To Our Stakeholders
	1. Basic Management Policy Our corporate philosophy is as follows: 1. "Creation of Tradepia" Tradepia envisages the creation of value through various business transactions, realizing "Utopia through Trade" so as to ensure "More for The World," i.e. affluence for every member of the global community. 2. "Respect for the Individual" We aim to become a corporation that respects individuality and maximizes the abilities of individuals. Our motto is to provide "More for The World," and our basic objective is to develop into a corporate entity that offers "true value to our stakeholders worldwide," a company in which investors want to invest (Investors' viewpoint), customers want to transact business with (Customers' viewpoint) and employees wish to work for (Employees' viewpoint). With the aim of contributing to society and the environment, and with the support of stakeholders, that is, investors, customers and employees, Nissho Iwai believes that it can increase the medium- and long-term value of the Company, thereby increasing shareholder value. 2. Dividend Policy The Company considers the redistribution of profits to shareholders one of its most important corporate policies. The Company distributes profits to shareholders according to business results, emphasizing stable dividends while aiming to increase profitability by improving management efficiency and to strengthen its financial position. Although performance has been favorable, the Company decided to write off losses associated with listed securities by bringing forward mark-to-market accounting of other marketable securities at year-end to the shareholders' equity section to promote a sounder financial position. Consequently, management plans to forego year-end dividend payments for the fiscal year ended March 31, 2001. Management has not reached a decision regarding dividend payments for the fiscal year ending March 31, 2002 at this point. 3. External Environment in the Fiscal Year Under Review The business environment inside and outside Japan increased in severity in the second half of the year ended March 31, 2001 (fiscal 2000). The Japanese economy staged a slight recovery in the first half of fiscal 2000 on the back of growth in capital investment and robust exports. The effects of the faltering U. S. economy beginning in the fall, however, caused a leveling off in exports, and a sustained decline in commodity prices and stock values increased deflationary pressures, all of which again stalled a recovery in the economy. The U. S. economy expanded steadily in the first half of fiscal 2000. In the second half, however, a deceleration rapidly became evident, as seen in a tapering off in capital investment due to lackluster performance by dot com businesses, as well as weak consumer spending as a consequence of stock prices falling across the board. Stocks on the New York Stock Exchange entered an adjustment phase as shown by unstable movements, despite interest rate cuts by the Federal Reserve Board. The European economy was adversely affected by rising petroleum prices. Strong exports due to a weak euro, however, drove a recovery in demand, including manufacturing and capital investment, which resulted in a strong economy overall. In Asia, the worldwide boom in information technology resulted in robust exports of semiconductors and electronic hardware, revealing signs of recovery in investment and consumer spending, despite the backlash of high oil prices and falling currencies and stock markets. In the second half of fiscal 2000, however, Asian economies were adversely affected by the slowdown in the U. S. economy, causing a falloff in manufacturing and other signs of declining growth. 4. Progress on Medium-Term Management Plan 2002 The Company designated fiscal 1999 as the first year of its three-year Medium-Term Management Plan 2002, which is scheduled for completion in fiscal 2001. The Company's two fundamental policies under the plan are (1) to improve the financial structure by promoting a sound balance sheet by streamlining assets and reducing interest-bearing debt, and (2) to strengthen the earnings structure by focusing on core businesses and withdrawing from low-margin transactions with low capital efficiency. The plan incorporates the following measures: (1) streamline assets, (2) select and concentrate on strategic core businesses, (3) reform the cost structure, (4) merge and liquidate Group companies, (5) improve and bolster risk management, (6) strengthen corporate governance and bolster corporate infrastructure for the coming era. The Company has made substantial progress over the past two years. Achievements to date are described below. (1) Streamline Assets By carefully selecting investment projects and withdrawing from low-margin transactions, the Company has reduced assets by approximately ¥1,040 billion of the ¥1,200 billion target in the three-year plan. The Company also reduced interest-bearing debt by approximately ¥830 billion, progressing on schedule toward a total reduction of ¥1,200 billion over three years. Both of these achievements exceeded second-year targets of the plan. (2) Select and Concentrate on Strategic Core Businesses In November 1999, the Company designated the following five areas as its core businesses: 1) Information Industries & Aerospace Industries, 2) Plant & Projects, 3) Steel & Ferrous Metals, 4) Energy, and 5) Consumer Products. Beginning in April 2000, the Company implemented its internal Division Company System with nine Company divisions, and further concentrated and consolidated these into five Company divisions in April 2001. By promoting financial self-sufficiency and accountability under market principles in each field of business, the Company is carrying out an overall policy of changing to a high-income structure by withdrawing from low-income transactions and promoting an optimal allocation of management resources. These efforts over the past two years are reflected