Kardan N.V. — Earnings Release 2014

May 28, 2014

PRESS RELEASE

Amsterdam/Tel Aviv, May 27, 2014 Number of pages: 14

FIRST QUARTER 2014 RESULTS KARDAN N.V.

'Kardan is reporting a profit of EUR 3.0 mn for the first quarter of 2014, substantially better than the EUR 22.4 mn loss which we presented in Q1 last year. All our major subsidiaries reported positive operating results, driven by healthy revenues and cost efficiencies, in line with our outlook as announced last March with our annual results for 2013. Our banking and retail lending operation particularly has reported a strong quarter of portfolio growth and a move into profit.

In an increasingly competitive environment, the construction of Kardan Land China's prestigious real estate project Europark Dalian is progressing according to plan. Just recently, a Letter of Intent was signed to sell one of the two SOHO buildings in the project to an investor and Europark Dalian was recognized at the Asia Pacific Property award ceremony as China's 'best mixed-use and residential development'.

Tahal Assets, which is mainly operational in the water treatment sector in China, reported growth in revenues on rendering more services, but mainly due to expansion activities the gross margin decreased. Tahal Projects, the project arm of our water infrastructure operations, continued to improve in terms of operating results, positioning and backlog.

At the Kardan holding level, we repaid approximately EUR 68 mn to the debenture holders in Q1 2014 settling the 2014 debenture repayment dues, predominantly funded from the sale in Q4 2013 of the GTC SA stake and from a newly arranged banking facility of EUR 33 mn. We also recorded a positive foreign exchange and index impact of EUR 4 mn on our debentures compared with a negative impact of EUR 20 mn in the first quarter last year.

We expect the operating results of our subsidiaries to continue to improve during 2014. At the same time our program of generating cash to meet the obligations to our debt holders will continue during the year. We are currently in negotiations on a number of different opportunities to do so, and are committed to succeed', states Shouky Oren, CEO of Kardan N.V.

Highlights Q1 2014:

Kardan N.V.

• EUR 3.0 mn profit attributable to shareholders (Q1 2013: EUR 22.4 mn loss)
• Finance income of EUR 4 mn (Q1 2013: EUR 20 mn expense) relating to Kardan N.V.'s debentures in NIS

Real Estate Asia

• EUR 1.5 mn profit (Q1 2013: EUR 2.3 mn profit)
• 28 Europark Dalian apartments delivered
• Lower valuation gain for Europark Dalian retail center than in Q1 2013
• Equity earnings up on 43% more apartments delivered (y-o-y) from the joint venture projects

Water Infrastructure, Projects

• EUR 0.6 mn profit (Q1 2013: EUR 5 mn profit due to one-off gain of EUR 8 mn on real estate sale)
• Revenues up by 21% (y-o-y)
• Stringent cost control
• Backlog up by 17% versus December 31, 2013

Water Infrastructure, Assets

• EUR 0.1 mn loss (Q1 2013: EUR 1.7 mn profit, mainly following a positive valuation of a warrant)
• Revenue up by 9% (y-o-y)

Banking and Retail Lending

• EUR 1.9 mn profit (Q1 2013: EUR 0.4 mn profit)
• Significant growth in revenue (49% y-o-y) and increased efficiency

Condensed Interim Consolidated Income Statement Kardan N.V.

The Q1 2014 condensed interim consolidated income statements split into the different segments of Kardan N.V. is shown in the table below.

For the first three months ended March 31, 2014 (in EUR million)

	Real Estate	Infrastructure		Banking and	Other	Total	Total	Total
	Asia	Projects	Assets	Retail lending		Q1 - 2014	Q1 - 2013	12M- 2013
Total revenues Total expenses	6.4 6.7	33.6 31.5	7.2 5.2	9.1 6.4	- 1.1	56.3 50.9	41.7 42.5	208.0 203.0
Profit (loss) from operation before fair value adjustments, disposal of assets and financial expenses	(0.3)	2.1	2.0	2.7	(1.1)	5.4	(0.8)	5.0
Profit (loss) from fair value adjustments, disposal of assets and investments, equity earnings (loss)	1.8	-	(0.2)	(0.2)	-	1.4	12.0	8.2
Result from operations before finance expenses	1.5	2.1	1.8	2.5	(1.1)	6.8	11.2	13.2
Financing income (expenses), net	0.5	(0.8)	(1.6)	(0.4)	0.4	(1.9)	(24.5)	(45.6)
Profit (Loss) before income tax	2.0	1.3	0.2	2.1	(0.7)	4.9	(13.3)	(32.4)
Income tax (expenses)/benefit	(0.5)	(0.6)	(0.4)	(0.2)	(0.2)	(1.9)	(4.6)	(14.4)
Profit (Loss) from continuing operations	1.5	0.7	(0.2)	1.9	(0.9)	3.0	(17.9)	(46.8)
Profit (Loss) from discontinued operations	-	-	-	-	-	-	(24.6)	(75.2)
Profit (Loss) for the period	1.5	0.7	(0.2)	1.9	(0.9)	3.0	(42.5)	(122.0)
Attributable to:
Non-controlling interest Net result for equity	- 1.5	0.1 0.6	(0.1) (0.1)	- 1.9	- (0.9)	- 3.0	(20.1) (22.4)	(20.6) (101.4)
Profit (Loss) for the period	1.5	0.7	(0.2)	1.9	(0.9)	3.0	(42.5)	(122.0)

