Kardan N.V. — Earnings Release 2012

Nov 27, 2012

PRESS RELEASE Amsterdam/Tel Aviv, November 27, 2012 Number of pages: 17

KARDAN Q3 2012: PROFIT OF EUR 20 MILLION ONE-OFF FINANCIAL GAIN ON DELEVERAGING AND INCREASED OPERATIONAL EFFICIENCY

Highlights segments Q3 and nine months – 2012:

Kardan N.V.

Q3 – 2012:

• Successful repurchases of Debentures: EUR 33 million financing income;
• EUR 20 million profit attributable to equity holders;
• 9M 2012:
• EUR 5 million loss attributable to equity holders (9M 2011: EUR 67 million loss);

Real Estate Asia

Q3 – 2012:

• All permits for construction of mixed-use project Europark Dalian received, bank loan obtained and successful sale of SOHO apartments started after reporting period;
• Substantial deliveries of apartments (704) compared to Q3 2011 (186);
• Increase in sale of apartments (436 versus 186 in Q2 2012);

9M – 2012:

• EUR 4 million profit attributable to Kardan (9M – 2011: EUR 20 million profit);

Real Estate Europe

Q3 – 2012:

• Sale agreement signed by GTC S.A. for Platinium Business Park(I-V) in Warsaw;
• GTC S.A. continues with cost optimization;
• Devaluation of EUR 33 million at GTC S.A. mainly for 3 retail centers in Romania (for which preliminary sale agreement has been signed after balance sheet date);

9M – 2012:

• EUR 14 million loss attributable to Kardan mainly due to impairments (9M – 2011: EUR 52 million loss);

Water Infrastructure Assets

Q3 – 2012:

• Continued construction to increase capacity of water facilities in China;
• 9M 2012:
• Break-even result attributable to Kardan, mainly due to one-off expenses (9M 2011: EUR 4 million profit);

Water Infrastructure Projects

Q3 – 2012:

• Substantial increase in revenue recognized due to projects in Africa;
• 9M 2012:
• EUR 6 million loss attributable to Kardan (9M 2011: EUR 8 million loss);
• Backlog position of EUR 333 million;

Banking and Retail Lending

Q3 – 2012:

• Branch license for TBI Bank in Romania obtained;
• Strong growth in deposit taking in Bulgaria;
• SME loan origination still difficult;

9M – 2012:

• EUR 17 million loss attributable to Kardan (9M – 2011: EUR 7 million loss).

Shouky Oren, CEO of Kardan N.V. stated: "The prime focus in the execution of our strategy remains to continue to create value in selected markets and segments, while emphasizing cash flow generation in our operations and materialization of cash through sale of assets. Starting in mid July and finishing beginning of August 2012, we have repurchased debentures for an amount of EUR 51 million and thereby reduced our total outstanding debt by EUR 84 million. The one-off financial income which was recognized in the third quarter of 2012 had a large impact on the Q3 2012 results. At the same time our subsidiaries are all taking measures to optimize their operational costs, adjusting to the economic environment we are in. In this respect, we will continue to witness an improvement of the operational results including cost saving at the level of the holding. Our strategy remains to continue to invest in emerging markets in primarily real estate and water infrastructure. We see the opportunities in the long term and realize that the global macroeconomic circumstances have become different and are more challenging".

The condensed consolidated income statement, both for Q3 – 2012 as well as for 9M – 2012, split into the different segments of Kardan N.V. are shown in the tables below. Management analyses the segment performance based on result from operations before finance expenses (in note 3 of the condensed interim consolidated financial statements called "Segment result"). In this press release, additional segment information is provided for information purposes.

Following the overall analysis, the Q3 and 9M – 2012 results of every individual segment is analyzed in more detail.

Condensed Consolidated Income Statement Kardan N.V.

		Real Estate		Infrastructure	Banking		Total	Total
					and Retail
	Asia	Europe	Assets	Projects	lending	Other	Q3 – 2012	Q3 – 2011*
Total revenues Total expenses	19 16	40 23	10 7	37 38	9 9	- 2	115 95	87 112
Profit (loss) from operation before fair value adjustments, disposal of assets and financial expenses	3	17	3	(1)	-	(2)	20	(25)
Profit (loss) from fair value adjustments and on disposal of assets and investments	-	(33)	-	-	(1)	-	(34)	(93)
Result from operations before finance expenses	3	(16)	3	(1)	(1)	(2)	(14)	(118)
Financing income (expenses), net	(2)	(13)	(1)	(1)	(1)	36	18	(40)
Profit (Loss) before income tax	1	(29)	2	(2)	(2)	34	4	(158)
Income tax (expenses)/benefit	(1)	-	(1)	-	-	(1)	(3)	(18)
Profit (Loss) from continuing operations	-	(29)	1	(2)	(2)	33	1	(176)
Profit (Loss) from discontinued operations	-	-	-	-	-	-	-	23
Profit (Loss) for the period	-	(29)	1	(2)	(2)	33	1	(153)
Attributable to:
Non-controlling interest Net result for equity holders	- -	(19) (10)	- 1	- (2)	- (2)	- 33	(19) 20	(122) (31)
Profit (Loss) for the period	-	(29)	1	(2)	(2)	33	1	(153)

For the three months ended September 30, 2012 (in EUR million)

* The results of 2011 have been restated as the results of Sovcombank have been classified as discontinued operations. In addition, Real Estate Asia has been reclassified to be in line with 2012 presentation.

