To Our Stakeholders

a) Basic Management Policy

	Nissho Iwai's corporate philosophy is based on the following two principles:
i.	" 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.
ii.	"Respect for the Individual" We always make an effort to create an organization that respects individual creativity and provides an environment in which each individual's productive faculties can reach their full potential.

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 support of all our stakeholders, including investors, customers, employees and society in general, we are confident that we will be able to increase medium- and long-term corporate value, which in turn will increase shareholder's value. b) Dividend Policy Management places utmost importance on ensuring maximum returns on shareholder investment in the form of stock dividends, and dividend policy is one of the most important corporate policies. We strive to ensure stable earnings and increased profitability through speedy decision-making and judicious allocation and utilization of management resources. In addition, we are committed to ensuring a stable dividend stream to our shareholders, while paying careful attention to reinforce our corporate base through retaining requisite reserves. However, we are in the midst of taking drastic measures to optimize our capital structure, which entails reduction of interest-bearing debt and reinforcement of our capital base. This is expected to lower the weighted average cost of capital (WACC), thus contributing to an increase in stockholder value. Under such conditions, management has decided to forego dividend payments for the April-September period of fiscal 2000. A decision regarding year-end dividend payments shall be made at a later date. c) External Operating Environment The external operating environment in the first-half of fiscal 2000 showed moderate improvement. Japanese private sector capital investment continued to grow, boosted by continued spending centering on IT-related goods and services. Exports also showed firm growth, supported by a healthy global economy. Both these factors kept the beleaguered Japanese economy on a slow but steady recovery track. The Japanese financial markets were also relatively stable, owing mainly to the Bank of Japan's low-interest rate policy. Though production increased and corporate sales revived, personal consumption failed to show any remarkable recovery in the midst of slumping employment and incomes. Thus, though partial economic recovery brought some cheer, the overall environment remained lackluster. The US economy continued to show rapid growth, spurred by strong personal consumption as well as private sector capital investment, with the unemployment rate at a historic low. The information technology revolution brought about large-scale productivity increases, contributing to the longest period of sustained economic growth in post-war history. However, fearing the effects of a tight labor market and an increase in oil prices, the Board of Governors of the Federal Reserve decided to raise interest rates, and signs of a slowdown started to appear in a few parts of the economy, such as the housing construction industry. The European economy, in spite of a weak euro, also continued on its path of recovery on the back of soaring exports and strong personal consumption. The Russian economy too shrugged off the aftereffects of their financial crisis, and began to show clear signs of recovery. In Asia, the Republic of Korea as well as the ASEAN countries emerged quickly from the region's currency crisis, and continued to show overall economic recovery led by government-backed initiatives and strong exports. The Chinese economy too chugged along firmly, with prospects for WTO affiliation becoming more concrete. d) Progress on the "Medium-term Management Plan 2002" Nissho Iwai is currently in the midst of implementing its three-year "Medium-term Management Plan 2002", which began in 1999 and is slated for completion in 2002. At the end of this interim period of fiscal 2000, we are exactly at the mid-point of this plan. The two fundamental policies of this plan are: (1) Reinforcement of financial position and building a sound balance sheet by reducing consolidated total assets and slashing interest-bearing debt, and (2) Reforming earnings structure by concentrating resources in strategic core businesses and withdrawing from non-core businesses and low-margin transactions. In concrete terms, we are concentrating on the following tasks: (a) Reduction of consolidated assets, (b) Selection/allocation of resources to core business areas, (c) Reformation of our cost structure, (d) Restructure Group companies, (e) Reinforce risk management capabilities, and (f) Management reform, and reinforcement of in-house infrastructure for the 21st century.

