MHG.L Regulatory News (MHG)

Merchant House Group plc

("MHG" or "the Group")

UCITS FUND UPDATE

MHG announced in its Chairman's Statement on 30 June 2011 that the Russian Phoenix UCITS Fund ("the Fund") had been approved by the Central Bank of Ireland. The Group now wishes to announce an update on the Fund.

Spectrum Partners Group ("SPG"), a hedge fund management group which focuses exclusively on Russian and CIS equity markets, has now launched the Fund on the independent UCITS platform of Merchant Capital Limited ("MCL"), the asset management division of the Group. The level of funds raised by SPG to date has reached US$40 million, surpassing the minimum level of US$30m in respect of the Fund. MCL is the asset manager of the Fund on which it charges an annual 2% fee and an annual performance fee of 20%.

The Fund replicates the strategy of an existing long/short product managed by SPG, the Spectrum Russian Phoenix Fund, which has a 2-year audited track record. The strategy follows a thematic investment approach with active stock-picking aiming to identify investment opportunities with a favourable risk/reward profile. The Spectrum Russian Phoenix Fund predominantly invests in large-cap equities actively traded in the markets of states of the Former Soviet Union.

By launching on MCL's platform the Fund is expected to benefit from being an onshore, regulated UCITS structure with weekly liquidity. The Fund is available to both institutional and retail investors in US dollar, euro, and sterling share classes with a minimum investment of 100,000 (USD, EUR, GBP) for institutions and 20,000 for professional retail investors.

This is the first in a series of five proposed UCITS fund launches referred to in the Group's announcement of 30 June 2011. The remaining four funds are expected to start trading by October 2011.

Commenting on the launch of the Fund, George Cadbury, Director of Asset Management for MCL, said:

"The consistent growth of our UCITS platform is extremely exciting as we continue to look for compatible and innovative strategies with great track records. Spectrum is one such firm which we believe can successfully replicate its offshore product in an onshore regulated structure."

Michael Kart, Managing Partner at SPG, added:

"Merchant Capital was an obvious partner in our pursuit of an onshore version of our large-cap equity long/short hedge fund. They are able to bring funds to market much quicker than some of the larger platforms and have a good track record specifically with alternative products. We look forward to creating a long-lasting relationship with the firm."

MCL's UCITS umbrella structure allows asset managers to launch UCITS-compliant investment vehicles, whereby MCL will be responsible for ensuring that all UCITS rules are met with confidence. With MHG's recent acquisitions in both the Structured Product and Independent Financial Advisor sector, the Group can also build a comprehensive distribution plan for clients such as SPG.

Enquiries:

About MCL's UCITS Platform

MCL, which is authorised and regulated by the FSA in the UK, built a UCITS umbrella structure domiciled in Dublin in November 2009. Coupled with the extensive experience of its management team, clients are supported by some of the industry's leading service providers whilst being provided with a cost-effective entry to the UCITS market. MCL has extensive structuring, investment management and systems expertise.

As investment manager of the UCITS Umbrella, MCL will appoint the client as adviser or sub-manager of a sub-fund ("Cell"). This Cell will be managed according to the client's instructions whilst MCL manages the oversight, administrative, processing and regulatory functions. Independent trustees, which are a UCITS requirement and also a due diligence prerequisite for many investors, are appointed.

http://www.merchant-capital.com/

About SPG

SPG is a hedge fund management group formed in 2002 exclusively focusing on Russian and CIS equity markets, with representative offices in Hamilton (Bermuda), Nicosia (Cyprus opening soon) and Moscow (Russia). SPG bases its investment strategy on a thorough knowledge of the markets, fundamental analysis and a broad experience of managing various products with an exclusive focus on CIS equities.

The SPG team led by Michael Kart consists of 12 people and demonstrates a successful public track record, investing more than $250 million in the regions' equity markets since 2003.