Portfolio Update

Merrill Lynch Br. SmallerCo Tst PLC
13 June 2006


MERRILL LYNCH BRITISH SMALLER COMPANIES TRUST plc

All information is at 31 May 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                          -6.6%           -0.8%            35.5%          112.6%           32.1%
Share price                              -10.0%          -5.0%            42.0%          132.1%           30.3%
FTSE SmallCap Index (ex IC's)            -4.3%           -3.2%            19.7%           63.1%            8.5%

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:                                 356.19p
Share price:                                     296.50p
Discount to NAV:                                   16.8%
Net yield:                                          1.6%
Total assets:                                    £195.1m
Gearing:                                            8.3%
Ordinary shares in issue:                        50,563,523


Ten Largest Sector
Weightings                                                                                             % of Total Assets
Support Services                                                                                                    18.2
Industrial Engineering                                                                                               9.4
Real Estate                                                                                                          8.5
Software & Computer Services                                                                                         7.3
Oil & Gas Producers                                                                                                  6.4
Electronic & Electrical Equipment                                                                                    6.2
Media                                                                                                                5.6
Mining                                                                                                               5.4
General Financial                                                                                                    5.2
Construction & Materials                                                                                             4.0
                                                                                                                    ----
Total                                                                                                               76.2
                                                                                                                    ----




Ten Largest Equity Investments
Company
Aveva Group
Brewin Dolphin
Charter
Dechra Pharmaceuticals
Headlam Group
Mouchel Parkman
Rathbone Brothers
Renishaw
Spirax-Sarco Engineering
WSP Group




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



May was a very difficult month for markets and a poor one for the Company. The
Company's NAV fell by 6.6%, not helped by many holdings going ex-div during the
month. The benchmark index fell by 4.3%. By way of comparison, the FTSE 100 fell
by 5.0%. Stockmarkets were, and remain, generally nervous due to fears that
interest rate increases in the US could carry on longer than expected to help
curb perceived inflationary pressures. It also began to seem more likely that
interest rates could increase in the UK in the near future. These concerns were
combined with a growing view that commodity prices had risen too far. Our
perception is that many hedge funds were too long of the market, and
specifically sectors such as commodities which had performed strongly. When
markets started to correct the movements were quite significant.



Despite this setback we have continued to see both good company results and
other newsflow from our holdings, and also confident management teams. Earnings
upgrades of more than 10% were seen during the month from a variety of companies
including Rathbones, Keller, Hamworthy, Betonsports, and Expro; this is clearly
very encouraging. These stocks have generally performed well in relative share
price terms.



Resources stocks which had performed particularly well in April, gave up some of
their gains. Our holding in Avocet Mining performed poorly having raised cash
early in the month at a much higher level and taken out marginal demand for the
shares; we remain confident of Avocet's prospects. Shares in Hardman Resources
performed poorly as it announced that two of the six producing wells in the
Chinguetti field are not performing to plan. Consolidated Minerals revised
downwards its profit expectations for the current year, pointing out that
manganese prices had not recovered as well as expected.



Other poor performers included some stocks with high US$ earnings, such as
Gyrus, property agents such as Colliers CRE and Savills both of which had
performed very strongly in recent months, and Mears which did not win a major
new social housing contract. SHL suffered a downgrade due to a poor performance
by the US arm of its assessment services business; the larger products business
continues to trade well and this is our key focus.



Resources holdings were reduced during the first half of the month; the holding
in Venture Production was sold, mostly at much higher prices. The main new
holding in the month was CLS, a real estate company with substantial interests
in mainland Europe which continues to trade at an attractive discount to NAV;
0.5% of the Company's portfolio was invested in CLS. We added to a variety of
core holdings at lower prices, notably Ultra Electronics, Brewin Dolphin,
Rathbones and Gyrus.



We are remaining fully invested, using our £15 million debenture,
notwithstanding current volatility. At some stage we expect the market to
recognise again the strength of trading and earnings momentum we are seeing at
many of our larger holdings.







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).



13 June 2006


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