Q3-2011: LOSS OF EUR 31 MILLION EUROZONE CRISIS … PRDR... · Restructuring plan initiated to strengthen marketing and sales as well as cost cutting measures; ... the loss of KFS

Kardan N.V. – Press Release - Q3 & 9M-2011 Results – Page 1

PRESS RELEASE Amsterdam/Tel Aviv, November 30, 2011 Number of pages: 90

Q3-2011: LOSS OF EUR 31 MILLION EUROZONE CRISIS IMPACTS VALUATION OF REAL ESTATE ASSETS

CHINESE ACTIVITIES DOING WELL

Highlights divisions (all figures represent Kardan stake):

Real Estate: GTC SA net contribution Q3-2011: loss of EUR 43 million (9M-2011: loss of

EUR 52 million) mainly due to negative revaluations in South Eastern Europe (SEE) GTC China (now called Kardan Land China) net contribution Q3-2011: profit of

EUR 10 million (9M-2011: profit EUR 20 million), including the proceeds from the sale of 50% of shopping mall in Chengdu China: apartments sold and paid for but not yet handed over will generate approximately EUR 30 million gross profit in coming 2 years.

Water Infrastructure:

Tahal Group International net contribution Q3-2011: loss of EUR 1 million (9M-2011: loss of EUR 5 million), mainly due to lower revenues and internal restructuring;

Restructuring plan initiated to strengthen marketing and sales as well as cost cutting measures;

Tahal Assets successful in China: two new wastewater treatment licenses signed in Q3-2011;

Current capacity of Tahal Assets in China: 630,000 m3/day to increase to 840,000m3/day by 2014.

Financial Services: Banking and retail lending services net contribution Q3-2011: profit of EUR 1 million

(9M-2011: loss of EUR 9 million, due to continuing provisioning on vintage portfolios); Acquisition of NLB Banka Sofia has provided Bulgarian financial services activities with

banking license.

The Management Board of Kardan N.V. (“Kardan”) commented on the results of Q3 and 9M-2011: “2011 started off with a slightly improved macroeconomic sentiment. In Q2-2011, markets started to show hesitation and in Q3-2011 the Eurozone crisis led to worldwide instability and a deterioration of consumer confidence, impacting the real economies. This also had its influence on Kardan. It decreased expectations of short term economic growth in Central and Eastern Europe (CEE) and South Eastern Europe (SEE) and consequently impacted revaluations of our real estate assets in the region. Adjusted forecasts of real estate appraisers in SEE specifically expect a downwards pressure on rental income, as a result of weaker consumer purchasing power. On the other hand our real estate business in China is progressing according to plan, as reflected in improved results and fundamentals going forward. In addition, our water infrastructure activities are well on track to generate long term cash flows by, among others, signing new licenses for wastewater treatment plants in China. The current market circumstances are challenging. However, the GDP growth forecasts for emerging markets are promising and clearly indicate that these markets, in which we operate, are the main growth engine for the world economy. Within all our divisions we are taking measures to weather this storm, whilst staying focused on our business strategy which is to initiate, develop and manage long term cash flow generating assets in emerging markets. In CEE we have building rights to continue our development of commercial assets in selected areas, and in China we also have building rights to achieve our development objectives over the short to medium term, depending on macroeconomic progress. As the demand for clean water remains strong we are strengthening our organization to successfully take on projects and develop wastewater treatment facilities. At the beginning of October, in accordance with our declared strategy to focus on our core emerging market activities, the Israeli activities were spun off, leaving Kardan with a strong position in real estate in CEE and China, a reputable water infrastructure organization active in emerging markets worldwide and a


specialized banking and retail lending operation in Bulgaria and Romania. In addition, also in line with our strategy, we have deleveraged. Our development strategy, focusing on real estate and water infrastructure assets, conveys our confidence in the growth prospects of emerging markets”, says Alain Ickovics, chairman of the management board. Summary of Developments, Results and Movement in Equity of Kardan N.V. in 9M-2011 The contribution of each of the businesses to the results of Kardan is shown in the table below. As profits attributable to minority shareholders in the businesses have already been deducted, these figures do not represent the full (100%) net result realized in each division or segment. The full net results of the divisions and segments are presented in paragraphs 1.1 and 2.1. Breakdown of the net result for equity holders of Kardan N.V. (EUR million)

9M-2011 9M-2010 Q3-2011 Q3-2010 2010

Real Estate (34) 3 (33) 1 13

Water Infrastructure – Projects (7) 2 (2) - 2

Water Infrastructure – Assets 2 2 1 3 3

Financial Services – Banking and Retail Lending

(9) (6) 1 24 (57)

Financial Services – Insurance and Pension*

- 31 - 1 31

Rental and Leasing of vehicles **

- 2 6 - 2

Sale of vehicles ** 6 6 2 2 7

Other (25) (16) (6) (8) (28)

Total net result attributable to equity holders

(67) 24 (31) 23 (27)

Profit (loss) per share (EUR) (0.60) 0.20*** (0.28) 0.20*** (0.24)***

Profit (loss) per share diluted (EUR)

(0.60) 0.20*** (0.28) 0.20*** (0.24)***

*The sale of the insurance and pension segment was completed in Q4-2010, and are presented as discontinued operations in the income statements **These activities were spun-off in Q4-2011 and are presented as discontinued operations in the income statement. ***Adjusted retrospectively, as a result of the spin-off of the Israeli activities. Reference is made to note 6 in the Financial Statements.

Kardan N.V. – balance sheet (company only )

September 30, 2011

December 31, 2010

September 30, 2010

Total Assets (in EUR million) 909 1,030 1,011

Total Equity (in EUR million) 267 334 358

Equity/Total assets (%) 29% 32% 35%

The net result of Kardan N.V. attributable to equity holders was a loss of EUR 67 million in 9M-2011 versus a profit of EUR 24 million in 9M-2010. Shareholder’s equity of Kardan N.V. decreased from EUR 334 million as of December 31, 2010 to EUR 267 million as of September 30, 2011, equal to the 9M-2011 loss, including direct movements in equity which are on balance zero.


Real Estate

(in EUR million) 9M-2011 9M-2010

GTC SA (52) 7

Kardan Land China* 20 7

Israeli Real Estate 2 (4)

Finance & G+A expenses (4) (7)

Net contribution (34) 3 * GTC China’s name was changed to Kardan Land China recently. The net contribution of the Real Estate division in the reporting period is a loss of EUR 34 million. GTC SA’s loss is fully attributable to revaluation losses due to intensified adverse market conditions mainly in SEE countries. Kardan Land China’s profit contribution for the nine months of 2011 is largely attributable to the revaluation of the shopping mall in Chengdu pursuant to the sale of 50% of the mall. The net result of Kardan Land China improved, although impacted by other expenses, among which a one off expense for an employee stock option plan for senior management, and tax. As a result of the Eurozone crisis as of August 2011, expectations with regard to rental income in CEE and SEE deteriorated, leading to negative revaluations of real estate assets. There are, however, differences in forecasts and underlying fundamentals for individual countries. Analysts expect, for instance, that domestic demand in Poland will remain fairly resilient and that private consumption in Romania will revive somewhat during the second half of 2012. GDP growth in China, although still very strong, is slowing down to around 9% per annum in line with the measures taken by the Chinese government, whilst real wages have been increasing steadily benefitting the private consumption, which resulted in a y-o-y retail sales growth of 17.7% in September 2011. Water Infrastructure Tahal (in EUR million)

Projects Assets 9M-2011Total

Projects Assets 9M-2010Total

Revenues 66 53* 119* 79 48* 127*

Net Contribution (7) 2** (5)* 2 2 4 (*) Includes the revenues of Tahal Assets Israel (Milgam), which are presented under discontinued operations in the Income Statement. (**) Excludes EUR 8 million proceeds from the sale of Tahal Assets Israel (Milgam) to Kardan NV, which are eliminated at Kardan NV level. Tahal, Kardan's Water Infrastructure division, saw revenues decline by 6% y-o-y in 9M-2011, due to delays in projects as well as to a negative translation effect (EUR 4 million) on the back of the devaluation of the US Dollar. Tahal management has initiated a reorganization plan (expense: over EUR 2 million), in which, besides cost cutting measures, more focus is put on centralization and marketing. Tahal Assets, however, continues to grow its footprint in China; Kardan Water, Tahal’s subsidiary in China, currently has 8 wastewater treatment plants, 1 water supply plant and 1 water re-use plant in operation (capacity to date: 630,000 m3/day) and 2 wastewater treatment plants under construction for which the licenses were signed in Q3-2011.


Financial Services


Sovcombank* 3 64

Romania & Bulgaria** (6) (5)

Finance & G+A expenses (7) (8) Discontinued operations*** 4 (11) Amortization intangible assets & goodwill impairment

(3) (15)

Net contribution (9) 25 (*) Agreement to sell signed in Q2-2011; closing expected 2012 (**) includes Banka Sofia, Bulgaria, only for August and September 2011 (***) includes insurance and pension activities (TBIH) as well as VAB bank; sold respectively in Q4-2010 and Q1-2011 Romania and Bulgaria were slowly showing signs of macroeconomic improvement in the first half of 2011, but due to the Eurozone crisis consumer confidence has not recovered as yet. This has impacted the results from operations of the Financial Services division (KFS). As indicated in the table above, the loss of KFS includes among others:

a) An accounting profit of EUR 3 million related to the ongoing sale transaction of 50% of the shares of Sovcombank in Russia, the closing of which is expected to take place in 2012; in the same period of last year the company sold 16% of the shares in the bank which together with the operating result resulted in a contribution of EUR 64 million.

b) Continuing provisioning due to lagging consumer confidence and slow recovery of purchasing power as well as with respect to vintage portfolios have impacted the results of the banking and retail lending activities in Bulgaria and Romania negatively.

c) Within the discontinued operations: in 9M-2010, TBIH contributed EUR 31 million profit, whereas in 9M-2010 the loss of VAB bank including an impairment of goodwill was substantial. In Q1-2011, the sale of the Ukrainian bank led to a gain of EUR 4 million.

