by 7.6 per cent to 336.5 pence per share
and the discount narrowing to 4.3 per cent.   In the paragraphs below I have
reported separately on the performance for the periods prior to, and after, 4
September 2006.

Results For The Period To 4 September 2006

The net asset value per share decreased by 5.3 per cent during the period from
31 March 2006 to 4 September 2006. This compares with a decrease of 2.3 per cent
in the previous benchmark, the Hoare Govett Smaller Companies (ex Investment
Companies) Index.

During this period, markets wrestled with uncertainty of both economic outlook
and market direction, with the prospects of inflation and rising interest rates
being the key concerns for the period ahead. The UK base rate increased to 4.75
per cent in August.  Emphasis was placed on defensive companies which had
structural factors in their favour.

Within the portfolio, there were positive contributions from Hitachi Capital,
which won two vehicle solutions contracts, and E2V Technologies, where the
market responded well to an announcement to raise new money to acquire a
business in France that is significantly earnings enhancing. Hornby and
Mothercare both benefited from positive trading statements.  Negative
contributors during the period included Xaar, Kewill Systems, Sanctuary Group
and Consolidated Minerals which were all affected by poor trading statements.

New purchases during the period included Severfield Rowan and Rotork which are
benefiting from structural growth. TDG and Christian Salvesen were sold on the
back of concerns over negative cyclical trends.

Results For The Period Since 4 September 2006

The net asset value per share increased by 2.6 per cent from the period from 4
September 2006 to 30 September 2006. This compares to an increase of 1.7 per
cent in the Company's new benchmark, the MSCI Europe Small Cap Index.

Since the change in the management arrangements, the new Investment Manager has
made good progress with the reconstruction of the portfolio. At the time of
writing this statement, approximately 75 per cent of the portfolio is invested
in Continental European small companies. Despite the inevitable costs of
restructuring the portfolio, it is pleasing to report that performance has been
strong and ahead of the benchmark. The bulk of the restructuring is now
complete.

Discount Management Policy

The circular sent to shareholders on 11 August 2006 contained details of the
Company's new discount management policy. The Board has stated its intention to
implement an active policy of share buy backs if the share price is at a
discount greater than 5.0 per cent to the net asset value per share. The Board
believes that the appointment of Montanaro and the broadening of the investment
mandate will attract new investors to the Company, and indeed has done so
already. Nevertheless, it believes that the introduction of a discount
management policy will help achieve a sustained improvement in the rating of the
shares.

As part of a policy of active discount management, the Board will be seeking
authority from shareholders to buy back shares to be held in Treasury and
subsequently re-issued.  This will serve to improve liquidity and help to
maintain the size of the Company.  A circular will be sent to shareholders
shortly containing further information.

The Board is encouraged by the reaction of the share price to the recent
changes. This has resulted in a significant narrowing of the discount, which was
4.3 per cent at 30 September 2006 compared to 13.6 per cent at 31 March 2006.

No shares were bought back during the period.

Earnings and Dividends

Earnings per Ordinary Share were 2.31 pence in respect of the six months ended
30 September 2006 (2005: 2.78 pence). The main reason for the reduction in
earnings relates to expenses incurred in relation to the review of management
arrangements during the period.

The Board has declared an interim dividend of 1.75 pence per Ordinary Share
(2005: 1.75 pence) payable on 5 January 2007 to shareholders on the register on
8 December 2006. This rate of dividend is in line with the expectations of the
Board as stated in the recent shareholder circular.

Since its appointment, the Investment Manager has begun to invest in European
companies.  It is expected that the investment income generated from these new
holdings will be less than the income from the portfolio prior to the change in
investment objective. The Board would therefore expect to declare lower levels
of dividends in the future to allow it to place emphasis on the Company's
capital growth objective. It is therefore likely that the total dividend in
respect of the current financial year will be less than the 4.00 pence per share
paid in the year ended 31 March 2006.