The current situation with regard to each of the six tasks mentioned above is as follows:
(a)	Reduction of consolidated assets: As against the three-year target of ¥1.2 trillion (starting March 1999), a total consolidated asset reduction of ¥850 billion has already been achieved within these 18 months, far exceeding the target set for the period ending September 2000.
(b)	Selection/allocation of resources to core business areas: In November 1999, the following 5 fields were identified as core business areas: (1) Information & Aerospace industries, (2) Plants & Projects, (3) Steel & Ferrous Materials, (4) Energy, and (5) Consumer products. In addition, a division company system was introduced from April 2000, under which each company has begun operating in its specific industry based on market principles, and shoulders full responsibility for its own profitability.
(c)	Reformation of our cost structure: Figures for selling, general and administrative expenses have remained more or less the same as before. However, when the effect of the increase in the number of affiliated companies (based on the revised Accounting Principles for Consolidated Financial Statements) as well as the effect of increased employee retirement expenses is taken into consideration, our efforts at curtailment of SG&A expenses through organizational and operational reform and workforce reductions become self-evident.
(d)	Restructure Group companies: The target for reducing the number of affiliated companies through mergers and liquidation in the three-year period beginning March 1999 had been set at about 200. By the end of September 2000, 104 affiliates had been merged or liquidated. However, the new accounting rules pertaining to consolidated financial statements caused the number of consolidated affiliates to increase by 80. We will continue our restructuring efforts by liquidating unprofitable companies and carrying-out vertical and horizontal mergers. We aim to raise the ratio of profitable companies to 85% by March 2002; at the end of September 2000, the ratio of profitable companies stood at 69.8%.
(e)	Reinforce risk management capabilities: Risk management is being improved through the activities of the Risk Management Committee set up last year, and the Risk Management Department. The measures being taken include: (1) Computation and strict implementation of country-wise exposure ceilings to control country risk exposure, (2) Setting-up ceilings for interest-rate fluctuation and price-fluctuation risks, and putting a mechanism in place to cut losses through third party monitoring, and (3) Introduction of risk-return indices.
(f)	Management reform, and reinforcement of in-house infrastructure for the 21st century: We have engaged in a broad-based overhaul of all existing corporate systems, along with the proactive introduction of new systems. These include: (1) introduction of a division company system based on market principles; (2) introduction of the Executive Officer system to clearly demarcate the roles of policy formulation and execution; (3) reduction of the term-of-office for Board members and executive officers; (4) introduction of a broad-based stock option plan for all employees of the company; (5) in-house human resource advertising and recruitment system; (6) allowing employees to invest in new enterprises, etc. New ways of doing things are being encouraged aggressively, without sticking to past practices.

In addition, numerical targets for the third and final year of the Medium-term Management Plan 2002 are being adjusted to reflect changes caused by the implementation of revised accounting standards as well as other changes in the operating environment.

e) Progress Regarding Other Issues for Fiscal 2000 Special issues that need to be dealt with in fiscal 2000 are: (1) Dealing with the effects of revised market-value-accounting rules, (2) Increasing earning capacity, and (3) Dealing with new management systems. The current situation with regard to these three tasks is as follows:

1.	Dealing with the effects of revised market-value-accounting rules: Extraordinary losses arising due to revised market-value accounting rules were appropriated as follows: investment securities revaluation loss of about ¥30 billion; provision for overseas doubtful receivables amounting to about ¥10 billion; loss on translation of receivable and payables in foreign currencies and interest-rate swaps revaluation losses, etc., amounting to about ¥30 billion. On the other hand, sale of investment securities yielded about ¥70 billion (appropriated as extraordinary gains), thus providing enough funds to offset the aforementioned extraordinary losses. This more or less concludes our efforts to deal with the effects of market value accounting rules.
2.	Increasing earning capacity: As compared to the interim financial results of fiscal 1999, gross profit increased from ¥128.6 billion to ¥138.1 billion, and gross profit margin improved from 3.43% to 4.18%, thus reflecting the improvement in our earning capacity. Moreover, the effects of our business portfolio restructuring are expected to begin showing up in the near future.
3.	Dealing with new management systems: As mentioned in the previous section, we have taken several measures to reform existing personnel, administrative, and management systems, at the same time taking new initiatives in various fields.

f) Reconstruction of Business Portfolio Management of group companies is becoming increasingly important with the formal introduction of the revised Accounting Principles for Consolidated Financial Statements. This has necessitated the adoption of strategies that call for forming strategic alliances and M&A activities on one hand, and the formation of a pure holding company, spin-offs of businesses, etc., as well as peripheral measures like tracking stocks on the other. We realize that in order to achieve the objectives set out in the Medium-term Management Plan 2002, regarding "Reinforcement of financial position" and "Reforming earnings structure", a much more drastic restructuring of our business portfolio is essential. As part of this effort, an aggressive plan of spinning-off business departments, selling off entire businesses, and creation of new corporate entities through mergers/acquisitions is being carried out. Some of the major steps taken in this regard are as follows:

