UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.  20549

FORM 20-F

[ ]REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934



[x]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the fiscal year ended December 31, 2007



[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[ ]SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
Date of event requiring this shell company report ................................



Commission file number: 1-11870

MADECO S.A.(Exact name of Registrant as specified in its charter)

MADECO INC.(Translation of Registrant’s name into English)

Republic of Chile(Jurisdiction of incorporation or organization)

Ureta Cox 930, Santiago, Chile(Address of principal executive offices)

José Luis Valdés M.; Tel: +(56 2) 520-1388; ir@madeco.cl; Ureta Cox 930, Santiago, Chile
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12 (b) of the Act:

|Title of each class                                  | Name of each exchange on which registered
|---------------------------------------------------- | -----------------------------------------
|American Depositary Shares representing Common Stock | New York Stock Exchange                  
|Common Stock, without par value                      | New York Stock Exchange*                 

___________
* Not for trading, but only in connection with the registration of American Depositary Shares which are evidenced by American Depositary Receipts.



Securities registered or to be registered pursuant to Section 12(g) of the Act.

Not applicable

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Not applicable

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Common Stock, without par value..................................... 5,661,192,887

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ] No [x]

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes [ ] No [x]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [x] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ] Accelerated Filer [x] Non accelerated filer [ ]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

U. S. GAAP [ ]                    International Financial Reporting Standards as issued                             Other [x]
by the International Accounting Standards Board [ ]

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 [ ] Item 18 [x]

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [x]







TABLE OF CONTENTS

PRESENTATION OF INFORMATIONFORWARD LOOKING STATEMENTSREQUESTS FOR INFORMATION

PART I

ITEM 1. Identity of Directors, Senior Management and AdvisersITEM 2. Offer Statistics and Expected TimetableITEM 3. Key InformationITEM 4. Information on the CompanyITEM 5. Operating and Financial Review and ProspectsITEM 6. Directors, Senior Management and EmployeesITEM 7. Major Shareholders and Related Party TransactionsITEM 8. Financial InformationITEM 9. The Offer and ListingITEM 10. Additional InformationITEM 11. Quantitative and Qualitative Disclosures about Market RiskITEM 12. Description of Securities Other than Equity Securities

PART II

ITEM 13. Defaults, Dividend Arrearages and DelinquenciesITEM 14. Material Modifications of the Rights of Security Holders and Use of ProceedsITEM 15. Controls and ProceduresITEM 16.

PART III

ITEM 17. Financial StatementsITEM 18. Financial StatementsITEM 19. Exhibits

Audited Consolidated Financial Statements



PRESENTATION OF INFORMATION

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Madeco S.A. is a sociedad anónima abierta (open stock corporation) organized under the laws of the Republic of Chile (“Chile”). In this Annual Report on Form 20-F (the “Annual Report”), unless otherwise specified, all references to “Madeco” or the “Company” are to Madeco S.A., together with its consolidated subsidiaries, and references to “Madeco Chile” include only Madeco S.A. The fiscal year for the Company ends on December 31 of each year. Madeco prepares its financial statements in Chilean pesos (Ch$) and in conformity with Chilean generally accepted accounting principles, or “Chilean GAAP”. Chilean GAAP as applied to Madeco differs in certain important respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). See Note 32 to Madeco’s audited consolidated financial statements (together with the notes thereto, the “Consolidated Financial Statements”) for the years ended December 31, 2005, 2006 and 2007 (with the exception of the Balance Sheet, which is included only as of December 31, 2006 and 2007), contained elsewhere in this Annual Report, for a description of the principal differences between Chilean GAAP and U.S. GAAP as they relate to the Company and a reconciliation to U.S. GAAP of net income or loss and total shareholders’ equity for the periods and as of the dates therein indicated. Unless otherwise specified, financial data for all periods included in the Consolidated Financial Statements and elsewhere throughout this Annual Report have been restated in constant Chilean pesos as of December 31, 2007 (which is further explained in Note 2 to the Consolidated Financial Statements). For clarity of presentation, certain amounts represented in U.S. dollars and Chilean pesos, as well as percentages, have been rounded. As a result, certain totals may not directly reflect the sum of their components.

Madeco’s operations are organized into four business units: Wire & Cable, Brass Mills, Flexible Packaging and Aluminum Profiles. The following table sets forth the divisions within each business unit as well as the countries where Madeco maintains operations for each respective business:

|Business Unit      | Divisions                                       | Countries of Operations                                                 
|------------------ | ----------------------------------------------- | ------------------------------------------------------------------------
|Wire & Cable       | Metallic Cable
Copper Rod
Optical Fiber (2)     | Chile, Brazil, Peru, Argentina(1)  and Colombia
Chile and Peru
Argentina
|Brass Mills        | Pipes, Bars and Sheets (“PBS”)
Coins and Sheets | Chile and Argentina (1)
Chile                                           
|Flexible Packaging | N/A                                             | Chile, Argentina and Peru                                               
|Aluminum Profiles  | N/A                                             | Chile                                                                   

(1)Certain facilities in  the Wire & Cable business unit located in Argentina have been, on a non-continuous basis, partially reopened and the Brass Mills business unit facilities located in Argentina are operating at limited capacity. See “Item 4. Information on the Company – History and Development of the Company  — History”.(2) See “Item 4. Information on the Company – History and Development of the Company  — History”.



To facilitate an understanding of the Company’s activities and performance, information for a business unit may be presented by division. In each division, exports are defined as sales to customers in countries where the Company does not maintain operations for the corresponding business.

The Company uses the metric system of weights and measures in calculating its operating and financial data. A conversion table of the most common metric units used by the Company and their U.S. equivalent units is set forth below:

|1 kilometer = 0.6214 miles | 1 mile = 1.6093 kilometers
|-------------------------- | --------------------------
|1 meter = 3.2808 feet      | 1 foot = 0.3048 meters    
|1 kilogram = 2.2046 pounds | 1 pound = 0.4536 kilograms
|1 ton = 2,204.6 pounds     |                           



This Annual Report contains various estimates by the Company of industry size, market share data and related sales volume information. These estimates are based principally on the Company’s analysis of available information, which includes:  (i) the Company’s internal production and sales data; (ii) import and export reports made available by customs authorities; (iii) copper sales reports from Corporación Chilena del Cobre(the Chilean Copper Corporation, or “Cochilco”); (iv) import and export reports from central banks of the countries where the Company has operations; (v) production reports from the Company’s suppliers of copper rods; (vi) sales information filed publicly by some of the Company’s competitors; and (vii) information informally obtained from market participants and the Company’s suppliers. No third parties or other independent companies have provided estimates or confirmed the Company’s market share calculations and estimates. Sources that use methodologies, which are not identical to the Company’s, may produce different results.



FORWARD LOOKING STATEMENTS

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This Annual Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable. The statements also relate to the Company’s future prospects, development and business strategies.

These forward-looking statements are identified by the use of terms and phrases such as “anticipates”, “believes”, “could”, “designed to”, “estimates”, “expects”, “goal”, “intends”, “may”, “plans”, “predicts”, “projects”, “should”, “thinks”, “will” and similar terms and phrases. Actual results could differ materially from those expected by the Company, depending on the outcome of certain factors, including, without limitation:

Estimates Relating to the Company’s Capital Expenditures Plan. The Company reviews its capital investment program periodically and changes to the program are made as it believes is appropriate. Accordingly, there can be no assurance that the Company will fully implement its capital expenditures plan and the actual amount of future capital expenditures will depend on a variety of factors. See “Item 5. Operating and Financial Review and Prospects — Capital Expenditures” for a discussion of the Company’s expected future capital expenditures;

“Cost-plus” Pricing Policy. Although the Company intends to continue its cost-plus pricing policy, there can be no assurance that the Company will be able to increase its selling prices in response to increases in the cost of raw materials in the future. See “Item 3. Key Information — Risk Factors”, “Item 4. Information on the Company — Raw Materials” and “Item 5. Operating and Financial Review and Prospects — Fluctuations in LME Metal Prices and Exchange Rates between Currencies” for a discussion of the effects of fluctuations in the price of raw materials;

Competition. Although the Company believes it will continue to compete effectively in its markets and industries, no assurance can be given in this regard. See “Item 3. Key Information — Risk Factors” and “Item 4. Information on the Company — Business Overview” for a discussion of factors that could affect the Company’s ability to compete;

Dividends. The Company’s current dividend policy is subject to various factors, including those described under “Item 8. Financial Information — Dividend Policy” and “Item 4. Information of the Company – History and Developments of the Company — Nexans”;

Economic Developments in Argentina and other Latin America Countries. The economic deterioration in Argentina, which occurred in prior years, had materially adversely affected the Company.  Adverse changes in any of the Latin American economies where the Company operates with respect to economic growth, currency devaluation, rates of inflation and other factors could have an adverse effect on the Company’s business and results of operations.  See “Item 3. Key Information — Selected Financial Data — Risk Factors” and “Item 5. Operating and Financial Review and Prospects — Economic Overview”;

Political Developments in Latin America. Adverse changes in the political situations in countries where the Company operates, including, without limitation, political instability and reversal of market-oriented reforms or the failure of such reforms to achieve their goals, could have an adverse effect on the Company’s business and results of operations. See “Item 3. Key Information — Risk Factors”;

Developments in Domestic and International Markets. Adverse changes in the international markets for the Company’s products, including domestic markets where the Company maintains operations as well as other Latin American countries, Asia, the United States or Europe could have an adverse effect on the Company’s business and results of operations. See “Item 3. Key Information — Risk Factors”; and

Additional Factors. See “Item 3. Key Information — Risk Factors”, for a discussion of some of the additional factors that could cause actual results to differ materially from those expected by the Company.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this annual report. The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof, including, without limitation, changes in the Company’s business strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.

REQUESTS FOR INFORMATION

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Written requests for copies of this Annual Report should be directed to Madeco S.A., Ureta Cox 930, San Miguel, Santiago, Chile, Attention: Investor Relations. Facsimile requests may be directed to (56-2) 520-1545. Telephone requests may be directed to (56-2) 520-1388. E-mail requests may be directed to ir@madeco.cl. Additional information about the Company and its products can be found at http://www.madeco.cl/. The contents of this website are not incorporated into this Annual Report.



PART I

ITEM 1. Identity of Directors, Senior Management and Advisers

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Not applicable



ITEM 2. Offer Statistics and Expected Timetable

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Not applicable



ITEM 3. Key Information

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Selected Financial Data

The following table presents selected consolidated financial information for the Company as of the dates and for each of the periods indicated. This information should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements of the Company included elsewhere in this annual report. The Consolidated Financial Statements are prepared in accordance with Chilean GAAP, which differs in certain significant respects from U.S. GAAP. Note 32 to the Consolidated Financial Statements provides a description of the principal differences between Chilean GAAP and U.S. GAAP as they relate to the Company and includes a reconciliation of net income or loss for the years ended December 31, 2005, 2006 and 2007 and shareholders’ equity as of December 31, 2006 and 2007 to U.S. GAAP. For clarity of presentation, certain amounts represented in U.S. dollars and Chilean pesos, as well as percentages, have been rounded. As a result, certain totals may not directly reflect the sum of their components.

Financial information as of and for the years ended December 31, 2003, 2004, 2005, 2006 and 2007 is presented below in constant pesos as of December 31, 2007.

|                                                                 | Year ended December 31,                                 
|---------------------------------------------------------------- | --------------------------------------------------------
|                                                                 | 2003                                                    
|                                                                 | (in millions of constant Ch$ as of December 31, 2007)(1)
|Income Statement Data (Chilean GAAP)                             |                                                         
|Net sales                                                        | 276,746                                                 
|Operating income                                                 | 8,683                                                   
|Non-operating income                                             | 2,191                                                   
|Non-operating expense                                            | (29,924)                                                
|Price-level restatement and currency translation                 | 2,026                                                   
|Income tax                                                       | (1,854)                                                 
|Net income (loss)                                                | (19,486)                                                
|                                                                 |                                                         
|Income Statement Data (U.S. GAAP)                                |                                                         
|Net sales                                                        | 148,013                                                 
|Operating income (loss)                                          | (2,998)                                                 
|Non-operating income and expenses                                | (6,246)                                                 
|Income taxes                                                     | 931                                                     
|Income (loss) from continuing operations                         | (3,792)                                                 
|Income (loss) from discontinued operations(2)                    | (18,631)                                                
|Net income (loss) .....................................                                  | (22,423)                                                
|                                                                 |                                                         
|Per share (Chilean GAAP)                                         |                                                         
|Number of shares as of December 31 (in thousands)                | 4,120,088                                               
|Number of shares, weighted average (in thousands)                | 2,857,098                                               
|Net income (loss) per share                                      | (4.73)                                                  
|Net income (loss) per share, weighted average                    | (6.82)                                                  
|Dividend per share in Ch$                                        | -                                                       
|Dividend per ADS in US$ (3)                                      | -                                                       
|                                                                 |                                                         
|Per share (U.S. GAAP)                                            |                                                         
|Earnings (loss) per share from continuing  operations (US GAAP)  | (1.33)                                                  
|Earnings (loss) per share from discontinued operations (US GAAP) | (6.52)                                                  
|Net earnings (loss) per share (US GAAP)                          | (5.44)                                                  
|Net earnings (loss) per share (US GAAP), weighted average        | (7.85)                                                  
|                                                                 |                                                         
|Balance Sheet Data (Chilean GAAP)                                |                                                         
|Current assets                                                   | 168,965                                                 
|Fixed assets                                                     | 189,522                                                 
|Total assets                                                     | 411,831                                                 
|Current liabilities                                              | 91,430                                                  
|Long-term liabilities                                            | 187,810                                                 
|Total liabilities                                                | 228,424                                                 
|Interest bearing debt                                            | 136,993                                                 
|Minority interest                                                | 11,573                                                  
|Total Shareholders’ equity                                       | 171,834                                                 
|                                                                 |                                                         
|Balance Sheet Data (U.S. GAAP)                                   |                                                         
|Current assets .................................                                       | 86,410                                                  
|Property, plant and equipment, net .........                           | 79,299                                                  
|Other long-term assets ...                                         | 173,903                                                 
|Total assets ...                                                 | 339,612                                                 
|Current liabilities ..............................                                   | 58,122                                                  
|Long-term liabiliies ...........................                                   | 119,270                                                 
|Total liabilities .................................                                  | 177,392                                                 
|Interest-bearing .........................                                       | 153,290                                                 
|Minority interest                                                | 9,883                                                   
|Total Shareholders’ equity ...                                     | 152,337                                                 

(1) Except for per share data, which is presented in constant Ch$ as of December 31, 2007.
(2) “Note 32, (o)”  to the Consolidated Financial Statements provides disclosure regarding discontinued operations. See also “Item 4. Information on the Company – Nexans”, as complementary information .
(3) Until May 2003, 1 ADS was equivalent to 10 ordinary shares. On May 12, 2003, this ratio was changed to 1 ADS = 100 shares, as described in "Item 9. The Offer and Listing — Offer and Listing Details".

Exchange Rate Information

Exchange Rates

Chile has two currency markets, the Mercado Cambiario Formal ("the Formal Exchange Market"), and the Mercado Cambiario Informal (the "Informal Exchange Market"). The Formal Exchange Market is comprised of banks and other entities so authorized by the Chilean Central Bank. The Informal Exchange Market is comprised of entities that are not expressly authorized to operate in the Formal Exchange Market, such as certain foreign exchange houses and travel agencies, among others. The Chilean Central Bank is empowered to determine that certain purchases and sales of foreign currencies be carried out in the Formal Exchange Market. All payments and distributions with respect to the Company’s American Depositary Shares (“ADSs”) referred to in this Annual Report must be transacted in the Formal Exchange Market.

For purposes of the operation of the Formal Exchange Market, the Chilean Central Bank sets a “Dólar Acuerdo” ("Reference Exchange Rate"). The Reference Exchange Rate is reset daily by the Chilean Central Bank, taking into account internal and external inflation and variations in parities between the Chilean peso and each of the U.S. dollar, Euro and Japanese Yen at a ratio of 80:15:5, respectively. In order to keep the average exchange rate within certain limits, the Chilean Central Bank may intervene by buying or selling foreign currency on the Formal Exchange Market.

The "Dólar Observado" (the "Observed Exchange Rate"), which is reported by the Chilean Central Bank and published daily in the Chilean newspapers, is computed by taking the weighted average of the previous business day’s transactions on the Formal Exchange Market. On September 2, 1999, the Chilean Central Bank eliminated the range within which the Observed Exchange Rate could fluctuate, in order to provide greater flexibility in the exchange market. Nevertheless, the Chilean Central Bank has the power to intervene by buying or selling foreign currency on the Formal Exchange Market in an attempt to maintain the Observed Exchange Rate within a desired range.

The Informal Exchange Market reflects transactions carried out at an informal exchange rate ("the Informal Exchange Rate"). There are no limits imposed on the extent to which the rate of exchange in the Informal Exchange Market can fluctuate above or below the Observed Exchange Rate.

Since 1993, the Observed Exchange Rate and the Informal Exchange Rate have typically been less than 1% from one another. On May 31, 2008, the average exchange rate in the Informal Exchange Market was Ch$480.20 per U.S. dollar and the U.S. dollar Observed Exchange Rate was Ch$479.54 per U.S. dollar.

The following table sets forth the low, high, average and period-end Observed Exchange Rates for U.S. dollars for each of the indicated periods starting in 2003 as reported by the Central Bank the following day. The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos.

|Daily Observed Exchange Rate
(Ch$ per US$)
|------------------------------------------
|Period                                    
|2003                                      
|2004                                      
|2005                                      
|2006                                      
|2007                                      
|December 2007                             
|January 2008                              
|February 2008                             
|March 2008                                
|April 2008                                
|May 2008                                  

_____________________Source:  Central Bank of Chile
(1) Rates shown are the low, high and period-end observed exchange rates, on a day-by-day basis, for each period.
(2) The average of monthly average rates during the period reported.

Madeco’s international activities include operations in Argentina, Brazil, Peru and Colombia. Beginning in the 1990’s, both Argentina and Brazil maintained fixed exchange rates. However, in 2002 and 1999, respectively, the Argentine and Brazilian central banks allowed their respective currencies to float freely against the U.S. dollar. In Peru, there have not been restrictions on companies’ ability to convert Peruvian currency into U.S. dollars, nor any associated fixed exchange rates since the 1990s. In Colombia, the Colombian peso has been allowed to float freely against the U.S. dollar since 1999, but the Colombian Central Bank can buy currencies in order to assure a steady currency rate. There can be no assurance that the countries where the Company has operations or interests will maintain their current currency exchange policies.

References to "R$", "AR$", "S$" and "COP$", are to Brazilian reais, Argentine pesos, Peruvian soles and Colombian pesos, respectively. While results of the Company’s foreign operations are converted to Chilean pesos on a periodic (daily, weekly or monthly) basis, low, high, average and year-end Brazilian real, Argentine peso, Peruvian sol and Colombian peso exchange rates for 2007 have been included below for reference:

|            | Brazilian Real |        | Argentine Pesos |            | Peruvian Sol |  | Colombian Peso
|----------- | -------------- | ------ | --------------- | ---------- | ------------ |  | --------------
|            | In Ch$ (1)     | In US$ |                 | In Ch$ (1) | In US$       |  | In Ch$ (1)    
|Low (2)     | 289.12         | 0.5772 |                 | 176.16     | 0.3273       |  | 166.81        
|High (2)    | 252.04         | 0.4639 |                 | 157.44     | 0.3145       |  | 166.90        
|Average (3) | 268.21         | 0.5133 |                 | 167.72     | 0.3210       |  | 166.93        
|Year-End(2) | 280.52         | 0.5646 |                 | 157.69     | 0.3174       |  | 166.05        

Source: Central Banks of Chile, Brazil, Argentina, Peru and Colombia.
(1) Figures in Chilean pesos for the respective exchange rates were calculated using the exchange rate observed in Chile on the dates in which the minimum, maximum, average and year-end occurred in the respective countries.
(2) Rates shown are the low, high and year-end exchange rates for each period, based on all of the daily rates within the specified period.
(3) The average annual exchange rate is based on the monthly average rates as calculated by the Central Bank of Chile.

Capitalization and Indebtedness

Not applicable

Reason for the Offer and Use of Proceeds

Not applicable

Risk Factors

The Company is subject to various changing competitive, economic, political, social and other risks and conditions, some of which are described below:

Certain Considerations Relating to Chile.The Company is engaged in its four businesses in Chile: Wire & Cable, Brass Mills, Flexible Packaging and Aluminum Profiles. For the year ended December 31, 2007, the Company had Ch$80,235 million, or 48.1% of its property, plant and equipment in Chile, and derived 39.1% of its revenues, from its Chilean operations. Consequently, the Company’s results of operations and financial condition are largely dependent on the overall level of economic activity in Chile. According to the Central Bank of Chile’s 2008 statistics, the Chilean economy has had GDP growth rates of  4.0%, 6.0%, 5.7%, 4.0% and 5.1% for the years 2003, 2004, 2005, 2006 and 2007, respectively. There can be no assurance regarding future rates of growth relating to the Chilean economy. Some of the factors that would be likely to have an adverse effect on the Company’s business and results of operations include future downturns in the Chilean economy, a return to the high inflation experienced by Chile in the 1970s and a devaluation of the Chilean peso relative to the U.S. dollar.

Effects of Argentine Gas Supply Restrictions and Price Increases on Chilean Operations.  Chile is dependent on foreign supply of energy sources such as oil, natural gas and fuel derivatives. Since 2003, the Argentine government has restricted gas exports to Chile due to supply problems in Argentina. This has affected the supply of energy to the Chilean industries. The reduction in gas supply may affect the Company’s operations. While the Company has access to alternative energy sources, such as liquid gas or diesel oil, which reduce the impact of the restrictions imposed on the Company, the cost of such sources has been higher than natural gas and there can be no assurance that the Company will be able to increase its selling prices in response to this potential cost increase. In addition, there can be no assurance that gas prices will not continue to rise. Therefore, any additional cost increase from the use of gas and alternative energy sources could have an adverse effect on the Company’s financial condition and results of operations.

Developments in the Region May Affect the Company. Although the Company's principal businesses are in Chile, Madeco also maintains substantial assets and derives significant revenues from its operations in Brazil, Argentina, Colombia and Peru. For the year ended December 31, 2007, the Company had Ch$35,073 million, or, 21.0% of its property, plant and equipment in Brazil, and derived 24.9% of its revenues, from its Brazilian operations. In the case of Argentina, the Company had Ch$21,178 million, or 12.7% of its property, plant and equipment in Argentina, and derived 7.4% of its revenues from its Argentine operations. The Company had Ch$3,279 million, or 2.0% of its property, plant and equipment in Colombia, and derived 3.5% of its revenues from its Colombian operations. In the case of Peru, the Company had Ch$27,185 million, or 16.3% of its property, plant and equipment in Peru, and derived 25.1% of its revenues from its Peruvian operations.

Although consumption and investment in Brazil remained low in 2003, in 2004, the Brazilian economy grew by 5.7%. In 2005 and 2006, the Brazilian economy grew by 2.9% and 3.7%, respectively. In 2007, the Brazilian economy grew at a higher rate compared to the two previous years, reaching a rate of 5.4%, according to information released in 2008 by the Instituto Brasileiro de Geografia e Estadística(the Brazilian Institute of Geography and Statistics, or
"IBGE"). This growth was due in large part, to an increase in exports, a favorable external economic scenario and strong domestic demand stimulated by the strengthening a Brazilian real against the U.S. dollar. There can be no assurance that economic growth in Brazil will continue in the future.

In recent years, Argentina suffered an economic recession which culminated in a political and economic crisis with significant currency devaluation in early 2002. The Argentine economy has since stabilized as a result of measures adopted by the Argentine government, including restrictions on bank deposits and withdrawals, exchange controls, suspension of payments of external debt and the abrogation of Argentine peso convertibility. The economic recession and crises materially affected Madeco, requiring the Company to close the majority of its operations in Argentina. In 2003, economic activity recovered across all sectors of the Argentine economy, and as a result, Madeco reopened certain of its operations at limited capacity. In 2006 and 2007, the Argentine economy grew by 8.5% and 8.7%, respectively. Although Argentina’s economy has improved, the country’s economic environment and political stability remain fragile.

The Colombian economy has achieved a steady GDP increase over the last few years. In 2004 and 2005, the Colombian economy grew 4.9% and 5.1%, respectively. In 2006 and 2007, the Colombian economy grew 6.8% and 6.5%, respectively, driven by a robust aggregate demand and investment, accompanied by a strong inflation scheme. However, there can be no assurance that economic growth in Colombia will continue in the future.

The Peruvian economy continues to develop at a steady pace. Economic growth is likely to continue, as the country profits from increased demand for commodities in the global economy. In 2006 and 2007, the Peruvian economy grew by 8.0% and 7.5%, respectively, as a result of strong domestic demand which outpaced GDP growth. Nonetheless, Peru remains a politically unstable country. This instability could have a material adverse effect on the Peruvian economy.

The economies to which Madeco exports the products it manufactures are also affected by social and political changes. There can be no assurance that political changes or political instability in the countries in which the Company operates or to which it exports its products will not materially adversely affect the Company in the future. Moreover, there can be no assurance that the economic system in Chile and the free trade agreements, which are expected to allow the Company to export its products more readily, will be maintained in the future.

Developments in Emerging Markets May Affect the Market Value of Chilean Securities.The market value of securities of Chilean companies is, to varying degrees, affected by economic and market conditions in other emerging market countries. Although economic conditions in such countries may differ significantly from economic conditions in Chile, investors’ reactions to developments in any of these other countries may have an adverse effect on the market value of securities of Chilean issuers. For example, in the second half of 1998 and early 1999, prices of Chilean securities were materially adversely affected by the economic crises in Russia and Brazil. Although the performance of the Chilean securities market has improved since 2003, there can be no assurance that the Chilean stock market will continue to grow or even sustain its gains and that the market value of the Company’s securities would not be adversely affected by events elsewhere, especially in emerging market countries.

Opportunities to Secure Financing Necessary to Operate the Company’s Businesses May Be Limited.In the future, the Company may need to raise funds for various purposes. Madeco was notified on July 1, 2002 that the Comisión Clasificadora de Riesgo(the “Risk Classification Commission”), which regulates the investment activities of pension funds in Chile, had ruled that as a result of the downgrading of the credit ratings of the Company’s securities and the deterioration of Madeco’s financial situation, Chilean pension funds were further limited in the amount of debt securities or common shares of Madeco that they could hold. Although the rating agencies have since upgraded the Company’s rating and Chilean pension funds are no longer limited in the amount of debt securities or common shares of Madeco that they can hold, there can be no assurance that the Company will not be downgraded, and the holding of Madeco’s securities by Chilean pension funds limited, in the future. See “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Changes in the Company’s Risk Classification”. Given that Chilean pension funds together constitute the most significant investor group in Chilean securities, any action taken by the Risk Classification Commission has in the past affected and could in the future affect the price and liquidity of Madeco's common shares and bonds. There can be no assurance that capital will be available in the future as needed on reasonable terms in Chile or otherwise. An inability to obtain capital could constrain the Company’s ability to refinance debt, expand sales, improve productivity or take advantage of business opportunities and could have a material adverse effect on the Company’s financial condition and results of operations.

The Company is Controlled by One Majority Shareholder, whose Interests May Differ from Minority Shareholders.As of March 31, 2008, the Quiñenco Group owned 45.2% of the Company’s shares. Accordingly, the Quiñenco Group has the power to control the election of the majority of members of the Company’s board of directors (the “Board of Directors” or the “Board”) and its interests may differ from the interests of other holders of the Company’s shares. The Quiñenco Group has a significant influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval (and according to Rule 18.046Ley de Sociedades Anónimas, Chilean Corporations Law), including mergers, consolidations,  the sale of substantial Madeco's assets and going-private transactions, and also the power to prevent or cause a change in control.

We may be subject to the Investment Company Act.The Company may be deemed to be an investment company under the United States Investment Company Act of 1940, as amended (the “Investment Company Act”) and suffer adverse consequences as a result. A company may, among other reasons, be deemed to be an investment company if it owns investment securities with a value exceeding 40% of its total assets, subject to certain exclusions. If the Company consummates the sale of its Wire & Cables business unit to Nexans for 2,500,000 shares of Nexans’ capital stock and cash, as disclosed elsewhere in this annual report, the Nexans capital stock and any investments the Company may make with the cash proceeds received from the sale may constitute investment securities under the Investment Company Act.  These investment securities could exceed 40% of the Company’s total assets.  If this were to occur, and an exclusion from registration or a safe harbor were not available to the Company, the Company may be deemed an investment company and be subject to the requirements of the Investment Company Act.  As a consequence, the Company may either be required to register as an investment company under the Investment Company Act be prohibited from issuing securities and accessing the U.S. capital or bank markets unless it took action to reduce its investment securities as a percentage of its total assets.

Although the Company does not believe it was a passive foreign investment company ("PFIC") for U.S. federal income tax purposes in years prior to 2008, this conclusion is subject to some uncertainty. Even if it was not previously a PFIC, the Company may become a PFIC if it consummates the sale of its Wire & Cables business unit to Nexans as disclosed elsewhere in this annual report. In general, the Company will be a PFIC if either (i) at least 75% of the gross income of the Company for the taxable year is passive income or (ii) at least 50% of the value (determined on the basis of a quarterly average) of the Company's assets is attributable to assets that produce or are held for the production of passive income. Cash and investment securities are passive assets. If the Company owns less than 25% by value of the stock of another corporation, that stock will constitute a passive asset. If the Company is treated as a PFIC, a U.S. Holder may be subject to materially adverse tax treatment with
respect to gain realized on the sale or other disposition of Shares or ADSs or certain "excess distributions." Although a U.S. holder of shares or ADSs in a PFIC can sometimes avoid the rules described above by electing to treat the company as a "qualified electing fund," the Company does not intend to comply with the requirements necessary to permit a U.S. Holder to make this election. A U.S. Holder may be able to make a mark-to-market election if the Company's stock is treated as regularly traded on a registered national securities exchange or other exchange to the extent permitted by the Internal Revenue Service, or "IRS". See "Taxation-United States Tax Considerations." U.S. Holders are urged to consult their own tax advisors concerning the U.S. federal income tax consequences of holding Shares or ADSs if the Company is or becomes a PFIC.

The Company is Susceptible to Interest Rate Risk.  Part of Madeco’s bank financial obligations has floating interest rates based on LIBOR or TAB (the Chilean Inter-bank rate). A substantial increase in interest rates would materially adversely affect Madeco’s financial position. There can be no assurance that such a rate increase will not occur.

The Price of Madeco’s ADSs and Any Dividends Will Be Affected by Fluctuations in Exchange Conditions.The Company’s ADSs trade in U.S. dollars. Fluctuations in the exchange rate between certain Latin American currencies and the U.S. dollar are likely to affect the market price of the ADSs. For example, since Madeco’s financial statements are reported in Chilean pesos and any dividend paid will be denominated in Chilean pesos, a decline in the value of the Chilean peso against the U.S. dollar would reduce the Company’s earnings as reported in U.S. dollars and would reduce the U.S. dollar equivalent of any dividend.

A devaluation of the Brazilian, Argentine, Peruvian or Colombian currency versus the U.S. dollar would also reduce the Company’s earnings in Chilean pesos and therefore the earnings reported in U.S. dollars. For example, given the relative importance of Brazilian operations to the Company’s consolidated results, a devaluation in Brazil’s currency could have a materially adverse impact on the Company’s earnings.

For a further discussion regarding the Company’s currency exchange rate risk, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Exchange Rate Risk”.

Holders of ADSs May be Subject to Certain Risks.  Due to the fact that holders of ADSs do not hold their shares directly, they are subject to the following additional risks:

In the event of a dividend or other distribution, if exchange rates fluctuate during any period of time when the ADS depositary cannot convert a foreign currency into dollars, the ADS holders may lose some or all of the value of the distribution. There can be no assurance that the ADS depositary will be able to convert any currency at a specific exchange rate or sell any property, rights, shares or other securities at a specific price, or that any of such transactions can be completed within a specific period of time.

In order to vote at shareholders’ meetings, ADS holders not registered on the books of the ADS depositary are required to transfer their ADSs for a certain number of days before a shareholders’ meeting into a blocked account established for that purpose by the ADS depositary. Any ADS transferred to this blocked account will not be available for transfer during that time. ADS holders who are registered on the books of the ADS depositary must give instructions to the ADS depositary not to transfer their ADSs during this period before the shareholders’ meeting. ADS holders must therefore receive voting materials from the ADS depositary sufficiently in advance in order to make these transfers or give these instructions. There can be no guarantee that ADS holders will receive voting materials in time to instruct the ADS depositary how to vote. It is possible that ADS holders, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote at all.  Additionally, ADS holders may not receive copies of all reports from Madeco or the ADS depositary.  Holders may have to go to the ADS depositary’s offices to inspect any reports issued.

In the event the Company fails to meet any of the continued listing requirements of the New York Stock Exchange, or “NYSE”, the Company’s ADSs may become subject to delisting at the option of NYSE. In 2002, the Company was not in compliance with NYSE’s minimum security price and minimum market capitalization continued listing requirements. On June 21, 2003, the Company regained compliance with both the minimum security price and the minimum market capitalization requirements. The Company has maintained its compliance status during 2007 and for the first quarter of 2008. There can be no assurance that the Company will not fail to meet the NYSE continued listing requirements in the future. See “Item 9. The Offer and Listing - Offer and Listing Details”.

Copper Supply and Price Levels.Copper is the primary raw material used by the Company, and the Company's results of operations are heavily dependent on its ability to buy an adequate supply of copper. Prices for copper are affected by numerous factors outside the Company's control and have historically fluctuated greatly.

The Corporación Chilena del Cobre (Chilean Copper Corporation, “Cochilco”), a governmental entity, guarantees and regulates the supply of copper to all domestic copper manufacturers in Chile according to the Ley de Reserva del Cobre, or the Copper Reserve Law. On an annual basis, all Chilean copper purchasers must inform Cochilco of their estimated copper requirements for the upcoming year. Cochilco assigns the domestic copper demand to the various mining companies and establishes conditions for the sale of copper including price levels, which reflect London Metal Exchange (“LME”) prices adjusted for reduced transportation and related insurance costs. Cochilco establishes the terms of the annual copper supply contracts between the copper producers and manufacturers such as the Company. Under this current system, copper purchases are made on a monthly basis, and payments are required prior to delivery. Over the past 10 years, the Company has not experienced any difficulty in obtaining adequate supplies of copper at satisfactory prices under these arrangements. There can be no assurances, however, that the Company will continue to be able to obtain its required copper at satisfactory prices, if at all.

In Peru, the Company obtains the majority of its copper needs from local mining companies. The copper obtained is used by Cobrecón S.A., a related company which produces copper rod for the Company’s requirements in Peru. In Colombia, the Company fulfills its copper rod requirements from its Chilean related copper rod production companies.

In Brazil, the Company purchases its copper rod requirements from its Chilean related copper rod production companies and from an unrelated third party, Caraiba Metais do Brasil. There can be no assurance that all the copper rod requirements in Brazil will be fulfilled at satisfactory prices, since a portion of the Company’s requirements is obtained from a third party and the rest is obtained from Chilean operations under the regulations of the Copper Reserve Law.

Copper Reserve Law.In 2006, the Chilean Congress set aside a long-standing initiative started in 1996 to abolish the Copper Reserve Law. Currently, there are no initiatives to change the existing law.

Fluctuations in London Metal Exchange Prices of Copper and Aluminum.Historically, international prices of both copper and aluminum have fluctuated greatly. The Company’s price policy is to sell its copper and aluminum products based on the quantity of metal contained in each of them, and the metal is valued at the London Metals Exchange, or “LME”, prices. The Company generally has been able to increase its selling prices in response to increases in costs of copper and/or aluminum. There can be no assurance, however, that the Company will be able to recover increases in the cost of copper and/or aluminum in the future.

There is also risk exposure associated with the copper and aluminum inventories that are not hedged kept by the Company exclusively for the fabrication of its products. Sharp drops in prices for these raw materials can cause the Company significant losses in its financial statements due to lower inventory value.

Company earnings can also be negatively affected by reductions in prices for copper and aluminum due to the difficulty in passing on the higher purchase prices of current metal inventories to the customer. In addition, there could be a decline in demand as customers wait for lower prices before issuing their purchase orders. The historical prices of these metals have experienced wide fluctuations, which are influenced by a great number of factors beyond the Company’s control.

Dependence on Several Raw Material Suppliers.  The Company is dependent on a limited number of suppliers for the procurement of copper and aluminum. The Company believes that its contracts and other agreements with third-party suppliers contain standard and customary terms and conditions. During the past ten years, the Company has experienced no substantial difficulties in obtaining adequate supplies of necessary raw materials at satisfactory prices, since these raw materials are commodities that can be acquired from various multinational suppliers. If the Company experiences difficulties in obtaining raw materials from suppliers in the future it would adversely affect the Company’s ability to operate its business.

Demand for Copper Pipes has Persistently Decreased. In spite of the strong demand for copper pipes prior to the year 2000, plastics pipes have increasingly become competitive substitutes for copper pipes due to the increasing price of copper. As the market share for plastics pipes has increased, the sales volume of the Brass Mills business unit has decreased, see “Item 4. Information on the Company — Business Overview — Brass Mills — PBS – Summary of Sales”. The Company believes that this product substitution effect will not decline.

Concentration of Customer Base.Over the past decade, there has been consolidation within the various industries to which the Company sells its products. As a result, the Company’s larger customers are now both fewer in number and more powerful in their ability to demand favorable sales conditions from Madeco such as prices and payment terms. This development could potentially put downward pressure on the Company’s selling prices  and margins.  See “Item 4. Information on the Company — Business Overview”.

Demand for Telecommunications Cable has Significantly Decreased and is not Expected to Recover to Previous Levels.Despite significant demand in 2000 and 2001 by the telecommunications, or “telecom”, industry for both copper and fiber optic cable, demand for these products which are manufactured by the Company have since significantly diminished. For a further discussion of this decrease in demand, see “Item 4. Information on the Company — Business Overview — Wire & Cable —Wire & Cable - Summary of Sales.” The Company does not expect the demand for these products by the telecom industry to recover in the foreseeable future and there can be no assurance that the demand for these products will increase to previous levels or at all.

Operations are Subject to Environmental Laws and Regulations.Madeco’s operations are subject to laws and regulations relating to the protection of the environment in the various jurisdictions in which the Company operates, such as regulations regarding the release of copper, aluminum or plastics dust into the air. Stricter laws and regulations, or stricter interpretations of existing laws or regulations, may impose new restrictions on the Company or result in the need for additional investments in pollution control equipment, either of which could result in a material adverse effect on Madeco’s profitability.

The Purchase Price Nexans Will Pay for Madeco’s Wire  Cable Unit is variable. As consideration for the purchase of Madeco's  Wire & Cable Business Units, Nexans will pay (i) US$ 448 million in cash (approximately Ch$227,024 million, historic value) subject to certain adjustments which are provisioned in the Purchase Agreement, such as minority interest, income tax, financial debt, change in working capital, exchange rates between EUR€, US$ and Ch$, copper and aluminum cost, and investments in fixed assets; and (ii) 2,500,000 shares of Nexans' stock the value of which must represent at least 7.5% of Nexans' outstanding capital stock, but which share are subject to Nexans' shares price and the exchange rate between Euros and Chilean pesos. Due to these external factors Madeco cannot state with any level of certainty a final transaction price.

Foreign Currency Exchange Rate Risk. Exposure to foreign currency exchange rate risk relates to the Company’s positions held in cash and cash equivalents, bank debt, bonds and other assets and liabilities indexed to currencies other than Chilean pesos.

In accordance with Technical Bulletin 64 issued by the Chilean Association of Accountants (“BT64”), most investments in foreign companies, as well as various liabilities associated with these foreign investments, should be considered as a net U.S. dollar exposure.

With respect to the Company’s foreign investment exposure, gains and losses from exchange rate variations are recorded directly to the cumulative adjustment from foreign currency translation account included in other reserves in shareholders’ equity, without impacting the Company’s income statement. For further information, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Exchange Rate Risk.”



ITEM 4. Information on the Company

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History and Development of the Company

General

Madeco S.A. (formerly known as “Manufacturas de Cobre S.A., Madeco”), was incorporated in the Republic of Chile in 1944 as asociedad anónima abierta, or open stock corporation, and operates under the laws of Chile. The Company also has operations in Argentina, Brazil, Peru and Colombia.

The Company’s head office and principal business address is located at Ureta Cox 930, San Miguel, Santiago, Chile. The telephone number at the Company’s head office is (56-2) 520-1000, and the facsimile number is (56-2) 520-1545. Its authorized representative in the United States is CT Corporation System, located at 111 Eighth Avenue, 13th Floor, New York, NY 10011, U.S.A. CT Corporation’s phone number is (1-212) 894-8500.

Madeco’s operations are organized into four principal operating segments or business units based on production processes. The Company’s current business units are:

- Wire & Cable;
- Brass Mills;
- Flexible Packaging; and
- Aluminum Profiles.

Madeco’s principal products include:

- in the Wire & Cable business: copper and aluminum power cables (thermo-plastic, thermo-stable and bare wire), mining cables, building wire, magnetic wires, optical fiber telecommunication cables, copper telecom cables and copper rods;
- in the Brass Mills business: pipes, sheets, coils, busbars, bars and coin blanks made from copper, aluminum and related alloys;
- in the Flexible Packaging business: rotogravure and flexo laminated flexible packaging (plastics, foil, paper); and
- in the Aluminum Profiles business: extruded profiles used mainly in residential and non- residential construction (windows and patio doors, curtain walls), and diverse industrial applications. In 2008, the Company began the production and commercialization of PVC profiles.

In 2007, the Company’s consolidated net revenues amounted to Ch$639,011 million, of which 64.5% was derived from Madeco’s Wire & Cable unit, 16.1% from the Brass Mills unit, 13.9% from the Flexible Packaging unit and 5.5% from the Aluminum Profiles unit.

History

Madeco S.A. was incorporated as an open stock corporation in Chile in 1944 and has expanded over the years into Brazil, Peru, Argentina and Colombia. Today, the Company is a leading Latin American manufacturer of finished and semi-finished non-ferrous products based on copper, aluminum and related alloys as well as a manufacturer of flexible packaging products for use in the mass consumer market for food, snacks and cosmetics products.

In 1944, Madeco was founded by Mademsa to manufacture copper and copper-alloy based products. The original principal shareholders were the Simonetti brothers and Corporación de Fomento de la Produccion(Corfo). In 1954, the Company initiated fabrication of aluminum based products (profiles, sheets and foil).

The company Alusa S.A. was created in 1961 in conjunction with the Zecchetto and Arduini families to manufacture flexible packaging for use in the mass consumer market for food, snacks and cosmetics products.

During the period of political turmoil (1971-1973), Madeco was forcibly nationalized and remained under government control during the administration of President Salvador Allende Gossens.

In 1975, operating control of the Company was returned to the Board of Directors during the military government presided by General Augusto Pinochet Ugarte.

In 1980, through Quiñenco S.A., the Luksic Group (one of the largest diversified companies engaged in the financial services, industrial and telecommunications sectors in multiple countries within Latin America) made a substantial investment in the Company. In 1983, the Luksic Group acquired a majority share and control of the Company.

In 1987, Colada Continua Chilena S.A. was created in Chile in order to ensure the opportune production and delivery of the Company's principal raw material for wire and cable production, copper rod.

In 1988, the Company acquired Armat S.A., a Chilean manufacturer of coin blanks and minted coins made of copper and copper - based alloys.

In 1990, Madeco commenced its wire & cable operations in Argentina, through the acquisition of Indelqui S.A. (a producer of telecom and energy cables).

In 1991, the Company acquired Indalum S.A., a Chilean aluminum profiles manufacturer. In conjunction with this acquisition, Ingewall S.A., was created that same year to participate in the curtain wall fabrication and installation business.

In 1993, Madeco made a capital increase whereby 57,750,000 shares were placed on the Santiago Stock Exchange and on the NYSE in the form of ADRs, raising approximately Ch$35,538 million (historic value) or US$83 million. In addition, the Company acquired Triple - C (a cable producer) in Peru and continued its expansion in Argentina through the acquisition of a power cable plant in Llavallol. The Company also expanded its flexible packaging business into Argentina with the construction of a plant in San Luis (Aluflex S.A.).

In 1994, Madeco acquired the Argentine company Decker S.A., a copper and brass pipes and sheets manufacturer. In Peru, the Company's subsidiary (Triple -C) merged with another large Peruvian cable manufacturer (Indeco S.A.); the new combined operation kept the name Indeco S.A.

In 1996, the Company acquired, through its subsidiary Alusa, a 25% and 25.6% share in two flexible packaging firms in Peru, Peruplast and Tech Pak, respectively.

In 1997, Madeco acquired a 67% share of Ficap S.A., then the second largest cable company in Brazil. In July, the Company made a second international capital increase on the Santiago Stock Exchange and in the form of ADRs on the NYSE; a total of 33,167,661 shares were subscribed and paid, raising approximately Ch$33,168 million (historic value) or approximately US$76 million.

In 1998, the Company acquired the remaining 33% of Ficap S.A.. In Argentina, the Company merged its two operating subsidiaries; the new entity, Decker-Indelqui S.A., incorporated both Cable and Brass Mills operations.

In 1999, the Company and Corning International Corporation (“Corning”) created Ficap Optel, a joint venture in which the Company initially had a 75% interest and Corning the remaining 25%. This joint venture was established to produce, sell and distribute optical fiber cables.

In 2000, Madeco successfully raised Ch$38,651 million (historic value, approximately US$75 million) in a local bond issuance. During April of that same year, the Company raised Ch$6,485 million (historic value), or approximately US$13 million, on the Chilean stock market through the issuance of 15,082,339 unsubscribed shares from a previous 1997 capital increase.

In 2001, the Company modified its Ficap Optel Joint Venture Agreement with Corning. Corning increased its interest in Ficap Optel from 25% to 50% by acquiring a 25% interest from the Company. As part of the new Joint Venture arrangement, Ficap Optel changed its name to Optel S.A. and purchased 99.9% of Corning Argentina S.A.

On December 31, 2001, as a result of the economic crisis in Argentina, Madeco decided to temporarily suspend production for the Wire & Cable and Brass Mills operations of its Argentine subsidiary Decker-Indelqui.

In October 2002, a new team led by Mr. Tiberio Dall'Olio took over the management of the Company. The new administration has extensive experience in the cable manufacturing industry, with a collective average of 30 years experience.

In March 2003, Madeco completed its debt restructuring process, which involved:

- a capital increase of approximately Ch$95,114 million (historic value) including a Ch$3,717 million (historic value) bond equitization, approximately US$181 million, through an offering of 3,714,577,380 shares;
- the payment of 30% of the Company’s outstanding bank debt equal to Ch$28,019 million (historic value, approximately US$38.3 million) and an additional payment of 10.3% of the outstanding debt equal to Ch$7,242 million (historic value, approximately US$9.9 million); and
- a seven year extension on the remaining bank debt equivalent to Ch$54,282 million (historic value, approximately US$74.2 million) with a three year grace period.

In September 2003, as a result of increased demand in Argentina for the Company’s products, Madeco reopened its Decker-Indelqui’s copper pipes plant (Barracas) with a limited production capacity.  In November 2003, the Company reopened, also at limited capacity, its  brass mills foundry plant (Llavallol) in Argentina.

In 2002, Madeco asked that a request by Corning to terminate the Joint Venture Agreement be decided through arbitration. During the second half of 2003, the arbitration proceedings resulted in a binding decision in Corning’s favor and the Joint Venture Agreement was lawfully terminated. As a result, in March 2005, Madeco bought Corning’s 50% interest in Optel Ltda., bringing its own ownership interest in Optel Ltda. to 100%.

In May 2004, the C Series Bonds were paid (UF1.4 million) and in December the A Series Bonds were paid in advance (UF1.9 million), financed mainly by the proceeds of the issuance of the D Series Bonds (UF1.8 million). A capital increase of Ch$10,240 million (historic value, approximately US$16.1 million) was completed by placing 321 million shares in the Chilean Stock Market.

In 2004, in Brazil the production capacity of magnetic cables was increased by 20% and the introduction of an Enterprise Resources Planning software (ERP), called SAP, was initiated. In November 2004, Madeco reopened partially and, on a non-continuous basis, its wire & cable plants (Llavallol and Quilmes) located in Argentina.

In July 2005, Ficap began operating on the SAP system. In September, Madeco prepaid all the Credit Rescheduling Agreements subscribed by the Company with its creditor banks on December 18, 2002. In November, the Company launched a successful capital increase, raising approximately Ch$43,565 million (historic value, approximately US$84 million), which was used to pay debt. In addition, in the same month, the Argentine subsidiary Decker-Indelqui won public bids to supply over Ch$7,779 million (historic value, approximately US$15 million) of aluminum transmission cables.

During 2006, SAP implementation began in Indeco and Madeco Chile. During the last quarter of 2007, the application of SAP also started in Decker-Indelqui, a process that ended successfully at the end of 2007, along with the Chilean and Peruvian implementations. Furthermore, SAP is being deployed throughout the Company with the aim of achieving high standards of corporate governance and fulfilling international requirements (Sarbanes Oxley and IFRS).

On May 5, 2006, the remaining shares issued and registered on October 17, 2005, were placed on the Santiago Stock Exchange. The offering raised proceeds of approximately Ch$9,463 million (historic value, approximately US$18 million). In June 2006, the Company refinanced a total of Ch$26,972 million (historic value, approximately US$50 million) of its financial debt by means of a 5-year club deal loan (Ch$6,473 million (historic value, approximately US$12 million) to repay debt to Quiñenco, Ch$7,013 million (historic value, approximately US$13 million) to repay a short-term bridge loan, and Ch$13,486 million (historic value, approximately US$25 million) was used for financing working capital). In addition, during 2006, Performance by Skills was introduced at Madeco Chile in order to retain and develop the talent of its employees, and had been fully implemented by the end of 2007.

On February 12, 2007, 80% of Cedsa S.A. (“Cedsa”, a Colombian wire & cable manufacturer) was acquired by the Company for Ch$2,022 million (historic value, approximately US$3.7 million); moreover, Cedsa ́s shareholders agreed to a capital increase of Ch$3,279 million (historic value, approximately US$6.0 million), to be subscribed and paid proportionally to their respective shares in two steps. At the first stage, the Company increased its manufacturing capacity from approximately 3,200 tons to 5,400 tons. The second stage is scheduled to be completed by the end of 2008. The Colombian acquisition was made in order to expand the Company’s presence in South America and to take advantage of recent growth opportunities presented by the expansion of the Colombian economy.

In mid February 2007, the Company signed an agreement whereby it increased its holding in Peruplast from 25% to 39.5% and in Tech Pak from 25.6% to 50%. The cash payment was made in the beginning of March 2007, as a disbursement of approximately Ch$1,725 million (historic value, approximately US$ 3.2 million) in the case of Peruplast and Ch$2,857 million (historic value, approximately US$ 5.3 million) in the case of Tech Pak. The Peruvian investor, Nexus Group, also signed contracts by which the same shareholding were acquired in both companies. In addition, both companies agreed to purchase the remaining shareholdings in Peruplast with Shintec S.A. in equal parts, thus permitting shareholdings of 50% in each. In July 2007, the Company increased its shareholding in Peruplast to 50% with the payment of Ch$742 million (historic value, approximately US$ 1.43 million) for the 10.5% interest agreed to earlier in the year. Finally, on October 1, 2007, both Peruvian subsidiaries were merged under the name of Peruplast S.A.

At the Annual Shareholders’ Meeting held on April 24, 2007, the Board of Directors informed shareholders that a change in the dividend policy, reducing the dividend rate from 50% to 30% of net income, had been approved by the Board on March 28, 2007. In addition, the Board called an Extraordinary Shareholders’ Meeting to decide whether to absorb the accumulated losses through a reduction of the share capital. This proposal was accepted and approved at the Extraordinary Shareholders’ Meeting held on April 24, 2007.

On November 8, 2007, Mr. Tiberio Dall'Olio and Julio Córdoba exercised their individual stock options right and purchased 100,000,000 and 20,000,000 shares, respectively. As the five year term, which was established at the Extraordinary Shareholders' Meeting held in 2002, within which to exercise any stock options granted pursuant to compensation plans has expired, there are no such stock options outstanding. For further information about the compensation plans, see "Item 6. Directors, Senior Management and Employees - Senior Management - Compensation".
On November 15, 2007, Madeco and the French cable manufacturing company, Nexans, entered into a framework agreement whereby Madeco would transfer all the assets of its Wire & Cable unit located in Colombia, Peru, Brazil, Argentina and Chile, to Nexans, in exchange for a cash payment of Ch$227,024 million (historic value) or US$448 million, and 2.5 million shares of Nexans' stock (approximately an 8.9% shareholding in Nexans). If completed, this transaction would not only make the Company a major shareholder of Nexans but also affords it an opportunity to elect a representative of Madeco as a member of the Nexans' board of directors.
Nexans is the worldwide leader in the Cable industry, with sales over Ch$5,366 billion or US$10.8 billion in 2007, with a presence in five continents and a broad mix of products, including specialized and high-tech cables such as submarines and umbilicals. On the day this transaction was announced, the net profit from the transaction was estimated at approximately Ch$143,410 million (historic value) or approximately US$283 million and the enterprise value of the Wire & Cable unit at Ch$417,055 million (historic value) or approximately US$823 million. The transaction is expected to be completed before September 30, 2008, following the approval of both Madeco and Nexans shareholders and the pertinent legal authorizations are obtained.
By the end of November 2007, the Board, in order to facilitate the reorganization of the Company, agreed to the creation of three new subsidiaries (closely-held corporations) to be held 100% directly and indirectly by the Company. The first was created to be related to the Wire & Cable business, the second was created to be related to the Brass Mills business and the last one was created as an investment subsidiary. Each of these companies was formed with 100 shares of no par value and initial capital of Ch$1,000,000. This capital will be increased once the business units’ investments and/or assets are contributed, as determined by the Board accordance with current legislation.

The Company’s Board, at its meeting held on December 18, 2007, and in accordance with Circular 660 of the Superintendency of Securities and Insurance, agreed to distribute an interim dividend of Ch$2.65 per share as a charge to net income for 2007. This dividend was paid on January 18, 2008 to all shareholders of the Company as recorded on the Company’s official registrar on January 12, 2008.

Nexans

On November 15, 2007, Madeco entered into a Framework Agreement with the French company, Nexans, whereby Madeco agreed the transfer all of the assets of its Wire & Cable unit in Chile, Argentina, Peru, Brazil and Colombia to Nexans, at a preliminary price of US$448 million or approximately Ch$227,024 million (historic value) plus 2.5 million shares of Nexans, totaling approximately US$823 million or approximately Ch$417,055 million (historic value). Pursuant to this Framework Agreement, the parties must perform reciprocal due diligence and sign a final contract before the completition of this transaction.

On February 21, 2008, Madeco and Nexans entered into a Purchase Agreement by which Madeco will transfer all of the assets and liabilities of its Wire & Cable unit in Chile, Peru, Brazil, Argentina and Colombia, subject to certain conditions (as discussed below).

At Nexans' Annual Shareholders' Meeting held on April 10, 2008, Nexans' shareholders approved the transaction with the Company and also agreed to elect Madeco's representative to its board of directors.

On April 23, 2008, the Board of Directors of the Company agreed to ask shareholders at the next Annual Shareholders’ Meeting, which is scheduled to be held no later than April 30, 2009, to approve the distribution of an extraordinary dividend of up to US$ 165 million or approximately Ch$73,504 million (historic value) , or 76% of the net profit expected from the transaction between Madeco and Nexans (as estimated on February 21, 2008), which is dependent on the completion of this transaction. For further information about Madeco ́s dividend policy, see “Item 8. Financial Information – Consolidated Statements and Other Financial Information – Dividend Policy”

At Madeco's Extraordinary Shareholders' Meeting held on April 25, 2008, Madeco's shareholders approved the transaction with Nexans as described in the Purchase Agreement. This transaction involves the sale of approximately 51% of the Company's assets, according to its Consolidated Financial Statements as of December 31, 2007. At this Extraordinary Shareholders' Meeting, the Company provided certain information regarding Nexans and the Purchase Agreement:

(a) Information as to Nexans and the Transaction.According to Nexans,Nexans is the largest cable company in the world with an industrial and commercial presence in Europe, North America, Asia, Africa, Oceania, South America and Brazil. Its sales in 2007 exceeded EUR€ 7,400 million equivalent to US$11,548 million (approximately Ch$5,738 billion), which is 45% higher than those of its nearest competitor Prysmian and a 120% greater than those of the third largest global participant in this industry, General Cable.

In 2007, Nexans had an EBITDA of EUR€ 510 million, equivalent to US$796 million (approximately Ch$395,524 million), and a profit of almost EUR€ 190 million, equivalent to US$296 million (approximately Ch$147,079 million). Additionally, Nexans has an important market capitalization on the Paris Stock Exchange, which as of April, 2008 exceeded EUR€ 2,180 million equivalent to US$3,401 million (approximately Ch$1,690 billion), and a significant volume of daily transactions. With regard to the proposed sale of Madeco's Wire & Cable unit, Nexans will pay:(i) Ch$227,024 million (historic value) or US$ 448 million in cash, subject to certain adjustments described in the Purchase Agreement, including minority interest, tax, financial debt, change in working capital and investments in fixed assets; and (ii) 2,500,000 shares of Nexans ́ common stock. Moreover, subject to the completion of the transaction, Mr. Guillermo Luksic Craig as a representative of Madeco, will be elected to Nexans ́ board of Directors.

(b) Completion Date of the Transaction (the "Closing Date").The Closing Date for this transaction is dependent on the fulfillment of certain conditions required to complete this transaction, or conditions for closing, which are explained further below. The Closing Date is to occur on the last day of the month in which these conditions for closing are fully accomplished. The Purchase Agreement also provides that the Closing Date should be no later than September 30, 2008.

(c) Representations & Warranties.The Company believes that the Representations & Warranties (the "R&W") in the Purchase Agreement are typical of those representations and warranties usually found in agreements involving similar transactions. All of the R&W made by Madeco are to remain in force until December 2009, with the exception of the following: (i) the labor and tax R&W, which shall survive until such time as the applicable statutes of limitations expire, including any extensions provided thereto; (ii) the environmental R&W,  which shall expire three years after the Closing Date; and (iii) those R&W, containing statements regarding the ownership of the shares and titles to properties being sold under the agreement, which shall expire 10 years after the Closing Date.

(d) Ancillary Agreements by Madeco.Under the Purchase Agreement, the Company will agree that, for a period of 12 months after the Closing Date, it will not sell to third parties the Nexans shares it receives as part of this transaction, and, for a period of 12 to 18 months after the Closing Date, it will not sell more than 50% of such shares.

(e) Covenants.Under the Purchase Agreement, the Company will agree to be obligated by certain covenants contained therein, which include, but are not limited to, the following: the Company (i) will undergo a corporate reorganization; (ii) will exercise its best efforts to obtain those permits and government authorizations required to complete the corporate reorganization; (iii) will operate the Company in its ordinary course of its business; (iv) will, prior to the Closing Date, report to Nexans any relevant issues of which it becomes aware; (v) will maintain a shareholders' equity of at least US$250 million  (historic value), approximately Ch$117,073 million, until all ofthe R&W expire; (vi) will compensate Nexans for any breach to the Purchase Agreement or other transaction documents for which Madeco is responsible; (vii) will, grant
to Nexans the same security interests (or "garantías reales") it may grant in the future to a creditor of the Company; (viii) will not compete with Nexans in the Wire & Cable business for a period of three years from the Closing Date;  and (ix) will maintain as confidential any information, of which the Company becomes aware as a result of its involvement in this transaction, which is not already publicly known.

(f) Conditions for Closing.The Purchase Agreement contains certain conditions for closing, which include, among others, that: (i) an event shall not have occurred which may cause a decrease of more than US$ 18 million (historic value) approximately Ch$8,429 million in the value of the Company’s assets which are to be acquired by Nexans or which will result in a material adverse change in the business, operations, properties, assets or condition of the companies whose shares are to be transferred to Nexans; (ii) an event shall not have occurred which may cause a decrease in Nexans’ shareholders’ equity in excess of €150,000,000; (iii) the 2.5 million shares of Nexans which are to be used as a form of payment in this transaction, must represent at least 7.5% of Nexans’ outstanding share capital; (iv) the corporate reorganization of Madeco must be completed and any approvals from antitrust and government authorities obtained; (v)  Madeco's shareholders must have authorized the transaction; and (vi) if, for the period that is 30 days prior to the Closing Date, the average price of copper shall have come to US$ 5,000 per ton, approximately ThCh$2,341 per ton, or exceeded US$9,000 per ton, approximately ThCh$4,215 per ton, then Nexans and Madeco shall have negotiated a new value for working capital as defined in the Purchase Agreement.

(g) Indemnification of Nexans by Madeco.Nexans will be compensated upon any breach by Madeco of its representations and warranties and other obligations under the Purchase Agreement. Also, Nexans will be entitled to reimbursement for: (i) those tax payments that it is required to make, which arise from incidents occurring prior to the Closing Date, except those incidents involving  Chile, Peru and Colombia, for which the Company has provided representations and warranties in the Purchase Agreement, (ii) civil and labor proceedings in Brazil, (iii) environmental unreported liabilities; and (iv) the obligations of the companies that Nexans will acquire which are not related to the Wire & Cable business.

(h) Liability of Madeco.The Purchase Agreement provides that Madeco will not be liable for damages caused by an individual event, where such event does not exceed US$ 73,000 (historic value) approximately Ch$34 million, or for damages caused by cumulative events, not counting damages resulting from an individual event, where such damages do not exceed US$ 1.46 million (historic value) approximately Ch$684 million.  Additionally, under the Purchase Agreement, Madeco's liability is limited to US$ 347 million (historic value) approximately Ch$162,497 million of tax contingences, and to US$ 146 million (historic value) approximately Ch$68,370 million for breach of its representations and warranties and other obligations under the Purchase Agreement.

Capital Expenditures and Divestitures

In recent years, capital expenditures have been primarily used to eliminate bottlenecks in the production process, replace and update equipment, increase Madeco’s production capacity and to analyze and look for new asset acquisitions that added favorable synergies to the Company’s different business units. The Company’s capital expenditures for 2005, 2006 and 2007 totaled approximately Ch$45,523 million. In 2007, investments reached Ch$18,727 million. Madeco’s investment policy is focused on the acquisition of assets necessary for the Company to sustain its businesses and operations in the long term and to improve its operational efficiencies, in order to increase value for its shareholders. For further information related to capital expenditure plans, see “Item 5. Operating and Financial Review and Prospects – Capital Expenditures”.

Wire & Cable Unit.In 2007, capital expenditures amounted to Ch$9,613 million, which was equivalent to 132.7% of the unit’s depreciation. Of this amount, approximately 64%, 22% and 9% was invested in Ficap, Indeco and Cedsa, respectively. In Brazil, the Company’s investments were oriented toward increasing the production capacity for aluminum and copper cables. In Peru, resources were mainly allocated for the acquisition of new cabling machines, and to a lesser degree, for the installation of ERP SAP software. In Colombia, investments included the increase of installed production capacity. In Chile and Argentina, capital expenditures were not material.

In 2006, capital expenditures amounted to Ch$4,612 million, which was equivalent to 57.7% of the unit’s depreciation. Of this amount, approximately 61%, 23% and 15% was invested in Ficap, Indeco and Madeco, respectively. In Brazil, the Company’s investments included the acquisition of wire-related machinery and equipment to increase production. In Peru, resources were mainly allocated towards improvements in drawing and cabling machines. In Chile, investments primarily included the acquisition of a wire drawing machine. In Argentina, capital expenditures were not material.

In 2005, capital expenditures amounted to Ch$2,756 million, equivalent to 42.5% of the unit’s depreciation. In Brazil, investments included the acquisition of wire-related machinery and equipment, and information technology improvements, including the implementation of Enterprise Resources Planning software (ERP), SAP. In Peru, the Company invested in machinery to increase production. In Chile, investments primarily included the acquisition of a continuous copper casting line for the Lo Espejo facility, and machinery to increase production. In Argentina, capital expenditures were not material.

Brass Mills Unit.In 2007, capital expenditures amounted to Ch$950 million, which was equivalent to 38.1% of the unit’s depreciation. Of this amount, 50%, 26% and 24% was invested in Chile (tubes & pipes), Armat (coin blanks) and Argentina, respectively. The unit’s significant investment was the acquisition of an induction furnace for the purpose of reducing production costs.

In 2006, capital expenditures amounted to Ch$553 million, which was equivalent to 21.7% of the unit’s depreciation. The unit’s significant investment was the acquisition of a new copper tube washing machine for the Chilean facility. In Argentina, capital expenditures were not material.

In 2005, capital expenditures amounted to Ch$889 million, which was equivalent to 32.4% of the unit’s depreciation. Most of the unit’s investments were related to the acquisition of a new copper tube washing machine in Chile. In Argentina, capital expenditures were not material.

Flexible Packaging Unit.In 2007, capital expenditures amounted to Ch$4,178 million, which was equivalent to 87.8% of the unit’s depreciation. The unit’s investments were mainly allocated to the acquisition of new extruding machines and flexographic printers for its operations in Chile, Peru and Argentina.

In 2006, capital expenditures amounted to Ch$7,100 million, which was equivalent to 262.4% of the unit’s depreciation. The unit’s investments were allocated to the Chilean subsidiary mainly for the purchase of a nearby property and a rotogravure printing machine. In Argentina, funds were used towards the purchase of an extruding machine and other related printing process machinery.

In 2005, capital expenditures amounted to Ch$5,792 million, which was equivalent to 237.9% of the unit’s depreciation. Investments were primarily related to the acquisition of machinery and equipment for the production facilities in Chile and Argentina, including two extruding machines, a cutter machine, a cylinder engraving machine and some cylinders.

Aluminum Profiles Unit.In 2007, capital expenditures amounted to Ch$3,986 million, which was equivalent to 308.3% of the unit’s depreciation. Most of the unit’s investments were related to the new PVC profiles extruding facilities (PVTEC). These expenditures were made in order to diversify the unit’s product base. Other investments were related to the expansion of manufacturing capacity and cost efficiencies.

In 2006, capital expenditures amounted to Ch$3,129 million, which was equivalent to 274.7% of the unit’s depreciation. Most of the unit’s investments were related to the new PVC subsidiary (PVTEC).

In 2005, capital expenditures amounted to Ch$1,964 million, equivalent to 187.6% of the units depreciation. Investments were made to improve the manufacturing process and capacity.

Business Overview

Strategy

For the period from 2003 through 2005, a Strategic Operational Business Plan (“Business Plan”) was created to make improvements in the marketing, production and administrative areas of the Company, with special emphasis on the Wire & Cable business unit and its largest operation, Ficap S.A. in Brazil.

After successfully implementing the 2003 - 2005 Business Plan, in late 2005, Madeco used it as a basis to define the 2006 - 2008 Business Plan. This new Business Plan was developed in order to focus efforts to grow, increase profitability, consolidate its current position and to develop the skills of its employees. The main objectives of the new Business Plan are the following:

- consolidate the activities of the Wire and Cable unit;

- diversify and search for growth and profit opportunities for the Brass Mills unit;

- make the Flexible Packaging unit profitable;

- maintain leadership in the Aluminum Profiles unit;

- achieve operational excellence by searching for process homologation options and best practices in  the different business units;

- implement a strategic management policy  in human resources; and

- consolidate the Company’s financial position.

Progress is being made in meeting the objectives of the 2006-2008 strategic plan, such as consolidation of the performance of the Wire and Cables and Flexible Packaging units and maintenance of the Aluminum Profiles unit’s market leadership position. In addition, the Company’s financial position has improved and it is reducing its leverage. Furthermore, the Company implemented SAP throughout several of its subsidiaries, achieving higher standards of corporate governance and management control. Finally, the Company put into practice the “Skills Management Program” in order to standardize processes and best practices, thus encouraging the development of the Madeco group employees.

In accordance with its 2006-2008 Business Plan, the Company will develop a new Business Plan by the end of 2008 that will set strategic guidelines for the Company in order to increase profitability, regional leadership and value addition to its shareholders, based on the future outlook of the Company, taking into consideration whether at such time the proposed transaction with Nexans has been completed.

Wire & Cable

Since Madeco's incorporation in 1944, its principal business has been the production, sale and distribution of wire and cable products. The Company’s Wire & Cable business unit is composed of two divisions: metallic cable, which includes copper rod, and optical fiber cable.

The following table includes the names of the Company’s subsidiaries dedicated to the production, sale and distribution of metallic as well as fiber optic wire and cable products:

|Entity Name          | Division       | Country  
|-------------------- | -------------- | ---------
|Madeco Chile         | Metallic Cable | Chile    
|Ficap S.A.           | Metallic Cable | Brazil   
|Indeco S.A.          | Metallic Cable | Peru     
|Cedsa S.A.           | Metallic Cable | Colombia 
|Decker-Indelqui S.A. | Metallic Cable | Argentina
|Optel Argentina S.A. | Optical Fiber  | Argentina

At year-end 2001, as a consequence of Argentina’s tumultuous economic environment and political instability, the Company suspended its Argentine Wire & Cable production operations. Decker-Indelqui (its Llavallol and Quilmes plants) maintained a minimal staff in Argentina, primarily to sell products imported from Madeco’s Brazilian facilities and to ensure the security and maintenance of its production facilities. In November 2004, Madeco reopened partially and, on a non-continuous basis, its wire & cable plants (Llavallol and Quilmes) located in Argentina. In November 2005, Decker-Indelqui won public bids to supply over Ch$7,779 million (historic value, approximately US$15 million) of aluminum transmission cables, allowing the Company to increase its capacity utilization in Argentina.

In February 2007, the Company purchased 80% of the total shares of Cedsa S.A., a Colombian company which owns a facility in the Colombian city of Bucaramanga and is the third largest manufacturer of copper and aluminum cables in the Colombian market, for Ch$2,022 million (historic value, approximately US$3.7 million). This acquisition was made in order to expand the presence of the Company in the region. Concurrently, Cedsa’s shareholders agreed to a capital increase of Ch$3,279 million (historic value, approximately US$6 million) payable in March and September 2007.

On November 15, 2007, Madeco entered into a Framework Agreement with the French company, Nexans, whereby Madeco agreed the transfer all the assets of its Wire & Cable unit in Chile, Argentina, Peru, Brazil and Colombia to Nexans, at a preliminary price of US$448 million or Ch$227,024 million (historic value) plus 2.5 million shares of Nexans, totaling approximately US$823 million or Ch$417,055 million (historic value). Pursuant to this Framework Agreement, the parties have to perform reciprocal due diligence and sign a final contract before the completition of this transaction.

On February 21, 2008, Madeco and Nexans enterd into a Purchase Agreement by which Madeco will transfer all of the assets and liabilities of its Wire & Cable Business Unit in Chile, Peru, Brazil, Argentina and Colombia, subject certain conditions (mentioned bellow).

At Nexans’ Annual Shareholders’ Meeting held on April 10, 2008, Nexans’ shareholders approved the transaction with the Company and also agreed to elect Madeco’s representative to its board of directors.

On April 23, 2008, the Board of Directors of the Company agreed to ask shareholders at the next Annual Shareholders' Meeting, which is scheduled to be held no later than April 30, 2009, to approve the distribution of an extraordinary dividend of up to US$ 165 million (approximately Ch$73,504 million) equivalent to 76% of the net profit from the transaction between Madeco and Nexans (as estimated on February 21, 2008), which is expected dependent on the completion of this transaction. For further information about Madeco's dividend policy, see "Item 8. Financial Information " Consolidated Statements and Other Financial Information - Dividend Policy"

At Madeco's Extraordinary Shareholders' Meeting held on April 25, 2008, Madeco's shareholders approved the transaction with Nexans as described in the Purchase Agreement. This transaction involves the sale of approximately the 51% of the Company's assets, according to its audited consolidated financial statements as of December 31, 2007. See “Item 4. Information on the Company – History”.

On December 29, 2007, Indelqui S.A. and Decker-Indelqui S.A. entered into a goodwill transfer contract by which Decker-Indelqui S.A. transferred to Indelqui S.A. its cable business unit, including: fixed assets, goods, credits, trademarks, client lists, databases, ratings, and Indelqui's shares in Optel Argentina S.A. (9,704,699 ordinary shares, with a nominal value of $1 each, representing 95.02% of Optel Argentina S.A.'s share capital). This transfer was made for a price of Ch$14,951 million (historic value, approximately US$30.1 million), plus VAT and taxes of Ch$1,761 million (historic value, approximately US$4.5 million). As a method of payment, the parties agreed to use an outstanding credit in the amount of Ch$13,815 million (historic value, approximately US$27.8 million), which Indelqui S.A. held against Decker-Indelqui S.A.. The application of this credit toward the transaction price, resulted in a net balance to be paid to Decker-Indelqui of Ch$2,897 million (historic value,
approximately US$5.8 million).

As of December 31, 2007, Optel Argentina S.A. had 10,215,473 shares, with a nominal value of ARS$ 1 each, outstanding.  Indelqui S.A. controlled 95.02% of these shares and the remaining 4.98% was controlled by HB San Luis S.A.

As of December 31, 2007, Indelqui S.A. had 86,257,478 shares, with a nominal value of ARS$ 1 each, outstanding.  Madeco S.A. controlled 99.999% of these shares and the remaining 0.001% was controlled by Metallurgical Industrial S.A.



Wire & Cable - Summary of Sales

The Wire & Cable unit is Madeco’s largest business unit in terms of sales, with revenues representing 64.5% of the Company’s consolidated revenues for the year 2007. The following tables show Madeco’s annual revenues and sales volume generated by the Wire & Cable business unit for the years 2005, 2006 and 2007:

|                                              |                                       |                                        |                |                        
|--------------------------------------------- | ------------------------------------- | -------------------------------------- | -------------- | -----------------------
|Wire & Cable Unit - Revenues (in Ch$ million)
|Year                                          | Metallic Cable Division 
Revenues (1) | Optical Fiber Cable Division 
Revenues | Total Revenues | % Consolidated Revenues
|2005                                          | 230,644                               | 1,893                                  | 232,537        | 58.0%                  
|2006                                          | 385,349                               | 1,531                                  | 386,880        | 64.4%                  
|2007                                          | 409,501                               | 2,346                                  | 411,847        | 64.5%                  



|                                      |                                   |                                           |                        |                      
|------------------------------------- | --------------------------------- | ----------------------------------------- | ---------------------- | ---------------------
|Wire & Cable Unit - Sales Volumes (2)
|Year                                  | Metallic Cable
Division (in tons) | Optical Fiber Cable Division
(in kms (3)) | Total Volume
(in tons) | % Consolidated Volume
|2005                                  | 68,712                            | 82,216                                    | 70,581                 | 56.3%                
|2006                                  | 79,368                            | 60,672                                    | 80,747                 | 59.1%                
|2007                                  | 87,924                            | 131,976                                   | 90,924                 | 56.3%                

(1) Revenues of the Metallic Cable division include copper rod sales. They also include copper sulfate sales from Indeco.
(2) Sales volumes of Optical Fiber in 2005 differs from those presented in the Company’s Annual Report on Form 20-F for 2005 as a result of a change in the Company’s methodology.
(3) Total sales volume presented in tons include the optical fiber conversion rate of 1 ton = 44 kms.

The Company’s Wire & Cable business unit generated revenues of Ch$411,847 million for the year 2007, an increase of 6.5% compared to the previous year (Ch$386,880 million). Sales volume of metallic cables increased by 10.8%, mainly due to higher sales of aluminum cables in Brazil (46.3%) and Argentina (135.5%), copper cables in Peru (23.2%) and the inclusion of Cedsa (4,031 tonnes). On the other hand, sales volumes of copper rods fell in Peru (25.1%) and Chile (23.6%), due to higher internal consumption and the incorporation of Cedsa as a related company. In spite of this sales decrease, the Company experienced general growth in its cable products in those countries where the Company operates due to improved economic conditions, which stimulated private sector investment of the Company’s Wire & Cable products.

Madeco sells its wire and cable products mainly in domestic markets. Export sales for the Wire & Cable unit represented 16.9% of the unit’s revenues for the year 2007 (73.6% of which represented copper rod). The following tables show Madeco’s annual revenues and sales volumes generated by the Wire & Cable business unit (sales volume are separated by division) by destination for the years 2005, 2006 and 2007:

|Wire & Cable Unit – Revenues by Destination(in Ch$ million)
|-----------------------------------------------------------
|Year                                                       
|2005                                                       
|2006                                                       
|2007                                                       



|Wire & Cable Unit – Sales Volumes of Metallic Cable by Destination (in tons)
|----------------------------------------------------------------------------
|Year                                                                        
|2005                                                                        
|2006                                                                        
|2007                                                                        



|Wire & Cable Unit – Sales Volumes of Optical Fiber Cable by Destination (in kms) (2)
|------------------------------------------------------------------------------------
|Year                                                                                
|2005                                                                                
|2006                                                                                
|2007                                                                                

(1) In 2005, 2006 and 2007, the Company’s revenues in Argentina are the result of the marketing and selling of both imported products from Ficap S.A. and manufactured products from Decker-Indelqui.
(2) This table differs from those presented in the Company’s Annual Report on Form 20-F for 2005 as a result of a change in the Company’s methodology.

The following table shows the Company’s total revenues generated by the Wire & Cable unit for the years 2005, 2006 and 2007, broken down by the subsidiary generating the revenues:

|Wire & Cable Unit – Revenues (in Ch$ million)
|---------------------------------------------
|Year                                         
|2005                                         
|2006                                         
|2007                                         

(1) In 2005, 2006 and 2007, the Company’s revenues in Argentina are the result of the marketing and selling of both imported products from Ficap S.A. and manufactured products from Decker-Indelqui.
(2) Cedsa was incorporated to the Company on February 2007

The following discussion of the Company’s Wire & Cable business unit (production, raw materials, sales and distribution, market demand and industry size estimates, and market share and description of competition) have each been separated into two sections, metallic wire and cable and optical fiber cable.



Cable - Production

The Company has a total of eight facilities for the production of metallic wire and cable products. In Chile, the Company maintains one cable production facility located in the district of Santiago. The Company has two modern facilities operating in Brazil, located in Rio de Janeiro and Sao Paulo. In Argentina, production facilities are located in Quilmes and Llavallol, both on the outskirts of Buenos Aires and the Optical fiber facility located in Ciudad de B. Aires. The Company’s Peruvian production facility is located in Lima and the Colombian facility, which was acquired in early 2007, is located in the city of Bucaramanga.

Since 2003, the Company has ceased producing magnetic cables in Chile and has commenced the production of flexible cables and anti-theft cables. Madeco’s wire and cable products are sold primarily in domestic markets.

The following table includes information regarding each wire and cable production facility: plant location, principal products manufactured and International Standard Organization certification, or “ISO certification”:

|          |                              |                                                                       |                        
|--------- | ---------------------------- | --------------------------------------------------------------------- | -----------------------
|Country   | Location                     | Principal Products                                                    | ISO Certification (1)  
|Chile     | San  Miguel, Santiago        | Cu: all wire and cable products                                       | 9001: 1998, 2007       
|Brazil    | Rio de Janeiro               | Cu and Al:thermo-plastic, thermo-stable, bare wire cable; Cu: telecom | 9001: 2003, 2008       
|          | Sao Paulo                    | Cu and Al: thermo-plastic, thermo-stable, building wire; Cu: magnetic | 9001: 2003, 2008       
|Argentina | Quilmes, B. Aires            | Cu and Al: bare wire, thermo-plastic, thermo-stable;
Cu: telecom      | 9001: 1999, 2007       
|          | Llavallol, B. Aires          | Cu and Al: bare wire                                                  | 9001: 2004, 2007       
|          | Ciudad de B. Aires,
B. Aires | Optical fiber cables                                                  | 9001: 2000, 2007
14,000
|Colombia  | Bucaramanga                  | Cu and Al: all wire and cable products                                | 9001: 2005, 2008       
|Peru      | Lima                         | Cu and Al: all wire and cable products                                | 9001: 1998, 2008       

(1)  In cases where two dates are included, the first date indicates the original certification and the second date indicates the most recent certification.

The Company has created joint ventures in both Chile and Peru with other wire and cable manufacturers to produce 8.0 mm copper rod, one of the principal raw materials used in the production of copper wire and cable products, see “Item 4. Information on the Company – Business Overview – Wire & Cable – Raw Materials”.

The Company manufactures bare wire as well as wires and cables sheathed with insulating materials such as plastic or rubber. Production of copper and aluminum wire and/or cable products begins with 8.0 mm copper and 9.5 mm aluminum rods, respectively. The rod is drawn to the diameter necessary to meet the properties and flexibility of the corresponding finished products. Madeco produces many different types of wires and cables, and each product can be classified based on certain characteristics: number and style of strands: wire (singular strand) or cable (multiple, joined or bundled strands); and type of insulation: bare, thermo-plastic insulated, thermo-stable insulated or magnetic. In addition, cables have different types of international classification standards: ASTM, IEC, ICEA, VDE and other standards.

The Company’s metallic wire and cable products include both standard products as well as customized special order products that satisfy the energy, mining, construction and telecom sectors’ requirements, as well as the durable goods manufacturers’ requirements. While standardized or on-the-shelf products are manufactured according to the highest international standards, customized wire and cable products are made to satisfy customer specifications.

The three principal types of copper telecom cables produced by the Company are high capacity multi-pair transmission cable, distribution cable and internal cable. Classification of the cables is based on their transmission capacity (i.e., the quantity of channels that can be carried simultaneously). The largest telecom cables are the high capacity multi-pair transmission cables (up to 2,400 pairs); these cables are insulated with polyethylene and used as underground trunk lines between major switching facilities. These trunk lines are being replaced over time by optical fiber cables, which carry high amounts of data with superior transmission performance. Distribution cables are polyethylene insulated telecom cables including between 10 and 400 pairs. They are used to interconnect trunk lines to individual homes and buildings. Internal cables (less than 25 pairs) are insulated with polyvinyl chloride (“PVC”) and used to link individual buildings to their respective external connection points which are located in close vicinity (“drop lines”). Internal cables are also used within commercial and residential buildings.

The following diagram depicts the production process for copper telecom cables:

Copper rod → drawing → drawing and insulating → pairing → cabling → coating

Madeco produces all types of power transmission and distribution cables, including bare, rubber insulated or plastic insulated cables. Bare copper and aluminum cables are mainly used for high voltage transmission (69 kilovolts (“kV”) or more) and are usually installed outside urban areas. Copper or aluminum insulated cables, both with rubber and plastic, are most often used for electricity distribution within an urban area; rubber and plastic insulated cables are used for low and medium voltage distribution (0.3 kV — 69 kV).  In all three cases — high voltage, medium voltage and low voltage — the diameter of the cable is a function of the current which is to be transmitted.

Mining cables are copper cables insulated with rubber, a thermally stable material. These cables are usually low and medium voltage transmission cables (between 1 kV and 15 kV) and are used for heavy machinery like bulldozers, drilling machines, and mechanical excavators and loaders.

The Company produces two basic types of wires and cables for the manufacturers of durable goods and other industrial companies: plastic insulated wires and cables and magnetic wires. Plastic insulated wires and cables are copper conductors insulated with plastic materials such as polyethylene, PVC or polyester. These products are sold primarily to manufacturers of home appliances and to industrial companies for their internal energy distribution. All plastic insulated wires and cables are used for low voltage applications. Magnetic wires, which are made of drawn enameled copper wire, are sold to manufacturers of engines and generators, and are used for ignition or electronic coil applications and refrigeration units. The Company also produces round, square or rectangular magnetic wires insulated with cotton and/or paper, used by manufacturers of electrical transformers.

The following diagram depicts the production process for bare, thermo-plastic and/or thermo-stable cables used in the mining, energy and industrial sectors:

Copper rod → drawing → cabling → insulating → protective sheathing → cabling → coating → cutting → packing

The following diagram depicts the production process for magnetic wires:

Copper rod → drawing → enameling → cutting → packing

The construction industry uses building wire, which is PVC insulated copper wire produced in a wide range of sizes (from 1.5 mm2 to 25 mm2). Building wire is used for multiple applications of internal low voltage distribution within a construction project, including electromotive applications and transmission of power and lighting, and is appropriate for both wet and dry applications. This kind of wire is most commonly sold to distributors and retailers.

The following diagram depicts the production process for building wire:

Copper rod → drawing → cabling → insulating and/or coating → cutting → packing

The Company also produces optical fiber telecom cables. Optical fiber is produced from compact glass (silicon) filaments (0.125 mm diameter), which are purchased in sealed reels to protect them from external contamination. The filaments are insulated with polyethylene through an extrusion process and are then bundled in groups of twelve. The individual twelve-filament groupings can then be further bundled, creating thick optical fiber cables with a maximum of 144 filaments. The bundle is finally protected by polyethylene and/or metal insulation. Optical fiber cables are used mainly for trunk lines for both local and long distance telecom services.

The following diagram depicts the production process for optical fiber telecom cables.

Optical Fiber → Insulating (Extrusion) → Bundling → Insulation → cutting → packing



Cables - Raw Materials

The principal raw materials used in the production of wires and cables are copper and aluminum as conductive materials and plastic and rubber for insulation. Historically, prices of copper, aluminum and metals in general have fluctuated greatly. The Company attempts to modify the selling prices of its products to respond to these fluctuations. See “Item 3. Key Information — Risk Factors” and “Item 5. Operating and Financial Review and Prospects — Fluctuations in LME Metal Prices and Exchange Rates between Currencies”.

Copper is the principal raw material used by the Company in the production of wire and cable products, representing approximately 68.0% of the total raw material costs for the Company’s Wire & Cable unit in 2007. The Company’s Brazilian unit purchases the majority of its copper from a domestic supplier, Caraiba Metais S.A. and Ibrame Ltda., and the remainder from Madeco Chile. In 2007, copper purchases from Caraiba Metais S.A., Ibrame Ltda and Madeco Chile represented approximately 43%, 12% and 45%, respectively. Of total copper purchases Combined, Xstrata Tintaya S.A., Southern Peru Copper Corporation and Sociedad Minera Cerro Verde S.A. are three large Peruvian mining companies, which together supply almost 100% of the Peruvian operation’s total copper requirements. In Argentina, copper rod is supplied by Madeco’s subsidiaries and related companies. The Colombian unit purchases its copper rod requirements from Madeco Chile.

In Peru, Cobrecón S.A., an affiliate company is the main supplier of copper rod. The Company, the Peruvian cable manufacturer, Conductores Eléctricos Peruanos (“Ceper”), and the Colombian cable manufacturer, Cables de Energía y Telecomunicaciones S.A. (“Centelsa”), each own a 33% equity participation in Cobrecón. In Chile, the Company owns a 41% share of Colada Continua S.A., which supplies copper rod to Madeco Chile. While in the past the Brazilian unit purchased the bulk of its copper rod directly from a domestic supplier, the Company has increased the supply of copper rod to Brazil from the Chilean copper rod production entity. The Company’s stake in these copper rod suppliers is an advantage which guarantees that the Company will have the raw material, it requires for wire and cable production.

In Chile, the government entity Corporación Chilena del Cobre (the Chilean Copper Corporation, or “Cochilco”) guarantees and regulates the supply of copper to all domestic manufacturers according to the Copper Reserve Law. On an annual basis, all Chilean copper customers must inform Cochilco of their estimated copper requirements for the upcoming year. Cochilco assigns the domestic copper demand to the various mining companies and establishes conditions for the sale of copper including price levels, which reflect London Metal Exchange, or “LME”, prices adjusted for a premium, less non-incurred expenses (freight and taxes) and related insurance costs. Copper purchases are made on a monthly basis, with copper price determined by utilizing an average market price and payments are made prior to delivery. Cochilco establishes copper supply contracts and decides which terms are subject to annual renewal. Whether or not a Chilean copper customer was able to obtain its estimated annual copper requirements will be taken into consideration by Cochilco when renewing contracts. Chile is the only country in which the Company operates where copper purchases are organized and controlled by a government entity; such an arrangement does not exist in Peru, Brazil, Argentina or Colombia.

Aluminum, another principal raw material of the Company, is currently purchased separately by the respective operations in each country. In Peru and Argentina, the Company purchases its aluminum rod supplies from ALUAR (Argentina). In addition, in Peru, the Company also purchases its aluminum rod supplies from Siderúrgica del Norte (Colombia). In Brazil, the Company purchases aluminum rod supplies from BHP Billington and Companhia Brasileira de Aluminio. In Colombia, the Company purchases its aluminum requirements mainly from Sidunor (Colombia).

In October 2003, the Company signed an agreement for the supply of PVC for Chilean and Peruvian operations with Petroquímica Colombiana S.A.. The contract provides greater flexibility to the Company. In Brazil, the Company mainly purchases its PVC requirements on a monthly basis from two different suppliers, Karina Ind. Com. Plásticos and Dacarto Benvic S/A. In Brazil, there are no signed contracts with suppliers. In Colombia, the Company purchases its PVC supplies from Andina Plast SRL.

During 2006, Madeco signed a supply agreement with Borealis Compounds LLC USA (“Borealis”) for the supply of polyethylene for its operations in Chile, Brazil, Peru, Colombia and Argentina. This supply agreement started in January 2006 and ended on December 31, 2006. In 2007, the Company agreed to purchase its polyethylene needs from Borealis and Dow Chemicals. The Company signed an agreement with Borealis that will last until the end of 2008, and an agreement with Dow Chemicals that will last until the end of 2009.

The Company has a choice of suppliers for other plastic and rubber materials and believes it is currently not dependent on any one supplier. In order to obtain more favorable price and payment terms for other insulation materials, the Company is evaluating the possibility of region-wide supply agreements for various types of raw materials.

The main raw material used in the production of optical fiber cable is optical fiber. Other raw materials used include thermoplastic materials, silicone filling compound, non-metallic strength elements between steel tapes or wires (in case of armored cables) and polyethylene as an outer jacket. The Company purchases its optical fiber supplies from Corning Fiber (USA) and Optomagic (Korea).

