1. Presentation of Financial Statements
Kobe Steel, Ltd. (the "Company") maintains its accounts and records in accordance with the provisions set forth in the Japanese Commercial Code and the Securities and Exchange Law and in conformity with accounting principles and practices generally accepted in Japan, which are different from the accounting and disclosure requirements of International Accounting Standards.
The accompanying non-consolidated interim financial statements should be read in conjunction with the financial statements and related notes included in the Annual Report of the Company to stockholders for the year ended March 31, 1999. The notes to the non-consolidated financial statements in the Annual Report explain that the Company changed its method of accounting for research and development expenses and adopted tax effect accounting commencing with the year ended March 31, 1999. These changes were not made in the interim financial statements for the six months ended September 30, 1998.
The accompanying non-consolidated interim financial statements are translations of the non-consolidated interim financial statements of the Company which were prepared in accordance with interim accounting principles and practices generally accepted in Japan from the accounts and records maintained by the Company and were filed with the Minister of Finance as required by the Securities and Exchange Law.
In preparing the accompanying non-consolidated interim financial statements, certain reclassifications have been made in the non-consolidated interim financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan.
Certain prior year amounts have been reclassified to conform to 1999 presentation. These changes had no impact on previously reported results of operations or stockholders' equity.
The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience of the reader, using the prevailing exchange rate at September 30, 1999, which was 106.95 yen to U.S. $1.00. The convenience translations should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.

2. Contingent Liabilities
At September 30, 1999, the Company was contingently liable for guarantees of loans of 134,570 million yen ($1,258,252 thousand). This figure includes contingent guarantees and letters of awareness of 92,346 million yen ($863,450 thousand).