The Rental and Leasing of Vehicles segment was negatively impacted by strong competition in the market due to low financing costs in the 9M-2011 period (y-o-y). In addition, the price of second hand lease cars was also put under pressure, which decreased profit hereof. The contribution of this segment was a loss of EUR 1 million in 9M-2011 (9M-2010: profit of EUR 2 million). The Sale of Vehicles segment continued to grow, with approximately 175,000 vehicles (14% growth y-o-y) being handed over in 9M-2011. Although UMI increased its market share to 7.7% (9M-2010: 6.4%) by selling more cars, this was not reflected in much higher net profit due to higher marketing expenses. Revenues in 9M-2011 were 18% higher y-o-y. In 9M-2011, the contribution (profit of EUR 6 million) of Sale of Vehicles segment was similar to the contribution in the same period last year. Other Results


Corporate expenses (18) (22)

Israeli activities* (3) 6

Deferred tax (4) -

Net contribution (25) (16) (*)Includes AVIS Ukraine which was reallocated from Rental and Leasing of Vehicles to “Other” as a result of the spin-off of the Israeli activities. Other Results mainly include corporate expenses not allocated to specific activities and the results of activities not attributable to a segment. The increased loss to EUR 25 million in 9M-2011, is explained as follows:


- Corporate expenses, including Finance and General and Administrative expenses decreased mainly due to positive foreign exchange differences on an un-hedged liability of Kardan N.V. denominated in Israeli NIS.

- The Israeli activities, not attributable to a segment, contributed a loss of EUR 3 million in 9M-2011. Last year (9M-2010), the Israeli activities reported a profit of EUR 6 million mainly due to the sale of a participation in a communications company.

Outlook 2011 As of October 6, 2011 the Israeli activities have been spun-off from Kardan. Consequently, these activities - which include the segments “Rental and Leasing of vehicles” and “Sale of vehicles” and activities that are included in the segment “Other” as well as Kardan Real Estate Israel - will no longer contribute to the result of Kardan in Q4-2011. Real Estate The current turmoil on the financial markets in Europe has an impact on the real estate industry in Central and South Eastern Europe, which influences valuations of Real Estate as well as the appetite of tenants to conclude a lease agreement. The financial result from the delivery of residential units in China, is expected to increase in Q4-2011. GTC SA and Kardan Land China plan to continue to develop selective projects out of their existing land bank. In order to fund these developments they will use proceeds from the sale of cash generating assets and other sources. Water infrastructure The revenues of Tahal in Q4-2011 may be negatively impacted due to the divestment of Tahal Assets Israel (Milgam) in August 2011. Financial Services It is expected that the operations in Bulgaria and Romania will not change significantly during Q4-2011 and thus will contribute negatively to the result of 2011.

Analyst & Investor Call An analyst and investor call will be held today at 15.00 CET. To take part in the call, please use the following dial-in number: Dial in number NL: +31 (0)45 6316902 Conference ID: 4487195

Dial in number UK: +44 (0)207 1532027 Conference ID: 4487195 Please confirm your attendance to [email protected].


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 (“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’s listings 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’s ability to achieve its objectives and (v) from any of the risk factors specified in Kardan’s Annual Report 2010 and in the “Periodic Report for 2010”published by Kardan N.V. in Israel on March 31, 2011 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, 2011 amounted to EUR 5 billion; revenues totaled EUR 322 million in 9M-2011. Kardan is listed on NYSE Euronext Amsterdam and the Tel-Aviv Stock Exchange. As of Page 7 of this press release, financial reports drawn up in accordance with the Dutch and Israeli regulations are included and form an integral part of this release. For further information please contact: Jan Slootweg Caroline Vogelzang Management Board member Director Investor Relations Office +31 (0)20 305 0010 +31 (0)20 305 0010 www.kardan.nl [email protected]

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


FINANCIAL REPORTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011

The Financial Reports contain the following sections: PART 1 MANAGEMENT REPORT FOR 9M-2011

1. Developments of divisions of Kardan and the respective markets

2. Main events in the period

3. Subsequent events

4. Results and equity attributable to equity holders of Kardan as of September 30, 2011

5. Book Value of investments of Kardan as of September 30, 2011

6. Financial position of Kardan Group as of September 30, 2011

7. Risk Management

PART 2 ADDITIONAL INFORMATION

1. Financial analysis of consolidated interim balance sheet, income statement and cash-

flow statement

2. Fair Value disclosure

3. Issuance of debt

4. Immaterial transactions procedure

5. Procedure for approving the financial reports

PART 3 FINANCIAL STATEMENTS INCLUDING INDEPENDENT AUDITOR’S REVIEW (PUBLISHED ON THE WEBSITE OF KARDAN N.V. (WWW.KARDAN.NL))


PART 11 MANAGEMENT REPORT FOR 9M - 2011 1.1 Development of divisions2 of Kardan and the respective markets For the sake of clarity, the explanations of the following paragraphs 1.1 and in 2.1 are based upon the consolidated figures, thus including proportionally consolidated subsidiaries and minority interests, unless specifically stated differently. Details on the percentage of ownership can be found in paragraph 1.5. Details of division and segment results can be found in note 3 of the Financial Statements in addition to the information provided in this press release. Real Estate Kardan is active in development and management of Real Estate through GTC SA, of which it holds 28%, and through its 100% subsidiary Kardan Land China. In addition, Kardan has a 49% holding in GTC Investments in Western Europe and, up to October 5, 2011, had a 53% indirect holding in Kardan Real Estate in Israel. In 9M-2011, the Real Estate division generated EUR 146 million revenues3 (9M-2010: EUR 139 million). General market developments Central and Eastern Europe (GTC SA) The growth dynamic in Central and Eastern Europe slowed markedly in the second and third quarter as the Eurozone began to stagnate. Confidence in Europe as a whole deteriorated on the financial markets, leading to anxiety with consumers and thus to decreasing spending activity. This significant change in sentiment is weighing down on rental expectations by real estate appraisers. It should be noted though that the forecasts differ country by country. The Polish economy has been demonstrating relative resilience to the crisis, whilst the South Eastern European markets prove to be the most vulnerable. In addition, growth prospects and availability for financing in CEE/SEE are challenging due to the tightened solvability requirements for banks and the repatriation by some of the Western European banks from CEE countries. Developments GTC SA GTC SA (100%) in EUR million

9M-2011 9M-2010 Q3-2011(30.09)

Q3-2010 (30.09)

2010 (31.12)

Rental + service Revenue 97 92 32 31 124

Residential Revenue 20 23 10 6 45

Gross profit rental 71 71 24 23 94

Gross profit residential 1 1 1 - 2

Revaluation / impairments (178) 15 (140) 3 43

Net Profit / (Loss) (201) 8 (163) 5 29

Inventory & residential land bank

203 273 203 273 254

Investment Property 1,778 2,053 1,778 2,053 2,118

Total Assets 2,443 2,739 2,443 2,739 2,728

Total Equity 863 998 863 998 1,053

Cash & ST investments 204 199 204 199 230

Ratios

Gross margin rental 73% 77% 75% 74% 76%

Gross margin residential 5% 4% 13% 5% 4%

Loan to Value* 59% 57% 59% 57% 49%

1 Reference is made to the disclaimer on page 6 and at the end of part 1 2 For the percentage of ownership reference is made to paragraph 1.5 3 Reference is made to the Segment Information in the Financial Statements, note 3


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

The main highlights of Q3-2011 were: o Intensified European debt crisis, as of August, adversely impacted real estate and

credit markets in CEE and specifically in SEE; o Revaluation of portfolio leads to EUR 140 million negative revaluations and

impairments to adapt to current market macroeconomic environment; o Asset divestment and refinancing will strengthen short term and mid-term liquidity. o Successful refinancing (EUR 130 million) of two assets in Romania and Serbia will

generate EUR 22 million of free cash in Q4-2011; o Ongoing discussions with lenders with respect to incompliance of loan covenants;

agreements expected to be reached in coming 2-3 months; o Active asset management focused on short term concessions to retail tenants to

maintain occupancy levels, as well as cost saving programs. In Q3-2011, rental and service revenues stayed at approximately the same level as in the

corresponding period last year, whereas residential sales arrived at EUR 10 million (Q3-2010: EUR 6 million). In 9M-2011, rental and service revenues were up by 5% y-o-y to EUR 97 million, despite the sale of Galeria Mokotow, mainly as a result of completion of new assets in 2010 and 2011. Residential revenues decreased in 9M-2011 by 13% y-o-y as a result of a slower pace of handovers to buyers in combination with higher discounts for the apartments.

38% of GTC SA’s debt expires in 2017 or later. The average cost of financing remains around 5.5%. EUR 126 million of long term loans were reclassified to short term loans. Ongoing negotiations with banks with respect to certain covenants; agreements expected to be reached in coming 2-3 months.

Investment in projects was EUR 152 million in 9M-2011, as compared to EUR 113 million in the same period last year. GTC SA will continue with the development of selected projects in attractive markets and unsaturated segments using its liquidity and debt raising capacity.

Completed commercial space was 539,000 sqm as at September 30, 2011, valued at EUR 1.4 billion. The average occupancy rate for GTC SA is approximately 86%. Average yield for completed commercial properties was 8%, the same level as at year end 2010: 7.9%.

General Market Developments in China (Kardan Land China) The Chinese economy expanded by 9.1% in Q3-2011 (y-o-y), the slowest pace since the third quarter of 2009 and the desired outcome of China’s macroeconomic regulations. Retail sales in China grew by 17% (y-o-y) in 9M - 2011. The high growth in consumption is in line with the current Five Year Plan of the Chinese government plan to increase local internal consumption. The world’s largest apparel retailers continue to expand aggressively in China. These developments all support Kardan Land China’s strategy to focus on the development of shopping malls in China’s second- and third tier cities. With respect to the residential real estate market, the Chinese government has taken numerous measures to cool down speculation, ranging from increasing interest rates to limiting purchases of, and financing for, second or third properties. This has generally resulted in a more moderate increase in y-o-y property prices to currently on average approximately 4%. These measures also have a deterring effect on buying decisions and thus on the number of apartments sold each month. The inflation rate has come down from 6.5% in July 2011 to 6.1% end of September 2011, and currently is around 5.5%. Developments Kardan Land China Kardan Land China is active in the residential and retail real estate markets. In the following table, the number of units represents 100% of the sales and apartments handed over by the project companies. In general, Kardan Land China owns 50% of these companies. The other information is derived from the financial statements in which figures for the joint venture projects are proportionally consolidated.


