May 28, 2004

At a meeting of the Board of Directors of the Company held today, the decision was taken to make a second issue of unsecured non-detachable warrants (“convertible bonds”) in a total issue amount of ten billion yen, the said issue to be underwritten in lump sum by one securities company. Details are as set out below.
The purpose of the issue of warrants in question is to strengthen the Company's shareholders' equity.
In its latest medium-term management plan, under the name “New KG200,” announced in February 2004, the Company revealed its target of raising its equity ratio to 10%. The issue of the warrants in question raises the probability of this target being reached within the period of the medium-term plan. In addition, it also brings within reach the goal of pulling down the debt-equity ratio (DER) to no more than 5 times, and the attainment of the objectives of the plan ahead of schedule.
The Company has decided to adopt the method of private placement with a single underwriting company for the following reasons:

(1) The conversion price will be revised on a monthly basis to reflect changes in market conditions, creating conditions conducive to a steady pace of conversion to equity shares during a relatively short period; this would be the most effective means of reinforcing the Company's capital base.
(2) The marketing policy with respect to the warrants to be followed by the securities company allows us to expect a gradual pace of exercise of the warrants that is flexible and responsive to market conditions and investor needs, with a minimum negative impact on the Company's share price.

Through this capital-bolstering initiative, Kanematsu aims to establish a firm and healthy financial position, which, in turn, will allow it to pursue a more aggressive investment policy. In particular, it will allow us to move forward in our drive to reinforce our marketing capabilities, which has been assigned top priority under the New KG200 plan.
The funds raised through this warrant issuance will mainly be employed as working funds in new business ventures and projects within the Group's core business fields, and a portion of the funds will be used to repay borrowings.

1. Name of bonds: Kanematsu Corp.'s 2nd issue of unsecured non-detachable warrants (non-detachable warrants with a special clause for non-subordination to other bonds traded solely in Japan; hereinafter referred to as “the bonds in question”; the share subscription rights attached to the bonds in question are referred to as “warrants”)
2. Bond issue price: \100 par face value of: \100 per face value of: \100 per face value of \100
3. Issue price of warrants: Not applicable (gratis issue)
4. Payment due date/ Date of issuance: June 14, 2004
5. Matters related to placement
(1) Method employed for placement: private placement (placed with Mitsubishi Securities in lump sum)
(2) Issue price: \100 per face value of \100
(3) Date for application: June 14, 2004
(4) Venue for application: Bank of Tokyo-Mitsubishi, Ltd.
6. Matters related to warrants
(1) Category and number of shares to be issued upon exercise of warrants: Ordinary shares shall be issued upon exercise of warrants. Aggregate number of shares to be issued or transferred upon exercise of warrants is as follows:
Number of shares = Total value of bonds declared for exercise of warrants
-------------------------------------------
Conversion price
Any fraction of less than one share upon exercise of warrants shall be disregarded, and no cash adjustment shall be made.
(2) Total number of warrants to be issued: 100 (one warrant shall be issued for each bond in question)
