Management Policy

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 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 of the Company. Nissho Iwai strives to ensure stable earnings and increased profitability through swift decision-making and judicious allocation and utilization of management resources. In addition, the Company is committed to ensuring a stable dividend stream to its shareholders while paying careful attention to reinforce the corporate base through retention of requisite reserves.       Based on its strong commitment to achieving the ultimate goal of maximizing shareholders' value, management has decided to forgo year-end dividend payments for fiscal 2001.      Management has not reached a decision regarding dividend payments for the fiscal year ending March 31, 2003 at this point. 3. External Environment in the Fiscal Year Under Review The business environment has generally continued to intensify in the fiscal year ended March 31, 2002 (fiscal 2001).      The Japanese economy witnessed signs of a further slowdown amid a significant drop-off in manufacturing and capital investment and worsening corporate earnings mainly as a result of a rapid fall in exports of IT-related products. Substantive gains made in financial deregulation were offset by an increasing trend toward deflation as non-performing loans grow more widespread and stock and commodity prices fall.      In the U.S. economy, while the ongoing recession coupled with the terrorist attack of September 11 to produce negative economic growth from July to September, stable personal consumption and timely enforcement of such measures as successive interest rate cuts and extensive tax cuts cleared a path for recovery by year's end.      The European economy experienced a more widespread slowdown from the impact of sluggish overseas markets and the fear of inflation following skyrocketing energy prices. Circulation of the euro commenced in 12 EU nations in January 2002, creating an integrated European currency zone.      In Asia, reduced exports of IT-related products predominately in Southeast Asia triggered an economic contraction, but a prolonged slowdown was restrained through the effects of inventory adjustments and a recovery in the U.S. economy. In China, strong growth was maintained from an influx of foreign investment on the back of the country's long-awaited entry into the WTO. 4. Summary of Medium-Term Management Plan 2002 The Company's three-year Medium-Term Management Plan 2002 was completed in fiscal 2001. The plan's two fundamental policies of improving the financial position and strengthening the earnings structure were pursued through various initiatives according to plan. Below is an outline of the degree of success attained within the management plan.

1) Degree of Success in Achieving Initial Targets (Consolidated Basis) A. Streamline Assets and Interest-Bearing Debt By carefully selecting investment and finance projects and withdrawing from low-margin transactions, the Company has reduced assets by approximately ¥1,700 billion of the ¥1,200 billion target outlined in the three-year plan. The Company also reduced interest-bearing debt by approximately ¥1,350 billion, progressing on schedule toward a total reduction of ¥1,200 billion over three years. Both of these achievements exceeded third-year targets of the plan.      As of March 26, 2002, Nissho Iwai has paid off a ¥600 billion credit facility that was supplied in January 1999 by seven banks and one corporation and has been in operation throughout the plan. B. Select and Concentrate on Strategic Core Businesses Beginning in April 2000, the Company implemented its internal Division Company System, and has been operating six Company divisions as of April 2002. 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 three years have been reflected in significant improvements in gross profit margins and operating income margins. C. Reform the Cost Structure Figures for selling, general and administrative expenses have declined approximately 5% since the first fiscal year of the management plan. 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 these results. D. Merge and Liquidate Group Companies The Company has successfully eliminated 223 of the 200 targeted Group companies for elimination through mergers and/or liquidations during the three-year period beginning April 1, 1999. The total number of Group companies has declined by 72 companies despite an increase of 151 companies through aggressive investment in core business areas and new consolidated accounting standards. E. Improve and Bolster Risk Management Main measures taken to improve risk management are as follows:

Rational setting of Country-wise Exposure Ceilings (CECs) and ensuring that the ceilings are strictly adhered to 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) Setting risk-return indices The Company also focused on improving credit management, including investment and finance, as well as enhancing internal auditing. Moreover, a Compliance & Crisis Committee is in place to augment structural reorganization and build a framework for compliance, corporate ethics and crisis management.

F. Strengthen Corporate Governance and Bolster Corporate Infrastructure for the Coming Era During the Medium-Term Management Plan, Nissho Iwai implemented the following new systems to create new business management structures and the Division Company System:

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. The terms of office of both directors and executive officers were shortened to build an optimal management structure, clarify management responsibilities and enforce a results-oriented approach. The Nomination Committee for Directors and Executive Officers, the Remuneration Committee for Directors and Executive Officers and the Advisory Board were established to ensure transparent, fair management in the organization and system. A broad-based stock option plan was introduced for all executives and employees of the Company, and financing programs were set up as companies were established to increase the participation of all executives and employees in management and to boost performance to higher levels.