Kardan Land China (in EUR million)

9M-2011 9M-2010 Q3-2011(30.09)

Q3-2010 (30.09)

2010 (31.12)

Rental + service Revenue 5 - 2 - 0.35

Residential Revenue 18 20 5 5 38

Gross profit margin Rental 70% - 76% - -

Gross profit margin Residential 23% 13% 23% 28% 14%

Revaluation (net of tax) 12 16 - 3 25

Net Profit (Loss) 23* 10 10 3 15

Completed investment property 64 - 64 - 110

Investment property under construction

- 86 - 86 -

Inventory 261 122 261 122 132

Total Assets 488 346 488 346 465

Advance payment from buyers 138 97 138 97 103

Total Equity 232 147 232 147 161

Cash & short term investments 49 52 49 52 124

Operational Parameters

Units sold in the period ** 1,781 2,656 641 737 3,461

Units handed over in the period**

679 912 186 226 1,748

Total units sold, not yet delivered**

6,101 4,896 6,101 4,896 4,999

(*) Before consolidation adjustment and including EUR 7 million gain on the divestment of HIFC, Hangzhou and an expense of EUR 5 million with regard to an Employee Stock Option Plan. (**) The numbers presented reflect 100%. The Kardan Land China share is on average 50%. Residential revenue in 9M-2011 was less than in the same period last year, resulting from 26% less deliveries, partially offset by a higher average apartment price. Rising interest rates as well as the slow down in price increases in residential real estate are deterring consumers’ decision to buy apartments, as is reflected in the lower number of units sold in 9M-2011 in comparison to 9M-2010. Kardan Land China has consequently, in line with its strategy, adjusted the product mix and the pace of construction of phases in projects to keep the unsold inventory low. In general, deliveries take place approximately 18 months after sales contracts have been signed. End of September 2011, Kardan Land China had 2% completed and unsold units of its total inventory, whereas this was 4% at year end 2010. As at September 30, 2011, 6,101 apartments are sold, but not yet delivered, compared to 4,999 as at December 31, 2010. These apartments will generate approximately EUR 30 million gross profit in the coming 2 years.

As at September 30, 2011, the occupancy rate of the shopping mall in Chengdu stood at 97% (end of June, 2011: 95%). The company is planning to develop 4 shopping centers in China in the coming years in Dalian, Xianyang, Shenyang and Changzhou, comprising of over 200,000 sqm for lease (GFA).

Water Infrastructure (Tahal) Through its 100% subsidiary Tahal Group International B.V. (TGI), Kardan operates as a leading international engineering company, specializing in water-related infrastructure projects and water-related asset ownership. TGI is active in approximately 30 countries, across 4 continents, primarily in, China, Africa, Central and Eastern Europe, Latin America and Israel. TGI has two subsidiaries: Tahal Projects and Tahal Assets. Revenues in 9M-2011 for TGI amounted to EUR 85 million in comparison to EUR 98 million over the same period in 2010. Reference is made to note 6 of the Financial Statements with respect to the impact of the sale of Tahal Assets Israel (Milgam) on the Income Statement of Tahal. Global Market Developments


The demand for water and the lack of sufficient (clean) water is becoming more evident as the world population increases, industrialization spreads and social mobility increases. However, tackling the water challenge differs by country / region. In China- where Kardan operates 8 wastewater treatment plants, 1 water supply and 1 water re-use facility, and has 2 wastewater treatment plants under construction for which the licenses were signed in Q3-2011- new guidelines for prevention and treatment of groundwater pollution were published by the State Council, China’s top policy making body, last August. In CEE, however, the need for a more strategic approach to water policy reforms in the region is evident. To move forward it is deemed necessary to create economies of scale in CEE as well as to implement new tariff and collection systems to fund the improvement of the water situation. Tahal co-operates with several International Finance Institutions, such as with the EBRD, in public / private projects in many countries mainly in Africa, Latin America and Europe. Developments Tahal Projects Tahal Projects (100%) (in EUR million)

9M-2011

9M-2010

Q3-2011

(30.09)

Q3-2010

(30.09)

2010 (31.12)

Revenues 66 79 23 27 112

Gross Profit 9 17 3 5 23

EBITDA (4) 7 - 2 10

Profit (Loss) (7) 2 (2) - 2

Total Assets 117 132 117 132 142

Equity* / assets 30% 31% 30% 31% 29%

Net debt ** (excl. SH loans)

(2) 16 (2) 16 10

Cash 14 16 14 16 34

Other

Backlog *** 322 194 322 194 183 * Group equity including shareholder loan ** Bank Loans net of cash and cash equivalents *** Projects with signed agreement and received first payment. Tahal Projects recorded 16% less revenues in 9M-2011 in comparison to the same period last year. This is partly due to delayed initiation of projects as well as due the fact that some clients change the scope of the project during its construction period. In addition, the devaluation of the US Dollar (the business of Tahal Projects in mainly US dollar denominated) had a negative translation impact of EUR 4 million. Management of Tahal Projects initiated a restructuring as of Q2-2011, of which the costs are EUR 2 million in 9M-2011, to improve the efficiency in the company by centralizing more and by cutting costs. In September 2011, Tahal Projects initiated its largest project; an integrated agricultural and regional development project in Angola with a total value of approximately EUR 143 million. Consequently, as the first down payment has been made, this project is now included in the backlog of EUR 322 million. The backlog also includes new projects in Asia, Latin America and Europe, such as a reconstruction of a water system in a mid- sized city in Poland and several infrastructure plan and design projects in Latin America.


Development Tahal Assets Tahal Assets (in EUR million)

9M-2011

9M-2010

Q3-2011

(30.09)

Q3-2010

(30.09)

2010 (31.12)

Revenues* 53 48 15 17 65

Gross Profit 16 12 5 5 16

EBITDA 16** 3 12 2 7

Profit (Loss) 10** 1 9** 2 3

Total Assets 167 181 167 181 186

Equity*** / assets 50% 36% 50% 36% 37% Net debt**** (excl. SH loans)

33 49 33 49 58

Cash 25 23 25 23 15 (*) Includes the revenues of Tahal Assets Israel (Milgam). In the Financial Statements, the results of Milgam are presented

as discontinued operations. Reference is made to note 6. (**) Includes operating results of Milgam as well as EUR 8 million proceeds from the sale of Milgam to Kardan NV, which are

eliminated at Kardan NV level. Consequently, the net contribution of Tahal Assets to the net result of Kardan NV amounts to EUR 2 million for 9M-2011 and EUR 1 million for Q3-2011.

(***) Group equity including shareholder loan; (****)Bank loans net of cash and cash equivalents Tahal Assets increased its presence in China to currently: 12 wastewater treatment facilities, of which 2 are under construction, 1 water supply plant and 1 water re-use plant. The current full capacity of the wastewater treatment plants is approximately 630,000 cubic meters / day. Once all facilities will be operational and expanded in 2014, the full capacity will amount to 840,000 cubic meters / day. The licenses for these wastewater treatment facilities generally have a life of over 25 years on average, underpinned by fixed contracts with municipalities. The increase in revenue incorporates the growth in assets in China. Financial Services (KFS) Kardan operates in the financial services sector through its 100% holding in KFS, which owns 92% of TBIF (retail lending). During the first nine months of 2010, TBIF was active in banking, consumer finance, leasing, mortgages and asset management: in Russia and Ukraine, mainly through its stakes in Sovcombank and in VAB Bank respectively, and in Romania and Bulgaria, through its fully owned non-banking subsidiaries. Kardan sold its stake in VAB Bank, Ukraine, in January 2011, and signed an agreement, in June 2011, with TBIF’s co-shareholder in Sovcombank to sell its 50% stake in this bank. Once this transaction is completed, the banking and retail lending activities in Bulgaria and Romania respectively remain. In July 2011, TBIF completed the acquisition of the Bulgarian bank NLB Banka Sofia AD, to upgrade its operation in Bulgaria into a full banking operation focused on retail and SME banking. Finally, the asset management activities in Bulgaria have been sold in August 2011. General Market Developments Romania and Bulgaria Due to the fact that the outlook for the European economy took a turn for the worse as of August, consumer confidence sharply deteriorated and as a consequence purchasing activity remained very low. The Autumn 2011 European Economic Forecast is projecting real GDP growth for Romania in 2011 to arrive at 1.7%, and at 2.1% for 2012, and for Bulgaria at 2.2% and 2.3% respectively. In Bulgaria, analysts point to a weak labor market which continues to make households reluctant to increase consumption. Conversely, consumers tend to save rather than take on credit facilities. The Greek debt crisis is clearly felt in Romania and Bulgaria; Greek banks are scaling down their operations, providing opportunities and space in the market for the remaining retail lenders.


