#1madco Médica Sur. Excelencia médica, calidez humana Sur Sudica Sur pi ic mea edica madca mad Middle medica m mee md daice SELLOPL madis maa madis medica madica ca Madur uns madica madico AC mad Sur nadico madic P - madica DOD madica Sur. Medica Sur madica Sur ippw mddicom medica ur. OPUL PW dico Su OPLU Dappu Medica pp madica M madic Inc ร อเม SUP madica dica Medica 85 рр mad e Midica maa Sur. The patients, our inspiration madica dicor Inc Mar mad ca Sur edica Medica Medica Ma medic madic Ma 2017 ANNUAL REPORTS Medi madica aisa madi È médica ma Sur ПРАШ adica Sur D madico Sur mac Medica madics Ser ВРШ mad#2APIA FISICA Table of Contents 2 COMPANY PROFILE 4 MISSION, VISION AND VALUES 6 OUTSTANDING FIGURES 8 CORPORATE STRUCTURE 10 MESSAGE FROM THE PRESIDENT OF THE BOARD OF DIRECTORS 16 WORLD-CLASS MEDICAL CARE mach 20 HOSPITAL SERVICES 24 CLINICAL SERVICES AND DIAGNOSTIC UNITS 28 TECHNOLOGY AND INFRASTRUCTURE 32 MÉDICA SUR CLINICAL FOUNDATION 36 HOSPITAL ACTIVITY INDICATORS 38 BOARD OF DIRECTORS 39 PRINCIPAL EXECUTIVE DIRECTORS 40 FINANCIAL STATEMENTS#32 Médica Sur Company Profile MÉDICA SUR IS A HEALTH CARE INSTITUTION COMPOSED OF DIAGONISTIC UNITS, MEDICAL CARE, RESEARCH, TEACHING AND COMMUNITY SERVICE. THE INSTITUTION HAS BROUGHT TOGETHER A SELECT GROUP OF MEDICAL, NURSING, ADMINISTRATIVE AND HOSPITAL MANAGEMENT PROFESSIONALS WHO, GUIDED BY A STRICT CODE OF ETHICS AND BACKED BY STATE-OF-THE- ART TECHNOLOGY, STRIVE TO OFFER A SERVICE OF MEDICAL EXCELLENCE WITH HUMAN WARMTH This project was conceived in 1981 by a group of Mexican doctors and health care professionals in order to create a private high specialty center where medical ethics along with international standards of efficiency, and academic vocation would be practiced while being economically sustainable. Thus, the Médica Sur Group began with one Specialty Tower and basic diagnostic services. It first evolved into a hospital, then into a High Specialty Center, and finally into a group of companies that covers the three levels of medical care. In this regard, thanks to the efficient integration of Laboratorio Médico Polanco and Laboratorios Clínicos de Puebla, Médica Sur Group became a larger and stronger group, giving the possibility of reaching out people of Mexico City and the Metropolitan Area, State of Mexico, Morelos, Puebla, Querétaro, Quintana Roo and Tlaxcala, with the most modern laboratories in the country. Purell Baxter CAMILLERO jedica Popul moc mmad ppu medica ca Рош S ippi medic p 3 maa dals PPUI madica mica iddica ma 0 medica medica Mddica PPLY medica medic medica EXTINTOR made Праш ре madic medica co ВРШ рр S 2017 Annual Report Medica made 3 ma mas medica med madica madca שקקוכט 93 ma Medica της ВРШ medica Фаш med Зрош Ирр medic medica medica Праш medica ПРРШ dica Sur pp Medica m medica Форш madic Madl medica добро medi mad madica medic medica medic medica Sur mad medica medica ma unc D Jasa Порш ppp Sur medica medica medica medico mad madica Medica Sur ПОРШ mea madic med mur medica ur орш med Medica g medic mad mda 13 mesu madj anddica medic#44 Médica Sur Medical excellence, human warmth السلام 2017 Annual Report 5 MISSION Médica Sur's mission is to offer conscientious health care to its patients, satisfaction to its doctors and its employees, and a fair medical alternative to the country. Patients are the most important reason for the creation of the institution and this principle shall prevail in any relationship or service given to the community. ETHICS It is indisputably our personal commitment to do things well, without any ulterior motive. We practice medicine and related fields always keeping in mind the best interest of the patient, with honesty, with respect for human life, with respect for the dignity of the individual, and without distinction. SAFETY For all patients, in every procedure, at all times. To avoid any harm to the patient that might arise from the procedure intended to treat him or her without harming anyone working at Médica Sur. USER The interest in satisfying the needs and meeting the expectations of the patients, their family members, doctors and companies that engage our services represents a priority. VISION To be the most prestigious Medical Service Group in Mexico in terms of community service, through teaching and biomedical research at the cutting edge of technology. To be auto-sustainable and profitable at attainable levels for the population. Ub S OUR PEOPLE We value our personnel as the organization's most important resource, and seek to secure their satisfaction, development and wellbeing. We encourage the expression of their best qualities through teamwork, motivation, training, communication, recognition. and remuneration. + SUSTAINABILITY We aim to sustain sound financial management in order to generate a reasonable profit for investors and obtain the resources needed to meet the organization's current and future needs. SERVICE We interact with each other in a caring manner, showing a genuine interest in the person.