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Issue of New Shares Through Allocation to Third Parties


The board of directors of KENWOOD Corporation (the Company) resolved at its meeting on September 27, 2002, to execute the issue of new shares through allocation to third parties in the following way:

1. Gist of the issue of new shares

(1) Number of new shares issued Par-value common stock 26,472,000
(2) Issue price Per share ¥78
(3) Total amount issued ¥2,064,816,000
(4) Amount capitalized Per share ¥39
(5) Total amount capitalized ¥1,032,408,000
(6) Subscription period From Tuesday, October 15, 2002, to Monday, October 28, 2002.
(7) Payment due date Tuesday, October 29, 2002.
(8) Initial date in reckoning of dividend Tuesday, October 1, 2002
(9) Person allocated and number of shares allocated
 
Funds managed by SPARX Asset Management Co., Ltd. 13,650,000
Funds managed by SPARX Asset Management Co., Ltd.
(See 6. Overview of the persons allocated, below, for details) 12,822,000
Total 26,472,000
(10) Agreement concerning continual ownership of the new shares
The Company intends to request each person allocated the new shares to make a commitment that it reports the details whenever transfer a part or whole of the new shares within two years from the issue date.
(11) The above each provision is based on the premise that the notification according to the Securities and Exchange Law becomes effective.

Note: The method for determining the issue price: The figure of ¥78 was reached by referencing the figure obtained by multiplying 0.95 into the one month average closing price for the Company's share on the Tokyo Stock Exchange from August 27, 2002 to September 26, 2002.

2. Change in total shares outstanding (change in capital)

Total number of shares currently issued 183,983,995
(Current capital ¥25,937,468,771)
New shares to be issued 26,472,000
(Capital increase ¥1,032,408,000)
Total number of shares issued after the new issue 210,455,995
(Capital after the new issue ¥26,969,876,771)

3. Reason for capital increase and use of the fund

(1) Reason for capital increase

a. Improvement and Strength of the financial affairs constitution
Together with the equity conversion of 25 billion yen of the debt advanced independently, by 27 billion yen recapitalization, the connection liabilities surpass assets of 17 billion yen will be canceled at the end of March, 2002, and a financial standing will be strengthened sharply.
At the end of previous fiscal year, the Company accelerated the withdrawal from loss-making businesses and depreciation of assets according to the new accounting standards to realize early recovery in business results.
Consequently, the Company's consolidated shareholders' equity decreased to the amount of ¥1,485 million as of March 31, 2001.
The capital increase of this time will recover substantially the shareholders' equity declined due to the above reasons by the investment from the new institutional investors, customers and suppliers, etc. and solidify the financial position.

b.

Stable management base
In addition to SPARX Asset Management Co., Ltd., the largest stockholder of our company, Merrill Lynch Investment Managers Co., Ltd. can also newly be financed in the capital increase of this time.
Both of the companies obtain understanding and support in reconstruction of our company, and its possibilities, and take over, and it leads to stabilization of the management base of our company.
The new shares are accepted by those persons who appreciate highly the favorable progress in the execution of Medium-term Restructuring Plan and the prospect of the Company's business results and share price.
The Company's management base becomes far stabler by the participation in our shareholders of those persons who understand well and strongly approve the Company's management policy.

(2) Use of the fund
The fund by this issue of new shares is due to be utilized for making the base of broad development, such as new development for future development of our company, and an alliance with plant-and-equipment investment and the other company.

(3) Effect on earnings
There is no change of the expected business results announced on May 24, 2002 due to this capital increase.

4. Payment of dividends to shareholders, etc.

a. Fundamental policy on dividends
The payment of dividend is decided comprehensively by considering the profit available for dividend and the financial position, etc. For the time being, the Company makes utmost efforts to improve financial position by stabilizing management and accumulating profits.

b.

Dividends paid in the past three terms
  Term Ended March, 2000 Term Ended March, 2001 Term Ended March, 2002
Net income per share (23.64 yen) (246.74 yen) (171.59 yen)
Dividends per share 0.0 yen 0.0 yen 0.0 yen
Actual dividend payout ratio -- -- --
Return on equity (7.7%) (131.0%) --
Dividend rate -- -- --

5. Equity financing over the past three fiscal years

a. Equity financing
The date Capital increase Capital after the new issue Summary
September 21, 2001 ¥7,110,100,000 25,937,468,000 New Shares Through Allocation to Third Parties

a.

Share prices during the past three terms and immediately before the new issue:
  Term Ended March, 2000 Term Ended March, 2001 Term Ending March, 2002 Term Ending March, 2003
Opening price 555 yen 449 yen 207 yen 93yen
High 725 570 290 150
Low 350 182 192 73
Closing price 449 203 223 87
Price earnings ratio -- -- -- --

Notes:
1. The figure recorded for the closing price for the term ended March, 2003, is the closing price on September 26, 2002.
2. No price earnings ratio is recorded for three of the terms because the Company recorded a net loss in the terms ended March 2000 and March 2002 and the ratio has not been determined for the term ending March, 2003.

