Portfolio Update

Merrill Lynch Br. SmallerCo Tst PLC
13 March 2007

MERRILL LYNCH BRITISH SMALLER COMPANIES TRUST plc

All information is at 28 February 2007 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                            1.4%          11.8%            25.3%           91.8%          112.7%
Share price                                3.4%          15.0%            25.9%          114.6%          131.0%
FTSE SmallCap Index (ex IC's)              0.6%          10.0%            12.7%           42.6%           58.9%

Sources:  BlackRock and Datastream.
At month end
Net asset value:                                 450.08p
Share price:                                     392.75p
Discount to NAV:                                   12.7%
Net yield:                                          1.2%
Total assets:                                    £247.1m
Gearing:                                            9.8%
Ordinary shares in issue:                        49,993,523


Ten Largest Sector                              
Weightings                                                     % of Total Assets
Support Services                                                      16.4
Real Estate                                                           10.0
Software & Computer Services                                           9.6
General Financial                                                      7.7
Industrial Engineering                                                 6.6
Oil & Gas Producers                                                    5.3
Electronic & Electrical Equipment                                      5.3
Media                                                                  5.2
Non-Life Insurance                                                     4.7
Mining                                                                 4.5
                                                                       ----
Total                                                                 75.3
                                                                       ----




Ten Largest Equity Investments (in alphabetical order)

Company
Aveva Group
Brewin Dolphin
BSS Group
Chaucer Holdings
Dechra Pharmaceuticals
Domino Printing
ITE Group
Rathbone Brothers
Victrex
WSP Group




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



The Company's NAV rose by 1.4% in February on a capital only basis. The
benchmark index rose by 0.6%.



For most of the month stock markets were firm, but on 27 February they collapsed
but have since recovered some of the ground lost. The main reasons for the
collapse appear to be concerns about the strength of the US economy, highlighted
by former US Federal Reserve Chairman Alan Greenspan; and the strength of the
Japanese Yen, following the recent increase in interest rates in Japan, which
may have forced some of those that borrow in Yen and invest in equities in other
markets, to unwind their positions rapidly. Neither of these factors have much
relevance to most UK smaller companies, which generally continue to trade well.
Indeed we have continued to see good results from many of the Company's holdings
over the last few weeks, resulting in further upgrades to earnings. Most
management teams we have met remain confident about the prospects for their
companies and are rather bemused by stock market nervousness. We have therefore
tried to ignore recent market turbulence and have remained fully invested.



The main positive contributors to relative performance in February were the
Company's holdings in Halladale and Kier Group, and smaller holdings in Imperial
Energy and Frontier Mining. Halladale was bid for at a 30% premium by an
Australian real estate company. Kier shares recovered after a period of weakness
as some brokers re-iterated a positive stance. Imperial Energy and Frontier
Mining are small producers of oil and gold respectively, but both own large
resources which are gradually being firmed up. In fact, since the month end,
Imperial Energy has announced a massive increase in its oil reserves following
an independent audit.



The largest negative impact on relative performance in February came from
Songbird Estates, Expro International and Encore Oil. Songbird Estates, which
owns much of Canary Wharf, succumbed to a bout of profit taking after a
sustained strong run; much the same can be said of Expro International. Encore
Oil announced an important exploration well was dry. Encore Oil management found
the huge Buzzard field in the North Sea whilst running another company. Whilst
this well, their first Encore well, was unsuccessful they have a diverse
portfolio of North Sea assets and are likely to make the most of them.



The main new holdings in the month were Grainger, Galliford Try, SDL and Gem
Diamonds. Grainger invests in domestic housing which is let long term to
tenants. When the properties are vacated, Grainger can sell them on an open
market value basis; it is a major beneficiary of UK house price inflation.
Galliford Try is a construction company and housebuilder. During the month it
announced the purchase of Linden Homes, a South East based housebuilder. We
supported the equity placing which helped to fund the acquisition. SDL focuses
on translating texts into other languages increasingly using its software
platform to speed up the process and save money. We invested following strong
results and a good meeting with management. Gem Diamonds is managed by a team of
former senior De Beers executives, who also impressed us on meeting and who are
well known to, and highly regarded by, our natural resources colleagues. Gem
Diamonds has amassed a substantial portfolio of highly prospective African
diamond assets. In addition we added materially to the Company's existing
holdings in Domino's Pizza and Wichford and had a good meeting with the
management of both companies during the month.



Following the bid for Halladale we sold our holding of ordinary shares in the
market. A number of holdings which had performed well were top sliced.




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



13 March 2007


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