#1medica midco medica WE TAKE CARE OF WHAT IS IMPORTANT Médica Sur Medical Excellence, Human Warmth 2016 ANNUAL REPORT#2ECAD SPEED AND THE MOST IMPORTANT THING IS OUR PATIENTS TABLE OF CONTENTS 23456 Company Profile 8 Message from the President 28 Hospital Activity Mission, Vision and Values of the Board of Directors Indicators Key Indicators 12 World-Class Medical Care 30 Board of Directors Key Statistics 14 Hospital services 31 Principal Executive Corporate Structure 18 Clinical Services and Diagnostic Units Directors 22 Tecnología e Infraestructura 32 Financial Statements 26 Médica Sur Clinical Foundation#3COMPANY 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. With the incorporation of Polanco Medical Laboratory, it now has 111 branches of diagnostic units in Mexico City, State of Mexico, Morelos, Puebla, Queretaro and Tlaxcala. MISSION 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. 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. MOTTO Medical excellence, human warmth VALUES 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 Service: We interact with each other in a caring manner, showing companies that engage our services represents a priority. a genuine interest in the person. 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. 2 16 // ANNUAL REPORT 3#44 SALES DISTRIBUTION % 55.60 HOSPITAL SERVICES 39.61 4.79 CLINICAL SERVICES AND DIAGNOSTIC UNITS OTHERS FINANCIAL STRUCTURE SALES-EBITDA * 3,000 720 6,000 2,500 600 5,000 2,000 480 4,000 1,500 360 3,000 1,000 240 500 120 PS Millones 2,000 1,000 PS Million * 0 11 12 13 14 15 16 Sales EBITDA Consolidated Sales and EBITDA 16 // ANNUAL REPORT 0 11 12 13 14 15 16 Assets Liabilities Stockholders' Equity PS 10 CARRYING VALUE * 20 30 19.11 20.99 22.37 25.21 26.39 26.83 Médica Sur, S.A.B. de C.V. and Subsidiaries KEY STATISTICS December 31, 2016 and 2015 Million pesos 2016 2015 Income 2,590 2,279 Gross Profit 796 709 Operating Profit Resultado Neto EBITDA* 211 211 331 16 146 241 536 453 Shares Outstanding 123,281,750 123,281,750 Basic Earnings per Share 1.19 1.95 Total Assets 5,459 3,771 Current Assets 1,002 594 Non-Current Assets 4,457 3,177 Total Liabilities 2,151 528 Short-Term Liabilities 745 391 Long-Term Liabilities 1,406 137 Stockholders' Equity 3,308 3,243 ROE (Return on Equity) 4.4% 7.4% * Operating Income plus Depreciation and Amortization// Earnings before Interest, Taxes, Depreciation and Amortization 0.2 0.4 DECLARED DIVIDEND PER SHARE 1.0 0.6 0.8 0.55 0.55 0.86 0.84 S Ո 0 0 11 12 13 14 15 16 11 12 abr 13 dic 13 15 16 * Stockholders' Equity / Shares Outstanding 5 0.85 89 0#5CORPORATE STRUCTURE HOSPITAL SERVICES TLALPAN HOSPITAL Surgical Units: Short Stay and Laser Surgery Gynecology and Obstetrics Main Operating Room Critical Care Units: Intensive Care Coronary Care Intermediate Care Emergency Room Pediatrics Neonatology Blood Bank Respiratory Therapy Pathological Anatomy PHARMACIES Médica Sur Tower I Pharmacy Médica Sur Tower II Pharmacy 6 16 // ANNUAL REPORT LOMAS HOSPITAL Operating Unit Labor, Delivery, and Recovery Rooms Hospitalization Adult ICU Neonatology Physiological Nursery Intensive Care (Intermediate, Growth and Development] CIAO OTHERS CLINICAL SERVICES AND DIAGNOSTIC UNITS VARIAN Advanced Urology Rehabilitation Medicine Radiotherapy Cancer Center Neurophysiology Gamma Knife Radiosurgery Gastroenterology, Hepatology and Endoscopy Laboratory Magnetic Resonance Imaging and Ultrasound Angiology Comprehensive Diagnostic and Treatment Center Angiography Nuclear Medicine PET-CT JIG BEAM Vascular Disease Unit Hemodialysis Unit Parking Restaurants Coffee Shops Hotel Banking Services 7#68 MESSAGE FROM THE PRESIDENT OF THE BOARD OF DIRECTORS madica DEAR SHAREHOLDERS, PARTNERS, CLIENTS AND COLLABORATORS: ON BEHALF OF THE BOARD OF ADMINISTRATION AND THE MÉDICA SUR MANAGEMENT TEAM, I AM PLEASED TO PRESENT THIS REPORT OF THE INSTITUTION'S