Important figures and information. Net revenues. Assets. Total gross ordinary dividend. Closing price at year-end (euros)

Transcription

1 Annual Report 2004

2 Main Financial Figures for the PERFORMANCE IN THE LAST THREE YEARS (PRO FORMA FIGURES FOR 2002) MAIN FIGURES FINANCIAL FIGURES (Euros 000) % CAGR 04/02 Important figures and information Net revenues EBITDA Income before tax Attributable net income Net cash-flow Assets Shareholders equity STOCK MARKET FIGURES Market capitalization (Euros 000) Ordinary dividend per share (Euros) Total gross ordinary dividend (Euros 000) Closing price at year end (Euros) Annual appreciation No. shares at year end Net revenues Euros 000 4,000,000 CAGR=33.9% 3,000,000 2,064,152 3,333,748 3,703, % 453, , , % 406, , , % 331, , , % 396, , , % 6,116,969 11,345,379 13,717, % 1,080,078 1,312,055 1,980, % 1,532,164 2,949,730 3,233, % % 46,035 73,527 95, % % 41.6% 21.2% 1.3% n/a 154,764, ,810, ,153, % Assets Euros ,000,000 CAGR=49.7% 12,000,000 2,000,000 8,000,000 1,000,000 4,000, Total gross ordinary dividend Euros 000 Closing price at year-end (euros) Euros ,000 80,000 CAGR=43.9% 120 CAGR=10.8% 60, ,000 20, * Not corrected for the effect of the bonus rights issue.

3 Group Sacyr Vallehermoso PERFORMANCE IN THE LAST THREE YEARS (PRO FORMA FIGURES FOR 2002) MAIN FIGURES OPERATING FIGURES Construction Backlog orders (Euros 000) Contracts won (Euros 000) Real Estate Development Land bank (m 2 ) Contracted sales (Euros 000) Asset value (Euros 000) Property Area for lease (m 2 ) % Occupancy Asset value (Euros 000) Contracts Concessions Km motorways in operation Gross investment in tang. assets (Euros 000) Services Desalination (m 3 /day) Population serviced Service stations Backlog orders Euros 000 4,000,000 CAGR=39.0% 3,000,000 2,000,000 1,000, % CAGR 04/02 1,932,258 3,200,926 3,732, % 895,241 2,079,675 2,676, % 2,660,225 3,213,174 4,031, % 877, ,052 1,111, % 1,776,047 2,317,611 3,339, % 1,293,803 1,429,177 1,371, % % 2,436,719 2,737,200 3,099, % 1,832 2,403 2, % 4,201,564 4,742,433 4,783, % 103, , , % 705,000 1,191,000 1,341, % % Committed housing sales Euros CAGR=12.6% Important figures and information Km motorways in operation Valuation of real estate property assets Euros 000 3,000 2,000 CAGR=18.8% 3,000,000 2,000,000 CAGR=12.8% 1,000 1,000,

4 Annual Report2004

5 Annual Report 2004 Index

6 01. Letter from the Chairman Governing Bodies 10 Board of Directors 12 Good Corporate Governance Sacyr Vallehermoso Group 22 Origins and background 24 Construction. Sacyr and Somague 26 Real estate development. Vallehermoso 38 Property. Testa 52 Infraestructure contracts. Itinere 66 Services. Valoriza Stock market performance and the financial community 82 Stock market performance 84 Investor relations Corporate responsibility 92 Corporate responsibility 94 Quality, prevention and environment 98 Organization and systems 102 Human resources Business performance 108 Income statement 110 Balance sheet Consolidated financial statements 128 Auditor s report 130 Balance sheet 132 Statement of income 134 Notes to the consolidated financial statements for Appendices 193

7 Annual Report 2004

8 1 Letter from the Dear Shareholders: It is a great pleasure and satisfaction for me to address you for the first time as Chairman of Sacyr Vallehermoso and to present the results for business year First and foremost, I must insist that for over ten months last year the company was presided over by José Manuel Loureda Mantiñán, who has played a decisive role in all the achievements that has put it where it is today. In 2004, the company basically worked in three countries -Spain, Portugal and Chile- and the general events in their economies had a logical influence on company performance. In Spain, on 11 March there was a terrible attack which caused 192 deaths and shocked the whole country. Shortly afterwards, general elections were held and the party in power changed. As you well know, any change in Government, and especially if the ruling party changes, initially tends to hold back public investment, especially in this case, when the two investor Ministries brought the National Hydrological Plan to a standstill. At the same time, messages were coming from different sectors of society suggesting that the so-called real estate bubble would shortly burst and this led to a significant slowdown in housing sales between May and September, although they were later to pick up that so that, in the end, 2004 was another record year for real estate development. Moreover, the fact that Spain is divided into Selfgoverning Regions means that only a third of tenders Chairman

9 Annual Report are State bids, while another third are Regional and the remainder local. However, it must be said that these administrations made extraordinary efforts in this respect, especially Madrid Regional Government and Madrid City Council, and brought public tendering in general up to an acceptable level. Construction grew by 4%, 1.4% more than the economy in general. For the first time ever, jobs in the sector hit the 2,000,000 mark and the sector itself accounted for 18% of Spain s G.D.P., with 630,000 housing starts. In Portugal too, the Government -but not the political party- changed and public investments slowed as a result. The situation was worsened by the fact that the construction of the football stadiums built for the 2004 European Cup had been completed. The country failed to reach the average European growth rate. Lastly, Chile went through a stage of strong economic recovery, with copper prices hitting all-time highs, and all of this led to an improvement in the company s tolls on the highways in operation. Business year 2004 was the first full year for Sacyr Vallehermoso and a lot of hard work with very positive results- went into unifying the management of the different companies in the Group and really large figures were achieved. Notable amongst these are: Total assets: Euros 13, million (2nd company in the sector in Spain). EBITDA/revenues ratio: 20.2% (1st company in the sector in Spain) EBIT/revenues ratio: 15,7% (1st company in the sector in Spain) Cash flow/revenues ratio: 14,4% (1st company in the sector in Spain) I.B.T./revenues ratio:: 10,2% (1st company in the sector in Spain) Total order book Euros 59,708.0 million. (1st in the sector in Spain) Shareholders equity: Euros 1,980.5 million. (5th in the sector in Spain) Revenues: Euros 3,703.3 million. (5th in the sector in Spain) In short, the Group increased its revenues by a total of 11.1%, with EBITDA growing by 29.5% and income before tax by 12,6% Income: Euros million. (4th in the sector in Spain) Unrealized capital gains on real estate assets: Euros 2,145.5 million (According to C.B. Richard Ellis appraisal) Within the efforts to unify the Group, the implementation of the SAP Platform was consolidated at Vallehermoso and Testa, as was the PLIDO Integrated Works Management Platform at Sacyr. Equally, a system of management by objectives, affecting 500 managers, was introduced throughout the entire company. Given the extremely heavy weight of infrastructure contracts, property and real estate development in the Group, major financing and refinancing operations were conducted. Notable amongst these are: The issuance of AUDASA and AUCALSA debentures for Euros 364 million. The formalization of 94 developer loans (transferable mortgages) for the same number of Vallehermoso developments, for a total of Euros 1,144 million. Project financing, notable amongst which was the USD 551 million for AUTOPISTAS METROPOLITANAS (Santiago de Chile). This won the Deal of the Year award, granted by the journal Project Finance, for its structure, making it the third year in succession that the Grupo SyV has won the prize. In 2003, it won the award for financing in the purchase of ENA and, in 2002, for the financing of the Rutas del Pacífico (Santiago de Chile Valparaíso) contract. Now let us quickly take a look at the most outstanding events in each of the Group s business divisions, i.e., construction with SACYR and SOMAGUE; real estate development with VALLEHERMOSO; infrastructure contracting with ITINERE as the head of the group, which includes the ENA holdings and Chilean contracts, and in 2005 the contracts in Portugal and Brazil; property with TESTA; and, lastly, the services business conducted by VALORIZA. Last year, SACYR moved into the Italian market through SIS, a company which is 60%-owned by

10 Letter from the Chairman SACYR, while the other 40% belongs to the Grupo INC (an Italian construction firm). In 2004, the company won the contracts for two works, one for roads (Cesare Torinese Claviere) with a value of Euros 99.9 million (VAT included) and the Palermo-Carini rail link for Euros 665 million (VAT included). Other major contracts were also won, such as: San José San Ramón motorway in Costa Rica, for Euros million (VAT included). M-30 motorway connection with the A-III dual carriageway (Madrid City Council) for Euros million. Connection between lines 1 and 4 of the Madrid Metro (Madrid Regional Government) for Euros million. Carballino Lalín AVE high-speed rail link (GIF) for Euros million. In addition, Vallehermoso adjudicated different building contracts to Sacyr for a value of Euros million. The following civil works were completed: Barajas Airport Terminal. Barajas Airport runway Barajas connecting tunnel. R-3 and R-5 radial roads and a stretch of the M-50 motorway. Santiago-Dozón motorway. And the following buildings: Barcelona Cosmocaixa Science Museum. The AC Forum hotel in Barcelona. SOMAGUE, for its part, in a very complicated year, managed to maintain the revenue figure of the previous year at around Euros 875 million. Amongst the contracts won were: Coimbra Pediatric Hospital for Euros 30.0 million. New basilica in Fatima for Euros 16.1 million. Amongst others, the works below had been completed by the year end: Oporto Concert Hall, designed by Dutch architect Rem Koolhaas. Sintra Palace of Justice, the largest court complex in Portugal (33,000 sq. metres). Plaza de España Business Centre in Lisbon, of 67,000 sq. metres. An agreement was also reached with BRISA to bid together in the Grande Lisboa IC 16/30 tender and to build the Litoral Centro highway. The Grupo SOMAGUE s services businesses will be explained with the description of VALORIZA. In a different field, SOMAGUE is bidding in tenders for ports in Spain in conjunction with SACYR, because of its wider experience, and some major Spanish port is expected to be obtained in As to VALLEHERMOSO, yet another year it was the out-and-out leader in housing development in Spain, with revenues of Euros 1,069.3 million, a 10.3% increase on the preceding year, and income before tax of Euros million. VALLEHERMOSO has a total of 519 developments, of which 230 are being marketed, built or delivered, while the remainder are at different stages of planning. A total of 4,368 homes were contracted, 4,222 were delivered and 4,584 were started. As of 31 December 2004, the value of its real estate assets, according to C.B. Richard Ellis, was Euros 3,339.7 million, a figure that discloses Euros 1,319.9 million in unrealized capital gains and is a 44.1% increase on the figure a year earlier. There are 4,031,670 sq. metres in the building land bank, equivalent to some 24,000 homes. In infrastructure contracts, ITINERE obtained a large volume of net revenues, Euros million, with EBITDA of Euros million, respective increases of 103% and 113,7% on the 2003 figures, and Euros 13.0 million in income before tax. It won the contract for the Palma Manacor shadow toll in Mallorca and the San José San Ramón toll road in Costa Rica. It also reached an agreement with OHL in respect of company reorganization, so that ITINERE now owns 100% of AUNOR, is the largest minority shareholder in ACCESOS DE MADRID (R-3 and R-5 radial roads) and ACEGA, and sold its holdings in the M-45 and the Airport Hub. In addition, it now owns 70% of ENA, after acquiring the 20% that was in the hands of CAIXANOVA and CAIXA GALICIA. As occurred throughout the Group, work was done on the functional and operational integration of ENA and ITINERE s organization structures. TESTA, the company which runs the real estate business, obtained net revenues of Euros million, as compared to Euros million in EBITDA amounted to Euros million, as against Euros million the previous year, and income before tax totalled Euros million. As of 31 December 2004, according to C.B. Richard Ellis appraisal, the value of its real estate assets amounted to Euros 3,099.9 million, with unrealized capital gains of Euros million. This was an increase of Euros million on the 2003 valuation and of Euros 66.5 million in terms of unrealized capital gains. The following investments were made: The purchase of the plot for the SyV Tower for Euros 140 million, from Madrid City Council. 7

11 Annual Report The purchase of the building at calle Alcalá 45 for Euros 99.8 million from Madrid City Council, with a 10-year lease to the Inland Revenue. The purchase of 50% of the AC Forum hotel in Barcelona, inaugurated in May. The purchase of 153,000 sq. metres of undeveloped land in Valdebebas for Euros 33.1 million, from Madrid City Council. The purchase of premises in the Porto Pí and Centro Oeste shopping centres for Euros 25.7 million. The additions of the Rodríguez Marín and Faro de Hércules homes for the elderly, in Madrid and La Coruña respectively, for Euros 19.1 million. Other notable events were the adjudication of the operation of the hotel in the SyV Tower to Hotusa, the ten-year extension of the lease for CEPSA s head office in Parque de las Naciones, and the 10% increase in the occupancy rate of the 86,000 sq. metre Mellon Centre building in Miami (including the area below grade) taking it up to 93.3%. The most important asset disposals were: The sale of the Capitán Haya building to Madrid City Council for Euros million. The sale of the company RENLOVI to RESTAURA for Euros 47.7 million. Land at Meco (Madrid) for Euros 36.2 million. The sale of the 20.25% holding in the capital of the Swiss company MAAG to SPS for Euros 25.4 million. The services businesses under VALORIZA generated Euros 90.1 million in revenues, as against Euros 48.3 million the previous year, and made slight losses of Euros 0.02 million. In 2004 the ground started to be prepared to develop this activity in the short term, and the first step that was taken was to hire an excellent experienced services management team, which will be the basis for the future growth of activity in this sector. In addition, these services will be unified with those of SOMAGUE, which is certain to produce a significant revenue figure for the company in In 2004 the ground started to be prepared to develop this activity in the short term, and the first step that was taken was to hire an excellent experienced services management team, which will be the basis for the future growth of activity in this sector. However, in 2004 some very interesting transactions were conducted, notable amongst which were: SADYT s contract for the Skida and Benisaf desalination plants in Algeria, with capacities of 100,000 m 3 /day and 150,000 m 3 /day respectively. Taking control of IBERESE up to 74%. Contract with the Government of Macao for a new solid waste treatment line of 300,000 Tn/year, for Euros 20 million. Increase in the holding in FINERGE, which engages in wind power production, from 50% to 100%. Preparing for the consolidation of A.G.S. as the leading private water operator in Portugal to supply water to 1.3 million inhabitants. In short, the Group increased its revenues by 10.3% in construction, 10.3% in development, 103.1% in infrastructure contracting, 5.7% in rentals from real estate and 86.5% in services. This gives a total increase of 11.1% for the Group, with a 29.5% rise in EBIDTA and 12.6% growth in income before tax. In addition, it contracted Euros 2,676.4 million in works, up 28.7% with respect to Lastly, in the second half of the year 2004, SyV took 90 million BBVA shares through an equity swap and acquired another 16 million shares of the same bank, making SyV its major shareholder. SyV applied to the Bank of Spain for it to authorize and consider this shareholding as significant (it was much larger than the stake of the next shareholder in the ranking and much, much larger than all the others). As the Bank of Spain failed to confirm SyV s request and, thus, SyV could not consolidate results according to IAS, on 16 February 2005 the Group decided to sell its rights over BBVA, obtaining Euros million in capital gains. However, the operation was criticized by analysts and some of the Press. SyV was trading at Euros on 29 November when the news filtered through to the Press but, because of this, it ended the year at Euros 12.15, while other companies in the sector on the Ibex-35 appreciated by an average of 35% towards the end of the year. This prevented the Group from maintaining the stock market gains of previous years (41% in 2002 and 21% in 2003) and it ended the year with market capitalization of Euros 3,233.7 million as of 31 December 2004, as compared to Euros 2,949.7 million a year earlier. This meant that SyV s P/E ratio was of 8.59 as of 31 December 2004, as compared to the average ratio of for the rest of the sector on the Ibex-35. However, because of all this, the stock should perform well in 2005.

12 Letter from the Chairman It should also be noted that the share came off the selective Ibex-35 index in the June revision, but went back on again when the index was next reviewed in December As 2004 is considered to have been a brilliant business year, the Board of Directors is proposing to the Meeting an ordinary dividend of Euros 0.36 per share, charged to results for This is a 20% increase on the ordinary dividend paid in We view 2005 with optimism as regards all the Group s businesses. In construction, the consolidation which always occurs a year after a change in Government has already had its effects and the Strategic Infrastructure and Transport Plan (SITP), a huge investment plan for Euros 240,000 million -a 25% increase on the investments foreseen in the previous plan- has been presented. Equally, the Ministry of the Environment has future investments as alternatives to the National Hydrological Plan pretty well earmarked. The new change in Government in Portugal looks promising for the moment in respect of public bidding and we believe we have taken up a very interesting position in Italy, which we hope to extend to Ireland and Greece. Lastly, in Chile the economy is growing at rates of 5% and we will also be bidding for contracts in Mexico, Brazil and Costa Rica. As regards development, a series of factors (long mortgage maturities, low interest rates in Europe, the number of workers per household, a market of 300 million people for housing on the coast, immigrants in the process of integration, divorces stabilized at 100,000/year) suggests that the Group will continue for a (short) time at 630,000 homes but, once accumulated demand has been satisfied, the figures will fall to 350, ,000 homes. VALLEHERMOSO aims to increase its market share from 0.7% to 1.5% and it is definitely in a position to do so, as it has delegations nationwide and it expects that when demand shrinks, the weakest developers will move out of the market. The margin will narrow, logically enough, so it already has a land management policy that will enable it to undertake new developments with managed land rather than land with planning We view 2005 with optimism as regards all the Group s businesses. permission, as occurred in business year 2002 and before. In respect of infrastructure contracts, as one of the three sources of funding (Europe) will be missing in the coming years, the SITP itself will have to develop private contributions so as not to fall into a deficit or put a brake on the economy. ITINERE, as the second infrastructure contractor in Spain, is well-prepared for this. This approach is applicable to Portugal and SyV s target countries, which will gradually lose aid from Europe. The Group s plans for TESTA are for it to focus on prime locations, where demand is high and supply short, as can be seen in the lack of major buildings inside Madrid s M-30 ring road. VALORIZA s activity is to be developed as from 2005, in accordance with SyV s strategic plan, which contemplates major efforts in this sector. In 2004 the foundations were laid with what is most important in any human enterprise, i.e. human resources and, as was mentioned earlier, the Group has highly experienced teams prepared to perform the task. Finally, I would like to thank everyone who works at the Group for their efforts and dedicated work. Without their contribution it could never have arrived where it has nor reach the goals it has set itself for the future. Equally, I would like to mention our clients and suppliers, without whom the success of the enterprise would not be possible, and of course, the confidence placed in us by the Group s shareholders, for whom we works. Luis del Rivero Chairman of Sacyr Vallehermoso 9

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14 Governing Bodies 2 Board of Directors Good Corporate Governance

15 Annual Report COMPOSITION Board of Directors CHAIRMAN Mr. Luis Fernando del Rivero Asensio Born in 1949, he has a degree in Civil Engineering from the Escuela Técnica Superior in Santander. Executive company director. He owns 102 shares directly and 33,944,531 shares indirectly through Actividades Inmobiliarias y Agrícolas, S.A. (13,487,468 shares) and Rimefor Milenio Nuevo, S.L. (20,457,063 shares), representing 12.75% of share capital. 1ST DEPUTY CHAIRMAN AND CHIEF EXECUTIVE OFFICER Mr. Manuel Manrique Cecilia Executive director. He was born in 1954 and obtained his degree in Civil Engineering from the Escuela Técnica Superior in Madrid. He has a direct holding of 100 shares and indirectly owns another 18,631,463 shares, representing 7.00% of capital, through Cymofag, S.L. 2ND DEPUTY CHAIRMAN Nueva Compañía de Inversiones, S.A. Represented by Mr. Juan Abelló Gallo, in his capacity as proprietary director. He was born in He has a degree in Pharmacy and a PhD and is a member of the Real Academia de Farmacia. He is also a Company Director of Aguas de Barcelona, a shareholder of Compañía Vinícola del Norte de España, S.A. and the Chairman of Torreal, S.A. Nueva Compañía de Inversiones, S.A. owns an indirect equity holding of 23,524,382 shares

16 Governing Bodies 13 Members of the Board of Directors. through Torreal, S.A. and Torreal Sociedad de Capital Riesgo, S.A., plus 5 direct shares, representing 8.84% of the Company s share capital. 3RD DEPUTY CHAIRMAN Mr. Diogo Alves Diniz Vaz Guedes Born in 1963, he has a degree in Business Organization and Management from Lisbon s Universidad Católica, he is the Chairman of the Board of Directors of Somague - Engenharia, S.A., Chairman of Esquilo, SGPS, S.A. and Aquapura Hotels & Resorts, S.A, Director of Banco Privado Portugués, of the Business Managers Forum, and a member of the Higher Council of Portugal s Universidad Católica. He is an executive director in his capacity as Chairman of Somague - Engenharia, S.A. BOARD MEMBERS Almarfe, S.L. It has a direct holding of 15,863,325 shares, representing 5.96% of capital. Represented by Mr. Fernando Martín Álvarez, who was born in 1947 and is a graduate in Chemical Sciences. He is the Chairman and founder of Grupo Martinsa. Mr. Vicente Benedito Francés Executive company director, in his capacity as Sacyr Vallehermoso s General Manager of Internal Resources. He was born in 1948 and has a degree in Law from the University of Valencia, a Diploma in Agricultural Law and in Real Property Law. He has a Master s degree in Foreign Trade. He is on several Advisory Boards of educational institutions. With 55,866 shares, he owns 0.02% of share capital. Mr. Demetrio Carceller Arce Born in 1962, he has a degree in Economic Science and Business Studies from CUNEF. He is a proprietary director in representation of Disa Corporación Petrolífera, S.A., of which he is Chairman, of Atlántica Petrogás, S.A. and Renta Insular Canaria. He is also the Executive Chairman of Sociedad Anónima Damm and of Corporación Económica Damm, S.A. He holds a direct and indirect equity holding of 18,450 shares, representing 0.01% of share capital.

