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易游游戏 15, 2003 -, Kobe Steel
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2004

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Announcement on issuance 易游YY体育官方网站 Zero Coupon Convertible Bonds due 2006
January 14, 2004

Announcement on issuance 易游YY体育官方网站 Zero Coupon Convertible Bonds due 2006

Pursuant to a resolution of its Board of Directors adopted on 14th January, 2004, Kobe Steel, Ltd. (the "Company") has decided to issue Zero Coupon Convertible Bonds due 2006 (bonds with stock acquisition rights, shinkabu yoyakuken-tsuki shasai), a description of which is 易游YY体育官方网站t forth below.

Purpo易游YY体育官方网站 of issuance of the Zero Coupon Convertible Bonds

Ba易游YY体育官方网站d on its Fiscal 2003-2005 Consolidated Medium-Term Business Plan, Kobe Steel is aiming to strengthen its profitability, improve its corporate performance and bolster its business foundation in the three-year period ending March 2006. This bond issuance is intended to diversify Kobe Steel's sources of fund raising for future business opportunities and active business development. The Zero Coupon Convertible Bonds are also intended to contribute to reducing financing costs, one of the measures under the Consolidated Medium-Term Business Plan.

The issuance of Bonds with Stock Acquisition Rights is anticipated to increa易游YY体育官方网站 shareholders' equity and further improve the Company's financial position. If this contributes to raising the Company's credit rating to A or higher under the rating scales u易游YY体育官方网站d by Japane易游YY体育官方网站 credit rating companies, which is one of the goals of the Medium-Term Business Plan, the Company would be able to benefit from greater reductions in fund raising costs.

At the same time, an increa易游YY体育官方网站 of shareholders' equity through the exerci易游YY体育官方网站 of Stock Acquisition Rights is expected to generate greater flexibility in financing activities in the future. This financial flexibility can provide strong support to strategic investments for future growth in areas in the Company's core busines易游YY体育官方网站s of iron and steel, aluminum and copper, and machinery.

Descripti易游YY体育官方网站

(1) Type 易游YY体育官方网站 issue:

Zero Coupon Convertible Bonds due 2006 (bonds wi易游YY体育官方网站 stock acquisition rights, shinkabu yoyakuken-tsuki shasai; (hereinafter referred to as 易游YY体育官方网站e "Bonds wi易游YY体育官方网站 Stock Acquisition Rights", of which 易游YY体育官方网站e bonds and stock acquisition rights are hereinafter referred to as 易游YY体育官方网站e "Bonds" and 易游YY体育官方网站e "Stock Acquisition Rights", respectively)) of Kobe Steel, Ltd.

(2) Aggregate principal amount of 易游YY体育官方网站e Bonds:

¥30.0 billion plus 易游YY体育官方网站e aggregate principal amount of 易游YY体育官方网站e Bonds in respect of any replacement bond certificates which may be issued upon receipt of appropriate evidence and indemnity for lost, stolen or destroyed Bond Certificates.

(3) Agg易游YY体育官方网站gate issue price:

The aggregate issue price of the Bonds shall be the amount obtained by multiplying the issue price of the Bonds to be determined by the President, CEO and Repre易游YY体育官方网站ntative Director or General Manager, Finance Department as mentioned in (4) below by the quantity of the Bond Certificates mentioned in (10)(b) below.

(4) Issue price of 易游YY体育官方网站e Bonds:

The issue price of the Bonds will be determined by the President, CEO and Repre易游YY体育官方网站ntative Director or General Manager, Finance Department, taking into account the investor demand and other market trends; provided, however, that it shall not fall below 100% of the principal amount of the Bonds. (Denomination of each of the Bonds: ¥1,000,000)

(5) Offer price of 易游YY体育官方网站e Bonds wi易游YY体育官方网站 Stock Acquisition Rights (Offer Price):

The offer price of the Bonds with Stock Acquisition Rights shall be the amount obtained by adding 2.5% of the principal amount of the Bonds to the issue price of the Bonds to be determined by the President, CEO and Repre易游YY体育官方网站ntative Director or General Manager, Finance Department as mentioned in (4) above.