As of January 1, 2013, following the adoption of IFRS 11 (Joint Arrangements), all the joint ventures are presented as Equity earnings / (losses) in joint ventures and associated companies.

Overall summarized review of Q1 2014 results

In the first quarter of 2014, Kardan reported a consolidated profit from continuing operations of EUR 3.0 mn, a marked improvement compared to the loss of EUR 17.9 mn in Q1 2013. The main reasons are: 1) Stronger growth in revenue (35% y-o-y) than in expenses (20%) leading to a higher profit from operations before fair value adjustments, disposal of assets and financing expenses, and 2) A Q1 2013 loss of EUR 20 mn was recognized on financing expenses at the holding company level due to the exchange rate movement between the NIS (Israeli Shekel) and the Euro, compared to a profit of EUR 4 mn in Q1 2014.

Real Estate Asia (Kardan Land China) contributed EUR 1.5 mn profit in Q1 2014, EUR 0.8 mn less than in Q1 2013. Revenue increased as the result of delivery of 28 apartments of the Europark Dalian project (which is fully owned by Kardan Land China) and equity earnings improved due to 43% more deliveries (y-o-y) of

apartments from the joint venture projects in Q1 2014. However, a lower fair value gain on the Europark Dalian retail center than in Q1 2013 and a significant decrease in financing income as the result of foreign exchange differences impacted the net result.

Water Infrastructure Projects recorded a profit of EUR 0.6 mn in Q1 2014 which was less than in Q1 2013 when a one-off gain of EUR 8 mn on a sale of a real estate asset impacted the results. Excluding this gain, the results improved on higher revenues combined with stringent cost control.

Water Infrastructure Assets contributed a small loss of EUR 0.1 mn in the first quarter of 2014 on higher revenues and a stable gross profit, off-set by higher financing expenses. In Q1 2013 the financing expenses included a positive valuation (EUR 0.7 mn) of a warrant and call option on a loan whereas in Q1 of this year a negative foreign exchange was included.

The Banking and Retail Lending segment reported a strong first quarter of 2014 with a markedly improved profit of EUR 1.9 mn compared to EUR 0.4 mn in Q1 2013. Revenues increased y-o-y by 49% on better origination and continuing better quality of the portfolio (and consequently less provisions, which are deducted from revenues) and cost control. Equity earnings were negative in Q1 2014, versus a profit in Q1 2013, mainly due to the substantial devaluation of the Ukrainian Hryvnia which impacted the results of Avis Ukraine.

Included in "Other" are the expenses and finance costs of Kardan and GTC RE, contributing a loss of EUR 0.9 mn in Q1 2014. In Q1 2013, the financing expenses were substantially impacted by a revaluation loss (EUR 20 mn) related to foreign exchange differences (Israeli Shekel versus Euro) with regard to the Group's debentures, whereas a gain of EUR 4 mn was reported in Q1 2014.

The loss from discontinued operations in Q1 and full year 2013 is fully attributable to the 27.75 % stake which Kardan held in GTC SA. This stake was sold in Q4 2013.

The Q1 2014 net result for equity holders of Kardan N.V. amounted to a profit of EUR 3.0 mn (Q1 2013: loss of EUR 22.4 mn).

Equity

Kardan N.V. (company only, in € million)	March 31, 2014	December 31, 2013
Total Assets	405.0	486.3
Total Equity	61.7	66.1
Equity/Total assets (%)	15%	14%

The shareholder's equity of Kardan N.V. decreased from EUR 66.1 mn as of December 31, 2013 to EUR 61.7 mn as of March 31, 2014 as the profit of EUR 3.0 mn for the period was more than off-set by the change in the non-controlling interest transaction reserve. For further details see note 7 of the Q1 2014 consolidated Financial Statements.

