Nov. 27, 2000

Victor Company of Japan, Ltd. (JVC) is pleased to announce the establishment of the "CRC. JVC. Audio Visual software Company Limited," a joint-venture between its fully owned subsidiary, JVC (China) Investment Co., Ltd. and China Record Corporation (CRC), the largest state-run record company in China. The joint-venture will engage in the production and manufacturing (duplication) and distribution of audio-visual software in China, in what is the first foreign joint-venture in this industry to be approved by the Chinese central government.

JVC has also started to serve as the agent in Japan for the export of master rights of Chinese software and for the import of those of Japanese and overseas software.

The most unique characteristic of this new joint-venture is to be able to exercise all the licenses (producing, manufacturing, publishing, and sales licenses of software and import license of master rights) of CRC's software business provided by the Chinese government. It will be a national level software project, combining advantages of CRC as a state-run record company, and JVC's audio-visual technologies, the most advanced facilities, and the long-time expertise in producing and manufacturing of software.

Pirate copies of music and video software are rampant in China, which have become an impediment to the normal development of this industry. The Chinese government has stepped up its efforts to combat pirate copying and smuggling as it prepares for formal accession to the WTO (World Trade Organization). It is also trying to promote the manufacture and marketing of legitimate, copy-guarded video tapes as a means of normalizing the Audio-Visual software industry. The approval for the joint-venture was part of a program to achieve these objectives of the Chinese Government.

Up to now, the new company, CRC. JVC. Audio Visual Software Co., Ltd., has been approved to engage in all aspects of audio and visual software production including master editing, language translation, subtitling, and mastering, and also engage in the manufacturing and distribution of audio and visual software.

The company plans to begin by manufacturing video software with high picture and sound quality for the video rental market and the video mini-theater market (China has well over one hundred thousand video mini-theaters), following which it will move into the music cassette market, an area where demand continues to be high. It also plans to begin manufacturing and distribution of optical discs (CDs, VCDs, DVDs, single CDs, etc.)

JVC will supply all production and manufacturing facilities for the joint-venture and technology support for the operation of the system, which will cover all aspects from editing to software duplication. The video editing studio will be equipped with state-of-the-art audio and visual equipment based on a core JVC "D-9 system". China too will be moving to digital broadcasting in the near future, and the studio will produce quality digital video software for this. VHS video software manufactured by the new company will have copy guard functions under a license from the Macrovision Company of the United States.

Currently, the master rights licensing trade in China is almost exclusively imports, an imbalance the Chinese government would like to rectify. The country is rich in cultural and historical artifacts and folk arts, but the trade in such master rights requires special expertise in coordinating the requirements on the demand and supply sides of the equation. JVC has a wealth of experience in this area and has therefore decided to cooperate.

JVC has started to serve as the agent in Japan for the export of master rights to software produced domestically in China, in collaboration with Beijing Pan Universe International Copyright Agency Co., Ltd., ("Pan Universe") which is under the direct control of the Audio-Video Association of China and the only agency approved by the National Copyright Administration of the People's Republic of China to import and export entertainment software master rights.

Holders of master rights in China will be able to expand their opportunities for export to foreign markets by consigning their master rights to Pan Universe and JVC. The two companies have already completed a list of Chinese works suitable for the Japanese market, and have begun individual negotiation of terms and contracts through JVC's Corporate Management Division for CHINA as a representative.

They are also staring the final licensing conditions through JVC's Corporate Management Division for CHINA for various cinematic software, animation, and television programming from Japan and other countries supplied to major software manufacturers such as CRC and television stations in China.

• In September 1998, JVC sponsored a "Research Conference on Development of the Audio-Visual Software Market in China" in Beijing in collaboration with the "Audio-Video Association of China" (an industry organization formed and supported by the Ministry of Culture, State Administration of Radio, Film and Television, Press and Publication Administration, and National Copyright Administration of PRC.). This led the way to collaboration with the Pan Universe, setting the groundwork for this new joint-venture.

# # #

# # #