(3) Payment upon exercise of warrant and convertible price: Amounts to be paid upon exercise of warrant shall be the same as the issue price. Initially, amounts of payment for issuance or transfer of the Company's ordinary shares upon exercise of the warrant(hereinafter, “conversion price”) shall be \184.
(4) Reason for gratis issue of warrants and calculation formula for payment amounts upon exercise of warrants: The Corporation has decided to make a gratis issue of warrants in consideration of the non-detachable nature of warrants and the fact that the bonds in question will disappear upon the exercise of warrants, and a comparison of the benefits accruing to and the burden placed on the Corporation on the assumption of terms and conditions for issuance of the bonds, including interest rates, advanced redemption and the issue price on one hand, and the value of the warrants by themselves on the other. In addition, the amounts of payment for exercising a warrant are the same as the bond issue price, and the initial conversion price is determined by multiplying by 1.00514 the closing price of ordinary shares of the Corporation's stock on the Tokyo Stock Exchange on May 28, 2004.
(5) Amounts to be incorporated into paid-in capital upon exercise of the warrants: Upon exercise of the warrant, an amount equivalent to one half of the aforementioned conversion price shall be incorporated into paid-in capital. (Conversion price is subject to adjustment in accordance with stipulations in Items (8) and (9) of these regulations.) Fractions less than \1 generated from calculation shall be rounded up.
(6) Exercise period for warrants:
From June 15, 2004 to June 13, 2006, inclusive.
In the event of advanced redemption, the last day of the said period shall be the last banking day before of the date of redemption.
(7) Conditions for exercising warrants: In the case of advanced redemption, warrants shall not be exercised after the date of redemption. In the case of benefit of the term expired, warrants shall not be exercised after the date of expiration. In the case of advanced redemption upon request of warrant holders, warrants shall not be exercised after the date of presentation to designated places of the bonds in question (or certificates for claims on advanced redemption of registered bonds in question).
(8) Revision on conversion price:
The revised conversion price shall be equivalent to 92% (calculation to be made up to first decimal place only) of the average closing price (including quotations) of the Company for the market price calculation period, which is three consecutive trading days ending the third Friday of the month at the Tokyo Stock Exchange. In the event that there is no trading in the Company's shares during the said calculation period, the latest closing price shall be employed. In the event of occurrence of matters described in Item (9) below, the conversion price shall be amended properly in line with the spirit of the clause. However, in the event that the revised conversion price does not reach \92 (subject to adjustments by description in Item (9) below) the revised conversion price shall be \92, and the relevant price exceeding \276 (subject to adjustments by description in Item (9) below), the revised conversion price shall be \276.
(9) Adjustment for conversion price
In the event of the issue of ordinary shares of common stock below market price, or the disposal of treasury shares of Kanematsu Corporation, pursuant to Articles 211 of the Commercial Code of Japan, after the issuance of the bonds in question, the conversion price shall be adjusted by the following formula:



1 = 2 ×		 4 × 5
3 + ------
6
------------
7 + 8
1. Conversion price after adjustment
2. Conversion price before adjustment
3. Number of shares issued and outstanding
4. Number of shares to be issued or disposed of
5. Per-share amount to be paid or disposed of
6. Market price
7. Number of shares issued and outstanding
8. Number of shares to be issued or disposed of
(10) Cancellation of the warrants: Grounds for cancellation of warrants shall not be specified.
(11) Initial date in reckoning for new shares issued upon exercise of warrants for dividend payment: In the event of the exercise of warrants during the period between April 1 and September 30, the date of reckoning for dividend payment shall be determined on the assumption of issue or transfer of shares on April 1. The relevant date for the reckoning for new shares exercise of warrants during the period between October 1 and March 31 next year shall be October 1.
(12) Proxy payment
Exercise of non-detachable warrants in question in accordance with Items 7 and 8, Clause 1, Article 341-3 of the Commercial Code shall be regarded as equivalent to a full payment for new share issuance, in place of the redemption of the bonds in question in the full amount.
(13) Venue for exercising warrants: Securities handling agent Chuo-Mitsui Trust Banking Corporation, Securities Handling Department
(14) Venue for acceptance of claims for exercising warrants: The Bank of Tokyo-Mitsubishi, Ltd., Head Office
7. Matters relating to the bonds
(1) Total face value: \10 billion
(2) Face value of bond: \100 million only
(3) Coupon rate: zero
(4) Redemption
a. Principal of the bond shall be totally redeemed on June 14, 2006 in an amount of \100 per face value of \100. In the case of advanced redemption, however, provisions in (d) or (f) of this clause shall be applied.
b. Kanematsu Corporation reserves the right to carry out redemption by purchase of the bonds in question on the next day of the due date for application or after. Redemption of warrants separately from the bonds in question, however, shall not be allowed. In the case of redemption by purchase of the bonds in question, unexercised share subscription rights attached to the bonds shall simultaneously be invalidated.
c. In the event of the date of redemption (including dates for advanced redemption in accordance with provisions in (d) or (f) of this clause; hereinafter “redemption date”) falling on a bank holiday, the redemption date shall be advanced to the latest business day of banks.
d. In the event of Kanematsu Corporation becoming a wholly-owned subsidiary of a company through share exchange or transfer upon resolution of the general meeting of shareholders of the Company, the Company shall be allowed to redeem all of the remaining portion of the bonds in question before maturity prior to the effective date for the said share exchange or transfer in the following amounts per face value of \100.
For the period between June 15, 2004 and June 14, 2005: \101 per face value of \100
For the period between June 15, 2005 and June 13, 2006: \100
e. The Company reserves the right to carry out advanced redemption in lump-sum of the bonds in question in an amount of \101 per face value of \100 on the third Friday of every month on the condition of prior notification on the first Friday of the same month. (In cases where the Friday in question falls on a bank holiday, redemption date shall be advanced to the latest business day of banks.)
f. Holders of the bonds in question shall be allowed to request advanced redemption of the bonds in lump-sum or in part in an amount of \99 per face value of \100 on the second Friday of the same month. (In the event that the Friday in question falls on a bank holiday, the redemption date shall be advanced to the latest business day of banks.) Regarding the registered bonds in question, certificates for claims on advanced redemption prepared in accordance with the Company's predetermined format (hereinafter “certificates for claims on advanced redemption”)shall be presented to the designated handling agent for the said redemption through the registration institution described in Item 10. The certificates for claims on advanced redemption shall contain the name of the bonds in question, day, month and year of the claims and name of the bond bearer with registered seal affixed.
(5) Inscription on bonds: Bearer bonds only
(6) Collateral and guarantees : Neither collateral on property nor real guarantees are secured and no specific properties are reserved for redemption of the bonds in question.
(7) Special clause for restriction of mortgage creation
The term “non-detachable warrants” (so-called “convertible bonds”) refers to bonds incorporating share subscription rights in accordance with the provisions of Article 341-2 of the Commercial Code, and to which a statutory exception is applied, under which the bond holders shall be allowed to acquire the shares of the bond issuer without additional payment upon exercise of share subscription rights instead of claims on redemption of the bonds in accordance with the provisions of Items 7 and 8 of Paragraph 1, Article 341-3 of the Commercial Code.
In the case of creation of a mortgage for issuance of non-detachable warrants during the period when the warrants in question are outstanding (both in full or in part), a relevant mortgage of the same rank shall be created for the bonds in question in line with the requirements of the relevant law.
The statutory exception also contains special clauses on properties pledged as collateral, under which the bond issuers are allowed to create a mortgage on the said bonds with the purpose of nullifying the special clause on loss of benefit of time, which shall become effective on the condition of significant changes in specified financial indicators of the bond issuer, and another clause under which the bond issuer is allowed to create a mortgage on the bonds in question of its free will before maturity of the bonds.
8. Bond management: No company is designated for management of the bonds in question, as the bonds in question will be issued in accordance with the provisions of Article 297 of the Commercial Code for exceptional treatments.
9. Ratings: not yet acquired
10. Registration institution; Bank of Tokyo-Mitsubishi, Ltd.
11. Designated agent for payment of redemption money, and specific office of said agent: Bank of Tokyo-Mitsubishi, Ltd., Head Office
12. Listings: unlisted
13. Articles mentioned above shall not become effective without approval under the Securities and Exchange Law.