Covenants

As at March 31, 2014, the Company and its subsidiaries were not in breach of any covenants. See note 8 of the Q1 2014 consolidated Financial Statements.

Highlights per segment:

The result from operations before finance expenses of each segment is presented 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.

REAL ESTATE

Kardan is active in development and management of Real Estate through the segment Real Estate Asia, which comprises its 100% subsidiary Kardan Land China. Up to November 2013, Kardan held 27.75% of the shares of GTC SA, a leading Central and Eastern European real estate company.

Real Estate Asia

General developments China and Kardan Land China

China's economy grew by 7.4% (y-o-y) in the first quarter of 2014, slowing from an annual increase of 7.7% in the last quarter of 2013 but in line with the growth target of 7.5% for the full year 2014. The Chinese leadership has stated that it will tolerate slower growth while pushing through economic reforms which should lead to more domestic consumption to create sustainable growth over the longer term. Examples are the recently announced tax break for small and medium sized enterprises and steps to open up the capital markets by allowing crossborder stock investment (Beijing – Hong Kong). It was also stated that this Chinese government will take a differentiated approach to cool the property market, rather than the former one-size-fits-all approach. Whilst exports and imports both dropped, retail sales for Q1 2014 spiked by 12.0% compared to Q1 2013, underscoring China's efforts to boost the economy via domestic consumption. Consumer prices increased by 2.3% in the first quarter of 2014 (y-o-y) but as the per capita cash income of rural and urban households grew by 12.3% and 9.8% (y-o-y) respectively, this did not influence the purchasing behavior of consumer negatively.

Kardan Land China's (KLC) focuses on the development of mixed-use real estate projects (retail and entertainment centers combined with residential apartments) in cities where it is expected that the growth in purchasing power of the middle class will exceed that of the country average. In Chengdu, where KLC opened a retail center in 2010 of which it owns 50%, GDP grew by 10.2% (y-o-y) in 2013, and in Dalian GDP improved by 9% y-o-y in 2013. Competition in the Chinese real estate market has intensified however, as new supply is increasing both in the residential sector as well as for the retail sector. Moreover, as credit availability has become tighter, the lead times for obtaining mortgages are increasing and consequently it takes longer to sell apartments. KLC has therefore taken various measures: to pace its development, to adjust its offering (in terms of lay out as well as price) and to increase its marketing efforts.

The first quarter is the traditional 'off-peak' season for the residential market; KLC sold 337apartments in Q1 2014 (575 in Q1 2013), compared to 516 in Q4 of 2013. The decrease in sales compared to last year's Q1 is mainly due to land clearance in one project and more challenging market circumstances in all projects.

During the Chengdu Gaoxin Government's '2013 Best Enterprise Awards' ceremony last March, Kardan Land's local asset management organization in Chengdu was named as one of the "Top 10 Commercial Trade and Service Enterprises" - the only shopping center to be included in the prestigious list – recognizing the asset management qualities of the mall in focusing on servicing tenants, consumers and partners alike.

The Europark shopping mall in Dalian, which is due to open in the fourth quarter of 2014, currently has approximately 30% pre leased (signed and Letter of Intent), which includes, among others, Kingsport Fitness with its first 1,600 sqm fitness location in Dalian. An additional approximately 22% of the mall are under advanced negotiations. Just recently, Europark Dalian was recognized as China's best mixed-use development, best residential development and best Asian Pacific retail development during the prestigious 2014 Asia Pacific Property awards.

In April 2014, KLC announced that it had signed a Letter of Intent with a Chinese investor for the sale of the complete A2 building in the Europark Dalian project, which comprises 201 Small Office Home Office units as well as 100 parking spaces, for a consideration of RMB 334 million (approximately EUR 39 million).

Results Real Estate Asia

	Real Estate Asia
	For the three months ended March 31		Full Year
	In € millions
	2014	2013	2013
Delivery of units	5.3	-	24.0
Management fee and other revenues	1.1	1.2	5.0
Other expenses, net	4.9	0.6	21.9
Gross profit	1.5	0.6	7.1
SG&A expenses	1.8	1.5	8.3
Adjustment to fair value (impairment) of investment properties	1.0	2.6	8.9
Equity earnings (losses)	0.8	(0.4)	14.5

Result from operations before finance expenses	1.5	1.3	22.2
Financing income (expenses), net	0.5	1.4	(0.1)
Income tax (expenses) / benefit	(0.5)	(0.4)	(3.8)
Profit (loss) from continuing operations	1.5	2.3	18.3
Net profit (loss)	1.5	2.3	18.3
Attributable to: Equity holders (Kardan N.V.)	1.5	2.3	18.3