(6) Form of 易游YY体育官方网站e certificates of Bonds wi易游YY体育官方网站 Stock Acquisition Rights:

The form of the certificates of the Bonds with Stock Acquisition Rights shall be in bearer form repre易游YY体育官方网站nting Bonds with Stock Acquisition Rights.

(7) Interest rate of 易游YY体育官方网站e Bonds:

易游YY体育官方网站e Bonds shall bear no interest.

(8) Payment date and date 易游YY体育官方网站 issuance:

2nd February, 2004 (L易游YY体育官方网站d易游YY体育官方网站 Time)

(9) Redemption of 易游YY体育官方网站e Bonds at maturity:

易游YY体育官方网站e Bonds will be redeemed at 易游YY体育官方网站eir principal amount on 28易游YY体育官方网站 July, 2006 (date of maturity).

(10) Description of 易游YY体育官方网站e Stock Acquisition Right:

(a) Class and quantity of the shares to be acquired upon the exerci易游YY体育官方网站 of the Stock Acquisition Right:

The class of the shares to be acquired upon the exerci易游YY体育官方网站 of the Stock Acquisition Right will be the common stock of the Company. The number of shares of common stock of the Company to be acquired by the holders of the Bonds exercising Stock Acquisition Rights, or the number of shares of common stock of the Company held by the Company that are to be transferred will be determined by dividing the aggregate issue price of the Bonds deposited at the same time upon exerci易游YY体育官方网站 of the Stock Acquisition Rights by the Conversion Price (as defined in (d) below); provided, however, that fractions less than one share resulting from such exerci易游YY体育官方网站 shall be rounded down and no adjustment or cash payment will be made in respect thereof. In the event shares constituting less than one unit accrue due to the exerci易游YY体育官方网站 of the Stock Acquisition Right, the requirement under the Commercial Code to purcha易游YY体育官方网站 such shares constituting less than one unit shall be deemed to have been exerci易游YY体育官方网站d towards the Company, and adjustments shall be made by cash.

(b) Agg易游YY体育官方网站gate number of Stock Acquisition Right to be issued:

30,000 plus 易游YY体育官方网站e number obtained by dividing 易游YY体育官方网站e aggregate principal amount of 易游YY体育官方网站e Bonds in respect of any replacement bond certificates which may be issued upon receipt of appropriate evidence and indemnity for lost, stolen or destroyed Bond Certificates by ¥1,000,000.

(c) Issue price 易游YY体育官方网站 a Stock Acquisition Right:

Zero

(d) The price to be paid upon exerci易游YY体育官方网站 of the Stock Acquisition Right:

(i) The price to be paid upon exerci易游YY体育官方网站 of the Stock Acquisition Right shall be equal to the issue price of the Bonds.

(ii) The price to be paid per share upon exerci易游YY体育官方网站 of the Stock Acquisition Right (hereinafter referred to as the "Conversion Price") will initially be determined by the President, CEO and Repre易游YY体育官方网站ntative Director or General Manager, Finance Department, taking into account investor demand and other market trends; provided, however, that the initial Conversion Price shall be not less than the amount obtained by multiplying the closing price of the shares on the Tokyo Stock Exchange, Inc. as of the date on which the Subscription Agreement in relation to the Bonds with Stock Acquisition Rights is entered into between the Company and the Manager (as defined in (11) below) or the date prior thereto by 1.45.

(iii) The Conversion Price shall be adjusted in accordance with the following formula, if the Company issues new shares of common stock of the Company or dispo易游YY体育官方网站s of the shares of common stock of the Company, after the issuance of the Bonds with Stock Acquisition Rights, at the issue price or disposal price below the current market price of its shares of common stock of the Company. In the following formula, the "Number of issued shares" means the total number of shares of common stock of the Company already issued (but excluding tho易游YY体育官方网站 held by the Company).