Madeco believes that its contracts and other agreements with third-party suppliers for the supply of raw materials for wire and cable products contain standard and customary terms and conditions. During the past ten years, the Company has not experienced any substantial difficulties in obtaining adequate supplies of necessary raw materials at satisfactory prices, nor does it expect to do so in the future.



Cables — The Company’s Sales and Distribution

The Company maintains direct relationships with each of its major customers and devotes substantial efforts toward developing strong, long-term relationships. In order to best serve the specific needs of the Company’s client groups, each sales representative is assigned to clients on an exclusive basis and clients are grouped based on industry and/or geographic region. Customer groupings include: distributors, durable goods manufacturers, mining, telecom and energy (utilities and industries) companies.

The Company’s Chilean sales force shares its sales staff with Madeco Chile’s Brass Mills unit. This combined sales force includes a Sales & Marketing manager, three supervisors, 12 sales representatives (two of them located in the southern region and one located in the northern region of the country to attend the mining industry), six sales assistants, one project engineer and one person in charge of marketing.

In Brazil, the Company has a total of 53 employees dedicated to sales, marketing and customer service; these individuals are geographically located across nine branch offices in the country's primary cities (Sao Paulo, Rio de Janeiro, Americana, Belo Horizonte, Curitiba, Brasilia, Recife, Porto Alegre and Salvador). The Brazilian sales efforts are divided into four sectors:  the first sector includes power utilities, naval industries, transportation, etc.; the second sector includes cable distributors and durable goods manufacturers; the third sector includes telecom operators; and the forth sector includes OEM enameled wire consumers. These sectors serve the Company’s customer groupings through all of the Company’s nine branch offices. In addition to its proprietary sales force, Madeco retains sales representatives (who are not Company employees) on a contract basis, to serve those regions that are located far from the branch offices. Over the last couple of years Madeco has reduced the number of its sales representatives in Brazil as part of its Business Plan.

The Company’s sales force in Peru has 10 sales representatives and eight sales assistants. Additionally, the Company maintains four proprietary retail outlets, located in the cities of Lima and Arequipa. Sales made through the retail stores represented approximately 6% of the total revenues generated in Peru.

The Company’s sales force in Argentina includes a sales & marketing manager, seven sales representatives and two sales assistants. The sales force is located in Buenos Aires.

The Company’s sales force in Colombia includes a sales & marketing manager, seven sales representatives and four sales assistants. The Colombian market is divided in five areas between the sales representatives and assistants mentioned above.

The Company’s wire and cable client base includes approximately 291 customers in Chile, 1,894 in Brazil, 1,502 in Peru, 245 in Argentina, 202 in Colombia and 79 in its export markets (all countries other than Chile, Brazil, Peru or Argentina). The Company’s largest customer for the year 2006 was a Brazilian manufacturer, and sales to this customer accounted for 6.0% of the Wire & Cable unit’s total sales revenues.

Given the unique tendencies that occur in each of the four countries in terms of demand levels among the various client sectors served by the Company’s wire and cable sales, information regarding sales by sector has been included on a country-by-country basis. The following charts show the Company’s sales breakdown by client grouping for each country for wire and cable products during the years 2005, 2006 and 2007:

|                                         |                 |                 |                
|---------------------------------------- | --------------- | --------------- | ---------------
|The Company’s Chilean Customer Groupings
|                                         | % 2005
Revenues | % 2006
Revenues | % 2007
Revenues
|Distributors                             | 13%             | 15%             | 16%            
|Durable goods manufacturers              | 53%             | 57%             | 55%            
|Mining                                   | 8%              | 8%              | 9%             
|Energy                                   | 16%             | 13%             | 14%            
|Telecom                                  | 5%              | 2%              | 2%             
|Others                                   | 5%              | 5%              | 4%             



|                                           |                 |                 |                
|------------------------------------------ | --------------- | --------------- | ---------------
|The Company’s Brazilian Customer Groupings
|                                           | % 2005
Revenues | % 2006
Revenues | % 2007
Revenues
|Distributors                               | 23%             | 24%             | 23%            
|Telecom companies                          | 5%              | 6%              | 10%            
|Energy                                     | 19%             | 19%             | 22%            
|Durable goods manufacturers                | 44%             | 35%             | 30%            
|Exports and others                         | 9%              | 15%             | 15%            



|                                          |                 |                 |                
|----------------------------------------- | --------------- | --------------- | ---------------
|The Company’s Peruvian Customer Groupings
|                                          | % 2005
Revenues | % 2006
Revenues | % 2007
Revenues
|Distributors                              | 23%             | 22%             | 27%            
|Mining                                    | 5%              | 5%              | 6%             
|Energy                                    | 14%             | 7%              | 6%             
|Telecom                                   | 11%             | 9%              | 4%             
|Durable goods manufacturers               | 5%              | 5%              | 6%             
|Retail                                    | 6%              | 5%              | 6%             
|Exports and others                        | 36%             | 47%             | 45%            



|                                           |                 |                 |                
|------------------------------------------ | --------------- | --------------- | ---------------
|The Company’s Argentine Customer Groupings
|                                           | % 2005
Revenues | % 2006
Revenues | % 2007
Revenues
|Distributors                               | 48%             | 27%             | 25%            
|Durable goods manufacturers                | 6%              | 9%              | 5%             
|Energy                                     | 40%             | 52%             | 56%            
|Telecom                                    | 0%              | 0%              | 0%             
|Exports and others                         | 6%              | 12%             | 16%            



|                                           |                 |                 |                
|------------------------------------------ | --------------- | --------------- | ---------------
|The Company’s Colombian Customer Groupings
|                                           | % 2005
Revenues | % 2006
Revenues | % 2007
Revenues
|Distributors                               | 55%             | 60%             | 53%            
|Mining                                     | 1%              | 1%              | 1%             
|Energy                                     | 33%             | 23%             | 38%            
|Telecom                                    | 5%              | 9%              | 4%             
|Durable goods manufacturers                | 6%              | 7%              | 4%             
|Exports and others                         | 0%              | 0%              | 0%             



While a small portion of the customers make cash payments for their purchase orders, the majority of sales were made with credit. The average payment period for the Company’s Wire & Cable business unit amounted to 52 days in 2007 versus 56 days in 2006.

Delivery or shipping of standard products that are in stock is made within a 48-hour period. In the case of customized products, the production time ranges between 30 and 90 days, depending upon the complexity of the cable being produced and the plant workload.

When products are completed and available for delivery, the Company either hires third-party transportation companies to deliver the finished goods to a customer’s plant or warehouse, or the customer picks up the products at the Company’s plant. The mode of transportation for exported products depends on the destination country; while ground transportation is used within the Southern Cone countries, sea transportation is used for exports to all other countries.



Cable - Market Demand and Industry Size Estimates

The principal users of the Company’s wire and cable products are the energy, mining, construction and telecom sectors as well as durable goods manufacturers. Additionally, some products are sold to the general public through retail operations.

The Company’s management believes that demand in the energy sector is typically dependent on new infrastructure projects, the energy regulation system and any energy deficits or surpluses that promote interconnection systems between countries or regions. In the mining sector, the Company’s management believes that the market prices of metals are a major determinant for new investment projects. While demand from durable goods manufacturers seems to depend primarily on gross domestic product, or “GDP” growth, demand from the construction sector appears to depend on GDP growth as well as interest rate and unemployment levels. The Company’s management believes that investments within the telecom sector are largely dependent on GDP growth. However, investment activity by telecom companies also depends on price regulations in each country and special situations such as privatization, among other factors. The Company’s management believes that demand within the telecom industry is affected by, among other things, a lack of investment in telecom cable networks and significant changes as copper telecom cables are being substituted with optical fiber cables and wireless technologies. In 2007, telecom cables and optical fiber represented 8.7% of the business unit’s revenues.

There are no formal third-party estimates on industry size for any of the countries in which the Company has wire and cable operations. The Company bases its estimates on published information from its competitors, import and export reports, the Company’s proprietary production and sales data, Chilean copper sales reports from Cochilco and production reports from the Company’s Chilean and Peruvian wire rod manufacturers. See “Presentation of Information”.

Given the unique evolution of the wire and cable industry within each individual country, a discussion regarding the industry growth/shrinkage over the period from 2005 through 2007 is included separately for each country. The following chart summarizes management’s estimates for the wire and cable industries (excluding copper wire rod) for the regions in which the Company participated for the years from 2005 through 2007:



|Industry Size (in metallic tons(1))
|-----------------------------------
|Year                               
|2005                               
|2006                               
|2007                               

(1) Measurement estimates for industry size only include metal (copper and/or aluminum); excludes insulation materials.
(2) The industry size statistics presented in this table differ from those presented in the Company’s Annual Report on Form 20-F for 2005 and 2006 due to the incorporation of the Colombian market.

Chilean Wire & Cable Market. The following chart shows the Company’s estimates for the Chilean wire and cable industry (excluding copper wire rod) as well as the country’s GDP growth rates for the years 2005, 2006 and 2007:

|     | Industry Size         |             
|---- | --------------------- | ------------
|Year | (in metallic tons(1)) | GDP Rate (2)
|2005 | 28,100                | 5.7%        
|2006 | 26,500                | 4.0%        
|2007 | 28,700                | 5.1%        

(1) Measurement estimates for industry size include only metal (copper and/or aluminum), excluding insulation materials.
(2) The GDP rates for Chile presented above differs from those  presented in the Company’s Annual Report on Form 20-F for the year 2005 as a result of a change in the Chilean Central Bank’s calculation methodology in 2007.

In 2006, the Chilean wire and cables market decreased to approximately 26,500 tonnes, due to the absence of both "mega projects" and new substantial private investment in the energy industry. In addition, during the last decade, the Company has also witnessed a considerable reduction in telephone cable consumption.

In 2007, the Chilean wire and cables market raised its tonnage to approximately 28,700 tonnes due to higher sales generated by new mining projects, new building construction and increased construction of public and private infrastructures, as compared to 2006.

Brazilian Wire & Cable Market. The following chart shows the Company’s estimates for the Brazilian wire and cable industry (excluding copper wire rod) as well as the country’s GDP growth rates for the years 2005, 2006 and 2007:

|     | Industry Size         |             
|---- | --------------------- | ------------
|Year | (in metallic tons(1)) | GDP Rate (2)
|2005 | 211,200               | 2.9%        
|2006 | 213,400               | 3.7%        
|2007 | 286,550               | 5.4%        

(1)Measurement estimates for industry size include only metal (copper and/or aluminum), excluding insulation materials.
(2) The 2006 GDP rate for Brazil presented above differs from that  presented in the Company’s Annual Report on Form 20-F for the year 2005 as a result of a change in the calculation methodology by the Brazilian IGBE.

In 2006, the Brazilian GDP grew 3.7%, while the wire and cable market only increased by 1.9%. The smaller growth in the wire and cable market is primarily due to the slower overall growth of the Brazilian economy in 2005.

In 2007, the Brazilian economy observed favorable conditions conducive to GDP growth of 5.4%. In accordance with this GDP growth, the cable industry also grew as a result of significant investments in energy generation and distribution, steelmaking, paper and pulp production, mining, oil & gas prospection, and naval construction that increased demand for, among other things, aluminum cables and insulated copper cables.

Peruvian Wire & Cable Market. The following chart shows the Company’s estimates for the Peruvian wire and cable industry (excluding copper wire rods) as well as the country’s GDP growth rates for the years 2005, 2006 and 2007:

|     | Industry Size         |         
|---- | --------------------- | --------
|Year | (in metallic tons(1)) | GDP Rate
|2005 | 16,200                | 6.4%    
|2006 | 17,275                | 8.0%    
|2007 | 19,300                | 7.5%    

(1) Measurement estimates for industry size include only metal (copper and/or aluminum), excluding insulation materials.

In 2006, the Peruvian wire and cable market increased by 6.6% compared to the prior year, which was less than the GDP growth of 8.0%, due to the postponement of large infrastructure projects. Furthermore, Ceper reentered into the wire and cable market.

In 2007, the Peruvian wire and cable market increased by 11.7% compared to the prior year, due to increased investments in and higher activity of the Peruvian economy. The Company also observed higher demand in building and energy cables.

Argentine Wire & Cable Market. The following chart shows the Company’s breakdown for the Argentine wire and cable industry (excluding copper wire rods) as well as the country’s GDP growth rates for the years 2005, 2006 and 2007:

|     | Industry Size         |         
|---- | --------------------- | --------
|Year | (in metallic tons(1)) | GDP Rate
|2005 | 40,100                | 9.2%    
|2006 | 45,500                | 8.5%    
|2007 | 62,600                | 8.7%    

(1)Measurement estimates for industry size include only metal (copper and/or aluminum), excluding insulation materials.

In 2006, the Argentine cable industry increased by 13.5% compared with the previous year due to growth in the industrial sector, higher investments in the energy and construction sectors and investment by the government to revert energy deficits.

In 2007, the Argentine cable industry increased by 37.6% compared to the previous year, mainly in aluminum, due to higher demand of the industrial sector, and increased public and private investments in infrastructure in order to revert energy deficits.

Colombian Wire & Cable Market. The following chart shows the Company’s estimates for the Colombian wire and cable industry (excluding copper wire rods) as well as the country’s GDP growth rates for the years 2005, 2006 and 2007:

|     | Industry Size         |         
|---- | --------------------- | --------
|Year | (in metallic tons(1)) | GDP Rate
|2005 | 39,000                | 5.1%    
|2006 | 43,200                | 6.8%    
|2007 | 45,250                | 6.5%    

(1)Measurement estimates for industry size include only metal (copper and/or aluminum), excluding insulation materials.

In 2006, the  Colombian wire & cable market increased by 10.8% compared with the previous year. This growth is due to the privatization in the telecommunications and energy industries in Colombia, and to the improvement in the management of certain public companies.  Some energy transmission lines in the departments of Atlanta, Bolivar, Antioquia, Caldas, Tolima and Boyaca, and telecommunications networks lines of south of Cali, central Barranquilla and north of Bogotá, were replaced.

In 2007, the Colombian construction market increased by 11.6% achieving the highest development of this sector the since 2002, followed by commerce (6.7%) and manufacting (5.8%). In addition, in 2007, 19.3m2million construction licenses were approved (of which 14m2 million were for social housing), amounting to an historic record of 144,190 new homes.



Wire & Cable - Market Share and Description of Competition

The Company strives to be a preferred supplier of wire and cable products in all the markets in which it participates based on its product portfolio as well as its high quality standards both in terms of products and customer service. The Company is implementing measures to strengthen its alliances with its key customer groups and to be the most reliable and competitive supplier for the distributors of its products. Madeco’s principal competitive advantages currently include the high quality of its products, competitive prices, a large commercial network, a diverse product portfolio and a recognized brand name.

There are no formal third-party estimates on market share and the Company bases its estimates on published information from its competitors, import and export reports, the Company’s own production and sales data, production reports from the Company’s wire rod manufacturing entities in Chile and Peru and reports from Cochilco. See “Presentation of Information”. Given the fact that the Company competes against different competitors in each of the four countries in which it has operations, market share and information regarding competitors has been separated by country.

Market Share and Competitors in the Chilean Cable Market.The following table sets forth the Company’s estimate of market share statistics for the Chilean copper wire and cable industry for the past three years:

|                   |      |      |     
|------------------ | ---- | ---- | ----
|                   | 2005 | 2006 | 2007
|The Company        | 38%  | 30%  | 30% 
|Cocesa             | 26%  | 28%  | 26% 
|Covisa             | 17%  | 17%  | 17% 
|Other Domestic     | 7%   | 5%   | 8%  
|Imports into Chile | 12%  | 20%  | 19% 

The Company’s market share calculation methodology includes products sold in Chile and sales from marketing and selling of imported products (mainly magnetic wire). Such imported products are not reflected in the Chilean sales volume because the Company’s definition of sales volume excludes sales from marketing and selling of imported products.

Madeco currently has two principal Chilean competitors in the wire and cable industry. Cocesa, which is owned by the international cable manufacturer Phelps Dodge Corporation (this cable division was acquired by General Cable Inc. on September 2007), has been in business since 1950. This competitor produces many of the same wire and cable products as those manufactured by the Company, except for magnetic wires and telecom cables, which are imported from other of Phelps Dodge’s facilities. Cocesa maintains its production facilities and headquarters in Santiago, and has a branch office in Antofagasta.

The Company’s other principal competitor is Covisa, a company that has been in business for 20 years and is owned by local investors. Covisa produces a variety of wires and cables, but does not manufacture magnetic wires and telecom cables. The headquarters and production facility are located in the city of Viña del Mar, and branch offices are located in Santiago and Concepcion. International wire and cable producers such as Prysmian (Brazil, ex Pirelli Group), Grupo Condumex S.A. de C.V. (“Condumex”, of Mexico), Conductores Monterrey S.A. de C.V. (Mexico) and Top Cable Sociedad Anonima (Spain) have been exporting products to Chile since 1997 and  compete in the bidding processes in the Chilean mining, energy and telecom sectors.

In 2006, the Company decreased its participation to 30% due to the termination of a purchase agreement with CTC (Compañía Telefónica de Chile or Chilean Telephone Company) for the sale of telecom cables and with CAM (Compañía Americana de Multiservicios or Multiservices American Company) which previously imported energy cables.

In 2007, the Company maintained its market share as demand increased in the Chilean cable industry. The Company participated in several public and private projects, such as in mining, energy transmission, road infrastructure, industrial plants and building construction.

Market Share and Competition in the Brazilian Cable Market. The following table sets forth the Company’s estimate of market share statistics for the Brazilian wire and cable industry for the past three years:

|                          |      |      |     
|------------------------- | ---- | ---- | ----
|                          | 2005 | 2006 | 2007
|The Company               | 15%  | 15%  | 12% 
|Phelps Dodge              | 10%  | 12%  | 9%  
|Invex (ex-Pirelli) (1)    | 9%   | 10%  | 9%  
|Prysmian (ex-Pirelli) (1) | 10%  | 10%  | 8%  
|Other Domestic            | 55%  | 51%  | 62% 
|Imports into Brazil       | 1%   | 2%   | 0%  

(1) Pirelli sold its worldwide cable business unit in mid-2005. As a result of this transaction, in Brazil, Pirelli was divided in two companies: Prysmian and Invex.

Phelps Dodge, a subsidiary of Phelps Dodge Corporation (a subsidiary acquired by General Cable Inc. on September 2007), has its Brazilian headquarters and a production facility located in Sao Paulo and has been in operation since 1965, (formerly as Alcoa). PD produces bare aluminum wire and cable, building wire and copper and aluminum thermo-plastic and thermo-stable cables.

Pirelli sold its worldwide cable business unit in mid-2005, which was bought by a fund of Goldman Sachs. As a result, Pirelli Brazil was separated in two companies:Invex (the magnetic wire production facilities) and Prysmian (the energy and telecom wire production facilities). The Company believes that PD is one of the leading producers in Brazil of aluminum wire and cable products. Furukawa (Japan) sold its aluminum facilities to Nexans, and only competes in the telecom industry. Other competitors include the multinational Nexans (French) and Sao Marco (Mexico). In addition, CBA-Companhia Brasileira de Aluminio S.A. and Wirex are local producers.

In 2006, the Company evaluated the possibility of exploiting the European market during 2007. However, because of the difficulties involved in competing in the European market, due mainly to certain logistical and exchange rate disadvantages, efforts to penetrate this market were abandoned in 2006. In addition, the Company continued to focus on value added segments such as utilities and industrial cables.

In 2007, the market share of the Company and its main competitors in Brazil decreased and was captured by certain smaller domestic competitors. The Brazilian cable industry experienced significant growth as a result of higher demand in the industrial sector, mining industry, infrastructure projects, and energy and transmission sectors.

Market Share and Competition in the Peruvian Cable Market.The following table sets forth the Company’s estimate of market share statistics for the Peruvian copper wire and cable industry for the past three years:

|                  |      |      |     
|----------------- | ---- | ---- | ----
|                  | 2005 | 2006 | 2007
|The Company       | 71%  | 64%  | 64% 
|Ceper             | 0%   | 6%   | 11% 
|Celsa             | 11%  | 11%  | 9%  
|Other Domestic    | 6%   | 7%   | 6%  
|Imports into Peru | 12%  | 12%  | 10% 

The Company estimates that it is the market leader in most of the product segments within the Peruvian cable industry: bare copper wire, copper and aluminum thermo-plastic and thermo-stable cables, building wire, magnetic wire and copper telecom cables. The Company’s principal Peruvian competitor is Conductores Electricos Peruanos (“Ceper”), founded in 1968; this company filed for bankruptcy at the end of 2001 and closed-down its facilities in 2004 due to financial difficulties. In November 2005, Ceper came back to the market and competed with the Company in almost every product line, except for smelted wire, but Ceper’s relative significance had decreased compared to that which it had experienced in the previous decade. However, in 2006, Ceper’s presence in the market negatively affected the Company’s market share in Peru. Conductores Electricos Lima (“Celsa”) produces building wire, copper thermo-plastic cables, copper thermo-stable cables and aluminum thermo-stable cables.

In 2006, the Company’s market share decreased by 7% compared to the previous year, due to competition from Ceper and an increase in low cost products from China, non-certified products and imitations. The Company’s sales volume was 11,211 tonnes in 2006.

In 2007, the Company maintained its market share from the previous year, selling a total of 12,549 tonnes.

Market Share and Competition in the Argentine Cable Market.The following table sets forth the Company’s estimate of market share statistics for the Argentine copper wire and cable industry for the past three years:

|                       |      |      |     
|---------------------- | ---- | ---- | ----
|                       | 2005 | 2006 | 2007
|Prysmian Argentina     | 24%  | 32%  | 30% 
|Imsa                   | 20%  | 21%  | 25% 
|The Company            | 6%   | 9%   | 12% 
|Cimet                  | 12%  | 10%  | 10% 
|Other Domestic         | 35%  | 21%  | 21% 
|Imports into Argentina | 3%   | 8%   | 2%  

The Company currently has three principal Argentine competitors in the wire and cable industry.  Prysmian, ex Pirelli Cables S.A.I.C. is the industry leader, with offices and production facilities in Buenos Aires. The Company believes Madeco is the leading supplier in Argentina of bare wire/cable, copper thermo-plastic and thermo-stable cables and building wire. Industria Metalúrgica Sudamericana S.A. (“Imsa”) is a local company which produces building wire and energy cable, and is the only manufacturer of magnetic wire in Argentina. Imsa’s offices and production facilities are located in Buenos Aires. Cimet S.A. is another local competitor and was originally a Phelps Dodge subsidiary which was subsequently acquired by Siemens and then by the Rasmuss Group of Chile. Cimet’s operations are located in Buenos Aires, producing a full range of copper and aluminum wire and cable products. The Company estimates that Cimet is the country’s leading supplier of copper telecom cables.

In 2006, the market share of the Company increased by 3%. This variation is mainly explained by the growth of the Company's market share in the energy sector, which increased sales volume in aluminum wire, medium-voltage power cables and underground copper cables.

In 2007, the Company's market share increased by 3% compared with the previous year. This growth is mainly due to the consolidation of the Company's market share in the energy sector, and more specifically by increased demand of aluminum wires, medium-voltage power cables and underground copper cables.

Market Share and Competition in the Colombian Cable Market.The following table sets forth the Company’s estimate of market share statistics for the Colombian copper wire and cable industry for the past three years:

|                      |      |      |     
|--------------------- | ---- | ---- | ----
|                      | 2005 | 2006 | 2007
|Centelsa              | 60%  | 54%  | 50% 
|Procables             | 22%  | 23%  | 25% 
|The Company           | 4%   | 7%   | 9%  
|PD Colombia           | 5%   | 6%   | 6%  
|Others                | 9%   | 10%  | 10% 
|Imports into Colombia | 0%   | 0%   | 0%  

Centelsa has its headquarters and a plant in the city of Cali and a facility in Venezuela. It has been the Colombian market leader for the last 12 years. Centelsa competes with the Company in several sectors such as in energy, industry, mining, construction and telecommunications, and has a relevant position in markets segments where the Company is not an important player (e.g. telecommunications, mining, etc.). Procables' headquarters and facility are located in Bogotá and is related to Sindunor, a copper and aluminum producer. This company produces cables for all segments of the energy cable market with the exception of medium voltage cables, which is purchased from Madeco Chile (Procables is currently is building a plant of medium voltage and enamelled cables in Barranquilla, which aims to initiate production in late 2008). The Company believes that is the Colombian market leader in aluminum energy cables.

In 2005, Cedsa started a strategy to increase its market share and to reduce the differences in the selling prices of itself and its two main competitors. In 2005 Cedsa began an alliance with Condumex to import certain products which allowed it to access several bids due to its expanded product portfolio. During 2006 and 2007, the Company reduced this "import dependence" eliminating the differential in selling prices with its competitors and reaching a market share of 9%.

In 2007, Phelps Dodge Colombia (a subsidiary of General Cable Inc. since 2007) started a low pricing policy in the Colombian market which reduced all players' margins. By the end of 2007, this competitor was able to strengthen its position in the Colombian market due to its imports from Cocesa (a Chilean subsidiary of Phelps Dodge).

Optical Fiber Cable

Madeco has participated in the optical fiber industry since 1997 with the acquisition of the Brazilian cable operation Ficap S.A. In June 1999 the Company created a joint venture, Ficap Optel Ltda., between its subsidiary Ficap and Corning. Ficap Optel Ltda. used to produce, sell and distribute optical fiber telecom cables. In April 2001, Corning increased its interest in Ficap Optel from 25% to 50% by acquiring a 25% interest from the Company such that both parties owned an equal 50% participation in the joint venture. As part of the joint venture agreement, Ficap Optel changed its name to Optel and acquired 99.9% of Optel Argentina S.A. (previously Corning Cable Systems Argentina S.A.), thereby expanding its optical fiber business into Argentina.

On June 27, 2002, Corning notified Madeco of its desire to liquidate the joint venture. The Company refused to liquidate the joint venture and requested an arbitration. On November 9, 2003, the arbitration suit was resolved against Madeco and the Joint Venture Agreement was declared lawfully terminated.

Until 2002, the Company produced optical fiber telecom cables, for which it had 2 production plants, one located in Brazil and the other in Argentina, with a combined installed capacity of 1,400,000 km. Due to the economic crisis in Brazil and Argentina, demand for Optel’s products, especially from the telecommunication industry, was negatively affected. As a result, during 2003 and 2004 Optel’s plants operated at reduced levels. The Company’s optical fiber cable subsidiary in Brazil sold telecom cables in stock but did not produce telecom cables. In Argentina, Madeco’s optical cable subsidiary Optel Argentina S.A. continued its operations, serving the local market and some neighboring countries.

On March 31, 2005, the Company and Corning reached an agreement whereby Corning sold its 50% interest in Optel Ltda. to the Company for the nominal amount of R$1. In accordance with the purchase agreement, Corning has executed a binding 2 year non-competition agreement not to compete in the markets where Optel currently operates.In addition, on March 31, 2005, the Company reached an agreement with two of Optel’s principal creditors to forgive Ch$3,105 million of Ch$4,277 million (historic value, equivalent to US$5.3 million and US$7.3 million, respectively) of indebtedness, the balance was paid.

In 2006, Decker-Indelqui's management assumed control of the administration and sales department of Optel in order to increase productivity and to develop a new business strategy in order to increase sales.

On May 31, 2007, Optel Ltda. Brazil and Madeco Brazil Ltda. sold to HB San Luis S.A. and Decker-Indelqui S.A., their respective shareholdings in Optel Argentina S.A. (4,914,439 shares par value ARS$1 each), valued at Ch$1,680 million (historic value, approximately US$3.2 million). On October 1, 2007, the share capital of Optel Argentina S.A. increased to 10,215,473 shares (5,301,034 were added with a par value ARS$1 each, equivalent to a historic value of Ch$857.0 million). At the end of 2007, after Indelqui S.A. acquired, on December 29, 2007, Decker-Indelqui's Wire & Cable assets, the shareholding of Optel Argentina S.A. was controlled by Indelqui S.A. with a shareholding of 95.02% of the capital share, and HB San Luis S.A. held the remaining 4.98%.

In 2007, Optel Argentina S.A. sold approximately 111,583 kilometers of optical fiber cable in Argentina and an additional 20,393 kilometers in the exports markets. This increase in sales during 2007 compared with the previous year is mainly explained by the implementation of a successful new business strategy, a stronger sales force and an increased demand for Optel's products, especially from the telecommunications industry.



Brass Mills

Since Madeco’s incorporation in 1944, the Company has been manufacturing pipe, bar and sheet products in Chile; the Company initiated the fabrication of aluminum based products (profiles, sheets and foil) in 1954.

In 1988, the Company acquired Armat, the sole private coin blanks producer in Chile dedicated to the production of coin blanks and minted coins made of copper and copper-based alloys mainly for central banks. Madeco sends its coins to the Chilean Mint for minting and then exports the coins to the various central banks around the world.

The Argentine company, Decker S.A.I.C.A.F. e I.  (“Decker”) was originally a Brass Mills operation founded in 1900 by Mr. Guillermo Decker. The Company acquired Decker in 1994. Decker-Indelqui S.A. was created in 1998 as a result of the merger of the Company’s two subsidiaries in Argentina; the merged entity is currently owned 99.85% by the Company and participates in both the Wire & Cable and Brass Mills businesses.

The following table includes the names of the Company’s subsidiaries dedicated to the production, sales and distribution of Brass Mills products:

|Country   | Entity Name             | Division               
|--------- | ----------------------- | -----------------------
|Chile     | Madeco Chile
Armat S.A. | PBS(1)
Coins and sheets
|Argentina | Decker-Indelqui S.A.    | PBS(1)                 

(1) PBS = Pipes, Bars and Sheets

At the end of 2002, the Company merged Armat’s and its administrative tasks to minimize costs and improve efficiency. As a result, since 2003, Armat’s administrative activities such as finance, accounting, human resources, information systems, and supply are conducted from the Company’s head office in Santiago.

In the second half of 2003, as a result of the gradual recovery in the Argentine market, the Company decided to reopen its copper tubes and foundry operations at a limited capacity, and additionally decided to boost its sales and marketing department, for which the Company maintains 10 employees focused on the sale of local production to over 500 active clients including imports from Madeco Chile.

A complete restructuring of the production process at the Madeco Chile brass mills plant was implemented in October 2005 to improve efficiency and reduce production costs, and this restructuring continued throughout 2007. As a result, low volume and labor-intensive products were discontinued, and Madeco Chile began to concentrate on the production of standard pipes and sheets and/or minimum-size orders.

PBS - Summary of Sales

The following table shows the Company’s annual net sales generated by the Brass Mills business unit for the years 2005, 2006 and 2007:

|Brass Mills Unit – Revenues (in Ch$ million)
|--------------------------------------------
|Year                                        
|2005                                        
|2006                                        
|2007                                        



|Brass Mills Unit – Sales Volumes (in tons)
|------------------------------------------
|Year                                      
|2005                                      
|2006                                      
|2007                                      

(1) The percentages of consolidated volumes for 2005 differ from those presented in the Company’s Annual Report on Form 20-F for 2005 as a result of a change in the Company’s methodology.

The Brass Mills unit is Madeco’s second largest business segment in terms of revenues, representing 16.1% of consolidated revenues in 2007; however substitution due to increasing copper prices has negatively affected its performance, see “Item 3. Key Information – Risk Factors”. Of the four businesses, the Company’s Brass Mills unit is the most internationally diverse, with customers in over 26 countries. Export sales in 2007 amounted to approximately 56.9% of total revenues and 57.0% of total sales volume for the Company’s Brass Mills unit.

The following table shows the Company’s total revenues generated by the Brass Mills unit for the years 2005, 2006 and 2007, broken down by the subsidiary generating the sale:

|Brass Mills Unit – Revenues (in Ch$ million)
|--------------------------------------------
|Year                                        
|2005                                        
|2006                                        
|2007                                        



Brass Mills - Production

The Company’s pipe, bar and sheet, or “PBS”, operation in Chile has two production facilities located in the southern part of Santiago, a smelting furnace and a manufacturing plant for pipes, bars and sheets. Moreover, the Company has its coin blank manufacturing plant in Quilpue, approximately 120 kilometers from Santiago. The Company’s Argentine Brass Mills facilities are located near Buenos Aires, in Llavallol and Barracas. The following table includes information regarding each Brass Mills production facility:

|Country   | Location                | Principal Products       | ISO Certification (1)
|--------- | ----------------------- | ------------------------ | ---------------------
|Chile     | San Miguel, Santiago    | Pipes and Bars           | 9001: 1998, 2007     
|          | San Bernardo, Santiago  | Smelting Furnace, Sheets | 9001: 1998, 2007     
|          | Quilpue                 | Coin Blanks and Sheets   | 9001: 1997, 2006     
|Argentina | Llavallol, Buenos Aires | Sheets and Foundry       | 9001: 2004, 2007     
|          | Barracas, Buenos Aires  | Pipes                    | 9001: 2004, 2007     

(1) In cases where two dates are included, the first date indicates the original certification and the second date indicates the most recent certification.

The Company’s Brass Mills operation produces pipe, bar and sheet products in a variety of copper, aluminum and brass alloys. Copper and brass pipes are used principally by the construction industry and its other bar and sheet products are used as raw material in the fabrication of electrical components, gutters and roofs, mechanical units and hardware fixtures. The Company also produces coin blanks and minted coins, made principally from copper-based alloys.

Production of pipes and/or sheet products begins by melting in a furnace the proper combination of metals and elements to obtain the desired alloy. The Company has two different types of foundry processes: electric and natural gas. The electric foundry is used to melt virgin raw material and to produce special alloys such as brass. The natural gas furnace, which can also operate with alternative energy sources such as diesel fuel or liquid gas, enables the Company to melt secondhand metals mixed with virgin metals and produce alloys which meet standard international requirements. The smelted material is then cast in vertical semi-continuous machines that produce different shapes depending on the final product; for example, cylinders are produced for pipes and rectangular bars are created for sheets, bars and busbars.

Copper and brass pipes are used primarily for heating and drinking water systems in the residential construction industry, the industrial sector, and the commercial construction industry. Copper pipes are also used for air conditioning, heating and refrigeration units, in the fabrication of various automobile parts and by other durable goods manufacturers. The Company’s pipe products range in diameter from 3/8” to 5”; pipes over 1” in diameter are produced in strips measuring up to 6 meters in length while pipes under 1” in diameter can be produced in strip or rolled form.

The following diagram depicts the production process for pipe products:

Billets

Metals → smelting → hot piercing → drawing → cutting → annealing → packing

Copper sheets are used mainly for roofing in the construction sector and for thermal isolation purposes (e.g., car radiators). Copper and brass sheets serve as raw material for decorative items such as picture frames and doors. The Company also manufactures aluminum sheets, which are mainly used for packaging products for the mass consumer market as well as ducts. The vast array of products differs in terms of thickness, width and metal temper, depending on the application for which the final product will be used.

The following diagram depicts the production process for sheets:

Cakes

Metals → Smelting → hot rolling → surface milling → cold rolling → annealing → cutting → packing

Copper busbars are principally used as heavy bars for control panels and serve as electrical conductors for low voltage and high amperage energy transmission. In general, the bar height is a function of the amperage; the greater amount of amperage to be transmitted, the greater the height. The Company produces bars up to eight inches in height. Brass bars are manufactured with a special leaded brass, which is a free cutting alloy necessary for the fabrication of bolts, nut or valves.

The following diagram depicts the production process for busbars and brass bars:

Billets

Metals → Smelting → extruding → drawing → cutting → packing

Recently launched products in the PBS division include copper water outlets, new copper roofing designs, plastic covered copper pipes for the energy sector and silver-plated busbars for the mining industry.

Coin blanks and minted coins can be made from more than 30 different alloys. The main types of coin blanks and minted coins are copper-based (Nordic Gold, brass, nickel silver, copper-nickel or copper-aluminum–nickel), steel-based (electroplated, cladding and stainless steel), bimetallic (different alloys for the outer and inner ring) and commemorative (gold or silver).  Madeco’s production specializes in four copper-based alloys: Nordic Gold (copper, aluminum, zinc and tin), brass (copper and zinc), nickel silver (copper, nickel and zinc) and bronze coins (copper plus nickel or copper, aluminum and nickel).  The exact alloy mix in each case is determined by customer specifications.

The following diagram depicts the production process for coins:

Electric melting furnace → horizontal continuous casting → cold rolling → annealing →cold rolling → blank cutting → rimming → annealing → polishing → sorting → inspecting →packing

In the case of minted coins, the central bank of each country provides the dies to produce the samples or ARMAT develops them with the cooperation of the Chilean Mint. Once approved, the minted coins are delivered under special security procedures to the vaults of the central bank, where they are carefully reviewed. Once the contract is completed, the dies are returned or destroyed and a certificate is emitted by the Chilean Mint certifying the amount of the coined currencies.



Brass Mills - Raw Materials

The primary raw materials used in the production of brass mills products are copper, aluminum, zinc, nickel and tin. Historically, prices of copper, aluminum and other metals in general, have fluctuated greatly. The Company attempts to modify the selling prices of its products to respond to these fluctuations. See “Item 3. Key Information — Risk Factors” and “Item 5. Operating and Financial Review and Prospects — Fluctuations in LME Metal Prices and Exchange Rates between Currencies”.

The Company purchases its copper supplies for its Brass Mills operations mainly from two large Chilean mining companies, Codelco and Enami, and two international mining companies, Escondida (BHP Billiton) and Soc. Contractual El Abra (Freeport-McMoran Copper&Gold). During 2006, the Company obtained most of its Brass Mills’ aluminum requirements from Aluminios Argentinos S.A.I.C. (“Aluar”, of Argentina) while in 2007, its aluminum supply came from both Aluar and Alcasa S.A. The Company’s zinc requirements are purchased mainly from Doe Run (Peruvian supplier). Nickel is purchased mainly from Inco Limited (Canada) and Companhia Niquel Tocantins S.A. (Brazil), and tin is purchased mainly from Minsur S.A. (Peru).

Madeco believes that its contracts and other agreements with third-party suppliers for the supply of raw materials for its brass mills products contain standard and customary terms and conditions. During the past ten years, the Company has not experienced any substantial difficulties in obtaining adequate supplies of necessary raw materials at satisfactory prices nor does it expect to do so in the future, see “Item 3. Key Information — Risk Factors”.

While the pipes, bars and sheets, or “PBS”, division and the coin division together constitute the Company’s Brass Mills business unit, the following discussions below have been separated into two sub-sections, PBS and Coins.



PBS – Sales by Destination

Madeco sells a large portion of its Brass Mills products in Chile and Argentina, where the Company has its production installations. Additionally, the Company exports pipes, bars and sheets to multiple countries including the United States, as well as countries in Latin America, Europe and Asia. Export sales of the PBS division consist of all sales to customers in any country other than Chile or Argentina and represented 54.0% of the total division’s revenues for the year 2007. The following table shows Madeco’s annual net sales generated by the PBS division by destination for the years 2005, 2006 and 2007:

|                                                        |        |           |             |             
|------------------------------------------------------- | ------ | --------- | ----------- | ------------
|PBS Division – Revenues by Destination (in Ch$ million)
|Year                                                    | Chile  | Argentina | Exports (1) | PBS Division
|2005                                                    | 29,600 | 7,525     | 43,592      | 80,717      
|2006                                                    | 32,997 | 10,891    | 73,862      | 117,750     
|2007                                                    | 33,527 | 9,335     | 50,411      | 93,273      



|                                                      |       |           |             |             
|----------------------------------------------------- | ----- | --------- | ----------- | ------------
|PBS Division – Sales Volumes by Destination (in tons)
|Year                                                  | Chile | Argentina | Exports (1) | PBS Division
|2005                                                  | 9,177 | 2,726     | 16,044      | 27,947      
|2006                                                  | 6,937 | 2,432     | 17,031      | 26,400      
|2007                                                  | 7,258 | 2,065     | 11,188      | 20,511      

(1) Exports of the PBS division consist of all sales to customers in any country other than Chile or Argentina.

In 2007, PBS division revenues decreased by Ch$24,477 million or 20.8% compared to the previous year. This decrease was due to a continued decrease of 22.3% in sales volume compared to the previous year, due to the negative effects of product substitution which was only slightly offset by higher average prices. Revenues in Chile increased compared to the previous year by 1.6%, but decreased in Argentina by 14.3% compared to the previous year. The division's exports in 2007 decreased by 31.7% compared to 2006, due to the appreciation of the Chilean Peso against the U.S. Dollar.



PBS – The Company’s Sales and Distribution

The Company attempts to maintain close relationships with each of its major customers and devotes substantial efforts toward developing strong long-term relationships. In order to best serve the specific needs of Madeco’s client groups, each sales representative is assigned to clients on an exclusive basis and clients are grouped together based on industry and/or geographic region.

The Company’s Chilean sales force shares its sales staff with Madeco Chile’s Wire & Cable unit. This combined sales force includes a Sales & Marketing manager, three supervisors, 12 sales representatives (two of them located in the southern region and one located in the northern region of the country to serve the mining industry), six sales assistants, one project engineer and one person in charge of marketing. Customer groupings in the Chilean market include: retail companies, electronic and electric appliance manufacturers, aluminum foil and sheet buyers, durable goods manufacturers and mining. The Company also utilizes the Chilean wire and cable commercial network to market and sell its Brass Mills products to other customer segments.

In Argentina, the Company has a total of 16 employees dedicated to sales and customer service. There is a head of sales and eight salesmen, six of whom are located in Buenos Aires, one in Cordoba and the other in Rosario.

The Company’s PBS operations have 316 clients in Chile, 700 Argentine customers and 84 customers in its export markets. In 2007, the largest customer was Wapro (Austria) and sales to this customer accounted for 12.2% of the Company’s total revenues generated from the sale of pipes, bars and sheets.

Given the unique tendencies that occur in each of the markets served by the Company’s Brass Mills business unit, information regarding sales by sector has been included on a country-by-country basis. The following charts show the Company’s sales breakdown by client grouping for the years 2005, 2006 and 2007:

|                                         |                 |                 |                
|---------------------------------------- | --------------- | --------------- | ---------------
|The Company’s Chilean Customer Groupings
|                                         | % 2005 Revenues | % 2006 Revenues | % 2007 Revenues
|Retail  and Distributors                 | 64%             | 65%             | 64%            
|Durable good manufacturers               | 17%             | 18%             | 17%            
|Mining                                   | 7%              | 7%              | 9%             
|Electric appliance manufacturers         | 5%              | 3%              | 3%             
|Aluminum                                 | 3%              | 3%              | 3%             
|Others                                   | 4%              | 4%              | 4%             



|                                           |                 |                 |                
|------------------------------------------ | --------------- | --------------- | ---------------
|The Company’s Argentine Customer Groupings
|                                           | % 2005 Revenues | % 2006 Revenues | % 2007 Revenues
|Retail  and Distributors                   | 50%             | 48%             | 45%            
|Construction                               | 17%             | 18%             | 22%            
|Durable good manufacturers                 | 24%             | 22%             | 25%            
|Others                                     | 9%              | 12              | 8%             

Delivery or shipping of standard products that are in stock is made within a 48-hour period. In the case of customized products, the production time ranges between 30 and 90 days, depending upon the complexity of the item being produced and the plant workload. The Company implemented an automated production programming system (Scheduler) in its Chilean operation in order to improve production flow and consequently shorten the time period between the ordering and delivery of customized products. When products are completed and available for delivery, the Company either hires third-party transportation companies to deliver the finished goods to a customer’s plant or warehouse, or the customer picks up the products at the Company’s plant. The mode of transportation for exported products depends on the destination country: while ground transportation is used within the Southern Cone countries, sea transportation is used for exports to all other countries.



PBS – Market Demand and Industry Size Estimates

The principal users of the Company’s pipe, bar and sheet products are the mining, energy, and construction sectors, as well as durable goods manufacturers. The Company’s management believes that overall demand for its Brass Mills products is largely dependent on GDP growth. Investments within the mining and energy sectors are also largely dependent on new infrastructure projects. Investment activity and/or demand for the Company’s products from the construction sector, durable goods manufacturers and retail operations depend largely on the country’s GDP growth. While demand from durable goods manufacturers seems to depend primarily on GDP growth, demand from the construction sector appears to depend both on GDP growth as well as interest rates and unemployment levels. However, the negative effects of product substitution are eroding the performance of this business, see “Item 3. Key Information – Risk Factors”.

There are no formal third-party estimates on industry size for any of the countries in which Madeco has Brass Mills operations and the Company bases its estimates on published information from its competitors, import and export reports and the Company’s proprietary production and sales data. See “Presentation of Information”.

Given the unique evolution of the brass mills industry within each individual country or segment, discussions regarding the industry growth/shrinkage over the period from 2005 through 2007 are included separately for Chile and Argentina.

Chilean PBS Market. The following chart shows the Company’s estimates for the Chilean pipe, bar and sheet industry as well as the country’s annual GDP growth rate for the years 2005, 2006 and 2007:

|                        |                     |             
|----------------------- | ------------------- | ------------
|Industry Size (in tons)
|Year                    | Total
Industry Size | GDP Rate (1)
|2005                    | 15,900              | 5.7%        
|2006                    | 12,905              | 4.0%        
|2007                    | 12,860              | 5.1%        



(1)  The annual GDP rates for Chile presented above differ from those presented in the Company’s Annual Report on Form 20-F for 2005 as a result of a change in Chilean Central Bank’s calculation formula and methodology.

The Company estimates that the industry size for copper and brass products for 2006 decreased 18.8% compared with the previous year due mainly to higher copper prices and the effects of increased substitution.

In 2007, the copper industry experienced a smaller decrease in sales as compared to 2006, due to slower growth rate for substitute products over the previous years. This reduction in the Chilean market was offset by increased demand of bars and tubes used in the mining industry and in construction of new buildings.

Argentine PBS Market. The following chart shows the Company’s estimates of the Argentine pipe, bar and sheet industry as well as the country’s GDP growth rates for the years 2005 to 2007:

|     |                         |         
|---- | ----------------------- | --------
|Year | Industry Size
(in tons) | GDP Rate
|2005 | 23,300                  | 9.2%    
|2006 | 21,700                  | 8.5%    
|2007 | 22,400                  | 8.7 %   



In recent years, competition from the Argentine PVC pipes sector has been increasing. While copper pipes are used for both water and sewage systems in commercial buildings and high-income private housing, PVC pipes dominate the medium and lower-income housing construction segments. Although copper pipes outperform PVC pipes in terms of mechanic resistance and durability, PVC pipes are popular due to their lower prices.

In 2005, the industry size increased by 31.1% compared with the previous year mainly due to the recovery of the brass bars market, and to a lesser extent, the growth of construction and industry and the corresponding increase in the sale of copper strips and pipes.

In 2006, industry size decreased by 6.9%, compared with the previous year, explained by the market’s product substitution due to higher copper prices.

In 2007, industry size was similar to 2006, reflecting the continued effect of the market's use of product substitution offset by a great number of building constructions.

PBS – Market Share Estimates and Description of Competition

The Company strives to be a preferred supplier domestically and globally, meeting international quality standards and delivering excellent customer service. Madeco’s principal competitive advantages currently include the high quality of its products, competitive prices, a large commercial network, a diverse product portfolio and a recognized brand name.

There are no formal third-party estimates on market share and the Company bases its estimates on published information from its competitors, import and export reports and the Company’s own production and sales data. See “Presentation of Information”. Given the fact that the Company competes against different competitors in both of the countries in which it has operations, market share and information regarding competitors has been separated by country.

Market Share and Competition in the Chilean PBS Market.The following table sets forth the Company’s estimate of market share statistics for the Chilean pipe, bar and sheet industry for the past three years:

|                   |          |      |     
|------------------ | -------- | ---- | ----
|                   | 2005 (1) | 2006 | 2007
|The Company        | 58%      | 54%  | 56% 
|Cembrass           | 26%      | 26%  | 25% 
|Conmetal           | 9%       | 10%  | 8%  
|EPC (ex Tecob)     | 3%       | 4%   | 6%  
|Offermanns         | 2%       | 0%   | 0%  
|Imports into Chile | 4%       | 6%   | 5%  

(1)  The Market Share statistics presented in this table differ from those presented in the Company’s Annual Report on Form 20-F for 2005 as a result of a change in the Company’s estimation methodology.

The Company is the largest local producer of pipes, bars and sheets in Chile, with an estimated market share of 56% in 2007. The Company believes that it is the leading producer in Chile of copper pipes, bars and sheets.

The Company’s primary competitor in the copper pipe segment is Themco-Conformadores de Metales S.A. (“Conmetal”). Conmetal manufactures rigid copper pipes and small copper bars and was founded in 1995 by Themco, a large plastic pipe and fitting conglomerate. In order to increase its production capacity, Conmetal inaugurated a new plant facility in 2004. The Company estimates that the leader in the brass bars segment is Cembrass S.A. (“Cembrass”). Cembrass is a subsidiary of CEM (one of Chile’s manufacturers of residential water heaters). Smaller competitors are Electro Copper Ltda. and Aceros y Metales S.A.

In 2006, due to a constant increase in the price of copper and product substitution by plastic pipes (mainly due to these higher prices), sales volumes decreased by 5.5%, however this effect was offset by higher product prices.

In 2007, the Company retained its leadership of the Chilean market and also increased its market share to 56% due to higher sales of bars for mining and tubes for construction; on the other hand, EPC increased its market share to 6% due to its increased participation in the copper tube segment.

Market Share and Competition in the Argentine PBS Market.The following table sets forth the Company’s estimate for market share statistics of pipe, bar and sheet products for the past three years:

|                       |      |      |     
|---------------------- | ---- | ---- | ----
|                       | 2005 | 2006 | 2007
|Pajarbol-Cembrass      | 21%  | 23%  | 19% 
|Sotyl                  | 13%  | 14%  | 17% 
|The Company            | 12%  | 10%  | 8%  
|Vaspia                 | 7%   | 7%   | 7%  
|Quimetal               | 7%   | 6%   | 6%  
|Other Domestic         | 27%  | 25%  | 32% 
|Imports into Argentina | 13%  | 15%  | 11% 

The Company’s principal competitor in Argentina is Pajarbol S.A.; this company was founded in 1957 and is the largest producer of high quality brass bars in Argentina. Sotyl S.A. was founded in 1973 and principally produces brass sheets. Vaspia S.A.I.C. was founded in 1960 and is a producer of brass bars, profiles, valves and hardware fixtures. Industrias Quimetal S.A.I.C. was founded over 30 years ago and has a modern plant specializing in copper pipe production for refrigeration and heating units.

In 2006, the Company’s market share decreased by 2% compared to the previous year, primarily as a result of a reduced volume in the copper and brass sheets markets where the Company lost relevant share. However, this negative effect was offset in part through the consolidation by the Company of its leadership position in the manufacturing and sales of pipes.

In 2007, the Company’s market share also decreased by 2% compared to the previous year, due to the Company's decision to discontinue sales of sheets and others products. Sales volume of sheets and bars decreased compared to 2006, the diminution of which was offset by increased sales of copper tubes.

Coins – Sales by Destination

Madeco sells the bulk of its coin products to countries outside Chile; export sales represented 83.7% of the total coin revenues for the year 2007. The following table shows Madeco’s annual net sales by destination for the years 2005, 2006 and 2007:

|                                                          |       |             |               
|--------------------------------------------------------- | ----- | ----------- | --------------
|Coins Division – Revenues by Destination (in Ch$ million)
|Year                                                      | Chile | Exports (1) | Coins Division
|2005                                                      | 1,130 | 5,777       | 6,907         
|2006                                                      | 2,960 | 7,506       | 10,466        
|2007                                                      | 1,595 | 8,162       | 9,757         



|                                                        |       |             |               
|------------------------------------------------------- | ----- | ----------- | --------------
|Coins Division – Sales Volumes by Destination (in tons)
|Year                                                    | Chile | Exports (1) | Coins Division
|2005                                                    | 9     | 1,557       | 1,566         
|2006                                                    | 39    | 1,572       | 1,611         
|2007                                                    | 66    | 1,255       | 1,321         

(1) Exports for the Coins division consist of all sales to customers in any country other than Chile.

In 2006, the Company’s coins and coin blanks revenues increased by 51.5% compared with 2005, mainly due to an important supply contract bid won with the Chilean Mint.

In 2007, the Company's coins and coin blanks revenues decreased by 6.8% compared with 2006. This reduction is due to the Company winning fewer bids in the Chilean market during 2007, offset by an increase in sales with "no metal cost consideration" or "non metal containing" (customers give to the Company metal to be shaped, therefore metal received under these circumstances is not considerated as part of sale) compared with 2006.

Coins – The Company’s Sales and Distribution

Manufacturing of coin blanks starts only when customers settle the orders and sign a formal contract. The sales department is run by a Sales & Marketing Manager who participates in bid processes, opening new potential markets and maintaining good relationships between the Company and its customers. The Company also hires agents in many countries to act as representatives according to local legal requirements.

The Company’s sales process begins with a bidding process, which can be either public or private, depending on the country. In the case of a public bid, any coin manufacturer has the right to make a sales quote. In contrast, manufacturers must be invited to participate in a private bid. In the case of bids made to Europe, Central and South America, the price determined by the Company usually has two components: a fixed price for the conversion of metal to coin blanks and a variable price for the metal used, based on prices quoted on the LME.

The Company’s largest clients are central banks and coin mints. This business is dependent upon the replenishment of coin supplies by the respective country’s central bank and/or mints, making for purchase patterns that are infrequent in nature but high in terms of sales volume. The Company’s key customers in 2007 were Banco de Guatemala with 36% of total coin sales; the Central Bank of the Dominican Republic with 12% of total coin sales and the Real Mint House of Spain with 10% of total coin sales.



Flexible Packaging

In 1961, Alusa S.A. was founded jointly by the Company and the Zecchetto and Arduini families with the objective of producing, selling and distributing flexible packaging products printed by rotogravure method. Also, this company sold foil wrapping attending industrial clients in the mass consumer market. In order to strengthen its strategic position within the two segments in which it then participated, Alusa separated its flexible packaging operations from its complementary business, the fabrication of aluminum foil and plastic wrap (both mass consumer products for home and commercial use) in 1994. In the same year, Alusa acquired Vigaflex (renamed as Alupack), a local company engaged in the flexographic packaging market.

The Company began the international expansion of its flexible packaging business in 1993 with the creation of Aluflex and the greenfield construction of a plant in San Luis, Argentina. The objective of the new operation was to supply the large mass consumer product companies in Argentina, as well as access the immense Brazilian potential market. In addition, the plant’s location is optimal to serve as a secondary production source to fulfill peaks in Chilean demand and vice versa.

Alufoil was established in 1995 as a subsidiary of Alusa to provide mass consumer products such as aluminum foil, trash bags and plastic wrap and industrial products such as ice cream cone wrapping, aluminum taps and other products. In November 2004, Alusa sold some of Alufoil’s assets (trademark, machinery and some current assets)  related to  mass consumer products to Cambiaso Hermanos S.A. for Ch$1,385 million (historic value). Remaining industrial business lines were absorbed by Alusa.

In 1996, Alusa S.A. entered the Peruvian packaging market, acquiring a 25.0% and 25.6% interest in Peruplast S.A. and Tech Pak S.A., respectively. Both companies are leaders in the Peruvian flexible packaging market.

During 2006, several structural changes were implemented in this business unit. To consolidate the development of the Argentinean subsidiary, Aluflex, a new CEO was hired and two sub-divisions were created. In addition, a new Sales & Marketing Manager and a Technical and Development Manager were hired by Alusa, as well as three new sub-divisions were added (Plant, Exports and Operations).

On March 1, 2007, the Company increased its share in Peruplast from 25.0% to 39.5% and in Tech Pak from 25.0% to 50.0%. Similarly, the Peruvian investor, Nexus Group, also increased its shareholdings in both companies. In July 2007, both the Company and Nexus increased their shareholdings in Peruplast to 50%. On October 1, 2007, both Peruplast and Tech Pak were merged under the name of Peruplast S.A.

The following table includes the names of the Company’s subsidiaries dedicated to the production, sales and distribution of flexible packaging products:

|Country   | Entity Name   
|--------- | --------------
|Chile     | Alusa S.A.    
|Argentina | Aluflex S.A.  
|Peru      | Peruplast S.A.



Flexible Packaging - Summary of Sales

The following table presents the Company’s annual net sales generated by the Flexible Packaging business unit for the years 2005, 2006 and 2007:

|Flexible Packaging Unit
|-----------------------
|Year                   
|2005                   
|2006                   
|2007                   

(1) The percentages of consolidated volumes for 2005 differ from those presented in the Company’s Annual Report on Form 20-F for 2005 as a result of a change in the Company’s methodology.

In 2007, revenues increased by 79.4%, from Ch$49,616 million in 2006 to Ch$89,000 million in 2007, as a result of the incorporation of Peruplast (which merged in October 2007 with Tech Pak), whose sales amounted to Ch$42,529 million in 2007 (including inter-company sales).

The consolidated sales volume of the Flexible Packaging unit amounted to 38,259 tons in 2007. In 2007, total sales volume in Chile increased by 10.7% compared with 2006 (including exports from Chile), while those in Argentina declined by 1.7% compared to 2006 (including exports from Argentina). In Peru, sales volume was 21,636 tonnes in 2007 (including exports from Peru), or a 95.7% increase in tonnage sold by the unit as compared to 2006.

The Company mainly sells its flexible packaging products in the same markets where it maintains its operations. Additionally, Madeco exports flexible packaging products to various countries, both within Latin America and abroad; export sales represented 16.1% of the total unit’s revenues for the year 2007.

The following tables present the Company’s annual net sales generated by the Flexible Packaging business unit by destination for the years 2005, 2006 and 2007:

|Flexible Packaging Unit - Revenues by Destination (in Ch$ million)
|------------------------------------------------------------------
|Year                                                              
|2005                                                              
|2006                                                              
|2007                                                              



|Flexible Packaging Unit – Sales Volumes by Destination (in tons)
|----------------------------------------------------------------
|Year                                                            
|2005                                                            
|2006                                                            
|2007                                                            

(1) Exports of the Flexible Packaging unit consist of all sales to customers in any country other than Chile or Argentina.

The following table presents the Company’s Flexible Packaging business unit total revenues for the years 2005, 2006 and 2007, broken down by the subsidiary that generated the sale:

|Flexible Packaging Unit – Revenues by Subsidiary (in Ch$ million)
|-----------------------------------------------------------------
|Year                                                             
|2005                                                             
|2006                                                             
|2007                                                             



Flexible Packaging - Production

The Company has a total of four modern facilities for the production of flexible packaging products.  The Chilean and the Argentine subsidiaries each have a production plant and the subsidiary located in Peru has two facilities. The following table presents information regarding each flexible packaging production facility including plant location, principal products manufactured and ISO or AIB certification:

|           |                     |                           |                               
|---------- | ------------------- | ------------------------- | ------------------------------
|Country(1) | Location            | Principal Products        | ISO or AIB Certification (2)  
|Chile      | Quilicura, Santiago | Flexographic, Rotogravure | 9001: 1997, 2006              
|Argentina  | San Luis            | Flexographic, Rotogravure | 9001: 1998, 2007              
|Peru       | Lima                | Flexographic, Rotogravure | AIB International Certificate.
|Peru       | Lima                | Flexographic, Rotogravure | AIB International Certificate.

(1) As of March 2007, the Company consolidated the Peruvian facilities in its financial statements.
(2) In cases where two dates are included, the first date indicates the original certification and the second date indicates the most recent certification.

Flexible packaging products include candy wrappers, bags for cookies, snack foods, fresh and frozen products, diapers and personal hygiene products, envelopes for powdered soups and juices, flexible bags for ketchup and mayonnaise and for cleaning products such as laundry detergents, labels for beverage bottles, peel-off lids and labels for yogurt containers and wrappers for ice cream products. All of the Company’s products are manufactured in accordance with international requirements and customized to meet individual customer specifications.

Production of flexible packaging products begins in pre-press. The principal pre-press process involves the digital design for packaging graphics, including color separation, text and layout. There are two forms of printing: rotogravure and flexographic. The rotogravure printing process involves diamond-etching a cylinder for each product’s color layer. It is appropriate for high-volume orders. Flexographic printing process requires a polymer plate (one for each color) with the design to be printed, that is added over a metallic cylinder. The flexographic method is better suited for lower price packaging due to the method’s lower costs and inferior printing quality.

Traditionally, machinery and equipment requirements for rotogravure printing have been greater than for flexographic printing, and as a result, flexographic printing has been more commonly used.  While the flexographic printing quality has traditionally been inferior to the rotogravure method in terms of printing clarity and quality, these differences have been diminishing over time as the quality and equipment investments in the flexographic printing method have increased.

Production of flexible packaging products continues by combining the different layers of material(s) required for each particular packaging order; the combination of materials depends on the product’s requirements, such as impermeability, desired shelf life and cost considerations. Flexible packaging products are made from any combination of the following: plastics (such as polypropylene, polyethylene and/or polyester), aluminum foil, paper, wax and adhesives. The most common packaging types are single-layer and multi-layer, coextruded barrier films, doy pack containers and metallized films. Many of the packaging component materials are purchased in film rolls. Due to the high volume of polyethylene used in flexible packaging, this raw material is purchased in pellet form (resin) and extruded at the Company’s facilities into rolls of the appropriate diameter, thickness, width and color for each particular order.

After the printing process, additional laminates and any other necessary layers are attached using adhesives between layers. Finally, the rolls are cut, folded (if necessary) and packaged. The following diagram depicts the flexible packaging production process:

Graphic designing → extrusion of polyethylene → printing → laminating & layering (as required) → cutting (as required) → folding (as required) → packing



Flexible Packaging - Raw Materials

The principal raw materials used in the production of flexible packaging are plastics (i.e.: polypropylene, polyethylene, resin and polyester), paper, aluminum foil, ink, adhesives and solvents.

The principal polypropylene film suppliers for Alusa in Argentina, Chile and Peru are Sigdopack S.A., Polo/Quimatic S.A., Vitopel S.A. and OPP Films S.A.C. The main polyethylene resin suppliers in 2007 were Dow Chemical Company subsidiaries, PBB Polisur S.A., Petroquímica Dow S.A. and Dow Química Chilena, S.A. These three companies provided approximately 23.7% of the raw materials used by the Company in 2007. However, the Company can access other available sources when price and delivery terms are more favorable.

The Company obtains most of its aluminum film requirements from Aluar (Argentina) and Hydro Aluminum Deutschland GMBH (Germany). However, the Company can access other sources when price and delivery terms are more favorable.

Paper is purchased from suppliers in Chile, Brazil, Italy, Austria and Finland. The Company purchases its various adhesives from Henkel, Rhom & Hass and Coim. Dye is purchased from Sun Chemical Ink S.A., Flint Ink and Tintas Gráficas Vencedor S.A.

Although the existence and competitiveness of diverse suppliers both within the region and internationally provide the Company with multiple alternatives in terms of attractive prices and payment terms, the increase in demand for raw material products on a global level during last time has caused a sharp increase in raw material prices. In any case, Madeco believes that all contracts or other agreements between it and third-party suppliers with respect to the supply of raw materials for flexible packaging contain standard and customary terms and conditions. The Company does not believe that it is dependent on any one supplier for a significant portion of its important raw materials for its Flexible Packaging production. During the past ten years, the Company has not experienced any material difficulties in obtaining adequate supplies of necessary raw materials at satisfactory market prices nor does it expect to do so in the future.



Flexible Packaging - The Company’s Sales and Distribution

In both Chile and Argentina, Madeco dedicates substantial effort toward developing strong long-term relationships with each of its major customers. The Company recognizes the importance of packaging to the customer, both in terms of cost and as an important marketing tool. Moreover, strong client relationships foster the potential to jointly develop new packaging ideas.

In Chile, the sales force includes one sales & marketing manager, one sub-manager of exports, one administrative employee and seven salesmen. Among the salesmen mentioned, five are responsible for local customers and two for exported products. Alusa also has a customer service department composed of seven customer service representatives.

In Argentina the sales department includes one sales & marketing manager, three sales executives, each responsible for a portfolio of customers, and three sales assistants.

In Peru, the sales force includes one sales & marketing manager, ten sales executives (four are responsible for local/foreign customers, while the remaining six are just for local clients) and three sales assistants. This subsidiary also has a customer service department composed of three representatives.

Additionally, in each country the Company has a team of technical advisors specialized in flexible packaging structures, which works closely with the Company's main customers in the development of new products, innovation of existing products and customization of requirements to match machine’s specifications of every client.

The Company has a representative office in Brazil, and agents in Mexico, Bolivia, Colombia, Venezuela, the United States and several countries in Central America

The Company’s Flexible Packaging unit has approximately 100 active customers in Chile, which include multinational companies, such as Nestlé, Unilever and Procter & Gamble, and local regional companies, such as Córpora and Carozzi. The Company also has approximately 30 clients in Argentina and more than 100 active customers in Peru, which include multinational companies, such as Unilever, Niza, Kimberly Clark, Procter & Gamble, Nestlé, Frito Lay, Kraft Foods and several local regional companies, such as Alicorp, Productos Tissue and Noel.

The Company’s largest customers in 2007 are in the food and hygiene industries. The Company’s largest customer accounted for 8.5% of the units’ total consolidated revenues in 2007. Given the unique tendencies that occur in Chile, Argentina and Peru in terms of demand levels among the various client sectors served by the Company’s Flexible Packaging business unit, information regarding sales by sector has been included on a country-by-country basis.

The following table presents Madeco’s sales breakdown by client grouping for each country for the years 2005, 2006 and 2007:

|                                         |                 |                 |                
|---------------------------------------- | --------------- | --------------- | ---------------
|The Company’s
Chilean Customer Groupings | % 2005
Revenues | % 2006
Revenues | % 2007
Revenues
|Concentrated & dehydrated products       | 23%             | 28%             | 28%            
|Ketchup & tomato sauces                  | 12%             | 13%             | 14%            
|Mayonnaise & mustard............................           | 2%              | 1%              | 1%             
|Condiments..........................................               | 4%              | 4%              | 4%             
|Biscuits, candies & snacks........................       | 22%             | 16%             | 20%            
|Dairy products                           | 12%             | 11%             | 10%            
|Pet food                                 | 4%              | 4%              | 5%             
|Cleaning & Personal Care                 | 13%             | 13%             | 9%             
|Others                                   | 8%              | 10%             | 9%             



|                                              |                 |                 |                
|--------------------------------------------- | --------------- | --------------- | ---------------
|The Company’s
Argentine Customer Groupings(1) | % 2005
Revenues | % 2006
Revenues | % 2007
Revenues
|Concentrated & dehydrated products            | 5%              | 5%              | 7%             
|Ketchup & tomato sauces                       | 4%              | 9%              | 18%            
|Mayonnaise & mustard............................                | 30%             | 39%             | 40%            
|Condiments..........................................                    | 0%              | 0%              | 0%             
|Biscuits, candies & snacks........................            | 15%             | 11%             | 1%             
|Dairy products                                | 0%              | 0%              | 0%             
|Pet food                                      | 32%             | 25%             | 23%            
|Cleaning & Personal Care                      | 10%             | 10%             | 11%            
|Others                                        | 4%              | 1%              | 0%             



|                                          |                 |                 |                
|----------------------------------------- | --------------- | --------------- | ---------------
|The Company’s
Peruvian Customer Groupings | % 2005
Revenues | % 2006
Revenues | % 2007
Revenues
|Concentrated & dehydrated products        | 6%              | 7%              | 7%             
|Ketchup & tomato sauces                   | 1%              | 2%              | 3%             
|Mayonnaise & mustard............................            | 4%              | 6%              | 8%             
|Condiments..........................................                | 0%              | 0%              | 1%             
|Biscuits, candies & snacks........................        | 27%             | 20%             | 25%            
|Dairy products                            | 25%             | 17%             | 11%            
|Pet food                                  | 0%              | 0%              | 1%             
|Cleaning & Personal Care                  | 24%             | 35%             | 35%            
|Others                                    | 13%             | 13%             | 9%             

(1) The Argentine Customer Groupings presented above differ from those presented in the Company’s Annual Report on Form 20-F for 2005, as a result of a change in the Company’s methodology.

In general, all of the Company’s Flexible Packaging unit’s customers can buy on credit. While a very small portion of the customers make cash payments for their purchase orders, the majority of sales (over 97% in 2007) were made under credit conditions.

Within the Flexible Packaging unit, the average payment period remained stable atapproximately 97 days in 2007 (92(1) days in 2006). Uncollectible accounts as a percentage of total unit revenues amounted to 0.42% in 2006 and 0.22% in 2007.

Delivery time of packaging products which require new graphics can be up to 30 days; for those products with repeat graphics, delivery time is approximately 20 days. Subsequent to production completion, the Company hires third-party distribution companies to deliver finished goods to the customer’s plant or warehouse. The mode of transportation for exported products depends on the destination country, but the most prevalent mode of transportation is by ocean freight.

(1) The average payment periods presented above differ from those presented in the Company’s Annual Report on Form 20-F for 2006, as a result of a change in the Company’s methodology.



Flexible Packaging - Market Demand and Industry Size Estimates

The principal clients of the Company’s flexible packaging products are multinational and domestic mass consumer product companies within the food, snacks and personal care segments.

In Chile, the demand for flexible packaging products is similar to the moderate growth of the local economy. Therefore, the Company believes that in order to increase sales volumes at a higher rate than that of the local economy, it would need to explore opportunities in entering new markets, especially those in foreign markets, the national market for seafood packaging (principally salmon products) and with multinational clients.

Over the last few years, the Company has observed several factors within the industry such as: increasing industry concentration, product biddings between few manufacturers and concentrated demand as a result of mergers and acquisitions of companies of mass consumer products. In spite of these adverse conditions, the Company believes that this industry will display favorable opportunities because of a growing trend among multinational companies to work with fewer suppliers.

There are no formal third-party estimates on industry sales volume, and the Company bases its estimates on published information from its competitors, supermarket sales estimates, import reports of raw materials and the Company’s own sales data.  See “Presentation of Information”.

Given the unique evolution of the flexible packaging industry within each country, information regarding the industry’s evolution over the period from 2005 through 2007 is included separately for Chile and Argentina.

Chilean Flexible Packaging Market. The following chart summarizes management’s estimates for the Chilean flexible packaging industry for the years 2005 through 2007:

|     |                        
|---- | -----------------------
|Year | Industry Size
(in tons)
|2005 | 30,000                 
|2006 | 31,200                 
|2007 | 32,000                 

From 2005 to 2007, the size of Chilean flexible packaging industry increased due to the industry’s ability to provide the global market with high quality and innovative products, despite the decreasing client base that has plagued the industry, which is due, in large part, to mergers and acquisitions within the mass consumer market. Although demand has been effectively concentrated in the hands of a few key players, the Chilean industry has, in many cases, been able to maintain its market share or, in some cases, even increase it.

Argentine Flexible Packaging Market. The following chart summarizes management’s estimates for the Argentine flexible packaging industry for the years 2005, 2006 and 2007:

|     |                            
|---- | ---------------------------
|Year | Industry Size (1)
(in tons)
|2005 | 88,212                     
|2006 | 97,033                     
|2007 | 99,000                     

(1) The industry sizes for Argentina presented above differ from those presented in the Company’s Annual Report on Form 20-F for 2005 due to updated figures.

During 2006, the Argentine economy grew by 8.5 %. This growth was attributable to a continuous increase in exports of 15.4% in 2006 compared to 2005. In addition, during 2006, the growth of the Argentine economy was complemented by an increase in internal consumption.

In 2007, local consumption continued stimulating the economic growth of the country, and with it, the flexible packaging market; furthermore, the Argentine economy grew by 8.7%.

Peruvian Flexible Packaging Market. The following chart summarizes management’s estimates for the Peruvian flexible packaging industry for the years 2005, 2006 and 2007:

|     |                        
|---- | -----------------------
|Year | Industry Size
(in tons)
|2005 | 30,107                 
|2006 | 31,692                 
|2007 | 32,970                 

From 2006 to 2007, the size of the Peruvian flexible packaging industry increased due to a significant improvement in packaging quality aimed at the food and hygiene industries. At the same time, there was an increase in the industry’s economic activity due to the continued increase in exports of 17% in 2007 compared to 2006. In addition, projected growth rates for the next few years indicate that these industries (food and hygiene) will also increase. Therefore, the Peruvian flexible packaging industry may provide the Company with potential growth opportunities in the short term.



Flexible Packaging - Market Share and Description of Competition

Madeco’s primary competitive advantages are its market leadership and a recognized brand name.  Moreover, given that the Company has four large flexible packaging plants, one in Chile, one in Argentina, and two in Peru, Madeco is considered to be one of the few companies capable of producing consolidated regional packaging requirements for large manufacturers.

Despite the existence of two distinct printing methods, the Company estimates market share based on the combined volume of both printing methods since the majority of packaging alternatives can be combined with either printing technique. There are no formal third-party estimates on market share and the Company bases its estimates on published information from its larger competitors, supermarket sales estimates, import reports of raw materials and the Company’s own sales data, see “Presentation of Information”.

Market Share and Competitors in the Chilean Flexible Packaging Market. The following table sets forth the Company’s market share estimate of the two most relevant participants in the flexible packaging market in Chile during the past three years:

|            |      |      |     
|----------- | ---- | ---- | ----
|            | 2005 | 2006 | 2007
|Edelpa      | 35%  | 31%  | 30% 
|The Company | 28%  | 29%  | 30% 
|Others      | 37%  | 40%  | 40% 

There is one other significant participant in the flexible packaging market with rotogravure printing capabilities: the Chilean company Envases del Pacífico S.A. (“Edelpa”). Edelpa has two manufacturing facilities, one in Santiago and another in Viña del Mar.

The main companies within the Multilayer Flexible Packaging industry are Edelpa and Alusa, which in conjunction concentrate approximately 60% of total sales of the industry segment. Edelpa uses rotogravure and flexographic techniques. This company has experienced growth during the past several years mainly due to acquisitions (Italprint in 1997, Prepac in 2000 and Alvher in 2003). Other important companies within this industry segment are: BO Packaging (previously Carter-Holt Packaging), HyC and Envases Flexibles. BO Packaging uses the rotogravure technique and therefore competes with Alusa and Edelpa. The other two companies use the flexographic technique.

Since 2004, the industry experienced a shift from companies that utilize flexographic techniques to those that produce laminated products and maintain superior production technology. Additionally, the larger companies have been expanding towards foreign markets. On an international level, particularly in Mexico, there are many Latin American multinational competitors introducing products into the market.

Over the past few years there has been increasing concentration within the industry. Demand has become concentrated as a consequence of mergers and acquisitions of companies of mass consumer products. There is a growing trend among multinational companies to work with fewer suppliers.

Market Share and Competitors in the Argentine Flexible Packaging Market.The following table sets forth the Company’s estimate of the market share in the Argentine flexible packaging industry for the past three years:

|               |      |      |     
|-------------- | ---- | ---- | ----
|               | 2005 | 2006 | 2007
|Converflex     | 16%  | 16%  | 12% 
|Celomat        | 10%  | 10%  | 7%  
|The Company(1) | 5%   | 6%   | 6%  
|Others         | 67%  | 68%  | 75% 

(1) The Company’s market shares presented above differ from those presented in the Company’s Annual Report on Form 20-F for 2005, due to updated figures.

The flexible packaging industry in Argentina shows high levels of fragmentation. In 2007, the three main competitors have 24% of the market share. The low concentration level of the industry and the successful implementation of Aluflex’s growth strategy, have allowed the Company to position itself as one of the three main competitors within the Argentine industry with a market share of 7.0% in 2007.

In 2007, the Company’s main competitors, Converflex (a subsidiary of Arcor) and Celomat, each experienced a decrease in market shares of four and five percentage points, respectively, compared to the prior year.

The main competitors of Aluflex, other than Converflex, are Alvher (a subsidiary of Edelpa), Celomat (Fleximat), Zaniello and Bolsapel. These companies concentrate their sales among multinational clients in high value added segments. These companies are also certified by ISO-9001. The remaining market share is distributed among more than 90 companies.

Market Share and Competitors in the Peruvian Flexible Packaging Market. The following table sets forth the Company’s market share estimate of the two most relevant participants in the flexible packaging market in Peru during the past three years:

|                  |      |      |     
|----------------- | ---- | ---- | ----
|                  | 2005 | 2006 | 2007
|The Company       | 60%  | 60%  | 59% 
|Envases Múltiples | 15%  | 15%  | 17% 
|Resinplast        | 14%  | 14%  | 15% 
|Others            | 11%  | 11%  | 9%  

The Company’s main competitors are Envases Múltiples and Resinplast. These companies concentrate their sales among multinational and local/regional clients. Nevertheless, these competitors only use the flexographic printing technique, while the Company uses the rotogravure and flexographic printing techniques. Peruplast has been able to maintain its leadership in the Peruvian market during the last three years due to superior production technology, as well as, its capacity to maintain its major clients.

In 2007, the Company’s main competitors (Envases Múltiples and Resinplast) increased their market share to 17% and 15%, respectively, due to use of a low-price strategy.



Aluminum Profiles

Industrias de Aluminio S.A. (“Indalum”) was founded in 1954. Madeco began producing aluminum profiles in 1954 and in 1991, acquired 99.2% stake in Indalum. Today, the Company is the only aluminum profiles manufacturer in Chile. The aluminum profiles manufactured by the Company are used as window and door frames in residential construction. They are also used in curtain walls and industrial applications in durable goods such as refrigerators and ovens. The Company is vertically integrated and owns the largest aluminum profiles distributor, Alumco S.A.

The Company owns a subsidiary in Bolivia, Distribuidora Boliviana Indalum S.A. which operated as an aluminum profiles distributor until June 2004, when operations ended. Distribuidora Boliviana Indalum S.A. has sold nearly all of its assets and Indalum is exporting directly from Chile to its Bolivian customers.

The Company commenced its curtain wall installation business in 1991. This business entailed the engineering, fabrication and installation of curtain walls in non residential construction. During 2002, Madeco made a strategic decision to concentrate solely on the production of aluminum profiles and to exit the curtain wall business. The Company sold its curtain wall operating assets in Chile, valued at approximately Ch$862 million (historic value, approximately US$1.2 million), which primarily included product inventories, receivables, machinery and equipment, plus the Ingewall brand. This sale also included the transfer of accounts payable, and other liabilities. The net transaction price amounted to approximately Ch$431 million (historic value, approximately US$0.6 million). During the first quarter of 2003, the Company also sold its Argentine subsidiary, Ingewall Argentina S.A.

In 2006, the Board made a strategic decision aimed at expanding the Company’s product portfolio to incorporate a new subsidiary dedicated to the manufacture and marketing of PVC door and window systems. The project was completed in 2007, and its subsidiary, PVTEC S.A., was created. In January 2008, the Company began the production and marketing of its PVC door and window systems through this subsidiary.

The following table includes the names of the Company’s subsidiaries engaged in the Aluminum and PVC Profile business:

|        |                                     |                                                                                                                                      
|------- | ----------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------
|Country | Entity Name                         | Division                                                                                                                             
|Chile   | Indalum S.A.
Alumco S.A.
PVTEC S.A. | Aluminum Profiles – production and marketing
Aluminum Profiles and accessories – distribution
PVC Profiles – production and marketing

The following table shows the Company’s annual revenues generated by the Aluminum unit for the years 2005, 2006 and 2007:

|Aluminum Profiles Unit
|----------------------
|Year                  
|2005                  
|2006                  
|2007                  

(1) The percentages of consolidated volumes for 2005 differ from those presented in the Company’s Annual Report on Form 20-F for 2005 as a result of a change in the Company’s methodology.



In 2006, revenues increased 11.2% compared to the previous year due to the positive effect of the volume increase in spite of the higher penetration of imported products.

In 2007, revenues decreased by 1.9% compared to the previous year as a result of the negative effect of the decrease in sales volume, due to the continued penetration of low priced imports into the Chilean market.

The following tables present the Company’s annual net sales generated by the Aluminum Profiles business unit by destination for the years 2005, 2006 and 2007:

|Aluminum Unit - Revenues by Destination (in Ch$ million)
|--------------------------------------------------------
|Year                                                    
|2005                                                    
|2006                                                    
|2007                                                    



|Aluminum Unit - Sales Volume by Destination (in tons)
|-----------------------------------------------------
|Year                                                 
|2005                                                 
|2006                                                 
|2007                                                 

(1) Exports for the Aluminum Unit consist of all sales to customers in any country other than Chile.

The following table shows the Company’s total revenues generated by the Aluminum unit for the years 2005, 2006 and 2007, broken down by business division:

|     |         |              
|---- | ------- | -------------
|Year | Indalum | Aluminum
Unit
|2005 | 32,193  | 32,193       
|2006 | 35,804  | 35,804       
|2007 | 35,131  | 35,131       

The table presented above differs from those presented in the previous Company’s Annual Report on Form 20-F due to Ingewall subsidiary was omitted (subsidiary sold in 2002).



Aluminum Profiles - Production

Indalum owns a modern aluminum profile extrusion plant located in San Bernardo, in the outskirts of Santiago. Indalum is technologically up to date both in terms of the manufacturing processes and product and system designs. In 1998, the Company was certified under ISO 9002 and re-certified under ISO 9001-2000 in 2007.

Production of aluminum profiles begins with aluminum billets. The billets are heated and then extruded. The extrusion process entails using high pressure to force the heated billet through a steel die in order to form elongated profiles, in either standard or customized shapes. After extrusion, the profiles are cut according to specifications and anodized, painted or left untreated.

Mill finished profiles are most commonly used by durable goods manufacturers. The following diagram depicts the production process for these profiles:

Billet → preheating → extruding → cutting → packing



Anodized profiles are used in the construction sector. Anodization is a chemical treatment and electrochemical coloration process which protects aluminum against corrosion. The following diagram depicts the production process for anodized profiles:

Billet → preheating → extruding → cutting → polishing → anodizing → stabilizing → packing



Painted profiles are also used in the construction sector. Painted profiles are offered in a wide variety of colors but are limited in their application to those uses where there is less exposure to corrosion. The following diagram depicts the production process for painted profiles:

Billet → preheating → extruding → cutting → removing grease and chroming → painting → heating → packing



PVC Profiles - Production

The Company owns a modern PVC profile extrusion plant located on the same site as Indalum’s production plant in San Bernardo. PVTEC is technologically up to date both in terms of the manufacturing processes and the product and system designs.

Production of PVC profiles begins from a dry blend compound, which is a mixture of polyvinyl chloride resin with calcium carbonate, titanium oxide and a stabilizer compound. The dry blend is first heated and then extruded. The extrusion process entails using high pressure to force the heated dry blend through a stainless steel dye in order to form elongated profiles, in customized shapes. After extrusion, the profiles are cut according to specifications and foiled if needed.

The following diagram shows the production process:

Raw materials → mixture → preheating → extruding → cutting → packing



Foiling or lamination is a mechanical process in which a special foil available in different colors and designs is used for decoration, in addition to UV protection.

The following diagram depicts the production process for foiled profiles:

Profile → cleaning → primer → preheating → adhesive → foil application → cutting → packing



Aluminum - Raw Materials

Aluminum is the principal raw material used in the production of aluminum profiles and represents more than 65.2% of the total production profile cost. The Company obtains most of its aluminum requirements from Aluar, located in Argentina.

Other raw materials used for aluminum profiles production include paint and chemical products. For the procurement of anodization chemical products, the Company establishes annual purchase agreements with four main suppliers, Brenntang Chile Comercial e Industrial, Chemal Katschmareck - GMBH (Germany), Química del Sur y Cía. Ltda. (Chile) and Solimpex S.A. (Chile).

The Company believes that all contracts and other agreements between the Company and third-party suppliers with respect to the supply of raw materials for its profiles business contain standard, customary terms and conditions. During the past ten years, the Company has not experienced any substantial difficulties in obtaining adequate supplies of necessary raw materials at satisfactory prices nor does it expect to do so in the future.



Aluminum Profiles – Summary of Sales

The following table shows the Company’s annual net sales from its Aluminum Profiles business unit for the years 2005, 2006 and 2007:

|     |                                             |                                          
|---- | ------------------------------------------- | -----------------------------------------
|Year | Aluminum Profiles
Revenues
(in Ch$ million) | Aluminum Profiles
Sales Volumes
(in tons)
|2005 | 32,193                                      | 10,819                                   
|2006 | 35,804                                      | 12,262                                   
|2007 | 35,131                                      | 10,354                                   

In 2006, the Company’s net sales increased by 11.2% compared to the previous year. This increase was due to a 13.3% increase in sales volume, supported by an overall industry increase of 19.5%.

In 2007, the Company’s net sales decreased 1.9% compared to the previous year, due to a reduction in sales volume of approximately 15.6% and higher raw material costs, partially offset by higher average sale prices for aluminum profiles.



Aluminum Profiles – Marketing, Sales and Distribution

The Company devotes substantial efforts toward developing strong long-term relationships with each of its major customers. Indalum has approximately 50 active aluminum profile customers, five of which are its national distributors. The profile sales system suffered an important change at the end of 2007. The Company decided to implement direct distribution through Alumco. This subsidiary has a national net of about 100 window and door fabricators certified by the Company, to fabricate and install its branded systems. Furthermore, the Company sells directly to durable good manufacturers as well as to large end-user clients engaged in the curtain wall business and in window and patio door fabrication.

Alumco is the Company’s largest distributor. Alumco has 13 sales representatives servicing approximately 1,500 active clients. The other major distributor is Distribuidora Arquetipo Ltda. The Company also sells profiles to ten large accounts which participate in the curtain wall industry as well as in window and patio door production.

At the end of 2007, Alumco opened three commercial offices in Iquique, Santiago and Concepción.

The following chart shows the Company’s sales breakdown by channel for the years 2005, 2006 and 2007:

|                                                       |                 |                 |                
|------------------------------------------------------ | --------------- | --------------- | ---------------
|The Company’s Sales Channels                           | % 2005 Revenues | % 2006 Revenues | % 2007 Revenues
|Retail                                                 | 21%             | 24%             | 32%            
|Independent distributors                               | 45%             | 45%             | 34%            
|Construction companies and durable goods manufacturers | 31%             | 28%             | 31%            
|Exports and others                                     | 3%              | 3%              | 3%             

Selling efforts are primarily focused on the Chilean market. Exports represent a small percentage of the Company’s aluminum profiles sales.

The Company sells its aluminum profiles in either cash or deferred payment. Cash payments have a price discount. Payment terms offered by the Company range between 30 to 90 days; the exact period depends on each client, and is related to its financial standing and credit history. The average payment period increased from 47 days in 2006 to 52 days in 2007 (these figures do not include non-operating activity nor related party receivables). The Company’s uncollectible accounts as a percentage of net sales increased from 2.3% in 2006 to 3.2% in 2007.

At the end of 1998, the Brazilian aluminum profiles manufacturer Alcoa installed a distribution office in Chile. Subsequent to its arrival, the Company lost a few distributors and a significant portion of its market share. At the beginning of 2000, the Company designed a commercial strategy with the purpose of recapturing its previous market share; instead of offering only aluminum profiles, door and window systems were introduced as part of the Company's products. Also, the quality of the extrusion process and the installation of products was improved. Related to the commercial strategy mentioned above, a new marketing and sales concept was created in 2001 “Indalum Building Systems” (IBS). The primary objective of IBS involves strengthening relationships with each of the Company’s key customer groups – real estate developers, architects, construction companies, producers, distributors and durable goods manufacturers – by providing adequate product solutions and optimal service quality.

During 2003, the Company launched the Superba System and the Xelentia System. The strategy behind the introduction of these two systems was product differentiation through market segmentation (based on the client’s market segmentation); each system provides a superior product to each segment. The Xelentia System is focused on the medium and lower-medium income segment -primarily subsidized governmental housing-, while the Superba System is focused on the higher segment -value residential housing-. The packaging of both systems includes not only an excellent quality-to-price relation product, but also includes its installation.

During 2004, commercial activities continued to focus on improvements in these two systems. A total of 20 and 100 installers were certified by the Superba System and Xelentia System, respectively. Although the Company does not provide installation guarantees to its clients, it does supervise indoor fabrication and on site installation of its certified installers and provides free technical assistance to all clients. The Company continued to focus on the IBS concept in 2004, achieving major improvements in service and technical assistance to clients.

In 2005, the Company continued with the marketing strategy described above, giving special attention to its branded systems with the purpose of increasing substitution of non branded systems. In this respect, the Company implemented a strategic plan with architects and real estate developers, with the purpose of increasing requirements of branded systems in new construction projects.

During 2006, the Company maintained its business strategy, emphasizing product diversification to meet market needs, as well as face competition. The Superba Legno brand was introduced and the Xelentia system was complemented by the Plexa system, an economical solution for the medium to low income segments. By the end of the year, a new system had been developed, the Inova system, which was especially designed to compete in the low income segment of the market.

Beginning in 2007, the Inova system was implemented, especially designed to compete in the Chilean market in order to sell more windows and door systems. This new strategy will require closer team work with the Company’s supply chain.



Aluminum Profiles – Market Demand and Industry Size Estimates

The main consumer of the Company’s aluminum profile products is the construction sector (residential and non residential). The level of construction activity in the Chilean market depends directly on GDP growth as well as interest rates and unemployment levels. Given that the installation of window and door frames occurs toward the end of the construction process, there is a six to ten month lag period between an increase in construction activity and an increase in aluminum profile demand.

There are no formal third-party research estimates on industry sales volume, and the Company bases its estimates on import and export reports and the Company’s own sales data, see “Presentation of Information”. The following chart shows the Company’s estimates for the Chilean aluminum profiles market industry and statistics for construction starts for the years 2005, 2006 and 2007:

|        |                         |                                           
|------- | ----------------------- | ------------------------------------------
|Year    | Industry Size
(in tons) | Construction Starts Index
(Dec 1996 = 100)
|2005(1) | 14,900                  | 105.7                                     
|2006    | 17,800                  | 114.0                                     
|2007    | 17,300                  | 101.4                                     

(1) The Construction Starts Index of 2005 presented in this table differs from those presented in the Company’s Annual Report on Form 20-F for 2005 as a result of updated figures made by the “Camara Chilena de la Construcción” (Chilean Chamber of Construction).