Additional information Kardan Land China	2014 (31.03)		2013 (31.12)
Balance sheet (in € millions)
Share of investment in JVs	106.1		105.8
Investment Property Under Construction	127.2		118.1
Inventory	97.2		94.4
Cash & short term investments	15.4		26.2
Total Assets	374.0		364.7
Loans and Borrowings	72.3		60.9
Advance payments from buyers	1.5		5.7
Total Equity	260.2		269.5
Operational Information Residential	Q1/14	Q1/13	2013
Revenue Residential - JV (in € million)	5.5	3.2	78.2
Gross profit residential - JV (in € million)	1.6	1.0	23.1
Apartments sold in period (a)	337	575	2,118
Apartments delivered in period	185(b)	110(c)	2,847(c)
Total apartments sold, not yet delivered	3,460(d)	4,502	3,308
Operational Information Retail (in € million)
Revenue Retail (50% rental Chengdu, 100% service fees)	1.9	1.8	7.4
Gross profit Retail	1.2	1.1	4.8

(a) All residential apartments, incl. Dalian (100%), including units "in reserve", for which contract is signed but less than 30% of sales price has been paid. The remainder of the price is on average deposited within approx. two months after signing of contract. Q1 2014 includes 9% sold apartments in reserve; 2013 includes 1% of the total sold (2,118).

(b) This number includes 28 Dalian apartments (100%); the remainder reflects 100% of the joint venture apartments of which KLC holds 50%

(c) Reflects number of apartments 100%; Kardan Land China holds 50%

(d) Includes approximately EUR 21 mn gross profit (Kardan Land China share)

Revenues

In line with IFRS 11, KLC reports the results of its joint venture residential activities as well as the results of the 50% stake in retail center Chengdu as "Equity in net earnings of joint ventures". Therefore, the "management and service recharge revenues" as presented relate to the 100% asset management activities of Chengdu. The revenues of the delivery of apartments of the Europark Dalian project (100%) are presented separately as "delivery of units".

Total revenues in Q1 2014 were substantially higher than in the same period last year resulting from the delivery of 28 apartments of the Europark Dalian project. The revenues from service management fees with respect to the retail center in Chengdu showed a slight annual decrease of 3% mainly due to the foreign exchange translation effect.

Gross Profit

The gross margin on the Dalian SOHO (small office home office) apartments which were handed over was lower at 18% than the margin on the joint venture residential apartments (29%), due the kind of apartments and the challenging circumstances and fierce marketing competition in Dalian.

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

These expenses were higher than in Q1 2013 mainly as the result of higher sales commissions on the delivery of the Dalian apartments and following intensified marketing efforts for the Europark Dalian project.

SG&A expenses relating to the joint venture operations (Chengdu and the residential apartments excluding Dalian) are included in the Equity earnings of joint ventures.

Adjustment to fair value of investment property

A positive adjustment to fair value was recorded for the Europark Dalian retail center in Q1 2014, as the construction continues to progress according to plan.

Equity earnings / (losses)

This line item relates to the share of profit / (loss) of the joint venture companies (i.e. Chengdu and the residential projects excluding those in the Europark Dalian project, which is fully owned by KLC).

Residential

During Q1 2014, KLC delivered 157 apartments, 45 % more units than in Q1 2013 and leading to a y-o-y revenue increase of 72% (revenue is recognized when apartments are handed over) as the mix of apartments was different and the average prices were higher. The gross profit margin (approximately 29%) on residential activities in Q1 2014 was slightly lower than the 31% gross margin in Q1 2013.

Retail

Rental income from the 50% stake in Chengdu combined with 100% service management fees increased y-o-y- by 7% in Q1 2014 predominantly due to a significant increase in base rents following a new and re leases which were signed recently. The gross profit margin on the retail activities (Chengdu) was 63% in Q1 2014 (compared to 65% in 2013).

Financing Income/expenses, net

The decrease (y-o-y) in financing income is predominantly due to a positive translation effect of the RMB compared to the Euro in Q1 2013 (EUR 1.7 mn) compared to only EUR 0.1 mn in Q1 2014.

Income tax (expenses) / benefit

The current tax charge from the delivery of apartments combined with a deferred tax charge on the valuation gain on the retail center of Europark Dalian were the reason for the income tax expense in Q1 2014.

Additional Information

Investment property under construction, which relates fully to the Europark Dalian retail center, increased by 8% (from December 31, 2013) as the result of the construction progress according to plan and the consequential positive valuation. "Loans and borrowings", which primarily relates to the use of a construction loan for Europark Dalian was significantly higher at March 31, 2014 than at year end 2013 following the signing of an additional construction loan of RMB 400 mn (approximately EUR 48 mn) in February 2014, of which RMB 100 mn (approximately EUR 12 mn) was drawn down during Q1 2014.

