News Release : December 21, 2001

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December 21, 2001
Kawasaki Steel Corporation
NKK Corporation

Foundation of JFE Group- Conclusion of the Basic Agreement for Consolidation of Kawasaki Steel and NKK In April 2001, Kawasaki Steel Corporation ("KSC") (President: Fumio Sudo) and NKK Corporation ("NKK")(President: Yoichi Shimogaichi) announced that they had reached a basic agreement to consolidate the entire operationsof the two companies including their subsidiaries and affiliates, on the basis of equal partnership and in mutual trust. Theaim was and is to create a new group with a strong earnings base generated mainly from its core businesses of steel andengineering. Following that announcement, KSC and NKK have conducted intensive discussions through theConsolidation Preparation Committee as well as its sub-committees, and today entered into the Basic Agreement forConsolidation.
I. Name of the New GroupJFE Group
The letter J comes from "Japan", F from "Fe" which is a symbol for an element of steel, and E from "Engineering". JFE
also implies Japan Future Enterprise, which embodies the image of a Japanese future-oriented business group with steel
and engineering as core businesses.
II. Corporate Mission
JFE Group is determined to realize world-class competitiveness through its strong customer base, advanced technology,
highly efficient steel works and manufacturing plants, and to create an innovative corporate culture with a challenging
spirit. By doing so, JFE Group will pursue the following:(1) Strengthening further the capabilities necessary to fulfill customers' needs on a global basis(2) Enhancing credibility from shareholders and capital markets in the world(3) Providing employees with more challenges and opportunities(4) Contributing to local communities as well as global environmental conservation
III. Establishment of a Holding Company
By October 2002, KSC and NKK will jointly establish a Holding Company ("Holding Co.") and become respectively a
100% subsidiary of the Holding Co. by the "stock-for-stock exchange" method. Under the Holding Co., KSC and NKK
will pursue coordinated operations with synchronized strategies for each business segment.
Before establishment of the Holding Co., both of KSC and NKK plan to have annual shareholders' meetings in June
2002 for resolution.
(1) Company Name
JFE Holdings, Inc.
(2) Functions
JFE Holdings will operate as a lean group headquarters that is responsible for strategic planning, risk management,
accountability and corporate communications for all the subsidiaries and affiliates.
(3) Exchange Ratio
For each share of KSC common stock, 1 share of the JFE Holdings common stock
For each share of NKK common stock, 0.75 share of the JFE Holdings common stock
KSC and NKK conducted thorough discussions and came to an agreement on the exchange ratios. KSC's advisor,
Morgan Stanley Japan Limited, NKK's advisor, Goldman Sachs (Japan) Ltd., and a joint advisor, Mizuho Securities Co.,
Ltd. respectively expressed their opinions that the mutually agreed exchange ratios above are fair and reasonable from afinancial point of view.
(4) Location of the Headquarters
To be approved by the next shareholders' meetings(5) Amount of Capital StockTo be approved by the next shareholders' meetings(6) Stock Transfer Agent
The Mizuho Trust and Banking Co., Ltd.
IV. Management Structure after the Reorganization of the Operating Companies
1. Business Formations
By April 2003, the businesses of KSC and NKK under JFE Holdings will be regrouped and reorganized by each businesssegment.
(1) JFE Steel Corporation
Steel(2) JFE Engineering CorporationEngineering

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http://preview1.jfe-holdings.co.jp/en/release/2001/011221-1.html(3) JFE Urban Development Corporation(4) Kawasaki Microelectronics Inc. *(5) JFE R&D Corporation

Urban Development
Semiconductor
Research and Development(please refer to "4. R&D")* Established in July 2001 as a 100% subsidiary of KSC by separating its LSI business.