Developments KFS/ TBIF Banking and Retail Lending Although the agreement to sell TBIF’s 50% stake in Sovcombank was announced in June 2011, the results of Sovcombank in the first nine months of 2011 are still proportionally consolidated. However, the results of Sovcombank for the nine months of 2010 that are included in the consolidated financial statements of that period are presented as discontinued operations. In 9M-2011 the bank increased its gross portfolio in local currencies by 45% (in EUR by 36%) when compared to year end 2010. In the same period, deposits increased by 16% in EUR (in local currency 24%). The percentage of loans outstanding more than 90 days (NPL’s) stayed low, at 2.7%, the same as in Q2-2011. The banking and retail lending activities in Bulgaria and Romania experienced a decrease of portfolios in all lines of business. Bulgaria & Romania 9M-2011

**9M-2010 Q3-2011

**Q3-2010 2010

100% (in EUR million) (30.06) (30.06) (31.12)

Net banking income* 22 28 7 9 37

Profit (Loss) (6) 1 (3) 4 (3)

Total Equity 48 48 48 48 43

Total Assets 236 229 236 229 217

Equity / Assets 20% 21% 20% 21% 20%

Cash & ST investments 23 15 23 15 18

Operational Parameters 31.12.10 Gross Loan Portfolio 237 210 237 210 204

Provisions 25.6% 15.9% 25.6% 15.9% 15.7%

Book value in TBIF 115 103 115 103 107

(equity, loans and goodwill)

(*) Incl. net interest income, net commission income and other operating income (**) Banka Sofia (Bulgaria) is consolidated as of August 2011 The Bulgarian lending activities started with the integration of the recently acquired Banka Sofia in Q3-2011. Banka Sofia is consolidated in their results for the months August and September 2011. Reflecting the challenging market circumstances, the Bulgarian and Romanian retail lending activities generated 21% (y-o-y) less net banking income in 9M-2011. Continuing provisioning with respect to vintage portfolios has impacted the results negatively. The book value of the Bulgarian and Romanian operations has increased from EUR 98 million at June 30, 2011, to EUR 115 million at September 30, 2011, which reflects the integration of the recently acquired Bulgarian bank, Banka Sofia. Kardan is active in the Rental and Leasing of vehicles and Sale of vehicles segments in Israel, through its 74% stake in Kardan Israel, which was spun off after reporting period, on October 5, 2011. Rental and Leasing of vehicles (spun off in October, 2011) In this segment Kardan N.V. was active through Kardan Vehicle (operational under the brand name AVIS Israel). In March 2011, Kardan Israel increased its stake in AVIS Israel to 68% and became the controlling shareholder of that company. In August 2011, however, Kardan Israel decreased its stake in AVIS to 34%. (Reference is made to paragraph 1.2).


Developments of Rental and Leasing of vehicles The leasing market in Israel has become more competitive mainly due to attractive financing, which has led to an increase of cars in the market and a pressure on pricing for leasing, renting and for the sale of second hand vehicles. In addition, the demand for leasing of vehicles has decreased due to recent regulations in Israel on taxation of lease cars. As a consequence, employees are facing increasing income tax amounts, as the value of their lease car is considered to be additional compensation. Developments AVIS Israel The revenues of Kardan Vehicle (Avis Israel) in 9M-2011 decreased by 9% y-o-y, mainly due to the market circumstances as mentioned above. As of September 30, 2011, AVIS Israel had a car fleet of approximately 29,500 cars (June 30, 2011: approx. 30,100). Sale of vehicles (spun off in October 2011) Developments of sale of vehicles The Israeli automotive sales market continued to grow, with approximately 175,000 vehicles (+14% y-o-y) being handed over in 9M-2011. In this segment, Kardan owns a 30% indirect stake of UMI, the exclusive importer of the core brands of General Motors in Israel; Chevrolet, Buick and Cadillac, as well as Isuzu. Developments UMI In 9M-2011, UMI increased its market share, in terms of number of new vehicles sold, to 7.7% (9M-2010: 6.4%), mainly due to the successful sales of mini and compact vehicles (Chevrolet Spark and Chevrolet Cruze). However, the increase in the number of vehicles sold was not reflected in a much higher net profit during the reporting period, due to higher marketing expenses associated with the launches of new models. In 9M- 2011, UMI reported a profit of EUR 6 million, similar to the profit a reported in the same period last year. 1.2 Main events in 9M - 2011 Kardan

In January, 2011 - Maalot, the Israeli subsidiary of Standard & Poor’s (“S&P”), reported that it had changed the outlook on the rating of the debentures issued by Kardan (ilBBB+), from negative to stable, mainly due to improved liquidity and greater financial flexibility for Kardan. Moreover, Kardan management confirmed that it intended to reduce its leverage by more than EUR 100 million during 2011.

In June 2011, Maalot changed the outlook on the rating of the debentures issued by Kardan (ilBBB+), from stable to positive, based on Kardan’s actions to reduce the debt of its holding and intermediate companies resulting in increased liquidity and financial flexibility. The trigger for a rating increase with one notch to A- would be a further sustainable reduction of the Loan to Value ratio to 40%.

In June 2011, Kardan announced that its Supervisory Board had approved the initiation of an intended Spin-Off of the Company's 74% stake in Kardan Israel Limited (“KIL”) and of its indirect 97% stake in Milgam Municipal Services Ltd. (“Milgam”), and the filing of a first draft prospectus with the Israel Securities Authority and the Tel Aviv Stock Exchange (TASE) in this regard. Following the Spin-Off, Kardan would have a clear portfolio of activities in emerging markets, fully in line with Kardan’s intention to simplify its organizational structure and to specifically grow its real estate activities in CEE and Asia as well as its Water Infrastructure activities worldwide in emerging markets. KIL and Milgam, active primarily in Israel, were considered no longer fitting in the focused, international growth of Kardan. The Extraordinary General Meeting of Shareholders (EGM) of Kardan with respect to the spin-off of the Israeli activities of Kardan was held on Thursday September 15, 2011. At the EGM, Kardan’s shareholders resolved to effectuate spin-off of the Israeli activities as


described in the prospectus. The structure of the Spin-Off included the transfer of Kardan’s shares in KIL as well as Kardan’s indirect stake in Milgam, including debt, to a newly incorporated Israeli company called Kardan Yazamut (2011) Ltd. held by Kardan. Following the transfer of these KIL and Milgam shares to Yazamut, Kardan distributed Yazamut shares to its existing shareholders and listed all Yazamut shares for trade on TASE on October 6, 2011.

In July, 2011, Kardan initiated a temporary share buyback plan ("the Share Plan") of up to EUR 1.5 million, until August 8, 2011, to meet its obligations and obligations of its subsidiaries towards its senior officers, without diluting the shareholders. In addition, Kardan announced that its subsidiary, GTC Real Estate Holding B.V. (“GTC RE”), initiated a plan to purchase Kardan Debentures Series A (issued in 2007) and Debentures Series B (issued in 2008) (“the Debenture Plan”) listed on the TASE of up to EUR 25 million until August 8, 2011, to decrease the leverage on the holding and intermediate holding company levels. The Share Plan and the Debenture Plan was funded by Kardan’s existing cash reserves. Through the Share Plan Kardan bought 421,384 shares for a total amount of EUR 1.3 million, approximately 87% of the Share Plan. Through the Debenture Plan, GTC RE acquired 66,707,379 Debentures Series A and 10,229,353 Debentures Series B for a total amount of approximately EUR 18 million; approximately 72% of the Debenture Plan was executed. As of August 8, 2011 GTC RE owned 5.9% of Kardan Debentures Series A and 3.6% of Kardan Debentures Series B and Kardan owned 0.39% of its shares (excluding the shares of Kardan held by its 74% subsidiary Kardan Israel Ltd).

End of September 2011, Kardan announced that it had initiated a share buyback plan (“the Plan”) of up to EUR 15 million, until November 8, 2011. GTC RE would execute the Plan, representing approximately 8.5% at maximum of the current number of shares issued, based on the share price at closing of the market on September 23, 2011. The Plan is funded by Kardan’s existing cash reserves. Kardan decided to initiate the Plan as the then share price, in its view, was attractive and provided an opportunity to ultimately generate a significantly higher return compared to the interest compensation on the surplus cash at hand. Ordinary shares that were repurchased through the Plan were repurchased through transactions executed on either the stock exchange of NYSE Euronext Amsterdam (“ASE”) or of Tel Aviv (“TASE”). The Plan was ended at the beginning of November 2011. Since the start, approximately 17.9% of the Share Plan has been completed. As at November 3, 2011, Kardan and GTC Real Estate Holding BV (GTC RE) jointly own 1.1% of Kardan shares. In total, GTC RE purchased 1,219,884 Kardan NV shares through the Stock Exchange of Euronext Amsterdam (“ASE”) and the Tel Aviv Stock Exchange (“TASE”), at an average share price of EUR 2.20 for a total amount of approximately EUR 2.68 million.

Real estate (GTC Real Estate)

In January, 2011, Kardan’s wholly owned subsidiary, GTC RE successfully sold 35,100,000 shares (representing 16% holdings) of GTC SA at a price of PLN 21.50 per share. Gross proceeds amounted to PLN 754,650,000 (approximately EUR 195 million) which were used by Kardan to increase financial headroom to implement its strategy, and to reduce its leverage. GTC RE retains approximately 27.14% of GTC SA’s issued share capital, which Kardan has agreed to hold for a period of at least 15 months.

At the end of January, 2011, Kardan’s wholly owned subsidiary Kardan Land China sold its 50% stake in a real estate project in Hangzhou, China (“HIFC”), to a Chinese real estate and investment company, Rich Holding Group Co. Ltd., for a consideration of RMB 269 million (approximately EUR 28 million on April 1, 2011). The transaction resulted in a gain for Kardan Land China of EUR 6.5 million net of withholding tax on the transfer of proceeds out of China, which for Kardan translated in a gain of EUR 5 million (after adjustments on the holding level).

In May 2011, GTC SA signed an agreement to sell its 50% stake in Galeria Mokotow in Warsaw to Unibail Rodamco S.E., the co-owner and manager of the shopping center. The transaction, which was completed at the beginning of August 2011, valued the asset at EUR 475 million. The sale generated approximately EUR 110 million of cash for GTC SA. The transaction was completed in August 2011.


In June 2011, Kardan Land China signed an agreement to sell a 50% stake in Galleria

Chengdu to MGPA, a private equity real estate investment advisory company for a net cash consideration of approximately RMB 422 million (EUR 46 million). Kardan Land China retains a 50% stake in Galleria Chengdu and will continue to manage and operate the shopping center. The transaction was completed end of August 2011. Kardan Land China recorded a profit in the amount of EUR 12 million in Q2-2011 as a result of this transaction.