For the nine months ended September 30, 2012 (in EUR million)

		Real Estate		Infrastructure	Banking and		Total	Total	Total
	Asia	Europe	Assets	Projects	Retail lending	Other	9M – 2012	9M – 2011	FY 2011*
Total revenues	53	117	28	79	14	-	291	252	332
Total expenses	49	67	22	84	26	5	253	275	391
Profit (loss) from operation before fair value adjustments, disposal of assets and financial expenses	4	50	6	(5)	(12)	(5)	38	(23)	(59)
Profit (loss) from fair value adjustments and on disposal of assets and investments	3	(49)	1	-	(1)	-	(46)	(100)	(217)
Result from operations before finance expenses	7	1	7	(5)	(13)	(5)	(8)	(123)	(276)
Financing income (expenses), net	-	(46)	(5)	(1)	(5)	32	(25)	(95)	(123)
Profit (Loss) before income tax	7	(45)	2	(6)	(18)	27	(33)	(218)	(399)
Income tax (expenses)/benefit	(3)	(5)	(2)	-	-	1	(9)	(19)	(28)
Profit (Loss) from continuing operations	4	(50)	-	(6)	(18)	28	(42)	(237)	(427)
Profit (Loss) from discontinued operations	-	-	-	-	1	-	1	12	18
Profit (Loss) for the period	4	(50)	-	(6)	(17)	28	(41)	(225)	(409)
Attributable to:
Non-controlling interest	-	(36)	-	-	-	-	(36)	(158)	(261)
Net result for equity holders	4	(14)	-	(6)	(17)	28	(5)	(67)	(148)
Profit (Loss) for the period	4	(50)	-	(6)	(17)	28	(41)	(225)	(409)

* The results of 2011 have been restated as the results of Sovcombank have been classified as discontinued operations. In addition, Real Estate Asia has been reclassified to be in line with 2012 presentation.

Overall 9M – 2012 review

If developments are specifically attributable to Q3 these are mentioned separately.

Total consolidated result from continuing operations in 9M – 2012 arrived at a loss of EUR 42 million, compared to a loss of EUR 237 million in the corresponding period last year, mainly due to losses in Real Estate Europe and Banking and Retail Lending:

The result from continuing operations of Real Estate Asia arrived at EUR 4 million, EUR 16 million less than in the same period last year. The first nine months of 2011 included a EUR 17 million revaluation profit on the sale of 50% of the shopping mall in Chengdu as well as a gain on the sale of the stake in Chengdu (EUR 12 million), whereas in the corresponding period this year valuation gains amounted to EUR 2 million. In addition, in 9M – 2012, a substantially higher gross profit was recorded than in 9M – 2011, mainly resulting from the significant revenue of deliveries of apartments. SG&A expenses were substantially less in 9M – 2012 than in the corresponding period last year which included a one-off expense for a share option plan.

Real Estate Europe recorded a loss from continuing operations of EUR 50 million, compared to a loss of EUR 210 million which was recorded in the same period (9M) last year. The biggest impact on these results in both years was the negative revaluation result and impairments on real estate assets. Revenue remained the same in the reporting period of 2012 and 2011, despite the sale of the remaining 50% in Galeria Mokotow in Q3 of 2011 but balanced out by the opening of new retail

centers and offices. Operational gross profit (i.e. excluding impairments on inventory, which are recorded under "Other expenses, net" in the segment analysis) also remained at the same level. In addition, GTC S.A. has taken measures to bring down the SG&A costs as well as its financing costs. An impairment loss of EUR 4 million in Q3 – 2012 was recognized with respect to GTC Investments, following the reclassification as of July 1, 2012, to "Assets Held for Sale".

Water infrastructure lost EUR 6 million from continuing operations (9M – 2011: loss of EUR 8 million). The results of "Projects" improved by EUR 2 million compared to the corresponding period last year, largely due to the reduction of overhead costs and effective hedging of financing expenses. In addition, revenues at "Projects" in Q3 of 2012 showed substantial y-o-y increase as revenues related to two large projects in Africa were recognized.

Infrastructure "Assets" reported a break-even result from continuing operations in the first nine months of 2012, similar to the corresponding period last year. Revenues and gross profit were higher especially in China, also due to revenue recognized due to the progress of construction/expansion of plants. SG&A expenses were higher, among other resulting from a one off expense in Q3 – 2012 related to the change of management.

The Banking and Retail Lending segment recorded a loss from continuing operations of EUR 18 million (9M – 2011: EUR 16 million loss). The result from continuing operations in Q3 of 2012 was EUR 2 million loss, an improvement compared with the previous two quarters of this year. Whereas the market circumstances in Bulgaria and Romania remain difficult, which can be noticed in loan origination in both countries, the decreasing trend has stabilized in the third quarter of this year, with portfolios remaining at the same level as at end of June 2012.

Significant provisions on non performing loans were recognized particularly in the first quarter of this year, impacting the revenue line (9M – 2012: EUR 14 million versus 9M – 2011: EUR 19 million). Cost cutting measures have impacted the results positively.

Included in "Other" are the expenses and finance costs of the holding companies Kardan N.V. and GTC Real Estate Holding B.V. In 9M – 2012 the result was a profit of EUR 28 million (9M – 2011: loss of EUR 23 million), primarily due to the result of profit recognized on the buy-back of debentures during the reporting period.

The profit from discontinued operations in 9M – 2012 is the effect of the closing of the sale of Sovcombank in Russia. In 9M – 2011 the result is also attributable to the Israeli activities, which were spun-off in Q4 – 2011.

The net result for equity holders of Kardan N.V. amounted to a loss of EUR 5 million (9M – 2011: loss of EUR 67 million).

Equity

Kardan N.V. – balance sheet (company only, in EUR million )	30.09.2012	31.12. 2011
Total Assets	659	864
Total Equity	199	203
Equity/Total assets (%)	30%	23%

Shareholder's equity of Kardan N.V. decreased from EUR 203 million as of December 31, 2011 to EUR 199 million as of September 30, 2012, mainly due to the result in the period.

Covenants

As at reporting date, September 30, 2012, the Company did not have any breach of covenants.

For additional information on covenants, refer to note 8 in the Financial Statements.

Highlights per segment:

Every segment result for 9M – 2012 is analyzed separately hereunder. It is noted that only if the development in Q3 – 2012 significantly differs from the result of the previous quarter, the third quarter of 2012 is discussed separately.

REAL ESTATE

Kardan is active in development and management of Real Estate through two segments: 1) Asia, which includes its 100% subsidiary Kardan Land China, and 2) Europe, which includes GTC S.A., of which it holds 28%, and a relatively small investment in Western Europe (49% holding in GTC Investments) which it intends to sell in the near future.