#56 Médica Sur Outstanding Figures December 31, 2017 and 2016 Millions of pesos SALES DISTRIBUTION 2017 2016 Income 3,431.4 2,510.4 Gross Profit 1,162.9 776.6 Operating Profit 513.1 215.3 Net Result 231.9 146.2 EBITDA* 733.5 540.5 Total Assets 5,602.9 5,459.1 Current Assets 1,102.9 1,002.4 Non-Current Assets 4,500.0 4,456.7 Total Liabilities 2,156.1 2,151.6 Short-Term Liabilities 716.8 745.2 Long-Term Liabilities 1,439.3 1,406.4 Stockholders' Equity 3,346.8 3,307.5 ROE (Return on Equity) 6.7% 4.4% *Operating Income plus Depreciation and Amortization// Earnings before Interest, Taxes, Depreciation and Amortization PS millions 44.5% 51.4% 4.0% Hospital Services Clinical Services Others and Diagnostic Units 2017 Annual Report SALES EBITDA Consolidated FINANCIAL STRUCTURE 4,000 1,000 6,000 5,000 3,000 800 4,000 600 2,000 3,000 400 1,000 200 0 PS millions 2,000 1,000 00 12 13 14 15 16 17 12 13 14 15 16 17 0 Sales (left axis) EBITDA Assets Liabilities Stockholders' Equity 30 CARRYING VALUE* 20 10 0 20.99 22.36 25.20 26.30 26.82 27.95 '12 '13 '14 '15 '16 '17 Stockholders' Equity / Shares Outstanding 1.0 0.8 0.6 DECLARED DIVIDEND PER SHARE о 0.4 0.55 0.86 0.84 0.68 0.70 0.2 0 12 13 14 '15 16 17 7#68 Médica Sur Corporate Structure PHARMACIES Médica Sur Tower | Pharmacy Médica Sur Tower II Pharmacy TLALPAN HOSPITAL Hospitalization Floors Surgical Unit: Short-Stay and Laser Surgery Gynecology & Obstetrics Main Operating Room CLINICAL SERVICES Advanced Urology Rehabilitation Medicine Radiotherapy Integral Oncology Center Neurophysiology Gamma Knife Radiosurgery Gastroenterology, Hepatology and endoscopy Laboratory MRI Scan Imaging and Ultrasound Angiology Integral Center of Diagnostic and Treatment Angiography Nuclear Medicine Unit PET-CT Critical Units: Intensive Care Coronary Care Intermediate Care Urgencies (Adults & Pediatrics) Pediatrics Neonatology Blood Bank Respiratory Care Pathologic Anatomy Neurology and Neurosurgery Center OTHER Vascular Clinic Hemodialysis Unit Parking Restaurants Cafeteria Services Hotel Banking Services 2017 Annual Report 9#710 Médica Sur Message from the President of the Board of Directors medica DEAR SHAREHOLDERS, PARTNERS, PATIENTS AND COLABORATORS: IN THE NAME OF THE MANAGEMENT BOARD AND THE DIRECTIVE TEAM OF MERICA SUR GROUP, IT IS MY PLEASURE TO PRESENT THIS REPORT ON THE PERFORMANCE OF THE INSTITUTION, AS WELL AS THE MAIN STRATEGIC AND OPERATIVE ACHIEVEMENTS OF THE YEAR During 2017 we continued the growth, renovation and improvement of our services path, keeping our goal clear, of being the most prestigious medical services group in Mexico, where the most important value is the health of our patients, striving on a daily basis to fulfill our motto "Medical Excellence with Human Warmth, providing the population the highest quality at a fair price allowing the growth and sustainability of Médica Sur. SERVICES QUALITY We renewed our credentials and certifications nationally and internationally, thus complying with the highest quality and security standards for our patients. We obtained the tri-annual of the "Joint Commission International", highest certifying agency of hospital attention and security, who certified that we incorporate the best international practices of medical quality and security for the benefit of our patients. Some strict quality indicators that differentiate Médica Sur are the low rate (annual) of nosocomial infections, meaning, infections acquired during hospitalization and the reduced mortality rate, which reached 1.07 and 0.82 patients per 100 discharges respectively. Likewise, the readmission rate was 5.03 per 100 admissions. The previous reflects the outstanding performance of the Institution compares to the national and international standards. Additionally, in 2017 Médica Sur was the first hospital in the American Continent to receive the "European Award for Best Practices" which recognizes the compromise, dedication and the results in the quality control. In the same way, since 2011 we are the best hospital in Mexico according to the ranking of clinics and hospitals of the prestigious magazine "América Economía". In the medical branch, along with our excellent group of doctors we continue to offer the highest quality service to around 13,000 hospitalized patients. We performed 8,783 high-complexity surgeries to 17,440 patients in Urgencies and made more than two million diagnostic studies. Likewise, we continue to support the activities of teaching, research and social assistance, accordant to the Vision of Médica Sur, reason why during the year we destined $28.4 million pesos toward these end. 2017 Annual Report 11#812 Médica Sur 2017 Annual Report 13 MEDICA SUR, AN ACADEMIC CENTER On the teaching branch, we back the formation of 50 resident doctors and 132 residents in the specialties of: Arthroscopy, Echocardiography, Cerebrovascular Disease, Gastrointestinal Endoscopy, Oncologic Pathology, MRI, Gastroenterology, Geriatrics, Critical Medicine, Neonatology, Oncology, Internal Medicine, among others. It is important to mention that since three years ago Médica Sur has received the CONACYT certification and the Quality Postgraduates in the courses of Internal Medicine, Gastroenterology and Oncology, which allows us to have access to scholarships for rotations abroad strengthening the learning of our residents. In the Simulation and Medical Skills Center (CESIDEM), 11 courses were given, 2,497 people were trained and 10,000 more in locations supported by the CESIDEM, meaning, with help from trainers from CESIDEM. It is important to mention that the CESIDEM has received the GOLD recognition for four consecutive years (2014-2017) due to the amount of trained people and the quality of the center for the "American Heart Association". Meanwhile, in the Virtual Inter-Institutional Teaching Center (CEVI) 7 courses for general physicians were offered and 15 modules for dentists with a participation of 94 people of different nationalities. MEDICA SUR CONTRIBUTES TO THE BIOMEDICAL RESEARCH Regarding research activities, during 2017 65 articles were published in international magazines and 8 in national magazines, which