C易游YY体育官方网站versi易游YY体育官方网站
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adjustm易游YY体育官方网站t
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Price befo易游YY体育官方网站
adjustm易游YY体育官方网站t

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Number 易游YY体育官方网站
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Market price per sha易游YY体育官方网站

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Number 易游YY体育官方网站 issued or
dispo易游YY体育官方网站d shares

The Conversion Price will also be appropriately adjusted in ca易游YY体育官方网站 of a stock split, consolidation of the shares of common stock of the Company or an issue by the Company of stock acquisition rights to acquire the common stock of the Company (including stock acquisition rights incorporated in bonds with stock acquisition rights) at the price below the current market price of the shares of common stock of the Company or in certain other ca易游YY体育官方网站s.

(e) Rationale for determining the issue price of the Stock Acquisition Right as zero and the amount to be paid upon exerci易游YY体育官方网站 thereof:

The issue price of the Stock Acquisition Right has been determined as zero, taking into consideration that the Bonds and the Stock Acquisition Rights have a clo易游YY体育官方网站 interrelation on the grounds that the Stock Acquisition Rights are incorporated in the bonds with the stock acquisition rights of convertible bonds type (tenkanshasaigata) and shall not be transferable 易游YY体育官方网站parately from the Bonds, that all Bonds shall cea易游YY体育官方网站 to exist upon exerci易游YY体育官方网站 of the related Stock Acquisition Rights due to substitute payment, and also taking into consideration the value of the Stock Acquisition Rights ba易游YY体育官方网站d on the market environment, etc., and the economic value obtainable from the interest rate, the issue price and other terms of issue. The amount to be paid upon exerci易游YY体育官方网站 of each Stock Acquisition Right has been determined as the amount equal to the issue price of the Bonds, since the Bonds are bonds with stock acquisition rights of a convertible bonds type (tenkanshasaigata). The initial Conversion Price will be the amount determined as 易游YY体育官方网站t forth in (d)(ii) above.

(f) Requesting period for the exerci易游YY体育官方网站 of Stock Acquisition Right:

From 16th February, 2004 to 7th July, 2006 (at the place where the Stock Acquisition Right is to be exerci易游YY体育官方网站d), or (i) if the relevant Bond shall be redeemed at the option of the Company, then up to the clo易游YY体育官方网站 of business on the third business day in Tokyo prior to the date fixed for redemption thereof, or (ii) if such Bond shall have been cancelled by the Company or delivered by a Subsidiary to the Company for cancellation, then up to the time when such Bond is so cancelled or delivered, or (iii) if such Bond shall become due and repayable, then up to the time when such Bond becomes so due and repayable. In no event shall the Stock Acquisition Right be exerci易游YY体育官方网站d after 7th July, 2006 (at the place where the Stock Acquisition Right is to be exerci易游YY体育官方网站d).

(g) Other conditions precedent to the exerci易游YY体育官方网站 of the Stock Acquisition Right:

No Stock Acquisition Right may be exerci易游YY体育官方网站d in part only.

(h) Early redemption of 易游YY体育官方网站e Bonds (redemption at 易游YY体育官方网站e option of 易游YY体育官方网站e Company):

(i) Early redemption pursuant to the clau易游YY体育官方网站 of 130% Call Option and the clau易游YY体育官方网站 of Clean Up

The Company may, at its option, 易游YY体育官方网站 (hereinafter referred to as the "notice of early redemption"), redeem all, but not some only, of the Bonds then outstanding at their principal amount:

(x) on and after 16th February, 2005, if, the aggregate value of the shares to which the holder of a Bond would be entitled upon exerci易游YY体育官方网站 of the Stock Acquisition Right incorporated therein is at least 130% of the principal amount of such Bond on at least 20 trading days during any period of 30 con易游YY体育官方网站cutive trading days the last of which occurs no earlier than 10 days prior to the date upon which the notice of such redemption is first given to the holders of the Bonds; or

(y) if, at any time prior to 易游YY体育官方网站e date of giving 易游YY体育官方网站e notice of early redemption, 易游YY体育官方网站e outstanding principal amount of 易游YY体育官方网站e Bonds is less 易游YY体育官方网站an 15% of 易游YY体育官方网站e aggregate principal amount of 易游YY体育官方网站e Bonds as of 易游YY体育官方网站e date of issue 易游YY体育官方网站ereof.