In June 2011, GTC China granted employee options to an executive, which represent 5% of the issued capital of GTC China.

In September, 2011, GTC RE purchased 1,353,635 shares of GTC SA for a total amount of approximately EUR 3.8 million. Through this purchase GTC RE increased its holding in GTC SA from 27.14% to 27.75%.

Water Infrastructure (Tahal)

In June 2011, Kardan Water Infrastructure Group (“KWIG”), subsidiary of Tahal Assets, granted employee options to an executive, which represent 2% of the issued capital of KWIG.

In September, 2011 – the water infrastructure subsidiary of Kardan, Tahal Projects, initiated a substantial project in Angola, (Quiminha). Total revenues to be generated by the Quiminha project will amount to approximately EUR 143 million. The first down payment for the project, constituting 15% of the total project revenues (EUR 21.5 million) was received, which was a condition precedent to initiate activities on the project. The financial closing, entailing that four financing banks led by ING Bank Structured Export Finance have signed the financing agreements for the project, became effective on August 25, 2011.The financial arrangements were initiated by Tahal.

Financial Services (KFS)

In January 2011, TBIF sold its stake in the Ukrainian bank, VAB Bank, to a group of international investors. On January 28, 2011, the sale of VAB Bank was completed. The sale of VAB Leasing was completed on February 2, 2011.

In April 2011, TBIF signed an agreement to acquire the Bulgarian bank NLB Banka Sofia AD (“Banka Sofia”) from two Slovenian banks to further strengthen its existing investments in Bulgaria and Romania and to upgrade its operation in Bulgaria into a full banking operation. The acquisition was completed end of July 2011 for a consideration of EUR 15 million. On the date of the acquisition the equity was EUR 10 million, as a result TBIF allocated the excess purchase price in the amount of EUR 5 million to goodwill. In addition, it was agreed that one of the sellers will maintain funding lines of up to EUR 15 million with Banka Sofia, for periods ranging from 3 months to 5 years.

In June 2011, TBIF signed an agreement to sell its 50% stake in the Russian bank Sovcombank to its co-owner in the bank. The structure of the transaction included an initial payment of approximately EUR 40 million, with the remainder of the price due on completion, expected by June 2012. Completion is subject to various conditions precedent and until completion TBIF continues to fully exercise its joint-control rights in the bank. The total consideration for the transaction is approximately EUR 123 million. Over the years, Kardan invested approximately EUR 100 million in the Bank. This sale, together with last year’s sale of a 16% interest in the Bank, generates accumulated proceeds of approximately EUR 160 million for Kardan.


Kardan Israel In January, 2011, Kardan Israel signed an agreement to purchase the controlling stake in

AVIS Israel and to simultaneously end its partnership with Dan Company for Public Transport Ltd. (“Dan”) in Emed Real Estate Development & Investments Ltd. (“Emed”). Kardan Israel signed two agreements: i) to end the joint control held by Kardan Israel and Dan in Emed by selling its stake in Emed Properties to the Dan Group for a consideration of NIS 359 million (appr. EUR 77 million) and ii) to increase Kardan Israel’s indirect control in AVIS (via Emed Properties) by purchasing from Emed its 54.25% stake in AVIS Israel, in consideration for NIS 334 million (appr. EUR 72 million, following which Kardan Israel had a stake of 68% in AVIS Israel. The transaction reflected a value of NIS 616 million (appr. EUR 133 million) for AVIS Israel. Kardan Israel recognized a loss of EUR 7 million as a result of these transactions.

In July 2011, Kardan Israel (KIL) signed an agreement to sell half of its holdings in Avis, viz. approximately 34% of Avis’ issued share capital for a consideration of NIS 200 million (appr. EUR 41 million) with the addition of interest from the signing date through the date of closing of the transaction to Hamizrach Company. The Agreement was closed in September 2011. KIL and Hamizrach currently together control Avis as laid down in the signed shareholders’ agreement. As of the closing of the Agreement, Kardan Israel has stopped consolidating Avis' results, and is treating its investment in Avis according to the Equity method.

1.3 Subsequent events In October 2011, Kardan announced that further to the completion, on October 5, 2011, of the

distribution in kind of the issued shares in the capital of Kardan Yazamut (2011) Ltd. ("Yazamut"), resulting in a spin-off of Kardan's 74% direct stake in Kardan Israel Limited and its indirect 97% stake in Milgam Municipal Services Ltd. –the Yazamut value for Dutch tax purposes is EUR 16.2 million (NIS 80.4 million). Pursuant to the tax ruling that was received from the Israeli tax authority on August 18, 2011, and as published in accordance with Israeli law in the Yazamut and Kardan prospectus dated August 31, the value of distribution for Israeli tax purposes shall be the Yazamut value, which is based on the average closing share price of Yazamut on the first three trading days plus the Dutch dividend withholding tax. For Dutch dividend tax purposes, the distribution value is based on the average closing price of Yazamut on the first three trading days, translated into EUR using the average NIS/EUR exchange rate of the same three days. The average Yazamut closing price per share on the first three trading days is NIS 0.72 (EUR 0.15) and the overall value of the Yazamut shares for Dutch tax purposes based on these three days average is EUR 16.2 million (NIS 80.4 million) . The Dutch dividend withholding tax to be grossed up and paid by Kardan based on such Yazamut value for tax purposes is EUR 2.9 million (NIS 14.2 million). The overall distribution value for Israeli tax purposes (Yazamut value for tax purposes plus the Dutch Dividend withholding tax) is NIS 94.6 million (EUR 19.0 million) (NIS 0.85 per share/EUR 0.17 per share).

In November 2011, Kardan announced that Mr. Walter van Damme will become the CEO of Kardan Water International Group (“KWIG”), the water infrastructure subsidiary of Kardan in China, and will consequently step down from the Management Board of Kardan in May, 2012. He joined Kardan in January 2007 and became a member of the Management Board in June 2007. In this position he is responsible, among others, for Corporate Governance (including Risk, Legal and Sustainability) and Investor Relations. He also serves as a member of the management board of Tahal Group International, the parent company of KWIG. His responsibilities in the Management Board of Kardan will be divided among the other (3) members of the Management Board. In the coming period, the Supervisory Board in consultation with the Management Board will review the necessity to replace Mr van Damme.


1.4 Results 9M - 2011 The contribution of each of the businesses to the results of Kardan is shown in the table below. As profits attributable to minority shareholders in the businesses have already been deducted, these figures do not represent the full net result realized in each division or segment. The full net results of the divisions and segments are presented in paragraphs 1.1 and 2.1.

Breakdown of the net result for equity holders of Kardan N.V. (EUR million)

9M-2011 9M-2010 Q3-2011 Q3-2010 2010

Real Estate (34) 3 (33) 1 13

Water Infrastructure – Projects (7) 2 (2) - 2

Water Infrastructure – Assets 2 2 1 3 3

Financial Services – Banking and Retail Lending

(9) (6) 1 24 (57)

Financial Services – Insurance and Pension*

- 31 - 1 31

Rental and Leasing of vehicles **

- 2 6 - 2

Sale of vehicles ** 6 6 2 2 7

Other (25) (16) (6) (8) (28)

Total net result attributable to equity holders

(67) 24 (31) 23 (27)

Profit (loss) per share (EUR) (0.60) 0.20*** (0.28) 0.20*** (0.24)***

Profit (loss) per share diluted (EUR)

(0.60) 0.20*** (0.28) 0.20*** (0.24)***

* The sale of the insurance and pension segment was completed in Q4-2010 **These activities were spun-off in Q4-2011 and are presented as discontinued operations in the income statement. ***Adjusted retrospectively, as a result of the spin-off of the Israeli activities. Reference is made to note 6 in the Financial Statements.

Kardan N.V. – balance sheet (company only )

September 30, 2011

December 31, 2010

September 30, 2010

Total Assets (in EUR million) 909 1.030 1,011

Total Equity (in EUR million) 267 334 358

Equity/Total assets (%) 29% 32% 35%

In 9M-2011 the net profit attributable to equity holders of Kardan N.V. amounted to a loss of EUR 67 million, a decrease of EUR 91 million compared to the profit of EUR 24 million in the same period of last year.

Real Estate The net result of the Real Estate division amounted to a loss of EUR 34 million, in comparison to a profit in 9M-2010 amounting to EUR 3 million. The details of the result are:


GTC Real Estate

9M-2011

9M-2010

(in EUR mln)

GTC SA (28%)

Kardan Land China (100%)

Total

GTC SA (43%)

Kardan Land China (100%)

Total

Result operating companies excluding revaluation and results on sale of investment properties after tax 3 (7) (4) 3 (6) (3) Revaluation/Impairment/ result on sale of investment properties after tax (55) 27 (28) 4 13 17 Result GTC operating companies after tax (52) 20 (32) 7 7 14

Real Estate Israel 2 (4)

Finance + G&A (holding level) (4) (7)

Net contribution (34) 3

The net loss of Kardan’s real estate operating companies (subsidiaries of GTC Real Estate Holding) net of tax, in 9M-2011 amounted to EUR 32 million, a decrease of EUR 46 million compared to the profit of EUR 14 million last year. In 9M-2011, GTC SA contributed a loss of EUR 52 million, whereas Kardan Land China contributed profit of EUR 20 million in 9M-2011. The main elements of the result are:

o Revaluation/Impairment and results on disposal of assets after tax can be detailed as follows:

GTC SA’s revaluation loss after tax is due to adverse market conditions mainly in Romania, Bulgaria, Croatia and Hungary. The changes in value were determined by GTC SA management in consultation with its external appraisers and are mainly attributable to lower Estimated Rental Values and postponement of developments. In some cases downward valuations reflect short term concessions given to tenants in order to improve or maintain occupancy. Included in the loss is a profit on the asset that was sold in the 9M period.

EUR 22 million of Kardan Land China’s revaluation profits are attributable to the shopping centre in Chengdu, which was opened in November 2010, EUR 4 million of the profit is attributable to an office project in Hangzhou that has been sold prior to the start of the actual development.

o Results from the operating companies after tax, excluding revaluation results: GTC SA contributed a profit of EUR 3 million, which includes a positive tax

impact of EUR 3 million on the sale of Galeria Mokotow. For details of the result from operations of GTC SA reference is made to par 1.1.

