Report of the statutory auditor on the financial statements

To the General Meeting of
Allreal Holding Ldt, Baar

Zurich, 13 February 2018


Report of the statutory auditor on the financial statements

As statutory auditor, we have audited the financial statements of Allreal Holding Ldt, which comprise the balance sheet, income statement and notes (pages 134 to 140), for the year ended 31 December 2017.


Board of Directors’ responsibility
The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.


Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


Opinion
In our opinion, the financial statements for the year ended 31 December 2017 comply with Swiss law and the company’s articles of incorporation.


Report on key audit matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the financial statements.

Valuation of equity investments and loans to equity investments

Risk
Management’s impairment testing of equity investments and loans was key for our audit because this item entails significant estimates (including future development of revenue and margins, long-term growth rate and discount rate) and the equity investments and loans to equity investments of CHF 2,216.9m were significant for the statement of financial position.

See notes to the financial statements under 6 “Equity investments”.

Our audit response
Among other audit procedures, we assessed the Company’s process for valuing equity investments and loans to equity investments. We also analyzed the underlying data for testing the impairment of equity investments and loans to equity investments.


Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a para. 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.

We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.

 

Ernst & Young AG

Daniel Zaugg
Licensed audit expert
(Auditor in charge)
Daniel Lanfranconi
Licensed audit expert