PERFORMANCE, AS WELL AS THE PRINCIPAL STRATEGIC AND OPERATING ACHIEVEMENTS IN THE YEAR. In 2016, we continued on the path of expanding, modernizing and improving our infrastructure in order to offer our patients medical excellence and human warmth at fair prices. In the medical field, by working together, the outstanding group of doctors and Médica Sur continue to offer the highest quality of service to more than 15,000 patients who were hospitalized in 2016. We performed 10,871 highly complex surgeries from radiosurgery to liver transplants, as well as more than 2 million diagnostic tests. In addition, 18,028 patients were attended in the Emergency Room. The Quality still the trait that sets Médica Sur apart, sample of quality in our services is the drop of the nosocomial infections annual rate (infections acquired in a hospital), and the low mortality rate, which stood at 1.02 and 0.74 patients per every 100 discharges, respectively. Likewise, the readmission rate was 3.9 per every 100 discharges. This reflects the institution's outstanding performance considering both national and international standards. Prevention is a regular part of our work. In this way, we have lowered the number of infections in our facilities. Our patients' average length of stay stood at 2.95 days and our average occupancy for the year was 72.0%. As part of our strategy for the growth and enhancement of our infrastructure, Laboratorio Médico Polanco and Laboratorios Clínicos de Puebla were acquired to position us as the only health care provider with both hospitals and diagnostic units. This has given us a competitive advantage over our main competitors, as well as created synergy in biomedical research. Together, we have already published more than 1,200 research papers. This acquisition has broadened our presence and the diversity of services that we currently offer in terms of clinical diagnosis and improved the range of services available to our patients. With this transaction, we have added 76 health care centers and two sample processing laboratories, one of which is a reference center for processing high specialty tests. It has also enabled us to attend populations in Mexico City, the State of Mexico, Morelos, Puebla, Queretaro and Tlaxcala, with the most advanced laboratories in Mexico. Moreover, we now offer a wide variety of diagnostic and other specialty imaging services in addition to clinical tests. This operation is the largest ever made in Médica Sur's history. It will increase the Group's consolidated sales by 35%, as well as its EBITDA, thus diversifying our source of income by lowering our dependence on the Tlalpan Campus from 96% to 68%. Furthermore, a letter of intent has been signed with Grupo Sordo Madaleno for the sale of 47% of the total surface area, but only 21% of the building density, of a plot adjacent to the Tlalpan Medical Complex. A mixed-use building with a shopping area will be built on this land for the benefit of our patients and their family members by offering them a better range of additional services to make their stay as pleasant as possible. The remaining 25,000 m2 will still be used to continue enlarging the medical project. At Médica Sur, we are proud to have the first private Cancer Center in Mexico, which celebrated its 20th anniversary in 2016. In early 2017, the center was reopened with an updated design and a team of specialists that make every effort to provide better alternatives throughout their patients' treatment. Additionally, the refurbishment of the 6th, 7th and 8th floors of the hospital tower was concluded in 2016. This will further the comfort of our patients by incorporating the highest standards of quality and hygiene, and creating a friendly environment for our patients and their family members. In terms of financial performance, the Group's sales reached an accumulated income of 2.59 billion