17 Annual Report COMPOSITION OF THE BOARD OF DIRECTORS AS OF 31 DECEMBER 2004 Name Representative Nature In representation Almarfe, S.L. Fernando Martín Álvarez Propietary Diogo Alves Diniz Vaz Guedes Vicente Benedito Francés Executive Executive Demetrio Carceller Arce Propietary Disa Corporación Petrolífera, S.A., Atlántica Petrogas, S.A. y Renta Insular Canaria, S.A. Corporación Caixa Galicia, S.A. José Luis Méndez López Propietary Matías Cortés Domínguez Luis Fernando del Rivero Asensio Manuel Manrique Cecilia Independient Executive Executive Nueva Compañía de Inversiones, S.A. Juan Abelló Gallo Propietary Participaciones Agrupadas, S.R.L. Ángel López-Corona Dávila Propietary Prilou, S.L. José Manuel Loureda Mantiñán Propietary Juan Miguel Sanjuán Jover Propietary S.G.T., S.A. José Seixas de Queiroz Vaz Guedes Executive Torreal, S.A. Pedro del Corro García-Lomas Propietary TOTAL (1) Nueva Compañía de Inversiones, S.A. has an indirect stake of 23,524,382 shares through Torreal, S.A. and Torreal Sociedad de (2) Mr. Luis del Rivero Asensio has an indirect holding of 33,944,531 shares through Actividades Inmobiliarias y Agrícolas, S.A. (3) Mr. Manuel Manrique Cecilia has an indirect holding of 18,631,463 shares through Cymofag, S.L. (4) Prilou, S.L. has a direct holding of 19,821,318 shares and an indirect stake de 13,307,668 shares through Prilomi, S.L (5) Mr. Diogo Alves Diniz Vaz Guedes has an indirect holding of shares through Finavague, S.L. Corporación Caixa Galicia, S.A. Represented by Mr. José Luis Méndez López, born in He has a degree in Economic Science and Business Studies from Madrid s Universidad Complutense, is General Manager of Caixa Galicia and the Chairman of Corporación Caixa Galicia in his capacity as proprietary director. José Luis Méndez is also the Chairman of Ence and of Ahorro Corporación Financiera and Deputy Chairman of Unión Fenosa and Caser, S.A. and a Director of other companies, including Pescanova, Prosegur and CECA. As of 31 December 2004, Corporación Caixa Galicia, S.A. had 7,558,684 direct shares, representing 2.84% of share capital. Mr. Matías Cortés Domínguez An independent company director, born in 1938, he has a degree in Law from Granada University and a PhD in Law from the University of Bologna (Italy). He is Professor of Financial and Fiscal Law at Madrid s Universidad Complutense and at the Universidad Autónoma de Madrid, Professor of Economics and Finance at the Granada Faculty of Law. Chairman of the law firm Cortés Abogados and a Company Director of Prisa, S.A. Participaciones Agrupadas, S.R.L. Represented by Mr. Angel López-Corona Dávila. Born in 1949, he has a degree in Economic Science, is the Assistant General Manager and the

18 Governing Bodies and Caja de Ahorros de Ávila have channelled their equity holding in Sacyr Vallehermoso, S.A. 15 Shares Direct Indirect Total % 15,863,325 15,863, % 13,992,222 (5) 13,992, % 55,866 55, % 3,075 15,375 18, % 7,558,684 7,558, % % ,944,531 (2) 33,944, % ,631,463 (3) 18,631, % 5 (1) % 16,295,815 16,295, % 19,821,318 13,307,668 (4) 33,128, % 9,272,262 9,272, % 18,602,176 4,922,206 (1) 23,524, % 78,200,566 94,085, ,286, % Capital Riesgo, S.A. (13,487,468 shares) and Rimefor Milenio Nuevo, S.L. (20,457,063 shares). Prilou, S.L. Represented by Mr. José Manuel Loureda Mantiñán, who was born in 1939 and has a degree in Civil Engineering from the Escuela Técnica Superior in Madrid. Proprietary director. Prilou, S.L. owns 19,821,318 shares directly. Prilomi, S.L., in which Prilou S.L. holds 81.71%, owns 13,307,668, which implies that the joint shareholding is equivalent to 12.45% of the share capital of Sacyr Vallehermoso, S.A. Mr. Juan Miguel Sanjuán Jover Born in 1945, he has a degree in Civil Engineering from the Madrid Escuela Técnica Superior de Ingenieros and has a Diploma in Economic Science from the UNED. He is the Executive Chairman of the Grupo Satocan, a construction company based in the Canary Islands, Deputy Chairman of Alenda, S.A., Chairman of Pas Jandia, S.A. and of the Círculo de Empresarios de Gran Canaria and is a Company Director of the Fundación Universitaria de Las Palmas. With an indirect holding of 9,272,262 shares (3.48% of capital) through S.G.T., S.A., he is a proprietary director. Manager of the Financial Division of Caixanova, and a member of the Management Committee. He is a member of the Board of Directors of Banco Gallego, Tavex Algodonera, S.A., Analistas Financieros Internacionales, S.A., Monbus, S.L., "R" Cable y Telecomunicaciones Galicia, S.A. and Vigo-Activo, S.A. Mr. José Seixas de Queiroz Vaz Guedes Born in 1963, he has a degree in Business Organization and Management from the Lausanne Business School in Switzerland. He is Deputy Chairman of Triángulo do Sol- Auto- Estradas, S.A. (Brazil) and is an Executive Director in his capacity as Deputy Chairman of Somague. Participaciones Agrupadas S.L. directly owns 16,295,815 shares, representing 6.12% of share capital and is the company through which Caixa de Aforros de Vigo, Ourense e Pontevedra (Caixa Nova), Montes de Piedad y Caja de Ahorros de Ronda, Cádiz, Almería, Málaga and Antequera (Unicaja), Caja de Ahorros de Murcia Torreal, S.A. Represented by Mr. Pedro del Corro García- Lomas, who was born in 1957 and has a degree in Economic Science and Business Studies from ICADE and a degree in Law from the Universidad de Deusto. He is a Company Director and General Manager of Torreal, S.A., Chairman of the Instituto Sectorial de

19 Annual Report Promoción y Gestión de Empresas (INSSEC), Chairman of Dominion, S.A., Deputy Chairman of Sufi, S.A. and a Company Director of Inova, VEO TV, Worldbest Cigars, Lanetro and Arbarín SIMC. SECRETARY (NON-DIRECTOR) Ms. Marta Silva de Lapuerta Born in 1969, she has a degree in Law and is a public prosecutor. She has worked as a public prosecutor in the High Court of Catalunya, the Court of Auditors, the Ministry of Finance and the Ministry of Economy. VICE-SECRETARY AND CONSULTANT SOLICITOR (NON-DIRECTOR) Mr. Gerardo Manso Martínez de Bedoya. BOARD COMMITTEES In compliance with its regulations, the Board also has the following committees: Viaduct over the Guadiana N-430. Stretch: Presa de García Sola-Puerto BOARD COMMITTEES Appointments and Executive Committee Remuneration Committee Audit Committee Luis Fernando del Rivero Asensio Diogo Alves Diniz Vaz Guedes Chairman Member Demetrio Carceller Arce Member Member Corporación Caixa Galicia, S.A. Matías Cortés Domínguez Member Chairman Manuel Manrique Cecilia Nueva Compañía de Inversiones, S.A. Member Member Participaciones Agrupadas, S.R.L. Member Member Prilou, S.L. Member Juan Miguel Sanjuán Jover Torreal, S.A. Member Chairman Marta Silva de Lapuerta Non-member secretary Non-member secretary Non-member secretary

20 Governing Bodies 17 de Los Carneros N-502. REMUNERATION The amount paid in respect of salaries, per diem or remuneration of any kind to the members of the Board of Directors in 2004, including those who came off the Board during the year, aggregated globally by payment item, is as follows: REMUNERATION (Euros) DIRECTORS FEES Attendance Fees Board of Directors Executive Committee 905, , The remuneration to be paid to the Board of Sacyr Vallehermoso, S.A. was approved at its meeting on 5 June 2003 and was based on the recommendations of the Appointments and Remuneration Committee. The amounts to be paid to Company Directors as of that date are: Audit Committee Appointments and Remuneration Committee TOTAL REMUNERATION TO DIRECTORS IN RESPONSABILITY POSTS AT ANY GROUP COMPANY Salaries 55, , ,206, For performing the functions of Company Director: Euros 5,000 per meeting. For performing the functions of member of the Executive Committee: Euros 3,333 per meeting. For performing the functions of member of the Audit Committee or the Appointments and Remuneration Committee: Euros 1,667 per meeting. Fixed Remuneration Variable Remuneration TOTAL TOTAL 2,544, ,406, ,950, ,156,914.25

21 Annual Report The remuneration paid to members of the Board and its respective Committees was as shown below: GROSS REMUNERATION PAID TO MEMBERS OF THE BOARD OF DIRECTORS (Euros) Luis Fernando del Rivero Asensio Manuel Manrique Cecilia (Cymofag, S.L.) Nueva Compañía de Inversiones, S.A. Diogo Alves Diniz Vaz Guedes Almarfe, S.L. (Fernando Martín) Vicente Benedito Francés Demetrio Carceller Arce Corporación Caixa Galicia, S.A. Matías Cortés Domínguez Participaciones Agrupadas, S.R.L. Prilou, S.L. (José Manuel Loureda) Juan Miguel Sanjuán Jover José Seixas de Queiroz Vaz Guedes Torreal, S.A. José Ramón Calderón Ramos (Left) Francisco Javier Gayo Pozo (Left) Pedro Gamero del Castillo y Bayo (Left) Antonio Basagoiti García-Tuñón (Left) TOTAL Comm Appointments and Board Exec. Comm. Audit Remuneration Committee Total 60,000 33,333 93,333 60,000 33,333 93,333 60,000 33,333 93,333 30,000 13,333 43,333 25,000 25,000 60,000 60,000 60,000 33,333 11, ,000 55,000 55,000 60,000 11,667 71,667 60,000 33,333 18, ,667 60,000 33,333 93,333 60,000 18,333 78,333 25,000 25,000 60,000 18,333 78,333 5,000 5,000 55,000 55,000 55,000 55,000 55,000 10,000 65, , ,333 55,000 33,333 1,206,667 In 2004, the Board and its committees met on the following occasions: The Board of Directors on 14 occasions; the Executive Committee on 10; the Audit Committee on 12 and the Appointments and Remuneration Committee on 8. The annual remuneration paid to the Executive Directors of Sacyr Vallehermoso, S.A. for the part corresponding to their executive function was as follows: ANNUAL REMUNERATION OF EXECUTIVE DIRECTORS (Euros) Luis Fernando del Rivero Asensio Manuel Manrique Cecilia Vicente Benedito Francés Diogo Alves Diniz Vaz Guedes José Seixas de Queiroz Vaz Guedes Directors who resigned in 2004 TOTAL Fixed Variable Total 507, , , , , , ,804 94, , , , , ,193 1,078, ,141 1,741,671 2,544,059 1,406,189 3,950,248

22 Governing Bodies Apart from those mentioned above, no other payments are made to Company Directors and the Company has no obligations in respect of pensions or life assurance, with the exception of those deriving from the Company s Collective Agreement for those who are also employees. No credits or loans have been extended to members of the Board. Lastly, there are currently no plans for stock options for Board members. MANAGEMENT COMMITTEE The decisions taken by the Board of Directors and, in the event, by the Executive Committee, are enforced by the Management Committee. This committee includes the business units, represented by the Chairmen and CEOs of the companies that effectively run the business, and central services, represented by the General Offices and the Secretariat General, all of whom report to the CEO and the Chairman of Sacyr Vallehermoso. 19 MANAGEMENT COMMITTEE Post Mission Luis Fernando del Rivero Asensio Manuel Manrique Cecilia Chairman of Sacyr Vallehermoso Chief Executive Officer Sacyr Vallehermoso Diogo Alves Diniz Vaz Guedes Chairman of Somague For business in Portugal Francisco Javier Gayo Pozo Chairman of Sacyr For the construction business Rafael del Pozo García Chief Executive Officer Vallehermoso For residential development Gonzalo Ferre Moltó Chief Executive Officer Itinere For the management of the motorway contract portfolio and its development Luis Janini Tatay Chief Executive Officer Valoriza For the development of services complementary to the core businesses Fernando Rodríguez-Avial Llardent Chief Executive Officer Testa For the management of property for lease and the development of new products Vicente Benedito Francés General Manager of Resources He brings together the legal activity of the businesses, technological and organizational support and Human Resources Francisco Javier Pérez Gracia Corporate General Manager To develop and plan financial policy and administrative support Ana de Pro Gonzalo General Manager of Communication To develop communication and and Institutional Relations investor relations Marta Silva de la Puerta Secretary to the Board She manages corporate legal activity and foments Good Governance practices José Antonio Guio de Prada Contracting Manager Preparation and control of bidding and works contracting

23 Annual Report Good Corporate Governance INFORMATION ON THE RULES OF GOVERNANCE APPLIED BY THE COMPANY At Sacyr Vallehermoso s General Meeting held on 25 June 2004, new Company By-laws were approved. The Amendment of the By-laws had three basic aims: To adapt the Company By-laws to the changes made to the Equity Market Act and the Company Act by the Transparency Act (Act 26/2003, of 17 July), adapting the By-laws to the best practices in respect of Corporate Governance. To add to the By-laws the necessary instruments so that the organization and management of the Company would be more flexible, and to include technological innovations. To update and introduce technical improvements in the wording of the previous By-laws, completing and clarifying the regulation of some matters. The General Meeting held on 25 June 2004 passed the Regulations for the General Meeting, thus complying with the obligation imposed by the so-called Transparency Act (Act 26/2003 of 17 July). The Regulations for Sacyr Vallhermoso s General Meeting aim to increase the transparency which should prevail in the preparation and functioning of the Meeting, to specify the ways in which shareholders may exercise their voting rights at the Meeting, and unify in a single text all the rules regarding the General Meeting, thus providing greater knowledge of the Company s Board of Directors. The Regulations for the Board of Directors dated 26 March 2003 were amended at the Board meeting held on 3 June 2004 and the General Meeting held on 25 June 2004 was informed of the same.

24 Governing Bodies The object of the amendment was to adapt the text to the latest obligations introduced by the Transparency Act in respect of Corporate Governance, and to the new Company By-laws. The Regulations for the Board set out the principles for the conduct of the Company s governing body, the basic rules for its organization and functioning and the rules of conduct for its members and the Company s Senior Management. Lastly, at its meeting on 25 June 2004, Sacyr Vallehermoso s Board of Directors passed a new text for the Internal Rules of Conduct, applicable to members of the Board of Directors and Company management who for reasons of their work, post or functions, have access to facts, decisions and information that could influence the price of Sacyr Vallehermoso shares. OTHER ACTIONS IN RESPECT OF CORPORATE GOVERNANCE In business year 2004, Sacyr Vallehermoso updated the contents of its website to comply with the Transparency Act 26/2003, of 17 July. Additionally, applying the mandates of the said regulation, the Annual Corporate Governance Report was put at shareholders disposal as from the day the General Meeting was announced. Lastly, it should be added that, following the most stringent principles of Corporate Governance, the remunerations of both External and Executive Directors were published in the Annual Report, with a breakdown of the different items of the remuneration. 21 A-67 dual carriageway. Los Corrales de Buelna-Molledo. Cantabria-Meseta.

25 Annual Report 2004

26 Sacyr Vallehermoso Group 3 Origins and background Construction. Sacyr and Somague Real estate development. Vallehermoso Property. Testa Infraestructure contracts. Itinere Services. Valoriza

27 Annual Report Origins and background Sacyr Vallehermoso is a diversified business group and one of the top fifteen Spanish companies in terms of the volume of assets and one of the top twenty-five in terms of net income. The definitive boost to its growth and its consolidation as one of Spain s giant business groups, with a leading position in Chile and Portugal as well, came in recent years. However, its history goes back over fifty years and is based on soundness, professionalism and a successful combination of prudence and controlled business risk. The business acumen of all the managers and administrators who have worked at the company in the course of its history is behind what is today a strong balanced group with future projection. In 1921, the oldest of the companies in the group today, Vallehermoso, was constituted under the initial name of Compañía Madrileña de Contratación y Transportes. In 1953 it took on its current name and started its core business of housing construction, sales and rental. In Portugal a few years earlier, specifically in 1947, José Vaz Guedes founded Empreitadas Moniz da Maia, Duarte & Vaz Guedes, the origin of the Somague group and a company engaging in the construction of infrastructure projects. In 1974 Coslada Edificios Comerciales, later to become Prima Inmobiliaria, was born with the exploitation of leased property as its mission, and in 1984 the Empresa Nacional de Autopistas (ENA) was founded, with State holdings in motorway contractors. Lastly, in 1986 Sociedad Anónima de Caminos y Regadíos, a construction firm focusing on civil works, was born. In 1991 it changed its name to Sacyr, in 1996 it diversified into the business of constructing and running toll motorways and in 2002 it became a holding and bought 24.5% of Vallehermoso.

