Thousands of U.S. dollars Due in  Due after one Due after five one year or  year through years through Due after  Fiscal year 2004  (As of Mar. 31, 2005) less five years ten years ten years Government bonds .............................................................................................................................................................. $ 187 $ 0 $ 0 $0 Corporate bonds ................................................................................................................................................................... 1,374 0 505 0 Others ............................................................................................................................................................................................ 0 37 0 0 Total ................................................................................................................................................................................................. $1,561 $37 $505 $0 FINANCIAL SECTION All strategies to manage financial market risk and risk hedge operations of the Group are carried out pursuant to the Rule which stipulates the Group’s basic policies for derivative transactions, management policies, management items, procedures, criteria for the selection of counterparties, and the reporting system, and so forth. The Rule prescribes that (i) the Group’s financial market risk is to be controlled by the Company in a centralized manner, and that (ii) no individual subsidiary is permitted to initiate a hedging operation without the prior approval of, and regular reporting back to the Company. The basic hedge policy is subject to the approval of the Monthly Hedge Policy Meeting attended by the corporate officer in charge of Treasury Department. Execution and management of all deals are to be conducted pursuant to the Rule. Derivative transactions are conducted by a special section of the Treasury Department and monitoring of contracts for such transactions and confirming the balance of all open positions are the responsibility of back office and risk management section. Commodity futures contracts are to be handled also by Treasury Department under guidelines which are to be drawn up by the MRMC (Materials Risk Management Committee). The MRMC is chaired by the corporate officer in charge of the Purchasing Department and the corporate officer in charge of Treasury Department and it will meet approximately once every six months. The status of derivative transactions is reported on a daily basis to the chief officer in charge of Treasury Department and on an annual basis to the Board of Directors. Credit risk is monitored quantitatively with reference to Renault’s rating system based principally on the counterparties’ long-term credit ratings and on their shareholders’ equity. The Finance Department sets a maximum upper limit on positions with each of the counterparties for the Group and monitors the balances of open positions every day. The Group is exposed to the risk that a counterparty to its financial transactions could default and jeopardize future profits. We believe that this risk is insignificant as the Group enters into derivative transactions only with financial institutions which have a sound credit profile. The Group enters into these transactions also with Renault Finance S.A. (“RF”), a specialized financial subsidiary of the Renault Group which, we believe, is not subject to any such material risk. This is because RF enters into derivative transactions to cover such derivative transactions with us only with financial institutions of the highest caliber carefully selected by RF based on its own rating system which takes into account each counterparty’s long-term credit rating and shareholders’ equity. The financial market risk to which the Group is generally exposed in its operations and the relevant derivative transactions primarily used for hedging are summarized as follows: The Company and its consolidated subsidiaries (collectively, the “Group”) utilize derivative transactions for the purpose of hedging their exposure to fluctuation in foreign exchange rates, interest rates and market prices. However, based on an internal management rule on financial market risk (the “Rule”) approved by the Company’s Board of Directors, they do not enter into transactions involving derivatives for speculative purposes. The Rule prescribes that (i) the Group’s financial market risk is to be controlled by the Company in a centralized manner, and that (ii) no individual subsidiary can initiate a hedge position without the prior approval of, and regular reporting back to the Company. The Group is exposed to the risk of entering into a financial agreement which may contain inappropriate terms and conditions as well as the risk that an existing contract may be affected by revisions to  the  relevant  laws  and  regulations.  The  Company’s  Legal Department and Finance Department make every effort to minimize legal risk by reviewing any new agreements of significance and by reviewing the related documents in a centralized way. Hedging Policies Risk to be hedged by derivative transactions Risk Management • Foreign exchange risk associated with assets and liabilities denominated in foreign currencies; forward foreign exchange contracts, foreign currency options, and currency swaps; • Interest rate risk associated with sourcing funds and investing: interest-rate swaps; • Risk of fluctuation in stock prices: options on stocks; • Risk of fluctuation in commodity prices (mainly for precious metals): commodity futures contracts (3) Legal risk (2) Credit risk (1) Market risk 20. DERIVATIVE TRANSACTIONS Nissan Annual Report 2004 89