Portfolio Update

Merrill Lynch Br. SmallerCo Tst PLC
18 May 2006

MERRILL LYNCH BRITISH SMALLER COMPANIES TRUST plc

All information is at 30 April 2006 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                            2.6%           9.7%            45.4%          156.3%           44.8%
Share price                                2.6%          10.3%            50.5%          187.8%           46.8%
FTSE SmallCap Index (ex IC's)              0.0%           3.4%            25.0%           90.4%           15.5%

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:                                 381.23p
Share price:                                     329.50p
Discount to NAV:                                   13.6%
Net yield:                                          1.4%
Total assets:                                    £207.6m
Gearing:                                            7.7%
Ordinary shares in issue:                        50,563,523


Ten Largest Sector
Weightings                                                     % of Total Assets
Support Services                                                            18.0
Industrial Engineering                                                       9.0
Real Estate                                                                  8.0
Oil & Gas Producers                                                          7.9
Software & Computer Services                                                 7.1
Media                                                                        6.8
Mining                                                                       6.3
Electronic & Electrical Equipment                                            6.1
General Financial                                                            4.7
Construction & Materials                                                     3.8
                                                                            ----
Total                                                                       77.7
                                                                            ----




Ten Largest Equity Investments
Company
Aveva Group
Brewin Dolphin
BSS Group
Charter
Colliers CRE
Headlam Group
Mouchel Parkman
Rathbone Brothers
Renishaw
WSP Group




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



April was a good month for the Company. The Company's NAV rose by 2.6% whilst
the benchmark index was unchanged.



Resources stocks performed well on the back of higher oil, gold and base metals
prices. Strong performers in the resources sectors included Avocet Mining, JKX
Oil & Gas, Emerald Energy, Metorex, Hambledon Mining and Venture Production. All
of these companies are producers with the exception of Hambledon, which
re-affirmed that its gold mining operations will commence over the next few
months.



In other sectors, Severfield-Rowen produced excellent full year results leading
to significant earnings upgrades. Rotork had a confident AGM statement also
leading to upgrades. Colliers CRE shares performed well in response to good
results in late March.



Disappointing share price performances came from Paypoint, White Young Green and
Quintain. Paypoint's shares performed very well in January; we continue to
believe the company is well placed. White Young Green produced results in line
with expectations, and has good visibility - the shares ran into profit taking
following a small placing. Quintain shares suffered from a lack of newsflow.



New holdings were Numis, City of London Investment Group and Playtech, 0.5% of
total assets being invested in each. Numis is well known to us as one of the
leading independent stockbrokers in London. It has raised significant levels of
money for its corporate clients and secondary trading has also been good. City
of London Investment Group is a new IPO; it manages portfolios of closed end
funds invested mainly in emerging markets equities. Its track record is good and
the shares were attractively priced. Playtech supplies software to online gaming
companies and shares in their success by taking a percentage of net revenues. It
provides good, diversified exposure to the online gaming sector as it benefits
from the success of all its customers.



Holdings in Entertainment Rights and Wyndeham Press were sold, and profits were
taken in various other companies.



Markets have moved sharply lower during mid May and this has impacted on the
absolute and relative performance of the Company. Resources companies have been
particularly hard hit, and the Company holds a significant overweight position
in this area. This position has been very profitable for the last year or so,
but costly over the last week. However, the Company's portfolio is built around
soundly based, well managed, growth stocks and whilst many of these have also
been marked sharply lower, we believe they will perform much better when the
market stabilises.



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).



18 May 2006


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