UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, 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, 2008



[ ] 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)



San Francisco 4760, Santiago, Chile

(Address of principal executive offices)



José Luis Valdés M.; Tel: +(56 2) 520-1388; ir@madeco.cl; San Francisco 4760, 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

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 INFORMATION

FORWARD LOOKING STATEMENTS

REQUESTS FOR INFORMATION

PART I

ITEM 1. Identity of Directors, Senior Management and Advisers

ITEM 2. Offer Statistics and Expected Timetable

ITEM 3. Key Information

ITEM 4. Information on the Company

ITEM 5. Operating and Financial Review and Prospects

ITEM 6. Directors, Senior Management and Employees

ITEM 7. Major Shareholders and Related Party Transactions

ITEM 8. Financial Information

ITEM 9. The Offer and Listing

ITEM 10. Additional Information

ITEM 11. Quantitative and Qualitative Disclosures about Market Risk

ITEM 12. Description of Securities Other than Equity Securities

PART II

ITEM 13. Defaults, Dividend Arrearages and Delinquencies

ITEM 14. Material Modifications of the Rights of Security Holders and Use of Proceeds

ITEM 15.Controls and Procedures

ITEM 16.

PART III

ITEM 17. Financial Statements

ITEM 18. Financial Statements

ITEM 19. Exhibits





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”(1). 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 35 to Madeco’s audited consolidated financial statements (together with the notes thereto, the “Consolidated Financial Statements”) for the years ended December 31, 2006, 2007 and 2008 (with the exception of the Balance Sheet, which is included only as of December 31, 2007 and 2008), 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, 2008 (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.





(1On January 1st, 2009, the Company implemented the International Financial Reporting Standards or IFRS, in accordance with new regulations adopted by the Chilean Superintendence of Securities and Insurances (S.V.S.)



Madeco’s operations are organized into three business units: Brass Mills, Flexible Packaging and 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  
|Brass Mills        | Pipes, Bars and Sheets (“PBS”)
Coins and Sheets | Chile and Argentina
Chile
|Flexible Packaging | N/A                                             | Chile, Argentina and Peru
|Profiles           | Profiles
PVC Profiles                           | Chile
Chile              



In September 2008, Madeco closed the sale of its Wire & Cable unit and unless otherwise stated, all information in this Annual Report for 2008 excludes the operations of the Wire & Cable unit. 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 Madeco does not conduct 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) sales information filed publicly by some of the Company’s competitors; and (vi) 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:



- changes in estimates relating to the Company’s capital expenditures plan;
- changes in the Company’s “cost-plus” pricing policy;
- increased competition;
- changes in dividends;
- economic developments in Argentina and other Latin America countries;
- political developments in Latin America; and
- developments in domestic and international markets.

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. 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.

REQUESTS FOR INFORMATION

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Written requests for copies of this Annual Report should be directed to Madeco S.A., San Francisco 4760, San Miguel, Santiago, Chile, Attention: Investor Relations. Facsimile requests may be directed to (56-2) 520-1158. 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/ingles. 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 35 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, 2006, 2007 and 2008 and shareholders’ equity as of December 31, 2007 and 2008 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, 2004, 2005, 2006, 2007 and 2008 is presented below in constant pesos as of December 31, 2008.

|                                                                 |                                                          |           |           |           |          
|---------------------------------------------------------------- | -------------------------------------------------------- | --------- | --------- | --------- | ---------
|                                                                 | Year ended December 31,                                 
|                                                                 | 2004                                                     | 2005      | 2006      | 2007      | 2008     
|                                                                 | (in millions of constant Ch$ as of December 31, 2008)(1)
|Income Statement Data (Chilean GAAP)                             |                                                          |           |           |           |          
|Net sales                                                        | 400,876                                                  | 436,446   | 653,964   | 695,883   | 692,958  
|Operating income                                                 | 31,146                                                   | 33,246    | 60,544    | 43,685    | 40,014   
|Non-operating income                                             | 2,990                                                    | 4,068     | 2,818     | 3,461     | 166,678  
|Non-operating expense                                            | (20,372)                                                 | (17,073)  | (18,694)  | (18,015)  | (63,560) 
|Price-level restatement and currency translation                 | (310)                                                    | (3,286)   | (1,488)   | (3,044)   | (2,769)  
|Income tax                                                       | (1,908)                                                  | (1,752)   | (6,087)   | (1,171)   | (39,709) 
|Net income (loss)                                                | 10,531                                                   | 14,347    | 35,326    | 21,410    | 97,184   
|                                                                 | Year ended December 31,                                 
|                                                                 | 2004                                                     | 2005      | 2006      | 2007      | 2008     
|                                                                 | (in millions of constant Ch$ as of December 31, 2008)(1)
|Income Statement Data (U.S. GAAP)                                |                                                          |           |           |           |          
|Net sales                                                        | 188,765                                                  | 182,929   | 232,652   | 201,068   | 193,527  
|Operating income (loss)                                          | 13,332                                                   | 10,936    | 18,078    | 6,361     | (508)    
|Non-operating income and expenses                                | (3,671)                                                  | (10,408)  | (4,162)   | (12,948)  | (28,121) 
|Income taxes                                                     | (1,343)                                                  | 996       | 553       | 4,654     | 253      
|Income (loss) from continuing operations                         | 6,208                                                    | 1,145     | 13,999    | (1,222)   | (27,451) 
|Income (loss) from discontinued operations(2)                    | 5,398                                                    | 15,658    | 25,815    | 24,904    | 100,628  
|Net income (loss) .....................................                                  | 11,607                                                   | 16,802    | 39,814    | 23,681    | 73,176   
|                                                                 |                                                          |           |           |           |          
|Per share (Chilean GAAP)                                         |                                                          |           |           |           |          
|Number of shares as of December 31 (in thousands)                | 4,441,193                                                | 5,348,390 | 5,541,193 | 5,661,193 | 5,661,193
|Number of shares, weighted average (in thousands)                | 4,221,196                                                | 4,537,185 | 5,471,995 | 5,558,289 | 5,661,193
|Net income (loss) per share                                      | 2.37                                                     | 2.68      | 6.38      | 3.78      | 17.17    
|Net income (loss) per share, weighted average                    | 2.49                                                     | 3.16      | 6.45      | 3.86      | 17.17    
|Dividend per share in Ch$                                        | -                                                        | -         | -         | 2.65      | 15.00    
|Dividend per ADS in US$ (3)                                      | -                                                        | -         | -         | 0.56      | 2.58     
|                                                                 |                                                          |           |           |           |          
|Per share (U.S. GAAP)                                            |                                                          |           |           |           |          
|Earnings (loss) per share from continuing  operations (US GAAP)  | 1.40                                                     | 0.21      | 2.53      | (0.22)    | (4.85)   
|Earnings (loss) per share from discontinued operations (US GAAP) | 1.22                                                     | 2.93      | 4.66      | 4.40      | 17.78    
|Net earnings (loss) per share (US GAAP)                          | 2.61                                                     | 3.14      | 7.19      | 4.18      | 12.93    
|Net earnings (loss) per share (US GAAP), weighted average        | 2.75                                                     | 3.70      | 7.27      | 4.26      | 12.93    
|                                                                 |                                                          |           |           |           |          
|Balance Sheet Data (Chilean GAAP)                                |                                                          |           |           |           |          
|Current assets                                                   | 187,127                                                  | 189,777   | 271,676   | 309,953   | 302,631  
|Fixed assets                                                     | 185,901                                                  | 172,989   | 173,038   | 181,808   | 115,535  
|Total assets                                                     | 424,227                                                  | 411,190   | 487,462   | 530,449   | 551,642  
|Current liabilities                                              | 78,699                                                   | 82,983    | 93,852    | 143,175   | 76,244   
|Long-term liabilities                                            | 136,644                                                  | 70,764    | 85,982    | 75,333    | 34,668   
|Total liabilities                                                | 215,343                                                  | 153,747   | 179,834   | 218,508   | 110,912  
|Interest bearing debt                                            | 136,644                                                  | 70,764    | 85,983    | 75,333    | 34,667   
|Minority interest                                                | 12,782                                                   | 12,188    | 13,413    | 24,561    | 25,551   
|Total Shareholders’ equity                                       | 196,102                                                  | 245,254   | 294,215   | 287,380   | 415,179  
|                                                                 |                                                          |           |           |           |          
|Balance Sheet Data (U.S. GAAP)                                   |                                                          |           |           |           |          
|Current assets .................................                                       | 81,435                                                   | 79,122    | 276,388   | 390,558   | 274,340  
|Property, plant and equipment, net .........                           | 83,650                                                   | 80,546    | 93,314    | 90,241    | 86,990   
|Other long-term assets ...                                         | 167,856                                                  | 178,943   | 22,062    | 16,133    | 121,383  
|Total assets ...                                                 | 332,942                                                  | 338,611   | 391,764   | 496,932   | 482,713  
|Current liabilities ..............................                                   | 32,292                                                   | 44,585    | 36,202    | 163,123   | 93,238   
|Long-term liabilities ...........................                                  | 112,097                                                  | 53,626    | 60,598    | 42,225    | 23,756   
|Total liabilities .................................                                  | 144,389                                                  | 98,210    | 96,800    | 205,348   | 116,995  
|Interest bearing debt .........................                                  | 119,574                                                  | 68,618    | 72,401    | 113,102   | 60,698   
|Minority interest                                                | 10,507                                                   | 10,336    | 11,530    | 12,640    | 13,110   
|Total Shareholders’ equity ...                                     | 178,046                                                  | 230,065   | 283,434   | 278,944   | 352,607  



