2004 Report

Fiscal year 2004 has been, for Fraternidad-Muprespa, highly positive, both in terms of income and surpluses. Regarding the first, our Entity surpassed the barrier of 800 million euros, reaching a total figure, only in terms of the management account, of 815.83 million, and in terms of surpluses, 66.82 million were reached. In this year, the Mutua counted 292,598 associated companies, with a protected population of 1,321,667 workers. Regarding Professional Contingencies, the total income was 581.39 million euros, of which 553.88 corresponded to fees with an increase of 9.43 percent compared to the previous year's figure.

Only as far as the management account is concerned, our Entity reached income of 815.83 million euros, and in terms of surpluses, 66.82 million euros were reached.

On the expense side, it is noteworthy that the figure corresponding to temporary disability grew at a rate (9.75 percent) similar to the increase in fee income. Expenses for capital income were 67.48 million, 16.98 percent lower than in 2003, and provisions for contingencies in process were 801,634 euros, an increase of 3.8 million over the previous year.

The growth in income and the moderation of expenditure resulted in obtaining a surplus figure for Professional Contingencies of 57 million euros, 37.5 percent higher than that of the previous year (41.5 million), which was already considered highly satisfactory by our Board at the time.

Regarding Professional Contingencies, the total income was 581.39 million euros.

The account for Common Contingencies showed income of 234.44 million euros, of which 233.72 for installments, with an increase of 21.47 percent over the previous year. Expenditure on temporary disability due to this contingency grew by 22.11 percent, its total figure representing 87.6 percent of income.

The Common Contingencies account showed income of 234.44 million euros.

With these figures the result would have been similar to the previous year. However, the Board of Directors considered it appropriate to modify the allocation of medical assistance expenses, which had previously been distributed between the two concepts (professional and common contingencies) in proportion to the IT quotas, to distribute them in proportion to the number of assistances, understanding that such a criterion is more in line with reality. Likewise, it decided to reduce by 1 point the allocation of administration expenses that had been allocated in previous years, understanding that a greater volume of this benefit requires a lower proportion of this type of expenses.

The result obtained by Common Contingencies in 2004 was 9.78 million euros.

With these new, more realistic expense allocation criteria, the result obtained by Common Contingencies was 9.78 million euros in fiscal year 2004, compared to a negative result of 4.18 million in 2003.

For both accounts (professional and common contingencies) the total income of our Mutual Fund corresponding to the collaboration with Social Security was 815.83 million euros, 13.59 percent higher than the previous year. Of these, 787.6 million corresponded to accrued fees, 12.74 percent more than in 2003. The total surpluses for both items amounted to 66.82 million euros, which represents an increase of 79 percent over the surpluses of 2003, and 8.19 percent over the total income figure for the year.

Both figures, the 815.83 million euros of total income and the 66.82 million of surpluses, characterize a year that has turned out to be the best in the recent history of our Entity.

A separate issue, which deserves special comment, is the activity of the Mutual Fund as a Prevention Service.In the year covered by this report, our Entity obtained income from its billing as an External Prevention Service of 32.5 million euros, corresponding to 23,546 contracts that covered 686,534 workers. At the end of the year, the Secretary of State for Social Security issued a Resolution dated December 28, applicable retroactively to the entire 2004 financial year, which modified the system of compensation for expenses in the management account, and which entailed a profound change in the SPA income statement with respect to that which would have been obtained in accordance with the compensation system until then in force (Resolution of December 22, 1998, development of the Order of April 22, 1998). 1997). The application of the aforementioned Resolution of December 28, 2004 caused the SPA management account to show a deficit of 7.95 million euros at the end of the year. As a result of this figure, the Private Equity of the Mutual Fund, which had obtained positive results of 3.31 million, closed the year with a net negative result of 4.64 million euros.

For the next fiscal year 2005, a new regulation (Royal Decree 688/2005 of June 10) imposes an absolute separation of the activity of the Mutual Fund as an External Prevention Service with respect to its activity as a Social Security Collaborating Entity, either through the formula of developing this activity directly through a specific organization, or through its continuation through the transfer to a prevention company whose sole owner is the Patrimony. Private of the Mutual.

Of both options, the second will be the one that will be submitted to the consideration of the General Meeting. If approved by the same, and assuming that the corresponding segregation file is approved by the Secretary of State for Social Security, the new Mutual Prevention Society would be established within the year 2005, with economic effects as of January 1 of said year. The obvious objective, both for fiscal year 2005 and for subsequent years, will be to consolidate said company, improve management and increase its turnover so that positive results are obtained.

Finally, with regard to the Mutual Fund's Balance Sheet for the year 2004, it is worth noting that the accumulated reserves amounted to 277.07 million euros as of December 31 with regard to Social Security Asset Management, and 14.55 million for Private Assets. Both figures, to which we must add the Provisions for Contingencies in Process for an amount of 92.76 million, give an idea of ​​the financial solvency of our Entity.

The accumulated reserves amounted to 277.07 million euros as of December 31 with regard to Social Security Asset Management, and 14.55 million for Private Assets.

Throughout 2004 our Entity continued with its policy of expanding and improving its facilities, developing its computer systems and enhancing services to our mutual members. Facilities were opened or expanded in 15 centers, reaching 168 management centers and 108 care centers. 2004 has been an extremely positive year for our Entity, according to the aforementioned figures, in which we have tried to meet the quality and service commitments that we have assumed towards our mutual members and the workers whose coverage has been entrusted to us. It is our purpose to continue working to justify the trust you have placed in us. All the professionals who provide their services at Fraternidad Muprespa are committed to this task, and we thank them for their dedication and effort.