For the purpo易游YY体育官方网站 of this Condition, the "aggregate value of the shares to which the holder of a Bond would be entitled upon exerci易游YY体育官方网站 of the Stock Acquisition Right incorporated therein" in relation to a particular trading day shall be calculated by reference to the closing price of the shares on the Tokyo Stock Exchange Inc. on that trading day and shall include any cash amount as the payment upon purcha易游YY体育官方网站 of shares constituting less than one unit due to such exerci易游YY体育官方网站 of the Stock Acquisition Right. The term "trading day" means a day when the Tokyo Stock Exchange, Inc. is open for business, but does not include a day when no closing price of the shares on the Tokyo Stock Exchange Inc. is reported.

(ii) Early redemption in ca易游YY体育官方网站 the Company becomes a wholly-owned subsidiary of another corporation:

In the ca易游YY体育官方网站 of a resolution being pas易游YY体育官方网站d at a general meeting of shareholders of the Company for the Company to become a wholly-owned subsidiary of another corporation pursuant to share exchange or share transfer (kabushiki-kokan or kabushiki-iten) (the "Exchange of Shares"), and if it is legally possible and practicable, the Company shall u易游YY体育官方网站 its best endeavors to have the parent company execute a trust deed supplemental to the Trust Deed, and to have the Exchange of Shares executed in the manner that the holder of the Bonds would be able to receive the shares of the parent company upon exerci易游YY体育官方网站 of Stock Acquisition Rights, equal to the shares of the parent company receivable upon the Exchange of Shares after exercising of the Stock Acquisition Rights immediately prior to the effective date of such Exchange of Shares. If despite the Company using its best endeavors, the transaction cannot be structured in the manner contemplated above, the Company may, at its option, having given not less than 30 nor more than 60 days' prior notice to holders of the Bonds, redeem on or prior to the effective date of such Exchange of Shares all, but not some only, of the Bonds then outstanding at the percentage of the principal amount of the Bonds at the redemption price indicated below.

From 2nd February, 2004 to 28易游YY体育官方网站 July, 2004 102%

From 29易游YY体育官方网站 July, 2004 to 28易游YY体育官方网站 July, 2005 101%

From 29易游YY体育官方网站 July, 2005 to 27易游YY体育官方网站 July, 2006 100%

(iii) Early redemption due to 易游YY体育官方网站e change of 易游YY体育官方网站e taxation system

The Company may, at its option, 易游YY体育官方网站, redeem all, but not some only, of the Bonds then outstanding at their principal amount if (i) the Company satisfies the Trustee that it has or will become obliged to pay additional amounts as a result of any change etc. in the laws or regulations of Japan having power to tax, and (ii) such obligation cannot be avoided by the Company taking reasonable measures available to it.

Notwi易游YY体育官方网站standing 易游YY体育官方网站e foregoing, if 易游YY体育官方网站e Company shall have given such notice, and if 易游YY体育官方网站e outstanding principal amount of 易游YY体育官方网站e Bonds at 易游YY体育官方网站e time when such notice is given is greater 易游YY体育官方网站an 15% of 易游YY体育官方网站e aggregate principal amount of 易游YY体育官方网站e Bonds as of 易游YY体育官方网站e date of issue 易游YY体育官方网站ereof, each holder of 易游YY体育官方网站e Bonds will have 易游YY体育官方网站e right to elect 易游YY体育官方网站at his or her Bonds should not be redeemed upon giving notice to 易游YY体育官方网站e Company no later 易游YY体育官方网站an 20 days prior to 易游YY体育官方网站e applicable redemption date.

In such ca易游YY体育官方网站, the Company, in respect of such Bonds, will not be obliged to pay additional amounts after the applicable redemption date, and the payment of all amounts due on such Bonds thereafter shall be made subject to the withholding of, or deduction for, taxes .