At the end of March 2014 "Advance Payments from Buyers", relating only to the Europark Dalian apartments, was lower than at year end 2013 as a more Dalian apartments were handed over than were sold in Q1 2014.

In general, KLC aligns the pace of construction to match the market conditions and to control the percentage of completed unsold apartments in the inventory. Given the higher pace of construction in the Europark Dalian buildings, the percentage as at March 31, 2014 remained at 6%, equal to the end of 2013 (6%), but higher than it was last year (around 4%).

WATER INFRASTRUCTURE

Tahal Group International B.V. ('TGI'), Kardan's water infrastructure company, focuses on executing water related projects worldwide through Tahal Projects and on developing water assets (e.g. wastewater, water treatment and water supply plants) through Tahal Assets. Tahal Projects is mostly active in Africa, Central and Eastern Europe, Latin America and in other regions and countries, such as Israel, whilst Tahal Assets is mainly active in China but also in Turkey.

General developments water infrastructure markets and Tahal

Climate change, population growth, urbanization and industrialization have led to water scarcity as a growing problem across the globe. It is widely recognized that access to natural or treated water is one of the preconditions for social and economic development and that in many emerging markets meeting basic human needs for potable water, wastewater treatment and electricity remains a challenge. Not only is the knowledge and technology to create reliable access points to clean or treated water relatively scarce, the necessary funds

for the required investments are not abundantly available either, albeit that this is changing. In China for instance, where Tahal Assets is operational through its subsidiary Kardan Water, the Government acknowledges that the increasing water problem needs immediate action and therefore embraces a Public Private Partnership policy to make it possible for both Chinese and international companies to initiate and execute infrastructure projects. In many emerging markets the public is not yet used to pay the actual costs for having access to potable or clean water through user fees. Analysts expect that expenditure on developing new water resources, such as water re-use and desalination among other, will grow significantly over the coming years, which is predominantly to be funded from public sources. The long term issue of funding of water infrastructure projects, namely who pays, and the shorter term options for financing of infrastructure, i.e. how do we pay, are very important questions for policy makers particularly in a time when the world is faced with significant economic and environmental challenges. Tahal Projects includes its experience of finding the relevant funding for a project as part of their tender offers.

In the first quarter of 2014, the majority of the projects of Tahal Projects progressed according to plan. Management attention was given to existing projects and specifically to identifying and attracting new projects. At the end of March, Tahal signed an agreement to manage part of a larger agricultural development project - involving developing, engineering, procurement, construction and consulting in Eastern Europe – for a consideration of EUR 62 million. This will be paid over the four years which the project is expected to take. Consequently, the backlog of Tahal Projects increased to USD 375mn (as the majority of the projects is US dollar denominated the backlog is reported in USD) from USD 320 mn as at year end 2013.

In Q1 2014, Kardan Water saw the average overall utilization of its facilities increase slightly, which is reflected in the revenue recognition from services. In addition, Kardan Water undertook some construction activities.

Results Water Infrastructure Projects*

ended March 31	Projects For the three months	Full Year
		2013
33.6	27.8	122.0
28.6	24.0	105.2
5.0	3.8	16.8
		11.9
-	-	(0.1)
(0.2)	8.3	(0.9)
2.1	8.4	3.9
(0.8)	(0.6)	(2.4)
(0.6)	(2.7)	(4.1)
0.7	5.1	(2.6)
0.7	5.1	(2.6)
0.1	0.1	0.3 (2.9)
	2014 2.7 0.6	In € millions 2013 3.7 5.0

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

Additional Information Projects	2014 (31.03)	2013 (31.12)
Balance sheet (in EUR million)
Cash & short term investments	11.6	7.0
Total Assets	139.7	140.9
Net debt (excl. shareholder loans)**	(11.0)	(5.5)
Equity*	39.7	40.8
Equity* / Assets	28.4%	28.9%

Other (in USD million) Backlog 375 320

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

Revenues

Revenues grew by 21% y-o-y in the first quarter of 2014 largely on the back of accelerated progress in existing projects, particularly in Africa.

Only when the first down payment of a new project has been received does Tahal Projects recognize the full value of the project into its backlog. Revenue starts to be recognized on these projects according to the relevant agreed upon milestones, which is generally after the first invoice has been sent or the first agreed upon phase of the project has been completed.

Gross Profit

As contract costs grew slower than revenues, the gross margin increased to 15% from 14% in Q1 2013

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

SG&A expenses in Q1 2014 were lower by 26% y-o-y as Q1 2013 included more expenses related to employee stock option plans.

