Independent
auditors’ report

To the Board of Directors and Stockholders of Grupo Carso, S. A. B. de C. V.

Opinion

We have audited the accompanying consolidated financial statements of Grupo Carso, S.A.B. de C.V. and Subsidiaries (the Entity or Grupo Carso), which comprise the consolidated statements of financial position as of December 31, 2017, 2016 and 2015, the consolidated statements of profit and other comprehensive income, the consolidated statements of changes in stockholders’ equity and the consolidated statements of cash flows for the years then ended, as well as the explanatory notes to the consolidated financial statements, which include a summary of the significant accounting policies used.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of Grupo Carso, S.A.B. de C.V. and Subsidiaries as of December 31, 2017, 2016 and 2015, as well as their consolidated financial performance and consolidated cash flows for the years then ended, in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

Basis for opinion

We have conducted our audits in accordance with International Standards on Auditing (ISA). Our responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Entity in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code of Ethics) and the one issued by the Mexican Institute of Public Accountants (IMCP Code of Ethics), and we have complied with the other ethical responsibilities in accordance with the IESBA Code of Ethics and with the IMCP Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other matter

The accompanying consolidated financial statements have been translated into English for the convenience of readers.

Composition of Grupo Carso

As indicated in Note 1 to the consolidated financial statements, Grupo Carso is a diversified conglomerate comprised of four sectors, which have been defined as strategic. In the accompanying consolidated financial statements, the four sectors which are consolidated are: Commercial, Industrial, Infrastructure and construction and Energy.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the year 2017. These matters were selected from those communicated to the Management and Audit Committee of the Entity, but are not intended to present all the matters discussed with them. Our audit procedures related to these matters were designed in the context of our audit of the consolidated financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined that the matters described below are the key audit issues which should be communicated in our report.