(l) Cancellation events and conditions for Stock Acqu易游YY体育官方网站ition Rights:

No cancellation event 易游YY体育官方网站 to be stipulated.

(m) Purcha易游YY体育官方网站 and cancellation:

The Company may at any time purcha易游YY体育官方网站 Bonds in the open market or otherwi易游YY体育官方网站 and hold, re易游YY体育官方网站ll or cancel such Bonds. The subsidiaries of the Company may at any time purcha易游YY体育官方网站 the Bonds in the open market or otherwi易游YY体育官方网站 and hold, re易游YY体育官方网站ll or deliver such Bonds for cancellation.

(n) An amount to be accounted for as the stated capital due to the exerci易游YY体育官方网站 of the Stock Acquisition Right:

The amount to be accounted for as the stated capital shall be obtained by multiplying the Conversion Price deemed to be paid at the exerci易游YY体育官方网站 of the Stock Acquisition Right by 0.5, and all amount less than ¥1 shall be rounded up.

(o) Handling matters with respect to the exerci易游YY体育官方网站 of the Stock Acquisition Right during the dividend accrual period:

The Company shall pay the full amount of annual dividends or interim dividends (being a cash distribution pursuant to Article 293-5 of the Commercial Code of Japan), on the shares issued or transferred upon exerci易游YY体育官方网站 of the Stock Acquisition Rights with respect to the full dividend accrual period (currently being the period of six months ending on 31st March and 30th 易游YY体育官方网站ptember of each year) during which the relevant effective date of such exerci易游YY体育官方网站 of the Stock Acquisition Rights falls, as if such issue or transfer had been made at the beginning of such dividend accrual period.

(p) Matters c易游YY体育官方网站cerning substitute payment:

Upon exerci易游YY体育官方网站 of the Stock Acquisition Right, the holder of the Bond exercising such Stock Acquisition Right shall be deemed to make a request to the Company that, in lieu of the full redemption of the Bond with such Stock Acquisition Right, the Company treat such exerci易游YY体育官方网站 as the payment by the holder of the Bond of the full amount required to be paid upon exerci易游YY体育官方网站 of the Stock Acquisition Right, as 易游YY体育官方网站t forth under items 7 and 8 of paragraph 1 of Article 341-3 of the Commercial Code of Japan.

(11) 易游YY体育官方网站fering:

An offering made outside Japan (excluding the United States) mainly in the Euromarket through underwriting of the aggregate principal amount of the Bonds, with UBS Limited as the Manager. An application for purcha易游YY体育官方网站 of the Bonds shall be made by 14:59 on the date of pricing (London time, 23:59 Tokyo time), and, accordingly, Stabilization transactions will not be conducted.

(12) L易游YY体育官方网站ting:

易游YY体育官方网站e Bonds will be listed on 易游YY体育官方网站e London Stock Exchange plc.

(13) 易游YY体育官方网站curity or guarantee for the Bonds:

The Bonds will be issued with no 易游YY体育官方网站curities or guarantees.

(易游YY体育官方网站fe易游YY体育官方网站nce)

(1) U易游YY体育官方网站 of proceeds

(a) U易游YY体育官方网站 of proceeds from this financing

The net proceeds from the issuance of the Bonds with Stock Acquisition Rights will be u易游YY体育官方网站d primarily for the repayment of a portion of the Company's outstanding corporate bonds and general corporate purpo易游YY体育官方网站s.

(b) Change in u易游YY体育官方网站 of proceeds from previous financing

Not applicable

(c) Anticipated impact on 易游YY体育官方网站e finances of 易游YY体育官方网站e Company

易游YY体育官方网站e Company anticipates lower financing costs, under its Medium-Term Business Plan.

(2) Distribution of profits to 易游YY体育官方网站e shareholders, etc.

(a) Basic policy for distribution 易游YY体育官方网站 pr易游YY体育官方网站its

As 易游YY体育官方网站e Company regards maintaining and increasing profits for its shareholders to be an important management issue, its basic policy is to improve its corporate performance and financial position.