pesos in 2016, which translates into: i) an operating profit of 210.7 million pesos with an operating margin of 8.1%; ii) a net income of 146.2 million pesos with a net margin of 5.6% and iii) and an EBIDTA margin of 20.6%, or 535.9 million pesos. During the year, there was a decrease in relevant metrics as a result of the capitalization of the investment for the "Avanza" project (EPR). This did not represent a cash flow and was replaced by technology with different capabilities. It should be noted that if this decision had not been taken, a significant investment would 16 // ANNUAL REPORT 9#7HB BY WORKING TOGETHER, THE OUSTANDING GROUP OF DOCTORS AND MÉDICA SUR WERE ABLE TO OFFER THE HIGHEST QUALITY OF SERVICE TO THE MORE THAN 15,000 PATIENTS WHO WERE HOSPITALIZED IN 2016. 10 16 // ANNUAL REPORT have been needed and the operating cost over the following years would have been unfeasible, as it would have increased the cost of the services for our patients. In view of the above, the return on equity for our investors stood at 4.4%. In 2016, we continued to back teaching, research and community service activities, in keeping with Médica Sur's vision. Hence, we allocated 28.1 million pesos over the year to this effect. In teaching, we provided support for the training of 35 medical interns and 130 residents in the fields of: Internal Medicine (which this year won 1st place in the National College of Internal Medicine), Imaging, Critical Care Medicine, Clinical Pathology, Anesthesiology, Neonatology, Medical Oncology, Radiology, General Surgery, Geriatrics, Gastroenterology, High Specialty Magnetic Resonance, Breast Imaging, Cerebral Vascular Accident, Knee Arthroscopy and Pathological Anatomy of Cancer. As part of the research activities in 2016, 67 articles were published in indexed and non-indexed journals and 42 research protocols were reviewed. With Laboratorios Clínicos de Puebla, Médica Sur has now published almost 100 research papers, making it the non-governmental group that most supports research. In the area of community service, it should be noted that our sister group with philanthropic goals, the Médica Sur Clinical Foundation, provided medical attention to 5,399 persons in the year, with basic diagnostic services, applications of vaccines, dental services, and so on. In view of all this, our commitment with the Society and our partners continues to grow stronger. On looking back over the past year, we would like to thank our patients for their trust, our valuable group of doctors, nurses, support personnel and administrative team for their efforts, and those who have entrusted us with their resources for their backing. Furthermore, on behalf of the medical group that directs this Institution, we would like to reiterate our commitment to carry on in the effort to offer the best alternative of ethical and high specialty medicine in Mexico, with quality above all and a fair return for our shareholders. Sincerely, Mddica Sur Dr Misael Uribe Esquivel President of the Board of Directors 1 1#8AWARDS AND ALLIANCES WORLD-CLASS MEDICAL ATTENTION These awards are given by accredited agencies that certify compliance with established requirements. They are the result of the institution's commitment to taking actions that protect the health of our patients. Because of the effort and participation of each and every one of Médica Sur's employees, the following awards have been attained. MAYO Care Network CLINIC Member The Mayo Clinic Care Network (MCCN) is a collaboration between the Mayo Clinic and other health care organizations in order to improve the way of delivering medical care to their communities. 