Portfolio Update

Merrill Lynch Br. SmallerCo Tst PLC
14 February 2006

MERRILL LYNCH BRITISH SMALLER COMPANIES TRUST plc

All information is at 31 January 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                            7.9%          18.6%            28.5%          148.9%           13.2%
Share price                                9.4%          22.1%            33.4%          165.6%           15.3%
FTSE Small Cap Index (ex IC's)             5.7%          13.9%            17.8%           95.6%            2.7%

Sources:  Merrill Lynch Investment Managers and Datastream.

From 30 December 2005 underlying investments are valued on a bid price basis, in
accordance with AITC guidelines.

At month end
Net asset value:                                 347.67p
Share price:                                     298.75p
Discount to NAV:                                   14.1%
Net yield:                                          1.5%
Total assets:                                    £190.5m
Gearing:                                            8.4%
Ordinary shares in issue:                        50,563,523


Ten Largest Sector
Weightings                                                                                             % of Total Assets
Support Services                                                                                                    14.3
Engineering & Machinery                                                                                              9.0
Construction & Building Materials                                                                                    8.1
Media & Entertainment                                                                                                7.6
Oil & Gas                                                                                                            7.3
Software & Computer Services                                                                                         7.1
Electronic & Electrical Equipment                                                                                    6.8
Real Estate                                                                                                          6.1
Mining                                                                                                               5.9
Speciality and other finance                                                                                         4.5
                                                                                                                    ----
Total                                                                                                               76.7
                                                                                                                    ----




Ten Largest Equity Investments
Company
Aveva Group
Brewin Dolphin
BSS Group
Charter Consolidated
Dechra Pharmaceuticals
Kier Group
Mouchel Parkman
Rathbone Brothers
Renishaw
WSP Group




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

January was a very good month for equity markets and the Company. The Company's
NAV rose by 7.9%.  The benchmark index rose by 5.7%.

January is a quiet time for results but many companies put out trading updates;
on the whole these were good for investments owned by the Company. In
particular, earnings upgrades came from Colliers CRE, due to continued strong
demand for UK commercial property, Expro International, which sees plenty of
demand for their technologically advanced oilfield services, SIG, through
continued strong demand for commercial insulation in the UK, and JKX Oil & Gas
who are benefiting from high gas prices for gas produced and sold in the
Ukraine. Resources stocks generally performed well with oil, gas, gold and
copper prices remaining firm, helping the value of holdings of producers such as
Avocet Mining (gold)and Venture Production (UK gas and oil). Additionally some
of the Company's smaller holdings in junior mining exploration companies
performed strongly on the back of drilling updates, in particular Jubilee
Platinum. Other strong performers included CSR, Paypoint, Kier Group and Big
Yellow.

The main underperformers during the month were Renishaw and Dechra
Pharmaceuticals. Renishaw produced interim results which were in line with
expectations, but the market had hoped for earnings upgrades. We met with
management who remain confident about demand for the existing product range and
excited about prospects for their new range of probes which are to be launched
soon; we are great believers in Renishaw and its management. Dechra announced
that trading had remained strong, but that additional trials in the US would be
needed before their Vetoryl drug could be launched in the US, putting back
likely first revenues by about a year. We do not see this as a significant
issue, and believe the shares continue to look attractive; they have recovered
well in February to date.

New holdings in the month included Savills and Melrose Resources. Both are
companies which we have tracked for a few years, and both are performing well.
Savills is one of the leading commercial property agents in the UK, and has
strongly growing practices overseas, especially in the Far East. Its recent
trading update was very positive, and the shares are good value. Melrose
produces gas in Bulgaria and has recently been consistently successful in
discovering oil in the Nile delta.

Latest information is available by typing www.mlim.co.uk/its on the internet,
'MLIMINDEX' on Reuters, 'MLIM' on Bloomberg or '8800' on Topic 3 (ICV terminal).


14 February 2006


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