Portfolio Update

MERRILL LYNCH BRITISH SMALLER COMPANIES TRUST plc
All information is at 29 February 2008 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                    7.5%      -2.4%    -9.4%     44.9%      189.2%    
Share price                        9.9%       3.3%   -13.4%     48.5%      209.8%    
HGSC ex Inv Trust + AIM (blended)* 3.6%      -5.4%   -16.7%     10.9%       89.9%   
                                                                   
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):                407.98p          
Net asset value (debt at fair value):               403.11p          
Share price:                                        340.00p          
Discount to NAV (debt at par value):                16.7%            
Discount to NAV (debt at fair value):               15.6%            
Net yield:                                          1.4%             
Total assets:                                       £214.0m          
Gearing:                                            8.0%             
Ordinary shares in issue^:                          48,509,708       

(^excluding 1,483,815 shares held in treasury)


Ten Largest Sector                                                             
Weightings                                  % of Total Assets
                                                                               
Support Services                                   14.1
Software & Computer Services                       12.0
Oil & Gas Producers                                11.5
Industrial Engineering                              9.1
General Financial                                   8.8
Industrial Metals & Mining                          8.6
Real Estate                                         5.5
Aerospace & Defence                                 4.6
Electronic & Electrical Equipment                   3.6
Pharmaceuticals & Biotechnology                     3.5
                                                   ----
Total                                              81.3         
                                                   ====

 

Ten Largest Equity Investments (in alphabetical order)                         
Company                                                                        
                                                                               
Albidon                                                                        
Avocet Mining                                                                  
Brewin Dolphin                                                                 
Dechra Pharmaceuticals                                                         
Hill & Smith                                                                   
ITE Group                                                                      
Rathbone Brothers                                                              
Spirax-Sarco                                                                   
Ultra Electronics                                                              
Victrex                                                                        
                                                                               
                                                                               
Commenting on the markets, Mike Prentis, representing the Investment Manager
noted:

February was a much better month with smallcaps recovering some of the ground
lost in previous months. The Company's NAV rose by 7.5%. The benchmark index
rose by 3.6%. The FTSE100 rose by 0.1% only.

In relative terms, the best stock contributions came from Expro International,
Fidessa, Avocet Mining and Dechra Pharmaceuticals. Expro announced that it had
received a bid approach although this is in a very early stage; the shares rose
by 35% on the news. We regard this oilfield services company very highly and
would expect any sale to be at an attractive premium. Fidessa and Dechra both
announced good results; in Fidessa's case the market had expected some signs of
caution given that all of its sales are in the financial services sector. In
fact management remain very confident and over 70% of Fidessa's revenues are
contractually recurring. Avocet Mining continued to benefit from the strong
gold price.

The stocks which underperformed most for us during the month were Gooch &
Housego, Bond International Software and Hambledon Mining. Gooch & Housego put
out a slightly disappointing AGM statement; first quarter trading was weak but
order intake has since picked up fairly strongly. Management believe they can
recover lost ground in the second half. Bond International Software shares
underperformed because it sells software mainly to recruitment companies around
the world. Recruiters have been sharply derated and the market has valued Bond
International on much the same basis, 8 times current year earnings, even
though it continues to win good new business. Hambledon had to stop production
at its recently opened gold plant after a boiler exploded and killed an
operator. Management are hopeful of restarting production in April.

We sold the remainder of our holdings in Gem Diamonds, Summit Germany and Eaga,
in each case preferring other stocks within their sectors.

We added a few new holdings during the month, the largest of which were Petra
Diamonds and Ridge Mining; each was 0.5% of the portfolio at the time of
purchase. After meeting twice with Petra management we decided to switch our
Gem Diamonds holding into Petra which we see as having a good mix of diamond
production and exploration interests at an attractive valuation. Ridge Mining
is due to bring its Blue Ridge platinum mine into production later this year.
At current platinum prices this should generate a lot of cash; management were
also confident on meeting.

Our portfolio positioning remains unchanged. We have minimal exposure to UK
consumer stocks. Our focus remains on growth stocks, especially those which
have good emerging markets exposure.

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).

31 March 2008