The sales volumes of the Company are closely related to the economy as a whole, as well as growth in the residential sector. In 2007, GDP in Chile expanded 5.1% while the overall construction sector (including infrastructure) expanded 8.3%, with a 4% growth on the residential sector.



Aluminum Profiles – Market Share and Description of Competition

Being the only local producer of aluminum profiles in Chile enables the Company to supply profile products more efficiently than its foreign competitors. The Company has been able to consolidate its relationship with distributors by using a stock consignment system. In addition, the Company’s IBS commercial concept previously outlined continues to offer superior service and technical assistance to clients.

There are no formal third-party research estimates on market share, and the Company bases its estimates on import and export reports and the Company’s own sales data, see “Presentation of Information”. The following table shows the Company’s estimate for market share of aluminum profiles products for the past three years:

|              |      |      |     
|------------- | ---- | ---- | ----
|              | 2005 | 2006 | 2007
|The Company   | 69%  | 67%  | 60% 
|Alcoa         | 16%  | 13%  | 10% 
|Other Imports | 15%  | 20%  | 30% 

The table presented above differs from those presented in the previous Company’s Annual Report on Form 20-Ffor 2005  due to a change in the classification of the Company’s competitors (excluding those competitors who do not participate directly in the same products as the Company and including imported Chinese products).

From 1998 until 2004, the Company’s principal competitor was the Brazilian aluminum profiles manufacturer, Alcoa. Although the Company lost some distributors and market share in 1999 due to Alcoa’s aggressiveness, the Company successfully recovered most of its distributors and market share, through the implementation of a consistent commercial strategy from 2001 to 2005. During 2006 and 2007, the main competitors have been imports from China due to their low prices. This competition has impacted the Company’s market share between 2005 and 2007 reducing its share by nine percentage points. During 2007, Chinese imports also decreased Alcoa’s share by 5 percentage points, compared with 2005.

At the end of 2007, Alumco began importing aluminum profiles from China, as a competitive strategy against Chinese imports. This strategy will be strengthened by increasing Alumco’s presence throughout the country and selling directly to end product customers.

Government Regulations

The Company is subject to the full range of government regulations and supervision generally applicable to companies engaged in business in Chile and other countries, including labor laws, social security laws, public health laws, consumer protection laws, environmental laws, securities laws and anti-trust laws. These include regulations to ensure sanitary and safe conditions in manufacturing plants.

There are currently no legal or administrative proceedings pending against the Company with respect to any regulatory matter, and the Company believes that it is in compliance in all material respects with all applicable statutory and administrative regulations with respect to its business.



Organizational Structure

The following diagram shows Madeco’s shareholders as well as its principal subsidiaries as of December 31, 2007:

|                       |                          |                    |                   |  |  | 
|---------------------- | ------------------------ | ------------------ | ----------------- |  |  | 
|ADRs (3.8%)            | Quiñenco (1) (45.2%)     | AFP (22.2%)        | Others (28.8%)   
|                      
|Wire & Cable           | Brass Mills              | Flexible Packaging | Aluminum Profiles
|Madeco Chile (100.00%) | Alusa (75.96%)           | Indalum (99.16%)  
|Indelqui (100.00%)     | Decker-Indelqui (99.85%) | Aluflex (75.96%)   |                  
|Ficap (100.00%)        | Armat (100.00%)          | Peruplast (37.98%) |                  
|Indeco (93.97%)        |                          |                    |                  
|Cedsa (80.00%)         |                          |                    |                  
|Optel (99.99%)         |                          |                    |                  

(1) The controlling shareholder of Madeco S.A. is the open stock corporation Quiñenco S.A..See “Item 7. Major Shareholders and Related Party Transactions - Major Shareholders”.

Madeco’s majority shareholder is Quiñenco S.A., which, through its direct and indirect interests in the Company, beneficially owns an aggregate of 45.2% of the outstanding shares (2,557,255,382 shares) of common stock as of December 31, 2007.

Quiñenco S.A. is a Chilean holding company engaged in multiple businesses in Chile, Brazil, Argentina, Peru and Colombia. Through its operating subsidiaries, Quiñenco is currently involved in the following industries: manufacturing, financial services, telecom and food and beverages.

The following table lists all of the Company’s subsidiaries and affiliates as of December 31, 2007:

|                   |                                  |                      |                                  |                                
|------------------ | -------------------------------- | -------------------- | -------------------------------- | -------------------------------
|Business Unit      | Name                             | Country of residence | Proportion of ownership interest | Proportion of voting power held
|Wire & Cable       | Soinmad S.A.                     | Chile                | 100.00%                          | 100.00%                        
|Wire & Cable       | Cotelsa S.A.                     | Chile                | 100.00%                          | 100.00%                        
|Wire & Cable       | Colada Continua Chilena S.A.     | Chile                | 41.00%                           | 41.00%                         
|Wire & Cable       | Ficap S.A.                       | Brazil               | 100.00%                          | 100.00%                        
|Wire & Cable       | Optel Ltda.(1)                   | Brazil               | 100.00%                          | 100.00%                        
|Wire & Cable       | Madeco Brasil Ltda.              | Brazil               | 100.00%                          | 100.00%                        
|Wire & Cable       | Indeco S.A.                      | Peru                 | 93.97%                           | 100.00%                        
|Wire & Cable       | Cobrecon S.A.                    | Peru                 | 31.32%                           | 31.32%                         
|Wire & Cable       | Cedsa S.A.                       | Colombia             | 80.00%                           | 80.00%                         
|Wire & Cable       | Metalurgica e Industrial S.A.    | Argentina            | 100.00%                          | 100.00%                        
|Wire & Cable       | Metacab S.A.                     | Argentina            | 99.85%                           | 99.85%                         
|Wire & Cable       | H.B. San Luis S.A.               | Argentina            | 99.85%                           | 99.85%                         
|Wire & Cable       | Comercial Madeco S.A.            | Argentina            | 100.00%                          | 100.00%                        
|Wire & Cable       | Optel Argentina S.A.             | Argentina            | 99.99%                           | 99.99%                         
|Wire & Cable       | Indelqui S.A.                    | Argentina            | 100.00%                          | 100.00%                        
|Wire & Cable       | Madeco Overseas S.A.             | Cayman Islands       | 100.00%                          | 100.00%                        
|Wire & Cable       | Invercable S.A.                  | Chile                | 100.00%                          | 100.00%                        
|Wire & Cable       | Madeco Cables S.A.               | Chile                | 100.00%                          | 100.00%                        
|Wire & Cable       | Metal Overseas S.A.              | Cayman Islands       | 100.00%                          | 100.00%                        
|Wire & Cable       | Madeco S.A. Agencia Islas Caiman | Cayman Islands       | 100.00%                          | 100.00%                        
|Brass Mills        | Armat S.A.                       | Chile                | 100.00%                          | 100.00%                        
|Brass Mills        | Decker Indelqui S.A.             | Argentina            | 99.85%                           | 99.85%                         
|Brass Mills        | Madeco Brass Mills S.A.          | Chile                | 100.00%                          | 100.00%                        
|Flexible Packaging | Alusa S.A.                       | Chile                | 75.96%                           | 75.96%                         
|Flexible Packaging | Alufoil S.A.(2)                  | Chile                | 75.96%                           | 75.96%                         
|Flexible Packaging | Inversiones Alusa S.A.           | Chile                | 75.96%                           | 75.96%                         
|Flexible Packaging | Peruplast S.A.(3)                | Peru                 | 37.98%                           | 37.98%                         
|Flexible Packaging | Aluflex S.A.                     | Argentina            | 75.96%                           | 75.96%                         
|Flexible Packaging | Alusa Overseas                   | Cayman Islands       | 75.96%                           | 75.96%                         
|Aluminum Profiles  | Indalum S.A.                     | Chile                | 99.16%                           | 99.16%                         
|Aluminum Profiles  | Alumco S.A.                      | Chile                | 99.16%                           | 99.16%                         
|Aluminum Profiles  | Inversiones Alumco S.A.          | Chile                | 99.16%                           | 99.16%                         
|Aluminum Profiles  | Ingewall S.A. (4)                | Chile                | 99.16%                           | 99.16%                         
|Aluminum Profiles  | PVTEC S.A.                       | Chile                | 99.16%                           | 99.16%                         

(1) On March 31, 2005, the Company purchased Corning’s 50% interest in Optel Ltda. (2) Alusa sold certain of Alufoil’s assets, including the trademark, related to its mass consumer products to Cambiaso Hermanos S.A. in November 2004.
(3) In 2007, Madeco increased its ownership interests in Peruplast to 37.98%.(or an increase of 50%  in the ownership of its subsidiary Alusa S.A.).
(4) At the beginning of 2002, as a consequence of the strategic decision to focus solely on the fabrication of aluminum profiles, the Company exited the curtain wall business segment. Ingewall Uruguay S.A. was sold on May 23, 2007.



Property, Plant and Equipment

The map of South America below depicts the Company’s plants by location and type of product manufactured:





The following chart depicts the location of each of the Company’s production facilities within each business unit:

|Country   | Metallic Cables | Optical Fiber Cables | Brass Mills | Flexible Packaging | Profiles
|--------- | --------------- | -------------------- | ----------- | ------------------ | --------
|Chile     | X               | ---                  | X           | X                  | X       
|Argentina | X               | X                    | X           | X                  | ---     
|Brazil    | X               | ---                  | ---         | ---                | ---     
|Peru      | X               | ---                  | ---         | X                  | ---     
|Colombia  | X               | ---                  | ---         | ---                | ---     

The Company’s headquarters are located in Santiago, Chile at Ureta Cox 930. The corporate office building contains approximately 3,524 square meters of office space. The Company, as of December 2007, owns plants warehouses and office space in Chile, Argentina, Brazil, Peru and Colombia, occupying approximately 438,641 square meters. Total production capacity for its Wire & Cable division, Optical Fiber division, Brass Mills unit, Flexible Packaging unit and Aluminum Profiles unit, including the production capacity of idle plants, amounts to 120,840 tons (excluding copper sulfates’ capacity), 400,000 km, 161,820 tons (including foundries’ capacity), 37,200 tons and 16,550 tons, respectively.

The following table sets forth information concerning the production facilities of the Company as of December 31, 2007. All listed facilities are either owned or leased and operated by the Company:

|                                      |                         |                       |                                           |                                     
|------------------------------------- | ----------------------- | --------------------- | ----------------------------------------- | ------------------------------------
|Production Facility                   | Principal Use/Products  | Size of Building
(M2) | Installed Production Capacity
(tons/year) | 2006 Average Capacity Utilization(1)
|Wire & Cable                          |                         |                       |                                           |                                     
|San Miguel, Santiago, Chile           | Copper cable            | 27,650                | 14,640                                    | 61%                                 
|Rio de Janeiro, Brazil                | Copper cable            | 58,000                | 17,400                                    | 74%                                 
|Sao Paulo, Brazil                     | Copper cable            | 26,500                | 34,200                                    | 69%                                 
|Lima, Peru                            | Copper / aluminum cable | 49,150                | 16,800                                    | 81%                                 
|Lima, Peru                            | Copper sulfates         | 770                   | 1,832                                     | 42%                                 
|Llavallol, B.A., Argentina (3)        | Copper / aluminum cable | 18,162                | 2,400                                     | 126%                                
|Quilmes, B.A., Argentina (3)          | Copper / aluminum cable | 39,850                | 4,800                                     | 128%                                
|Bucaramanga, Colombia                 | Copper / aluminum cable | 6,032                 | 5,400                                     | 74%                                 
|Lo Espejo, Santiago, Chile            | Copper rod              | 1,050                 | 12,000                                    | 54%                                 
|Sao Paulo, Brazil                     | Aluminium Rod           | 1,800                 | 13,200                                    | 85%                                 
|Buenos Aires, Argentina (km.) (2) (4) | Optical fiber cable     | 4,400                 | 400,000                                   | 33%                                 
|                                      |                         |                       |                                           |                                     
|Brass Mills                           |                         |                       |                                           |                                     
|San Miguel, Santiago, Chile           | Pipes, bars and sheets  | 32,400                | 36,900                                    | 66%                                 
|Lo Espejo, Santiago, Chile            | Foundry                 | 20,450                | 78,900                                    | 54%                                 
|Quilpue, Chile                        | Coin blanks and sheets  | 12,100                | 8,400                                     | 60%                                 
|Llavallol, B.A., Argentina (3)        | Copper sheets           | 30,112                | 10,120                                    | 0%                                  
|Llavallol, B.A., Argentina (3)        | Foundry                 | 1,775                 | 22,000                                    | 5%                                  
|Barracas, B.A., Argentina (3)         | Copper pipes            | 15,800                | 5,500                                     | 27%                                 
|                                      |                         |                       |                                           |                                     
|Flexible Packaging                    |                         |                       |                                           |                                     
|Santiago, Chile                       | Flexible packaging      | 19,430                | 13,200                                    | 87%                                 
|San Luis, Argentina                   | Flexible packaging      | 10,800                | 7,500                                     | 78%                                 
|Lima, Peru                            | Flexible packaging      | 41,110                | 16,500                                    | 89%                                 
|                                      |                         |                       |                                           |                                     
|Aluminum Profiles                     |                         |                       |                                           |                                     
|Santiago, Chile                       | Aluminum profiles       | 21,300                | 16,550                                    | 65%                                 

(1) Average Capacity Utilization represents total production output as a percentage of installed annual production capacity.
(2) On March 31, 2005, the Company acquired all the rights to Optel Ltda.  For additional information, see “Item 4. Information on the Company – History and Development of the Company – History”
(3) Since November 2004, the Company has been partially operating, on a non-continuous basis,  the Llavallol and Quilmes wire & cable facilities.
(4) The total production and utilization capacity of optical fiber cable (per kilometer) differs from final cable sold (per kilometer), because each cable sold is composed of multiple optical fibers (each fiber is used as a parameter in production and installed capacity in Madeco ́s optical fiber facility).

The Company’s operations are subject to both national and local regulations relating to the protection of the environment. The fundamental environmental law in Chile is the Health Code, which establishes minimum health standards and provides for regulation of air and water quality and sanitary landfills.

Since 1982, the Ministerio de Salud ("Chilean Health Ministry") and the Ministerio Secretaria General de la Presidencia ("Ministry of the General Secretary of the Presidency of Chile") have issued several regulations applicable to the control of pollution in the Santiago Metropolitan Region, which provide that, in cases of emergency due to high levels of air pollution, the Secretaria Regional Ministerial de Salud ("Regional Health Ministry") has the authority to order the temporary reduction of the activities of companies in the region that produce particles and gas emissions. According to Decree No.16 (issued in 1998), which establishes a contamination prevention and atmospheric decontamination plan for the Santiago metropolitan region, in emergency situations, the Regional Health Ministry can order the reduction or even the suspension of activities of those companies classified as producing the highest level of particles and gas emissions. Since Decree No. 16 was issued, emissions from Madeco's principal plants have remained below those levels that require the Regional Health Ministry to suspend production activity. Consequently, since Decree No. 16 was issued, Madeco has not been required to reduce or halt its normal production activity.

The regulation of matters relating to the protection of the environment is not as well developed in Chile, Argentina, Brazil, Peru and Colombia, as in the United States and certain other countries. Accordingly, the Company anticipates that additional laws and regulations will be enacted over time with respect to environmental matters. While the Company believes that it will continue to be in compliance with all applicable environmental regulations of which it is now aware, there can be no assurance that future legislative or regulatory developments will not impose restrictions on the Company that would be material or that would have a material adverse effect on the Company’s financial position and results of operations.

Until the acquisition of Cedsa and its capital increase (see “Item 4. Information on the Company – History and Development of the Company  —  History”), and the Company’s investment to produce PVC profiles (see “Item 5. Operating and Financial Review and Prospects — Capital Expenditures”) the Company had no material plan to expand the capacity of its plants.



ITEM 5. Operating and Financial Review and Prospects

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Introduction

The following discussion should be read in conjunction with the Company’s Consolidated Financial Statements and the Notes thereto included in “Item 18. Financial Statements”. For clarity of presentation, certain amounts presented in U.S. dollars and Chilean pesos, as well as percentages, have been rounded. As a result, certain totals may not directly reflect the sum of their components.

As discussed below, the Consolidated Financial Statements have been prepared in accordance with Chilean GAAP, which differs in certain important respects from U.S. GAAP.  Note 32 to the Consolidated Financial Statements provides a description of the principal differences between Chilean GAAP and U.S. GAAP as they relate to the Company’s results, and a reconciliation to U.S. GAAP of shareholders’ equity and net income (loss) for the years ended December 31, 2005, 2006 and 2007. In accordance with Chilean GAAP, financial data included in the Company’s Consolidated Financial Statements have been restated in constant Chilean pesos as of December 31, 2007. See Note 2 to the Consolidated Financial Statements.

The Company’s principal operating segment and its largest business unit is its Wire & Cable business, with production facilities in Chile, Brazil, Peru, Argentina and Colombia. Madeco is a leading Latin American manufacturer of wire and cable products, designed to meet client needs in the energy, mining, construction, telecom and industrial sectors. The Company’s second operating segment is its Brass Mills unit, which manufactures pipes, bars and sheets from copper, brass, aluminum and related alloys. Additionally, the Brass Mills unit manufactures coin blanks and minted coins from alloys comprising copper, nickel, aluminum and zinc. While the Company’s Brass Mills facilities are located in Chile and Argentina, a significant portion of the Brass Mills unit’s revenues are generated from export sales. The Company’s third operating segment, Flexible Packaging, manufactures printed flexible packaging for use in the packaging of mass consumer products. The Company has flexible packaging facilities in Chile, Argentina and Peru. Finally, the Company is a leading Chilean manufacturer of aluminum profiles used in residential, non residential construction and in the fabrication of industrial durable goods. See “Item 4. Information on the Company — Business Overview”.

The Company’s lines of business and results of operations are, to a large extent, dependent on the overall level of economic activity and growth in Chile, Brazil, Peru, Argentina and Colombia. The Company depends specifically on sectors which buy products from its Wire & Cable, Brass Mills, Flexible Packaging and Aluminum Profiles businesses, as well as on levels of economic activity in the Company’s principal export markets.

Economic Overview

Economic and market conditions in other emerging market countries, especially those in Latin America, influence companies with significant operations in Chile and the other countries where the Company has facilities.

Chile: Chile has a market-oriented economy characterized by a high level of foreign trade, strong financial institutions and sound economic policy that have given it the strongest sovereign bond rating in South America. The Chilean economy grew by 5.1% in 2007, as compared to 4.0% in 2006; nevertheless, falling short of projections made earlier in the year by both the Central Bank and a consensus of private analysts. This higher growth is explained by the considerable dynamism of most components of domestic demand, led by an increase in investment of around 12%, as compared to 2006. This performance was complemented by a persistent increase in exports, due to high global demand for major export goods (copper, molybdenum, cellulose, methanol and salmon). Unemployment has exhibited a downward trend over the past two years, dropping to 7.8% and 7.0% at the end of 2006 and 2007, respectively. In spite of these favorable macroeconomics conditions, during 2007 the Chilean economy observed high rate of
inflation, explained by increased prices of food, oil and energy, reaching a rate of 7.4% compared to 2.1% in 2006. In 2008, economic growth is expected to increase to approximately 4.5% based partly on local demand and high level of exports offset by high energy costs and unfavorable worldwide economics conditions.

Brazil: A floating exchange rate, an inflation-targeting regime, and a tight fiscal policy are the three main components of the Brazilian economic program. From 2003 to 2007, Brazil ran record trade surpluses and recorded its first current account surpluses since 1992. According to estimates, in 2007 Brazil's economy grew by 5.3% (3.7% in 2006) as a result of the favorable performance of economic variables such as the annual inflation rate, which ranked below the target of 4.5%; exports of goods, whose expansion was reflected in positive trade surplus and higher international reserves (which rose by nearly US$80,000 million). From a fiscal point of view, primary surplus remained in line with its target (3.8% of GDP), which was positively influenced by a record level of tax revenues and improved working conditions, including a decrease in the unemployment rate (from an average of 10% to 9.4% in 2007) and an increase in real income (an average of 3.4%). Market projections indicate that for 2008, the
growth rate will be slightly lower.

Peru: With an expansion of 7.5% in 2007, Peru's economy showed, for the fourth consecutive year, an economic growth rate above 5%. Domestic demand and exports of natural gas, minerals and agriculture products, were the main drivers of its high growth rate. In 2007, the rate ofinflation remained low, compared to other Latinamerican countries, but higher than in 2006 due to higher international prices for oil and imported products In addition, the inflation rate reached 3.9%, wich was over the Peruvian's Central Bank goal of 3.0%. In 2008, it is expected that the decrease in the pace of the global economy could lead to a fall in Peru's trade, but domestic demand is expected remain strong, producing only moderate economic growth of aproximately a 6.5%.

Argentina: In 2007, the Argentine economy grew by 8.7% experiencing robust growth for the fifth consecutive year and surpassing the level of activity reached in 1998 prior to the recession, due to robust domestic demand, increased private investment and Governmental expenditures. The urban poverty rate dropped to 26.9% (down from 48% observed in 2003, but still above the level existing prior to the recession), agricultural and manufacturing outputs accounted for 10% and 35% of GDP, respectively, during 2007. GDP growth for 2008 is estimated at 6.5%, which lower when compared to 2007, which is mostly due to a lack of large scale projects in the energy sector that are expected to limit the supply of electricity and natural gas.

Colombia: Having experienced an average growth of 5.1% between 2002 and 2006, continued internal demand is expected to help aadvance the Colombian economy to a 6.5% percent growth rate in 2007. Fixed investment, which averaged 19% annual growth between 2003 and 2006, has been a significant factor behind the positive economic expansion. In 2006 alone, fixed investment grew 27% in real terms. Steady increases in capital expenditures over the last four years have raised the investment to GDP ratio to 25%, setting the stage for the five percent annual growth expected over the next three years. Colombia's economy has experienced positive growth over the past three years despite a serious armed conflict. The economy continues to improve in part because of austere government budgets, focused efforts to reduce public debt levels, an export-oriented growth strategy, an improved security situation
in the country, and high commodity prices. Ongoing economic problems facing President Uribe range from reforming the pension system to reducing high unemployment, and to achieving congressional passage of a fiscal transfers reform. New exploration is needed to offset declining oil production. International and domestic financial analysts note with concern the growing central government deficit, which hovers at 5% of GDP. However, the government's economic policy and democratic security strategy have engendered a growing sense of confidence in the economy, particularly within the business sector.

While cyclical downturns in the Chilean or regional economy have an adverse effect on the Company’s business and results of operations, reduced domestic and regional sales can be partially offset by increases in exports outside the region, particularly with respect to the Company’s brass mills products, which meet international standard specifications and can be produced and sold competitively in international markets. There can be no assurance, however, that profits on any export sales would fully offset lost profits resulting from reductions in domestic or regional sales. Export sales for each business unit consist of all sales made to customers in countries other than those countries where the Company maintains operations for that respective business unit. In 2007, 22.4% of the Company’s consolidated revenues were attributable to exports.

Fluctuations in LME Metal Prices and Exchange Rates between Currencies

The Company’s revenues fluctuate as a result of the appreciation or depreciation of the Chilean peso versus the U.S. dollar since substantially all of the Company’s sales—whether for local or export markets—are linked to the London Metal Exchange (LME) price of copper, which is denominated in U.S. dollars and has historically fluctuated widely. In addition, the Company’s export sales are generally invoiced in U.S. dollars. In order to reduce the effects of fluctuations in the price of copper and aluminum on its results of operations, the Company’s pricing policy is to sell its copper and aluminum products based on the quantity of metal contained in the product valued at the prices of the London Metal Exchange with a cost-plus. Generally, the Company has been able to increase its selling prices in response to increases in costs of copper and/or aluminum. There can be no assurance, however, that the Company will be able to recover increases in the cost of copper and/or aluminum in the future. Fluctuations in the market price of aluminum have become more important for the Company, during the
recent years, due to the recent higher aluminum sales volume.

To hedge part of its risk of exposure to copper price fluctuations, in 2007, the Company entered into derivatives contracts of this underlying asset, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk — Commodity Price Risk”.

The Company’s Summary of Operations

The following table provides certain information relating to the Company’s results of operations in millions of Chilean pesos and as a percentage of net sales for the periods indicated:

|                                                         |           |        |  |           |        |  |           |       
|-------------------------------------------------------- | --------- | ------ |  | --------- | ------ |  | --------- | ------
|Year ended December 31,                                 
|(in Ch$ million as of Dec. 31, 2007, except percentages)
|                                                         | 2005      |        |  | 2006      |        |  | 2007      |       
|Net Sales                                                | 400,777   | 100.0% |  | 600,517   | 100.0% |  | 639,011   | 100.0%
|Cost of Goods Sold                                       | (343,822) | -85.8% |  | (514,413) | -85.7% |  | (564,099) | -88.3%
|Gross Income                                             | 56,955    | 14.2%  |  | 86,105    | 14.3%  |  | 74,912    | 11.7% 
|SG&A Expenses                                            | (26,427)  | -6.6%  |  | (30,508)  | -5.1%  |  | (34,797)  | -5.4% 
|Operating Income                                         | 30,528    | 7.6%   |  | 55,597    | 9.3%   |  | 40,115    | 6.3%  
|Non-Operating Income                                     | 3,736     | 0.9%   |  | 2,588     | 0.4%   |  | 3,122     | 0.5%  
|Non-Operating Expenses                                   | (15,677)  | -3.9%  |  | (17,166)  | -2.9%  |  | (16,487)  | -2.6% 
|Price-Level Restatement (1)                              | (3,018)   | -0.8%  |  | (1,366)   | -0.2%  |  | (2,796)   | -0.4% 
|Net Non-Operating Results                                | (14,959)  | -3.7%  |  | (15,945)  | -2.7%  |  | (16,160)  | -2.5% 
|Income Taxes                                             | (1,608)   | -0.4%  |  | (5,590)   | -0.9%  |  | (1,076)   | -0.2% 
|Minority Interest                                        | (808)     | -0.2%  |  | (1,652)   | -0.3%  |  | (3,308)   | -0.5% 
|Amortization of Negative Goodwill                        | 21        | 0.0%   |  | 28        | 0.0%   |  | 89        | 0.0%  
|Net Income                                               | 13,174    | 3.3%   |  | 32,439    | 5.4%   |  | 19,660    | 3.1%  

(1) Includes the effect of foreign exchange differences gains (losses).

The following tables set forth, for each of the periods indicated, the sales volumes, net sales and operating income of each of the Company’s business units, as well as the percentage of the Company’s total consolidated sales volume, revenues and operating income, respectively:



|                              |         |        |  |         |        |  |         |       
|----------------------------- | ------- | ------ |  | ------- | ------ |  | ------- | ------
|Sales Volumes                
|(in tons, except percentages)
|                              | 2005(2) |        |  | 2006    |        |  | 2007    |       
|Wire & Cable(1)               | 70,581  | 56.3%  |  | 80,747  | 59.1%  |  | 90,924  | 56.3% 
|Brass Mills                   | 29,513  | 23.5%  |  | 28,011  | 20.5%  |  | 21,831  | 13.5% 
|Flexible Packaging            | 14,527  | 11.6%  |  | 15,649  | 11.5%  |  | 38,259  | 23.7% 
|Aluminum Profiles             | 10,819  | 8.6%   |  | 12,262  | 9.0%   |  | 10,354  | 6.4%  
|Total                         | 125,440 | 100.0% |  | 136,669 | 100.0% |  | 158,369 | 100.0%

(1)  Total sales volumes presented in tons include the conversion of optical fiber sales volumes using the conversion rate of 1 ton = 44 km.
(2) The sales volume in Wire & Cable  for 2005 differs from those presented in the Company’s Annual Report on Form 20-F for 2005 as a result of a change in the Company’s methodology.



|                                                         |         |        |  |         |        |  |         |       
|-------------------------------------------------------- | ------- | ------ |  | ------- | ------ |  | ------- | ------
|Year ended December 31,                                 
|(in Ch$ million as of Dec. 31, 2007, except percentages)
|                                                         | 2005    |        |  | 2006    |        |  | 2007    |       
|Net Sales                                                |         |        |  |         |        |  |         |       
|Wire & Cable                                             | 232,538 | 58.0%  |  | 386,883 | 64.4%  |  | 411,849 | 64.5% 
|Brass Mills                                              | 87,623  | 21.9%  |  | 128,214 | 21.4%  |  | 103,031 | 16.1% 
|Flexible Packaging                                       | 48,422  | 12.1%  |  | 49,616  | 8.3%   |  | 89,000  | 13.9% 
|Aluminum Profiles                                        | 32,193  | 8.0%   |  | 35,804  | 6.0%   |  | 35,131  | 5.5%  
|Total                                                    | 400,777 | 100.0% |  | 600,517 | 100.0% |  | 639,011 | 100.0%
|                                                         |         |        |  |         |        |  |         |       
|Operating Income (Loss)                                  |         |        |  |         |        |  |         |       
|Wire & Cable                                             | 21,263  | 69.6%  |  | 36,844  | 66.3%  |  | 30,542  | 76.1% 
|Brass Mills                                              | 2,219   | 7.3%   |  | 10,514  | 18.9%  |  | (1,361) | -3.4% 
|Flexible Packaging                                       | 3,756   | 12.3%  |  | 5,154   | 9.3%   |  | 8,783   | 21.9% 
|Aluminum Profiles                                        | 3,290   | 10.8%  |  | 3,085   | 5.5%   |  | 2,151   | 5.4%  
|Total                                                    | 30,528  | 100.0% |  | 55,597  | 100.0% |  | 40,115  | 100.0%



2007 versus 2006

Consolidated financial results as of December 31, 2007, increased by 6.4% over 2006, reaching Ch$639,011 million. The increase in sales is due to the contribution from the Company’s acquisitions made in 2007 (Cedsa, Peruplast and Tech Pak) and an increase in sales of cable subsidiaries in Brazil, Peru and Argentina, partially offset by a reduction in sales of the Brass Mills unit.

Consolidated sales volume rose by 17.1% in 2007 compared to the prior year. The Flexible Packaging unit increased its sales by 144.5%, largely due to the contribution made by the acquisitions and subsequent consolidation in Peru. Second was the Cables unit which increased its sales by 10.8%, mainly due to improved performances by its subsidiaries in Brazil, Peru and Argentina, and also the contribution of the operation in Colombia acquired in 2007. The Aluminum Profiles and Brass Mills units obtained reductions in their tonnage sold of 15.6% and 22.1% respectively, the result of heavy price pressure from both domestic and international competitors.

Gross margin fell to Ch$74,912 million in 2007, a decrease of 13.0% compared to the previous year (Ch$86,105 million), due to the extraordinary income reported during 2006 and the weaker performance of the Brass Mills unit as a result of lower volumes and margins. These negative effects were partially offset by the contributions of the new companies which jointly produced a gross income of Ch$10,111 million, representing 13.5% of the total gross income for 2007. Additionally, the increase in the cost of sales in 2007 of Ch$49,686 million was mainly due to the higher cost of raw materials (copper and aluminum) and the inclusion of the new companies in the consolidation.

By the end of 2007, the Company’s operating income had decreased by 27.8% to Ch$40,115 million. This decrease was due to the drastic fall in the performance of the Brass Mills unit, especially in Chile. Secondly, the previous year included extraordinary gains that were not repeated in 2007, due to the sharp rise in the copper price in April, May and June 2006. Furthermore, this lower income is partly explained by the reduced gross income of Ch$11,193 million and an increase of Ch$4,289 million in administrative and selling expenses. The latter is essentially due to the expenses incurred by the inclusion of Cedsa and Peruplast (Ch$3,233 million) and the increase in the Profiles unit (Ch$1,198 million) resulting from the strategy for strengthening its commercial structure.

Analysis of Operating Segment Performance: 2007 versus 2006

The Company’s operating results for each business unit are described in further detail below:

Wire & Cable

|                                               |           |           |           |           |          |               |               |                  
|---------------------------------------------- | --------- | --------- | --------- | --------- | -------- | ------------- | ------------- | -----------------
|Year 2007 (in Ch$ million, except percentages)
|                                               | Chile     | Brazil    | Peru      | Argentina | Colombia | Optical Fiber | Inter-company | Wire & Cable Unit
|Revenues                                       | 154,158   | 162,660   | 124,075   | 24,624    | 22,190   | 2,350         | (78,208)      | 411,849          
|COGS                                           | (145,888) | (142,178) | (109,920) | (21,267)  | (18,454) | (2,381)       | 78,089        | (361,999)        
|Gross Income                                   | 8,270     | 20,482    | 14,155    | 3,357     | 3,736    | (31)          | (119)         | 49,850           
|Gross Margin                                   | 5.4%      | 12.6%     | 11.4%     | 13.6%     | 16.8%    | -1.3%         | 0.2%          | 12.1%            
|SG&A                                           | (2,400)   | (10,050)  | (2,893)   | (952)     | (1,061)  | (369)         | (1,583)       | (19,308)         
|Operating Income                               | 5,870     | 10,432    | 11,262    | 2,405     | 2,675    | (400)         | (1,702)       | 30,542           
|Operating Margin                               | 3.8%      | 6.4%      | 9.1%      | 9.8%      | 12.1%    | -17.0%        | 2.2%          | 7.4%             



|                                               |           |           |           |           |          |               |               |                  
|---------------------------------------------- | --------- | --------- | --------- | --------- | -------- | ------------- | ------------- | -----------------
|Year 2006 (in Ch$ million, except percentages)
|                                               | Chile     | Brazil    | Peru      | Argentina | Colombia | Optical Fiber | Inter-company | Wire & Cable Unit
|Revenues                                       | 141,530   | 152,986   | 127,880   | 14,436    | N/C      | 1,532         | (51,481)      | 386,883          
|COGS                                           | (128,607) | (128,734) | (111,570) | (12,035)  | N/C      | (1,644)       | 50,631        | (331,959)        
|Gross Income                                   | 12,923    | 24,252    | 16,310    | 2,401     | N/C      | (112)         | (850)         | 54,924           
|Gross Margin                                   | 9.1%      | 15.9%     | 12.8%     | 16.6%     | N/C      | -7.3%         | 1.7%          | 14.2%            
|SG&A                                           | (2,336)   | (10,263)  | (3,003)   | (683)     | N/C      | (352)         | (1,445)       | (18,082)         
|Operating Income                               | 10,587    | 13,989    | 13,307    | 1,718     | N/C      | (464)         | (2,295)       | 36,842           
|Operating Margin                               | 7.5%      | 9.1%      | 10.4%     | 11.9%     | N/C      | -30.3%        | 4.5%          | 9.5%             



|                          |        |        |        |           |          |               |                  
|------------------------- | ------ | ------ | ------ | --------- | -------- | ------------- | -----------------
|2007 versus 2006 % change
|                          | Chile  | Brazil | Peru   | Argentina | Colombia | Optical Fiber | Wire & Cable Unit
|Revenues                  | 8.9%   | 6.3%   | -3.0%  | 70.6%     | N/C      | 53.4%         | 6.5%             
|COGS                      | 13.4%  | 10.4%  | -1.5%  | 76.7%     | N/C      | 44.8%         | 9.0%             
|Gross Income              | -36.0% | -15.5% | -13.2% | 39.8%     | N/C      | -72.3%        | -9.2%            
|SG&A                      | 2.7%   | -2.1%  | -3.7%  | 39.4%     | N/C      | 4.8%          | 6.8%             
|Operating Income          | -44.6% | -25.4% | -15.4% | 40.0%     | N/C      | -13.8%        | -17.1%           

In 2007, revenues reached Ch$411,849 million, up 6.5% compared to Ch$386,883 million in 2006, due to metal price increases and higher sales volume. Sales volume of metallic wire and cables increased by 10.8%, particularly due to aluminum cables in Brazil (46.3%) and Argentina (135.5%), copper cables in Peru (23.2%) and the inclusion of Cedsa (with an addition of 4,031 tonnes). On the other hand, sales volumes of copper wire fell by 25.1% in Peru and 23.6% in Chile, due to higher internal consumption and the incorporation of Cedsa to the Company (an old customer for wire).

In 2007, cost of goods sold rose 9.0% to Ch$361,999 million, as compared to Ch$331,959 million in 2006. This increase reflects growth of 10.8% in volume sold, increased raw material costs of copper and aluminum on the LME and the inclusion of Cedsa.

In 2007, gross income decreased 9.2% to Ch$49,850 million, as compared to Ch$54,924 million in 2006.  This decrease is mainly due to the lack of extraordinary gains seen in 2006 due to the abrupt rises in the copper price, the larger portion of aluminum cables in the product mix (which have lower average margins than copper cables) and the steep fall in wire margins.

In 2007, selling, general and administrative expenses increased 6.8% to Ch$19,308 million, as compared to Ch$18,082 million in 2006, due to the inclusion of Cedsa (Ch$1,062 million) and the higher costs of implementing the requirements of the US Sarbanes Oxley Act. In spite of higher sales, selling, general and administrative expenses maintained its ratio of 4.7% over sales.

In 2007, operating income decreased by 17.1% to Ch$30,542 million, as compared to Ch$36,842 million in 2006. This decrease is mainly due to an 86.1% reduction in operating income from copper wire (Ch$5,596 million).

Brass Mills

|                                               |          |           |         |               |                 
|---------------------------------------------- | -------- | --------- | ------- | ------------- | ----------------
|Year 2007 (in Ch$ million, except percentages)
|                                               | Chile    | Argentina | Coins   | Inter-company | Brass Mills Unit
|Revenues                                       | 98,309   | 9,593     | 10,101  | (14,972)      | 103,031         
|COGS                                           | (95,903) | (8,796)   | (9,277) | 14,969        | (99,007)        
|Gross Income                                   | 2,406    | 797       | 824     | (3)           | 4,024           
|Gross Margin                                   | 2.4%     | 8.3%      | 8.2%    | 0.0%          | 3.9%            
|SG&A                                           | (3,702)  | (708)     | (450)   | (525)         | (5,385)         
|Operating Income                               | (1,296)  | 89        | 374     | (528)         | (1,361)         
|Operating Margin                               | -1.3%    | 0.9%      | 3.7%    | 3.5%          | -1.3%           



|                                               |           |           |         |               |                 
|---------------------------------------------- | --------- | --------- | ------- | ------------- | ----------------
|Year 2006 (in Ch$ million, except percentages)
|                                               | Chile     | Argentina | Coins   | Inter-company | Brass Mills Unit
|Revenues                                       | 117,640   | 10,581    | 12,618  | (12,624)      | 128,215         
|COGS                                           | (106,284) | (8,814)   | (9,642) | 12,603        | (112,137)       
|Gross Income                                   | 11,356    | 1,767     | 2,976   | (21)          | 16,078          
|Gross Margin                                   | 9.7%      | 16.7%     | 23.6%   | 0.2%          | 12.5%           
|SG&A                                           | (3,750)   | (792)     | (586)   | (434)         | (5,562)         
|Operating Income                               | 7,606     | 975       | 2,390   | (455)         | 10,516          
|Operating Margin                               | 6.5%      | 9.2%      | 18.9%   | 3.6%          | 8.2%            



|                          |         |           |        |                 
|------------------------- | ------- | --------- | ------ | ----------------
|2007 versus 2006 % change
|                          | Chile   | Argentina | Coins  | Brass Mills Unit
|Revenues                  | -16.4%  | -9.3%     | -19.9% | -19.6%          
|COGS                      | -9.8%   | -0.2%     | -3.8%  | -11.7%          
|Gross Income              | -78.8%  | -54.9%    | -72.3% | -75.0%          
|SG&A                      | -1.3%   | -10.6%    | -23.2% | -3.2%           
|Operating Income          | -117.0% | -90.9%    | -84.4% | -112.9%         



In 2007, revenues decreased by 19.6% to Ch$103,031 million, compared to Ch$128,215 million in 2006. The lower sales were mainly due to a substitution effect in the Company’s products, lower sales prices (strong competition inside Chile) and lower sales volume sold.

In 2007, cost of goods sold decreased 11.7%, but in terms of percentage over sales rose from 87.5% in 2006 to 96.1% in 2007. The higher ratio is partially explained by higher prices for raw materials and higher energy costs.

In 2007, gross margin decreased to 3.9% of sales, as compared to 12.5% of sales in 2006.  This is mainly due to a higher comparison base (due to extraordinary gains in 2006), devaluation of the dollar which eroded export prices, higher energy costs and the effects of competitive pricing pressures on the Chilean market.

In 2007, selling, general and administrative expenses decreased by 3.2% to Ch$5,385 million, as compared to Ch$5,562 million in 2006. As a percentage of sales, selling, general and administrative expenses increased to 5.2% in 2007 from 4.3% in 2006.

In 2007, operating income decreased 19.6% to a loss of Ch$1,361 million from a gain of Ch$10,516 million in 2006. Similarly, the operating margin decreased in 2007 to a negative 1.3% compared to a positive 8.2% in 2006.

Flexible Packaging

|                                               |          |           |          |               |                        
|---------------------------------------------- | -------- | --------- | -------- | ------------- | -----------------------
|Year 2007 (in Ch$ million, except percentages)
|                                               | Chile    | Argentina | Peru     | Inter-company | Flexible Packaging Unit
|Revenues                                       | 35,362   | 14,797    | 42,529   | (3,688)       | 89,000                 
|COGS                                           | (29,430) | (13,209)  | (35,874) | 3,455         | (75,058)               
|Gross Income                                   | 5,932    | 1,588     | 6,655    | (233)         | 13,942                 
|Gross Margin                                   | 16.8%    | 10.7%     | 15.6%    | 6.3%          | 15.7%                  
|SG&A                                           | (1,961)  | (765)     | (2,172)  | (261)         | (5,159)                
|Operating Income                               | 3,971    | 823       | 4,483    | (494)         | 8,783                  
|Operating Margin                               | 11.2%    | 5.6%      | 10.5%    | 13.4%         | 9.9%                   



|                                               |          |           |      |               |                        
|---------------------------------------------- | -------- | --------- | ---- | ------------- | -----------------------
|Year 2006 (in Ch$ million, except percentages)
|                                               | Chile    | Argentina | Peru | Inter-company | Flexible Packaging Unit
|Revenues                                       | 33,476   | 16,865    | N/C  | (725)         | 49,616                 
|COGS                                           | (27,359) | (14,697)  | N/C  | 724           | (41,332)               
|Gross Income                                   | 6,117    | 2,168     | N/C  | (1)           | 8,284                  
|Gross Margin                                   | 18.3%    | 12.9%     | N/C  | 0.1%          | 16.7%                  
|SG&A                                           | (2,132)  | (758)     | N/C  | (241)         | (3,131)                
|Operating Income                               | 3,985    | 1,410     | N/C  | (242)         | 5,153                  
|Operating Margin                               | 11.9%    | 8.4%      | N/C  | 33.4%         | 10.4%                  



|                          |       |           |      |                        
|------------------------- | ----- | --------- | ---- | -----------------------
|2007 versus 2006 % change
|                          | Chile | Argentina | Peru | Flexible Packaging Unit
|Revenues                  | 5.6%  | -12.3%    | N/C  | 79.4%                  
|COGS                      | 7.6%  | -10.1%    | N/C  | 81.6%                  
|Gross Income              | -3.0% | -26.8%    | N/C  | 68.3%                  
|SG&A                      | -8.0% | 0.9%      | N/C  | 64.8%                  
|Operating Income          | -0.4% | -41.6%    | N/C  | 70.4%                  

In 2007, revenues increased 79.4% to Ch$89,000 million as compared to Ch$49,616 million in 2006, mainly due to the incorporation of Peruplast (which merged in October 2007 with Tech Pak), whose sales amounted to Ch$42,529 million, including inter-company sales.  Sales volume in Chile increased by 10.7%, offset by lower sales in Argentina of 1.7%.  The sales volume of Peruplast was 21,636 tonnes in 2007, which was 95.7% of the unit’s volume.

In 2007, the cost of sales rose by 81.6%, to Ch$75,058 million from Ch$41,332 million in 2006. This includes Peruplast’s cost of sales of Ch$35,874 million (including the cost of inter-company sales). As a percentage of sales, cost of sales increased from 83.3% to 84.3%, due to the higher costs of raw materials (polypropylene, polyethylene, aluminum, etc.) as well as higher energy and labor costs.

In 2007, gross income increased 68.3% to Ch$13,942 million as compared to Ch$41,332 million in 2006. However, the gross margin decreased from 16.8% to 15.6%, mainly due to a reduction in the gross margin in Chile from 18.3% to 16.8%, and to a lesser extent, to reduced gross margin of Argentina, which decreased from 12.9% to 10.7%.

In 2007, selling, general and administrative expenses increased by 64.8%, or Ch$2,028 million, to negative Ch$5,159 million, from Ch$3,131 million in 2006, including the addition of Peru’s addition Ch$2,172 million in expenses.  This increase reflects efforts by the Company, since the second half of 2005, to streamline the business unit’s operations in order to achieve greater efficiency.

In 2007, operating income increased 70.4% to Ch$8,783 million as compared to Ch$5,153 million in 2006, mainly due to the incorporation of Peruplast and the Company’s cost cutting efforts.

Aluminum Profiles

|                                               |          |                       
|---------------------------------------------- | -------- | ----------------------
|Year 2007 (in Ch$ million, except percentages)
|                                               | Chile    | Aluminum Profiles Unit
|Revenues                                       | 35,131   | 35,131                
|COGS                                           | (28,035) | (28,035)              
|Gross Income                                   | 7,096    | 7,096                 
|Gross Margin                                   | 20.2%    | 20.2%                 
|SG&A                                           | (4,945)  | (4,945)               
|Operating Income                               | 2,151    | 2,151                 
|Operating Margin                               | 6.1%     | 6.1%                  



|                                               |          |                       
|---------------------------------------------- | -------- | ----------------------
|Year 2006 (in Ch$ million, except percentages)
|                                               | Chile    | Aluminum Profiles Unit
|Revenues                                       | 35,804   | 35,804                
|COGS                                           | (28,985) | (28,985)              
|Gross Income                                   | 6,819    | 6,819                 
|Gross Margin                                   | 19.0%    | 19.0%                 
|SG&A                                           | (3,734)  | (3,734)               
|Operating Income                               | 3,085    | 3,085                 
|Operating Margin                               | 8.6%     | 8.6%                  



|                          |                   |                       
|------------------------- | ----------------- | ----------------------
|2007 versus 2006 % change
|                          | Aluminum Profiles | Aluminum Profiles Unit
|Revenues                  | -1.9%             | -1.9%                 
|COGS                      | -3.3%             | -3.3%                 
|Gross Income              | 4.1%              | 4.1%                  
|SG&A                      | 32.4%             | 32.4%                 
|Operating Income          | -30.3%            | -30.3%                

In 2007, revenues decreased by 1.9% to Ch$35,131 million from Ch$35,804 million in 2006. This is mainly due to a positive price effect of Ch$4,899 million and a negative volume effect of Ch$5,571 million.

In 2007, cost of goods sold decreased by 3.3% to Ch$28,035 million as compared to Ch$28,985 million in 2006, due to a reduction in sales volume of  15.6% as compared to the previous year.  This was offset by higher aluminum prices. As a percentage of sales, cost of goods sold decreased to 79.8% in 2007 from 81.0% in 2006.

In 2007, gross margin as a percentage of sales increased to 20.2% from 19.0% in 2006.

In 2007, selling, general and administrative expenses increased 32.4% to Ch$4,945 million as compared to Ch$3,734 million in 2006, due to higher sales and marketing expenses related to the enhancement of Company’s commercial network in Chile.

In 2007, the Company’s operating income from aluminum profiles decreased by 30.3%, or Ch$934 million, to Ch$2,151 million as compared to Ch$3,085 million in 2006.  This is mainly due to higher sales and marketing expenses, and was offset by higher gross income in 2007 as compared to 2006.



The Company’s Non-Operating Results

In 2007, non-operating expenses increased by 1.4%, to Ch$16,160 million, as compared to Ch$15,944 million in 2006. For further details regarding the Company’s non-operating results, see Note 23 to the Company’s Consolidated Financial Statements.

- Non-Operating Income



2006 versus 2005

Consolidated financial results as of December 31, 2006, are positive due to revenue growth of 49.8% compared to the previous year. The increase in sales reflects higher average selling prices as well as a change in product mix, which resulted in a substantial revenue increase in the Wire & Cable Business Unit, especially in Peru, Brazil and Argentina, partially offset by a reduction in sales of the Brass Mills unit.

Consolidated sales volume reached 135,290 tons (not including optical fiber volumes), up 9.5% when compared to 2005. This is mainly due to growth of 15.5% (10,656 tons) in the sales volume of cables, 7.7% in flexible packaging and 13.3% in aluminum profiles, partially offset by a decrease of 5.1% in sales volume in the Brass Mills unit.

Gross margin grew to Ch$86,104 million in 2006, an increase of 51.2% compared to the previous year (Ch$56,955 million), as a result of the higher sales level, partially offset by an increase of 49.6% in the cost of goods sold. The increase in cost of goods sold was mainly due to price increases in raw materials such as copper, aluminum and plastics. The average copper price on the LME (London Metal Exchange) increased 82.7%, from US$3,684/ton or ThCh$1,888/ton approximately in 2005 to US$6,731/ton or ThCh$3,584/ton approximately in 2006, while aluminum increased 35.4%. Consequently, the cost of raw materials rose by Ch$163,278 million. Additionally, production costs increased Ch$7,313 million, due to higher production levels and energy expenses.

By the end of 2006, the Company’s operating income had increased by 82.1% to Ch$55,597 million, as a result of higher average prices and sales volumes and in spite of raw material increases, demonstrating the company’s ability to pass cost increases onto clients. The increase in operating income is explained by a higher gross margin of Ch$29,151 million, partially offset by a rise in selling, general and administrative expenses of 15.4%, as a result of expenses associated with higher sales, implementation of the Sarbanes Oxley Act and the ERP SAP software installation.

The sharp rise in copper prices during April and May 2006 (of US$3,000/ton on average or approximately ThCh$1,558/ton) generated non-recurring income estimated at Ch$6,981 million in the first half of the year due to the method of accounting for copper, which utilizes the average weighted price in calculating the cost of sales for each month. In the third quarter of 2006, the LME price stabilized and there was no significant difference between that and the weighted average accounting price. However, this situation was reverted in November, and has been reflected in additional costs of Ch$3,353 million in order to balance, at year-end, the value of copper inventories at the average LME price for December 2006.

Analysis of Operating Segment Performance: 2006 versus 2005

The Company’s operating results for each business unit are described in further detail below:

Wire & Cable

|                                               |           |           |           |           |               |               |                  
|---------------------------------------------- | --------- | --------- | --------- | --------- | ------------- | ------------- | -----------------
|Year 2006 (in Ch$ million, except percentages)
|                                               | Chile     | Brazil    | Peru      | Argentina | Optical Fiber | Inter-company | Wire & Cable Unit
|Revenues                                       | 141,530   | 152,986   | 127,880   | 14,436    | 1,533         | (51,481)      | 386,883          
|COGS                                           | (128,605) | (128,734) | (111,570) | (12,035)  | (1,644)       | 50,631        | (331,958)        
|Gross Income                                   | 12,925    | 24,252    | 16,310    | 2,400     | (112)         | (851)         | 54,924           
|Gross Margin                                   | 9.1%      | 15.9%     | 12.8%     | 16.6%     | -7.3%         | 1.7%          | 14.2%            
|SG&A                                           | (2,336)   | (10,263)  | (3,003)   | (683)     | (352)         | (1,443)       | (18,081)         
|Operating Income                               | 10,589    | 13,989    | 13,307    | 1,717     | (464)         | (2,294)       | 36,844           
|Operating Margin                               | 7.5%      | 9.1%      | 10.4%     | 11.9%     | -30.3%        | 4.5%          | 9.5%             



|                                               |          |          |          |           |               |               |                  
|---------------------------------------------- | -------- | -------- | -------- | --------- | ------------- | ------------- | -----------------
|Year 2005 (in Ch$ million, except percentages)
|                                               | Chile    | Brazil   | Peru     | Argentina | Optical Fiber | Inter-company | Wire & Cable Unit
|Revenues                                       | 85,349   | 98,961   | 69,449   | 6,313     | 1,895         | (29,428)      | 232,538          
|COGS                                           | (78,292) | (82,091) | (59,142) | (5,503)   | (1,628)       | 29,921        | (196,736)        
|Gross Income                                   | 7,056    | 16,869   | 10,307   | 810       | 266           | 493           | 35,802           
|Gross Margin                                   | 8.3%     | 17.0%    | 14.8%    | 12.8%     | 14.1%         | -1.7%         | 15.4%            
|SG&A                                           | (1,990)  | (8,150)  | (2,486)  | (461)     | (215)         | (1,237)       | (14,539)         
|Operating Income                               | 5,066    | 8,720    | 7,821    | 349       | 52            | (744)         | 21,263           
|Operating Margin                               | 5.9%     | 8.8%     | 11.3%    | 5.5%      | 2.7%          | 2.5%          | 9.1%             



|                           |        |        |       |           |                  
|-------------------------- | ------ | ------ | ----- | --------- | -----------------
|2006 versus 2005  % change
|                           | Chile  | Brazil | Peru  | Argentina | Wire & Cable Unit
|Revenues                   | 65.8%  | 54.6%  | 84.1% | 128.7%    | 66.4%            
|COGS                       | 64.3%  | 56.8%  | 88.6% | 118.7%    | 68.7%            
|Gross Income               | 83.2%  | 43.8%  | 58.2% | 196.4%    | 53.4%            
|SG&A                       | 17.4%  | 25.9%  | 20.8% | 48.3%     | 24.4%            
|Operating Income           | 109.0% | 60.4%  | 70.1% | 392.0%    | 73.3%            

In 2006, revenues reached Ch$386,883 million, up 66.4% compared to Ch$232,538 million in 2005, as a result of copper price increases and higher sales volume. Sales volume of metallic wire and cables grew 15.5%, led by Argentina, which was up 78.1%, and to a lesser extent by Peru and Brazil with increases of 33.3% and 9.7%, respectively. In terms of sales mix to third parties, copper rod rose by 57.5% and aluminum cables increased in Argentina and Brazil by 126.0% and 46.1%, respectively. These increases were partially offset by a decline in the sales volume of copper cables in Chile and Peru, which fell by 22.7% and 7.5%, respectively.

Cost of goods sold rose 68.7% to Ch$331,958 million in 2006, compared to Ch$196,736 million in 2005. This increase reflects growth of 15.5% in volume sold and increased raw material costs of copper and aluminum on the LME.

Gross income rose 53.4% compared to 2005, from Ch$35,802 million in 2005 to Ch$54,924 million in 2006. However, as a percentage of sales, the gross margin decreased from 15.4% in 2005 to 14.2% in 2006, mainly due to the higher price of raw materials.

Selling, general and administrative expenses increased 24.4% to Ch$18,081 million from Ch$14,539 million in 2005, due to increased marketing and sales expenses, costs related to the ERP SAP software implementation and increased costs associated with the implementation of the Sarbanes Oxley Act. As a percentage of revenues, selling, general and administrative expenses fell to 4.7%, compared to 6.3% in 2005.

Operating income increased by 73.3% in 2006 from Ch$21,263 million to Ch$36,844 million.

Brass Mills

|                                               |           |           |         |               |                 
|---------------------------------------------- | --------- | --------- | ------- | ------------- | ----------------
|Year 2006 (in Ch$ million, except percentages)
|                                               | Chile     | Argentina | Coins   | Inter-company | Brass Mills Unit
|Revenues                                       | 117,640   | 10,581    | 12,618  | (12,625)      | 128,214         
|COGS                                           | (106,284) | (8,814)   | (9,642) | 12,603        | (112,137)       
|Gross Income                                   | 11,355    | 1,767     | 2,976   | (21)          | 16,077          
|Gross Margin                                   | 9.7%      | 16.7%     | 23.6%   | 0.2%          | 12.5%           
|SG&A                                           | (3,750)   | (792)     | (586)   | (434)         | (5,562)         
|Operating Income                               | 7,605     | 975       | 2,390   | (455)         | 10,514          
|Operating Margin                               | 6.5%      | 9.2%      | 18.9%   | 3.6%          | 8.2%            



|                                               |          |           |         |               |                 
|---------------------------------------------- | -------- | --------- | ------- | ------------- | ----------------
|Year 2005 (in Ch$ million, except percentages)
|                                               | Chile    | Argentina | Coins   | Inter-company | Brass Mills Unit
|Revenues                                       | 84,637   | 7,892     | 7,533   | (12,438)      | 87,623          
|COGS                                           | (79,313) | (6,786)   | (6,879) | 12,633        | (80,344)        
|Gross Income                                   | 5,324    | 1,106     | 654     | 195           | 7,280           
|Gross Margin                                   | 6.3%     | 14.0%     | 8.7%    | -1.6%         | 8.3%            
|SG&A                                           | (3,488)  | (719)     | (450)   | (404)         | (5,061)         
|Operating Income                               | 1,835    | 388       | 204     | (208)         | 2,219           
|Operating Margin                               | 2.2%     | 4.9%      | 2.7%    | 1.7%          | 2.5%            



|                          |        |           |         |                 
|------------------------- | ------ | --------- | ------- | ----------------
|2006 versus 2005 % change
|                          | Chile  | Argentina | Coins   | Brass Mills Unit
|Revenues                  | 39.0%  | 34.1%     | 67.5%   | 46.3%           
|COGS                      | 34.0%  | 29.9%     | 40.2%   | 39.6%           
|Gross Income              | 113.3% | 59.7%     | 355.0%  | 120.8%          
|SG&A                      | 7.5%   | 10.2%     | 30.3%   | 9.9%            
|Operating Income          | 314.3% | 151.5%    | 1071.1% | 373.9%          

In 2006, revenues increased by 46.3% to Ch$128,214 million compared to Ch$87,623 million in 2005. The increase was mainly due to higher copper prices partially offset by the unit’s lower sales volume as a result of strong substitution.

Cost of goods sold rose 39.6% due to higher raw material costs, especially copper, in spite of decreased sales volumes. As a percentage of revenues, costs of goods sold decreased to 87.5%, compared to 91.7% in 2005 as result of efficiencies generated by the restructuring of operations in Chile during the fourth quarter of 2005.

The gross margin increased to 12.5% of sales in 2006 from 8.3% in 2005, due to the effect of the weighted average cost of copper used and to operational efficiencies. Furthermore, in Argentina sales were focused on special pipes used in refrigeration and heat exchange in sugar mill plants.

Selling, general and administrative expenses increased 9.9% to Ch$5,562 million in 2006 from Ch$5,061 million in 2005 and, as a percentage of sales, fell to 4.3% in 2006 from 5.8% in 2005.

Operating income increased 373.9% or Ch$8,295 million in 2006 compared to the previous year. Similarly, the operating margin rose in 2006 to 8.2% compared to 2.5% in the previous year.

Flexible Packaging

|                                               |          |           |               |                        
|---------------------------------------------- | -------- | --------- | ------------- | -----------------------
|Year 2006 (in Ch$ million, except percentages)
|                                               | Chile    | Argentina | Inter-company | Flexible Packaging Unit
|Revenues                                       | 32,772   | 16,865    | (20)          | 49,617                 
|COGS                                           | (26,655) | (14,697)  | 19            | (41,332)               
|Gross Income                                   | 6,118    | 2,168     | (1)           | 8,285                  
|Gross Margin                                   | 18.7%    | 12.9%     | 0.0%          | 16.7%                  
|SG&A                                           | (2,137)  | (758)     | (235)         | (3,131)                
|Operating Income                               | 3,980    | 1,410     | (236)         | 5,154                  
|Operating Margin                               | 12.1%    | 8.4%      | 0.0%          | 10.4%                  



|                                               |          |           |               |                        
|---------------------------------------------- | -------- | --------- | ------------- | -----------------------
|Year 2005 (in Ch$ million, except percentages)
|                                               | Chile    | Argentina | Inter-company | Flexible Packaging Unit
|Revenues                                       | 34,606   | 13,817    | (1)           | 48,422                 
|COGS                                           | (29,492) | (11,902)  | 0             | (41,394)               
|Gross Income                                   | 5,114    | 1,915     | (1)           | 7,028                  
|Gross Margin                                   | 14.8%    | 13.9%     | 0.0%          | 14.5%                  
|SG&A                                           | (2,179)  | (876)     | (217)         | (3,272)                
|Operating Income                               | 2,935    | 1,039     | (218)         | 3,756                  
|Operating Margin                               | 8.5%     | 7.5%      | 0.0%          | 7.8%                   



|                          |       |           |                        
|------------------------- | ----- | --------- | -----------------------
|2006 versus 2005 % change
|                          | Chile | Argentina | Flexible Packaging Unit
|Revenues                  | -5.3% | 22.1%     | 2.5%                   
|COGS                      | -9.6% | 23.5%     | -0.2%                  
|Gross Income              | 19.6% | 13.2%     | 17.9%                  
|SG&A                      | -1.9% | -13.5%    | -4.3%                  
|Operating Income          | 35.6% | 35.8%     | 37.2%                  

Revenues increased 2.5% to Ch$49,617 million in 2006 from Ch$48,422 million in 2005. Operations in Chile experienced an increase in sales volume of 2.6%, while the Argentine operations saw an increase of 18.1%. Total sales volume was up 7.7% in 2006. The unit price (per tonne) dropped as a result of the heavier products sold.

Cost of goods sold declined by 0.2% to Ch$41,332 million in 2006 from Ch$41,394 million in 2005. In the Chilean operations, cost decreased from Ch$29,492 million to Ch$26,655 million because of improvements in purchasing and supply chain management. In contrast, the Argentine operations experienced an increase in cost of goods sold from Ch$11,902 million in 2005 to Ch$14,697 million in 2006 due to higher sales volume.

The gross margin increased to 16.7% in 2006 from 14.5% in 2005 due to the streamlining of certain production processes.

Selling, general and administrative expenses decreased by 4.3% to Ch$3,131 million in 2006 from Ch$3,272 million in 2005, reflecting the efforts made in the second half of 2005 to streamline the business unit’s operations in a quest for greater efficiency.

Operating income increased Ch$1,398 million, or 37.2% in 2006 compared to the previous year, mainly due to the aforementioned increase in gross income and a lower level of selling, general and administrative expenses.



Aluminum Profiles

|                                               |          |                       
|---------------------------------------------- | -------- | ----------------------
|Year 2006 (in Ch$ million, except percentages)
|                                               | Chile    | Aluminum Profiles Unit
|Revenues                                       | 35,804   | 35,804                
|COGS                                           | (28,985) | (28,985)              
|Gross Income                                   | 6,819    | 6,819                 
|Gross Margin                                   | 19.0%    | 19.0%                 
|SG&A                                           | (3,734)  | (3,734)               
|Operating Income                               | 3,085    | 3,085                 
|Operating Margin                               | 8.6%     | 8.6%                  



|                                               |          |                       
|---------------------------------------------- | -------- | ----------------------
|Year 2005 (in Ch$ million, except percentages)
|                                               | Chile    | Aluminum Profiles Unit
|Revenues                                       | 32,193   | 32,193                
|COGS                                           | (25,347) | (25,347)              
|Gross Income                                   | 6,846    | 6,846                 
|Gross Margin                                   | 21.3%    | 21.3%                 
|SG&A                                           | (3,555)  | (3,555)               
|Operating Income                               | 3,291    | 3,291                 
|Operating Margin                               | 10.2%    | 10.2%                 



|                          |                   |                       
|------------------------- | ----------------- | ----------------------
|2006 versus 2005 % change
|                          | Aluminum Profiles | Aluminum Profiles Unit
|Revenues                  | 11.2%             | 11.2%                 
|COGS                      | 14.4%             | 14.4%                 
|Gross Income              | -0.4%             | -0.4%                 
|SG&A                      | 5.0%              | 5.0%                  
|Operating Income          | -6.3%             | -6.3%                 

In 2006, revenues rose by 11.2% to Ch$35,804 million from Ch$32,193 million in 2005. This increase was due to a 13.3% higher sales volume, partially offset by lower average prices as a result of stiffer competition from low-priced products imported from China.

Cost of goods sold rose 14.4% to Ch$28,985 million in 2006 from Ch$25,347 million in 2005, due to growth in sales volume and an increase in the average price of raw materials, especially aluminum LME price which rose by 35.4%.

The gross margin as a percentage of sales fell to 19.0% in 2006 from 21.3% in 2005.

Selling, general and administrative expenses increased 5.0% to Ch$3,734 million in 2006 from Ch$3,555 million in 2005, due to higher sales and marketing expenses and an increase in costs of external services. However, as a percentage of sales, selling, general and administrative expenses decreased to 10.4% in 2006 from 11.0% in 2005, attributable to higher cost of aluminum in 2006.

The Company’s operating income from aluminum profiles decreased in 2006 by Ch$206 million, or 6.3%, and the operating margin decreased to 8.6% from 10.2% in the previous year.



The Company’s Non-Operating Results

Non-operating expenses increased by Ch$985 million to a loss of Ch$15,945 million in 2006 compared to a loss of Ch$14,960 million in 2005. For further details regarding the Company’s non-operating results, see Note 23 to the Company’s Consolidated Financial Statements.

- Non-Operating Income

Acquisitions and dispositions

1. Discontinued operations

Management’s Discussions and Analysis of results of operations as presented above are based on Chilean GAAP financial information. Under Chilean GAAP, discontinued operations are not presented separately from financial results of discontinued operations. Thus, the analysis presented below includes results from operations of discontinued operations.

Under U.S. GAAP, operating results for discontinued operations through the disposal date, as well as the gains or losses from ultimate sale, are reported in “Income (Loss) from discontinued operations, net” in the condensed Consolidated Statements of Income under U.S. GAAP. The assets and liabilities of the business units which were classified as held for sale as of December 31, 2007 and 2005 in the condensed balance sheet under U.S. GAAP, but which were not yet sold as of the respective balance sheet date, are reported as “Assets of disposal groups” and “Liabilities of disposal groups”, respectively, in the respective Consolidated Balance Sheets under U.S. GAAP. Therefore, Alufoil and the Wire & Cable Unit have been reclassified.

For more information on the discontinued operations as presented under U.S. GAAP, including certain selected financial information, see Note 32 of the Consolidated Financial Statements.

1. Unconsolidated Peruplast

Under Chilean GAAP the Company, as of December 31, 2007, consolidated its 50% owned shareholding in Peruplast S.A., since pursuant to a shareholders’ agreement, the Company through its representatives in the board of directors can appoint the chief executive officer of the investment. Consequently, the Company is able to establish finance and operation policies and strategies, which under Chilean GAAP is sufficient to presume control and thus consolidate this subsidiary. With its 50% ownership in Peruplast, the Company does not exercise control over Peruplast pursuant to U.S. GAAP.  Consequently, the investment is accounted for under the equity method. See Note 32 of the Consolidated Financial Statements.

1. Acquisitions

During the first quarter of 2007, the parent company Madeco S.A. and its subsidiary Alusa S.A. have acquired and increased, respectively, their ownership in Cedsa S.A. (Colombia), Peruplast S.A. and Tech Pak S.A. (Peru) as follows:

On February 12, 2007, Madeco S.A. entered a purchase and sale agreement and acquired 80% of Cedsa S.A. for US$3.7 million in cash. Together with the acquisition of these shares, the shareholders assumed the commitment of making a capital increase for US$6 million in two equal installments the first of which expired in March 2007 and the second installment expired in September 2007.

On February 15, 2007, the subsidiary Alusa S.A. entered a share purchase and sale agreement for the shares of Peruplast S.A. and acquired 10,984,402 shares of this company, equivalent to ownership of 14,5%, which implied increasing its ownership from 25.0% to 39.5%. The price paid in cash for this acquisition was US$3.2 million paid on March 1, 2007.

On July 11, 2007, in Lima, Peru, Shintec S.A. formalized the commitment of selling its shares in Peruplast S.A. For this purpose, through Tech Pack S.A., the Company acquired from Shintec S.A. the rest of the shares issued by Peruplast S.A. The price paid for these shares was the same as in the previous purchase and sale and therefore, the buyer paid the sum of US$4.6 in cash.

At the General Shareholder’s Meeting of Peruplast S.A. and Tech Pack S.A. held on July 18, 2007, the shareholders approved the project for the merger and absorption of Tech Pack S.A by Peruplast S.A. On October 1, 2007, Peruplast S.A. has absorbed in full the shareholders’ equity of Tech Pack S.A. and has commenced operations as a single legal entity.

Additionally, the subsidiary Alusa S.A. has entered a shareholders’ agreement for the management of both companies, which has implied that beginning on that date, our subsidiary Alusa S.A. has included in its consolidation the financial statements of the new Peruplast S.A. (Peruplast S.A. and Tech Pak S.A. through September 30.)

The summarized financial statements included in the consolidation of Madeco S.A. are detailed as follows:

|                                                                                                            |            |               
|----------------------------------------------------------------------------------------------------------- | ---------- | --------------
|Condensed statement of income of entities additionally consolidated during the year ended December 31, 2007
|                                                                                                            |            |               
|                                                                                                            | Cedsa S.A. | Peruplast S.A.
|                                                                                                            | ThCh$      | ThCh$         
|                                                                                                            |            |               
|Sales                                                                                                       | 22,190,004 | 42,528,795    
|Gross margin                                                                                                | 3,736,192  | 6,654,949     
|Operating income, net                                                                                       | 2,675,149  | 4,482,943     
|Non-operating loss, net                                                                                     | (438,382)  | (37,670)      
|Income taxes                                                                                                | (687,965)  | (1,176,029)   
|Net income                                                                                                  | 1,548,802  | 3,323,004     

Impact of Inflation and Price Level Restatement

In general, inflation has the adverse effect of diminishing the purchasing power of a company’s monetary assets that are not price-level indexed, and has the positive effect of reducing the real value of a company’s monetary liabilities that are not price-level indexed. In addition, to the extent that increases in a company’s costs of production are not passed on to the consumer in the form of higher prices for a company’s goods, inflation will adversely affect the Company’s earnings.

As explained in Note 2 b) to the Consolidated Financial Statements, the Company is required to restate non-monetary assets, non-monetary liabilities, shareholders’ equity, and income and expense accounts to reflect the effect of variations in the purchasing power of the Chilean peso, thus reflecting by an indirect method the gain or loss resulting from holding or owning monetary assets and liabilities. For all the above figures, the restatement is based on the variation of the official Indice de Precio al Consumidor (the Chilean Consumer Price Index, or “IPC”) published by the Instituto Nacional de Estadisticas (National Institute of Statistics, or “INE”) (with the exception of inventories which are reflected at the lower of restated cost or net realizable value) and assets and liabilities in foreign currency which are adjusted based on period-end exchange rates.

Chilean companies sometimes finance current assets and fixed assets with short-term and long-term liabilities in foreign currency. Given that assets are generally restated using the IPC and liabilities in foreign currencies are restated to period-end exchange rates, the price-level restatement line in the income statement is affected by the relationship between local inflation and the U.S. dollar exchange rate to the Chilean peso.

As a result of Chile’s past inflation, the financial markets have developed a system of borrowing and lending in UFs. Most long-term assets and liabilities in pesos are indexed in UFs, and the adjustment to the closing value is reflected in the price-level adjustment account.

Price-level restatement losses also result from holding monetary assets in excess of monetary liabilities during inflationary periods, or from holding foreign exchange-denominated liabilities in excess of foreign exchange-denominated assets during periods of devaluation of the Chilean peso versus the U.S. dollar.

There is no assurance that high rates of inflation in the future will not have an adverse effect on the Company’s business or results of operations.

Madeco’s foreign currency exchange exposure arises from maintaining foreign investments in Brazilian reais, Argentine pesos, Peruvian soles, Colombian pesos and U.S. dollars. For further explanation, see Note 2 c) to the Company’s Consolidated Financial Statements.

Working Capital in Foreign Currencies

The Company’s operating results and investments outside Chile are exposed to fluctuations of foreign currency exchange rates in part as a result of carrying working capital in local currencies. According to Chilean GAAP, the Company’s financial statements are expressed in Chilean pesos as a result of the consolidation of financial statements of Chilean subsidiaries expressed in Chilean pesos and the translation of the foreign subsidiaries’ financial statements expressed in the respective local currencies, restated in U.S. dollars following Chilean GAAP and converted to Chilean pesos using year-end exchange rates.

The following table presents the working capital position in local currencies as of December 31, 2007 of the Company’s consolidated foreign subsidiaries. All amounts are expressed in millions of Chilean pesos.

|                                    |             |          |         |         |       |           |                  |         
|----------------------------------- | ----------- | -------- | ------- | ------- | ----- | --------- | ---------------- | --------
|                                    | U.S. Dollar | R$       | AR$     | S$      | Euro  | $ Colomb. | Other currencies | Total   
|Current Assets                      | 58,314      | 63,079   | 17,976  | 36,748  | 1,631 | 14,293    | 0                | 192,041 
|Current Liabilities                 | (55,486)    | (20,846) | (5,668) | (3,094) | (154) | (5,597)   | (1)              | (90,846)
|Working Capital in Local Currencies | 2,828       | 42,233   | 12,308  | 33,654  | 1,477 | 8,696     | (1)              | 101,195 

The above table only includes the current assets and current liabilities in foreign currencies held by the Company as of December 31, 2007, and does not represent the Company’s total foreign currency exchange risk exposure. For additional discussion, see “Item 3. Key Information — Risk Factors” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Exchange Rate Risk”.

Critical Accounting Policies and Estimates

The Company prepares its consolidated financial statements in conformity with Chilean GAAP and the guidelines issued by the Chilean Superintendency of Securities and Insurance. The notes to the Consolidated Financial Statements contain a summary of the accounting policies that are significant to the Company, as well as a description of the significant differences between these policies and U.S. GAAP. The notes include additional disclosures required under U.S. GAAP, reconciliation between shareholders’ equity and net income to the corresponding amounts that would be reported in accordance with U.S. GAAP and a discussion of recently issued accounting pronouncements.

Both Chilean and U.S. GAAP require management to make certain estimates and assumptions, as some of the amounts reported in the financial statements are related to matters that are inherently uncertain. The Company believes that the following discussion describes those areas that require the most judgment or involve a higher degree of complexity in the application of the accounting policies that currently affect the Company’s financial condition and results of operations. The most critical judgments that have a significant impact on the Company’s financial statements include: estimates with respect to the extent to which allowances are required for doubtful accounts receivable and inventory obsolescence, estimates involved in impairment testing for property, plant and equipment and goodwill, estimates used in the valuation of derivatives and the determination as to whether valuation allowances are required against deferred income tax balances.

Allowance for doubtful accounts

Accounts receivables are shown net of the allowance for doubtful accounts. Allowances are recorded at the end of each period for those balances considered to be of doubtful recovery based on an analysis of aging of balances and the evaluation of customers’ financial standing.

The Company believes that this accounting estimate is critical because estimates of future recoverability of accounts receivables may prove to be inaccurate, in which case the Company may have understated or overstated the allowance required for doubtful accounts receivables. Therefore, although the Company periodically reviews the aging of accounts receivables and evaluates customers’ financial standing, any significant unanticipated change in the recoverability of accounts receivable could have a significant impact on the Company’s reported operating results.

During the years ended December 31, 2005, 2006 and 2007, the Company’s net charges to income related to allowances amounted to ThCh$155,247, ThCh$363,026 and ThCh$318,092, respectively.

Allowance for inventory obsolescence

Inventories of finished products, work in progress and by-products are valued at production cost including direct and indirect manufacturing costs plus price-level restatement. Inventories of goods for resale, raw materials, other materials and materials in transit are valued at price-level restated cost. The Company regularly reviews inventory quantities on hand and records an allowance for obsolescence based upon inventory turnover, aging, specific physical conditions by type of inventory considering current expectations of future product demands and production requirements. To the extent necessary, the Company establishes provisions for obsolescence based on a comparison of the carrying value and the net realizable value of finished goods and work-in-progress, using expected selling prices, evidenced by sales subsequent to the balance sheet date, customer contracts and estimations of the cost to complete or dispose of the respective inventory.

The Company believes that this accounting estimate is critical because estimates of future product demand may prove to be inaccurate, in which case the Company may have understated or overstated the provision required for excess and obsolete inventory. Therefore, although the Company periodically reviews the accuracy of its forecasts of future product demands, any significant unanticipated change in demands or technical developments could have a significant impact on the realizable value of its inventory and reported operating results.

During the years ended December 31, 2005, 2006 and 2007, the Company was able to sell certain products that were previously subject to the obsolescence provision, due to an increase in demand of certain products of the wire and cable segment, which resulted in lower cost of sales in the amount of ThCh$279,946, ThCh$643,895 and ThCh$316,138, respectively. Inventoryvalues do not exceed their estimated net realizable value.

Property, Plant and Equipment

The Company estimates the useful lives of property, plant and equipment in order to determine the amount of depreciation expense to be recorded during any reporting period. The estimated useful lives are based on the historical experience with similar assets taking into account anticipated technological or other changes. If technological changes are expected to occur more rapidly or in a different way than previously anticipated, the useful lives assigned to these assets may need to be reduced, resulting in the recognition of increased depreciation and amortization expense in future periods.

The Company evaluates the recoverability of its long-lived assets (other than intangibles and deferred tax assets) in accordance with Technical Bulletin No. 33 “Accounting treatment of Property, Plant and Equipment”, issued by the Chilean Association of Accountants, and SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The rules require recognition of impairment of long-lived assets in the event that the net book value of such assets exceeds the future undiscounted net cash flows attributable to such assets. Impairment, if any, is recognized in the respective period to the extent the carrying amount of an asset exceeds the fair value of such asset. The Company believes that the accounting estimate related to asset impairment is critical because it requires management to make assumptions about future sales and cost of sales over the estimated useful life of its property, plant and equipment, and to estimate net realizable values of inactive assets classified in other assets.

While the carrying values of property, plant and equipment may differ under Chilean GAAP and US GAAP, the impairment testing methodology is similar. During the years ended December 31, 2005, 2006 and 2007, the Company recorded charges for impairment related to its property, plant and equipment, including those assets which are temporarily inactive and underutilized production facilities, amounting to ThCh$529,975, ThCh$1,317,043 and ThCh$163,842, respectively. During 2005, the Company recorded a gain for the reversal of impairment related to its investment in Optel Ltda. of ThCh$558,454, this gain was eliminated under US GAAP. There were no reversals of impairments recorded during 2006 and 2007.

Investments

The Company evaluates also the recoverability of its equity method investments based on Technical Bulletin No. 72 “Business combinations: permanent investments and consolidation of financial statements” and APB 18 “The Equity Method of Accounting for Investments in Common Stock”. The investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The rules require recognition of impairment generally in absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity which would justify the carrying amount of the investment. The Company believes that the accounting estimate related to impairment of investments is critical because it requires management to make assumptions about future profitability of the investments.

During 2005 the Company recorded under Chilean GAAP a gain for the reversal of impairment related to its investment in Optel Ltda. of ThCh$558,455 that was recognized in 2003. Since under US GAAP reversal of impairment losses are not allowed, this gain was eliminated under US GAAP. There were no impairments or reversals of impairments recorded from 2005 to 2007.

Goodwill

The Company has significant intangible assets related to goodwill. Under Chilean GAAP, goodwill is depreciated on a straight line basis over its useful life and should be reviewed for impairment when events or circumstances, such as recurring losses indicate a possible inability to realize the carrying amount of the asset. Under US GAAP, Statement of Financial Accounting Standard (SFAS) No. 142, goodwill is not amortized however, it must be allocated to reporting units and tested for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business environment, indicate that there may be justification for conducting an interim test. Impairment testing is performed at the reporting-unit level (which is generally one level below the four major business segments of Madeco). The first part of the test is a comparison, at the reporting unit level, of the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value is less than the carrying value, then the second part of the test is required to measure the amount of potential goodwill impairment. The implied fair value of the reporting unit goodwill is calculated and compared to the carrying amount of goodwill recorded in the Company’s financial records. If the carrying value of reporting unit goodwill exceeds the implied fair value of that goodwill, then the Company would recognize an impairment loss in the amount of the difference, which would be recorded as a charge against net income. For further detail of the differences in goodwill between Chilean GAAP and U.S. GAAP see Note 32 of the Consolidated Financial Statements.

The fair values of the reporting units are determined using discounted cash flow models based on each reporting unit’s internal forecasts.

The impairment analysis requires management to make subjective judgments concerning estimates of how the assets will perform in the future using a discounted cash flow analysis. Additionally, estimated cash flows may extend beyond five years and, by their nature, are difficult to determine. Events and factors that may significantly affect the estimates include, among others, competitive forces, customer behavior and attrition, changes in revenue growth trends, cost structures and technology and changes in interest rates and specific industry or market sector conditions. There were no impairments or reversals of impairments recorded from 2005 to 2007.

Deferred Income Tax Valuation Allowance

The Company records a valuation allowance to reduce deferred tax assets to the amount that it believes is more likely than not to be realized. The valuation of the deferred tax asset is dependent on, amongst other things, the ability of the Company to generate a sufficient level of future taxable income.

The Company believes that the accounting estimate related to valuation allowances against deferred tax assets is critical because the analysis requires management to make subjective judgments concerning estimates and timing of future taxable income, considering both positive and negative evidence including historical results of operations, losses realized in recent periods, and the implementation of prudent and feasible tax planning strategies. The Company has reviewed and will continue to review its assumptions and tax planning strategies and, if the amount of the estimated realizable net deferred tax asset is less than the amount currently on the balance sheet, the Company would reduce its deferred tax asset, recognizing a non-cash charge against reported earnings. For additional information about deferred tax and the differences between Chilean GAAP and U.S. GAAP see Note 32 of the Consolidated Financial Statements.

Derivative Instruments

The Company uses derivatives in the normal course of business to manage its exposure to fluctuations in foreign currency denominated assets and liabilities. By policy, the Company does not enter into such contracts for trading purposes or for the purpose of speculation. The Company accounts for derivatives on the consolidated financial statements at fair value in accordance with Technical Bulletin No. 57 “Accounting for Derivatives” of the Chilean Association of Accountants and Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted, incorporating FASB Statements No. 137, 138 and 149". Fair values are based on quoted market prices or, if not available, on internally developed pricing models provided by independently obtained market information. However, market information is often limited or in some instances not available. In such circumstances management applies its professional judgment. Notwithstanding the level of subjectivity inherent in determining fair value, the Company believes its estimates of fair value are adequate. The use of different models or assumptions could lead to changes in the Company’s reported results.

The Company maintains forward foreign exchange contracts and foreign exchange swap contracts to cover the risks of fluctuation in exchange rates between the Chilean peso, US dollar and Brazilian real and changes in the interest rates. The Company enters into forward foreign exchange contracts to mitigate the risk that cash flows will be adversely affected by changes in exchange rates resulting from the collection of receivables from international customers and the purchase of supplies and raw materials. The Company also utilizes interest rate swap agreements to manage interest rate risk on its floating rate debt portfolio. These derivative instruments are recorded at fair value as of the balance sheet date in Other assets or Other liabilities. Changes in the fair values of such instruments are recorded in income. For further details see Note 27 of the Consolidated Financial Statements.

In addition, the Company held 2,500 tons of Copper hedged by Swaps with a positive effect of Ch$1,729 million as of December 2007 in the statements of income. Further details see Note 27 of the Consolidated Financial Statements.



Net Realizable Values of Inventories

As of December 2007, before the decrease of the market Copper price (LME), the Company registered its inventories at net realizable values whereby a charge of Ch$992 million was included in the net income of 2007.



U.S. GAAP Reconciliation

The Company prepares its audited consolidated financial statements in accordance with Chilean GAAP, which differs in certain significant respects from U.S. GAAP. See Note 32 to the audited consolidated financial statements for a description of the material differences between Chilean GAAP and U.S. GAAP, as they relate to us and our consolidated subsidiaries, reconciliation to U.S. GAAP of net income and Shareholders’ equity and a discussion of new accounting rules under U.S. GAAP. The following table sets forth net income and Shareholders’ equity for the years ended December 31, 2005, 2006 and 2007 under Chilean GAAP and U.S. GAAP:

|                                    |                                                       |         |        
|----------------------------------- | ----------------------------------------------------- | ------- | -------
|                                    | Year Ended December 31,                              
|                                    | 2005                                                  | 2006    | 2007   
|                                    | (in millions of constant Ch$ as of December 31, 2007)
|Net income (Chilean GAAP)           | 13,174                                                | 32,439  | 19,660 
|Net income (U.S. GAAP)              | 15,429                                                | 36,560  | 21,746 
|Shareholders’ equity (Chilean GAAP) | 225,210                                               | 270,170 | 263,894
|Shareholders’ equity (U.S. GAAP)    | 211,263                                               | 260,270 | 256,147

Significant differences exist between net income and Shareholders’ equity under Chilean GAAP and under U.S. GAAP as presented in Note 32 to our audited consolidated financial statements.

The higher net income under U.S. GAAP, is a result of reversals in goodwill, reversals in impairment of property, plant and equipment – which generate a lower depreciation under U.S. GAAP – deferred income taxes and reversals of depreciation in increased value from technical revaluation of property, plant and equipment.

Simultaneously, the lower Shareholders’ equity under U.S. GAAP is due to reversals in technical revaluations of property, plant and equipment,deferred income taxes, acquisition of Optel Brazil, reversals of goodwill amortization – balanced by the goodwill impairment in Ficap Brazil – and finally staff severance indemnities.



Liquidity and Capital Resources

The Company generally finances its activities with funds generated by its operations, short-term financing and, from time to time, long-term bond issuances and bank loans. On December 31, 2007, the Company’s total financial indebtedness was Ch$154,294 million (US$310.5 million). With respect to the Company’s financial bank and public debt, its total short-term financial indebtedness (including the short-term portion of long-term obligations) was Ch$57,810 million (US$116.3 million), and its long-term financial indebtedness was Ch$52,915 million (US$106.5 million). With respect to the Company’s other financial indebtedness, its short-term liabilities were Ch$36,415 million (US$73.3 million) and its long-term liabilities were Ch$7,154 million (US$14.4 million). Management believes that its current level of working capital is sufficient for its requirements, assuming an average copper price similar to the one witnessed in the first six months of 2008.

Short Term Financing

On December 31, 2007, the Company’s short-term bank debt (excluding the short-term portion of its long-term bank obligations) was Ch$35,077 million (equivalent to US$70.6 million).

On June 5, 2006, Madeco signed a US$50 million or Ch$26,680 million (historic value) 5-year club deal, of which US$28.6 million or Ch$15,261 million (historic value) was the local portion of the credit and US$21.4 million or Ch$11,419 million (historic value) was the off-shore portion of the credit. Approximately US$12 million or Ch$6,403 million (historic value) of the proceeds were used to repay debts held with Quiñenco. Another US$13 million or Ch$6,937 million (historic value), was used to repay a bridge loan that BBVA had granted to the Company pending the capital increase. The remaining US$25 million or Ch$13,340 million (historic value), was used for financing working capital. During 2006, US$12.2 million or Ch$6,510 million (historic value) was paid of the local part of this credit and in March 2007, the remainder was prepaid for an amount of US$16.4 million or Ch$8,751 million (historic value). The off-shore part of the credit will be paid according to the contract, starting in June 2008.

As of March 31, 2008, the Company’s total short-term bank debt (excluding the short-term portion of its long-term bank obligations) was Ch$48,231 million (equivalent to US$110.2 million at the Ch$437.71 to US$1.00 at the observed exchange rate on March 31, 2008). This amount includes various short-term obligations, mainly from Madeco Chile, Indeco and Cedsa to finance its working capital needs, and the dividend paid by the Company in January 2008.

The Company’s total remaining short-term loans are not committed to credit lines and do not require the Company to comply with financial covenants. The Company generally uses these loans for the financing of trade transactions, working capital and other general corporate purposes. The Company experiences no seasonality of borrowing requirements.

Bonds

On December 15, 2004, the Company prepaid its Series A bonds primarily with the proceeds obtained from the issuance of its 7 year Series D bonds in December 2004, and the remaining balance from cash. The prepayment amounted to UF1.97 million, equivalent to Ch$34,634 million (historic value) or US$62.1 million, of which UF 1.9 million corresponded to a capital payment and UF0.07 million corresponded to an interest payment. The Series D bond issuance amounted to UF1.8 million.

The Series D bonds, which amounted to Ch$31,260 million, were issued in the Chilean market, for a term of seven years and at 5% interest rate over the UF.

The total amount of Series D bonds outstanding on December 31, 2007, was Ch$21,704 million (equivalent to US$43.7 million at the Ch$496.89 to US$1.00 observed exchange rate for December 31, 2007).

On June 10, 2008, the corresponding bonds installments were paid and the rest of the outstanding bonds were prepaid by the Company, totaling UF1,130,299 equivalent to Ch$22,710 million (or equivalent to US$46.97 million at Ch$483.55 to US$1.00, at the observed exchange rate on June 10, 2008).

Medium-Term and Long-Term Bank Loans

The Company’s consolidated medium-term and long-term bank debt (including the short-term portion of these loans) outstanding as of December 31, 2007, was approximately Ch$53,944 million (equivalent to US$108.6 million at the Ch$496.89 to US$1.00 observed exchange rate for December 31, 2007).

The Company’s medium-term and long-term bank debt (including the short-term portion of these loans) outstanding as of March 31, 2008, was approximately Ch$47,732 million (equivalent to US$109.0 million at the Ch$437.71 to US$1.00 observed exchange rate for March 31, 2008).