Real Estate Asia

General developments China

Although GDP growth slowed down for the seventh straight quarter, to 7.4% (y-o-y) in the third quarter of 2012, economists see signs of stabilization in the economy with relatively sound export orders and resuming consumption. The Chinese Government targets GDP growth of 7.5% for the full year 2012. The inflation rate has continued to drop, to a level of 1.9% at the end of September 2012 - from 2.2% at the end of June last – which has supported a growth (y-o-y) of 14.2% in retail sales. In the residential real estate market, prices of apartments in the 70 largest cities have started to decrease. This is in line with the policy of the Chinese government to, among other, address speculation in the property market and to take measures to facilitate buying apartments for own use. As the urbanization continues, demand for low to mid-end residential real estate as well as for shopping centers in Tier 2 and Tier 3 cities remains. These are the two focal areas for Kardan Land China.

The construction of the large mixed-use project in Dalian, which was started in Q2 of 2012, is advancing at a higher pace. After reporting date - end of October, 2012 - the sale of the SOHO (Small Office Home Office) apartments in Dalian was initiated. On October 31, 31 apartments were sold. Europark Dalian is a project combining a shopping center with SOHO and residential apartments. The expected completion of this large project is 2015.

Results Real Estate Asia

		For the nine months ended September 30		For the three months ended September 30	Full Year
			In EUR million
	2012	2011*	2012	2011*	2011*
Property rental and service recharge revenues	4	5	1	2	6
Delivery of apartments	49	17	18	4	41
Total revenues	53	22	19	6	47
Costs of property rental and service recharge operations	2	2	-	-	3
Cost of delivery of apartments	38	13	13	4	31
Other expenses, net	-	1	-	-	1
Gross profit	13	6	6	2	12
SG&A expenses	9	12	3	3	16
Adjustment to fair value (impairment) of investment
properties	3	17	-	-	17
Gain on disposal of assets and other income	-	16	-	12	16
Result from operations before finance expenses	7	27	3	11	29
Financing income (expenses), net	-	-	(2)	1	3
Income tax (expenses) / benefit	(3)	(7)	(1)	(3)	(8)
Net profit (loss)	4	20	-	9	24

Attributable to: Equity holders (Kardan N.V.) 4 20 - 9 24

*Reclassified in line with 2012 presentation

Additional information Real Estate Asia	2012 (30.09)	2011 (30.09)	2011 (31.12)
Balance sheet (in EUR million)
Completed investment property	70	64	68
Investment Property Under Construction	69	-	54
Inventory	232	261	231
Cash & short term investments	33	49	67
Total Assets	489	488	514
Loans and Borrowings	38	42	43
Advance payments from buyers	110	138	136
Total Equity	251	232	247
Other
Apartments sold in period *	640	1,781	1,883
Apartments delivered in period *	1,817	679	1,767
Total apartments sold, not yet delivered *	3,938	6,101	5,115

* reflects number of apartments 100%; Kardan Land China holds 50%; numbers relate to nine months 2012, 2011 and 12 months 2011

Revenues

"Property rental and service recharge revenues", attributable to the 50% owned shopping center in Chengdu, is similar to the corresponding period last year. In August 2011, Kardan Land China sold 50% of the mall; consequently as of September 1, 2011 Kardan Land China is only entitled to 50% (instead of 100%) of the rental income, but still to 100% of the asset management fees. On a like for like basis, the rental revenue of Chengdu increased by 48% in 9M – 2012 compared to the same period last year, and the asset management fees increased by 27%. As at September 30, 2012, Galleria Chengdu is fully occupied.

Residential revenue is recognized when apartments are handed over. Revenue from the delivery of apartments nearly tripled in the first nine months of 2012, compared to the same period last year. From the start of 2012 until end of September 2012, a significant number (1,817 apartments) were handed over, compared to 679 in the same period last year (Q3 – 2012: 704 vs Q3 – 2011: 186). These deliveries represent 100%: Kardan Land China has a stake of approximately 50%, consequently the revenue shown represents 50% of the total revenues booked on these deliveries.

Gross margin

The gross margin on rental and service recharge revenues in 9M – 2012, was 52% compared to 59% in 9M – 2011; the margin was negatively impacted by a one-off property tax charge. Without this oneoff charge, the gross margin in 9M – 2012 would have been 59%.

The gross margin on delivery of apartments was 24%, slightly better than in the comparative period last year, mainly due to a mix of on average higher priced apartments.

Sales & Marketing, and General Administrative expenses (SG&A)

On the one hand, G&A expenses in 9M – 2012 were substantially lower than in 9M – 2011: in Q2 – 2011, EUR 5 million expenses relating to employee options were recognized (in 9M – 2012: EUR 0.1 million). On the other hand, S&M expenses were higher due to higher commission costs resulting from a larger number of deliveries of apartments which were recorded in 9M – 2012 compared to the corresponding period last year. And finally, as the mixed-use project Dalian was initiated in the beginning of 2012, additional marketing expenses were incurred in 9M – 2012 in comparison to last year.

Adjustment to fair value of investment properties

The positive adjustment to fair value in both 9M – 2012 (recorded in Q1 – 2012) as in 9M – 2011, is attributable to the shopping mall in Chengdu (recorded mainly in Q2 – 2011).

Gain on disposal of assets and other income

The gain in 9M – 2011 reflects the sale of a land plot in Hangzhou (EUR 4 million) and the sale of 50% of the shopping mall in Chengdu (EUR 12 million).

Financing Income/expenses

In 9M – 2012, the financing expenses were break even, similar to the corresponding period last year. Financing expenses in the third quarter of 2012 relate mostly to negative foreign exchange results due to the weakening of the RMB versus the Euro in the quarter. old.

Income tax (expenses) / benefit

The income tax expenses in 9M – 2012 mostly relate to deferred tax expenses on the valuation of the shopping center in Chengdu as well as to the high number of deliveries in the period. In the corresponding period in 2011, the tax expenses related mainly to the sale of the Hangzhou project as well as to positive valuation gains on Galleria Chengdu.

Additional Information

"Loans and Borrowings", decreased by EUR 5 million when compared to end of 2011, as the result of a EUR 25 million shareholder loan to GTC Real Estate Holding, which was repaid in full in Q3 – 2012, and new loans in the sum of EUR 20 million, mainly relating to Dalian were obtained.

