Audit and Corporate Practices Committee

To the Board of Directors of Grupo Sanborns, S.A.B de C.V.:

In our capacity as members of the Audits and Company Practices Committee of Grupo Sanborns, S.A.B. de C.V., (“the Committee”), we hereby deliver the following annual report of activities for the fiscal year of 2020.

Purview of the Audits and Company Practices and Evaluation of Compensation Committee

The CEO of Grupo Sanborns, S.A.B. de C.V., (“the Company”) and the relevant directors of the juridical persons the Company controls have satisfactorily met the objectives with which they were entrusted and complied with their responsibilities.

The purchase-sale operations with related parties that were submitted to the consideration of the Committee were approved, totaling: operations with revenue of $946.2 million pesos; purchase operations for $253.2 million pesos, and Expenses and Other operations in the amount of $1,580.3 million pesos.

The principal operations were carried out with the Carlos Slim Foundation, S.C., for the sale of prepared meals to COVID hospitals; Radiomóvil Dipsa, S.A. de C.V. and América Móvil, S.A.B. de C.V. for the purchase of cell phones, rate plans and memory cards for telephones and other concepts from the Company and its subsidiaries; Teléfonos de México, S.A.B. de C.V., for the concept of a call center, telephone installation services and the sale of telephony items and dining hall services; Seguros Inbursa, S.A, for the concept of automobile fleet insurance and insurance for the Company’s and its subsidiaries’ real estate, commissions and dining hall services; to the subsidiaries of Inmuebles Borgru, S.A. de C.V. and Inmuebles SROM, S.A. de C.V., for the lease of real estate; Banco Inbursa, S.A. for leases, commissions, the sale of meals, and for the dining hall services it provides to the other companies.

All the operations with related parties were carried out at market prices and were reviewed by Galaz, Yamazaki, Ruiz Urquiza, S.C. and a summary of the said operations is found in a Note to the financial statements rendered for Grupo Sanborns, S.A.B. de C.V. y Subsidiarias to 31 December, 2020

The CEO of Grupo Sanborns, S.A. B. de C.V. does not receive any remuneration for the performance of his activities as such. The Company does not have 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

The internal control and internal auditing system of Grupo Sanborns, 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 administration and from the opinion rendered by the external audit.

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 accounting firm of Galaz, Yamazaki, Ruiz Urquiza, S.C., the juridical person who carried out the audit of the financial statements of Grupo Sanborns, S.A.B. de C.V. y Subsidiarias to December 31, 2020 and of the external auditor responsible for the said audit was satisfactory, and the objectives that were defined when the Firm was contracted were achieved. Likewise, and in accordance with the information that the said Firm provided to the Company’s administration, its fees for the external audit do not represent more than 10% of its total income.

After a review of the financial statements of Grupo Sanborns, S.A.B. de C.V. and Subsidiaries up to 31 December, 2020, it was determined that there are no important errors caused by fraud and that the principal adjustments proposed are due to excesses or insufficiency in the provisions.

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

In response to the health crisis caused by the COVID-19 pandemic Grupo Sanborns established extraordinary measures in order to address the emergency caused by the COVID-19 virus. It implemented prevention and mitigation measures to preserve the health of our customers, collaborators, providers, and the population in general, while endeavoring to minimize the economic impact.

As a short-term strategy to deal with the emergency, online business was boosted by offering all the products online that could be found in a physical store, to thereby respond to the health crisis that was affecting the other formats that had been forced to temporarily shut down in order to ensure the social distancing requirement imposed by the authorities. This phase had its most significant effects in the months of April and May, although it was extended into June and July in some states.

In Mexico City and the State of Mexico, beginning on December 19, the red light was once more announced for all non-essential activities, including restaurants, pharmacies and self-service stores. In several states of the Republic of Mexico the local authorities also imposed a reduction in the hours of operation and in the capacity that was allowed.

These measures once again affected the flow of customers in the metropolitan zone, an area in which an important part of our physical sales points are located. Sales and services to our customers through our digital stores continued, however, at,, and Our distribution centers and stores carry out their operations in compliance with all the protocols imposed by the health authorities.

Physical operations have been maintained in a limited manner, always in compliance with the protocols indicated by the respective authorities, implementing certain adjustments and logistic strategies to ensure the appropriate health conditions in our physical stores, while continuing to fortify sales through digital channels.

The procedures indicated above have mitigated the risks associated to the concentration on one type of format alone, and have provided stability to our cash flows.

The Company continued to meet all its obligations towards its creditors, including the complete payment of salaries, even during the complete closure of some of its stores, maintaining the labor payroll but without renewing temporary contracts.

In response to the COVID-19 health emergency, investments were halted and the payment of dividends was not announced. The control of expenses was carried out, without thereby affecting the Company’s image and services, obtaining thereby a reduction in administration and sales expenses. Inventory was optimized by reducing purchases.

In accordance with our expectations and depending on the behavior of the economy after a return to the “new normal,” the Company will once more be profitable and generate positive cash flows from its operations.

The contingencies of a labor, civil, mercantile and administrative nature up to 31 December 2020, showed a behavior similar to previous fiscal years, and therefore the resolution of the said situations will not affect the financial position and economic stability of the companies involved.

During 2020 the Company bought back some of its own shares, in the amount of $63,702 million pesos.

A loss was recorded from the valuation of investment properties (Commercial Locations) in 2020 in the amount of $44,750 million pesos.

The provisions recorded in accumulated expenses must comply with the criteria of a liability, in conformance with the IFRS, so that provisions are recorded only for acquired commitments or expenses that have already been paid.

In regard to matters related to fraud, the violation of laws and regulations, and undue influence in the performance of the audit, the pertinent investigations were carried out with the Company’s administration, and various procedures were applied without finding any violation.

For the elaboration of this report the Audits and Company Practices Committee utilized the information that was provided to it by the CEO of the Company, the relevant Directors of the juridical persons controlled by the Company, and by the external auditor.

Audits and Company Practices Committee

Antonio Cosío Pando

Juan Rodríguez Torres