appeared in more than 45 high-impact magazine covering a wide range of specialties, being the main ones Gastroenterology, Hepatology, Immunology and microbiology. Added up, the group has published a total of 818 issues. Likewise, three medicine books were published. Additionally, 74 research studies were registered of different kinds and specialties, thanks to the academic orientation of Medica Sur's doctors in diverse disciplines. In this sense, during 2017 the number of researchers belonging to the National System of Researchers of the The National Council of Science and Technology increased to 12. In the assistance branch, the sister group with philanthropic ends, Médica Sur Foundation outstands, as it gave medical attention to 1,035 patients through 2,000 medical consultations, 510 laboratory studies made, 1,426 immunotherapy treatments were applied and 44 allergology test were performed. Regarding dental services, 334 patients were treated through 653 consultations totaling 1,278 treatments. WE OBTAINED THE TRIANNUAL RE-CERTIFICATION OF THE "JOINT COMMISSION INTERNATIONAL", TOP CERTIFYING AGENCY OF HOSPITAL ATTENTION AND SECURITY PROCESSES, WHO CERTIFIED THAT WE IMPLEMENT THE BEST INTERNATIONAL MEDICAL QUALITY AND SECURITY PRACTICES FOR THE BENEFIT OF OUR PATIENTS madica Sur Medica Sur 0009068#914 Médica Sur 2017 Annual Report 15 INNOVATION AND RENOVATION OF THE FACILITIES On the other hand, as center of our growth and infrastructure improvement strategy, during 2017 147.1 million pesos were invested, 92 million pesos were used for the Hospital remodeling, 20.6 million pesos were implemented in informatics improvements, 19.3 million pesos in renovation of medical equipment, 10.2 million pesos in laboratory branches and 5 million pesos in minor assets. In this sense, the remodeling of floor 5 & 6 was concluded and the remodeling of the 4th floor began, whereby we incorporate the highest standards of quality and hygiene and create a warmer environment for our patients and our families. Likewise, in November the first branch of our new generation of Medica Sur Laboratories was inaugurated in Cuernavaca, Morelos, under a unique service concept and exclusive ambiance, designed for the satisfaction of our patients. This new concept has a wide variety of services and cutting-edge equipment that will have double reading on the imaging studies and will be 100% digital. During 2017, Médica Sur Group became bigger and stronger thanks to the efficient integration of Laboratorio Médico Polanco and Laboratorios Clínicos de Puebla. This integration positioned us as key player within the diagnosis sector in our country, reason why we will continue growing and differentiating ourselves by being the only contestant in this sector with the medical backing of a hospital as is Médica Sur. Likewise, it gives us the possibility of reaching out people of Mexico City and the Metropolitan Area, State of Mexico, Morelos, Puebla, Querétaro, Quintana Roo and Tlaxcala, with the most modern laboratories of the country, offering more clinical analysis and a wide variety of diagnostic imaging services and other specialties. Additionally, Médica Sur integrated new partners and advisors with a proven professional trajectory thanks to the incorporation of the private investment fund "ProActive Capital". This will allow continuing to strengthen the growth strategy with the commitment for the excellence in the health service provision, both in the hospital sector as well as in the clinical diagnosis sector and boost the corporate government by sharing the same values and ethical principles. FINANCIAL PERFORMANCE Regarding financial performance, 2017 was a year of moderate economic growth for Mexico, with high volatility associated to the uncertainty regarding the future of the commercial relationship of our country with the USA, paired to political uncertainty among others. With the previous being said, it is important to highlight that in Medica Sur we achieved to increase our Income meaningfully by going from 2,510.40 million pesos in 2016 to 3,431.4 million pesos in 2017, the Operative Profit increased from 513.1 million pesos and there was an Operative Margin of 15.0%, the EBITDA was 733.5 million pesos reaching an EBITDA Margin of 21.4% and the Net Profit increased 85.7 million pesos by going from 146.2 million pesos in 2016 to 231.9 million pesos in 2017. The previous is due to the cost and expenditure control plan, as well as the reengineering of the operative processes and the efficient integration of the laboratories. Regarding our assets, we have defined a plan for the maximization of the value of real estate assets seeking to develop a medical complex, comparable to the highest-prestige medical destinations in other parts of the world. Thus, based on this target, in November there was an allocation of the adjacent land to the hospital campus to a Guarantee and Administration Trust Fund in order to, subject to a series of conditions, Médica Sur transmitting a 24,000m² area in favor to Sordo Madaleno Group, in which this group plans to build a mixed-use real estate development with commercial area. Médica Sur preserved the ownership of the additional fraction of the real estate (26,704 m²), with a construction potential equivalent to 225,000 m², meaning, Médica Sur keeps 73.2% of the density of the construction, while Sordo Madaleno Group acquires the remaining 26.8%. Finally, we would like to thank the confidence of our patients, the effort of our valuable group of doctors, nurses, administrative and support