In the third quarter of 2012, as a result of a successful marketing effort and following a slight improvement in buyers' sentiment, substantially more apartments were sold (423) than in Q2 – 2012 (136) and Q1 (81), but in total (640) far less apartments were sold in 9M – 2012 compared to the same period last year (1,781). This reflects the measures that the Chinese Government has taken to cool down the property market and to reign in the inflation. Kardan Land China aligns the pace of construction to match the market conditions and to keep the percentage of completed unsold apartments in the inventory low (September 30, 2012: 3%).

In May 2012, Kardan Land China received the construction permit for its mixed-use project in Dalian, comprising of a shopping center (NRA – net rentable area – of approx. 65,000 sqm), residential apartments and (SOHO) small home offices (GFA -gross floor area- of approx. 100,000 sqm). The estimated total development cost, including land, amounts to approximately EUR 475 million. Besides Equity which has already been invested, the development of the project is financed by a bank loan and proceeds from sale of apartments.

Real Estate Europe

General developments Central and Eastern Europe (CEE)

Economic uncertainties in Europe, and therefore in Central and Eastern Europe, continue to prevail. Consequently, consumer confidence throughout CEE and particularly in South Eastern Europe (SEE) remains fragile to low. This sentiment impacts the retail real estate sector, specifically in secondary locations. GTC S.A. has therefore taken the decision to sell three non core retail assets in second tier cities in Romania. This is in line with its strategic re-orientation to improve its operating results and to focus on its large scale shopping centers due to the change in market conditions.

Poland continues to show a relatively strong economic growth although a further slowdown in GDP growth in the third quarter of 2012 (2.5% y-o-y) was recognized following lower domestic demand. Warsaw remains the prime location in Poland. GTC S.A. plans to develop two shopping centers in Warsaw, with a combined Net Rentable Area of 140,000 sqm, which includes the acquisition, in September 2012, of the 50% stake in the Wilanow project. Consequently, GTC S.A. currently fully owns both projects (Wilanow and Bialoleka). The Real Estate investment activity in Poland over January until October 2012 is 43% slower than the comparative period in 2011, when there were a few big lot size transactions. It is expected, however, that some transactions which have already been announced, will be completed in the fourth quarter of 2012, bringing the overall 2012 investment volume for Poland close to the volume achieved in full year 2011. End of October 2012, GTC S.A. announced that it had completed the sale of Platinium Business Park (buildings I – IV), and that it expects the completion of the sale of building V to take place in Q1 - 2013. Outside of Poland the investment markets are impacted by lack of financing and tighter investor requirements.

Results Real Estate Europe

Real Estate Europe comprises GTC S.A. which operates in Central and Eastern Europe, as well as the small entity GTC Investments, in which Kardan holds 49%. As the 28% that Kardan holds in GTC S.A. is a controlling stake, the results of GTC S.A. are 100% consolidated in the financial statements of Kardan. Consequently, the results of Real Estate Europe are mainly reflective of the results of GTC S.A.

The results of GTC Investments are not included as of July 2012, as the investment in GTC Investments was classified as held for sale.

		For the nine months ended September 30,		For the three months ended September 30,	Full Year
			in EUR million
	2012	2011	2012	2011	2011
Property rental and service recharge revenues	101	102	34	33	136
Delivery of apartments	16	21	6	11	25
Total revenues	117	123	40	44	161
Costs of property rental and service recharge operations	28	28	10	9	38
Cost of delivery of apartments	15	20	6	9	23
Operational Gross Profit	74	75	24	18	100
Other expenses, net	5	53	2	39	77
Gross profit	69	22	22	(13)	23
SG&A expenses Adjustment to fair value (impairment) of investment	19	21	5	4	29
properties	(39)	(126)	(28)	(100)	(221)
Impairment losses on goodwill and other assets	(4)	(10)	(4)	(10)	(11)
Equity in net earnings of associated companies	(6)	(1)	(1)	-	(4)
Result from operations before financing expenses	1	(136)	(16)	(127)	(242)
Financing income (expenses), net
Income tax (expenses) / benefit	(46) (5)	(67) (7)	(13) -	(32) (12)	(86) (18)
Net profit (loss)	(50)	(210)	(29)	(171)	(346)
Attributable to:
Non-controlling interest holders	(36)	(158)	(19)	(126)	(262)
Equity holders (Kardan N.V.)	(14)	(52)	(10)	(45)	(84)
	(50)	(210)	(29)	(171)	(346)

Additional information GTC S.A.	2012 (30.09)	2011 (30.09)	2011 (31.12)
Balance sheet (in EUR million)
Inventory & residential land bank	170	203	182
Investment property	1,675	1,778	1,704
Assets held for sale	185	134	134
Cash & short term investments	221	203	179
Total Assets	2,350	2,443	2,310
Total bank debts and financial liabilities	1,375	1,454	1,395
Total Equity	792	863	724
Other
Loan to Value*	57%	53%	60%
Completed commercial space(sqm)**	608,147	514,665	579,856
Value completed commercial space (EUR million)**	1,535	1,444	1,465
Average occupancy	90%	87%	87%
Average yield completed assets	8.3%	8.0%	8.1%

* LTV = Loans net of cash and deposits / Investment Property, inventory and assets held for sale

** Excludes Czech Republic and Ukraine, includes assets held for sale

Revenues

"Property rental and service recharge revenues" in 9M – 2012 were stable compared to the same period last year, i.e. EUR 101 million, despite the sale in Q3 – 2011 of 50% of Galeria Mokotow, the former retail center of GTC S.A. in Warsaw. The loss of revenue of Galeria Mokotow was compensated by the opening of new offices and retail centers in Poland and Bulgaria, as well as new leases and renewals. Currently, average occupancy of completed properties at GTC S.A. stands at 90%, slightly better than at the end of June of this year.

Revenues (recognized on deliveries of apartments) declined in nine months 2012 by 24%. The residential market in CEE/SEE remains weak as mortgage availability deteriorates.

Operational Gross profit

The operational gross profit margin in 9M – 2012 (63%) was at the same level (61%) as in the same period last year. The gross profit margin (9M – 2012) of GTC S.A. on property rental and service recharge revenues stayed at the same level of 73 % (y-o-y), although the gross margin in Q3 – 2012 showed a decline to 71%.

"Other expenses, net" relates to an impairment of inventory, reflecting the weak market.

