ASCOT CORP.

Qualitative information regarding consolidated operating results
In the Japanese economy during the second quarter six-month accounting period under review (from October 1, 2008 to March 31, 2009; hereinafter "the second quarter under review"), there was a sharp appreciation of the yen because economic unease in the U.S. caused the U.S. Federal Reserve Board to significantly lowering target rates for the federal funds rate. The stronger yen created financial unease and caused deterioration of export-based corporate earnings. In addition, the index of all industry activity and the real gross domestic product fell, and data for the ratio of job offers to applicants and household consumption both reflected the economic downturn; plainly, the Japanese economy has entered a historic economic recession.
In the real estate industry to which our Group belongs, financial institutions continued to make tighter lending assessments of real estate related business projects.
In central Tokyo, the target area of our Group, land prices fell due to a decline in real estate investment. Moreover, despite a smaller amount of new condominium units being supplied to the market and drops in sale-by-lot prices and sales-unit prices, the number of residences for sale grew. Likewise for offices and commercial facilities, vacancy rates in offices and other buildings rose. These and other circumstances are symptomatic of a continuation of remarkable deterioration in the real estate market caused by the slowdown in the real economy. At present, it is not possible to make any forecasts as to when the market will recover.
Operating in this business environment, our Group has been reviewing the account balance and cash flows for each project, and working to efficiently integrate our management resources based on the ASCOT REVIVAL-PLAN 2011, our medium-term management plan covering the three-year period beginning this fiscal year (ending September 2009).
Looking at revenues in the second quarter under review, we executed (a) sales, ahead of schedule, of certain projects contained in the initial plan and (b) sales of projects not contained in the initial plan. This action was based on the following considerations: (a) the impact of the remarkably deteriorated environment in the real estate market and the future uncertainty concerning market recovery, and (b) motivation to curtail the amount of outstanding interest-bearing debt through sale of development projects and held properties recorded in the inventory. Looking at expenses, on the other hand, although we executed rationalization measures-involving reductions to the number of directors, the amount of directors' salaries, and the number of employees-providing effective reductions with respect to recurring costs on expense items in selling, general and administrative expenses, we recorded a loss on valuation of inventories of \2,496 million in cost of sales in the second quarter under review, treating the loss on valuation of inventories as the difference between the "market price" and the "fair value cost to sell" based on the assumption that the current real estate conditions have remarkably deteriorated. Furthermore, as a result of examining the collectability of deferred tax assets, such collection was deemed difficult so we pulled out the full amount and recorded \385 million in income taxes.
As a result, our Group's operating results for the second quarter under review were as follows: net sales down 30.3% year on year to \9,367 million, operating loss of \3,009 million (same period a year ago: operating income of \3,062 million), ordinary loss of \3,250 million (same period of previous year: ordinary income of \2,677 million), and net loss of \3,339 million (same period of previous year: net income of \1,592 million).

Qualitative information related to consolidated financial position
(1) Assets
At the end of the second quarter under review (March 31, 2009), total assets stood at \14,360 million, a decrease of \12,751 million compared with \27,111 million at the end of the previous year.
Current assets stood at \12,263 million, a decrease of \12,533 million compared with \24,796 million at the end of the previous year. The main factors of this were as follows. By reducing the balance of interest-bearing debt through sale of development projects and held properties recorded in the inventory, real estate for sale was down by \3,767 million, real estate for sale in process was down by \5,876 million, and costs on uncompleted services was down by \1,100 million. Inventories in current assets was down \10,744 million to \11,653 million.
Fixed assets stood at \2,096 million, a decrease of \217 million compared with \2,314 million at the end of the previous year. The main factors of this were as follows: property, plant and equipment decreased by \49 million and investments and other assets decreased by \165 million.

(2) Liabilities
At the end of the second quarter under review, liabilities amounted to \13,619 million, a decrease of \9,391 million compared with \23,011 million at the end of the previous year.
Current liabilities amounted to \12,011 million, a decrease of \5,604 million compared with \17,615 million at the end of the previous year. The main factors of this were as follows: short-term loans payable decreased by \2,490 million due to the measures to reduce the balance of interest-bearing debt, notes and accounts payable-trade decreased by \1,884 million accompanying the hand-over or sale of developments and held properties, and advances received decreased by \1,409 million.
Noncurrent liabilities amounted to \1,608 million, a decrease of \3,787 million compared with \5,396 million at the end of the previous year. As the main component of this, long-term loans payable decreased by \3,712 million due to the measures to reduce the balance of interest-bearing debt. The balance of interest bearing debt in liabilities decreased \5,667 million yen to \11,978 million.

(3) Net Assets
At the end of the second quarter under review, net assets amounted to \740 million, a decrease of \3,359 million compared with \4,099 million at the end of the previous year. As the main component of this, retained earnings decreased by \3,339 million because of the net loss recorded for the second quarter under review.

(4) Cash flow position
The balance of cash and cash equivalents at the end of the second quarter under review was \403 million, down \965 million compared with \1,369 million at the end of the previous fiscal year.

(a) Cash flows from operating activities
Net cash provided by operating activities was \4,535 million. The main factors behind cash increases were the recording of a net loss before income taxes of \2,949 million, a decrease of \1,734 million in notes and accounts payable-trade following the cancellation of joint-development projects, and a decrease of \1,009 million in advances received due to hand-over transactions. Other main factors behind cash increases were the recording of \2,496 million as a loss on valuation of inventories, treated as the difference between the "market price" and the "fair value cost to sell" based on the assumption that the current real estate conditions have remarkably deteriorated, and a decrease of \8,103 in inventories accompanying the sale of 13 properties recorded in real estate for sale and costs on uncompleted services.

(b) Cash flows from investing activities
Net cash provided by investing activities was \166 million. The main factors behind this increase were \100 million from proceeds from the sales of investment securities and \22 million from other proceeds.

(c) Cash flows from financing activities
Net cash used in financing activities was \5,667 million. The main factors behind this decrease were the repayments of \2,490 million in short-term loans and \3,176 million in long-term loans to financial institutions following the sale-by-lot or sale of 8 real estate development projects and 5 solution businesses.