28 Sacyr Vallehermoso Group The year 2003 saw the genesis of a group where the success stories and profits of all these companies were compounded. On 3 April of the same year, Sacyr and Vallehermoso s General Shareholders Meetings (the latter had absorbed Prima Inmobiliaria two years earlier, giving rise to Testa) approved the merger of the two companies; in October the same year, the purchase of ENA from the State was signed and in December the agreement with the majority shareholders for the total integration of Somague was sealed. Thus, 2004 was the first full year for the Sacyr Vallehermoso group as we know it today. Sacyr Vallehermoso is structured as a holding and owns majority shareholdings in the different companies which specialize in running each of the businesses. This organization maximizes the efficiency of the human teams, the technical equipment and economic and material resources. The businesses are: and tourist areas. At the end of 2004 the value of its assets was in excess of Euros 3,300 million. Property Testa Inmuebles en Renta is the leading Spanish firm engaging exclusively in leasing its buildings. It is a listed company, with an asset value of Euros 3,100 million. It has a wide-ranging supply of quality properties located in strategic areas, including offices, hotels, shopping centres, commercial and industrial premises, open-market and subsidized housing, and homes for the elderly. Infrastructure contracts Itinere groups together all the Group s holdings in motorway and railway (Seville Metro) contracts. It is the second operator in Spain in terms of the number of kilometres managed and the first in terms of volume of investment. 25 Construction This business is run by Sacyr, which is positioned as a construction firm of recognized prestige in Spain, Sacyr Chile in Chile, Sis in Italy and Somague in Portugal and Brazil. It carries out all types of public and private civil works and building projects in an integrated manner, with a structure that enables it to optimize the execution of works, through on-going customer service, by meeting the deadlines foreseen, through its desire to do a job well-done, and by always keeping to the amount budgeted. Services Valoriza is at the head of a group of companies which engage in activities that complement those described above and also in high value-added businesses such as integrated cycle water management, the development of alternative energies, environmental (waste collection and treatment, etc.) and multi-service activities (facilities management, service areas, etc.). Real estate development The Group conducts its development business through Vallehermoso in Spain with 7 regional offices and over 30 delegations and Somague Inmobiliaria in Portugal. Vallehermoso is the leading developer in Spain with 4,368 homes sold in 2004 and a large supply of quality housing in towns inland, on the coast and in the most exclusive leisure

29 Annual Report Construction Sacyr & Somague ACTIVITY Sacyr is one of the world leaders in the construction sector in terms of profitability. This leadership is achieved by the Group s strategy of combining strict cost control with maximum quality and punctuality in the provision of services with a selective international presence, always constituting local companies in foreign markets. Selectively opening up new markets and, in this way, moving into them as a local company distinguishes it from other construction firms and has not only been a growth formula for both revenues and profitability, but has also strengthened the internal structure and has given it unquestionable competitive advantages, besides boosting its prestige in the market. Thus, the Group s business is conducted by Sacyr in Spain, by Somague in Portugal and by Sacyr Chile in Chile, while Sis is the firm responsible for the business in Italy, a market the Group has just moved into. In terms of work executed, Sacyr ranks fifth in Spain, while Sacyr Chile is the second construction group in the Chilean Public Works Ministry s Contracts Programme. In Portugal Somague is the leading construction firm and, in Italy, Sis was one of the most successful bidders in 2004, with over Euros 600 million in contracts. In the Group, the aim is to put the experience accumulated into every project. To apply the latest technological advances. To provide more efficacious and efficient innovative solutions, always adopting the prevention and protection measures necessary to avoid and reduce all the risks which might arise when the work is being done. In 2004 revenues grew by 10.3% to reach Euros 2,138.2 million, and were broken down as follows:

30 Sacyr Vallehermoso Group REVENUES BY TYPE OF BUSINESS (Millions of Euros) % 04/03 Civil works Building TOTAL , , % % 1, , , % In 2004, the contracts won reached a record figure, Euros 2,676.4 million, a 28.7% increase on the Euros 2,079.7 million won in assigns to it and because this has enabled it to establish itself in new geographical areas where it previously did not have a presence. This strong growth is due to several factors, such as moving into new markets in civil works mainly Italy, and the higher share achieved in Public Administrations contracts in Spain. Another factor contributing to growth in domestic building is the policy whereby Sacyr executes around 60% of the work on the residential developments sold by Vallehermoso, both through the direct contracting Vallehermoso The only market which performed negatively was Portugal, since the country is going through difficult times in this respect. However, Somague has managed to diversify outside Portugal and has boosted its building division. The division was particularly important in 2003 with the work on the football stadiums for the 2004 World Cup and thus its performance will be more positive in coming years. CONTRACTS WON (Millions of Euros) % 04/03 Civil works Spain Civil works Portugal Civil worksl Italy Civil works Chile Civil works Costa Rica Civil works other countries Civil works Building Spain Building Portugal Building other countries Building TOTAL % % % % , , % % % % % , , %

31 Annual Report CIVIL WORKS This division engages in highway infrastructure works (roads, dual carriageways and motorways), work on railways and track renovation, hydraulic works (dams, canals, conduits, pipes, etc.), subterranean works (tunnels and sewers) and airport works, amongst others. Civil works accounts for 71.3% of the total construction business conducted by the Group. In Spain, it represents 71.9% of the total work executed in the country, in Portugal 71.5% and in Chile 100%. CIVIL WORKS BY GEOGRAPHICAL MARKET (Millions of Euros) % 04/03 Spain Portugal Chile Other TOTAL % % % % , , % REVENUES BY TYPE OF WORK 4% Airports 33% Roads and highways In 2004, revenues amounted to Euros 1,525.3 million, a 23.6% increase on Road and railway works were of notable importance and accounted for 56% of total revenues. TYPES OF WORK 10% Hydraulic Road infrastructure works In 2004 construction work was done on the following: 23% Railways 30% Other Los Corrales de Buelna-Molledo stretch of the Cantabria-Meseta dual carriageway, in Santander, with two double tunnels with a total of 7.2 kilometres and some emblematic structures, such as the Cieza and Pedredo viaducts. The latter viaduct is 960 metres in length. It was completed at the end of the year and its inauguration is foreseen for the beginning of 2005.

32 Sacyr Vallehermoso Group Los Carneros bypass on the N-430 in Badajoz, which includes a 560-metres long singular structure for crossing the Guadiana river. The work is expected to be completed at the beginning of Plasencia-Navalmoral de la Mata dual carriageway: the 25 km Rio Tietar-Plasencia stretch. This is the first dual carriageway built by the Extremadura Regional Government and it links the Vía de la Plata with the A The shadow toll motorway between Palma de Mallorca and Manacor. It is 41 kilometres long and the work is expected to be completed in a total of 27 months. The work on improving the link road between Madrid s M-30 motorway and the A-3 dual carriageway (Autovía del Mediterráneo) will be completed in a period of 24 months and includes the construction of two tunnels to avoid going down calle Conde de Casal to get from the M-30 to the A-3. Argamasilla de Calatrava-Puertollano stretch of the Badajoz-Valencia (N-430) road. In Chile, the following works are in progress: The Vespucio Sur motorway, a 24 km contract in the centre of the capital of Chile, which forms a ring in the south from the Avenida de Grecia to Ruta 78. It will come on stream in The Northeast Access to Santiago. This is a contract for a road of approximately 22 kilometres in length which runs through the outskirts of Santiago de Chile, from the Enlace Centenario, connecting with the Costanera Norte road and with Américo Vespucio. The project is for 16.2 km of Pedredo Viaduct. Cantabria-Meseta Dual Carriageway. Stretch: Los Corrales de Buelna-Molledo.

33 Annual Report Rail link to the North and Northwest. Guadarrama Tunnel. Stretch: Soto del Real-Segovia. motorway with two lanes in each direction, four double tunnels in both directions with a total length of 3.6 km and viaducts and bridges with a length of 1.7 km. In Italy the following is to be constructed: In Portugal, the following are being built: A1 motorway, prolongation between Averías and Santarem, the construction of a third lane on a 22 km stretch of the Lisbon-Oporto motorway. The road between Cesana and Claviere, in the province of Turin. The project consists of building the 6.2 km bypass on the State highway, including the two tunnels which are to be built, of 1.75 km and 1.25 km in length. The period for executing the work is 1 year and 4 months. Puente Europa in Coimbra, a very beautiful emblematic bridge, with a single mast. The largest arch is 180 m. and the total length including the viaducts leading to the bridge is of 1,506 metres. Railway works In Costa Rica, construction has started on the following: HIGH SPEED Stretches currently under construction: The toll motorway for the San José-San Ramón strip, which has the most traffic in the country and gives access to San José International Airport, and the Santa Ana-Río Segundo radial road. The motorway is 60 km long and the radial road is 5.8 km. On the Galicia high-speed network, the 13.3 km Carballiño-Lalín strech between the provinces of Orense and Pontevedra. Sacyr bid in the tender in conjunction with its recently created subsidiary Osega, in what is the first contract for this firm.

34 Sacyr Vallehermoso Group On the new rail link to the North and Northwest, work on one of the Guadarrama tunnels on the Soto del Real-Segovia stretch continues. The tunnel is 14 km long and is being made with a tunnel-borer with a double shield 9.51 metres in diameter. 31 On the León-Asturias line, work is being done on the construction of the 10.2 km Pajares tunnel. A tunnel-borer 9.88 metres in diameter is being used in this work. METRO The following work was started in Madrid in 2004: Line 1 and Line 4 of the Madrid Metro. Charmartin-Parque Santa María bus and Metro station. The Cordoba-Malaga line, with the construction of the 7.1 km Abdalajís tunnel. To execute this work, a tunnel-borer with a double shield 10 metres in diameter, the first fully manufactured in Spain, was acquired and put to work. Line 7 of the Madrid Metro (Eastbound Metro to Coslada and San Fernando de Henares). Las Musas-M-40 stretch. Widening of the platforms in Lavapiés station on Line 3 of the Metro. The 4.5 km Martorell-Barcelona stretch in Santa Coloma del Cervelló on the Madrid- Barcelona-French Border line is also in progress, as is the 7.9 km Sils-Riudellots stretch on the same line. On the Madrid-Barcelona-French Border line, in 2004 the 4.76 km Llinars-Sant Celoni stretch in the province of Barcelona was also started, together with the km Massanes- Maçanet stretch in the province of Gerona. On the route of the new high-speed rail link to Levante, work is being executed on sub-stretch III of the 8 km Alcira-Algemessí stretch and in 2004 the Sax-Elda stretch was started in the province of Alicante. In Barcelona, different work is being executed on Line 9: Line 9 of the Barcelona Metro on the 1r, Aeroport-Parc Logístic stretch. The sub-stretch is 4,500 metres in length. Three stations are to be built, two of which will be at Barcelona Airport, one in the present terminal and another in the new terminal which is being built. The Sagrera Meridiana Metro station on Line 9 of Barcelona Metro. The work is on one of the main roads into Barcelona (Avenida Meridiana) and consists of the construction of a station for changing between two existing Metro lines (Line 1 and Line 5) and the new Line 9 (currently under construction).

35 Annual Report In Seville, Sacyr is taking part in the contract and construction of the Seville Metro. Both the project for this and the work started in There are 18.9 kilometres of line, 51% of which is above ground and 49% in tunnels, connecting Aljarafe Sur and Dos Hermanas, with 23 stations on the line. It should come on stream in the summer of In Portugal work is being done on the following: Oporto Metro, light Metro network with 4 lines and 63 km in total. It has 63 stations above ground and 11 underground. Seven kilometres of tunnel were built using a tunnel-borer. Modernization of the Vila Franca de Xira Azambuja Northern Line, a new 14 km double-track line for the National Railway Network. Right bank of the Bembézar in Hornachuelos and Lora del Río, with an irrigable area of 12,000 hectares. Irrigation works at La Herrera and Los Llanos in Albacete, to take advantage of the resources from the Tajo-Segura transfer. In the summer the work on the second conduit for Barrio Jarana-Ramal Norte water supply, in Puerto de Santa María and Puerto Real, in Cadiz was completed. Aguas de Sora-La Loteta water supply works in the province of Zaragoza. Works on the Navarre Canal. Pumping from the Carboneras desalination plant to the Almanzora-Poniente Almeriense conduit. RAILWAYS In Italy, Sis has won the contract to duplicate the rail line on the Palermo-Orleáns-Carini stretch, a project that will bring a notable improvement in the service. In addition, the stations on the line are to be improved and one of them is to be put underground. The stretch is 19 km long; 8 km are underground and the rest in false tunnels. The period of execution is 5 years and 2 months. Integrated drainage of the Aljarafe, main sewers on the right bank of the Guadalquivir Hydraulic works In 2004 the following works were under way: In the Júcar basin work is being done on the Júcar-Vinalopó conduit, corresponding to Stretch VII of the San Diego Reservoir. Modernization of the irrigable area of Guadalcacín in Cádiz, with an area of 12,000 hectares. Oporto Metro. Portugal.

36 Sacyr Vallehermoso Group river, stretch III, consisting of a polyester drainpipe 1,000 millimetres in diameter to collect wastewaters from the villages in the Aljarafe and take them to the future purification plant. Madrid-Barajas airport. The tunnel is 600 metres long and is formed by six conduits 10 metres wide and 4 metres high. The train taking passengers to the Satellite runs through one of them, conveyor belts through three and internal airport traffic through the last two. 33 Airport works In the extension of Barcelona Airport, the work on lengthening runway 07L-25R and the related taxiways is very advanced. In the Extension of Madrid Barajas Airport, different projects have already been completed on the new 15R/33L runway, 3,500 metres in length and with earthworks of 29 million cubic metres. In addition, the new Ciudad Real Airport is under construction. The service gallery and the earthworks have already been completed and paving is expected to start very shortly. This is a significant increase of 28.9% in contracts won with respect to 2003, reaching a record figure in this very important field. MAIN CONTRACTS WON (Millions of Euros) Also at Madrid-Barajas, work is in progress on the platforms for Iberia s container yard and for fire-fighter training next to the Fire Service for runway 15/33, and on the airport service tunnel connecting Terminal 4 and the Satellite of Palermo-Orleáns duplication (Italy) M-30 connection with A-III Lines 1 and 4 of Madrid Metro Carballino-O Rixo Lalín high-speed link Cesana-Claviere road (Italy) Américo Vespucio contract (Chile) Line 7 Madrid Metro San José strip (Costa Rica) Line 9 Barcelona Metro Madrid-Levante high-speed link, Sax-Elda Extension C-715 Manacor Madrid-Barna high-speed link, Llinars-S. Celoni Argamasilla de Calatrava dual carriageway Madrid-Barna high-speed link, Massanet-Maçanet S. Vicente-Porto Moniz Júcar-Vinalopó conduit A-8 Abeledo-Regovide stretch Dev. Sector H-12 Reus Other CIVIL WORKS ,056.1

37 Annual Report BUILDING In the building sphere, the Group engages in non-residential building work (hotels, business service centres, museums, shopping and leisure centres, restoration of buildings, offices, prisons, etc.) and residential building. BUILDING BY TYPE OF WORK (Millions of Euros) % 04/03 Residential Non-residential TOTAL % % % Hotel residence and training centre. Grupo Santander.

38 Sacyr Vallehermoso Group homes Isla de la Vela. Cádiz. The downturn in Portugal, after the football stadiums built in 2004 were completed, means that the total figure for building fell by 13% to Euros million. Some of the most significant works which were in progress in 2004 were as follows: The contract for the extension of the School of Engineering at Barcelona s Universidad Autónoma. A project from Fabre i Torras architect s studio for three buildings, one of which will be for a laboratory, another for teaching and the third for research for a European Space Agency project. The contract for a high-resolution hospital in Utrera, Seville, with an area of 9,244 square metres and a foreseen period of execution of 23 months. The hotel residence and training centre for the Grupo Santander, designed by the architects Kevin and John Dinkeloo. The work consists of the construction of a training centre, with lecture theatre, and a building to be used as a hotel for short stays. It was completed in September In December 2004, the Xeresa Golf hotel was finished in Alicante, it is the work of the MAIN CONTRACTS WON (Millions of Euros) Housing adjudicated Vallehermoso Subsidized housing Parla Con. 2* F.Inf +290 rooms Coimbra Pediatric Hospital Construction of 290 homes Extension of Menorca airport terminal New basilica in Fatima Lucrecia Paim Maternity Hospital Housing in Almeria Library Universidad A. Neto Refurbishment Puerto de Praia Terceira Riu Funana hotel Refurbishmnet 137 homes Estaçao de Trinidade Utrera high-resolution hospital Miramar housing estate Auchan Puazn Amadora Technical school Barcelona Universidad Autónoma Saude S. Vicente centre Other building BUILDING

39 Annual Report Airport Terminal at Barajas. Madrid. architects Piñiero, with a total of 460 rooms, distributed on the luxury complex formed by a four-star hotel and luxury five-star hotel. The terminal of the new Cuidad Real airport has been started. Worth highlighting because of its importance is the work on the New Terminal Area at Madrid s Barajas Airport and its roof. The project was designed by the architects Lamela and Rogers and has an area built of 495,000 square metres. The aluminium roof has a double curvature, of the kalzip type. The new church of the Santísima Trinidad de Nuestra Sra. del Rosario in Fatima is under construction. It is an emblematic work, in the form of a circle with a 125-metre diameter, conceived by the Dutch architect Alexandro Tombasis. It will have an area of 35,673 square metres, which will give a new dimension to the present church, with an austere monumental space that enhances the religious nature of the area. Construction of the Casa da Música do Porto, an emblematic building in white concrete designed by the Dutch architect Rem Colas; the structure of the façade is unusual in that it is the construction of the ceiling slabs that makes it stable. Palacio da Justicia da Sintra: this work on the different courts in the Portuguese legal system Administrative, Fiscal, Civil and Family with its 33,000 square metres, is the largest judicial complex built in Portugal and, because of its architecture, has features unique to construction today. The period of execution should be highlighted: it was built in only 20 months. In April the Hotel Corintia Alfa in Lisbon (31,900 sq. metres) was completely refurbished.

40 Sacyr Vallehermoso Group 37 A business centre in Lisbon s Plaza de España, comprising two office buildings for the Banco Nacional de Crédito and Banco Totta, with an area of 67,000 sq. metres. BACKLOG ORDERS IN HAND The performance of the backlog orders in hand in the past few years is as shown below: BACKLOG ORDERS IN HAND BY GEOGRAPHICAL MARKET (Millions of Euros) Spain Portugal Italy Chile Costa Rica Other countries TOTAL 1, , , , , ,732.0

41 Annual Report Real estate development Vallehermoso ACTIVITY Vallehermoso is the company in the Group which specializes in the housing development business, a sector which showed in 2004 that it continues to be one of the drivers of the Spanish economy. Its business is based on a determined policy to acquire land after an in-depth viability study and its subsequent development, exhaustive control of the technical and economic projects for the work and an appropriate marketing process. For over fifty years now, Vallehermoso has been a symbol of quality. Since 1953, over 100,000 families have placed their confidence in Vallehermoso and have set up home in modern functional dwellings, which guarantee the best quality of life. Homes like the 4,584 started in 2004, in 51 developments where quality is controlled in an exhaustive manner, starting from the acquisition of the land, through the technical development of the project to the use of top brand materials.

42 Sacyr Vallehermoso Group The company mainly engages in the development of permanent homes in towns but in 2004, Vallehermoso took further steps to participate in the second-home or seaside home business and acquired different plots of land for developing major projects associated with golf courses and leisure activities for their subsequent sale. LAND: AGE 1% > 9 years 6-9 years 2% 3-5 years 25% 39 Vallehermoso is present nationwide through its seven regional offices and nearly thirty delegations and this is another factor that gives it competitive edge in the market. LAND BANK 72% 0-2 years In order to guarantee growing activity with high profitability margins, in 2004 Vallehermoso earmarked investments of over Euros 600 million for land at different stages of development. At the end of business year 2004, there was 4,031,670 sq.metres of building land above grade in the land bank, 91% of which was for residential use. Some 24,000 homes can be built on this land which would guarantee the company 5 years of activity in optimum conditions. LAND: SITUATION OF DEVELOPMENT WITH RESPECT TO BUILDING PERMITS 9% With a permit Applied for 17% 16% Not applied for In process 58%

43 Annual Report LAND: GEOGRAPHICAL REGION Galicia 7% 25% North Andalusia 18% 12% Levante Canaries 7% 18% Centre Catalunya 13% LAND BANK Amount (Millions of Euros) m 2 Years , , ,660,225 3,213,174 4,031, COMMERCIAL ACTIVITY The economic circuit of the development business can be summarized in the following steps: Execution of the development and marketing. Delivery of homes. Study of the land purchase, based on technical, financial and commercial studies. Management of formalities in an appropriate period of time. Technical development, projects, tender and adjudication of works. The business conducted by each of Vallehermoso s Regional Offices in 2004 is described below: ANDALUSIA This Regional Office is responsible for business in the Self-governing Region of Andalusia and has delegations in Granada, Malaga and Seville.