Sales & Marketing, and General Administrative expenses (SG&A)

The decrease in SG&A expenses is mainly the result of less sales and marketing expenses following completion of leasing activities in newly completed assets. In addition, following cost optimization measures taken by the management of GTC S.A., administrative expenses significantly decreased in 9M this year compared to the same period of last year – which included a one-off cost related to the sale of Galeria Mokotow. In Q3 – 2012, SG&A expenses were slightly higher y-o-y, due to cost optimization actions taken by the management of GTC S.A.

Adjustment to fair value of investment properties and other

In the third quarter of 2012 an impairment loss of EUR 28 million was recognized, mainly on the three retail centers in Romania for which GTC S.A. signed a sale agreement after balance sheet date (October 2012). Consequently, the impairment of investment properties totaled EUR 39 million in 9M – 2012, substantially less than in nine months of 2011 (impairment of EUR 126 million).

In addition, following the reclassification of GTC Investments to "Assets Held for Sale" as of July 1, 2012, EUR 4 million impairment loss was recognized in Q3 – 2012.

Equity in net earnings of associated companies

The negative contribution in 9M – 2012 mainly includes the negative revaluation results which were recorded in the Czech Republic and Ukraine by associated companies of GTC S.A.

Financing Income /expense

Net financing expenses in 9M – 2012 decreased substantially y-o-y by EUR 21 million mainly due to a decrease in the average debt balance, following the sale of Galeria Mokotow and the repayment of loans and bonds ( EUR 21 million redeemed in April 2012). In addition, it should be noted that in 9M – 2011, a hedge amount of EUR 8 million related to the sale of Galeria Mokotow was recognized as a one-off expense.

Direct result

The gross profit from operations, excluding impairments on inventory (recorded under "Other expenses, net"), and deducting SG&A and finance expenses, is positive: EUR 8 million in 9M – 2012 compared to a loss of EUR 13 million in 9M – 2011, mainly resulting from substantially lower net financing expenses as well as a reduction in SG&A expenses following cost optimization measures at GTC S.A.

Income tax

The income tax expense is largely the result of positive results of GTC S.A. in Poland, as well as the effect of a deferred tax liability which became smaller. For negative results in those activities where no turnaround is expected in the foreseeable future, no deferred tax asset is recognized. In 9M – 2011, GTC S.A. in Poland recognized a tax income largely relating to the sale of retail center Galeria Mokotow in Warsaw.

Net profit / (loss) attributable to Equity holders

In 9M – 2012, the contribution to the equity holders of Kardan from the Real Estate Europe segment was a loss of EUR 14 million (9M –2011: loss of EUR 52 million), mainly due to the adjustment to fair value of investment properties and the impairment related to GTC Investments.

Additional Information GTC S.A.

Total Equity of GTC S.A. increased to EUR 792 million (September 30, 2012) from EUR 724 million as of year-end 2011,mainly resulting from the rights issue amounting to EUR 100 million (net), which was placed successfully in Q2 of 2012, combined with the recorded results (EUR 43 million loss). Following the capital raised through the rights issue, the loan to assets value ratio arrived at 57% as at September 30, 2012 (December 31, 2011: 60%). The short term loans (including derivatives) amount to EUR 359 million (June 30, 2012: EUR 337 million), of which EUR 161 million will be repaid on the completion of the sale of the related assets (Platinium, NCC and residential apartments). As at September 30, 2012, EUR 108 million relates to bonds (including hedges) to be redeemed by May 2013.

After balance sheet date, GTC S.A. announced that it has extended EUR 50 million of bonds (due to be redeemed in 2014) until 2017 – 2018 at a slightly higher interest rate, whilst simultaneously redeeming EUR 17 million of bonds and repayments of bonds maturing in 2013. Consequently, there will be hardly any impact on the total interest costs.

GTC S.A. is listed on the Warsaw Stock Exchange. For full details on the GTC S.A. 9M – 2012 results, which were published on November 14, 2012, reference is also made to the company website: www.gtc.com.pl.

WATER INFRASTRUCTURE

Tahal Group International ("TGI"), the fully owned water infrastructure company of Kardan, focuses on developing water assets (e.g. wastewater and water treatment plants) and on executing water related projects worldwide. Tahal Assets is mainly active in China and Turkey, whilst Tahal Projects is mostly involved in projects in Israel, Africa, Central and Eastern Europe as well as in Latin America.

General developments water infrastructure

The necessity for clean water is recognized throughout the world. The funds, however, to develop wastewater treatment facilities, water reuse plants, water supply plants etc. are not always sufficiently available. Consequently, international financial institutions – such as the European Bank for Reconstruction and Development – support private companies, such as Tahal, to organize and support the financing of water infrastructure projects. As a result of the overall savings which countries need to enforce, due to the fragile to poor macro-economic situations worldwide, governments are faced to either postpone or cancel infrastructure projects, or – as is the case in China – to speed up infrastructure projects and investments in order to create more jobs.

The impact on Tahal could be that initiation of projects, although signed, may be delayed as funds still need to be confirmed.

Results Infrastructure Assets*

	For the nine months ended September 30		For the three months ended September 30 in EUR million		Full year
	2012	2011	2012	2011	2011
Contract revenues	28	22	10	10	29
Contract cost Other expenses, net	15 -	10 1	4 -	4 -	16 1
Gross profit	13	11	6	6	12
SG&A expenses Gain on disposal of assets and other income	7 1	5 2	3 -	1 2	7 2
Result from operations before financing expenses	7	8	3	7	7

Financing income (expenses) net	(5)	(6)	(1)	(3)	(5)
Income tax (expenses) / benefit	(2)	(2)	(1)	(2)	(2)
Profit (loss) from continuing operations	-	-	1	2	-
Net profit (loss) from discontinued operations	-	3	-	-	2
Net profit (loss)	-	3	1	2	2
Attributable to: Non-controlling interest holders Equity holders (Kardan N.V.)	- -	(1) 4	- 1	- 2	(1) 3

(*) Finance expenses of Tahal Group International have been allocated to Tahal Assets

Additional Information Assets (in EUR million)	2012 (30.09)	2011 (30.09)	2011 (31.12)
Cash & short term investments	9	25	17
Total Assets	174	167	171
Net Debt (excl shareholder loans)**	55	42	54
Equity*	88	84	84
Equity*/ Assets	50%	50%	49%

* Group equity including shareholder loan ** Bank loans net of cash and cash equivalents

Revenues

The revenue of Tahal Assets is mainly generated by Kardan Water in China. In 9M – 2012, Tahal Assets recorded a 27% higher revenue than in the corresponding period last year, which can mainly be attributed to revenue which is recognized during construction of plants in China as well as to capacity expansion following the acquisition in H1 – 2011 of a new waste water treatment plant in Xuanhua with a capacity of 120,000 m3 a day.