(1) Except for per share data, which is presented in constant Ch$ as of December 31, 2008.

(2) “Note 35, (j)”  to the Consolidated Financial Statements provides disclosure regarding discontinued operations. See also “Item 4. Information on the Company – Nexans”, for additional information.



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 29, 2009, the average exchange rate in the Informal Exchange Market was Ch$560.80 per U.S. dollar and the U.S. dollar Observed Exchange Rate was Ch$560.58 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                                     | Low (1) | High (1) | Average (2) | Period–end(1)
|2004                                       | 557.40  | 649.45   | 609.41      | 557.40       
|2005                                       | 509.70  | 592.75   | 559.68      | 512.50       
|2006                                       | 511.44  | 549.63   | 530.34      | 532.39       
|2007                                       | 493.14  | 548.67   | 522.55      | 496.89       
|2008                                       | 431.22  | 676.75   | 522.35      | 636.45       
|December 2008                              | 625.59  | 674.83   | 647.91      | 636.45       
|January 2009                               | 610.09  | 643.87   | 622.09      | 617.10       
|February 2009                              | 583.32  | 623.87   | 605.10      | 599.04       
|March 2009                                 | 572.39  | 614.85   | 592.21      | 583.26       
|April 2009                                 | 575.12  | 601.04   | 583.03      | 580.10       
|May-2009                                   | 558.95  | 573.55   | 564.69      | 560.58       

_____________________

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 and Peru. Beginning in the 1990’s, Argentina maintained fixed exchange rates. However, in 1999 and 2002, the Argentine central bank allowed its currency to float freely against the U.S. dollar. In Peru, there have not been restrictions on a company’s ability to convert Peruvian currency into U.S. dollars, nor any associated fixed exchange rates since the 1990s. There can be no assurance that the countries where the Company has operations or interests will maintain their current currency exchange policies.

References to “ARS$” and “S$”, are to Argentine pesos and Peruvian nuevos soles, 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 Argentine peso and Peruvian nuevo sol exchange rates for 2008 have been included below for reference:

|            |  |                    |        |                  |            |        | 
|----------- |  | ------------------ | ------ | ---------------- | ---------- | ------ | 
|            |  | Peruvian Nuevo Sol |        | Argentinean Peso |           
|            |  | In Ch$ (1)         | In US$ |                  | In Ch$ (1) | In US$ | 
|Low (2)     |  | 162.03             | 0.3713 |                  | 184.37     | 0.3318 | 
|High (2)    |  | 193.31             | 0.3165 |                  | 191.99     | 0.2884 | 
|Average (3) |  | 178.54             | 0.3418 |                  | 165.30     | 0.3165 | 
|Year-End(2) |  | 202.56             | 0.3183 |                  | 184.37     | 0.2897 | 



Source: Central Banks of Chile, Argentina and Peru.

(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:

Our Business is Concentrated in Chile.The Company is engaged in its three businesses in Chile: Brass Mills, Flexible Packaging and Profiles.For the year ended December 31, 2008, the Company had Ch$460,894 million, or 83.6% of its property, plant and equipment in Chile, and derived 59.5% of its revenues (excluding the sales of the Wire & Cable unit) or 37.4% of its revenues (including the sales of the Wire & Cable unit) 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 2009 statistics, the Chilean economy has had GDP growth rates of  6.0%, 5.6%, 4.6%, 4.7% and 3.2% for the years 2004, 2005, 2006, 2007 and 2008, respectively. There can be no assurance that economic growth in Chile will continue in the future.. 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 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. Despite the restrictions mentioned before, the adverse dependence effect may decline after a new plant of Natural liquid Gas begins its operations in the second half of the year 2009 (project related to BG Group) .

