Portfolio Update

Merrill Lynch Br. SmallerCo Tst PLC
17 November 2006

MERRILL LYNCH BRITISH SMALLER COMPANIES TRUST plc

All information is at 31 October 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                            4.8%          10.4%            32.8%           87.1%           96.9%
Share price                                5.5%          12.9%            38.1%          106.1%          114.6%
FTSE SmallCap Index (ex IC's)              2.4%           7.8%            19.1%           41.7%           53.8%

Sources:  BlackRock Merrill Lynch Investment Managers and Datastream.
At month end
Net asset value:                                 389.36p
Share price:                                     338.00p
Discount to NAV:                                   13.2%
Net yield:                                          1.4%
Total assets:                                    £212.3m
Gearing:                                            8.6%
Ordinary shares in issue:                        50,193,523


Ten Largest Sector
Weightings                                                                                             % of Total Assets
Support Services                                                                                            16.8
Software & Computer Services                                                                                 9.0
Industrial Engineering                                                                                       8.0
Real Estate                                                                                                  7.6
General Financial                                                                                            6.8
Oil & Gas Producers                                                                                          6.1
Media                                                                                                        5.4
Electronic & Electrical Equipment                                                                            4.5
Mining                                                                                                       4.3
Construction & Materials                                                                                     4.0
                                                                                                            ----
Total                                                                                                       72.5
                                                                                                            ----




Ten Largest Equity Investments (in alphabetical order)
Company
Aveva Group
Brewin Dolphin
Chaucer Holdings
Dechra Pharmaceuticals
Expro Internacional Group
Headlam Group
Mouchel Parkman
Rathbone Brothers
Speedy Hire
WSP Group




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



October was a good month for the Company. The NAV rose by 4.8% on a capital only
basis to 389.36 pence. The benchmark index rose by 2.4%.



The main positive contributors to performance in October were the Company's
holdings in Gooch & Housego, Expro International, Premier Research and Kier
Group. Gooch & Housego announced a full year trading update and indicated that
trading is slightly ahead of plan. Dr Julian Blogh, the well respected former
CEO of Ultra Electronics, was recently appointed Chairman. Expro continues to
benefit from strong demand in the oilfield services sector. Premier Research and
Kier both announced excellent results, buoyant trading and good outlooks.



The largest negative impact on relative performance in October came from Wolfson
Microelectronics, Paypoint and Victrex. Wolfson delivered good third quarter
results but indicated that orders for the last quarter were behind expectations
- the shares fell sharply. Wolfson operate in a highly volatile sector and
significant swings from one quarter to the next do occur. The Manager's view is
that Wolfson remains well placed to capture greater share of the mobile handset
market, so the Company retained the holding, which is relatively modest.
Paypoint shares dipped possibly on fears of greater competition, although we
regard them as well entrenched, and run by a highly competent team capable of
taking the business much further. Victrex shares underperformed as a competitor
indicated it was increasing production capacity; Victrex's products are approved
for use by its customers and this should give it good protection.



The main new holdings in the month were Dunelm Mill, Land of Leather, Findel,
and Kiln with about 0.5% of NAV going into each. The first three are all retail
related. Dunelm floated during the month and has gone to a good premium. It
retails a large range of soft furnishings and has grown strongly over the last
ten years. Land of Leather floated last year and its shares have performed well.
It retails leather sofas which it sources from overseas and sells at very
competitive prices. By contrast, Findel is a mail order company which has a good
longer term record. The shares were overlooked at the time of purchase and are
good value. Each of these consumer related companies are trading well in a very
mixed retail environment. Kiln is a Lloyds underwriter with an excellent long
term record and an attractive valuation relative to its peer group and in
absolute terms. With the recent bid for Wellington Underwriting and a lack of
hurricanes this year, now seems like a good time for the Company to increase its
exposure to this sector.



The main sales in the month were the holdings in Renishaw and Huveaux. Renishaw
management were slightly less confident last time we saw them and their October
trading statement referred to foreign currency movements having an adverse
effect on profits. We like the company but in the short term believe the risks
outweigh the potential rewards. Huveaux is a commercial publisher and its
earnings are very second half weighted.





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).



17 November 2006


                      This information is provided by RNS
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