2) Reorganization of Administrative Functions The Company launched Nissho Iwai Professional Services, Ltd. in April 2002 to strategically spin off and merge administrative functions and subsidiaries. The goals of this new organization will be discussed in more detail in "Improving the Group's Management." 3) Structural Reorganization Overseas The Company aims to create a global framework that stretches across Japan and the trilateral network of the Americas, Europe and Asia to bring created businesses to market and bolster profits. The Americas in particular have discontinued the use of the Regional Manager System, as opposed to Europe where the practice has continued in its association with Africa, but the local controlling companies in both regions have developed into self-contained decision-making entities. 4) Introduction of a 21st-Century Retirement Plan Amid the strategies pursued by the Company to spin off divisions and establish operating holding companies, introduction of a new retirement plan was aimed at enabling transferred employees to collect retirement allowances, ease the transfer of personnel among Group companies and foster self-reliant employees who take responsibility for life planning and asset management to advance their careers. In specific, it will consist of a defined contribution pension plan (Japanese version of 401[k] pension plan) and an advanced retirement allowance. On March 19, 2002, Nissho Iwai received permission from the Ministry of Health, Labor and Welfare to dissolve the Nissho Iwai Pension Fund, which was formally dissolved on the following day, March 20. With permission received on March 26 from the Ministry to introduce a defined contribution pension plan (Japanese 401[k]), the Company pursued comprehensive reform of its retirement allowance system in April through such initiatives as introduction of an advanced retirement allowance. Costs incurred in the transition to the new system were appropriated as an extraordinary loss for the fiscal year ended March 31, 2002. This move will result in reduced retirement benefit expenses from fiscal 2002 and offset unexpected increases in losses on the pension plan assets amid a predicted fierce operating environment to come. 5) Restructuring the Company's Business Portfolio Group management is taking on greater significance with the full-scale introduction of consolidated accounting. Such peripheral infrastructure systems as holding companies, company spin-offs, consolidated taxation and tracking stocks are being developed and a multifaceted strategy covering such aspects as spin-offs, strategic tie-ups and mergers and acquisitions is being pursued. 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.      The spin-off of the Information Business Division into ITX Corporation at the end of fiscal 1999 was the first of its kind at Nissho Iwai, and the company was later listed on the NASDAQ Japan in December 2001. The main activities in restructuring businesses during the management plan were:

<Fiscal 1999>

Established the portal site start-up support and operation company EBISTRADE, Inc. through a joint venture with ITX Corporation and NTT-X, Inc.

<Fiscal 2000>

Merged the Company's and Nichimen Corporation's construction materials subsidiaries to form Sun Building Materials Corporation Merged the Company's and Nichimen Corporation's construction materials subsidiaries to form Sun Building Materials Corporation Established RiskMonster.com as an online credit research and management service company through a joint venture with companies including ITX Corporation ITX acquired shares of Nichimen's IT-related subsidiaries. Seventy percent of the shares in the Company's LPG subsidiaries were transferred to Osaka Gas Corporation Reached an agreement to integrate steel products operations with Mitsubishi Corporation Spun off non-ferrous subsidiaries with a management buy-out (MBO) completed to form Nissho Iwai Alconix Company

<Fiscal 2001>

The Group's textile business was consolidated and then merged with a subsidiary of Teijin Limited to form NI Teijin Shoji Co., Ltd. A sugar subsidiary was merged with Mitsui Sugar Co., Ltd. to form Shin-Mitsui Sugar Co., Ltd. Consolidated and spun off meat and livestock and horticulture businesses to form Nissho Iwai Meat and Agri-Products Corporation Established Nissho Iwai FTX Holdings Corporation as a Group financial technologies-centered company for organizational expansion of predominately fee-based financial businesses using optimized trading company functions Formed a tie-up with Sumitomo Corporation in the LNG business to establish LNG JAPAN CORPORATION Merged two logistics subsidiaries to form Nissho Iwai Logistics Corporation to chiefly handle Group logistical technology Acquired coal and iron ore, and petroleum and carbon products businesses from Nichimen Purchased overseas raw materials business from Snow Brand Foods Co., Ltd. Established a joint holding company with Nichimen in the plastics business and further expanded scale with addition of Chori Co., Ltd. Formed business tie-ups with Nichimen in the chemicals field and condominium sales and management businesses

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."      In this way, Nissho Iwai is pursuing change rather than cowering from it and aggressively pushing through needed reforms to recast itself as a more competitive company.