staff, as well as the backing of who has trusted us with their resources. Likewise, we would like to renew our commitment to continue striving to offer the best alternative of ethical and high-specialty medicine in Mexico with fair profit for shareholders. Kind Regards, Dr. Misael Uribe Esquivel Chairman of the Board of Directors#1016 Médica Sur World-Class Medical Assistance MGE Corporativo APRIAGA RULOBA ЗАМЕ МАСОВО ' ransfer ble hd dir m mar 301 medic magico adica 2017 Annual Report 17 MC - РАШ medica unc DOPPL mak medico Sur D Sur madic madico 10 mddico dica medioe Maayu medico 63рош ca Sur _X medica Medica Sur madca madico Medico Порш madco pippu men. medic โออเม madica madica Sur DOD Sur Su medico Da md. ACKNOWLEDGEMENTS AND ALLIANCES In Médica Sur we rely on acknowledgements and certifications nationwide and worldwide, thus we comply with the highest quality and security standards in benefit to our patients. These acknowledgements are given by accredited agencies that certify and accredit the compliance of the norms and established requisites and are the result of the commitment of the institution in the action-taking for the protection of the health of our patients. Thanks to the effort and participation of each and every one of Médica Sur's employees, the following acknowledgements have been achieved: dica Jur Брош moca medica Mur BECAUSE THE MOST IMPORTANT THING IS THE SECURITY OF OUR PATIENTS, WE IMRPOVED THE QUALITY OF OUR SERVICES BY UNDERGOING NATIONAL AND INTERNATIONAL QUALIFICATIONS Medica Jur DPU medica Sur Madd Med Sur m#1118 Médica Sur INTERNATIONAL JOINT COMMISSION INTERNATIONAL CERTIFICATION It identifies, measures and shares the best practices in matter of quality and security of the patient in the whole world. It provides leadership and innovative solutions to help the health attention organizations improve their performance and results. COMMISSION QUALITY APPROVAL Organization Accredited by Joint Commission International QUALITY AWARD BY THE EUROPEAN ASSOCIATION FOR QUALITY REASEARCH Promotes the quality culture, recognizes good corporate practices, technology innovation, quality achievements in organizations around the world and spreads successful acting strategies in such organizations. WINNER MAYO CLINIC CARE NETWORK AFFILIATION Through this affiliation to the world's most important hospital network, the information exchange on medical advancements that improve our medical practice is simplified. MAYO Care Network CLINIC Member 2017 Annual Report 19 - CAP ACCREDITED COLLEGE of AMERICAN PATHOLOGISTS INTERNATIONAL CERTIFICATION OF THE LABORATORY BY THE COLEGE OF AMERICAN PATHOLOGISTS (CAP) It is a way to elevate the certainty grade of our results, as it certifies we cover with global quality the following points: capacitation and competence of the staff in the laboratories; the procedures followed in each of the more than 23 thousand tests we performed; the effectiveness and validity of our procedures followed in each one of the more than 23 thousand test we made; the effectiveness and validity of the chemical reagents we use; our facilities, and the fact that we do not give any gratification, payment or compensation to doctors that solicit exams for their patients, only benefiting the interests of the patient in the results. HOSPITAL CERTIFICADO CONSO DE SALU CERTIFICATION OF THE GENERAL HEALTH BOARD It certifies that we comply with the standards that show the quality of Médica Sur in: the security of the handling of our patients; the quality of the medical attention we provide, and the security of our hospital facilities. This certification is also a test of our commitment of a continuous improvement for the benefit of our patients, their families and Médica Sur staff and the society. CERTIFICATION OF THE MEXICAN BOARD OF THE MEDICAL TOURISM INDUSTRY Certifies that the personal attention and follow-up we give to our foreign patients is of excellence. COUNCIL FOR MEDIC CMT CERTIFIED 2017 QUALITY IN MEDICAL TOURISM STINTIVO DISTINT "DISTINTIVO H" WAS AWARDED BY THE MINISTRY OF HEALTH AND THE MINISTRY OF TOURISM t is the acknowledgement for the high quality and hygiene standards in the food service for our patients. CERTIFICATION FOR CLINICAL LABORATORIES UNDER THE MEXICAN NORM NMX-EC-15189-IMNC-2015/ ISO15189:2012 The norm evaluates the technical competence of all the processes and the staff of the Blood Bank, with the end to eliminate risks associated to the production of supplies for blood transfusion. H ema American Heart Association® CERTIFICATION OF THE AMERICAN HEART ASSOCIATION AS HEADQUARTERS OF INTERNATIONAL TRAINING It is an acknowledgement to the Simultaion and Medical Skills Center (CESIDEM) of Médica Sur as headquarters of international training in diverse courses related to the cardiovascular system, for doctors, health staff and the general public. PREMIO NACIONAL DE CALIDAD NATIONAL AWARD OF QUIALITY GRANTED IN 2013 The National Quality Award is the top distinction to the organizations that are national quality and competiveness benchmarks. This award was obtained by being a model company in quality, competitiveness and relationship with our patients, suppliers and shareholders. Additionally, since 2011 Médica Sur has been listed as the best hospital of Mexico according to the ranking of the prestigious magazine "América Economía". In its 2017 edition, we confirmed it once again, being the number one of our country and twelfth in Latin America.