Oct. 21, 2004 --TOKYO -- Kokudo Corp. appears to have been controlling its effective stake in Seibu Railway Co. by holding some of them under individuals' names and adjusting the number of such shareholdings for at least five years, sources familiar with the matter said Thursday.

The sources cited Seibu Railway's revised financial reports released Oct. 13 that show the number of individual shareholders whose shares were actually held by Kokudo was about 800 more in the 1999 and 2001 business years than in the 2002 and 2003 business years.

The Securities and Exchange Surveillance Commission has begun investigating Kokudo, an unlisted firm which runs the Prince Hotels chain and sports facilities.

The investigations center on whether Kokudo and Seibu Railway falsified information in their financial statements and whether there was insider trading in connection with the sales of shares in the railroad operator.

Seibu Railway submitted the revised reports to the Kanto Local Finance Bureau on Oct. 13. The reports include the ratio of shares held by Kokudo and Kokudo subsidiary Prince Hotels Co.

It also admitted that Kokudo and Prince Hotels held Seibu Railway shares under the names of about 1,100 individual investors and some 100 individuals, respectively, in the 2003 business year, which ended March 31 this year.

The ratio of Kokudo's shareholdings was revised upward to 64.83 percent from 43.16 percent and that of Prince Hotels to 4.20 percent from 0.98 percent for the 2003 business year. As a result, the ratio of shareholdings by Kokudo and nine group companies topped 88 percent.

Stock exchange regulations stipulate that shares are to be delisted if the combined ownership by the top 10 shareholders exceeds 80 percent for more than one year.

A Seibu Railway official said Thursday the company has no knowledge at the moment of the reason for the difference in the number of the individuals' names between the 1999 and 2001 years and the 2002 and 2003 years.

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