1 2 16 // ANNUAL REPORT MÉDICA SUR HAS RECEIVED NATIONAL AND INTERNATIONAL AWARDS THAT ENSURE THE SAFETY AND QUALITY OF OUR SERVICES. Joint Commission International (JCI) identifies, measures, and shares the best practices in the world with regard to the quality and safety of patients. It provides leadership and innovative solutions to help health care organizations improve their performance and results. WINNER The European Society for Quality Research promotes a culture of quality by acknowledging good business practices, technological innovation, and achievements in quality of organizations around the world and it circulates information about the successful performance of these organizations. 12 HOSPITAL CERTIFICADO CONSFIO DE SALURON GENERAL ema cap ACCREDITED™ STINTIVE H TRACE ® Médica Sur has reasserted its commitment to the quality and safety of its patients and family members by obtaining one of the highest scores given by the General Health Council. Accreditation for clinical laboratories was obtained under Official Mexican Standard NMX-EC-15189-IMNC-2008/ISO 15189:2007, which ensures competency and quality. International laboratory certification was obtained from the College of American Pathologists (CAP) by meeting the highest standards of excellence in its processes for improving the patient's safety in clinical laboratories. Distinction H was awarded by the Ministry of Health and the Ministry of Tourism, which recognizes good practices of hygiene and sanitation in food handling area for patient's food preparing. Trace International is a company founded by anti-bribery experts to achieve economies of scale and set a common standard for two shared elements of anti-bribery compliance programs: due diligence reviews of commercial intermediaries and anti-bribery training for the global supply chain. 1 3#914 16 // ANNUAL REPORT HOSPITAL SERVICES OUR HOSPITAL SERVICES CONSIST OF: 223 HOSPITAL ROOMS, 21 OPERATING ROOMS, 15 CUBICLES OF CRITICAL CARE CUBICLES AND 562 DOCTOR'S OFFICES. WE ALSO HAVE A TEAM OF 3,823 COLLABORATORS AND A MEDICAL SOCIETY WITH 1,451 MEMBERS. 15,038 HOSPITALIZED PATIENTS 10,871 SURGERIES 18,028 EMERGENCIES 15#10HOSPITAL SERVICES MÉDICA SUR CAMPUS TLALPAN Located in the south of Mexico City, the Médica Sur Campus Tlalpan is one of the largest and most modern private medical centers in the country. This campus has 190 hospital rooms, 16 operating rooms, 15 critical care cubicles and 540 doctor's offices. The Tlalpan Campus is a high specialty center with the capacity to attend a wide range of conditions and provide a wide variety of medical services, ranging from elective surgeries and intensive care to some of the most complex procedures like organ transplants. In 2016, we received 13,160 hospitalized patients, 8,993 surgeries were performed and 18,028 patients were attended in the emergency room. MÉDICA SUR LOMAS This hospital center with 33 rooms and 5 operating rooms is located in the west of Mexico City. It is a medical center specializing in gynecology and obstetrics. Médica Sur Lomas is the first private hospital to be recognized by the Council for Bio-Ethically Responsible Companies, A.C. (COEBIO) as a company with values, at the cutting edge and operating within the bioethical guidelines set by national and international standards. In 2016, this facility, as well as the Tlalpan Campus, received its General Health Recertification. In 2016, a total of 1878 patients were attended, 366 surgical procedures were performed, 736 deliveries were attended, and 776 C-sections were done. 13,160 PATIENTS RECEIVED IN HOSPITAL 8,993 SURGERIES 18,028 PATIENTS ATTENDED IN THE EMERGENCY ROOM 16 16 // ANNUAL REPORT 1,878 PATIENTS ATTENDED 366 SURGICAL PROCEDURES 736 DELIVERIES 776 CAESAREAN SECTION 17#1118 16 // ANNUAL REPORT CLINICA SERVICES AND DIAGNOSTIC UNITS PERFEXION CUTTING EDGE CLINICS AND DIAGNOSTIC UNITS, KEY ELEMENTS OF EXCELLENCE IN HEALTH CARE 2,007,587 LABORATORY TESTS * 97,320 IMAGING TESTS * ENTRUERES IS PERFEXION * Do not include Laboratorio Médico Polanco NO 19#12CLINICAL SERVICES AND DIAGNOSTIC UNITS 20 16 // ANNUAL REPORT