6. Overview of the persons allocated

1. Funds managed by SPARX Asset Management Co., Ltd.
Name SPARX Strategic Investment Fund Limited
Number of shares allocated to it 5,200,000
Amount to be paid in 405,600,000 yen
Details of the subscriber Address of headquarters Bank of Bermuda Building, 6 Front Street, Hamilton HM 11, Bermuda
Name and title of representative Shuhei Abe, chairman
Assets 14,532 million yen (shareholders' equity)
Nature of business Investment trust (corporate type)
Major shareholder --
Relationship to the Company
Investment relationship  
Number of the subscriber's shares owned by the Company --
Number of the Company's shares owned by the subscriber 4,401,000
Business relationship
Operating transactions None
Non operating transactions None
Connections through personnel None

Name SPARX Strategic Investment Fund II Limited
Number of shares allocated to it 5,850,000
Amount to be paid in 456,300,000 yen
Details of the subscriber Address of headquarters Bank of Bermuda Building 6 Front Street Hamilton HM 11, Bermuda
Name and title of representative Shuhei Abe, chairman
Assets 5,734 million yen (amount paid)
Nature of business Investment trust (corporate type)
Major shareholder --
Relationship to the Company
Investment relationship
Number of the subscriber's shares owned by the Company --
Number of the Company's shares owned by the subscriber 1,392,000
Business relationship
Operating transactions None
Non operating transactions None
Connections through personnel None

Name Covenstone Limited
Number of shares allocated to it 1,300,000
Amount to be paid in 101,400,000 yen
Details of the subscriber Address of headquarters Vanterpool Plaza, 2nd Floor, Wickhams Cay I, Road Town, Tortola, British Virgin Islands
Name and title of representative Daniel Rohrsser, representative
Assets 4,013 million yen (shareholders' equity)
Nature of business Investment company
Major shareholder --
Relationship to the Company
Investment relationship
Number of the subscriber's shares owned by the Company --
Number of the Company's shares owned by the subscriber 698,000
Business relationship
Operating transactions None
Non operating transactions None
Connections through personnel None

Name Japan Partners LLC
Number of shares allocated to it 650,000
Amount to be paid in 50,700,000 yen
Details of the subscriber Address of headquarters 2501 McGee St., Mail Drop 323, Kansas City, MO 66028, USA
Name and title of representative John MacDonald, Executive Vice President
Assets 3,072 million yen (shareholders' equity)
Nature of business Investment company
Major shareholder --
Relationship to the Company
Investment relationship
Number of the subscriber's shares owned by the Company --
Number of the Company's shares owned by the subscriber 558,000
Business relationship
Operating transactions None
Non operating transactions None
Connections through personnel None

Name Mellon Trust
Number of shares allocated to it 650,000
Amount to be paid in 50,700,000 yen
Details of the subscriber Address of headquarters Princess House, 1 Suffolk Lane, London EC4R OAN
Name and title of representative Suzanne Carr, supervisor
Assets 7,555 million yen (shareholders' equity)
Nature of business Trustee services banking
Major shareholder --
Relationship to the Company
Investment relationship
Number of the subscriber's shares owned by the Company --
Number of the Company's shares owned by the subscriber 1,538,000
Business relationship
Operating transactions None
Non operating transactions None
Connections through personnel None

2. Funds managed by Merrill Lynch Investment Managers Co., Ltd.
Name Merrill Lynch Japanese Small Cap Equity Open
Number of shares allocated to it 2,475,000
Amount to be paid in 193,050,000 yen
Details of the subscriber Address of headquarters Ohtemachi 1-4-5, Chiyoda-ku, Tokyo Ohtemachi Financial Center
Name and title of representative David J. Semaya, President
Assets 15,369 million yen (shareholders' equity)
Nature of business Investment trust
Major shareholder --
Relationship to the Company
Investment relationship
Number of the subscriber's shares owned by the Company --
Number of the Company's shares owned by the subscriber --
Business relationship
Operating transactions None
Non operating transactions None
Connections through personnel None

Name Mercury Active . Japan Open
Number of shares allocated to it 3,962,000
Amount to be paid in 309,036,000 yen
Details of the subscriber Address of headquarters Ohtemachi 1-4-5, Chiyoda-ku, Tokyo Ohtemachi Financial Center
Name and title of representative David J. Semaya, President
Assets 25,193 million yen (shareholders' equity)
Nature of business Investment trust
Major shareholder --
Relationship to the Company
Investment relationship
Number of the subscriber's shares owned by the Company --
Number of the Company's shares owned by the subscriber --
Business relationship
Operating transactions None
Non operating transactions None
Connections through personnel None

Name Merrill Lynch International Investment Funds Japan opportunities Fund
Number of shares allocated to it 6,385,000
Amount to be paid in 498,030,000 yen
Details of the subscriber Address of headquarters 6D route de Treves, L-2633 Senningerberg Grand-Duchy of Luxembourg
Name and title of representative Jurgen Remnitz, Frankfurt am Main Corporate Director
Assets US$361.8million (shareholders' equity)
Nature of business Investment trust
Major shareholder --
Relationship to the Company
Investment relationship  
Number of the subscriber's shares owned by the Company --
Number of the Company's shares owned by the subscriber --
Business relationship  
Operating transactions None
Non operating transactions None
Connections through personnel None

Notes:
1. The entry giving the assets of the funds under management by SPARX Asset Management Co., Ltd., its major shareholders and its investment relationship with the Company is as of August 31, 2002.
2. The entry giving the assets of the funds under management by Merrill Lynch Investment Managers Co., Ltd., its major shareholders and its investment relationship with the Company is as of August 31, 2002.

7. Composition of major shareholders after the capital increase

Shareholder Number of shares Percentage of issued shares
SPARX Strategic Investment Fund Limited 16,843,000 8.00%
The Asahi Bank, Ltd. 8,761,559 4.16%
The Daiichi Mutual Life Insurance Co. 8,250,848 3.92%
Merrill Lynch International Investment Funds Japan opportunities Fund 6,385,000 3.03%
Goldman Sax Inter national 5,149,000 2.45%

Notes: The above figures result from adding the number of shares to be acquired in the planned new issue to existing shareholdings.


For queries regarding this article, please contact:

Mr. S. Yamaga
PR Department
KENWOOD Corporation (Japan)
email: pr.qa@pr.kenwood.co.jp


Updated 02/09/27 (C) 2002 KENWOOD Corporation
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