Sales & Marketing, and General Administrative expenses (SG&A)

The increased (y-o-y) administrative expenses in the third quarter of 2012 included a one off expense relating to the change in management in China and in 9M – 2011 a one-off expense related to share based payments was recognized.

Financing income (expenses) net

Net financing costs in 9M – 2012 includes EUR 2.5 million (the effect of which is EUR 1.5 million on Kardan holding level) relating to an extension of a repayment of a USD 25 million loan (signed in 2010) which was negotiated with FIMI, a private equity investor, which was recognized in Q2 of 2012. Excluding the FIMI financing expense, the net financing costs decreased significantly when compared to 9M – 2011, as a result of a decrease in loans and effective hedging.

Net profit/(loss) from discontinued operations

The discontinued operations in 9M – 2011 mainly concern Milgam, an Israeli company that was sold as part of the spin-off of Kardan Yazamut (the Israeli activities) which was affected in October 2011.

Results Infrastructure Projects*

		For the nine months ended September 30		For the three months ended September 30	Full Year
			in EUR million
	2012	2011	2012	2011	2011
Contract revenues	79	66	37	23	85
Contract cost	73	57	34	20	76
Other expenses, net	-	3	-	-	3
Gross profit	6	6	3	3	6
SG&A expenses	11	13	4	4	19
Gain on disposal of assets and other income	-	1	-	-	1
Result from operations before financing expenses	(5)	(6)	(1)	(1)	(12)

Financing income (expenses), net Income tax (expenses) / benefits	(1) -	(3) 1	(1) -	(1) -	(3) 1
Net profit (loss)	(6)	(8)	(2)	(2)	(14)
Attributable to: Equity holders (Kardan N.V.)	(6)	(8)	(2)	(2)	(14)

(*) General and Administrative expenses of Tahal Group International have been allocated to Tahal Projects

Additional Information Projects	2012 (30.09)	2011 (30.09)	2011 (31.12)
Balance sheet (in EUR million)
Cash & short term investments	18	14	26
Total Assets	133	117	119
Net debt (excl. shareholder loans)**	(13)	(2)	(18)
Equity*	36	36	34
Equity* / Assets	27%	31%	29%
Other (in EUR million)
Backlog	333	322	316

* Group equity including shareholder loan

** Bank loans net of cash and cash equivalents

Revenues

Revenues in Q3 of 2012 showed a significant improvement: over 60% y-o-y increase and nearly double the revenue recorded in Q2 – 2012, which was EUR 20 million. The growth is due to new projects in Africa, which started in Q3 after some delay in the second quarter of this year. Consequently, revenue from Projects, in 9M – 2012, increased by 20% compared to the same period last year.

Gross profit

The gross profit margin in 9M – 2012 at 8% is lower than in 9M 2011 (9%) due to revenues recognized on projects with relatively lower profit margins.

Sales and Marketing, and General & Administrative expenses (SG&A)

In 9M – 2012, SG&A expenses significantly decreased compared to the corresponding period last year, resulting from the reorganization which was initiated in H2 of 2011.

Gain on disposal of assets and other income

In H1 – 2011, this included the participation in an Israeli desalination company that was sold in H2 – 2011.

Financing income /(expenses) net

These expenses decreased significantly, reflecting successful hedging, as well as less use of credit facilities following receipt of outstanding debts and advance payments on projects.

Additional information Tahal Projects

The new business in 9M – 2012 amounted to EUR 100 million, leading to a backlog position of EUR 333 million. The main contract was the 3K project with the National Water Company of Ghana to design, construct, expand and upgrade the drinking water systems in the Kumawu, Konongo and Kwahu region of Ghana. This will take approximately three years from commencement.

BANKING AND RETAIL LENDING

Kardan operates in the financial services sector through its 100% holding in Kardan Financial Services (KFS), which owns 100% of TBIF (banking and retail lending), mainly in Bulgaria and Romania. In July 2011, TBIF completed the acquisition of the Bulgarian bank TBI Bank, to upgrade its operation in Bulgaria into a full banking operation focused on retail and SME banking to be funded by deposit taking. In May, 2012, TBIF closed the sale of its 50% in the Russian Sovcombank to its co-shareholder in the bank.

General developments Bulgaria and Romania

The ongoing sovereign debt situation in Europe affects Bulgaria and Romania. Because of lagging external demand, the net export of Bulgaria has turned negative. Domestic demand, however, is picking up but remains weak. Data from the banking sector suggest a downward trend in both deposit and lending interest rates, to support a modest growth in credit with a possible lagged effect on consumption.

Economic development in Romania showed some positive recovery in Q2 of 2012, after harsh winter conditions negatively impacted the first quarter of this year. Severe summer drought, political unrest, waning consumer confidence and renewed difficulties in absorbing EU funds have brought economic growth to a standstill in Q3 of 2012. Banks are continuing to deleverage after a long period of deteriorating asset quality. Consumers, however, tend to show saving behavior. TBI Bank, which has received its banking branch license in Romania in the fourth quarter of 2012, will focus on obtaining deposits from retail clients.