As of December 31, 2005, the Company’s subsidiary Alusa had a 5 year syndicated loan agreement with Banco de Chile and Banco del Estado for a total amount of UF300,000 (equivalent to US$10.5 million at the Ch$512.5 to US$1.00 observed exchange rate for December 31, 2005), with semi-annual payments. The principal covenants included a maximum leverage ratio of 0.75 times equity and a minimum equity of UF1,765,000 (equivalent to US$61.9 million at the Ch$512.5 to US$1.00 observed exchange rate for December 31, 2005). As of December 31, 2006, the Company was in compliance with all of these covenants. On March 8, 2007, all the covenants related to these loans were eliminated, and it was agreed that Madeco must own over 50.1% of the common stock shares with voting power. On April 31, 2005, the Company’s subsidiary, Alusa S.A., obtained a loan from Banco Security of UF163,000 (equivalent to US$5.7 million at the Ch$512.5 to US$1.00 observed exchange rate for December 31, 2005). The initial terms of the loan were an annual interest rate of TAB for a 180 day period (interest at which banks lend to each other) plus 0.8% and a total payment period of 5 years (due in 2010). The main covenant agreed upon was that Madeco must own over 50.1% of the common stock shares with voting power. In May 2006, Alusa renegotiated a leaseback of UF306,983 reducing the interest rate from a 6.53% variable rate to a 4.80% fixed rate and the term from 15 years to 10 years.

For additional discussion regarding the covenants corresponding to the Company’s various credit facilities, see Note 22 to the Company’s Consolidated Financial Statements. Apart from those restrictions set forth in Note 22 to the Company’s Consolidated Financial Statements, there are no material restrictions, either legal or economic, that would limit Company’s ability to collect funds from their subsidiaries.

The Company’s Compliance with Financial Covenants

During 2007 and the first quarter 2008, the Company was in compliance with all financial and non-financial covenants required by banks and bondholders.

Changes in the Company’s Risk Classification

Rating agencies evaluate Madeco’s common shares and its debt. From 2003 to 2007, Fitch Chile Clasificadora de Riesgo Ltda. (“Fitch Chile”) and Feller Rate Clasificadora de Riesgo Limitada (“Feller”) have published ratings related to the financial standing of certain of Madeco’s debt instruments and shares. These two rating agencies are registered with the Superintendency of Securities and Insurance (the Chilean regulatory authority).

In September 2004, Feller classified the Company’s debt as BBB- and its shares as First Class Level 4. In June 2005, Fitch Chile classified the Company’s debt as BBB- and its shares as First Class Level 3. In March 2006, 2007 and 2008, these agencies classified the Company’s debt as BBB+ and its shares as First Class Level 3.

Financial Instruments Used for Hedging Purposes

For information on the Company’s use of financial instruments for hedging purposes, see “Item 5. Operating and Financial Review and Prospects – Critical Accounting Policies and Estimates – Derivatives”, and Note 27 to the Company’s Consolidated Financial Statements.

Contractual Obligations and Commercial Commitments

The following table summarizes the Company’s financial obligations, their expected maturities as of December 31, 2007, and the effect such obligations are expected to have on the Company’s liquidity and cash flow in the periods indicated:

|                                                       |         |          |           |           |          
|------------------------------------------------------ | ------- | -------- | --------- | --------- | ---------
|Contractual Obligations Due by Period (in Ch$ million)
|Contractual Obligations                                | Total   | < 1 year | 1-3 years | 3-5 years | > 5 years
|Short-Term and Long-Term Debt                          | 168,243 | 110,887  | 41,072    | 13,767    | 2,517    
|Capital Lease Obligations                              | 9,455   | 2,312    | 2,979     | 1,724     | 2,440    
|Operating Leases                                       | 2,041   | 619      | 744       | 468       | 210      
|Other Long-Term Obligations                            | 188     | -        | 188       | -         | -        
|Service Contracts                                      | 7,782   | 1,713    | 4,158     | 1,397     | 514      
|Scheduled interest payment obligations (1)             | 13,687  | 7,745    | 4,937     | 1,005     | -        
|Severance Indemnities                                  | 4,719   | 1,015    | 2,084     | 97        | 1,523    
|Total Contractual  Obligations                         | 206,115 | 124,291  | 56,162    | 18,458    | 7,204    

(1) Scheduled interest payment obligations related to long-term obligations were calculated using stated coupon rates for fixed debt and interest rates applicable on December 31, 2007, for variable rate debt.

As of December 31, 2007, the Company had standby Commercial Commitments and Guarantees amounting to Ch$14,588 million with a number of lending institutions (for further detail see Note 22 to the consolidated financial statements). Of these contingent commitments, guarantees of Ch$5,887 million are scheduled to be released within the upcoming 12 month period.

Liquidity

As of March 31, 2008, the Company had Ch$13,177 million in cash and cash equivalents. The Company’s total short-term indebtedness with banks and financial institutions amounted to Ch$48,231 million. This was comprised of Ch$16,873 million of the current long-term bank debt, Ch$5,403 million of the current long-term bond debt, Ch$2,091 million in other loans, Ch$57,884 million in various accounts and notes payable and Ch$705 million in payables to related parties. Long-term indebtedness (excluding the current portion thereof) included Ch$30,859 million of long-term obligations with banks, Ch$16,792 million of long-term bond obligations and Ch$6,552 million of long-term accounts and notes payable.

As of December 31, 2007, the Company had Ch$11,199 million in cash and cash equivalents. The Company’s total short-term indebtedness with banks and financial institutions amounted to Ch$35,077 million, composed of Ch$17,652 million of the current portion of long-term bank debt, Ch$5,081 million of the current portion of long-term bond debt, Ch$2,312 million in other loans, Ch$34,103 million in various accounts and notes payable and Ch$615 million in payables to related parties. Long-term indebtedness (excluding the current portion thereof) included Ch$36,292 million of long-term obligations with banks, Ch$16,623 million of long-term bond obligations, Ch$7,154 million of long-term accounts and notes payable.

As of December 31, 2006, the Company had Ch$18,844 million in cash and cash equivalents. The Company’s total short-term indebtedness with banks and financial institutions amounted to Ch$16,637 million, composed of Ch$17,443 million of the current portion of long-term bank debt, Ch$4,873 million of the current portion of long-term bond debt, Ch$524 million in other loans, Ch$26,020 million in various accounts and notes payable and Ch$480 million in payables to related parties. Long-term indebtedness (excluding the current portion thereof) included Ch$44,540 million of long-term obligations with banks, Ch$21,723 million of long-term bond obligations, Ch$5,629 million of long-term accounts and notes payable.



Cash Flow

As of December 31, 2007, the Company had cash and cash equivalents totaling Ch$11,199 million compared to Ch$18,844 million as of December 31, 2006, and Ch$8,544 million as of December 31, 2005. As of March 31, 2007, the Company had cash and cash equivalents totaling Ch$13,177 million.

The Company’s cash flows from operating, investing and financing activities, as reflected in the Consolidated Financial Statements of Cash Flows, are summarized in the following table:

|                                                   |          |          |         
|-------------------------------------------------- | -------- | -------- | --------
|Cash Flow(1)                                       | 2005     | 2006     | 2007    
|Cash provided by (used in):                        |          |          |         
|Operating activities                               | 11,378   | 6,351    | 15,140  
|Financing activities                               | (4,470)  | 15,517   | 942     
|Investing activities                               | (12,656) | (11,201) | (23,528)
|Effect of inflation on cash                        | (332)    | (366)    | (198)   
|Net change in cash and cash equivalents            | (6,079)  | 10,300   | (7,645) 
|Cash and cash equivalents at the beginning of year | 14,623   | 8,544    | 18,844  
|Cash and cash equivalents at the end of the year   | 8,544    | 18,844   | 11,199  

(1) Amounts are stated in million of constant Chilean pesos as of December 31, 2007.

The Company’s principal capital requirements are to finance working capital of its normal operations, as well as capital expenditures to modernize and increase the efficiency of its machines. Madeco expects that it will have sufficient resources from operations to fund Madeco’s currently anticipated capital expenditures and working capital needs. The amount of resources obtained from operations may be affected, however, by a variety of factors.  See “Item 3. Key Information — Risk Factors”.

Cash flow from operating activities in 2007 increased Ch$8,789 million compared to 2006. This is the result of the cash flows from the Company’s acquisitions, Peruplast and Cedsa, and reduced working capital needs in 2007 as compared to 2006.

In 2007, cash flow related to financial activities decreased by Ch$14,575 million compared to 2006, due to the reduced need to finance working capital, the payment of dividends to the minority shareholders in Indeco and Alusa, and the capital distribution to the shareholder Nexus in Peruplast. In March 2007, Ch$8,843 million (historic value) or US$16.4 million of the off-shore part of the syndicated loan was prepaid and bond repayments of Ch$4,844 million were paid. During 2007, net loans drawn were Ch$5,078 million lower compared to Ch$13,373 million in 2006.

Cash flow used in investment activities in 2007, was mainly for the acquisitions of Cedsa, Peruplast and Tech Pak, and the investment plan for the year, which includes the construction of a PVC profiles plant (PVTEC), increases in capacity in cables (Ficap, Indeco and Cedsa), packaging (Alusa, Peruplast and Aluflex) and the implementation of SAP in Chile, Peru and Argentina

The following table summarizes the Company’s assets as well as the scheduled maturities of the Company’s debt as of December 31, 2007:

|                                              |                                          |        |        |        |       |               |        |           
|--------------------------------------------- | ---------------------------------------- | ------ | ------ | ------ | ----- | ------------- | ------ | ----------
|                                              | As of December 31, 2007 (in Ch$ million)
|                                              | Expected Maturity Date                  
|                                              | 2008                                     | 2009   | 2010   | 2011   | 2012  | 2013 & beyond | TOTAL  | FAIR
VALUE
|ASSETS                                        |                                          |        |        |        |       |               |        |           
|Fixed Rate                                    |                                          |        |        |        |       |               |        |           
|Time Deposits (BRL)                           | 8                                        | -      | -      | -      | -     | -             | 8      | 8         
|Average Interest Rate (%)                     | 11.31%                                   | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 11.31% | 11.31%    
|Marketable securities (Non-Indexed Ch$)       | 533                                      | -      | -      | -      | -     | -             | 533    | 533       
|Average Interest Rate (%)                     | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Marketable securities (COP)                   | 248                                      | -      | -      | -      | -     | -             | 248    | 248       
|Average Interest Rate (%)                     | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 5.35%  | 5.35%     
|                                              |                                          |        |        |        |       |               |        |           
|DEBT                                          |                                          |        |        |        |       |               |        |           
|Fixed Rate                                    |                                          |        |        |        |       |               |        |           
|Bank Debt (US$)                               | -                                        | 4,163  | -      | -      | -     | -             | 4,163  | 4,198     
|WAIR (%)(1)                                   | 0.00%                                    | 6.25%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 6.25%  | 5.78%     
|Bank Debt (BRL)                               | -                                        | -      | -      | 201    | -     | -             | 201    | 201       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 11.50% | 0.00% | 0.00%         | 11.50% | 11.50%    
|Bonds (UF)                                    | 5,081                                    | 5,273  | 5,537  | 5,813  | -     | -             | 21,704 | 22,348    
|WAIR (%)                                      | 5.00%                                    | 5.00%  | 5.00%  | 5.00%  | 0.00% | 0.00%         | 5.00%  | 3.71%     
|Bank Debt (UF)                                | 549                                      | 543    | 569    | 597    | 626   | 2,440         | 5,324  | 5,324     
|WAIR (%)                                      | 4.81%                                    | 4.80%  | 4.80%  | 4.80%  | 4.80% | 4.80%         | 4.80%  | 4.80%     
|Bank Debt (US$)                               | 1,596                                    | 1,151  | 466    | 419    | 157   | -             | 3,788  | 3,788     
|WAIR (%)                                      | 7.70%                                    | 7.68%  | 7.48%  | 7.48%  | 7.60% | 0.00%         | 7.64%  | 7.64%     
|Bank Debt (COP)                               | 167                                      | 154    | 22     | -      | -     | -             | 343    | 343       
|WAIR (%)                                      | 12.21%                                   | 12.21% | 12.21% | 0.00%  | 0.00% | 0.00%         | 12.21% | 12.21%    
|Dividends  payable (Non-Indexed Ch$)          | 15,002                                   | -      | -      | -      | -     | -             | 15,002 | 15,002    
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Dividends  payable (S$)                       | 49                                       | -      | -      | -      | -     | -             | 49     | 49        
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Accounts payable (Non-Indexed Ch$)            | 6,389                                    | -      | -      | -      | -     | -             | 6,389  | 6,389     
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Accounts  payable (UF)                        | 560                                      | -      | -      | -      | -     | -             | 560    | 560       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Accounts payable (US$)                        | 18,330                                   | -      | -      | -      | -     | -             | 18,330 | 18,330    
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Accounts payable (EUR)                        | 154                                      | -      | -      | -      | -     | -             | 154    | 154       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Accounts payable (ARS)                        | 296                                      | -      | -      | -      | -     | -             | 296    | 296       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Accounts payable (BRL)                        | 4,026                                    | -      | -      | -      | -     | -             | 4,026  | 4,026     
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Accounts payable (S$)                         | 573                                      | -      | -      | -      | -     | -             | 573    | 573       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Accounts payable (COP)                        | 227                                      | -      | -      | -      | -     | -             | 227    | 227       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Accounts payable (other currencies)           | 1                                        | -      | -      | -      | -     | -             | 1      | 1         
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Notes payable (Non-Indexed Ch$)               | 5                                        | -      | -      | -      | -     | -             | 5      | 5         
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Notes payables (US$)                          | 2,908                                    | -      | -      | -      | -     | -             | 2,908  | 2,908     
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Notes payables (ARS)                          | 343                                      | -      | -      | -      | -     | -             | 343    | 343       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Sundry Creditors (UF)                         | 10                                       | -      | -      | -      | -     | -             | 10     | 10        
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Sundry Creditors (Non-Indexed Ch$)            | 156                                      | -      | -      | -      | -     | -             | 156    | 156       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Sundry Creditors (US$)                        | 19                                       | 11     | -      | -      | -     | -             | 30     | 30        
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Sundry Creditors (ARS)                        | 22                                       | -      | -      | -      | -     | -             | 22     | 22        
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Sundry Creditors (BRL)                        | 65                                       | -      | -      | -      | -     | -             | 65     | 65        
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Sundry Creditors (S$)                         | 18                                       | -      | -      | -      | -     | -             | 18     | 18        
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Due to related companies (Non-Indexed Ch$)    | 584                                      | -      | -      | -      | -     | -             | 584    | 584       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Due to related companies (US$)                | 31                                       | -      | -      | -      | -     | -             | 31     | 31        
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Provisions and Withholdings (UF)              | 107                                      | 44     | 35     | 28     | 28    | 576           | 817    | 817       
|WAIR (%)                                      | 0.00%                                    | 5.59%  | 5.59%  | 7.00%  | 7.00% | 7.00%         | 5.95%  | 5.95%     
|Provisions and Withholdings (Non-Indexed Ch$) | 5,184                                    | 136    | 26     | 21     | 21    | 947           | 6,334  | 6,334     
|WAIR (%)                                      | 0.00%                                    | 2.01%  | 2.01%  | 7.00%  | 7.00% | 7.00%         | 1.14%  | 1.14%     
|Provisions and Withholdings (US$)             | 242                                      | -      | -      | -      | -     | -             | 242    | 242       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Provisions and Withholdings (ARS)             | 3,790                                    | 120    | -      | -      | -     | -             | 3,910  | 3,910     
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Provisions and Withholdings (BRL)             | 3,681                                    | 2,509  | -      | -      | -     | -             | 6,190  | 6,190     
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Provisions and Withholdings (S$)              | 2,387                                    | -      | -      | -      | -     | -             | 2,387  | 2,387     
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Provisions and Withholdings (COP)             | 361                                      | -      | -      | -      | -     | -             | 361    | 361       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Unearned income (Non-Indexed Ch$)             | 94                                       | -      | -      | -      | -     | -             | 94     | 94        
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Unearned income (BRL)                         | 1,323                                    | -      | -      | -      | -     | -             | 1,323  | 1,323     
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Unearned income (ARS)                         | 1,217                                    | -      | -      | -      | -     | -             | 1,217  | 1,217     
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Unearned income (S$)                          | 67                                       | -      | -      | -      | -     | -             | 67     | 67        
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Unearned income (COP)                         | 422                                      | -      | -      | -      | -     | -             | 422    | 422       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Unearned income (US$)                         | 1,405                                    | -      | -      | -      | -     | -             | 1,405  | 1,405     
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Deferred Taxes (Non-Indexed Ch$)              | -                                        | -      | -      | -      | -     | 89            | 89     | 89        
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Deferred Taxes (US$)                          | -                                        | -      | 724    | -      | -     | -             | 724    | 724       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Deferred Taxes (ARS)                          | -                                        | 45     | -      | -      | -     | -             | 45     | 45        
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Deferred Taxes (S$)                           | -                                        | 189    | 211    | 99     | 99    | 2,271         | 2,869  | 2,869     
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Deferred Taxes (COP)                          | -                                        | -      | 40     | -      | -     | -             | 40     | 40        
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Other liabilities (ARS)                       | -                                        | 188    | -      | -      | -     | -             | 188    | 188       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Other liabilities (Non-Indexed Ch$)           | 122                                      | -      | -      | -      | -     | -             | 122    | 122       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Other liabilities (S$)                        | -                                        | -      | 231    | -      | -     | -             | 231    | 231       
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Other liabilities (US$)                       | 4                                        | -      | -      | -      | -     | -             | 4      | 4         
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|Other liabilities (BRL)                       | 1,176                                    | 432    | -      | -      | -     | -             | 1,608  | 1,608     
|WAIR (%)                                      | 0.00%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 0.00%  | 0.00%     
|                                              |                                          |        |        |        |       |               |        |           
|Variable Rate                                 |                                          |        |        |        |       |               |        |           
|Bank Debt  (UF)                               | 2,840                                    | -      | -      | -      | -     | -             | 2,840  | 2,830     
|Interest Rate Based on                        | Tab                                      | -      | -      | -      | -     | -             | Tab    | -         
|WAIR (%)                                      | 4.74%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 4.74%  | 5.12%     
|Bank Debt  (US$)                              | 30,951                                   | -      | -      | -      | -     | -             | 30,951 | 31,117    
|Interest Rate Based on                        | Libor                                    | -      | -      | -      | -     | -             | Libor  | -         
|WAIR (%)                                      | 6.35%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 6.35%  | 5.78%     
|Bank Debt  (Non-Indexed Ch$)                  | 3,943                                    | -      | -      | -      | -     | -             | 3,943  | 3,943     
|Interest Rate Based on                        | Ipc                                      | -      | -      | -      | -     | -             | Ipc    | -         
|WAIR (%)                                      | 7.55%                                    | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 7.55%  | 7.55%     
|Bank Debt  (BRL)                              | 10,576                                   | -      | -      | -      | -     | -             | 10,576 | 10,576    
|Interest Rate Based on                        | CDI                                      | -      | -      | -      | -     | -             | CDI    | -         
|WAIR (%)                                      | 10.41%                                   | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 10.41% | 10.41%    
|Bank Debt  (COP)                              | 4,419                                    | -      | -      | -      | -     | -             | 4,419  | 4,419     
|Interest Rate Based on                        | DTF                                      | -      | -      | -      | -     | -             | DTF    | -         
|WAIR (%)                                      | 13.04%                                   | 0.00%  | 0.00%  | 0.00%  | 0.00% | 0.00%         | 13.04% | 13.04%    
|Bank Debt  (UF)                               | -                                        | 1,773  | 1,773  | 102    | -     | -             | 3,649  | 3,650     
|Interest Rate Based on                        | -                                        | Tab    | Tab    | Tab    | -     | -             | Tab    | -         
|WAIR (%)                                      | 0.00%                                    | 5.16%  | 5.16%  | 4.63%  | 0.00% | 0.00%         | 5.15%  | 5.12%     
|Bank Debt  (US$)                              | -                                        | 7,371  | 7,569  | 4,721  | 1,590 | -             | 21,251 | 21,514    
|Interest Rate Based on                        | -                                        | Libor  | Libor  | Libor  | Libor | -             | Libor  | -         
|WAIR (%)                                      | 0.00%                                    | 6.25%  | 6.26%  | 6.37%  | 6.10% | 0.00%         | 6.27%  | 5.78%     
|Bank Debt  (BRL)                              | -                                        | 5,804  | -      | -      | 1,224 | -             | 7,028  | 7,028     
|Interest Rate Based on                        | -                                        | CDI    | -      | -      | CDI   | -             | CDI    | -         
|WAIR (%)                                      | 0.00%                                    | 11.39% | 0.00%  | 0.00%  | 8.27% | 0.00%         | 10.85% | 10.85%    

(1) WAIR = Weighted Average Interest Rate

The Company's cash flows from operating, finance and investment activities stated above include cash flows from the Wire & Cable unit, which is likely to be sold during 2008. Under Chilean GAAP, there is no requirement of separating cash flows from operations which under U.S. GAAP would be presented as discontinued operations. The disposal of the Wire & Cable unit will have a significant impact on the cash flows from operating, investing and finance activities, as the segment to be sold represents a significant portion of the Company's business.

Upon the closure of the disposal of the Wire & Cable unit, the Company will receive US$448 million in cash and 2.5 million shares of Nexans. Furthermore, the net profit from the transaction will be included in net income of the year the transaction is closed, thereby forming part of net income of the year over which, pursuant to the dividend policy applied, 76%, but up to US$165 millions, will be distributed to Company's shareholders.

In future periods, the Company expects to receive dividend payments from Nexans based on the shares received as purchase price consideration. These dividends will be included in cash flows from operating activities.

Nexans shares are traded on public markets and thus highly fungible, which allows for the rapid liquidation of such shares in case the Company, needs cash. Nevertheless, according to the purchase agreement, the Company is prohibited in selling any share of Nexans during the first 12 months, from the close of the agreement, and up to 50% between 12 and 18 months from the closing of the agreement. Cash flows from the disposal of these shares would be included in cash flows from investment activities.

A portion of the purchase price consideration received in cash will be used to repay short-term bank debt and other current liabilities. Therefore, after required debts prepayments, the Company expects that future cash flows created by continuing operations will be sufficient to timely fulfill short-term and long-term obligations.

Capital Expenditures

The investment and financing policy for the current year was presented during the Annual Shareholders’ Meeting that was held on April 25, 2008. This policy requires that the Company’s investment levels shall be at the levels necessary to sustain its businesses and operations.

The Company’s capital expenditure plans amount to Ch$37,106 million for the period 2007 to 2009, and are broken down as follows:

Amounts in Ch$ millionBusiness Unit
2007
2008-2009(1)
TotalWire & Cable
9,613
10,550
20,162Brass Mills
950
614
1,564Flexible Packaging
4,178
6,935
11,113Aluminum Profiles
3,986
281
4,267Total
18,727
18,379
37,106

(1) Excpet for Wire & Cable Business that consider capital expenditures only for 2008.

Wire & Cable Unit. The Company's expected investments for the Wire & Cable business unit of Ch$10,550 million for 2008, include the acquisition of machinery and equipment mainly in Brazil, Peru and Colombia, and to a lesser extent in Chile and Argentina. As was agreed with Nexans, these expenditures are considered as part of the transaction. For 2009, the Company has no intention to continue investing in this business unit, unless the transaction with Nexans is not completed, for details see discussion below.

Brass Mills Unit. The Company's investment plans for the Brass Mills unit amount to Ch$614 million the next years, which includes machinery and overhaul of equipment primarily for its plant facility in Chile.

Flexible Packaging Unit. Planned capital expenditures for the Company's Flexible Packaging unit total Ch$6,935 million and include machinery and equipment in Chile, Argentina and Peru, mainly for the acquisition of printers and laminators. In the case that the transaction with Nexans is completed, the Company will set new investments for this business unit, for details see discussion below.

Aluminum Profiles Unit. Planned capital expenditures for the Aluminum unit amount to Ch$281 million, which include the acquisition of machinery and equipment for its aluminum and PVC profiles plants.

As discussed above, in the case that the transaction with Nexans is completed, the Company will sold its Wire & Cable unit, so no further capital expenditures will be required by Madeco to this unit. However,  upon the completion of the transaction, the Company will receive from Nexans 2.5 million shares and US$448 million that after charges (i.e. minority interest, bond prepayment, Wire & Cable financial debt, income tax and extraordinary dividend payment), as was estimated on February 21, 2008, will amount to approximately US$98 million. The Company believes that it could invest approximately US$38 millions in debt prepayment and US$60 million in its Flexible Packaging unit in order to expand its regional presence and to increase its installed capacity; nevertheless, the Company may decided to invest in one of its other business units. The Company modifies its capital investment program on an ongoing basis due to changes in market conditions for the Company’s products, changes in general economic conditions in Chile, Argentina, Brazil, Peru, Colombia or elsewhere, changes in the prices of raw materials, interest rate changes, inflation and foreign exchange rate changes, competitive conditions and other factors. Accordingly, there can be no assurance that the Company will make any of the above-mentioned expenditures, and the actual amount of such future capital expenditures could be significantly more or less than planned.
If necessary, Madeco intends to provide or actively participate in obtaining financing (whether equity, debt or a combination thereof) to support the planned future capital expenditures and expansion of its principal businesses. The amounts and terms of any such debt or equity financing for Madeco will depend, among other things, on the terms and conditions of financing available to its businesses from third parties and international capital markets, as well as Madeco’s ability to substantially and timely complete its refinancing plan.
Research and Development, Patents and Licenses
The Company’s research and development efforts do not involve material expenditures as the Company relies primarily on technology and equipment purchased or licensed from foreign companies.
Trends
The 2003 - 2005 Business Plan developed in late 2002 was successfully completed last year. It focused on: 1) increasing sales, 2) improving production efficiency at plants, 3) reducing selling and administrative expenses, and 4) increasing the profitability of Company’s assets. As a result of this Business Plan, in 2004 the Company was able to reverse the losses of the previous five years, and increase profit by 34% in 2005.
In late 2005, Madeco did an evaluation of the 2003 - 2005 Business Plan, which it used as a basis for defining the 2006 - 2008 Business Plan to efficiently align efforts to make the Company grow profitably. The main objectives of the new Business Plan follow: 1) to consolidate the activities of the Wire and Cable unit, 2) to diversify and search for growth and profit opportunities for the Brass Mills unit, 3) to make the Flexible Packaging unit profitable, 4) to maintain leadership in the Aluminum Profiles unit, 5) to achieve operational excellence by searching for homologous process options and best practices in  the different business units, 6) to implement a strategic management policy in human resources, 7) to consolidate the Company’s financial position.
Progress is being made on the strategic plan for 2006-2008 including consolidation of the performance of the Wire and Cable and Flexible Packaging units and maintenance of the market leadership of the Aluminum Profiles unit. Simultaneously, the Company’s financial position has improved and the Company has begun to use SAP in order to implement best practices throughout the Company. In addition, the Company implemented the Skills Management Program in order to improve strategic management in the human resources area.
Development of the Business Plan is expected to continue to have a positive impact on profitability at the operating level. Notwithstanding the successful implementation of the Business Plan, the Company is facing a permanent increase in the cost of its main raw material, copper. Even though the Company has been able to transfer this cost increase to its customers, there can be no assurance that the Company will be able to continue to pass along increases in the cost of copper and/or aluminum to its customers in the future. Furthermore, as long as copper prices keep increasing, the Company will have to continue meeting greater working capital requirements.

In spite of the strong demand for copper pipes prior the year 2000, plastic pipes have increasingly become competitive substitutes for copper pipes due to the increasing price of copper. As the market share for plastic pipes has increased, the sales volume of the Brass Mills business unit has decreased. The Company believes that this product substitution effect will not decline.

Macroeconomic conditions in the main markets where the Company operates continue to be a key driver for results.  For additional discussion see Item 3. “Key Information – Risk Factors.”

Wire & Cable

In Chile, the Company expects that growth in the wire and cables industry will be driven by increasing demand from the construction industry as well as the energy distribution sector

Brass Mills

In Chile, though the Company expects that growth in GDP and new mining projects will support demand, high copper prices, deteriorated exchange rate affecting exports and competition from local producers will continue affecting the Company’s sales and margins. This Business Unit expects to focus its marketing efforts on the penetration of new foreign markets, particularly in the industrial pipes sector and thus mitigate its dependence on the construction industry. In Argentina, the Company expects to continue with its current level of production for the local market, developing markets such for refrigeration tubes, industrial water pipes and tubes used in heat exchangers. Furthermore, due to the estimated growth in demand for ethanol, the Company is exploring the possibility of entering the market for pipes used in sugar mills to produce ethanol in Brazil.

Flexible Packaging

In the Chilean flexible packaging segment, management will continue focusing the Company’s growth efforts on cross-selling to large customers, increasing its presence in the Chilean seafood industry and export market, and emphasizing value-added products. To support this goal, the Company has made relevant investments in Chile to increase capacity. In Argentina, the Company has focused on restructuring its product portfolio to include more value–added products and to carry out an investment plan which will upgrade capacity and technological capabilities. During 2006, the Company’s customers in the Argentine market have exerted pressure to fix prices; therefore, the Company will continue to focus its growth efforts on export markets, particularly in those markets where the Company has some competitive advantages, such as Brazil. In March 2007, Alusa increased its participation in Peruplast and Tech Pak and subsequently, the two companies merged forming Peruplast. Peruplast implemented a new strategy focused on more value-added products in order to increase the return on its assets. Additionally, Peruplast will focus on creating new synergies between the Alusa Group companies.

Aluminum Profiles

Even though the construction sector experienced important growth during 2007, foreign competition (mainly from China at low costs), and substantive increases in aluminum prices, have placed increased pressure on the industry and the Company’s margins. During 2008, the Company expects moderate growth in residential construction, with a scenario similar to the last 2 years in terms of competition and margins. At the end of 2007, the Company completed the implementation of its new PVC profiles subsidiary, enhancing its mix of products in 2008 allowing it to offer PVC window and door profiles and systems to its customers. Synergies between both divisions are expected to strengthen the Company’s current competitive position.



Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements as of December 31, 2007.





ITEM 6. Directors, Senior Management and Employees

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Directors

During the Company’s Annual Shareholders’ Meeting held on March 25, 2008, the Company’s Board of Directors was elected for a period of 3 years.

The following table sets out the current membership of the Board of Directors and each member’s position on the Board, year of birth, year of initial election to the Board and other directorships:



|                                  |                   |      |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--------------------------------- | ----------------- | ---- | ------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Board Member                      | Position          | Born | First Elected | Other Directorships                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Guillermo Luksic Craig (1) (4)    | Chairman          | 1956 | 1984          | Chairman, Quiñenco S.A.
Chairman, Compañía Cervecerías Unidas S.A.

Chairman, Ficap S.A. (Brasil)

Chairman, Inversiones y Rentas S.A.

Chairman, Embotelladoras Chilenas Unidas S.A.

Chairman, Compañía Cervecerías Unidas Argentina S.A.
Chairman, Compañía Telefónica del Sur S.A.

Chairman, Compañía de Teléfonos de Coyhaique S.A.
Chairman, LQ Inversiones Financieras S.A.

Chairman, Viña San Pedro S.A.

Director, Compañía Pisquera de Chile S.A.

Director, Viña Altair S.A.

Director, Banco de Chile

Director, SM Chile S.A.

Director, Antofagasta Minerals S.A.

Director, Antofagasta plc
|Jean-Paul Luksic Fontbona (1) (4) | Vice-Chairman     | 1964 | 1985          | Chairman, Minera El Tesoro

Chairman, Minera Los Pelambres

Chairman, Minera Michilla S.A.

Chairman, Antofagasta Minerals S.A.

Chairman, Antofagasta PLC

Chairman, Antofagasta Railway Company PLC

Chairman, Minera Esperanza

Director,  Quiñenco S.A.                                                                                                                                                                                                                                                                                                                                                 
|Andrónico Luksic Craig (1)        | Director          | 1954 | 1980          | Vice-Chairman, Quiñenco S.A.

Vice-Chairman, Banco de Chile

Director, Compañia Cervecerias Unidas S.A.

Director, Industria Nacional de Alimentos S.A.

Director, Sociedad de Fomento Fabril (SOFOFA)

Director, Bolsa de Comercio de Santiago                                                                                                                                                                                                                                                                                                                                                             
|Hernán Büchi Buc                  | Director          | 1949 | 1994          | Director, Quiñenco S.A.

Director, Soquimich S.A.

Director, Falabella S.A.

Director, Pilmaiquén S.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Francisco Pérez Mackenna (2) (3)  | Director          | 1958 | 2007          | Director, Banco de Chile

Director, SM Chile S.A.

Director, Compañía Cervecerías Unidas S.A.

Director, Viña San Pedro S.A.

Director, Inversiones y Rentas S.A.

Director, Embotelladoras Chilenas Unidas S.A.

Director, Compañía Cervecerías Unidas Argentina S.A.
Director, Compañía Telefónica del Sur S.A.

Director, Compañía de Teléfonos de Coyhaique S.A.
Director, LQ Inversiones Financieras S.A.

Director, Banchile Corredores de Bolsa S.A.

Director, Compañía Pisquera de Chile S.A.

Director,  Calaf S.A.                                                                               
|Alejandro Ferreiro Yazigi (3) (4) | Director          | 1966 | 2008          | Director, compañía de seguros de vida Corpvida. S.A.
Consejero del Sistema de Empresas Públicas, SEP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Augusto Iglesias Palau (3) (4)    | Director          | 1956 | 2008          | Director, Compañía Chilena de Fósforos S.A.Director, PrimAmérica ConsultoresDirector, Colegios Padre Hurtado y Juanita de los AndesDirector, SCANDirector, Top Partners                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Oscar Ruiz-Tagle Humeres (4)      | Honorary Chairman | 1920 | 1970          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

(1) Guillermo Luksic Craig, Andrónico Luksic Craig and Jean-Paul Luksic Fontbona are brothers.
(2) On June 26, 2007, Alessandro Bizarri Carvallo resigned from the Board of Directors and the Company’s Directors’ Committee. Francisco Pérez Mackenna was elected by the Board to replace him until the reelection of the Board on March 25, 2008.
(3) The Company’s Directors’ Committee includes Francisco Pérez Mackenna, Augusto Iglesias Palau and Alejandro Ferreiro Yazigi.
(4) The Audit Committee includes Augusto Iglesias Palau and Alejandro Ferreiro Yazigi. Both members are independent from the controlling shareholder and were elected as new directors at the Annual Shareholders’ Meeting held on March 25, 2008 to replace Felipe Joannon Vergara and Euguenio Valck Varas.
(5) Mr. Oscar Ruiz-Tagle Humeres resigned on July 24, 2001 and on that same day was nominated as an Honorary Chairman of the Board.  Mr. Guillermo Luksic Craig was nominated as the new Chairman of the Board; in his replacement as Vice-Chairman, Mr. Jean Paul Luksic Fontbona was elected.



Senior Management

On October 2002, the Board of Directors designated as Madeco’s new Chief Executive Officer Mr. Tiberio Dall’Olio, an executive who has multiple years of experience in the cable manufacturing industry. Mr. Julio Cordoba was named Madeco Chile’s Director of Operations.

The following table sets out the current executive officers of the Company and each officer’s position, the month and year from which each officer has held the position and the month and year in which each officer joined the Company:

|                            |                                              |                     |              
|--------------------------- | -------------------------------------------- | ------------------- | -------------
|Executive Officers          | Position                                     | Position Held Since | Joined
Madeco
|Tiberio Dall’Olio (1)       | Chief Executive Officer                      | Oct. 2002           | Oct. 2002    
|Cristián Montes             | Chief Financial Officer                      | April 2006          | April 2006   
|Enrique Sotomayor (2)       | Legal Counsel and Secretary of the Board (2) | Sep. 1974           | Sep. 1974    
|Julio Cordoba (3)           | Director of Operations                       | Oct. 2002           | Oct. 2002    
|Jorge Tagle                 | Business Unit Manager: Flexible Packaging    | July 2005           | Oct. 2002    
|Mario Puentes               | Business Unit Manager: Aluminum Profiles     | Oct. 1999           | Oct. 1999    
|Agilio Leao de Macedo Filho | Chief Executive Officer Ficap                | July 2004           | July 2004    
|Juan Enrique Rivera         | Chief Executive Officer Indeco               | Jan. 1996           | June 1995    
|Sady Herrera                | Chief Executive Officer Decker-Indelqui      | May 2002            | July 2000    
|Jorge Uribe                 | Chief Executive Officer Cedsa                | July 2001           | February 2007

(1) Mr. Dall’Olio’s contract with Madeco expires on September 30, 2008.
(2) Enrique Sotomayor was named Secretary of the Board in November 1986.
(3) Mr. Cordoba’s contract with Madeco expires on September 30, 2008.

Tiberio Dall’Olio (born 1937).Mr. Tiberio Dall’Olio has been the Company’s Chief Executive Officer since October 2002. Previously he was the CEO of the Company between 1980 and 1986. His additional work experience includes: Teleco Cables Italy (1991-2000), CCU (1986-90), Ceat General Cable (1968-1973), Ceat Italy Cables (1962-68) and Olivetti (1960-62).  Mr. Dall’Olio received his law degree at the Padua University (Italy).

Cristián Montes (born 1965). Mr. Cristián Montes has served as Chief Financial Officer of Madeco S.A. since April 2006. Prior to his current position, he was Chief Executive Officer at Construmart S.A. for six years. He also was Chief Financial Officer and Sales & Marketing Manager of Cerámicas Cordillera S.A. (part of the Pizarreño Group of companies). He received a degree in Business Administration from the Universidad Católica de Chile.

Enrique Sotomayor (born 1945).  Mr. Enrique Sotomayor has served as legal counsel and secretary of the Board of Directors since 1986. Prior to joining Madeco, he practiced law at: Leonidas Montes Asociados (1967-69); Singer Sewing Machine Corp. (1970-73); and A.A.P. Ahorromet (1973-74). He received his law degree at the Universidad de Chile.

Julio Cordoba (born 1947).  Mr. Cordoba joined the Company in October 2002 and was appointed as Director of Operations in Chile. His previous work experience includes: Plásticos Ecológicos Ltda. (1999-2001), Aceros del Pacífico S.A. (1998), Lloreda Productores de Acero S.A. (1997), Cables de Energía y Telecomunicaciones S.A. (1992-96), Ceat General de Colombia S.A. (1984-92), Madeco S.A. (1980-83), Ceat General de Colombia S.A. (1974-79), Industrias Metálicas de Palmira S.A. (1971-73).

Jorge Tagle (born 1969).  Mr. Jorge Tagle joined the Company in October 2002 and was appointed as Business Unit Manager of the Flexible Packaging in July 2005. His previous work experience includes: Madeco’s Chief Financial Officer (2002-2005), Quiñenco S.A. (1999-2002), Corpgroup (1998-1999), Citicorp (1994-1996) and Soquimich (1993-1994).He received his degree in Civil Industrial Engineering from the Universidad Católica de Chile and his MBA from the Wharton School of the University of Pennsylvania.

Mario Puentes (born 1948).  Mr. Mario Puentes joined the Company in October 1999 as the Business Unit Manager for the Aluminum Profiles unit. His previous work experience includes: Compañía de Acero del Pacífico (1971-1975); Oficina Consultora RFA Ingenieros Ltda. (1975-1977); Forestal S.A. (1977-1979); Watt’s Alimentos S.A. (1979-1981); Compañía Cervecerías Unidas S.A. (1981-1987); Citibank N.A. (1987-1989); and Vidrios Lirquén S.A. (1990-1995). Immediately prior to joining the Company, Mr. Puentes worked for 4 years as an independent consultant (1995-1999) in various industries.  He received his degree in Civil Industrial Engineering from the Universidad de Chile and his Masters of Science from the University of Strathclyde, United Kingdom.

Agilio Macedo (born 1947).  Mr. Agilio Macedo joined the Company in July 2004 as the Chief Executive Officer of Ficap S.A., the Company’s wholly owned Brazilian affiliate. His previous work experience includes: Master Mind Consultoria Ltda. (2002-2004); Aracruz Celulose S.A. (1995-2002); Courtaulds International Ltda. (1991-1995); Associados em Finanças e Investimentos Ltda.(1987-1991); Cia Fiat Lux (1983-1986); Xerox do Brasil S.A. (1976-1983) and Cummins Engine Co. (1974-1976). He received his degree in Civil Engineering from the University of Paraná and Masters in Business Administration from the Stanford University Business School.

Juan Enrique Rivera (born 1942). Mr. Juan Enrique Rivera joined the Company in 1995 and was appointed Chief Executive Officer of Indeco S.A. in January 1996. His previous work experience includes: Decker-Indelqui (1995), Phelps Dodge Cable Operation in Chile - Cocesa (1979-1995), Industrias Electrónicas del Perú S.A. (1973-1979), Mellafe y Salas S.A. - Planta Arica (1968-1973). He received his degree in Electrical Engineering from the University of Chile.

Sady Herrera (born 1957). Mr. Sady Herrera joined the Company in July 2000 and was appointed Deker-Indelqui’s Chief Executive Officer in May 2002. His previous work experience includes: Coresa Argentina S.A. (1998-2000), Empresas Torre S.A. (1986-1997), Armada de Chile (1979-1985). He received his degree in Naval Engineering from the Academia Politécnica Naval de Viña del Mar and his post-graduate degree in Economics and Administration from the Universidad Católica de Chile.

Jorge Uribe (born 1956). Mr. Jorge Uribe studied Public Accounting at St. Thomas University in the city of Bucaramanga and received an MBA from the same university. In 2001, he acquired Cedsa S.A., and has been its CEO since its inception. Additionally, he has served as an advisor to several companies in the city of Bucaramanga and is a university professor in the undergraduate program at St. Thomas University.

Compensation

For the year ending December 31, 2007, the total compensation paid by the Company to all directors was Ch$90 million and to all executive officers, Ch$5,534 million. The Company does not disclose to its shareholders, or otherwise make public, information regarding the compensation of its individual executive officers, nor is it required by Chilean law. The Company does not maintain any pension plans or retirement programs for its directors or executive officers.

On October 27, 2004, Madeco's Board of Directors approved the renewal of the employment agreements of the Company's Chief Executive Officer, Tiberio Dall'Olio, and the Director of Operations of Madeco Chile, Julio Cordoba, for an additional two-year period. The two executives, originally hired for a two-year period in October 2002, were given renewed contracts that expire on September 30, 2008. The contract of Tiberio Dall’Olio was renewed in September 2006, and will terminate on September 30, 2008.

These executives were granted new stock options on May 20, 2005 to subscribe for shares of Madeco pursuant to the compensation plans established in the Special Shareholders Meeting held on November 14, 2002 and approved by the Board on January 25, 2005. The subscription price for these new shares was Ch$60 per share, as determined in the Extraordinary Shareholders Meeting on December 22, 2004.

The Board of Directors agreed to offer subscription options at Ch$60 per share to the executives as follows: i) Chief Executive Officer, Tiberio Dall’Olio, 100,000,000 shares, with the provision that the option be exercised between September 30 and November 30, 2006; ii) Director of Operations in Chile, Julio Córdoba, 20,000,000 shares, with the provision that  the option be exercised between September 30 and November 30, 2006; iii) Corporate Director of  Operations, Giampiero Genesini, 10,000,000 shares, with the provision that the option be exercised between September 30 and November 30, 2005.

On August 31, 2005, the contracts on stock options signed on May 20, 2005 were declared null and void by mutual accord between Madeco S.A. and the above mentioned executives.

At its meeting on November 29, 2005, the Company’s Board of Directors agreed to set a new strike price for the stock options included in the compensation plan mentioned above at Ch$48.52 per share in order to equal this price to the issue price of the shares destined to be subscribed by the shareholders and corresponding to the same capital increase, agreed to in the Extraordinary Shareholders’ Meeting of September 2, 2005. In the same Board of Directors meeting, a new compensation plan was devised for the placement of the remaining shares destined for this purpose.

In its meeting on May 30, 2006, the Board granted new stock options at Ch$48.52 per share to Mr. Tiberio Dall’Olio, for 100,000,000 shares and to Mr. Julio Cordoba, for 20,000,000 shares. Both options can be exercised between October 1st and November 12 of 2007. The contracts for these stock options were signed on July 14, 2006, between these executives and the Company.

There is an annual performance-based bonus program for executive officers.

Each year, the Board of Directors submits a proposal regarding compensation of its members to the shareholders, who approve the Board’s proposal at the annual ordinary Shareholders’ Meeting. The following table sets forth the total compensation paid by the Company and its subsidiaries to each Company’s director of the Board for services rendered in 2007 in thousands of Chilean pesos:

|                                 |                
|-------------------------------- | ---------------
|Director                         | 2007
(In ThCh$)
|Guillermo Luksic Craig (1)       | 1,340          
|Andrónico Luksic Craig (1)       | 373            
|Jean-Paul Luksic Fontbona (1)    | 1,896          
|Hernan Büchi Buc                 | 2,067          
|Alessandro Bizzarri Carvallo (2) | 1,837          
|Francisco Pérez Mackenna (2)     | 3,271          
|Felipe Joannon Vergara           | 19,084         
|Eugenio Valck Varas              | 5,941          
|Oscar Ruiz-Tagle Humeres (3)     | 54,226         
|Total                            | 90,035         

1. Guillermo Luksic Craig, Andronico Luksic Craig and Jean Paul Luksic Fontbona are brothers.
2. On June 26, 2007, Alessandro Bizarri Carvallo resigned from the Board of Directors and the Company’s Directors’ Committee. Francisco Pérez Mackenna was elected by the Board to replace him until the reelection of the Board on March 25, 2008.
3. Mr. Oscar Ruiz-Tagle Humeres resigned on July 24, 2001 and on that same day was nominated as an Honorary Chairman of the Board.

Board Practices

Directors’ Service Contracts

As approved at the Ordinary Shareholders’ Meeting, held on March 25, 2008, the current term of office for each director expires in 2011. There are no service contracts among any of the directors and Madeco S.A. providing for benefits upon termination of employment.

Directors’ Committee

According to Chilean Corporations Law, the Boards of Directors of corporations whose market capitalization reaches or exceeds UF1.5 million (as of May 31, 2008, approximately US$62.8 million) shall designate a Directors’ Committee (the “Directors’ Committee”). If the market capitalization falls below this threshold, there is no obligation to designate a Directors’ Committee. However, corporations which do not reach the threshold may voluntarily assume Directors’ Committee obligations, in which case they shall strictly follow the provisions of the Law.

However, the Directors’ Committee, as defined and mandated under the Chilean Corporations Act, does not satisfy the Directors’ Committee requirements of Rule 10A-3 under the Exchange Act and certain additional requirements under NYSE Rule 303A, with which the Company was required to comply since July 31, 2005.

The Directors’ Committee shall have the following powers and duties:

1. to examine the independent accountants’ reports, the balance sheets, and other financial statements submitted by the corporation’s managers or liquidators to the shareholders, and issue an opinion about them prior to their submission for shareholder approval;
2. to propose to the Board of Directors, the independent accountants and the risk rating agencies, which the Board must then propose to the shareholders. If the Board disagree with the Directors’ Committee’s proposal, the Board shall be entitled to make its own proposal, submitting both proposals to the shareholders for their consideration;
3. to examine the documentation concerning (i) contracts or agreements in which directors have an interest and (ii) transactions between related or affiliated companies, and to produce a written report on such documentation. A copy of the report shall be delivered to the Chairman of the Board, who shall read it at the Board meeting in which the relevant transaction is presented for approval or rejection;
4. to examine the managers’ and chief executives’ remuneration policies and compensation plans; and
5. all other matters contemplated in the Company’s bylaws or entrusted to the Directors’ Committee by a Shareholders’ Meeting or the Board of Directors.

1. any entities within the financial conglomerate to which the companybelongs;
2. corporate entities that have, with respect to the company, the character of parent company, affiliated company, subsidiary or related company. Parent companies are those that control directly or indirectly more than 50% of the subsidiary’s voting stock (or participations, in the case of business organizations other than stock companies), or that may otherwise elect or appoint, or cause the election or appointment, of the majority of the directors or officers. Limited partnerships (sociedades en comandita) may likewise be affiliates of a corporation, whenever the latter has the power to direct or guide the administration of the general partner (gestor) thereof.  Related companies are those that, without actually controlling the affiliate, own directly or indirectly 10% or more of the affiliate’s voting stock (or participations, in the case of business organizations other than stock companies), or that may otherwise elect or appoint, or cause the election or appointment of at least one board member or manager;
3. persons who are directors, managers, administrators or liquidators of the company, and their spouses or their close relatives (i.e., parents, father/mother in law, sisters, brothers, sisters/brothers in law); and
4. any person who, whether acting alone or in agreement with others, may appoint at least one member of the management of the Company or controls 10% or more of the capital of the Company.

1. whether acting alone or in agreement with others, has sufficient voting power to influence the company’s management;
2. creates conflicts of interest in doing business with the company;
3. in the case of a corporate entity, is influenced in its management by the company; or
4. holds an employment or position which affords the person access to non-public information about the company and its business, which renders the person capable of influencing the value of the company’s securities.

The Directors’ Committee’s discussions, agreements, and organization are regulated, in every applicable matter, by the Chilean Corporation's Law provisions related to Board of Directors’ meetings. The Directors’ Committee shall inform the Board of Directors about the manner it will request information and of its resolutions.

The Directors’ Committee shall be composed of three members, the majority of which shall be independent. Independent directors are those that would have been elected even if the votes cast in the director’s favor by the controlling shareholder and its related persons had not been counted. However, a majority of directors related to the controlling shareholder is permissible if there are an insufficient number of independent directors. Should there be more than three directors entitled to participate in the Directors’ Committee, the Board of Directors shall elect the members of the Directors’ Committee by unanimous vote. Should the Board fail to reach an agreement, the matter shall be decided by drawing. The Company’s Directors’ Committee was composed, until June 26, 2007, of Mr. Felipe Joannon, Alessandro Bizzarri and Eugenio Valck. Mr. Felipe Joannon and Mr. Alessandro Bizzarri were appointed by the controlling shareholder while Mr. Eugenio Valck is an independent director. On June 26, 2007, the Board of Directors accepted the resignation of Mr. Alessandro Bizzarri and designated Mr. Francisco Pérez Mackenna to replace him until the next Annual Shareholder ́s Meeting.

At the Annual Shareholders’ Meeting held on March 25, 2008, the Board of Directors was renewed. Eugenio Valck Varas and Felipe Joannon Vergara were replaced by Augusto Iglesias Palau and Alejandro Ferreiro Yazigi, both independent Directors, as explained above. The Board of Directors then elected Augusto Iglesias Palau, Alejandro Ferreiro Yazigi and Francisco Pérez Mackenna to form the Company’s Directors’ Committee for a period of three years.

In addition to the general liabilities imputable to any director, the directors that compose the Directors’ Committee shall, in the exercise of their duties, be jointly and severally liable for any damage caused to the corporation or the shareholders.

The members of the Director’s Committee shall be remunerated. The amount of such remuneration shall be established annually by the shareholders, taking into consideration the duties that the Director’s Committee members shall perform. The remuneration of the members of the Company’s Director’s Committee is UF 50 (as of May 31, 2008, approximately US$2,092) per Director’s Committee meeting.

The shareholders shall determine the budget of the Directors’ Committee and those of its advisors, and the Director’s Committee shall be allowed to request the recruitment of professionals to fulfill its duties, within the limits imposed by the budget. The activities of the Directors’ Committee and its expenses, including its advisors’, shall be included in the annual report and conveyed to the shareholders. The budget of the Company’s Directors’ Committee and its advisors is UF 2,000 per year (as of May 31, 2008, approximately US$83,668).

Audit Committee

Pursuant to NYSE Rule 303A.06, in 2008, Madeco designated an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act and the additional requirements under NYSE Rule 303A. The Audit Committee is currently composed by Messrs. Augusto Iglesias Palau and Alejandro Ferreiro Yazigi.

General summary of significant differences with regard to corporate government standards.

The following paragraphs provide a brief, general summary of significant differences between corporate governance practices followed by Madeco pursuant to its home-country rules and those applicable to U.S. domestic issuers under New York Stock Exchange (“NYSE”) listing standards.

Composition of the Board of Directors; independence. The NYSE listing standards provide that listed companies must have a majority of independent directors and that certain board committees must consist solely of independent directors. Under NYSE rule 303A.02, a director qualifies as independent only if the board affirmatively determines that such director has no material relationship with the company, either directly or indirectly. In addition, the NYSE listing standards enumerate a number of relationships that preclude independence.

Under Chilean law there is no legal obligation to have independent directors. However, Chilean law establishes a number of principles of general applicability designed to avoid conflicts of interests and to establish standards for related party transactions. Specifically, directors elected by a group or class of shareholders have the same duties to the company and to the other shareholders as the rest of the directors, and thus may not fail to perform such duties under the pretense of defending the interests of the shareholder who elected them.  Furthermore, all transactions with the company in which a director has an interest, either personally (which includes the director’s spouse and certain relatives) or as a representative of a third party, require prior approval by the board of directors and must be entered into on market terms and conditions. Furthermore, such transactions must be reviewed by the Directors’ Committee (as defined below) and disclosed at the next meeting of shareholders. Pursuant to NYSE rule 303A.00, Madeco may follow Chilean practices and is not required to have a majority of independent directors. The directors of a company are jointly and severally liable for any damages they cause to the company and its shareholders.

Committees.The NYSE listing standards require that listed companies have aNominating/Corporate Governance Committee, a Compensation Committee and an Audit Committee. Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified by the listing standards.

Under Chilean law, the only board committee that is required is the Directors’ Committee, composed of three members, such a committee having a direct responsibility to (a) review the company’s financial statements and the independent auditors’ report and issue an opinion on such financial statements and report prior to their submission for shareholders’ approval, (b) make recommendations to the Board of Directors with respect to the appointment of independent auditors and risk rating agencies, (c) review transactions in which directors have an interest and transactions between affiliated companies, and issue a report on such transactions, (d) review the managers and principal executive officers compensation policies and plans and (e) perform other duties as defined by the company’s charter, by the annual shareholders’ meeting or by the board. Of the three members of the Committee, two have to be independent from the controlling shareholder. A director who is a member of the Directors’ Committee is “independent” if, subtracting the votes of the controlling shareholder and its affiliates from the total number of votes given in favor of such director, he or she would have been nevertheless elected. Directors elected with the votes of the controlling shareholder and its affiliates may constitute the majority of the Directors’ Committee if there are not enough independent directors on the board. The members of the Committee are jointly and severally liable for any damages they cause to the company and its shareholders.

Shareholder approval of equity-compensation plans. Under NYSE listing standards, shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereof, with limited exemptions. An “equity-compensation plan” is a plan or other arrangement that provides for the delivery of equity securities of the listed company to any employee, director or other service provider as compensation for services.

Under Chilean law, if previously approved by shareholders at an extraordinary shareholders’ meeting, up to ten percent of a capital increase in a publicly traded company may be set aside to fund equity-compensation plans for the company’s employees and/or for the employees of the company’s subsidiaries. Pursuant to NYSE rule 303A.00, as a foreign issuer, Madeco may follow Chilean practices and is not required to comply with the NYSE listing standards with respect to shareholder approval of equity-compensation plans.

Corporate Governance Guidelines.The NYSE listing standards provide that listed companies must adopt and disclose corporate governance guidelines with regard to (a) director qualifications standards; (b) director responsibilities; (c) director access to management and independent advisors; (d) director compensation; (e) director orientation and continuing education; (f) management succession; and (g) annual performance evaluation of the board.

Chilean law does not require that such corporate governance guidelines be adopted. Director responsibilities and access to management and independent advisors are directly provided for by applicable law. Director compensation is approved by the annual meeting of shareholders pursuant to applicable law. As a foreign issuer, Madeco may follow Chilean practices and is not required to adopt and disclose corporate governance guidelines.

Code of Business Conduct and Ethics.The NYSE listing standards require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.

Madeco has adopted a code of business conduct and ethics that applies generally to all of its executive officers and employees. A copy of the code of ethics is filed as an exhibit to this annual report.

Executive Sessions.To empower non-management directors to serve as a more effective check on management, NYSE listing standards provide that non-management directors of each company must meet at regularly scheduled executive sessions without management.

Under Chilean law, the office of director is not legally compatible with that of a company officer in publicly traded companies. The board of directors exercises its functions as a collective body and may partially delegate its powers to executive officers, attorneys, a director or a board commission of the company, and for specific purposes to other persons. As a foreign issuer, Madeco may follow Chilean practices and is not required to comply with the NYSE listing standard for executive sessions.

Certification Requirements. Under the NYSE listing standards, Section 303A.12(a) requires that each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards. Section 303A.12(b) requires that each listed company CEO must promptly notify the NYSE in writing after any executive officer of the listed company becomes aware of any material non-compliance with any applicable provisions of Section 303A. Section 303 A.12 (c) requires that each listed company must submit an executed written affirmation regarding certain board and committee practices annually and each time a change occurs to the board or certain of its committees.

As a foreign private issuer, Madeco is required to comply with Section 303A.12(b) and (c), but is not required to comply with the certifications requirements set forth in Section 303A.12(a).

Employees

The following table breaks down the Company’s total number of employees by country as of December 31, 2005, 2006 and 2007 as well as of March 31, 2008:

|                             |              |              |              |               
|---------------------------- | ------------ | ------------ | ------------ | --------------
|Total Number of Employees(1)
|Country                      | Dec 31, 2005 | Dec 31, 2006 | Dec 31, 2007 | March 31, 2008
|Chile                        | 1,634        | 1,555        | 1,554        | 1,636         
|Brazil                       | 618          | 731          | 895          | 915           
|Peru (2) Peru                | 308          | 315          | 1,194        | 1,227         
|Argentina                    | 298          | 390          | 433          | 444           
|Colombia (3)                 | -            | -            | 181          | 201           
|Total                        | 2,858        | 2,991        | 4,257        | 4,423         

1. The Table includes Optel ́s workforce in Madeco ́s consolidation, 5 employees as of December 31, 2005, 18 employees as of December 31, 2006, 23 employees as of December 31, 2007, and 21 employees as of March 31, 2008.
2. Since March 31, 2007, Alusa’s Peruvian subsidiaries, Peruplast S.A. and Tech Pak S.A., consolidated their accounting records with those of the Company.
3. Since March 31, 2007, Madeco’s Colombian subsidiary, Cedsa S.A., has consolidated its accounting records with those of Madeco.

During the 1999 - 2003 period, the Company implemented a series of restructuring measures in response to the continued unfavorable economic conditions within the region. As a consequence of Argentina’s deep economic recession, in December 2001, the Company closed the production operations of its Argentine subsidiary Decker-Indelqui. Since December 31, 2004, the Wire & Cable business unit located in Argentina has been, on a non-continuous basis, partially reopened. The Brass Mills business unit facilities also located in Argentina have been operating at limited capacity since 2003.

The Company does not maintain any pension fund or retirement program for its employees and has no liability for the performance of governmental pension plans or any governmental pension payments to employees.

The following tables and discussion provide further information regarding the Company’s total human resources by business unit as of December 31, 2005, 2006 and 2007, as well as of March 31, 2008:



|                             |            |               |           |      
|---------------------------- | ---------- | ------------- | --------- | -----
|                             | Executives | Professionals | Employees | Total
|                             |            |               |           |      
|December  31, 2005           |            |               |           |      
|Wire & Cable and Brass Mills | 35         | 475           | 1,512     | 2,022
|Flexible Packaging           | 7          | 147           | 400       | 554  
|Aluminum Profiles            | 7          | 84            | 191       | 282  
|Madeco Consolidated          | 49         | 706           | 2,103     | 2,858
|                             |            |               |           |      
|December  31, 2006           |            |               |           |      
|Wire & Cable and Brass Mills | 36         | 511           | 1,563     | 2,110
|Flexible Packaging           | 5          | 158           | 438       | 601  
|Aluminum Profiles            | 7          | 89            | 184       | 280  
|Madeco Consolidated          | 48         | 758           | 2,185     | 2,991
|                             |            |               |           |      
|December  31, 2007 (1)       |            |               |           |      
|Wire & Cable and Brass Mills | 47         | 633           | 1,902     | 2,582
|Flexible Packaging           | 25         | 407           | 978       | 1,410
|Aluminum Profiles            | 10         | 105           | 150       | 265  
|Madeco Consolidated          | 82         | 1,145         | 3,030     | 4,257
|                             |            |               |           |      
|March  31, 2008(1)           |            |               |           |      
|Wire & Cable and Brass Mills | 49         | 665           | 2,003     | 2,717
|Flexible Packaging           | 26         | 432           | 979       | 1,437
|Aluminum Profiles            | 10         | 106           | 153       | 269  
|Madeco Consolidated          | 85         | 1,203         | 3,135     | 4,423

(1) Figures for the Wire & Cable and Flexible Packaging business units include employees from the Colombian facility, which was acquired in February 2007, and from the Peruvian subsidiaries which started consolidating in March 2007.

Wire & Cable and Brass Mills.  The following table sets forth the Company’s human resources as of December 31, 2007 for the Wire & Cable and Brass Mills business units. The employees are broken down by employee category and country:

|                                                                      |            |               |           |      
|--------------------------------------------------------------------- | ---------- | ------------- | --------- | -----
|Wire & Cable and Brass Mills Units: Employees as of December 31, 2007
|                                                                      | Executives | Professionals | Employees | Total
|Chile                                                                 | 14         | 147           | 689       | 850  
|Brazil                                                                | 17         | 88            | 790       | 895  
|Peru                                                                  | 4          | 334           | 80        | 418  
|Argentina                                                             | 2          | 39            | 197       | 238  
|Colombia                                                              | 10         | 25            | 146       | 181  
|Total                                                                 | 47         | 633           | 1,902     | 2,582

In Chile as of December 2007, the Company had 850 permanent employees and 25 temporary employees. A total of 664 employees were represented by 7 labor unions and one non-unionized labor union (590 and 74 employees, respectively). On December 16, 2004, Madeco Chile reached an agreement with Unions No1 and No2 prior to the expiration of the collective bargaining agreement. The Company also reached an agreement with Union No3 and the non-unionized workers. Consequently, the Company and the Unions signed new contracts with a three year term, expiring on January 1, 2010. The last work stoppage in Madeco-Chile was in February 1993 and lasted 10 days. At Armat, new collective bargaining agreements were signed with Unions No1 and No2, which involved 42 and 26 workers respectively with a 2 year term. Armat’s last work stoppage was in 1991 and lasted 12 days. By the end of 2006, Cotelsa signed a collective bargaining agreement with its two labor unions which represented 101 employees.

In October 2005 and January 2007, the Company reduced its workforce by 120 and 54 employees, respectively, in the Brass Mills business unit’s facilities located in Chile.

In Brazil, as of December 2007, the Company had 895 permanent employees and 11 temporary employees. A total of 318 employees were represented by 2 labor unions, Metalurgicos do Rio de Janeiro and Metalurgicos de Campinas. Collective bargaining in Brazil is done on a statewide basis rather than on an industry-wide basis or on a company-by-company basis. Each year, the unions negotiate with their respective municipal governments to reach an agreement. The Company’s last work stoppage in Brazil was in October 1997, lasting four days and involving 54 employees; currently, the Company considers its relations with all its employees to be good.

In Peru, as of December 2007, the Company had 418 permanent employees and 12 temporary employees, none of which were members of labor unions, in 2007. The Company has experienced no strikes in Peru since 1993.

In Argentina, as of December 2007, the Company had 238 permanent employees and 1 temporary employee. A total of 142 employees were represented by 2 labor unions. Collective bargaining in Argentina is done on a statewide basis, rather than on an industry-wide basis or on a company-by-company basis. Although, there have been several work stoppages in Argentina since the Company’s acquisition of Indelqui in 1990 these were due to strikes called by nation wide labor federations and were unrelated to conditions at the Company’s operations. The last work stoppage was in 1999 and involved 301 employees.

In Colombia, as of December 2007, the Company had 181 permanent employees and 35 temporary employees, none of which were members of a labor union during 2007. The Company has experienced no strikes in Colombia.

Flexible Packaging. The following table sets forth the Company’s human resources as of December 31, 2007, for the Flexible Packaging unit.  The personnel are broken down by employment category and country of origin.

|                                                           |            |               |           |      
|---------------------------------------------------------- | ---------- | ------------- | --------- | -----
|Flexible Packaging Unit: Employees as of December 31, 2007
|                                                           | Executives | Professionals | Employees | Total
|Chile                                                      | 4          | 107           | 328       | 439  
|Argentina                                                  | 3          | 40            | 152       | 195  
|Peru                                                       | 18         | 260           | 498       | 776  
|Total                                                      | 25         | 407           | 978       | 1,410

In Chile as of December 2007, the Company had 439 permanent employees and 9 temporary employees. A total of 270 and 163 employees were represented by four bargaining commissions (three labor unions and one non-unionized personnel commission, respectively). In 2006, the Company entered into a three-year collective bargaining agreement with bargaining commissions. The last work stoppage, which occurred on August 1998, lasted 20 days and included 130 employees.

In Argentina as of December 2007, the Company had 195 permanent employees and 50 temporary employees. A total of 52 employees were represented by one labor union in 2007. On June 2006, Aluflex signed a collective bargaining agreement with a union that represented 166 company employees.

In Peru as of December 2007, the Company had 776 permanent employees and 2 temporary employees, none of which were members of labor unions, in 2007. The Company has experienced no strikes in Peru since 1996.

Aluminum Profiles. The following table sets forth the Company’s personnel at December 31, 2007 for the Aluminum Profiles unit. Personnel are broken down by employment category.

|                                                 |            |               |           |      
|------------------------------------------------ | ---------- | ------------- | --------- | -----
|Aluminum Unit: Employees as of December 31, 2007
|                                                 | Executives | Professionals | Employees | Total
|Total                                            | 10         | 105           | 150       | 265  

The Aluminum Profilesdivision in Chile had 265 permanent and 53 temporary employees. A total of 53 employees were represented by two unions. In December 2006, Indalum completed its collective bargaining process and entered into an employee labor agreement for the next 3 years with Unions No.1 and No.2, and with the Bargaining Commission for non unionized personnel (both groups represented a total of 226 employees).

Indemnities

All employees who are terminated in Chile, Brazil, Peru, Argentina and Colombia for reasons not imputable to the workers are entitled by law to receive a severance payment.

In Chile, if the employee has been working continuously for a period of 12 months or more and the employer ended his contract due to necessities of the company, the employer will have to pay the employee, an indemnification for each year and fraction thereof (up to six months) that the employee worked for the company, equivalent to thirty days of salary for the last worked month. This indemnification has a maximum amount equivalent to three hundred and thirty days of remuneration (11 years) and a limit of 90 U.F. per year (as of May 31, 2008, approximately US$41,416). If the employer chooses to terminate an employee under these circumstances, it will have to inform the worker within thirty days of the anticipated termination. Nevertheless, it will not be required to give the employee this much notification, if the Employer chooses to pay the indemnification (in money equivalent) of the last yielded remuneration.

In Chile, the employees of the Company who are subject to collective bargaining agreements receive an indemnification for each year worked (exclusive of the remuneration discussed above), equivalent to 30 days of salary for each full year, and fraction thereof that is worked. This payment will become effective if the Company has the need to terminate the employee’s contract, or if the worker voluntary resigns (unless the worker violates sections N°1 and N°6 of article N° 160 of the labor code). The collective bargaining agreement does not contain any limitation regarding the total amount that may be paid to the employee (in terms of years or remunerations), but establishes a maximum number of employees per year that may voluntarily terminate their contracts and claim severance benefit. However, the above referenced indemnification must not be inferior to the amount established by law.

In Brazil, permanent employees are entitled to a percentage of their salary based on the number of months worked, as well as a payment of 1.33 times the employee’s salary in case of any pending vacations and a payment of 40% of the amount the employee has contributed to the Fondo Guarantia Por Tiempo Servicio (Guaranteed Funds for Service Time, or “FGTS”).

In Peru, permanent employees are entitled to compensation payments related to Compensación por Tiempo de Servicios(Employee Severance Indemnities, or CTS). The compensation amount is payable in two installments (May and November) and is equivalent to one month’s salary for each year of service. These CTS payments act as the employee’s unemployment insurance. Additionally, permanent employees are also entitled to, in certain circumstances, severance payments upon termination equivalent to one and a half month’s salary for each year of service with a maximum limit of 12 month’s salary.

In Argentina, permanent employees are entitled to one month’s salary for each year of service with a limit established by the Ministry of Labor.

In Colombia, permanent employees are entitled to one month’s salary for each year of service, under the Colombian law (“Cesantias”). The employees who are terminated in Colombia for reasons not imputable to them are entitled by law to receive a severance payment (“Indemnizaciones”). The payment is as follows:

- If an employee earns less than 10 minimum Legal Salaries: For a year of service, the employee will earn 30 days of work; for more than a year of service, 30 days the first year plus 20 days for each additional year worked.

- If an employee earns more than 10 actual minimum Legal Salaries: For a year of service, the employee will earn 20 days of work; for more than a year, 20 days the first year and 15 additional days for each year worked.

Workers in Chile are subject to a national pension fund law which establishes a system of independent pension plans, administered by Administradoras de Fondos de Pensiones (Pension Fund Administrators, or “AFPs”). The Company has no liability for the performance of the pension plans or any pension payments to be made to the employees.

Retired employees in Brazil receive government payments from both the FGTS and the Instituto Nacional de Seguridad Social(National Institute of Social Security). The Company has no liability for the performance of the pension plans or any pension payments to be made to the employees.

Workers in Peru are subject to a national pension fund law, which establishes a system of independent pension plans administered by AFPs. The Company has no liability for the performance of the pension plans or any pension payments to be made to the employees.

Workers in Argentina are subject to a national pension fund law that establishes a system of independent pension plans administered by Administradoras de Fondos de Jubilaciones y Pensiones (Pension and Retirement Fund Administrators, or “AFJPs”).  The Company has no liability for the performance of the pension plans or any pension payments to be made to the employees.

Retired employees in Colombia are subject to a national pension fund law, which establishes a system of independent pension plans administered by private pension funds. The Company has no liability for the performance of the pension plans or any pension payments to be made to the employees.

Share Ownership

With respect to directors and senior management, information concerning their share ownership in the Company is addressed in “Item 7. Major Shareholders and Related Party Transactions”.

The only compensation program is the one detailed above in “Item 6. Directors, Senior Management and Employees – Senior Managment – Compensation ”. The Company does not have any other stock option or other programs involving employees in the share capital of the Company.



ITEM 7. Major Shareholders and Related Party Transactions

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Major Shareholders

Madeco’s only outstanding voting securities are its shares of common stock. The following table sets forth information concerning ownership of Madeco’s common stock as of May 31, 2008 with respect to each shareholder owning more than 5% of the outstanding shares of common stock and with respect to the percentage of Madeco’s common stock owned by all directors and executive officers of Madeco as a group:

|                                                                 |                        |            
|---------------------------------------------------------------- | ---------------------- | -----------
|Shareholder                                                      | Number of
shares owned | % Ownership
|Quiñenco S.A. and subsidiaries (1) (2)                           | 2,557,255,382          | 45.17%     
|The Bank of New York                                             | 427,161,930            | 7.55%      
|AFP Provida S.A.                                                 | 377,214,179            | 6.66%      
|AFP Habitat S.A.                                                 | 322,983,162            | 5.71%      
|AFP Cuprum S.A.                                                  | 306,875,815            | 5.42%      
|AFP Capital S.A.                                                 | 298,009,551            | 5.26%      
|Directors, Executive Officers and related parties as a group (3) | 138,889,305            | 2.45%      

(1) The controlling shareholder of Madeco S.A. is Quiñenco S.A., an open stock corporation.
(2) Quiñenco S.A. directly controls 40.10% of Madeco S.A. (2,269,895,546 shares) and indirectly controls through its subsidiary, Inversiones Río Grande S.A., 5.08% (287,359,836 shares).
(3) Includes shares owned by Executives, Luksic family members and its related companies, excluding Quiñenco S.A. and Inversiones Río Grande S.A.

Quiñenco S.A. is controlled by the Luksic Group, whose principal members are The Luksburg Foundation, Andrónico Luksic Craig, Guillermo Luksic Craig and Jean-Paul Luksic Fontbona. Until his death in August 2005, the Luksic Group also included Andrónico Luksic Abaroa, the father of Andrónico Luksic Craig, Guillermo Luksic Craig and Jean-Paul Luksic Fontbona. As of the date of this Annual Report, certain members of the Luksic Group beneficially own 83.1% of the outstanding shares of common stock of Quiñenco. Jean-Paul Luksic Fontbona does not directly or indirectly owns any shares of Quiñenco but exercises control through memberships on boards of directors and managing councils of Luksic Group companies.

Control by the Luksic Group is exercised through the Luksic Group’s control of Andsberg Inversiones Ltda., Ruana Copper A.G. Agencia Chile, Inversiones Orengo S.A., Inversiones Consolidadas S.A., Inversiones Salta S.A., Inmobiliaria e Inversiones Río Claro S.A. and Inversiones Río Claro Ltda., which are the Luksic Group companies that hold shares of Quiñenco. The Luksburg Foundation beneficially owns approximately 94.6% of the total equity interest in Andsberg Inversiones Limitada, 100% of the outstanding shares of common stock of Ruana Copper A.G. Agencia Chile and 97.3% of the common shares of Inversiones Orengo S.A., entities which jointly hold approximately 56.8% of the outstanding shares of common stock of Quiñenco.

Although there are no formal agreements as to the voting or disposition of shares known to Quiñenco, Quiñenco believes that the members of the Luksic Group generally consult with each other regarding actions to be taken by shareholders of Quiñenco. Consequently, the Luksic Group has the power to elect a majority of Quiñenco’s directors and to determine the outcome of substantially all matters to be decided by a vote of shareholders.

Quiñenco’s only outstanding voting securities are its shares of common stock. There was no significant change in the share ownership of Quiñenco in 2005, 2006 or 2007. The following table sets forth information concerning ownership of the shares with respect to the Luksic Group’s companies as of December 31, 2007:

|               |                                                                                                                                                                                                                  |                                                                                |                                       
|-------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | --------------------------------------
|Title of Class | Identity of Person or Group                                                                                                                                                                                      | Amount Owned                                                                   | Percent of Class                      
|Common Stock   | Andsberg Inversiones Ltda. 
Ruana Copper A.G. Agencia Chile 
Inmobiliaria e Inversiones Río Claro S.A. 
Inversiones Consolidadas S.A.
Inversiones Salta S.A.
Inversiones Río Claro Ltda.
Inversiones Orengo S.A. | 391,308,877
255,946,677
143,427,860
129,988,779
19,121,268
8,934,508
2,619,260 | 34.2%
22.4%
12.5%
11.4%
1.7%
0.8%
0.2%

In addition, the Fundación Andrónico Luksic A., a charity foundation, owned 1,432,232 shares of Quiñenco equivalent to a 0.1% interest, and Inversiones Carahue S.A., a company owned by Paola Luksic Fontbona, owned 8,211 shares as of December 31, 2007. Davor and Andrónico Luksic Lederer, sons of Andrónico Luksic Craig, each own 128 shares of Quiñenco.

The Company’s shareholders have identical voting rights. To the knowledge of the Company, there are no arrangements or operations that may result in a change in control of the Company.

Madeco’s majority shareholder is Quiñenco S.A., which, through its direct and indirect interests in the Company, beneficially owns as of May 31, 2008 an aggregate of 45.17% of the outstanding shares (2,557,255,382 shares) of Common Stock. Between April 26, 2005 and March 25, 2008, six members of the Company’s Board of Directors were representatives of the Quiñenco Group, including the Chairman of the Board. The entire Board of Directors was reelected at the Annual Shareholders’ Meeting held on March 25, 2008, for a three-year period pursuant to the Company’s bylaws. After the Annual Shareholders’ Meeting, the Quiñenco Group reduced its representatives in the Company’s Board of Directors to five members, including the Chairman of the Board.

The following table shows the total number of shares authorized and paid as of December 31, 2005, 2006 and 2007:

|                                                    |               |               |              
|--------------------------------------------------- | ------------- | ------------- | -------------
|                                                    | 2005          | 2006          | 2007         
|Common Stock
(number of shares authorized and paid) | 5,348,390,129 | 5,541,192,887 | 5,661,192,887

The following table includes each of the Company’s shareholders with an ownership interest exceeding 1.0% at December 31, for the years 2005, 2006 and 2007, demonstrating the significant changes in ownership percentages during the past three years:

|                                        |                   |                   |                   |        |               |       
|--------------------------------------- | ----------------- | ----------------- | ----------------- | ------ | ------------- | ------
|Shareholder                             | December 31, 2005 | December 31, 2006 | December 31, 2007
|Quiñenco S.A. and related parties (1)   | 2,557,141,629     | 47.81%            | 2,557,255,382     | 46.15% | 2,557,255,382 | 45.17%
|AFP Provida S.A.                        | 88,927,032        | 1.66%             | 150,227,032       | 2.71%  | 387,214,179   | 6.84% 
|AFP Habitat S.A.                        | 82,908,314        | 1.55%             | 313,895,523       | 5.66%  | 334,545,142   | 5.91% 
|The Bank of New York                    | 210,112,530       | 3.93%             | 318,509,330       | 5.75%  | 216,157,030   | 3.82% 
|AFP Bansander S.A.                      | 25,537,117        | 0.48%             | 258,140,595       | 4.66%  | 206,966,302   | 3.66% 
|AFP Cuprum S.A.                         | 21,389,584        | 0.40%             | 145,647,038       | 2.63%  | 183,066,962   | 3.23% 
|Citibank Chile Cta.de Terceros          | 46,017,234        | 0.86%             | 113,360,357       | 2.05%  | 174,654,001   | 3.09% 
|Dall’Olio Lenzini, Tiberio              | 61,056,097        | 1.14%             | 61,056,097        | 1.10%  | 161,056,097   | 2.84% 
|AFP Santa Maria S.A.                    | 29,828,899        | 0.56%             | 104,559,989       | 1.89%  | 124,208,710   | 2.19% 
|Banchile Corredores de Bolsa S.A.       | 254,852,902       | 4.77%             | 163,733,746       | 2.95%  | 118,248,424   | 2.09% 
|Celfin Capital S.A. Corredores de Bolsa | 142,689,620       | 2.67%             | 103,510,306       | 1.87%  | 104,170,529   | 1.84% 
|Axxion S.A.                             | 0                 | 0.00%             | 0                 | 0.00%  | 87,985,096    | 1.55% 
|Bolsa de Comercio de Santiago           | 283,819,492       | 5.31%             | 68,221,617        | 1.23%  | 86,053,526    | 1.52% 
|Bolsa Electronica de Chile              | 151,685,754       | 2.84%             | 49,135,641        | 0.89%  | 60,400,432    | 1.07% 
|Fondo mutuo Legg Mason                  | 0                 | 0.00%             | 71,305,359        | 1.29%  | 58,280,547    | 1.03% 
|Others                                  | 1,392,423,925     | 26.03%            | 1,062,634,875     | 19.18% | 800,930,528   | 14.15%

(1) Quiñenco S.A. directly controls 40.10% of Madeco S.A. (2,269,895,546 shares) and indirectly controls through its subsidiary, Inversiones Río Grande S.A., 5.08% of Madeco S.A. (287,359,836 shares).

As of May 31, 2008, The Bank of New York, as depositary for Madeco’s ADS facility, was the record owner of 427,161,930 shares of Common Stock in the form of 4,271,619 ADSs. These ADSs represented 7.55% of the total number of issued and outstanding shares at such date. The ADSs are issued pursuant to a deposit agreement dated June 7, 1993, as amended (the “Depositary Agreement”), among the Company, the Bank of New York as depositary (the “Depositary”) and the holders from time to time of the American Depositary Receipts (“ADSs”) evidencing the ADSs issued pursuant to the Depositary Agreement. It is not practicable for Madeco to determine the portion of its common stock or ADSs beneficially owned by U.S. persons.



Related Party Transactions

Under the Chilean Corporations Law, a corporation may not enter into a contract or agreement in which a director has a direct or indirect interest without prior approval by the Board of Directors, and only if the terms of the conflicting interest transaction are similar to those of an arm’s length transaction.

The Directors’ Committee is required by Chilean law to examine all documentation concerning (i) contracts or agreements in which directors have an interest and (ii) transactions between related or affiliated companies, and report their findings at the Board of Director meetings. For further discussion regarding Chilean law as it pertains to the Committee’s responsibilities and regulations regarding related party transactions, see “Item 6. Directors, Senior Management and Employees — Board Practices — Directors’ Committee”.

If the conflicting interest transaction involves a “material amount,” the Board of Directors is required to produce a statement declaring in advance that the conflicting interest transaction is similar in its terms to an arm’s length transaction. A conflicting interest transaction is deemed to involve a “material amount” if the amount involved is both greater than UF2,000 (as of May 31, 2008, approximately US$83,668) and exceeds 1% of the consolidated assets of the corporation, or if the amount exceeds UF20,000 (as of May 31, 2008, approximately US$836,678) regardless of the size of the corporation.

If the Board of Directors believes that it is not possible to ascertain whether the conflicting interest transaction is similar to an arm’s length transaction, it may approve or reject the conflicting interest transaction, or appoint independent advisors to make such a determination, in all these cases, with the exclusion of the interested directors. If the Board appoints independent advisors, the report prepared by the advisors must be made available to the shareholders and the Board of Directors within 20 business days from the date the report was received from the independent advisors. The shareholders must be notified in writing of the receipt of the report. After this period the Board may approve or reject the conflicting interest transaction, but the Board is not required to follow the independent advisors’ conclusion. The Board may treat the conflicting interest transaction and the report as confidential information, with the exclusion of the interested directors. Shareholders representing at least a 5% of the voting shares of the Company may request the Board call an Extraordinary Shareholders’ meeting in order to approve or reject the conflicting interest transaction by a two-thirds majority of the outstanding voting shares.

All decisions adopted by the Board in respect of the conflicting interest transaction must be reported at the following Shareholders’ Meeting. The controller of the corporation or the related party which intends to enter into the conflicting interest transaction shall make available to the Board of Directors, at the time the transaction is being considered by the Board, all information relating to the transaction filed with any non-Chilean regulatory entities or stock exchanges.

If a suit for damages arises from such a transaction, the defendant (i.e., one or more directors, the controller, a related party, or all of them) bears the burden of proof that the transaction was equally as or more beneficial to the corporation than an arm’s length transaction, unless the conflicting interest transaction was previously approved by the shareholders.

In the ordinary course of its business, the Company engages in a variety of transactions with affiliates of Madeco. Financial information concerning these transactions during the last three years is set forth in Note 24 to the Consolidated Financial Statements. The Company believes that it has complied with the requirements of Article 89 and Article 44 in all transactions with related parties.

Although the Company generally does not provide or receive long-term debt financing to or from other entities within Madeco (except in connection with bank loans on arm’s length terms in the ordinary course of business from the Company’s former banks), the Company has occasionally in the past and expects in the future to advance funds and receive advances of funds from other companies under the common control of the Quiñenco Group where required to meet short-term liquidity requirements. These loans have been on a short-term unsecured basis at market rates of interest and, in the case of loans made by the Company to affiliated companies, have required the prior approval of Madeco’s Board of Directors pursuant to the requirements of the Chilean Corporations Law relating to open stock corporations such as Madeco. The outstanding amounts of such loans made by the Company to affiliated companies during the years ended December 31, 2005, 2006 and 2007 were not material to Madeco, individually or in the aggregate. In addition, the Company has from time to time in the past made loans and advances to affiliated companies and to strategic investors and their affiliates to provide financing resources in connection with acquisitions of assets and other transactions. Such loans and advances have generally been made on a secured basis at market rates of interest. See Note 24 to the Consolidated Financial Statements.

The Company also provides goods and services in commercial transactions in the ordinary course of business to affiliated companies. In connection with such transactions, the Company from time to time extends unsecured credit on terms substantially similar to those available to other customers purchasing goods and services in similar quantities.

Except for the transaction described below, none of the transactions carried out during 2005, 2006 and 2007 between the Company and related parties were deemed to have been material to the Company and/or to the related party.

Interests of Experts and Counsel

Not applicable



ITEM 8. Financial Information

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Consolidated Statements and Other Financial Information

Identification of Financial Statements and Other Financial Information

See “Item 18.  Financial Statements”

Export Sales

The tables below show export sales from each of the Company’s business units and their division components, in tons and in revenues. In each case, sales are also shown as a percentage of the total for the corresponding division or business unit:

|                                     |        |         |        |         |        |        
|------------------------------------ | ------ | ------- | ------ | ------- | ------ | -------
|Export (1) Sales Volume             
|                                     | 2005   | 2006    | 2007  
|                                     | Volume | % total | Volume | % total | Volume | % total
|Metallic Cable (in tons)             | 13,132 | 19.1%   | 15,015 | 18.9%   | 17,749 | 20.2%  
|Optical Fiber Cable (in km)          | 9,516  | 11.6%   | 17,151 | 28.3%   | 20,393 | 15.5%  
|Wire & Cable (in equivalent tons)(2) | 13,348 | 18.9%   | 15,405 | 19.1%   | 18,212 | 20.0%  
|Pipes Bars and Sheets (in tons)      | 16,044 | 57.4%   | 17,031 | 64.5%   | 11,188 | 54.5%  
|Coins (in tons)                      | 1,557  | 99.4%   | 1,572  | 97.6%   | 1,255  | 95.0%  
|Brass Mills(in tons)                 | 17,601 | 59.6%   | 18,603 | 66.4%   | 12,443 | 57.0%  
|Flexible Packaging(in tons)          | 2,118  | 14.6%   | 2,674  | 17.1%   | 6,159  | 16.1%  
|Aluminum Profiles(in tons)           | 474    | 4.4%    | 484    | 3.9%    | 389    | 3.8%   
|Total (in equivalent tons)           | 33,541 | 26.7%   | 37,166 | 27.2%   | 37,203 | 23.1%  



|                      |             |         |             |         |             |        
|--------------------- | ----------- | ------- | ----------- | ------- | ----------- | -------
|Export (1) Revenues  
|                      | 2005        | 2006    | 2007       
|                      | Ch$ million | % total | Ch$ million | % total | Ch$ million | % total
|Metallic Cable        | 33,710      | 14.6%   | 65,011      | 16.9%   | 69,495      | 17.0%  
|Optical Fiber Cable   | 354         | 18.7%   | 25          | 1.6%    | 18          | 0.8%   
|Total Wire & Cable    | 34,064      | 14.6%   | 65,036      | 16.8%   | 69,513      | 16.9%  
|Pipes Bars and Sheets | 43,592      | 54.0%   | 73,862      | 62.7%   | 50,411      | 54.0%  
|Coins                 | 5,777       | 83.6%   | 7,505       | 71.7%   | 8,161       | 83.7%  
|Brass Mills           | 49,369      | 56.3%   | 81,367      | 63.5%   | 58,572      | 56.9%  
|Flexible Packaging    | 6,816       | 14.1%   | 8,270       | 16.7%   | 14,359      | 16.1%  
|Aluminum Profiles     | 1,764       | 5.5%    | 994         | 2.8%    | 915         | 2.6%   
|Total                 | 92,013      | 23.0%   | 155,667     | 25.9%   | 143,359     | 22.4%  

(1) Exports of Metallic cables consist of all sales to customers in any country other than Chile, Brazil, Peru, Argentina and Colombia (figures for 2005 and 2006 include Colombia due to the Company acquisition of Cedsa S.A. in 2007). Exports of Optical Fiber cables consist of all sales to customers in any country other than Argentina. Exports of the PBS division of the Brass Mills unit consist of all sales to customers in any country other than Chile or Argentina. Exports of the Coins division of the Brass Mills unit consist of all sales to customers in any country other than Chile. Exports of the Flexible Packaging unit consist of all sales to customers in any country other than Chile, Argentina and Peru (figures for 2005 and 2006 include Peru due to the consolidation by the Company of Peruplast S.A.in 2007). Exports for the Aluminum unit consist of all sales to customers in any country other than Chile

(2) Total sales volume of the Wire & Cable unit includes sales of both metallic and optical fiber cable products. Optical fiber sales volumes have been converted to tons, using the conversion rate: 1 ton = 44 km.

Wire & Cable.In 2007, the Wire & Cable business unit generated export sales, which amounted to 18,212 tons or 20.0% of the total business unit’s sales volume. In terms of revenues, exports amounted to Ch$69,513 million, an increase of 6.9% compared to 2006, and represented 16.9% of the total business unit’s revenues. The copper wire rod is the primary product exported  to South American countries (73.6% of Wire & Cable exports) where the Company does not have a subsidiary.

PBS.In 2007, the PBS division of the Brass Mills business unit generated export sales, which amounted to 11,188 tons or 54.5% of the total division’s sales volume. Export revenues as a percentage of the PBS division’s revenues amounted to 54.0% or Ch$50,411 million. With regard to exports, a total of 48.9% and 23.8% of products were sold in North America and Europe, respectively.

Coins. In 2007, export sales volume amounted to 1,255 tons or 95.0% of the coins division’s total sales volume. The business unit’s primary customers are central banks and coin mints around the world, with special emphasis on customers located in Central America and Europe, which represent 60.3% and 36.2% of total export revenues, respectively.

Flexible Packaging.  In 2007, export sales volume amounted to 6,159 tons or 16.1% of the Flexible Packaging business unit's total sales volume. Export sales as a percentage of total in revenues represent 16.1% or Ch$14,359 million in 2007 an increase of 73.6% compared to 2006, due to the acquisition of Peruplast. Principal export customers for the Flexible Packaging unit are located in other Latin American countries. In 2007, exports to South and Central America represented 71.9 % of total export sales volumes for the unit.

Aluminum Profiles. Export sales for the Aluminum Business unit include sales made to customers in countries other than Chile. In 2007, export sales volume amounted to 389 tons or 3.8% of the Aluminum Profiles business unit’s total sales volume, or Ch$915 million represented 2.6% of the unit’s revenues.



Legal Proceedings

There are two lawsuits pending in Brazil brought by the State Secretary of Finance (Rio de Janeiro) against the previous owner of Ficap S.A., dating from before the time that Madeco S.A. bought the company in 1997. The total damages amount to approximately 6,950 thousand Brazilian reales as of December 31, 2005. Madeco S.A. has personal guarantees from the previous owner of Ficap S.A. to indemnify Madeco S.A. should the Brazilian subsidiary be affected by such legal actions.