#1220 Médica Sur Hospital Services με 2017 Annual Report 21 WE OFFER THE HIGHEST QUALITY TO OUR PATIENTS, THROUGH OUR HOSPITAL SERVICES 12,813 HOSPITALIZED PATIENTS 8.783 SURGERIES 17,440 PATIENTS SEEN IN URGENCIES 189 HOSPITAL ROOMS 16 OPERATING ROOMS WE COUNT ON A TEAM OF 3,895 COLLABORATORS AND A MEDICAL SOCIETY THAT GROUPS TOGETHER 1,550 MEMBERS OF MORE THAN 75 SPECIALTIES AND SUBSPECIALTIES 15 CRITICAL-CARE CUBICULES 540 MEDICAL OFFICES#1322 Médica Sur MÉDICA SUR TLALPAN Médica Sur Tlalpan is a high-specially private medical center, with capacity to treat a wide range of illnesses and provide various medical services, from elective surgery, going through intensive care and high-specialty procedures, as organ transplants. Located south of Mexico City, Médica Sur Tlalpan in one of the biggest and most modern medical private centers in the country, which counts with 189 hospital rooms, 16 operating rooms, 15 intensive-care cubicles and 540 medical offices. In the medical branch, along with our excellent group of doctors we continue to offer the highest- quality service to 12,813 hospitalized patients. We made 8,783 high-complexity surgeries, treated 17,440 patients in Urgencies and made almost two million diagnostic studies. Likewise, the facilities count with a wide range of complimentary services, for greater comfort to our patients and their families: restaurants, cafeterias, banking branches and offices of the most important insurance companies. Alexanda Cardenas Cougia Plástica M. 2017 Annual Report 23 medica ur.#1424 Médica Sur ABG Clinical Services and Diagnostic Units CUTTING-EDGE CLINICS AND DIAGNOSIS UNITS, KEY ELEMENTS IN THE MEDICAL ATTENTION OF EXCELLENCE 2017 Annual Report 25 1,985,989 LABORATORY STUDIES* 101.004 IMAGING STUDIES, MRI AND NUCLEAR MEDICINE *Does not include Laboratorio Médico Polanco#1526 Médica Sur 2017 Annual Report 27 CLINICAL SERVICES It consists in high-specialty medical attention units where treatments are given that, because of their nature, do not require hospitalization of the patient. Our ambulatory units provide attention in the following specialties: Oncology, Radiotherapy, Radiosurgery, Gamma Knife Surgery, Neurophysiology, Advanced Urology, Gastroenterology, Endoscopy and Rehab Medicine. DIAGNOSTIC UNITS The Diagnostic Units are essential for our medical team to achieve the correct diagnosis and follow-up of diverse pathologies. Our units provide attention both to hospitalized patients as well as external patients. The aforementioned due to our extensive network of diagnostic units that reached 105 units at the end of 2017. These units give us the possibility to serve people of Mexico City and the Metropolitan Area, Estate of México, Morelos, Puebla, Querétaro, Quintana Roo and Tlaxcala, with the most modern laboratories of the country, offering in addition to clinical analysis, a wide variety of diagnostic imaging services and other specialties. Currently, Médica Sur counts with diagnostic units such as: Imaging, Laboratory, Nuclear Medicine, PET-CT, Integral Diagnosis and Treatment Center (CIDYT), Angiology and X-Ray. MÉDICA SUR GROUP TURNED INTO A BIGGER AND STRONGER GROUP DUE TO THE EFFICIENT INTEGRATION OF LABORATORIO MÉDICO POLANCO AND LABORATORIOS CLÍNICOS DE PUEBLA. THIS INTEGRATION POSITIONED US AS KEY PLAYERS WITHIN THE DIAGNOSIS SECTOR IN THE COUNTRY, THUS WE WILL CONTINUE GROWING AND DIFFERENTIATING OURSELVES BY BEING THE ONLY CONTESTANT IN THIS SECTOR WITH THE MEDICAL BACKING OF A HOSPITAL SUCH AS IS MÉDICA SUR#1628 Médica Sur VARIAN medical systems Technology & Infrastructure VARIAN DURING 2017 WE CONTINUED OUR GROWTH, RENOVATION AND IMPROVEMENT OF OUR SERVICES PATH, KEEPING OUR OBJECTIVE CLEAR, OF BEING THE MOST PRESTIGIOUS MEDICAL GROUP IN MEXICO, WHERE THE MOST IMPORTANT VALUE IS THE HEALTH OF OUR PATIENTS trueBEAM 32,800 m² OF HOSPITAL 27,000 m² OF MEDICAL OFFICES 36,000 m² OF PARKING 2 50.704 m² OF LAND SURROUNDING THE HOSPITAL CAMPUS 7.047 m² MÉDICA SUR LOMAS 105 DIAGNOSTICS UNITS 2017 Annual Report 29#1730 Médica Sur As center of our growth and infrastructure improvement strategy, during 2017 147.1 million pesos were invested, 92 million pesos were used for the remodeling of the hospital, 20.6 million pesos were used in matter of informatics improvements, 19.3 million pesos in medical equipment renovation, 10.2 million pesos in laboratory branches and 5 million pesos in minor assets. The remodeling of floors 5 and 6 concluded and the remodeling of floor 4 began in the hospital tower, thus incorporating the highest standards of quality and hygiene and created a warm ambiance for our patients and their families. In November, in Cuernavaca, Morelos, the first branch of our new generation of Médica Sur Laboratories was inaugurated, under a unique service concept and exclusive ambiance, designed for the satisfaction of our patients. This new concept counts with a wide variety of services and cutting-edge equipment that will have double-reading in imaging studies and will be 100% digital. Likewise, we are in constant innovation, as much of the installed equipment has been the first to arrive to Mexico. In this sense, we currently count the cutting-edge technology, among which the following outstand: last generation Truebeam lineal accelerator, Perfexion Gamma Knife Radiosurgery unit, Varian Clinac IX lineal accelerator, Somatom Definition tomograph, Axiom Artis, clinical analysis robotic line, among others. Additionally, our facilities count with a variety of complimentary services, which improve the experience and attention of our patients and family members, among which the following outstand: 2 restaurants, 3 cafeterias, 2 banking branches. 