OUTPATIENT SERVICES These high specialty health care units provide treatments that, due to their nature, do not require hospitalization. Our outpatient units provide care for the following specialties: Oncology, Radiotherapy, Gamma Knife Radiosurgery, Neurophysiology, Advanced Urology, Gastroenterology, Endoscopy and Rehabilitation Medicine. DIAGNOSTIC UNITS The Diagnostic Units play a vital role in helping our medical team to reach the correct diagnosis and follow-up on various pathologies. Our units tend to both hospitalized patients and outpatients. By the end of 2016, our network of diagnostic units numbered 111 with the incorporation of 76 Laboratorio Médico Polanco branches. These units are located in Greater Mexico City, State of Mexico, Morelos, Puebla, Queretaro, and Tlaxcala. Médica Sur currently has diagnostic units, such as Imaging, Laboratory, Nuclear Medicine, PET-CT, the Comprehensive Diagnostic and Treatment Center (CIDYT) and Angiography. WITH THE ACQUISITION OF LABORATORIO MÉDICO POLANCO AND LABORATORIOS CLÍNICOS DE PUEBLA, WE HAVE NOW POSITIONED OURSELVES AS THE ONLY HEALTH CARE PROVIDER WITH BOTH HOSPITALS AND DIAGNOSTIC UNITS, THUS GIVING US COMPETITIVE ADVANTAGE OVER OUR MAIN COMPETITORS. 21#1322 TECHNOLOGY AND INFRASTRUCTURE BY THE END OF 2016, OUR INFRASTRUCTURE CONSISTED OF: 2 HOSPITALS 111 EXTERNAL DIAGNOSTIC UNITS 32,800 M² OF HOSPITAL FACILITIES 26,000 M² OF DOCTORS' OFFICES 23#14TECHNOLOGY AND INFRASTRUCTURE IN 2016, WE CONTINUED ON THE PATH OF EXPANDING, MODERNIZING AND IMPROVING OUR INFRASTRUCTURE IN ORDER TO OFFER OUR PATIENTS MEDICAL EXCELLENCE AND HUMAN WARMTH AT FAIR PRICES. MUS We have high-tech medical equipment, including: the latest model of the True Beam Linear Accelerator, a Gamma Knife Perfexion radiosurgery unit, a Varian Clinac IX System Linear Accelerator, a Somatom Definition CT scanner, an Axiom Artis, and robotic lines for clinical analysis, among others. At Médica Sur, we are proud to have the first private Cancer Center in Mexico, which celebrated its 20th anniversary in 2016. In early 2017, the center was reopened with an updated design and a team of specialists that make every effort to provide better alternatives throughout their patients' treatment. Additionally, the refurbishment of the 6th, 7th and 8th floors of the hospital tower was concluded in 2016. This will further the comfort of our patients by incorporating the highest standards of quality and hygiene, and creating a friendly environment for our patients and their family members. Our installations also have a variety of complementary services to better the experience and care of our patients and their family members, including: 2 restaurants, 3 coffee shops and 2 bank branches. AT MÉDICA SUR, WE ARE PROUD TO HAVE THE FIRST PRIVATE CANCER CENTER IN MEXICO, WHICH CELEBRATED ITS 20TH ANNIVERSARY IN 2016. 2 4 16 // ANNUAL REPORT 25#15CLINICAL FOUNDATION THE MÉDICA SUR CLINICAL FOUNDATION, A.C. IS A NON-PROFIT ORGANIZATION THAT WAS CREATED TO PROMOTE ACADEMIC, RESEARCH AND COMMUNITY SERVICE ACTIVITIES. 26 16 // ANAL REPORT AS PART OF ITS COMMITMENT TO SOCIAL RESPONSIBILITY, MÉDICA SUR ALLOCATED MORE THAN 28.1 MILLION PESOS FOR ACADEMIC AND RESEARCH ACTIVITIES. In teaching, we provided support for the training of 35 medical interns and 130 residents in the fields of: Internal Medicine (which this year won 1st place in the National College of Internal Medicine), Imaging, Critical Care Medicine, Clinical Pathology, Anesthesiology, Neonatology, Medical Oncology, Radiology, General Surgery, Geriatrics, Gastroenterology, High Specialty Magnetic Resonance, Breast Imaging, Cerebral Vascular Accident, Knee Arthroscopy and Pathological Anatomy of Cancer. As part of the research activities in 2016, 67 articles were published in indexed and non-indexed journals and 42 research protocols were reviewed. With the Puebla Group, Médica Sur