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 Argentina and Peru (before the sale of its Wire & Cable unit in September 2008, the Company also maintained facilities in Brazil and Colombia). For the year ended December 31, 2008, the Company had Ch$1,203 million, or, 0.2% of its property, plant and equipment in Brazil (assets for disposal), and derived 0.0% of its revenues (excluding the sales of the Wire & Cable unit) or 24.1% of its revenues (including the sales of the Wire & Cable unit) from its Brazilian operations. In the case of Argentina, the Company had Ch$38,380 million, or 7.0% of its property, plant and equipment in Argentina, and derived 15.8% of its revenues (excluding the sales of the Wire & Cable unit) or 8.2% of its revenues (including the sales of the Wire & Cable unit)  from its Argentine operations. The Company had not operations in Colombia by the end of the year, but derived 3.1% of its revenues if the sales of the Wire & Cable are included. In the case of Peru, the Company had Ch$51,161 million, or 9.3% of its property, plant and equipment in Peru, and derived 24.7% of its revenues (excluding the sales of the Wire & Cable unit) or 27.1% of its revenues (including the sales of the Wire & Cable unit) from its Peruvian operations.

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 crisis 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 2007 and 2008, the Argentine economy grew by 8.6% and 7.0%, respectively. Although Argentina’s economy has improved, the country’s economic environment and political stability remain fragile.

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 2007 and 2008, the Peruvian economy grew by 9.0% and 9.8%, respectively, as a result of strong domestic demand which outpaced GDP growth.

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.

Market and Exchange Rate Volatility of Nexans InvestmentIn accordance with the implementation of IFRS the investment in Nexans was recognized as an financial investment. Stock market and/or exchange rate volatility may adversely affect the value of this investment. If the Company’s management has sufficient evidence of deterioration in either market value or exchange rate an impairment may be applied to Nexans investment, reducing its value and could have a material adverse effect on the Company’s financial condition.

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, 2009, the Quiñenco Group owned 47.7% 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.

A failure in our information technology infrastructure or applications could negatively affect our business. The Company depends on information technology to record customer’s orders, manufacture and ship products in a timely manner, and maintain the financial accuracy of our business records. Madeco is in the process of developing and implementing a global Enterprise Resource Planning (ERP) system that will redesign and organize new processes and a common information system in the Flexible Packaging and Profiles units over the upcoming years (which has already been implemented in the Brass Mills unit). There can be no assurance that this system will deliver the expected benefits. The failure to achieve this system implementation may impact our ability to process transactions accurately and efficiently, and remain in line with the changing needs of the trade, which could result in the loss of sales and/or customers. In addition, the failure to either deliver the application on time, or anticipate the necessary readiness and training needs, could lead to business disruptions and loss of customers and revenue. Finally, malfunction or abandonment of the ERP system could result in a write-off of part or all of the costs that have been capitalized on the implementation plan.

We May Be Subject to the Registration Requirements of 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. The Company consummated the sale of its Wire & Cable business unit to Nexans for 2,500,000 shares of Nexans’ capital stock and cash, as disclosed elsewhere in this Annual Report. The Nexans stock as well as 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 registration requirements of the Investment Company Act.  If the Company is required to register and does not register, it will 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 Believes it May Be a Passive Foreign Investment Company (a “PFIC”) for its Current Taxable Year Ending December 31, 2009, this Conclusion is Subject to Some Uncertainty.The Company believes that it may also have been a PFIC for its taxable year ending December 31, 2008.Even if it was not previously a PFIC, the Company may be a PFIC now that it has concluded the sale of its Wire & Cable 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 Argentine or Peruvian currencies 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 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 continue 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 one of the primary raw materials 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 obtain its required copper at satisfactory prices, if at all.

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 kept by the Company exclusively for the fabrication of its products and are not hedged. 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 customers. 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 plastic 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”.

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 Final Purchase Price Nexans Will Pay for Madeco’s Wire Cable Unit is Uncertain. On September 30, 2008 the company concluded the sale of its Wire & Cable unit’s assets to Nexans. Pursuant to the terms of the Purchase Agreement, Madeco received in exchange a US$393 million cash payment (US$448 million minus minority interest, working capital and financial debt) plus 2.5 million shares of Nexans stock (with an approximate market value of US$218 million, representing 8.9% of Nexans’ share capital). The amount of the cash payment was subject to adjustment to reflect any differences between the pro-forma financial statements as of September 30, 2008, and the accounting books at the end of the same period. In order to fund such adjustment, Madeco opened an escrow account of US$37 million for the benefit of Nexans. On November 12, 2008, Nexans sent a letter to Madeco summarizing the accounts, as of September 30, 2008, of the companies sold and providing Nexans’ estimate of the necessary adjustment to the cash payment amount. Madeco responded with a letter dated November 26, 2008, expressing its disagreement with respect to the amounts held in the accounts, as well as the basis for determining those amounts, and therefore to Nexans’ estimate of the necessary adjustment to the cash payment. If differences persist, the materials in question should be submitted to arbitration and resolution of External Auditors pursuant to conditions stablished on the purchase agreement. Due to these external factors Madeco cannot state with any level of certainty a final transaction price.



Madeco Expects to Delist its ADS from The New York Stock Exchange and May Deregister Under the Exchange Act.Due to the high cost of complying with U.S. reporting obligations and small percentage of Madeco’s outstanding shares that are held as ADSs on The New York Stock Exchange and the low number of U.S. holders of Madeco’s ADSs, Madeco’s Board of Directors resolved on June 22, 2009 to delist its ADSs from The New York Stock Exchange and to deregister Madeco under the Exchange Act if it meets the criteria for deregistration set forth by the U.S. Securities and Exchange Commission. Madeco expects that the liquidity of its ADSs will decrease as a result of the delisting and if it deregisters investors will have less information about the company available to it.  Madeco intends to maintain its listing on the Chilean stock exchange and to provide the information and disclosure required under Chilean law.

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 and Peru. Prior to the sale of its Wire & Cable unit, the Company also had operations in Brazil and Colombia.

The Company’s head office and principal business address is located at San Francisco 4760, San Miguel, Santiago, Chile. The telephone number at the Company’s head office is (56-2) 520-1000, and the facsimile numberis (56-2) 520-1158. 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 three principal operating segments or business units based on production processes. The Company’s current business units are:

h Flexible Packaging;

h Brass Mills; and

h Profiles.

Madeco’s principal products include:

h In the Flexible Packaging business: rotogravure and flexo laminated flexible packaging (plastics, foil, paper);

h In the Brass Mills business: pipes, sheets, coils, busbars, bars and coin blanks made from copper, aluminum and related alloys; and

h In the 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 2008, the Company’s consolidated net revenues amounted to Ch$692,958 million, of which 63.1% was derived from Madeco’s sold Wire & Cable unit, 18.8% from the Flexible Packaging unit, 12.8% from the Brass Mills unit and 5.3% from the Profiles unit.

