(Convenience Translation into English from the Original Previously Issued in Portuguese) São Carlos Empreendimentos e Participações S.A. and Subsidiaries Individual and Consolidated Financial Statements for the Year Ended December 31, 2016 and Independent Auditor’s Report Deloitte Touche Tohmatsu Auditores Independentes (Convenience Translation into English from the Original Previously Issued in Portuguese) INDEPENDENT AUDITOR’S REPORT To the Shareholders, Directors and Management of São Carlos Empreendimentos e Participações S.A. Opinion We have audited the accompanying individual and consolidated financial statements of São Carlos Empreendimentos e Participações S.A. (“Company”), identified as Parent and Consolidated, respectively, which comprise the balance sheet as at December 31, 2016, and the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the individual and consolidated financial statements present fairly, in all material respects, the individual and consolidated financial position of the São Carlos Empreendimentos e Participações S.A. as at December 31, 2016, and its individual and consolidated financial performance and its individual and consolidated cash flows for the year then ended in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board (“IASB”). Basis for Opinion We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Individual and Consolidated Financial Statements section of our report. We are independent of the Company and its subsidiaries in accordance with the relevant ethical requirements in the Code of Ethics for Professional Accountants and the professional standards issued by the Federal Accounting Council (“CFC”), and we have fulfilled our other ethical responsibilities in accordance with these standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Key Audit Matters 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 individual and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. a) Revenue recognition As mentioned in Notes 2.20 and 2.21, the Company recognizes revenue from the sale of properties at the time the sale is completed, regardless of the term for the receipt of the amount established by contract, and revenue arising from operating lease agreements is recognized on a straight-line basis over the lease period. Accordingly, we consider revenue recognition as a key audit matter because the procedures performed by the Company involve specific contractual clauses and system calculations to determine the revenue amount per agreement and the recognition period. The key audit procedures are intended to understand the key control activities performed by Management on the determination of an agreement’s amount and the revenue recognition timing, and conduct tests, on a sampling basis, on the sale and lease agreements entered into to validate the completeness, accuracy, classification, and occurrence of the generated revenue. We also assessed the adequacy of the disclosures made in the financial statements. b) Impairment of investment properties According to Note 2.3, the Company owns investment properties held for earning rent revenue and/or for capital appreciation, which are recognized at cost, less accumulated depreciation, which does not exceed its realizable value. In light of the unfavorable economic environment and the increase in the supply of inventories of commercial real estate units, we understand that there is a significant risk of impairment of such investment properties. Due to the materiality of the balances and the use of internal subjective and market assumptions to determine the recoverable amount of the assets, which involves significant Management judgment, this matter was considered a key audit matter. As part of our audit procedures, we assessed the design of the controls put in place by Management to ensure the completeness and accuracy of the data on the operating lease agreements used to project future cash flows, we conducted tests, on a sampling basis, of the lease agreements used to project future cash flows, and challenged the reasonableness of the assumptions and projections used by Management to prepare the impairment test of investment properties. c) Compliance with covenants in borrowings and financing agreements As disclosed in Note 10, certain borrowings and financing agreements contain accelerated maturity clauses in case of noncompliance with financial and operating ratios. This matter involves the use of assumptions and significant Management judgment to calculate these ratios. The key audit procedures applied were the identification of controls put in place by Management in relation to the preparation and review of the calculations to confirm the compliance with contractual ratios. In addition, we reviewed the borrowing and financing agreements, as well as the relevant covenants, and checked if the financial and operating ratios had been complied with. We also assessed the adequacy of the disclosures made in the financial statements. © 2017 Deloitte Touche Tohmatsu. All rights reserved. 2 Other Matters Statements of value added The individual and consolidated statements of value added (“DVA”) for the year ended December 31, 2016, prepared under the responsibility of the Company’s management and disclosed as supplemental information for purposes of the IFRS, were subject to audit procedures performed together with the audit of the Company’s financial statements. In forming our opinion, we assess whether these statements are reconciled with the financial statements and the accounting records, as applicable, and whether their form and content are in accordance with the criteria set out in technical pronouncement CPC 09 - Statement of Value Added. In our opinion, these statements of value added have been prepared, in all material respects, in accordance with the criteria set out in such technical pronouncement and are consistent in relation to the individual and consolidated financial statements, taken as a whole. Other Information Accompanying the Individual and Consolidated Financial Statements and the Independent Auditor’s Report Management is responsible for such other information. The other information comprises the Management Report. Our opinion on the individual and consolidated financial statements does not cover the Management Report and we do not express any form of audit conclusion thereon. In connection with our audit of the individual and consolidated financial statements, our responsibility is to read the Management Report and, in doing so, consider whether such report is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the Management Report, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Individual and Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance accounting practices adopted in Brazil and International Financial Reporting Standards (“IFRSs”), issued by the IASB, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the individual and consolidated financial statements, Management is responsible for assessing the Company’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 Company and its subsidiaries or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s and its subsidiaries’ financial reporting process. © 2017 Deloitte Touche Tohmatsu. All rights reserved. 3 Auditor’s Responsibilities for the Audit of the Individual and Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s 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 Brazilian and International Standards on Auditing 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