has now published almost 100 research papers, making it the non-governmental group that most supports research. The Médica Sur Clinical Foundation, A.C. is a non-profit organization that was created to promote academic, research and community service activities. In the area of community service, it should be noted that our sister group with philanthropic goals, the Médica Sur Clinical Foundation, provided medical attention to 5,399 persons in the year, with medical consultations, basic diagnostic services, applications of vaccines, dental services, and so on. Moreover, we organized a campaign to get hearing aids at a discount. We also donated medications, medical rehabilitation supplies, clothing, and toys to various associations. In teaching, we covered national and international student scholarships. 35 MEDICAL INTERNS 130 RESIDENTS 42 RESEARCH PROTOCOLS 27#1628 25,000 20,000 15,000 10,000 5,000 16 // ANNUAL REPORT 12,000 10,000 8,000 6,000 4,000 2,000 HOSPITAL ACTIVITY INDICATORS 20,000 15,000 10,000 50,00 17,504 HOSPITALIZED PATIENTS* 18,001 16,549 16,165 15,130 11 12 13 14 15 16 * Consolidated figures for Tlalpan and Lomas SURGICAL PROCEDURES [SURGERIES)* 11,588 11,385 11,183 10,695 11,112 12 13 14 15 16 * Consolidated figures for Tlalpan and Lomas EMERGENCY ROOM (PATIENTS) 11 12 13 14 15 16 10,871 15,038 (C80 SPEED EXCITE 2,500,000 2,000,000 1,500,000 1,000,000 S 120,000 100,000 IMAGING (TESTS)* 80,000 60,000 40,000 20,000 0 11 12 13 14 * Do not include Laboratorio Médico Polanco LABORATORY (TESTS)* 500,000 0 11 12 13 14 15 16 * Do not include Laboratorio Médico Polanco 29 16 E 罪#17BOARD OF DIRECTORS DIRECTORS Lic. Enrique Castillo Sánchez Mejorada Lic. Joaquín Vargas Guajardo Dr. Juan Ramón de la Fuente Lic. Santiago Garza Borde Lic. Santiago Casanueva Pérez Ing. Santiago Chico Servitje C.P. C. Manuel 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. Misael Uribe Esquivel [Chairman of the Board of Administration) Dr. Fernando Gabilondo Navarro Dra. Martha Helena Ramos Ostos Dr. Octavio González Chon Lic. Juan Carlos Griera Hernando ALTERNATE DIRECTORS Lic. Adrián Rodríguez Macedo Rivera Act. Abraham Hernández Pacheco Dr. Cesar Athie Gutiérrez Don Enrique Carvajal González Dr. Alejandro Ruíz Argüelles Lic. Luis Javier Solana Morales C.P. Vinicio González Castillo Dr. Francisco López Jiménez Dr. Jaime Guadalupe de la Garza Salazar Dr. Nahum Méndez Sánchez Dr. José Manuel Correa Rovelo Dr. Ramiro del Valle Robles Dr. José Casiano Pérez Jáuregui Dr. Jaime Arriaga Gracia SECRETARY Lic. Cuauhtémoc Rafael Santa-Ana Otero 30 16 // ANNUAL REPORT PRINCIPAL EXECUTIVE DIRECTORS AUDIT COMMITTEE C.P.C. Manuel Sánchez y Madrid President Lic. Santiago Garza Borde Board Member Lic. Daniel del Río Loaiza Board Member Dr. Eduardo González Pier Board Member 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. SANTIAGO CHICO SERVITJE LIC. CONCEPCIÓN GUADALUPE ARRIAGA RUILOBA LIC. JORGE MARCOS MARTÍNEZ ING. JORGE AGUSTÍN ARREDONDO REYNA CHAIRMAN OF THE BOARD OF DIRECTORS GENERAL DIRECTOR MEDICAL DIRECTOR DCHIEF FINANCIAL AND ADMINISTRATIVE OFFICER HUMAN RESOURCES DIRECTOR OPERATING DIRECTOR LABORATORY DIRECTOR MARKETING, COMMUNICATION AND EVENTS DIRECTOR SALES DIRECTOR SYSTEMS AND IT DIRECTOR CORPORATE PRACTICES COMMITTEE Lic. Daniel del Río Loaiza President C.P.C. Manuel Sánchez y Madrid Board Member Dr. Octavio González Chon Board Member Lic. Alejandro Quiroz Pedrazzi Board Member Lic. Juan Carlos Griera Hernando Board Member LIC. JOSÉ IGNACIO MORENO ORTIZ COUNSEL C.P. RUBÉN DÍAZ CRUZ INTERNAL AUDIT DIRECTOR 3 1#1832 16 // ANNUAL REPORT FINANCIAL STATEMENTS 3 3#19Médica Sur, S.A.B. and Subsidiaries CONSOLIDATED FINANCIAL STATEMENTS December 31, 2016 and 2015 (Mexican pesos) Assets Current Assets: Cash and cash equivalents Notes 2016 2015 Liabilities and Stockholders' Equity Notes 2016 2015 9 $ 104,310,067 359,127,708 Accounts receivable, net 