2017 Annual Report 31 IN NOVEMBER, THE FIRST BRANCH OF OUR NEW GENERATION OF MÉDICA SUR LABORATORIES WAS INAUGURATED IN CUERNAVACA, MORELOS, UNDER A UNIQUE SERVICE CONCEPT AND EXCLUSIVE AMBIANCE#1832 Médica Sur Médica Sur Clinic Foundation THE "FUNDACIÓN MÉDICA SUR, A.C." HAS AS MISION TO CONTRIBUTE TO THE SCIENTIFIC INVESTIGATION, MEDICAL TEACHING AND ASSISTANCE TO VULNERABLE GROUPS FOR THE IMPROVEMENT OF THE HEALTH OF MEXICANS WITH THE VISION OF BEING A NATIONAL BENCHMARK IN SOCIAL SUPPORT ACTIVITIES THAT CONTRIBUTE TO A MORE EQUITABLE HEATLH SYSTEM Médica Sur has maintained and boosted a policy of social responsibility through the "Fundación Clínica Médica Sur A.C., a non-profit institution created in 1995 to promote academic activities of research and social assistance. During 2017, Médica Sur, committed with this social responsibility, destined more than 28.4 million pesos for economic and research activities. In the teaching side, we back the formation of 50 undergraduate doctors and 132 residents in the specialties of Arthroscopy, Echocardiography, Cerebrovascular disease, Gastrointestinal Endoscopy, Oncologic Pathology, MRI, Gastroenterology, Geriatrics, Critical Medicine, Neonatology, Oncology, Internal Medicine, among others. It is important to mention that since 3 years ago Médica Sur has received the certification of the CONACYT and the Quality Postgraduates in the courses of Internal Medicine, Gastroenterology and Oncology, which allows us to access scholarships for rotations abroad strengthening the learning of our residents. In the Simulation and Medical Skills Center (CESIDEM), 11 courses were given, 2,497 people were trained and 10,000 people more in locations aided by the CESIDEM, meaning, with the help of trainers of the CESIDEM. Meanwhile, in the Inter Institutional Virtual Teaching Center (CEVI) 7 courses were offered for general physicians, 15 modules for dentists with a participation of 94 people of different nationalities. 2017 Annual Report 33#1934 Médica Sur Regarding research activities, during 2017 65 articles were published in international magazines and 8 in national magazines, which appeared in more than 45 high-impact magazine covering a wide range of specialties, being the main ones Gastroenterology, Hepatology, Immunology and microbiology. Added up, the group has published a total of 818 issues. Likewise, three medicine books were published. Additionally, 74 research studies were registered of different kinds and specialties, thanks to the academic orientation of Medica Sur's doctors in diverse disciplines. In this sense, during 2017 the number of researchers belonging to the National System of Researchers of The National Council of Science and Technology increased to 12. In the assistance branch, the sister group with philanthropic ends, Medica Sur Foundation outstands, as it gave medical attention to 1,035 patients through 2,000 medical consultations, 510 laboratory studies made, 1,426 immunotherapy treatments were applied and 44 allergology test were performed. Regarding dental services, 334 patients were treated through 653 consultations totaling 1,278 treatments. Regarding social assistance project for health, 63 patients with deafness were treated, providing them with devices that help their hearing function. Additionally, in-kind donations were offered such as medicine, medical equipment and instruments, furniture, clothing, bedding and toys to hospitals in the public sector, municipalities and other foundations and institutions, homes, as well as individuals. 967 P BLAM madica ENO AE Lidia Moreno C. 2017 Annual Report 35 IN THE TEACHING SIDE, WE BACK THE FORMATION OF 50 UNDERGRADUATE DOCTORS AND 132 RESIDENTS IN THE SPECIALTIES OF ARTHROSCOPY, ECHOCARDIOGRAPHY, CEREBROVASCULAR DISEASE, GASTROINTESTINAL ENDOSCOPY, ONCOLOGIC PATHOLOGY, MRI, GASTROENTEROLOGY, GERIATRICS, CRITICAL MEDICINE, NEONATOLOGY, ONCOLOGY, INTERNAL MEDICINE, AMONG OTHERS madic#2036 Médica Sur Hospital Activity Indicators 10,000 8,000 6,000 4,000 2,000 0 25,000 20,000 15,000 10,000 5,000 0 SURGICAL PROCEDURES (SURGERIES) о- ° 9.997 9.338 9,229 8.993 8,783 13 14 15 O 16 16 '17 HOSPITALIZED PATIENTS 20,000 15,000 10,000 5,000 0 14,109 13,271 13,241 13,224 12,813 13 14 15 '16 '17 IMAGING, MRI AND NUCLEAR MEDICINE* 120,000 100,000 80,000 60,000 40,000 20,000 0 107,773 102,608 100,403 106,595 101,004 13 14 15 16 17 *Does not include Laboratorio Médico Polanco URGENCIES (PATIENTS) LABORATORY (STUDIES)* 2,500,000 2,000,000 O 19,773 19.104 17,793 18,028 13 14 15 16 17,440 17 17 6 1,500,000 1,000,000 500,000 1,997,519 1,981,048 1,959,146 2,007,587 1.985,989 0 13 14 15 16 17 *Does not include Laboratorio Médico Polanco 2017 Annual Report 37#2138 Médica Sur Board of Directors 2017 Annual Report 39 Board Member Dr. Misael Uribe Esquivel (Chairman of the Board of Directors) Lic. Enrique Castillo Sánchez Mejorada Lic. Joaquín Vargas Guajardo Dr. Juan Ramón de la Fuente Lic. Santiago Garza Borde Lic. Luis Javier Solana Morales C.P.C. Manuel Augusto Sánchez y Madrid Dr. Xavier Soberón Mainero Dra. Xóchitl Castañeda Dr. Eduardo González Pier Lic. Daniel Antonio del Río Loaiza Lic. Alejandro Quiroz Pedrazzi Dr. Francisco López Jiménez Dra. Martha Helena Ramos Ostos Dr. Octavio González Chon Lic. Juan Carlos Griera Hernando Dr. José Manuel Correa Rovelo Dr. Fernando Bernardo Gabilondo Navarro Ing. Genaro Borrego Estrada Ing. Mario Federico Sicilia Benard Alternate Member Dr. Salvador Rivero Boschert Lic. Adrián Rodríguez Macedo Rivera Dr. Lorenzo de la Garza Villaseñor Act. Abraham Hernández