FOUNDATION OF THE JFE GROUP

NKK and Kawasaki Steel will consolidate the entire operations of the two companies, including their subsidiaries and affiliates, based on equal partnership and in mutual trust.

Corporate Mission

The JFE Group is determined to realize world-class competitiveness through its strong customer base, advanced technology and state-of-the-art steel works and manufacturing plants; and to create an innovative corporate culture characterized by a spirit of challenge. By doing so, the JFE Group will pursue the following:

(1)	Further strengthen the capabilities necessary to fulfill customers’ needs on a global basis
(2)	Enhance credibility for shareholders and global capital markets
(3)	Provide more challenges and opportunities for employees
(4)	Contribute to local communities and global environmental conservation

Establishment of a Holding Company

On September 27, 2002, NKK and Kawasaki Steel will jointly establish a holding company, JFE Holdings, and become 100% subsidiaries of JFE Holdings by the “stock-for-stock exchange” method. Under JFE Holdings, NKK and Kawasaki Steel will pursue coordinated operations with integrated strategies for each business segment.


COMPANY NAME	JFE Holdings, Inc.

HEADQUARTERS	1-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8202, Japan

CAPITAL	¥100 billion

Management of the JFE Group

CHAIRMAN, CO-CEO AND REPRESENTATIVE DIRECTOR
Kanji Emoto	Currently Chairman, Kawasaki Steel

PRESIDENT, CO-CEO AND REPRESENTATIVE DIRECTOR
Yoichi Shimogaichi	Currently Chairman of the Board, NKK

Exchange Ratios

1,000 shares of Kawasaki Steel common stock for 100 shares of
JFE Holdings common stock

1,000 shares of NKK common stock for 75 shares of
JFE Holdings common stock

The estimated number of common shares of
JFE Holdings is 570 million.

Management Structure after the Reorganization of
the Operating Companies

By April 2003, the businesses of NKK and Kawasaki Steel under JFE Holdings will be regrouped and reorganized by business segment into the following companies:


JFE Steel Corporation
CHAIRMAN OF THE BOARD
Masayuki Hammyo	Currently President and CEO, NKK

PRESIDENT
Fumio Sudo	Currently President and CEO, Kawasaki Steel

JFE Engineering Corporation
PRESIDENT
Shigeharu Dote	Currently Executive Vice President, NKK

JFE Steel and JFE Engineering will adopt a “corporate officer” system to accelerate the decision making process and business execution. New management of other operating companies will be announced later.

Synergy Effects

1. Summary of Synergy Effects

The JFE Group plans to achieve synergy effects totaling ¥80 billion by March 31, 2006.

Synergy effect	Amount

Reduce overhead and related expenses	¥30 billion

Reduce procurement costs through volume discount and unification of specifications	¥20 billion

Reduce costs of production, maintenance and logistics by optimizing production allocation; reduce capital expenditure through integrating capital expenditure programs and optimizing utilization of common facilities	¥20 billion

Enhance the efficiency of R&D operations, technology exchange and know-how	¥10 billion

Total	¥80 billion

2. Optimization of Facilities
(1) Integration of Blast Furnace Operations

JFE Steel will have 11 blast furnaces after integration, but intends to close two of them as detailed below:

(i)	JFE Steel will close the No. 5 blast furnace at the Chiba Works by March 31, 2004, and only operate the No. 6 blast furnace.
(ii)	At the Mizushima Works, the No. 1 blast furnace has been used as a backup while other blast furnaces are relined. As it becomes possible for JFE Steel to utilize iron from other works, it will close the No. 1 blast furnace of the Mizushima Works.

(2) Integration of Other Production Facilities

Both NKK and Kawasaki Steel have been conducting studies focused on consolidating production lines and effectively utilizing production facilities, taking into account geographical factors and the uniqueness of the facilities. Details are as follows:

(i)	Steelmaking and casting: Production of stainless steel slab The stainless steel production and casting operations at the Fukuyama Works will be integrated into the existing operations at the Chiba Works. The stainless steel refining furnace at the Fukuyama Works will be used for dephosphorization.
(ii)	Sheets: Batch annealing furnace and continuous annealing line at the Keihin Works Studies are being conducted with a view to closing the above facilities and integrating these operations into the existing operations at the Chiba Works by March 31, 2003.
(iii)	Others: Consolidation of rolling mills (sheets, shapes, and pipes and tubes) Consolidation of the following facilities is being considered:

Production line

No. of
lines in
operation

No. of
lines to
be closed

Electrolytic galvanizing lines

Continuous galvanizing lines

Electric tinning lines

Section mills

Electric resistance welded pipe mills

1–2

Note :

The number of lines includes lines owned by the subsidiaries of the two companies.

Financial Targets

By carrying out various profit-improving programs and pursuing the synergy effects above, the JFE Group will aim to reach the following financial targets:

Year ended
March 31, 2002

Year ending
March 31, 2006

Ordinary income(*1)

¥46 billion

¥200 billion

Interest-bearing debt
outstanding

¥2,255 billion

¥1,800 billion

Return on assets(*2)

2.1%

6.5%

Return on sales(*3)

1.8%

7.5%

Reference :

Sales of ¥2,600 billion (The same level as the year ended March 31, 2002)

*1	Income before special credits and special charges
*2	(Ordinary income + interest expenses)/total assets
*3	Ordinary income/sales