in significant improvements in gross profit margins and operating income margins. (3) Reform the Cost Structure Figures for selling, general and administrative expenses have remained constant. Taking into consideration such upward pressures on expenses as the effects of new consolidated accounting standards as well as retirement benefit costs, however, indicate that efforts centering on the optimal placement of employees have contributed to reductions in selling, general and administrative expenses. (4) Merge and Liquidate Group Companies The Company has targeted approximately 200 Group companies to be eliminated through mergers and liquidations during the three-year period beginning March 1999. Over the past two years, the Company has eliminated 150 Group companies through merging and liquidation, progressing some three-fourths of the way toward the stated goal. The total number of Group companies has increased by 101, however, due to applying new consolidated accounting standards, consequently bringing to 49 the total number of eliminated companies. The ratio of profitable Group companies at the end of the fiscal year under review was 74%, an improvement of 3.0 percentage points compared with the previous fiscal year. In the current fiscal year and in the future, the Company will continue to merge and liquidate, and promote vertical and horizontal integration of unprofitable companies that meet requirements for withdrawal, aiming to improve the ratio of profitable companies to over 85% by March 2002. (5) Improve and Bolster Risk Management The Company has expanded and strengthened the activities of the Risk Management Committee and the Risk Management Department, which was merged with the Investment Office. Main measures taken to improve risk management are as follows:
	1) Rational setting of Country-wise Exposure Ceilings (CEC) and ensuring that the ceilings are strictly adhered to 2) Setting up ceilings for interest rate, foreign exchange and commodity price volatility risk in dealing transactions, using a market-valuation system on a daily basis and implementing measures to cut losses through third-party monitoring (Integrated data management) 3) Setting risk-return indices
	The Company also focused on improving credit management, including investment and lending, as well as enhancing internal auditing. (6) Strengthen Corporate Governance and Bolster Corporate Infrastructure for the Coming Era This subject is covered under section 6, Policies Relating to Business Management and Structures. 5. Progress Regarding Other Issues For Fiscal 2000 The Company focused efforts on three main issues in fiscal 2000; (1) the adoption of the mark-to-market accounting rule, (2) maintenance and expansion of profitability and (3) introduction and maintenance of new management structures and the Division Company System. (1) Adoption of the Mark-to-Market Accounting Rule The Company applied the mark-to-market accounting rule by posting extraordinary losses including losses on the assessment and sale of listed securities of ¥48.2 billion, losses on translation of foreign-currency monetary assets and liabilities of ¥6.5 billion and valuation loss on interest rate swaps and other derivatives of ¥30.7 billion, and by recording extraordinary income including a gain on the sale of shares of IT-related subsidiaries. Furthermore, the Company brought forward the mark-to-market accounting rule for other marketable securities planned for fiscal 2001 and recognized unrealized holding losses of approximately ¥5.3 billion in a separate component of shareholders' equity. (2) Maintenance and Expansion of Profitability Gross profit rose to ¥287.7 billion from ¥267.7 billion in the previous fiscal year, and the gross profit ratio improved 0.76 percentage point to 4.44%, indicating improvements in profitability. The Company looks forward to results from restructuring its business portfolio as well. (3) Introduction and Maintenance of New Management Structures and Division Company System As described in the next section, the Company has implemented various reforms, adopted a number of new systems and realigned its business framework. 6. Policies Relating to Business Management and Structures New systems to reform management and enhance in-house infrastructure were put in place in an aim to create new business management structures and the Division Company System. The new systems implemented during the Medium-Term Management Plan are as follows:
	(1) The Board of Directors was reorganized by reducing the number of directors, and an Executive Officer System was introduced to separate management and business execution functions, accelerate decision making and reinvigorate the Board of Directors. (2) The terms of office of both directors and executive officers were shortened to build an optimal, mobile management structure, clarify management responsibilities and enforce a results-oriented approach. (3) The Director Nomination Committee, the Director Remuneration Committee and the Advisory Board were established to ensure transparent, fair management in the organization and system. (4) A broad-based stock option plan was introduced for all directors and employees of the Company, and financing programs were set up as companies were established to increase the participation of all directors and employees in management and to boost performance to higher levels. (5) The Company is advancing work reforms along the following two pillars:   1) The Company aims to establish an efficient, function-based organization by means of a "small parent company" structure in reforming work roles, boost work efficiency by changing function-based subsidiaries into shared-service companies, improve service, reduce costs and create a system for acquiring external revenues. 2) The Company worked to introduce new core systems that swiftly respond to changes in the operating environment.     (6) The Company introduced and extended the Division Company System.