5. Pressing Issues in the New Medium-Term Management Plan The Company made efforts toward and largely achieved measures founded on its fundamental policies of "improving the financial position" and "strengthening the earnings structure" as outlined in the Medium-Term Management Plan 2002 spanning three years from April 1999. However, the pace of change in the operating environment has outstripped internal changes within the Company, making it impossible to improve the Company's credit rating or achieve a recovery in the capital market.      Nissho Iwai, in recognizing environmental changes and turbulent times, formulated the "Medium-Term Management Plan 2005" in January 2002 for the period from April 1, 2002 to March 31, 2005.      The new medium-term management plan aims to continue improving the Group's structure and bolstering the financial position while optimizing the business and asset portfolio and creating a new Group organizational model, and embodies the target of unprecedented, dynamic growth in the coming three years.      The plan does not simply represent the ethic of balanced equilibrium. Rather, it expresses a determination in making cutbacks, improving structure and reinforcing financial position. The plan will also call for steadily laying the groundwork for rapid growth in the near future by shifting assets, making new investments and loans and expanding business through mergers and acquisitions in core fields.

	1)	Numerical Targets
		Financial Strength: Net Debt to Equity Ratio Consolidated: Less than 7 Non-consolidated: Less than 4 Profitability: Net Income Consolidated: ¥22.5 billion Non-consolidated: ¥8 billion Performance Metrics: Consolidated ROA: More than 1% Consolidated ROE: Approximately 14%
	2)	Fundamental Policy

		1.	Maximize Profitability (for survival in this age of mega-competition)
		2.	Implement Structural Reforms (for long-lasting growth and vitality)
		3.	Reinforce Financial Structure (to rebuild investor confidence and strengthen ability to raise capital)
		Based on the above policy, the Company aims to achieve significant growth in the future.

Fundamental Policy-1: Maximizing Profitability As a result of the greater selection and concentration of resources throughout the Group, non-consolidated profits have been secured, and the Company is realizing the increase in consolidated net income called for in its Strategic Alliance.      The Medium-Term Management Plan 2005 identifies the following core business areas:

The five core business areas    1. Energy and Natural Resources    2. Aerospace Industries    3. Electronics and Telecommunications    4. Automotive Industries    5. Consumer Products New business development (eBusiness, Biotechnology and Environment [Afforestation, etc.]) Core areas for alliances (Information Industries, LNG, Steel Products and Chemicals) Overseas operations (Regional headquarters system for America, Europe and Asia)

Organizing around the "five core business areas" creates different divisions from the Company's recent internal division company and segment structure, and there are differences in the scale of these business areas. However, each of them is already a strong field, and all have potential for strong performance in the future. By allotting management resources to them now, Nissho Iwai plans to achieve increased earning power in three years.      Because the "new business development" shows potential for continued strength in the future, the Company is cultivating expansion in these areas. These also will become new sources of earnings.      Nissho Iwai has gained a step on its competitors in the core areas for alliances. To survive and prosper, the Company has broken with its past policy of closed self-sufficiency and, based on a strategy of open cooperation, looks for its independent corporate allies to make a significant contribution to consolidated earnings.      The Company is also expanding earnings in its overseas offices by focusing on localized trade as well as cross-border trade emanating from and controlled by each region, and making full use of its overseas network.      Nissho Iwai is allocating management resources on a priority basis to these core areas in the expectation that they will make a contribution to the Company's earning power in three years. At present, the core business areas account for approximately 85% of Nissho Iwai's total earnings, but that share is forecast to increase over the coming three years, to the point that they will be generating virtually all of the Company's income. The 50% of the Company's total assets now utilized by the core areas is expected to grow to 75% during the next three years.      The Company has designated those business fields not included among the core business areas, but which offer the prospect of stable earnings, as sustainable businesses. It is allocating management resources to these businesses proportionate to their potential for earnings and forecasts that they will make a stable contribution to income. Fundamental Policy-2: Implementing Structural Reforms Improving the Cost Structure The principal issues facing the Company in this area are the optimal allocation of human resources, radical reevaluation of the salary structure, reform of the employee pension and retirement benefits system and reduction of non-personnel SG&A expenses.      First, looking at the optimal allocation of human resources, optimization of Nissho Iwai's business portfolio will lead to reductions in personnel. With regard to the Company's salary structure, executive remuneration is included in the radical reevaluation now in progress. Of course, this is not limited to the parent company, but extends to subsidiaries and affiliates as well. The introduction of the defined contribution pension plans system will lower the Company's retirement benefit obligations, and will also reduce non-personnel SG&A expenses. In today's deflationary economy, the business environment for trading companies remains severe, and no great increase in gross trading profit can be expected. Rather, improvement in profitability and enhanced cost competitiveness will be the two engines of earning power.

