Portfolio Update

Merrill Lynch Br. SmallerCo Tst PLC
15 January 2007

MERRILL LYNCH BRITISH SMALLER COMPANIES TRUST plc

All information is at 31 December 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                            7.5%          16.4%            34.2%          102.0%           95.1%
Share price                                8.8%          15.9%            36.1%          129.3%          111.7%
FTSE SmallCap Index (ex IC's)              8.4%          11.2%            20.1%           54.2%           48.2%

Sources:  BlackRock Merrill Lynch Investment Managers and Datastream.

At month end
Net asset value:                                 432.71p
Share price:                                     371.50p
Discount to NAV:                                   14.1%
Net yield:                                          1.3%
Total assets:                                    £231.1m
Gearing:                                            6.8%
Ordinary shares in issue:                     49,993,523


Ten Largest Sector
Weightings                                                                                             % of Total Assets
Support Services                                                                                                    17.3
Real Estate                                                                                                         11.4
Software & Computer Services                                                                                         8.5
General Financial                                                                                                    7.1
Industrial Engineering                                                                                               6.6
Media                                                                                                                5.7
Oil & Gas Producers                                                                                                  5.5
Electronic & Electrical Equipment                                                                                    5.4
Non-Life Insurance                                                                                                   4.6
Mining                                                                                                               3.6
                                                                                                                    ----
Total                                                                                                               75.7
                                                                                                                    ----




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




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



December was a strong month for the Company in absolute NAV terms. The NAV rose
by 7.5% on a capital only basis to 432.71 pence. The benchmark index rose even
more strongly finishing the month up by 8.4%.



The main positive contributors to relative performance in December were the
Company's holdings in Plant Health Care and Alternative Networks; neither of
which are especially large holdings. Hopes continue to build that Plant Health
Care's products can help achieve much better agricultural yields for crops, and
that major licensing deals will be signed this year. Alternative Networks tabled
strong final results which led to substantial earnings upgrades. Good absolute
share price performances came from a range of stocks including YouGov, Universal
Salvage, Spice, Hyder Consulting and Hamworthy.





The largest negative impact on relative performance in December came from the
holdings in Calyx, Rathbone Brothers, Avocet Mining and Bloomsbury Publishing.
Calyx and Bloomsbury both produced trading updates which led to downgrades. We
met with the management of both companies and have subsequently reduced the size
of the holding in Bloomsbury. Avocet Mining shares continue to languish despite
the fact that its Malaysian reserves were upgraded during the month. Rathbones
shares were dull on a lack of news, but in early January the company posted a
satisfactory trading update.



The main new holdings in the month were Datamonitor and Hansard Global.
Datamonitor supplies research to business subscribers around the world. Earnings
growth and cash generation have been strong and we expect this to continue.
Hansard is a new IPO and specialises in providing investment products to wealthy
private clients overseas. It has excellent distribution and a good technology
platform.



Holdings in Umeco and LSL Property Services were sold. Umeco shares have been
dull for some time and whilst the shares are reasonable value, short of a bid we
expect them to remain dull. LSL was a recent IPO; we decided to bank a
reasonable profit.





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).



15 January 2007


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