Portfolio Update

Merrill Lynch Br. SmallerCo Tst PLC
17 January 2006



MERRILL LYNCH BRITISH SMALLER COMPANIES TRUST plc

All information is at 31 December 2005 and unaudited.

Performance at month end is calculated on a capital only basis

                                            One          Three              One           Three            Five
                                         Month         Months              Year           Years           Years

Net asset value                            3.8%           3.9%            27.3%          114.8%           10.3%
Share price                                5.0%           3.3%            30.9%          144.8%           11.0%
FTSE Small Cap Index (ex IC's)             2.8%           4.1%            16.4%           75.6%            1.7%

Sources:  Merrill Lynch Investment Managers and Datastream.

From 30 December 2005 underlying investments are valued on a bid price basis, in
accordance with AITC guidelines.

At month end
Net asset value:                                 322.33p
Share price:                                     273.00p
Discount to NAV:                                   15.3%
Net yield:                                          1.7%
Total assets:                                    £178.1m
Gearing:                                            9.3%
Ordinary shares in issue:                        50,563,523


Ten Largest Sector
Weightings                                                                                             % of Total Assets
Support Services                                                                                                    14.0
Engineering & Machinery                                                                                              9.1
Media & Entertainment                                                                                                8.3
Construction & Building Materials                                                                                    7.4
Electronic & Electrical Equipment                                                                                    7.1
Software & Computer Services                                                                                         7.1
Mining                                                                                                               5.9
Oil & Gas                                                                                                            5.4
Real Estate                                                                                                          5.3
Speciality and other finance                                                                                         4.5
                                                                                                                    ----
Total                                                                                                               74.1
                                                                                                                    ----




Ten Largest Equity Investments
Company
Aveva Group
Brewin Dolphin
BSS Group
Charter
Dechra Pharmaceuticals
Kier Group
Mouchel Parkman
Rathbone Brothers
Renishaw
WSP Group




Commenting on the markets, Mike Prentis, representing the Investment Manager
noted:



December was a good month for equity markets and the Company. The Company's NAV
rose by 3.8%.  The benchmark index rose by 2.8%.



Good final results were produced by Brewin Dolphin and Gooch & Housego, both
leading to upgraded earnings. Brewin Dolphin manages a significant level of
discretionary funds for private clients and advises on the management of further
significant funds. It is very well placed to benefit from the strength of equity
markets, and if the UK market remains at the current level over the next nine
months, the company should show continuing strong earnings growth. Gooch &
Housego produce a range of sophisticated acousto-optic components and products.
Although only small, it is the global leader in various high margin niche areas.
Management are confident about future prospects. The share prices of both Brewin
Dolphin and Gooch & Housego increased by more than 10% during the month. Other
stocks showing similar share price increases included JKX Oil & Gas, which
produces oil and gas in the Ukraine, MTL Instruments, a leading supplier of
electrical surge protection systems, Abcam, which supplies a wide range of
antibodies mainly for medical research purposes which are all sold through an
online catalogue, Entertainment Rights, which announced various new programming
commissions and the purchase of the 'Rupert Bear' property, and Monstermob which
announced late in December the purchase of a supplier of mobile entertainment in
Russia.



Disappointments were few but the share prices of The Local Radio Company and
Plasmon both fell by more than 20%. The share price move in the former was due
to a distressed seller taking well below the market price for a small disposal.
Radio station advertising has been weak during 2005 although, operationally, The
Local Radio Company has traded better than many. Plasmon has produced more
encouraging newsflow in relation to partnership deals with IBM but has yet to
return to profitability.



New holdings in the period were Detica, Victrex, Expro International and Premier
Oil. Detica is an IT services company which works very closely with Government
particularly in the area of national security (anti terrorism and organised
crime) where IT budgets are growing at about 15% per annum.  Victrex manufacture
a product called Peek which is a very hard material used in many applications
worldwide. Its use is invariably specified by users which gives it good
protection against potential competitors. Expro is an oilfield services company
with proven expertise in subsea applications, cased hole services, well testing
and production solutions. Premier Oil produces gas and oil primarily in
Pakistan, Indonesia and the UK. Current production is about 30,000 barrels of
oil equivalent per day. Victrex and Expro are former holdings of the Company.
1.0% of the Company's assets were invested in Detica with 0.5% being invested in
each of the others. The Company also invested in the highly successful IPO of
Carluccio's but was allocated only a small holding which currently amounts to
0.3% of total assets.



The Company also exchanged several small, illiquid holdings for stock in the
Third Advance Value Realisation Company, a new investment company which will
seek to maximise the value of its underlying investments, and return capital to
shareholders (70% of the investment in TAVRC is by way of redeemable preference
shares).







Latest information is available by typing www.mlim.co.uk/its on the internet,
'MLIMINDEX' on Reuters, 'MLIM' on Bloomberg or '8800' on Topic 3 (ICV terminal).



17 January 2006


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