	Improving the Group's Management To strengthen Group management and build the optimal management organization, the Group is pursuing a continuous, thoroughgoing reform of all systems.
	1) The Company is implementing further reductions in the number of its directors and has abolished the corporate advisor system. 2) Improving the Company's administrative functions Nissho Iwai has streamlined headquarters and established Nissho Iwai Professional Services, Ltd. (NIPROS) as a shared services company (SSC). This will allow the Company to move forward with the selection and concentration of administrative functions, to enhance efficiency and improve the quality of services through reforms of operational processes, and to increase income not merely through the provision of services to the Company and the Group, but by marketing to third parties and realizing greater financial independence. By integrating the Group's administrative functions, Nissho Iwai intends to decrease Group costs and rationalize operations. The Company's administrative divisions are the repository of knowledge, experience and expertise on every topic and issue a trading company encounters. An intangible asset, it is the source of the Company's guarantee as a trading company to be a one-stop solution. NIPROS will generate non-group earnings through its own efforts and capabilities, and as an organization of administrative professionals, will serve as the lynchpin of the Group. 3) Measures by subsidiaries and affiliates to improve Group management The Company is working to increase consolidated net income and corporate value. Within the period covered by this plan, Nissho Iwai will proceed with the reorganization and rationalization of subsidiaries and affiliates (reducing their number by 200 companies), in this way achieving a sweeping enhancement of the Group's earning power. Nissho Iwai will also reinforce Group management through such measures as strengthening risk management, organizing the Group board and further monitoring Group companies. 4) Improving the Group's human resources development system The Company is making changes to its pension and retirement plan system to facilitate the cultivation of talent and the free movement of personnel between Group companies. In addition, the Company has instituted a flexible personnel rotation system that will allow staff to move to a subsidiary or back to the parent company at need.      All these measures are designed to strengthen Group management and cost competitiveness as well as to generate numerous other benefits. Fundamental Policy-3: Strengthening the Financial Position The most important issue facing the Company is the improvement of the net interest-bearing debt to equity ratio. The reduction of assets becomes a financial resource that contributes to the reduction of interest-bearing debt. The Company plans to reduce consolidated total assets, which stood at ¥2,957.6 billion at March 31, 2002, to a level just above ¥2 trillion by March 31, 2005. Specifically, Nissho Iwai will be liquidating the fixed and financial assets of non-core businesses to minimize the effect of market prices on capital stock. In addition, asset reductions in connection with the Company's Strategic Alliance are predicted. Operating assets will also be reduced, as will loans and investments. These cuts will not be limited to reductions in the value of existing investments, but will extend to a complete changeover of assets, requiring new investments in the future.      The Company plans to reduce net interest-bearing debt, which totaled ¥1,847.2 billion at March 31, 2002, to approximately ¥1 trillion by March 31, 2005 and to achieve significant improvement in the net interest-bearing debt to equity ratio, which Nissho Iwai plans to reduce from its present level of 17.31 to less than seven.      The numerical targets set forth in the Medium-Term Management Plan 2005 are as discussed above. Another goal, one for the final year of the plan, is to achieve reforms at an even faster pace than called for in the plan. The Company also wishes to better its credit rating as soon as possible, not waiting for the plan's final year. This will allow the Company to return to the capital markets, and to resume dividends to shareholders at the earliest possible time.

Consolidated Financial Statements Non-Consolidated Financial Statements Management Policy Business Results and Financial Position