The 1st Japan Strategic IT Partnership for Investment, administered by Inspire Corporation (head office: Minato-ku, Tokyo, president: Makoto Naruke) and SMBC Capital Co., Ltd.（head office: Chuo-ku, Tokyo, president: Michihiro Matsuda） has completed to subscribe a part of new shares of Kobe Diesel Co., Ltd. (head office: Nishi-ku, Kobe, president: Shigeru Yano, Securities code: 6016) allocated to a third party effective on March 12. Kobe Diesel Co., Ltd. is listed on the second section of the Osaka Securities Exchange. Dew to subscription of these new shares, we announce that we come to hold 17.85 % of its shares and become the largest shareholders same as Mitsubishi Heavy Industries, Ltd..

This is because we admire Kobe Diesel’s competitive superiority in the domestic market of middle-sized diesel engines for marine and growth potential of global markets including China in the field of engineering products for marine.
Regarding allocation of new shares to a third party on this occasion, Mitsubishi Heavy Industries, Ltd., which is the current licenser, Mitsui & Co., Ltd. and Shin Kurushima Dockyard Co., Ltd. have subscribed new shares, as well as the partnership for investments.
Kobe Diesel Co., Ltd. was established as a manufacturer of marine engines, and has been producing and selling UE diesel engines for marine under license from Mitsubishi Heavy Industries,,Ltd. since 1957.
Since Nagasaki factory (Tarami-cho Nishisonogi-gun, Nagasaki prefecture) has been recently aging and there is little place for expanding facilities, capacity of production to fill orders has reached its performance limits. Even with another factory in Kobe (Nishi-ku, Kobe City), they cannot respond to their clients’ requests to increase production, as demand for overseas ships is rapidly increasing because of active marine transport with Chinese economic growth. In addition, shipping expenses by land transportation have been a burden since the factory is located in internal region.
By allocation of new shares to a third party, Kobe Diesel Co., Ltd. will take the land on lease in Futami Plant of Kobe Shipyard & Machinery Works of Mitsubishi Heavy Industries, Ltd, and construct a new plant (19.8 thousand square meter, amount of capital investment: about 4 billion yen) adjacent to the shipping quay, after improving its financial standing. Building a new plant, annual capacity of production of diesel engines will be doubled from current 400 thousand horsepower to about 800 thousand horsepower, reduction in land transportation cost will be implemented thanks to its location adjacent to the shipping quay, and cutting-edge production facilities will be introduced and set up effectively. In addition, closing two factories in-service in Nagasaki and Kobe and consolidating production, manufacturing costs are going to be reduced by about more than 5 %. From here on, Kobe Diesel Co., Ltd aims to improve its market share in middle-sized diesel engines for marine with progress of production capacity and cost competitiveness. In accordance with consolidating factories and increase of production capacity, employees in Nagasaki plant will be transferred to Kobe and more than 20 new employees will be added.
Regarding allocation of new shares to a third party in this occasion, Kobe Diesel Co., Ltd acquired certification of restructuring plan based on the Law on Special Measures for Industrial Revitalization by Land, Infrastructure and Transportation Ministry effective on March 26, 2004. With regard to capital increase by allocation of new shares to a third party in this case, Kobe Diesel Co., Ltd will use special measures on reduced tax rate for registration based on the certificated restructuring plan as stipulated under Section 80 Paragraph 2 of Special Taxation Measures Law.

Overview of Investment
Method of Investment: subscription of new shares allocated to a third party
Acquired Shares: 5,000,000 shares (17.85% of outstanding shares)
Total Amount of Investment: 645,000,000 yen
Due Date for Payment: March 30, 2004
Shareholder Proportions: Mitsubishi Heavy Industries,Ltd. (17.85 %), The 1st Japan Strategic IT Partnership for Investment (17.85 %), Mitsui & Co., Ltd (16.5 %)
Overview of Invested Company
Company name: Kobe Diesel Co., Ltd.
Head office: 3-2-2 Takatsukadai Nishi-ku, Kobe City
Representative: representative director and president Shigeru Yano
Establishment: June 10, 1910
Capital: 2,215,000,000 yen
Outstanding Shares: 28,000,000 shares (as of March 31, 2004)
Business Lines: production and distribution of diesel engines for marine
Contact for this matter
Inspire Corporation: Mr. Kenma 03-5549-4321