Gearing

At 30 September 2006 the Company had cash amounting to 10.6 per cent of net
assets, which compares to gearing, net of cash, of 5.2 per cent as at 31 March
2006. The Company's borrowings are represented by a £10 million multi-currency
revolving credit facility, of which £6 million was drawn down. Since the end of
the period the Company has changed the denomination of its borrowings to Euros.

Outlook

The European Union is experiencing the highest level of growth in more than five
years due, among other factors, to an improvement in consumer spending and the
benefits of investment  in improving the infrastructure in the new accession
countries.  Small companies are among the prime beneficiaries of the enlargement
of the EU.   There are more than 6,000 quoted European companies of which half
are below €500 million in size and less well-researched. This offers the
Investment Manager a wide choice of investments at a time when the economic
outlook in Europe is better than in many years.

A R Irvine
Chairman



Condensed Unaudited Group Balance Sheet

                                                                 As at 30         As at 30      As at 31
                                                           September 2006   September 2005    March 2006
                                                                    £'000            £'000         £'000
Non-current assets
Investments held at fair value                                     54,156           63,492        65,803
                                                                  _______          _______       _______

Current Assets
Investments held by dealing subsidiary                                  -              101            61
Due from brokers                                                    2,790               85            14
Other receivables                                                      66               99           146
Cash and cash equivalents                                          11,280            3,819         3,761
                                                                  _______          _______       _______

                                                                   14,136            4,104         3,982
                                                                  _______          _______       _______

Total assets                                                       68,292           67,596        69,785
                                                                  _______          _______       _______

Current liabilities
Revolving credit facility                                         (6,000)          (9,000)       (6,000)
Due to brokers                                                      (436)            (163)         (470)
Other payables                                                      (506)             (97)         (132)
                                                                  _______          _______       _______

Total liabilities                                                 (6,942)          (9,260)       (6,602)
                                                                  _______          _______       _______

Net Assets                                                         61,350           58,336        63,183
                                                                  _______          _______       _______

Capital and reserves
Called-up share capital                                             8,724            9,099         8,724
Share premium account                                               3,935            3,935         3,935
Capital redemption reserve                                          2,212            1,836         2,212
Capital reserve - realised                                         30,521           23,918        25,458
                - unrealised                                       14,366           17,849        21,272
Revenue reserve                                                     1,592            1,699         1,582
                                                                  _______          _______       _______

Equity Shareholders' funds                                         61,350           58,336        63,183
                                                                  _______          _______       _______

Net asset value per Ordinary Share                                351.61p          320.56p       362.12p
                                                                  _______          _______       _______


Unaudited Statement of Changes in Equity
For the six months ended 30 September 2006

                                     Share     Share     Capital     Capital     Capital     Revenue     Total
                                   Capital   Premium  Redemption     Reserve     Reserve     Reserve
                                             Account     Reserve    Realised  Unrealised

Balance as at 1 April 2006           8,724     3,935       2,212      25,458      21,272       1,582    63,183
Net gain on realisation of               -         -           -       5,522           -           -     5,522
investments
Decrease in unrealised                   -         -           -           -     (6,906)           -   (6,906)
appreciation
Share buy backs                          -         -           -           -           -           -         -
Management fee charged to capital        -         -           -       (174)           -           -     (174)
Interest charged to capital              -         -           -       (104)           -           -     (104)
Other expenses charged to capital        -         -           -       (243)           -           -     (243)
Retained net profit for the              -         -           -           -           -         403       403
period
Dividends paid                           -         -           -           -           -       (393)     (393)
Currency gains                           -         -           -          62           -           -        62
                                     _____    ______      ______      ______      ______      ______    ______
Balance as at 30 September 2006      8,724     3,935       2,212      30,521      14,366       1,592    61,350
                                     _____    ______      ______      ______      ______      ______    ______