Results Banking & Retail Lending

		For the nine months ended September 30		For the three months ended September 30	Full Year
	2012	2011	2012	2011	2011
			in EUR million
Banking and retail lending activities Other revenues	9 5	14 5	7 2	2 2	4 6
Total revenues	14	19	9	4	10
Costs of banking and lending activities Other expenses, net	22 3	24 5	8 1	9 3	35 5
Gross profit	(11)	(10)	-	(8)	(30)
SG&A expenses	1	3	-	1	3
Gain (loss) on disposal of assets and other income	-	1	-	3	2
Impairment losses on goodwill	1	-	1	-	(19)
Result from operations before financing expenses	(13)	(12)	(1)	(6)	(50)
Financing income (expenses), net	(5)	(5)	(1)	(1)	(12)
Income tax (expenses) / benefits	-	1	-	-	1
Profit (loss) from continuing operations	(18)	(16)	(2)	(7)	(61)
Net profit (loss) from discontinued operations	1	9	-	9	8
Net profit (loss)
	(17)	(7)	(2)	2	(53)
Attributable to:
Equity holders (Kardan N.V.)	(17)	(7)	(2)	2	(53)
Additional Information KFS Banking & Retail Lending	2012 (30.09)	2011* (30.09)	2011 (31.12)
Balance sheet (in EUR million)
Net loan portfolio**	139	173	158
Cash & Short term investments	31	74	80
Total Assets	246	965	979
Total Equity	47	101	63
Other
Provisions	35%	25%	32%

* Includes Sovcombank, excludes TBI Bank (but which is consolidated in the 9M 2012 results)

** 100% of TBIF subsidiaries

General

In the first half of 2011, Kardan signed the agreement to sell its remaining 50% in its Russian Sovcombank, for a pre-agreed fixed transaction price. No material results from Sovcombank were recognized in the 9M – 2012 income statement, which mainly included the interest received on the part of the purchase price that was paid on the closing date, as well as to the release of capital reserves.

It should also be noted that the results of TBI Bank are not included in H1 – 2011 results, as TBI Bank was acquired in Q3 of 2011. The results of TBI Bank are fully consolidated in the 9M – 2012 results.

Revenues

Revenues in 9M – 2012 amounted to EUR 14 million compared to EUR 19 million in 9M – 2011, mainly the result of the weak economic situations in Bulgaria and Romania which led to impairments on loans (deducted from revenues), amounting to EUR 10 million in 9M – 2012 (9M – 2011: EUR 4 million), mostly recognized in Q1 – 2012. Revenues in Q3 – 2012 amounted to EUR 7 million compared to EUR 2 million in Q3 – 2011, resulting from the consolidation of the Bulgarian bank and reduced provisions taken in the period this year compared to the Q3 period of 2011.

Gross profit

The "Gross Profit" amounted to a loss of EUR 11 million (9M – 2011: a loss of EUR 10 million) following the impact of provisions on consumer credits and a portfolio which was too small to generate sufficient income to cover the overhead expenses. In Q3 – 2012, the gross profit was break even, versus a loss of EUR 8 million in Q3 – 2011, in line with the explanation for the revenue development.

Sales & Marketing, and General & Administrative expenses (SG&A)

These expenses comprise of employee and other expenses of KFS, the holding company of the banking & retail lending activities. The significant decrease in 9M – 2012 compared to the same period last year are the result of a decrease in overhead costs in 2012, whereas in the corresponding period of 2011 some one-off severance costs were incurred resulting from the sale of activities. SG&A expenses of the operating companies of KFS are allocated in costs of banking.

Net profit (loss) from discontinued operations

The EUR 9 million reported for the period 9M – 2011 relates mainly to the results of Sovcombank, as well as to VAB bank which was sold at the beginning of 2011. In the second quarter of this year, the final payments with respect to the closing of the sale of Sovcombank were received.

Additional Information

At September 30, 2012, the total portfolio of KFS was equal to the situation as at the end of last quarter. Loan origination in both Romania and Bulgaria remains difficult, particularly to the SME segment, as the confidence in the political (Romania) and economic situation of the countries stays slim.

In Bulgaria, where TBI Bank is able to attract deposits, a strong growth in deposits could be recognized: EUR 55 million by end of September 2012, which is a 53% increase compared to the situation at the end of Q2 – 2012 and more than 5 times the amount in deposit as at December 31, 2011. The growth derives mostly from retail clients.

Other Expenses

	For the six months ended June 30		For the three months ended June 30		Full Year
	2012	2011	2012	2011	2011
	in EUR million
General and administration expenses	5	4	2	2	8
Financing income (expenses), net	32	(14)	36	(4)	(20)
Income tax (expenses) / benefit	1	(5)	(1)	(1)	(2)
Profit (loss) from continuing operations Net profit (loss) from discontinued operations	28	(23)	33	(7)	(30)
Net profit (loss)	-	-	-	14	8
	28	(23)	33	7	(22)

Attributable to:

Equity holders (Kardan N.V.)	28	(24)	33	2	(24)
Non-controlling interest holders	-	1	-	5	2

General

The results under "Profit (loss) from continuing operations" relate to the holding and finance expenses of Kardan N.V. and its direct subsidiary GTC Real Estate Holding BV (GTC RE).

General and Administrative expenses

These expenses increased y-o-y in 9M – 2012, due to one-off management expenses, largely recognized in Q2 – 2012.

Financing income (expenses), net

In 9M – 2012, the financing expenses were positively impacted by a profit of EUR 43 million (Q3 – 2012: EUR 33 million) related to the repurchase of debentures issued by Kardan N.V.

Income tax

These amounts relate to deferred tax on hedge instruments. The same amount is recorded to shareholder's equity.

Net profit (loss) from discontinued operations and non controlling interest holders In 9M – 2011 the amounts are attributable to Kardan Israel Ltd., the subsidiary that was spun-off in Q4 – 2011.

Additional Information

In the first half of 2012, Kardan, through GTC RE, repurchased 209,118,413 Debentures Series A of Kardan for a total amount of EUR 41 million, reducing the total outstanding debt by EUR 52 million.

Consecutively, in July and August 2012, Kardan, through GTC RE, purchased 222,118,772 Debentures Series A for a total amount of EUR 35.9 million and 120,222,513 Debentures Series B for a total amount of EUR 15.5 million, reducing the total outstanding debt by EUR 84 million. As a result of the purchases, Kardan recognized a financial income from early repayment of debentures amounting to EUR 33 million in Q3 – 2012. As of September 30, 2012, Kardan, through its subsidiaries, held 47.5% of Debentures Series A and 12.6% of Series B.

These purchases were funded by the proceeds from the sale of cross currency swaps and own cash sources. The sale of these swaps was needed due to the change of the profile of the assets of Kardan N.V. from a predominantly Euro related company into a company with increased exposure to the Chinese RMB.

OUTLOOK 2012

Kardan N.V.