44 Sacyr Vallehermoso Group 41 El Salado Housing. Seville. ANDALUSIA Started Finished Sold Reported Development Location Units m 2 Units m 2 Units Mill. Units Mill. Verazul Mirador de San Cayetano Atalaya de San Lázaro Campo de la Salud I y II Bahía Litoral Fórum Housing I Los Monteros Coast Vallesol Housing Torres de San Andrés Alameda de San Francisco Bulevar Housing Contadores Building El Olivar de Aljamar Salado Housing Land Premises and other TOTAL ANDALUSIA 2004 Almeria 86 7, Cordoba 35 7, Granada Granada , , Malaga 90 15, , Malaga 94 18, Malaga 9 2, Malaga , Malaga 92 19, Seville 72 10, Seville 60 10, Seville 46 6, , Seville , , Seville 46 8, , ,

45 Annual Report CANARY ISLANDS Balcón del Teide. Tenerife. This Regional Office conducts its business on the Canary Islands, where it has delegations in Las Palmas de Gran Canaria and Santa Cruz de Tenerife. CANARY ISLANDS Started Finished Sold Reported Development Location Units m 2 Units m 2 Units Mill. Units Mill. Las Palmeras Housing Las Ramblas Golf Housing Balcón del Teide Jardines del Teide Bellamar Housing Castellano Housing IV Torres Housing Los Eres Housing Gran Canaria Gran Canaria 63 8, Tenerife 32 3, Tenerife Tenerife Tenerife , Tenerife 54 8, Tenerife Land Premises and other TOTAL CANARY ISLANDS , ,

46 Sacyr Vallehermoso Group 43 CATALUNYA Present throughout Catalunya and the Balearic Islands, this Regional Office has delegations in Tarragona, Barcelona and Palma de Mallorca. Son Xigala Housing. Majorca. CATALUNYA Started Finished Sold Reported Development Location Units m 2 Units m 2 Units Mill. Units Mill. Castellar Golf del Maresme La Guinardera Mediterrania Housing Miradors de Gelida Mollet Estación Montcada Nou Sant Andreu Torre Nova Diagonal Poble Nou Carretera Barcelona Pardinyes Príncipe de Viana El Molinar Las Brisas de Son Verí Son Xigala Housing Abat Oliva Nou Salou Land Premises and other TOTAL CATALUNYA 2004 Barcelona 49 6, Barcelona Barcelona 60 7, Barcelona , Barcelona Barcelona , Barcelona 82 15, Barcelona 95 12, Barcelona Gerona 80 11, Lérida Lérida 49 5, Majorca 64 9, Majorca Majorca Tarragona Tarragona 60 9, , ,

47 Annual Report CENTRE The Centre Regional Office manages the business conducted in the Self-governing Region of Madrid, Ciudad Real, Salamanca, Avila and Guadalajara and has delegations in Madrid and Ciudad Real. CENTRE Started Finished Sold Reported Development Location Units m 2 Units m 2 Units Mill. Units Mill. Atalaya Housing Don Ramón de la Cruz 105 Condes del Val El Mirador de la Dehesa El Mirador de Palacio El Mirador del Encinar Las Lomas de Montecarmelo Los Altos de la Villa Monte Hermoso Parque Golf Paseo del Molino Valcasa de Valdemoro Housing El Capricho Housing Enebro Housing Valderrivas Housing Rivas Vaciamadrid Señorío del Pinar Valdelasfuentes Villacisneros Vega Real Land Premises and other TOTAL CENTRE 2004 Ciudad Real 38 5, Madrid 46 13, Madrid Madrid 96 19, Madrid 70 15, , Madrid , Madrid 98 17, Madrid , Madrid , , Madrid , , Madrid Madrid , Madrid 48 8, Madrid Madrid 43 5, Madrid Madrid , Madrid 48 4, Madrid , Salamanca ,660 1, , ,

48 Sacyr Vallehermoso Group GALICIA This Regional Office is responsible for business in the Region of Galicia, specifically in A Coruña and Vigo. 45 GALICIA Started Finished Sold Reported Development Location Units m 2 Units m 2 Units Mill. Units Mill. Parque Ronda San Amaro Housing Pintor José Frau 4 Augusta Housing A Coruña , , A Coruña 81 12, Pontevedra Pontevedra 37 7, Land Premises and other TOTAL GALICIA , , Don Ramón de la Cruz 105. Madrid.

49 Annual Report LEVANTE The Self-governing Region of Valencia, together with Murcia and Albacete are the areas covered by this Regional Office. There are delegations in Valencia, Murcia, Castellón, Albacete and Alicante. LEVANTE Started Finished Sold Reported Development Location Units m 2 Units m 2 Units Mill. Units Mill. Hoya de San Ginés Pº de la Cuba Córcega Housing Porto Fino Housing Maisonave Mare Nostrum Puerta Mítica Puerto Pesquero Housing Avda. Valencia Miramar Building Els Lledoners Puerta de las Artes Las Azaleas Housing Ribalta Park San Jaume Los Arrayanes Juan Carlos I Housing Villamagna Almirante Cruilles Campos Elíseos Perival Building Nova Benicalap Porta de Picassent Vera II Albacete Albacete 21 6, Albacete 39 10, Albacete , Alicante 39 6, Alicante 96 14, Alicante Alicante 99 18, Castellón Castellón 53 9, Castellón 16 6, Castellón 45 10, Castellón Castellón Castellón , , Murcia 42 7, Murcia 82 17, Murcia 37 11, Valencia 96 11, Valencia Valencia Valencia 46 6, , Valencia Valencia Land Premises and other TOTAL LEVANTE , ,

50 Sacyr Vallehermoso Group NORTH With registered offices in Bilbao and delegations en Oviedo, Santander, Burgos, San Sebastián, Valladolid, Logroño, Zaragoza, León and Pamplona, this Regional Office is responsible for business in the north of Spain, covering the Self-governing Regions of Cantabria, Asturias, the Basque Country, Rioja, Castilla León, Navarre and Aragón. 47 NORTH Started Finished Sold Reported Development Location Units m 2 Units m 2 Units Mill. Units Mill. Zabalgana Avenida Pumarín Building El Prado Building Jardines de Vinjoy Murano Parque Ribera de la Florida El Alto de Fuentecillas El Mirador del Parral Granja Avícola Aureola Housing Bellavista Herrera Oria Peñacastillo San Martín Torrelavega Ategorrieta El Arco de Logroño Ridruejo Building La Torre Nuevo Artica Residencial Parque Fluvial S. Jorge Arco del Ladrillo Pinar del Jalón La Solana Housing Los Retamares Housing Panamá Housing Villa del Prado Álava 52 9, Asturias 80 10, Asturias Asturias Asturias , Asturias , , Burgos Burgos Burgos 59 8, Cantabria 60 9, Cantabria 59 10, Cantabria 88 11, Cantabria 24 5, , Cantabria 58 8, Cantabria 88 15, Guipúzcoa 36 6, La Rioja 40 5, , León León 77 15, Navarre 95 15, Navarre 36 5, Valladolid 34 5, Valladolid 52 9, Valladolid Valladolid Valladolid 71 12, Valladolid , (continues overlaf)

51 Annual Report Bentazarra Housing. Vizcaya. NORTH Started Finished Sold Reported Development Location Units m 2 Units m 2 Units Mill. Units Mill. Abandoibarra Bentazarra Mirivilla Padre Larramendi Torre Zuloko Árbol del Paraíso Plaza Mozart Azucarera Housing Land Premises and other TOTAL NORTH 2004 Vizcaya , Vizcaya Vizcaya , Vizcaya , Vizcaya , Zaragoza 94 23, Zaragoza 87 15, Zaragoza , , , ,218 1, , ,

52 Sacyr Vallehermoso Group To summarize, the business conducted by the seven Regional Offices was as follows: 49 SUMMARY OF REGIONAL OFFICES Started Finished Sold Reported Units m 2 Units m 2 Units Mill. Units Mill. Total Centre Total Andalusia Total Catalunya Total Galicia Total Levante Total North Total Canary Islands TOTAL ,660 1, , , , , , , , , , , , ,218 1, , , , , , ,297 4, ,370 4,368 1, ,327 1,066.8 In 2004, the Group s total volume of committed pre-sales (regardless of the time these sales are reported) amounted to Euros 1,111.9 million, an increase of 17.9% on the preceding year. A total of 4,368 homes were sold during the year, 14% more than in 2003, with an average increase in the sales price of around 10%. It should be noted that, because of their excellent location and quality, Vallehermoso s homes are already towards the top of the price range for medium-high level homes. In 2004 revenues from land sales fell to Euros 30.6 million from the Euros 41.5 million of the previous year. In addition, the revenues from Somague s real estate business in Portugal amounted to Euros 11.2 million and a further Euros 2.5 million was obtained from services. Sales contracted pending reporting on the income statement amounted to Euros million as of 31 December 2004 in Spain, 7.4% more than on the same date in 2003, and to Euros 22.0 million in Portugal ACTIVIDAD INMOBILIARIA % 04/03 Housing starts (m 2 ) Housing starts (Units) Housing finished (m 2 ) Housing finished (Units)) Committed sales ( Mill.) Reported sales ( Mill.) 610, , , % 3,686 4,101 4, % 525, , , % 3,085 4,373 4, % , % , %

53 Annual Report The performance of committed pre-sales and the operating margin for the residential product and land is as show below: COMMITTED SALES %04/03 Sales Margin (1) Sales Margin (1) Sales Margin (1) Sales Margin (1) Land and other products Development TOTAL % 55.2% , % 24.8% , % 25.2% (1) Direct margin (only incluiding direct operating costs). To complete its product range, Vallehermoso is making an effort to increase its presence in all Spanish cities with over 100,000 inhabitants, with its usual medium-high product and with other lower-priced products which are accessible to a larger number of potential clients, in order to increase its market share. Moreover, its projects on the coast, with the development of large resort complexes with attractive leisure facilities, such as golf courses, will start to bear their fruit in the medium term. La Florida Building. Oviedo.

54 Sacyr Vallehermoso Group 51 Paseo de La Habana. Madrid. VALUATION OF REAL ESTATE ASSETS According to the appraisal conducted by C.B. Richard Ellis, the value of the real estate assets belonging to Vallehermoso and its subsidiaries as of 31 December 2004 amounted to Euros 3,339.7 million, a 44.1% increase on The unrealized capital gains amount to Euros 1,319.9 million. The breakdown of the value of the real estate assets is as shown below: VALUATION OF REAL ESTATE ASSETS (Millions of Euros) % 04/03 Land Other assets TOTAL 1, , , % % 1, , , %

55 Annual Report ACTIVITY Property Testa The Sacyr Vallehermoso group runs this business through its subsidiary Testa Inmuebles en Renta, a listed company 99.33% owned by the Group. Testa has a notable capacity for generating recurrent revenues, thanks to the long lifespan of its assets for lease and its customer portfolio, which puts it in a position to create value in a sustained manner over time. In turn, the appreciation potential of its property assets adds capital gains to the revenues from rentals generated. In this context, Testa maintains continuous growth, supported by its development profile, which enables it to develop the product to be leased and to obtain yields higher than those registered in the market. The portfolio focuses on tertiary uses, offices and shopping centres, although it maintains a selective position in other sectors, such as hotels, homes for the elderly, logistics, etc., in different localities and in assets which are in strong demand. Moreover, the turnover of mature assets is also contemplated, provided that their sale generates funds for new, more profitable investments and they have no significant appreciation potential in the future if they remain the portfolio. PROPERTY FOR LEASE Testa has 1,371,642 sq. metres of property for lease, of which 1,032,670 sq. metres are above grade and 338,972 sq. metres below grade.

56 Sacyr Vallehermoso Group Revenues from rentals are broken down below, by product: 53 REVENUES FROM RENTALS (Millions of Euros) 2002 % 2003 % 2004 % Ofices Commercial Premises Hotels Industrial Premises Housing Homes for the Elderly Car Parks TOTAL % % % % % % % % % % % % % % % % % % % % % % % % In addition, Euros 3.8 million was obtained in revenues from service related to the management of properties, an increase of 22.6% on the Euros 3.1 million reported in GEOGRAPHICAL BREAKDOWN The Self-governing Region of Madrid accounts for approximately 60% of the rental business. The table below shows the geographical breakdown of the group s rental business: REVENUES FROM RENTALS (Millions of Euros) 2002 % 2003 % 2004 % Madrid Catalunya Miami (USA) Andalusia Balearic Islands Asturias Remainder TOTAL % % % % % % % % % % % % % % % % % % % % % % % %

57 Annual Report The evolution of the factors behind the variation in revenues from rentals is shown below: VALUATION OF REVENUES FROM RENTALS % 04/03 Revenues ( Mill.) Average Occupied Area (m 2 ) Average Unit Revenue ( /m 2 /year) Average Leasable Area (m 2 ) Average Occupancy Rate (%) % 1,134,358 1,315,350 1,311, % % 1,216,270 1,401,771 1,376, % 93.3% 93.8% 95.3% 1.6% TENANTS AND OCCUPANCY Testa s position in high-quality assets, their prime locations and an extremely solvent type of client meant that the occupancy rate was of 95.3% last year, way above the average level registered in the Group s main markets in Madrid and Barcelona. In this respect, it is worth highlighting the importance of the customer portfolio. Its quality and long duration, together with the customization of the properties, in many cases have created a strong bond with customers and have brought notable strength and stability to the revenue portfolio and to occupancy levels. As regards their quality and solvency, it should be noted that the top ten customers account for 38.9% of revenues from rentals, as is shown below: TENANTS AND OCCUPANCY 2,6% Madrid City Council 2,2% El Corte Inglés 2,2% Uni 2 2,1% Sol Meliá Hotusa 2,7% Endesa 14,7% Madrid Regional Goverment 2,9% Indra 2,9% 2,1% Amena Cepsa 3,2% Grupo Inditex 3,4% 59,2% Other

58 Sacyr Vallehermoso Group The table below shows the main properties owned by Testa as of 31 December 2004: 55 PORTFOLIO OF PROPERTY OWNED (as of 31 December 2004) Property Area in m 2 Parking Spaces Sant Cugat 10. Barcelona. As of 31 December 2004, the occupancy rate was satisfactory: 96.7% in housing, 94.5% in offices and 97.1% in shopping centres. Industrial premises were 98.5% occupied, while all the hotels and homes for the elderly were leased to their managers. The occupancy rate of the Mellon Financial Center, Testa s office block in Miami (United States) has risen to 93.3% after the latest lease contracts which have just been formalized with American Express, Telefónica USA Data and the practices of the lawyers Hogan & Hartson and Wallace Bauman. Testa has signed new lease contracts for a total of 7,036 sq. metres, thus pushing the office occupancy rate up from 92.1% in 2003 to 94.5% in PRODUCTS Office lease The business world requires working environments conceived to save energy and to optimize performance at work. Offices which are located in the main business districts and in representative and emblematic buildings like those Testa leases out. Endesa Building Campo de las Naciones Indra Building Princesa Complex O'Donnell Building Ática 7 Alcalá 45 Amena Building Raqueta Castellana Los Jacintos Príncipe de Vergara 187 Pedro Valdivia 10 Juan de Mariana 17 Madrid Muntadas I Endesa Building Sant Cugat Diagonal 605 Diagonal 514 Paseo Gracia 56 Muntadas II Paseo Gracia 28 Barcelona Rest of Spain Mellon Financial Center Miami (USA) TOTAL 54,849 1,253 37, , ,668 27, , , , , , , , , , ,566 5,380 24, , , , , , , , ,997 1,397 39, ,378 1,105 48,378 1, ,089 8,111

59 Annual Report Lease of shopping centres Shopping centres attract a greater number of consumers every day. In 2004 over 1,100 million people visited shopping centres in Spain. most innovative in Spain and offer a notably wide range of shops, leisure facilities, restaurants and services. Testa, aware of this reality, responds to the needs of high-consumption retail trade with seven shopping centres which are amongst the As of 31 December 2004, Testa s shopping centre portfolio comprised: SHOPPING CENTRE PORTFOLIO (as of 31 December 2004) Locality Area m 2 No Premises Parque Corredor Larios Porto Pi Los Fresnos Princesa Lakua Centro Oeste TOTAL Madrid 37, Malaga 21, Palma de Mallorca 19, Gijón 17, Madrid 13, Vitoria 12, Madrid 10, , Porto Pi Shopping Centre. Palma de Mallorca.

60 Sacyr Vallehermoso Group 57 Los Fresnos Shopping Centre. Gijón. In 2004 Los Fresnos shopping centre in Gijón was awarded the Diploma as a Finalist in the 2004 European Shopping Centre Awards in the category of conversion and extension of shopping centres. This award was granted by the European International Council of Shopping Centres and pays tribute to the best shopping centres in Europe. Also in 2004 Testa acquired 40 commercial premises (2,688 sq. metres of Gross Leasable Area) in the Centro Oeste shopping centre in Majadahonda (Madrid). Lease of industrial premises Testa, which is very much aware of this, owns industrial premises on the Madrid-Barcelona dual carriageway and major companies in the logistics sector are amongst its clients. The table below shows the main industrial complexes owned by Testa as of 31 December 2004: PORTFOLIO OF INDUSTRIAL COMPLEXES (as of 31 December 2004) Premises Location Area m 2 Logistics centre Logistics centre Logistics centre Cabanillas del Campo (Guadalajara) 70,134 Alovera (Guadalajara) 39,879 Coslada (Madrid) 35,934 Industrial and logistics businesses do not only require large spaces for their work. Today, proximity to cities and to fast roads is also a requirement when choosing a location for their business installations. Logistics centre Logistics centre Logistics centre TOTAL Azuqueca de Henares (Guadalajara) 27,995 Pedrola (Zaragoza) 21,579 Lliça de Vall (Barcelona) 14, ,430

61 Annual Report Housing rental Housing prices hold back the early emancipation of young people in Spain and also reduce geographical mobility in terms of work. Testa responds to this problem with open-market and subsidized housing for rental. The main properties for housing rental owned by Testa as of 31 December 2004 are shown below: PORTFOLIO OF PROPERTY FOR RENTAL (as of 31 December 2004) Area m 2 Parking spaces Homes Plaza de Castilla Conde Xiquena 17 Madrid open market Alcorcón Pavones Este Valdebernardo Madrid subsidized Usera Leganés Madrid concessions Sundry Madrid for sale Santa María Benquerencia Toledo subsidized Benta Berri San Sebastián concessions 20, , , , , , , , , , , , , , TOTAL 95,748 1,043 1,262

62 Sacyr Vallehermoso Group Hotel lease Testa s hotels are leased to top hotel chains, which are offered spacious carefully-decorated buildings where no detail is overlooked. All the rooms are equipped for comfort and the hotels are in prime well-served locations. 59 The main hotels owned by Testa as of 31 December 2004 are listed below: Tryp Jerez. Cádiz. PORTFOLIO OF HOTELS OWNED (as of 31 December 2004) Chain Area m 2 Rooms Category Puerta Castilla Eurostars Gran Madrid MADRID Eurostars Grand Marina Tryp Barcelona Aeropuerto BARCELONA Tryp Oceanic VALENCIA Tryp Alameda Tryp Jerez ANDALUSIA Silken 13, * * * * Hotusa 3, * * * * 16, Hotusa 20, * * * * * Sol Meliá 10, * * * * 30, Sol Meliá 9, * * * * 9, Sol Meliá 6, * * * * Sol Meliá 4, * * * * 10, TOTAL 66,861 1,140

63 Annual Report Lease of homes for the elderly All the Centres are modern buildings, designed exclusively for older people, with magnificent installations that allow for temporary or more definitive all-round care for able and physically or mentally disabled people. The Centres offer an all-round personalized service and programmes for the care of older people, short-term stays, daytime or overnight stays, post-operation and convalescence facilities, etc., so that the family or normal carers can have a rest. Endesa Building. Madrid. As part of its diversification policy, Testa has made a bid for a new product line: homes for the elderly, amongst which are the following: BREAKDOWN OF PROPERTY FOR LEASE (as of 31 Dece Housing Offices (tenants) Location m 2 Units m 2 Units PORTFOLIO OF HOMES FOR THE ELDERLY (as of 31 December 2004) Area m 2 Rooms Beds Madrid Catalunya Andalusia Valencia 66, , , ,124 7 Getafe 8, Balearic Islands La Moraleja 4, Asturias El Viso 3, Zaragoza 10,796 2 Madrid 16, Toledo 10, Puente de Piedra 6, San Sebastián 18, Zaragoza 6, Vitoria Faro de Hércules 5, Guadalajara A Coruña 5, Galicia Miami 48, TOTAL 29, TOTAL 95,748 1, , % AREA 7.0% 36.2% Housing Offices Occupancy m 2 Units m 2 Units Area Leased Vacant 95, % 497, % 92, % 469, % 3, % 27, %

64 Sacyr Vallehermoso Group 61 As of 31 December 2004, the breakdown of Testa s property for rental by sector was as set out below: mber 2004) Commercial (tenants) Industrial Garage Spaces Hotels Homes for Elderly TOTAL m 2 Units m 2 Units m 2 Units m 2 Units m 2 Units m 2 Units 61, , ,408 8,134 16, , ,950 9,099 14, ,097 1,397 30, ,386 1,509 21, , , , , , , , , , , , , , , , , , , , , , , , ,760 1,105 81,138 1, , , ,972 11,272 66, , ,371,642 13, % 15.3% 24.7% 4.9% 2.2% 100.0% Commercial Industrial Garage Spaces Hotels Homes for Elderly TOTAL m 2 Units m 2 Units m 2 Units m 2 Units m 2 Units m 2 Units 133, % 210, % 338, % 66, % 29, % 1,371, % 129, % 207, % 315, % 66, % 29, % 1,310, % 3, % 3, % 23, % 60, %

65 Annual Report WORK IN PROGRESS Testa also has work in progress which will gradually be added to property for rental as it is completed. The investments earmarked are as follows: PROJECTED WORK (Millions of Euros) m 2 A/G Total Inv. Rents Expected Yield Offices Hotels Homes for the Elderly Shopping Centres Housing TOTAL 49, % 33, % 52, % 44, % 9, % 189, % Eurostars Grand Marina. Barcelona.

