Pioneer Property Group ASA

Audit Report / Information • Mar 20, 2017

lndependent Auditor's Report

To the GeneralMeeting of Pioneer Property Group ASA

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Pioneer Property Group ASA. The financial statements comprise:

• The financial statements of the parent company, which comprise the batance sheet as at 31 December 2016, and the income statement, statement of changes in equity and cash ftow statement for the year then ended, and notes to the financiat statements, inctuding a summary of significant accounting poticies, and a
• The financia[ statements of the group, which comprise the batance sheet as at ³¹ December 2016 and income statement, statement of changes in equity, cash ftow for the year then ended, and notes to the financial statements, including a summary of significant accounting poticies. a

ln our opinion:

• The financial statements are prepared in accordance with the law and regulations.
• The accompanying financial statements give a true and fair view of the financial position of the parent company as at 31 December 2016, and its financial performance and its cash ftows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generatty accepted in Norway.
• a The accompanying financial statements give a true and fair view of the financial position of the group as at 31 December 201ó, and its financial performance and its cash flows for the year then ended in accordance with lnternational Financiat Reporting Standards as adopted by the EU.

Basis for Opinion

We conducted our audit in accordance with [aws, regutations, and auditing standards and practices generaIty accepted in Norway, including lnternationaI Standards on Auditing (lSAs). Our responsibitities under those standards are further described in the Auditor's Responsibilitíes for the Audit of the Financial Statements section of our report. We are independent of the Company as required by laws and regulations, and we have futfitted our other ethicaI responsibitities in accordance with these requirements. We betieve 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 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 whote, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Description of key audit matter How the key audit matter was addressed in the audit

Valuation of investment properties The Group's vatue of investment properties in the financial statements amounts to NOK 4 042 640 000 equivalent to 91,4% of lhe group's total assets. The valuation of the properties is performed by an external party, Newsec, and is described in note 12 to the financial statements. The amount and the complexity and judgement involved in the vatuation, lead us to identify this as a risk area in our audit.

Our audit procedures inctuded, among others, involving our internaI valuation specialists to assist us in evatuating the assumptions and methodologies used by Newsec, in particutar those retating to the discounted cash flow modet and market based yietd for the rental properties. We atso focused on the adequacy of the Group's disctosures about those assumptions to which the outcome of the valuation is most sensitive, that is, those that have the most significant effect on the determination of the value of the properties. We have atso evatuated Newsec's competence and independence in performing the valuation of the investment rties

Bon d Pioneer Property Group ASA has issued one bond on the Oslo Stock Exchange in the amount of NOK 1 000 000 000 equivatent to 39,0% of total group tiabitities. Due to the substantiaI amount, and the structure and terms of the bond agreement, this issue was deemed significant to our audit. The bond is described in note 9 to the financial statements.

Our audit procedures included, among others, a review of the bond agreement focusing on the [imitations for the group, as wetl as our own catculations to ensure that att the covenants in the bond agreement were met, and that the classification were in accordance with IFRS requirements.

Other information

Management is responsibte for the other information. The other information comprises the Board of Directors' report, statements on Corporate Governance and Corporate Social Responsibility, but does not inctude the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conctusion thereon.

ln connection with our audit of the financial statements, our responsibitity is to read the other information and, in doing so, consider whether the other information is materiatty inconsistent with the financial statements or our knowtedge obtained in the audit or otherwise appears to be materially misstated.

lf, based on the work we have performed, we conctude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibitities of the Board of Directors and the Managing Director for the Financial Statements

The Board of Directors and the Managing Director (management) are responsibte for the preparation and fair presentation of the financial statements of the parent company in accordance with Norwegian Accounting Act and accounting standards and practices generatty accepted in Norway, and for the preparation and fair presentation of the financiaI statements of the group in accordance with lnternational Financial Reporting Standards as adopted by the EU, and for such interna[ 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.

ln preparing the financial statements, management is responsible for assessing the Company's and the Group's abitity to continue as a going concern, disctosing, as appticabte, matters related to going concern. The financial statements of the parent company use the going concern basis of accounting insofar as it is not tikety that the enterprise wit[ cease operations. The financial statements of the group use the going concern basis of accounting unless management either intends to tiquidate the Group or to cease operations, or has no reatistic alternative but to do so.

Auditor's Responsibitities for the Audit of the FinanciaI Statements

Our objectives are to obtain reasonable assurance about whether the financiaI statements as a whote are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that inctudes our opinion. Reasonable assurance is a high [eve[ of assurance, but is not a guarantee that an audit conducted in accordance with [aws, regutations, and auditing standards and practices generatly accepted in Norway, inctuding lSAs witt atways detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individuatly or in aggregate, they coutd reasonabty be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with [aws, regutations, and auditing standards and practices generalty accepted in Norway, inctuding lnternationaI Standards on Auditing (lSAs), we exercise professionaI judgment and maintain professional scepticism throughout the audit. We atso:

• ^a identify and assess the risks of materiaI misstatement of the financial statements, whether due to fraud or error. We 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 materiat misstatement resutting from fraud is higher than for one resulting from error, as fraud may involve coltusion, forgery, intentionaI omissions, misrepresentations, or the override of internaI controt.
• obtain an understanding of internal control retevant 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 Company's internat controt. a
• evaluate the appropriateness of accounting poticies used and the reasonableness of accounting estimates and retated disctosures made by management. a
• conctude 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 retated to events or conditions that may cast significant doubt on the Company's abitity to continue as a going concern. lf we conctude that a material uncertainty exists, we are required to draw attention in our auditor's report to the retated disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conctusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern. a
• evatuate the overall presentation, structure and content of the financial statements, inctuding the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. a
• obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financiaI statements. We are responsible for the direction, supervision and performance of the group audit. We remain solety responsibte for our audit opinion. ¡

We communicate with the Board of Directors regarding, among other matters, the ptanned scope and timing of the audit and significant audit findings, including any significant deficiencies in internaI control that we identify during our audit

We atso provide the Board of Directors with a statement that we have complied with retevant ethicaI requirements regarding independence, and to communicate with them atl retationships and other matters that may reasonabty be thought to bear on our independence, and where applicabte, related safeguards.

From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's

report untess law or regulation prectudes pubtic disclosure about the matter or when, in extremety rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so woutd reasonably be expected to outweigh the pubtic interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

Opinion on the Board of Directors' report

Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors' report and statements on Corporate Governance and Corporate SociaI Responsibitity concerning the financiaI statements, the going concern assumption, and the proposat for the attocation of the profit is consistent with the financia[ statements and compties with the law and regulations.

Opinion on Registration and Documentation

Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the lnternational Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial lnformation, it is our opinion that management has futfitted its duty to produce a proper and clearly set out registration and documentation of the company's accounting information in accordance with the law and bookkeeping standards and practices generalty accepted in Norway.

Drammen, 20 March 2017 BDO A5

Eti-Ann Murberg Casso State Authorised Public Accountant