Pacheco Dr. César Athie Gutiérrez Don Enrique Carvajal González Dr. José Luis Miguel Gutiérrez Dr. Manuel Hugo Ruíz de Chávez Dr. Jaime Guadalupe de la Garza Salazar C.P.C. J. Vinicio González Castillo Dr. Misael Uribe Ramos Dra. Sandra María García López Lic. José Ignacio Moreno Ortiz Dr. Ramiro del Valle Robles Ing. José Antonio Fernández Carbajal Ing. Jaime Eduardo Alatorre Benard Secretary Lic. Cuauhtémoc Rafael Santa-Ana Otero Principal Executive Directors CHAIRMAN OF THE BOARD GENERAL DIRECTOR AUDITING COMMITTEE Board Member C.P.C. Manuel Sánchez y Madrid Lic. Santiago Garza Borde Lic. Daniel Antonio del Río Loaiza Dr. Eduardo González Pier Alternate Member C.P.C. J. Vinicio González Castillo Act. Abraham Hernández Pacheco CORPORATE PRACTICES COMMITTEE Board Member Lic. Daniel Antonio del Río Loaiza C.P.C. Manuel Sánchez y Madrid Lic. Juan Carlos Griera Hernando Dr. Octavio González Chon Lic. Alejandro Quiroz Pedrazzi Lic. Santiago Garza Borde Ing. Mario Federico Sicilia Benard Alternate Member Dra. Xóchitl Castañeda Dr. Misael Uribe Ramos C.P.C. J. Vinicio González Castillo Ing. Jaime Eduardo Alatorre Benard DR. MISAEL URIBE ESQUIVEL LIC. JUAN CARLOS GRIERA HERNANDO DR. OCTAVIO GONZÁLEZ CHON C.P. MARISOL VÁZQUEZ MELLADO MOLLÓN ACT. OMAR HERRERA GARCÍA DR. JOSÉ MANUEL CORREA ROVELO ING. IÑIGO GUTIÉRREZ GUTIÉRREZ LIC. CONCEPCIÓN GUADALUPE ARRIAGA RUILOBA ING. JORGE AGUSTÍN ARREDONDO REYNA LIC. CUAUHTÉMOC RAFAEL SANTA-ANA OTERO C.P. RUBÉN DÍAZ CRUZ LIC. ALFREDO ANTONIO ASSAM KARAM DR. JAIME JACOBO ARRIAGA GRACIA DRA. MARTHA ELENA RAMOS OSTOS DRA. SANDRA MARÍA DEL CARMEN GARCÍA LÓPEZ DR. RODOLFO BARRAGÁN GARCÍA DR. NAHUM MÉNDEZ SÁNCHEZ DR. JOSÉ PÉREZ JÁUREGUI DR. FRANCISCO DE JESÚS SÁNCHEZ GIRÓN DR. JAVIER LIZARDI CERVERA DR. EDUARDO GONZALEZ PIER DR. JORGE HERNÁNDEZ ORTIZ MEDICAL DIRECTOR FINANCE AND ADMINISTRATION DIRECTOR HUMAN RESOURCES DIRECTOR OPERATIONS DIRECTOR OPERATIONS MS LABORATORY DIRECTOR MARKETING, COMMUNICATION AND SPECIAL EVENTS DIRECTOR I.T. AND SYSTEMS DIRECTOR LEGAL DIRECTOR INTERNAL AUDITING DIRECTOR INFRASTRUCTURE AND PROJECTS DIRECTOR STRATEGY, ALLIANCES AND PATIENT-DOCTOR APPROACHMENT DIRECTOR CLINICAL DIAGNOSIS AND IMAGING DIRECTOR MEDICINE AND HOSPITALIZATION SURGERY DIRECTOR BIOMEDICS INVESTIGATION DIRECTOR MS REFERENCE LABORATORY DIRECTOR MS LABORATORY PROCESS CENTER DIRECTOR MS MEDICAL NETWORK DIRECTOR MÉDICA SUR FOUNDATION GENERAL DIRECTOR STRATEGIC ACQUISITIONS COMMITTEE DIRECTOR#2210 40 Médica Sur Financial Statements Welch Allyn 114/69 972 60 36.6 Probe et Welch Allyn Welch Allyn Thermometer e Covers NAO HOSPITAL PISO 8 CENTRAL DE ENFERMERS MSTHBCEMSV003 WELCH ALLYN Marce Modelo CONNEX SPOT Serve Sun PROPEDAD Madica 51 MONITOR DE SONOS WALES DRONING OFCe Mac a Medica Sur 0014054 SANTIAG SELL 2017 Annual Report 41 P mdc Excelencia méd#2342 Médica Sur Consolidated Financial Situation Statements Médica Sur, S.A.B. de C.V. and Subsidiaries December 31st of 2017 and 2016 (Pesos) Asset 2017 Annual Report Liabilities and Stockholders' equity Notes 2017 2016 Current liabilities Loan 16 $ 30,000,000 $ 30,000,000 Suppliers 261,688,079 343,775,705 Taxes and accumulated expenses 302,175,608 332,391,347 Received deposits 1(a) 100,454,051 Direct benefits to employees 6,988,230 7,790,238 Contingent liability provisions 26 15,460,293 31,228,338 Total Current Liabilities 716,766,261 745,185,628 Long-Term debt, net 16 1,351,104,639 1,284,297,760 Employee benefits 17 17,980,349 31,795,545 Notes 2017 2016 Differed profit taxes 18 70,253,858 90,326,291 Total Liabilities 2,156,105,107 2,151,605,224 Floating Asset Cash, restricted cash and cash equivalents 9 and 1(a) $ 216,696,647 $ 104,310,067 Stockholders' equity Share capital 20 Accounts receivable, net 10 313,444,417 243,017,165 Future capital increase contributions "Fundación Clínica Médica Sur A.C." 249,330 119,148 Share subscription surplus Other accounts receivable 11 96,169,069 72,731,964 Accumulated Profit Inventories, net 12 133,832,237 117,711,083 Legal reserve Insurance paid in advance 12,387,147 13,874,180 Assets available for sale 3 (e) Share re-purchase reserve 517,869,032 517,869,032 124,628 124,628 121,280,931 121,280,931 2,504,172,475 2,358,953,976 103,573,805 103,573,805 199,543,300 200,000,000 330,133,067 450,668,542 Other integral profit Total Floating Asset Real Estate, furniture, equipment and improvements, to 13 2,848,717,649 2,759,658,229 leased office spaces, net Investment properties, net 1,102,911,914 1,002,432,149 Actuary profits (losses), net of profit taxes. 17 (685,486) 1,404,581 Controlled-share stockholders' equity 3,445,878,685 3,303,206,953 14 89,833,115 97,335,224 Non-controlling share 890,262 4,297,267 Commercial credit Intangible Assets, net Other Services, net 15 1,116,737,401 1,120,216,275 Total Stockholders' equity 3,446,768,947 3,307,504,220 6 425,627,836 447,594,046 Compromises and contingent liabilities 26 19,046,139 31,873,521 See notes attached to the consolidated financial statements. $ 5,602,874,054 $ 5,459,109,444 See notes attached to the consolidated financial statements $ 5,602,874,054 $ 5,459,109,444 43#2444 Médica Sur Consolidated Financial Statements and other Integral Results Médica Sur, S.A.B. de C.V. and Subsidiaries Year terms ended on December 31st of 2017 and 2016 (Pesos) Note 2017 Consolidated Cash Flow Statements Médica Sur, S.A.B. de C.V. and Subsidiaries Year terms ended on December 31st of 2017 and 2016 (Pesos) Notes 2017 2017 Annual Report 45 2016 Operation activities cash flow: Net profit Adjustments by: $ 231,870,092 $ 146,210,922 Net cost of the period of employee