66 Sacyr Vallehermoso Group VALUATION OF REAL ESTATE ASSETS 63 The value of the Testa group s real estate assets as of December 2004, according to the appraisal conducted by C.B. Richard Ellis, amounted to Euros 3,099.9 million in December This is a 13.3% increase on the 2003 figure. The breakdown of the value of the real estate assets by type is as follows: VALUATION OF REAL ESTATE ASSETS (Millions of Euros) % 04/03 Property for lease Other fixed assets TOTAL 2, , , % % 2, , , % PROPERTY FOR RENTAL As of 31 December 2004, the assets for rental were valued at Euros 2,678.9 million, which is a 4.6% increase on the 2003 appraisal. The like-for-like valuation of the area of properties for rental was 6.7% higher and the decrease corresponds to the difference between the new assets put out for lease and those sold during the year. The breakdown of the valuation by product is as shown below: PROPERTY FOR LEASE BY PRODUCTS (Millions of Euros) % 04/03 Offices Commercial premises Housing Hotels Industrial Other TOTAL 1, , , % % % % % % 2, , , %

67 Annual Report The valuation method used by C.B. Richard Ellis for the assets for lease is discounted cash flows, based on the following assumptions: Period of discounted cash flows = 10 years. Forecast annual net revenues and residual value at the end of the period. Internal Rate of Return. Net revenues according to contracts and rent growth expectations. Residual value according to expectations of the exit yield specific to each type of asset. OTHER FIXED ASSETS The value of the Land, Inventories, Affiliates and Work in Progress for projects for lease amounts to Euros million, 139.9% more than the preceding year even though the properties which were finished during the year (two homes for the elderly) were moved to property for lease. This increase was largely the result of: SyV Tower. Madrid. The purchase in 2004 of land for the future SyV Tower on Madrid s Paseo de la Castellana. The SyV Tower is currently at the stage of drawing up the definitive project and the building permits are still to be obtained. The building is expected to be completed in the year It will be 250 metres in height, with 52,672 square metres on 55 floors above grade and another 45,000 square metres below grade. A hotel from the Hotusa chain will occupy the first 33 storeys, with an area of some 33,200 square metres. The remaining 19,500 square metres will be used as offices for lease. The building was designed by the architects Carlos Rubio Carvajal and Enrique Álvarez-Sala Walter

68 Sacyr Vallehermoso Group and will be one of the most emblematic buildings in Madrid s new business district at the northern end of the Paseo de la Castellana. The acquisition of land in Valdebebas from Madrid City Council. It also sold the City Council the building in calle Capitán Haya 41 and bought from it the office block at calle Alcalá 45, Madrid. TURNOVER OF REAL ESTATE ASSETS The most important sales of real estate assets were: The office block in calle Capitán Haya 41 in Madrid for Euros million, with a margin of Euros 51.8 million. A plot for Euros 36.2 million. Because of the time it had been amongst the group s assets, it brought a high margin of Euros 29.3 million. 65 TURNOVER OF REAL ESTATE ASSETS (Millions of Euros) %04/03 Sales Margin Sales Margin Sales Margin Sales Margin Capitán Haya 41 Solar Meco Philips Building Princesa 3 Emilio Jiménez Millas 2 Others TOTAL % 31.8%

69 Annual Report ACTIVITY Infrastructure contracts Itinere Sacyr Vallehermoso s contracting business is conducted through Itinere, the head of a large group of infrastructure contractors mainly involved with toll motorways, in Spain and Chile. The group also has a presence in Portugal and Brazil, through the position held by the Somague group, Sacyr Vallehermoso s leading company in Portuguese-speaking markets, and in Costa Rica where Itinere won the first contract for a toll motorway. In 2004, Itinere consolidated its position as the second motorway operator in Spain, with 1,149.3 kilometres of motorways in operation. This position has been further reinforced by the acquisition of another 20% of the ENA group s capital, taking its stake up to 70%. Moreover, the pace of new contracts won remained much as it had been the previous year. During the year, two new contracts were obtained: the Palma-Manacor motorway on the island of Mallorca and the first contract in Costa Rica, with the San José-San Ramón stretch. With these, Itinere has a stake in a total of 24 concessions, 19 of which are in operation and 5 at different stages of development. This evidences the group s marked nature as a developer, in addition to Itinere s notable experience as the operator of a large portfolio of contracts in operation. Future strategy focuses on continuing to expand in new geographical markets with sound fundamentals and strong growth potential in terms of demand and use of infrastructures. This is the case of Greece, Ireland, Mexico and, in the medium term, within the EU, moving towards Eastern European countries.

70 Sacyr Vallehermoso Group INFRASTRUCTURE CONTRACTS-ITINERE 67 Company Motorway Stretch % Stake Cons. Method Total km. Avasa Audasa Audenasa Accesos de Madrid Aucalsa Henarsa Aunor Acega Autopistas Madrid Sur Autoestradas SPAIN S.C. Del Elqui S.C. De Los Lagos S.C. Rutas del Pacífico S.C. Red Vial Litoral Central CHILE Lusoponte Autoestradas del Atlántico Via Litoral PORTUGAL Triangulo do Sol Via Norte BRAZIL TOTAL IN OPERATION S.C. Pamasa Metro Sevilla S.C.J.A. SPAIN Autopistas Metropolitanas Acceso Nororiente CHILE S.C. Autopistas del Valle,S.A. COSTA RICA AP-68 Bilbao-Zaragoza 50.00% Prop AP-9 Ferrol-Tuy 70.00% Global AP-15 Irurzun-Tudela 35.00% Global R-3. R-5. M-50 M-40-Arganda/Navalcarnero 21.66% Equity 90.3 AP-66 León-Campomanes 70.00% Global 86.8 R-2 M-40-Guadalajara 7.50% Equity 61.3 M-50 M-50 (N-I. N-II y M-40) 7.50% Equity 19.0 C-415 Alcantarilla-Caravaca % Global 62.0 AP-53 Santiago de Compostela-Alto de Sto. Domingo 15.66% Equity 56.7 R-4 M-40-Ocaña 7.00% Equity 52.6 M-50 M-50 (N-II-N-IV) 7.00% Equity 40.9 AG-55 A Coruña-Carballo 70.00% Global 32.6 AG-57 Puxeiros-Val Minor 70.00% Global ,149.3 R-5 Norte Los Vilos-La Serena 72.66% Global R-5 Sur Río Bueno-Puerto Montt 96.43% Global R-68 Santiago-Valparaíso 50.00% Prop F-90 Algarrobo-Casablanca 50.00% Prop 33.4 NCC Cartagena-Algarrobo 50.00% Prop 24.1 F-962-G Variante las Pataguas 50.00% Prop Puente Vasco de Gama 17.21% Equity 17.2 Puente 25 de Abril 17.21% Equity 3.3 A-8 Sur Cril-Caldas da Rainha 20.00% Equity 81.0 A-8 Norte Caldas da Rainha-Leira 20.00% Equity 49.0 A-15 Caldas da Rainha-Santarém 20.00% Equity 40.0 ER-101 Ribeira Brava-Machico-Caniçal 12.00% F.I SP-326 Matao-Bebedouro 50.00% Equity 86.3 SP-333 Sertãozinho-Borborema 50.00% Equity SP-310 Sao Carlos-Mirasol 50.00% Equity SP-330 Ribeirão Preto-Igarapara 12.36% F.I SP-325 Ribeirão Preto-Anel Viário Sur 12.36% F.I. 8.0 SP-328 Avda Bandeirantes-Via Anhanguera 12.36% F.I SP-322 Ribeirão Preto-Bebedouro 12.36% F.I ,647.6 C-715 Palma-Manacor 40.00% Equity 41.7 Línea 1 Metro Sevilla-23 estaciones 27.83% Equity Américo Vespucio-Avda. Grecia 50.00% Prop 24.0 Acceso Nororiente % Global San José/Aeropuerto-San Ramón 35.00% Equity TOTAL UNDER CONSTRUCTION TOTAL ,819.6

71 Annual Report REMAINING LIFE Number of years Total Spain Total in operation Total Portugal Total Chile Total Brazil In bold print, the average by category. The Spanish market warrants a separate mention. The new Strategic Infrastructure and Transport Plan (SITP) contemplates a total investment of over Euros 241,000 million. Of this amount, nearly 20% or some Euros 45,000 million, will largely come from private contributions from contract developers. The wide scope of the plan, which is expected to be implemented in the period , suggests that Itinere will have great growth potential, in view of its leading position and its proven capacity as a developer. Moreover, the group s target of increasing its position in contracts where there is high added value potential remains intact. In 2004 this was crystallized in the acquisition of another 20% of the capital of the subgroup ENA. In this way, Itinere underscores its target of combining a sound portfolio in the coming years with the long period of remaining life of its contracts, with an average of 40 years in 2004 for Spain, 24 years for Portugal, 22 years for Chile and 13 for Brazil, together with new contracts won. This enables it to continue with its policy of investing the surplus funds generated by an already consolidated portfolio in new projects. MOTORWAYS IN OPERATION Itinere s roads in operation are located in Spain and Chile. Moreover, through the Somague group, which is being integrated into Itinere, different concessions are in operation in Portugal and Brazil. In December 2004, the group s concessions in operation totalled 2,647.6 kilometres. Thus, of a total of 2,819.6 kilometres under concession, 93.9% were open at the end of During the year, kilometres were inaugurated: 52.6 kilometres corresponding to Autopistas Madrid Sur R-4 (M-40 Ocaña) and another 90.3 kilometres corresponding to Accesos de Madrid R-3, R-5 (M-40 Arganda/Navalcarnero). In addition, the 46.5 kilometre Chilena Red Vial Litoral Central, which links the capital of Chile with San Antonio, the country s main port, has come on stream.

72 Sacyr Vallehermoso Group 69 In 2004 the group continued to direct its efforts at maintaining a high level of service for its customers, based on the modern maintenance and communication systems set up on all the stretches in operation. Thanks to this joint effort, the number of accidents registered on the group s roads fell over the year. TRAFFIC The volume of traffic on the group s motorways performed very positively, increasing by 3.8% with respect to the previous year. YEAR-ON-YEAR AVERAGE DAILY TRAFFIC % 04/03 Avasa Aunor Aucalsa Audasa Audenasa Autoestradas (AG-55) Autoestradas (AG-57) SPAIN R-5 Norte El Elqui R-5 Sur Los Lagos Rutas del Pacífico Red Vial Litoral Central CHILE 12,358 12,843 13, % 8,408 9,881 10, % 7,696 8,049 8, % 20,787 21,958 22, % 14,194 14,883 15, % 10,885 11,554 12, % 6,426 6,887 7, % 13,434 14,162 14, % 3,090 3,045 3, % 6,576 6,290 6, % 14,031 15,968 15, % 0 0 2,064 6,858 7,586 7, % TOTAL 10,985 11,575 12, %

73 Annual Report The opening in December 2003 of the last stretch of the road adjudicated to Audasa, the northern access to Ferrol and the Tuy-Rebullón stretch with another 24.7 km in operation, puts ADT growth at 3.8%. Excluding the effect of this opening, traffic grew by 12.7%. The Red Litoral Central figure is not comparable either, since the 2004 figure includes new stretches (F-962-G Las Pataguas and NCC by-pass). In Spain, after adjusting for the effect of the opening of new stretches at Audasa in 2003, traffic grew by more than 5%, amply outstripping average economic growth. TOLL REVENUES This increase is due to several factors: First, the organic growth of the business, stemming from both the increase in user traffic and the effect of the annual tariff revision. In 2004, contractors increased tariffs by around 3.5% to offset the effect of inflation. Second, the contribution of the ENA group s motorways for a full year, as against the three months of the previous year. And, lastly, the fact that two new stretches came on stream - the Cartagena-Algarrobo and Las Pataguas ring road in the Red Vial Litoral Central contract in Chile. Revenues from tolls increased by 103.2% in 2004 to reach Euros million. Revenues in Spain accounted for 82.7% of the total, up 147.9% on the preceding year. TOLL REVENUES (Millions of Euros) % 04/03 Avasa Aunor Aucalsa Audasa Audenasa Autoestradas Otras SPAIN R-5 Norte El Elqui R-5 Sur Los Lagos Rutas del Pacífico Red Vial Litoral Central Others CHILE TOTAL % % % % % % % % % % % % % % %

74 Sacyr Vallehermoso Group Revenues in Chile increased by 4.7% during the year. The portfolio of recurrent revenues from the business amounted to Euros 49,369.6 million in December, 50.6% more than in REVENUE PORTFOLIO (Millions of Euros) % 04/03 Spain Chile and Costa Rica TOTAL 6, , , % 4, , , % 11, , , % INVESTMENTS Itinere s investments in motorways and other transport infrastructures in operation amounted to Euros 4,696.0 million at the end of business year the subgroup ENA, taking the Group s holding in ENA up to 70%. Through the contribution from BBVA of a further 10% of the capital of Aunor, putting the Group s stake in the contractor at 55%. On 30 November 2004, a rights issue was approved at Itinere for Euros 24.3 million, disbursed in the following manner: Through the contribution by Caixa Nova and Caixa Galicia of a further 20% of capital of As a result of this operation, Caixa Nova and Caixa Galicia will each have an 8.62% stake in the share capital of Itinere infraestructuras, S.A., while BBVA will own 0.07%. In addition, Itinere s shareholders equity has increased by Euros 373 million.

75 Annual Report The investments made in improvement work, maintenance and extraordinary conservation amounted to Euros 4.9 million. Notable amongst these were the execution of the new link roads on Avasa and Audenasa s motorways and the start-up of the teletoll system on the first of the two. Thanks to these investments, traffic will be more fluid and the roads will have greater capacity for absorption, so that they will be able to cope with future demand. The total amount reported under the heading Motorways and other toll roads includes the cost of construction and the start-up of the concessions in operation developed by Itinere, together with the investment for adding the contracts in operation, such as Avasa and the contractors in the ENA subgroup. Moreover, in 2004 an agreement was reached with OHL, whereby Itinere acquired the following stakes from OHL: 45% of Autopista del Noroeste Concesionaria de la Comunidad Autónoma de Murcia (Aunor), thus giving it full ownership of the company. 6.75% of Alazor Inversiones (the owner of the R-3 and R-5 toll roads in the Self-governing Region of Madrid), which implies that it now owns 25.16% (the major shareholder). INVESTMENTS MADE (Millions of Euros) Operation Progress Operation Progress Operation Progress Avasa Aunor Aucalsa Audasa Audenasa Autoestradas SPAIN R-5 El Elqui R-5 Los Lagos Rutas del Pacífico Red Vial Litoral Central Americo Vespucio Nororiente CHILE , , , , Autopistas del Valle COSTA RICA TOTAL , ,

76 Sacyr Vallehermoso Group 73 main ring road in the capital of Chile, which is expected to come on stream at the end of % of Tacel Inversiones (the owner of Autopista Central Gallega, Acega) so the group has a total stake of 18.35% through Itinere and ENA. For its part, OHL acquired the following holdings from SyV: 33% of Euroglosa 45 Concesionaria de la Comunidad de Madrid (the owner of stretch 3 of the M-45 motorway); 20% of Aeropistas (the owner of Concesionaria Eje Aeropuerto which links the M-40 with Barajas airport). MOTORWAYS UNDER CONSTRUCTION At the end of 2004 Itinere had five contracts at different stages of development. A total of 172 kilometres of motorways are under construction, 35% of which corresponds to projects in Spain; amongst these is the 19-kilometre Line 1 of Seville Metro, Itinere s first contract for an underground. Worth highlighting in the foreign markets because of its importance is the progress made on the Vespucio Sur contract, the In business year 2004 two new concessions were contracted. Thus, the consortium in which Itinere has a 35% stake won the tender for the development and management of a motorway in Costa Rica, specifically the San José-San Ramón strip, which is the busiest in the country and gives access to San José International Airport. The Santa Ana-Río Segundo radial road has been added to this contract. The motorway is 60 kilometres long and the radial road 5.8 kilometres. The period of operation is 25 years and it involves duplicating and improving the existing road, mobilizing a total investment of USD 266 million. In addition, in April Majorca s Island Council adjudicated the development and running of the shadow toll motorway which links Palma de Mallorca with Manacor to the consortium in which Sacyr Vallehermoso has a 40% stake. The project has a length of 41.7 kilometres and the investment foreseen is of Euros 116 million. The contract is for 33 years and the estimated construction time 27 months. Besides the fee for demand according to the number of vehicles using the motorway, the contractor will receive fixed payments from the Regional Government for the first seven years of the contract amounting to Euros 37 million. Estimated traffic for the first year the motorway is in operation is 16,000 vehicles a day. Total investments earmarked for these stretches pending completion amount to Euros million.

77 Annual Report Services Valoriza ACTIVITY One of Sacyr Vallehermoso s strategic areas for growth is the wide field of services, where it is extremely interested in expanding, in both the activities in which it already has a presence and in new lines of business. The target in Services is to develop them as a component which should bring growth and stability to the Group s revenues, while enabling it to boost and capitalize on the synergies existing with the other divisions. In this context, 2004 was of key importance in defining the business, and four broad areas of action were established: Water This comprises the development of treatment activities (drinking water treatment, purification and desalination) and its integrated cycle: harnessing at source, supply and subsequent return to the network. Alternative energies This involves the promotion, execution, maintenance and management of different systems for generating clean energy, which help to reduce the emission of contaminating gases. The types foreseen are: the generation of biomass and wind power and cogeneration (from agricultural/cattlebreeding and industrial waste). Multiservices This brings together a set of different services which are labour-intensive and where the capacity to access and organize networks is of prime importance for providing the services. Thus, it includes businesses such as service areas on highways, integrated maintenance of buildings, cleaning of buildings and premises, handling, socio-sanitary

78 Sacyr Vallehermoso Group services, gardening, environmental recovery, road maintenance and other activities with a similar profile which are being studied. These activities have been restructured using the affiliates Valoriza Facilities and Microtec as the basis. Environment The business consists of the integrated management of different types of waste, including collection at source of both selected and separated waste, transport, treatment through different processes for its recycling and evaluation with a view to reducing its impact on the environment. This field also includes street-cleaning, providing sweeping and swilling services and other special services such as the cleaning of beaches and waste paper bins. Apart from restructuring the fields of action, during the year the staff assigned to this business within the Valoriza group increased. The addition of staff took place in record time and has brought in professionals with extensive experience so that an ambitious growth strategy can be developed. WATER The business comprises two fields of action: on the one hand, engineering, development, execution, maintenance and operation of all types of treatment (industrial, agricultural and drinking water) and, on the other, water supply systems for large groups of clients, through construction and operating systems under public contracts. WATER TREATMENT Sadyt engages in a wide range of activities and is at the head of the Grupo Valoriza s water treatment businesses. Sadyt is one of the leading companies in its field and has won some of the most important contracts tendered in the sector during the year: Within the Temporary Joint Venture GEIDA, two projects to develop and operate two 75 Desalination plant at Cuevas de Almanzora. Almería.

