Notice on Capital and Business Alliance and Management Integration for Further Study, Between JVC and Kenwood As Well As Third Party Allotment of New Shares of JVC

Business Wire, July 24, 2007

OSAKA, Japan -- Victor Company of Japan, Limited ("JVC") and Kenwood Corporation ("KENWOOD"), upon the resolution of the meetings of their respective Boards of Directors held on July 24, 2007, entered into a capital and business alliance agreement, the focal points of which relate to their business cooperation in the areas of car electronics and home/portable audio businesses and the commencement of discussions concerning the integration of their management.

Notice is hereby given that, on the same day, as described in detail below, each of JVC, KENWOOD and SPARX International (Hong Kong) Limited, an investment management company which belongs to a group of companies headed by SPARX Group Co., Ltd. (the "SPARX Group") adopted resolutions for, or affirmed, JVC's issuance of new stock through third party allotments, where allotments of such new stock will be made to, and the new stock will be subscribed by, KENWOOD and the several investment funds (collectively, the "SPARX Funds") managed by SPARX International (Hong Kong) Limited.

It is expected that, if and when the payment for the new issue of stock is made, JVC's status will change from a consolidated subsidiary of Matsushita Electric Industrial Co., Ltd. ("MATSUSHITA") to an equity-method associated company of MATSUSHITA.

MATSUSHITA, as JVC's largest shareholder, has agreed with JVC, KENWOOD and the SPARX Group that MATSUSHITA will continue to support the discussions concerning the possible integration of JVC and KENWOOD's management, although MATSUSHITA will not be directly involved in such discussions.

The SPARX Group shall not assume any responsibility and liability whatsoever for the contents of this document, except with respect to the information relating to the SPARX Group and its affiliated companies.

I. DISCUSSIONS ON CAPITAL AND BUSINESS ALLIANCE AND MANAGEMENT INTEGRATION

1. Reasons for capital and business alliance

(1) JVC's goals relating to capital and business alliance

JVC reported net losses for three (3) consecutive fiscal years, including the fiscal year ended March 31, 2007, and its urgent task is to implement a fundamental management reform. It is currently in the process of implementing a management reform based on the voluntary reconstruction plan which was announced on May 30, 2007. Furthermore, JVC has set the "Action Plan 2007" (*) based on its realization that further steps for more aggressive management reform need to be taken in order to ensure a management reconstruction in the increasingly more competitive market and to regain the market's trust.

The purposes of JVC's planned capital increase through third party allotments to KENWOOD and the SPARX Funds are to procure funds for the structural reform and to enhance JVC's equity capital which has been damaged by the net losses reported during the three (3) consecutive fiscal years. Through such capital increase, it is anticipated that JVC will implement the "Action Plan 2007" announced today and will be sure to turn operating profits during the fiscal year ending March 31, 2008.

The consumer electronics industry is dominated by digital products which require significant capital investments and massive software development processes. In addition, the digitization trend has shortened product development cycles and led to fierce market-share and pricing competitions. Finally, the rise of Korean, Taiwanese and Chinese manufacturers has further intensified the competition in the global market.

Under such market environment, JVC and KENWOOD have agreed that the planned capital increase through third party allotment will be treated not as a mere transfer of capital, but as a strategy, in conjunction with the commencement of cooperation in the car electronics and home/portable audio businesses which both of them are engaged in, and that they will continue their discussion with an aim of their management integration for surviving in the AV market where competition is increasingly more fierce.

With respect to the business cooperation which is scheduled to begin in October 2007 under the structure currently contemplated, the scale of the combined car electronics business of the two companies will be approximately 160 billion yen, which is expected to lead to an increase in their added values and enhanced market competitiveness, through business integration in the areas of development, materials procurement and production, as well as a full exploitation of the "scale merit" and the two companies' resources.

Further, for the management integration which is targeted for 2008, the establishment of a joint holding company will be considered, in order to pursue the synergy effect in all aspects of management of the two companies and to enhance their respective corporate values.

Respecting the brands each other developed in the markets on a long-term basis, the two companies will, on an equal footing in spirit, intend to make a new start of latest management structure in the AV market whereby contributing to strengthening the competitiveness of the consumer electronics markets on a global basis.