José Kuri Harfush
Antonio Cosío Ariño
Rafael Moisés Kalach Mizrahi
To the Board of Directors:
I, the undersigned, in my capacity as Chairman of the Corporate Practices and Audit Committee of Grupo Carso, S.A.B. de C.V. (the “Committee”), hereby submit the following annual activity report for the fiscal year 2014.
Functions of Corporate Practices, Evaluation and Compensation
The Chief Executive Officer of Grupo Carso, S.A.B. de C.V. (the “Company”) and the relevant executives of the entities the Company controls, complied satisfactorily with their objectives and responsibilities.
The following succeeding transactions with related parties were authorized by and submitted for consideration of the Committee, including the following significant transactions, each of which represents more than 1% of the Company’s consolidated assets:
Teléfonos de Mexico, S.A. de C.V., for the sale of telephone copper wire and optic fiber, “Call Center” services, telephone installation and sale of items for telephony; installation services of outside plant fiber optic and network design, including sale of telephone copper wire and optic fiber; catering services; and commissions from the sale of scrap, rescues and fleet replacement vehicles; Concesionaria Guadalajara-Tepic, S.A. de C.V., construction of road bypasses, revamp of roads and optic fiber linkage; Delphi Packard Electric Systems, from the sale of [harnesses] and cables, and automotive engineering services; Empresa Brasileira de Telecomunicações, S.A., for the concept of facilities and construction of various works, and sale of telephone copper wire and optic fiber; Radiomovil Dipsa, S.A. de C.V., for purchases of mobile handsets, mobile service plans and memory cards, and other items; and Minera María, S.A. de C.V., for purchases of electrolytic cathode.
All transactions with related parties were conducted at market values and reviewed by Galaz, Yamazaki, Ruiz Urquiza, S.C., which elaborated a summary thereof recorded in a note included in the audited financial statements of Grupo Carso, S.A.B. de C.V. and subsidiaries as of December 31, 2014.
The Chief Executive Officer of Grupo Carso, S.A.B. de C.V. receives no remuneration for the performance of his activities as such. The Company has no employees and therefore, in regard to the total compensation received by the directors of the companies controlled by us, we ensure that the policies that were approved in this respect by the Board of Directors have been complied with.
The Board of Directors of the Company did not grant any waiver to any relevant director, officer or person in command to take advantage of business opportunities for themselves or for third parties, corresponding to the Company or entities it controls or in which it has significant influence. Nor did the Committee grant any waiver for the transactions indicated under subsection c) of section III of Article 28 of the Securities Market Act.
The system of internal control and internal audit of Grupo Carso, S.A.B. de C.V. and the entities it controls is satisfactory and meets the guidelines approved by the Board of Directors, according to the information provided to the Committee by the Management of the Company and the independent auditor’s report.
We had no knowledge of any noncompliance with any guidelines or policies in regard to the operation or accounting rules of the Company or in regard to the entities it controls, and consequently, no preventive or corrective action was implemented.
The performance of the accounting firms Galaz, Yamazaki, Ruiz Urquiza, S.C. and Camacho, Camacho y Asociados, S.C., entities that conducted the audit of the financial statements of Grupo Carso, S.A.B. de C.V. and subsidiaries as of December 31, 2014 and of its subsidiaries, and the performance of the independent auditor in charge of the audit were satisfactory and the objectives set at the time of contracting the said entities were achieved. Also, according to the information provided by the said firms to the Management of the Company, their fees for the independent audit represented a percentage of less than 10% of their total revenue.
Moreover, it was agreed that Galaz, Yamazaki, Ruiz Urquiza, S.C. would provide the following services in addition to the audit works, to Condumex, S.A. de C.V.: legal and fiscal analysis of the effects of the change in tax laws on the valuation of inventories, from LIFO to the average and FIFO methods, including the change from direct cost to absorption cost.
As a result of the review of the financial statements of Grupo Carso, S.A.B. de C.V. and subsidiaries up to December 31, 2014, there were no adjustments to the audited figures and no exceptions that needed to be revealed.
In accordance with information we received from the Company’s Board of Directors and during the meetings in which we participated, which were attended by independent and internal auditors and carried out without the presence of officers of the Company, as far as we know there were no relevant comments from shareholders, directors, relevant officers and employees and, in general, from any third party, regarding accounting, internal controls or other issues related to internal or external audits, or complaints made by those persons on irregularities in the administration of the Company.
During the reporting period, we verified that resolutions adopted by the Shareholders’ Meeting and the Board of Directors of the Company were complied with. Also, according to the information provided by Company’s Board of Directors, we verified the existence of controls designed to determine compliance with the provisions applicable in terms of financial markets and that the legal department reviewed such compliance at least once a year. There were no comments in regard to any adverse change in the Company’s legal status.
Regarding the financial information that the Company prepared and submitted to the Mexican Stock Exchange and the National Securities and Exchange Commission, we declare that this information was prepared under the same principles, criteria and practices with which the annual information is prepared.
Finance and Planning functions
During the fiscal year 2014, the Company and some of the entities it controls made significant investments. In this regard, we make sure that any financing is undertaken in a manner consistent with the strategic medium- and long-term plan of the Company. In addition, we ensured that the strategic position of the Company is in alignment with the plan. We also reviewed and evaluated the budget for the fiscal year 2014 together with the financial projections that were considered for its construction, including major investments and financing transactions of the Company, which we consider feasible and consistent with the Company’s investment and financing policies and strategic vision.
In preparing this report, the Corporate Practices and Audit Committee relied on information that was provided by the Chief Executive Officer of the Company, the relevant officers of the entities it controls and the independent auditor.
José Kuri Harfush