History

Madeco S.A. was incorporated as an open stock corporation in Chile in 1944 and has expanded over the years into Latin America. Today, the Company is a leading regional 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 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 May 2004, the C Series Bonds were paid (UF1.4 million) and in December the A Series Bonds were paid (UF1.9 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 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 July 2005, Ficap began operating on the SAP system. In September 2005, 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 its Wire & Cable unit ́s assets 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).

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 related to the Brass Mills business, and the third 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 each units’ investments and/or assets are contributed, as determined by the Board in 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.

On February 21, 2008, after having extended by mutual agreement the initial term set in the framework agreement and having satisfactorily completed the diligence process, Madeco and Nexans signed the final transfer agreement of the Wire & Cable assets.

On April 23, 2008, the Company’s ordinary board meeting held on April 23 agreed to carry out definitively the sale of the Wire & Cable business of Madeco S.A. to the company Nexans. Its intention is to propose to the next ordinary shareholders meeting, to be held in the first months of 2009, the distribution of a dividend equivalent to 76% of the Company’s net income, subject to this not exceeding US$165 million.

On September 30, 2008 the company concluded the sale of its Wire & Cable unit’s assets to Nexans. Pursuant to the terms of the Purchase Agreement, Madeco received in exchange a US$393 million cash payment (US$448 million minus minority interest, working capital and financial debt) plus 2.5 million shares of Nexans common stock (with an approximate market value of US$218 million, representing 8.9% of Nexan’s share capital). The amount of the cash payment was subject to adjustment to reflect any differences between the pro-forma financial statements as of September 30, 2008, and the accounting books at the end of the same period. In order to fund such adjustment, Madeco opened an escrow account of US$37 million for the benefit of Nexans. On November 12, 2008, Nexans sent a letter to Madeco summarizing the accounts, as of September 30, 2008, of the companies sold and providing Nexans’ estimate of the necessary adjustment to the cash payment amount. Madeco responded with a letter dated November 26, 2008, expressing its disagreement with respect to the amounts held in the accounts, as well as the basis for determining those amounts, and therefore to Nexans’ estimate of the necessary adjustment to the cash payment. If differences persist, the materials in question should be submitted to arbitration and resolution of External Auditors pursuant to conditions stablished on the purchase agreement. Due to these external factors Madeco cannot state with any level of certainty a final transaction price.

On October 22, 2008, the Board accepted the resignation of Tiberio Dall’Olio from his position as the Chief Executive Officer of Madeco S.A. (effective October 31, 2008). As his replacement, the Board agreed to appoint Cristian Montes Lahaye as the chief executive officer of the Company (effective November 1, 2008). Mr. Montes Lahaye, was previously the Company’s Chief Financial Officer and the Chief Executive Officer of Alusa S.A.

As part of the restructuring process the Company changed its domicile in early December 2008  from Ureta Cox Street 930 to San Francisco Street 4760, both in the district of San Miguel. The new domicile is where Madeco’s Brass Mills plant operates.

In early March 2009, the Company appointed Mr. Nicolás Burr as the corporate Chief Financial Officer of Madeco. This position had been vacant since Mr. Cristián Montes replaced Mr. Tiberio Dall’Olio as Chief Executive Officer of Company.

On April 3, 2009 Madeco paid a dividend of Ch$15 per share (equivalent to US$2.02 per ADS), as agreed at the Shareholders’ Meeting held on March 25, 2009. This dividend derived from the ordinary net income for the year 2008 and the extra gain obtained through the Wire & Cable unit’s sale.

On August 28, 2007, the Chilean Securities and Insurance Superintendency announced the adoption of International Financial Reporting Standards (IFRS) in Chile (the use of which will be required of Chilean companies beginning in 2010). The Company voluntarily agreed to adopt the IAS and IFRS from IASB, as its accounting and reporting standards beggining January 1, 2009.  Moreover, in accordance with IFRS, the Company changed its functional currency from Chilean Pesos to U.S. Dollars, and  the figures of the Wire & Cable unit (sold on September 2008) were classified as discontinued operations. The cash and shares obtained from this transaction were incorporated into a new segment called “investments”, which was created in 2009 in order to manage these financial assets.

Also as part of the adoption of IFRS, the Shareholders’ Equity underwent, including the revaluation of plant and equipment, changes in goodwill amortization criteria, changes in the staff severance indemnity and changes in deferred taxes.

On June 22, 2009, Madeco’s Board resolved to terminate Madeco’s ADR program with the Bank of New York Mellon, as depositary, delist its ADSs from the New York Stock Exchange and deregister under the Securities Exchange Act of 1934 and cease filing reports with the Securities and Exchange Commission. Factors that the Board considered in making its decision include the high cost of complying with U.S. reporting obligations and the small percentage of Madeco’s outstanding shares that are held as ADSs.



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 add favorable synergies to the Company’s different business units. The Company’s capital expenditures for 2006, 2007 and 2008 totaled approximately Ch$62,014 million. In 2008, investments reached Ch$24,856 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 2008, capital expenditures amounted to Ch$16,069 million. This investment was considered within the price adjustments agreed as part of the sale of this unit.

In 2007, capital expenditures amounted to Ch$10,468 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$5,023 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.

Flexible Packaging Unit.In 2008, capital expenditures amounted to Ch$6,067 million, which was equivalent to 98.0% of the unit’s depreciation. The unit’s investments included the purchase of flexographic printers, laminators and the start of the contrution of the solvents recovery plant in the Chilean subsidiary.

In 2007, capital expenditures amounted to Ch$4,550 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$7,732 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.

Brass Mills Unit.In 2008, capital expenditures amounted to Ch$1,141 million, which was equivalent to 48.8% of the unit’s depreciation. The unit’s investment were mainly allocated towards maintenance of machinery.

In 2007, capital expenditures amounted to Ch$1,034 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$602 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.

Profiles Unit.In 2008, capital expenditures were approximately Ch$1,579 million, which was equivalent to 109.2% of the unit’s depreciation. The unit’s investments were related to the development of its commercial network and, to a smaller degree, its aluminum and PVC processing plants.

In 2007, capital expenditures amounted to Ch$4,341 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$3,407 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).

Business Overview

Strategy

The Company successfully carried out its three-year 2006–2008 Business Plan. The Company’s achievements included the consolidation of the Wire & Cable unit (the unit was sold in late September 2008), the increase in profitability of the Flexible Packaging unit following improvements in its operational and commercial management, and the consolidation of the Company’s financial position.

