FINANCIAL STATEMENTS Statutory Auditors’ report on the consolidated financial statements 3 3.2 Statutory Auditors’ report on the consolidated financial statements This is a translation into English of the statutory auditors’ report on the consolidated financial statements of the Company issued in French and it is provided solely for the convenience of English speaking users. This statutory auditors’ report includes information required by European regulation and French law, such as information about the appointment of the statutory auditors or verification of the information concerning the Group presented in the management report. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France. To the Annual General Meeting of Klépierre, Opinion In compliance with the engagement entrusted to us by your Annual Independence General Meeting, we have audited the accompanying consolidated financial statements of Klépierre for the year ended December 31, 2017. We conducted our audit engagement in compliance with independence rules applicable to us, for the period from January 1, In our opinion, the consolidated financial statements give a true and 2017, to the date of our report and specifically we did not provide fair view of the assets and liabilities and of the financial position of any prohibited non-audit services referred to in Article 5 (1) of the Group as at December 31, 2017 and of the results of its operations Regulation (EU) No. 537/2014 or in the French Code of Ethics (Code for the year then ended in accordance with International Financial de déontologie) for Statutory Auditors. Reporting Standards as adopted by the European Union. The audit opinion expressed above is consistent with our report to Justification of assessments – the Audit Committee Key audit matters Basis for opinion In accordance with the requirements of Articles L. 823-9 and R. 823- 7 of the French Commercial Code (Code de commerce) relating Audit framework to the justification of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our We conducted our audit in accordance with professional standards professional judgment, were of most significance in our audit of the applicable in France. We believe that the audit evidence we have consolidated financial statements of the current period, as well as how obtained is sufficient and appropriate to provide a basis for our we addressed those risks. opinion. These matters were addressed in the context of our audit of the Our responsibilities under those standards are further described in the consolidated financial statements as a whole, and in forming our Statutory Auditors’ Responsibilities for the Audit of the Consolidated opinion thereon, and we do not provide a separate opinion on specific Financial Statements section of our report. items of the consolidated financial statements. Measurement of investment properties Risk identified Our response As at December 31, 2017, the Group’s carrying amount of investment We assessed management’s controls over data used for the valuation properties accounted at fair value amounted to €21,494 million (in respect of of investment properties and controls over management’s analysis €20,390 million as at December 31, 2016) with a change in fair value recognised of the variances in values in comparison with prior periods. in net profit for €836 million. The audit team, including our real estate valuation specialists, attended In addition, the fair value of investment properties held by joint ventures meetings with the appraisers to understand the methodology applied, the main and associates, which are accounted for using the equity method, amounted to assumptions underlying their valuations and more particularly, amongst €1,389 million (in respect of €1,425 million as at December 31, 2016) other inputs, market trends, recent market transactions, and market yields. as mentioned in Note 5.4.4 to the consolidated financial statements. We assessed the competence, independence and integrity of the third-party The Group’s investment property portfolio is composed of shopping centers appraisers. across sixteen countries, mainly in Europe. We performed procedures to reconcile the valuations concluded The determination of the fair value of investment properties requires significant by appraisers with the consolidated financial statements. judgement, due to a large number of assumptions/estimates such as market We performed analytical procedures comparing assumptions and fair values rent levels, expected capital expenditures, as well as prevailing market yields and on a year-on-year basis. We benchmarked the latest assumptions used to market transactions. For development assets, other factors such as projected relevant market information. We performed specific procedures on the largest costs to complete, leasing status and risks until completion are also considered. properties in the portfolio, where the valuation and variances were significant, The valuations retained by management are carried out by third-party appraisers and those where the assumptions used and/or year-on-year movement in values at six-month intervals. suggested a possible outlier versus market data for the relevant sector. Accordingly, the valuation of investment properties is considered to be When required, we planned further discussions with management. a key audit matter due to the significance of the item in the financial statements For assets not subject to appraisal managed at the head office, under our instruction, as a whole, combined with the level of judgement exercised for determining we involved component auditors in the performance of similar procedures. the fair value. Refer to Note 5.4. to the consolidated financial statements. Additionally, assessed the appropriateness of the disclosures in the consolidated financial statements in respect of investment properties. KLÉPIERRE 2017 REGISTRATION DOCUMENT 129