79 Annual Report sea-water desalination plants in Algeria for a period of 25 years. The first of these plants, located in Skikda, was adjudicated in March and has a desalination capacity of 100,000 cubic metres per day. The second project was won in May and is located in the region of Beni-Saf; it has a desalination capacity of 150,000 cubic metres of sea water a day. Sedebisa effluent treatment plant, Puente Genil. A chemical dosification plant for the Arcos III thermal station. With these plants, Sadyt will have installed a desalination capacity of over 330,000 m 3 /day at the forty-eight plants it has developed, besides other installations for purification and other types of water treatment. The operation business has gradually been consolidated, supported by the growing portfolio of projects executed. At the end of 2004, 26.7% of production was operated by Sadyt. Today, nearly 36.4% of Sadyt s revenues comes from services (operation and maintenance and supplies), thus lending stability to the business. maintaining a leading position, meant that in 2004 conventional treatments (obtaining ultra-pure water through electrodeionization- EDI) were joined by ultrafiltration and inverse osmosis, together with the biological reactor with membranes. Sadyt has its own desalination technology and currently has over 155,000 m 3 / day installed or under construction at plants with inverse osmosis technology. Sadyt maintains its quality system (ISO ) that was introduced in 2001 and in 2004 it obtained the environmental management certification according the standard UNE-EN ISO 14000:1996. Lastly, desalination is increasingly important both in Spain and abroad as an alternative means of supply to terrestrial harnessing and is another of the future keys for the group. Sadyt s international presence is growing constantly and national plans to increase desalination capacity in the Mediterranean in the coming years will mobilize Euros 3,900 million in investment in the period For these Sadyt boasts proven experience and technical solutions. In 2004 the construction work on the drinking water treatment plants in Calpe, with production of 3,500 m 3 /day, and in Jaca ( m 3 /day) was completed. The extension of the desalination plant at Cuevas de Almanzora ( m 3 /day) and the first stage (2,500 m 3 /day) of the tertiary treatment plant for the Xeresa Golf hotel in Benidorm (Alicante) were also completed. The second stage of the latter is currently in progress. The ultra pure water treatment Plants in Villanueva de Algaidas and Puente Genil were also finished, as was the Algueña wastewater purification plant in Alicante. Technological development, which is essential for remaining competitive and INTEGRATED SUPPLY CYCLE The water supply business is conducted through the subsidiary AGS. In 2004 it reinforced its position in the Portuguese market and, at the year end, it had a 40% share in the privatized market and revenues from its total contracts of Euros 21.6 million. The population served had increased by 16% at the end of 2004 to reach 1.35 million inhabitants. Moreover, AGS has a presence in Brazil, through a water supply contract. At the end of 2004 a total of 10 contractors were operating, nine in Portugal and one in Brazil. They were:

80 Sacyr Vallehermoso Group Aguas de Alenquer, a contractor operating and managing public water supply and wastewater drainage services in Alenquer, where 40,000 inhabitants are serviced. Aguas de Cascais, a contractor operating the municipal water supply and wastewater drainage system in Cascais (a population of 191,000 inhabitants). 77 Aguas de Sado, a contractor responsible for the water supply and drainage system for the Council of Setúbal. The population serviced totals 114,000 inhabitants. TRATAVE Tratamiento de Aguas Residuales de Ave, the contractor operating and managing the integrated decontamination system for the Vale do Ave (the municipalities of Guimarães, Santo Tirso and Vila Nova de Famalicão), with a population of 392,000 inhabitants. Aguas de Carrazeda, a contractor operating and managing the municipal water supply and drainage services for Carrazeda de Ansiães Council. It services a population of 7,700 inhabitants. Aguas de Gondomar, a concessionaire company which operates and manages the municipal water supply and drainage services for the Municipality of Gondomar with 170,000 inhabitants. Aguas de Figueira, the concessionaire company operating the water harnessing, treatment and supply system and the collection, treatment and recycling of affluents for the Council of Figueira da Foz, a town with a population of 75,500 inhabitants. Aguas de Barcelos, the contractor responsible for operating the muncipal water supply and drainage services for the Council of Barcelos, which has 125,000 inhabitants. The tender was won in 2003 and it started its activities in Aguas de Barcelos. Portugal.

81 Annual Report Aguas de Paços de Ferreira, which runs the drinking water supply and drainage systems for Paços de Ferreira Council. It started its business during the year and services a population of 54,000 inhabitants. Aguas de Mandaguahy, the company contracted for the municipal water production services for the partial supply of the Municipality of Jaú in Brazil. It services a population of 102,000 inhabitants. During the year three new contracts were added in Portugal and will start operations in 2005: Aguas de Marco, a contractor responsible for the operation and management of municipal water supply and drainage services for Marco de Canaveses Council. It serves a population of 54,000 inhabitants. Aguas de Penafiel, a contractor which will run and manage municipal water supply and drainage services for the Municipality of Penafiel, with 75,000 inhabitants. ALTERNATIVE ENERGIES The businesses conducted fall within the Special Regulation on Renewable Energies which enjoy special consideration and are grouped in two fields of action. On the one hand, the generation of energy through the use of waste produced by different types of human activity, biomass, such as sludge from purification plants or subproducts from the farming and cattle-breeding sector. And, on the other, the generation of energy based on cogeneration and wind-power stations. All of these sources of energy have significant future growth potential, in view of the sustained boost they will be given with the Kyoto Protocol coming into force in the EU. When the Protocol is implemented in 2005, both Spain and Portugal will have to significantly reduce contaminating gas levels to comply with the emission rights assigned to them. BIOMASS AND COGENERATION Aguas de Covilha, which is the contractor operating municipal water supply and drainage services for the Council of Covilha, with 55,000 inhabitants. Moreover, in 2004 AGS was selected for the contract of public-private association with the Council of Faro (61,000 inhabitants) for the integrated development of water supply, solid waste collection and street-cleaning services for a period of 35 years. Presence in Spain, with a view to future expansion, is centred on the water contract for Toledo and some neighbouring towns, run by the company Aguas de Toledo. In 2004 a population of 70,000 inhabitants was serviced. Iberese leads the business of treating waste from olives, other slurry from agriculture and of urban origin, and also the market for executing small and medium-power cogeneration plants in Spain. It is important to note the acquisition in 2004 of a further 24% of the company, thus pushing the total holding up to 74% of capital and consolidating management control in a field that has strong growth potential. In biomass, the following plants were in operation in 2004: Olextra, for drying and treating slurry from olive oil industries (16 MW); Extragol, in Malaga, which generates electricity (9.5 MW) from olive pulp (orujillo); Compañía Energética de la Roda

82 Sacyr Vallehermoso Group (8.2 MW), which dries sludge; and, lastly, Compañía Energética de Pata de Mulo, with a plant for treating and reducing sludge through a combined cycle plant in Cordoba, with 16 MW of power installed, which started its activities in January Biomasas de Puente Genil (9.5 MW) plant in progress in Cordoba, which will come on stream in Thus, at the end of the year there were a total of six plants in portfolio. When all of them are operating, the total installed capacity will be in excess of 77 MW. 79 In 2004 the following biomass projects were still in progress: A new plant, Compañía Energética Jabalquinto (18 MW), was adjudicated in 2004, located in the province of Jaen and based on electricity cogeneration through the drying of agricultural slurry. This is in addition to the In cogeneration projects, Iberese runs the cogeneration plant for the paper company Echazarreta (10 MW). In 2004, the construction of two plants, with 11 MW of power installed for industrial clients (turn-key projects) continued and, in addition, seven new projects also turnkey were won, with 61.6 MW of power: COGENERATION PROJECTS Location Industry Power installed-mw Moyresa Moyresa Cottocer II Ceranor Euroatomizado II Pamesa Reyenvas CONTRACT WON 2004 Europac Aspla II IN PROGRESS Echezarreta IN OPERATION Vizcaya Food 20.0 Barcelona Food 10.0 Castellón Tile manufacturing 10.0 León Brick-making 10.0 Castellón Tile manufacturing 5.0 Brazil Tile manufacturing 5.0 Seville Plastics Huesca Paper 10.0 Cantabria Plastics Guipúzcoa Paper TOTAL 82.6

83 Annual Report WIND POWER Finerge, a company which belongs to Somague, is at the head of the wind power business. It runs its business in an integrated manner, going from development to the management of wind farms, and also has a smaller portfolio of cogeneration plants. It is currently participating in several consortia for the development of 587 MW in renewable energies, of which MW can be attributed to Finerge s stake. The degree of development of this is as follows: 59.9 MW (32.9 MW in cogeneration and 27 MW wind power) are up and running, 51 MW are under construction and MW are at the development stage. MULTI-SERVICES This heading comprises the provision of different labour-intensive services. Some were already functioning in 2004, others may be developed, depending on market opportunities and the degree of profitability they offer. Examples of these services are airport handling, cleaning of interiors and socio-sanitary services. The performance of the activities in operation was as follows: Integrated property maintenance - Valoriza Facilities. Its services are broken down into management and documentary and legal technical assistance, integrated maintenance of facilities and ancillary services such as gardening, security, reception, internal mail, etc. At the end of 2004, its customer portfolio included such major clients as SCH-Banif Fondo de Inversión Inmobiliario, Procter & Gamble, Testa and Gestalia (Grupo Lar), enabling it to post a sales figure of Euros 25,7 million for the year. In February 2005 it won maintenance contracts for Madrid Regional Government s Consejería de Justicia, for the Ministry of Economy and Finance and for the Ministry of Labour. Service areas Cafestore. This operator of service areas aims to achieve nationwide presence. At the end of 2004 it had 21 establishments on different high-capacity highways in Spain, as compared to the 7 existing at the beginning of the year. In 2004 another a area was under construction. This year Cafestore has completed a strategic plan for the next three years with a view to becoming one of the leaders in catering on motorways and dual carriageways. In 2004 it obtained Euros 12.1 million in revenues. Gardening and landscaping - Viveiros do Falcao. It is based in Portugal and engages in the design, construction and maintenance of parks and gardens and sports areas, but also does landscaping work for road and railway works. Amongst the most important contracts won in 2004 is the maintenance of Benfica s stadium in Lisbon, which enabled it to report revenues of Euros 5.2 million during the year. Environmental engineering Microtec. From its activity of assessing and correcting environmental impacts it obtained a total of Euros 8.4 million in total revenues in Notable amongst the contracts won during the year was the adjudication of the installation work on the official network for controlling subterranean waters from the Ebro for the Confederación Hidrográfica del Ebro, the construction of the semi-link road between the NA-123 highway and the AP-68 motorway, the treatment of woodland to prevent fires for the Castilla León Regional Government in the Villadiego area, etc.

84 Sacyr Vallehermoso Group Lastly, this division also includes the operation of a car park in the city of Toledo, which has been fully consolidated since it was opened in the year In respect of the activities to be developed in the future, worth highlighting is the agreement reached at the beginning of this year, 2005, with the multinational group Servisair to present joint handling bids in Spain. This agreement with one of the world s leading airport service providers is an excellent springboard for developing the business. Moreover, different projects in cleaning and socio-sanitary services where Sacyr Vallehermoso can offer a large number of jobs and great opportunities are currently being analyzed. ENVIRONMENT This division covers the full waste management cycle, from the different formulae for collection (solid urban waste and street-cleaning) to waste treatment, landfill, recycling/composting and energy valuation. Amongst the businesses in operation, it is present in the foreign markets through different companies: Hidurbe Gestión de Residuos, S.A., which is fully-owned by Somague Ambiente and engages in industrial and solid urban waste (S.U.W.) management in Portugal. In 2004 it managed the Meia Serra S.U.W. Treatment Centre for waste on the island of Madeira, with an incinerator plant that processes 150,000 tonnes of urban waste a year, obtaining 10 MW/h of electricity production; in addition, the Lipor Organic Waste Treatment Plant came on stream, with 15 automatic composting tunnels where the solid urban waste from the region of Oporto is treated, with a capacity of 60,000 tonnes/year. It uses the latest technologies for composting and odour treatment, obtaining high quality compost which is bagged or pelletized for later sale. Procesl Ingeniería Hidráulica y Ambiental, Ltda., an environmental consultancy firm in which Somague Ambiente has a 70% holding and which is the leader in the Portuguese market in environmental fields, hydric resources, solid waste, submarine emissaries and supply and drainage infrastructures. CESL Asia, a company 51%-owned by Somague Ambiente and based in Macao, with clear potential as a springboard to the rest of the local market. It engages in the following activities: AGS-Macau, a company which runs public and private installation and engages in solid waste management, purification plants and drinking water. Notable amongst its contracts is the operation of the Macao Incinerator Plant for the treatment of all the solid urban waste from Macao. The extension of this plant is currently being studied. The plant has a nominal capacity of 315,000 tonnes p.a. and generates 12 MW/h of electricity. Focus, which provides operation and maintenance services for installations, including those at the International Airport, which is currently being refurbished, and Macao Cultural Centre. MPS (Macao Servicios Profesionales, Ltda.), which provides a wide range of consultancy services related to design and engineering in environmental projects. 81

85 Annual Report 2004

86 Stock market performance and the financial community 4 Stock market performance Investor relations

87 Annual Report CAPITAL Stock market performance As of 31 December 2004, Sacyr Vallehermoso s capital stock was fully subscribed and paid up. It comprises 266,153,343 shares, each with a par value of Euros 1, of the same type and series, and with the same rights. During the year two rights issues were conducted. Sacyr Vallehermoso s General Shareholders Meeting held on 25 June 2004 adopted the following resolutions: To increase share capital by 13,850,948 shares, each with a par value of Euros 1, with an issue premium of 10.5 and with economic rights as from 1 January 2004, to cover the operation of integrating Somague in the Group. To increase share capital by 6,491,544 shares, each with a par value of Euros 1, charged to unrestricted reserves and in the proportion of one new share for every forty old ones. These shares were admitted to trading on 30 September on the Madrid, Barcelona, Bilbao and Valencia stock exchanges. Moreover, after the required formalities, Sacyr Vallehermoso extended base its trading base, as its shares started trading on Lisbon s Euronext market in September The table below shows the company s share capital at the end of the past three years: CAPITAL (Euros) Year Share capital No. of shares ,153, ,153, ,810, ,810, ,764, ,764,041

88 Stock market performance and the financial community 85 A rights issue is to be presented for approval at the General Shareholders Meeting, with the issue of 8,317,291 shares, each with a par value of Euros 1, equivalent to one new share for every 32 previously issued shares, fully paid-up for shareholders. As of 9 January 2004 the third interim dividend charged to 2003 was paid and amounted to Euros per share. On 29 June 2004 the final dividend for 2003, amounting to Euros per share, was paid. After this issue, share capital will comprise 274,470,634 shares. DIVIDENDS In business year 2004, the total amount received by shareholders in dividends was as follows: On 28 July the first interim dividend of Euros per share, charged to business year 2004, was paid. The 2.5% increase in this first dividend was to offset the fact that on the date of payment, the shares corresponding to the bonus rights issue conducted in September 2004 in the proportion of 1x40 had not yet been issued. DIVIDENDS PER SHARE (Euros) (1) 2004 % 04/03 Interim Final No. Shares No. Shares in treasury stock TOTAL CASH ,764, ,810, ,153,343 1,221, ,337 2,228,583 46,035,027 73,526,854 95,288, % (1) Excluding the extra dividend of Euros 0.12 per share paid for the merger.

89 Annual Report On 15 October the second interim divided of Euros per share, charged to 2004 results, was paid. The following dividends have already been paid this year 2005: A third interim divided, agreed by the company s Board of Directors at their meeting held on 15 December This dividend of Euros per share was paid on 14 January A final dividend of Euros per share agreed by the company s Board of Directors on 29 March 2005, payable on 15 April These dividends of Euros 0.36 paid and charged to business year 2004 are submitted to the General Shareholders Meeting for its approval Sacyr Vallehermoso remains firm as regards its policy of maximizing the return on its shares. Thus, if the final dividend proposed is approved, the total amount to be paid to shareholders and charged to business year 2004, is Euros 95.3 million, 29.6% more than the ordinary dividend paid last year. STOCK MARKET PERFORMANCE The stock market performance of the Sacyr Vallehermoso share continued on the upward trend of previous years. Thus, annual appreciation was of 3.8% (not counting dividends and corrected for the effect of the bonus rights issue).

90 Stock market performance and the financial community SHARE PERFORMANCE IN 2004 SHARE PERFORMANCE 2004 (Euros) 87 Number of shares Trading volume (Euros 000) Trading days 266,153,343 2,176, Closing price 2003 (Euros) Closing price 2004 (Euros) High (on 01/03/04) (Euros) Low (on 26/08/04) (Euros) Weighted average price (Euros) Average daily volume (No. shares) Liquidity (shares traded/ capital) 721, J F M A M J JL A S O N D Although the share appreciated below the market in general during the year, its cumulative performance in the past few years shows total appreciation of 78.3% ( ), which is a wide positive spread with the scant increase observed on all the international and domestic stock market indices in the same period. TRADING VOLUME (Thousands of Euros) 3,500,000 3,000,000 3,228,721 It is worth noting the reincorporation of the Sacyr Vallehermoso share on the selective IBEX-35 index as of 2 January 2005, thanks to the good performance of its trading volume throughout the second half of This was beneficial to its liquidity and served to support the performance of the share price. 2,500,000 2,000,000 1,500,000 1,000, , , ,218 1,357, ,176, The trading volume for the year amounted to a total of Euros 2,176.2 million, equivalent to 68% of market cap. as of 31 December last year. This high turnover evidences the company s soundness, circulation and liquidity in the stock market. 3,233,763 thousand, a 9.63% increase on the end of This variation was due to the combination of two factors: At the end of 2004, Sacyr Vallehermoso s market capitalization amounted to Euros The positive performance of the share, which appreciated by 1.3% during the year.

91 Annual Report The rights issue, with a non-monetary contribution, for a total of 13,850,948 shares, conducted as a result of the agreement to integrate Somague, together with the bonus rights issue charged to reserves for a total of 6,491,544 shares. The performance of Sacyr Vallehermoso shares on the Computer-Assisted Trading System in 2004 was as shown below: STOCK MARKET PERFORMANCE 2004 (Euros) General SyV Ibex Construction Index % Science Museum. Barcelona.

92 Stock market performance and the financial community STOCK MARKET INFORMATION Share price (Euros) High Low Average Year-end No. of shares at year end Average daily volume (No. of shares) Annual volume (Euros 000) Market capitalization (Euros 000) Weighting on MSE (%) Earnings per share (Euros/share) Cash flow per share (Euros/share) Dividend per share (Euros/share) Price/Book value (No. of times) Payout (of attributed income) (%) Dividend yield (%) P/E ratio P/Cash-flow ,764, ,810, ,153, ,293 1,751, ,902 1,357,058 3,228,721 2,176,254 1,532,164 2,949,730 3,233,

93 Annual Report Investor relations In business year 2004 Sacyr Vallehermoso implemented an active communication policy increasing the number of presentations, meetings and contacts with the financial market and minority shareholders through different means. The Group, through the Institutional Relations department, has a direct relationship with analysts and investors and strives to continuously assist shareholders through the minority shareholder care office. The objects of this active policy of communication with the financial market are: To explain the enormous changes which the company has gone through in the past two years and major events such as the Sacyr Vallehermoso merger, the purchase of ENA, the share swap agreement with Somague, the change in Chairman, the move into the Italian market, etc. To contact the main institutional investors, Group shareholders and analysts, so that they have a view of the Group as a point of reference in the diversified landscape of the listed construction sector in Spain and Europe. Over the year this policy has led to an increase of over 60% in coverage from merchant banks and stockbroker firms, reaching 15 entities at the end of Apart from the different presentations given in major cities in Europe and North America, a total of 194 meetings were held with different investors, shareholders and analysts, almost doubling the figure of the previous year. The company made notable efforts to continue to make information about the Group as accessible as possible, in compliance with

94 Stock market performance and the financial community SHAREHOLDER CARE s + Telephone calls Meetings Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. 0 what is set out in the Financial Transparency Act. In this respect, all the important information about the Group s results, corporate governance and communications is available in the shareholder and investor information section on the website ( Sacyr Vallehermoso reiterates its undertaking to ensure that the information about its activities is issued simultaneously and with the same transparency to all its shareholders and investors. Minority shareholders have contacted Sacyr Vallehermoso by telephone (shareholder care line ), through the web page and (relacionesinversores@gruposyv.com). As a result of all of these actions and the capital movements that occurred during the year, the following ownership can be estimated as of December 2004: Around 83% of Sacyr Vallehermoso s shareholders are Spanish, while the remaining 17% are foreign, a percentage slightly below the average for the whole group of listed companies in Spain. As of December 2004, free float was of 35.3% while 64.7% was in the hands of shareholders on the Board of Directors. This implies that the company s senior governing body is highly represented in the ownership structure. At the end of 2004, the estimated breakdown of the free float by type of shareholder and geographical region was as shown below: BREAKDOWN OF FREE FLOAT In % millions shares In % of total capital Domestic institutional 24.40% 8.6% Foreign institutional 37.53% 13.2% Retail 38.14% 13.5% Total Free Float % 35.3%

95 Annual Report 2004

96 Corporate Responsibility 5 Corporate responsibility Quality, prevention and environment Organization and systems Human resources

97 Annual Report Corporate responsibility Sacyr Vallehermoso has an unquestionable commitment to its shareholders and clients, but an equally binding commitment to the more than ten thousand people who work for the Company and those it has decided to take on to help in developing cultural activities and actions of solidarity. The group considers that its prime commitment to society is to generate good jobs and the proof of this is the large number of posts that have been created in the past few years. In addition, the principles behind all Sacyr Vallehermoso s actions are the conservation of the environment, conduct which follows the most stringent rules of transparency in the markets where it operates, compliance with the legislation in force and offering quality services and products. This Annual Report gives detailed information about the Group s activity, Good Governance and everything related to human resources, quality, the environment, etc. As far as corporate social responsibility is concerned, in 2004 Sacyr Vallehermoso passed a Corporate Social Responsibility Plan, approved by its Management Committee. This plan establishes the objectives and criteria that govern action as regards the societies and groups it is related to. The main action being taken by Sacyr Vallehermoso as regards corporate social responsibility is in connection with the following projects: Fundación Juan XXIII Sacyr Vallehermoso is financing different equipment for the new building in Madrid which will house the occupational centre, a special job centre and a day centre for mentally-disabled people which is being managed by the Foundation.