For the six months ended 30 September 2005

Balance as at 1 April 2005          10,777     3,935         159      28,559      16,441       1,744    61,615
Net gain on realisation of               -         -           -       4,287           -           -     4,287
investments
Increase in unrealised                   -         -           -           -       1,408           -     1,408
appreciation
Share buy backs                    (1,678)         -       1,678     (8,575)           -           -   (8,575)
Management fee charged to capital        -         -           -       (202)           -           -     (202)
Interest charged to capital              -         -           -       (152)           -           -     (152)
Retained net profit for the              -         -           -           -           -         549       549
period
Dividends paid                           -         -           -           -           -       (594)     (594)
                                     _____    ______      ______      ______      ______      ______    ______
Balance as at 30 September 2005      9,099     3,935       1,837      23,917      17,849       1,699    58,336
                                     _____    ______      ______      ______      ______      ______    ______

For the year ended 31 March 2006

Balance as at 1 April 2005          10,777     3,935         159      28,559      16,441       1,744    61,615
Net gain on realisation of               -         -           -       7,920           -           -     7,920
investments
Increase in unrealised                   -         -           -           -       4,831           -     4,831
appreciation
Share buy backs                    (2,053)         -       2,053    (10,670)           -           -  (10,670)
Management fee charged to capital        -         -           -       (401)           -           -     (401)
Interest charged to capital              -         -           -       (268)           -           -     (268)
Special dividend credited to             -         -           -         318           -           -       318
capital
Retained net profit for the year         -         -           -           -           -         736       736
Dividends paid                           -         -           -           -           -       (898)     (898)
                                     _____    ______      ______      ______      ______      ______    ______
Balance as at 31 March 2006          8,724     3,935       2,212      25,458      21,272       1,582    63,183
                                     _____    ______      ______      ______      ______      ______    ______


Condensed Unaudited Group Income Statement
(Incorporating the Revenue Account)

                                                            Six Months to 30 September 2006

                                                                    Revenue         Capital          Total
                                                                      £'000           £'000          £'000
Income
Investment income                                                       785               -            785
Other operating income                                                  117               -            117
                                                                     ______          ______         ______
                                                                        902               -            902

Losses on investments held at fair value                                  -         (1,384)        (1,384)
Exchange differences                                                      -              62             62
                                                                     ______          ______         ______
Total income                                                            902         (1,322)          (420)

Expenses
Investment management fees                                             (94)           (174)          (268)
Other expenses                                                        (349)           (243)          (592)
                                                                     ______          ______         ______
Net operating profit/(loss) before finance costs and tax                459         (1,739)        (1,280)

Finance costs                                                          (56)           (104)          (160)
                                                                     ______          ______         ______
Net operating profit/(loss) before tax                                  403         (1,843)        (1,440)

Tax                                                                       -               -              -
                                                                     ______          ______         ______
Net profit/(loss)                                                       403         (1,843)        (1,440)
                                                                     ______          ______         ______

Earnings per share                                                    2.31p        (10.56)p        (8.25)p
                                                                    ______         ______           ______


Condensed Unaudited Group Income Statement
(Incorporating the Revenue Account)

                                                                         Six Months to 30 September 2005

                                                                    Revenue        Capital           Total
                                                                      £'000          £'000           £'000
Income
Investment income                                                       740              -             740
Other operating income                                                  187              -             187
                                                                     ______         ______          ______
                                                                        927              -             927

Gains on investments held at fair value                                   -          5,695           5,695
Exchange differences                                                      -              -               -
                                                                     ______         ______          ______
Total income                                                            927          5,695           6,622

Expenses
Investment management fees                                            (109)          (202)           (311)
Other expenses                                                        (187)              -           (187)
                                                                     ______         ______          ______
Net operating profit before finance costs and tax                       631          5,493           6,124

Finance costs                                                          (82)          (152)           (234)
                                                                     ______         ______          ______
Net operating profit before tax                                         549          5,341           5,890

Tax                                                                       -              -               -
                                                                     ______         ______          ______
Net profit                                                              549          5,341           5,890
                                                                    ______          ______          ______

Earnings per share                                                    2.78p         27.09p          29.87p
                                                                     ______         ______          ______