Gain (loss) on disposal of assets and other income

In Q1 2013 this related to a gain realized on the sale of Tahal's rights in a leased real estate asset in Tel Aviv, Israel.

Financing income /(expenses) net

Net financing expenses in Q1 2014 increased by 38% y-o-y largely as the result of negative foreign currency effects.

Income tax (expenses) / benefit

In Q1 2013 the tax expense was influenced by the sale of the real estate asset in Tel Aviv.

Results Water Infrastructure Assets*

For the three months ended March 31		Full year
2014	2013	2013
7.2	6.6	31.0
3.9	3.3	16.1
3.3	3.3	14.9
		6.4
		(0.2)
(0.2)	(0.1)	0.2
1.8	1.8	8.5
(1.6)	0.2	(3.5)
(0.4)	(0.6)	(2.8)
(0.2)	1.4	2.2
(0.2)	1.4	2.2
		(0.9)
(0.1)	1.7	3.1
	1.3 - (0.1)	Assets In € millions 1.5 0.1 (0.3)

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

Additional Information Assets	2014 (31.03)	2013 (31.12)
Balance sheet (in EUR million)
Cash & short term investments	3.7	7.3
Total Assets	164.9	166.6
Net Debt (excl shareholder loans)**	66.8	62.4
Equity*	75.3	84.5
Equity*/ Assets	45.6%	50.7%

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

Revenues

The revenue of Tahal Assets is largely generated by Kardan Water in China.

Reported revenues comprise the operational revenues from rendering of water services and the effect of construction activities. In the first quarter of 2014, Kardan Water increased its revenues from rendering of services by 9% (y-o-y). The positive revenue contribution of expansion activities was partially off-set by a decrease in the revenues of other Tahal Assets operations.

Gross profit

The overall gross margin decreased to 45% in Q1 2014 from 50% in Q1 2013. Construction activities generally lead to lower margins: in Q1 2013 there were no such activities in China, whereas in the first quarter of this year the gross margin at Kardan Water (Q1 2014: 48% compared to Q1 2013: 55%) was impacted by expansion activities regarding a plant.

Financing income (expenses), net

The substantial difference in the net financing result from a slight income in Q1 2013 to an expense of EUR 1.6 mn in Q1 2014 can be explained by: a) the positive valuation of a warrant and call option regarding a loan which was EUR 0.7 mn in Q1 2013 and EUR 0.1 mn in Q1 2014, and b) a negative foreign exchange impact in Q1 2014.

Additional information

The equity of Tahal Assets decreased due to a change in the non-controlling interest transaction reserve and a foreign exchange impact. Net debt increased due to a decrease in cash balances.

BANKING AND RETAIL LENDING

Kardan is active in the financial services sector through its 100% holding in Kardan Financial Services (KFS) which operates through its wholly owned subsidiary TBIF (banking and retail lending) in Bulgaria and Romania. In addition, KFS is active in Ukraine with leasing activities through its 66% holding in Avis Ukraine. In line with IFRS 11 Joint Arrangements, the results of Avis Ukraine and two other small entities are presented according to the equity method.

General developments Bulgaria and Romania and TBIF

The European Union is gradually emerging from a recession one year ago, and is showing signs of continued economic recovery. It should be noted however, that substantial differences persist across the member states.

It is expected that the Bulgarian economy will continue to develop at a slow but improving pace in 2014 on the back of export, which has been the main driver of growth thus far, and expected stronger expenditures related to the utilization of EU support funds. Domestic demand is slowly picking up, but is still at a low level. Although consumer confidence is rising and purchasing power has increased due to low inflation combined with some fiscal stimulus measures, this has as yet to translate into higher household consumption. This has to do with a continued weak labor market and a negative demographic trend as a result of ageing and immigration. The recent crisis in Ukraine may impact Bulgaria's fragile economic recovery as Bulgaria is almost entirely dependent on Russian gas.

The financial sector is relatively strong as it has been accumulating liquidity on the back of increasing consumer deposits over the last couple of years. Moreover, interest rates on loans and deposits have declined in an environment where consumers are still not willing to take on loans or credits but rather use their savings as is clear from the decrease in deposits which TBI Bank experienced in Q1 2014.

In the first quarter of 2014, TBI Bank saw a continuation of the improvement of the quality of the retail portfolio,

with a stabilizing level of non- performing loans which are comfortably provisioned. Consequently, a collection on a legacy portfolio contributed approximately EUR 0.6 mn in Q1 2014. SME and leasing remains a difficult market.

