Portfolio Update

MERRILL LYNCH BRITISH SMALLER COMPANIES TRUST plc

All information is at 31 May 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                             2.3%       8.3%       36.8%      120.9%      121.6%   
                                                                                                  
Share price                                 2.5%       5.8%       40.1%      142.3%      128.9%   
                                                                                                  
FTSE SmallCap Index (ex IC's)               1.8%       4.5%       21.7%       61.3%       58.4%   
                                                                                                  

Sources:  BlackRock and Datastream.

At month end                                     
                                                 
Net asset value:                   487.25p       
                                                 
Share price:                       415.50p       
                                                 
Discount to NAV:                     14.7%       
                                                 
Net yield:                            1.2%       
                                                 
Total assets:                      £262.3m       
                                                 
Gearing:                              7.7%       
                                                 
Ordinary shares in issue:          49,993,523    
                                                 

 

Ten Largest Sector                                                                      
Weightings                                                             % of Total Assets
                                                                                        
Support Services                                                                    14.1
                                                                                        
Real Estate                                                                         12.0
                                                                                        
Software & Computer Services                                                        10.2
                                                                                        
General Financial                                                                    8.3
                                                                                        
Industrial Engineering                                                               6.6
                                                                                        
Oil & Gas Producers                                                                  5.4
                                                                                        
Electronic & Electrical Equipment                                                    5.2
                                                                                        
Mining                                                                               4.8
                                                                                        
Health Care Equipment & Services                                                     4.5
                                                                                        
Media                                                                                4.1
                                                                                    ----
                                                                                        
Total                                                                               75.2
                                                                                    ----
                                                                                        

                                                                                        
Ten Largest Equity Investments (in alphabetical order)                                  
                                                                                        
Company                                                                                 
                                                                                        
Aveva Group                                                                             
                                                                                        
Brewin Dolphin                                                                          
                                                                                        
BSS Group                                                                               
                                                                                        
Dechra Pharmaceuticals                                                                  
                                                                                        
Domino Printing                                                                         
                                                                                        
ITE Group                                                                               
                                                                                        
Rathbone Brothers                                                                       
                                                                                        
Speedy Hire                                                                             
                                                                                        
Victrex                                                                                 
                                                                                        
WSP Group                                                                               
                                                                                        


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

May was a reasonable month for the Company with the NAV increasing by 2.3%,
ahead of the benchmark which was up by 1.8%.

The main positive contributors to relative performance in May were the
Company's holdings in Oilexco, International Ferro Metals and Babcock
International. Oilexco continued its successful run of finding oil in the North
Sea with a discovery on the Huntingdon prospect; the market also anticipated
the first, and much delayed, oil from the Brenda field. International Ferro
Metals management toured London and confirmed that the recently commissioned
plant is running well and generating good cash flow. Babcock announced very
strong results with underlying earnings up 36%, a confident outlook and the
proposed purchase of Devonport which has unique capabilities to support nuclear
submarines and surface vessels for the Royal Navy.

On the negative side, performance was hindered by not holding an investment in
Eurotunnel, a benchmark stock which performed very strongly after announcement
of restructuring and relisting. Not holding Eurotunnel shares cost the Company
just over 1.0% in relative performance terms during the month.

New holdings during the month included Axon, Euromoney and Anite. Axon is a
leading integrator of SAP systems and has grown very strongly in recent years
recently expanding into the US, a move that has gone well. Euromoney posted
excellent results which followed on from its purchase of Metal Bulletin, a
former holding. Management were confident when we met them after the results.
Anite owns a successful handset testing business, and the value of its various
parts looks to be rather greater than Anite's share price suggests.

Disposals included holdings in Spice, Carter & Carter and Headlam, all of which
looked fully valued. We also sold the Company's holding in Imperial Energy
because we regarded the political risks as too high. 

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 June 2007