In addition, the Company has other minor legal proceedings, the outcome of its outstanding litigation will not have a material adverse effect on the Company’s financial condition or results of operations. See Note 22 to the Company’s Consolidated Financial Statements.

Dividend Policy

The Company's dividend policy is established by the Board of Directors. The Company’s current dividend policy was modified in 2007. The change in dividend policy was reported by the Board of Directors on March 28, 2007, and the Board informed shareholders at the shareholders’ meeting held on April 24, 2007. The dividend policy authorizes distribution of cash dividends in an amount equal to at least 30% of the Company’s annual net income under Chilean GAAP for the previous year. The Company’s dividend policy is subject to amendment by reason of changes in Chilean law, capital requirements, economic results and/or other factors. See “Item 3.  Key Information — Risk Factors.” The Board of Directors may declare interim dividends out of profits earned during such interim period; these interim dividends must be imputed to the period dividends under the Dividend Policy. However, each year the Board of Directors must submit for shareholder approval the final declared dividend with respect to the preceding year.

On April 23, 2008, the Board of Directors of the Company agreed to ask shareholders at the next Annual Shareholders' Meeting, which is scheduled to be held no later than April 30, 2009, to approve the distribution of an extraordinary dividend of up to US$ 165 million (approximately Ch$73,504 million), or 76% of the net profit that is expected from the transaction between Madeco and Nexans (as estimated on February 21, 2008), which dividend payment would be dependent on the completion of this transaction.

With respect to the distribution of dividends, Chilean Corporate law provides that the company must distribute cash dividends equal to at least 30% of its annual net income calculated in accordance with Chilean GAAP, unless otherwise decided by a unanimous vote of the holders of all issued shares and unless and except to the extent it has accumulated losses.

Dividends are paid to all of the shareholders of record on the fifth business day (including Saturday) before the date set for payment of the dividend. Holders of record of ADSs are entitled to dividends declared for each applicable period. The dividend amounts and the aggregate amount of such dividends per share of Common Stock and per ADR for the period between 2003 and 2007 are shown in “Item 3. Key Information — Selected Financial Data.”

On December 19, 2007, the Board of Directors agreed to distribute an interim dividend of $2.65 per share, chargeable to the profits of the 2007 business year, which was paid on January 18, 2008. In spite of this dividend, due to the existence of accumulated losses, the Company has not paid any other dividends, since May 1999.

Generally, shareholders who are not Chilean residents must register as foreign investors under one of the foreign investment regimes provided for by Chilean law in order to be entitled to the payment outside Chile, through the Formal Exchange Market of dividends, sale proceeds and other amounts with respect to their shares. Under the Foreign Investment Contract, the Depositary, on behalf of the ADS holders, has granted access to the Formal Exchange Market to convert cash dividends from Chilean pesos to U.S. dollars and to pay such dollars to ADS holders outside Chile. Dividends paid in respect of shares of Common Stock, including to holders of ADSs who are not Chilean residents, are subject to Chilean withholding tax. See “Item 10. Additional Information —Taxation”.

Significant Changes

See “Item 4. Information on the Company – History and Development of the Company – History”.



ITEM 9. The Offer and Listing

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Offer and Listing Details

The shares of the Company’s Common Stock are currently traded on the Santiago Stock Exchange, the Bolsa de Valores de Valparaiso and the Bolsa Electronica de Chile, an electronic over-the-counter trading system.

Shares of Madeco’s Common Stock also trade in the United States on the New York Stock Exchange Inc. (NYSE) since May 28, 1993 in the form of American Depositary Shares (“ADSs”) under the symbol “MAD”. Since May 12, 2003, each ADS represents 100 shares of Common Stock of the Company.

For the periods indicated, the table below sets forth the low and high closing sales prices of Madeco’s Common Stock in Chilean pesos on the Santiago Stock Exchange. The table also includes for the same periods the low and high closing sales prices of the ADSs in U.S. dollars on the NYSE.

|                              |                         |               |       |      
|----------------------------- | ----------------------- | ------------- | ----- | -----
|                              | Santiago Stock Exchange | NYSE         
|                              | Low                     | High          | Low   | High 
|Years                         | (Ch$ per Share) (1)     | (US$ per ADS)
|2003                          | 17.0                    | 57.5          | 0.25  | 0.89 
|2004                          | 35.0                    | 64.0          | 0.57  | 1.10 
|2005                          | 40.0                    | 62.5          | 7.83  | 11.10
|2006                          | 40.5                    | 60.0          | 7.67  | 11.29
|2007                          | 56.8                    | 82.9          | 10.91 | 15.90
|                              |                         |               |       |      
|Quarters                      |                         |               |       |      
|2006                          |                         |               |       |      
|First Quarter                 | 40.5                    | 47.7          | 7.67  | 9.21 
|Second Quarter                | 42.5                    | 52.0          | 7.79  | 10.51
|Third Quarter                 | 47.3                    | 54.0          | 8.65  | 9.90 
|Fourth Quarter                | 52.5                    | 60.0          | 9.80  | 11.55
|2007                          |                         |               |       |      
|First Quarter                 | 57.1                    | 69.5          | 10.82 | 13.01
|Second Quarter                | 61.3                    | 75.5          | 11.01 | 14.90
|Third Quarter                 | 58.5                    | 82.9          | 9.90  | 12.00
|Fourth Quarter                | 56.8                    | 80.0          | 10.99 | 14.30
|2008                          |                         |               |       |      
|First Quarter                 | 39.4                    | 57.5          | 7.75  | 12.00
|Second Quarter through May 31 | 49.2                    | 56.5          | 10.90 | 13.49
|                              |                         |               |       |      
|Months                        |                         |               |       |      
|December 2007                 | 56.8                    | 66.0          | 11.00 | 13.45
|January 2008                  | 39.4                    | 57.5          | 7.75  | 11.97
|February 2008                 | 42.0                    | 53.5          | 8.95  | 11.98
|March 2008                    | 46.5                    | 51.0          | 10.01 | 12.00
|April 2008                    | 49.2                    | 56.5          | 11.05 | 13.49
|May 2008                      | 55.6                    | 50.2          | 10.90 | 12.10

(1) Chilean pesos per share of Common Stock reflect the price at the trade date and have not been restated to constant real pesos.

On June 25, 2002, the Company was notified of its non-compliance with NYSE requirements for continued listing as a consequence of the price of Madeco’s shares, which was below US$1.00 over a consecutive 30-trading-day period.

On December 31, 2002, NYSE informed the Company that it was also not in compliance with NYSE’s continued listing standard requiring an average market capitalization of not less than US$15 million (approximately Ch$10,779 million, historic value) over a 30-trading-day period.

On January 10, 2003, NYSE informed the Company that NYSE’s Listing and Compliance Committee had approved Madeco’s proposed course of action to resolve its non-compliance with NYSE’s listing criteria. Madeco successfully completed its capital increase and indebtedness restructuring in the first quarter 2003. As a result of its capital increase and restructuring, Madeco’s market capitalization is above NYSE’s minimum market capitalization requirement.

On May 2003, the Company implemented a share to ADS ratio change which became effective on May 12, 2003. The ratio of shares to ADS changed from 1 ADS = 10 shares of common stock to 1 ADS = 100 share of common stock. This ratio change, together with the capital increase discussed above was implemented by Madeco to attempt to comply with the NYSE’s continuing listing requirements.

On May 21, 2003 NYSE informed the Company that as a result of actions taken to meet the minimum security price and minimum market capitalization continued listing requirements, the Company regained compliance with both requirements. There can be no assurance that the Company will meet the NYSE continued listing requirements in the future.



ITEM 10. Additional Information

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Memorandum and Articles of Association

Provided below is a summary of certain material information found in the Company’s bylaws and provisions of current Chilean law. This summary is not complete. For more information relating to the items discussed in this summary, you are encouraged to read the bylaws which we have filed as an exhibit to the Annual Report on Form 20-F for the year 2002.

Registration and Corporate Purposes

Madeco S.A. is an open stock corporation (sociedad anonima abierta) organized by means of a public deed (escritura publica) dated April 3, 1944, the abstract of which was recorded on Folio 1,099, No. 946 of Santiago’s Registry of Commerce in 1944 and published in Chile’s Official Gazette on May 4, 1944.  Its existence was approved by a Decree No. 1740 of the Ministry of Finance, dated April 26, 1944, recorded on Folio 1,105, No. 947 of Santiago’s Registry of Commerce in 1944, published in the Official Gazette as of May 4, 1944 and recorded at the Securities Registry of the Chilean Superintendencia de Valores y Seguros (Superintendency of Securities and Insurance, or “SVS”) under No. 251 on July 20, 1984.

As set forth in Article 4 of Madeco’s bylaws, its purpose is to manufacture processed products from metal and metal alloys, to engage in other businesses relating to such production, and the exploration and development of ore deposits and mining rights, among other businesses.

Directors

Under the Ley de Sociedades Anónimas (Chilean Corporations Law), a corporation may not enter into a contract or agreement in which a director has a direct or indirect interest (i.e., a conflicting interest transaction) without prior approval by the Board of Directors, and only if the terms of the conflicting interest transaction are similar to those of an arm’s length transaction.

If the conflicting interest transaction involves a “material amount,” the Board of Directors is required to produce a statement declaring in advance that the conflicting interest transaction is similar in its terms to an arm’s length transaction. A conflicting interest transaction is deemed to involve a “material amount” if the amount involved is both greater than UF2,000 (as of May 31, 2008, approximately US$83,668) and exceeds 1% of the assets of the corporation, or if the amount exceeds UF20,000 (as of May 31, 2008, approximately US$836,678) regardless of the size of the corporation.

If the Board of Directors believes that it is not possible to ascertain whether the conflicting interest transaction is similar to an arm’s length transaction, it may approve or reject the conflicting interest transaction, or appoint independent advisors to make such a determination, in all these cases, with the exclusion of the interested directors. If the Board appoints independent advisors, the report prepared by the advisors will be made available to the shareholders and the Board of Directors for 20 business days from the date the report was received from the independent advisors. The shareholders will be notified in writing of the receipt of the report. After this period the Board may approve or reject the conflicting interest transaction, but the Board is not required to follow the independent advisors’ conclusion. The Board may treat the conflicting interest transaction and the report as confidential information. Shareholders representing at least a 5% of the voting shares of the Company may request the Board to call a shareholders’ meeting in order to approve or reject the conflicting interest transaction by a two-thirds majority of the outstanding voting shares.

All decisions adopted by the Board in respect of the conflicting interest transaction must be reported to the next following shareholders’ meeting. The controller of the corporation or the related party which intends to enter into the conflicting interest transaction shall make available to the Board of Directors, at the time the transaction is being considered by the Board, all information relating to the transaction filed with any non-Chilean regulatory entities or stock exchanges.

If a suit for damages arises from such a transaction, the defendant (i.e., one or more directors, the controller, a related party, or all of them) bears the burden of proof that the transaction was equally as or more beneficial to the corporation than an arm’s length transaction, unless the conflicting interest transaction was previously approved by the shareholders.

The amount of any director’s remuneration is established each year at the annual Shareholders’ Meeting. Directors are prohibited from borrowing or otherwise making use of corporate money or assets for their own benefit, unless previously authorized by the Board of Directors. Directors are also prohibited from borrowing or otherwise making use of corporate money or assets for the benefit of companies in which such directors are either directors or owners of a 10% interest or more, unless previously authorized by the Board of Directors.  However, the shareholders’ authorization is not required. These rules can only be modified by law.

It is not necessary to hold shares of the company to be elected a director, and there is no age limit established for the retirement of directors.

Rights, Preferences and Restrictions Regarding Shares

At least thirty percent of the company’s net profits for each fiscal year is required to be distributed in cash to the shareholders, unless the shareholders unanimously decide otherwise and except in the case the Company has unabsorbed prior year losses. Any remaining profits may be used to establish a reserve fund (that may be capitalized at any time, amending the corporate bylaws by the vote of a majority of the voting stock issued) or to pay future dividends.

Compulsory minimum dividends (i.e., at least 30% of the company’s net profits for each fiscal year) become due thirty days after the date on which the shareholders’ meeting has approved the distribution of profits in the fiscal year. Any additional dividends approved by the shareholders become due on the date set by the shareholders or the Board of Directors if previously empowered by the Shareholders at the Annual Shareholders’ Meeting.

Accrued dividends that corporations fail to pay or make available to their shareholders within certain periods are to be adjusted by the variation of the UF from the date on which those dividends became due and to the date of the actual payment. Overdue dividends will accrue annual interest established for adjustable operations over the same period.

Dividends and other cash benefits unclaimed by shareholders after five years from the date on which they became due will become the property of the Chilean Fire Department.

Madeco has only one class of shares and there are therefore no preferences or limitations on the voting rights of shareholders. Each shareholder is entitled to one vote per share. In shareholders’ meetings, determinations are generally made by a simple majority of stockholders entitled to vote. However, the Chilean Corporations Law provides that certain determinations require the vote of a two-thirds majority of the voting stock issued.

The company’s directors are elected every three years and their terms are not staggered. Chilean law does not permit cumulative voting. However, shareholders may accumulate their votes in favor of just one person or distribute their votes to more than one person. In addition, by unanimous agreement of the shareholders present and entitled to vote, the vote may be omitted and the election made by acclamation.

In the event of liquidation, the Chilean Corporations Law provides that corporations may carry out distributions to shareholders on account of a reimbursement of capital only after the payment of corporate indebtedness.

There are no redemption or sinking fund provisions applicable to the Company, nor are there any liabilities to shareholders relating to future capital calls by the corporation.

Under Chilean law, certain provisions affect any existing or prospective holder of securities as a result of the shareholder owning a substantial number of shares. The Securities Market Law establishes that(a)any person who, directly or indirectly, (i)owns 10% or more of the subscribed capital of a corporation (the “majority shareholders”) whose shares are registered in the Securities Registry of the SVS, or (ii)owns any such percentage because of the purchase of shares; and (b)all liquidators, directors, the chief executive officer and the other principal officers of any corporation whose shares are registered with the Securities Registry of the SVS, regardless of the number of shares they own, must report any purchase or sale of shares made by such persons or entities within two business days of such transactions to the SVS and to each of the stock exchanges in Chilewhere such corporation has securities registered. In addition, majority shareholders must inform the SVS and the stock exchanges with respect to whether the purchase is aimed at acquiring control of the corporation or just as a financial investment.

The Securities Market Law also provides that when one or more persons intend to takeover a corporation subject to oversight by the SVS, they must give prior public notice. This notice must include the price to be offered per share and the conditions of the proposed transaction, including the expected manner of acquiring the shares. Chapter XXV of the Securities Market Law considers that controlling shareholders share with minority shareholders the benefits of a change of control, by requiring that certain share acquisitions be made pursuant to a tender offer.

The Chilean Corporations Law provides shareholders with preemptive rights. The Act requires that options to purchase representing stock capital increases in corporations and debentures duly convertible into stock of the issuing corporation, or any other securities extending future rights over such stock, must be offered preferably, at least once, to existing shareholders, proportionally to the number of shares owned by them. A corporation must distribute any bonus stock in the same manner.

The Chilean Corporations Law also provides shareholders with a right to withdraw from a corporation in certain situations. Unless there is an ongoing bankruptcy proceeding, if a Shareholders’ Meeting approves any of the following matters, dissenting shareholders will be automatically entitled to withdraw from the corporation upon payment by the corporation of the market value of their shares:

- conversion of the corporation into a different type of legal entity;
- merger of the corporation;
- disposition of 50% or more of the assets of the corporation, whether or not including the disposition of liabilities;
- guarantee of a third party’s liabilities with collateral exceeding 50% of the corporation’s assets;
- establishment of preferences in connection with a series of shares, or any other modification of existing preferences, in which case only dissenting shareholders in the affected series will have the right to withdraw; and
- curing certain errors or defects, affecting the corporate charter or amending the bylaws in respect of one or more of the matters listed above.

In addition, shareholders may withdraw if a person becomes the owner of two-thirds of the outstanding shares of the corporation as a consequence of a share acquisition and such person does not make a tender offer for the remaining shares within 30 days.

The Company’s bylaws do not provide for additional circumstances under which shareholders may withdraw.

Action Necessary to Change the Rights of Holders of Stock

Rights of stockholders are established by law and pursuant to the bylaws of a corporation. Any change to the rights of stockholders must be adopted by an absolute majority of stockholders or, in some cases, by a two-thirds majority vote, as discussed above.  However, the amendment of certain rights requires a unanimous vote of the shareholders, including the right of shareholders to receive at least 30% of the net profits for each fiscal year. Notwithstanding the preceding, no decision of the shareholders’ meeting can deprive a shareholder from property over the stock.

The Company’s bylaws do not contemplate additional conditions in connection with matters described in this subsection.

Shareholders’ Meetings

Annual shareholders’ meetings are to be held during the months of February, March or April of each year. During the meetings, determinations are made relating to particular matters, matters that may or may not be specifically indicated in the notice of such meeting.

The quorum for a shareholders’ meeting is established by the presence, in person or by proxy, of shareholders representing at least an absolute majority of the issued voting stock of Madeco; if a quorum is not present at the first meeting, the meeting can be reconvened and upon the meeting being reconvened, shareholders present at the reconvened meeting are deemed to constitute a quorum regardless of the percentage of the voting stock represented. In that case, decisions will be made by the absolute majority of stock with voting rights present or otherwise represented. The following matters are specifically reserved for annual meetings:

1. review of the state of the corporation and of the reports of internal and independent auditors, and the approval or rejection of the annual report, balance sheet, financial statements and records submitted by the officers or liquidators of the corporation;
2. distribution of profits, including the distribution of dividends;
3. election or revocation of regular and alternate Board members, liquidators and management supervisors; and
4. determination of the remuneration of the Board members, designation of a newspaper to publish the notice of meetings and, in general, any other matter to be dealt with by the annual meeting being of corporate interest and not specifically reserved to extraordinary shareholders’ meetings.

1. dissolution of the corporation;
2. transformation, merger or spin off of the corporation and amendments to its bylaws;
3. issuance of bonds or debentures convertible into stock;
4. transfer of corporate fixed assets and liabilities; and
5. guarantees of third parties’ obligations, except when these third parties are affiliated companies (in which case approval of the Board of Directors is sufficient).

1. when requested by shareholders representing at least 10% of issued stock; and
2. when required by the SVS.

Limitations on the Right to Own Securities

The right to own any kind of property is guaranteed by the Chilean Constitution, and the Chilean Corporations Law does not contain any general limitation regarding the right to own securities. There are, however, certain limitations on the right of foreigners to own securities of Chilean corporations, but only for certain special types of companies. Madeco is not affected by these limitations, and Madeco’s bylaws do not contain limitations or restrictions in this regard.

Takeover Defenses

Madeco’s bylaws do not contain any provisions that would have the effect of delaying, deferring or preventing a change in control of Madeco and that would operate only with respect to a merger, acquisition or corporate restructuring involving Madeco (or any of its subsidiaries).

Ownership Threshold

Madeco’s bylaws do not contain any ownership threshold above which shareholder ownership must be disclosed. For a description of the ownership thresholds mandated by Chilean law, see “Item 10. Additional Information — Rights, Preferences and Restrictions Regarding Shares”.

Changes in Capital

Madeco’s bylaws do not impose any conditions that are more stringent than those required by law for effecting changes in the capital of the Company.

Material Contracts

In December 2004, the Company entered into a 7-year local Series D bond contract for a total amount of UF1.8 million, with a fixed 5.0% annual interest rate.

Madeco had prepaid all local Series D bonds as of June 10, 2008, for a remaining value of UF1,130,299 equivalent to Ch$22,710 million (or equivalent to US$46.97 million at the Ch$483.55 to US$1.00 at the observed exchange rate on June 10, 2008). To pay these bonds, Madeco used a short-term bridge loan with Banco ITAU that includes an option for Madeco to refinance with a long-term loan with a structure similar to that of the Series D bond.

In September 2005, Madeco prepaid all the Credit Rescheduling Agreements subscribed by the Company with its creditor banks on December 18, 2002, freeing it from the restrictions pertaining to the agreements mentioned above.

On June 5, 2006, the Company refinanced a total of US$50 million or Ch$26,680 million (historic value) of its financial debt by means of a 5-year term club deal loan, (US$ 28.6 million or Ch$15,261 million (historic value) was lent by local banks and the remaining US$ 21.4 million or Ch$11,419 million (historic value) was lent by off-shore banks). Approximately US$12 million or Ch$6,403 million (historic value) of this credit was used to prepay liabilities of the Company with Quiñenco, another US$13 million or Ch$6,937 million (historic value) was used to repay a short-term bridge loan that Banco BBVA had granted pending a capital increase, and the remaining US$25 million or Ch$13,340 million (historic value) was utilized for financing working capital requirements. During 2006, US$12.2 million or Ch$6,510 million (historic value) was paid of the local part of this credit and in March 2007, the remainder was prepaid for an
amount of US$16.4 million or Ch$8,751 million (historic value). The off-shore part of the credit will be paid according to the contract, starting in June 2008. As of April 30, 2008, the syndicated banks had authorized the Nexans Transaction.

As described in Item 4, on November 15, 2007, the Company enterd into a framework agreement with Nexans whereby Madeco would sell to Nexans its Wire & Cable unit's assets, setting the purchase price at US$448 million in cash plus 2.5 million shares in Nexans (representing a an interest in Nexans of approximately 8.9%). On February 21, 2008, a purchase agreement formalizing this transaction was signed by both companies. The transaction is expected to completed before September 30, 2008, subject to regulatory approvals and certain conditions. For further details regarding this purchase agreement, a copy is included as part of this annual report as exhibit 4.3.

Exchange Controls

The Central Bank is responsible for, among other things, monetary policies and exchange controls in Chile. See “Item 3. Key Information - Exchange Rates”. Foreign investments can be registered with the Foreign Investment Committee under Decree Law No. 600 - registration which grants the investor access to the Formal Exchange Market - or with the Central Bank under Chapter XIV of the Central Bank Foreign Exchange Regulations.

Effective April 19, 2001, the Central Bank abrogated the then existing Chapter XXVI of the Central Bank Foreign Exchange Regulations (“Chapter XXVI”), which addressed issuances of ADSs by a Chilean company, and issued an entirely new set of Foreign Exchange Regulations (the “2001 Foreign Exchange Regulations”), virtually eliminating all the restrictions and limitations that had been in force up to that date. The 2001 Foreign Exchange Regulations were based upon the general principle that foreign exchange transactions can be done freely in Chile by any person, notwithstanding the power conferred by law to the Central Bank of imposing certain restrictions and limitations on such transactions.

With the issuance of the 2001 Foreign Exchange Regulations, the approval by the Central Bank required for access to the Formal Exchange Market was replaced with the requirement of disclosure of the relevant transactions to the Central Bank. However, some foreign exchange transactions, notably foreign loans, capital investment or deposits, continued to be subject to the requirement of being effected through the Formal Exchange Market.

The 2001 Foreign Exchange Regulations, among other things, eliminated the following restrictions:

1) prior authorization by the Central Bank for the entry of capital in connection with foreign loans, investment, capital contribution, bonds and ADRs;
2) prior authorization by the Central Bank for the remittance of capital in connection with repatriation of capital, dividends and other benefits related to capital contributions and investment, and prepayment of foreign loans;
3) minimum risk classification restrictions and terms for the issuance of bonds;
4) restrictions to the issuance of ADSs. Therefore, the rules established under Chapter XXVI of the previous Foreign Exchange Regulations were abrogated; and
5) mandatory reserve deposits for foreign capital.

The abrogation of Chapter XXVI by the 2001 Foreign Exchange Regulations implied that the issuance of ADSs by a Chilean company remained subject to the rules contained in Chapter XIV of such regulations, according to which credits, deposits, investments and capital contributions coming from abroad must be effected through the Formal Exchange Market.

According to the 2001 Foreign Exchange Regulations, the foreign exchange transactions performed before April 19, 2001, remained subject to the regulations in effect at the time of the transactions, unless the interested parties elected the applicability of the 2001 Foreign Exchange Regulations, thereby expressly waiving the applicability of the regulations in force at the time of the execution of the respective transaction.

Effective March 1, 2002, the Central Bank abrogated the then existing Central Bank Foreign Exchange Regulations, i.e. the 2001 Foreign Exchange Regulations, and issued an entirely new set of Foreign Exchange Regulations (the “New Regulations”), thereby continuing the liberalization of the foreign exchange regulations. As the 2001 Foreign Exchange Regulations, the New Regulations are also based upon the general principle that foreign exchange transactions can be done freely in Chile by any person, notwithstanding the power conferred by law to the Central Bank of imposing certain restrictions and limitations on such transactions.

The New Regulations also require the disclosure of the relevant transaction to the Central Bank and that some foreign exchange transactions, notably foreign loans, capital investments or deposits, be effected through the Formal Exchange Market.

The issuance of ADSs by a Chilean company remains subject to the rules contained in Chapter XIV. These rules were partly amended in the New Regulations, which allow the use of proceeds from a foreign credit, deposit, investment or capital contribution directly abroad, i.e., without delivering the currency into Chile. The direct use abroad of the proceeds of a foreign credit, deposit, investment or capital contribution remain subject to the obligation of informing the Central Bank of the transaction.

The New Regulations have also simplified the forms required to provide the information to the Central Bank, so as to reduce the time needed to effect foreign exchange transactions by foreign investors in Chile.

The New Regulations contain a transitory norm establishing that foreign exchange transactions performed before April 19, 2001, remain subject to the regulations in effect at the time of the transactions, unless the interested parties elect the applicability of the New Regulation, thereby expressly waiving the applicability of the regulations in force at the time of the execution of the relevant transaction.

A Foreign Investment Contract was entered into among the Central Bank, Madeco and the Depositary pursuant to Article 47 of the Central Bank Act and Chapter XXVI. According to Chilean law, a contract is ruled by the law in effect at the time of the execution of the contract. Therefore, the Foreign Investment Contract entered into among the Central Bank of Chile, Madeco and the Depositary is ruled by the foreign exchange regulations in force before April 19, 2001, among which is Chapter XXVI.

Absent of the Foreign Investment Contract, under Chilean exchange controls in force until April 19, 2001, investors would not have been granted access to the Formal Exchange Market for the purpose of converting Chilean pesos to U.S. dollars and repatriating from Chile amounts received in respect of deposited shares or shares withdrawn from deposit on surrender of ADRs (including amounts received as cash dividends and proceeds from the sale in Chile of the underlying shares and any rights with respect thereto). In December 1999, amendments were introduced in Chapter XXVI whereby, among other things, the Central Bank was authorized to reject applications under such regulations without expression of cause. In resolving such applications, the Central Bank was required to take into account the situation of the balance of payments and the stability of the capital accounts. However, the Central Bank was authorized to require certain conditions of the applicants prior to resolving on the applications. In April 2000, Chapter XXVI was again amended in order to incorporate, in addition to shares issued by Chilean corporations, quotes of investment funds as eligible to be converted into ADSs. Chapter XXVI did not require delivery of a new application in case of the entry of U.S. dollars intended for the acquisition of shares not subscribed by the shareholders or by the transferees of the options to subscribe the shares.

Under Chapter XXVI and the Foreign Investment Contract, the Central Bank agreed to grant to the Depositary, on behalf of ADR holders, and to any non-Chilean resident investor who withdrew Shares upon surrender of ADRs (such Shares being referred to herein as “Withdrawn Shares”) access to the Formal Exchange Market to convert Chilean pesos to U.S. dollars (and to remit such dollars outside of Chile) in respect of Shares represented by ADSs or Withdrawn Shares, including amounts received as (a) cash dividends, (b) proceeds from the sale in Chile of Withdrawn Shares (subject to receipt by the Central Bank of a certificate from the holder of the Withdrawn Shares (or from an institution authorized by the Central Bank) that such holder’s residence and domicile were outside Chile and a certificate from a Chilean stock exchange (or from a brokerage or securities firm established in Chile) that such Withdrawn Shares had been sold on a Chilean exchange), (c) proceeds from the sale in Chile of pre-emptive rights to subscribe for and purchase additional Shares, (d) proceeds from the liquidation, merger or consolidation of the company and (e) other distributions, including, without limitation, those resulting from any recapitalization, as a result of holding Shares represented by ADSs or Withdrawn Shares. Access to the Formal Exchange Market in the case of (a), (b), (c) and (d) above would be available for only five working days following the sale of the shares on the stock exchange. Transferees of Withdrawn Shares would not be entitled to any of the foregoing rights under Chapter XXVI unless the Withdrawn Shares were redeposited with the Custodian. Investors receiving Withdrawn Shares in exchange for ADRs would have the right to redeposit such Shares in exchange for ADRs, provided that certain conditions to redeposit were satisfied. For a description of the Formal Exchange Market, see “3A Exchange Rates”. Alternatively, according to the amendments introduced to Chapter XXVI in December 1999, in case of Withdrawn Shares and their subsequent sale in a stock exchange, the Chilean peso proceeds obtained thereby could be converted into U.S. dollars in a market different from the Formal Exchange Market within five business days from the date of the sale.

Chapter XXVI provided that access to the Formal Exchange Market in connection with the sale of Withdrawn Shares or distributions thereon would be conditioned upon receipt by the Central Bank of a certification by the Depositary or the Custodian, as the case might have been, that such Shares had been withdrawn in exchange for delivery of the pertinent ADRs and receipt of a waiver of the benefits of the Foreign Investment Contract with respect thereto (except in connection with the proposed sale of the Shares) until such Withdrawn Shares were redeposited. Chapter XXVI also provided that access to the Formal Exchange Market in connection with dividend payments was conditioned on certification by Madeco to the Central Bank that a dividend payment had been made. The provision contained in Chapter XXVI that established that access to the Formal Exchange Market in connection with dividend payments was conditioned on certification by Madeco to the Central Bank that any applicable tax had been withheld was eliminated on November 23, 2000.

Chapter XXVI and the Foreign Investment Contract provided that a person who brought foreign currency into Chile, including U.S. dollars, to purchase Shares entitled to the benefit of the Foreign Investment Contract was required to convert such foreign currency into Chilean pesos on the same date and had five banking business days within which to invest in Shares in order to receive the benefit of the Foreign Investment Contract. If such person decided within such period not to acquire Shares, such person could access the Formal Exchange Market to reacquire foreign currency, provided that the applicable request was presented to the Central Bank within seven banking days of the initial conversion into pesos. Shares acquired as described above could be deposited in exchange for ADRs and receive the benefit of the Foreign Investment Contract, subject to receipt by the Central Bank of a certificate from the Depositary that such deposit had been effected and that the related ADRs had been issued and receipt by the Custodian of a declaration from the person making such deposit waiving the benefit of the Foreign Investment Contract with respect to the deposited Shares.

Chapter XXVI required foreign investors acquiring shares or securities in Chile to maintain a mandatory reserve (the “Mandatory Reserve”)  for one year in the form of a non-interest bearing U.S. dollar deposit with the Central Bank, or to pay to the Central Bank a non-refundable fee (the “Fee”).  Such reserve requirement was imposed with respect to investments made by foreign investors to acquire shares or securities in the secondary market, but did not apply to capital contributions made for purposes of paying-in capital for a newly created company or increasing the capital of an existing company. As of June 1, 1999, the Mandatory Reserve was not applied to foreign investments made for purposes of acquiring shares of a stock corporation, provided that the investor was entitled to the benefit of Chapter XXVI, and that such acquisition was consummated in accordance with the provisions of Chapter XXVI.  On September 17, 1998, the Central Bank reduced the Mandatory Reserve to 0%.

Access to the Formal Exchange Market under any of the circumstances described above was not automatic. Pursuant to Chapter XXVI, such access required approval of the Central Bank of Chile based on a request presented through a banking institution established in Chile within five business days from the occurrence of any of the events described in letters (a), (b), (c) and (d) above. Pursuant to the Foreign Investment Contract, if the Central Bank had not acted on such request within seven banking days, the request would be deemed approved.

Under current Chilean law, the Foreign Investment Contract cannot be changed unilaterally by the Central Bank. No assurance can be given, however, that new restrictions applicable to the holders of ADRs, the disposition of underlying Shares or the repatriation of the proceeds from such disposition will not be reinstated in the future by the Central Bank, nor can there be any assessment of the possible duration or impact of such restrictions.

On January 1, 2004, a Free Trade Agreement (FTA) between Chile and the U.S. became effective. This state-of-the-art agreement, eliminates bilateral tariffs, lowers trade barriers, promotes economic integration and expands opportunities for both countries. As a result of this agreement, both countries are negotiating a bilateral tax treaty.



Taxation

Chilean Tax Considerations

The following discussion relates to Chilean income tax laws presently in force, including Ruling No. 324 of January 29, 1990 of the Chilean Internal Revenue Service and other applicable regulations and rulings in effect on the date of this Annual Report, all of which are subject to change. The discussion summarizes the principal Chilean income tax consequences of an investment in the ADSs or Shares by a person who is neither domiciled in nor a resident of Chile or by a legal entity that is not organized under the laws of Chile and does not have a permanent establishment located in Chile (any such individual or entity, a “Foreign Holder”). For purposes of Chilean tax law, an individual holder is a resident of Chile if he has resided in Chile for more than six consecutive months in one calendar year or for a total of six months, whether consecutive or not, in two consecutive tax years. The discussion is not intended as tax advice to any particular investor, which can be rendered only in light of that investor’s particular tax situation.

Under Chilean law, provisions contained in statutes such as tax rates applicable to foreign investors, the computation of taxable income for Chilean purposes and the manner in which Chilean taxes are imposed and collected may only be amended by another statute. In addition, the Chilean tax authorities enact rulings and regulations of either general or specific application and interpret the provisions of Chilean tax law. Chilean tax may not be assessed retroactively against taxpayers who act in good faith relying on such rulings, regulations and interpretations, but Chilean tax authorities may change these rulings, regulations and interpretations prospectively. Currently Chile and U.S. are negotiating a bilateral tax treaty.

Cash Dividends and Other Distributions

Cash dividends paid by Madeco with respect to the ADSs or Shares held by a Foreign Holder will be subject to a 35% Chilean withholding tax, which is withheld and paid over to the Chilean tax authorities by Madeco (the “Withholding Tax”). A credit against the Withholding Tax is available based on the level of corporate income tax actually paid by Madeco on the income to be distributed (the “First-Category Tax”); however, this credit does not reduce the Withholding Tax on a one-for-one basis because it also increases the base on which the Withholding Tax is imposed.  In addition, if Madeco distributes less than all of its distributable income, the credit for First-Category Tax paid by Madeco is proportionately reduced. Presently, the First-Category Tax rate is 17%. The example below illustrates the effective Chilean Withholding Tax burden on a cash dividend received by a foreign holder, assuming a Withholding Tax rate of 35%, an effective First-Category Tax rate of 17% and a distribution of 30% of the consolidated net income of Madeco distributable after payment of the First-Category Tax:

|                                                                                         |       
|---------------------------------------------------------------------------------------- | ------
|Madeco taxable income                                                                    | 100   
|First-Category Tax (17% of Ch$100)                                                       | (17)  
|Net distributable income                                                                 | 83    
|Dividend distributed (30% of net distributable income)                                   | 24.9  
|Withholding Tax (35% of the sum of Ch$24.9 dividend plus Ch$5.1
First-Category Tax paid) | (10.5)
|Credit for 30% of First-Category Tax                                                     | 5.1   
|Net additional tax withheld                                                              | (5.4) 
|Net dividend received                                                                    | 19.5  
|Effective dividend withholding rate                                                      | 21.69%

In general, the effective dividend Withholding Tax rate, after giving effect to the credit for the First-Category Tax, can be calculated using the following formula:

(Withholding Tax Rate) - (First Category Tax Rate)
Effective Dividend Withholding Tax Rate =                      1 – (First Category Tax Rate)

Under Chilean income tax law, dividends generally are assumed to have been paid out of the company’s oldest retained profits for purposes of determining the level of First-Category Tax that was paid by the company. For information as to the retained earnings of the Company for tax purposes and the tax credit available on the distribution of such retained earnings, see Note 18 to the Consolidated Financial Statements. The effective rate of Withholding Tax to be imposed on dividends paid by Madeco will vary depending upon the amount of First Category Tax paid by the Company on the earnings to which the dividends are attributed. The effective rate for dividends attributed to earnings from 1991 until 2001, for which the First Category Tax was 15%, generally was 23.5%. For 2002, the First Category Tax rate was 16%, which resulted in an effective rate of Withholding Tax of 22.6%, and for 2003, the First Category Tax rate was 16.5%, resulting in an effective rate of withholding tax of 22.16% for the year. From 2004 onwards, the First Category Tax rate will be 17%, which will result in an effective rate of withholding tax of 21.69%.

For dividends attributable to the Company’s profits during years when the First Category Tax was 10% (before 1991), the effective dividend Withholding Tax rate will be 27.8%. However, whether the First Category Tax is 10%, 15%, 16%, 16.5% or 17%, the effective overall combined tax rate imposed on the Company’s distributed profits will be 35%.

Dividend distributions made in property would be subject to the same Chilean tax rules as cash dividends based on the fair market value of such property. Stock dividends and the distribution of preemptive rights are not subject to Chilean taxation.

Capital Gains

Under current tax law, the gain from the sale or other disposition by a Foreign Holder of ADSs (or ADRs evidencing ADSs) outside Chile will not be subject to Chilean taxation. The deposit and withdrawal of Shares in exchange for ADRs will not be subject to any Chilean taxes.

Gain recognized on a sale or exchange of shares (as distinguished from sales or exchanges of ADRs evidencing ADSs representing such Shares) may be subject to both the First-Category Tax and the Withholding Tax (the former being creditable against the latter) if either, (i) the Foreign Holder has held the Shares for less than one year since exchanging ADSs for the Shares, (ii) the Foreign Holder acquired and disposed of the Shares in the ordinary course of its business or as a habitual trader of shares, or (iii) the Foreign Holder and the purchaser of the Shares are “related parties” within the meaning of Article 17, Number 8, of Decree Law No 824 of 1974, the Chilean Income Tax Law. In all other cases, gain on the disposition of Shares will be subject only to a capital gains tax which is assessed at the same rate as the First Category Tax (currently imposed at a rate of 17%).

Gain recognized in the transfer of shares that have a high presence in the stock exchange, however, is not subject to capital gains tax in Chile, provided that the Shares are transferred in a local stock exchange, in other authorized stock exchanges (up to this date, the New York Stock Exchange, the London Stock Exchange and the Madrid Stock Exchange have been authorized for these purposes), or within the process of a public tender of shares governed by the Chilean Securities Market Act. The shares must also have been acquired either in a stock exchange, within the referred process of a public tender of shares governed by the Chilean Securities Market Act, in an initial public offer of shares resulting from the formation of a corporation or a capital increase of the same, or in an exchange of convertible bonds. Shares are considered to have a high presence in the stock exchange when they (i) are registered in the Securities Registry, (ii) are registered in a Chilean Stock exchange, and (iii) have an adjusted presence equal to or above 25%. To calculate the adjusted presence of a particular Share, the aforementioned regulation states that, the number of days in which the operations regarding the stock exceeded, in Chilean pesos, the equivalent of UF200 (as of May 31, 2008, approximately US$8,367) within the previous 180 business days of the stock market, must be divided by 180, multiplied by 100, and expressed in a percentage value. The referred tax regime does not apply in case the transaction involves an amount of Shares that would allow the acquirer to take control of the publicly traded corporation, in which case the ordinary tax regime referred in the previous paragraph will apply, unless the sale complies with one of the following conditions: (i) the transfer is part of a tender offer governed by the Chilean Securities Market Act; or(ii) the transfer is done in a Chilean stock exchange, without substantially exceeding the market price.

Capital gains obtained in the sale of shares that are publicly traded and have a high presence in a stock exchange are also exempt from capital gains tax in Chile when the sale is made by “foreign institutional investors”, such as mutual funds and pension funds, provided that the sale is made in a stock exchange or in accordance with the provisions of the Securities Market Law, or in any other form authorized by the Superintendencia de Valores y Seguros ( the SVS is equivalent to the Securities and Exchange Commission in the U.S.). To qualify as a foreign institutional investor, the referred entities must be formed outside of Chile, not have a domicile in Chile, and they must be at least one of the following:

a) An investment fund that offers its shares or quotas publicly in a country with an investment grade for its public debt, according to a classification performed by an international risk classification entity registered with the SVS;

b)  An investment fund registered with a regulatory agency or authority from a country with an investment grade for its public debt, according to a classification performed by an international risk classification entity registered with the SVS, provided that its investments in Chile constitute less than 30% of the share value of the fund, including deeds issued abroad representing Chilean securities, such as ADRs of Chilean companies;

c) An investment fund whose investments in Chile represent less than 30% of the share value of the fund, including deeds issued abroad representing Chilean securities, such as ADRs of Chilean companies, provided that not more than 10% of the share value of the fund is directly or indirectly owned by Chilean residents;

d) A pension fund, i.e., those formed exclusively by natural persons that receive pensions out of an accumulated capital in the fund;

e) A Foreign Capital Investment Fund, as defined in Law No18.657; or

f) Any other foreign institutional investor that complies with the requirements set forth through general regulations for each category of investor, prior information from the SVS and the Chilean tax authority or Servicio de Impuestos Internos(“SII”).

The foreign institutional investor must not directly or indirectly participate in the control of the corporations issuing the shares it invests in nor possess or participate in 10% or more of the capital or the profits of the same corporations.

Other requirements for the exemption to apply are that the referred foreign institutional investors must execute a written contract with a bank or a stock broker, both incorporated in Chile. In this contract, the bank or stock broker undertake to perform the purchase and sale orders, as well as to verify the applicability of the tax exemption and inform the SII of the investors it operates with and the transactions it performs. Finally, the foreign institutional investor must register with the SII by means of a sworn statement issued by the entities referred above (bank or stock broker).

The tax basis of Shares received in exchange for ADRs will be the acquisition value of the Shares on the date of exchange. The valuation procedure set forth in the Deposit Agreement, which values Shares which are being exchanged at the highest price at which they trade on the Santiago Stock Exchange on the date of the exchange, will determine the acquisition value for this purpose. Consequently, the surrender of ADRs for Shares and the immediate sale of the Shares for the value established under the Deposit Agreement will not generate a capital gain subject to taxation in Chile.

The exercise of preemptive rights relating to the Shares will not be subject to Chilean taxation. Any gain on the sale of preemptive rights relating to the Shares will be subject to both the First-Category Tax and the Withholding Tax (the former being creditable against the latter).

Other Chilean Taxes

There are no Chilean inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of ADSs by a Foreign Holder, but such taxes generally will apply to the transfer at death or by gift of the Shares by a Foreign Holder. There are no Chilean stamp, issue, registration or similar taxes or duties payable by Foreign Holders of ADSs or Shares.

Withholding Tax Certificates

Upon request, Madeco will provide to Foreign Holders appropriate documentation evidencing the payment of the Chilean Withholding Tax (net of applicable First Category Tax).

United States Tax Considerations

The following is a summary of certain United States federal income tax consequences of the ownership of Shares or ADSs by an investor that is a U.S. Holder (as defined below) that holds the Shares or ADSs as capital assets. This summary does not purport to address all material tax consequences of the ownership of Shares or ADSs, and does not take into account the specific circumstances of any particular investors (such as tax-exempt entities, certain insurance companies, broker-dealers, traders in securities that elect to mark-to-market, investors liable for alternative minimum tax, investors that actually or constructively own 10% or more of the voting stock of the company, investors that hold Shares or ADSs as part of a straddle or a hedging or conversion transaction or U.S. Holders (as defined below) whose functional currency is not the U.S. dollar), some of which may be subject to special rules. This summary is based on the tax laws of the United States (including the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions) as in effect on the date hereof, all of which are subject to change (or changes in interpretation), possibly with retroactive effect.

For purposes of this discussion, a “U.S. Holder” is any beneficial owner of Shares or ADSs that is (i) a citizen or resident of the United States, (ii) a corporation or partnership organized under the laws of the United States or any State, (iii) an estate whose income is subject to United States federal income tax regardless of its source or (iv) a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust. The discussion does not address any aspects of United States taxation other than federal income taxation. Investors are urged to consult their tax advisors regarding the United States federal, state and local and other tax consequences of owning and disposing of Shares and ADSs.

In general, assuming that the representations of the Depositary are true and that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms, for United States federal income tax purposes, holders of ADSs evidencing ADSs will be treated as the owners of the Shares represented by those ADSs, and exchanges of Shares for ADSs, and ADSs for Shares, will not be subject to United States federal income tax.

Cash Dividends and Other Distributions

Under the United States federal income tax laws, and subject to the passive foreign investment company (“PFIC”) rules discussed below, U.S. Holders will include in gross income the gross amount of any dividend paid (after reduction for any Chilean First-Category Tax that is credited against Chilean Withholding Tax, but before reduction for the net amount of Chilean Withholding Tax) by the company out of its current or accumulated earnings and profits (as determined for United States federal income tax purposes) as ordinary income when the dividend is actually or constructively received by the U.S. Holder, in the case of Shares, or by the Depositary, in the case of ADSs. The dividend will not be eligible for the dividends-received deduction. Dividends paid to a U.S. Holder that is a corporation are not eligible for the dividends received deduction available to corporations. Current law provides for a reduced tax rate (currently 15%) on the dividend income of an individual U.S. Holder with respect to dividends paid by a domestic corporation or "qualified foreign corporation". A qualified foreign corporation generally includes a foreign corporation if (i) its shares (or ADSs) are readily tradable on an established securities market in the United States or (ii) it is eligible for benefits under a comprehensive United States income tax treaty.  The ADSs are traded on the New York Stock Exchange. As a result, the company may be treated as a qualified foreign corporation.  However, if the company is treated as a PFIC, as discussed below, it will not be a qualified foreign corporation. If the company is a qualified foreign corporation, dividends paid to an individual U.S. Holder with respect to Shares or ADSs should, subject to generally applicable limitations, be taxed at a maximum rate of 15%. The maximum 15% tax rate is effective with respect to dividends included in income during the period beginning on or after January 1, 2003, and ending December 31, 2008.  Each U.S. Holder should consult its own tax advisor regarding the treatment of dividends. The amount of the dividend distribution includible in income of a U.S. Holder will be the U.S. dollar value of the Chilean peso payments made, determined at the spot Chilean peso/U.S. dollar rate on the date such dividend distribution is includible in the income of the U.S. Holder, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in income to the date such payment is converted into U.S. dollars will be treated as ordinary income or loss.  Such gain or loss will generally be from sources within the United States for foreign tax credit limitation purposes.

Subject to certain generally applicable limitations, the net amount of Chilean Withholding Tax (after reduction for the credit for Chilean First-Category Tax) paid over to Chile will be creditable against the U.S. Holder’s United States federal income tax liability. For foreign tax credit limitation purposes, the dividend will be income from sources without the United States. In the case of U.S. individuals, if the reduced rate of tax on dividends applies to such holder, such limitations and restrictions will appropriately take into account the rate differential under rules similar to section 904(b)(2)(B) of the Internal Revenue Code. The rules governing foreign tax credits are complex and U.S. Holders should consult their tax advisors regarding their application to the particular circumstances of such holder.

Pro rata distributions of Shares or preemptive rights generally are not subject to United States federal income tax.  The basis of the new Shares or preemptive rights (if such rights are exercised or sold) generally will be determined by allocating the U.S. Holder’s adjusted basis in the old shares between the old Shares and the new Shares or preemptive rights received, based on their relative fair market values on the date of distribution (except that the basis of the preemptive rights will be zero if the fair market value of the rights is less than 15% of the fair market value of the old Shares at the time of distribution, unless the U.S. Holder irrevocably elects to allocate basis between the old Shares and the preemptive rights). The holding period of a U.S. Holder for the new Shares or preemptive rights will include the U.S. Holder’s holding period for the old Shares with respect to which the new Shares or preemptive rights were issued.

Capital Gains

U.S. Holders will not recognize gain or loss on deposits or withdrawals of Shares in exchange for ADSs or on the exercise of preemptive rights. U.S. Holders will recognize capital gain or loss on the sale or other disposition of ADSs or Shares (or preemptive rights with respect to such Shares) held by the U.S. Holder or by the Depositary equal to the difference between the amount realized and the U.S. Holder’s tax basis in the ADSs or Shares. Any gain recognized by a U.S. Holder generally will be treated as United States source income.  Consequently, in the case of a disposition of Shares or preemptive rights (which, unlike a disposition of ADSs, will be taxable in Chile), the U.S. Holder may not be able to claim the foreign tax credit for Chilean tax imposed on the gain unless it appropriately can apply the credit against tax due on other income from foreign sources.  Loss generally would be treated as United States source loss.

The long-term capital gain tax rate for an individual U.S. Holder is currently 15% for sales occurring on or before December 31, 2010.

PFIC Rules

The Company believes that it was not a passive foreign investment company (a "PFIC") for United States federal income tax purposes for taxable years before to 2008, although this conclusion is subject to some uncertainty. However, this is a factual determination made annually and thus is subject to change. Even if it was not previously a PFIC, the Company may become a PFIC for 2008 and subsequent taxable years if it consummates the sale of its Wire & Cables business unit to Nexans as disclosed elsewhere in this annual report.

In general, the Company will be a PFIC with respect to a U.S. Holder if, for any taxable year in which the U.S. Holder held the Company's ADSs or Shares, either (i) at least 75% of the gross income of the Company for the taxable year is passive income or (ii) at least 50% of the value (determined on the basis of a quarterly average) of the Company's assets is attributable to assets that produce or are held for the production of passive income.  For this purpose, passive income generally includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. If the Company owns at least 25% by value of the stock of another corporation, the Company is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation's income. However, if the Company owns less
than 25% by value of the other corporation (as in the case of Nexans shares to be received upon sale of the Wire & Cables business unit), the shares would be a passive asset and produce passive income.  Cash and investment securities generally are passive assets without regard to the purpose for which the Company holds the cash or securities

If the Company is treated as a PFIC, a U.S. Holder would be subject to special rules with respect to (i) any gain realized on the sale or other disposition of Shares or ADSs and (ii) any "excess distribution" by the Company to the U.S. Holder (generally, any distributions to the U.S. Holder in respect of the Shares or ADSs during a single taxable year that are greater than 125% of the average annual distributions received by the U.S. Holder in respect of the Shares or ADSs during the three preceding taxable years or, if shorter, the U.S. Holder's holding period for the Shares or ADSs). Under these rules, (i) the gain or excess distribution would be allocated ratably over the U.S. Holder's holding period for the Shares or ADSs, (ii) the amount allocated to the taxable year in which the gain or excess distribution was realized would be taxable as ordinary income, (iii) the amount allocated to each prior year, with certain exceptions (in particular for amounts allocated to certain years in which the Company
was not a PFIC), would be subject to tax at the highest tax rate in effect for that year and (iv) the interest charge generally applicable to underpayments of tax would be imposed in respect of the tax attributable to each such year. If the Company is determined to be a PFIC for 2008, a U.S. Holder may be subject to these rules even if it sells Shares or ADSs prior to the event during 2008 that results in the Company becoming a PFIC for such year.  Even if such a U.S. Holder is not subject to an interest charge under these rules, gains may be treated as ordinary rather than as capital gains eligible for reduced rates on long term capital gains.

Special rules apply with respect to the calculation of the amount of the foreign tax credit with respect to excess distributions by a PFIC.

If the Company is treated as a PFIC, a U.S. Holder may be able to make a mark-to-market election if the Company's stock is treated as regularly traded on a registered national securities exchange or other exchange to the extent permitted by the Internal Revenue Service, or "IRS". If the election is made, the PFIC rules described above will not apply.  Instead, in general, the electing U.S. Holder will be required to include as ordinary income each year the excess, if any, of the fair market value of the Shares or ADSs at the end of the taxable year over the U.S. Holder's adjusted tax basis in the Shares or ADSs. The electing U.S. Holder will also be allowed to take an ordinary loss in respect to the excess, if any, of the adjusted tax basis in the Shares or ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). An electing U.S. Holder's tax basis in the Shares or ADSs will be
adjusted to reflect any such income or loss amounts.

A U.S. holder of shares or ADSs in a PFIC can sometimes avoid the rules described above by electing to treat the company as a "qualified electing fund" under section 1295 of the Internal Revenue Code. The Company does not intend to comply with the requirements necessary to permit a U.S. Holder to make this election. U.S. Holders should consult their own tax advisors concerning the U.S. federal income tax consequences of holding Shares or ADSs if the Company is considered a passive foreign investment company in any taxable year.

Information Reporting and Backup Withholding

Dividends in respect of the Shares or ADSs and proceeds from the sale, exchange, or redemption of the Shares or ADSs may be subject to information reporting to the United States Internal Revenue Service and a backup withholding tax of 28% may apply unless the holder furnishes a correct taxpayer identification number or certificate of foreign status or is otherwise exempt from backup withholding.  Generally, a U.S. Holder will provide such certification on Form W-9 and a non-U.S. Holder will provide such certification on Form W-8BEN.

Documents on Display

The constituent documents of the Company, exhibits to this and previous Annual Reports and other documents referred to herein may be inspected at the Company’s main corporate office at Ureta Cox 930, San Miguel, Santiago, Chile.



ITEM 11. Quantitative and Qualitative Disclosures about Market Risk

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The Company is exposed to market risk from interest rate changes, foreign currency fluctuations and changes in the market values of its investments.

Policies and Procedures

In the normal course of its business, the Company applies established policies and procedures to manage its exposure to changes in interest rates, foreign currencies and the fair market value of certain of its investments using a variety of financial instruments.

It is the Company’s policy to enter into foreign currency and interest rate transactions and other financial instruments only to the extent considered necessary to meet its objectives as stated above. The Company does not enter into these transactions for speculative purposes.

The following discussion about the Company’s risk management includes “forward-looking statements” that involve risks and uncertainties. Actual results could differ from those projected in the forward-looking statements. See section “Forward Looking Statements”. In addition to the inherent risks related to the operations in each of its segments and countries in which it does business, the Company faces material market risk exposures in three categories: foreign currency exchange rate risk, interest rate risk and commodity price risk. The following discussion provides additional information regarding the Company’s exposure to each of these risks as of December 31, 2007.

Foreign Currency Exchange Rate Risk

Exposure to foreign currency exchange rate risk relates to the Company’s positions held in cash and cash equivalents, bank debt, bonds and other assets and liabilities indexed to currencies other than Chilean pesos.

In accordance with Technical Bulletin 64 issued by the Chilean Association of Accountants (“BT64”), most investments in foreign companies as well as various liabilities associated with these foreign investments should be considered as a net U.S. dollar exposure.

With respect to the Company’s foreign investment exposure, gains and losses from exchange rate variations are registered directly to the cumulative adjustment from foreign currency translation account included in other reserves in shareholders’ equity, without impacting the Company’s income statement. Assuming a 10% increase during 2008 of the Chilean peso/U.S. dollar exchange rate with respect to 2007 year-end balances, the impact on equity would be an increase in the Company’s cumulative translation adjustment account of approximately Ch$11,868 million.

The Company’s net exposure in Chile to U.S. dollar exchange rate risk in Chilean pesos as of December 31, 2007 was Ch$36,100 million (equivalent to US$72.7 million). Assuming a 10% increase during 2008 of the Chilean peso/U.S. dollar exchange rate with respect to 2007 year-end balances, the result would be a pre-tax accounting profit of approximately Ch$3,610 million. In addition to the Company’s net exposure in foreign investments, there are other assets and liabilities subject to foreign exchange fluctuations whose results impact the income statement. In particular, the Company maintains local currency exposures in Brazil, Argentina, Peru and Colombia, all of which could affect the income statement. Based on the year-end balances, a simultaneous increase of 10% in the exchange rate in Argentina, Brazil, Peru and Colombia of their respective local currencies in relation to the U.S. dollar during 2007 would result in a net loss of Ch$7,114 million.

Interest Rate Risk

Exposure to interest rate risk reflects the Company’s exposure to floating interest debt as well as debt renewals or rollovers which could be reset at higher than existing interest rates. As of December 31, 2007, approximately 33.8% of the Company’s total debt was represented by floating rate debt. The Company’s net exposure to interest rate risk as of December 31, 2007 was Ch$40,664 million. Assuming a 100 basis point, or “b.p.”, increase during 2007 in the weighted average interest rate with respect to 2007 year-end balances, the result would be an increase in net annual interest expenses of approximately Ch$281 million.

The Company has contracted debt in different currencies to take in account the possibility that a 100 b.p. increase in interest rates is more likely in certain countries than in others. In addition, a significant amount of debt is indexed to Chilean inflation (UF indexed debt), and as such, an increase in Chilean inflation will affect the total interest the Company pays on such debt.

Commodity Price Risk

The Company uses significant amounts of copper and aluminum to manufacture its products. Exposure to commodity price risk relates primarily to the Company’s metal inventories of copper and aluminum. The Company fixes product prices taking into consideration the market value of the principal raw materials it purchases in such a way that prices should normally follow trends in raw material costs (with a short time lag), thereby reducing commodity price risks. Depending on the competitive price environment and general economic conditions, the Company from time to time is unable to pass along raw material cost increases to its customers.

To hedge part of its risk of exposure to copper price fluctuations, the Company entered into derivatives contracts of this underlying asset. As of December 31, 2007, the Company had 2,500 tons of copper hedged and as of March 31, 2008, the Company had 4,500 tons of copper hedged by derivatives contracts.

During 2007, the Company sold on a consolidated basis 86,392 tons of copper and 33,771 tons of aluminum. As of December 31, 2006, the Company held inventories of copper and aluminum of 15,189 and 12,939 tons, respectively.

The following table presents the commodity inventories held by the Company for non-trading purposes as of December 31, 2007.

|                       |                         |           
|---------------------- | ----------------------- | ----------
|                       | As of December 31, 2007
|                       | Carrying Amount         | Fair Value
|Copper                 |                         |           
|Tons                   | 15,189                  |           
|Value (in Ch$ million) | 56,519                  | 56,519    
|Aluminum               |                         |           
|Tons                   | 12,939                  |           
|Value (in Ch$ million) | 19,815                  | 19,815    



ITEM 12. Description of Securities Other than Equity Securities

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Not applicable





PART II



ITEM 13. Defaults, Dividend Arrearages and Delinquencies

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Not applicable



ITEM 14. Material Modifications of the Rights of Security Holders and Use of Proceeds

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Not applicable



ITEM 15. Controls and Procedures

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Evaluation of Disclosure Controls and Procedures

For the year ended December 31, 2007, the Company carried out, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Rules 13a−15(e) and 15d−15(e) under the Exchange Act). Based on their evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of December 31, 2007, the Company’s disclosure controls and procedures were effective.



Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a−15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, including the possibility of human error, and the circumvention of overriding of the controls and procedures, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

With the participation of the Chief Executive Officer and Chief Financial Officer, the Company’s management conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2007, based on the framework and criteria established in Internal Control − Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.

As permitted by the Securities and Exchange Commission, the Company has elected to exclude an assessment of the internal controls of entities over which control was obtained during the year 2007. These entities, which are listed in Note 10 of Notes to Consolidated Financial Statements, constituted 3.9% of the Company ́s total assets, as of December 31, 2007, and 3.7% and 7.1% of revenues and net income, respectively, for the year then ended.

Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this assessment, management has concluded and hereby reports that as of December 31, 2007, the Company’s internal control over financial reporting is effective in providing reasonable assurance that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is gathered and communicated to the Company’s Management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Ernst & Young Ltda., the independent registered public accounting firm that has audited our Consolidated Financial Statements, has issued an attestation report on the company’s internal control over financial reporting as of December 31, 2007.



Attestation report of the registered public accounting firm

This attestation report appears on page F-2



Changes in Internal Control Over Financial Reporting

During the period covered by this annual report there have been made the following changes which materially affected the internal control over financial reporting of our subsidiary Ficap:

- The satisfactory implementation of the remediation strategy, which was approved by the audit committee, whose main plan of action included the reassignment of certain personnel to strengthen core functions and implement programmed and access on information system SAP.



ITEM 16.

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Reserved

Item 16A. Audit Committee Financial Expert

Pursuant to NYSE Rule 303A.06, Madeco has an Audit Committee that satisfies the requirements of Rule 10A-3 under the Exchange Act and certain additional requirements under NYSE Rule 303A. Messrs. Augusto Iglesias Palau and Alejandro Ferreiro Yazigi serve as Madeco’s audit committee financial experts.

Item 16B. Code Of Ethics

Madeco has adopted a code of ethics that applies to all of its employees, including the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer of Madeco S.A. It has filed the code of ethics as an exhibit to this annual report. Madeco’s code of ethics was not amended during 2007, and no waivers, either explicit or implicit, of provisions of the code of ethics were granted to its Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer in 2007.

Item 16C.  Principal Accountant Fees and Services

In 2005, 2006 and 2007, the Company hired Ernst & Young as independent auditors. The table below sets forth the total amount billed by Ernst & Young for services performed in the years 2007 and 2006, respectively:

|                   |                       |        
|------------------ | --------------------- | -------
|                   | (in thousands of Ch$)
|                   | 2006                  | 2007   
|Audit Fees         | 265,312               | 491,296
|Audit-Related Fees | 189,688               | 113,211
|Tax Fees           | 29,742                | 77,291 
|All Other Fees     | 159                   | 143,469
|Total Fees         | 484,901               | 825,267



Audit Fees

Audit fees are fees billed for the audit of the Company’s annual consolidated financial statements.

Audit-Related Fees

Audit-related fees in 2006 and 2007 include fees associated with SOX consulting, due diligence and translations.

Tax Fees

Tax fees in 2006 and 2007 were related to services for tax compliance, tax planning and tax advice.

Pre-Approval Policies and Procedures

The Audit Committee approves all audit, audit-related services, tax services and other services provided by Ernst & Young. Any service provided by Ernst & Young that is not specifically included within the scope of the audit is pre-approved by the Audit Committee prior to any engagement. The Audit Committee is permitted to approve certain fees for audit related services, tax services and other services pursuant to a de minimusexception before the completion of the engagement. In 2007, none of the fees paid to Ernst & Young were approved pursuant to the de minimusexception.



Item 16D.  Exemptions from the Listing Standards for Audit Committees

Not applicable.



Item 16E.  Purchases of Equity Securities by the Issuer and Affiliated Purchasers

For the year ended December 31, 2007, neither the Company nor any person acting on the Company’s behalf made any purchase of the Company’s common shares.





PART III

ITEM 17. Financial Statements

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Not applicable



ITEM 18. Financial Statements

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Reference is made to pages F-1 through F-118



ITEM 19. Exhibits

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Exhibit  Description

1.1 Articles of Incorporation and Bylaws

4.1* Amended and Restated Loan Agreement, dated as of December 18, 2002, among Madeco S.A. as Borrower, and Bank of America, N.A. and Bankboston N.A., Nassau Branch as Lenders.

4.2* Amended and Restated Loan Agreement, dated as of December 18, 2002, among Madeco S.A. as Borrower, and Citibank, N.A., Agencia en Chile, Scotiabank Sud Americano, Banco de Chile, Dresdner Bank Lateinamerika, Banco del Estado de Chile, Banco de Credito e Inversiones, Corpbanca, Banco Bice, Banco Santander-Chile, Bankboston, N.A., Sucursal en Chile, Banco Security and Banco del Desarrollo, as Lenders.

4.3 Purchase Agreement dated as of February 21, 2008, between Madeco S.A. and Nexans

8.1 List of Subsidiaries of Madeco S.A.

11.1 Code of Ethics

12.1 Section 302 Certification of the Chief Executive Officer

12.2 Section 302 Certification of the Chief Financial Officer

13.1 Section 906 Certification of the Chief Executive Officer

13.2 Section 906 Certification of the Chief Financial Officer

* Incorporated by reference to the annual report in Form 20-F for the fiscal year ended December 31, 2002.





Signatures

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.



Madeco S.A.



/s/Tiberio Dall’Olio

Chief Executive Officer



Date: June 30, 2008

















Audited Consolidated Financial Statements as of 
December 31, 2006 and 2007 and for each of the three years in the period ended December 31, 2007
together with the Reports of Independent Registered Public Accounting Firms

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Madeco S.A. and Subsidiaries



Index to the Audited Consolidated Financial Statements



|                                                                                                          
|----------------------------------------------------------------------------------------------------------
|Reports of Independent Registered Public Accounting Firms:                                                
|Report of Independent Registered Public Accounting Firm for the years 2005, 2006 and 2007                 
|Report of Independent Registered Public Accounting Firm
      on Internal Control over Financial Reporting
|                                                                                                          
|Consolidated Financial Statements:                                                                        
|Consolidated Balance Sheets as of December 31, 2006 and 2007                                              
|Consolidated Statements of Income for the years ended December 31, 2005, 2006 and 2007                    
|Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007                
|Notes to the Consolidated Financial Statements                                                            

ThCh$ - Thousands of Chilean pesos
US$ - United States dollars
ThUS$ - Thousands of United States dollars
UF - “Unidad de Fomento”. The UF is a Chilean inflation-indexed, peso-denominated monetary 
unit that is set daily based on changes in the Chilean Consumer Price Index.



Application of Constant Chilean Pesos



The December 31, 2005 and 2006 consolidated financial statements have been restated for general price-level changes and expressed in constant Chilean pesos of December 31, 2007 purchasing power.

Report of Independent Registered Public Accounting Firm

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To the Board of Directors and Shareholders of Madeco S.A. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Madeco S.A. and its subsidiaries (the “Company”) as of December 31, 2006 and 2007, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Madeco S.A. and subsidiaries at December 31, 2006 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in Chile, which differ in certain respects from accounting principles generally accepted in the United States of America (see Note 32 to the consolidated financial statements).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 4, 2008, except for internal control over financial reporting related to Notes 28 and 32 of the 2007 consolidated financial statements for which the date is June 20, 2008, expressed an unqualified opinion thereon.



|ERNST & YOUNG LTDA. | 
|------------------- | 

Santiago, Chile 
February 4, 2008
(Except for Notes 28 and 32 for which the date is June 20, 2008)



Report of Independent Registered Public Accounting Firm

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To the Board of Directors and Shareholders of Madeco S.A. and Subsidiaries:

We have audited Madeco S.A. and Subsidiaries’ internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). Madeco S.A.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in Management’s Report on Internal Control over Financial Reporting included in item 15 of this annual report, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Cedsa S.A., which is included in the 2007 consolidated financial statements of Madeco S.A. and constituted 3.9% of total assets as of December 31, 2007 and 3.7% and 7.1% of revenues and net income, respectively, for the year then ended.  Our audit of internal control over financial reporting of Madeco S.A. also did not include an evaluation of the internal control over financial reporting of Cedsa S.A.

In our opinion, Madeco S.A. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Madeco S.A. as of December 31, 2006 and 2007, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007 and our report dated February 4, 2008, except for Notes 28 and 32 for which the date is June 20, 2008, expressed an unqualified opinion thereon.



|                    | 
|------------------- | 
|ERNST & YOUNG LTDA. | 

Santiago, Chile 
February 4, 2008 
(except for Notes 28 and 32 for which the date is June 20, 2008)

Consolidated Balance SheetsGo to ACFS index

|                                                     |       |  |                    |  |             |  |             
|---------------------------------------------------- | ----- |  | ------------------ |  | ----------- |  | ------------
|                                                     |       |  | As of December 31,
|                                                     |       |  | 2006               |  | 2007        |  | 2007        
|ASSETS                                               | Notes |  | ThCh$              |  | ThCh$       |  | ThUS$       
|                                                     |       |  |                    |  |             |  | (Note 2 (c))
|Current assets:                                      |       |  |                    |  |             |  |             
|Cash                                                 |       |  | 5,083,958          |  | 10,410,066  |  | 20,950      
|Time deposits                                        | 5     |  | 280,907            |  | 7,883       |  | 16          
|Marketable securities                                | 6     |  | 328,664            |  | 780,804     |  | 1,571       
|Accounts receivable, net                             | 7     |  | 101,438,255        |  | 107,255,059 |  | 215,853     
|Notes and accounts receivable from related companies | 24    |  | 1,661,627          |  | 1,781,850   |  | 3,586       
|Inventories, net                                     | 8     |  | 104,823,552        |  | 134,879,735 |  | 271,448     
|Recoverable taxes, net                               | 19    |  | 10,087,083         |  | 13,259,735  |  | 26,685      
|Prepaid expenses                                     |       |  | 519,545            |  | 1,009,367   |  | 2,031       
|Deferred income taxes, net                           | 19    |  | 5,987,127          |  | 10,832,815  |  | 21,801      
|Other current assets                                 | 9     |  | 19,262,049         |  | 4,404,190   |  | 8,864       
|Total current assets                                 |       |  | 249,472,767        |  | 284,621,504 |  | 572,805     
|                                                     |       |  |                    |  |             |  |             
|Property, Plant and Equipment, net                   | 10    |  | 158,896,582        |  | 166,949,097 |  | 335,988     
|                                                     |       |  |                    |  |             |  |             
|Other assets:                                        |       |  |                    |  |             |  |             
|                                                     |       |  |                    |  |             |  |             
|Investments in related companies                     | 11    |  | 9,649,466          |  | 2,188,207   |  | 4,404       
|Investments in other companies                       |       |  | 3,828,139          |  | 4,404,704   |  | 8,865       
|Goodwill, net                                        | 12    |  | 18,758,542         |  | 15,844,783  |  | 31,888      
|Negative goodwill, net                               | 12    |  | (518,479)          |  | (1,782,733) |  | (3,588)     
|Long-term notes and accounts receivable              |       |  | 474,534            |  | 246,375     |  | 496         
|Intangible assets, net                               |       |  | 335,539            |  | 1,204,488   |  | 2,424       
|Other                                                | 13    |  | 6,726,587          |  | 13,420,905  |  | 27,010      
|Total other assets                                   |       |  | 39,254,328         |  | 35,526,729  |  | 71,499      
|Total assets                                         |       |  | 447,623,677        |  | 487,097,330 |  | 980,292     

The accompanying notes form an integral part of these consolidated financial statements.



|                                                |       |  |                    |  |              |  |             
|----------------------------------------------- | ----- |  | ------------------ |  | ------------ |  | ------------
|                                                |       |  |                   
|                                                |       |  | As of December 31,
|                                                |       |  | 2006               |  | 2007         |  | 2007        
|LIABILITIES AND SHAREHOLDERS’ EQUITY            | Notes |  | ThCh$              |  | ThCh$        |  | ThUS$       
|                                                |       |  |                    |  |              |  | (Note 2 (c))
|Current liabilities:                            |       |  |                    |  |              |  |             
|Short-term bank loans                           | 14    |  | 16,636,807         |  | 35,077,092   |  | 70,593      
|Current portion of long-term debt               | 14    |  | 17,442,658         |  | 17,651,927   |  | 35,525      
|Current portion of bonds payable                | 17    |  | 4,872,734          |  | 5,081,276    |  | 10,226      
|Long-term obligations, current portion          |       |  | 524,503            |  | 2,312,427    |  | 4,654       
|Dividends payable                               |       |  | 89,015             |  | 15,050,872   |  | 30,290      
|Accounts and notes payable                      |       |  | 26,019,177         |  | 34,102,408   |  | 68,632      
|Notes and accounts payable to related companies | 24    |  | 479,654            |  | 615,093      |  | 1,238       
|Accrued liabilities and provisions              | 15    |  | 8,710,735          |  | 12,114,765   |  | 24,381      
|Withholdings                                    |       |  | 1,669,117          |  | 3,636,679    |  | 7,319       
|Unearned revenues                               |       |  | 8,429,225          |  | 4,529,223    |  | 9,115       
|Other current liabilities                       |       |  | 1,307,823          |  | 1,302,090    |  | 2,622       
|Total current liabilities                       |       |  | 86,181,448         |  | 131,473,852  |  | 264,595     
|                                                |       |  |                    |  |              |  |             
|Long-term liabilities:                          |       |  |                    |  |              |  |             
|Long-term debt                                  | 17    |  | 44,539,651         |  | 36,291,524   |  | 73,037      
|Bonds payable                                   | 17    |  | 21,722,840         |  | 16,623,066   |  | 33,454      
|Miscellaneous payables                          | 18    |  | 5,628,953          |  | 7,154,165    |  | 14,398      
|Accrued liabilities and provisions              | 15    |  | 5,909,109          |  | 4,489,108    |  | 9,034       
|Deferred income taxes                           | 19    |  | 526,320            |  | 3,767,112    |  | 7,581       
|Other long-term liabilities                     |       |  | 628,744            |  | 850,922      |  | 1,712       
|Total long-term liabilities                     |       |  | 78,955,617         |  | 69,175,897   |  | 139,216     
|                                                |       |  |                    |  |              |  |             
|Minority interest                               | 25    |  | 12,316,348         |  | 22,553,910   |  | 45,390      
|                                                |       |  |                    |  |              |  |             
|Contingencies and commitments                   | 22    |  | -                  |  | -            |  | -           
|                                                |       |  |                    |  |              |  |             
|Shareholders’ equity:                           | 20    |  |                    |  |              |  |             
|Paid-in capital, no par value                   |       |  | 283,613,711        |  | 234,329,190  |  | 471,592     
|Reserves                                        |       |  | 41,710,054         |  | 24,906,578   |  | 50,125      
|Accumulated deficit                             |       |  | (87,592,569)       |  | -            |  | -           
|Net income for the year                         |       |  | 32,439,068         |  | 19,660,064   |  | 39,566      
|Provisional dividends                           |       |  | -                  |  | (15,002,161) |  | (30,192)    
|Total Shareholders’ equity                      |       |  | 270,170,264        |  | 263,893,671  |  | 531,091     
|Total liabilities and Shareholders’ equity      |       |  | 447,623,677        |  | 487,097,330  |  | 980,292     

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Statements of Income
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|                                                                                    |      |  |                                 |  |               |  |               |  |             
|----------------------------------------------------------------------------------- | ---- |  | ------------------------------- |  | ------------- |  | ------------- |  | ------------
|                                                                                    |      |  | For the year ended December 31,
|                                                                                    | Note |  | 2005                            |  | 2006          |  | 2007          |  | 2007        
|                                                                                    |      |  | ThCh$                           |  | ThCh$         |  | ThCh$         |  | ThUS$       
|                                                                                    |      |  |                                 |  |               |  |               |  | (Note 2 (c))
|Operating income:                                                                   |      |  |                                 |  |               |  |               |  |             
|Net sales                                                                           |      |  | 400,776,781                     |  | 600,517,944   |  | 639,011,008   |  | 1,286,021   
|Cost of sales                                                                       |      |  | (343,821,957)                   |  | (514,413,129) |  | (564,099,291) |  | (1,135,260) 
|Gross profit                                                                        |      |  | 56,954,824                      |  | 86,104,815    |  | 74,911,717    |  | 150,761     
|Administrative and selling expenses                                                 |      |  | (26,426,325)                    |  | (30,508,415)  |  | (34,797,188)  |  | (70,030)    
|Operating income                                                                    |      |  | 30,528,499                      |  | 55,596,400    |  | 40,114,529    |  | 80,731      
|                                                                                    |      |  |                                 |  |               |  |               |  |             
|Non-operating income and expense:                                                   |      |  |                                 |  |               |  |               |  |             
|Interest income                                                                     |      |  | 882,853                         |  | 1,723,658     |  | 2,360,736     |  | 4,751       
|Other non-operating income                                                          | 23   |  | 2,544,642                       |  | 125,284       |  | 817,414       |  | 1,645       
|Equity participation in income of related companies                                 | 11   |  | 308,213                         |  | 739,206       |  | -             |  | -           
|Interest expense                                                                    |      |  | (10,263,191)                    |  | (12,254,807)  |  | (12,837,007)  |  | (25,835)    
|Equity participation in losses of related companies                                 | 11   |  | -                               |  | -             |  | (56,150)      |  | (113)       
|Amortization of goodwill                                                            | 12   |  | (1,820,232)                     |  | (1,848,606)   |  | (1,673,690)   |  | (3,368)     
|Other non-operating expenses                                                        | 23   |  | (3,593,855)                     |  | (3,062,600)   |  | (1,976,126)   |  | (3,977)     
|Price-level restatement, net                                                        | 3    |  | (2,192,920)                     |  | (1,725,622)   |  | (6,729,819)   |  | (13,544)    
|Foreign exchange (loss) gain, net                                                   | 4    |  | (824,691)                       |  | 359,400       |  | 3,934,247     |  | 7,918       
|Non-operating loss                                                                  |      |  | (14,959,181)                    |  | (15,944,087)  |  | (16,160,395)  |  | (32,523)    
|                                                                                    |      |  |                                 |  |               |  |               |  |             
|Income before income taxes, minority interest and amortization of negative goodwill |      |  | 15,569,318                      |  | 39,652,313    |  | 23,954,134    |  | 48,208      
|Income taxes                                                                        | 19   |  | (1,608,403)                     |  | (5,589,678)   |  | (1,075,507)   |  | (2,164)     
|Income before minority interest and amortization of negative goodwill               |      |  | 13,960,915                      |  | 34,062,635    |  | 22,878,627    |  | 46,044      
|Minority interest                                                                   | 25   |  | (807,501)                       |  | (1,651,976)   |  | (3,307,751)   |  | (6,657)     
|Income before amortization of negative goodwill                                     |      |  | 13,153,414                      |  | 32,410,659    |  | 19,570,876    |  | 39,387      
|Amortization of negative goodwill                                                   | 12   |  | 20,940                          |  | 28,409        |  | 89,188        |  | 179         
|Net income                                                                          |      |  | 13,174,354                      |  | 32,439,068    |  | 19,660,064    |  | 39,566      

The accompanying notes form an integral part of these consolidated financial statements.





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|                                                                          |                                  |  |               |  |               |  |             
|------------------------------------------------------------------------- | -------------------------------- |  | ------------- |  | ------------- |  | ------------
|                                                                          | For the years ended December 31,
|                                                                          | 2005                             |  | 2006          |  | 2007          |  | 2007        
|                                                                          | ThCh$                            |  | ThCh$         |  | ThCh$         |  | ThUS$       
|                                                                          |                                  |  |               |  |               |  | (Note 2 (c))
|Cash flow from operating activities:                                      |                                  |  |               |  |               |  |             
|Collection of accounts receivable                                         | 469,897,452                      |  | 687,146,193   |  | 773,154,716   |  | 1,555,988   
|Financial income received                                                 | 2,422,329                        |  | 1,094,546     |  | 4,482,038     |  | 9,020       
|Dividends and other distributions received                                | -                                |  | 55,765        |  | -             |  | -           
|Other income received                                                     | 408,023                          |  | 8,339,512     |  | 10,195,515    |  | 20,519      
|Payments to suppliers and personnel                                       | (439,220,634)                    |  | (670,210,190) |  | (746,001,797) |  | (1,501,342) 
|Interest paid                                                             | (14,766,220)                     |  | (10,024,475)  |  | (11,551,540)  |  | (23,248)    
|Income taxes paid                                                         | (2,500,710)                      |  | (5,339,940)   |  | (6,598,487)   |  | (13,280)    
|Other expenses                                                            | (651,915)                        |  | (308,053)     |  | (5,496,278)   |  | (11,061)    
|Value added taxes and other similar items paid                            | (4,209,801)                      |  | (4,402,469)   |  | (3,044,599)   |  | (6,127)     
|Net cash provided by operating activities                                 | 11,378,524                       |  | 6,350,889     |  | 15,139,568    |  | 30,469      
|                                                                          |                                  |  |               |  |               |  |             
|Cash flow from investing activities:                                      |                                  |  |               |  |               |  |             
|Proceeds from sales of investments                                        | 233,995                          |  | -             |  | 106           |  | -           
|Proceeds from sales of property, plant and equipment                      | 335,024                          |  | 2,665,407     |  | 934,669       |  | 1,881       
|Additions to property, plant and equipment                                | (11,401,912)                     |  | (15,394,293)  |  | (18,726,889)  |  | (37,688)    
|Investments in Cedsa S.A. and Peruplast S.A.                              | -                                |  | -             |  | (9,828,177)   |  | (19,779)    
|Additions to cash from acquired companies                                 | -                                |  | -             |  | 4,119,327     |  | 8,290       
|Investments in other companies                                            | (201,533)                        |  | (4,574)       |  | -             |  | -           
|Decrease in accounts receivable from related companies                    | 56,691                           |  | 90,663        |  | -             |  | -           
|Other investing activities (net)                                          | 1,193,123                        |  | 1,441,921     |  | -             |  | -           
|Other disbursements for investment                                        | (2,870,977)                      |  | -             |  | (27,038)      |  | (54)        
|Net used in provided by investing activities                              | (12,655,589)                     |  | (11,200,876)  |  | (23,528,002)  |  | (47,350)    
|                                                                          |                                  |  |               |  |               |  |             
|Cash flow from financing activities:                                      |                                  |  |               |  |               |  |             
|Borrowings from banks and others                                          | 124,632,545                      |  | 150,557,190   |  | 224,125,913   |  | 451,057     
|Proportion of dividends paid to minority shareholders                     | (41,692)                         |  | (652,132)     |  | (677,765)     |  | (1,364)     
|Payments of loans                                                         | (171,489,299)                    |  | (137,183,716) |  | (219,047,628) |  | (440,837)   
|Payment of loans from related parties                                     | -                                |  | (1,667,612)   |  | -             |  | -           
|Capital distributions                                                     | -                                |  | -             |  | (5,079,808)   |  | (10,223)    
|Decrease in bonds payable                                                 | (4,893,335)                      |  | (4,571,397)   |  | (4,844,185)   |  | (9,749)     
|Capital increase in subsidiaries contributed     by minority shareholders | 47,321,149                       |  | 10,163,418    |  | 6,465,247     |  | 13,011      
|Other financing disbursements                                             | -                                |  | (1,129,240)   |  | -             |  | -           
|Net cash (used in) provided by financing activities                       | (4,470,632)                      |  | 15,516,511    |  | 941,774       |  | 1,895       
|Net (decrease) increase in cash and cash equivalents                      | (5,747,697)                      |  | 10,666,524    |  | (7,446,660)   |  | (14,986)    
|Effect of price-level restatement on cash and cash equivalents            | (331,512)                        |  | (366,135)     |  | (198,258)     |  | (399)       
|Net (decrease) increase of cash and cash equivalents                      | (6,079,209)                      |  | 10,300,389    |  | (7,644,918)   |  | (15,385)    
|Cash and cash equivalents at the beginning of year                        | 14,622,491                       |  | 8,543,282     |  | 18,843,671    |  | 37,923      
|Cash and cash equivalents at the end of year                              | 8,543,282                        |  | 18,843,671    |  | 11,198,753    |  | 22,538      

The accompanying notes form an integral part of these consolidated financial statements.



|                                                                                        |                                  |  |              |  |              |  |             
|--------------------------------------------------------------------------------------- | -------------------------------- |  | ------------ |  | ------------ |  | ------------
|                                                                                        | For the years ended December 31,
|                                                                                        | 2005                             |  | 2006         |  | 2007         |  | 2007        
|                                                                                        | ThCh$                            |  | ThCh$        |  | ThCh$        |  | ThUS$       
|                                                                                        |                                  |  |              |  |              |  | (Note 2 (c))
|Reconciliation of net income for the year to net cash from operating activities:        |                                  |  |              |  |              |  |             
|Net income for the year                                                                 | 13,174,354                       |  | 32,439,068   |  | 19,660,064   |  | 39,566      
|Items that do not represent cash flows:                                                 |                                  |  |              |  |              |  |             
|Depreciation                                                                            | 12,328,826                       |  | 14,382,150   |  | 15,785,052   |  | 31,768      
|Amortization of goodwill                                                                | 1,820,232                        |  | 1,848,606    |  | 1,673,690    |  | 3,368       
|Amortization of negative goodwill                                                       | (20,940)                         |  | (28,409)     |  | (89,188)     |  | (179)       
|Minority interest                                                                       | 807,501                          |  | 1,651,976    |  | 3,307,751    |  | 6,657       
|Price-level restatement, net                                                            | 2,192,920                        |  | 1,725,622    |  | 6,729,819    |  | 13,544      
|Foreign exchange loss (gain), net                                                       | 824,691                          |  | (359,400)    |  | (3,934,247)  |  | (7,918)     
|Gain on sales of property, plant and equipment                                          | (211,684)                        |  | (17,878)     |  | (440,291)    |  | (886)       
|Loss on sale of investments                                                             | -                                |  | -            |  | 33,418       |  | 67          
|Equity participation in net losses (income)     of investments under equity method, net | (308,213)                        |  | (739,206)    |  | -            |  | -           
|Accrued equity participation in loss of related companies                               | -                                |  | -            |  | 56,150       |  | 113         
|Gains on sales of investments                                                           | -                                |  | (33,967)     |  | 10,352       |  | 21          
|Write-offs and provisions                                                               | 916,596                          |  | 6,690,246    |  | 1,029,140    |  | 2,071       
|Other charges to income which do not     represent cash flows (1)                       | 5,088,618                        |  | 7,896,625    |  | 9,001,191    |  | 18,115      
|Net changes in operating assets and liabilities:                                        |                                  |  |              |  |              |  |             
|Increase in accounts and notes receivable                                               | (8,385,138)                      |  | (27,792,799) |  | (1,897,682)  |  | (3,819)     
|Increase in inventories                                                                 | (2,905,933)                      |  | (27,367,735) |  | (16,606,150) |  | (33,420)    
|Increase in other assets                                                                | (8,396,716)                      |  | (1,707,466)  |  | (9,257,367)  |  | (18,631)    
|(Decrease) increase in accounts and notes payable                                       | (6,135,658)                      |  | 4,931,285    |  | (7,292,867)  |  | (14,677)    
|Increase (decrease) in other current liabilities                                        | 589,068                          |  | (7,167,829)  |  | (2,629,267)  |  | (5,291)     
|Net cash flow (used in) provided by operating activities                                | 11,378,524                       |  | 6,350,889    |  | 15,139,568   |  | 30,469      
|                                                                                        |                                  |  |              |  |              |  |             
|                                                                                        | For the years ended December 31,
|                                                                                        | 2005                             |  | 2006         |  | 2007         |  | 2007        
|                                                                                        | ThCh$                            |  | ThCh$        |  | ThCh$        |  | ThUS$       
|                                                                                        |                                  |  |              |  |              |  | (Note 2 (c))
|Supplemental Cash Flow Information:                                                     |                                  |  |              |  |              |  |             
|Assets acquired under capital leases                                                    | 417,904                          |  | 456,949      |  | 409,686      |  | 825         

(1) Other charges to income, which do not represent cash flows, include additional depreciation charges, which were reflected in other non-operating expenses, as detailed in Note 10.

The accompanying notes form an integral part of these consolidated financial statements.



Notes to the Consolidated Financial Statements

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Note 1 – The Company

Madeco S.A. and subsidiaries (“the Company”) is asociedad anónima abierta (open stock corporation) that is organized under the laws of the Republic of Chile (“Chile”) whose shares and American Depositary Receipts are quoted on the Chilean and New York Stock Exchanges, respectively. Furthermore, the Company files financial statements with the Chilean Superintendencia de Valores y Seguros (Superintendency of Securities and Insurance, or “SVS”) and the United States Securities and Exchange Commission (“SEC”). Unless otherwise specified, all references to “Madeco” or the “Company” are to Madeco S.A. together with its consolidated subsidiaries and references to “Madeco Chile” include only Madeco S.A.

The Company operates in four main segments. The principal operating segment and the Company’s largest business unit is its Wire & Cable business, with production facilities in Chile, Brazil, Peru and Argentina. The Wire & Cable business unit’s main clients are in the telecom, energy, mining, construction and industrial sectors. The Company’s second operating segment is Brass Mills unit, which manufactures pipes, bars and sheets from copper, brass, aluminum and related alloys. Additionally, the Brass Mills unit manufactures coin blanks and minted coins from alloys comprising copper, nickel, aluminum and zinc. The Company’s Brass Mills facilities are located in Chile and Argentina. The Company’s third operating segment, Flexible Packaging manufactures printed flexible packaging for use in the packaging of mass consumer products. The Company has flexible packaging facilities in Chile and Argentina, and in addition it exerts significant influence over its equity investment in Peru that operates in the same business. The fourth operating segment of the Company is Aluminum Profiles. The aluminum profiles produced by the Company in Chile are used in the residential and the non-residential construction sector as well as in the production of industrial durable goods.



Note 2 – Summary of significant accounting policies

1. Basis of preparation, presentation and consolidation of the consolidated financial statements

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in Chile and the regulations established by the SVS, (collectively referred to as “Chilean GAAP”). Certain accounting practices applied by the Company that conform with accounting principles generally accepted in Chile do not conform with accounting principles generally accepted in the United States of America (“US GAAP”). A reconciliation of Chilean GAAP to US GAAP is provided in Note 32.

Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year’s presentation.

The preparation of financial statements in conformity with Chilean GAAP, along with the reconciliation to US GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The accompanying financial statements reflect the consolidated results of operations of Madeco S.A. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation, as well as any unrealized gains or losses arising from such transactions. The Company consolidates the financial statements of companies in which it controls over 50% of the voting shares. The participation of minority shareholders in subsidiaries has been given effect in the consolidated financial statements under the caption Minority interest.