Kardan Land China recorded a loss of EUR 7 million: Total gross margin (before tax) in 9M-2011 improved by

EUR 4 million to EUR 7 million compared to the similar period of last year, due to rental income from the shopping center in Chengdu as well as increased gross profit on the sale of apartments.

Other expenses and taxes of Kardan Land China in 9M-2011 amounted to EUR 13 million (9M-2010: EUR 10 million). The increase is largely due to to an option plan for senior management (EUR 5 million).

Emed, a real estate joint venture of Kardan Israel, revalued a land plot in Tel Aviv which contributed a revaluation gain of EUR 2 million to Kardan (reference is also made to paragraph 1.2). Kardan Israel was spun off in October 2011.

Finance, general and administrative expenses decreased by EUR 3 million to EUR 4 million.


Water Infrastructure (Tahal) Tahal reported a loss of EUR 5 million in 9M-2011, a decrease of EUR 9 million compared to the profit of EUR 4 million in 9M-2010.

In 9M-2011, Tahal Projects, recording 16% less revenues compared to 9M-2010, lost EUR 7 million (9M-2010: profit of EUR 2 million), EUR 2 million of which is attributable, amongst others, to delayed projects as well as due to the fact that some clients change the scope of the project during its construction period. In addition, a restructuring plan has been initiated aimed at increasing the organization’s efficiency and effectiveness. The revenue was furthermore impacted by a EUR 4 million negative translation due to the devaluation of the US Dollar (the business of Tahal Projects is mainly US Dollar denominated).

Finance, general and administrative expenses count for EUR 1 million of the loss. Tahal Assets recorded a net profit of EUR 2 million in 9M-2011. Revenues increased by 10%

y-o-y to EUR 53 million (9M-2011).It should be noted that Tahal Assets Israel (Milgam) was sold in August 2011 to Kardan N.V. in line with the spin-off of the Israeli activities.

Financial Services (KFS) KFS contributed a loss of EUR 9 million in 9M-2011, compared to a profit of EUR 25 million in 9M-2010. The contribution of the activities still in the portfolio as of September 30, 2011 (i.e. the Bulgarian and Romanian lending activities as well as Banka Sofia but excluding Sovcombank) was a loss of EUR 2 million, equal to the same period last year as is shown in the table:

KFS (in EUR million) 9M-2011 9M-2010

Activities sold before June 30, 2011:

Insurance and pension (TBIH*) - 31

Banking and Retail lending:

VAB Bank & VAB Leasing** 4 (42)

Sovcombank*** 3 64

Sub-total 7 53

Operating companies in portfolio as of June 30, 2011

Results (6) (5)

Amortization intangible assets & goodwill impairment (3) (15)

Finance & General + Administrative expenses of TBIF/KFS (7) (8)

Sub- total contribution (operating & holding activities) (16) (28)

Total contribution (9) 25 (*) Sold in H2-2010 (**) Sold in Q1-2011 (***) Sale agreement signed in Q2-2011. Closing is subject to conditions precedent.

The results presented in the table can be elaborated as follows:

Results related to the operating companies sold before June 30, 2011 contributed a profit of EUR 7 million (including the impairment of goodwill which relates to Sovcombank):

o The agreement to sell Sovcombank is intended to be closed in 2012. As the consideration for the sale is fixed at a slightly lower level than the value in the accounts of KFS at the time that the agreement was signed, a material impairment was made in H1-2011, leading to a loss of EUR 5 million, whilst in Q3-2011 a foreign exchange profit of EUR 8 million had to be recognized.

The operating companies in portfolio as of June 30, 2011 (mainly the Romanian and Bulgarian activities and the Bulgarian bank that was acquired, but not including Sovcombank) contributed a loss of EUR 6 million in 9M-2011, almost similar to last year. Their contribution was negative due to a decreasing portfolio as new business is still slow and provisions which were taken on the consumer finance and leasing portfolios;

Finance and General and Administrative expenses of KFS and TBIF in both 9M-2011 and 9M-2010 are largely caused by the net debt position of the companies and the expenses of the head office of the retail banking segment.


Rental and Leasing of Vehicles (spun off in October 2011) The segment recorded a break even result in 9M-2011 (9M-2010: profit of EUR 2 million). The contribution of the companies operating under the AVIS brand in Israel and Ukraine decreased y-o-y by EUR 2 million to EUR 1 million, largely due to decreasing prices on the second hand lease car market. Similarly the results from the sale of the rental cars are lower. Sale of Vehicles (spun off in October 2011) In 9M-2011, the contribution of UMI was EUR 6 million, similar to the results of 9M-2010. Other Other activities include investments of Kardan Israel that are relatively immaterial (“Communications and Technology”, “Import and Sale of white goods” and “El Har”, which performs building construction works in Israel), finance and tax expenses, general and administrative expenses of Kardan N.V. and Kardan Israel Ltd. The total loss of these activities amounted to EUR 25 million (9M-2010: loss of EUR 16 million). Communications and Technology, Import and Sale of white goods and El Har contributed a loss in 9M-2011 of EUR 3 million (9M-2010: Profit of EUR 6 million). The Finance expenses in 9M-2011 decreased by EUR 3 million to 9M-2011: EUR 12 million, whereas in 9M-2010: EUR 15 million. EUR 3 million out of the EUR 12 million is attributable to Kardan Israel (9M-2010: EUR 3 million. The decrease mainly relates to a positive currency exchange difference of EUR 4 million on the balance of the part of the Kardan N.V. Israeli Shekel (NIS) denominated debentures, which has not been hedged to the Euro.

General and Administrative expenses in 9M-2011 amounted to EUR 6 million (9M-2010 EUR 7 million). This includes expenses of Kardan Israel amounting to EUR 2 million (9M-2010: EUR 1 million).

Finally, Kardan N.V. recognized a deferred tax expense of EUR 4 million in 9M-2011 (9M-2010: nil).

Third Quarter 2011 results

In the third quarter of 2011, the net loss attributable to equity holders was EUR 31 million. In the same period of last year a profit of EUR 23 million was recorded.

In Q3-2011, the Real Estate division recorded a loss of EUR 33 million (Q3-2010: profit of EUR 1 million). Kardan Land China realized a profit of EUR 10 million attributable to the sale of 50% of the shares of the shopping Centre in Chengdu. GTC RE had to record negative revaluation results of EUR 42 million largely due to the adverse economic developments mainly in SEE.

The Water Infrastructure division lost EUR 1 million in Q3-2011, whereas the result in the same period last year was a profit of EUR 3 million. The activities in China (KWIG) contributed a profit of EUR 2 million, a significant improvement compared to last year when the result was nil. The contribution of other operating companies was breakeven (Q3-2010: EUR 3 million profit mainly due to the sale of rights related to Central American asset). The finance and general and administrative expenses of the holding companies were EUR 2 million (Q3-2010: breakeven).

The Banking and Retail Lending segment gained EUR 1 million (Q3-2010: profit of EUR 24 million). EUR 8 million of the contribution is attributable to Sovcombank. Due to the devaluation of the Ruble, the value of Sovcombank (denominated in Ruble) decreased. As the agreed price for the sale of the 50% share in Sovcombank is fixed and denominated in Euro, Kardan recognized a translation gain of EUR 8 million. In addition the devaluation resulted in an equivalent negative direct equity movement of EUR 8 million. Reference is also made to paragraph 1.2. The remainder of the result is mainly related to the activities in Bulgaria and Romania (loss of EUR 3 million) and Finance, General and Administrative expenses of the holding company (EUR 3 million). In Q3-2010, the profit of EUR 24 million was mainly attributable to Sovcombank (EUR 55 million), losses in the Ukrainian bank VAB which was sold in Q1-2011 (EUR 5 million), the activities in Bulgaria and Romania (loss of EUR 2 million), Finance General and Administrative expenses (EUR 1 million) and Goodwill impairments of EUR 21 million.


Rental and leasing of Vehicles contributed a profit of EUR 6 million in Q3-2011 (Q3-2010: break even). The significant increase is due to the sale of the 34% stake in Avis Israel to Hamizrach (reference is made to paragraph 1.2) which resulted in a gain due to accounting treatment of goodwill .

Sale of vehicles segments contributed EUR 2 million profit in Q3-2011 (Q3-2010: EUR 2 million).

The result of “Other” activities was a loss of EUR 7 million against a loss of EUR 9 million in Q3-2010. In Q3-2011 Finance expenses and General and Administrative expenses amounted to EUR 6 million, EUR 1 million more than in Q3-2010. A decrease of a deferred tax asset resulted in a loss of EUR 2 million (Q3-2010: loss of EUR 1 million) and the results of the Israeli activities generated a profit of EUR 1 million. (Q3-2010: EUR 1 million loss). Equity attributable to the shareholders of Kardan N.V. as of September 30, 2011, and net

debt position As at September 30, 2011, the shareholders’ equity of Kardan amounted to EUR 267 million, EUR 67 million less than the EUR 334 million at year-end 2010. This decrease is equal to the loss for the period of EUR 67 million, which includes direct movements in equity, on balance zero. The solvency ratio (shareholder’s equity/total assets) of Kardan as of September 30, 2011 is 29%, slightly lower than at year-end 2010 (32%). As a result of transactions in 9M-2011, the net debt position of Kardan N.V., KFS BV and GTC RE BV as of September 30, 2011 decreased to EUR 424 million from EUR 633 million as of December 31, 2010. This is fully in line with the strategy to reduce the debt on the level of Kardan NV and its intermediate holding companies. The main contributor to the decrease of net debt is the proceeds from the sale of 16% of the shares of GTC SA. 1.5 Book value of investments Kardan N.V.

