New investment manager

3i Smaller Quoted Co's Trust PLC
13 December 2004


3i Smaller Quoted Companies Trust plc
Change of investment manager


Introduction

Further to its announcement of 28 October 2004, the Board of Directors of 3i
Smaller Quoted Companies Trust plc (the "Company") is pleased to announce the
appointment of Merrill Lynch Investment Managers Limited ("MLIM") as investment
manager to the Company.


Background

3i Group plc, the parent company of 3i Investments plc, the Company's current
investment manager, announced on 7 July 2004 that it would be disposing of its
quoted fund management activities as they were no longer a core part of 3i's
strategy.  Since that date, the Company has undertaken a full review of the
options available to it in the light of that announcement, including discussions
with a number of interested third parties regarding their taking over the
investment management arrangements of the Company.  Terms have now been agreed
between the Company, MLIM and 3i for the transfer of management responsibilities
to MLIM.


The new Investment Manager

Merrill Lynch is one of the world's leading financial management and advisory
companies, with offices in 36 countries and total client assets of approximately
US$1.5 trillion.  As an investment bank, it is a leading global underwriter of
debt and equity securities and strategic advisor to corporations, governments,
institutions and individuals worldwide.  Through MLIM, Merrill Lynch is one of
the world's largest managers of financial assets.  Its firm-wide assets under
management total US$478 billion.

The Company's portfolio will be managed by MLIM's high performing UK Smaller
Companies team, headed by Richard Plackett.  Richard currently manages the
Merrill Lynch UK Smaller Companies Fund which over the last year has been one of
the best performing of all unit trusts registered in the UK, achieving returns
of 30.9% over the 12 months to 30 November 2004.  It has also ranked within the
first quartile of its peer group over the last three months, six months, one,
three and five years, generating annualised returns of 11.9% per annum over the
last five years; in comparison the Hoare Govett Smaller Companies Index
(excluding investment companies) showed annualised returns of 3.5%, the FTSE
SmallCap Index (excluding investment companies) showed annualised returns of
1.7% and the FTSE All Share Index showed annualised losses of 2.5% over the same
period.

Mike Prentis, who currently manages the Company's investment portfolio on behalf
of 3i Investments plc, will continue in that role as a member of the MLIM UK
Smaller Companies team.  The Board believes that Mike's appointment will prove
beneficial, as it provides continuity and stability for the Company going
forward.


Investment management arrangements

Details of the terms upon which management arrangements will be transferred to
MLIM are as follows:
     
(a)  Management fee

The Company currently pays an annual management fee to 3i equal to 0.65% of the
Company's total assets less current liabilities.  Under the terms agreed with
MLIM, this fee will be maintained at 0.65% in respect of the first £50 million
of the Company's total assets less current liabilities, and reduced to 0.50%
thereafter.  As at 9 December 2004, the Company had total assets less current
liabilities of approximately £126.0 million.  The performance fee, equal to 10%
of the average of the outperformance by the Company of its benchmark on a total
return basis in its two immediately preceding financial years, capped at 0.25%
of the average of total assets less current liabilities over those two financial
years, will remain unchanged.  The first performance fee will be calculated for
the period from appointment of MLIM as investment manager to 28 February 2006.
The reduction in the management fee will help to ensure that the Company's
management arrangements remain competitive in the context of the UK Small Cap
investment trust sector.

(b)  Notice period

The present management contract with 3i is terminable upon twelve months'
notice. Under the terms of the new management agreement with MLIM, the agreement
will have an initial fixed period of twelve months, after which time it may be
terminated at any time by either the Company or MLIM giving six months' notice.

(c)  Change of name

The Board proposes that the Company's name should be changed to take full
advantage of the marketing benefits brought by the Merrill Lynch name, including
its investment trust savings schemes.  A brief circular convening an
extraordinary general meeting of the Company for the purposes of putting forward
the requisite resolution will be sent to shareholders shortly.

(d)  Administrative and custodial arrangements

MLIM has a dedicated in-house investment trust company secretarial department
which will be responsible for the Company's administrative and secretarial
arrangements.  MLIM will also procure the provision of the requisite accounting
services for the Company.  The cost of all these services will be covered by the
management fee payable by the Company to MLIM on the basis described above.

The Company will continue to employ Bank of New York for the provision of
custody services.

(e)  Composition of Board

As previously indicated by the Company, William Govett will be retiring as
Chairman at the Company's next Annual General Meeting, which is due to be held
in June 2005, at which time the current Deputy Chairman, Richard Brewster, will
be appointed as Chairman.  Two new non-executive directors will be appointed in
the near future with the intention that, following William Govett's retirement,
the Board will once again be comprised of five non-executive directors.

(f)  Termination and compensation arrangements

Following discussions between the Company, 3i and MLIM, it has been agreed that
the balance of the notice period outstanding on the existing management
agreement between the Company and 3i will be settled by the payment to 3i of
monies equivalent to approximately three months' management fees.  MLIM has
agreed to make a contribution to the Company which will cover that sum.
Furthermore, MLIM has agreed to cover all of the costs incurred by the Company
in connection with the transfer of the investment management arrangements, and
to manage the portfolio free of management fees for a period of six months
commencing upon the date of such transfer.




William Govett, Chairman of 3i Smaller Quoted Companies Trust plc, said, "On
behalf of shareholder, the Board carried out a comprehensive search for the fund
manager with the best understanding of the smaller companies sector and a
consistently strong track record.  MLIM and Richard Plackett have just these
qualities."

Richard Plackett, head of the MLIM Smaller Companies team, added:

"The MLIM UK Smaller Companies Fund and team has enjoyed a record of sustained
outperformance over many years.  We are very excited to be taking on the
management of 3i Smaller Quoted Companies Trust plc.  I look forward to
arranging meetings with the significant shareholders in the Company as soon as
possible."


Enquiries

William Govett                                                     020 7835 0516
Chairman
Andrew Zychowski/David Yovichic                                    020 7623 8000
Dresdner Kleinwort Wasserstein



Dresdner Kleinwort Wasserstein, which is authorised and regulated by the
Financial Services Authority in the conduct of investment business, is acting
for the Company in connection with this announcement and no-one else and will
not be responsible to anyone other than the Company for providing the
protections afforded to clients of Dresdner Kleinwort Wasserstein nor for
providing advice in relation to the announcement.


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