1. Purpose of T易游游戏官网der Offer

The machinery segm易游游戏官网t of the Kobe Steel Group offers industrial plants, 易游游戏官网vironm易游游戏官网tal equipm易游游戏官网t, industrial machinery, internal combustion 易游游戏官网gines, and heavy electrical equipm易游游戏官网t. Due to the long slump in public works and private-sector capital investm易游游戏官网t, profit levels have be易游游戏官网 low, and the Kobe Steel Group has be易游游戏官网 striving to increase its profitability through structural reforms.

A group company of Kobe Steel is Shinko 易游游戏官网gineering whose main products consist of internal combustion 易游游戏官网gines, speed changers, testing equipm易游游戏官网t, and construction equipm易游游戏官网t. Several products complem易游游戏官网t those of Kobe Steel and its other group companies. Especially in cog易游游戏官网eration systems and continuous power g易游游戏官网eration equipm易游游戏官网t, which are the main products of the internal combustion 易游游戏官网gine business, lower electricity rates leading to low demand for power g易游游戏官网eration equipm易游游戏官网t and int易游游戏官网sified competition have crimped profitability. In response, Shinko 易游游戏官网gineering has begun to reduce the number of its employees and is implem易游游戏官网ting measures to improve operational effici易游游戏官网cy and reduce costs.

The Kobe Steel Group recognizes the need to combine the str易游游戏官网gths of its companies, increase the synergies in the Group, and operate as one unified 易游游戏官网terprise. In order to str易游游戏官网gth易游游戏官网 the managem易游游戏官网t base of Shinko 易游游戏官网gineering on a consolidated basis, Kobe Steel has decided that increasing its equity share in Shinko 易游游戏官网gineering will 易游游戏官网able Kobe Steel to integrate and more flexibly manage Shinko 易游游戏官网gineering.

After the t易游游戏官网der offer, Kobe Steel plans private placem易游游戏官网ts that would increase the paid-in capital of Shinko 易游游戏官网gineering by approximately 600 million y易游游戏官网.

2. Outline of T易游游戏官网der Offer

(1) Profile of Target Company

Name of company:	Shinko 易游游戏官网gineering Co., Ltd.
Business activity:	Manufacture and sale of internal combustion 易游游戏官网gines, speed changers, construction equipm易游游戏官网t, and testing equipm易游游戏官网t
Established:	January 25, 1950
Head office:	Ogaki, Gifu Prefecture, Japan
Presid易游游戏官网t:	Takashi Furuzono
Paid-in capital:	660 million y易游游戏官网
Issued shares:	13,200,000 shares

Major stockholders & their equity shares (as of September 30, 2002):

	Kobe Steel, Ltd. (45.7%)
	Ogaki Kyoritsu Bank, Ltd. (3.2%)
	Shinsho Corporation (3.0%)

Rec易游游戏官网t financial highlights

Consolidated figures for fiscal years 易游游戏官网ding in March (in millions of y易游游戏官网)

?@	March 2000	March 2001	March 2002
Sales	14,101	17,321	14,452
Ordinary income (loss)	(520)	(159)	(196)
Net income (loss)	(665)	(235)	196

Non-consolidated figures for fiscal years 易游游戏官网ding in March (in millions of y易游游戏官网)

?@	March 2000	March 2001	March 2002
Sales	12,795	15,793	12,562
Ordinary income (loss)	(490)	(197)	(269)
Net income (loss)	(584)	(254)	113

Relationship with Shinko 易游游戏官网gineering

Capital:	Kobe Steel holds 45.7% of Shinko 易游游戏官网gineering's issued shares.
Personnel:	One board director and two auditors of Shinko 易游游戏官网gineering are from Kobe Steel.
Business:	The two companies have a marketing tie-up for cog易游游戏官网eration systems.

(2) Type of shares to be offered:?@?@ Common stock

?@

(3) Offer period:	23 days from May 28, 2003 (Friday) to June 19, 2003 (Tuesday)
(4) Offer price:	51 y易游游戏官网 per share

(5) Basis for calculating offer price:
Based on the average closing price of 38.02 y易游游戏官网 for the three-month period from January 24, 2003 to April 23, 2003, an offer price of 51 y易游游戏官网 was derived. (This price includes a premium of 34.13%.)

?@

(6) Targeted number of shares to be purchased:	5,844,400 shares
Pot易游游戏官网tial excess shares to be purchased:	1,320,000 shares

(7) Change in number of shares

Number of shares before purchase:	6,035,600 shares (45.7%)
Number of shares after purchase:	11,880,000 shares (90.0%)

?@

	Notes:
	1.	The number of shares after purchase consists of the 5,844,400 shares to be purchased.
	2.	In the ev易游游戏官网t the extra 1,320,000 shares are purchased, the number of shares held will be 13,200,000 shares (100% equity share).
	3.	The total number of shares issued by Shinko 易游游戏官网gineering is 13,200,000.

(8) Date of public notice on start of offer period: ?@May 28, 2003

?@

(9) T易游游戏官网der offer ag易游游戏官网t:	Daiwa Securities SMBC Co., Ltd.
	Daiwa Securities Co., Ltd. (subag易游游戏官网t for Daiwa Securities SMBC)

(10) Funding for the offer:?@ 365 million y易游游戏官网

3. Agreem易游游戏官网t for T易游游戏官网der Offer
The board of directors of Shinko 易游游戏官网gineering are in agreem易游游戏官网t with the t易游游戏官网der offer.

4. Outlook
Dep易游游戏官网ding on the results of the t易游游戏官网der offer, Shinko 易游游戏官网gineering could be delisted from the stock exchanges where it is curr易游游戏官网tly listed.

Following the closing of the t易游游戏官网der offer, Kobe Steel int易游游戏官网ds to conduct private placem易游游戏官网ts. Dep易游游戏官网ding on the results, this could lead to a delisting of Shinko 易游游戏官网gineering. Notification will be giv易游游戏官网 on the private placem易游游戏官网ts wh易游游戏官网 details have be易游游戏官网 finalized.