MHG.L Regulatory News (MHG)

1 February 2010

Merchant House Group Plc (the "Company")

Trading update

Merchant House, the evolving financial services business is pleased to update shareholders on recent, further progress in three new divisions.

The Company announced in December that foreign exchange proprietary trading had commenced with a trading facility provided by a major global clearer and that trading was ahead of budget with nominal trading values exceeding $5bn per day. At the time, it was projected that the business would grow significantly over the following six months. The Company can report that the trading volumes continue to grow with nominal trading values now exceeding $10bn per day, a second major clearer should shortly be in place and net fee contributions to Merchant Capital, our FSA regulated subsidiary being ahead of budget. Merchant Capital receives 12.5% of the net profits.

George Cadbury, Merchant Capital Head of Foreign Exchange commented, " The business remains effectively a joint venture with the FX team who invested a lot of their own capital and take a leading role but the net fee contribution to Merchant was higher than expected in December ( which has just been calculated). We are working with the team to carefully nurture the continued growth of this business"

The Company also announced in December that Merchant Capital had been granted authorisation by the FSA to act as Investment managers with permission to manage funds on a discretionary and advisory basis for professional clients. The Company was seeking permission from the Irish Financial Services Regulatory Authority to establish a Dublin based UCITS III umbrella fund which would be European Union wide. The board is pleased to report that Merchant Funds Plc has been authorised whilst Merchant Capital has been authorised as Promoter and Investment Manager subject only to establishing and maintaining the required amount of shareholder assets within Merchant Capital about which a further announcement is expected very shortly. Following this success and separately, favourable press comment, the team have been contacted by funds from around the world interested in using the platform, is in active discussions with some twenty funds and has received requests from a number for formal paperwork. In addition, discussions are underway with distributors of the funds and shareholders will be updated in due course. The team is also working with an American bank to source US and European clients. Client funds are charged a fixed management fee and a percentage of the annual growth of the fund.

Christopher Day, Managing Director of Merchant Asset Management said, "Whilst its too early to say how many funds will sign up, I do believe we have created a platform that will be of interest to funds who seek a wider scope for fundraising and investment. Our first fund, the advisor and distributor being Spanish based is now trading actively and we have completed the framework and groundwork needed to help this Merchant Capital business grow. Discussions over a number of months with potential clients can now be moved forward more quickly to a conclusion either way."

Merchant House launched its new Plan Management business in December and having taken over the administration of funds from a company in administration is now responsible for some £90 million. The Company is pleased to announce the launch of a new growth plan backed by Morgan Stanley and which it will now sell through the distribution network of 2,000 IFAs established over a number of years. A second product launch is expected shortly. Merchant Capital is also in discussions with a number of parties regarding the possibility of taking over their Plan Management businesses and hence adding considerably to the funds being administered and the investors being serviced.

Peter Redmond, Managing Director of Merchant Capital commented, " Merchant Capital has written to the three thousand plan management investors whose plans we now administer and we hope that a good service will make them prime candidates to invest in future products now being launched having made money on their current plans. In time, we hope other group products and services can also be offered. Whilst discussions are at an early stage with an uncertain outcome, it remains the strategy to grow the plan management business by taking over portfolios as well as organically"

Martin Eberhardt, Merchant House Group Chairman said, "The Board is greatly encouraged by progress even in the last six weeks and whilst our markets all remain uncertain, even volatile, we hope that progress will continue. The board has been considering warrant and incentive packages for directors and senior management so that their aspirations can be fully aligned with shareholders. Finally, the Company continues to search out and explore suitable acquisitions using the shares of the Group to make any investment if the right opportunity can be progressed. Shareholders will be updated on all of this in due course.

Enquiries:

Merchant House Group Plc

James Holmes

Tel: 020 7332 2200

Shore Capital and Corporate Limited

Pascal Keane

Tel: 020 7408 4090