Annual Report 2004 - FCC

1. COMPANIES’ BUSINESS ACTIVITIESThe FCC Group’s activity is carried on mainly through the following three strategic business areas:Services: this unit groups together the areas specializing in environmental services, i.e. services related to urban cleaning, industrialwaste treatment and the integral water cycle, and includes Versia, which provides various services such as logistics, street furniture,passenger transport, vehicle roadworthiness tests, vehicle parking lots and ground aircraft and passenger handling, etc.Financial Statements. Consolidated GroupConstruction: this area specializes in infrastructure construction projects, building construction and related activities, such as highways,freeways, roads, tunnels, bridges, waterworks, ports, airports, residential property developments, housing units, nonresidential buildingconstruction, lighting, industrial air conditioning and heating systems, environmental restoration, etc. The Construction area alsoencompasses the concession-holder companies (highways, tunnels, marinas, railways, trams and multiuse buildings).Cement: this unit engages in the operation of quarries and mineral deposits, the manufacture of cement, lime, plaster and relatedpremanufactured products and the production of concrete..The FCC Group is also highly active in the Real Estate industry, both through its 49.17% holding in Realia Business, S.A., with a presencein housing development and in the office and commercial premises lease market, and through the operation of the Torre Picasso building,which is 80%-owned by the Parent Company.Operations abroad, which represent 10% of the FCC Group’s net sales, are carried on mainly in European Union, U.S. and Latin-Americanmarkets.2. BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTSa) Basis of presentationThe consolidated financial statements, which were prepared from the accounting records as of December 31, 2004, of Fomento deConstrucciones y Contratas, S.A. and of its investees, are presented in accordance with current legislation and are expressed in thousandsof euros.The financial statements of Fomento de Construcciones y Contratas, S.A. and of its investees, which were prepared by their respectivedirectors, have not yet been approved by the related Shareholders’ Meetings. However, no changes are expected to be made to thefinancial statements as a result of compliance with this requirement.b) Consolidation principlesThe subsidiaries listed in Exhibit I, which Fomento de Construcciones y Contratas, S.A. controls by virtue of ownership of a majority of thevoting rights, either directly or through other companies controlled by it, were fully consolidated.The equity of minority interests in the net worth and results of the consolidated companies is presented under the "Minority Interests" captionon the liability side of the consolidated balance sheet and under the "Income Attributed to Minority Interests" caption in the consolidatedstatement of income, respectively.Exhibit II details the companies which were proportionally consolidated because one or several FCC Group companies have ownershipinterests in them and manage them jointly with one or more non-Group companies.The companies listed in Exhibit III, in which Fomento de Construcciones y Contratas, S.A. does not have majority direct or indirect holdingsbut does exercise significant influence, are presented in the accompanying consolidated balance sheet under the "Long-Term Investments -Investments Accounted for by the Equity Method" caption at the underlying book value of the holding. The share in the after-tax income forthe year of these companies is reflected in the accompanying consolidated statement of income as "Share in the Income of CompaniesAccounted for by the Equity Method”.159