Management attention in 2012 will continue to be focused on the cash flow and debt position of Kardan N.V. and of its intermediate holding company GTC RE in view of coming redemption of (part of) the outstanding debentures, starting in 2013. A cash flow forecast for the coming two years can be found in the Director's Report on page 15.

Real Estate Asia

For the full year 2012, Kardan Land China expects to deliver approximately 2,100 apartments (9M – 2012: 1,817 delivered, Kardan Land has 50%), which were sold over a year ago.

Real Estate Europe

Markets will remain difficult. GTC S.A. management aims to continue to decrease the leverage of GTC S.A. (57% as at September 30, 2012), mainly through the sale of assets which should generate free cash of EUR 180 million by end of 2014. With the sale agreements of Platinium Busines Park in Warsaw and two land plots, GTC S.A. will have realized approximately 35% of the targeted EUR 180 million by Q1 – 2013. In addition, GTC S.A. will continue to focus on active asset management, sale of assets and further improvement in operating margin and reducing general expenses.

Water infrastructure

The company will increase its focus to investment in water related Assets. In China, we expect that the capacity of our plants increases to 630,000 m3/day by the end of 2012 (end of 2011: 605,000 m3/day). Revenues in for the full year 2012 (y-o-y) are consequently expected to be higher than in 2011. Entry into other markets is under review.

In the Project segment the spectrum of activities is more focused on Engineering, Procurement and Construction Projects (EPC) projects in frontier countries, as well as on design and engineering activities in Israel. Revenues are expected to increase from existing and recently signed projects (yo-y).

Banking and Retail Lending

TBIF will continue to merge its consumer finance and leasing activities in Bulgaria into the new bank, TBI Bank, allowing the Bank to sell new products more efficiently and to increase loan origination by raising deposits. The consumer and leasing markets in Bulgaria and Romania remain difficult. The company obtained a branch license in Romania in the fourth quarter of 2012, which will enable the Bank to start raising deposits in Romania in 2013 as well. If the markets are not deteriorating any further, the company expects that no further major provisions need to be taken.

This report also contains information regarding market developments which are based on external party research which was published in the following reports.

Macro-economic reports National Bureau of Statistics, China International Monetary Fund, World Economic Outlook (October 2012) Asian Development Bank, Asian Development Outlook 2012 update (October 2012) European Commission; Economic Forecast Autumn 2012 World Bank; Global Economic Prospects, Managing Growth in a Volatile World, June 2012

Real Estate:

Jones Lang LaSalle: City Reports Q3–2012 CBRE: Market View CEE Offices & European Valuation Monitor, August 2012

Water Infrastructure

www.globalwaterintel.com Water21, Magazine of the International Water Association, October 2012

Financial Services

Bulgarian National Bank, Economic Review Summaries, February 2012 Unicredit; Equity daily, August 2012

Kardan N.V. is not responsible for the nature or correctness of data presented in this section regarding market developments or projections.

Analyst & Investor Call

An analyst and investor call will be held today at 11.00 CET. To take part in the call, please use the following dial-in number:

Dial in number NL: +31 (0)45 6316902 Conference ID: 4572964 Dial in number UK: +44 (0)207 1532027 Conference ID: 4572964

Please confirm your attendance to eventmanagement@citigateff.nl.

This press release contains forward-looking statements and information, for example concerning the financial condition, results of operations, businesses and potential exposure to market risks of Kardan N.V. and its group companies (jointly "Kardan Group"). All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements (including "forward looking statements" as defined in the Israeli Securities Law). Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. These forward-looking statements are identified by the use of terms and phrases such as ''anticipate'', ''believe'', ''could'', ''estimate'', ''expect'', ''intend'', ''may'', ''plan'', ''objectives'', ''outlook'', ''probably'', ''project'', ''will'', ''seek'', ''target'', ''risks'', ''goals'', ''should'' and similar terms and phrases. A variety of factors, many of which are beyond Kardan Group's control, affect our operations, performance, business strategy and results and could cause the actual results, performance or achievements of Kardan Group to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. For Kardan Group, particular uncertainties arise, amongst others but not limited to and not in any order of importance, (i) from dependence on external financing with the risk that insufficient access to capital threatens its capacity to grow, execute its business model, and generate future financial returns (ii) from concentration of its business in Central Eastern Europe and China as a result of which Kardan Group is strongly exposed to these particular markets (iii) from risks related to the financial markets as a result of Kardan N.V.'s listings on NYSE Euronext Amsterdam and the Tel Aviv Stock Exchange and (iv) from it being a decentralized organization with a large number of separate entities spread over different geographic areas in emerging markets, so that Kardan Group is exposed to the risk of fraudulent activities or illegal acts perpetrated by managers, employees, customers, suppliers or third parties which expose the organization to fines, sanctions and loss of customers, profits and reputation etc. and may adversely impact Kardan Group's ability to achieve its objectives and (v) from any of the risk factors specified in Kardan N.V.'s Annual Report 2011 and in the "Periodic Report for 2011" published by Kardan N.V. in Israel on March 30, 2012 and which is also available at the Kardan website. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement as expected, anticipated, intended, planned, believed, sought, estimated or projected. Kardan N.V. does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated.

About Kardan

Kardan identifies and develops assets in promising emerging markets, mainly in the CEE, CIS and China. Its activities are mainly focused on three sectors that benefit from the rising middle class: Real Estate, Water Infrastructure and Retail Lending. Company headquarters are in the Netherlands. Kardan aims at holding controlling interests in its investments and, through the development of local business platforms, is actively involved in the definition and implementation of their strategy. Total assets as of September 30, 2012 amounted to EUR 3.5 billion; revenues totaled EUR 291 million in 9M – 2012. Kardan is listed on NYSE Euronext Amsterdam and the Tel Aviv Stock Exchange.

The Director's Report including the financial reports, drawn up in accordance with the Dutch and Israeli regulations, are presented in a separate document and form an integral part of this release.

For further information please contact:

Caroline Vogelzang Director Investor Relations +31 (0)20 305 0010 Vogelzang@kardan.nl www.kardan.nl

"This press release contains regulated information (gereglementeerde informatie) as defined in the Dutch Act on Financial Supervision (Wet op het financieel toezicht)"