To all employees, I wish you a Happy New Year! Please let me take this opportunity to share my thoughts with you.

Following the serious economic conditions caused by the bursting of the bubble economy in the early 1990s, Kobe Steel has focused its resources on its core businesses in accordance with two goals. One is the selection and consolidation of particular businesses and the other is the improvement of our financial position. At the same time, we have channeled our resources into a new business pillar ﾐ the independent power producer (IPP) business. Over the past two years, we have implemented temporary, emergency measures to raise our profitability and have asked for your considerable support.

Consequently, the financial performance of the entire Kobe Steel Group in fiscal 2003, ending March this year, is expected to improve. As the rise in our stock price and credit rating shows, the capital market's evaluation of our company is getting better. This is because our constant efforts to achieve our goals, such as reducing our debt, have been recognized. I deeply appreciate and highly value the tireless effort and support of all of you.

As you know, we decided to reverse our legal reserve at last year's general shareholders' meeting and aim to resume dividend payments in June this year. I am determined to achieve this goal. At the same time, it is my intention to complete the emergency measures by the end of March as planned.

Kobe Steel has surmounted the collapse of the bubble economy and we are now at the starting line for the next stage of development. Our business performance, however, is not yet firm enough and the business environment surrounding our company gives no grounds for optimism. Although recovering, the Japanese economy is still in deflation and the improvement in corporate earnings is export driven.

While the majority of the companies are continuing their efforts to improve their financial position, the domestic economy is far from a demand-led recovery. Furthermore, we are facing sluggish personal consumption, high unemployment, an uncertain U.S. economy, and a strong yen. The situation is unpredictable and uncertain. For instance, raw material and shipping costs have been rising sharply due to strong demand from China. I am also concerned about the rising yen because this will hit Japan's export industry as well as our customers, causing an adverse impact upon our company's profits. For this reason, we must make strong efforts to improve our profits in fiscal 2004.

Taking these factors into account, last year we drew up the Consolidated Medium-Term Business Plan covering fiscal years 2003 to 2005. We intend to further strengthen our core businesses to become a manufacturer of distinctive products, and not just of volume production. We must strictly review businesses that do not measure up. As for improving our financial position, there is no change in our policy. We will also strive to reduce our debt, while funneling financial resources on the consolidation and development of our core businesses.

Huge business opportunities abound. China and other Asian nations are boosting the demand for steel, welding consumables, construction machinery, and industrial equipment. More and more, cars are using aluminum. The demand for direct reduced iron is also rising globally. On this background, we plan to build new plants for construction equipment and welding consumables in China. We are constructing a facility in the U.S. to make aluminum forgings for automobiles. On the home front, we will also have to make the necessary investments to increase the competitiveness of our domestic production facilities. We cannot, however, improve our financial position and make investments at the same time without securing profits. Unless our profits reach a certain level in fiscal 2004, it will be impossible for us to make active investments.

The No. 2 Power Plant of our IPP business begins commercial operation this April and this will contribute to the expansion of our profit base. Let us put together the wisdom of the entire Kobe Steel Group to improve profits in fiscal 2004 and achieve our medium-term goals.

Coming to a close, I would like to ask for your cooperation in preventing work-related accidents. To eliminate accidents, please go back to the basics again and devise creative measures such as risk assessment. In particular, I would like executives and managers to be keenly aware that employees' lives are in your hands. You are responsible for protecting them. At each workplace, please have candid discussions with all employees and see matters from the same point of view. We must firmly bear in mind that grave accidents can be fatal to a manufacturer. Please implement strict crisis-control measures to prevent accidents.

Finally, I express my deep thanks to you for the efforts you have made, and I wish you and your families good health and every happiness for the New Year.