The Company also successfully completed the implementation of the corporate management project (integrated through ERP SAP) in the Wire & Cable and Brass Mills units allowing better integration between the companies. At the end of 2008, the Company began working on implementing the corporate management project in its other business units and establishing the groundwork for the transition to the IFRS accounting standards.

The business plan for the 2009 – 2011 period includes the following1:



1. Increase the profitability and regional presence of the Flexible Packaging unit.
2. Improve the operational efficiency and strategic orientation of the Brass Mills unit.
3. Consolidate the investments made in the Profiles unit, improving its profitability and commercial strategy.
4. Take advantage of the synergies within the Company’s business units in order to standardize processes and best practices.
5. Implement a strategic human resources Management policy.
6. Carry out and strengthen the corporate management integration project of the Madeco group’s business units.



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 production 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 significant Brazilian 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 caps 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 flexible packaging market, acquiring a 25.0% and 25.6% interest in Peruplast S.A. and Tech Pak S.A., respectively. Both companies were leaders in the Peruvian flexible packaging market.

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%. Similary, 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 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 2006, 2007 and 2008:

|                        |                           |                         |                        |                      
|----------------------- | ------------------------- | ----------------------- | ---------------------- | ---------------------
|Flexible Packaging Unit
|Year                    | Revenues
(in Ch$ million) | % Consolidated Revenues | Sales Volume
(in tons) | % Consolidated Volume
|2006                    | 54,032                    | 8.3%                    | 15,649                 | 11.6%                
|2007                    | 96,920                    | 13.9%                   | 38,259                 | 24.2%                
|2008                    | 130,445                   | 18.8%                   | 43,689                 | 28.9%                





In 2008, revenues increased by 34.6%, from Ch$96,921  million in 2007 to Ch$130,445 million in 2008, as a result of an increase in sales volume by 14.2%, the incorporation of Peruplast and the exchange rate fluctuations between Ch$ and US$.

The consolidated sales volume of the Flexible Packaging unit amounted to 43,689  tons in 2008. In 2008, total sales volume in Chile increased by 15.4% compared with 2007, while those in Argentina increased by 15.2% compared to 2007. In Peru, sales volume decreased by 6.6% in 2008.

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 26.5% of the total unit’s revenues for the year 2008.

The following tables present the Company’s annual net sales generated by the Flexible Packaging business unit by destination for the years 2006, 2007 and 2008:

|                                                                   |        |           |        |             |                        
|------------------------------------------------------------------ | ------ | --------- | ------ | ----------- | -----------------------
|Flexible Packaging Unit - Revenues by Destination (in Ch$ million)
|Year                                                               | Chile  | Argentina | Peru   | Exports (1) | Flexible Packaging Unit
|2006                                                               | 31,596 | 13,431    | 1,093  | 7,913       | 54,033                 
|2007                                                               | 33,320 | 10,342    | 37,623 | 15,636      | 96,921                 
|2008                                                               | 35,635 | 17,032    | 43,266 | 34,512      | 130,445                



|                                                                 |        |           |        |             |                        
|---------------------------------------------------------------- | ------ | --------- | ------ | ----------- | -----------------------
|Flexible Packaging Unit – Sales Volumes by Destination (in tons)
|Year                                                             | Chile  | Argentina | Peru   | Exports (1) | Flexible Packaging Unit
|2006                                                             | 8,838  | 4,137     | 313    | 2,361       | 15,649                 
|2007                                                             | 9,621  | 3,586     | 18,893 | 6,159       | 38,259                 
|2008                                                             | 11,106 | 4,132     | 17,637 | 10,814      | 43,689                 



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

The following table presents the Company’s Flexible Packaging business unit total revenues for the years 2006, 2007 and 2008, broken down by the subsidiary that generated the sale:

|                                                                  |        |         |           |               |                        
|----------------------------------------------------------------- | ------ | ------- | --------- | ------------- | -----------------------
|Flexible Packaging Unit – Revenues by Subsidiary (in Ch$ million)
|Year                                                              | Alusa  | Aluflex | Peruplast | Inter-company | Flexible Packaging Unit
|2006                                                              | 36,455 | 18,366  | 0         | (788)         | 54,033                 
|2007                                                              | 38,510 | 16,114  | 46,314    | (4,017)       | 96,921                 
|2008                                                              | 41,508 | 27,409  | 63,470    | (1,942)       | 130,445                



Flexible Packaging - Production

The Company has a total of four 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            | Impression Technologies   | 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              | 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 main pre-press process involves the digital design for packaging graphics, including color separation, text and layout. There are two forms of printing: rotogravure and flexography. The rotogravure printing process involves diamond-etching a cylinder for each product’s color layer. It is appropriate for high-quantity orders. Flexographic printing process requires a polymer plate (one for each color) with the design to be printed, that is wrapped around a metallic cylinder.

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 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 2008 were Dispercol S.A., Goechem Interacional Corp., and Dow Chemical Company subsidiaries PBB Polisur S.A., Petroquímica Dow S.A. and Dow Química Chilena, S.A. These three companies provided more than 20% of the raw materials used by the Company in 2008. 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 Hydro Aluminum Deutschland GMBH (Germany), Noble (China) and CBA (Brazil). However, the Company can access other sources when price and delivery terms are more favorable.

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

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 Chile, Argentina and Peru, 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 (currently vacant), 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 five 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, eight sales executives (four are responsible for local/foreign customers, while the remaining four are just for local clients) and four 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, Colombia, Uruguay, 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 and Unilever, and local regional companies, such as Córpora and Carozzi. The Company also has approximately 70 clients in Argentina which include multinational companies, such as Nestlé, Unilever, Masterfoods, Royal Canin, Procter & Gamble, Clorox, AGD, and The Value Brand and more than 100 active customers in Peru, which include multinational companies, such as Unilever, Kimberly Clark, Procter & Gamble, Nestlé, Frito Lay, Kraft Foods and several local regional companies, such as Alicorp, Productos Tissue, Molitalia and Gloria.

