To the Board of Directors and Stockholders of Kobe Steel, Ltd. We have audited the accompanying consolidated balance sheets of Kobe Steel, Ltd. (a Japanese corporation) and subsidiaries at March 31, 1999 and 1998 and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended, expressed in Japanese yen. Our audits were made in accordance with generally accepted auditing standards in Japan and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the consolidated financial statements referred to above present fairly the consolidated financial position of Kobe Steel, Ltd. and subsidiaries at March 31, 1999 and 1998 and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in Japan, applied on a consistent basis, except for the change, with which we concur, in the method of accounting for expenses in respect of the development of new products and research into and the application of new technologies as explained in Note 2 (8). Kobe Steel, Ltd. has included information on differences between Japanese generally accepted accounting principles and International Accounting Standards in Note 3 to the Consolidated Financial Statements. This information is not required to be disclosed in Japan and is not included in the audited consolidated financial statements filed with the Ministry of Finance of Japan. We have also reviewed the translation of the statements mentioned above into U.S. dollars on the basis described in Note 1. In our opinion, such statements have been properly translated on such basis. Osaka, Japan June 29, 1999 (Member Firm of Andersen Worldwide SC) Statement on Accounting Principles and Auditing Standards This statement is to remind users that accounting principles and auditing standards and their application in practice may vary among nations and therefore could affect, possibly materially, the reported financial position and results of operations. The accompanying financial statements are prepared based on accounting principles generally accepted in Japan, and the auditing standards and their application in practice are those generally accepted in Japan. Accordingly, the accompanying financial statements and the auditors' report presented above are for users familiar with Japanese accounting principles, auditing standards and their application in practice.