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Kanji Emoto  Chairman and Co-CEO

Yoichi Shimogaichi  President and Co-CEO

CONSOLIDATED EARNINGS FOR THE YEAR ENDED MARCH 2004 (APRIL 2003 TO MARCH 2004)

 FIRST MEDIUM-TERM BUSINESS PLAN
The most important tasks facing the JFE Group are strengthening our earnings power and our financial position. Our First Medium-Term Business Plan (April 2003 to March 2006) is a roadmap formulated to guide us in quickly establishing a stable earnings flow, maximizing cash flow by shrinking our inefficient assets and carefully selecting investments, and aggressively reducing debt outstanding. This Plan includes specific goals for the year ending March 2006: raising ordinary income to ¥250.0 billion, increasing the ROS to 10% and boosting the ROA to 9%. Moreover, to strengthen our financial position, we aim to improve total assets to ¥3,460 billion, debt outstanding to ¥1,600 billion and shareholders' equity to ¥830 billion by the end of the year ending March 2006. We have already made substantial progress in the first fiscal year of the Plan. We are confident of reaching our goals throughout the three-year period and think it eventually will be possible to stretch them to further heights.
  The progress we have made so far has been due in part to improvements in the external environment, but we believe the bulk of this progress should be ascribed to the concerted efforts of all employees of the Group to fortify our profitability base.
  The consolidation effects have been realized much more quickly than we anticipated. In the steel business alone, we succeeded in shaving costs by roughly ¥50 billion compared with the previous fiscal year. By unifying the Kurashiki District (former Kawasaki Steel) and the Fukuyama District (former NKK) into West Japan Works, we have made the most of both technological cooperation and competition. In continuous casting and continuous galvanizing processes, we have achieved one new record after another in terms of monthly production volume. At the same time, we have lowered our operating costs, improved our production yields, stabilized quality and shortened delivery times. Through these kinds of direct and indirect cost reductions, West Japan Works has already attained a ROS of 15%, placing itself in the ranks of the world's most profitable steelworks. Aiming for even further improvements in profitability, West Japan Works started to revamp its blast furnace and expand its coke oven facilities in the Fukuyama District. At the same time, at East Japan Works, where profitability has been an issue, the blast furnace revamping in the Keihin District was completed as of the end of March 2004, and another blast furnace in the Chiba District was closed as planned at the end of June. These moves helped to optimize the blast furnace operations at East Japan Works, with no great change in its crude steel output. Looking forward, we aim to further enhance its profitability by making necessary investments to leverage the character of various down-stream processes as well as its location close to customers in the Tokyo metropolitan area, and to improve productivity in our highly value-added products for such as the automotive and home appliance sectors.
  We are also putting great effort into consolidation of group companies. In April 2003, we completed this process in three areas—containers, construction materials and chemicals—and have since been enjoying the benefits. In the second stage, we consolidated group companies in the four areas—surface treatments, logistics, facilities maintenance, and services—in April 2004.
  The Plan places a strong emphasis on our “Only One” and “Number One” products, high-value-added products which have a clear technological superiority in global market. These products have grown to represent 13% of our sales in the steel business, up from 6% in the previous fiscal year. About ¥10 billion of the increase in profit for steel business in the year ended March 2004 can be ascribed to the higher ratio of these Only One and Number One products in our product mix. In the year ended March 2004, for example, one of our Only One products, a 6.5% silicon steel sheet known as JFE Super Core^*1, was selected for use in the pressurization converter components of the new Toyota Prius hybrid automobile. Our hyper-burring high-carbon steel^*2 has also been adopted for use in the drive-train components made by several automotive components manufacturers. In addition, in the area of automotive steel, JFE Steel offers Only One products such as NANO HITEN (high tensile-strength steel sheet) and bake hardenable steel with tensile strength increase (BHT), as well as Number One products such as HITEN with excellent spot weldability and high lubrication galvanized steel sheet. Going forward, we continue to focus on developing new Only One products and improving our existing Number One products. In doing so, we aim to achieve a target sales ratio of Only One and Number One products, 15-20% for the steel business, set in our First Medium-Term Business Plan.
  In our engineering business, Only One and Number One products still account for only about 5% of overall sales. Through further product development efforts, we intend to boost that percentage steadily to 14% by the year ending March 2006.