benefits Depreciation and amortization 13 and 14 (12,759,011) 220,440,656 15,031,944 325,247,154 Transport equipment and other asset sales loss (1,758,707) Profit taxes 2016 Interest in favor 120,428,082 (5,676,881) 107,917 53,519,878 (15,110,169) Financial activities related item Services Income Services Costs Consolidated gross profit $ 3,431,445,846 $ 2,510,362,515 2,268,545,024 1,162,900,822 1,733,753,756 776,608,759 Interest expense Sub total Accounts receivable, net Expenses: Fundación Clínica Médica Sur, A.C.. 141,851,298 694,395,529 (70,427,252) (130,182) 26,877,608 551,885,254 (4,108,574) 95,606 Sales and administration expenses 663,185,180 565,400,468 Other accounts receivable (23,437,105) (42,821,646) Other expenses, net 23 (13,392,260) (4,079,640) Total of expenses 649,792,920 561,320,828 Consolidated operation profit 513,107,902 215,287,931 Income and financial costs (Loss) currency exchange gain, net Interest expenses (268,560) (141,851,298) Interest income Financial Costs, net 24 5,676,881 (136,442,977) 19,718,382 (6,547,897) Consolidated profit before profit taxes, discontinued operations and other integral results 376,664,925 208,740,034 614,576 (26,880,855) Inventories, net Insurance paid in advance Suppliers Taxes and accumulated expenses Contingent liability provisions Net cash flow of operation activities Taxes expenses Interest expenses Net cash flow from operating activities Investment activities: (16,121,154) 1,487,033 (24,208,083) (10,172,043) (55,117,703) (204,087,506) (4,707,748) (7,484,573) 80,594,487 15,436,374 518,456,845 362,613,869 (170,474,322) (143,192,000) (133,996,659) (20,639,728) 213,985,864 198,782,141 Profit taxes 18 120,428,082 55,491,361 Increases in other fixed assets, net Interrupted operation 25 (24,366,751) (7,037,751) Interest received Consolidated net profit 231,870,092 146,210,922 Resources received in real estate, furniture and equipment sales Other integral results: Received deposits 5,676,881 75,944,248 100,454,051 4,837,391 15,110,169 (Losses) actuary profit, net of profit taxes 17 Consolidated Integral Profit (2,090,067) 229,780,025 1,936,970 148,147,892 Real estate, furniture, equipment and investment properties acquisitions Receivable payments or entity share recovery 13 y 14 (266,079,788) (456,700) (230,325,263) Net consolidated profit imputable to: Business acquisitions Controlling share Non-controlling share 231,798,220 71,872 231,870,092 142,634,010 3,576,912 146,210,922 Net cash flow used in investment activities (1,447,493,000) (84,461,308) (1,657,870,703) Financing activities: Integral consolidated profit imputable to: Controlling share Non-controlling share Basic and diluted per share profit Number of average weighted shares See notes attached to the consolidated financial statements 22 $ 229,708,153 71,872 229,780,025 144,570,980 3,576,912 148,147,892 1.88 1.19 123,281,750 $ 123,281,750 Obtained loans 16 Paid dividends 20 Net cash flow (used in) generated by financing activities Cash flow net increase (decrease) and cash equivalents Cash and cash equivalents: 65,000,000 1,285,000,000 (82,137,976) (80,729,079) (17,137,976) 1,204,270,921 112,386,580 (254,817,641) At the beginning of the year At the end of the year 104,310,067 359,127,708 9 $ 216,696,647 $ 104,310,067 See notes attached to the consolidated financial services#2546 Médica Sur Consolidated Financial Statements of Changes in the Sockholders' Equity Médica Sur, S.A.B. de C.V. and their Subsidiaries Year terms ended on December 31st of 2017 and 2016 (Pesos) 2017 Annual Report 47 Contributions Net actuarial profits Note Share Capital for future capital increases Surplus in the share subscription Accumulated Profit Share buy-back Legal reserve reserves (losses) from income tax Total Non-controlling share Total Stockholders' Equity Balances at January 1st 2016 20 $ 517,869,032 $ 124,628 $ 121,280,931 $ 2,300,441,642 $ 103,573,805 $ 200,000,000 $ (532,389) $ 3,242,757,649 $ 720,355 $ 3,243,478,004 Declared dividends 20 Actuary gains 17 27 (84,121,676) (84,121,676) (84,121,676) 1,936,970 1,936,970 1,936,970 Net profit 142,634,010 142,634,010 3,576,912 146,210,922 Comprehensive income 1,936,970 144,570,980 3,576,912 148,147,892 Balances at December 31st of 2016 20 517,869,032 124,628 121,280,931 2,358,953,976 103,573,805 200,000,000 1,404,581 3,303,206,953 4,297,267 3,307,504,220 Declared dividends Non-controlling share 20 (86,753,785) (86,753,785) (86,753,785) (3,478,877) (3,478,877) (282,636) (282,636) (282,636) Extraordinary movements Share buy-back reserves Actuary losses Net profit Comprehensive income 456,700 (456,700) (2,090,067) (2,090,067) (2,090,067) 231,798,220 231,798,220 71,872 231,870,092 (2,090,067) 229,708,153 71,872 229,780,025 Balances at December 31st of 2017 20 $517,869,032 $ 124,628 $ 121,280,931 $ 2,504,172,475 $ 103,573,805 $ 199,543,300 $ (685,486) $ 3,445,878,685 $ 890,262 $ 3,446,768,947 See notes attached to the consolidated financial statements#2648 Médica Sur medica SUP Excelencia médica, calidez humana Contact Information cotiza en Bolsa Mexicana MÉDICA SUR Puente de Piedra 150 Col. Toriello Guerra Zip Code. 14050, CDMX Tel. +52 (55) 5424-7200 Toll-Free: 01800-501-0101 www.medicasur.com.mx INVESTOR RELATIONS C.P. Marisol Vázquez Mellado Mollón [email protected] Lic. Roberto Navarro Rangel [email protected] Tel: +52 (55) 5424-7200 ext. 3425 TICKER MEDICAB INDEPENDENT AUDITORS KPMG Cárdenas Dosal, S.C. Blvd. Manuel Ávila Camacho No. 176 P1 Zip Code. 11650, CDMX. Tel. +52 (55) 5246-8300 www.kpmg.com.mx 2017 Annual Report 49#27www.medicasur.com.mx