	The Company is aggressively engaged in the necessary reforms to become a better corporation and business that welcomes rather than fears change. 7. Division Company System In April 2000, the Company created nine internal companies to promote financial self-sufficiency and accountability under market principles in each field of business in an aim to establish optimal organizational scale and structures, personnel systems and operational guidelines. In April of this year, these nine Division Companies were reorganized into five in line with a review. By introducing the Division Company System, the Company aims to maximize shareholder value by increasing asset and capital efficiency on a consolidated basis. The Division Companies were established with their own internal capital and performance targets that take into account debt ratios and annual net income based on the cost of capital as management benchmarks. Following a period of preparation in fiscal 2000, the Division Company System is slated for full-fledged operation in fiscal 2001. The aim of the Division Company System is to establish a holding company structure through measures for restructuring the Company's business portfolio that include spinning off businesses and forming strategic tie-ups with sources of external capital. Advancing the aforementioned work reforms, the small Parent Company will handle planning, strategy and risk management for the Group, while each Division Company will work to build independent operating structures under their own responsibility. 8. Restructuring the Company's Business Portfolio Group management is taking on greater significance with the full-scale introduction of consolidated accounting. A multifaceted strategy is necessary, covering such aspects as spin-offs, strategic tie-ups and mergers and acquisitions. Peripheral infrastructure is gradually being built to support these strategies, such as holding companies, spin-offs, consolidated taxation and tracking stocks. The Company recognizes that a drastic restructuring of its business portfolio is essential to improve the financial and earnings structure. As a part of this effort, the Company has been reorganizing businesses through spin-offs and transference of businesses as well as buyouts and mergers. Since the spin-off of the Information Business Division into ITX Corporation at the end of fiscal 1999, the main activities in restructuring businesses have been as follows:
	(1) The Company's and Nichimen Corporation's construction materials subsidiaries merged. (2) ITX acquired shares of Nichimen's IT-related subsidiaries. (3) Seventy percent of the shares in the Company's LPG subsidiaries were transferred to Osaka Gas Co., Ltd. (4) The Group's textile business was consolidated and then merged with a subsidiary of Teijin Co., Ltd. (5) The Company's sugar subsidiary was merged with Mitsui Sugar Co., Ltd. (6) The Company considered integrating its metals business with Mitsubishi Corporation. (7) The Company reorganized the chemical products field and established an industry-specific structure with subsidiaries. (8) Spin-off of non-ferrous subsidiaries with a management buy-out (MBO) completed (9) Established a joint holding company with Nichimen in the plastics business (10) Consolidated and spun off meat and livestock and horticulture businesses
	Regarding the proposed partnership in the metals field, the Company and Mitsubishi Corporation agreed in January of this year to begin full-fledged discussions with the aim of integrating their operations on an equal basis. The two companies are working toward the establishment of an integrated company in October 2002. The two companies aim to further bolster functions by taking advantage of their accumulated knowledge in the metals field, and also aim to maximize corporate value on a consolidated basis through improved competitiveness garnered from greater efficiencies. These strategic tie-ups through spin-offs and external financing are being implemented with the following objectives in mind. The Company expects to make further progress in these areas as well. (1) Pursue optimal business structures in each field (2) Become number one (or at least number three) in each industry (3) Materialize business value through synthesis (4) Respond to the increasing pace of change The 21st century is the age of mega competition. To be a corporate group truly preferred by stakeholders of the Company, it is essential that the Company respond quickly and effectively to change. Medium- and long-term objectives are "to increase net income and expand cash generating capabilities on a consolidated basis". Although sales and employee figures of the Company may decline in scale on a non-consolidated basis, the spin-offs and strategic tie-ups with external financing that the Group is carrying out are initiatives aimed at increasing profits of the Group. The Company believes this will result in the creation of steady profits through the cycle of selling business investments and adding new investments, and secure a revenue foundation for the parent company by securing dividend income. 9. Efforts in New Businesses The Nissho Iwai Group is examining entry and gradually moving forward into e-commerce markets in all manner of business fields. Taking advantage of its market knowledge and know-how in distribution, risk management, finance and settlements, the Group is making aggressive inroads into the creation of exchanges on the Internet and fields offering various services that are essential following the completion of a contract in electronic commerce transactions. New efforts and major in-house infrastructure are as follows: EBISTRADE, Inc. Startup support for and operation of a portal site created through a joint venture with NTT-X, Inc. and ITX Corporation Cynomix Corporation Created through a joint venture with Computer Associates, Inc., the new company offers one-stop trading support services for e-business. Establishment of E-Commerce Department A Companywide organization for promoting and supporting e-business within the Division Companies RiskMonster.com A credit research and management service company with features available online Nissho Iwai, along with ITX, EBISTRADE, and Cynomix, are entering alliances with leading partners to launch a number of e-business projects. In the field of biological and environmental businesses, the Company established the Bio Business Department in April 2001. The Company is moving forward in this area, supporting its Division Companies. Nissho Iwai is developing investment frameworks for its e-commerce business and biological and environmental businesses, securing the necessary capital and preparing a Companywide system to promote these businesses.

Consolidated Financial Statements Non-Consolidated Financial Statements To Our Stakeholders Business Results (Consolidated) Outlook for Fiscal Year 2001 (Consolidated)