The consolidated financial statements as of December 31, 2006 and 2007 and for the years ended December 31, 2005, 2006 and 2007 include the following subsidiaries:

|                                                      |         |                    |  |       |  |      
|----------------------------------------------------- | ------- | ------------------ |  | ----- |  | -----
|                                                      |         | As of December 31,
|                                                      |         | 2005               |  | 2006  |  | 2007 
|                                                      |         | %                  |  | %     |  | %    
|Percentage of Direct and Indirect Ownership           |         |                    |  |       |  |      
|Alusa S.A. and Subsidiaries                           | (1) (8) | 75.96              |  | 75.96 |  | 75.96
|Indalum S.A. and Subsidiaries                         | (2)     | 99.16              |  | 99.16 |  | 99.16
|Armat S.A.                                            |         | 100                |  | 100   |  | 100  
|Comercial Madeco S.A. and Subsidiaries (Argentina)    | (3)     | 100                |  | 100   |  | 100  
|Indeco S.A. (Peru)                                    |         | 93.97              |  | 93.97 |  | 93.97
|Madeco Overseas S.A. (Cayman Islands)                 |         | 100                |  | 100   |  | 100  
|Soinmad S.A. and Subsidiaries                         | (4)     | 100                |  | 100   |  | 100  
|Metal Overseas S.A. and Subsidiaries (Cayman Islands) | (5)     | 100                |  | 100   |  | 100  
|Indelqui S.A. and Subsidiary (Argentina)              | (6)     | -                  |  | -     |  | 100  
|Madeco Brass Mills S.A.                               | (7)     | -                  |  | -     |  | 100  
|Invercables S.A.                                      | (7)     | -                  |  | -     |  | 100  
|Madeco Cables S.A.                                    | (7)     | -                  |  | -     |  | 100  
|Cedsa S.A.                                            | (8)     | -                  |  | -     |  | 80   

1. The financial statements of Alusa S.A. and subsidiaries include the consolidation of the following direct and indirect subsidiaries: Aluflex S.A. (Argentina), Alufoil S.A., Inversiones Alusa S.A. and Alusa Overseas S.A. (Cayman Islands) and Peruplast S.A. (Peru). The control over Peruplast S.A. is based on a shareholder’s agreement, which assigns the operative management decisions to Alusa S.A. in addition to a participation in share capital of 50%.

1. Indalum S.A. and subsidiaries include the consolidation of PVTEC S.A., Alumco S.A. and subsidiaries and Inversiones Alumco S.A. and subsidiaries.

1. Comercial Madeco S.A. and subsidiaries include the consolidation of Metalúrgica Industrial S.A. and its subsidiary Decker-Indelqui S.A. including its subsidiaries Metacab S.A. and H. B. San Luis S.A. (Argentina). Metalúrgica Industrial S.A. was presented as a direct subsidiary until June 2006, when Comercial Madeco S.A. acquired 106,393,873 shares of that subsidiary in a group transaction, increasing its participation from 24.25% to 61.33%. The Company’s total participation in Metalúrgica Industrial S.A. remained unchanged.

1. The consolidated financial statements of Soinmad S.A. include the direct subsidiaries Cotelsa S.A. and Inmobiliaria e Industrial Cotelsa S.A.

1. The financial statements of Metal Overseas S.A. and subsidiaries include the consolidation of the direct subsidiaries Ficap S.A. (Brazil) and Madeco Brasil Ltda. and subsidiaries. On March 31, 2005, Madeco S.A. through its indirect subsidiary Madeco Brasil Ltda., entered into an agreement with Corning International Corporation, by virtue of which it acquired, at a par value of one Brazilian Real, 50% of the participation that Corning Inc. had in Optel Ltda. In this manner, the parties resolved the effects of the arbitrage settlement provided for a lawsuit followed by both companies in New York before the American Arbitration Association. As a result, beginning December 2005, the financial statements of this subsidiary have been included in the consolidated financial statements of Madeco S.A. Until May 2007, this subsidiary also consolidated Optel Argentina S.A., which was first sold to Decker-Indelqui S.A. and subsequently to Indelqui S.A.

1. In December 2007, the Company established the subsidiary Indelqui S.A. in consideration of the restructuring process to separate the cable unit, which is expected be sold in 2008. Indelqui S.A.  and subsidiaries include the consolidation of Optel Argentina S.A., which was acquired from Decker-Indelqui S.A. together with certain fixed assets and inventories related to the cable unit.

1. During 2007, the Company established the subsidiaries Madeco Brass Mills S.A., Invercables S.A. and Madeco Cables S.A. in consideration of the restructuring process to separate the Cable and Wire unit, which is expected be sold in 2008.

1. The 2007 acquisitions of Cedsa S.A. (Colombia) and Peruplast S.A. (Peru) were accounted for in accordance with Technical Bulletin No. 72 and are detailed in Note 26 of the financial statements.

All group transactions were executed at book values and did not generate any effects in income.

Price-level restatement

The cumulative inflation rate in Chile as measured by the Chilean Consumer Price Index (“CPI”) for the three-year period ended December 31, 2007 was approximately 14.7%.

Chilean GAAP requires that the financial statements be restated to reflect the full effects of changes in the purchasing power of the Chilean peso on the financial position and results of operations of reporting entities. The method described below is based on a model that enables calculation of net inflation gains or losses caused by monetary assets and liabilities exposed to changes in the purchasing power of local currency. The model prescribes that the historical cost of all non-monetary accounts be restated for general price-level changes between the date of origin of each item and the year-end.

The financial statements of the Company have been price-level restated in order to reflect the effects of the changes in the purchasing power of the Chilean currency during each year. All non-monetary assets and liabilities, all equity accounts and income statement accounts have been restated to reflect the changes in the CPI from the date they were acquired or incurred to year-end.

The resulting gain or loss included in net income reflects the effects of Chilean inflation on the monetary assets and liabilities held by the Company (Note 3).

The restatements were calculated using the official consumer price index of the National Institute of Statistics and based on the “prior-month rule,” in which the inflation adjustments are based on the CPI at the close of the month preceding the close of the respective period or transaction. This index is considered by the business community, the accounting profession and the Chilean government to be the index that most closely complies with the technical requirement to reflect the variation in the general level of prices in Chile, and consequently it is widely used for financial reporting purposes.

The values of the Chilean consumer price indices used to reflect the effects of the changes in the purchasing power of the Chilean peso (“price-level restatement”) are as follows:

|                          |        |                                   
|------------------------- | ------ | ----------------------------------
|                          | Index  | Change over Previous November  30,
|                          |        |                                   
|November 30, 2005 ..................... | 100.00 | 3.6%                              
|November 30, 2006 ..................... | 102.10 | 2.1%                              
|November 30, 2007 ..................... | 109.67 | 7.4%                              

By way of comparison, the actual values of the Chilean consumer price indices as of the balance sheet dates are as follows:

|                          |        |                                  
|------------------------- | ------ | ---------------------------------
|                          | Index  | Change over Previous December 31,
|                          |        |                                  
|December 31, 2005 ..................... | 100.00 | 3.7%                             
|December 31, 2006 ..................... | 103.67 | 2.6%                             
|December 31, 2007 ..................... | 111.76 | 7.8%                             

The above-mentioned price-level restatements do not purport to represent appraisal or replacement values and are only intended to restate all non-monetary financial statement components in terms of local currency of a single purchasing power and to include in net income or loss for each year the gain or loss in purchasing power arising from the holding of monetary assets and liabilities exposed to the effects of inflation.

Index-linked assets and liabilities

Assets and liabilities that are denominated in index-linked units of account are stated at the year-end values of the respective units of account. The principal index-linked unit used in Chile is the Unidad de Fomento (“UF”), which is adjusted daily to reflect the changes in Chile’s CPI. Certain of the Company’s investments are linked to the UF. As the Company’s indexed liabilities exceed its indexed assets, the increase in the index results in a net loss. Values for the UF are as follows (historical Chilean pesos per UF):



|                       |          
|---------------------- | ---------
|                       | Ch$      
|                       |          
|December 31, 2005 ............ | 17,974.81
|December 31, 2006 ............ | 18,336.38
|December 31, 2007 ............ | 19,622.66

Comparative financial statements

For comparative purposes, the historical December 31, 2005 and 2006 consolidated financial statements and their accompanying notes have been presented in constant Chilean pesos as of December 31, 2007. Amounts previously presented in constant Chilean pesos as of each balance sheet date have been adjusted by the percentage changes in the CPI to December 31, 2007 as follows:



|             |                
|------------ | ---------------
|Year         | Change in Index
|             |                
|2006........................ | 9.7%  (1)      
|2007........................ | 7.4%  (2)      

(1) Equivalent to the change in the CPI for 2006 multiplied with the change in the CPI for 2007.(2) Equivalent to the change in the CPI for 2007.

This updating does not change the prior years’ statements or information in any way except to update the amounts to constant Chilean pesos of similar purchasing power.



c)  Currency translation

Balances denominated in foreign currencies included in the consolidated balance sheets and detailed in Note 21 have been translated into Chilean pesos at the observed exchange rates determined by the Central Bank of Chile in effect at each year end.



As of December 31 2005, 2006 and 2007 the foreign exchange rates of most relevant foreign currencies were as follows:

|                           |  |                    |  |        |  |       
|-------------------------- |  | ------------------ |  | ------ |  | ------
|                           |  | As of December 31,
|                           |  | 2005               |  | 2006   |  | 2007  
|Currency                   |  |                    |  |        |  |       
|United States dollar (US$) |  | 512.50             |  | 532.39 |  | 496.89
|Argentine peso (AR$)       |  | 169.42             |  | 173.93 |  | 157.79
|Brazilian real (BR$)       |  | 219.35             |  | 248.78 |  | 280.32
|Peruvian sol (S$)          |  | 149.77             |  | 166.89 |  | 167.40

The net effect of foreign exchange translation in income is detailed in Note 4.

Convenience translation to US dollars

The financial statements are stated in Chilean pesos. The translations of Chilean pesos into US dollars are included solely for the convenience of the reader, using the observed exchange rate reported by the Chilean Central Bank as of December 31, 2007 of Ch$ 496.89 for US$ 1.00. The convenience translations should not be construed as representations that the Chilean peso amounts have been, could have been, or could in the future be, converted into US dollars at this or any other exchange rate.



d)  Cash and cash equivalents

The Company considers all short-term, highly liquid investment securities with remaining maturities of three months or less to be cash equivalents for purposes of the consolidated statements of cash flows:

|                                                      |                    |  |            |  |           
|----------------------------------------------------- | ------------------ |  | ---------- |  | ----------
|                                                      | As of December 31,
|                                                      | 2005               |  | 2006       |  | 2007      
|                                                      | ThCh$              |  | ThCh$      |  | ThCh$     
|Cash and Cash Equivalents                             |                    |  |            |  |           
|Cash                                                  | 4,695,431          |  | 5,083,958  |  | 10,410,066
|Time deposits (Note 5)                                | 103,217            |  | 280,907    |  | 7,883     
|Mutual funds (Note 6)                                 | 164,483            |  | 328,664    |  | 780,804   
|Securities purchased under resell agreements (Note 9) | 3,580,151          |  | 13,150,142 |  | -         
|Total                                                 | 8,543,282          |  | 18,843,671 |  | 11,198,753



e) Time deposits and marketable securities

Time deposits denominated in UF are stated at cost plus interest and indexation accrued at each year-end.

Marketable securities consist in Mutual Funds and are valued at the quoted redemption value of the respective share at each balance sheet date.



f)  Accounts receivable and allowance for accounts receivable

Accounts receivables are shown net of the allowance for doubtful accounts. Allowances are recorded at the end of each period for those balances considered to be of doubtful recovery based on an analysis of aging of balances and the evaluation of customers’ financial standing.



g) Inventories

Inventories of finished products, work in progress and by-products are valued at production cost including indirect manufacturing costs plus price-level restatement. Inventories of raw materials, materials in warehouse and materials in transit are valued at price-level restated cost. Inventory values do not exceed their estimated net realizable value. Reductions in inventory are valued using the weighted average method. The related obsolescence allowances have been presented as a deduction from inventories.

Inventories with a turnover exceeding one year are classified as Other long-term assets and are presented net of respective obsolescence allowances.



h) Property, plant and equipment

Property, plant and equipment are stated at cost plus price-level restatement. In accordance with instructions issued by the SVS, property, plant and equipment include also effects of the revaluation increment arising from the technical appraisals of certain assets which were carried out in 1979 and 1986.

Assets acquired under capital lease contracts are recorded at their present value, calculated using the contracted monthly installments plus the purchase option and using the interest rate implicit in the respective contract. The corresponding liability is shown net of deferred interest. Assets obtained under financial contracts are not the legal property of the Company until it exercises the related purchase option. Therefore, the Company cannot freely dispose of them. Included as part of accumulated depreciation is accumulated amortization related to capital lease fixed assets.

Property, plant and equipment are presented net of accumulated depreciation and impairment write-downs.

Depreciation of property, plant and equipment is determined using straight-line method based on the estimated useful lives of the assets. In accordance with Circular No. 1529 issued by the SVS depreciation amounts include respective portion of the technical appraisal revaluation.

The estimated useful lives of the principal categories of property, plant and equipment are as follows:



|                             | Estimated years of useful lives
|---------------------------- | -------------------------------
|Assets group                 |                                
|Buildings and Infrastructure | 20 to 70                       
|Installations                | 5 to 33                        
|Machinery and equipment      | 5 to 40                        
|Engine and Equipment         | 7                              
|Other fixed assets           | 2 to 10                        



Depreciation of temporarily inactive property, plant and equipment is classified under other non-operating expenses in the Consolidated Statement of Income.

The Company periodically evaluates the carrying amount of its property, plant and equipment in relation to the operating performance and future undiscounted cash flows of the underlying assets. An impairment loss is recognized in the event that the carrying amount of an asset may not be fully recoverable, when compared to the estimated future undiscounted cash flows expected from its use and its eventual disposition.  The Company has temporarily inactive or underutilized production facilities which are tested for impairment when the Company's management believes such underutilization constitutes a triggering event for the impairment test.



i)  Investments in related companies

Investments in related companies over which the Company has significant influence, are included under the caption Other assets and are recorded using the equity method. Accordingly, the Company’s proportional share in the net income (loss) of each investee is recognized in the non-operating income or expense on an accrual basis, after eliminating any unrealized gains and losses from transactions with the related companies.

Equity movements that do not affect the income of the related companies are shown proportionally as a charge or credit to the account other reserves in Shareholders’ equity.



j)  Other investments

Investments in equity instruments of entities, in which the Company has not more than 20% of the voting stock and which are considered to be permanent, are recorded at the lower of cost plus price-level restatement or market value. They are shown under the caption other assets. Dividends from such investments are recognized as income when received.



k)  Securities purchased under resell agreements

Securities purchased under resell agreements are valued at placement value plus accrued interest and indexation at year-end. These investments are presented in other current assets.



l)  Goodwill and negative goodwill

Prior to January 1, 2004, goodwill was recognized as the excess of the purchase price of companies acquired over their net book value; negative goodwill arose when net book value exceeded the purchase price of companies acquired. Chilean GAAP also provided at that time that goodwill and negative goodwill amortization may be accelerated if the proportional net income or net loss of the investee exceeds the respective straight-line amortization amount.

Beginning January 1, 2004, the Company adopted Technical Bulletin No. 72 of the Chilean Association of Accountants, which prospectively changed the basis for determining amounts of goodwill and negative goodwill generated in transactions after January 1, 2005. This new standard requires allocation of the purchase price based on the fair value of the identifiable assets acquired and identifiable liabilities assumed. Both goodwill and negative goodwill are amortized over the expected period of return of the investment that corresponds to a useful life of 5 to 20 years.Negative goodwill is amortized over the estimated useful life of the underlying non-monetary assets acquired.

Goodwill and negative goodwill may also be recorded in the purchase of investments accounted for by the equity method.



m)  Intangibles

Trademarks are recorded at historical cost plus price-level restatement, and are amortized on a straight-line basis over the period in which they are expected to benefit the Company; however no longer than 40 years in accordance with Technical Bulletin No. 55 of the Chilean Association of Accountants.



n)  Bonds payable

Bonds payable are included in liabilities at their par value plus accrued indexation and interest. The discount and deferred debt issuance costs that arises from the difference between par value and the proceeds received is included in other assets and is amortized using the straight-line method over the term of the bond. The amount of the interest recognized does not differ materially from amounts that would have been recognized under the effective rate method.



o)  Staff severance indemnities

The Company has obligations for staff severance indemnities which are recognized using an accrued cost of the benefit method, i.e. calculating present value of the estimated future payments of the benefits and assuming real annual discount ratesusing the accrued cost of the benefit method.



p)  Accrued vacation expense

The cost of employee vacations is recognized in the financial statements on an accrual basis.



q)  Current and deferred income taxes

Current income tax provisions are recognized by the group companies on the basis of respective tax regulations in each jurisdiction where the Company operates.

The Company records income taxes in accordance with Technical Bulletin No. 60 (“BT 60”) and complementary technical bulletins thereto issued by the Chilean Association of Accountants, and with SVS Circulars No. 1466 and No. 1560, recognizing, using the liability method, the deferred tax effects of temporary differences between the financial and tax values of assets and liabilities. As a transitional provision on January 1, 2000, the date of adoption of BT 60, a contra asset or liability has been recorded offsetting the effects of the deferred tax assets and liabilities not recorded prior to January 1, 2000. Such contra assets or liabilities must be amortized to income over the estimated average reversal periods corresponding to the underlying temporary differences to which the deferred tax asset or liability related were calculated using the tax rates that were expected to be in effect at the time of reversal.

To the extent necessary, deferred tax assets are further reduced by a valuation allowance, if based on the weight of available evidence; it is more likely than not that some portion of the deferred tax assets will not be realized.



r)  Revenue recognition

Revenue is recognized when goods are delivered to customers or the services are rendered. Unearned revenues related to sales that the Company has invoiced and collected in advance is not recognized until the related goods are delivered.



s)  Translation of foreign currency financial statements

In accordance with Technical Bulletin No. 64 issued by the Chilean Association of Accountants, the financial statements of foreign subsidiaries whose activities do not constitute an extension of the Chilean operations, or which operate in countries that are exposed to significant risks, restrictions or inflation/exchange fluctuations are remeasured using the US dollar as the functional currency and then translated into Chilean pesos at the year end exchange rate.

Accordingly, the financial statements of the Company’s subsidiaries in Argentina, Brazil and Peru are remeasured into US dollars as follows:

- Monetary assets and liabilities are translated at year-end rates of exchange between the US dollar and the local currency.
- All non-monetary assets and liabilities and shareholders’ equity are translated at historical rates of exchange between the US dollar and the local currency.
- Income and expense accounts, except for such accounts that are calculated using historical rates (e.g. depreciation and amortization) are translated at average rates of exchange between the US dollar and the local currency.
- Any exchange differences are included in the results of operations for the period.

Investments in foreign subsidiaries and equity method investees are price-level restated, the effects of which are reflected in income, while the effects of the foreign exchange gains or losses between the Chilean peso and the US dollar on the foreign investment measured in US dollars, are reflected in equity in Cumulative translation adjustment.

In addition as permitted by the Technical Bulletin No. 64, the Company designated certain debt instruments as hedges of net foreign investments. Exchange gains and losses resulting from translation of hedging instruments are recorded directly in Shareholders’ equity in the Cumulative translation adjustment.



t)  Derivative instruments

The Company enters into foreign currency forward contracts, interest rate swap contracts and option contracts to hedge against the risk of fluctuations in exchange rates between the Chilean peso, US dollar and Brazilian Real, changes in interest rates and changes in market prices of commodities. These
instruments are recorded in accordance with Technical Bulletin No. 57.

Derivativecontracts that are designated as hedges of existing assets or liabilities are valued at their respective fair values. No adjustment to the hedged item’s carrying amount is recorded. If the net variation in the value of the derivative instrument and the hedged item results in a loss, the difference is recorded in the operating income. If the net variation in the value of the derivative instrument and the hedge item results in a gain, the net difference is deferred and recorded as an unrealized gain in the balance sheet.

Derivative contracts that are designated as hedges of future cash flows or transactions are valued at their
respective fair values. Variation in the fair value are deferred and recorded as unrealized gains or losses
in the income statement until the underlying transaction is realized.



u)  Share issuance costs

The costs of stock issuance and placement related to capital increases have been recorded in Shareholders’ equity under the caption Contributed surplus.



v)  Stock based compensation plans

The company accounts for stock-based compensation plans in accordance with the International Financial Reporting Standard No. 2 Share-based payment, showing the effect of recording the fair value of the options granted as administrative and selling expenses on a straight-line basis over the period between the date of granting of these options to the date that these become vested.



Note 3 - Price-level restatement



The application of price-level restatement as described in note 2 b) resulted in net (charges) credits to income, the effect of which is summarized as follow:

|                                                       |                                    |  |             |  |             
|------------------------------------------------------ | ---------------------------------- |  | ----------- |  | ------------
|                                                       | Credit (charge) as of December 31,
|                                                       | 2005                               |  | 2006        |  | 2007        
|                                                       | ThCh$                              |  | ThCh$       |  | ThCh$       
|                                                       |                                    |  |             |  |             
|Property, plant and equipment, net                     | 3,131,490                          |  | 1,796,252   |  | 6,042,439   
|Inventories, net                                       | 553,251                            |  | 176,986     |  | 115,104     
|Other current assets                                   | 343,980                            |  | 168,421     |  | 652,566     
|Other assets                                           | 4,569,677                          |  | 2,346,970   |  | 9,090,383   
|Other liabilities and minority interest                | (444,084)                          |  | (194,797)   |  | (923,181)   
|Shareholders’ equity, net                              | (6,162,598)                        |  | (4,706,719) |  | (18,661,661)
|Income and expense accounts                            | (322,664)                          |  | (321,156)   |  | (583,788)   
|Net adjustment of assets and liabilities indexed to UF | (3,861,972)                        |  | (991,579)   |  | (2,461,681) 
|Price-level restatement, net                           | (2,192,920)                        |  | (1,725,622) |  | (6,729,819) 



Note 4 - Foreign exchange differences

Foreign exchange differences are summarized as follows:

|                                                     |                                    |  |             |  |            
|---------------------------------------------------- | ---------------------------------- |  | ----------- |  | -----------
|                                                     | Credit (charge) as of December 31,
|                                                     | 2005                               |  | 2006        |  | 2007       
|                                                     | ThCh$                              |  | ThCh        |  | ThCh$      
|                                                     |                                    |  |             |  |            
|Cash and short-term investments                      | (59,321)                           |  | 342,274     |  | (5,659)    
|Accounts receivable                                  | (1,077,472)                        |  | 591,271     |  | (1,615,742)
|Other assets                                         | (298,082)                          |  | 261,085     |  | (257,055)  
|Bank loans                                           | 504,713                            |  | (564,581)   |  | 609,304    
|Other liabilities                                    | 922,729                            |  | (412,538)   |  | 963,908    
|Loss on hedging transactions                         | (2,005,024)                        |  | (2,357,775) |  | (1,093,377)
|Translation adjustments in foreign subsidiaries, net | 1,187,766                          |  | 2,499,664   |  | 5,332,868  
|                                                     | (824,691)                          |  | 359,400     |  | 3,934,247  



Note 5 – Time deposits

Time deposits are summarized as follows:

|                                          |                    |  |      
|----------------------------------------- | ------------------ |  | -----
|                                          | As of December 31,
|                                          | 2006               |  | 2007 
|                                          | ThCh$              |  | ThCh$
|                                          |                    |  |      
|Time deposits in other foreign currencies | 280,907            |  | 7,883
|Total time deposits                       | 280,907            |  | 7,883



Note 6 – Marketable securities

Marketable securities are summarized as follows:

|                            |                    |  |        
|--------------------------- | ------------------ |  | -------
|                            | As of December 31,
|                            | 2006               |  | 2007   
|                            | ThCh$              |  | ThCh$  
|                            |                    |  |        
|Mutual funds                | 328,664            |  | 780,804
|Total marketable securities | 328,664            |  | 780,804



Note 7 - Accounts receivable

a) Accounts receivable, net of allowances for doubtful accounts, are summarized as follows:

|                                                 |                    |  |            
|------------------------------------------------ | ------------------ |  | -----------
|                                                 | As of December 31,
|                                                 | 2006               |  | 2007       
|                                                 | ThCh$              |  | ThCh$      
|Trade accounts receivable                        | 94,154,288         |  | 93,594,643 
|Allowance for doubtful trade accounts receivable | (4,284,132)        |  | (3,579,120)
|Notes receivable                                 | 6,513,522          |  | 12,328,743 
|Allowance for doubtful notes receivables         | (954,920)          |  | (1,590,553)
|Other accounts receivable                        | 9,740,755          |  | 8,754,117  
|Allowance for doubtful other accounts            | (3,731,258)        |  | (2,252,771)
|Total accounts receivable, net                   | 101,438,255        |  | 107,255,059



b) Changes in short-term allowance for doubtful accounts receivable for the years ended December 31, 2005, 2006 and 2007 are as follows:

|                                            |                    |  |           |  |            
|------------------------------------------- | ------------------ |  | --------- |  | -----------
|                                            | As of December 31,
|                                            | 2005               |  | 2006      |  | 2007       
|                                            | ThCh$              |  | ThCh$     |  | ThCh$      
|Balance at the beginning of the year        | 6,692,602          |  | 9,001,652 |  | 8,970,310  
|Price-level restatement                     | (170,402)          |  | (155,525) |  | (319,902)  
|Effect of devaluation of foreign currencies | (712,483)          |  | 57,797    |  | 193,196    
|Reclassification from long-term (1)         | 3,492,484          |  | -         |  | -          
|Allowance established, net                  | 155,247            |  | 363,026   |  | 318,092    
|Write-offs                                  | (455,796)          |  | (296,640) |  | (1,739,252)
|Balance at the end of the year              | 9,001,652          |  | 8,970,310 |  | 7,422,444  

(1)  Amount was reclassified from the long-term allowance consistent with the corresponding balance of account receivable that was reclassified from long-term.

Changes in long-term allowance for doubtful accounts receivable for the years ended December 31, 2005, 2006 and 2007 are as follows:

|                                   |                    |  |       |  |      
|---------------------------------- | ------------------ |  | ----- |  | -----
|                                   | As of December 31,
|                                   | 2005               |  | 2006  |  | 2007 
|                                   | ThCh$              |  | ThCh$ |  | ThCh$
|                                   |                    |  |       |  |      
|Balance at the beginning of year   | 3,618,214          |  | -     |  | -    
|Price-level restatement            | (125,730)          |  | -     |  | -    
|Reclassification to short term (1) | (3,492,484)        |  | -     |  | -    
|Balance at the end of year         | -                  |  | -     |  | -    

(1)  Amount was reclassified to the short-term allowance for doubtful accounts consistent with the corresponding balance of account receivable that was reclassified to short-term.



Note 8 - Inventories

a) Inventories are summarized as follows:

|                           |                    |  |            
|-------------------------- | ------------------ |  | -----------
|                           | As of December 31,
|                           | 2006               |  | 2007       
|                           | ThCh$              |  | ThCh$      
|                           |                    |  |            
|Raw materials              | 28,274,878         |  | 34,451,200 
|Finished goods             | 40,662,641         |  | 44,977,146 
|Work-in-progress           | 24,443,883         |  | 24,252,396 
|Consumable materials       | 7,632,118          |  | 8,853,254  
|Supplies in transit        | 4,108,336          |  | 18,083,428 
|Supplies                   | 3,686,153          |  | 6,786,340  
|Sub-total                  | 107,833,809        |  | 137,403,764
|Allowance for obsolescence | (3,010,257)        |  | (2,524,029)
|Inventories, net           | 104,823,552        |  | 134,879,735



b) Changes in the allowance for obsolescence for the years ended December 31, 2005, 2006 and 2007 are as follows:

|                                            |                    |  |           |  |          
|------------------------------------------- | ------------------ |  | --------- |  | ---------
|                                            | As of December 31,
|                                            | 2005               |  | 2006      |  | 2007     
|                                            | ThCh$              |  | ThCh$     |  | ThCh$    
|                                            |                    |  |           |  |          
|Balance at beginning of year                | 3,316,166          |  | 3,042,582 |  | 3,010,256
|Price-level restatement                     | (115,234)          |  | (62,580)  |  | (207,410)
|Effect of devaluation of foreign currencies | (49,366)           |  | 115,024   |  | (29,076) 
|Allowance established                       | 315,951            |  | 559,125   |  | 300,723  
|Allowance released (1)                      | (279,946)          |  | (643,895) |  | (287,032)
|Write-offs                                  | (144,989)          |  | -         |  | (263,432)
|Balance at end of year                      | 3,042,582          |  | 3,010,256 |  | 2,524,029



1. Corresponds to the reversal of the allowance for obsolescence previously recorded for slow moving inventories that have been sold during the period. Such reversal is recognized as an adjustment to the cost basis of the item sold.

The Company’s inventory primarily consists of copper as a raw material and copper-based products. The costs and sales prices of respective products are directly linked to the commodity price, and fluctuations significantly affect the Company’s results.

The Company generally records inventory at net realizable value in accordance with to the accounting policy described in Note 2 g). The inventory covered by hedging agreements (detailed in Note 27) is recorded at fair value with the recognition of offsetting effects in income.



Note 9 – Other current assets

Other current assets are summarized as follows:



|                                                                  |                    |  |          
|----------------------------------------------------------------- | ------------------ |  | ---------
|                                                                  | As of December 31,
|                                                                  | 2006               |  | 2007     
|                                                                  | ThCh$              |  | ThCh$    
|Securities purchased under resell agreements (1)                  | 13,150,142         |  | -        
|Deposit in guarantee                                              | 726,791            |  | 1,362    
|Property, plant and equipment to be disposed of, net  (2) and (3) | 4,026,047          |  | 2,355,767
|Discount on bond issuance                                         | 168,993            |  | 168,387  
|Copper hedging agreement at fair value (4)                        | 1,117,676          |  | 1,728,667
|Other                                                             | 72,400             |  | 150,007  
|Total                                                             | 19,262,049         |  | 4,404,190

1. Details provided in the table below.
2. Shown net of adjustment to realization value of ThCh$ 275,462 (ThCh$ 318,399 as of December 31,  2006).
3. During 2007, the subsidiary Optel Brasil Ltda. reclassified assets in the amount of ThCh$ 1,070,314 related to the sale of the Aratú plant to other long-term assets.
4. Relates to the fair value of existing purchase hedging agreements (Asian options and Swap), which are detailed in Note 27 “Derivative Contracts”.

The detail of securities purchased under resell agreements to resell as of December 31, 2006 is as follows:



|                  |                 |                                    |          |             |          |           |                             |           
|----------------- | --------------- | ---------------------------------- | -------- | ----------- | -------- | --------- | --------------------------- | ----------
|                  |                 |                                    | Original | Transaction | Interest | Final     |                             | Market    
|Purchase Date     | Maturity Date   | Counterpart                        | currency | Amount      | rate     | value     | Description of Instrument   | Value     
|                  |                 |                                    |          | ThCh$       | %        | ThCh$     |                             | ThCh$     
|December 28, 2006 | January 8, 2007 | BBVA Corredores de Bolsa BHIF S.A. | Ch$      | 28,339      | 6.00     | 28,391    | Non-indexed promissory note | 28,353    
|December 28, 2006 | January 8, 2007 | BBVA Corredores de Bolsa BHIF S.A. | Ch$      | 197,005     | 6.00     | 197,366   | Non-indexed promissory note | 197,104   
|December 28, 2006 | January 8, 2007 | BBVA Corredores de Bolsa BHIF S.A. | Ch$      | 224,663     | 6.00     | 225,074   | Non-indexed promissory note | 224,774   
|December 28, 2006 | January 2, 2007 | BBVA Corredores de Bolsa BHIF S.A. | Ch$      | 43,469      | 6.00     | 43,520    | Non-indexed promissory note | 43,505    
|December 28, 2006 | January 2, 2007 | BBVA Corredores de Bolsa BHIF S.A. | Ch$      | 3,480       | 6.00     | 3,484     | Non-indexed promissory note | 3,483     
|December 28, 2006 | January 2, 2007 | BBVA Corredores de Bolsa BHIF S.A. | Ch$      | 2,333,667   | 6.00     | 2,336,389 | Non-indexed promissory note | 2,335,612 
|December 28, 2006 | January 2, 2007 | BBVA Corredores de Bolsa BHIF S.A. | Ch$      | 2,156,950   | 6.00     | 2,159,466 | Non-indexed promissory note | 2,158,748 
|December 28, 2006 | January 2, 2007 | BBVA Corredores de Bolsa BHIF S.A. | Ch$      | 939,835     | 6.00     | 940,931   | Non-indexed promissory note | 940,618   
|December 28, 2006 | January 8, 2007 | BCI corredores de Bolsa S.A.       | Ch$      | 974,091     | 6.24     | 975,779   | Non-indexed promissory note | 974,428   
|December 28, 2006 | January 8, 2007 | BCI corredores de Bolsa S.A.       | Ch$      | 3,249       | 6.24     | 3,254     | Non-indexed promissory note | 3,250     
|December 28, 2006 | January 2, 2007 | Banco Estado USD                   | US$      | 3,246,137   | 5.34     | 3,252,878 | Non-indexed promissory note | 3,252,692 
|December 28, 2006 | January 2, 2007 | Banco Estado USD                   | US$      | 13,048      | 5.34     | 13,076    | Non-indexed promissory note | 13,072    
|December 28, 2006 | January 8, 2007 | Banco Estado USD                   | US$      | 2,171,173   | 5.45     | 2,174,788 | Non-indexed promissory note | 2,172,159 
|December 28, 2006 | January 8, 2007 | Banco Estado USD                   | US$      | 1,617       | 5.45     | 1,621     | Non-indexed promissory note | 1,619     
|December 28, 2006 | January 8, 2007 | Banco Estado USD                   | US$      | 1,699       | 5.10     | 1,702     | Non-indexed promissory note | 1,700     
|December 28, 2006 | January 8, 2007 | Banco Estado USD                   | US$      | 798,803     | 5.10     | 799,933   | Non-indexed promissory note | 799,025   
|                  |                 |                                    |          |             |          |           | Total                       | 13,150,142

There are no securities purchased under resell agreements as of December 31, 2007.



Note 10 – Property, plant and equipment

Property, plant and equipment are presented net of write-downs of ThCh$ 2,395,193 and ThCh$ 2,301,648 as of December 31, 2006 and 2007, respectively, and are summarized as follows:



|                                                    |                    |  |              
|--------------------------------------------------- | ------------------ |  | -------------
|                                                    | As of December 31,
|                                                    | 2006               |  | 2007         
|                                                    | ThCh$              |  | ThCh$        
|                                                    |                    |  |              
|Land                                                | 12,575,994         |  | 14,964,573   
|Buildings and Infrastructure                        |                    |  |              
|Buildings and infrastructure                        | 57,878,851         |  | 62,031,258   
|Accumulated depreciation                            | (20,159,507)       |  | (20,974,956) 
|Subtotal buildings and infrastructure, net          | 37,719,344         |  | 41,056,302   
|Machinery and Equipment                             |                    |  |              
|Machinery and equipment                             | 230,935,810        |  | 243,153,800  
|Accumulated depreciation                            | (151,479,163)      |  | (161,495,251)
|Subtotal machinery and equipment, net               | 79,456,647         |  | 81,658,549   
|Other Property, Plant and Equipment                 |                    |  |              
|Leased assets                                       | 15,594,852         |  | 20,677,629   
|Furniture and fixtures                              | 3,814,496          |  | 3,849,055    
|Office equipment                                    | 7,223,552          |  | 7,031,656    
|Tools and others                                    | 1,712,532          |  | 1,657,119    
|Other property, plant and equipment                 | 6,741,173          |  | 7,047,131    
|Accumulated depreciation (1)                        | (14,287,360)       |  | (18,250,197) 
|Subtotal other property, plant and equipment, net   | 20,799,245         |  | 22,012,393   
|Revaluation from technical appraisals               |                    |  |              
|Land                                                | 3,319,549          |  | 3,109,992    
|Buildings and infrastructure                        | 8,871,219          |  | 7,980,352    
|Machinery and equipment                             | 1,846,393          |  | 1,819,857    
|Accumulated depreciation                            | (5,691,809)        |  | (5,652,921)  
|Subtotal revaluation from technical appraisals, net | 8,345,352          |  | 7,257,280    
|Total property, plant and equipment, net            | 158,896,582        |  | 166,949,097  

(1) The total accumulated depreciation includes accumulated depreciation of leased assets of ThCh$ 1,769,709 and ThCh$ 3,065,113 as of December 31, 2006 and 2007, respectively.

Depreciation expense is summarized as follows:



|                                                        |                                 |  |            |  |           
|------------------------------------------------------- | ------------------------------- |  | ---------- |  | ----------
|                                                        | For the year ended December 31,
|                                                        | 2005                            |  | 2006       |  | 2007      
|Included within the following income statement caption: | ThCh$                           |  | ThCh$      |  | ThCh$     
|                                                        |                                 |  |            |  |           
|Cost of sales                                           | 11,630,565                      |  | 12,848,563 |  | 14,438,869
|Administrative and selling expenses                     | 698,261                         |  | 1,533,587  |  | 1,346,183 
|Sub total                                               | 12,328,826                      |  | 14,382,150 |  | 15,785,052
|                                                        |                                 |  |            |  |           
|Non-operating expense                                   | 1,464,358                       |  | 973,654    |  | 539,132   
|Total                                                   | 13,793,184                      |  | 15,355,804 |  | 16,324,184

No financing costs were capitalized to property, plant and equipment during 2005, 2006 and 2007. The Company recorded impairment losses related to its property, plant and equipment amounting to ThCh$ 264,208, ThCh$ 1,001,621 and ThCh$ 163,842 during 2005, 2006 and 2007, respectively.

a) Assets to be disposed of

Property, plant and equipment to be disposed of consist mainly of land and buildings which are not in Madeco’s core business. The Company is in the process of disposing those assets normally by sale taking decision about selling based on the real estate market conditions.

As of December 31, 2006 and 2007, the detail of property, plant and equipment held for sale, after adjustments to net realizable value was as follows:



|                                                           |                    |  |          
|---------------------------------------------------------- | ------------------ |  | ---------
|                                                           | As of December 31,
|                                                           | 2006               |  | 2007     
|                                                           | ThCh$              |  | ThCh$    
|                                                           |                    |  |          
|Building Vitacura (Chile)                                  | 1,100,836          |  | 1,096,889
|Land in Via Matoim 902 (Aratú plant) (Brazil) (1)          | 1,231,644          |  | -        
|Machinery and equipment Optel Ltda. (Brazil)               | 1,098,750          |  | 954,829  
|Other                                                      | 594,817            |  | 304,049  
|Subtotal current assets (Note 9)                           | 4,026,047          |  | 2,355,767
|                                                           |                    |  |          
|Land at Vicuña Mackenna 4665 (Chile)                       | 1,056,935          |  | 1,056,935
|Land and building at Lomas de Zamora (Argentina)           | 1,281,994          |  | 1,070,032
|San Luis plant (Argentina)                                 | 235,353            |  | 204,524  
|Land in Via Matoim 902 (Aratú plant) (Brazil) (1)          | -                  |  | 1,070,314
|Machinery and equipment Laton (Chile)                      | 550,559            |  | 338,273  
|Other                                                      | 526,742            |  | 441,600  
|Subtotal non-current assets (Note 13)                      | 3,651,583          |  | 4,181,678
|Total property, plant and equipment to be disposed of, net | 7,677,630          |  | 6,537,445

Property, plant and equipment held for sale are recorded at their net realizable values and include allowances of ThCh$ 318,399 and ThCh$ 275,462 related to current assets, and of ThCh$ 5,536,351 and ThCh$ 4,760,063 related to non-current assets as of December 31, 2006 and 2007, respectively.

For the years ended December 31, 2005, 2006 and 2007, the Company recognized impairment charges (net realizable value) related to its Property, plant and equipment held for sale of ThCh$ 265,767, ThCh$ 315,422 and for ThCh$ 0, respectively.

(1)  During 2007, the amount of ThCh$ 1,070,314, related to assets for sale of the subsidiary Ficap S.A., was reclassified to Other assets.



1. Leaseback transactions

In connection with the restructuring of its liabilities, on March 30, 2001, the subsidiary Alusa S.A., entered into a sale and leaseback contract for certain assets located in Quilicura (Santiago, Chile) with Corpbanca. The main features of the contract are as follows:

Seller     :                                                                      Alusa S.A.
Purchaser    :                                                                Corpbanca
Assets involved    :              Buildings and plant located in Quilicura
Purchase price    :                                                      UF 414,597
Final value of contract   :                                            UF 641,265
Number of installments   :                                            180 months
Contract period    :                March 30, 2001 to March 30, 2016
Interest rate    :                                  6.53% semiannual (variable)

This transaction generated no effect on income.



On May 5, 2006, the related agreement was amended in respect to installments and interest rates. The new characteristics of this agreement are as follows:

Seller     :                                                                            Alusa S.A.
Purchaser    :                                                                     Corpbanca
Assets involved    :                      Building and plant located in Quilicura
Principal amount   :                                                         U.F. 306,983
Nominal value of agreement  :                                         U.F. 390,131
No. of installments   :                                               20 (semi-annually)
Period     :                                          May 16, 2006 to May 16, 2016
Fixed interest rate   :                                                                  4.80%



Note 11 – Investments in related companies

The participation owned and carrying values of investments in related companies as of December 31, 2006 and 2007 are as follows:



|                             |                  |  |                    |  |           |  |          
|---------------------------- | ---------------- |  | ------------------ |  | --------- |  | ---------
|                             | Percentage owned |  | As of December 31,
|                             | 2006             |  | 2007               |  | 2006      |  | 2007     
|                             | %                |  | %                  |  | ThCh$     |  | ThCh$    
|Related company              |                  |  |                    |  |           |  |          
|Peruplast S.A. (1)           | 25.00%           |  | -                  |  | 4,343,197 |  | -        
|Tech Pak S.A. (1)            | 25.61%           |  | -                  |  | 2,968,464 |  | -        
|Colada Continua Chilena S.A. | 41.00%           |  | 41.00%             |  | 1,624,387 |  | 1,573,553
|Cobrecon Peru S.A.           | 33.33%           |  | 33.33%             |  | 713,418   |  | 614,654  
|Total                        |                  |  |                    |  | 9,649,466 |  | 2,188,207

(1) As of December 31, 2007, these companies are included in the consolidation as described in Note 2a).



The Company’s equity participation in the net income of the investees is as follows:



|                             |                                  |  |         |  |         
|---------------------------- | -------------------------------- |  | ------- |  | --------
|                             | For the years ended December 31,
|                             | 2005                             |  | 2006    |  | 2007    
|                             | ThCh$                            |  | ThCh$   |  | ThCh$   
|Related company              |                                  |  |         |  |         
|                             |                                  |  |         |  |         
|Peruplast S.A.               | 218,255                          |  | 407,870 |  | -       
|Tech Pak S.A.                | 61,540                           |  | 321,489 |  | -       
|Colada Continua Chilena S.A. | 886                              |  | 507     |  | (50,835)
|Cobrecon Peru S.A.           | 27,532                           |  | 9,340   |  | (5,315) 
|Total                        | 308,213                          |  | 739,206 |  | (56,150)



Note 12 – Goodwill and Negative goodwill

Goodwill as of December 31, 2006 and 2007 and related amortization charges in the years ended December 31, 2005, 2006 and 2007 are as follows:



|                   |                                              |  |                                |  |           |  |            |  |           
|------------------ | -------------------------------------------- |  | ------------------------------ |  | --------- |  | ---------- |  | ----------
|                   | Amortization for the year ended December 31, |  | Net Balance as of December 31,
|Company            | 2005                                         |  | 2006                           |  | 2007      |  | 2006       |  | 2007      
|                   | ThCh$                                        |  | ThCh$                          |  | ThCh$     |  | ThCh$      |  | ThCh$     
|                   |                                              |  |                                |  |           |  |            |  |           
|Alumco S.A.        | 93,966                                       |  | 93,966                         |  | 93,966    |  | 762,878    |  | 668,910   
|Alupack S.A. (1)   | 11,461                                       |  | 11,461                         |  | 11,461    |  | 34,384     |  | 22,923    
|Ficap S.A.         | 1,450,225                                    |  | 1,475,522                      |  | 1,282,248 |  | 15,738,908 |  | 12,395,061
|Cedsa S.A. (2)     | -                                            |  | -                              |  | 44,176    |  | -          |  | 1,016,049 
|Indeco S.A.        | 149,048                                      |  | 151,641                        |  | 131,780   |  | 1,697,451  |  | 1,343,325 
|Peruplast S.A. (2) | 18,489                                       |  | 18,811                         |  | -         |  | 174,005    |  | -         
|Tech Pak S.A. (2)  | 9,327                                        |  | 9,488                          |  | 22,342    |  | 87,766     |  | 223,081   
|Vigaflex S.A. (1)  | 87,717                                       |  | 87,717                         |  | 87,717    |  | 263,150    |  | 175,434   
|Total              | 1,820,233                                    |  | 1,848,606                      |  | 1,673,690 |  | 18,758,542 |  | 15,844,783



Negative goodwill as of December 31, 2006 and 2007 and related amortization in the years ended December 31, 2005, 2006 and 2007 are as follows:



|                   |                                              |  |                                |  |        |  |         |  |          
|------------------ | -------------------------------------------- |  | ------------------------------ |  | ------ |  | ------- |  | ---------
|                   | Amortization for the year ended December 31, |  | Net Balance as of December 31,
|Company            | 2005                                         |  | 2006                           |  | 2007   |  | 2006    |  | 2007     
|                   | ThCh$                                        |  | ThCh$                          |  | ThCh$  |  | ThCh$   |  | ThCh$    
|Peruplast S.A. (2) | -                                            |  | -                              |  | 64,500 |  | -       |  | 1,356,858
|Optel Brasil Ltda. | 20,940                                       |  | 28,409                         |  | 24,688 |  | 518,479 |  | 425,875  
|Total              | 20,940                                       |  | 28,409                         |  | 89,188 |  | 518,479 |  | 1,782,733

1. Effective January 1, 2005, the amortization period of goodwill was changed from 10 to 5 years. The change resulted in an additional charge to income of ThCh$ 48,150 for the year ended December 31, 2005. All other amortization periods remained unchanged and amount to 20 years.

1. During the first quarter of 2007, Madeco S.A. acquired Cedsa S.A. (Colombia). In addition, the subsidiary Alusa S.A. increased its participations in Peruplast S.A. and Tech Pak S.A. (Peru), as described in Note 2a), which generated additional goodwill and negative goodwill.



Note 13 – Other non-current assets

Other non-current assets are summarized as follows:



|                                                                         |                    |  |           
|------------------------------------------------------------------------ | ------------------ |  | ----------
|                                                                         | As of December 31,
|                                                                         | 2006               |  | 2007      
|                                                                         | ThCh$              |  | ThCh$     
|                                                                         |                    |  |           
|Recoverable tax incentives in Argentina (1)                              | 440,533            |  | 631,486   
|Bond discount                                                            | 666,583            |  | 505,160   
|Property, plant and equipment to be disposed of (held-for-sale), net (2) | 3,651,583          |  | 4,181,678 
|Lawsuit deposits                                                         | 1,073,478          |  | 7,407,045 
|Bond issuance cost                                                       | -                  |  | 155,788   
|Recoverable minimum tax in Argentina                                     | 455,597            |  | 169,281   
|Inventories, net (3)                                                     | 330,251            |  | 304,968   
|Other                                                                    | 108,562            |  | 65,499    
|Total other non-current assets                                           | 6,726,587          |  | 13,420,905

1. These amounts are presented net of an allowance for doubtful accounts of ThCh$ 107,550 as of December 31, 2007 (ThCh$ 2,128,600 as of December 31, 2006).
2. These amounts are presented net of adjustments to realizable value of ThCh$ 5,536,351 and ThCh$ 4,760,063 as of December 31, 2006 and 2007, respectively.
3. These inventories have a rotation of more than one year and are presented at net realizable values.



Note 14 – Short-term bank loans

a) Short-term bank loans are summarized as follows:

|                             |                    |  |           
|---------------------------- | ------------------ |  | ----------
|                             | As of December 31,
|                             | 2006               |  | 2007      
|                             | ThCh$              |  | ThCh$     
|Payable in:                  |                    |  |           
|Chilean pesos                | 1,263,631          |  | 3,943,396 
|United States dollars        | 12,126,643         |  | 25,536,723
|Loans in Euros               | 53,411             |  | -         
|Inflation-indexed units (UF) | -                  |  | 1,177,760 
|Other foreign currencies     | 3,193,122          |  | 4,419,213 
|Total short-term bank loans  | 16,636,807         |  | 35,077,092
|Total outstanding principal  | 16,346,235         |  | 34,559,177



|                                          |                    |  |      
|----------------------------------------- | ------------------ |  | -----
|                                          | As of December 31,
|                                          | 2006               |  | 2007 
|                                          | %                  |  | %    
|Year-end weighted average interest rates: |                    |  |      
|Loans in Chilean pesos                    | 6.11               |  | 7.43 
|Loans in United States dollars            | 5.93               |  | 6.63 
|Loans in UF                               | -                  |  | 4.08 
|Loans in Euros                            | 6.45               |  | -    
|Loans in other foreign currencies         | 7.66               |  | 13.77



b) Current portion of long-term liabilities is summarized as follows:

|                                              |                    |  |           
|--------------------------------------------- | ------------------ |  | ----------
|                                              | As of December 31,
|                                              | 2006               |  | 2007      
|                                              | ThCh$              |  | ThCh$     
|Payable in:                                   |                    |  |           
|Inflation-indexed units (UF)                  | 3,306,812          |  | 1,662,449 
|United States dollars                         | 9,311,295          |  | 5,413,914 
|Other foreign currencies                      | 4,824,551          |  | 10,575,564
|Total current portion of long-term bank loans | 17,442,658         |  | 17,651,927
|Total outstanding principal                   | 16,971,123         |  | 17,486,151
|Average annual interest rate %                | 7.98               |  | 8.89      



Note 15 – Accrued liabilities and provisions

a) Current accrued liabilities and provisions are as follows:

|                                                 |                    |  |           
|------------------------------------------------ | ------------------ |  | ----------
|                                                 | As of December 31,
|                                                 | 2006               |  | 2007      
|                                                 | ThCh$              |  | ThCh$     
|                                                 |                    |  |           
|Accrued employee vacation expenses               | 2,165,789          |  | 2,750,932 
|Remuneration and consulting services             | 3,001,240          |  | 3,428,769 
|Staff severance indemnities, short-term          | 945,328            |  | 1,015,322 
|Project expenses, suppliers and other            | 833,864            |  | 997,546   
|Municipal taxes and others                       | 692,584            |  | 670,023   
|Freight                                          | 313,390            |  | 357,853   
|Electricity consumed and other basic services    | 334,102            |  | 458,359   
|Import and export costs                          | 78,306             |  | 252,521   
|Lawsuits pending (Argentina)                     | 245,439            |  | 1,468,144 
|Directors’ benefits                              | -                  |  | 491,502   
|Others                                           | 100,693            |  | 223,794   
|Total current accrued liabilities and provisions | 8,710,735          |  | 12,114,765



b) Long-term accrued liabilities and provisions are as follows:

|                                                   |                    |  |          
|-------------------------------------------------- | ------------------ |  | ---------
|                                                   | As of December 31,
|                                                   | 2006               |  | 2007     
|                                                   | ThCh$              |  | ThCh$    
|                                                   |                    |  |          
|Staff severance indemnities, long-term             | 1,204,647          |  | 1,034,832
|Provisions for pending lawsuits (1)                | 2,304,830          |  | 2,669,132
|Municipal taxes and others                         | 1,242,108          |  | 766,613  
|Customs obligations                                | 1,133,605          |  | -        
|Other                                              | 23,919             |  | 18,531   
|Total long-term accrued liabilities and provisions | 5,909,109          |  | 4,489,108

1. This item includes mainly provision for pending lawsuits and unpaid settlements with current employees, which will be paid at their retirement. The liability is stated at present value applying an annual discount rate of 7% and considering the years remaining to estimated retirement dates.



Note 16 – Staff severance indemnities

Staff severances indemnities are presented as described in Note 2 o) and are summarized as follow:

|                                                           |                    |  |            
|---------------------------------------------------------- | ------------------ |  | -----------
|                                                           | As of December 31,
|                                                           | 2006               |  | 2007       
|                                                           | ThCh$              |  | ThCh$      
|                                                           |                    |  |            
|Balance at the beginning of period                         | 1,960,098          |  | 2,001,839  
|Price-level restatement                                    | 7,201              |  | 57,050     
|Provisions established                                     | 1,854,366          |  | 2,317,450  
|Payments during the period                                 | (1,671,690)        |  | (2,326,185)
|Balance at the period-end                                  | 2,149,975          |  | 2,050,154  
|                                                           |                    |  |            
|Presented in balance sheet in:                             |                    |  |            
|Current liabilities - accrued liabilities and provisions   | 945,328            |  | 1,015,322  
|Long-term liabilities - accrued liabilities and provisions | 1,204,647          |  | 1,034,832  
|Total                                                      | 2,149,975          |  | 2,050,154  



Note 17 – Long-term debt and bonds payable

a) Long-term liabilities with banks and financial institutions as of December 31, 2006 and 2007 are as follows:

|                                 |                       |               |               |               |               |           |                |               
|-------------------------------- | --------------------- | ------------- | ------------- | ------------- | ------------- | --------- | -------------- | --------------
|                                 |                       | Average       |               |               |               |           | Total          | Total         
|Bank                             | Currency or           | annual        | More than 1   | More than 2   | More than 3   | More than | as of December | as of December
|or financial institution         | indexation            | interest rate | up to 2 years | up to 3 years | up to 5 years | 5  years  | 31, 2007       | 31, 2006      
|                                 |                       | %             | ThCh$         | ThCh$         | ThCh$         | ThCh$     | ThCh$          | ThCh$         
|                                 |                       |               |               |               |               |           |                |               
|Banks in Chile                  
|Banco Estado de Chile            | Indexed Chilean Pesos | 5.08          | 486,082       | 486,080       | 102,030       | -         | 1,074,192      | 2,156,764     
|Banco Estado de Chile            | US dollars            | -             | -             | -             | -             | -         | -              | 285,895       
|BBVA                             | US dollars            | -             | -             | -             | -             | -         | -              | 1,184,416     
|Banco de Crédito e Inversiones   | Indexed Chilean Pesos | 5.49          | 252,602       | 252,601       | -             | -         | 505,203        | 760,534       
|Bank Boston                      | US dollars            | -             | -             | -             | -             | -         | -              | 759,501       
|Banco de Chile                   | Indexed Chilean Pesos | 5.49          | 368,798       | 368,796       | -             | -         | 737,594        | 1,701,170     
|Banco del Desarrollo             | Indexed Chilean Pesos | 6.37          | 596,268       | 795,024       | -             | -         | 1,391,292      | 2,287,147     
|Scotiabank                       | US dollars            | -             | -             | -             | -             | -         | -              | 2,450,514     
|Banco Security                   | Indexed Chilean Pesos | 4.86          | 666,015       | 666,013       | -             | -         | 1,332,028      | 3,500,936     
|                                 |                       |               |               |               |               |           |                |               
|Banks in Brazil:                 |                       |               |               |               |               |           |                |               
|Banco Itaú                       | Other currency        | -             | -             | -             | -             | -         | -              | 8,312,287     
|Itaú Finame                      | Other currency        | 11.95         | 4,698,571     | -             | -             | -         | 4,698,571      | -             
|Bndes                            | Other currency        | 8.85          | 1,105,087     | -             | 1,425,333     | -         | 2,530,420      | 205,218       
|Citibank                         | US dollars            | 5.12          | 1,480,700     | -             | -             | -         | 1,480,700      | -             
|Unibanco                         | US dollars            | 6.87          | 2,682,135     | -             | -             | -         | 2,682,135      | 1,293,833     
|                                 |                       |               |               |               |               |           |                |               
|Banks in other countries:        |                       |               |               |               |               |           |                |               
|Banco Estado New York            | US dollars            | 5.4           | 1,526,162     | 1,526,162     | 763,080       | -         | 3,815,404      | 6,146,710     
|Itaú Finame                      | US dollars            | 5.4           | 759,670       | 759,670       | 379,835       | -         | 1,899,175      | -             
|Scotiabank - Peru                | US dollars            | 6.1           | 795,024       | 795,024       | 1,590,048     | -         | 3,180,096      | -             
|Crédito Peru                     | US dollars            | 7.04          | 2,948,216     | 2,948,216     | 3,204,942     | -         | 9,101,374      | 7,433,229     
|BBVA - Cayman Islands            | US dollars            | 5.4           | 745,336       | 745,336       | 372,668       | -         | 1,863,340      | 3,001,879     
|Bank Of America - Cayman Islands | US dollars            | -             | -             | -             | -             | -         | -              | 3,059,618     
|Total                            |                       |               | 19,110,666    | 9,342,922     | 7,837,936     | -         | 36,291,524     | 44,539,651    



b) Bonds have been issued and are payable by the following Group companies:

|                      |                    |  |            
|--------------------- | ------------------ |  | -----------
|                      | As of December 31,
|                      | 2006               |  | 2007       
|                      | ThCh$              |  | ThCh$      
|Company               |                    |  |            
|Madeco                | 26,595,574         |  | 21,704,342 
|Total                 | 26,595,574         |  | 21,704,342 
|Less: Current portion | (4,872,734)        |  | (5,081,276)
|Long-term portion     | 21,722,840         |  | 16,623,066 



Madeco S.A. issued the bonds in December 2004 under the following terms:

Amount issued :                                                               UF 1,800,000 composed of 360 Series D bonds of UF 5,000 each.
Term :                                                                                                                                                                 Seven years.
Principal amortization :                                                                           Fourteen semi-annual installments from June 10, 2005.
Interest rate :                 5.00% real annual rate calculated and paid semi-annually on the outstanding UF-denominated principal.



The scheduled principal payments on long-term debt, bonds payable, capital lease obligations and other long-term liabilities at December 31, 2007 are summarized as follows:

|                                                               |                   
|-------------------------------------------------------------- | ------------------
|                                                               | As of December 31,
|                                                               | 2007              
|                                                               | ThCh$             
|Principal payments during the fiscal years ending December 31, |                   
|2008                                                           | 25,045,630        
|2009                                                           | 28,683,340        
|2010                                                           | 14,347,034        
|2011                                                           | 11,853,126        
|2012 and thereafter                                            | 6,036,177         
|Total                                                          | 85,965,307        



Note 18 – Miscellaneous payables

Miscellaneous long-term payables as of December 31, 2006 and 2007 are summarized as follows:

|                          |                    |  |          
|------------------------- | ------------------ |  | ---------
|                          | As of December 31,
|                          | 2006               |  | 2007     
|                          | ThCh$              |  | ThCh$    
|                          |                    |  |          
|Capital lease obligations | 5,628,953          |  | 7,154,165
|Total                     | 5,628,953          |  | 7,154,165



Note 19 – Income taxes and other taxes

a) Net recoverable taxes are summarized as follows:



|                                       |                    |  |            
|-------------------------------------- | ------------------ |  | -----------
|                                       | As of December 31,
|                                       | 2006               |  | 2007       
|                                       | ThCh$              |  | ThCh$      
|Income taxes payable                   | (7,727,250)        |  | (6,463,676)
|Monthly income tax payments            | 7,746,531          |  | 7,747,167  
|Other credits against income taxes (1) | 9,904,815          |  | 11,172,802 
|Other recoverable taxes (2)            | 162,987            |  | 803,442    
|Recoverable income taxes, net          | 10,087,083         |  | 13,259,735 

1. The balance of other recoverable taxes is shown net of an allowance for unrecoverable taxes in Uruguay and Argentina of ThCh$ 1,555,651 as of December 31, 2007 (ThCh$ 560,096 as of December 31, 2006).

1. During 2007, minimal income taxes in Argentina of ThCh$ 1,555,651were reclassified from other long-term assets; these taxes are fully provided for.



b) The net income tax charge to the consolidated statement of income for each year is summarized as follows:

|                                                  |                                  |  |             |  |            
|------------------------------------------------- | -------------------------------- |  | ----------- |  | -----------
|                                                  | For the year ended  December 31,
|                                                  | 2005                             |  | 2006        |  | 2007       
|                                                  | ThCh$                            |  | ThCh$       |  | ThCh$      
|Current year provision for income tax             | (3,325,480)                      |  | (7,727,250) |  | (6,463,676)
|Income tax from previous year                     | 1,671,773                        |  | (24,308)    |  | 183,003    
|Deferred income tax                               | (2,012,101)                      |  | 290,874     |  | (406,636)  
|Tax benefit from (use of) tax loss carry forwards | 2,828,259                        |  | (2,528,416) |  | (2,417,450)
|Amortization of complementary accounts            | 1,046,451                        |  | (427,748)   |  | (569,933)  
|Valuation allowance on deferred tax assets        | (2,117,372)                      |  | 4,602,506   |  | 8,389,106  
|Other                                             | 300,067                          |  | 224,664     |  | 210,079    
|Net income tax expense                            | (1,608,403)                      |  | (5,589,678) |  | (1,075,507)

The income tax provision has been determined based on current tax laws in each country in which the Company operates.

c) Deferred income taxes



|                                                                 |                    |  |                   |  |              |  |             
|---------------------------------------------------------------- | ------------------ |  | ----------------- |  | ------------ |  | ------------
|                                                                 | As of December 31,
|                                                                 | Current portion    |  | Long-term portion
|Timing differences                                               | 2006               |  | 2007              |  | 2006         |  | 2007        
|                                                                 | ThCh$              |  | ThCh$             |  | ThCh$        |  | ThCh$       
|Accrued vacation expense                                         | 158,556            |  | 297,396           |  | -            |  | -           
|Unearned revenues                                                | 26,435             |  | 106,362           |  | -            |  | -           
|Allowance for doubtful accounts                                  | 1,421,487          |  | 1,248,585         |  | 30,004       |  | 3,095       
|Allowance for obsolescence of inventories                        | 1,328,890          |  | 656,206           |  | 102,547      |  | 18,918      
|Property, plant and equipment held for sale                      | 32,273             |  | 19,510            |  | 23,995       |  | 23,482      
|Write-downs of property, plant and equipment                     |                    |  | 491,419           |  | 219,280      |  | 466,211     
|Impairment of investment in Brazil                               | 1,565,742          |  | 1,907,846         |  | 5,349,618    |  | 3,703,466   
|Allowances for other current and long-term receivables           | 630,189            |  | 353,941           |  | -            |  | -           
|Adjustment to realization value of property, plant and equipment | 12,580             |  | 30,599            |  | -            |  | -           
|Deferred foreign currency exchange differences                   |                    |  | 72,416            |  | 491,634      |  | 352,337     
|Other provisions                                                 | 1,595,804          |  | 1,794,303         |  | 961,008      |  | 242,567     
|Property, plant and equipment in leasing                         | -                  |  | 102,217           |  | (3,569,756)  |  | (4,698,383) 
|Accelerated depreciation of property, plant and equipment        | -                  |  | (48,579)          |  | (3,507,747)  |  | (5,157,552) 
|Staff severance indemnities                                      | -                  |  | -                 |  | (589,939)    |  | (564,661)   
|Production costs                                                 | (476,285)          |  | (498,354)         |  | -            |  | -           
|Negotiation of bonds                                             | (33,037)           |  | (79,600)          |  | -            |  | (26,484)    
|Bond issuance costs                                              | -                  |  | -                 |  | (142,048)    |  | (114,503)   
|Other                                                            | (5,890)            |  | (756)             |  | (142,513)    |  | (301,935)   
|Subtotal                                                         | 6,256,744          |  | 6,249,086         |  | (774,007)    |  | (6,053,442) 
|Complementary accounts, net of amortization                      | -                  |  | -                 |  | 4,039,512    |  | 3,496,030   
|Valuation allowance                                              | (3,342,743)        |  | (2,846,184)       |  | (26,572,735) |  | (17,701,339)
|Tax loss carry forwards                                          | 3,073,126          |  | 7,429,913         |  | 22,780,910   |  | 16,491,639  
|Total deferred income taxes, net                                 | 5,987,127          |  | 10,832,815        |  | (526,320)    |  | (3,767,112) 



Note 20 – Shareholders’ equity

a) The changes in Shareholders' equity during each of the years 2005, 2006 and 2007 in historical Chilean pesos are summarized as follows:

|                                                                              |                  |                 |                     |                |                                   |                     |              |                                |             
|----------------------------------------------------------------------------- | ---------------- | --------------- | ------------------- | -------------- | --------------------------------- | ------------------- | ------------ | ------------------------------ | ------------
|                                                                              |                  |                 | Reserves            |                |                                   |                     |             
|                                                                              | Number of shares | Paid in capital | Contributed Surplus | Other Reserves | Cumulative Translation Adjustment | Accumulated Deficit | Dividends    | Net (loss) Income for the year | Total       
|Balances as of January 1, 2005                                                | 4,441,192,887    | 198,492,593     | 38,458,668          | 9,494,028      | 1,022,532                         | (97,467,650)        | -            | 8,512,367                      | 158,512,538 
|Allocation of 2004 net loss                                                   | -                | -               | -                   | -              | -                                 | 8,512,367           | -            | (8,512,367)                    | -           
|Capital increase                                                              | 907,197,242      | 44,017,210      | -                   | -              | -                                 | -                   | -            | -                              | 44,017,210  
|Share issuance expenses                                                       | -                | -               | (774,759)           | -              | -                                 | -                   | -            | -                              | (774,759)   
|Stock options issued                                                          | -                | -               | -                   | 263,500        | -                                 | -                   | -            | -                              | 263,500     
|Reclassification of capital increase year                                     | -                | (195,111)       | 195,111             | -              | -                                 | -                   | -            | -                              | -           
|Price-level restatement of equity accounts                                    | -                | 7,057,699       | 1,386,063           | 341,785        | 36,810                            | (3,202,389)         | -            | -                              | 5,619,968   
|Cumulative translation adjustments, net                                       | -                | -               | -                   | -              | (14,272,719)                      | -                   | -            | -                              | (14,272,719)
|Net income for the year                                                       | -                | -               | -                   | -              | -                                 | -                   | -            | 12,014,323                     | 12,014,323  
|Balances as of December 31, 2005                                              | 5,348,390,129    | 249,372,391     | 39,265,083          | 10,099,313     | (13,213,377)                      | (92,157,672)        | -            | 12,014,323                     | 205,380,061 
|Restatement of December 31, 2005 balances to December 31, 2007 constant pesos | -                | 267,825,948     | 42,170,699          | 10,846,662     | (14,191,167)                      | (98,977,340)        | -            | 12,903,383                     | 220,578,185 
|Balances as of January 1, 2006                                                | 5,348,390,129    | 249,372,391     | 39,265,083          | 10,099,313     | (13,213,377)                      | (92,157,672)        | -            | 12,014,323                     | 205,380,061 
|Allocation of 2005 net income                                                 | -                | -               | -                   | -              | -                                 | 12,014,323          | -            | (12,014,323)                   | -           
|Capital increase                                                              | 192,802,758      | 9,350,934       | -                   | -              | -                                 | -                   | -            | -                              | 9,350,934   
|Stock options issued                                                          | -                | -               | -                   | 275,040        | -                                 | -                   | -            | -                              | 275,040     
|Reclassification of stock options                                             | -                | -               | -                   | (263,500)      | -                                 | 263,500             | -            | -                              | -           
|Price-level restatement of equity accounts                                    | -                | 5,349,032       | 824,566             | 206,553        | (320,254)                         | (1,677,478)         | -            | -                              | 4,382,419   
|Cumulative translation adjustments, net                                       | -                | -               | -                   | -              | 1,962,753                         | -                   | -            | -                              | 1,962,753   
|Net income for the year                                                       | -                | -               | -                   | -              | -                                 | -                   | -            | 30,203,974                     | 30,203,974  
|Balances as of December 31, 2006                                              | 5,541,192,887    | 264,072,357     | 40,089,649          | 10,317,406     | (11,570,878)                      | (81,557,327)        | -            | 30,203,974                     | 251,555,181 
|Restatement of December 31, 2006 balances to December 31, 2007 constant pesos | -                | 283,613,711     | 43,056,283          | 11,080,894     | (12,427,123)                      | (87,592,569)        | -            | 32,439,068                     | 270,170,264 
|Balances as of January 1, 2007                                                | 5,541,192,887    | 264,072,357     | 40,089,649          | 10,317,406     | (11,570,878)                      | (81,557,327)        | -            | 30,203,974                     | 251,555,181 
|Allocation of 2006 net income                                                 | -                | -               | -                   | -              | -                                 | 30,203,974          | -            | (30,203,974)                   | -           
|Capital increase                                                              | 120,000,000      | 5,822,400       | -                   | -              | -                                 | -                   | -            | -                              | 5,822,400   
|Absorption of accumulated deficit                                             | -                | (51,353,352)    | -                   | -              | -                                 | 51,353,352          | -            | -                              | -           
|Interim dividend                                                              | -                | -               | -                   | -              | -                                 | -                   | (15,002,161) | -                              | (15,002,161)
|Stock options issued                                                          | -                | -               | -                   | 412,560        | -                                 | -                   | -            | -                              | 412,560     
|Price-level restatement of equity accounts                                    | -                | 15,787,785      | 2,966,634           | 763,487        | (856,245)                         | -                   | -            | -                              | 18,661,661  
|Cumulative translation adjustments, net                                       | -                | -               | -                   | -              | (17,216,035)                      | -                   | -            | -                              | (17,216,035)
|Net income for the year                                                       | -                | -               | -                   | -              | -                                 | -                   | -            | 19,660,064                     | 19,660,064  
|Balances as of December 31, 2007                                              | 5,661,192,887    | 234,329,190     | 43,056,283          | 11,493,453     | (29,643,158)                      | -                   | (15,002,161) | 19,660,064                     | 263,893,671 

b) Dividends

As required by the Chilean Law, unless otherwise decided by the unanimous vote of the holders of all of the issued and subscribed shares, open stock corporations must distribute a cash dividend in an amount equal to at least 30% of their net income for each year, as determined in accordance with Chilean GAAP, unless and except to the extent that the Company has accumulated losses.

The accumulated losses were absorbed as described in point d) below. On December 18, 2007, the Company declared to distribute an interim dividend of Ch$ 2.65 per share as a charge to net income for 2007, which was paid on January 18, 2008.

There are no additional restrictions on the payments of dividends under the terms of the various loan agreements with banks and other financial institutions.

c) Cumulative translation adjustment

Certain US dollar-denominated obligations are designated as economic hedges covering the exposure of foreign investments as permitted by Technical Bulletin No. 64. The exchange differences that relate to such obligations are charged directly against Shareholders’ equity to the Cumulative translation adjustment account. The detail of the cumulative translation adjustment for foreign currency gains and losses on liabilities and net investments measured in currencies other than the Chilean peso as of December 31, of each year are as follows:



|                                          |                                                     |  |                            |  |              |  |              |  |             
|----------------------------------------- | --------------------------------------------------- |  | -------------------------- |  | ------------ |  | ------------ |  | ------------
|                                          | (Charges) / credits for the year ended December 31, |  | Balance as of December 31,
|Item                                      | 2005                                                |  | 2006                       |  | 2007         |  | 2006         |  | 2007        
|                                          | ThCh$                                               |  | ThCh$                      |  | ThCh$        |  | ThCh$        |  | ThCh$       
|Alusa S.A.                                | (1,881,203)                                         |  | 206,951                    |  | (1,836,265)  |  | (2,745,190)  |  | (4,581,455) 
|Comercial Madeco S.A. (Argentina)         | (144,892)                                           |  | 143,294                    |  | 702,552      |  | (170,749)    |  | 531,803     
|Indeco S.A. (Peru).                       | (2,387,461)                                         |  | 286,580                    |  | (2,774,271)  |  | (1,565,528)  |  | (4,339,799) 
|Metalúrgica e Industrial S.A. (Argentina) | (449,420)                                           |  | 60,073                     |  | 439,404      |  | 11,280,493   |  | 11,719,897  
|Metal Overseas S.A. (Cayman Islands)      | (9,360,746)                                         |  | 1,238,469                  |  | (8,556,677)  |  | 908,528      |  | (7,648,149) 
|Cedsa Colombia                            | -                                                   |  | -                          |  | (620,642)    |  | -            |  | (620,642)   
|Indalum S.A.                              | (180,360)                                           |  | -                          |  | -            |  | 2,108        |  | 2,108       
|Decker-Indelqui S.A. (Argentina)          | (1,160,708)                                         |  | 140,928                    |  | (1,062,170)  |  | (720,917)    |  | (1,783,087) 
|Indelqui S.A. Argentina                   | -                                                   |  | -                          |  | (3,285,622)  |  | -            |  | (3,285,622) 
|Indeco S.A. (Peru)                        | (249,276)                                           |  | 31,702                     |  | (222,344)    |  | (67,391)     |  | (289,735)   
|Exchange gain (loss) on debt              | 163,259                                             |  | -                          |  | -            |  | (19,348,477) |  | (19,348,477)
|Total                                     | (15,650,807)                                        |  | 2,107,997                  |  | (17,216,035) |  | (12,427,123) |  | (29,643,158)

1. Capital increases and decreases

In May 2006, the Company subscribed and paid 192,802,758 shares for a total of ThCh$ 9,350,934 at a value of  Ch$ 48.50 per share (historical). This capital increase did not affect the contributed surplus.

On April 24, 2007, an extraordinary shareholders meeting agreed to reduce the capital by the absorption of the Company’s accumulated losses of ThCh$ 51,353,352.



e) Contributed surplus

The detail of contributed surplus in historic values is as follows:



|                                  |                              |  |       |  |      
|--------------------------------- | ---------------------------- |  | ----- |  | -----
|                                  | For years ended December 31,
|                                  | 2005                         |  | 2006  |  | 2007 
|                                  | ThCh$                        |  | ThCh$ |  | ThCh$
|                                  |                              |  |       |  |      
|Issuance of shares in 2005        | 209,549                      |  | -     |  | -    
|Share issuance costs  (Note 2 u)) | (832,092)                    |  | -     |  | -    
|Total                             | (622,543)                    |  | -     |  | -    

f) Stock options for the compensation plans

At the Extraordinary Shareholders’ Meeting of Madeco S.A., held on November 14, 2002, a stock-based compensation plan was agreed upon for the Company’s executives and, accordingly, 493,334,000 shares were allocated to a capital increase for that purpose.

On January 25, 2005, the Board of Directors granted a group of executives the option to subscribe for a total of 130,000,000 shares of the total shares authorized at a price of Ch$ 60 per share. This was formalized on May 20, 2005 through the signing of share subscription contracts with the following terms:

- The first share subscription to be exercised between September 30 and November 30, 2005.
- The second share subscription to be exercised between September 30 and November 30, 2006.
- The beneficiary to be an employee of Madeco on the respective exercise date.
- The option to be transferable only between September 30 and November 30, 2005 and 2006 (the periods for exercising the respective options).
- Should the controlling entity sell a third of its control of Madeco, the beneficiaries have the right to exercise the option within 60 days of the sale date.
- In the event of death of the beneficiary prior to September 30, 2005, the right to subscribe to extinguish. In the event of death after October 1, 2005, the relatives to have the right to subscribe and pay for the respective shares within 6 months from the date of death.
- The option to be exercised for all or part of the shares and to be paid for in cash.
- While the shares remain un-subscribed, they grant no economic or voting rights in the company and are not considered for quorum purposes at shareholders' meetings.

On August 31, 2005, the share subscription contracts signed on May 20, 2005 between Madeco S.A. and its executives were cancelled. The unamortized amount of the stock options was fully charged to income for the year.

During June 2006, the Company reclassified the respective amount of ThCh$ 263,500 from Other Reserves to Retained Earnings, in accordance with Excerpt No. 5908 issued by the Chilean Superintendency of Securities and Insurance dated June 5, 2006.

On May 30, 2006, the Board of Directors agreed to issue to a group of executives stock options for a total of 120,000,000 shares out of the shares issued for this purpose in 2002. The Share Subscription Agreement dated July 14, 2006 sets the exercise price at Ch$ 48.52 per share. Additional terms and conditions are as follows:

- The exercise period is from October 1, 2007 to November 12, 2007.
- The beneficiary must be working for Madeco on the day the exercise period begins, October 1, 2007.
- The option can not be transferred before the exercise period begins.
- Should the controlling entity sell to a third party the control over Madeco, the beneficiaries will have the right to exercise this option within a term of 60 days from the date of the sale
- In the event of the death of a beneficiary on a date prior to October 1, 2006, the subscription right extinguishes. In the event of death on a date subsequent to October 1, 2006, the relatives obtain the right of subscribing and paying the respective shares within a term of 6 months from the date of death.
- The beneficiary has the right to exercise all stock options or a portion; payment must be made in cash
- As long as the stock options are not exercised, they do not bear shareholders’ interest, i.e. economic benefits or voting rights.

As described in Note 2v), the Company determined the fair value of ThCh$ 687,600 for these options at the grant date using the "Black-Scholes-Merton" method and considering the following variables:

Share price at date in which the option is granted             Ch$ 48.52
Liquidity effect                                                             3.48%
Price for the year                                                    Ch$ 48.52
Annual expected volatility                                                        23.88%
Option life (in years)                                                       1.25
Expected dividends                                                           0%
Free-of-risk rate                                       5.73 for 15 months

Volatility has been estimated based on historical information in the absence of a market for these options. The fair value determined is recorded with a charge to Compensation cost and a credit to Other Reserves on a straight-line basis over the period between the grant date of the options and the date that these become vested. The charges to income for the year 2006 and 2007 were ThCh$ 295,393 and ThCh$ 412,560, respectively.



Note 21 – Foreign currency, UF indexed and CPI restated assets and liabilities

Balances denominated or measured in foreign currencies (principally US dollars) at December 31, 2006 and 2007 are included in these financial statements in thousands of Chilean pesos equivalents as follows:

|                                                                   |                     |  |            
|------------------------------------------------------------------ | ------------------- |  | -----------
|                                                                   | As of December  31,
|                                                                   | 2006                |  | 2007       
|                                                                   | ThCh$               |  | ThCh$      
|Assets                                                             |                     |  |            
|Cash and time deposits                                             | 5,104,333           |  | 9,013,404  
|Accounts receivable, net                                           | 73,450,112          |  | 78,838,523 
|Notes and account receivable from related companies                | 6,808               |  | 8,198      
|Inventories, net                                                   | 54,933,180          |  | 89,191,013 
|Other current assets                                               | 17,739,538          |  | 14,989,115 
|Property, plant and equipment and other non-monetary assets        | 110,125,731         |  | 116,917,492
|Other monetary assets                                              | 177,415             |  | 4,714      
|Total assets                                                       | 261,537,117         |  | 308,962,459
|Liabilities                                                        |                     |  |            
|Short-term bank loans and current portion of long-term liabilities | 29,510,901          |  | 47,708,426 
|Accounts and notes payable                                         | 20,428,738          |  | 27,031,176 
|Notes and account payable to related companies                     | 59,320              |  | 31,124     
|Other current liabilities                                          | 15,751,454          |  | 16,075,388 
|Long-term debt                                                     | 34,133,100          |  | 32,642,508 
|Other long-term liabilities                                        | 5,325,849           |  | 9,538,396  
|Total liabilities                                                  | 105,209,362         |  | 133,027,018
|Net asset position                                                 | 156,327,755         |  | 175,935,441

The inventories, property, plant and equipment and other non-monetary asset balances presented above relate to assets of foreign investments for which the financial statements are translated to US dollars in accordance with Technical Bulletin No. 64 as described in Note 2 s). Accordingly, from an accounting perspective only, there is an exposure to changes in the exchange rate between the US dollar and the Chilean peso.

Balances denominated in UFs or indexed based on variations in Chilean CPI are included in the financial statements as follows:

|                                                                   |                     |  |            
|------------------------------------------------------------------ | ------------------- |  | -----------
|                                                                   | As of December  31,
|                                                                   | 2006                |  | 2007       
|                                                                   | ThCh$               |  | ThCh$      
|Assets                                                             |                     |  |            
|Time deposits and marketable securities                            | 589,196             |  | 2,185,349  
|Accounts receivable, net                                           | 27,988,143          |  | 28,416,536 
|Notes and account receivable from related companies                | 1,654,819           |  | 1,773,652  
|Inventories, net                                                   | 49,890,372          |  | 45,688,722 
|Other current assets                                               | 18,116,266          |  | 14,516,992 
|Property, plant and equipment and other non-monetary assets        | 87,550,645          |  | 85,311,959 
|Other assets                                                       | 297,119             |  | 241,661    
|Total assets                                                       | 186,086,560         |  | 178,134,871
|Liabilities                                                        |                     |  |            
|Short-term bank loans and current portion of long-term liabilities | 5,093,067           |  | 7,333,020  
|Bonds payable                                                      | 26,595,574          |  | 21,704,342 
|Accounts and notes payable                                         | 5,679,454           |  | 22,122,104 
|Notes and account payable to related companies                     | 420,334             |  | 583,969    
|Other current liabilities                                          | 4,365,446           |  | 5,507,369  
|Long-term debt                                                     | 10,406,551          |  | 3,649,016  
|Other long-term liabilities                                        | 7,367,277           |  | 6,722,911  
|Total liabilities                                                  | 59,927,703          |  | 67,622,731 
|Net asset position in UF or indexed to Chilean CPI                 | 126,158,857         |  | 110,512,140



Note 22 – Commitments and contingencies

The Company and its subsidiaries are party to various lawsuits arising in the ordinary course of its business. Management and its legal advisers consider it unlikely that any losses associated with the pending lawsuits described below will significantly affect the Company or it subsidiaries' results of operations, financial position and cash flows, although no assurance can be given to such effect.



Madeco S.A.

1) Covenants on the Company’s Management Activities or Limits to Financial Indicators:

1.1) Series D Bonds

a) The Company will have to maintain the current ratio above 1.0.
b) The Company will have to maintain equity equal to or greater than UF 7,000,000.
c) The Company’s debt to capital ratio (Debt with third parties / Equity plus minority interest) will have to be maintained in at least 1.8 times.
d) The Company’s assets free of liens must not be lower than 1.2 times the issuance unpaid amount.
e) That the Company’s controller, Quiñenco S.A., maintains this status, with direct or indirect participation of at least 40% in accordance with article No. 97 of the Security Market Law, with no prejudice that Quiñenco S.A. has to maintain, at all times, participation of at least 35%.



1.2) Bank Loans

As of December 31, 2007, the Company maintains syndicated loans with financial institutions, and during the entire life of the agreements up to the date in which all and each payment obligations contained in agreements have been complied with in full, the Company is obliged to the following:

a) The Company will have to prepay the total amount of bank loans in the event that the Luksic Group does not maintain in a direct or indirect manner at least 40% of voting right shares of Madeco S.A. and the direct or indirect control of Madeco S.A. (per definition contained in Article No. 97 of Law No.18,045 of the Securities Market.

b) Compliance with financial ratios

1. Net Financial Debt less Variation in Working Capital to EBITDA (for the last four quarters) not to exceed 3.2 times.
2. Net Financial Debt less Variation in Working Capital to Adjusted Equity to be lower than 0.75 times.
3. EBITDA to Financial Expenses (for the last four quarters) to be equal or greater than 2.5 times.
4. Adjusted Equity must be at least equal to UF 7,000,000.

c) Main obligations for the Company:

1. The Debtor and its significant subsidiaries (Alusa S.A., Indalum S.A., Ficap S.A., Indeco S.A.) have to comply with all requirements to maintain its legal existence, rights, franchises and licenses.2. The Debtor and its significant subsidiaries have to maintain and preserve their Essential Assets; “Essential Assets” for these purposes are equipment, machinery and all essential elements the Debtor needs to conduct its businesses and those of the Essential Subsidiaries.
3. Designate the funds indicated in this instrument only and exclusively to finance exports and investments in assets related directly and solely to the export of its products, and the refinancing of existing financing debt.
4. The Debtor and its significant subsidiaries have to substantially meet all laws with respect to pollution or material waste, environmental matters, which do not have any adverse material effect.

d) Main limitations for the Company:

1. The Debtor and its significant subsidiaries should not constitute any lien without the Creditors' prior and written consent.2. The Debtor and/or its significant subsidiaries, without the prior and written authorization by the Creditors, will not be able to agree any mergers, absorption or incorporation and nor can they be liquidated, terminate their business activities or dissolve.
3. Not disposing of one or any or its Essential Assets in leaseback operations.
4. The Debtor and/or its Essential Subsidiaries will not be able to make any significant changes in the nature of their primary line of business without the Creditors’ prior and written consent.

3) As of December 31, 2007, the Company meets all covenants required in subordinated loan agreements.

4) Agreement with Nexans

On November 15, 2007, in Paris, France, Madeco and Nexans entered into a Framework Agreement by virtue of which both parties agreed the transfer to Nexans of all the assets of the Wire and Cable unit of Madeco in Chile, Argentina, Peru Brazil and Colombia for US$ 448 million plus 2.5 million shares of Nexans, which is equivalent to approximately US$ 823 million (historical).

The Board of Directors of Madeco believes this operation to be beneficial for its shareholders in consideration of its terms and conditions as a result of which Madeco becomes the biggest shareholder of Nexans with approximately 8.9 % of its share capital. Nexans is the main manufacturer of wire worldwide with presence in Europe, North America, Asia, Africa and Brazil in South America.

With the signing of the Framework Agreement with Nexans, the Companies initiated a due diligence process, and if both parties are satisfied, at the end of which the final agreement will be executed, which currently is estimated to take place in June 2008.

For these purposes, Madeco S.A. will separate the wire segment in Chile and Argentina through the incorporation of subsidiaries to which this activity will be transferred.

As this operation includes the transfer of approximately 60% of the Company’s assets, an extraordinary shareholders’ meeting will be held to approve this transaction.



5) Tax Contingencies

Until December 31, 2007, Madeco S.A. has received reimbursements from the Chilean Internal Revenue Service for tax years 2001, 2002, 2003 and 2004 related to corporate income tax differences, and income tax reimbursements from 21st article of the Income Tax Law for a total of ThCh$ 4,774,410 (tax amount). Company’s management, in accordance with terms established in the Tax Code has filed through its legal advisors the administrative procedures required to claim reimbursements in the first instance before the Tax Court; it believes that these are not applicable.

Additionally, for tax year 2004, the Company is requesting the reimbursement of ThCh$ 642,494, related to the remaining balance withheld by the Chilean Internal Revenue Service of ThCh$ 3,038,789 originally requested for the concept of tax loss absorption



Metal Overseas and Subsidiaries

1) In Brazil, two legal proceedings are pending which have been filed by the State Finance Secretary’s Office  (Rio de Janeiro) against the prior owner of Ficap S.A., from a date prior to the acquisition of this subsidiary by Madeco S.A. in 1997. As of December 31, 2007, the total sum for claims amounts to approximately ThR$ 6,950. Madeco S.A. has a personal guarantee from the previous owner of Ficap S.A. related to providing compensation to the Company, should the Brazilian subsidiary be affected by these legal proceedings

2) On July 19, 2006, the Company’s subsidiary Ficap S.A. has received a procedure related to a infraction filed by the State Finance Secretary’s Office (Rio de Janeiro) for tax years 2001, 2002, 2003, 2004 and 2005, related to income tax differences for a total of ThR$18,550, which, according to the Company’s legal advisors, present no risk of significant losses.



Armat S.A.

As of December 31, 2007, there are pending lawsuits filed against this company in the normal course of business, which, in the opinion of the company’s legal advisors, present no risk of significant losses.



Indalum S.A. and subsidiaries

1) There are no lawsuits or other legal proceedings filed against the Company and its subsidiaries.

2) In conformity with the negotiation performed by the Company as of December 29, 2003, with Banco de Chile, Banco de Crédito Inversiones, BancoEstado and Banco Security the following covenants were established, which will apply for the period between the aforementioned date and December 26, 2010.

2.1) Maintain in June and December of each year, based on the consolidated financial statements, in accordance with the respective statutory FECU format:

a) Indebtedness or leverage ratio not greater than 1.2 times.
b) Restated minimum capital for the amount equivalent to UF 1,630,000.

2.2) Maintain the ownership of property, plant and equipment required for its business, maintain the normal course of operations, and maintain the ownership of the subsidiary Alumco S.A.

2.3) Not pledging or mortgaging or constitute any guarantee or actual right on any property, plant and equipment item owned by Indalum S.A. or by its subsidiaries except for those guarantees on assets that are acquired in the future and which are granted as guarantee for the financing of the acquisition of these assets.

2.4) Not providing any personal guarantee or collateral to ensure compliance with any obligation, debt, liability or commitment assumed by any person or entity other than Indalum S.A. or its subsidiaries without the Creditors’ prior and written consent.

2.5) Not paying or distributing dividends which exceed 30% of net income for each year except with the prior and written consent by the creditors.

2.6) Not granting direct financing to third parties other than those related to the normal course of operations. This concept of direct financing does not include accounts receivable of Indalum S.A. with its customers or loans to executives and employees of Indalum S.A. or its subsidiaries.

2.7) Should the Company dispose the properties located at Avda. Vitacura No. 2736, Office 301, in the commune of Vitacura, and at Santa Marta No. 1313 in the commune of Maipú, the debtor will have to designate the total sum of the sales proceeds for these properties to pro-rata prepayment of the balance of restructured obligations. In August 2006, the Company disposed of the property located at Santa Marta No. 1313, and the banks agreed to release the Company from before mentioned restrictions related to this property.

2.8) Indalum S.A. can pay the loan currently owed to its parent company Madeco S.A. only if it has complied with all covenants it assumes by virtue of the agreement or that resources are provided by the sale of the properties indicated above. The loan with Madeco S.A. was completely paid in 2006.

2.9) Madeco S.A. must have the direct or indirect control of the ownership of Indalum S.A. or have at least 50.1% ownership during the life of the agreement.



As of December 31, 2007, the Company has complied with all these covenants.

3) In November 2007, a complaint was filed against the Company before the National Economic Treasurer’s Office by a former distributor, seeking payment of open positions with the Company.  In the legal advisors’ opinion, this complaint should not prosper.

4) Tax Contingencies

As of December 31, 2007, Indalum S.A. has received reimbursements for a sum of ThCh$ 327,810 (tax amount) from the Chilean Internal Revenue Service for tax years 1999 to 2003 related to corporate income tax differences. Company’s management, in accordance with terms established in the Tax Code, has began through its legal advisors the administrative proceedings required to claim in the first instance before the Tax Court the reimbursements, as it deems they are not applicable.

As of December 31, 2007, with respect to the subsidiary Ingewall S.A., the Chilean IRS is in the process of reviewing the value added tax assessment for the periods from July to December 1999, February and August 2001, that originally amounted to ThCh$ 276,549.