The Company’s largest customers in 2008 are in the food and hygiene industries. The Company’s largest multinational customer accounted for 13.7% of the units’ total consolidated revenues in 2008. 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 2006, 2007 and 2008:

|                                         |                 |                 |                
|---------------------------------------- | --------------- | --------------- | ---------------
|The Company’s Chilean Customer Groupings | % 2006
Revenues | % 2007
Revenues | % 2008
Revenues
|Concentrated & dehydrated products       | 28%             | 28%             | 33%            
|Ketchup & tomato sauces                  | 13%             | 14%             | 14%            
|Mayonnaise & mustard............................           | 1%              | 1%              | 2%             
|Condiments..........................................               | 4%              | 4%              | 3%             
|Biscuits, candies & snacks........................       | 16%             | 20%             | 16%            
|Dairy products                           | 11%             | 10%             | 10%            
|Pet food                                 | 4%              | 5%              | 5%             
|Cleaning & Personal Care                 | 13%             | 9%              | 8%             
|Others                                   | 10%             | 9%              | 9%             



|                                           |                 |                 |                
|------------------------------------------ | --------------- | --------------- | ---------------
|The Company’s Argentine Customer Groupings | % 2006
Revenues | % 2007
Revenues | % 2008
Revenues
|Concentrated & dehydrated products         | 5%              | 7%              | 4%             
|Ketchup & tomato sauces                    | 9%              | 18%             | 18%            
|Mayonnaise & mustard............................             | 39%             | 40%             | 38%            
|Condiments..........................................                 | 0%              | 0%              | 4%             
|Biscuits, candies & snacks........................         | 11%             | 1%              | 1%             
|Dairy products                             | 0%              | 0%              | 2%             
|Pet food                                   | 25%             | 23%             | 17%            
|Cleaning & Personal Care                   | 10%             | 11%             | 15%            
|Others                                     | 1%              | 0%              | 1%             



|                                          |                 |                 |                
|----------------------------------------- | --------------- | --------------- | ---------------
|The Company’s Peruvian Customer Groupings | % 2006
Revenues | % 2007
Revenues | % 2008
Revenues
|Concentrated & dehydrated products        | 7%              | 7%              | 9%             
|Ketchup & tomato sauces                   | 2%              | 3%              | 4%             
|Mayonnaise & mustard............................            | 6%              | 8%              | 10%            
|Condiments..........................................                | 0%              | 1%              | 1%             
|Biscuits, candies & snacks........................        | 20%             | 25%             | 20%            
|Dairy products                            | 17%             | 11%             | 10%            
|Pet food                                  | 0%              | 1%              | 2%             
|Cleaning & Personal Care                  | 35%             | 35%             | 39%            
|Others                                    | 13%             | 9%              | 5%             





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 98% in 2008) were made under credit conditions (non-interest credits).

Within the Flexible Packaging unit, the average payment period remained stable atapproximately 95 days in 2008 (97 days in 2007). Uncollectible accounts as a percentage of total unit revenues amounted to 0.22% in 2007 and 0.32% in 2008.

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.











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 growth of 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 and with multinational clients.

Over the last few years, the Company has observed several factors within the industry such as: increasing industry concentration, both on the provider and the customer side, 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, and strong flexible packaging industry fundamentals as compared to substitutive packaging (i.e. glass, rigid plastic and PET containers).

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 2006 through 2008 is included separately for Chile, Argentina and Peru.

Chilean Flexible Packaging Market. The following chart summarizes management’s estimates for the Chilean flexible packaging industry for the years 2006 through 2008:

|     |                        
|---- | -----------------------
|Year | Industry Size
(in tons)
|2006 | 31,200                 
|2007 | 32,000                 
|2008 | 33,300                 



From 2006 to 2008, 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 2006, 2007 and 2008:

|     |                        
|---- | -----------------------
|Year | Industry Size
(in tons)
|2006 | 97,033                 
|2007 | 99,000                 
|2008 | 102,000                



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 8.6%.

During 2008, the Argentine economy grew by 7.0%. The decrease in international prices of cereals together with the fall of the automotive and steel industries accounts for the deceleration of the GDP growth. However, the Company’s food and beverages markets grew during 2008 in those markets where Aluflex sells most of its products.

Peruvian Flexible Packaging Market. The following chart summarizes management’s estimates for the Peruvian flexible packaging industry for the years 2006, 2007 and 2008:

|     |                           
|---- | --------------------------
|Year | Industry Size
(in tons)(1)
|2006 | 23,515                    
|2007 | 24,463                    
|2008 | 25,388                    

(1) The Industry Sizes presented above differ from those presented in the Company’s Annual Report on Form 20-F for 2007, due toa  change in the Company’s methodology.



From 2006 to 2008, 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 20% in 2008 compared to 2007.

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

Alusa’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, Alusa 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:

|            |      |      |     
|----------- | ---- | ---- | ----
|            | 2006 | 2007 | 2008
|The Company | 29%  | 30%  | 32% 
|Edelpa      | 31%  | 30%  | 28% 
|Others      | 40%  | 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 one manufacturing facility in Santiago.

The main companies within the Multilayer Flexible Packaging industry are Edelpa and Alusa, which together account for 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 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:

|            |      |      |     
|----------- | ---- | ---- | ----
|            | 2006 | 2007 | 2008
|Converflex  | 16%  | 12%  | 12% 
|Celomat     | 10%  | 7%   | 7%  
|The Company | 6%   | 6%   | 7%  
|Others      | 68%  | 75%  | 74% 



The flexible packaging industry in Argentina shows high levels of fragmentation. In 2008, the three main competitors had 26% 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% in 2008.

The main competitors of Aluflex, other than Converflex, are Alvher, 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:

|                  |      |      |     
|----------------- | ---- | ---- | ----
|                  | 2006 | 2007 | 2008
|The Company       | 60%  | 59%  | 58% 
|Envases Múltiples | 15%  | 17%  | 18% 
|Resinplast        | 14%  | 15%  | 16% 
|Others            | 11%  | 9%   | 8%  



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 twenty years due to superior production technology, as well as, its capacity to maintain its major clients.

In 2008, the Company’s main competitors (Envases Múltiples and Resinplast) increased their market share to 18% and 16%, respectively, due to use of a low-price strategy in BOPP and non-printed LDPE markets.



Brass Mills

Since Madeco’s incorporation in 1944, the Company has been manufacturing pipes, bars and sheets products in Chile. The Company initiated the fabrication of aluminum based products (profiles, sheets and foils) in 1954. During 2008, the Wire & Cable and Brass Mills operations in Chile were split in order to transfer the assets of the Wire & Cable division to Madeco Cables, a subsidiary that was sold to Nexans.

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. In preparation for the sale of the Wire & Cable unit, both operations were separated by the end of 2007.