The following table summarizes the book value of the companies held directly by Kardan as of September 30, 2011 and December 31, 2010 (amounts in EUR million):

Holding Company

Name of subsidiary

Share in subsidiary

Book Value in Kardan

NV

Loans granted

by Kardan

NV

Total Investment

in books 30.09.11

Total Investment

in books 31.12.10

Kardan NV GTC RE Holding (*)

100% 381 95 476 511

KFS (**) 100% 107 93 200 201

Tahal 100% 55 44 99 97

Holding Company

Name of subsidiary

Share in subsidiary

GTC Holding

Book Value

Loans granted by GTC Holding

Total Investment

in books 30.09.11

Total Investment

in books 31.12.10

GTC RE Holding

GTC SA 27.75% 230 - 230 427

Kardan Land China

100% 231 35 266 230

GTC Investments

48.75% 5 11 16 14


Holding Company

Name of subsidiary

Share in subsidiary

KFS Book Value

Loans granted by KFS

Total Investment

in books 30.09.11

Total Investment

in books 31.12.10

KFS TBIF 92.2% 135 93 228 247

1.6 Financial Position of Kardan Group as of September 30, 2011

Loans maturity Kardan has a decentralized funding structure. This means that Kardan, its direct subsidiaries (all being holding companies of the operational entities), and the operational entities mostly are responsible for the funding of their own activities. As a consequence, within the Kardan group many agreements with lenders are in place with different covenants. For additional information, reference is made to note 7 in the Financial Statements. The following table provides an overview of the cash positions, and refinance obligations for convertible and non convertible debentures and other interest bearing loans as at September 30, 2011 for Kardan N.V. and its divisions.

In EUR Million

Free Cash & Cash

equivalents

Debt/loans maturing

Before September 30, 2012*

Before September 30, 2013



After September 30, 2015 &

up to September

30, 2028

Total

Kardan N.V. 45 30 65 108 108 279 590

GTC Group 305 426 172 262 41 582 1,483

KFS 236 148 39 7 2 29 225

Tahal Group International

39 33 11 24 4 14 86

Total(**) 625 637* 287 401 155 904 3,150 (*) Includes EUR 182 million and EUR 126 million (GTC SA) which was reclassified from long to short term loan with respect to a breach of existing covenants. A letter of consent for the breach with respect to the EUR 182 million has been received in November 2011. GTC SA received a waiver for EUR 25 million after reporting date, and expects to have reached agreements with the banks for the remainder in the coming 2-3 months. Reference is made to note 7 in the Financial Statements. From the total debt payable after September 30, 2015, the total amounts due in the next five years are respectively EUR 124 million, EUR 107 million, EUR 88 million, EUR 259 million and EUR 79 million.

* Upon considering the impact of the hedge instruments on the level of Kardan N.V. the liability

on the level of Kardan N.V. is reduced to EUR 492 million. ** Not including the liabilities of Kardan Yazamut which was spun-off after the balance sheet

date, in October 2011.


Net debt 4 The following table summarizes the net debt of Kardan NV and if applicable of its directly held subsidiaries (company only) as of September 30, 2011:

Company Net Debt (in EUR million )

Kardan NV Liabilities: Debentures (*) Loans from banks

(507)

(30) Assets: Loan to KFS Cash and short term investments

93 45

Net debt (399)

GTC RE Holding Liabilities: Loans from banks Assets: Cash and short term deposits Loans to subsidiary Debentures of Kardan NV Net debt / cash

(100)

50 34 25

9

KFS Liabilities:

Loans from Kardan NV Loans from banks and others

(93) (46)

Assets:

Cash and short term investments Loans to minority in subsidiary Loans to TBIF

-

12 93

Net debt (34)

TGI Liabilities:

Loans from others

(and related warrants)

Assets:

Loan to related party

Net debt

(19)

-

(19)

(*) Approximately 87% of the debentures are presented in EUR in accordance with the currency hedging transactions.

4 Net debt includes interest bearing loans and borrowings, debentures and convertible debentures, less cash and cash

equivalents and interest bearing receivables


1.7 Risk Management

The Company has three main fields of activity (divisions) divided into five segments. Each segment is managed by an executive director or Board of Directors which is responsible for managing its market segment risks. In addition, in each operating company a senior manager is responsible for managing its risks. One of the members of the management board of Kardan is responsible for risk management of Kardan. The annual report for 2010 describes the main risks relating to Kardan’s strategy, such as interest rate and currency risks, capital availability and financial market risks etc. These risks are deemed incorporated and repeated in this Press Release by reference. Kardan is focused on further expanding its businesses in emerging markets. By nature, these markets are relatively underdeveloped and unstable in various aspects and therefore often exposed to risks arising from unforeseen changes such as (geo) political, regulatory, legal and economic changes. Through its investments in emerging markets, Kardan is exposed to a relatively high degree of inherent risk which is managed among others by the strong local footprint. The current and future developments in the global financial markets could possibly have additional adverse economic implications possibly leading to a further slowdown in the world economy in general. These global economic factors could possibly have future negative consequences for the activities and results of Kardan, its equity base, the value of its assets, its ability to comply with the covenants agreed upon with lenders and its ability to raise financing, as well as the terms of such financing. Kardan NV closely follows the changing global economic developments and carefully reviews and monitors the impact of the crisis on its financing position, valuation of assets, and liquidity position. Contacts between the Management Board and the local management of its subsidiaries remain intensive, to discuss the latest development and expectations in the respective markets as well as the (financial) resilience of these subsidiaries. Credit risk, interest-rate risk, liquidity risk and foreign currency risk form a selection of the main financial risks. For a more comprehensive overview of the main risks the Group is exposed to, reference is made to the 2010 Annual Report, notably the consolidated financial statements and the management board report and the 2010 Israeli Annual Report (Barnea). In addition, there may be other significant risks Kardan has not yet identified or that have not been assessed as having a significant potential impact on the business but which in a later stage could materialize as such. Disclaimer This report contains forward looking information as defined in the Israeli Securities Act, based on macro economic data relevant to each geographical region in which Kardan N.V. is active, the management's experience and the condition of the local and global market. The aforesaid may not materialize completely or part thereof, or materialize in a different manner, including materially different from what is expected as a result of changes in the state of the market, new regulations, continuation and/or worsening of the global economic crisis or incorrect assessments by management. This report also contains information regarding market developments which are based on external party research which was published in the following reports. Real Estate: IMF; Macro Economic Forecast September 2011, World economic outlook. European Commission; European Economic Forecast, Autumn 2011 KBC; Economic Outlook update, November 2011 EBRD; Regional Economic Prospects in EBRD countries of operations, October 2011 Jones Lang LaSalle; City Reports Q3-2011 CB Richard Ellis; EMEA rents and yields, Q3-2011 KBC; CEE Real Estate, September 2011


ZY Real Estate Group; Weekly News

Water Infrastructure Nomura (Water & Environment | Asia, February 2011), Global Water Intelligence, (Volume 12, Issue 9, September 2011) www.globalwaterintel.com Financial Services EBRD; Regional Economic Prospects in EBRD countries of operations, October 2011 European Commission; European Economic Forecast, Autumn 2011 Automotive market

Car Importers Association (Israel), website

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


PART 2 ADDITIONAL INFORMATION 2.1. Financial analysis 2.1.1 Following is a summary of Kardan N.V.’s consolidated balance sheet (in EUR million)

30.9.11 30.9.10 31.12.10 Notes

Total balance sheet

4,940 5,939 5,999 The decrease as of September 30, 2011 compared to December 31, 2010 is mainly a result of the sale of VAB; its assets accounted for EUR 578 million in December 2010; and the sale of Avis Israel, which resulted in a decrease of EUR 476 million.

Current assets

2,195 2,053 2,298 The decrease as of September 30, 2011 compared to December 31, 2010 is mainly a result of the sale of VAB whose assets, which were presented as current assets, accounted for EUR 578 million on December 31, 2010. The decrease was offset by the classification of the assets of Kardan Yazamut as assets held for distribution in the amount of EUR 493 million.

Non-current assets

2,745 3,886 3,701 The decrease is mainly a result of the sale of Galeria Mokotow and 50% of Galeria Chengdu and impairment of investment properties, as well as classification of the non-current assets of Kardan Yazamut as assets held for distribution.

Current liabilities

1,798 1,667 1,949 The decrease as of September 30, 2011 compared to December 31, 2010 is mainly a result of the sale of VAB whose liabilities, which were presented as current liabilities, amounted to EUR 575 million on December 31, 2010. The decrease was offset by the classification of the liabilities of Kardan Yazamut, amounting to EUR 422 million, as liabilities associated with assets held for distribution.

Other debentures

816 1,045 1,016 The decrease as of September 30, 2011 compared to December 31, 2010 is mainly a result of classification of the debentures of Kardan Yazamut as liabilities associated with assets held for distribution and exchange differences on the NIS and Polish Zloty.

Interest-bearing loans and borrowings

889 1,753 1,582 The decrease as of September 30, 2011 compared to December 31, 2010 is mainly as a result of classification of long term loans as current liabilities due to breach of covenants [EUR 309 million] , as a result of early repayment of loans within the Group and as a result of classification of the loans of Kardan Yazamut as liabilities associated with assets held for distribution.

Equity attributable to equity holders of the parent

267 358 334 The decrease as of September 30, 2011, compared to December 31, 2010 is mainly a result of the net loss in the period.


2.1.2 Income Statement of Business Operations (in EUR million):

Notes

Year 2010

Q3 - 2010

Q3 - 2011

9M - 2010

9M - 2011

Revenues

The slight decrease in sale of goods in 9M-2011 vs. 9M-2010 is mainly a result of decrease in delivery and sale prices of apartments for which income could be recognized.

83 10 15 41 39 Sale of goods

This income represents revenues from projects in the (Water) Infrastructure segment operated by Tahal Group. The decrease in 9M-2011 in comparison to 9M-2010 is a result of delays in some projects and devaluation of the USD.

134 34 33 98 85 Contract revenues

The increase in revenues from banking and retail lending activities in 9M-2011 vs 9M-2010 is mainly a result of the proportional consolidation of Sovcombank which is in effect since September 2010. In the first 3 quarters of 2010 the results of Sovcombank are presented as discontinued operations.