As of December 31, 2007, Ingewall S.A. has received a resolution from the Chilean IRS for tax years 2001 and 2002 related to the modification of tax loss carryforwards. Additionally, liquidations have been received from the Chilean Internal Revenue Service for tax years 2004 to 2006 related to the first category unique tax for ThCh$185,333 (tax amount.) Company’s management, according to the complaint terms established in the Tax Code has filed through its legal advisors administrative procedures required to file a complaint in the first instance before a Tax Court against this resolution as it believes these liquidations are not applicable.



Alusa S.A. and subsidiaries

2) Loan agreements

As of December 31, 2007, the Company has the following obligations with financial institutions:

- Syndicated loan with Banco de Chile and Banco Estado of UF 300,000 (historic amount). (*)
- Loan with Banco Security of UF 163,000 (historic amount).
- Loan with Banco Estado of UF 52,000 (historic amount).

Alusa S.A. has the following covenants related to these loans:

- Madeco S.A. must be the direct or indirect owner of, at least 50.1% of voting right capital of Alusa S.A., during the duration of these loans.

On December 26, 2006, Alusa S.A. became the guarantor and collateral of Aluflex S.A. for a loan granted by Banco del Desarrollo to this company of US$ 4,000,000. The principal is payable in January 2010.

(*) Further restrictions with respect to this loan agreement, reported in the previous financial statements were eliminated in amendment dated March 8, 2007

On November 6, 2007, the subsidiary Peruplast S.A. assumed the following commitments as a result of two long-term bank loans with Scotiabank and Banco de Credito del Perú for US$ 8,000,000 each:

With Scotiabank, Peruplast S.A. agreed to maintain at the end of each quarter the following indicators:

- Maintain indebtedness ratio (total liabilities less deferred income taxes between net shareholders’ equity less intangible assets and non-trading accounts receivable from Peruplast’s affiliates) no greater than 1.50 times until September 2009 and no greater than 1.25 times thereafter.
- Maintain debt coverage ratio (financial debt between EBITDA) no greater than 2.0 times from December 2007 to September 2009 and no greater than 1.75 times from December 2009 and thereafter.
- Maintain debt service coverage (EBITDA between the sum of the current portion of long-term debt plus financial expenses) no lower than 1.50 times

- Maintain total liabilities less taxes and deferred participation divided by equity lower than 1.50 times. (The measurement of this ratio will consider as the Company’s liabilities all collaterals and contingent guarantees granted by it in favor of third parties.)
- Maintain operating income plus depreciation and amortization less income taxes and participation less distributions to shareholders less loans to affiliates less capital investments net of financing plus opening cash on debt servicing greater than 1.25 times.

As of December 31, 2007, Peruplast S.A. meets all requirements for the loans described above.



2) Tax Contingencies

As of December 31, 2007, Alusa S.A. has received liquidations from the Chilean Internal Revenue Service for tax years 2001, 2002 and 2003, related to first category income tax differences and income reimbursements for a total sum of ThCh$ 281,263 (tax amount). Company’s management, according to the terms established in the Tax Code has filed through its legal advisors administrative procedures required to file a complaint in the first instance before a Tax Court against this liquidations as it believes these liquidations are not applicable.

Comercial Madeco S.A. and subsidiaries

Metacab S.A. (a subsidiary of Decker Indelqui S.A.) has received claims generated in the Ownership Participation Program according to the purchase agreement signed with the former ECA Company, a company owned by the State of Argentina. The by-laws of Metacab S.A. provided that the owners of 6% of share capital must be organized under a Participation Ownership Program, to which the Company’s employees could adhere, provided that they met certain requirements. This plan was never implemented.

Former employees filed a complaint alleging inadequate management by the Company, causing losses and damaging beneficiaries of the aforementioned program. Among other restrictions, attachments were placed on the Lomas de Zamora plant and certain pieces of machinery. To date, the Company’s legal advisors believe it is not possible to estimate the outcome of this complaint or possible obligations.

Direct Guarantees



|                                                   |             |                             |                         |                      |         |        |       
|-------------------------------------------------- | ----------- | --------------------------- | ----------------------- | -------------------- | ------- | ------ | ------
|                                                   |             |                             | Balance pending payment | Release of guarantee
|                                                   | Company     | Transaction                 | 2006                    | 2007                 | 2008    | 2009   | 2010  
|CASA MONEDA DE CHILE                               | Madeco S.A. | Compliance with sales order | 4,016                   | -                    | -       | -      | -     
|CÍA.TELECOMUNICACIONES DE CHILE SA.                | Madeco S.A. | Compliance with sales order | -                       | 1,794                | 1,794   | -      | -     
|COMERCIAL Y LOGÍSTICA GENERAL SA.                  | Madeco S.A. | Compliance with sales order | -                       | 42,922               | 42,922  | -      | -     
|S.Q. M. INDUSTRIAL S.A.                            | Madeco S.A. | Compliance with sales order | 3,791                   | 3,53                 | 3,530   | -      | -     
|SQM SALAR S.A.                                     | Madeco S.A. | Compliance with sales order | 2,892                   | 1,298                | 1,298   | -      | -     
|TECHINT CHILE SA.                                  | Madeco S.A. | Compliance with sales order | 25,023                  | 854                  | -       | 854    | -     
|CORPORACIÓN NACIONAL DEL COBRE                     | Madeco S.A. | Compliance with sales order | 537                     | 83,985               | -       | -      | 83,985
|ATACAMA MINERALS CHILE SCM                         | Madeco S.A. | Compliance with sales order | -                       | 654                  | 654     | -      | -     
|CASA MONEDA DE CHILE SA.                           | Madeco S.A. | Compliance with sales order | -                       | 94,676               | 94,676  | -      | -     
|CÍA. AMERICANA DE MULTISERVICIOS                   | Madeco S.A. | Compliance with sales order | 223,970                 | -                    | -       | -      | -     
|CÍA. DE TELECOMUNICACIONES DE CHILE S.A.           | Madeco S.A. | Compliance with sales order | -                       | 34,873               | 34,873  | -      | -     
|CORPORACIÓN NACIONAL DEL COBRE                     | Madeco S.A. | Compliance with sales order | -                       | 10,823               | 10,823  | -      | -     
|FAM AMERICA LATINA                                 | Madeco S.A. | Compliance with sales order | 72,272                  | 31,982               | 31,982  | -      | -     
|METSO PAPER                                        | Madeco S.A. | Compliance with sales order | 30,702                  | 26,681               | 26,681  | -      | -     
|MINERA ESCONDIDA LTDA.                             | Madeco S.A. | Compliance with sales order | -                       | 57,612               | 57,612  | -      | -     
|MINERA ESPENCE S.A.                                | Madeco S.A. | Compliance with sales order | 3,503                   | -                    | -       | -      | -     
|MINERA LOS PELAMBRES                               | Madeco S.A. | Compliance with sales order | 72,281                  | 91,777               | 62,814  | 28,963 | -     
|MINERA SAN CRISTOBAL                               | Madeco S.A. | Compliance with sales order | 182,836                 | 158,886              | 158,886 | -      | -     
|MITSUBISHI CORP. SUCURSAL CHILE CONST. Y PROYECTOS | Madeco S.A. | Compliance with sales order | 73,932                  | 64,248               | 64,248  | -      | -     
|COSTANERA CENTER SA.                               | Madeco S.A. | Compliance with sales order | -                       | 4,969                | 4,969   | -      | -     
|CÍA. MINERA RIOCHILEX S.A.                         | Madeco S.A. | Compliance with sales order | 12,078                  | -                    | -       | -      | -     
|CORPORACIÓN NACIONAL DEL COBRE                     | Madeco S.A. | Compliance with sales order | 251,380                 | -                    | -       | -      | -     
|CÍA. AMERICANA DE MULTISERVICIOS                   | Madeco S.A. | Compliance with sales order | 8,292                   | -                    | -       | -      | -     

Indirect Guarantees



|                                         |            |                          |                         |                      |           |         |          
|---------------------------------------- | ---------- | ------------------------ | ----------------------- | -------------------- | --------- | ------- | ---------
|                                         |            |                          | Balance pending payment | Release of guarantee
|                                         | Company    | Transaction              | 2006                    | 2007                 | 2008      | 2009    | 2010     
|BANCO CENTRAL DE LA REPUBLICA ARGENTINA  | ARMAT S.A. | ORDER COMPLIANCE         | -                       | 844,713              | 844,713   | -       | -        
|BANCO CENTRAL DE LA REPUBLICA DOMINICANA | ARMAT S.A. | ORDER COMPLIANCE         | -                       | 174,240              | 174,240   | -       | -        
|BANCO DE GUATEMALA                       | ARMAT S.A. | ORDER COMPLIANCE         | 343,072                 | 359,719              | 359,719   | -       | -        
|CASA DE MONEDA DE CHILE                  | ARMAT S.A. | ORDER COMPLIANCE         | -                       | 470,306              | 470,306   | -       | -        
|CASA DE MONEDA DE CHILE                  | ARMAT S.A. | ORDER COMPLIANCE         | 725,462                 | 464,393              | 6,541     | -       | 457,852  
|CODELCO                                  | ARMAT S.A. | ORDER COMPLIANCE         | -                       | 3,833                | 479       | 3,354   | -        
|BANCO CENTRAL DE CHILE                   | ARMAT S.A. | ORDER COMPLIANCE         | 228,715                 | -                    | -         | -       | -        
|MINISTERIO DE HACIENDA                   | FICAP S.A. | PP&E  (COMPLAINT)        | -                       | 124,603              | -         | -       | 124,603  
|MINISTERIO DE HACIENDA                   | FICAP S.A. | PP&E (TAX)               | -                       | 5,081,862            | -         | -       | 5,081,862
|PORTO PRIMAVERA TRANSM. ENERGIA          | FICAP S.A. | ORDER COMPLIANCE         | 12,382                  | 12,987               | 12,987    | -       | -        
|PROMON ENG LTDA                          | FICAP S.A. | ORDER COMPLIANCE         | 15,382                  | 16,135               | -         | 16,135  | -        
|ENERG POWER LTDA                         | FICAP S.A. | ORDER COMPLIANCE         | 17,782                  | 18,653               | 18,653    | -       | -        
|CONSÉORCIO PRA 1                         | FICAP S.A. | ORDER COMPLIANCE         | 7,416                   | 7,779                | 7,779     | -       | -        
|ALSTOM BRASIL LTDA                       | FICAP S.A. | ORDER COMPLIANCE         | 76,774                  | 80,530               | 80,530    | -       | -        
|ANDE                                     | FICAP S.A. | ORDER COMPLIANCE         | 35,387                  | -                    | -         | -       | -        
|OUTOTEC TEC. BRASIL                      | FICAP S.A. | ORDER COMPLIANCE         | -                       | 120,076              | -         | 120,076 | -        
|MARINHA DO BRASIL                        | FICAP S.A. | GUARANTEE FOR COMPLIANCE | -                       | 8,136                | 8,136     | -       | -        
|POYRY EMPREEND. IND.                     | FICAP S.A. | GUARANTEE FOR COMPLIANCE | -                       | 95,223               | 95,223    | -       | -        
|ITUMBIARA TRANSMS. DE ENERGIA            | FICAP S.A. | ORDER COMPLIANCE         | -                       | 32,904               | 32,904    | -       | -        
|ATE III TRANSM.                          | FICAP S.A. | ORDER COMPLIANCE         | 66,278                  | 57,558               | -         | 57,558  | -        
|COVERTEAM BRASIL LTDA                    | FICAP S.A. | ORDER COMPLIANCE         | -                       | 294,946              | 294,946   | -       | -        
|SERRA DA MESA TRANSM. ENERGIA            | FICAP S.A. | ORDER COMPLIANCE         | 802,789                 | 230,120              | -         | 230,120 | -        
|FURNAS CENTRAIS ELETRICAS                | FICAP S.A. | ORDER COMPLIANCE         | -                       | 9,187                | 9,187     | -       | -        
|IEMG                                     | FICAP S.A. | ORDER COMPLIANCE         | -                       | 1,326,891            | 1,326,891 | -       | -        
|SERRA DA MESA TRANSM. ENERGIA            | FICAP S.A. | ORDER COMPLIANCE         | -                       | 41,336               | 41,336    | -       | -        

Indirect Guarantees



|                                              |              |                       |                         |                      |         |        |        
|--------------------------------------------- | ------------ | --------------------- | ----------------------- | -------------------- | ------- | ------ | -------
|                                              |              |                       | Balance pending payment | Release of guarantee
|                                              | Company      | Transaction           | 2006                    | 2007                 | 2008    | 2009   | 2010   
|11a VARA DE FAZENDA RJ                        | FICAP S.A.   | INF PROCESS GUARANTEE | -                       | 329,468              | -       | -      | 329,468
|11a VARA DE FAZENDA RJ                        | FICAP S.A.   | INF PROCESS GUARANTEE | -                       | 727,577              | -       | -      | 727,577
|11a VARA DE FAZENDA RJ                        | FICAP S.A.   | INF PROCESS GUARANTEE | -                       | 713,129              | -       | -      | 713,129
|11a VARA DE FAZENDA RJ                        | FICAP S.A.   | INF PROCESS GUARANTEE | -                       | 515,326              | -       | -      | 515,326
|11a VARA DE FAZENDA RJ                        | FICAP S.A.   | INF PROCESS GUARANTEE | -                       | 144,924              | -       | -      | 144,924
|POÇOS DE CALDAS TRANSM. ENERGIA               | FICAP S.A.   | BANK GUARANTEE        | -                       | 242,363              | 242,363 | -      | -      
|POÇOS DE CALDAS TRANSM. ENERGIA               | FICAP S.A.   | ORDER COMPLIANCE      | -                       | 486,420              | 486,420 | -      | -      
|OBRAS Y DESAROLLO S/A                         | FICAP S.A.   | ORDER COMPLIANCE      | 28,167                  | 12,686               | 12,686  | -      | -      
|UTE                                           | FICAP S.A.   | ORDER COMPLIANCE      | -                       | 5,311                | 5,311   | -      | -      
|CIA. AMERICANA DE MULTICSERVICIOS             | FICAP S.A.   | ORDER COMPLIANCE      | -                       | 19,379               | -       | 19,379 | -      
|ATE II TRANS. DE ENERGIA S/A                  | FICAP S.A.   | ORDER COMPLIANCE      | -                       | 32,516               | 32,516  | -      | -      
|ELECNOR S/A                                   | FICAP S.A.   | ORDER COMPLIANCE      | 505,605                 | 46,949               | -       | 46,949 | -      
|ALUNORTE ALUMINA DO BRASIL                    | FICAP S.A.   | GUARANTEE             | 314,536                 | -                    | -       | -      | -      
|CONSORCIO LUMMUS                              | FICAP S.A.   | GUARANTEE             | 114,152                 | -                    | -       | -      | -      
|CPEL COMERCIALIZACIÓN BRASIL                  | FICAP S.A.   | GUARANTEE             | 70,915                  | -                    | -       | -      | -      
|ELECTRO NORTE                                 | FICAP S.A.   | ORDER COMPLIANCE      | 22,732                  | -                    | -       | -      | -      
|ENERBRASIL ENERG RENT DO BRASIL               | FICAP S.A.   | ORDER COMPLIANCE      | 97,352                  | -                    | -       | -      | -      
|FICAP S.A. (MATRIZ)                           | FICAP S.A.   | GUARANTEE             | 534,880                 | -                    | -       | -      | -      
|KVAERNER DO BRASIL LTDA.                      | FICAP S.A.   | GUARANTEE             | 218,022                 | -                    | -       | -      | -      
|MICHELIN PARTIC. IND. COMERCIO                | FICAP S.A.   | GUARANTEE             | 575,514                 | -                    | -       | -      | -      
|SAFRA                                         | FICAP S.A.   | LEGAL GUARANTEE       | 1,121,801               | -                    | -       | -      | -      
|VILA DO CONDE TRANSM. ENERG                   | FICAP S.A.   | ORDER COMPLIANCE      | 5,625                   | -                    | -       | -      | -      
|DIRECCION DE VIALIDAD                         | INDALUM S.A. | CERTICATE OF DEPOSIT  | 862                     | 853                  | 853     | -      | -      
|SERVIU REGION METROPOLITANA                   | INDALUM S.A. | CERTICATE OF DEPOSIT  | -                       | 94                   | -       | -      | 94     
|HUEMURA REPRESENTACIONES S.R.L. / BCP         | INDECO S.A.  | GUARANTEE             | -                       | 4,969                | 4,969   | -      | -      
|CONDUMAX S.A / BBVA                           | INDECO S.A.  | GUARANTEE             | -                       | 2,484                | 2,484   | -      | -      
|V Y F TECNOLOGIA COMERCIAL S.A.C / SCOTIABANK | INDECO S.A.  | GUARANTEE             | -                       | 24,845               | 24,845  | -      | -      
|INGENIERIA SOCIEDAD ANONIMA NORTE / BCP       | INDECO S.A.  | GUARANTEE             | -                       | 4,969                | 4,969   | -      | -      
|DISTRIBUIDORA ROMERO S.R.L. / BBVA            | INDECO S.A.  | GUARANTEE             | -                       | 24,845               | 24,845  | -      | -      
|HUEMURA REPRESENTACIONES S.R.L. / BCP         | INDECO S.A.  | GUARANTEE             | -                       | 9,938                | 9,938   | -      | -      
|DISTRIBUIDORA ROMERO S.R.L. / BCP             | INDECO S.A.  | GUARANTEE             | -                       | 4,969                | 4,969   | -      | -      

Indirect Guarantees



|                                                  |             |             |                         |                      |         |      |     
|------------------------------------------------- | ----------- | ----------- | ----------------------- | -------------------- | ------- | ---- | ----
|                                                  |             |             | Balance pending payment | Release of guarantee
|                                                  | Company     | Transaction | 2006                    | 2007                 | 2008    | 2009 | 2010
|IND COMERCIAL SANTA ADELAIDA S.A. / BCP           | INDECO S.A. | GUARANTEE   | -                       | 12,422               | 12,422  | -    | -   
|CONDUMAX S.A. / BBVA                              | INDECO S.A. | GUARANTEE   | -                       | 29,813               | 29,813  | -    | -   
|DISTRIBUIDORA ROMERO S.R.L. / BBVA                | INDECO S.A. | GUARANTEE   | -                       | 9,938                | 9,938   | -    | -   
|DIMEX S.A.C / BBVA                                | INDECO S.A. | GUARANTEE   | -                       | 11,606               | 11,606  | -    | -   
|DISTRIBUIDORA INCORESA S.A. / BCP                 | INDECO S.A. | GUARANTEE   | -                       | 17,391               | 17,391  | -    | -   
|COMERCIAL IQUITOS S.A. / BBVA                     | INDECO S.A. | GUARANTEE   | -                       | 9,938                | 9,938   | -    | -   
|KOLLER S.R.L. / BBVA                              | INDECO S.A. | GUARANTEE   | -                       | 49,689               | 49,689  | -    | -   
|DISTRIBUIDORA INCORESA S.A. / BCP                 | INDECO S.A. | GUARANTEE   | -                       | 9,938                | 9,938   | -    | -   
|HUEMURA REPRESENTACIONES S.R.L. / SCOTIABANK      | INDECO S.A. | GUARANTEE   | -                       | 9,938                | 9,938   | -    | -   
|JORVEX S.A. / BANCO CONTINENTAL                   | INDECO S.A. | GUARANTEE   | -                       | 149,067              | 149,067 | -    | -   
|DISTRIBUIDORA ROMERO S.R.L. / BCP                 | INDECO S.A. | GUARANTEE   | -                       | 9,938                | 9,938   | -    | -   
|DISTRIBUIDORA INCORESA S.A. / BCP                 | INDECO S.A. | GUARANTEE   | -                       | 7,453                | 7,453   | -    | -   
|DISTRIBUIDORA ROMERO S.R.L. / BCP                 | INDECO S.A. | GUARANTEE   | -                       | 4,969                | 4,969   | -    | -   
|JORVEX S.A. / SCOTIABANK                          | INDECO S.A. | GUARANTEE   | -                       | 49,689               | 49,689  | -    | -   
|CONDUTEK S.A. Y/O CONDUMAX S.A. / BBVA            | INDECO S.A. | GUARANTEE   | -                       | 49,689               | 49,689  | -    | -   
|CANALA COM. ELECTRICA CIA LTDA. / AMERICAN EXPRES | INDECO S.A. | GUARANTEE   | -                       | 55,155               | 55,155  | -    | -   
|JORVEX S.A. / BCP                                 | INDECO S.A. | GUARANTEE   | -                       | 149,067              | 149,067 | -    | -   
|RENSA VENTAS Y SERVICIOS S.R.L. / BCP             | INDECO S.A. | GUARANTEE   | -                       | 1,491                | 1,491   | -    | -   
|DISTRIBUIDORA ROMERO S.R.L. / BCP                 | INDECO S.A. | GUARANTEE   | -                       | 4,969                | 4,969   | -    | -   
|DISTRIBUIDORA ROMERO S.R.L / BCP                  | INDECO S.A. | GUARANTEE   | -                       | 4,969                | 4,969   | -    | -   
|CAM PERU S.R.L.                                   | INDECO S.A. | GUARANTEE   | 115,831                 | -                    | -       | -    | -   
|EDELNOR S.A.                                      | INDECO S.A. | GUARANTEE   | 667,843                 | -                    | -       | -    | -   
|ELECTRO ORIENTE S.A.                              | INDECO S.A. | GUARANTEE   | 2,202                   | -                    | -       | -    | -   
|ELECTRO PUNO S.A.                                 | INDECO S.A. | GUARANTEE   | 2,252                   | -                    | -       | -    | -   
|ELECTRO SUR ESTE S.A.                             | INDECO S.A. | GUARANTEE   | 4,257                   | -                    | -       | -    | -   
|ELECTROCENTRO S.A.                                | INDECO S.A. | GUARANTEE   | 6,112                   | -                    | -       | -    | -   
|ELECTRONOROESTE S.A.                              | INDECO S.A. | GUARANTEE   | 9,327                   | -                    | -       | -    | -   
|ELECTRONORTE S.A.                                 | INDECO S.A. | GUARANTEE   | 8,503                   | -                    | -       | -    | -   
|GAS NATURAL DE LIMA Y CALLAO                      | INDECO S.A. | GUARANTEE   | 3,202                   | -                    | -       | -    | -   
|HIDRANDINA S.A.                                   | INDECO S.A. | GUARANTEE   | 15,584                  | -                    | -       | -    | -   
|LIMA AIRPORT PARTNERS S.R.L.                      | INDECO S.A. | GUARANTEE   | 17,318                  | -                    | -       | -    | -   
|LUZ DEL SUR S.A.                                  | INDECO S.A. | GUARANTEE   | 1,976                   | -                    | -       | -    | -   
|RED DE ENERGIA DEL PERU S.A.                      | INDECO S.A. | GUARANTEE   | 4,950                   | -                    | -       | -    | -   
|SOCIEDAD ELECTRICA DEL SUR OESTE S.A.             | INDECO S.A. | GUARANTEE   | 629                     | -                    | -       | -    | -   
|SUNAT                                             | INDECO S.A. | GUARANTEE   | 1,926,432               | -                    | -       | -    | -   
|TURBOGENERADORES DEL PERU SAC                     | INDECO S.A. | GUARANTEE   | 29,662                  | -                    | -       | -    | -   



Note 23 – Other non-operating income and expenses

Other non-operating income and expenses for each year are summarized as follows:

|                                                                   |                                  |  |           |  |          
|------------------------------------------------------------------ | -------------------------------- |  | --------- |  | ---------
|                                                                   | For the years ended December 31,
|                                                                   | 2005                             |  | 2006      |  | 2007     
|                                                                   | ThCh$                            |  | ThCh$     |  | ThCh$    
|                                                                   |                                  |  |           |  |          
|Other non-operating income                                         |                                  |  |           |  |          
|Asset rental                                                       | -                                |  | -         |  | 140,586  
|Gain on sale of property, plant and equipment                      | 211,684                          |  | 17,878    |  | 440,291  
|Net gain from sale of disposable assets                            | -                                |  | 33,967    |  | 8,489    
|Reversal of allowance for receivables due from Optel Ltda.         | 381,351                          |  | -         |  | -        
|Recovery of tax benefits in foreign subsidiaries                   | 550,700                          |  | -         |  | 28,333   
|Reversal of allowance for investment in Optel Ltda.                | 558,454                          |  | -         |  | -        
|Release of provision for expenses related to Optel Ltda.           | 724,826                          |  | -         |  | -        
|Indemnities received                                               | -                                |  | -         |  | 45,542   
|Others                                                             | 117,627                          |  | 73,439    |  | 154,173  
|Total                                                              | 2,544,642                        |  | 125,284   |  | 817,414  
|                                                                   |                                  |  |           |  |          
|                                                                   |                                  |  |           |  |          
|Other non-operating expenses                                       |                                  |  |           |  |          
|Staff severance indemnity payments related to restructuring        | 298,945                          |  | -         |  | 459,702  
|Obsolescence and write-offs of other long-term assets              | 264,208                          |  | 1,001,621 |  | 163,842  
|Adjustment to realizable value of assets held for sale (Note 10)   | 265,767                          |  | 315,422   |  | -        
|Provision for closure and valuation on assets Ingewall and Uruguay | 42,749                           |  | -         |  | -        
|Provision for lawsuit s                                            | 107,895                          |  | 18,609    |  | 65,186   
|Appraisal of assets to be disposed of                              | -                                |  | -         |  | 119,796  
|Net loss on sale of investments                                    | -                                |  | -         |  | 33,418   
|Directors’ benefits                                                | -                                |  | -         |  | 442,352  
|Depreciation of inactive assets – Argentina (1)                    | 1,484,141                        |  | 1,010,056 |  | 627,132  
|Government fines, taxes and interest from foreign subsidiaries     | 996,144                          |  | 698,682   |  | 41,151   
|Other                                                              | 134,006                          |  | 18,210    |  | 23,547   
|Total                                                              | 3,593,855                        |  | 3,062,600 |  | 1,976,126

(1)  Corresponds to depreciation of property, plant and equipment (Note 10) and inactive assets (Note 13).



Note 24 – Balances and transactions with related parties

Balances with related companies at December 31 of each year are as follows:

a) Current assets

|                                    |                                        |                       |                    |  |          
|----------------------------------- | -------------------------------------- | --------------------- | ------------------ |  | ---------
|                                    |                                        |                       | As of December 31,
|                                    |                                        |                       | 2006               |  | 2007     
|Company                             | Nature of relationship                 | Nature of transaction | ThCh$              |  | ThCh$    
|                                    |                                        |                       |                    |  |          
|Cobrecon S.A.                       | Equity method investment               | Loan                  | 4,104              |  | 8,198    
|Embotelladoras Chilenas Unidas S.A. | Member of Controlling Group            | Sales                 | 216,560            |  | 138,163  
|Sodimac S.A.                        | Member of Controlling Group            | Sales                 | 1,061,101          |  | 1,290,056
|Calaf S.A.                          | Member of Controlling Group            | Sales                 | 31,310             |  | 41,352   
|Minera Michilla S.A.                | Member of Controlling Group            | Sales                 | 58,901             |  | 2,478    
|Minera Los Pelambre S.A.            | Member of Controlling Group            | Sales                 | 203,607            |  | 257,827  
|Alte S.A.                           | Controlled by Minority Interest Holder | Sales                 | 58,554             |  | 34,358   
|Other related Companies             | Various                                | Various               | 27,490             |  | 9,418    
|Total                               |                                        |                       | 1,661,627          |  | 1,781,850



b)  Current liabilities

|                             |                             |                       |                    |  |        
|---------------------------- | --------------------------- | --------------------- | ------------------ |  | -------
|                             |                             |                       | As of December 31,
|                             |                             |                       | 2006               |  | 2007   
|Company                      | Nature of relationship      | Nature of transaction | ThCh$              |  | ThCh$  
|                             |                             |                       |                    |  |        
|Colada Continua Chilena S.A. | Equity method investment    | Commercial            | 232,968            |  | 413,343
|Minera Michilla S.A.         | Shareholder                 | Commercial            | 117,415            |  | 101,996
|Cobrecon S.A.                | Equity method investment    | Loan                  | 59,318             |  | 31,124 
|Sodimac S.A.                 | Member of Controlling Group | Loan                  | 53,508             |  | 58,102 
|Other related Companies      | Various                     | Various               | 16,445             |  | 10,528 
|Total                        |                             |                       | 479,654            |  | 615,093

In accordance with Article 89 of the Chilean Companies Act, the Company’s transactions with related parties must be carried out under market conditions. Short-term receivables and payables relate to current accounts and do not accrue interest.

Additionally, cash, long-term debt and its current portion, as well as fixed assets under capital leases and related miscellaneous payables, include the balances of transactions with Banco de Chile and its related companies, and with Banco Latinoamericano de Exportaciones S.A. (Brazil). These financial institutions are related companies under common control, however, respective balances have been classified according to the nature of the underlying transaction to present fairly the character of these relations.

c) Significant transactions with related parties are summarized as follows:

|                                    |                                         |                                |                                                     |  |           |  |          
|----------------------------------- | --------------------------------------- | ------------------------------ | --------------------------------------------------- |  | --------- |  | ---------
|                                    |                                         |                                | Revenue (Expenses) for the years ended December 31,
|Company                             | Nature of relationship                  | Transaction                    | 2005                                                |  | 2006      |  | 2007     
|                                    |                                         |                                | ThCh$                                               |  | ThCh$     |  | ThCh$    
|                                    |                                         |                                |                                                     |  |           |  |          
|Alte S.A.                           | Member of Group of Minority Shareholder | Services                       | (21)                                                |  | (17,553)  |  | (8,064)  
|                                    |                                         | Sales of products and services | 137,694                                             |  | 173,035   |  | 166,777  
|Almacenes Paris Comercial           | Member of Controlling Group             | Products purchase              | (220)                                               |  | -         |  | -        
|Artikos Chile S.A. .                | Member of Controlling Group             | Services                       | (1,453)                                             |  | (1,237)   |  | (1,122)  
|Banchile Corredores de Bolsa.       | Member of Controlling Group             | Interest                       | 23,580                                              |  | 29,347    |  | 32,417   
|Banco de Chile                      | Member of Controlling Group             | Interest from investments      | (365,108)                                           |  | (269,183) |  | (153,109)
|Banco Latinoamericano - Bladex      | Member of Controlling Group             | Interest from investments      | -                                                   |  | (159,024) |  | (136,473)
|Interbank                           | Shareholder                             | Interest from investments      | -                                                   |  | -         |  | (108,697)
|Nessus Peru S.A.                    | Shareholder                             | Services                       | -                                                   |  | -         |  | (38,159) 
|Calaf S.A.                          | Member of Controlling Group             | Sales of products and services | 60,438                                              |  | 57,342    |  | 131,964  
|CNT Telefónica del Sur S.A.         | Member of Controlling Group             | Sales of products and services | 149,009                                             |  | 117,235   |  | 90,676   
|Cobrecon                            | Equity method investment                | Sales                          | -                                                   |  | 30,687    |  | 35,626   
|Colada Continua Chilena S.A.        | Equity method investment                | Sales of products and services | (92,418)                                            |  | 192,032   |  | 148,242  
|Embotelladoras Chilenas Unidas S.A. | Member of Controlling Group             | Sales of products and services | 710,149                                             |  | 868,289   |  | 788,203  
|                                    |                                         | Services                       | (8,748)                                             |  | (6,702)   |  | (4,151)  
|Entel S.A.                          | Member of Controlling Group             | Services                       | (55,704)                                            |  | (15,608)  |  | (53,295) 
|Falabella S.A.C.I.                  | Member of Controlling Group             | Services                       | (1,861)                                             |  | (441)     |  | (1,144)  
|Gianfranco Zechetto                 | Member of Controlling Group             | Sales                          | 30                                                  |  | -         |  | -        
|Sodimac S.A.                        | Member of Controlling Group             | Sales of products and services | 4,518,428                                           |  | 6,117,030 |  | 5,686,402
|Minera El Tesoro                    | Member of Controlling Group             | Sales of products and services | 54,280                                              |  | 49,458    |  | 125,198  
|Minera Los Pelambres S.A.           | Member of Controlling Group             | Sales of products and services | 200,602                                             |  | 1,320,622 |  | 383,660  
|Minera Michilla S.A.                | Shareholder                             | Sales of products and services | 67,644                                              |  | 72,957    |  | 46,136   
|Quiñenco S.A.                       | Parent Company                          | Loan indexation                | (317,842)                                           |  | (64,948)  |  | -        
|                                    |                                         | Interest and expenses          | (313,748)                                           |  | (162,852) |  | -        
|Transportes CCU Ltda.               | Member of Controlling Group             | Sales of products and services | -                                                   |  | 194,124   |  | -        
|Vending y Servicios CC              | Member of Controlling Group             | Services                       | -                                                   |  | (2,166)   |  | (4,718)  
|Viña San Pedro S.A.                 | Member of Controlling Group             | Sales of products and services | 134,034                                             |  | 2,885     |  | -        
|                                    |                                         | Products purchase              | (2,117)                                             |  | (3,672)   |  | (692)    
|Inmobiliaria Norte Verde S.A.       | Member of Controlling Group             | Services                       | (23,547)                                            |  | (12,032)  |  | (15,084) 
|Peruplast S.A.                      | Equity method investment                | Sales                          | -                                                   |  | 3,814     |  | -        
|Others                              | Member of Group of Minority Shareholder | Various                        | 56,586                                              |  | 5,429     |  | 7,825    

In accordance with Article 89 of the Chilean Companies Act, the Company’s transactions with related parties must be carried out on an “arm’s length” or market basis.



Note 25 – Minority Interest

Minority shareholders’ investment participation in the shareholders’ equity of the Company’s subsidiaries as of each year-end is as follows:

|                   |                    |  |           
|------------------ | ------------------ |  | ----------
|                   | As of December 31,
|                   | 2006               |  | 2007      
|                   | ThCh$              |  | ThCh$     
|Balance Sheet      |                    |  |           
|Alusa S.A.         | 10,505,546         |  | 10,538,567
|Indalum S.A.       | 263,473            |  | 270,421   
|Indeco S.A.        | 1,547,329          |  | 1,612,743 
|Cedsa S.A. (1)     | -                  |  | 1,234,060 
|Peruplast S.A. (1) | -                  |  | 8,898,119 
|Total              | 12,316,348         |  | 22,553,910



The equity participation of minority shareholders’ in the net results from operations of the Company’s subsidiaries for each year is as follows:

|                                            |                    |  |             |  |            
|------------------------------------------- | ------------------ |  | ----------- |  | -----------
|                                            | As of December 31,
|                                            | 2005               |  | 2006        |  | 2007       
|                                            | ThCh$              |  | ThCh$       |  | ThCh$      
|Income Statement                            |                    |  |             |  |            
|Alusa S.A.                                  | (560,699)          |  | (1,097,733) |  | (941,311)  
|Distribuidora Boliviana Indalum S.A. (2)    | 336                |  | 739         |  | -          
|Indalum S.A.                                | (18,801)           |  | (12,172)    |  | (6,948)    
|Indeco S.A.                                 | (228,337)          |  | (542,810)   |  | (417,180)  
|Cedsa S.A. (1)                              | -                  |  | -           |  | (279,541)  
|Peruplast S.A. (1)                          | -                  |  | -           |  | (1,662,771)
|Minority interest participation in net loss | (807,501)          |  | (1,651,976) |  | (3,307,751)

1. The 2007 acquisitions are detailed in Note 26.
2. In May 2007, the subsidiary Indalum S.A. sold its participation in this company.



Note 26 – Companies acquired in 2007

During the first quarter if 2007, the parent company Madeco S.A. and its subsidiary Alusa S.A. have acquired and increased, respectively, their ownership in Cedsa S.A. (Colombia), Peruplast S.A. and Tech Pak S.A. (Peru) as follows:

1. On February 12, 2007, Madeco S.A. entered into a share purchase agreement acquiring 80% of Cedsa S.A. for US$ 3.7 million in cash. Together with the acquisition of these shares, the shareholders assumed the commitment of making a capital increase of US$ 6 million in two equal installments in March and September 2007.

1. On February 15, 2007, the subsidiary Alusa S.A. entered into a share purchase agreement acquiring 10,984,402 shares of Peruplast S.A., equivalent to 14,5%, which implied increasing its ownership from 25.0% to 39.5%.  The price paid for this acquisition was US$ 3.2 million paid on March 1, 2007.

On July 11, 2007, Shintec S.A. signed a commitment of selling its shares in Peruplast S.A. For this purpose, through Tech Pack S.A. the Company acquired from Shintec S.A. the rest of shares issued by Peruplast S.A. The price paid for these shares was the same as in the previous purchase and sale and therefore, the buyer paid the sum of  US$ 4.6 million in cash.

At the General Shareholder’s Meeting of Peruplast S.A. and Tech Pack S.A. held on July 18, 2007, the shareholders approved the merger and absorption of Tech Pack S.A. by Peruplast S.A., which was executed on October 1, 2007.

Additionally, the subsidiary Alusa S.A. has entered into a shareholders’ agreement assigning to the company the management of both companies. As a consequence, Alusa S.A. included in its consolidation the financial statements of Peruplast S.A. (including Tech Pak S.A.).

The summarized financial statements included in the consolidation of Madeco S.A. are detailed as follows:

|                                                                                       |            |               
|-------------------------------------------------------------------------------------- | ---------- | --------------
|c.1) Summarized balances of incorporated companies as of December 31, 2007:            |           
|                                                                                       |            |               
|                                                                                       | Cedsa S.A. | Peruplast S.A.
|                                                                                       | ThCh$      | ThCh$         
|                                                                                       |            |               
|Assets                                                                                 |            |               
|Current assets                                                                         | 14,574,975 | 22,879,092    
|Property, plant and equipment                                                          | 3,406,309  | 15,902,295    
|Other assets                                                                           | 38,770     | (1,016,461)   
|Total Assets                                                                           | 18,020,054 | 37,764,926    
|                                                                                       |            |               
|Liabilities                                                                            |            |               
|Current liabilities                                                                    | 12,250,195 | 10,726,558    
|Long-term liabilities                                                                  | 215,782    | 11,352,374    
|Shareholders’ equity                                                                   | 5,554,077  | 15,685,994    
|Total Liabilities and Shareholders equity                                              | 18,020,054 | 37,764,926    
|                                                                                       |            |               
|c.2) Summarized statement of income of incorporated companies as of December 31, 2007:
|                                                                                       |            |               
|                                                                                       | Cedsa S.A. | Peruplast S.A.
|                                                                                       | ThCh$      | ThCh$         
|                                                                                       |            |               
|Sales                                                                                  | 22,190,004 | 42,528,795    
|Gross margin                                                                           | 3,736,192  | 6,654,949     
|Operating income, net                                                                  | 2,675,149  | 4,482,943     
|Non-operating loss, net                                                                | (438,382)  | (37,670)      
|Income taxes                                                                           | (687,965)  | (1,176,029)   
|Net income                                                                             | 1,548,802  | 3,269,244     
|                                                                                       |            |               
|At carrying value recognized by the acquired company:                                  |            |               
|                                                                                       |            |               
|                                                                                       | Cedsa S.A. |               
|                                                                                       | ThCh$      |               
|                                                                                       |            |               
|Property, plant and equipment at fair value                                            | 3,406,309  |               
|Property, plant and equipment at fair value recorded by the acquired company           | 3,747,672  |               
|Net difference of assets and liabilities at fair value vs. carrying value              | (341,363)  |               
|Less: difference which does not affect minority interest                               | 68,273     |               
|                                                                                       |            |               
|Fair value difference affecting the investor as of December 31, 2007                   | (273,090)  |               



Note 27 – Derivative Contracts

As of December 31, 2006 and 2007 the details of derivative contracts, recorded in conformity with Note 2 t), are as follows:

|             |                |                    |               |                  |              |                         |                  |                 
|------------ | -------------- | ------------------ | ------------- | ---------------- | ------------ | ----------------------- | ---------------- | ----------------
|             |                |                    |               |                  |              | As of December 31, 2006
|Type         | Nominal amount | Period of maturity | Item          | Sales / Purchase | Hedged item  | Amount                  | Effect in Income | Effect in Income
|             | ThCh$          |                    |               |                  |              | ThCh$                   | ThCh$            | ThCh$           
|Swap         | 6,406,137      | 1st  Quarter 07    | Exchange rate | Purchase         | Loans        | 6,406,138               | (388,465)        | -               
|Forward      | 382,240        | 1st  Quarter 07    | Exchange rate | Purchase         | Cash flow    | 382,240                 | -                | 180,227         
|Asian option | 423,351        | 1st  Quarter 07    | Copper        | Purchase         | Inventory    | 423,350                 | -                | (41,886)        
|Swap         | 5,078,461      | 1st  Quarter 07    | Copper        | Purchase         | Inventory    | 4,495,673               | 629,394          | -               
|Swap         | 3,040,461      | 2nd  Quarter 07    | Exchange rate | Purchase         | Loans        | 2,697,404               | 352,597          | -               
|Forward      | 1,944,990      | 2nd  Quarter 07    | Exchange rate | Purchase         | Loans        | 1,944,990               | (211,679)        | -               
|Swap         | 2,821,465      | 2nd  Quarter 07    | Exchange rate | Purchase         | Loans        | 2,821,465               | (465,697)        | -               
|Forward      | 533,728        | 2nd  Quarter 07    | LME CU        | Purchase         | Cash flow    | 533,728                 | (48,217)         | -               
|Forward      | 272,742        | 2nd  Quarter 07    | LME AL        | Purchase         | Cash flow    | 272,742                 | -                | (930)           
|Swap         | 2,345,184      | 2nd  Quarter 07    | Copper        | Purchase         | Inventory    | 2,345,183               | -                | 180,471         
|Swap         | 2,810,579      | 3rd  Quarter 07    | Exchange rate | Purchase         | Loans        | 2,697,404               | 119,121          | -               
|Forward      | 1,505,332      | 3rd  Quarter 07    | LME CU        | Purchase         | Cash flow    | 1,505,332               | (92,613)         | -               
|Forward      | 272,742        | 3rd  Quarter 07    | LME AL        | Purchase         | Cash flow    | 272,742                 | (2)              | (810)           
|Swap         | 2,382,607      | 3rd  Quarter 07    | Copper        | Purchase         | Inventory    | 2,382,607               | -                | 142,909         
|Swap         | 2,743,019      | 4th  Quarter 07    | Interest rate | Purchase         | Loans        | 2,697,405               | 16,563           | -               
|Swap         | 1,685,691      | 4th  Quarter 07    | Exchange rate | Purchase         | Loans        | 1,685,691               | (22,138)         | -               
|Forward      | 328,816        | 4th  Quarter 07    | LME CU        | Purchase         | Cash flow    | 328,816                 | (24,258)         | -               
|Forward      | 272,742        | 4th  Quarter 07    | LME AL        | Purchase         | Cash flow    | 272,742                 | -                | (2,188)         
|Swap         | 595,373        | 1st  Quarter 08    | Exchange rate | Purchase         | Loans        | 595,373                 | -                | 39,922          
|Swap         | 9,244,784      | 2nd  Quarter 08    | Exchange rate | Purchase         | Loans        | 9,360,651               | 172              | -               
|Swap         | 1,274,650      | 2nd  Quarter 08    | Exchange rate | Purchase         | Loans        | 1,274,650               | (129,196)        | -               
|Swap         | 11,823,426     | 2nd  Quarter 11    | Interest rate | Purchase         | Loans in USD | 12,208,207              | (15,373)         | -               
|             |                |                    |               |                  |              | Total                   | (279,791)        | 497,715         



|        |                |                    |               |                  |                   |                         |                  |                 
|------- | -------------- | ------------------ | ------------- | ---------------- | ----------------- | ----------------------- | ---------------- | ----------------
|        |                |                    |               |                  |                   | As of December 31, 2007
|Type    | Nominal amount | Period of maturity | Item          | Sales / Purchase | Hedged item       | Amount                  | Effect in Income | Effect in Income
|        | ThCh$          |                    |               |                  |                   | ThCh$                   | ThCh$            | ThCh$           
|Swap    | 1,107,687      | 2nd  Quarter 08    | Exchange rate | Purchase         | debt              | 1,107,687               | (547,590)        | -               
|Swap    | 312,601        | 1st  Quarter 08    | Exchange rate | Purchase         | debt              | 312,601                 | (87,696)         | -               
|Swap    | 2,610,402      | 3rd  Quarter 09    | Exchange rate | Purchase         | debt              | 2,610,402               | (246,881)        | -               
|Swap    | 805,995        | 4th  Quarter 08    | Exchange rate | Purchase         | debt              | 805,995                 | (84,274)         | -               
|Swap    | 699,264        | 1st  Quarter 09    | Exchange rate | Purchase         | debt              | 699,264                 | (73,114)         | -               
|Swap    | 658,444        | 4th  Quarter 09    | Exchange rate | Purchase         | debt              | 658,444                 | (68,846)         | -               
|Swap    | 2,484,450      | 4th  Quarter 08    | Exchange rate | Purchase         | debt              | 2,484,450               | (36,327)         | -               
|Swap    | 1,473,050      | 1st  Quarter 08    | Exchange rate | Purchase         | debt              | 1,473,050               | 3,734            | -               
|Swap    | 1,535,544      | 1st  Quarter 08    | Exchange rate | Purchase         | debt              | 1,535,544               | 3,892            | -               
|Swap    | 511,741        | 1st  Quarter 09    | Exchange rate | Purchase         | debt              | 511,741                 | (43,227)         | -               
|Forward | 153,787        | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 153,787                 | -                | (7,870)         
|Forward | 181,365        | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 181,365                 | -                | (9,304)         
|Forward | 130,185        | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 130,185                 | -                | (6,705)         
|Forward | 444,220        | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 444,220                 | -                | 6,436           
|Forward | 54,161         | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 54,161                  | -                | 407             
|Forward | 216,147        | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 216,147                 | -                | 2,350           
|Forward | 49,803         | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 49,803                  | -                | (2,153)         
|Forward | 83,117         | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 83,117                  | -                | (3,677)         
|Forward | 83,701         | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 83,701                  | -                | (3,762)         
|Forward | 50,221         | 3rd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 50,221                  | -                | (2,285)         
|Forward | 66,782         | 3rd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 66,782                  | -                | (3,102)         
|Forward | 133,663        | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 133,663                 | -                | (2,173)         
|Forward | 33,789         | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 33,789                  | -                | (496)           
|Forward | 111,303        | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 111,303                 | -                | (1,769)         
|Forward | 3,229,785      | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 3,229,785               | (35,685)         | -               
|Forward | 5,217,345      | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 5,217,345               | (92,519)         | -               
|Forward | 2,732,895      | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 2,732,895               | (46,513)         | -               
|Forward | 1,490,670      | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 1,490,670               | (7,171)          | -               



|        |                |                    |        |                  |             |                         |                  |                 
|------- | -------------- | ------------------ | ------ | ---------------- | ----------- | ----------------------- | ---------------- | ----------------
|        |                |                    |        |                  |             | As of December 31, 2007
|Type    | Nominal amount | Period of maturity | Item   | Sales / Purchase | Hedged item | Amount                  | Effect in Income | Effect in Income
|        | ThCh$          |                    |        |                  |             | ThCh$                   | ThCh$            | ThCh$           
|Forward | 954,078        | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 954,078                 | -                | (118,420)       
|Forward | 920,004        | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 920,004                 | -                | (108,539)       
|Forward | 545,188        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 545,188                 | -                | (74,462)        
|Forward | 408,891        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 408,891                 | -                | (53,138)        
|Forward | 533,014        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 533,014                 | -                | (32,868)        
|Forward | 501,660        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 501,660                 | -                | (27,323)        
|Forward | 501,660        | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 501,660                 | -                | (24,141)        
|Forward | 501,660        | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 501,660                 | -                | (20,792)        
|Forward | 501,660        | 3rd  Quarter 08    | LME AL | Purchase         | Cash flow   | 501,660                 | -                | (17,455)        
|Forward | 501,660        | 3rd  Quarter 08    | LME AL | Purchase         | Cash flow   | 501,660                 | -                | (14,237)        
|Forward | 652,168        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 652,168                 | -                | (34,341)        
|Forward | 652,168        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 652,168                 | -                | (29,601)        
|Forward | 652,168        | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 652,168                 | -                | (25,424)        
|Forward | 652,168        | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 652,168                 | -                | (21,029)        
|Forward | 671,284        | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 671,284                 | -                | (17,363)        
|Forward | 30,683         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 30,683                  | (1,058)          | -               
|Forward | 209,911        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 209,911                 | (8,469)          | -               
|Forward | 31,549         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 31,549                  | -                | (426)           
|Forward | 71,657         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 71,657                  | (4,148)          | -               
|Forward | 62,282         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 62,282                  | (4,527)          | -               
|Forward | 87,723         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 87,723                  | (8,306)          | -               
|Forward | 73,441         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 73,441                  | (5,877)          | -               
|Forward | 41,580         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 41,580                  | (3,626)          | -               
|Forward | 47,261         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 47,261                  | -                | (2,283)         
|Forward | 32,233         | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 32,233                  | (1,408)          | -               
|Forward | 34,574         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 34,574                  | -                | (1,099)         
|Forward | 74,325         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 74,325                  | -                | (2,603)         
|Forward | 65,917         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 65,917                  | -                | (352)           



|        |                |                    |        |                  |             |                         |                  |                 
|------- | -------------- | ------------------ | ------ | ---------------- | ----------- | ----------------------- | ---------------- | ----------------
|        |                |                    |        |                  |             | As of December 31, 2007
|Type    | Nominal amount | Period of maturity | Item   | Sales / Purchase | Hedged item | Amount                  | Effect in Income | Effect in Income
|        | ThCh$          |                    |        |                  |             | ThCh$                   | ThCh$            | ThCh$           
|Forward | 89,801         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 89,801                  | -                | (1,540)         
|Forward | 60,074         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 60,074                  | -                | (782)           
|Forward | 555,483        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 555,483                 | (73,811)         | -               
|Forward | 181,370        | 2nd  Quarter 08    | LME CU | Purchase         | Cash flow   | 181,370                 | -                | (32,038)        
|Forward | 130,113        | 2nd  Quarter 08    | LME CU | Purchase         | Cash flow   | 130,113                 | -                | (23,132)        
|Forward | 153,770        | 2nd  Quarter 08    | LME CU | Purchase         | Cash flow   | 153,770                 | -                | (26,914)        
|Forward | 96,521         | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 96,521                  | (14,644)         | -               
|Forward | 437,869        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 437,869                 | -                | (58,669)        
|Forward | 113,460        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 113,460                 | (21,796)         | -               
|Forward | 100,682        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 100,682                 | -                | (17,884)        
|Forward | 95,853         | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 95,853                  | -                | 840             
|Forward | 147,353        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 147,353                 | (443)            | -               
|Forward | 149,142        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 149,142                 | -                | (1,805)         
|Forward | 150,036        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 150,036                 | (2,608)          | -               
|Forward | 69,599         | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 69,599                  | (817)            | -               
|Forward | 106,963        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 106,963                 | (5,332)          | -               
|Forward | 83,005         | 2nd  Quarter 08    | LME CU | Purchase         | Cash flow   | 83,005                  | -                | 1,322           
|Forward | 83,117         | 2nd  Quarter 08    | LME CU | Purchase         | Cash flow   | 83,117                  | -                | 1,366           
|Forward | 83,701         | 3rd  Quarter 08    | LME CU | Purchase         | Cash flow   | 83,701                  | -                | 1,323           
|Forward | 83,701         | 3rd  Quarter 08    | LME CU | Purchase         | Cash flow   | 83,701                  | -                | 1,371           
|Forward | 83,478         | 4th  Quarter 08    | LME CU | Purchase         | Cash flow   | 83,478                  | -                | 1,457           
|Forward | 92,956         | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 92,956                  | (6,369)          | -               
|Forward | 134,250        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 134,250                 | (16,358)         | -               
|Forward | 87,950         | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 87,950                  | (6,076)          | -               
|Forward | 70,290         | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 70,290                  | (4,792)          | -               
|Forward | 352,394        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 352,394                 | -                | (19,092)        
|Forward | 353,736        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 353,736                 | -                | (19,180)        
|Forward | 88,198         | 2nd  Quarter 08    | LME CU | Purchase         | Cash flow   | 88,198                  | (6,206)          | -               



|        |                |                    |               |                  |              |                         |                  |                 
|------- | -------------- | ------------------ | ------------- | ---------------- | ------------ | ----------------------- | ---------------- | ----------------
|        |                |                    |               |                  |              | As of December 31, 2007
|Type    | Nominal amount | Period of maturity | Item          | Sales / Purchase | Hedged item  | Amount                  | Effect in Income | Effect in Income
|        | ThCh$          |                    |               |                  |              | ThCh$                   | ThCh$            | ThCh$           
|Forward | 89,962         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 89,962                  | -                | (7,338)         
|Forward | 555,051        | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 555,051                 | -                | (57,727)        
|Forward | 449,872        | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 449,872                 | -                | (34,691)        
|Forward | 84,037         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 84,037                  | (1,928)          | -               
|Forward | 83,701         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 83,701                  | -                | 379             
|Forward | 106,374        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 106,374                 | -                | 1,523           
|Forward | 82,608         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 82,608                  | -                | 1,583           
|Forward | 130,483        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 130,483                 | -                | 4,191           
|Forward | 115,110        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 115,110                 | -                | 5,228           
|Forward | 126,791        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 126,791                 | -                | 1,507           
|Forward | 84,198         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 84,198                  | -                | (108)           
|Forward | 257,811        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 257,811                 | -                | (7,419)         
|Forward | 82,919         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 82,919                  | -                | (204)           
|Forward | 82,996         | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 82,996                  | -                | (179)           
|Forward | 83,057         | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 83,057                  | -                | (77)            
|Forward | 166,263        | 3rd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 166,263                 | -                | (218)           
|Forward | 161,489        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 161,489                 | -                | 3,759           
|Forward | 81,300         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 81,300                  | -                | 1,325           
|Forward | 161,489        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 161,489                 | -                | 4,097           
|Forward | 161,489        | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 161,489                 | -                | 4,285           
|Forward | 161,489        | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 161,489                 | -                | 4,454           
|Forward | 161,489        | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 161,489                 | -                | 4,583           
|Forward | 161,489        | 3rd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 161,489                 | -                | 4,688           
|Forward | 161,489        | 3rd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 161,489                 | -                | 4,741           
|Forward | 161,489        | 3rd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 161,489                 | -                | 4,740           
|Forward | 161,489        | 4th  Quarter 08    | LME CU        | Purchase         | Cash flow    | 161,489                 | -                | 4,691           
|Forward | 161,489        | 4th  Quarter 08    | LME CU        | Purchase         | Cash flow    | 161,489                 | -                | 4,609           
|Forward | 161,489        | 4th  Quarter 08    | LME CU        | Purchase         | Cash flow    | 161,489                 | -                | 4,513           
|Forward | 161,489        | 1st  Quarter 09    | LME CU        | Purchase         | Cash flow    | 161,489                 | -                | 4,335           
|Swap    | 11,008,776     | 2nd  Quarter 11    | Interest rate | Purchase         | Loans in USD | 10,609,086              | (4,214)          | -               
|Swap    | 1,030,468      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 829,372                 | (23,623)         | -               
|Swap    | 1,020,043      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 829,372                 | (2,381)          | -               
|Swap    | 1,026,701      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 829,372                 | (5,114)          | -               
|Swap    | 1,019,765      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 829,372                 | (335)            | -               
|Swap    | 1,025,359      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 829,372                 | (4,011)          | -               
|Swap    | 1,024,780      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 829,372                 | (2,895)          | -               
|Swap    | 1,018,323      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 829,372                 | (17,810)         | -               
|Swap    | 1,022,460      | 2nd  Quarter 08    | Copper        | Purchase         | Inventory    | 829,372                 | (4,707)          | -               
|Swap    | 1,032,076      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 829,372                 | (10,854)         | -               
|        |                |                    |               |                  |              |                         | (1,636,760)      | (892,086)       



Note 28 – Subsequent events

There have been no significant events between January 1, 2007 and the date of the financial statements.



Note 29 – Guarantees received from third parties

As of December 31, 2006 and 2007, the Company holds the following guarantees from third parties:

|                                                                                         |              |                                     |           |        
|---------------------------------------------------------------------------------------- | ------------ | ----------------------------------- | --------- | -------
|                                                                                         |              | Type of                             | Balances 
|Guarantee received                                                                       | Relationship | guarantee                           | 2006      | 2007   
|                                                                                         |              |                                     | ThCh$     | ThCh$  
|Angel Aravena                                                                            | Customer     | Pledge                              | 32,435    | 21,230 
|Angel Aravena                                                                            | Customer     | 2 vehicles                          | -         | 10,510 
|Arriaza Romo Luis                                                                        | Customer     | Credit limit guarantee              | 10,740    | 10,000 
|Aseguradora de Cauciones S.A.                                                            | Customer     | Advance guarantee                   | 5,033,507 | -      
|Cam Perú S.R.L. - Banco de Crédito.                                                      | Supplier     | Guarantee letter                    | -         | 31,737 
|Cam Perú S.R.L. - Interbank                                                              | Supplier     | Guarantee letter                    | -         | 62,394 
|Cammesa S.A.                                                                             | Customer     | Compliance with PO                  | -         | 16,230 
|Centelha equipamientos eléctricos Ltda.                                                  | Customer     | Bank guarantee                      | 267,440   | 280,523
|Chubb Argentina de seguros S.A.                                                          | Customer     | Contract compliance                 | 1,104,817 | -      
|Comité de Administración del fondo fiduciario para el transporte electrico federal (CAF) | Customer     | Offer maintenance                   | -         | 604,063
|Consorcio Alfa Tarapoto - Interbank                                                      | Supplier     | Guarantee letter                    | -         | 54,380 
|Construcciones Termicas SA                                                               | Customer     | Advance guarantee                   | -         | 69,941 
|Coop. Pop. de Electr., Obras y Serv. Pub. de Santa Rosa LTDA                             | Customer     | Offer maintenance                   | -         | 174    
|Coop. Pop. de Electr., Obras y Serv. Pub. de Santa Rosa LTDA                             | Customer     | Compliance with PO                  | -         | 1,309  
|Cristales y Aluminios S.A.                                                               | Customer     | Promissory note                     | 189,055   | 188,378
|Daniel Valverde                                                                          | Customer     | Industrial pledge                   | 125,238   | 121,967
|Project Executive Director's Office of the Ministry                                      | Supplier     | Guarantee letter                    | -         | 5,529  
|Project Executive Director's Office of the Ministry                                      | Supplier     | Guarantee letter                    | -         | 11,861 
|Executive Director’s Office of Mine Energy Project                                       | Supplier     | Guarantee letter                    | -         | 4,821  
|Edelnor S.A.A. - Banco de Crédito                                                        | Supplier     | Guarantee letter                    | -         | 679    
|Edelnor S.A.A. – Interbank                                                               | Supplier     | Guarantee letter                    | -         | 641,774
|Edesur S.A.                                                                              | Customer     | Acquisition of wires and conductors | -         | 131,559
|Edesur S.A.                                                                              | Customer     | Compliance with PO                  | -         | 2,556  
|Edesur S.A.                                                                              | Customer     | Offer maintenance                   | -         | 5,112  
|Electro Oriente – Interbank                                                              | Supplier     | Guarantee letter                    | -         | 8,584  
|Electro Oriente – Interbank                                                              | Supplier     | Guarantee letter                    | -         | 9,674  
|Electro Puno S.A. – Interbank                                                            | Supplier     | Guarantee letter                    | -         | 8,911  
|Electro Sur Este S.A. – Interbank                                                        | Supplier     | Guarantee letter                    | -         | 24,907 
|Electro Sur S.A. – Interbank                                                             | Supplier     | Guarantee letter                    | -         | 8,966  
|Electrocentro S.A. – Interbank                                                           | Supplier     | Guarantee letter                    | -         | 12,474 
|Electromecanica Industrial                                                               | Customer     | Rent guarantee                      | 7,877     | 7,849  
|Electronoroeste - Interbank                                                              | Supplier     | Guarantee letter                    | -         | 740    
|Electronoroeste S.A. - Interbank                                                         | Supplier     | Guarantee letter                    | -         | 21,045 
|Electronorte S.A. - Interbank                                                            | Supplier     | Guarantee letter                    | -         | 35,969 
|Electroucayali S.A.                                                                      | Supplier     | Guarantee letter                    | -         | 7,964  
|Elfle Comercial Ltda.                                                                    | Customer     | Credit limit guarantee              | 75,180    | 70,000 
|Empresa Brasil central de Eng. Ltda.                                                     | Customer     | Bank guarantee                      | -         | 645,202
|Empresa Provincial de Energía de Córdoba                                                 | Customer     | Offer maintenance                   | -         | 2,597  
|Empresa Provincial de Energía de Córdoba                                                 | Customer     | Contract performance guarantee      | -         | 823    
|Empresa Provincial de Energía de Sta. Fe.                                                | Customer     | Offer maintenance                   | -         | 1,873  
|Empresa Provincial de Energía de Sta. Fe.                                                | Customer     | Compliance with PO                  | -         | 325    
|Emprocil Emp. Projetos cosnt. Inst. elet.                                                | Customer     | Bank guarantee                      | 267,440   | -      



|                                                          |              |                                    |           |           
|--------------------------------------------------------- | ------------ | ---------------------------------- | --------- | ----------
|                                                          |              | Type of                            | Balances 
|Guarantees received                                       | Relationship | Guarantee                          | 2006      | 2007      
|                                                          |              |                                    | ThCh$     | ThCh$     
|Ernesto Retamal                                           | Customer     | Mortgage guarantee                 | 2,938     | 2,876     
|Etc Comercio e representaciones Ltda.                     | Customer     | Bank guarantee                     | 267,440   | -         
|Ferbras S.A.                                              | Customer     | Checks                             | 128,880   | 120,000   
|Fianza y Crédito S.A.                                     | Customer     | Contract compliance                | 147,143   | -         
|Gas Natural de Lima y Callao - Interbank                  | Supplier     | Guarantee letter                   | -         | 10,485    
|Gobierno Regional de Arequipa                             | Supplier     | Guarantee letter                   | -         | 977       
|Gtía.de Business Recovery Ltda                            | Customer     | Rent guarantee                     | 8,055     | 7,500     
|Heat Transfer                                             | Customer     | Letters of credit                  | -         | 5,017     
|Hidrandina S.A -  Interbank                               | Supplier     | Guarantee letter                   | -         | 73,469    
|Incosyp Ingen. y construcciones Ltda.                     | Customer     | Certificate of deposit             | 174,553   | 23,048    
|Ind. Nac. De Piezas Y Partes                              | Customer     | Credit limit guarantee             | 40,904    | 38,086    
|Ind. Radiadores Gallardo Ltda.                            | Customer     | Credit limit guarantee             | 32,220    | 30,000    
|Interbank                                                 | Supplier     | Guarantee letter                   | -         | 30,297    
|Ivan Maturana                                             | Customer     | Vehicle                            | 2,148     | 2,102     
|Juan C. Inostroza Carrasco                                | Customer     | Checks                             | 6,444     | 6,000     
|Kitchen Pack Ltda.                                        | Customer     | Credit limit guarantee             | 87,212    | 81,203    
|Lima Airport Partners - Interbank                         | Supplier     | Guarantee letter                   | -         | 20,681    
|Lima Airport Partners S.R.L.                              | Supplier     | Guarantee letter                   | -         | 5,017     
|Lima Airport Partners S.R.L. - Banco de Credito           | Supplier     | Guarantee letter                   | -         | 10,033    
|Lineas Mesopotamicas SA                                   | Customer     | Repair fund substitution guarantee | -         | 335,983   
|Lineas Mesopotamicas SA                                   | Customer     | Advance guarantee                  | -         | 4,374,692 
|Lineas Mesopotamicas SA                                   | Customer     | Financial advance                  | -         | 271,491   
|Lineas Mesopotamicas SA                                   | Customer     | Guarantee encumbrance              | -         | 662,359   
|Luigi Lotito y Cia. Ltda.                                 | Customer     | Credit limit pledge                | 40,091    | 34,840    
|Luz del Sur S.A.A. - Interbank                            | Supplier     | Guarantee letter                   | -         | 858       
|Luz del Sur S.A.A. - Interbank                            | Supplier     | Guarantee letter                   | -         | 19,712    
|Municipalidad Distrital de Coronel Gregorio - Inte        | Supplier     | Guarantee letter                   | -         | 8,713     
|Municipalidad Distrital Santa Rita de Siguas-Inter        | Supplier     | Guarantee letter                   | -         | 2,583     
|Pedro Gajardo                                             | Customer     | Mortgage guarantee                 | 2,890     | 2,828     
|Progos                                                    | Customer     | Certificate of deposit             | -         | 2,922     
|Puerto L SA                                               | Customer     | Compliance with PO                 | -         | 178,931   
|Red de Energía del Perú S.A. - Interbank                  | Supplier     | Guarantee letter                   | -         | 1,745     
|Renovación Cam Peru - Interbank                           | Supplier     | Guarantee letter                   | -         | 5,327     
|Ruben Riojas                                              | Customer     | Pledge                             | 1,074     | 1,051     
|Servicios Energéticos del Chaco-Empresa Estado Provincial | Customer     | Compliance with PO                 | -         | 5,080     
|Sialum                                                    | Customer     | Mortgage                           | 2,577     | 2,521     
|Soc. Ing. Y const. Inducon.                               | Customer     | Mortgage                           | 39,344    | 38,501    
|Sociedad Electrica del Sur Oeste - Interbank              | Supplier     | Guarantee letter                   | -         | 63,043    
|Sunat- Banco Interamericano de Finanzas                   | Supplier     | Guarantee letter                   | -         | 862,138   
|Techint - Panedile - U.T.E.                               | Customer     | Repair fund substitution guarantee | -         | 21,467    
|Tito Alvarado                                             | Supplier     | Letters of credit                  | 100,436   | 100,076   
|Transportel Minera 2 SA                                   | Customer     | Compliance with PO                 | -         | 86,602    
|Turbogeneradores del Peru S.A.C - Banco de Crédito        | Supplier     | Guarantee letter                   | -         | 10,248    
|Turbogeneradores del Peru S.A.C - Interbank               | Supplier     | Guarantee letter                   | -         | 35,217    
|Unidad ejecutora del programa de la interconexión NEA-NOA | Customer     | Offer maintenance                  | -         | 1,479,321 
|Vidrios y aluminios Alucenter                             | Customer     | Mortgage guarantee                 | 17,184    | 16,816    
|Wood-Es Ing. Plásticos Ltda.                              | Customer     | Credit limit guarantee             | 21,480    | 20,000    
|Total                                                     |              |                                    | 8,236,742 | 12,256,487



Note 30 – Local and foreign currency

As of December 31, 2006 and 2007, foreign currency denominated assets and liabilities are as follows:

|                                                     |                         |                   |           
|---------------------------------------------------- | ----------------------- | ----------------- | ----------
|                                                     |                         | As of December31,
|                                                     | Currency of Measurement | 2006              | 2007      
|                                                     |                         | ThCh$             | ThCh$     
|CASH                                                 | Ch$                     | 260,532           | 1,652,484 
|                                                     | US dollars              | 1,910,864         | 5,693,895 
|                                                     | Argentine pesos         | 836,752           | 1,282,789 
|                                                     | REAL                    | 1,326,878         | 867,262   
|                                                     | SOLES                   | 277,434           | 291,387   
|                                                     | EUROS                   | 458,084           | 173,498   
|                                                     | Colombian $             | -                 | 448,751   
|                                                     | OTHER CURRENCIES        | 13,414            | -         
|TIME DEPOSITS                                        | REAL                    | 280,907           | 7,883     
|MARKETABLE SECURITIES, NET                           | Ch$                     | 328,664           | 532,865   
|                                                     | Colombian $             | -                 | 247,939   
|TRADE ACCOUNTS RECEIVABLE, NET                       | Ch$                     | 23,162,466        | 23,941,612
|                                                     | US dollars              | 42,606,991        | 34,430,333
|                                                     | Argentine pesos         | 1,235,205         | 4,057,593 
|                                                     | REAL                    | 21,917,574        | 22,225,102
|                                                     | SOLES                   | 143,030           | 777,933   
|                                                     | EUROS                   | 793,410           | 1,409,281 
|                                                     | Colombian $             | -                 | 3,173,669 
|                                                     | OTHER CURRENCIES        | 11,480            | -         
|NOTES RECEIVABLE, NET                                | Ch$                     | 3,436,782         | 3,743,500 
|                                                     | Adjustable Ch$          | 11,539            | -         
|                                                     | US dollars              | 457,716           | 5,267,492 
|                                                     | Argentine pesos         | 1,619,728         | 1,716,844 
|                                                     | SOLES                   | -                 | 10,354    
|                                                     | OTHER CURRENCIES        | 32,837            | -         
|MISCELLANEOUS RECEIVABLES, NET                       | Ch$                     | 1,088,286         | 726,401   
|                                                     | Adjustable Ch$          | 289,070           | 5,023     
|                                                     | US dollars              | 742,329           | 3,573,688 
|                                                     | Argentine pesos         | 2,850,529         | 778,677   
|                                                     | REAL                    | 574,326           | 476,393   
|                                                     | SOLES                   | 464,957           | 461,657   
|                                                     | EUROS                   | -                 | 47,947    
|                                                     | Colombian $             | -                 | 431,560   
|NOTES AND ACCOUNTS RECEIVABLE FROM RELATED COMPANIES | Ch$                     | 1,654,819         | 1,773,652 
|                                                     | US dollars              | 6,808             | 8,198     



|                         |                         |                   |            
|------------------------ | ----------------------- | ----------------- | -----------
|                         |                         | As of December31,
|                         | Currency of Measurement | 2006              | 2007       
|                         |                         | ThCh$             | ThCh$      
|INVENTORY, NET           | Ch$                     | 49,890,372        | 45,688,722 
|                         | US dollars              | 1,752,068         | 6,614,386  
|                         | Argentine pesos         | 9,602,824         | 9,497,287  
|                         | REAL                    | 28,998,860        | 33,386,810 
|                         | SOLES                   | 14,579,428        | 30,212,730 
|                         | Colombian $             | -                 | 9,479,800  
|INCOME TAXES RECOVERABLE | Ch$                     | 5,284,085         | 4,518,734  
|                         | REAL                    | 3,909,092         | 3,509,317  
|                         | SOLES                   | 888,932           | 4,842,907  
|                         | Colombian $             | -                 | 388,777    
|                         | OTHER CURRENCIES        | 4,974             | -          
|PREPAID EXPENSES         | Ch$                     | 151,125           | 594,549    
|                         | Adjustable Ch$          | 126,141           | 16,299     
|                         | US dollars              | -                 | 42,262     
|                         | Argentine pesos         | 72,538            | 64,677     
|                         | REAL                    | 127,812           | 119,003    
|                         | SOLES                   | 41,929            | 58,479     
|                         | Colombian $             | -                 | 114,098    
|DEFERRED INCOME TAXES    | Ch$                     | 2,664,382         | 7,806,880  
|                         | Argentine pesos         | 961,132           | 561,525    
|                         | REAL                    | 2,209,053         | 2,363,976  
|                         | SOLES                   | 152,560           | 92,295     
|                         | Colombian $             | -                 | 8,139      
|OTHER CURRENT ASSETS     | Ch$                     | 9,527,719         | 1,219,017  
|                         | Adjustable Ch$          | 362,814           | 361,513    
|                         | US dollars              | 8,636,139         | 2,683,496  
|                         | Argentine pesos         | 3,125             | 17,042     
|                         | REAL                    | 732,252           | 123,122    
|Total current assets     |                         | 249,472,767       | 284,621,504



|                                          |                         |                   |              
|----------------------------------------- | ----------------------- | ----------------- | -------------
|                                          |                         | As of December31,
|                                          | Currency of Measurement | 2006              | 2007         
|                                          |                         | ThCh$             | ThCh$        
|LAND                                      | Ch$                     | 5,024,584         | 5,025,171    
|                                          | US dollars              | 7,551,410         | 9,939,402    
|BUILDINGS AND INFRASTRUCTURE              | Ch$                     | 24,435,711        | 24,777,068   
|                                          | US dollars              | 33,443,140        | 37,254,190   
|MACHINERY AND EQUIPMENT                   | Ch$                     | 102,412,450       | 106,371,183  
|                                          | US dollars              | 128,523,360       | 136,782,617  
|OTHER PROPERTY, PLANT AND EQUIPMENT       | Ch$                     | 23,636,246        | 23,541,748   
|                                          | US dollars              | 11,450,358        | 16,720,842   
|REVALUATION FROM PP&E TECHNICAL APPRAISAL | Ch$                     | 5,636,165         | 5,609,629    
|                                          | US dollars              | 8,400,997         | 7,300,572    
|DEPRECIATION                              | Ch$                     | (79,355,141)      | (86,052,713) 
|                                          | US dollars              | (112,262,698)     | (120,320,612)
|Total property, plant and equipment       |                         | 158,896,582       | 166,949,097  



|                                 |                         |                   |            
|-------------------------------- | ----------------------- | ----------------- | -----------
|                                 |                         | As of December31,
|                                 | Currency of Measurement | 2006              | 2007       
|                                 |                         | ThCh$             | ThCh$      
|INVESTMENTS IN RELATED COMPANIES | Ch$                     | 1,624,387         | 1,573,553  
|                                 | US dollars              | 8,025,079         | 614,654    
|INVESTMENTS IN OTHER COMPANIES   | Ch$                     | 16,693            | 16,693     
|                                 | REAL                    | 3,798,652         | 4,371,930  
|                                 | SOLES                   | 12,794            | 16,081     
|GOODWILL                         | Ch$                     | 1,060,413         | 867,268    
|                                 | US dollars              | 17,698,129        | 14,977,515 
|NEGATIVE GOODWILL                | US dollars              | (518,479)         | (1,782,733)
|LONG-TERM ACCOUNTS RECEIVABLE    | Ch$                     | 297,119           | 241,661    
|                                 | Argentine pesos         | 9,748             | 4,714      
|                                 | REAL                    | 167,667           | -          
|INTANGIBLE ASSETS                | Ch$                     | 326,511           | 897,443    
|                                 | US dollars              | 7,011             | 6,093      
|                                 | Argentine pesos         | -                 | 45,974     
|                                 | REAL                    | 62,228            | 65,272     
|                                 | SOLES                   | 203,504           | 531,691    
|AMORTIZATION                     | Ch$                     | (180,486)         | (176,336)  
|                                 | US dollars              | (5,035)           | (4,990)    
|                                 | SOLES                   | (78,194)          | (160,659)  
|OTHER                            | Ch$                     | 2,246,529         | 2,200,304  
|                                 | Adjustable Ch$          | 666,583           | 660,948    
|                                 | US dollars              | 1,774,652         | 2,344,869  
|                                 | Argentine pesos         | 465,016           | 176,252    
|                                 | REAL                    | 1,572,948         | 8,038,532  
|                                 | OTHER CURRENCIES        | 859               | -          
|Total other assets               |                         | 39,254,328        | 35,526,729 
|Total assets                     |                         | 447,623,677       | 487,097,330



|                                                    |                |            |                    |           |       |           |      |           |     
|--------------------------------------------------- | -------------- | ---------- | ------------------ | --------- | ----- | --------- | ---- | --------- | ----
|                                                    | Currency       | 90 days    | 90 days to 1 years
|12/31/2007                                          | 12/31/2006     | 12/31/2007 | 12/31/2006        
|Amount                                              | Rate           | Amount     | Rate               | Amount    | Rate  | Amount    | Rate
|SHORT-TERM OBLIGATIONS WITH BANKS                   | Ch$            | 3,320,326  | 7.43               | 1,263,630 | 6.11  | 623,068   | 7.43 | -         | -   
|SHORT-TERM OBLIGATIONS WITH BANKS                   | Adjustable Ch$ | -          | -                  | -         | -     | 1,177,760 | 4.08 | -         | -   
|SHORT-TERM OBLIGATIONS WITH BANKS                   | US$            | 16,811,576 | 6.63               | 6,442,383 | 5.93  | 8,725,150 | 6.63 | 5,684,259 | 5.93
|SHORT-TERM OBLIGATIONS WITH BANKS                   | Argentine $    | -          | -                  | 749       | 8.80  | -         | -    | -         | -   
|SHORT-TERM OBLIGATIONS WITH BANKS                   | REAL           | -          | -                  | 908,355   | 14.30 | -         | -    | -         | -   
|SHORT-TERM OBLIGATIONS WITH BANKS                   | SOLES          | -          | -                  | 1,284,316 | 5.27  | -         | -    | 999,704   | 5.70
|SHORT-TERM OBLIGATIONS WITH BANKS                   | EUROS          | -          | -                  | 53,411    | 6.46  | -         | -    | -         | -   
|SHORT-TERM OBLIGATIONS WITH BANKS                   | Colombian $    | 4,419,212  | 13.04              | -         | -     | -         | -    | -         | -   
|CURRENT PORTION OF LONG-TERM OBLIGATIONS WITH BANKS | Adjustable Ch$ | 293,345    | 5.22               | 748,680   | 5.65  | 1,369,103 | 5.22 | 2,558,132 | 5.65



|                                                    |                  |            |                    |           |      |           |       |           |     
|--------------------------------------------------- | ---------------- | ---------- | ------------------ | --------- | ---- | --------- | ----- | --------- | ----
|                                                    | Currency         | 90 days    | 90 days to 1 years
|12/31/2007                                          | 12/31/2006       | 12/31/2007 | 12/31/2006        
|Amount                                              | Rate             | Amount     | Rate               | Amount    | Rate | Amount    | Rate 
|CURRENT PORTION OF LONG-TERM OBLIGATIONS WITH BANKS | US$              | 357,035    | 5.04               | 1,289,975 | 5.22 | 5,056,879 | 5.04  | 8,021,320 | 5.22
|CURRENT PORTION OF LONG-TERM OBLIGATIONS WITH BANKS | REAL             | 841,952    | 12.10              | -         | -    | 9,733,613 | 11.30 | 4,286,376 | 3.64
|CURRENT PORTION OF LONG-TERM OBLIGATIONS WITH BANKS | OTHER CURRENCIES | -          | -                  | -         | -    | -         | -     | 538,175   | 2.52
|BONDS PAYABLE                                       | Adjustable Ch$   | -          | -                  | -         | -    | 5,081,276 | 5.00  | 4,872,734 | 5.00
|LONG-TERM OBLIGATIONS MATURING WITHIN ONE YEAR      | Adjustable Ch$   | -          | -                  | 1,262     | 4.81 | 549,418   | 4.81  | 521,363   | 4.81
|LONG-TERM OBLIGATIONS MATURING WITHIN ONE YEAR      | US$              | 882,928    | 7.58               | 560       | 8.00 | 713,024   | -     | 1,318     | 8.00
|LONG-TERM OBLIGATIONS MATURING WITHIN ONE YEAR      | Colombian $      | 167,057    | -                  | -         | -    | -         | -     | -         | -   
|DIVIDENDS PAYABLE                                   | Ch$              | 15,002,161 | -                  | -         | -    | -         | -     | -         | -   
|DIVIDENDS PAYABLE                                   | SOLES            | 48,711     | -                  | 89,015    | -    | -         | -     | -         | -   



|                 |                  |            |                    |            |      |        |      |       |      
|---------------- | ---------------- | ---------- | ------------------ | ---------- | ---- | ------ | ---- | ----- | -----
|                 | Currency         | 90 days    | 90 days to 1 years
|12/31/2007       | 12/31/2006       | 12/31/2007 | 12/31/2006        
|Amount           | Rate             | Amount     | Rate               | Amount     | Rate | Amount | Rate
|ACCOUNTS PAYABLE | Ch$              | 6,389,194  | -                  | 5,487,522  | -    | -      | -    | -     | -    
|ACCOUNTS PAYABLE | Adjustable Ch$   | 559,650    | -                  | 34,887     | -    | -      | -    | -     | -    
|ACCOUNTS PAYABLE | US$              | 18,330,213 | -                  | 11,239,729 | -    | -      | -    | -     | -    
|ACCOUNTS PAYABLE | Argentine $      | 295,912    | -                  | 1,248,952  | -    | -      | -    | -     | -    
|ACCOUNTS PAYABLE | REAL             | 4,025,534  | -                  | 4,964,105  | -    | -      | -    | -     | -    
|ACCOUNTS PAYABLE | SOLES            | 573,469    | -                  | 246,388    | -    | -      | -    | -     | -    
|ACCOUNTS PAYABLE | EUROS            | 154,346    | -                  | 141,397    | -    | -      | -    | -     | -    
|ACCOUNTS PAYABLE | YENS             | -          | -                  | 370,252    | -    | -      | -    | -     | -    
|ACCOUNTS PAYABLE | Colombian $      | 226,978    | -                  | -          | -    | -      | -    | -     | -    
|ACCOUNTS PAYABLE | OTHER CURRENCIES | 1,477      | -                  | 155,738    | -    | -      | -    | -     | -    
|NOTES PAYABLE    | Ch$              | 4,559      | -                  | -          | -    | -      | -    | -     | -    
|NOTES PAYABLE    | US$              | 2,908,006  | -                  | 1,085,992  | -    | -      | -    | 2,455 | 12.25
|NOTES PAYABLE    | Argentine $      | 342,954    | -                  | 279,480    | -    | -      | -    | -     | -    



|                                                |                |            |                    |           |      |           |      |         |  
|----------------------------------------------- | -------------- | ---------- | ------------------ | --------- | ---- | --------- | ---- | ------- | -
|                                                | Currency       | 90 days    | 90 days to 1 years
|12/31/2007                                      | 12/31/2006     | 12/31/2007 | 12/31/2006        
|Amount                                          | Rate           | Amount     | Rate               | Amount    | Rate | Amount    | Rate
|MISCELLANEOUS EXPENSES                          | Ch$            | 156,048    | -                  | 151,779   | -    | -         | -    | -       | -
|MISCELLANEOUS EXPENSES                          | Adjustable Ch$ | 10,492     | -                  | 5,266     | -    | -         | -    | -       | -
|MISCELLANEOUS EXPENSES                          | US$            | 18,647     | 3.49               | 564,460   | 4.98 | -         | -    | -       | -
|MISCELLANEOUS EXPENSES                          | Argentine $    | 22,303     | -                  | 1,384     | -    | -         | -    | -       | -
|MISCELLANEOUS EXPENSES                          | REAL           | 65,052     | -                  | 39,391    | -    | -         | -    | -       | -
|MISCELLANEOUS EXPENSES                          | SOLES          | 17,574     | -                  | -         | -    | -         | -    | -       | -
|NOTES AND ACCOUNTS PAYABLE TO RELATED COMPANIES | Ch$            | 583,969    | -                  | 420,334   | 8.85 | -         | -    | -       | -
|NOTES AND ACCOUNTS PAYABLE TO RELATED COMPANIES | US$            | 31,124     | -                  | 59,320    | -    | -         | -    | -       | -
|ACCRUED EXPENSES                                | Ch$            | 3,593,456  | -                  | 2,736,422 | -    | 630,492   | -    | 696,299 | -
|ACCRUED EXPENSES                                | Adjustable Ch$ | 107,047    | -                  | 115,047   | -    | -         | -    | -       | -
|ACCRUED EXPENSES                                | US$            | 241,763    | -                  | 155,108   | -    | -         | -    | -       | -
|ACCRUED EXPENSES                                | Argentine $    | 952,858    | -                  | 725,067   | -    | 1,065,264 | -    | -       | -
|ACCRUED EXPENSES                                | REAL           | 3,210,359  | -                  | 2,689,746 | -    | -         | -    | -       | -
|ACCRUED EXPENSES                                | SOLES          | 2,052,812  | -                  | 1,593,046 | -    | -         | -    | -       | -
|ACCRUED EXPENSES                                | Colombian $    | 260,714    | -                  | -         | -    | -         | -    | -       | -



|                          |             |            |                    |            |      |            |      |            |  
|------------------------- | ----------- | ---------- | ------------------ | ---------- | ---- | ---------- | ---- | ---------- | -
|                          | Currency    | 90 days    | 90 days to 1 years
|12/31/2007                | 12/31/2006  | 12/31/2007 | 12/31/2006        
|Amount                    | Rate        | Amount     | Rate               | Amount     | Rate | Amount     | Rate
|WITHHOLDINGS              | Ch$         | 959,883    | -                  | 812,072    | -    | -          | -    | -          | -
|WITHHOLDINGS              | Argentine $ | 1,771,404  | -                  | 393,237    | -    | -          | -    | -          | -
|WITHHOLDINGS              | REAL        | 470,756    | -                  | 329,499    | -    | -          | -    | -          | -
|WITHHOLDINGS              | SOLES       | 333,954    | -                  | 134,309    | -    | -          | -    | -          | -
|WITHHOLDINGS              | Colombian $ | 100,682    | -                  | -          | -    | -          | -    | -          | -
|UNEARNED INCOME           | Ch$         | 94,471     | -                  | 566        | -    | -          | -    | -          | -
|UNEARNED INCOME           | US$         | 1,404,942  | -                  | 1,029,951  | -    | -          | -    | -          | -
|UNEARNED INCOME           | Argentine $ | 1,217,360  | -                  | 3,456,791  | -    | -          | -    | -          | -
|UNEARNED INCOME           | REAL        | 1,322,998  | -                  | 3,776,201  | -    | -          | -    | -          | -
|UNEARNED INCOME           | SOLES       | 67,356     | -                  | 165,716    | -    | -          | -    | -          | -
|UNEARNED INCOME           | Colombian $ | 422,096    | -                  | -          | -    | -          | -    | -          | -
|OTHER CURRENT LIABILITIES | Ch$         | 122,020    | -                  | 5,040      | -    | -          | -    | -          | -
|OTHER CURRENT LIABILITIES | US$         | 4,214      | -                  | 1,232,060  | -    | -          | -    | -          | -
|OTHER CURRENT LIABILITIES | REAL        | 1,175,856  | -                  | 70,723     | -    | -          | -    | -          | -
|Total Current Liabilities |             | 96,748,805 |                    | 57,999,313 |      | 34,725,047 |      | 28,182,135 |  



Long term liabilities as of December 31, 2007

|                                      |                |              |              |               |                    |           |      |           |     
|------------------------------------- | -------------- | ------------ | ------------ | ------------- | ------------------ | --------- | ---- | --------- | ----
|                                      | Currency       | 1 to 3 years | 3 to 5 years | 5 to 10 years | More than 10 years
|Amount                                | Rate           | Amount       | Rate         | Amount        | Rate               | Amount    | Rate
|OBLIGATIONS WITH BANKS AND FIN. INST. | Adjustable Ch$ | 3,546,987    | 5.16         | 102,029       | 4.63               | -         | -    | -         | -   
|OBLIGATIONS WITH BANKS AND FIN. INST. | US$            | 19,102,941   | 6.25         | 6,310,572     | 6.30               | -         | -    | -         | -   
|OBLIGATIONS WITH BANKS AND FIN. INST. | REAL           | 5,803,663    | 11.39        | 1,425,332     | 8.73               | -         | -    | -         | -   
|BONDS PAYABLE                         | Adjustable Ch$ | 10,809,607   | 5.00         | 5,813,459     | 5.00               | -         | -    | -         | -   
|MISCELLANEOUS PAYABLES                | Adjustable Ch$ | 1,111,992    | 4.80         | 1,222,648     | 4.80               | 2,439,635 | 4.80 | -         | -   
|MISCELLANEOUS PAYABLES                | US$            | 1,628,187    | 1.08         | 419,045       | -                  | 156,583   | -    | -         | -   
|MISCELLANEOUS PAYABLES                | Colombian $    | 176,075      | 12.21        | -             | -                  | -         | -    | -         | -   
|ACCRUED EXPENSES                      | Ch$            | 161,651      | 2.01         | 41,355        | 7.00               | 72,371    | 7.00 | 874,583   | 2.85
|ACCRUED EXPENSES                      | Adjustable Ch$ | 78,240       | 5.59         | 55,495        | 7.00               | 97,116    | 7.00 | 478,642   | 7.00
|ACCRUED EXPENSES                      | Argentine $    | 120,363      | -            | -             | -                  | -         | -    | -         | -   
|ACCRUED EXPENSES                      | REAL           | 2,509,292    | -            | -             | -                  | -         | -    | -         | -   
|DEFERRED INCOME TAXES                 | Ch$            | -            | -            | -             | -                  | -         | -    | 89,183    | -   
|DEFERRED INCOME TAXES                 | US$            | 724,134      | -            | -             | -                  | -         | -    | -         | -   
|DEFERRED INCOME TAXES                 | Argentine $    | 44,781       | -            | -             | -                  | -         | -    | -         | -   
|DEFERRED INCOME TAXES                 | SOLES          | 399,812      | -            | 198,460       | -                  | 2,271,035 | -    | -         | -   
|DEFERRED INCOME TAXES                 | Colombian $    | 39,707       | -            | -             | -                  | -         | -    | -         | -   
|OTHER LIABILITIES                     | Argentine $    | 187,687      | -            | -             | -                  | -         | -    | -         | -   
|OTHER LIABILITIES                     | REAL           | 432,069      | -            | -             | -                  | -         | -    | -         | -   
|OTHER LIABILITIES                     | SOLES          | 231,166      | -            | -             | -                  | -         | -    | -         | -   
|Total Long-Term Liabilities           |                | 47,108,354   |              | 15,588,395    |                    | 5,036,740 |      | 1,442,408 |     



Long term liabilities as of December 31, 2006

|                            |                       |              |              |               |                    |           |      |           |     
|--------------------------- | --------------------- | ------------ | ------------ | ------------- | ------------------ | --------- | ---- | --------- | ----
|                            | Currency              | 1 to 3 years | 3 to 5 years | 5 to 10 years | More than 10 years
|                            |                       | Amount       | Rate         | Amount        | Rate               | Amount    | Rate | Amount    | Rate
|                            |                       | ThCh$        | %            | ThCh$         | %                  | ThCh$     | %    | ThCh$     | %   
|Bank Loans                  | Indexed Chilean pesos | 7,003,765    | 5.94         | 3,402,786     | 6.34               | -         | -    | -         | -   
|Bank Loans                  | US$                   | 15,175,443   | 5.64         | 10,440,152    | 3.41               | -         | -    | -         | -   
|Bank Loans                  | Reales                | 8,312,287    | 14.15        | 205,218       | 11.50              | -         | -    | -         | -   
|Bonds payable               | Indexed Chilean pesos | 10,331,909   | 5.00         | 11,390,931    | 5.00               | -         | -    | -         | -   
|Miscellaneous payable       | Indexed Chilean pesos | 1,064,293    | 4.80         | 1,170,204     | 4.80               | 3,076,486 | 4.80 | -         | -   
|Miscellaneous payable       | US$                   | 317,970      | 7.44         | -             | -                  | -         | -    | -         | -   
|Accrued expenses            | Ch$                   | 185,184      | 2.28         | 57,213        | 7.00               | 101,461   | 7.00 | 985,594   | 3.46
|Accrued expenses            | Indexed Chilean pesos | 77,610       | 5.47         | 57,455        | 7.00               | 101,889   | 7.00 | 489,888   | 7.00
|Accrued expenses            | Argentine $           | 1,357,295    | -            | -             | -                  | -         | -    | -         | -   
|Accrued expenses            | Brazilian Real        | 2,495,520    | -            | -             | -                  | -         | -    | -         | -   
|Deferred income taxes       | Argentine $           | 56,215       | -            | -             | -                  | -         | -    | -         | -   
|Deferred income taxes       | Peruvian Soles        | 470,105      | -            | -             | -                  | -         | -    | -         | -   
|Other liabilities           | US$                   | 129,196      | -            | -             | -                  | -         | -    | -         | -   
|Other liabilities           | Argentine $           | 328,173      | -            | -             | -                  | -         | -    | -         | -   
|Other liabilities           | Brazilian Real        | 171,375      | -            | -             | -                  | -         | -    | -         | -   
|Total long-term liabilities |                       | 47,476,340   |              | 26,723,959    |                    | 3,279,836 |      | 1,475,482 |     



Note 31 - Sanctions

The Company and its directors has not been the subject of sanctions by the SVS nor by any other administrative authorities.



