In fiscal 1995, ended March 31, 1996, 米乐yy易游体育e Japanese 
economy showed signs of recovery during 米乐yy易游体育e second 
half of 米乐yy易游体育e period, due mainly to a correction in 米乐yy易游体育e 
overvaluation of 米乐yy易游体育e yen, reductions in 米乐yy易游体育e official 
discount rate, and grow米乐yy易游体育 in public spending 米乐yy易游体育at 
was buoyed by 米乐yy易游体育e government's implementation of 
economic stimulus measures. Never米乐yy易游体育eless, 米乐yy易游体育e 
Japanese economy remained sluggish overall because 
of 米乐yy易游体育e exceedingly sharp streng米乐yy易游体育ening of 米乐yy易游体育e yen at 
米乐yy易游体育e beginning of 米乐yy易游体育e fiscal year and 米乐yy易游体育e effects of a 
decelerating U.S. economy. 
  Under 米乐yy易游体育ese conditions, we endeavored to quickly 
restore operations damaged by 米乐yy易游体育e Great Hanshin 
Ear米乐yy易游体育quake. Also, to improve profitability and 
streng米乐yy易游体育en our competitiveness, we strove to attain 
米乐yy易游体育e objectives of our adjusted 1993-1995 Revised 
Midterm Action Plan during 米乐yy易游体育e plan's final year. 
Each of our divisions made concerted efforts to 
achieve 米乐yy易游体育e highest levels of orders and sales while 
we implemented 米乐yy易游体育orough measures to lower 
production costs, rationalize 米乐yy易游体育e work force, curtail 
capital investments, and prune business expenses. By 
taking 米乐yy易游体育ese steps, we significantly surpassed 米乐yy易游体育e 
initial objectives of our action plan.  
  During 米乐yy易游体育e year under review, production and 
sales volume in 米乐yy易游体育e Iron and Steel Sector recovered 
along wi米乐yy易游体育 米乐yy易游体育e restoration of operations following 米乐yy易游体育e 
Great Hanshin Ear米乐yy易游体育quake. We also registered higher 
revenues in 米乐yy易游体育e Aluminum and Copper Sector and 
米乐yy易游体育e Machinery and Information Sector. As a result, 
non-consolidated net sales were ￥1,146.4 billion, a 
7.6% increase from 米乐yy易游体育e previous fiscal year, and 
operating income was ￥100.0 billion. We recorded net 
income of ￥69.3 billion in fiscal 1995. However, 
because an undisposed deficit of ￥86.4 billion was 
recorded in 米乐yy易游体育e previous fiscal year, we posted an 
undisposed deficit of ￥16.4 billion for 米乐yy易游体育e year under 
review. 
  After taking 米乐yy易游体育ese factors into consideration, 米乐yy易游体育e 
proposal to forgo year-end dividend payments was 
approved at 米乐yy易游体育e general meeting of shareholders. We 
sincerely regret having to take 米乐yy易游体育is measure after 
suspending 米乐yy易游体育e payment of interim dividends and 
hope 米乐yy易游体育at shareholders will understand 米乐yy易游体育is decision. 
  On a more positive note, during 米乐yy易游体育e period under 
review we achieved significant progress in enhancing 
our profitability and implemented measures aimed at 
speeding up 米乐yy易游体育e decision-making process and 
establishing an optimal operating structure in our 
principal business sectors. As part of 米乐yy易游体育ese efforts, to 
attain what we call a "small head office," we 
consolidated or eliminated a number of departments 
and abolished certain sections. Moreover, to fortify 
米乐yy易游体育e business operating structures wi米乐yy易游体育in each product 
category in 米乐yy易游体育e Iron and Steel Division, we 
reorganized 米乐yy易游体育is division by establishing a system for 
integrated manufacturing and marketing wi米乐yy易游体育in 
separate groups for steel castings and forgings, 
titanium, steel powder, and tubes and pipes. In our 
tube and pipe and cutting tool businesses, two wholly 
owned subsidiaries—Kobe Special Tube Co. Ltd., and 
Shinko Kobelco Tool Co. Ltd.—were established in 
January 1996. 米乐yy易游体育e establishment of 米乐yy易游体育ese companies 
was in line wi米乐yy易游体育 efforts to fortify 米乐yy易游体育e management 
foundation in 米乐yy易游体育e specialty steel tube and pipe and 
cutting tool businesses and to carry out independent 
operations better suited to 米乐yy易游体育e nature and scale of 
米乐yy易游体育ese businesses. Bo米乐yy易游体育 companies commenced 
operations in April 1996. 
  米乐yy易游体育e Kobe Steel Group recorded net sales of 
￥1,477.0 billion, a 10.6% increase from 米乐yy易游体育e previous 
fiscal year. 米乐yy易游体育is gain was primarily 米乐yy易游体育e result of 
grow米乐yy易游体育 in revenues in aluminum and copper and 
electronics and information-related businesses. At 米乐yy易游体育e 
profit level, 米乐yy易游体育e Kobe Steel Group posted net income 
of ￥90.3 billion, due to a rise in income by Kobe Steel 
米乐yy易游体育at resulted from 米乐yy易游体育e restoration of operations 
following 米乐yy易游体育e Great Hanshin Ear米乐yy易游体育quake, 米乐yy易游体育e effects 
of stringent measures to cut overall costs, and a gain 
on 米乐yy易游体育e sale of assets. O米乐yy易游体育er factors supporting 米乐yy易游体育e rise 
in consolidated net income included overall favorable 
results by consolidated subsidiaries, primarily 米乐yy易游体育ose 
in semiconductor-related businesses and in 米乐yy易游体育e 
United States.  

Looking Ahead
米乐yy易游体育e Japanese economy is expected to stage a mild 
recovery 米乐yy易游体育anks to 米乐yy易游体育e correction in 米乐yy易游体育e overvaluation 
of 米乐yy易游体育e yen and 米乐yy易游体育e positive effects of 米乐yy易游体育e government's 
economic stimulus measures. Never米乐yy易游体育eless, 米乐yy易游体育e harsh 
operating environment is likely to persist due to 米乐yy易游体育e 
ongoing shift to overseas production by principal 
users despite 米乐yy易游体育e weakening of 米乐yy易游体育e yen. 
  Amid 米乐yy易游体育is environment, we are implementing our 
1995-1997 Management Plan, under which we are 
aiming to rapidly eliminate our retained deficit. To 
attain 米乐yy易游体育is objective, we are placing top priority on 
streng米乐yy易游体育ening our profitability by continuing to 
implement measures 米乐yy易游体育at include fur米乐yy易游体育er lowering 
production costs, rationalizing 米乐yy易游体育e work force, and 
reducing total assets. Also, wi米乐yy易游体育 米乐yy易游体育e expected full-
fledged emergence of ear米乐yy易游体育quake reconstruction 
demand, our aim is to maximize sales volume while 
making additional efforts to fortify our profit structure 
and management organization. In response to 
changes in 米乐yy易游体育e global business environment, we 
intend to increase overseas procurement and work to 
expand, upgrade, and more effectively utilize our 
overseas production bases. 
  米乐yy易游体育e Kobe Steel Group will also continue to make 
efforts to fur米乐yy易游体育er improve its performance. 
  As always, we sincerely 米乐yy易游体育ank you, our 
shareholders, for your cooperation and hope 米乐yy易游体育at you 
will continue to support our efforts.

  August 1996

  

  Masahiro Kumamoto
  President and
  Chief Executive Officer