(Notes)
1. Use of funds

(1) Use of funds to be procured
An approximate amount of \9,960 million to be procured shall be used as working funds or for repayment of borrowings.
(2) Changes in purpose from previous fund procurement: none
(3) Effects created by the fund procurement on business forecasts for the current term
Interest payments will decline due to repayment of borrowings, but as this has already been taken into account in the business forecasts for fiscal 2004, no revision of the said forecasts is required.


2. Profit distribution

(1) Basic policies
The Company regards profit distribution as a crucial management issue and maintains its basic policy of making dividend payments reflecting the Company's business performance, while bolstering retained earnings.
(2) Dividend distribution policy and usage of retained earnings
For the term ended March 2004, the Company made no dividend payment in consideration of the need to strengthen shareholders' equity in the form of retained earnings, which will be used a funds for enhancing its marketing capabilities.
(3) Basic indicators for dividend payments for the latest three terms
Term ended March 2002 Term ended March 2003 Term ended March 2004
Earnings per share \13.26 \7.56 \10.34
Annual dividends -- -- --
Payout ratio -- -- --
Return on equity(*) 26.7% 16.9% 19.1%
Ratio of dividend as a percentage of equity -- -- --
(*) Return on equity is calculated from the figure for net income for the term by dividing it by the average shareholders' equity at the beginning of the term and the end of the term.


3. Equity finance by the Company for the latest three years

(1) Dilution : The ratio of the number of shares to be issued upon exercise of the warrants to the Company's total number of shares issued as of the end of April 2004 will amount to 15.7%. The ratio is calculated from the number of shares to be issued upon exercise of the warrants divided by the total number of shares issued, assuming that all warrants are exercised using the initial conversion price.
(2) Prior equity financing
a. Equity financing carried out over the past three years
i) Non-detachable warrants (“convertible bonds”; public offering)
Date of issue: February 17, 2003
Issue amount: \50 billion
Conversion price: \135
Conversion rate: fully converted
ii) Gratis issue of share subscription rights (placement for shareholders)
Date of issue: May 9, 2003
Number of share subscription rights issued: 11,841,928
(Category and number of shares upon exercise of share subscription rights: 1 ordinary share per 1 share subscription right)
Conversion price: \174
b. Stock price movements by term
Term ended March 2002 Term ended March 2003 Term ended March 2004 Current term
(as of May 27, 2004)
Opening price \285 \197 \117 \225
Closing price \510 \257 \240 \235
Lowest price \128 \66 \110 \153
Highest price \189 \118 \224 \171
PER (times) 3.02 8.90 29.63 --
Notes: 1. Stock prices quoted at the Tokyo Stock Exchange
2. PER refers to the price earnings ratio calculated from the closing price of the Company's shares at the balance sheet date of the term divided by the EPS for the previous term.


4. Private placement

Underwriter for the private placement: Mitsubishi Securities Co., Ltd.
Non-detachable warrants (Face value): \10 billion
Paid-in amounts: \10 billion
Outline of underwriting company:
Head Office: 2-4-1 Marunouchi, Chiyoda-ku, Tokyo
Representative: Koichi Kane, President
Paid-in capital: \65,254 million (as of September 30, 2003)
Line of business: Securities business
Major shareholders:
The Bank of Tokyo-Mitsubishi, Ltd. 52.31%
Toyota Motor Corp. 5.90%
The Mitsubishi Trust & Banking Corp. 4.05%
Japan Trustee Services Bank, Ltd. 2.58%
The Master Trust Bank of Japan, Ltd. 2.54%
Nippon Life Insurance Company 2.23%
Trust & Custody Services Bank, Ltd. 1.23%
Daido Life Insurance Company 1.22%
UFJ Trust Bank Ltd. 1.21%
State Street Bank & Trust Company 505025 1.09%
(Standing trustee: Mizuho Corporate Bank, Ltd., Kabutocho Securities Clearance Office)
Relationship with Kanematsu Corporation
Equity holdings (as of September 30, 2003)
Number of the acquirer's shares held by Kanematsu Corporation
Number of Kanematsu's shares held by the acquirers
Business relationship: buying and selling of the securities
Personnel: none