10 Médica Sur Clinical 243,017,165 119,148 162,145,591 214,754 Foundation, A.C. Other accounts receivable 11 72,731,964 4,238,099 Current Liabilities: Loans Suppliers Taxes and accrued expenses Direct employee benefits Inventories, net 12 117,711,083 65,002,000 Provisions for contingent liabilities Prepaid Insurance Assets held for sale 3 (e) 13,874,180 450,668,542 3,702,137 Total current liabilities 17 $ 30,000,000 343,775,705 128,007,863 332,391,347 232,467,170 7,790,238 14,309,432 26 31,228,338 15,791,964 745,185,628 390,576,429 Total current assets 1,002,432,149 594,430,289 Long-term debt, net 17 1,284,297,760 Employee benefits 18 Deferred profit tax 19 31,795,545 90,326,291 12,181,377 125,115,897 Properties, furnishings, equipment 13 2,759,658,229 2,839,239,078 and leasehold improvements, net Investment properties, net 14. 97,335,224 105,267,278 Total liabilities 2,151,605,224 527,873,703 Commercial credit Stockholders' Equity: 16 1,120,216,275 224,016,932 Share capital Contribution for future capital increases Intangible assets, net 6 447,594,046 Other assets, net 31,873,521 8,398,130 Share subscription surplus Accrued earnings Legal reserve Share buy-back reserves Other comprehensive income: Net actuarial profits (losses) from income tax Total equity attributable to controlling interests Non-controlling interests 21 517,869,032 124,628 121,280,931 517,869,032 124,628 121,280,931 2,358,953,976 2,300,441,642 103,573,805 103,573,805 200,000,000 200,000,000 18 1,404,581 (532,389) 3,303,206,953 3,242,757,649 Total Stockholders' Equity Commitments and contingent liabilities 4,297,267 3,307,504,220 720,355 3,243,478,004 26 $ 5,459,109,444 3,771,351,707 See the relevant notes to the Consolidated Financial Statements. 3 4 16 // ANNUAL REPORT $ 5,459,109,444 3,771,351,707 3 5#20Médica Sur, S.A.B. and Subsidiaries STATEMENT CONSOLIDATED RESULTS AND OTHER COMPREHENSIVE RESULTS Years ending on December 31, 2016 and 2015 (Mexican pesos) Service revenue Service costs Consolidated gross profit Notes 2016 2015 $ 2,590,272,612 2,278,751,602 1,794,333,517 1,569,274,825 795,939,095 709,476,777 Médica Sur, S.A.B. and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS Years ending on December 31, 2016 and 2015 (Mexican pesos) Cash flows from operating activities: Total pre-tax profit Adjustments for: Net cost of the period for employee benefits Notes 2016 2015 $ 199,730,800 349,579,120 Expenses: Sales and administrative expenses Other (income) expenses, net 24 588,202,883 358,818,301 (2,922,504) 19,615,186 Total expenses 585,280,379 378,433,487 Consolidated operating income 210,658,716 331,043,290 Financial income and costs Foreign currency gain, net 15,031,944 7,873,078 Participation in the results of affiliated companies 15 (4,077,369) Impairment of investment in affiliated company shares 15 y 24 10,401,840 Depreciation and amortization 13 y 14 Losses in the sale of transportation equipment and other assets Interest income 325,247,154 107,917 121,748,868 (15,110,169) 193,823 (10,910,475) Interest expenses Interest income 839,523 (26,877,608) 15,110,169 3,627,898 10,910,475 (Costs) Financial income, net 25 (10,927,916) 14,458,461 Participation in the results of affiliated companies 15 Consolidated operating income before tax 199,730,800 349,579,120 Profit tax 19 53,519,878 108,461,781 Consolidated operating income $ 146,210,922 241,117,339 Other comprehensive results Net actuarial profits (losses) from income tax 18 Consolidated comprehensive income $ Net comprehensive income attributable to: Controlling interests $ Non-controlling interests 142,634,010 241,018,529 3,576,912 98,810 $ 146,210,922 241,117,339 (79,912) 4,077,369 1,936,970 (306,550) 148,147,892 240,810,789 Entries from financing activities: Interest expenses Subtotal Accounts receivable, net Médica Sur Clinical Foundation, A. C. Other accounts receivable Inventories, net