 GLOBAL STRATEGY
JFE Steel, our steel division, has formed alliances with steel companies around the world, primarily in Asia. JFE Steel plays a vital role as a major supplier of hot-rolled coils, slabs and tin mill black plates. Our cooperative agreements have created a win-win situation by helping JFE Steel to strengthen further the capabilities necessary to fulfill customers' needs on a global basis and its capacity utilization in upstream processes, while also relieving our steelmaker partners of some of the heavy burden of capital investment in upstream processes. Our export ratio for steel products is 40.6%, but over 80% of these exports are to our alliance partners and major contract-based customers such as in the automotive, home appliance and shipbuilding industries. The remainder consists mainly of highly value-added products that only a limited number of suppliers can offer, such as super-thin steel sheet. Therefore, we believe our steel business will continue to see stable demand and profitability in these areas. The China market is expanding rapidly and the demand is projected to keep growing. To facilitate JFE Steel's participation in the market for steel sheet for automotive applications where we have a technological edge, we established a joint venture with Guangzhou Iron & Steel Enterprises Holdings Ltd. in October 2003. Construction has already started on the company's continuous galvanizing line and operations are expected to begin in April 2006.
  Our engineering business has been suffering as a result of the prolonged slump in Japan's public-sector investment, underscoring how urgent it is for us to develop our overseas businesses. To help JFE Engineering to attain its goals under the Plan despite the unfavorable business environment, we established the International Business Development Center to expand and fortify the functions of our overseas businesses in April 2004. By concentrating our sales, technology and other corporate resources for overseas businesses in this center, we are enhancing the efficiency of our operations and optimizing our personnel and capital deployment through rigorous risk management. We aim to establish an organizational structure capable of reliably winning annual orders of ¥20-30 billion overseas by the year ending March 2006.

 CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY
The foundation of the JFE Group has greatly expanded the scale of our businesses and the geographical reach of our corporate activities. Consequently, we are mindful of the weighty social impact of our organization and make tangible efforts to promote our corporate citizenship. To this end, we must build a sincere corporate culture that is both humble and dignified. No matter how strong our technological prowess, without a high-minded corporate culture we cannot expect to win the understanding and empathy of our shareholders, customers, employees and other stakeholders.
  In terms of corporate governance, the two of us are pursuing a highly transparent management style, and are devoted to managing JFE Holdings as Co-CEOs while supervising the management of each group company at arm's length. Major operating companies in the Group have management committees and corporate officer systems in place that facilitate speedy decision-making, while the holding company focuses on the full exercise of managerial and supervising functions to maximize the value of the Group as a whole.
  We regard thorough and conscientious efforts to ensure public safety as the foundation for our making a significant contribution to society. When an accident occurs in our business, the ramifications are huge and a great deal of trouble is caused for our neighboring communities and our customers. We are fully aware that ensuring safety is our most important task.
  The Group cannot ensure sustainable growth without fulfilling its responsibilities to society through the efforts made by all the members at the Group to conduct our business with a strong sense of mission and ethics. Since the founding of the Group, we have required all officers and employees to honor the JFE Group Standards of Business Conduct in all of our business activities. In addition, we have established the JFE Group Compliance Committee to ensure that all employees show due respect for both the law and corporate ethics.
  With regard to the environment, we are keenly aware of the burden that our LCA-based products and services place on the environment. In addition to striving to reduce environmental loads from our business activities, we are serious about contributing to the solutions of environmental problems through our world-class technologies such as DME (dimethyl ether), which is widely regarded as the clean fuel of the future. Partnering with other companies, we have studied how to make DME commercially viable and establish a DME mass production process. In November 2003, we upgraded our demonstration DME production facility output to100 tons per day.
  All of our group companies are incessantly honing their technologies in the “technology trailblazer” spirit which serves as the DNA of the Group. As Co-CEOs, our main goal is to continue striving to achieve the kind of corporate governance system that will maximize the results from the group companies' efforts as well as social value of the Group as a whole.

 TO ACHIEVE ANOTHER PRODUCTIVE YEAR FOR THE GROUP IN THE YEAR ENDING MARCH 2005
—MAKING STEADY EFFORTS TOWARDS ESTABLISHING A SOLID FOUNDATION AND QUICKLY DISCERNING BUSINESS CONDITIONS
In the year ending March 2005, the second year of the JFE Group, we feel the necessity of fully proving our capabilities. Demand for steel is expected to remain robust, but we must remain vigilant, as many points of uncertainty remain, including the rising cost of raw materials, the appreciation of the yen, rising interest rates and expanding environmental costs. In this business environment, we will pursue further profit growth through the implementation of our First Medium-Term Business Plan and construct a strong management foundation for future growth. Even when it appears to be smooth sailing ahead, we must not let our guard down, but be constantly monitoring signs of change in our business environment and preparing our responses to them in advance.
  We ask for your ongoing understanding and support for our business in the future.

August 2004
Kanji Emoto Chairman and Co-CEO		Yoichi Shimogaichi President and Co-CEO