The economic growth in Romania in 2013 was driven by a robust industrial output, a strong export and abundant harvest. In the first quarter of 2014 improved confidence led to a stronger domestic demand whilst export was slightly lower, indicating that Romania seems to be on a more balanced economic recovery path. Confidence is returning as disposable income increases on account of higher wages. As households and banks are still deleveraging, credit growth remains subdued. The Romanian branch of TBI bank managed to generate substantially more retail revenues in Q1 2014 than in the same period last year with less – but better trained – sales agents. Although the market circumstances were still challenging, some positive movement was noticeable in the SME and leasing sector which was evident from growth in a higher quality gross portfolio. Deposits, particularly from the SME sector, continued to increase significantly by 61% compared to year end 2013, leading to a 82% / 18% ratio of retail and SME deposits as at end of March 2014 (year end 2013: 88% / 12%).

TBIF is active in Ukraine through its 66% shareholding in Avis Ukraine, which focuses on operational leasing services mainly to international corporations. The political situation of Ukraine is unstable and TBIF is monitoring the situation closely both with respect to its Avis Ukraine operations as with respect to its intention to sell its stake in this company.

Results Banking & Retail Lending

	Banking and Retail Lending
		For the three months ended March 31
	2014	2013	2013
		in € millions
Banking and retail lending activities	8.6	5.7	24.4
Other revenues	0.5	0.4	1.6
Total revenues	9.1	6.1	26.0
Costs of banking and lending activities	5.8	6.4	25.2
Other expenses, net	0.6	-	1.1
Gross profit	2.7	(0.3)	(0.3)
SG&A expenses	-	0.3	1.1
Equity earnings (losses)	(0.3)	0.3	(2.7)
Gain on disposal of assets and other income	0.1	1.2	(8.4)
Impairment losses on goodwill	-	-	(3.9)
Result from operations before financing expenses	2.5	0.9	(16.4)
Financing income (expenses), net	(0.4)	(0.3)	(1.9)
Income tax (expenses) / benefits	(0.2)	(0.2)	(0.5)
Profit (loss) from continuing operations	1.9	0.4	(18.8)
Net profit (loss)	1.9	0.4	(18.8)
Attributable to:
Equity holders (Kardan N.V.)	1.9	0.4	(18.8)
Additional Information KFS Banking & Retail Lending	2014 (31.12)	2013 (31.12)
Balance sheet (in EUR million)
Net loan portfolio	139.9	137.2
Cash & short term investments	49.4	64.1
Total Assets	254.6	268.3
Deposits	137.5	149.7
Total Equity	31.1	29.2

Portfolio quality

Provisions / non performing loans 77% 77%

Revenues

The significant y-o-y improvement in revenues in Q1 2014 is due to better origination and quality of portfolios (and therefore less provisions deducted from revenues) both in Bulgaria (over 50% growth) and in Romania (approximately 40% growth).

Gross profit

TBIF reported a gross profit of EUR 2.7 mn, indicating the firm turn-around of the results and a significant improvement compared to the negative gross result which was reported in Q1 2013, on the back of the improved revenues and tight cost control.

Equity earnings

These relate predominantly to the leasing activities of the joint venture Avis Ukraine, of which TBIF holds 66%, as well as to the mortgage activities operations in Bulgaria (of which 50% is owned). The reported loss in Q1 2014 is attributable to a revaluation on deferred tax assets, following a significant devaluation of the Ukrainian Hryvnia as a result of the political situation in the country.

Other income (loss)

"Other income" in Q1 2013 related to a one off recovery payment relating to a former investment in Serbia, whereas there was no such event in Q1 2014.

Other Expenses

	For the three months ended March 31		Full Year
	2014 2013		2013
		in € millions
General and administration expenses	1.1	1.2	5.8
Equity earnings (losses)	-	-	0.8
Financing income (expenses), net	0.4	(25.2)	(37.7)
Income tax expenses (benefit)	0.2	0.7	3.2
Profit (loss) from continuing operations	(0.9)	(27.1)	(45.9)
Net Profit (loss) from discontinued operations	-	(24.6)	(75.2)
Net profit (loss)	(0.9)	(51.7)	(121.1)
Attributable to:
Non controlling interest holders	-	(19.9)	(20.0)
Equity holders (Kardan NV)	(0.9)	(31.8)	(101.1)

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).

Financing income (expenses), net

In Q1 2013, the financing expenses were negatively impacted by a revaluation loss (EUR 20 mn) related to foreign exchange differences with regard to the debentures, resulting from the strengthening of the Israeli Shekel (NIS) versus the Euro. In Q1 2014, the NIS weakened and the index, to which the debentures are linked, decreased resulting in a positive revaluation of EUR 4 mn. Currently, the company equity is mostly exposed to the Chinese RMB on its assets side and to NIS on its liabilities side. Changes in the NIS exchange rate mostly

impact the income statement while changes in RMB mostly impact the equity directly.