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 Brass Mills
Armat S.A. | PBS(1)
Coins and Sheets
|Argentina | Decker 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. In addition, the Company decided to boost its sales and marketing department, comprised of 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 and 2008. 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 2006, 2007 and 2008(1):

|                                             |               |                 |                |                        
|-------------------------------------------- | ------------- | --------------- | -------------- | -----------------------
|Brass Mills Unit – Revenues (in Ch$ million)
|Year                                         | PBS- Revenues | Coins-
Revenues | Total Revenues | % Consolidated Revenues
|2006                                         | 128,232       | 11,396          | 139,628        | 21.4%                  
|2007                                         | 101,578       | 10,624          | 112,202        | 16.1%                  
|2008                                         | 81,732        | 7,177           | 88,909         | 12.8%                  





|                                           |                    |                      |                     |                      
|------------------------------------------ | ------------------ | -------------------- | ------------------- | ---------------------
|Brass Mills Unit – Sales Volumes (in ton.)
|Year                                       | PBS-
Sales Volumes | Coins-
Sales Volumes | Total Sales Volumes | % Consolidated Volume
|2006                                       | 26,400             | 1,611                | 28,011              | 20.7%                
|2007                                       | 20,511             | 1,320                | 21,831              | 13.8%                
|2008                                       | 17,209             | 300                  | 17,509              | 11.6%                



(1) Figures for 2008 includes sales of the Wire & Cable unit (until September 2008)



The Brass Mills unit is Madeco’s second largest business segment in terms of revenues, representing 12.8% of consolidated revenues in 2008; however substitution due to increasing copper prices has negatively affected its performance, see “Item 3. Key Information – Risk Factors”.Of the three businesses, the Company’s Brass Mills unit is the most internationally diverse, with customers in over 16 countries.Export sales in 2008 amounted to approximately 45.9% of total revenues and 52.2% 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 2006, 2007 and 2008, broken down by the subsidiary generating the sale:

|                                             |              |        |        |               |                 
|-------------------------------------------- | ------------ | ------ | ------ | ------------- | ----------------
|Brass Mills Unit – Revenues (in Ch$ million)
|Year                                         | Madeco Chile | Decker | Armat  | Inter-company | Brass Mills Unit
|2006                                         | 128,112      | 11,523 | 13,741 | (13,748)      | 139,628         
|2007                                         | 107,060      | 10,447 | 11,000 | (16,305)      | 112,202         
|2008                                         | 87,632       | 14,232 | 8,312  | (21,267)      | 88,909          



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

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

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

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), 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 one international mining company Escondida (BHP Billiton). During 2008 and 2007, the Company obtained most of its Brass Mills’ aluminum requirements from Aluminios Argentinos S.A.I.C. (“Aluar”, of Argentina) 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 facilities. 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 close to 52.9% of the total division’s revenues for the year 2008. The following table shows Madeco’s annual net sales generated by the PBS division by destination for the years 2006, 2007 and 2008:



|                                                        |        |           |             |             
|------------------------------------------------------- | ------ | --------- | ----------- | ------------
|PBS Division – Revenues by Destination (in Ch$ million)
|Year                                                    | Chile  | Argentina | Exports (1) | PBS Division
|2006                                                    | 35,936 | 11,860    | 80,436      | 128,232     
|2007                                                    | 36,512 | 10,166    | 54,900      | 101,578     
|2008                                                    | 29,010 | 14,209    | 38,513      | 81,732      



|                                                      |       |           |             |             
|----------------------------------------------------- | ----- | --------- | ----------- | ------------
|PBS Division – Sales Volumes by Destination (in tons)
|Year                                                  | Chile | Argentina | Exports (1) | PBS Division
|2006                                                  | 6,937 | 2,432     | 17,031      | 26,400      
|2007                                                  | 7,258 | 2,065     | 11,188      | 20,511      
|2008                                                  | 6,358 | 1,983     | 8,868       | 17,209      

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



In 2008, PBS division revenues decreased by Ch$19,846 million or 19.4% compared to the previous year. This decrease was due to a continued decrease of 16.1% 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 decreased compared to the previous year in 20.5%, but increased in Argentina by 39.8% compared to the previous year. The division’s exports in 2008 decreased by 29.8% compared to 2007.



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 includes a sales & marketing manager, three area managers, seven sales representatives (one located in the south and the other located in the north of the country serving the mining industry) and three sales assistants. Customer groupings in the Chilean market include: retail companies, electronic and electric appliance manufacturers, durable goods manufacturers and mining.

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 in Chile have 68 clients in Chile, 300 Argentinean customers and 46 customers in its export markets. In 2008, the largest customer was Unimet and sales to this customer accounted for 8.3% 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 2006, 2007 and 2008:



|                                         |                 |                 |                
|---------------------------------------- | --------------- | --------------- | ---------------
|The Company’s Chilean Customer Groupings
|                                         | % 2006 Revenues | % 2007 Revenues | % 2008 Revenues
|Retail  and Distributors                 | 65%             | 64%             | 66%            
|Durable good manufacturers               | 18%             | 17%             | 16%            
|Mining                                   | 7%              | 9%              | 11%            
|Electric appliance manufacturers         | 3%              | 3%              | 2%             
|Aluminum                                 | 3%              | 3%              | 2%             
|Others                                   | 4%              | 4%              | 3%             



|                                           |                 |                 |                
|------------------------------------------ | --------------- | --------------- | ---------------
|The Company’s Argentine Customer Groupings
|                                           | % 2006 Revenues | % 2007 Revenues | % 2008 Revenues
|Retail  and Distributors                   | 48%             | 45%             | 47%            
|Construction                               | 18%             | 22%             | 19%            
|Durable good manufacturers                 | 22%             | 25%             | 26%            
|Others                                     | 12%             | 8%              | 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 2006 through 2008 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 2006, 2007 and 2008:

|                        |                     |             
|----------------------- | ------------------- | ------------
|Industry Size (in tons)
|Year                    | Total Industry Size | GDP Rate (1)
|2006                    | 12,905              | 4.7%        
|2007                    | 12,860              | 4.6%        
|2008                    | 11,507              | 3.2%        



(1)  The annual GDP rates for Chile presented above differ from those presented in the Company’s Annual Report on Form 20-F for 2007 as a result of a change in Chilean Central Bank’s calculation formula and methodology.



In 2008, the tubes and pipes industry in Chile, compared to other sectors such as sheets or bars experienced a decrease in sales compared to 2007, in part due to higher copper prices. In contrast the mining industry and new building constructions experienced an increase in sales.

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 2006 to 2008:

|     |                         |         
|---- | ----------------------- | --------
|Year | Industry Size (in tons) | GDP Rate
|2006 | 21,700                  | 8.5%    
|2007 | 22,400                  | 8.6 %   
|2008 | 21,750                  | 7.0 %   



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 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.

In 2008, the trend to use PVC instead copper pipes for plumbing construction resulted in negative or flat industry size growth. However, the Company is well positioned to provided a wide range of refrigeration and air conditioning tubes to satisfy the growing regional demand. At the end of the year the Ente Nacional Regulador de Gas en Argentina (National Gas Regulator, or “ENARGAS”) announced that it would allow the use of copper tubing for internal natural lines, which has opened a new market for the Company.