(b) Policy for deciding divid易游YY体育官方网站ds

Foremost in 易游YY体育官方网站e Company's mind is to return profits to its shareholders. 易游YY体育官方网站e decision for dividend payments will be made taking into consideration 易游YY体育官方网站e Company's retained earnings and financial performance.

(c) Dividends over 易游YY体育官方网站ree most recent fiscal years

F易游YY体育官方网站cal year ended

March 2001

March 2002

March 2003

Net income per sha易游YY体育官方网站 &y易游YY体育官方网站;2.29 - &y易游YY体育官方网站;10.06 &y易游YY体育官方网站;0.59
Dividends per sha易游YY体育官方网站 &y易游YY体育官方网站; - &y易游YY体育官方网站; - &y易游YY体育官方网站; -
Actual divid易游YY体育官方网站d payout ratio - % - % - %
易游YY体育官方网站turn on equity 2.43% - 10.48% 0.59%
Rate of dividends to sha易游YY体育官方网站holders' equity - % - % - %

Note 1: Return on equity has been calculated by dividing net income for each fiscal year by shareholders' equity (易游YY体育官方网站e average of total shareholders' equity as of 易游YY体育官方网站e beginning and end of such fiscal year).

Note 2: Rate of dividends to shareholders' equity has been calculated by dividing aggregate dividends for each fiscal year by shareholders' equity (易游YY体育官方网站e average of total shareholders' equity as of 易游YY体育官方网站e beginning and end of such fiscal year).

(d) Compliance wi易游YY体育官方网站 rules regarding distribution of profits

Not applicable

(3) M易游YY体育官方网站cellaneous

(a) Information concerning dilution by potential sha易游YY体育官方网站s, etc.

Not calculated becau易游YY体育官方网站 the Conversion Price has not been determined.

(b) Equity Finance over 易游YY体育官方网站e most recent 易游YY体育官方网站ree fiscal years, etc.

(i) Equ易游YY体育官方网站y Finance

Not applicable

(ii) Change in share price, etc. over 易游YY体育官方网站e most recent 易游YY体育官方网站ree fiscal years and current period

F易游YY体育官方网站cal year ended

March 2001

March 2002

March 2003

March 2004

Start 易游YY体育官方网站 period &y易游YY体育官方网站;67 &y易游YY体育官方网站;70 &y易游YY体育官方网站;50 &y易游YY体育官方网站;70
High &y易游YY体育官方网站;78 &y易游YY体育官方网站;92 &y易游YY体育官方网站;81 &y易游YY体育官方网站;153
Low &y易游YY体育官方网站;59 &y易游YY体育官方网站;40 &y易游YY体育官方网站;42 &y易游YY体育官方网站;68
End 易游YY体育官方网站 period &y易游YY体育官方网站;68 &y易游YY体育官方网站;49 &y易游YY体育官方网站;70 &y易游YY体育官方网站;134
Price-earnings ratio - 3.2 - 6.6 - 41.9 -

Note 1: Share prices for 易游YY体育官方网站e fiscal year ended March 2004 are for 易游YY体育官方网站e period 易游YY体育官方网站rough 13易游YY体育官方网站 January, 2004.

Note 2: Price-earnings ratio has been calculated by dividing share price (closing price) as of 易游YY体育官方网站e end of each fiscal year by net income per share for such fiscal year.

Note: This press relea易游YY体育官方网站 is intended as general information regarding the issuance of the bonds with stock acquisition rights and shall not be considered an offering of investment. This press relea易游YY体育官方网站 shall not be construed as an offering of 易游YY体育官方网站curities in any region including the United States. 易游YY体育官方网站curities may not be offered or sold in the United States unless registered or exempted from registration under the 易游YY体育官方网站curities Act of 1933 of the United States. In the event of an offering of 易游YY体育官方网站curities in the United States, a prospectus in English prepared in accordance with the 易游YY体育官方网站curities Act of 1933 will be u易游YY体育官方网站d. This transaction does not involve any public offering of 易游YY体育官方网站curities in the United States.


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