Rafael Moisés Kalach Mizrahi Chairman
Antonio Cosío Ariño
David Ibarra Muñoz
Annual Report
To the Board of Directors:
In my capacity as Chairman of the Company Practices and Auditing Committee of Grupo Carso, S.A.B. de C.V. (“the Committee”), I am hereby submitting the following annual report on activities during the fiscal year of 2020.
Purview of the Company Practices, Evaluation and Compensation Committee
The general director of Grupo Carso, S.A.B. de C.V. (the “Company”) and the relevant Board members of the juridical persons that it controls have satisfactorily accomplished the objectives and met the responsibilities with which they were entrusted.
The operations with related parties that were submitted to the Committee for their consideration have been approved. Among those operations are the following significant transactions, each of which, successively executed, represents more than one percent of the Company’s consolidated assets:
“Red Nacional Última Milla, S.A. P.I. de C.V. for the concept of down pipes, maintenance and conduits and the sale of cabinets for telecommunications; Aptiv Services US LLC and other companies of Grupo Aptiv for the sale of harnesses and cables and automotive engineering services; Claro, S.A. for the fabrication and installation of radio bases, the installation of fiber optic cable and design of networks, including the sale of copper telephone and fiber optic cable and the sale of wire and fiber optic cable; Teléfonos de México, S.A.B. de C.V. for the sale of telephone cable and fiber optic cable, telephone installation services and the sale of telephony items, long-distance optic fiber loops and the customization of telephony sites; dining hall services, and commissions from the sale of scrap metal and for the salvage and replacement of automobiles for fleets.”
All the operations with related parties were carried out at market prices and reviewed by the Galaz, Yamazaki, Ruiz Urquiza, S.C. accounting firm (“the Firm”), the juridical person who carried out the audit of the financial statements of Grupo Carso, S.A.B. de C.V. and Subsidiaries and of the majority of its other subsidiaries up to December 31 of 2020, a summary of which can be found in a note to the said financial statements.
The Chief Executive Officer of the Company does not receive any remuneration for the performance of his activities as such. The Company does not have any employees, and, in regard to the integral remunerations of the relevant Directors of the companies that are controlled by the Company, we have ascertained that they have all complied with the policies approved by the Board of Directors in that respect.
The Board of Directors of the Company did not grant any dispensation so that any councilor, director or person of authority could take advantage – to his own benefit or to the benefit of a third party – of business opportunities corresponding to the Company or to juridical persons that it controls or in which it has a significant influence. On its own part, the Committee also did not grant dispensations for the transactions referred to in subparagraph c) of Fraction III of Article 28 of the Stock Market Law.
Auditing functions
We submitted to the consideration of the Board of Directors of the Company the ratification of Galaz, Yamazaki, Ruiz Urquiza, S.C. to carry out the external audit of the financial statements of Grupo Carso, S.A.B. de C.V. and Subsidiaries and of the majority of its other subsidiaries up to December 31 of 2020 (“the Audit”), as well as the ratification of its fee for the said service. Towards that effect, we considered that the resources proposed by the Accounting Firm for the execution of the auditing program were reasonable, given the scope of the said audit, the nature and complexity of the Company’s operations, and its structure. We also reviewed the terms in the request for the Audit.
We evaluated the conformance of the Firm and of the External Independent Auditor with the personal, professional and Independence requirements referred to in Article 6 of the Provisions of a General Nature applicable to the entities and issuers supervised by the National Banking and Securities Commission who contract external basic financial statement auditing services (“the External Auditors Circular”) and determined that both the Firm as well as the Independent External Auditor were in satisfactory compliance with the said requirements.
We did not find it necessary to implement any measure to guarantee the independence of the Firm and of the Independent External Auditor or of the personnel who participated in the audit.
We obtained from the Firm the usual declaration of compliance with the quality control standard for the performance of the services corresponding to the Audit, as referred to in Article 20 of the External Auditors’ Circular.
