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Wednesday, July 25, 2007
JVC Joins Forces With Kenwood

Victor Company of Japan, Limited (JVC) and Kenwood Corporation 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.

The companies announced the alliance on on July 24, after the meetings of their respective Boards of Directors.

"The consumer electronics industry is dominated by digital products which require significant capital investments and massive software development processes," JVC said in a statement. "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," the company added.

JVC reported net losses for three 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.

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.

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.

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.

Matsushita, JVC's largest shareholder, has approved the JVC-Kenwood alliance. "Matsushita has determined that the optimal path to JVC?s speedy recovery and increase in corporate value is for JVC to gain the cooperation of KENWOOD which has a thorough understanding of the relevant business, to implement the ?Action Plan 2007? announced by JVC today, and to commence efforts for business cooperation which takes into consideration possible management integration with KENWOOD."

On the target date of October 1, 2007, KENWOOD and JVC shall commence the business alliance with respect to their car electronics and home electronics businesses. Specific implementation plans, their detailed schedules, etc., shall be considered and determined by the Collaboration Committee consisting of the two companies; however, the business alliance is expected to involve the establishment of a joint framework of research and development through a joint venture, etc., mutual promotion of manufacturing services and mutual utilization of intellectual property rights.

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