Mongolia Growth Group Ltd., MGG is
pleased to announce that it has agreed to and signed a binding term sheet
agreeing to sell shares of Mandal General Insurance (MGI) to UMC Capital, the
operators of MGI, at a purchase price equivalent to MGG”s original funding cost
in June of 2011. Following the closing of this transaction, UMC Capital and MGG
will respectively own approximately 16% and 84% of Mandal”s currently
outstanding shares. In addition, UMC Capital will retain the right to purchase
an additional 25% of Mandal at the higher of stated book value or funding cost.
The transaction is subject to regulatory approvals in Mongolia.

“Insurance is a business
predicated on shifting risks from insureds to insurance companies that are more
capable of assuming those risks. Our partner”s decision to invest their capital
into Mandal displays their commitment to shoulder some of these risks with
us,” said Jordan Calonego, COO of MGG. “It”s one thing to have a
carried interest in the future profits of a company; it”s a very different
experience to actually put your own capital at risk. We welcome UMC Capital”s
decision to co-invest with us. ”

“We are very proud of our
achievements to date at Mandal. In less than a year of operations, we have
achieved tremendous successes and look forward to a bright future in the
insurance business,” said Ganzorig Ulziibayar, Chairman of UMC Capital.
“We are thankful that MGG has allowed us to increase our ownership
interest in Mandal and feel that this will allow us to further motivate our key
employees in the future.”

“Following this transaction,
insurance will represent approximately 7% of MGG”s stated book value,”
noted Harris Kupperman, CEO of MGG. “While we are very confident in the
future of Mandal and the insurance industry in Mongolia, given the rapid growth
of our property business, we are increasingly recognizing that insurance has
become less critical to the overall future of MGG itself. We are exploring
various transactions that would allow Mandal management to have increased
discretion in managing the business, the ability to direct future strategy and
access to additional growth capital; while simultaneously allowing MGG to
maintain a sizable ownership interest in the future success of Mandal.”

The purchase of Mandal shares by UMC
Capital will be completed in stages. 5% of the shares of Mandal will be
purchased within 15 days of signing a definitive purchase agreement and the
remainder will be purchased over the following 6 months, for total cash
consideration of less than one million Canadian dollars. In addition, 200,000
of UMC Capital”s 10 year MGG share purchase options will vest immediately. In
exchange for accelerating the vesting of these options, the new strike price
will be CDN $1.90 compared to the original strike price of CDN$ 1.64 (a 16%
increase). MGG applied for an exemption to the stock option policies of the
CNSX in order to adjust the vestation and exercise price of the options. The
exemption was approved by the CNSX.