Portfolio Update

Merrill Lynch Br. SmallerCo Tst PLC
14 July 2006

MERRILL LYNCH BRITISH SMALLER COMPANIES TRUST plc

All information is at 30 June 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                            0.3%          -3.9%            28.7%          101.9%           41.8%
Share price                                1.4%          -6.3%            33.1%          116.0%           41.5%
FTSE SmallCap Index (ex IC's)            -1.5%           -5.7%            14.5%           55.3%           13.9%

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:                                 357.12p
Share price:                                     300.75p
Discount to NAV:                                   15.8%
Net yield:                                          1.5%
Total assets:                                    £195.6m
Gearing:                                            8.3%
Ordinary shares in issue:                     50,563,523


Ten Largest Sector
Weightings                                                                                             % of Total Assets
Support Services                                                                                                    18.5
Industrial Engineering                                                                                               9.0
Real Estate                                                                                                          8.8
Software & Computer Services                                                                                         7.1
Electronic & Electrical Equipment                                                                                    6.1
Oil & Gas Producers                                                                                                  6.0
Media                                                                                                                5.3
General Financial                                                                                                    5.1
Mining                                                                                                               4.4
Pharmaceuticals and Biotechnology                                                                                    4.2
                                                                                                                    ----
Total                                                                                                               74.5
                                                                                                                    ----




Ten Largest Equity Investments
Company
Aveva Group
Brewin Dolphin
BSS Group
Dechra Pharmaceuticals
Headlam Group
Mouchel Parkman
Rathbone Brothers
Renishaw
Spirax-Sarco Engineering
WSP Group




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



June was a more stable month following a very difficult month for markets in
May. During June the Company's NAV rose marginally by 0.3% to 357.12p. The
benchmark index fell by 1.5%.



The main contributor to outperformance in June was Neutec Pharma which received
a bid from Novartis at a premium of just over 100%. Whilst not a large holding,
Neutec has been our main investment in the biotechnology sector and the bid made
a welcome difference. Amongst other holdings, good performers were Colliers CRE,
Victrex, Synergy Healthcare and Hambledon Mining. Colliers shares performed well
mainly on the back of a couple of small acquisitions and also bid rumours.
Victrex and Synergy Healthcare revealed very good results and in the case of
Victrex significant upgrades. Hambledon Mining announced that it was moving
ahead towards gold production on schedule in the last quarter of this year, and
with reserves well ahead of previous indications.



On the negative side, our small holding in WIN warned on profits, management
having been positive only about four months ago, and the holding has been
significantly reduced. Expro announced a large acquisition in the US part funded
by a rights issue, causing some share price weakness, but earnings upgrades have
been strong over the last few months and we expect further upgrades. Charter
also underperformed as profit takers came in, yet it too had another significant
earnings upgrade late in the month. Some stocks not held in the portfolio
despite being large benchmark constituents performed well, including Chemring,
which announced good results, and Photo-Me, which pointed to the possibility of
a bid despite weak trading.



Resources holdings were further reduced with the sale of part of the holdings in
Metorex and Consolidated Minerals. The holding in Charter was also reduced and
part of the proceeds re-invested in Rotork which had fallen too far for such a
high quality company. We decided to reduce the large underweight position in
general retailers and bought 0.5% holdings in both Topps Tiles and Blacks
Leisure, both former holdings and companies we know well. We also supported the
IPO of Clinphone, a company which assists major pharmaceutical companies in
conducting their clinical trials more efficiently and quickly.







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 July 2006


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