35 1 31 18 86 Banking and retail lending activities

The increase in property rental revenues in 9M-2011 in comparison to 9M-2010 is mainly as a result of completion of construction and leasing of a number of retail and commercial projects during 2010 which generated rental income starting 2010 and 2011.

131 34 35 97 107 Property rental revenues

This income represents the revenues generated by Avis Ukraine.

8 2 2 8 5 Other income

391 81 116 262 322 Total Revenues


Expenses

See explanations for the changes in sale of goods.

75 10 13 39 34 Cost of goods sold

See explanations for the changes in revenues from contract works.

105 27 24 77 67 Contract costs

See explanations for the changes in revenues from banking and lending activities.

47 9 24 27 63 Cost of banking and lending activities

See the explanations for the changes in rental revenues; in addition there were some bad debt charges in Romania.

33 8 9 23 30 Cost of property rental operations

See explanations for the changes in revenues from sale of vehicles

8 4 42 9 63 Other expenses, net

- 268 58 112 175 257 Total expenses

- 123 23 4 87 65 Gross margin

- 20 5 5 13 14 Selling and

marketing expenses

The increase in general and administration expenses is mainly due to employee option plans approved late 2010 and in 2011, and bonuses which are payable in 2011.

57 10 10 34 44 General and administration expenses

Notes Year 2010

Q3 - 2010

Q3 - 2011

9M - 2010

9M - 2011

- 46 8 (11) 40 7 Profit (loss)

from operations before fair value adjustments, disposals of assets and financial expenses


Results of Business Operations (in EUR million) (cont'd):

Notes Year

2010

Q3 -

2010

Q3 -

2011

9M -

2010

9M -

2011

Finance income in 9M-2011 is mainly the result of interest on

the cash balances of the group.

22 9 1 27 17 Financial Income

The financial expenses in 9M- 2011 are the financing costs of loans and debentures in the group.

(143) (19) (41) (104) (108) Financial expenses

- (1) 2 (2) - (2) Adjustments to fair value of other financial instruments

- (122) (8) (42) (77) (93) Total financial expenses, net

- (26) (21) (146) (32) (207) Profit (loss) from operations

Substantially all investment properties in GTC Group were revaluated to their fair value and resulted in a loss of EUR 110 million in 9M-2011largley due to worsening of the macro economic situation in Europe.

71 4 (100) 31 (110) Adjustment to fair value of investment properties

In 9M-2011 the impairment losses on goodwill relate primarily to the holding in Sovcombank, in order to align its book value to the price set in the sale agreement.

(28) (17) (11) (20) (33) Impairment losses on goodwill

In 9M-2011the gain on disposal of assets and other income relates primarily to gains on assets sold in GTC China.

7 (8) 18 (6) 22 Gain on disposal of assets and other income

- 50 (21) (93) 5 (121) Profit (loss) on

disposal of assets and investments

-

96 (13) (104) 45 (114) Profit (loss) before finance expenses and income taxes


The decrease in equity profits relate to a decrease in the results of the real estate associates in the GTC Group.

6 2 (1) 6 (1) Share of profit (loss) of associates accounted for using the equity method

- (20) (19) (147) (26) (208) Net profit (loss) before income taxes

Main tax expenses/benefits are a result of provision for deferred taxes due to revaluation/devaluation of investment properties. The tax expenses in 9M-2011 increased due to the proportional consolidation of Sovcombank which is in effect since September 2010. In the first 3 quarters of 2010 the results of Sovcombank are presented as discontinued operations.

24 3 20 18 26 Income tax (benefit) expenses

- (44) (22) (167) (44) (234) Net profit (loss) for the year from continuing operations

In 2011 the profit derives from the sale of VAB bank which was completed in Q1 2011and the results of Kardan Yazamut which are presented as discontinued operation due to the distribution.

15 48 14 72 9 Net profit (loss) for the year from discontinued operations

- (29) 26 (153) 28 (225) Net profit (loss) for the period

See also analysis of the net result to the equity holders of Kardan N.V.

(27) 23 (31) 24 (67) Net profit (loss) attributed to equity holders of the parent

- (2) 3 (122) 4 (158) Net profit (loss) attributed to non controlling interest holders


2.1.3. Cash flow and source of funding (in EUR million)

1-9

2011

1-9

2010

6-9

2011

6-9

2010

1-12

2010

Notes

Net cash provided by (used in) operating activities

(55)

24

(18)

54

(2) -

Net cash used in investing activities

(178) (231) 3 (74) (16) In 9M 2011, EUR 160 million were generated disposal of formerly consolidated subsidiaries, , EUR 183 million were used for acquisition of tangible fixed assets and investment properties, EUR 137 million were used in loans to bank customers.

In 9M-2010, EUR 143 million were used for acquisition of tangible fixed assets and investment properties , EUR 137 million were used for change in long term loans and receivables, EUR 28 million were generated from change from proportional to full consolidation of a subsidiary.

In 2010, EUR 196 million were used for acquisition of tangible fixed assets and investment properties and EUR 124 million were used for loans to bank customers.

In addition, EUR 237 million was generated from sale of assets and investments and EUR 69 were generated from Disposal of formerly consolidated subsidiaries, net of cash disposed.

Net cash provided by financing activities

129 206 40 18 120 In 9M 2011, EUR 189 million were generated from issuance of shares in subsidiaries to third parties, EUR 83 million were generated from issuance of debentures,, EUR 237 million were generated from proceeds of long term loans, EUR 391 million were used in repayment of long term loans .

In 9M-2010, EUR 158 million were generated from change in loans to bank customers, EUR 282 million were generated from proceeds of long term loans, EUR 196 million were used in repayment of long term loans.

In 2010, EUR 275 million were generated from change in loans to bank customers, EUR 29 million were generated from sale of hedge instruments, EUR 448 million were used in repayment of long term loans and EUR 184 million were used in repayment of short term credit.

In the consolidated financial statements the company presents negative cash-flow used in operating activities. The Management Board of Kardan NV believes there is no reason for concern that Kardan NV will not be able to meet its current financial obligations and those expected in the next two years.


This assumption is based on the projected cash flow forecast of Kardan NV, listing its sources and uses as of September 30, 2011 and its unrestricted assets.


2.2 Fair Value disclosure

Completed Investment properties: Kardan Land China:

Country City Asset name

Asset use

GTC China Share

Type of ownership

Net rentable

area (sqm) (*)

Gross rentable

area (sqm) (*)

Construction cost (Million

Euro) (*)

Occupancy rate

Project book value (Million

Euro) (**)

Av. rent per

SQM (Euro) during Jan-Sept (***)

NOI per SQM per

month (Euro)(***)

Jan-Sept 2011 NOI

(Million Euro) (***)

Valuation method

(**)

External valuator

(**)

Date of last valuation

(**)

China Chengdu Galleria

Chengdu Shopping

Center %50 Leasing 35,779 53,837 78.3 96% 127.8 15.5 9.8 2.2 n/a n/a n/a

(*) Kardan Land China portion is 50%. The above numbers represent the entire project (100%) (**) On June 9, 2011, GTC China entered into a share purchase agreement with a third party to sell 50% of Chengdu Shopping Center. The asset was revalued based on the agreed value. (***) For areas which are already under operation. (***) Since the property began to operate by the end of 2010, some of the financial data is not yet represented GTC SA:

Country City Asset name

Asset use

GTC SA Share

Type of ownership

Net rentable

area (sqm)

Gross rentable area

(sqm)

Construction cost (Million

Euro)

Occupancy rate

Yield Projectbook value

(Million Euro)

Av. rent per

SQM (Euro) during Jan-Sept

****

NOI per

SQM per

month (Euro)****

Jan-Sept 2011 NOI

(Million Euro)

****

Valuation method

External valuator

Date of last

valuation

Romania Arad Galleria

Arad

Shopping Center

%100 Ownership 32,500 42,000 85 %95 %9 62.3 N/A N/A N/A DCF Colliers 30.09.2011(****) Since the property began to operate at the beginning of Q4 2011, some of the financial data is not yet represented.


2.3. Issuance of debt

The following are details regarding the marketable debentures of Kardan NV as of September 30, 2011:

Debenture series A Debenture series B

Par value of issued debentures EUR 236 million (NIS 1,190,000,000)

EUR 264 million (NIS 1,333,967,977)

Linkage basis

Principal and interest linked to Israeli CPI (CPI of January 2007)

Principal and interest linked to Israeli CPI (CPI of December 2006)

Par value of debentures as of September 30, 2010

EUR 236 million (NIS 1,190,000,000 par value)

EUR 264 million (NIS 1,333,967,977 par value)

Debentures held by subsidiary 70,333,863 par value 48,311,699 par value

Interest rate (per annum) 4.45% 4.9%

Principal repayment Four equal installments from: From February 2013 to February 2016

Seven equal installments from: From February 2014 to February 2020

Interest payment dates Nine annual installments from February 2008 to February 2016

13 annual installments from February 2008 to 2020

Total debt up to the date of the balance sheet (including interest and Israeli CPI linkage)

EUR 284 million (net of debentures held by a subsidiary) (*)

EUR 312 million (net of debentures held by a subsidiary) (*)

Market capitalization as of September 30, 2011

EUR 257 million EUR 277 million

The trustee Aurora Fidelity Trustees Ltd (CPA Daniel Vafnish +972-3-6083252)

Hermatic trustee (1957) (Adv. Dan Avnun +972-3- 5274867)

Rated by S&P Maalot S&P Maalot

Rating at the time of issuance AA - (February 2007) AA - (February 2007)

Updated rating BBB + (January 2011) BBB+ (January 2011)

Debenture holders conference

On July 28, 2011 a conference of debenture holders was held at the request of the trustee. In order to discuss the impact of the planned split of Kardan NV’s Israeli activities and other issues. No decisions were made in the meeting.

(*) Approximately 87% of the debentures are swapped to EUR using hedge transactions.


November 30, 2011 Management Board: A. Ickovics W. van Damme E. Oz-Gabber J. Slootweg

Documents

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