Condensed Unaudited Group Income Statement
(Incorporating the Revenue Account)


                                                            Year to 31 March 2006

                                                                  Revenue         Capital           Total
                                                                    £'000           £'000           £'000
Income
Investment income                                                   1,264             318           1,582
Other operating income                                                235               -             235
                                                                   ______          ______          ______
                                                                    1,499             318           1,817

Gains on investments held at fair value                                 -          12,751          12,751
Exchange differences                                                    -               -               -
                                                                   ______          ______          ______
Total income                                                        1,499          13,069          14,568

Expenses
Investment management fees                                          (216)           (401)           (617)
Other expenses                                                      (403)               -           (403)
                                                                   ______          ______          ______
Net operating profit before finance costs and tax                     880          12,668          13,548

Finance costs                                                       (144)           (268)           (412)
                                                                   ______          ______          ______
Net operating profit before tax                                       736          12,400          13,136

Tax                                                                     -               -               -
                                                                   ______          ______          ______
Net profit                                                            736          12,400          13,136
                                                                   ______          ______          ______

Earnings per share                                                  3.95p          66.62p          70.57p
                                                                   ______          ______          ______


Summarised Group Statement of Cash Flows (Unaudited)




                                                       Six months to       Six months to             Year to
                                                        30 September        30 September            31 March
                                                                2006                2005                2006
                                                               £'000              £ '000               £'000

Net cash inflow from operating activities                        489                 512                 787
Cash flows from investing activities                           7,575               9,168              14,428
Cash flows from financing activities                           (545)             (7,403)            (12,996)
                                                              ______              ______              ______
Increase in cash and cash equivalents                          7,519               2,277               2,219
                                                              ______              ______              ______

Reconciliation of net operating (loss)/profit before finance costs
and tax to net cash flow from operating activities

Net operating (loss)/profit before finance costs             (1,280)               6,124              13,548
and taxation
Losses/(gains) on investments held at fair value               1,384             (5,695)            (12,840)
Exchange differences                                            (62)                   -                   -
Changes in working capital and other non cash
items                                                            447                  83                  79
                                                                 
                                                              ______              ______              ______
Net cash inflow from operating activities                        489                 512                 787
                                                              ______              ______              ______




Notes

1.         The interim financial statements have been prepared in accordance
with the accounting policies that the Directors anticipate will be applied in
the annual financial statements for 2007.

The accounting policies adopted in the preparation of the interim financial
statements are consistent with those followed in the preparation of the annual
report and financial statements for the year ended 31 March 2006.

2.         Earnings for the first six months should not be taken as a guide to
the results for the full year.

3.         Earnings per Ordinary Share is based on a weighted average of
17,448,260 Ordinary Shares in issue during the period (year end 31 March 2006:
18,613,479; six months ended 30 September 2005: 19,718,779).

4.         The interim dividend of 1.75 pence per Ordinary Share will be paid on
5 January 2007 to shareholders on the Register on 8 December 2006.

5.         Net asset value per Ordinary Share is based on 17,448,260 Ordinary
Shares in issue (31 March 2006: 17,448,260; 30 September 2005: 18,198,260).

6.                 The group results consolidate those of ISIS UK Securities
Limited, a wholly owned subsidiary which deals in securities.

7.                 These are not statutory accounts in terms of Section 240 of
the Companies Act 1985 and are unaudited.  The information for the year ended 31
March 2006 has been extracted from the latest published financial statements
which received an unqualified audit report and have been filed with the
Registrar of Companies.  No statutory accounts in respect of any period after 31
March 2006 have been reported on by the Company's auditors or delivered to the
Registrar of Companies.

Copies of the Interim Report, which has been reviewed by the Company 's
auditors, will be mailed to shareholders and will be available for inspection at
the Registered Office of the Company, 80 George Street, Edinburgh, EH2  3BU.







For further information contact:



Montanaro Investment Managers Limited : tel. [phone]




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