2. Management of JFE Steel Corporation(1) JFE Steel will adopt a product-wise management system strengthening responsiveness with customers' needs andthorough control over profitability of each product.
(2) In order to realize the highest level of competitiveness by integrated operations of adjacent steel works, and toaccelerate the consolidation process, the four steel works of KSC and NKK - Keihin Works, Chiba Works, Fukuyama
Works and Mizushima Works - will be reorganized into two steel works, East Works and West Works. JFE Steel will
therefore have two major steel works and Chita Works specializing in production of pipes and tubes.
3. Management of JFE Engineering Corporation
JFE Engineering will adopt a consolidated division system encompassing divisions and functional group companies inorder to flexibly respond to the changes in the business environment, promote common business strategies with thegroup companies, and to maximize profits on a consolidated basis.
4. Research and Development
R&D operations of KSC and NKK will be reorganized as follows:(1) JFE Steel and JFE Engineering will each own R&D functions to realize closely linked operations amongproduct/technology development, manufacturing and sales & marketing.
(2) JFE R&D will focus on research and development for common basic technologies and development on projects withgrowth potentials to effectively realize synergy effects of the whole group.
5. Reorganization of Subsidiaries and Affiliates
JFE Group will initiate the reorganization and restructuring of all subsidiaries and affiliates of KSC and NKK. As a firststep, JFE Holdings plans to merge the following businesses in April 2003:(1) Construction Material:
Nippon Kokan Light Steel Kabushiki Kaisha
Kawasaki Steel Metal Products & Engineering Inc.
(2) Containers:
KOKAN DRUM COMPANY, LTD.
Kawasaki Steel Container Co., Ltd.
As for chemical business, we are now in discussion of consolidating KSC's chemical division and NKK's subsidiary,
ADCHEMCO Corporation.
V. New Management
The new management of JFE Group is as follows:
1. JFE Holdings Inc.
Chairman of the Board: Kanji Emoto(current position: Chairman of the Board, KSC)
President: Yoichi Simogaichi(current position: President and CEO, NKK)
2. JFE Steel Corporation
Chairman of the Board: Masayuki Hanmyo (current position: Executive Vice President, NKK)
President: Fumio Sudo
(current position: President and CEO, KSC)
3. JFE Engineering Corporation
President: Shigeharu Dote(current position: Executive Vice President, NKK)JFE Steel and JFE Engineering will adopt a "corporate officer system" in order to accelerate decision-making process
and business execution.
New management of other operating companies will be determined later.
VI. Financial Targets (Consolidated base for the fiscal year ended March 31, 2006)
JFE Group will endeavor to enhance efficiency and profitability to match those of competitors in the world. The
financial targets are as follows:
1. Synergy Effects(1) Reducing overhead and related expenses(2) Reducing procurement costs through volume discount and unified specifications(3) Reducing costs of production, maintenance and logistics by optimized production allocation, andsaving capital expenditure through integrating capex programs and optimized utilization of commonfacilities(4) More efficient R&D operations and exchange of technology and know-how
Total

30 billion Yen
20 billion Yen
20 billion Yen

10 billion Yen
80 billion Yen

2. Financial Targets

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By carrying out various profit-improving programs, as well as pursuing the synergy effects above, JFE Group will aim toreach the financial targets below:(1)Ordinary Income(*1)(2) Interest-bearing Debts Outstanding(3) Return on Assets(*2)

Fiscal Year

Fiscal Year

ended March31, 2001

ended March31, 2006

110 billion yen

200 billion yen

2,530 billion yen
3.7%

1,800 billion yen
6.5%

4.1%
7.5%
(4) Return on Sales(*3)(Reference) Sales: 2,600 billion yen (the same level as the FY ended March 31, 2002)*1 Income before Special Credits and Special Charges*2 (Ordinary Income + Interest Expenses)/ Total Assets*3 Ordinary Income/ Sales
Japan Fair Trade Commission commented on November 8, 2001 that the consolidation of KSC and NKK does not pose
any problem in terms of Japan's Antimonopoly Law.
This release includes forward-looking statements that reflect plans and expectations of KSC and NKK in relation to theshare exchange schemes described above and the benefits resulting from them. These forward-looking statements
involve known and unknown risks, uncertainties and other factors, including in particular the ability of JFE Group torealize synergies effectively and future trends in the level of demand in the Japanese and overseas steel markets, that
may cause JFE Group's actual results, performance, achievements or financial position to be materially different fromany future results, performance, achievements of financial position expected or implied by these forward-lookingstatements.

<Notice to United States investors>
The business combination referred to in this release (the "Transaction") involves securities of foreign companies. The
Transaction is subject to disclosure requirements of a foreign country that are different from those of the UnitedStates. Financial information included in this release has been prepared in accordance with foreign accounting
standards that may not be comparable to similar financial information of United States companies.
It may be difficult for you to enforce your rights and any claim you may have arising under the federal securities laws,
since KSC and NKK are located in a foreign country, and some or all of their officers and directors may be residents
of a foreign country. You may not be able to sue a foreign company or its officers or directors in a foreign court forviolations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject
themselves to a U.S. court's judgement.
If you have any questions, please contact the persons listed below:
For Kawasaki Steel Corporation
Tetsuo Oki (Mr.)
Manager (Investor Relations)
Accounting and Budget Control Department
Phone # 81-3-3597-3296 Fax # 81-3-3597-3602
Email te-oki@kawasaki-steel.co.jp
For NKK Corporation
Shinji Okutsu (Mr.)
Manager (Public Relations)
Corporate Secretariat Department
Phone # 81-3-3217-2140 Fax # 81-3-3214-8436
Email shinji_okutsu@ntsgw.tokyo.nkk.co.jp

Copyright 2001 JFE Holdings,Inc.Terms and Conditions

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