98 Corporate Responsibility 95 Fundación Juan XXIII. This project is called 10,000 square metres of solidarity because of the area the Foundation s building will have. It will have a capacity for some 400 people. The centre has two main functions: the occupational centre of the Fundación Juan XXIII and the special Ibermail job centre. The latter is one of the Foundation s companies where the majority of staff is mentally handicapped and from which Sacyr Vallehermoso hires people for different posts. Amongst the activities that will be run in the occupational centre is a goods handling workshop, integration in society and the labour market, psycho-social care, leisure and free time activities, psychomotor activities, sports, computer skills, handicrafts and drama. The Fundación Juan XXIII was created in 1986 but its history dates from 1966 and the Centro de Discapacitados Juan XXIII (Centre for the Disabled). Its object is to foment the integration and the quality of life of the mentally handicapped. To this end, the Foundation works on programmes adapted to the levels and needs of these people, providing occupational therapy activities, workshops, psychological assistance, physical rehabilitation and leisure activities. Ibermail, which was born in 1990 and belongs to the Foundation, is a special job centre with 100 workers (the majority of them disabled) which provides direct publicity services, printing, storage and logistics and promotional elements. The two organizations work together to achieve the integration of the mentally disabled. Constructoras Andaluzas por Centroamérica Prinur, Sacyr Vallehermosos s construction firm which operates in Andalusia, is doing a magnificent social job in conjunction with Andalusia s Regional Government through the association Constructoras

99 Annual Report Andaluzas por Centroamérica (Andalusian Construction Firms for Central America). Through this association, a whole village was built for the victims of Hurricane Mitch in El Cuco (El Salvador). The project consists of 278 homes, street paving, drainage and water purification, a school and other buildings and common areas. In February 2005 the building work was completed with the construction of a new community centre, a school and a health centre and the President of Andalusia, Manuel Chaves, has been to El Salvador to visit El Cuco. Sacyr Vallehermoso s work does not stop here but it will continue to collaborate in educational tasks and in improving the living conditions of the people from this area destroyed by Hurricane Mitch in a long-term commitment, in which everyone in the Group is involved. Madrid Olympic Candidature Sacyr Vallehermoso is sponsoring Madrid s candidature for the 2012 Olympics in the Platinum category, the highest existing, as it is convinced that this event could significantly boost the economy of both Madrid and Spain as a whole and would also be an incentive for youngsters doing soport in Spain. By offering its support, Sacyr Vallehermoso would like to promote Madrid as a venue for a greater number of top-level sporting events and encourage children and young people to do sport. Escuela de Música Reina Sofía Sacyr Vallehermos sponsors a chamber music group formed by young Europeans who are doing their musical training at the Escuela de Constructoras Andaluzas por Centroamérica.

100 Corporate Responsibility Música Reina Sofía (Queen Sofia School of Music). The Escuela Superior de Música Reina Sofía forms part of the Fundación Albñeniz and is currently one of the institutions most highly recognized in the international arena for its excellent staff of renowned teachers. Fundación de Apoyo a la Historia del Arte Hispánico Sacyr Vallehermos is sponsoring the most important study that has been conducted in Spain on the 17th century Cordoba painter, Antonio del Castillo. His work is on exhibition at the most important museums in the world but there had been no exhaustive study of his paintings. The books resulting from the study are published by the Fundación de Apoyo a la Historia del Arte Hispánico, with which Sacyr Vallehermoso collaborates directly. Refurbishment and equipping of a school in Angola Somague is thoroughly refurbishing and equipping primary school 205 in the municipality of Maianga in Luanda (Angola). Collaboration in the integration of immigrants Between 10 and 20 June 2004, Somague sponsored the Lisbon-Funchal-Lisbon trip for 90 young people from nearly 70 immigrants associations recognized by Portugal s High Commission for Immigrants and Ethnic Minorities, organized by the Presidency of Portugal s Council of Ministers. Donation of machinery for the work on clearing and rebuilding the areas affected by the Tsunami in south-east Asia Apart from these actions which could be viewed as the most important in the field of social and cultural activity, Sacyr Vallehermoso has collaborated with other foundations, associations and institutions: NGO Entreculturas and the Spanish Red Cross with the campaign Pon tu móvil donde más se necesita ( Put your cell phone where it is most needed ); Ayuda en Acción and Nuevo Futuro, with which Sacyr Vallehermoso make Christmas cards; Instituto Galego de Cooperación Iberoamericana, sponsorship of the Dia de Chile-Xacobeo 2004 with the presence of different political and ecclesiastic personalities from Chile and Santiago de Compostela; Adena, a competition at Sacyr Vallehermoso s shopping centres aimed at fomenting children s love of nature and respect for the environment; Cooperación Internacional; Liga Portuguesa contra el Cáncer; Fundaçao do Gil, for young people with problems of social integration; UNICEF; SOS Solidaridade; Natal dos Hospitais; Ponto de Apoio à vida, for older people in difficulty; Forum Portugal Global; Instituto Portugués do Sangue; Fundaçao Luso-espanhola; Lisbon Cultural Centre; Instituto das Artes; Museo da Presidência da República de Portugal. 97

101 Annual Report QUALITY AND ENVIRONMENT Quality, prevention and environment The Sacyr Vallehermoso group has chosen to make a commitment to quality and the environment in all the activities conducted by the companies in the group, following the general strategy defined for the Organization. To this end, one of the main challenges of the Quality and Environment Department is to standardize management systems, integrating criteria and conduct and introducing them where they do not yet exist, in order to integrate processes, define responsibilities and establish the necessary resources, and all of this in a coherent and coordinated manner throughout the Organization. In 2004, in the context of certifications, the necessary steps were taken to obtain certification for Sacyr Chile and this is the first Spanish construction firm in Chile to receive certification according to the ISO 9001 and ISO standards, thus clearly distinguishing it from other companies operating there. CosmoCaixa Museum. Barcelona. But our action did not stop at that. The group s commitment was evident as all the activities conducted by Sacyr were certified and the building division and the road conservation and maintenance division were included in the environment certification. The same things occurred with Scrinser, whose certificates were extended to include road conservation and maintenance, both in terms of quality and the environment. All the businesses of the two companies are now certified. Other companies in the Group which obtained certification during the year were: According to the ISO 9001 requirements: PRINUR, VALORIZA

102 Corporate Responsibility According to the ISO requirements: Prinur and Sadyt. One of the cornerstones of the actions fomented by Quality and Environment Department is to contribute to achieving a high degree of environmental protection day by day. For this reason, training and informing workers and heightening their awareness led us to prepare a Manual of Good Environmental Practices. This manual explains and transmits ideas clearly and simply, in language that everyone can understand, and comes as close as possible to everyday reality. Its contents are general but its targets are specific and it aims to increase workers awareness of the environment and encourage a change in their attitude towards it which should lead to more correct behaviour, with activities being carried out in a more respectful manner and enhancing the quality of life for everyone, thus contributing to sustainable development. Moreover, a computer application has been developed which makes it possible to manage all environmental matters globally. This software 99 Plant for obtaining ultra-pure water. Biomass thermal station. Malaga.

103 Annual Report Palace of Justice. Sintra. Portugal. was fully developed by Sacyr Vallehermoso and brings a series of improvements such as: Integration of the different work centres, by relating the data generated at each centre with the others. Information for the entire organization in real time. Multi-company and multi-country information. The Group s commitment to the environment will be clear in 2005, as the necessary steps are already being taken to offer all investors, and anyone else who might be interested, information about its environmental conduct, and to establish a system of environmental indicators, which will enable the Group to clearly present the environmental behaviour of the entire organization, with its commitment to transparency in information. Sacyr Vallehermoso is aware of the need to show quality in the businesses it conducts and this is one of its main strategic targets, since it enables it to be competitive and stand apart from other companies, thus guaranteeing its success in business. To this end, the Group has developed its own method for analyzing customer satisfaction and for objectively evaluating the expectations placed upon it. This enables the Group to put in place the necessary mechanisms for achieving their maximum satisfaction, with the ultimate object of making them faithful to Sacyr Vallehermoso.

104 Corporate Responsibility 101 PREVENTION Once the merger between Sacyr and Vallerhermoso creating a holding of companies which operate in different business sectors was consolidated, the Group opted to choose a preventive model of organization in accordance with its size. Sacyr s former Prevention Service was reorganized and the Sacyr Vallehermoso s Joint Prevention Service was implemented. This serves the different companies in the Group, mainly in Construction (with special attention being given to this sector) and Development (under the tutorage of the Health and Safety Coordinators). The growth in the Services sectors, through Valoriza, and in Concessions, through ENA-Itinere, is a new challenge for the Prevention Service; by means of its main tool, the Labour Risk Prevention Management System, the service is extended to new contracts, in accordance with the guidelines issued by the Chairman based on the Prevention Policy. As part of the company s policy on innovation and improving information, an on-line Management, Control and Monitoring programme is being developed. This will constantly improve the working conditions of employees and collaborators at Sacyr Vallehermoso s work centres. Aware that training is essential to management systems in general and to prevention in particular, work is being centred on an on-going training scheme for all levels of the organization.

105 Annual Report Organization and systems ORGANIZATION As a result of the merger conducted in business year 2003 and the effective addition to the Group in 2004 of companies as important as ENA and Somague, activity has been intense in terms of analyzing and designing organizational structures, describing and updating posts, and monitoring and controlling the coverage of vacancies and the creation of new posts within the organization. The issue, control and update of circulars and operational procedures in line with the needs to optimize the management and operation of the different businesses were also coordinated. SYSTEMS The activities in which the Information Systems department were most involved in 2004 were: Making major progress in extending the SAP Management System to the Sacyr Vallehermoso Group s new companies, so that it has now been introduced at all the companies in the different business lines: Real Estate, Property, Concessions and Services. Productivity improved across the board, as greater, more detailed information was provided and this was also of higher quality and greater reliability which facilitates decision-making. Completing the design of the Computer Planning and Management System for Work Projects (PLIDO) and adapting it to the management needs of the Group companies involved in the Construction business. As a result of this, it was introduced at a faster pace and the majority of construction projects in progress in Spain were put into the system. Thanks to this, work project managers now have a very powerful tool for

106 Corporate Responsibility 103 their tasks which will help them to plan and manage their activities and will also mean that the Central Structure will be able to share this same updated on-line information. together with a specific instrument panel for the contracting business. The next stages will include extending the experience of the contractors to the other businesses. Progress has been made in implementing the Centralized Personnel Management and Administration System (LOGA) at the majority of Group companies, including companies abroad under different labour legislation and agreements, such as Chile and Portugal. Moreover, a Human Resources System is also being implemented; this comprises modules for training, internal and external selection, evaluation, preparation of budgets and management of payments for the entire Sacyr Vallehermoso Group. The rapid evolution of the business, its diversification (construction, real estate development, contracting, property management, services ), and the variety of markets (Spain, Portugal, Chile ) have brought new requirements as regards information systems and the need for solutions which simplify monitoring key business indicators and make it possible to establish common calculation criteria. Because of this, during the year an instrument panel system was introduced which brings together the main corporate indicators for each of the Group s divisions, During the year, work continued on standardizing, unifying and optimizing computer infrastructures, such as network architectures, servers, communications, etc., and on systems infrastructure intranet, web, , management and department applications, etc. All of this was necessary because of the merger between Sacyr and Vallehermoso, a situation that was resolved in 2004, as the technological environment was unified for all the companies in the Group and appropriate levels of availability and security were guaranteed, both in their physical and logical aspects. Moreover, during the year the Data Processing Centre was moved to a new building, with more modern facilities and equipped with specialized security systems and devices, such as areas of restricted and controlled access, systems for detecting and extinguishing fires, emergency and evacuation, an electricity supply system with a backup generator set and uninterrupted supply, air-conditioning, etc. Security measures and policies to protect the whole of the Group s technological environment were also put in place.

107 Annual Report Human resources Aware that human capital is one of the bases of a good part of the Group s development expectations and the successful fulfilment of its goals, the Sacyr Vallehermoso s Human Resources Department, through its Personnel Administration, Management and Development, Selection and Training and Labour Relations departments, helps to integrate and optimize the organizational structure and to develop dynamic policies on innovation, training, development and communication, aimed at motivating the people in the Group and achieving maximum efficiency. PERSONNEL MANAGEMENT DEPARTAMENT Business year 2004 was a year of changes in the Department, in terms of structure and resources. In order to follow the strategy defined, technical administrative personnel were specialized by business areas, to make them more familiar with the different collective agreements and to make them work more closely with them. In addition, during the year a new personnel management system was implemented, in line with both the Group s current requirements and future needs. Amongst the priorities of the Human Resources Department is the commitment to seek social improvements for employees and, to this end, health insurance was taken out for 1,400 families. MANAGEMENT AND DEVELOPMENT DEPARTAMENT In 2004, the Management and Development Department worked on setting up different programmes, tools and policies for managing

108 Corporate Responsibility 105 Human Resources, in order to be able to develop, evaluate, recognize, remunerate and reward the talent of its employees. policies for the valuation and remuneration of jobs, management by competencies, definition of development paths, etc. Amongst them, the evaluation programmes were consolidated. Examples of these are Management by Objectives, a tool which transmits the strategic objectives of the Group and each of its Business Divisions to the people involved in fulfilling them, evaluates their performance and rewards them for their results; and Performance Evaluation, a tool for management and evaluation by competencies, which makes it possible to detect employees with potential and identifies the strengths of the staff evaluated and the area for improvement. Thanks to the collaboration and implication of senior management, managers, middle management and collaborators, the number of managers in the different evaluation programmes rose from 93 managers in 2003 to 470 managers and middle managers in This programme is to be introduced in Chile and Portugal in Apart from laying the foundations for staff evaluation, a Job Description Project was also set up as the basis for developing appropriate Sacyr Vallehermoso believes in the potential of the workers in the Organization, it has furthered internal selection to enable the people in the Group to change jobs and to be promoted, together with a common remuneration policy which establishes salaries that are competitive in the market. This policy promotes internal equity and fair payment, recognizing, valuing and rewarding excellence. In addition, development paths aimed at new graduates, were introduced. These enable the Group to guide their professional development from the time they enter the Organization, with a view to training future professionals within the Company. In 2005 the Management and Development team committed itself to continuing to develop new policies for personnel management. These aim to respond to the needs of a Group like Sacyr Vallehermoso which is in the process of expansion and diversification.

109 106 Annual Report 2004

110 Corporate Responsibility SELECTION AND TRAINING DEPARTAMENT Appropriate staff training and good qualifications are essential to business capacity and competence. Prices are not the only source of competition, but quality and flexibility are becoming increasingly important for adapting products to the exacting new demands. For this reason, the Training Department has taken different measures that have brought it optimum results in quantitative terms and, thus, have increased the level of competitiveness in the new markets: A 442.7% increase in hours of training, with: 138 training actions 41,320 hours of training 671 workers trained. Average score: 3.4 (between 1 and 4) Triplication of the number of workers trained. Moreover, amongst the different training subjects Administration, Legal Affairs, Auditing, Quality, Accounting, Studies, Offers, Installations, Finance, Hostelry, Languages, Computers, Office Computers, Real Estate, Labour Relations, Marketing, Environment, Risk Prevention, Topography, Building Technology, etc. strong emphasis was laid on the use of applications from information technology and communications. 5,271 interviews held. 251 posts filled. 93,2% probation periods passed. It should be noted that in both the Selection and Training areas, the Department managed to service all the Group s divisions and business lines, while also reorganizing itself. However, despite these positive results, a qualitative analysis of areas for improvement is being conducted, in order to continue to optimize its work. LABOUR RELATIONS DEPARTAMENT In December 2004, in view of the evolution of the Group and its present size, the Labour Relations Department was created. The object of this Department is simply to offer the Company legal advice on labour issues, ensuring that all legal obligations are fulfilled, and to deal with social requests, thus ensuring that everyone at Sacyr Vallehermoso is totally satisfied. Another of this Department s tasks is to manage expatriates and to help all the collaborators who go to work abroad something more and more frequent because of the Group s new international successes- to feel at home. 107 In respect of Selection, last year there was a 291.8% increase in processes, with quality levels of over 92%, with:

111 Annual Report 2004

112 Business performance 6 Income statement Balance sheet

113 Annual Report In 2004 sales, operating income and ordinary income grew sharply and this explains the 12.6% increase in attributable net income to Euros million. Income Statement REVENUES Revenue performance by business is described below. Net revenues rose by a sharp 11.1% to Euros 3,703.3 million. This was due to the growth in all the business divisions. In the contracting division, sales rose by 103.2% to reach Euros million, partly due to the fact that in 2004 ENA s contribution was for a full year, whereas only three months were reported on the 2003 income statement, as the infrastructure group was purchased in October that year. The other reason for the increase was the good performance of traffic and the higher motorway tariffs. The construction business conducted by Sacyr-Somague reported revenues of Euros 2,138.2 million, 10.3% more than in the preceding year. Construction sales accounted for 57.7% of the Group total. Sacyr posted Euros 1,304.3 million in revenues, with a notable increase of 17.6% with respect to the previous year. Despite the temporary situation of slack activity in the Portuguese market, Somague reported Euros million in revenues, of which Euros million corresponded to construction. Real estate development, for its part, obtained Euros 1,069.3 million in revenues, accounting for 28.8% of consolidated revenues and its net revenues grew by a sharp 10.3% with respect to the same period

114 Business performance CONSOLIDATED INCOME STATEMENT (Euros 000) 111 December Variation 04/03 Net revenues Other revenues Total operating revenues Operating and external expenses Gross operating income Allocation to fixed asset depreciation and amortization Allocation to reversion fund Provisions for working capital Net operating income Financial results Results from equity-accounted companies Provisions for financial investments Allocation to goodwill amortization Ordinary income Ordinary income TOTAL INCOME (A.D.I.) Corporate tax TOTAL INCOME Attributable to minorities ATTRIBUTABLE NET INCOME 3,703,323 3,333, % 459, , % 4,162,323 3,778, % 3,415,014 3,201, % 747, , % 117,394 92, % 39,664 16, % 10,614 16, % 579, , % 189, , % 9,925 2, % 1,132 2, % 11,715 7, % 387, , % 120, , % 507, , % 99, , % 408, , % 31,958 23, % 376, , % the previous year. Contracted sales, which reflect the performance of the commercial activity during the period, rose by 17.9% to reach Euros 1,111.9 million, with a total of 4,368 homes sold as of 31 December The services business registered a notable 86.3% increase, with revenues reaching Euros 90.1 million, as a result of the start-up of different alternative energy projects and the start of new contracts for highway service areas in recent months. In property, Testa s revenues grew by 5.7% to reach Euros million. This performance comes from a combination of the growth in the degree of occupancy and the 4% increase in the average prices of the rent portfolio, which completely offset the slight 0.3% reduction in the area leased. Of total revenues, 71% are generated in Spain. Also worth highlighting because of their importance are Portugal, thanks to Somague s construction business, and Chile which reflects

115 Annual Report the revenues from the highways in operation in the country and the work done on these. Revenue performance by business was as shown below: REVENUES (Thousands of Euros) December Variation 04/03 Sacyr/Somague Vallehermoso Itinere Testa Valoriza Adjustments and others TOTAL 2,179,106 1,985, % 1,069, , % 322, , % 191, , % 90,083 48, % 150,043 10,127 1,381.7% 3,703,323 3,333, % REVENUES (Thousands of Euros) December Variation 04/03 Spain Chile Portugal Other countries TOTAL 2,645,572 2,350, % 170, , % 792, , % 95,518 61, % 3,703,323 3,333, % GROSS OPERATING INCOME (EBITDA) The Group s gross operating income was up 29.5% with respect to the previous year and amounted to Euros million. All the business divisions registered positive growth. The contribution of the infrastructure contracting, property rental and services businesses accounts for 53.1% of the total, at Euros million, with an increase of 54.1% during the year. Infrastructure contracts made a notable contribution after the acquisition of ENA, since Itinere already accounted for 33.2% of gross operating income as of 31

116 Business performance December 2004, at Euros million up by 113.7% on the 2003 figure. The growth businesses (construction and housing development) and the holding contributed 46.9%, or Euros million, to consolidated operating income. These activities grew by 9.7% with respect to 2003 due to the organic growth achieved and the reduction in operating expenses. PROVISIONS, DEPRECIATION AND AMORTIZACION The increase in the allocation to depreciation and amortization and the reversion fund, to Euros million, is largely due to the infrastructure business, both because of the acquisition of ENA and the opening of new stretches of motorways. The application of deferred financial expenses related to infrastructure contracts brought revenues of Euros 49.3 million. ORDINARY INCOME Results from equity accounting rose sharply to reach Euros 9.9 million, as against the Euros 2.7 million in losses reported the previous year. The reason for this is the increasing contribution from services in the Somague group. Moreover, the allocation to goodwill increased in 2004 and stood at Euros 11.7 million. This corresponded to the Somague group s holdings. Thus, ordinary income increased by 11.6% to reach Euros million. 113 FINANCIAL RESULTS The 78.3% increase in net financial expenses in 2004, to Euros million, can be explained by the following factors: An increase in the average volume of debt, as a result of the investments made during the period, especially in concessions because of the acquisition of another 20% in ENA in December 2004, the purchase of land for new developments and the acquisition of different property assets, amongst which is a plot for Euros 140 million for Testa to develop an emblematic building for tertiary use in the centre of Madrid. The positive effect of Euros 41.2 million, produced on the sale of 100% of a property company which owned a set of old rent properties and which was sold last March. EXTRAORDINARY RESULTS At Euros million, the extraordinary result was down 0.9% on the preceding year s figure and the bulk of it stemmed from the sale of an office building and a plot of land in Madrid, both from the Testa group and both forming part of the asset turnover process typical of the business. NET INCOME Total income before tax amounted to Euros million, up 8.3% on the same period in In 2004 the lower tax rate than in the preceding year, together with the increase in minorities share in infrastructure contracting gave attributable net income of Euros million, 12.6% more than in 2003.