• Commercial Sector:
  Revenue recognition
  Presentation and completeness of the revenues reported in the financial statements
  (see Note 24 to the consolidated financial statements)
  We assumed a risk of material misstatement related to revenue recognition and evaluated the types of revenues, revenue transactions or representations giving rise to such risks.
  We ascertained the completeness of the revenues based on tests related to the daily point-of-sale closing process and the parameters used as a control by the system, as well as aspects related to the cutoff in the appropriate accounting period and their realization in cash or through accounts receivable. We analyzed the accurate presentation of the revenues in the financial statements. The results of our audit procedures were reasonable.
  Allowances for doubtful accounts
  (see Note 8 to the consolidated financial statements)
  The Entity carries out sales of goods and services based on credit, resulting in accounts receivable and the corresponding allowance for doubtful accounts, which are determined once the loans have been made and the receivables show arrears regarding their recovery. The factors considered by the Entity in the allowance for doubtful accounts are mainly collection delays based on the credit conditions established, unsecured accounts and other relevant economic conditions.
  We ascertained and confirmed that the allowance for doubtful accounts is calculated and recorded in accordance with the accounting policies and operations of the Entity, and we conducted maturity analysis tests and also reviewed the appropriate classification of the overdue receivables which support the parameters applied to determine the allowance for the current year. The results of our audit procedures were reasonable.
  Property and equipment
  (see Note 14 to the consolidated financial statements)
  During the year and as a result of its normal operations, the Entity has opened, closed, remodeled, expanded and transformed some of its stores in their different formats; consequently, we have identified as a risk the appropriate control, recording and disclosures related to those operations in the financial statements, given the materiality of the amounts invested.
  The procedures applied to validate the appropriate recording consisted of: 1) review of the amounts budgeted against the amounts invested and the review of internal controls for each project; 2) selective physical inspection of the newly opened or remodeled stores; 3) review of the appropriate and timely capitalization of each project to begin its depreciation; and 4) review of the correct handling and recording of the assets write offs during the closure or remodeling of the stores. The results of our audit procedures were reasonable.
• Industrial Sector:
  Revenue recognition
  Presentation and occurrence of the revenues reported in the financial statements
  (see Note 24 to the consolidated financial statements)
  We assumed a risk of material misstatement related to revenue recognition and assessed which types of revenues, revenue transactions or representations give rise to such risks.
  Our audit procedures included test of details and analytical tests, in order to validate the recognition of revenues inherent to the transfer of risks and benefits of ownership. We also analyzed the proper presentation of revenues in the financial statements. The results of our audit procedures were reasonable.
  Inventories and cost of sales
  (see Note 9 and 25 to the consolidated financial statements)
  We identified as a risk the physical existence of raw materials and finished product inventories, as well as the net realizable value of the finished product inventory, and the correct determination of the cost of sales of the Entity for the following reasons; a) recording of nonexistent inventories, b) high demand for its basic raw material (copper), c) incorrect classification of the production process, based in the different elements comprising cost of sales, such as raw material, labor force, and manufacturing expenses (fixed and variable), d) recording of cost of sales for finished products not shipped, e) recognition of the cost of sales derived from nonexistent sales, and f) errors in the determination of cost of sales.
  Our procedures included tests of details focusing on the physical inspection of raw materials and finished product inventories; we also tested the net realizable value of the finished products and based on analytical tests, we validated that the cost of sales matched the revenues recorded. The results of our audit procedures were reasonable.
• Infrastructure and construction sector:
  Recognition of construction revenues
  (see Note 24 to the consolidated financial statements)
  We identified that there is a risk of revenue recognition associated with the recorded costs incorporated in the Stage of Completion, and the associated account receivable for the Non Billed Stage of Completion (OENF, by its acronym in Spanish), for the following reasons: a) they represent work not authorized by the customers or, there is not appropriate documentation for revenue recognition or its possible collection, b) they includes costs valued at prices different from those agreed, or c) they have profit margins assigned when only their cost is recoverable.
  Our review included detail tests focusing on the costs incurred, and we checked that the related documentation included that supported the occurrence and validity of the revenue. Also, we reviewed the lists of agreed prices and confirmed that the costs incurred were approved by the customer, as the case may be. Additionally, given the nature of the risk, we included procedures designed to review the revenue recognition trend of certain projects to address additional considerations. Finally, we carried out procedures focusing on the OENF receivable balances, with regard to the evidence of their collectability. The results of our audit procedures were reasonable.
• Energy Sector:
  Impairment of long-lived assets in the subsidiary Tabasco Oil Company (TOC)
  (see Note 4u. to the consolidated financial statements)
  Given the significance of the balance of Exploration expenses and equipment, it is important to ensure that the deterioration of these concepts is reviewed in an adequate manner to identify potential deterioration, it is worth mentioning that TOC restarted activities in July 2017.
  The determination of whether the book value of exploration and equipment expenses is recoverable requires management to make significant estimates regarding future cash flows, discount rates and their growth, based on management’s point of view of the future prospects of the business.
  As the Group’s auditors, given that TOC is audited by other independent auditors, we met with the management of the Entity and analyzed the working papers and conclusions of the other auditors, and reviewed the assumptions used by management in the impairment model, including specifically the cash flow projections, discount rates and long-term revenue growth.
  Our fair value appraisal specialists assisted us with an independent assessment of the discounts rates used and the methodology used in the preparation of the impairment test model. We also tested the integrity and accuracy of the impairment model.
  The results of our audit tests were reasonable, including that the assumptions used, such as the discount rate, which originated the recording of impairment on exploration expenses in the year.
  Joint Ventures in gas pipelines
  Analysis of differences between USGAAP and IFRS’s and income recognition
  (see Note 4g. to the consolidated financial statements)
  We assume a risk of material error related to the recognition of the method of participation in joint ventures in gas pipelines and we evaluate what types of income, income transactions or assertions give rise to such risks.
  Our audit procedures included, among others, a review of the Entity’s policies to evaluate the differences between the information prepared by joint ventures using USGAAP and the IFRSs used by the Group. Likewise, the conclusions reached by the joint ventures on the recognition of their income were reviewed. The results of our audit procedures were reasonable.

Information different from the consolidated financial statements and the auditors’ report

Management is responsible for the other information. The other information will include the information that will be incorporated into the Annual Report that the Entity is required to prepare in accordance with Article 33, section I, subsection b) of Title Fourth, Chapter First of the General Provisions Applicable to Issuers and Other Stock Market Participants in Mexico, and the Instructions which accompany those provisions (the Provisions). The Annual Report is expected to be available for consultation after the date of this audit report.

Our opinion on the consolidated financial statements will not cover the other information and we will not express any form of assurance thereon.

In relation to our audit of the consolidated financial statements, our responsibility is to read the Annual Report, and when doing so, to consider if the other information contained therein is materially inconsistent with the consolidated financial statements or with our knowledge obtained during the audit, or appears to contain a material misstatement. When we read the Annual Report we will issue the legend on the reading of the Annual Report required by Article 33, section I, subsection b) numeral 1.2. of the Provisions.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity’s consolidated financial reporting process.

Auditors’ responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention to our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going concern.
• Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the relevant transactions and events in a manner that achieves a fair presentation.
• Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Entity to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and have communicated with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 2017 consolidated financial statements and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu Limited

C.P.C. Manuel Nieblas Rodríguez

March 23, 2018

Galaz, Yamazaki,
Ruiz Urquiza, S.C.
Paseo de la Reforma 505
Piso 28
Colonia Cuauhtémoc
06500 México, Ciudad de México
México

Tel: +52 (55) 5080 6000
www.deloitte.com/mx