Note 32 – Differences between Chilean and United States Generally Accepted Accounting Principles

Chilean GAAP varies in certain important respects from US GAAP. Such differences involve certain methods for measuring the amounts shown in the financial statements.

1. Differences in measurement methods

The principal differences between Chilean GAAP and US GAAP are described below together with an explanation, where appropriate, of the method used in the determination of the adjustments that affect net income (loss) and total shareholders’ equity. References below to “SFAS” are to Statements of Financial Accounting Standards issued by the Financial Accounting Standards Board in the United States of America.

a)  Inflation accounting

Pursuant to Chilean GAAP, the Company’s financial statements recognize certain effects of inflation (see Note 2 b). In addition, the Company translates the accounting records of its subsidiaries abroad to Chilean pesos from US dollars in accordance with Technical Bulletin No. 64, Accounting for Foreign Permanent Investments (see Note 2 s)). In the opinion of the Company, this foreign currency translation methodology forms part of the comprehensive basis of preparation of price-level adjusted financial statements required by Chilean GAAP. Inclusion of inflation and the effects of translation in the accompanying consolidated financial statements under the Chilean accounting standards in the financial statements is considered appropriate under the inflationary conditions that have historically affected the Chilean economy even though the cumulative inflation rate for the last three years does not exceed 100%. Accordingly, and as allowed pursuant to Form 20-F, these effects have not been eliminated in the reconciliation to US GAAP included under paragraph (1.p) below.



b)  Revaluation of property, plant and equipment

In accordance with standards issued by the SVS, certain property, plant and equipment are recorded in the financial statements at amounts determined in accordance with a technical appraisal. The difference between the carrying value and the revalued amount is included as part of Property, plant and equipment in Other Reserves within Shareholders’ equity, and is subject to adjustments for price-level restatement and depreciation. Revaluation of property, plant and equipment is not allowed under US GAAP, therefore, the effects of the reversal of this revaluation, as well as of the related accumulated depreciation and depreciation expense is included in paragraph (1.p) below. Certain revaluations presented in the financial statements were recorded as part of purchase accounting adjustments under Chilean GAAP and therefore were not eliminated.

c)  Deferred income taxes

Under Chilean GAAP, until December 31, 1999, deferred income taxes were recorded based on non-recurring timing differences between the recognition of income and expense items for financial statement and tax purposes. Accordingly, there was an orientation toward the income statement focusing on differences in the timing of recognition of revenues and expenses in pre-tax accounting income and taxable income. At the time, Chilean GAAP also permitted not providing for deferred income taxes where a deferred tax asset or liability was either offsetting or not expected to be realized.

Beginning January 1, 2000, the Company recorded income taxes in accordance with Technical Bulletin No. 60 and its related amendments issued by the Chilean Association of Accountants, recognizing, using the liability method, the deferred tax effects of temporary differences between the financial and tax values of assets and liabilities. As a transitional provision, a contra (referred to as “complementary”) asset or liability has been recorded offsetting the effects of the deferred tax assets and liabilities not recorded prior to January 1, 2000. Such complementary assets or liabilities are being amortized to income over the estimated average reversal periods corresponding to the underlying temporary differences to which the deferred tax assets and liabilities relate.

Under US GAAP, companies must account for deferred taxes in accordance with SFAS No. 109 Accounting for Income Taxes (“SFAS 109”), which requires an asset and liability approach for financial accounting and reporting of income taxes, under the following basic principles:

1. A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and tax loss carry-forwards.
2. The measurement of deferred tax liabilities and assets is based on the provisions of the enacted tax law. The effects of future changes in tax laws or rates are not anticipated.
3. The balance of deferred tax assets is reduced by a valuation allowance, if based on the weight of available evidence, it is more-likely-than-not that some portion of the deferred tax assets will not be realized.

Temporary differences are defined as any difference between the financial reporting basis and the tax basis of an asset and liability that at some future date will reverse, thereby resulting in taxable income or expense. Temporary differences ordinarily become taxable or deductible when the related asset is recovered or the related liability is settled. A deferred tax liability or asset represents the amount of taxes payable or refundable in future years as a result of temporary differences at the end of the current year.

The principal differences between US GAAP and Chilean GAAP relate to:

1. The reversal of the complementary assets and liabilities recorded as a transitional provision for unrecorded deferred taxes as of January 1, 2000 and their corresponding amortization into income,
2. Accounting for deferred tax effects related to US GAAP adjustments.

The effect of these differences on the net income and shareholders’ equity of the Company is included in paragraph (1.p) below. Additional disclosures required under SFAS 109 are further described in paragraph (2.b) below.

During 2007, the Company adopted FASB Interpretation No. 48: “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards No. 109: “Accounting for Income Taxes” (“FAS 109”). The Interpretation prescribes a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken within an income tax return. For each tax position, the enterprise must determine whether it is more likely than not that the position will be sustained upon examination by taxing authorities, based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is then measured to determine the amount of benefit to be recognized within the financial statements. No benefits may be recognized for tax positions that do not meet the more likely than not threshold. For tax positions that meet the more likely than not threshold, the benefit to be recognized is the largest amount that is greater than 50% likely of being realized upon ultimate settlement.

As a result of implementing FIN 48, no material adjustment in the provision for uncertainties in tax positions was recognized.  The Company and its subsidiaries recognize interest and penalties related to unrecognized tax benefits in financial expense and other operating expense, respectively.

The Company is potentially subject to income tax audits in numerous jurisdictions in Chile and internationally until the applicable statute of limitations expires. Tax audits by their nature are often complex and can require several years to complete. The following is a summary of tax years, potentially subject to examination, in the significant tax and business jurisdictions in which the Company operates.



|                 |  |                                 
|---------------- |  | --------------------------------
|Tax jurisdiction |  | Tax Years Subject to Examination
|                 |  |                                 
|Chile            |  | 2005-2007                       
|Argentina        |  | 2006-2007                       
|Brazil           |  | 2001-2007                       
|Colombia         |  | 2007                            
|Peru             |  | 2002-2007                       

d)  Goodwill



Under Chilean GAAP, prior to the implementation of Technical Bulletin No. 72, (“BT 72”) which is mandatory for periods beginning after December 31, 2005, the excess of cost over the net book value of a purchased company was recorded as goodwill and amortized to income over a maximum period of twenty years. Amortization of goodwill may be accelerated if the acquired company generates sufficient income to absorb the additional amortization in any given year. The adoption of BT 72 did not change the amortization period for goodwill, but instead requires measurement of acquired assets and liabilities in their fair values for all acquisitions after January 1, 2004.

Under US GAAP, in a business combination accounted for under the purchase method of accounting, the acquired company’s identifiable assets and liabilities are recorded at fair values to give effect to the purchase price paid by the acquiring company. If, after the assets and liabilities of the acquired company have been adjusted to their fair value at the acquisition date, the purchase price exceeds the amount of such fair value, the excess is recorded as goodwill. The Company adopted SFAS No. 142 Goodwill and other Intangible Assets (“SFAS 142”) as of January 1, 2002. SFAS 142 applies to all goodwill and identified intangible assets acquired in a business combination. Under this standard, beginning January 1, 2002, all goodwill, including amounts acquired before initial application of SFAS No. 142, and indefinite-lived intangible assets are not amortized, but must be tested for impairment at least annually.

For the years ended December 31, 2006 and 2007, the Company performed the annual impairment test of goodwill required by the standard and determined that no impairment existed under either Chilean GAAP or US GAAP.

The following effects are included in the net income (loss) and Shareholders’ equity reconciliation to US GAAP under paragraph (1.p) below:

(i)  Differences in the amount of the impairment under US GAAP related to basis differences in the original determination and subsequent amortization methodology between Chilean GAAP and US GAAP;
(ii)  The reversal of goodwill amortization recorded under Chilean GAAP.



A summary of the changes in the Company's goodwill under US GAAP during the years ended December 31, 2005, 2006 and 2007, by segment of operation is as follows:



|                   |                 |                                 |                   |                                 |                   |              |                        |                                 |                  
|------------------ | --------------- | ------------------------------- | ----------------- | ------------------------------- | ----------------- | ------------ | ---------------------- | ------------------------------- | -----------------
|                   | January 1, 2005 | Currency translation adjustment | December 31, 2005 | Currency translation adjustment | December 31, 2006 | Acquisitions | Discontinued Operation | Currency translation adjustment | December 31, 2007
|                   | ThCh$           | ThCh$                           | ThCh$             | ThCh$                           | ThCh$             | ThCh$        | ThCh$                  | ThCh$                           | ThCh$            
|                   |                 |                                 |                   |                                 |                   |              |                        |                                 |                  
|Wire and Cable     | 22,536,419      | (2,471,798)                     | 20,064,621        | 342,218                         | 20,406,839        | 1,252,431    | (18,866,391)           | (2,792,879)                     | -                
|Flexible Packaging | 1,096,811       | (52,036)                        | 1,044,775         | 5,078                           | 1,049,853         | 175,342      | -                      | (285,373)                       | 939,822          
|Aluminum Profiles  | 1,257,173       | -                               | 1,257,173         | -                               | 1,257,173         | -            | -                      | -                               | 1,257,173        
|Total              | 24,890,403      | (2,523,834)                     | 22,366,569        | 347,296                         | 22,713,865        | 1,427,773    | (18,866,391)           | (3,078,252)                     | 2,196,995        

e)  Acquisition of 50% participation in Optel Ltda.

As described in Note 11, Madeco held a 50% participation in the fiber-optic company Optel Ltda. (“Optel”) joint venture with Corning International Corporation. In November 2005 based on arbitration ruling the joint venture agreement was declared lawfully terminated. As a result, Madeco lost the ability to appoint Optel’s management and was required to initiate the liquidation of Optel. The Company deconsolidated this entity and recorded a write-down of its investment in Optel in December 2005 and provided for expected costs related to the litigation with Corning and the forced liquidation of Optel.

On March 31, 2005, Madeco S.A., through its indirect subsidiary Madeco Brasil Ltda., signed an agreement with Corning whereby it acquired, for the nominal price of 1 Brazilian real, Corning’s 50% interest in Optel and also renegotiated and repaid indebtedness owed by Optel to its creditors. Under Chilean GAAP, as a result of that step acquisition the Company once again gained control over Optel and reversed through 2007 net income the impairment previously recorded in 2003. Under Technical Bulletin No. 72 the excess of the net assets acquired over the cost of acquisition referred to as “negative goodwill” was recorded in the step acquisition of an additional 50% interest in Optel in 2005. This negative goodwill is being amortized on a straight-line basis over a period of 20 years.

Under US GAAP the impairment write-offs on investments are not be reversed for improvements in the situation affecting the underlying investment, also the negative goodwill determined on the step acquisition of an additional 50% interest in Optel in 2005 would have been allocated as a reduction of the non-current assets (property, plant and equipment) in accordance with SFAS 141 Business Combinations..

In addition under Chilean GAAP certain payables due to Madeco Group companies were considered identifiable liabilities assumed during the additional 50% step acquisition in Optel. Those payables resulted principally from reimbursements payable for expenses incurred by other entities controlled by Madeco on behalf of Optel during the period when this investment was not controlled by the Company. In addition, as a result of regaining control and renegotiating Optel’s indebtedness the Company released into income the allowances against receivables due from Optel that were recorded in the moment of losing control over it in 2003. For US GAAP purposes the above mentioned payables represented no additional benefit or incremental liability to the acquirer and therefore no portion of the purchase price would be allocated to such amounts. Consequently the amount of the net assets acquired under US GAAP is different than under Chilean GAAP. This difference also affected the determination of the amount of excess of the net assets acquired over the cost of acquisition that reduced the amount of property, plant and equipment.

The differences between Chilean GAAP and US GAAP related to the accounting for the acquisition of 50% participation in Optel are included in paragraph (1.p) below and are as follows:

1. The reversal of negative goodwill and its amortization recorded under Chilean GAAP;

f)  Minimum dividend

As required by the Chilean Companies Act, unless otherwise decided by the unanimous vote of the holders of issued and subscribed shares, the Company must distribute a cash dividend in an amount equal to at least 30% of its net income before amortization of negative goodwill for each year as determined in accordance with Chilean GAAP, unless and except to the extent the Company has unabsorbed prior year losses. Net income related to the amortization of negative goodwill can only be distributed as an additional dividend by the approval of the shareholders, and accordingly, is not included in the calculation of the minimum dividend to be distributed. Under Chilean GAAP dividend amounts are only recorded in the period in which the dividend is declared, whereas under US GAAP, absent shareholder approval to the contrary, the amount of the minimum dividend required to be distributed represents a liability.

Until 2006, the Company had unabsorbed losses from prior years and did not record a minimum dividend liability.  These losses were absorbed during 2007, and the Company declared and recorded a dividend obligation satisfying the minimum dividend criteria. As a consequence, no adjustment has been recorded in the reconciliation in paragraph (1.q.) in any period.



g)  Staff severance indemnities

The Company and certain subsidiaries record a provision for staff severance indemnities when rights to such benefits have been formally guaranteed to employee groups. These severance indemnity plans are unfunded. Under Chilean GAAP these obligations are recorded using the present value of the liability determined at the end of each year based on the current salary and the estimated remaining number of years of service of each employee, as described in Note 2 o) using an interest rate of 7%. Under US GAAP based on EITF 88-1 such severance indemnities may be recorded based on the vested benefits to which the employees are entitled if their employment terminated immediately (settlement basis). The effect of this difference in accounting for staff severance benefits between Chilean GAAP and US GAAP is included in the reconciliation to US GAAP under paragraph (1.p) below.



h)  Derivative instruments and hedging activities

The Company is exposed to the impact of fluctuations foreign currency exchange rates, changes in interest rates and changes in the market prices of commodities. In the normal course of business, the Company enters into a variety of derivate contracts designated to hedge its exposure to these risks.

Under Chilean GAAP, foreign forward exchange contracts and swaps have been recorded in accordance with Technical Bulletin No. 57 issued by the Chilean Association of Accountants, as follows:

(i) Derivative contracts not qualifying for hedge accounting are recorded at the closing spot rate and gains and losses are included in earnings as Other non-operating income and expenses.



i)  Derivative instruments and hedging activities

(i)  Derivatives that are designated and are effective as hedges of existing assets or liabilities are valued, together with the item being hedged, based on the closing spot rate. If the net change in values of the derivative instrument and the hedged item results in a loss, the net difference is recorded in operating income. If the net variation in the value of the derivative instrument and the hedge item results in a gain, the net difference is recorded as unrealized gains and is deferred in the balance sheet.

(ii) Derivative contracts that are designated as hedges of future cash flows or forecasted transactions must be marked-to-market based on the closing spot rate, with any variation in the fair value recorded as unrealized gains or losses in the income statement

Under US GAAP, in accordance with SFAS 133 Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), derivatives are always carried at fair value on the balance sheet. Hedge accounting can only be applied if the instruments meet certain requirements, among others a formal documentation of the hedging relationship and a periodic assessment of its effectiveness. If the derivative instrument does not qualify as a hedging instrument, changes in the fair value are reported directly in income. If the derivative instrument qualifies as a hedge, the accounting treatment varies based on the type of instrument being hedged.

The Company’s derivative instruments do not meet the formal documentation requirement of SFAS 133, therefore all effects should be reported in the same accounting period under US GAAP. As of December 31, 2005, the differences between Chilean GAAP and US GAAP were not material to the Company’s financial position and results of its operation. As of December 31, 2006, the Company is reporting a loss related to fair value hedges under Chilean GAAP, which results in a valuation consistent with US GAAP. Additionally in 2006, the Company entered into cash flow hedges and deferred an unrealized gain related to these derivatives. The effect of recognizing this gain for the year 2006 is included in the reconciliation to US GAAP under paragraph (1.p) below.

Current Chilean accounting rules do not consider the existence of derivative instruments embedded in other contracts and therefore they are not reflected in the financial statements. For US GAAP purposes in accordance with SFAS 133, certain implicit or explicit terms included in host contracts that affect some or all of the cash flows or the value of other exchanges required by the contract in a manner similar to a derivative instrument, must be separated from the host contract and accounted for at fair value. The Company separately measures embedded derivatives as freestanding derivative instruments at their estimated fair values recognizing changes in earnings when they occur. Currently the only host contracts and instruments that the Company has, which have implicit or explicit terms that must be separately accounted for at fair value, are raw materials sale and purchase contracts. The effect of accounting for embedded derivatives is not material to the Company’s financial position and results of its operations and therefore was not included in the reconciliation to US GAAP under paragraph (1.p) below.

j)  Reversal of impairment loss

Under Chilean GAAP, during 2001 the Company recorded an impairment loss on property, plant and equipment related to its plants in Argentina. During the year ended December 31, 2002, the Company reassessed this impairment provision based on an improvement in the economic situation in Argentina and reversed, as permitted by Chilean GAAP, the amount of ThCh$ 7,870,470 related to previously recognized impairment losses. For US GAAP purposes, SFAS 144 does not allow the reversal of impairment losses. Therefore, the provision amount reversed for Chilean GAAP purposes is treated as a reconciling item in the US GAAP reconciliation under paragraph (1.p) below.



k)  Stock option plan

At the Extraordinary Meeting of Shareholders held on November 14, 2002, the shareholders approved a stock option plan, which was adopted by the Company’s Board of Directors on January 28, 2005. This incentive plan authorized the issuance of up to 493,334,000 shares of the Company’s common stock upon the exercises of stock options.

On April 24, 2003, the Company granted stock options to certain employees in the total amount of 182,147,724 shares.

- The options exercise period was from September 30, 2004 to November 30, 2004, assuming the employee continued service to that date, with an exercise price of Ch$ 24 per share. On October 29, 2004, the executives exercised the portion of the stock options and subscribed 182,147,724 shares at the price of Ch$ 24 per share, which was paid with their own resources on that same date. In accordance with the accounting criteria described in Note 2 v) the corresponding capital increase of ThCh$ 4,371,545 (historic value) was recognized in the financial statement.

- At an Extraordinary Shareholders’ Meeting held on December 22, 2004, it was agreed to modify the placement value of remaining 311,186,276 authorized shares destined to such compensation plan, setting a price of Ch$ 60 per share.

On January 25, 2005 the Board of Directors agreed to a separate stock option plan of 130,000,000 shares for certain executives. The exercise price was set at Ch$ 60 per share. This plan commenced on May 20, 2007 when the stock option contracts were issued. Under Chilean GAAP the stock options were recognized in accordance with accounting criteria described in the Note 2 v) at the fair value of ThCh$ 263,500 determined using the “Black-Scholes-Merton” model as of the grant date (January 25, 2005).

On August 31, 2005, the above mentioned contracts signed on May 20, 2005 were nullified and the Company recorded in income the unamortized amount of the fair value of the options.

On May 30, 2006, the Board of Directors agreed to issue to a group of executives stock options for a total of 120,000,000 shares out of the shares issued for this purpose in 2002. The Share Subscription Agreement dated July 14, 2006 sets the exercise price at Ch$ 48.52 per share.

The Company determined the fair value of ThCh$ 687,600 for these options at the grant date using the "Black-Scholes-Merton" method, which is recorded with a charge to compensation cost and a credit to other reserves on a straight-line basis over the period between the grant date of the options and the date that these  become  vested.  The  charge  to  income  for  the  year  2006  was  ThCh$ 275,040  and  ThCh$ 412,560 in 2007.

A summary of stock option activity for the plan is as follows:



|                            |                                  |  |                           |  |               |  |               |  |             |  |              
|--------------------------- | -------------------------------- |  | ------------------------- |  | ------------- |  | ------------- |  | ----------- |  | -------------
|                            | For the years ended December 31,
|                            | Authorized Options               |  | Granted Options (thereof)
|                            | 2005                             |  | 2006                      |  | 2007          |  | 2005          |  | 2006        |  | 2007         
|                            | Number                           |  | Number                    |  | Number        |  | Number        |  | Number      |  | Number       
|                            |                                  |  |                           |  |               |  |               |  |             |  |              
|Balance as of January 1,    | 311,186,276                      |  | 311,186,276               |  | 311,186,276   |  | -             |  | -           |  | 120,000,000  
|Granted during the period   | -                                |  | -                         |  | -             |  | 130,000,000   |  | 120,000,000 |  | -            
|Cancelled during the period | -                                |  | -                         |  | (191,186,276) |  | (130,000,000) |  | -           |  | -            
|Exercised during the period | -                                |  | -                         |  | (120,000,000) |  | -             |  | -           |  | (120,000,000)
|Balance as of December 31,  | 311,186,276                      |  | 311,186,276               |  | -             |  | -             |  | 120,000,000 |  | -            



Under US GAAP, the Company applied until December 31, 2005 the Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees when accounting for stock options. Until then no compensation cost was recognized for grants made to employees when the grant price is greater than or equal to the market price of a common share on the grant date. For the year 2005, the amount recorded in income under Chilean GAAP was reversed in the US GAAP reconciliation under paragraph (1.p) below.

As of January 1, 2006, the Company adopted SFAS No. 123(R) Accounting for Stock-Based Compensation. This standard requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values estimated at the date of the grant. As of the date of the transition, there were no stock options outstanding; the Company is applying SFAS 123(R) using the modified-prospective-transition method. There is no difference in the treatment under Chilean GAAP, which is in accordance with International Financial Reporting Standard No. 2 Share-based payments, and SFAS 123(R), accordingly there is no adjustment included in the reconciliation under paragraph (1.p) for the year 2006.

There are no stock options authorized or granted by the Company as of December 31, 2007.



l) Capitalized Interest

Under Chilean GAAP, all interest on debt directly associated with construction projects is capitalized, including interest, price-level restatement and, with respect to foreign currency borrowings, foreign currency translation gains and losses. The capitalization of interest costs associated with projects under construction is optional when incurred on debt that is not directly related to such projects. During 2005, 2006 and 2007, the Company’s debt was not considered directly associated with construction projects, and the Company did not capitalize interest.

Under US GAAP, capitalization of interest is required for the interest, which could be avoided should expenditures for the associated assets have not been made. As a consequence of increasing construction activities, starting 2006 the Company was implementing an adjustment for the capitalization of interest and the corresponding effect on depreciation that is included under paragraph (1.p) below.



|                                   |  |                                  |  |             
|---------------------------------- |  | -------------------------------- |  | ------------
|                                   |  | For the years ended December 31,
|                                   |  | 2006                             |  | 2007        
|                                   |  | ThCh$                            |  | ThCh$       
|                                   |  |                                  |  |             
|Interest cost incurred             |  | (12,254,807)                     |  | (12,837,007)
|Interest capitalized under US GAAP |  | 308,922                          |  | 133,377     



m)  Minority interest

The effects on the minority interest of the US GAAP adjustments in subsidiaries that are not wholly-owned by the Company have been reflected in Minority interest and are included in paragraph (1.p) below.



n)  Elimination of discontinued operations

(i) Alufoil S.A.

Under Chilean GAAP the Company records divestitures of investments or assets in the year in which they occur and no restatement to the financial statement information presented in previous years is required after a divestiture has occurred. Under US GAAP, in accordance with SFAS 144 Accounting for the Impairment or Disposal of Long-Lived Assets, the discontinued operations of a component must be retroactively separated from the continuing operations of an entity, when the operations and cash flows of the component will be eliminated from the ongoing operations of an entity as a result of a disposal or a sale transaction, and the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.

During 2004 and 2005 the Company disposed substantially all of its assets of subsidiary Alufoil S.A. that produced in Chile mass consumer flexible packaging products such as aluminum foil, trash bags and plastic wrap and did not maintain any continuing involvement in the operations of this component after the disposal transaction.

As a result of the disposal, the results of operations of that component have been eliminated from the ongoing operations of the Company. The effect of restating discontinued operations is included in the reconciliation of net income to US GAAP and is presented net of tax (benefit) expenses of ThCh$ 248,435 and ThCh$ 42, and net of minority interest of ThCh$ 162,539 and ThCh$ (266) for the years ended December 31, 2004 and 2005, respectively under paragraph (1.p) below.



(ii) Wire and Cable Unit

As of November 15, 2007 the Company signed a framework agreement with the Nexans Group about the intention to transfer the Company’s Wire and Cable Unit, which was formalized on February 21, 2008 setting the purchase price at US$ 448 million in cash plus 2.5 million shares in Nexans (participation of approximately 8.9%). The transaction is expected to close by September 30, 2009, subject to regulatory approvals and customary closing conditions. The estimated purchase price is higher than the carrying value of the disposal group, therefore, the Company did not recognize any gain or loss on this transaction at December 31, 2007.

Pursuant to SFAS 144 “Accounting for the Impairment or Disposal of Long Lived Assets”, the Wire and Cable segment was considered as "discontinued" as of December 31, 2007. The results of operations of the unit have been eliminated from the continuing operations of the Company. The effect of restating discontinued operations is included in the reconciliation of net income to US GAAP under paragraph (1.p) below.



o)  Investment in related company

Under Chilean GAAP the Company, as of December 31, 2007, consolidated its 50% owned investee Peruplast S.A., since pursuant to a shareholders’ agreement, the Company through its representatives in the board of directors can appoint the chief executive officer of the investee. Consequently, the Company is able to establish finance and operation policies and strategies, which under Chilean GAAP is sufficient to presume control and thus consolidate the investee.

With its 50% ownership in Peruplast S.A., the Company does not exercise control over the investee pursuant to US GAAP.  Consequently, the investment is accounted for in accordance with Accounting Principles Board Opinion No. 18 “The Equity Method for accounting for Investments in Common Stock”, recognizing the investor’s share of the earnings and losses determined under US GAAP. The principal US GAAP adjustment affecting the Company’s equity investee is the capitalization of interest and corresponding effects to deferred taxes and minority interest, which is included in the US GAAP reconciliation under paragraph (1.p) below.



p)  Effects of conforming to US GAAP

The adjustments to the reported consolidated net income (loss) required to conform to US GAAP are as follows:

|                                                                                      |                                  |  |              |  |             
|------------------------------------------------------------------------------------- | -------------------------------- |  | ------------ |  | ------------
|                                                                                      | For the years ended December 31,
|                                                                                      | 2005                             |  | 2006         |  | 2007        
|                                                                                      | ThCh$                            |  | ThCh$        |  | ThCh$       
|                                                                                      |                                  |  |              |  |             
|Net (loss) income in accordance with Chilean GAAP                                     | 13,174,354                       |  | 32,439,068   |  | 19,660,064  
|Reversal of depreciation on revaluation increment of fixed assets (par. 1b)           | 121,342                          |  | 54,052       |  | 54,549      
|Deferred income taxes (par. 1c)                                                       |                                  |  |              |  |             
|c.i Reversal of amortization of complementary accounts                                | 290,267                          |  | 285,582      |  | 288,314     
|c.ii Deferred tax effects of US GAAP adjustments                                      | 2,232,806                        |  | 5,811,893    |  | 3,899,248   
|Amortization of goodwill (par. 1d)                                                    | 220,958                          |  | 221,442      |  | 215,486     
|Staff severance indemnities (par. 1g) .                                               | 166,865                          |  | (11,719)     |  | 125,041     
|Reversal of impairment loss (par. 1j)                                                 | 244,382                          |  | 212,508      |  | 264,421     
|Stock option plan (par. 1k)                                                           | 172,367                          |  | -            |  | -           
|Capitalized interests (par. 1l)                                                       |                                  |  |              |  |             
|l.i  Capitalized interest                                                             | -                                |  | 125,177      |  | 37,459      
|l.ii Accumulated depreciation                                                         | -                                |  | (5,505)      |  | (6,377)     
|Minority interest (par. 1m)                                                           | 178,955                          |  | 491,303      |  | 643,299     
|Elimination of discontinued operations (par. 1n)                                      | (15,750,801)                     |  | (26,768,566) |  | (26,322,590)
|Investment in related company (par. 1o)                                               | -                                |  | -            |  | 18,575      
|Net income (loss) from continuing operations in accordancewith US GAAP                | 1,051,495                        |  | 12,855,235   |  | (1,122,511) 
|Income from discontinued operations, net of taxesand minority interest (par. 1n)      | 14,377,800                       |  | 23,704,784   |  | 22,868,497  
|Net income in accordance with US GAAP                                                 | 15,429,295                       |  | 36,560,019   |  | 21,745,986  
|                                                                                      |                                  |  |              |  |             
|Other comprehensive income:                                                           |                                  |  |              |  |             
|Foreign currency translation adjustment, net of taxes                                 | 667,415                          |  | (75,016)     |  | 45,464      
|Loss on hedge of the foreign currency exposure of net investmentin foreign operations | (15,814,066)                     |  | 2,107,997    |  | (17,216,035)
|Gain on hedge of the foreign currency exposure of net investmentin foreign operations | 163,259                          |  | -            |  | -           
|Comprehensive income in accordance with US GAAP                                       | 445,903                          |  | 38,593,000   |  | 4,575,415   

The following is a reconciliation of consolidated Shareholder’s Equity differences under Chilean GAAP to the corresponding amounts under US GAAP:

|                                                                   |  |                    |  |            
|------------------------------------------------------------------ |  | ------------------ |  | -----------
|                                                                   |  | As of December 31,
|                                                                   |  | 2006               |  | 2007       
|                                                                   |  | ThCh$              |  | ThCh$      
|                                                                   |  |                    |  |            
|                                                                   |  |                    |  |            
|Shareholder’s Equity in accordance with Chilean GAAP               |  | 270,170,264        |  | 263,893,671
|Reversal of revaluation of property, plant and equipment (par. 1b) |  |                    |  |            
|b.i Property, plant and equipment                                  |  | (5,647,670)        |  | (5,609,629)
|b.ii Accumulated depreciation                                      |  | 2,933,007          |  | 3,003,417  
|Deferred income taxes (par. 1c)                                    |  |                    |  |            
|c.i Reversal of complementary accounts                             |  | (5,199,966)        |  | (4,656,482)
|c.ii Deferred tax effects of US GAAP adjustments                   |  | 1,055,109          |  | 1,510,650  
|Amortization of goodwill (par. 1d)                                 |  | 9,673,192          |  | 10,187,505 
|Acquisition of Optel (par. 1e)                                     |  |                    |  |            
|e.i Reversal of negative goodwill amortization                     |  | (49,717)           |  | (67,893)   
|e.i Reversal of negative goodwill                                  |  | 568,195            |  | 493,769    
|e.ii-iii New basis of property, plant and equipment                |  | (1,769,991)        |  | (1,538,176)
|e.iii Accumulated depreciation of property, plant and equipment    |  | 190,684            |  | 280,383    
|Staff severance indemnities (par. 1g)                              |  | (3,943,807)        |  | (3,721,521)
|Derivative instruments (par. 1i)                                   |  | 497,714            |  | (892,084)  
|Reversal of impairment loss (par. 1j)                              |  | (3,110,219)        |  | (2,443,638)
|Impairment of goodwill Ficap (par. 1d)                             |  | (5,717,871)        |  | (4,968,902)
|Capitalized interests (par 1l)                                     |  |                    |  |            
|l.i  Capitalized interest                                          |  | 308,922            |  | 402,613    
|l.ii Accumulated depreciation                                      |  | (15,085)           |  | (30,714)   
|Minority interest (par. 1m)                                        |  | 326,856            |  | 285,029    
|Investment in related company (par. 1o)                            |  | -                  |  | 18,575     
|Shareholder’s Equity in accordance with US GAAP                    |  | 260,269,617        |  | 256,146,573



The following summarizes the changes in shareholders’ equity under US GAAP during the years ended December 31, 2005, 2006 and 2007:

|                                  |                    |  |             |  |             
|--------------------------------- | ------------------ |  | ----------- |  | ------------
|                                  | As of December 31,
|                                  | 2005               |  | 2006        |  | 2007        
|                                  | ThCh$              |  | ThCh$       |  | ThCh$       
|                                  |                    |  |             |  |             
|Beginning balance                 | 163,494,996        |  | 211,263,749 |  | 260,269,617 
|Capital increase                  | 48,267,248         |  | 10,042,903  |  | 5,822,400   
|Issuance of stock options         | -                  |  | 295,393     |  | 412,560     
|Cumulative translation adjustment | (14,983,392)       |  | 2,032,981   |  | (17,170,571)
|Interim dividend                  | -                  |  | -           |  | (15,002,161)
|Price-level restatement           | (944,398)          |  | 74,572      |  | 68,742      
|Net income for the year           | 15,429,295         |  | 36,560,019  |  | 21,745,986  
|Ending balance                    | 211,263,749        |  | 260,269,617 |  | 256,146,573 

Additional disclosure requirements

1. Earnings (loss) per share

|                                                              |                                  |  |           |  |          
|------------------------------------------------------------- | -------------------------------- |  | --------- |  | ---------
|                                                              | For the years ended December 31,
|                                                              | 2005                             |  | 2006      |  | 2007     
|                                                              | Ch$                              |  | Ch$       |  | Ch$      
|                                                              |                                  |  |           |  |          
|Earnings (loss) per share from continuing operations(US GAAP) | 0.23                             |  | 2.35      |  | (0.20)   
|Earnings per share from discontinued operations(US GAAP)      | 3.17                             |  | 4.32      |  | 4.11     
|Net earnings (loss) per share (US GAAP)                       | 3.40                             |  | 6.68      |  | 3.91     
|Net earnings (loss) per share (Chilean GAAP)                  | 2.90                             |  | 5.93      |  | 3.54     
|                                                              |                                  |  |           |  |          
|Weighted average number of common stock                       |                                  |  |           |  |          
|outstanding (in thousands)                                    | 4,537,185                        |  | 5,471,995 |  | 5,558,289



The earnings per share figures disclosed above for both US GAAP and Chilean GAAP purposes have been calculated by dividing the respective earnings determined in accordance with US GAAP and Chilean GAAP, respectively, by the weighted average number of common shares outstanding during the year. The outstanding employee stock options do not have a dilutive effect on the above calculation under application of the treasury stock method.



1. Income taxes

The provision for income taxes charged to the results of operations determined in accordance with US GAAP is as follows:



|                                                                          |                                      |  |           |  |             |  |           |  |            
|------------------------------------------------------------------------- | ------------------------------------ |  | --------- |  | ----------- |  | --------- |  | -----------
|                                                                          | For the year ended December 31, 2005
|                                                                          | Chile                                |  | Argentina |  | Peru        |  | Brazil    |  | Total      
|                                                                          | ThCh$                                |  | ThCh$     |  | ThCh$       |  | ThCh$     |  | ThCh$      
|                                                                          |                                      |  |           |  |             |  |           |  |            
|Income (loss) before income taxes and minority interestunder Chilean GAAP | 3,712,638                            |  | (413,274) |  | 6,754,163   |  | 5,536,731 |  | 15,590,258 
|Current income taxes as determined under Chilean GAAP                     | (240,440)                            |  | -         |  | (2,676,524) |  | (408,516) |  | (3,325,480)
|Deferred income taxes as determined under Chilean GAAP                    | 2,229,933                            |  | (683,531) |  | (265,578)   |  | 436,252   |  | 1,717,076  
|Subtotal                                                                  | 1,989,493                            |  | (683,531) |  | (2,942,102) |  | 27,736    |  | (1,608,404)
|US GAAP adjustments:                                                      |                                      |  |           |  |             |  |           |  |            
|Deferred tax effects of applying SFAS No. 109                             | 440,930                              |  | -         |  | 83,154      |  | -         |  | 524,084    
|Deferred tax effects of US GAAP adjustments                               | (48,028)                             |  | -         |  | -           |  | 231,336   |  | 183,308    
|Reclassification of income of discontinued operations                     | (897,741)                            |  | 113,547   |  | 2,858,948   |  | (259,072) |  | 1,815,682  
|Expense (benefit) for the year under US GAAP                              | 1,484,654                            |  | (569,984) |  | -           |  | -         |  | 914,670    



|                                                                        |                                      |  |           |  |             |  |             |  |           |  |            
|----------------------------------------------------------------------- | ------------------------------------ |  | --------- |  | ----------- |  | ----------- |  | --------- |  | -----------
|                                                                        | For the year ended December 31, 2006
|                                                                        | Chile                                |  | Argentina |  | Peru        |  | Brazil      |  |           |  | Total      
|                                                                        | ThCh$                                |  | ThCh$     |  | ThCh$       |  | ThCh$       |  |           |  | ThCh$      
|                                                                        |                                      |  |           |  |             |  |             |  |           |  |            
|Income before income taxes and minority interestunder Chilean GAAP      | 16,975,808                           |  | 1,322,483 |  | 12,848,317  |  | 8,534,115   |  |           |  | 39,680,723 
|Current income taxes as determined under Chilean GAAP                   | (804,660)                            |  | (725,717) |  | (3,736,072) |  | (2,460,800) |  |           |  | (7,727,249)
|Deferred income taxes as determined under Chilean GAAP                  | 2,535,123                            |  | 98,055    |  | (111,375)   |  | (384,232)   |  |           |  | 2,137,571  
|Subtotal                                                                | 1,730,463                            |  | (627,662) |  | (3,847,447) |  | (2,845,032) |  |           |  | (5,589,678)
|US GAAP adjustments:                                                    |                                      |  |           |  |             |  |             |  |           |  |            
|Deferred tax effects of applying SFAS No. 109                           | 411,450                              |  | -         |  | 78,410      |  | -           |  |           |  | 489,860    
|Deferred tax effects of US GAAP adjustments                             | (26,878)                             |  | 88,272    |  | (941)       |  | 79,150      |  |           |  | 139,603    
|Reclassification of income of discontinued operations                   | (1,293,068)                          |  | 225,220   |  | 3,769,978   |  | 2,765,882   |  |           |  | 5,468,012  
|Expense (benefit) for the year under US GAAP                            | 821,967                              |  | (314,170) |  | -           |  | -           |  |           |  | 507,797    
|                                                                        | For the year ended December 31, 2007
|                                                                        | Chile                                |  | Argentina |  | Peru        |  | Brazil      |  | Colombia  |  | Total      
|                                                                        | ThCh$                                |  | ThCh$     |  | ThCh$       |  | ThCh$       |  | ThCh$     |  | ThCh$      
|                                                                        |                                      |  |           |  |             |  |             |  |           |  |            
|Income before income taxes and minority interest     under Chilean GAAP | 4,271,301                            |  | (33,170)  |  | 9,993,635   |  | 9,722,368   |  | 1,406,733 |  | 25,360,867 
|Current income taxes as determined under Chilean GAAP                   | (415,701)                            |  | (137,920) |  | (3,969,203) |  | (760,150)   |  | (687,965) |  | 5,970,939  
|Deferred income taxes as determined under Chilean GAAP                  | 5,483,369                            |  | (351,980) |  | (282,817)   |  | 46,860      |  | -         |  | 4,895,432  
|Subtotal                                                                | 5,067,668                            |  | (489,900) |  | (4,252,020) |  | (713,290)   |  | (687,965) |  | (1,075,507)
|US GAAP adjustments:                                                    |                                      |  |           |  |             |  |             |  |           |  |            
|Deferred tax effects of applying SFAS No. 109                           | 397,413                              |  | -         |  | 98,142      |  | -           |  | -         |  | 495,555    
|Deferred tax effects of US GAAP adjustments                             | (58,743)                             |  | 235,750   |  | (6,487)     |  | 315,562     |  | -         |  | 486,082    
|Reclassification of income of discontinued operations                   | (736,108)                            |  | (142,358) |  | 2,984,336   |  | 397,728     |  | 687,965   |  | 3,191,563  
|Deconsolidation Peruplast                                               | -                                    |  | -         |  | 1,176,029   |  | -           |  | -         |  | 1,176,029  
|Expense (benefit) for the year under US GAAP                            | 4,670,230                            |  | (396,508) |  | -           |  | -           |  | -         |  | 4,273,722  

Deferred tax assets (liabilities) as of December 31, 2006 are as follows:

|                                                                    |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|------------------------------------------------------------------- | ------------------------------- |  | ------------------------------------------- |  | -------------------------- |  | ------------------------------- |  | ------------------------------------------- |  | --------------------------
|                                                                    | Short-term                      |  | Long-term                                  
|                                                                    | Deferred tax under Chilean GAAP |  | SFAS No. 109 applied to US GAAP adjustments |  | Deferred tax under US GAAP |  | Deferred tax under Chilean GAAP |  | SFAS No. 109 applied to US GAAP adjustments |  | Deferred tax under US GAAP
|                                                                    | ThCh$                           |  | ThCh$                                       |  | ThCh$                      |  | ThCh$                           |  | ThCh$                                       |  | ThCh$                     
|Deferred tax assets                                                 |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Allowance for doubtful accounts                                     | 1,421,487                       |  | -                                           |  | 1,421,487                  |  | 30,004                          |  | -                                           |  | 30,004                    
|Tax loss carry forwards                                             | 3,073,126                       |  | -                                           |  | 3,073,126                  |  | 21,620,458                      |  | -                                           |  | 21,620,458                
|Valuation allowance                                                 | (3,342,743)                     |  | -                                           |  | (3,342,743)                |  | (26,572,735)                    |  | (990 ,606)                                  |  | (27,563,341)              
|Accrued vacation expense                                            | 158,556                         |  | -                                           |  | 158,556                    |  | -                               |  | -                                           |  | -                         
|Property, plant and equipmentheld for sale                          | 32,273                          |  | -                                           |  | 32,273                     |  | 23,995                          |  | -                                           |  | 23,995                    
|Impairment of investment in Decker                                  | -                               |  | -                                           |  | -                          |  | -                               |  | 1,088,577                                   |  | 1,088,577                 
|Impairment of investment in Brazil                                  | 1,565,742                       |  | -                                           |  | 1,565,742                  |  | 5,349,618                       |  | -                                           |  | 5,349,618                 
|Adjustment to realizable valuefor property, plant and equipment     | 12,580                          |  | -                                           |  | 12,580                     |  | -                               |  | -                                           |  | -                         
|Allowance for obsolescenceof inventories                            | 1,328,890                       |  | -                                           |  | 1,328,890                  |  | 102,457                         |  | -                                           |  | 102,457                   
|Allowances for other currentand long-term receivables               | 630,189                         |  | -                                           |  | 630,189                    |  | -                               |  | -                                           |  | -                         
|Write-downs of property, plantand equipment                         | -                               |  | -                                           |  | -                          |  | 219,280                         |  | -                                           |  | 219,280                   
|Provision for unused property,plant and equipment                   | -                               |  | -                                           |  | -                          |  | 491,634                         |  | 33,851                                      |  | 525,485                   
|Other                                                               | 1,622,238                       |  | -                                           |  | 1,622,238                  |  | 862,090                         |  | 65,061                                      |  | 927,151                   
|Gross deferred tax assets                                           | 6,502,338                       |  | -                                           |  | 6,502,338                  |  | 2,126,801                       |  | 196,883                                     |  | 2,323,684                 
|                                                                    |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Deferred tax liabilities                                            |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Property, plant and equipment inleasing and accelerateddepreciation | -                               |  | -                                           |  | -                          |  | 1,925,638                       |  | 4,695,951                                   |  | 6,621,589                 
|Manufacturing expenses                                              | 476,285                         |  | -                                           |  | 476,285                    |  | -                               |  | -                                           |  | -                         
|Staff Severance Indemnities                                         | -                               |  | -                                           |  | -                          |  | 442,925                         |  | (442,925)                                   |  | -                         
|Negotiation of bonds                                                | 33,038                          |  | -                                           |  | 33,038                     |  | -                               |  | -                                           |  | -                         
|Bond issuance costs                                                 | -                               |  | -                                           |  | -                          |  | 142,047                         |  | -                                           |  | 142,047                   
|Other                                                               | 5,890                           |  | -                                           |  | 5,890                      |  | 142,513                         |  | (80,508)                                    |  | 62,005                    
|Gross deferred tax liabilities                                      | 515,213                         |  | -                                           |  | 515,213                    |  | 2,653,123                       |  | 4,172,518                                   |  | 6,825,641                 
|                                                                    |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Net assets (liabilities) deferred taxes                             | 5,987,125                       |  | -                                           |  | 5,987,125                  |  | (526,322)                       |  | (3,975,635)                                 |  | (4,501,957)               

Deferred tax assets (liabilities) as of December 31, 2007 are as follows:

|                                                                    |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|------------------------------------------------------------------- | ------------------------------- |  | ------------------------------------------- |  | -------------------------- |  | ------------------------------- |  | ------------------------------------------- |  | --------------------------
|                                                                    | Short-term                      |  | Long-term                                  
|                                                                    | Deferred tax under Chilean GAAP |  | SFAS No. 109 applied to US GAAP adjustments |  | Deferred tax under US GAAP |  | Deferred tax under Chilean GAAP |  | SFAS No. 109 applied to US GAAP adjustments |  | Deferred tax under US GAAP
|                                                                    | ThCh$                           |  | ThCh$                                       |  | ThCh$                      |  | ThCh$                           |  | ThCh$                                       |  | ThCh$                     
|Deferred tax assets                                                 |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Allowance for doubtful accounts                                     | 1,248,585                       |  | -                                           |  | 1,248,585                  |  | 3,095                           |  | -                                           |  | 3,095                     
|Tax loss carry forwards                                             | 7,429,913                       |  | -                                           |  | 7,429,913                  |  | 15,331,187                      |  | -                                           |  | 15,331,187                
|Valuation allowance                                                 | (2,846,184)                     |  | -                                           |  | (2,846,184)                |  | (17,701,339)                    |  | (526,613)                                   |  | (18,227,952)              
|Accrued vacation expense                                            | 297,396                         |  | -                                           |  | 297,396                    |  | -                               |  | -                                           |  | -                         
|Property, plant and equipmentheld for sale                          | 19,510                          |  | -                                           |  | 19,510                     |  | 23,482                          |  | -                                           |  | 23,482                    
|Impairment of investment in Decker                                  | -                               |  | -                                           |  | -                          |  | -                               |  | 855,274                                     |  | 855,274                   
|Impairment of investment in Brazil                                  | 1,907,846                       |  | -                                           |  | 1,907,846                  |  | 3,703,466                       |  | -                                           |  | 3,703,466                 
|Adjustment to realizable valuefor property, plant and equipment     | 30,599                          |  | -                                           |  | 30,599                     |  | -                               |  | -                                           |  | -                         
|Allowance for obsolescenceof inventories                            | 656,206                         |  | -                                           |  | 656,206                    |  | 18,918                          |  | -                                           |  | 18,918                    
|Allowances for other currentand long-term receivables               | 353,941                         |  | -                                           |  | 353,941                    |  | -                               |  | -                                           |  | -                         
|Write-downs of property, plantand equipment                         | 491,419                         |  | -                                           |  | 491,419                    |  | 466,211                         |  | -                                           |  | 466,211                   
|Provision assets long-term                                          | 72,416                          |  | -                                           |  | 72,416                     |  | 352,337                         |  | 30,410                                      |  | 382,747                   
|Other                                                               | 1,900,665                       |  | -                                           |  | 1,900,665                  |  | 152,516                         |  | 59,641                                      |  | 212,157                   
|Gross deferred tax assets                                           | 11,562,372                      |  | -                                           |  | 11,562,372                 |  | 2,349,873                       |  | 418,712                                     |  | 2,768,585                 
|                                                                    |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Deferred tax liabilities                                            |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Property, plant and equipment inleasing and accelerateddepreciation | 150,787                         |  | -                                           |  | 150,787                    |  | 5,238,039                       |  | 4,252,390                                   |  | 9,490,429                 
|Manufacturing expenses                                              | 498,354                         |  | -                                           |  | 498,354                    |  | -                               |  | -                                           |  | -                         
|Staff Severance Indemnities                                         | -                               |  | -                                           |  | -                          |  | 436,024                         |  | (400,730)                                   |  | 35,294                    
|Negotiation of bonds                                                | 79,600                          |  | -                                           |  | 79,600                     |  | 26,484                          |  | -                                           |  | 26,484                    
|Bond issuance costs                                                 | -                               |  | -                                           |  | -                          |  | 114,503                         |  | -                                           |  | 114,503                   
|Other                                                               | 756                             |  | -                                           |  | 756                        |  | 301,935                         |  | (272,754)                                   |  | 29,181                    
|Gross deferred tax liabilities                                      | 729,497                         |  | -                                           |  | 729,497                    |  | 6,116,985                       |  | 3,578,906                                   |  | 9,695,891                 
|                                                                    |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Net assets (liabilities) deferred taxes                             | 10,832,815                      |  | -                                           |  | 10,832,815                 |  | (3,767,112)                     |  | (3,160,194)                                 |  | (6,927,306)               

A reconciliation of the Chilean Statutory income tax rate to the Company’s effective tax rate on net income calculated in accordance with US GAAP is as follows:

|                                                                    |                                  |  |             |  |            
|------------------------------------------------------------------- | -------------------------------- |  | ----------- |  | -----------
|                                                                    | For the years ended December 31,
|                                                                    | 2005                             |  | 2006        |  | 2007       
|                                                                    | ThCh$                            |  | ThCh$       |  | ThCh$      
|                                                                    |                                  |  |             |  |            
|Pretax (loss) income in accordance with US GAAP                     | 485,577                          |  | 12,778,752  |  | (6,048,906)
|                                                                    |                                  |  |             |  |            
|Statutory tax rate                                                  | 17.0%                            |  | 17.0%       |  | 17.0%      
|                                                                    |                                  |  |             |  |            
|Statutory tax rate applied to pretax (loss) income                  | (82,548)                         |  | (2,172,388) |  | 1,028,313  
|Effect on tax and financial equity restatement (1)                  | 758,805                          |  | 32,773      |  | 814,435    
|Non-taxable income                                                  | 596,918                          |  | 753,718     |  | 4,230,244  
|Non-deductible expenses                                             | 611,386                          |  | (606,426)   |  | (2,459,747)
|Adjustments for application of BT 64                                | 2,556,691                        |  | (590,552)   |  | (7,126,326)
|Other local taxes                                                   | -                                |  | (27,147)    |  | (15,962)   
|Foreign taxes in excess of domestic rate                            | 117,729                          |  | 968,518     |  | 401,246    
|Valuation allowance changes affecting the provisionfor income taxes | (3,639,012)                      |  | 2,509,296   |  | 7,386,324  
|Other                                                               | (5,299)                          |  | (359,995)   |  | 15,196     
|At effective tax rate                                               | 914,670                          |  | 507,797     |  | 4,273,722  
|                                                                    |                                  |  |             |  |            

(1) This item corresponds to the difference in the basis used for the price-level restatement calculation of shareholder’s equity for financial and tax purposes.

Expiration dates of the tax loss carry-forwards as of December 31, 2007 are as follows:

|              |  |           |  |        |  |         |  |         |  |        |  |           
|------------- |  | --------- |  | ------ |  | ------- |  | ------- |  | ------ |  | ----------
|Country       |  | 2008      |  | 2009   |  | 2010    |  | 2011    |  | 2012   |  | Total     
|              |  | ThCh$     |  | ThCh$  |  | ThCh$   |  | ThCh$   |  | ThCh$  |  | ThCh$     
|Argentina (1) |  | 8,005,310 |  | 72,972 |  | 550,617 |  | 102,008 |  | 63,552 |  | 8,794,459 
|Brazil (2)    |  | -         |  | -      |  | -       |  | -       |  | -      |  | 8,917,791 
|Chile (3)     |  | -         |  | -      |  | -       |  | -       |  | -      |  | 75,051,274
|Total         |  | 8,005,310 |  | 72,972 |  | 550,617 |  | 102,008 |  | 63,552 |  | 92,763,524
|              |  |           |  |        |  |         |  |         |  |        |  |           

(1) Tax-loss carry-forwards in Argentina expire in 5 years under current tax legislation.
(2) Tax-loss carry-forwards in Brazil under current tax legislation do not expire but the deduction from taxable income is limited to 30% of the taxable income.
(3) Tax loss carry-forwards do not expire in Chile under current tax legislation.



1. Concentration of credit risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash investments and trade accounts receivable.

The Company maintains cash and cash equivalents, marketable securities, and certain other financial instruments with various financial institutions. These financial institutions are located in Chile and other parts of the world, and the Company’s policy is designed to limit exposure to any institution. The Company performs periodic evaluations of the relative credit standing of these financial institutions as part of its investment strategy.

Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities comprising the Company’s customer base located in Chile, Argentina, Brazil and Peru. The Company’s credit risk customer base sales in this region amounted to approximately 75.56% and 78.47% as of December 31, 2006 and 2007 respectively. As of these dates, no customer has outstanding receivables of more than 10%. Furthermore, the Company does not require collateral or security for its accounts receivable.



1. Collective bargaining agreements

As of December 31, 2007, approximately 58.28% of the Company’s employees are covered by collective bargaining agreements. Of the employees covered by collective bargaining agreements, 41.76% of the agreements will expire within one year.

Lease commitments

The Company leases certain property under long-term non-cancelable leases, which are accounted for as capital leases. The related future minimum lease payments as of December 31, 2007 were as follows:

|                  |                        
|----------------- | -----------------------
|                  | As of December 31, 2007
|                  | ThCh$                  
|                  |                        
|2008              | 1,512,595              
|2009              | 1,392,779              
|2010              | 1,109,097              
|2011              | 961,325                
|2012              | 763,147                
|Due after 5 years | 2,439,635              
|Total             | 8,178,578              

The present value of net long-term minimum lease payments totaled ThCh$ 7,038,163 as of December 31, 2007. The imputed interest totals ThCh$ 1,140,415.

Operating lease and related future minimum payments as of December 31, 2007 are presented as follows:

|                                     |                        
|------------------------------------ | -----------------------
|                                     | As of December 31, 2007
|                                     | ThCh$                  
|                                     |                        
|Due within 1 year                    | 461,730                
|Due after 1 year but within 2 years  | 414,545                
|Due after 2 years but within 3 years | 272,851                
|Due after 3 years but within 4 years | 224,572                
|Due after 4 years but within 5 years | 209,821                
|Due after 5 years                    | 209,821                
|Total                                | 1,793,340              

Cash paid for operating leases for the years ended December 31, 2005, 2006 and 2007 was ThCh$ 342,750, ThCh$ 392,036 and ThCh$ 617,114. respectively. The Company did not incur contingent rental expenses and did not receive sublease rentals.



1. Advertising Costs

The Company expenses advertising costs when the related advertising has been published or aired. Advertising expenses amounted to ThCh$ 429,442, ThCh$ 1,272,006 and ThCh$ 901,248 for the years ended December 31, 2005, 2006 and 2007, respectively.

Fair value of financial instruments

The accompanying tables provide disclosure of the estimated fair value of financial instruments owned by the Company. Carrying values are based on amounts reported in accordance with Chilean GAAP. The following methods and assumptions were used to estimate the fair value of each class of financial instruments at December 31, 2006 and 2007, for which it is practicable:

Cash and Cash Equivalents- Cash and Cash Equivalent are stated at the carrying amounts, which approximate fair values.

Marketable securities- The fair value of marketable securities is based on quoted market prices.

Long-term accounts receivable- As substantially all of the Company’s long-term accounts receivable bear interest rates at variable rates, and these interest rates are stated at current market rates, the carrying value of the long-term accounts balance approximates fair value.

Short-term and long-term debt- The fair value of short-term and long-term debt is based on rates currently available to the Company for debt with similar terms and remaining maturities.

Other current liabilities - This category consists of current liabilities whose carrying value approximates their fair value. The derivative contracts’ fair value is based on market-prices at December 31, 2006, and 2007 respectively.

Other current assets- The fair value of these derivative contracts is based on market price.

The following represent the company’s required disclosures regarding the fair value of financial instruments under US GAAP as of December 31, 2006 and 2007,

|                                                                            |                    |  |            |  |            |  |           
|--------------------------------------------------------------------------- | ------------------ |  | ---------- |  | ---------- |  | ----------
|                                                                            | As of December 31,
|                                                                            | 2006               |  | 2007      
|                                                                            | Carrying           |  | Fair       |  | Carrying   |  | Fair      
|                                                                            | Amount             |  | value      |  | Amount     |  | Value     
|                                                                            | ThCh$              |  | ThCh$      |  | ThCh$      |  | ThCh$     
|Assets:                                                                     |                    |  |            |  |            |  |           
|Cash                                                                        | 5,083,958          |  | 5,083,958  |  | 10,410,066 |  | 10,410,066
|Time deposits and marketable securities                                     | 609,571            |  | 609,571    |  | 788,687    |  | 788,687   
|Other current assets                                                        | 13,150,142         |  | 13,150,142 |  | -          |  | -         
|Derivative financial instruments                                            | 1,221,241          |  | 1,221,241  |  | 1,635,672  |  | -         
|Financial assets:                                                           |                    |  |            |  |            |  |           
|Long-term accounts receivable                                               | 474,534            |  | 474,534    |  | 246,375    |  | 246,375   
|Derivative financial instruments                                            | -                  |  | -          |  | 4,335      |  | -         
|Short-term debt:                                                            |                    |  |            |  |            |  |           
|Short-term bank borrowings (includes current portionof long-term liability) | 34,079,465         |  | 34,028,585 |  | 52,729,019 |  | 52,884,954
|Current portion of bonds payable                                            | 4,872,734          |  | 4,900,812  |  | 5,081,276  |  | 5,144,480 
|Current portion of long-term liabilities                                    | 524,503            |  | 524,503    |  | 2,312,427  |  | 2,312,427 
|Other current liabilities                                                   | 53,624             |  | 53,624     |  | -          |  | -         
|Derivative financial instruments                                            | 1,254,199          |  | 1,254,199  |  | 1,302,090  |  | -         
|Long-term debt:                                                             |                    |  |            |  |            |  |           
|Bonds payable                                                               | 21,722,840         |  | 22,224,439 |  | 16,623,066 |  | 22,436,525
|Long-term bank liabilities                                                  | 44,539,651         |  | 44,547,361 |  | 36,291,524 |  | 36,590,989
|Derivative financial instruments                                            | 129,196            |  | 129,196    |  | 432,070    |  | -         



h)    Restrictions on net assets

As stated in Note 22 the Company has subsidiaries that must abide by certain financial ratios and covenants that require minimum equity levels or that contain other characteristics that restrict the transfer of assets to the parent company. The amounts of Madeco’s proportional share in restricted net assets in consolidated subsidiaries as of December 31, 2007 are as follows:

|             |                                             
|------------ | --------------------------------------------
|             | Proportionate share
of restricted net assets
|Legal Entity | as of December 31, 2007                     
|             | ThCh$                                       
|             |                                             
|Alusa S.A.   | 26,307,983                                  
|Indalum S.A. | 31,716,262                                  

The consolidated retained earnings which represent undistributed earnings of investees accounted for using the equity method as of December 31, 2007 amounts to ThCh$ 19,152.



i)    Comprehensive income (loss)

The Company presents comprehensive income and its components with the objective to report a measure of all changes in shareholders’ equity that result from transactions and other economic events of the period other than transactions with owners (“comprehensive income”). Comprehensive income is the total net income and other non-owner equity transactions that result in changes in net equity.

The following represents accumulated other comprehensive income balance, for the years ended December 31, 2005, 2006 and 2007:



|                               |                                      |                                                |  |                                                                   |  |                                            
|------------------------------ | ------------------------------------ | ---------------------------------------------- |  | ----------------------------------------------------------------- |  | -------------------------------------------
|                               | For the year ended December 31, 2005
|                               |                                      | Chilean GAAP cumulative translation adjustment |  | Effect of US GAAP adjustmentson cumulative translation adjustment |  | AccumulatedOther ComprehensiveIncome (Loss)
|Beginning balance              |                                      | 1,161,624                                      |  | 1,659,177                                                         |  | 2,820,801                                  
|Credit (charge) for the period |                                      | (15,650,807)                                   |  | 667,415                                                           |  | (14,983,392)                               
|Ending balance                 |                                      | (14,489,183)                                   |  | 2,326,592                                                         |  | (12,162,591)                               



|                               |                                      |                                                |  |                                                                   |  |                                            
|------------------------------ | ------------------------------------ | ---------------------------------------------- |  | ----------------------------------------------------------------- |  | -------------------------------------------
|                               | For the year ended December 31, 2006
|                               |                                      | Chilean GAAP cumulative translation adjustment |  | Effect of US GAAP adjustmentson cumulative translation adjustment |  | AccumulatedOther ComprehensiveIncome (Loss)
|Beginning balance              |                                      | (14,489,183)                                   |  | 2,326,592                                                         |  | (12,162,591)                               
|Credit (charge) for the period |                                      | 2,107,997                                      |  | (75,016)                                                          |  | 2,032,981                                  
|Price-level restatement        |                                      | (45,397)                                       |  | -                                                                 |  | (45,397)                                   
|Ending balance                 |                                      | (12,427,123)                                   |  | 2,251,576                                                         |  | (10,175,547)                               



|                               |                                      |                                                |  |                                                                   |  |                                            
|------------------------------ | ------------------------------------ | ---------------------------------------------- |  | ----------------------------------------------------------------- |  | -------------------------------------------
|                               | For the year ended December 31, 2007
|                               |                                      | Chilean GAAP cumulative translation adjustment |  | Effect of US GAAP adjustmentson cumulative translation adjustment |  | AccumulatedOther ComprehensiveIncome (Loss)
|Beginning balance              |                                      | (12,427,123)                                   |  | 2,251,576                                                         |  | (10,175,547)                               
|Credit (charge) for the period |                                      | (17,216,035)                                   |  | 45,464                                                            |  | (17,170,571)                               
|Ending balance                 |                                      | (29,643,158)                                   |  | 2,297,040                                                         |  | (27,346,118)                               



1. Reclassifications for US GAAP purposes

Under Chilean GAAP, the following income and expenses are classified as non-operating expenses whereas under US GAAP they would be classified as operating income and expenses:

|                                                                                            |                                  |  |           |  |          
|------------------------------------------------------------------------------------------- | -------------------------------- |  | --------- |  | ---------
|                                                                                            | Charge/(credit)                 
|                                                                                            | For the years ended December 31,
|                                                                                            | 2005                             |  | 2006      |  | 2007     
|                                                                                            | ThCh$                            |  | ThCh$     |  | ThCh$    
|                                                                                            |                                  |  |           |  |          
|Gain on sale of property, plant and equipment                                               | (191,343)                        |  | (320,683) |  | -        
|Recovery of tax benefits in foreign subsidiaries                                            | -                                |  | -         |  | (13,329) 
|Asset rental                                                                                | -                                |  | -         |  | (133,083)
|Indemnities received                                                                        | -                                |  | -         |  | (1,251)  
|Other non-operating income                                                                  | (51,834)                         |  | (29,414)  |  | (4,483)  
|Amortization of negative goodwill                                                           | -                                |  | -         |  | (64,500) 
|Amortization of goodwill                                                                    | 220,958                          |  | 221,443   |  | 215,486  
|Staff severance indemnity payments related to restructuring                                 | 178,321                          |  | -         |  | -        
|Obsolescence and write-offs of other long-term assets                                       | 169,120                          |  | 584,140   |  | -        
|Provision for lawsuits settlements                                                          | 64,360                           |  | 1,462     |  | -        
|Adjustment to realizable value of assets held for sale                                      | 146,995                          |  | 315,422   |  | -        
|Depreciation of inactive assets (Argentina)                                                 | 757,440                          |  | 505,028   |  | 313,566  
|Government fines, taxes and interest from foreign subsidiaries                              | -                                |  | 392,729   |  | 10,352   
|Indemnity Cost                                                                              | -                                |  | -         |  | 287,946  
|Directors’ profit sharing                                                                   | -                                |  | -         |  | 438,750  
|Disposable asset appraisal cost                                                             | -                                |  | -         |  | 119,796  
|Allowance for closure and valuation of assetsin foreign subsidiaries (Ingewall and Uruguay) | 42,749                           |  | -         |  | -        
|Discontinued operations                                                                     | 3,044,197                        |  | 3,115,984 |  | 1,913,872
|Deconsolidation Peruplast                                                                   | -                                |  | -         |  | (367,035)
|Other non-operating expense                                                                 | 132,171                          |  | 5,369     |  | 2,198    
|                                                                                            |                                  |  |           |  |          
|Total                                                                                       | 4,513,134                        |  | 4,791,480 |  | 2,718,285

The condensed consolidated statements of income for the years ended December 31 under US GAAP are presented as follows:

|                                                                                      |                                  |  |               |  |              | 
|------------------------------------------------------------------------------------- | -------------------------------- |  | ------------- |  | ------------ | 
|                                                                                      | For the years ended December 31,
|                                                                                      | 2005                             |  | 2006          |  | 2007        
|                                                                                      | ThCh$                            |  | ThCh$         |  | ThCh$       
|                                                                                      |                                  |  |               |  |             
|Sales                                                                                 | 167,979,452                      |  | 213,638,331   |  | 184,635,475 
|Cost of sales                                                                         | (145,416,829)                    |  | (183,722,704) |  | (164,972,448
|                                                                                      |                                  |  |               |  |             
|Gross Margin                                                                          | 22,562,623                       |  | 29,915,627    |  | 19,663,027  
|Administrative and selling expenses                                                   | (12,520,527)                     |  | (13,314,509)  |  | (13,822,017)
|Operating (loss) income...  ......                                                          | 10,042,096                       |  | 16,601,118    |  | 5,841,010   
|Non-operating income and expenses, net                                                | (9,556,519)                      |  | (3,822,366)   |  | (11,889,916)
|Income (loss) before income taxesand minority interest  interest                      | 485,577                          |  | 12,778,752    |  | (6,048,906) 
|Income taxes                                                                          | 914,670                          |  | 507,797       |  | 4,273,722   
|Equity in participation on (loss) incomeof related companies, net                     | 279,795                          |  | 729,360       |  | 1,661,502   
|Income (loss) before minority interest                                                | 1,680,042                        |  | 14,015,909    |  | (113,682)   
|Minority interest                                                                     | (628,547)                        |  | (1,160,674)   |  | (1,008,829) 
|Income (loss) from continuing operations                                              | 1,051,495                        |  | 12,855,235    |  | (1,122,511) 
|Income (loss) from discontinued operations                                            | 14,377,800                       |  | 23,704,784    |  | 22,868,497  
|Net (loss) income                                                                     | 15,429,295                       |  | 36,560,019    |  | 21,745,986  
|                                                                                      |                                  |  |               |  |             
|Other comprehensive income (loss):                                                    |                                  |  |               |  |             
|Loss on hedge of the foreign currency exposureof net investment in foreign operations | (15,650,807)                     |  | 2,107,997     |  | (17,216,035)
|Cumulative translation adjustment                                                     | 667,415                          |  | (75,016)      |  | 45,464      
|Comprehensive net (loss) income                                                       | 445,903                          |  | 38,593,000    |  | 4,575,415   



Certain reclassifications would be made to the Chilean GAAP balance sheet in order to present Chilean GAAP amounts in accordance with presentation requirements under US GAAP.

The following are summarized balance sheets of the Company using a US GAAP presentation and amounts determined in accordance with US GAAP:

|                                                          |                    |  |              
|--------------------------------------------------------- | ------------------ |  | -------------
|                                                          | As of December 31,
|                                                          | 2006               |  | 2007         
|                                                          | ThCh$              |  | ThCh$        
|                                                          |                    |  |              
|Current assets                                            | 245,277,729        |  | 94,690,298   
|Assets of disposal group                                  | -                  |  | 263,948,515  
|Property, plant, and equipment                            | 343,405,683        |  | 185,011,040  
|Accumulated depreciation of property, plant and equipment | (191,619,452)      |  | (102,145,508)
|Property, plant, and equipment, net                       | 151,786,231        |  | 82,865,532   
|Goodwill, net                                             | 22,713,863         |  | 2,196,995    
|Other assets                                              | 24,373,728         |  | 12,617,875   
|Total assets                                              | 444,151,551        |  | 456,319,215  
|                                                          |                    |  |              
|Current liabilities                                       | 85,514,741         |  | 54,930,290   
|Liabilities of disposal group                             | -                  |  | 94,860,869   
|Long-term liabilities                                     | 86,377,700         |  | 38,774,061   
|Minority interest                                         | 11,989,493         |  | 11,607,422   
|Shareholders’ equity                                      | 260,269,617        |  | 256,146,573  
|Total Liabilities and Shareholders’ equity                | 444,151,551        |  | 456,319,215  



k)  Cash flow information

The statement of cash flow under Chilean GAAP differs in certain aspects from the presentation of the same statement under US GAAP, as follows:



|                                                                   |                                  |  |              |  |             
|------------------------------------------------------------------ | -------------------------------- |  | ------------ |  | ------------
|                                                                   | For the years ended December 31,
|                                                                   | 2005                             |  | 2006         |  | 2007        
|                                                                   | ThCh$                            |  | ThCh$        |  | ThCh$       
|                                                                   |                                  |  |              |  |             
|Cash provided by operating activities under Chilean GAAP           | 11,378,524                       |  | 6,350,889    |  | 15,139,568  
|                                                                   |                                  |  |              |  |             
|Cash provided by operating activities under US GAAP                | 11,378,524                       |  | 6,350,889    |  | 15,139,568  
|                                                                   |                                  |  |              |  |             
|Cash provided by (used in) financing activities under Chilean GAAP | (4,470,632)                      |  | 15,516,511   |  | 941,774     
|                                                                   |                                  |  |              |  |             
|Cash provided by (used in) financing activities under US GAAP      | (4,470,632)                      |  | 15,516,511   |  | 941,774     
|                                                                   |                                  |  |              |  |             
|Cash used in investing activities under Chilean GAAP               | (12,655,587)                     |  | (11,200,876) |  | (23,528,002)
|Purchase of time deposits and marketable securities                | (267,700)                        |  | (609,571)    |  | (780,804)   
|Sale of time deposits and marketable securities                    | -                                |  | 267,700      |  | 601,688     
|Cash used in investing activities under US GAAP                    | (12,387,887)                     |  | (10,859,005) |  | (23,348,886)



Under US GAAP, cash and cash equivalents includes all highly liquid debt instruments purchased with a maturity of three months or less. The detail is a follows:

|                                                |                    |  |           
|----------------------------------------------- | ------------------ |  | ----------
|                                                | As of December 31,
|                                                | 2006               |  | 2007      
|                                                | ThCh$              |  | ThCh$     
|                                                |                    |  |           
|Cash in banks                                   | 5,083,958          |  | 10,410,066
|Securities purchased under agreements to resell | 13,150,142         |  | -         
|Total                                           | 18,234,100         |  | 10,410,066



l) Segment reporting

The Company provides disclosures in accordance with Statement of Financial Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”) which establishes standards for reporting information about operating segments in annual financial statements as well as related disclosures about products and services and geographic areas. Operating segments are defined as components of an enterprise about which separate financial statement information is available and is evaluated regularly by the chief operating decision maker in making decisions about allocating resources and assessing performance. The Company operates in four business segments including Wire and Cable, Brass Mills, Flexible Packaging and Aluminum Profiles.

The accounting policies of each segment are as described in the Company’s summary of significant accounting policies (See Note 2). The following is a description of the four segments:



Wire and Cable

The Company produces and sells in Chile, Argentina, Peru and Brazil various wire and cable products designed to meet client needs in the telecommunications, energy, mining, construction and manufacturing industries. Wire and Cable products have certain generalized differentiating characteristics, such as single or multiple strand (wire), twisted strands (cable), bare or insulated, type of material used for insulation and magnetic or non-magnetic. This segment is expected to be sold during 2008 and presented as discontinued operations in accordance with SFAS 144 as detailed in Note 32, section 2.m below.



Brass Mills

The Company’s Brass Mills segment manufactures a variety of products used by other industrial companies and the construction sector. These products include pipes, bars, busbars and sheets made of copper, copper alloy, brass, aluminum and aluminum alloy. The Company also manufactures coin blanks and minted coins, which are produced principally from alloys comprised of copper, nickel, aluminum and zinc. While the Company’s Brass Mills facilities are located in Chile and Argentina, a significant portion of revenues are generated from export sales. Exports for the pipes, bars and sheets, or “PBS” division of the Brass Mills may include sales to customers in countries other than Chile or Argentina. Exports for the Coins division of the Brass Mills unit may include sales to customers in any country other than Chile.



Flexible Packaging

The Company’s Flexible Packaging segment manufactures flexible packaging for use in the packaging of large scale consumer products, as well as aluminum foil and plastic wrap, for both commercial and home use. The Company has flexible packaging operations in Chile and Argentina. In Peru, the subsidiary Alusa also has a 50% interest in two Peruvian operations, Peruplast S.A. and Tech Pak S.A. that operate in that business. Financial information of these investees is not considered as part of segment data reviewed by the chief operating decision maker and consequently these investees are not included in the segment information presented below.



Aluminum Profiles

The Company’s aluminum segment manufactures aluminum siding used principally in the construction sector for window frames, door frames, external and internal hardware fixtures and customized goods for the production of industrial durable goods.



The Company presents segment information in accordance with Chilean GAAP. Disclosure of segment data and a reconciliation of the total amounts reported by reportable segments to the consolidated amounts in the financial statements are as follows:



|                                                        |                                      |  |             |  |                   |  |            |  |             |  |              |  |             
|------------------------------------------------------- | ------------------------------------ |  | ----------- |  | ----------------- |  | ---------- |  | ----------- |  | ------------ |  | ------------
|                                                        | For the year ended December 31, 2005
|                                                        | Wire andCable                        |  | BrassMills  |  | FlexiblePackaging |  | Aluminum   |  | Unallocated |  | Elimination  |  | Consolidated
|                                                        | ThCh$                                |  | ThCh$       |  | ThCh$             |  | ThCh$      |  | ThCh$       |  | ThCh$        |  | ThCh$       
|                                                        |                                      |  |             |  |                   |  |            |  |             |  |              |  |             
|Sales to external customers                             | 232,536,782                          |  | 87,624,095  |  | 48,422,686        |  | 32,193,218 |  | -           |  | -            |  | 400,776,781 
|Intersegment sales                                      | 29,429,902                           |  | 12,437,251  |  | -                 |  | -          |  | -           |  | (41,867,152) |  | -           
|Total revenues                                          | 261,966,684                          |  | 100,061,346 |  | 48,422,686        |  | 32,193,218 |  | -           |  | (41,867,152) |  | 400,776,781 
|Interest income                                         | 336,129                              |  | 415,797     |  | 23,995            |  | 106,932    |  | -           |  | -            |  | 882,853     
|Interest expense                                        | (5,667,218)                          |  | (3,292,827) |  | (435,683)         |  | (867,463)  |  | -           |  | -            |  | (10,263,191)
|Income taxes                                            | (2,261,132)                          |  | 1,811,765   |  | (349,701)         |  | (809,335)  |  | -           |  | -            |  | (1,608,403) 
|Equity participation in net income of related companies | 28,418                               |  | -           |  | 279,795           |  | -          |  | -           |  | -            |  | 308,213     
|Depreciation expense                                    | 6,102,310                            |  | 2,745,883   |  | 2,434,012         |  | 1,046,622  |  | -           |  | -            |  | 12,328,827  
|Operating income                                        | 21,262,792                           |  | 2,218,644   |  | 3,756,686         |  | 3,290,377  |  | -           |  | -            |  | 30,528,499  
|                                                        |                                      |  |             |  |                   |  |            |  |             |  |              |  |             
|Investments in related companies                        | 2,315,890                            |  | -           |  | 6,523,243         |  | -          |  | -           |  | -            |  | 8,839,133   
|Identifiable assets at December 31, 2005                | 202,740,708                          |  | 69,636,682  |  | 62,112,157        |  | 40,532,538 |  | 2,562,777   |  | -            |  | 377,584,862 
|Capital expenditures                                    | 2,756,019                            |  | 889,465     |  | 5,791,938         |  | 1,964,489  |  | -           |  | -            |  | 11,401,911  



|                                                        |                                      |  |             |  |                   |  |            |  |             |  |              |  |             
|------------------------------------------------------- | ------------------------------------ |  | ----------- |  | ----------------- |  | ---------- |  | ----------- |  | ------------ |  | ------------
|                                                        | For the year ended December 31, 2006
|                                                        | Wire andCable                        |  | BrassMills  |  | FlexiblePackaging |  | Aluminum   |  | Unallocated |  | Elimination  |  | Consolidated
|                                                        | ThCh$                                |  | ThCh$       |  | ThCh$             |  | ThCh$      |  | ThCh$       |  | ThCh$        |  | ThCh$       
|                                                        |                                      |  |             |  |                   |  |            |  |             |  |              |  |             
|Sales to external customers                             | 386,879,612                          |  | 128,217,340 |  | 49,617,306        |  | 35,803,686 |  | -           |  | -            |  | 600,517,944 
|Intersegment sales                                      | 51,483,582                           |  | 12,621,496  |  | 19,282            |  | -          |  | -           |  | (64,124,359) |  | -           
|Total revenues                                          | 438,363,194                          |  | 140,838,836 |  | 49,636,588        |  | 35,803,686 |  | -           |  | (64,124,359) |  | 600,517,944 
|Interest income                                         | 1,041,323                            |  | 546,917     |  | 60,557            |  | 71,958     |  | 2,903       |  | -            |  | 1,723,658   
|Interest expense                                        | (7,991,346)                          |  | (2,587,790) |  | (1,103,608)       |  | (567,340)  |  | (4,723)     |  | -            |  | (12,254,807)
|Income taxes                                            | (5,773,866)                          |  | 1,271,837   |  | (587,588)         |  | (393,876)  |  | (106,185)   |  | -            |  | (5,589,678) 
|Equity participation in net income of related companies | 9,846                                |  | -           |  | 729,360           |  | -          |  | -           |  | -            |  | 739,206     
|Depreciation expense                                    | 7,994,587                            |  | 2,542,616   |  | 2,705,901         |  | 1,139,046  |  | -           |  | -            |  | 14,382,150  
|Operating income                                        | 36,839,999                           |  | 10,518,127  |  | 5,154,239         |  | 3,084,035  |  | -           |  | -            |  | 55,596,400  
|                                                        |                                      |  |             |  |                   |  |            |  |             |  |              |  |             
|Investments in related companies                        | 2,284,106                            |  | -           |  | 7,311,660         |  | -          |  | -           |  | -            |  | 9,595,766   
|Identifiable assets at December 31, 2006                | 239,298,977                          |  | 84,114,535  |  | 69,886,028        |  | 41,926,895 |  | 12,397,242  |  | -            |  | 447,623,677 
|Capital expenditures                                    | 4,612,358                            |  | 552,607     |  | 7,100,440         |  | 3,128,888  |  | -           |  | -            |  | 15,394,293  



|                                                        |                                      |  |             |  |                   |  |            |  |             |  |              |  |             
|------------------------------------------------------- | ------------------------------------ |  | ----------- |  | ----------------- |  | ---------- |  | ----------- |  | ------------ |  | ------------
|                                                        | For the year ended December 31, 2007
|                                                        | Wire andCable                        |  | BrassMills  |  | FlexiblePackaging |  | Aluminum   |  | Unallocated |  | Elimination  |  | Consolidated
|                                                        | ThCh$                                |  | ThCh$       |  | ThCh$             |  | ThCh$      |  | ThCh$       |  | ThCh$        |  | ThCh$       
|                                                        |                                      |  |             |  |                   |  |            |  |             |  |              |  |             
|Sales to external customers                             | 411,846,738                          |  | 103,032,211 |  | 89,000,333        |  | 35,131,726 |  | -           |  | -            |  | 639,011,008 
|Intersegment sales                                      | 78,209,907                           |  | 14,971,335  |  | 50,875            |  | -          |  | -           |  | (93,232,117) |  | -           
|Total revenues                                          | 490,056,645                          |  | 118,003,546 |  | 89,051,208        |  | 35,131,726 |  | -           |  | (93,232,117) |  | 639,011,008 
|Interest income                                         | 613,512                              |  | 426,407     |  | 207,612           |  | 84,856     |  | 1,028,349   |  | -            |  | 2,360,736   
|Interest expense                                        | (8,582,920)                          |  | (814,817)   |  | (1,969,990)       |  | (600,359)  |  | (868,921)   |  | -            |  | (12,837,007)
|Income taxes                                            | (3,991,495)                          |  | 489,083     |  | (1,433,269)       |  | (184,615)  |  | 4,044,789   |  | -            |  | (1,075,507) 
|Equity participation in net income of related companies | (56,150)                             |  | -           |  | -                 |  | -          |  | -           |  | -            |  | (56,150)    
|Depreciation expense                                    | 7,245,513                            |  | 2,490,301   |  | 4,756,225         |  | 1,293,013  |  | -           |  | -            |  | 15,785,052  
|Operating income                                        | 30,539,473                           |  | (1,360,723) |  | 8,783,690         |  | 2,152,089  |  | -           |  | -            |  | 40,114,529  
|                                                        |                                      |  |             |  |                   |  |            |  |             |  |              |  |             
|Investments in related companies                        | 2,188,207                            |  | -           |  | -                 |  | -          |  | -           |  | -            |  | 2,188,207   
|Identifiable assets at December 31, 2007                | 262,263,399                          |  | 66,932,311  |  | 98,431,943        |  | 40,438,993 |  | 19,030,684  |  | -            |  | 487,097,330 
|Capital expenditures                                    | 9,612,545                            |  | 949,931     |  | 4,178,122         |  | 3,986,291  |  | -           |  | -            |  | 18,726,889  



The following represents sales data for the years ended December 31, 2005, 2006 and 2007 and property, plant and equipment information by geographic area as of December 31, 2006 and 2007:

|          |             |  |                              |  |             |  |             |  |            
|--------- | ----------- |  | ---------------------------- |  | ----------- |  | ----------- |  | -----------
|          | Sales       |  | Property, plantand equipment
|          | 2005        |  | 2006                         |  | 2007        |  | 2006        |  | 2007       
|          | ThCh$       |  | ThCh$                        |  | ThCh$       |  | ThCh$       |  | ThCh$      
|          |             |  |                              |  |             |  |             |  |            
|Chile     | 183,997,259 |  | 281,773,634                  |  | 250,270,144 |  | 81,790,016  |  | 80,234,507 
|Brazil    | 96,105,833  |  | 150,193,084                  |  | 158,952,347 |  | 39,494,158  |  | 35,072,755 
|Argentina | 57,689,624  |  | 42,208,466                   |  | 47,655,051  |  | 25,440,704  |  | 21,178,199 
|Peru      | 62,984,065  |  | 126,342,760                  |  | 159,943,462 |  | 12,171,704  |  | 27,184,806 
|Colombia  | -           |  | -                            |  | 22,190,004  |  | -           |  | 3,278,830  
|Total     | 400,776,781 |  | 600,517,944                  |  | 639,011,008 |  | 158,896,582 |  | 166,949,097

m) Discontinued Operations

As described in Note 32 par. q) during 2005 the Company disposed substantially all of its assets of subsidiary Alufoil S.A. and during 2007  was signed a compromise agreement to sell the business unit to the wire and cable company Nexans SA  that was accounted for as discontinued operations in accordance with SFAS 144, accordingly, amounts in the reconciliation of net income to US GAAP and the additional disclosure notes required under US GAAP for all periods shown, reflect discontinued accounting.

The following major classes of discontinued combined assets and combined liabilities included in the Madeco S.A. consolidated balance sheet under US GAAP:



|                                                          |                    |  |             
|--------------------------------------------------------- | ------------------ |  | ------------
|                                                          | As of December 31,
|                                                          | 2006               |  | 2007        
|                                                          | ThCh$              |  | ThCh$       
|                                                          |                    |  |             
|Current assets                                            | 130,065,118        |  | 164,527,960 
|Property, plant, and equipment                            | 157,749,312        |  | 147,904,145 
|Accumulated depreciation of property, plant and equipment | (91,650,693)       |  | (83,550,412)
|Property, plant, and equipment, net                       | 66,098,619         |  | 64,353,733  
|Goodwill, net                                             | 20,406,839         |  | 18,866,391  
|Other assets                                              | 6,421,934          |  | 16,200,431  
|Total assets                                              | 222,992,510        |  | 263,948,515 
|                                                          |                    |  |             
|Current liabilities                                       | 52,271,915         |  | 66,540,700  
|Long-term liabilities                                     | 30,732,006         |  | 25,501,707  
|Minority interest                                         | 1,401,223          |  | 2,818,462   
|Shareholders’ equity                                      | 138,587,366        |  | 169,087,646 
|Total liabilities and shareholders’ equity                | 222,992,510        |  | 263,948,515 

The following major classes of revenues and expenses are included in the Madeco S.A. consolidated income statement under US GAAP, presented net of taxes as discontinued operations:

|                                                          |                                  |  |               |  |              
|--------------------------------------------------------- | -------------------------------- |  | ------------- |  | -------------
|                                                          | For the years ended December 31,
|                                                          | 2005                             |  | 2006          |  | 2007         
|                                                          | ThCh$                            |  | ThCh$         |  | ThCh$        
|                                                          |                                  |  |               |  |              
|Sales                                                     | 232,797,332                      |  | 386,879,613   |  | 411,846,738  
|Costs of sales                                            | (199,783,200)                    |  | (332,384,583) |  | (363,446,316)
|Gross Margin                                              | 33,014,132                       |  | 54,495,030    |  | 48,400,422   
|Administrative and selling expenses                       | (14,177,120)                     |  | (17,819,149)  |  | (19,332,589) 
|Operating  income...  ......                                    | 18,837,012                       |  | 36,675,881    |  | 29,067,833   
|Non-operating income and expenses, net                    | (2,438,896)                      |  | (6,965,296)   |  | (2,246,861)  
|Net income before income taxes and minority  interest     | 16,398,116                       |  | 29,710,585    |  | 26,820,972   
|Income taxes                                              | (1,815,682)                      |  | (5,468,012)   |  | (3,191,563)  
|Equity in participation on income of related companies... | 28,418                           |  | 9,846         |  | (56,150)     
|Income before minority interest                           | 14,610,852                       |  | 24,252,419    |  | 23,573,259   
|Minority interest                                         | (233,052)                        |  | (547,635)     |  | (704,762)    
|Net income from discontinued operations                   | 14,377,800                       |  | 23,704,784    |  | 22,868,497   

n)  Recent accounting pronouncements

(i) In September 2006, the FASB issued Statement of Financial Accounting Standards No, 157, "Fair Value Measurements". This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact that will result from the adoption of SFAS 157.

(ii) In February 2007, the FASB issued Statement of Financial Accounting Standards No, 159, "The Fair Value Option for Financial Assets and Financial Liabilities". SFAS No. 159 permits measurement of recognized financial assets and liabilities at fair value with some exceptions, Changes in the fair value of items for which the fair value option is elected should be recognized in income or loss, The election to measure eligible items at fair value is irrevocable and can only be made at defined election dates or events, generally on an instrument by instrument basis. Items for which the fair value option is elected should be separately presented or be parenthetically disclosed in the statement of financial position. SFAS No, 159 also requires significant new disclosures that apply for interim and annual financial statements. SFAS No. 159 will be effective for fiscal years beginning after November 15, 2007 with earlier adoption permitted, if certain conditions are met. The Company does not expect the result of adopting SFAS No. 159 to be material to the consolidated financial statements.

(iii)  In December 2007, the FASB issued SFAS No. 141 (revised 2007) “Business Combinations”. SFAS 141 (R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008. Earlier adoption is prohibited. SFAS 141 (R) will be applied to future business combinations, if any, consummated by the Company.

(iv) In December 2007, the FASB issued SFAS No. 160 “Noncontrolling interests in Consolidated Financial Statements – an amendment of ARB No. 51”. SFAS No. 160 establishes accounting and reporting standards that require that the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent's equity; the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income; and changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company is in the process of evaluating the financial impact of adopting SFAS 160.

(v) In March 2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities”. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is in the process of evaluating the financial impact of adopting SFAS 161.

(vi) On August 28, 2007, the SVS issued an official announcement with respect to the adoption of International Financial Reporting Standards (IFRS) in Chile. According to this announcement, the Company will have to adopt IFRS as of January 1, 2009 or 2010. The Company is in the process of defining a convergence plan, and is currently evaluating the impacts that the application of IFRS will have on the financial statements.



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