Portfolio Update

MERRILL LYNCH BRITISH SMALLER COMPANIES TRUST plc

All information is at 31 October 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           7.1%      0.4%       23.2%      106.4%     232.5%    
                                                                               
Share price               4.1%      -0.9%      16.4%      101.8%     249.8%    
                                                                               
Hoare Govett Smaller      5.2%      -0.4%       7.2%       45.9%     113.1%  
Companies plus AIM (ex                                                         
IC's) Index*                                                                   

Sources: BlackRock and Datastream.

*with effect from 1 September 2007 the Hoare Govett Smaller Companies plus AIM
(ex Investment companies) Index replaced the FTSE SmallCap Index (ex Investment
Companies) as the Company's benchmark. The above index has been blended to
reflect this.

At month end                                                         
                                                                     
Net asset value (debt at par value):                479.50p          
                                                                     
Net asset value (debt at fair value):               473.51p          
                                                                     
Share price:                                        393.50p          
                                                                     
Discount to NAV (debt at par value):                17.9%            
                                                                     
Discount to NAV (debt at fair value):               16.9%            
                                                                     
Net yield:                                          1.2%             
                                                                     
Total assets:                                       £254.8m          
                                                                     
Gearing:                                            7.4%             
                                                                     
Ordinary shares in issue^:                          49,474,708       

(^excluding 518,815 shares held in treasury).

 

Ten Largest Sector                                                             
Weightings                                                    % of Total Assets
                                                                               
Support Services                                                           17.4
                                                                               
Software & Computer Services                                               11.9
                                                                               
Industrial Engineering                                                      9.6
                                                                               
Industrial Metals & Mining                                                  8.4
                                                                               
General Financial                                                           8.4
                                                                               
Oil & Gas Producers                                                         8.3
                                                                               
Real Estate                                                                 6.0
                                                                               
Electronic & Electrical Equipment                                           4.5
                                                                               
Media                                                                       3.7
                                                                               
Non-Life Insurance                                                          3.2
                                                                           ----
                                                                               
Total                                                                      81.4
                                                                           ----

 

Ten Largest Equity Investments (in alphabetical order)                         
                                                                               
Company                                                                        
                                                                               
Aveva                                                                          
                                                                               
Brewin Dolphin                                                                 
                                                                               
BSS Group                                                                      
                                                                               
Dechra Pharmaceuticals                                                         
                                                                               
ITE Group                                                                      
                                                                               
Rathbone Brothers                                                              
                                                                               
Spirax-Sarco Engineering                                                       
                                                                               
Ultra Electronics                                                              
                                                                               
Victrex                                                                        
                                                                               
WSP Group                                                                      
                                                                               
                                                                               

 

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

October was a much stronger month both for the Company and for smallcaps in
general. The Company's NAV rose by 7.1% on a capital only basis; the benchmark
increased by 5.2%. Sadly this absolute and relative outperformance has been
reversed in November to date.

The main positive contributors to relative performance in October were our
holdings in City of London Investment Group, Aveva Group, WSP Group, Mouchel
Parkman and Brewin Dolphin. City of London Investment Group, which invests
mainly in emerging markets equities closed end funds, produced a very strong
trading update which led to a 15% earnings upgrade by its house broker. Its
funds continue to perform well, and it is benefiting from the strength of
equities in many emerging markets. Aveva also provided a strong trading update
leading to a 12% earnings upgrade. WSP announced a number of small acquisitions
which led to modest upgrades to earnings. Mouchel Parkman produced strong final
results and management were very confident when we met them. Brewin Dolphin
shares rebounded after a weak period for its shares since mid-July.

On the negative side, our worst performing holding was Colliers CRE. Colliers
CRE shares have been hit by negative sentiment regarding UK commercial
property, for which it provides a variety of broking, management and valuation
services. It is probable that lower levels of activity in commercial property
markets will impact its revenues.

New holdings included 0.5% of total assets purchases in each of Hunting and Big
Yellow. Hunting provides services to oil producing companies; it focuses on
well construction and well completion equipment, and blending, refining and
distribution of oil in Alberta. Big Yellow, a former holding, provides self
storage facilities around the UK; we regard management highly but had
previously sold at higher share price levels believing the shares had been
overbought.

Disposals included our holdings in Keller, due to our caution over the US
economy from which Keller derives over half of its profits, and Anite,
following doubts about the strength of trading at its handset testing division.
We further reduced the size of some of our real estate holdings.

November to date has been a more difficult month with much of the October gains
being reversed. Our approach has continued to be sticking to the stocks we know
well and have confidence in, and selectively adding to positions, usually after
good management meetings. We have also reduced our construction and
housebuilding exposure by selling our holding in Galliford Try.

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).

 

20 November 2007