Independent
Auditors’ Report

To the Stockholders and Board Members of El Puerto de Liverpool, S. A. B. de C. V.

Opinion

We have audited the consolidated financial statements of El Puerto de Liverpool, S. A. B. de C. V. and its subsidiaries (the Company) which comprise the consolidated statement of financial position as of December 31, 2018, and the related consolidated statements of comprehensive income, at changes in equity and of cash flows for the year then ended and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2018, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards 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 Company in accordance with the Ethics Standards of Mexican Institute of Public Accountants together with other requirements applicable to our audit of the consolidated financial statements in Mexico. We have fulfilled our other ethical responsibilities in accordance with these requirements and standards. 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 judgment, 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.

Provision for credit losses

As described in Notes 3.3.2 and 8 to the financial statements, the $40,140 million peso credit portfolio arises from goods and services acquired on credit by Company cardholders. The recoverability of the portfolio is periodically evaluated and the provision for impairment is recorded based on expected credit losses, as established in new IFRS 9 “Financial Instruments”, in effect as from January 1, 2018. That criterion means identifying, for the portfolio, the likelihood of failure to make payments, the severity of the loss and exposure to noncompliance.

During our audit, we mainly focused on that caption considering the value of the credit portfolio and the provision for credit losses, since definition of the calculation parameters used makes it necessary for management to apply significant judgment, and the standard for determining that provision was modified in this period.

Specifically, we concentrated our audit efforts on: 1) the methodology used by management, 2) key entry data: portfolio segmentation, historical cardholder performance, portfolio classification, the behaviour score of credits, the credit limit established and the outstanding balance receivable or capital at the date of calculation and 3) the following key assumptions: prospecting economic scenarios (forward looking).

As part of our audit, we performed the following procedures:

• With the support of our systems specialist, we understood and evaluated the design and functioning of controls implemented by management in the credit revenue cycle by type of portfolio, as well as the credit system, particularly those pertaining to the accuracy and completeness of key entry data used in calculating that provision.
• With the support of our valuation experts, we analyzed the methodology applied by management when calculating the provision for credit losses, as prescribed by IFRS 9.
• We applied selective tests to evaluate key data used, as follows:
  • Segmentation of the portfolio. We checked it against the respective credit files; by type of card (Liverpool Credit Card and Liverpool Premium Card (LPC)).
  • We matched the historical behavior of the cardholder, classification of the portfolio and the behavior score, to the credit system.
  • We matched the established credit limit and the balance receivable or capital at December 31, to the credit system and the cardholder’s statement of account.
• We used selective tests to evaluate key assumptions as follows:
  • Prospection of economic scenarios. We evaluated the changes in the calculation parameters against changes in the economic variables, in order to identify the variables of significant impact, such as the consumer price index and the consumer confidence index. And we compared these variables against public and recognized sources in this industry.
  • With the support of our experts, we reprocessed the calculation of the provision for credit losses.
  • We matched the consistency of disclosures made by the Company in the notes to financial statements, with the information obtained.

Other Information

Management is responsible for the other information. The other information comprises the annual report presented to the National Banking and Securities Commission (CNBV) and the annual information presented to shareholders (but does not include the consolidated financial statements and our auditor’s report thereon), which are expected to be made available to us after the date of this report.

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

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the other information not yet received, we will issue the report required by the CNBV and if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and, if required, describe the issue in our report.

Responsibilities of the Management and those Charged with the 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 of material misstatement, whether due to fraud or error.

In preparing the 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 or to cease operations, or has no realistic alternative to do so.

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

Auditor’s 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 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 ISAs 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 ISAs, 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 Company’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 Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s 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 auditor’s report. However, future events or conditions may cause the Company 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 underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of the consolidated financial statements. We remain solely responsible for our audit opinion.

We communicated 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 provided those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and 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 determined those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We described these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determined 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.

The engagement partner on the audit resulting in this independent auditor’s report is stated below.

PricewaterhouseCoopers, S. C.

José Luis Guzmán

Audit Partner
Mexico City, March 6, 2019