RHM.L Regulatory News (RHM)

04 June 2010

RedHot Media International Limited

('RedHot' or the 'Company')

RM 1.5 million investment in RH Media Group Sdn. Bhd.

The Directors of RedHot Media International Limited are pleased to announce a further investment of RM 1.5 million (equivalent to c. USD 458,000*) in its wholly-owned subsidiary, RH Media Group Sdn. Bhd. ("RHMG") by Kumpulan Modal Perdana Sdn. Bhd. ("KMP"), a Malaysian government linked corporation based in Kuala Lumpur, (the "Investment"). The Company intends to use the net proceeds of the Investment to enable the Company to pursue its stated strategy of growing organically and through potential mergers and acquisitions in the People's Republic of China ("PRC"). The Company announced on 2 November 2009 an investment in RHMG of USD 1.0 million by KMP and therefore the Investment takes the aggregate funds invested by KMP in RHMG to a total of approximately US 1.45 million.

The Investment is for RM 1.5 million in RHMG, for receipt of 1.5 million Class B Redeemable Convertible Cumulative Preference Shares ("RCCPS"). KMP has been granted a coupon rate of 4% per annum for the investment and KMP has the right to convert the RCCPS into ordinary shares in RHMG in the event RHMG or any other entity used for purposes of an initial public offering ("IPO") or reverse take-over ("RTO") has received approval for the said public listing or when RHMG has received a proposal in relation to its entire business undertaking or shares pursuant to a trade sale and proceeds with such sale. RHMG shall warrant an exit strategy for KMP upon conversion of its RCCPS via a listing of RHMG on a mutually accepted stock exchange within 48 months from the date of Investment with either: (i) a return of 3 times the Investment value, or (ii) a 40% discount to the listing price, whichever results in lower cost per share at point of conversion. The event of a listing of RHMG can be on any recognized bourse by way of an IPO exercise or RTO exercise except for any corporate exercise which involves a listing, or transfer of listing, on the ACE market or Main Market of Bursa Malaysia Securities Berhad ("BMSB").

In the event a listing does not occur within 48 months from the date of Investment, KMP at its sole discretion shall have an option to either grant 12 month extension, or exercise a put-option for 2 times of the Initial Investment value. The put option, if exercised, would be paid in cash or an equivalent value through the issuance of equity by the Company based on a 5-day average of the Company's share price prior to the date of exercise.

In the event of a breach of agreement by RHMG, insolvency or liquidation of RHMG, commencement of any criminal prosecution against the board of directors of RHMG or Cheong Chia Chieh ceasing to be a director of the Company, KMP shall reserve the right to redeem the RCCPS or exercise a put-option to RHMG which grants KMP returns of Investment with 4% coupon rate and 10% annual rate of return of the Investment value to be paid in cash or an equivalent value by issuance of equity of the Company's shares based on a 5-day average of the Company's share price prior to the date of exercise.

Group Managing Director of RedHot, Mr. Cheong Chia Chieh, said "We are very pleased to have KMP's further investment ensuring our significant ability to further improve the shareholders value and confidence through strategic focus on our expanding commitment in the PRC in anticipation of steady and increase growth for the future."

*Based on the exchange rate of 1 USD = 3.27410 MYR as at 4 June 2010

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