Press Release

December 10, 1997

The Securities and Exchange Surveillance Commission (SESC) conducted the investigation of Nikko Securities Co. (Nikko) based on the provisions of Securities and Exchange Law (SEL) and found legal violations and improper activities described below.

appropriate measures against Nikko pursuant to Article 19 1) of Ministry of Finance Establishment Law on December 10, 1997.

1. Providing property gains to compensate for losses Nikko, by involvement of the six then board members totally including the vice president, for the purpose of compensating for a part of a customer's losses incurred in securities transactions, offered to the customer:

1)approximately \14,500,000 by disguising as if the customer had bought the profitable warrants before the price started to rise, which in fact Nikko held on its own accounts and repurchasing them immediately at the current price on Nikko's own account five times between March and June 1994;

2)approximately \900,000 by disguising its own warrant-buying transactions as the customer's transactions in June 1994;

3)approximately \14,100,000 in total by disguising its own equity-buying transactions as the customer's transactions 11 times between January and December 1995;

(violation of SEL 50-3 1)3))

2. Entering into an agreement to make discretionary trading account aspects of securities transactions to decide, without consulting the customer, whether purchase or sell, shares issued, number of shares and prices, and executed the customer's order for two accounts based on this agreement from September 1992 to October 1995 and from August 1994 to June 1996 respectively.

(violation of SEL 501)3))

3. Problems with internal controls The SESC recognized the following problems with Nikko's internal controls underlying legal violations mentioned above:

1)the Internal Administration Supervisor, who was in a position of securing compliance with laws and regulations, was involved in illegal activities as described above. Internal check system did not function virtually. Usual check by the internal control officer and internal auditing by Compliance and Guidance Division were conducted only routinely;

2)an employee at Coordination Division, who was in charge of dealing with a “sokaiya" or racketeer, in office and even after resignation, opened an account for the said illegal transactions and directed asset management, which made that account out of internal control;

3)in Nikko's computer system an order initially input as own transaction was to be fixed after the contract was made, including the category of own transaction or a customer's transaction.Taking advantage of such a system, improper operations were done such as processing own transaction as a customer's transaction.

The SESC thus recognized that the officers and employees involved in such improper activities were not mindful of compliance with laws and rules and there was serious defect with internal control system of Nikko.