117 Annual Report CONSOLIDATED BALANCE SHEET (Thousands of Euros) Balance sheet ASSETS Fixed assets Net intangible fixed assets Net tangible fixed assets Financial investments and other Goodwill in consolidation Deferred charges Current assets Inventories Accounts receivable Cash and short-term financial investments Other current assets TOTAL ASSETS/LIABILITIES SHAREHOLDERS EQUITY AND LIABILITIES Shareholders equity Minority interests Losses in consolidation Deferred revenues Provisions for contingencies and expenses Long-term accounts payable Short-term accounts payable The Euros 2,371.7 million increase on the balance sheet, 20.9% growth, is largely due to: The investments in infrastructure contracting, with the acquisition of a further 20% in the ENA group and in motorways in progress, which involved Euros 1,063 million in new assets/liabilities.

118 Business performance 115 December Variation 04/03 8,364,410 6,719,119 1,645, , ,628 64,630 6,823,553 5,958, ,993 1,026, , , ,028 79,917 23, , ,873 19,775 4,640,024 3,956, ,554 2,288,824 1,844, ,180 2,136,313 1,844, , , ,971 46, ,749 6,749 13,717,110 11,345,379 2,371,731 1,980,497 1,312, , , , ,553 11, , , , , , ,231 35,266 6,755,716 4,991,187 1,764,529 3,395,085 3,592, ,615 Vallehermoso s investments in land and products in progress, with an increase of Euros million in inventories and of Euros million in accounts receivable, due to foreseen business growth and housing delivery in the future. The Euros million increase in property assets, notable amongst which is the purchase of a plot for tertiary use for Euros 140 million.

119 Annual Report FIXED ASSETS The balance as of 31 December 2004 is broken down as follows: FIXED ASSETS (Thousands of Euros) December Variation 04/03 Start-up expenses Net intangible fixed assets Net tangible fixed assets Financial investments and long-term accounts receivable Controlling company treasury stock TOTAL 16,676 14,627 2, , ,628 64,630 6,823,553 5,958, ,993 1,003, , ,441 6,883 1,705 5,178 8,364,410 6,719,119 1,645,291 Intangible assets include, amongst other items, Euros 330 million corresponding to the lease of 12 properties to the Endesa group, and other assets for lease under a long-term contract, for an additional amount of Euros million. The most significant tangible fixed assets are the land and properties for lease, at Euros 1,705.0 million, and the motorways and other toll roads in operation, at Euros 4,696.0 million. During the period, the existing investments in progress, in both properties for rental and motorway concessions, continued and these amounted to Euros million and Euros 87.1 million respectively. Notable amongst these are the addition of a plot of land for the construction of a tower for tertiary use in Madrid for Euros 140 million last June and an office building for Euros 99.8 million. The remainder corresponds to machinery, technical installations and other fixed assets. Total accumulated depreciation amounted to Euros million. Financial investments include, amongst other items, equity-accounted holdings amounting to Euros million, amongst which are Somague s investment in services and contracts for Euros 82.8 million, Itinere s stake in Alazor (Madrid radial roads 3 and 5) at Euros 41.8 million and the addition of the Palma-Manacor contractor Puente Reina Santa Isabel. Portugal.

120 Business performance with Euros 7 million. Moreover, this chapter also includes Euros 405 million largely corresponding to capital grants for the operation of different concessions of Itinere s which have these guarantees and other holdings in the securities portfolio amounting to Euros million. CURRENT ASSETS The performance of current assets was as shown below: 117 CURRENT ASSETS (Thousands of Euros) Inventories Accounts receivable Cash and short-term financial investments Other current assets TOTAL December Variation 04/03 2,288,824 1,844, ,180 2,136,313 1,844, , , ,971 46, ,749 6,749 4,640,026 3,956, ,554 Overall, current assets increased by Euros million, up 17.3% on the same period in This is largely due to: An increase in inventories, largely as a result of the growth of stocks corresponding to the housing development business amounting to Euros million, due to land purchases and work in progress on new developments. The Euros million increase in accounts receivable in development, as a result of the 10.3% increase in reported sales. SHAREHOLDERS EQUITY During the period shareholders equity increased by Euros million. Of this increase, Euros million comes from the rights issue conducted in July to acquire Somague, which boosted share capital by Euros 13.8 million and implied an issue premium of Euros million. It also reflects the increase in reserves at Group companies stemming from the capital increase at Itinere in order to buy 20% of ENA. The rest of the increase comes from accumulated attributable income of Euros million and the dividends paid in the same period for a total amount of Euros million.

121 Annual Report Iberese. Puente Genil. In September, a bonus rights issue of 6,491,544 shares, each with a par value of Euro 1, was conducted and charged to reserves. Thus, as of 31 December 2004, share capital was represented by shares, each with a par value of Euro 1. FINANCIAL DEBT The greater part of the Group s financial debt is to be found on the balance sheet of each of the five main business subsidiaries. Thus, the structure, type of financing, maturities and financial instruments most appropriate to each of them can be identified, according to the nature of the different businesses, which is the case of Testa s property business, Itinere s infrastructure contracts and Vallehermoso s housing development projects. By type of instrument, bank debt predominated, with 77.7%, and by maturity, long-term debt accounted for 81.0% of the total. At the end of 2004, the amount of debt at a guaranteed rate accounted for 46.7% of the total and was concentrated in the most recurrent businesses where the assets remain longest on the balance sheet (contracting and property for rental). As of 31 December 2004, the Group s net debt was broken down as follows:

122 Business performance FINANCIAL DEBT (Thousands of Euros) 119 SyV Group Capital-intensive Corporate Assoc. Projects businesses Total Long-term Short-term TOTAL Cash and ST fin. inv. TOTAL NET DEBT 636,025 35,681 5,578,576 6,250, , , ,487 1,461,758 1,146, ,266 6,426,062 7,712, , , ,887 1,018, ,266 6,339,168 7,497,154 The amount of the gross debt in capitalintensive activities (contracting, property and housing development) amounted to Euros 6,426.1 million, 83.3% of the total. Amongst these activities, it is important to highlight the weight of the debt related to the funding of transport concession projects, which amounted to Euros 3,087.8 million last December, accounting for 40% of the Group total and 64.6% of the book value of the investment in motorways, which amounted to Euros 4,783.1 million at the end of the period. This financing is linked to specific public service contracting activities, toll motorways; it gives great stability and visibility to revenues and to the cash flow generated by their operation. It is worth highlighting the successful refinancing carried out at two major motorway contractors, Audasa and Aucalsa, for Euros 364 million last June and which was closed at a fixed rate of only 4%, for a period of 10 years. In the property division, the debt is in the form of mortgages and leasing contracts and amounts to Euros 1,454.9 million to finance assets in operation. Thus, in accordance with the last appraisal conducted by an independent expert, as of December 2004, its real estate assets had a market value of Euros 3,100 million. Thus, the debt only represented 46.9% of the said value. Lastly, in the development business, the Euros 1,884.2 million in debt finances the inventories on Vallehermoso s balance sheet with a book value of Euros 2,084.5 million. As of the same date, the market value of these stocks amounted to Euros 3,339.7 million, 177.2% more than the debt financing them. Moreover, contracted sales pending delivery to clients amounted to Euros million, while the number of homes sold increased by 14.0% to 4,368 units. Structured debt in other businesses, amongst them works financing by the German method at Sacyr, with Euros 94.7 million, and the funding of environmental projects at Valoriza, with a further Euros 18.2 million, amounted to a total of Euros million. Moreover, Sacyr did not effect any factoring operations and paid its suppliers a total of Euros 81 million in advance. Finally, the Group s corporate net debt, 13.6% of the total existing as of 31 December 2004, amounted to Euros 1,018.7 million, as against shareholders equity of Euros 1,980.5 million as of the same date.

123 Annual Report CONSOLIDATED INCOME STATEMENT AS OF 31 DECEMBER 2004 (Thousands of Euros) Sacyr Itinere Vallehermoso Net revenues Other revenues Total operating revenues Operating and external expenses Gross operating income Allocation to fixed asset depreciation and amortization Allocation to reversion fund Provisions for working capital Net operating income Financial results Results from equity-accounted companies Provisions for financial investments Allocation to goodwill amortization Ordinary income Net extraordinary income TOTAL INCOME (A.D.I.) Corporate tax TOTAL INCOME Attributable to minorities ATTRIBUTABLE NET INCOME 1,304, ,916 1,069,278 47,003 24, ,119 1,351, ,904 1,417,397 1,241, ,012 1,205, , , ,415 15,447 42, , , ,447 81, , ,496 14, ,492 33, , ,232 56, ,537 1,534 4, ,698 60, ,660 31,684 20,008 63,013 63,014 40, , , ,094 12, ,772

124 Business performance 121 Testa Valoriza Somague Holding Adjustments TOTAL 191,983 90, , ,398 3,703, ,702 14,053 28,534 5, , ,247 91, ,847 28, ,061 4,162,323 46,054 88, ,845 38, ,100 3,415, ,193 3,013 39,003 9, ,309 31,033 3,133 17,113 6,094 1, , , ,115 3, , , ,775 11,931 1, ,637 11,826 1,153 17, , , , , , , , , ,905 11, ,545 1,560 6, , , ,316 97, ,789 2,555 11, , ,888 2,168 13, , , ,738 45,790 2,669 3,849 62, , , , , , , ,321 31, , , , , ,332

125 Annual Report CONSOLIDATED INCOME STATEMENT AS OF 31 DECEMBER 2003 (Thousands of Euros) Sacyr Itinere Vallehermoso Net revenues Other revenues Total operating revenues Operating and external expenses Gross operating income Allocation to fixed asset depreciation and amortization Allocation to reversion fund Provisions for working capital Net operating income Financial results Results from equity-accounted companies Provisions for financial investments Allocation to goodwill amortization Ordinary income Net extraordinary income TOTAL INCOME (A.D.I.) Corporate tax TOTAL INCOME Attributable to minorities ATTRIBUTABLE NET INCOME 1,109, , ,463 31,105 48, ,361 1,140, ,175 1,323,824 1,046,390 91,196 1,121,909 93, , ,915 11,988 24, , , ,045 76,943 74, ,543 10,212 4,382 24, , ,345 69, ,907 4,652 2, ,997 72, ,866 32,963 15,804 60,462 72,034 56, , , ,607 42, ,545

126 Business performance 123 Testa Valoriza Somague Holding Adjustments TOTAL 181,604 48, ,518 25,566 35,693 3,333,748 5, , , , ,167 48, ,971 25,651 46,756 3,778,019 47,039 47, ,771 48,214 46,755 3,201, ,128 1,504 46,200 22, ,882 28,442 1,494 18,627 5,282 1,549 92, , , , , ,779 33,281 1, ,177 46, , , , ,217 3, , , , , ,057 7,752 60,699 2,198 15,084 92, , , , ,475 1,312 6, , ,662 2,458 18,559 91, , ,702 17, ,629 23, , ,726 1,524 9, , , , , ,315 23, ,726 1,363 8, , , ,349

127 Annual Report CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2004 (Thousands of Euros) Sacyr Itinere Vallehermoso FIXED ASSETS Tangible fixed assets Intangible fixed assets Financial investments and other Goodwill Deferred charges CURRENT ASSETS Inventories Accounts receivable Other ASSETS = LIABIILITIES 416,704 5,695, ,907 26,750 4,662,890 3,591 59, , , , , ,095 4, , ,607 2,994, ,226 2,888 2,084, ,123 97, ,511 79,491 70,186 3,689 1,331,544 5,866,345 3,415,654 SHAREHOLDERS EQUITY AND LONG-TERM LIABILITIES Shareholders equity Minority interests Losses in consolidation Deferred revenues Provisions for contingencies and expenses Other cost-free long-term debt Long-term financial debt CURRENT LIABILITIES Trade accounts payable Operating provisions Other cost-free short-term debt Short-term financial debt 486,718 5,511,564 2,024, , , ,653 1, ,683 3, , , ,110 14,602 6, , , ,810 2,863,539 1,329, , ,781 1,390, ,653 15, ,862 30, , , , , , , ,461

128 Business performance 125 Testa Valoriza Somague Holding Adjustments TOTAL 2,543,167 87, ,281 1,900,260 2,302,725 9,077,086 1,844,118 64, ,829 3, ,871 6,823, ,379 8,545 1,666 3, , ,343 9, ,520 1,891,611 2,467,541 1,026, , , ,028 78,327 5, , ,648 45,801 47, ,634 59, ,299 4,640, ,545 77,087 1,073 1,598 2,288,824 32,727 35, ,631 55, ,392 2,136,313 13,019 7,235 41,916 2,660 3, ,887 2,588, , ,915 1,959,298 2,504,023 13,717,110 2,483,621 79, ,636 1,619,500 2,301,595 10,322,025 1,061,500 26, , ,551 1,557,229 1,980, ,479 8, , , , ,799 6,308 2, ,830 3, ,899 3, ,497 26,491 2,960 18, , , ,432 1,385,280 43, , , ,250, ,347 55, , ,798 2,133,753 3,395,085 17,463 41, ,087 3, ,510,117 1, ,357 10, ,297 18,116 5,983 76,852 7, , ,915 68,715 7, , , ,461,756

129 Annual Report CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2003 (Thousands of Euros) Sacyr Itinere Vallehermoso FIXED ASSETS Tangible fixed assets Intangible fixed assets Financial investments and other Goodwill Deferred charges CURRENT ASSETS Inventories Accounts receivable Other ASSETS = LIABIILITIES 130,053 4,618, ,209 38,533 4,107,232 2,900 34, ,165 28, , , , ,522 8, , ,476 2,471,768 73,151 2,039 1,695, ,267 66, , , ,543 5,396 1,107,043 4,803,115 2,710,977 SHAREHOLDERS EQUITY AND LONG-TERM LIABILITIES Shareholders equity Minority interests Losses in consolidation Deferred revenues Provisions for contingencies and expenses Other cost-free long-term debt Long-term financial debt CURRENT LIABILITIES Trade accounts payable Operating provisions Other cost-free short-term debt Short-term financial debt 486,581 4,083,258 1,023, , , ,869 1, ,486 3, ,331 80, ,657 14,698 19, , , ,252 2,425, , , ,858 1,687, ,690 34, ,610 20, ,891 88, ,109 49,595 11, , ,658

130 Business performance 127 Testa Valoriza Somague Holding Adjustments TOTAL 2,215,718 58, ,352 1,454,713 1,626,360 7,388,910 1,573,990 36,835 99,346 3,992 95,732 5,958, ,912 6, , , ,176 14, ,763 1,439,701 1,947, , , ,172 79,917 83, , , ,873 51,753 41, , , ,622 3,956, ,599 51, ,257 1,844,645 37,382 29, ,406 67,497 95,652 1,844,107 13,509 8,899 34, , , ,718 2,267, , ,850 1,636,390 2,095,982 11,345,379 2,179,501 69, ,730 1,111,270 1,604,522 7,752, ,139 25, , ,942 1,428,217 1,312, ,009 10, , , ,895 2,280 43, ,354 4, ,686 8, ,231 25,248 3,928 43, , , ,383 1,218,222 34, , , ,678,804 87,969 30, , , ,460 3,592,700 19,372 19, ,411 3, ,494,413 2, , ,391 7,401 3,368 63, , , ,838 58,869 7,641 83, , ,689,061

131 Annual Report 2004

132 Consolidated annual financial statements 7 Grupo Sacyr Vallehermoso (Sacyr Vallehermoso, S.A. and dependent companies) 31 December 2004 Auditor's report Balance sheet Statement of income Notes to the financial statements Consolidated management report

133 Translation of a report originally issued in Spanish based on our work performed in accordance with generally accepted auditing standards in Spain. In the even of a discrepancy, the Spanish-language version prevails. AUDITOR S REPORT ON CONSOLIDATED FINANCIAL STATEMENTS To the Shareholders of SACYR VALLEHERMOSO, S.A. 1. We have audited the consolidated annual financial statements of Sacyr Vallehermoso S.A. and Dependent Companies, comprising the consolidated balance sheet as of 31 December 2004, the consolidated statement of income and the notes to the consolidated financial statements for the year ended on that date. The preparation of these financial statements is the responsibility of the controlling Company s Directors. Our responsibility is to express an opinion on the consolidated financial statements taken as a whole, based on our audit work performed in accordance with generally accepted auditing standards, which require the examination, by means of selective tests, of the documentation supporting the consolidated financial statements and the evaluation of their presentation, the accounting principles applied and the estimates made. Our work did not include the audit of the financial statements of certain dependent companies whose assets and results represented as of 31 December 2004, Euros 4,840 and 18 million respectively of the consolidated aggregate figures. The financial statements of these companies were examined by other auditors and our opinion as expressed in this report on the consolidated financial statements of Sacyr Vallehermoso, S.A. and Dependent Companies is based, with respect to holding in these companies, solely on the reports of the other auditors. These companies and their respective auditors are listed in Note 2 to the notes to the consolidated financial statements. 2. As required by Spanish corporate law, for comparison purposes, in addition to the 2004 figures for each item on the balance sheet and statements of income and of changes in financial position, the Directors of the controlling Company present the figures for Our opinion refers only to the 2004 consolidated financial statements. Our auditor s report dated 15 March 2004, on the 2003 consolidated financial statements, contained an unqualified opinion. 3. In our opinion, based on our audit and on the reports of the other auditors (see Note 2), the accompanying consolidated financial statements for business year 2004 present, in all material respects, a true and fair view of the net worth and financial position of Sacyr Vallhermoso S.A. and Dependent Companies as of 31 December 2004, and of the results of its operations and of the funds obtained and applied by it in the year then ended, and contain the required information, sufficient for their proper interpretation and comprehension, in conformity with generally accepted accounting principles and standards, which were consistent with those applied the preceding year.