“la Caixa” Banking Foundation Group Consolidated Financial Statements and Consolidated Management Report for the year ended 31 December 2017 Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group in Spain (see Note 2). In the event of a discrepancy, the Spanish-language version prevails. Translation of a report originally issued in Spanish based on our work performed in accordance with the audit regulations in force in Spain. In the event of a discrepancy, the Spanish-language version prevails. INDEPENDENT AUDITOR'S REPORT ON CONSOLIDATED FINANCIAL STATEMENTS To the Board of Trustees of Fundación Bancaria Caixa d’Estalvis i Pensions de Barcelona, ”la Caixa”, Report on the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of Fundación Bancaria Caixa d’Estalvis i Pensions de Barcelona, “la Caixa” (the Foundation) (the Parent) and its subsidiaries (the Group), which comprise the consolidated balance sheet as at 31 December 2017, and the consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of changes in total equity, consolidated statement of cash flows and notes to the consolidated financial statements for the year then ended. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated equity and consolidated financial position of the Group as at 31 December 2017, and its consolidated results and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRSs) and the other provisions of the regulatory financial reporting framework applicable to the Group in Spain. Basis for Opinion We conducted our audit in accordance with the audit regulations in force in Spain. Our responsibilities under those regulations are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements, including those pertaining to independence, that are relevant to our audit of the consolidated financial statements in Spain pursuant to the audit regulations in force. In this regard, we have not provided any services other than those relating to the audit of financial statements and there have not been any situations or circumstances that, in accordance with the aforementioned audit regulations, might have affected the requisite independence in such a way as to compromise our independence. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed 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. Impairment of investments in associates Description Procedures applied in the audit As described in Note 8, the Group has Our audit procedures included, among ownership interests in the share capital of others, the review of the design and associates that amounted to EUR 18,270 implementation of the relevant controls million at 2017 year-end and for which an that mitigate the risks associated with the impairment loss of EUR 111 million was process to assess the impairment of the recognised. investments in associates, as well as tests to verify that the aforementioned controls Determining whether there is any operate effectively. objective evidence of impairment of the net investment giving rise to a loss with an We also obtained and analysed the impact on estimated future cash flows valuations of the aforementioned requires the use of significant judgements investments performed by management of and estimates by management of the the Group, and verified the clerical Group, both in determining future cash accuracy thereof and the appropriateness flow discounting as the valuation method of the valuation method used in relation to and in considering the key assumptions the investment held. In addition, we established for each method in question reviewed the future cash flow forecasts (use of correction factors to adapt the and compared them with external data and comparable data considered, use of historical information of the investees in discount rates, etc.). order to assess the reasonableness thereof. - 2 - Impairment of investments in associates Description Procedures applied in the audit The matters indicated above, and the We checked that the main assumptions significance of the investments held, led us considered in the model are reasonable to determine the situation described to be based on public information on the a key matter in our audit. business sector in which the investee operates and also reviewed the sensitivity analysis prepared by the Group. We involved our in-house valuation experts in the performance of our procedures in order to evaluate the methodology employed by the Group in the analysis conducted, the discount rates considered and the terminal value, expressed in perpetuity growth terms, of the projected future cash flows, where appropriate. Lastly, we evaluated whether the disclosures included in Note 8 to the accompanying consolidated financial statements in connection with this matter are in conformity with those required by the regulatory financial reporting framework applicable to the Group. - 3 - Ownership interest held in the CaixaBank Group Description Procedures applied in the audit As described in Note 1, in 2017 the Group Our audit procedures included, among fulfilled the conditions established by the others, an understanding of the conditions European Central Bank for the established by the European Central Bank deconsolidation of the CaixaBank Group for and the response planned by the Group, prudential purposes. Compliance with the identification of where decisions about these conditions entailed, from an the investee’s relevant activities are made accounting standpoint, the Parent of the and the assessment of the influence, if Group ceasing to have control over the any, that the Parent might have over the CaixaBank Group. Consequently, the CaixaBank Group. Group excluded its investment in CaixaBank, S.A. from the scope of We also assessed the Parent’s consolidation for accounting purposes and representation on the CaixaBank Group’s now considers it to be an associate that is management bodies and the mechanisms accounted for using the equity method in through which the voting rights of its the consolidated financial statements. ownership interest are exercised. In this connection, accounting for the We obtained a legal opinion regarding the ownership interest using the measures implemented by the CaixaBank aforementioned method gave rise to the Group, Fundación Bancaria la Caixa and derecognition from the Group’s Criteria Caixa, S.A. (Sole-Shareholder consolidated financial statements of the Company) in relation to the CaixaBank Group’s assets and liabilities deconsolidation conditions relating to and the recognition of the ownership corporate governance. interest retained at its fair value at the Lastly, we evaluated whether the date when control was lost. This loss of disclosures included in Notes 1 and 8 to control required a complex analysis of the the accompanying consolidated financial Parent’s ability, or otherwise, to exercise statements in connection with this matter power over its investee. For that reason, are in conformity with those required by we considered this matter to be a key the regulatory financial reporting matter in our audit. framework applicable to the Group. - 4 - Valuation of investment property and property inventories Description Procedures applied in the audit The Group manages a portfolio of real Our audit procedures included, among estate assets for lease (“Investment others, the review and assessment of the Property”) and owns a portfolio of land, valuation process for property assets. housing developments in progress and completed housing developments Also, we conducted tests to verify the (“Property Inventories”) located completeness of the information used as throughout Spain, the carrying amounts of the basis for estimating impairment. which at 31 December 2017 were EUR In this connection, with the cooperation of 1,137 million and EUR 1,637 million, our internal experts in the valuation of respectively (see Notes 7 and 11). property assets, we: (i) evaluated the The Group measures its investment competence, capability and objectivity of property at acquisition cost, less the the experts engaged by the Group to value related accumulated depreciation, and its property assets, as well as the recognises impairment losses, where adequacy of their work to be used as audit appropriate, if the market value of the evidence, (ii) analysed and concluded investment property falls below its upon, for a sample of appraisals carrying amount; in addition, the Group determined on a selective basis, the measures its property inventories at the reasonableness of the valuation lower of acquisition cost and net realisable procedures and methodology used by the value, to which end