Prepaid insurance Suppliers Taxes and accrued expenses Provisions for contingent liabilities Net cash flows from operating activities Paid taxes Interest paid Net flows generated from operating activities Investment activities: Increase (decrease) in other non-current assets, net Interest collected 26,877,608 79,912 551,885,254 474,888,797 (4,108,574) (4,277,881) 95,606 (115,305) (42,821,646) 1,943,706 (24,208,083) (9,102,220) (10,172,043) (737,095) (204,087,506) (29,803,571) 80,594,487 26,664,296 15,436,374 1,800,000 362,613,869 461,260,727 (143,192,000) (133,373,575) (20,639,728) (79,912) 198,782,141 327,807,240 4,837,391 15,110,169 Revenue from the sale of properties, furnishings and equipment Acquisitions of property, furnishings, equipment and investment properties Dividends received from investments in affiliated companies Business acquisitions 13 y 14 (2,073,299) 10,910,475 767,963 (230,325,263) (228,355,320) 6,527,202 6 Net cash flows used in investment activities Financing activities (1,447,493,000) (1,657,870,703) (212,222,979) Consolidated comprehensive income attributable to: Loans obtained Controlling interests $ Non-controlling interests 144,570,980 3,576,912 240,711,979 Dividends paid 98,810 Net cash flows generated by (used in) financing activities SA $ 148,147,892 240,810,789 Basic and diluted earnings per share Weighted average number of shares $ 1.19 1.95 Cash and cash equivalents: 22 123,281,750 123,281,750 Net decrease (increase) in cash and cash equivalents At the beginning of the year At the end of the year 17 1,285,000,000 21 (80,729,079) (100,632,547) 1,204,270,921 (100,632,547) (254,817,641) 14,951,714 9 $ 359,127,708 344,175,994 104,310,067 359,127,708 See the relevant notes to the Consolidated Financial Statements. 36 16 // ANNUAL REPORT See the relevant notes to the Consolidated Financial Statements. 3 7#21Médica Sur, S.A.B. and Subsidiaries CONSOLIDATED CHANGES IN STOCKHOLDERS' EQUITY Years ending on December 31, 2016 and 2015 (Mexican pesos) Balances of December 31, 2014 Declared Dividends Actuarial losses Net profit Comprehensive income Notes Share capital 21 18 Contributions for future capital increases Net actuarial Share subscription surplus Accrued earnings Legal reserve Share buy-back reserves profits (losses) from income tax Total Non- controlling participation Total Stockholders' Equity $ 517,869,032 124,628 121,280,931 2,164,212,601 103,573,805 200,000,000 (225,839) 3,106,835,158 621,545 3,107,456,703 (104,789,488) 241,018,529 (104,789,488) (104,789,488) (306,550) (306,550) (306,550) 241,018,529 98,810 241,117,339 (306,550) 240,711,979 98,810 240,810,789 Balances of December 31, 2015 21 517,869,032 124,628 121,280,931 2,300,441,642 103,573,805 200,000,000 (532,389) 3,242,757,649 720,355 3,243,478,004 Declared Dividends Actuarial losses 21 18 (84,121,676) (84,121,676) (84,121,676) 1,936,970 1,936,970 1,936,970 Net profit Comprehensive income 142,634,010 142,634,010 3,576,912 146,210,922 1,936,970 144,570,980 3,576,912 148,147,892 Balances of December 31, 2016 21 $ 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 See the relevant notes to the Consolidated Financial Statements. 3 8 16 // ANNUAL REPORT 39#22Ling 40 16 // ANNUAL REPORT MultiSync LCD cotiza en SIRALA Bolsa Mexicana MEDICAB Médica Sur Puente de Piedra 150 Col. Toriello Guerra C.P. 14050, CDMX Tel. 52 (55) 5424-7200 Toll-Free: 01800-501-0101 www.medicasur.com.mx Investor Relations Lic. Mariana Rojo Granados Tel: 52 (55) 5424-7200 ext. 4606 [email protected] Ticker MEDICAB Independent auditors KPMG Cárdenas Dosal, S.C. Blvd. Manuel Ávila Camacho No. 176 Pl C.P. 11650, CDMX. Tel: 52 (55) 5246-8300 www.kpmg.com.mx CONTACT INFORMATION#23WWW.MEDICASUR.COM.MX WE TAKE CARE OF WHAT IS IMPORTANT 2016 ANNUAL REPORT Medica WE TAKE CARE OF WHAT IS IMPORTANT Médica Sur Medical Excellence, Human Warmth 2016 ANNUAL REPORT Ⓡ modco medica Sur.