José Kuri Harfush
Chairman
Antonio Cosío Ariño
Rafael Moisés Kalach Mizrahi

To the Board of Directors:

In my capacity as Chairman of the Audit and Corporate Practices Committee of Grupo Carso, S.A.B. de C.V. (the “Committee”), I am pleased to submit to you the following Annual Report of activities for the 2018 fiscal period.

Corporate Practices and Evaluation and Compensation Functions

The Chief Executive Officer of Grupo Carso, S.A.B. de C.V. (the “Company”) and the corresponding directors of the juridical persons controlled by the Company satisfactorily completed the objectives with which they were entrusted and fulfilled their responsibilities

Transactions with related parties were assumed, which were submitted to the consideration of the Committee. Among them, we find the following significant transactions, each of which represents more than one per cent of the consolidated assets of the Company, successively performed: Teléfonos de México, S.A.B. de C.V., for long-distance fiber optic links and site adaptation for telephony, copper and fiber optic telephone cable sales, telephone installation services and sale of items for telephony, as well as commissary services, commissions on the sales of waste, automobile fleet salvaging and substitution; Delphi Packard Electric Systems, for harness and cable sales, as well as automotive engineering services; and Claro, S.A., for manufacture and installation of radio bases, fiber optic installation and network design, including copper and fiber optic telephone cable sales.

All the related party transactions were carried out at market value and reviewed by the accounting firm of Galaz, Yamazaki, Ruiz Urquiza, S.C. (the “Firm”), an entity which carried out the audit of the consolidated financial statements of Grupo Carso, S.A.B. de C.V. and subsidiaries as of December 31, 2018, as well as of the majority of its subsidiary companies, a summary of the results of which is included in a note to the audited financial statements of Grupo Carso, S.A.B. de C.V. and subsidiaries as of December 31, 2018.

The Company’s Chief Executive Officer does not receive any compensation whatsoever for performing his activities. The Company has no employees and, as regards the overall compensation of the relevant executives of the juridical persons by the Company, we assure the observance and adherence to the applicable policies approved by the Board of Directors. .

The Company’s Board of Directors has not granted any dispensation so that any councilor, director or person with a mandate can take advantage of his position in order to carry out, to his own benefit or to the benefit of any third party, any business transaction corresponding to the Company or to the juridical persons it controls or over whom it has a significant influence. Nor has the Committee granted any dispensation for the transactions referred to in subparagraph c), Fraction III, Article 28 of the Stock Market Law.

Audit Function

We submitted for consideration by the Company’s Board of Directors the ratification of Galaz, Yamazaki, Ruiz Urquiza, S.C. for performing independent auditing work on the financial statements of Grupo Carso, S.A.B. de C.V. and Subsidiaries as of December 31, 2018, and those concerning the majority of its subsidiary companies (the “Audit”), and the approval of the amount of its compensation for the provision of said services. For such purposes, we took into account that the amount suggested by the Firm for carrying out the Audit was reasonable, considering both the scope of such audit, and the nature and complexity of the structure and transactions of the Company.

We assessed the performance by the Firm and by the External Auditor, of the personal, professional and independence requirements contained in article 6 of the “Provisions of a General Nature Applicable to the Entities and Issuers Supervised by the National Banking and Stock Market Commission retaining external auditing services for basic financial statements” (the “External Auditor Circular Letter”). We feel that both the Firm and the Independent External Auditor satisfactorily comply with such requirements.

To warrant the independence of the Firm and of the Independent External Auditor, as well as of the staff participating in the Audit, we did not deem necessary to implement any measure in that respect.

We procured from the Firm a statement on the compliance with the quality control standard for the provision of auditing services as provided, in connection with article 10 of the External Auditor Circular Letter.

We provided accurate follow up of the auditing activities carried out by the Firm and reported to the Company’s Board of Directors in that respect. Further, we monitored the activities of the Independent External Auditor, who reported to us on his activities and the development itself of the Audit.

As a result of the review of the report and of the financial statements of Grupo Carso, S.A.B. de C.V. and Subsidiaries as of December 31, 2018, no relevant adjustments were made to the audited figures, as well as the reported exceptions to be disclosed by such financial statements. The results of the review of the report from the Independent External Auditor, foreseen by section I of article 15 of the Issuer Sole Circular Letter, were satisfactory.

The performance by the Firm and by the Independent External Auditor was as expected, since the goals established at the time they were retained, were accomplished. Further, the quality of the report on the financial statements of Grupo Carso, S.A.B. de C.V. and Subsidiaries as of December 31, 2018 was satisfactory.

As a result of the review made by the Committee on the Remarks Communication on the substantive procedures, as well as the assessment of internal controls and the relevant issues that the Independent External Auditor provided the Company, we made several remarks on the Issuer and some of its subsidiaries. In this respect, the Company’s Management informed us about an Action Plan is being prepared, which will include preventative and corrective measures, to satisfy the performance of the remarks made, as well as the term granted for their compliance, in accordance with the contents of the applicable legal provisions.

As a result of the auditing activities, no preventative or corrective measures were suggested.

As far as we know, according to the information given to us by the Company’s Management and from what we learned in the meetings we attended with the external and internal auditors, without the presence of Company’s officials, there were no relevant observations made by shareholders or councilors, and there were no relevant directives or objections by any third party in general in regard to the accounting, internal controls or other matters related to the internal or external accounting, nor have there been any denunciations realized by the said persons in regard to irregular acts in the administration of the Company.

The internal control and internal auditing systems of Grupo Carso, S.A.B. de C.V. and of the juridical persons controlled thereby is satisfactory. They comply with the guidelines approved by the Board of Directors, as is evident both from the information provided to the Committee by the Company’s Management, and the external audit report.

We have no knowledge of any violation in regard to the Company’s operational guidelines and policies or in regard to its accounting practices or in regard to the juridical persons controlled by the Company. Consequently, no preventive or corrective measures were implemented in that respect.

During the period, we assured the due compliance of the resolutions adopted by the Stockholders’ Meeting and the Board of Directors of the Company. Further, in accordance with the information provided by the Company’s Management, we verified that controls are implemented making it possible to determine that the Company does comply with the provisions that are applicable on stock market matters, taking into consideration the fact that such performance is produced annually through a review of the legal area of the Company. For this reason, no remark or signal whatsoever was submitted about the presence of any adverse change in the legal position of the Company.

As regards the financial information prepared by the Company and submitted to the Mexican Stock Exchange, and to the National Banking and Securities Commission, we assured that such information is prepared annually in accordance with the applicable principles, criteria and accounting practices.

Finance and Planning Functions

During the 2018 fiscal period, the Company and some of the juridical persons controlled thereby carried out significant investments. In this respect, we assured that the financing of such investments was carried out congruently with the mid- and long-term strategic plan adopted by the Company. On the other hand, we perform a periodical review of the Company’s strategic position, with the purpose of verifying that it reflects its strategic plan. Further, we reviewed and assessed the budget corresponding to the 2018 fiscal period, and the financial forecasts that were taken into consideration for the preparation thereof, including the major investments and financing transactions of the Company. As a result of the foregoing, we have considered the feasibility and congruence of the Company’s budget and of said forecasts in view of our investment and financing policies, as well as under its strategic vision.

For the elaboration of this report, the Audit and Corporate Practices Committee based its procedures on the information that was provided to the Committee by the Chief Executive Officer of the Company and by the corresponding managers of the juridical persons controlled by the Company, as well as on the information provided by the external auditor.

Mexico City, April 1, 2019

José Kuri Harfush
Chairman