We carried out a punctual follow-up on the activities realized by the Firm in the Audit and kept the Board of Directors of the Company continuously informed of its progress. We also monitored the activities of the External Independent Auditor, who informed us of its activities and on the development of the Audit.
After a review of the opinion and of the financial statements of Grupo Carso, S.A.B. de C.V., and Subsidiaries up to December 31 of 2020 there were no important adjustments to the audited numbers or any exceptions to be revealed in the said statements.
As a result of the review of the External Independent Auditor’s Observations (the “Letter of Observations”), as established in Fraction I of Article 15 of the External Auditors Circular, on the substantive procedures, the evaluation of internal controls and the relevant matters that the External Independent Auditor provided to the Company, we found various comments on the Issuer and some of its subsidiaries. In that respect, the Company’s Administration informed us that a Plan of Action is being prepared, with the preventive and corrective measures to be taken and the period in which those observations will be addressed, in conformance with the indications in the applicable legal provisions.
We did not learn of any violation of the Company’s operating guidelines and policies or of its accounting records, or violations by the entities that it controls. Therefore, no preventive or corrective measures were implemented in that respect.
The performance of the Firm and of the External Independent Auditor was as had been expected, and the objectives that were set at the time the Firm was contracted were achieved. Likewise, the quality of the opinion of the financial statements of Grupo Carso, S.A.B. de C.V. and Subsidiaries up to December 31 of 2020 was satisfactory.
The internal control and internal auditing system of Grupo Carso, S.A.B. de C.V. and of the juridical persons it controls is satisfactory and meets the guidelines approved by the Board of Directors, as can be gathered from the information provided to the Committee by the Company’s Administrators and by the persons responsible for the internal audit of both Grupo Carso, S.A.B. de C.V. as well as of Grupo Sanborns, S.A.B. de C.V. in regard to the activities they carried out in compliance with the internal audit plan under their responsibility and the monitoring of the principal findings they discovered during the fiscal year of 2020, or which they had previously reported, as well as from the opinion of the external audit.
According to what was reported to us by the Administration, and from the meetings we held with the external and internal auditors without the presence of Company officers, and as far as we are aware, no relevant observations were made by shareholders, councilors, Board members, employees or by any third party in general in regard to the accounting, internal controls or other subjects related to the internal or external audit, nor were any denunciations made by the said persons in regard to irregularities in the administration of the Company or of the juridical persons it controls.
During the period of this report, we ensured that the accords adopted by the shareholders assembly and the Company’s Board of Directors were duly complied with. Also, in accordance with the information provided to us by the Company’s Administration, we verified that the Company has controls in place that allow us to determine that it is in compliance with the applicable provisions in regard to the stock market, that its legal department reviews the said compliance at least once a year, and that there have been no adverse observations in that respect nor any adverse change in its legal situation.
In regard to the financial information that the Company is preparing for submission to the Bolsa Mexicana de Valores, S.A.B. de C.V. and to the National Banking and Securities Commission, we have ensured that the said information is being elaborated under the same accounting policies, criteria and practices under which the annual report was elaborated.
Finance and Planning Functions
Due to the COVID-19 pandemic, neither the Company nor the juridical persons it controls made any important investments in the fiscal year of 2020, and, in respect to the investments that were made, we ensured that their financing was carried out in a manner that was in keeping with the Company’s medium- and long-term strategic plan. Additionally, we periodically verified that the Company’s strategic position was in accordance with the said plan. We also reviewed and evaluated the Budget for the fiscal year of 2020, along with the financial projections that were considered for its elaboration, including the Company’s principal investments and financing transactions, which we considered to be viable and in keeping with the Company’s investing and financing policies and its strategic outlook.
In the elaboration of this report the Company Practices and Audits Committee relied on the information that was provided by the Director General of the Company, the relevant Directors of the juridical persons controlled by the Company, and the information provided by the external auditor.
Mexico City, March 29, 2021
Chairman
Mr. Rafael Moisés Kalach Mizrahi
