Portfolio Update

Merrill Lynch Br. SmallerCo Tst PLC
14 December 2006

MERRILL LYNCH BRITISH SMALLER COMPANIES TRUST plc

All information is at 30 November 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                            3.4%          12.1%            29.6%           92.3%           85.7%
Share price                                1.0%          12.7%            31.3%          110.2%          100.9%
FTSE SmallCap Index (ex IC's)              0.2%           5.7%            13.9%           43.8%           36.2%

Sources:  BlackRock Merrill Lynch Investment Managers and Datastream.

At month end
Net asset value:                                 402.48p
Share price:                                     341.50p
Discount to NAV:                                   15.2%
Net yield:                                          1.4%
Total assets:                                    £218.1m
Gearing:                                            8.2%
Ordinary shares in issue:                        50,093,523


Ten Largest Sector
Weightings                                                                                             % of Total Assets
Support Services                                                                                                    16.4
Real Estate                                                                                                         11.3
Software & Computer Services                                                                                         8.5
General Financial                                                                                                    7.0
Industrial Engineering                                                                                               6.6
Electronic & Electrical Equipment                                                                                    5.3
Oil & Gas Producers                                                                                                  5.2
Media                                                                                                                5.1
Mining                                                                                                               3.8
Non-Life Insurance                                                                                                   3.7
                                                                                                                    ----
Total                                                                                                               72.9
                                                                                                                    ----




Ten Largest Equity Investments (in alphabetical order)
Company
Aveva Group
Brewin Dolphin
BSS Group
Chaucer Holdings
Dechra Pharmaceuticals
ITE Group
Mouchel Parkman
Rathbone Brothers
Speedy Hire
WSP Group




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



November was a strong month for the Company. The NAV rose by 3.4% on a capital
only basis to 402.48 pence. The benchmark index rose by 0.2%.



The main positive contributors to performance in November were the Company's
holdings in BSS Group, Aveva Group and Songbird Estates. BSS announced strong
final results and management were in confident form when we met them. Aveva also
produced excellent final results with further large earnings upgrades. As with
Aveva, management were very confident that demand in their end markets will
remain very firm for the foreseeable future. Songbird Estates, the controlling
shareholder in Canary Wharf, is benefiting from increased demand for large
amounts of high quality space which is not readily available in the City but can
in time be made available at Canary Wharf. Rents at Canary Wharf remain low
relative to the City, and thus there is also scope for rental growth.



The largest negative impact on relative performance in November were holdings in
the benchmark index but not owned by the Company, particularly UK Coal and DTZ
Holdings. UK Coal announced that its large tracts of land around Northern former
collieries could have significant development potential.



The main new holdings in the month were Babcock, Development Securities,
Wichford and Oxford Instruments. Babcock produced strong interim results leading
to 10% earnings upgrades to this year's figures. We had a good meeting with
management who confirmed that all divisions are trading well with good
opportunities in each. Babcock's main activities include refurbishing old, and
assembling new, warships at Rosyth, managing UK armed forces home bases,
providing and refurbishing high voltage electricity transmission lines, and
providing signalling requirements for the UK rail network. Visibility of its
revenue streams is generally excellent. Development Securities has a strong
pipeline of property development opportunities and was looking to raise some
additional equity to part fund some of these; management are very confident
about their own prospects. Wichford is a low risk real estate company which owns
property let out to Central Government on a long term basis. Yields are high for
the low risk, and Wichford shares have been trading very close to estimated NAV.
Oxford Instruments specialises in the design and manufacture of high-technology
tools and systems. It has particular expertise and intellectual property in high
magnetic field environments. Historically it has failed to achieve the good
margins which its market position and technology should allow. New management
are getting to grips with the issues, impressed us on meeting, and are starting
to achieve better profitability.



The main sales in the month were the holdings in WS Atkins, Topps Tiles and
Highway Insurance, although a number of smaller holdings were also sold in their
entirety. Results meetings were held with the first two companies, neither of
which were entirely satisfactory, and so we decided to sell. The sale of Highway
shares reflects our current preference for Chaucer, Beazley and Kiln shares. The
latter two holdings were added to during the month.



We retain a positive view of the market based on recent good newsflow especially
in relation to the portfolio. Accordingly we remain fully invested.









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).



14 December 2006


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