Income tax

The income tax expense relates to deferred and current tax on hedge instruments.

OUTLOOK 2014

Kardan N.V.

Management of Kardan deems it in the interest of all its stakeholders to continue to generate cash through the sale of assets and to work with its business segments to improve their results, thereby creating value and generating cash to meet the Group's obligations to its debt holders and bank.

Management is committed to succeed in both organically growing Kardan's existing businesses and in strengthening its financial position. A cash flow forecast for the coming two years can be found in the Directors' Report on page 11.

Real Estate Asia

Given the increased competition, Kardan Land China has adjusted its outlook for 2014 and expects to sell 1,200 apartments, significantly fewer than in 2013 (2,118). Pending the economic situation in China and the possible measures which the Chinese government may take to fight speculation in the real estate market management believes it is prudent to take a conservative view of likely activity during this period. In addition, KLC expects to deliver approximately 1,500 apartments during 2014 (2013: 2,847). The Europark Dalian retail center is due to be opened in Q4 2014. Based on many (re)new(ed) lease contracts during H2 2013 for the Chengdu shopping mall, Kardan Land China expects to achieve better results during 2014. The focus of KLC will continue to be on developing mixed-use projects.

Water Infrastructure Projects

In the Project segment the spectrum of activities is focused on Engineering, Procurement and Construction Projects (EPC) projects and on agricultural irrigation projects in frontier countries, as well as on design and engineering activities in Israel. Revenues and profitability are expected to increase from existing and recently signed projects (y-o-y), resulting in a net profit for the full year. Tahal Projects expects to reach a backlog (in USD) at year end 2014 which is approximately 20% higher than at year end 2013.

Water infrastructure Assets

Kardan Water aims to continue increasing the revenue from rendering water treatment services during 2014, mainly as a result of increasing utilization rates. Also, expansion activities in two of its current plants are planned to increase the total designed capacity of the combined Kardan Water facilities to 695,000 m3/day by year end 2014. The construction of the expansions should have a positive impact on the revenue line of Kardan Water in the upcoming quarters.

Banking and Retail Lending

TBIF focuses on increasing its loan origination. It also plans to grow its network by opening approximately 5 new branches in both Bulgaria and Romania each. Furthermore, TBIF continues to effect synergies of business consolidation in order to improve the operational result and to maintain the high profitability as achieved in Q1 2014. TBIF will continue to take action to sell its 66% stake in AVIS Ukraine in 2014.

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: Recovery Strengthens, Remains Uneven (April 2014) European Commission; Economic Forecast Spring 2014: Growth becoming broader- based (May 2014)

Real Estate:

Cushman & Wakefield: Investment Market Beat China 2013 National Bureau of Statistics, China

Water Infrastructure PWC: Gridlines; China's war on water scarcity, 2013 EY: Infrastructure 2013, Global Priorities, Global Insights

www.globalwaterintel.com CDP Global Water Report: Moving beyond business as usual, 2013

Financial Services KBC: Economic Outlook Central Europe, January 2014 Bulgarian National Bank, Economic Review Summaries Ministry of Finance Bulgaria, Recent economic developments, 2013 Unicredit; EEMEA Macro Flashes 2013 World Bank Group: Romania Partnership, October 2013

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

Analyst & Investor Call

An analyst and investor call will be held on Wednesday May 28, 2014, at 09.00 CET. To take part in the call, please use the following dial-in number:

Dial in number NL: +31 (0) 45 6316902 Conference ID: 4683053 Dial in number UK: +44 207 153-2027 Conference ID: 4683053 The Investor Relations presentation will be published on the corporate site, www.kardan.nl, approximately one hour after publication of this release.

Please confirm your attendance to eventmanagement@citigateff.nl.

DISCLAIMER

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 and in the related "Periodic Report" (published by Kardan N.V. in Israel) published in April, 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 Asia (predominantly China), Africa and selected CEE and CIS countries.

Its activities are mainly focused on three sectors that benefit from the rising middle class: Real Estate, Water Infrastructure and Banking & Retail Lending. Company headquarters are in the Netherlands. Kardan aims at holding controlling interests in its investments and is actively involved in the definition and implementation of their strategy through its local business platforms. Total assets as of March 31, 2014 amounted to EUR 887 mn; revenues totalled EUR 56 mn in the first quarter of 2014. 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)"