	July 2000: Merger of Nissho Iwai Building Materials Corporation (Nissho Iwai's subsidiary) and Nichimen Sogo Kenzai Co. Ltd. (Nichimen Corporation's subsidiary) to form a new company 'Sun Building Materials Corporation'.
	July 2000: Acquisition of Nichimen Corporation's IT-related subsidiaries by ITX Corporation, a subsidiary of Nissho Iwai Corporation. In the cellular-phone industry, NI Telecom and Nichimen Telecom Inc. merged in October 2000 to form a new company 'IT Telecom'.
	July 2000, January 2001 (planned) : Announcement of the merger of Infocom Co., Ltd., a subsidiary of ITX Corporation, with Teijin Systems Technology, Inc. (a subsidiary of Teijin Corporation).
	August 2000: Transfer of all textile-related businesses to subsidiary Nissho Iwai Apparel Co., Ltd. Announcement of the merger of Nissho Iwai Apparel Co., Ltd., with Teijin Shoji Co., Ltd. (subsidiary of Teijin Corporation), with effect from 1st April 2001.
	September 2000: Sale of 70% of the stock of liquefied petroleum gas affiliates to Osaka Gas Co., Ltd.
	October 2000, April 2001 (planned) : Announcement of the merger of Nissho Iwai Corporation's consolidated subsidiary Shin-Meito Sugar Refining Co., Ltd., with Mitsui Sugar Co., Ltd.

g) Introduction of Division Company System In April 2000, we replaced the existing organizational structure with a new division company system of nine in-house companies. This was done with a view to adapt to market principles, and accelerate decision-making and raise the level of self-responsibility by establishing optimal organizational structures, personnel systems and operating guidelines in each business area. Prior to this move, the Company's Information Business Division was spun-off to form an independent subsidiary, ITX Corporation, in February 2000. The ultimate goal of introducing the division company system is to boost consolidated return on assets and return on equity, and to increase shareholder value. The new system is scheduled for full implementation from fiscal 2001, with the current fiscal year being a 'trial period'. For the duration of this trial period, each company has been allotted its own capital, and individual net profit targets and D/E ratio targets (based on the cost of capital) have been set. From now on, corporate headquarters will be responsible for strategic planning, risk management, etc. for the entire Nissho Iwai group, while each company will be responsible for its own operations. In the future, a holding company structure may be adopted keeping in view the forthcoming revision of corporate tax rules pertaining to consolidated accounts. h) Development of New Growth Opportunities In an environment where the IT revolution, led by web-based transactions, is creating an entirely new business paradigm, the Nissho Iwai Group has been considering entry into the EC (electronic commerce) market in all industries, and has actually taken concrete steps in some areas. By utilizing our core competency-extensive know-how pertaining to global markets, logistics, risk management, finance and settlements-we are engaged in the establishment of online marketplaces as well as the provision of all kinds of post-transaction fulfillment services.

Some of our latest initiatives in this field are as follows:
	March 2000: Establishment of eBistrade, Inc. -A joint venture formed with NTT-ME/ITX, for creating and operating industry-specific portal sites.
	March 2000: Participation/Investment in Trade Alliance, Ltd. - A joint venture with U.S. based Commerce One Inc., and the Sinar Mas Group (Asia Pulp Paper Co.), for establishment and operation of industry-specific procurement vortals centering on the Asian market.
	May 2000: Establishment of Cynomix Corporation - A joint venture with US-based Computer Associates International, Inc., to provide one-stop integrated trade support services for eBusiness.
	August 2000: Establishment of an eBusiness Development Department to promote and support the eBusiness efforts of each division company.
	September 2000: Establishment of Risk Monster Corp., which aims to provide web-based credit research and management services.

A separate investment fund has been set up to ensure adequate capital resources for promoting our eBusiness efforts, and rules have been set up for speedy decision-making. In addition to eBusiness, we are aggressively pursuing new business opportunities in the environment industry, biotechnology, waste disposal (incinerator ash, emission gases, and sewage), recycling, etc., and are also engaged in activities like investing in the 'Advanced Medical Center', which forms the core of the Kobe (Medical) Industrial Area, development and imports of non-GMO products, development of related insurance products, etc.

Consolidated Financial Statements Non-Consolidated Financial Statements To Our Stakeholders Results of Operations Outlook for Fiscal Year 2000