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:

|                   |      |      |     
|------------------ | ---- | ---- | ----
|                   | 2006 | 2007 | 2008
|The Company        | 54%  | 56%  | 57% 
|Conmetal           | 10%  | 8%   | 19% 
|EPC (ex Tecob)     | 4%   | 6%   | 6%  
|Impovar            | 0%   | 0%   | 4%  
|Imports into Chile | 6%   | 5%   | 3%  
|Cembrass           | 26%  | 25%  | 0%  



The Company is the largest local producer of pipes, bars and sheets in Chile, with an estimated market share of 57% in 2008. 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.

Since 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 year by year, however this effect was offset by higher product prices.



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:

|                       |      |      |     
|---------------------- | ---- | ---- | ----
|                       | 2006 | 2007 | 2008
|Pajarbol-Cembrass      | 23%  | 19%  | 19% 
|Sotyl                  | 14%  | 17%  | 14% 
|The Company            | 10%  | 8%   | 9%  
|Vaspia                 | 7%   | 7%   | 6%  
|Quimetal               | 6%   | 6%   | 6%  
|Other Domestic         | 25%  | 32%  | 28% 
|Imports into Argentina | 15%  | 11%  | 18% 



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 2007, the Company’s market share decreased by 4% 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.

In 2008, the Company’s market share increase compared to the previous year as a result of increased sales of air conditioningand refrigeration copper tubes.



Coins – Sales by Destination

Madeco sells the bulk of its coin products to countries outside Chile; export sales represented 32.1% of the total coin revenues for the year 2008.The following table shows Madeco’s annual net sales by destination for the years 2006, 2007 and 2008:

|                                                          |       |             |               
|--------------------------------------------------------- | ----- | ----------- | --------------
|Coins Division – Revenues by Destination (in Ch$ million)
|Year                                                      | Chile | Exports (1) | Coins Division
|2006                                                      | 3,223 | 8,173       | 11,396        
|2007                                                      | 1,737 | 8,888       | 10,625        
|2008                                                      | 4,870 | 2,307       | 7,177         



|                                                        |       |             |               
|------------------------------------------------------- | ----- | ----------- | --------------
|Coins Division – Sales Volumes by Destination (in tons)
|Year                                                    | Chile | Exports (1) | Coins Division
|2006                                                    | 39    | 1,572       | 1,611         
|2007                                                    | 66    | 1,254       | 1,320         
|2008                                                    | 27    | 273         | 300           



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



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 considered as part of sale) compared with 2006.

In 2008, the Company experienced decreased sales due to winning fewer bids. Sales volume decreased compared to 2007 due to a higher number of “non metal containing” sales, related to the Chilean Mint House.



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 principal 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 coin mints, making for purchase patterns that are infrequent by nature but high in terms of sales volume. The Company’s key customers in 2008 were Casa de Moneda de Chile with 61% of total sales, followed by Banco de Guatemala and the Royal Dutch Mint.



Profiles

Industrias de Aluminio S.A. (“Indalum”) was founded in 1954. Madeco began producing aluminum profiles in 1954 and in 1991, acquired a 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, in Chile Alumco 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 2006, 2007 and 2008:

|              |                           |                         |                        |                      
|------------- | ------------------------- | ----------------------- | ---------------------- | ---------------------
|Profiles Unit
|Year          | Revenues
(in Ch$ million) | % Consolidated Revenues | Total Volume
(in tons) | % Consolidated Volume
|2006          | 38,990                    | 6.0%                    | 12,262                 | 9.1%                 
|2007          | 38,259                    | 5.5%                    | 10,354                 | 6.5%                 
|2008          | 36,650                    | 5.3%                    | 10,851                 | 7.2%                 



In 2008, revenues decreased by 4.2% compared with the previous year as a result of the negative effect of sales volumes, due to the increase in market share of low priced imports from China and the deterioration of the construction market by the end of 2008. Both effects were partially offset by the introduction of the PVC division.

The following tables show the Company’s annual net sales broken down in local sales and exports for the years 2006, 2007 and 2008.

|                                          |        |         |                  
|----------------------------------------- | ------ | ------- | -----------------
|Profiles Unit - Revenues (in Ch$ million)
|Year                                      | Chile  | Exports | Total Revenues(1)
|2006                                      | 37,907 | 1,083   | 38,990           
|2007                                      | 37,263 | 996     | 38,259           
|2008                                      | 35,349 | 1,301   | 36,650           



|                                       |        |             |             
|-------------------------------------- | ------ | ----------- | ------------
|Profiles Unit - Sales Volume (in tons)
|Year                                   | Chile  | Exports (1) | Total Volume
|2006                                   | 11,778 | 484         | 12,262      
|2007                                   | 9,965  | 389         | 10,354      
|2008                                   | 10,247 | 604         | 10,851      



(1)The year 2008 includes revenues of PVC division.

The following table shows the Company’s total revenues generated by the Aluminum and PVC divisions for the years 2006, 2007 and 2008:

|     |               |                            |                      
|---- | ------------- | -------------------------- | ---------------------
|Year | Profiles Unit | Aluminum
Profiles Division | PVC
Profiles Division
|2006 | 38,990        | 38,990                     | N/A                  
|2007 | 38,259        | 38,259                     | N/A                  
|2008 | 36,650        | 35,374                     | 1,276                



Aluminum Profiles - Production

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

Production of aluminum profiles begins with aluminum billets that are heated and pressed at high pressure rates against a steel die which has been cut according to the desired shape of the final product. This is called the extrusion process. After, the cutting process, a straightened profile leaves the press after being cut to the ordered length. Then, it is placed in a furnace where it can attain the desired mechanical properties. After this treatment, a profile can be sold without further processing, this is called a mill finished aluminum profile, or it can go through the anodizing or painting processes.

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 and lamination plant adjacent to Indalum’s aluminum production plant in San Bernardo. It was a greenfield project, which began operations on January of 2008, under the name of PVTEC S.A., as a subsidiary of Indalum. It has state of the art technology both in terms of the manufacturing process and the product and systems 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 die 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% of the total production profile cost. The Company obtains most of its billets from Aluar, located in Argentina.

Other raw materials used for aluminum profile 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 division for the years 2006, 2007 and 2008:

|     |                                             |                                          
|---- | ------------------------------------------- | -----------------------------------------
|Year | Aluminum Profiles
Revenues (in Ch$ million) | Aluminum Profiles Sales Volumes (in tons)
|2006 | 38,990                                      | 12,262                                   
|2007 | 38,259                                      | 10,354                                   
|2008 | 35,374                                      | 10,551                                   



In 2006, the Company’s net sales increased by 11.2% compared with the previous year. This increase was due to a 13.3% increase in sales volumes. Overall industry had a 19.5% growth over 2005.

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, which were partially offset by higher average sale prices for aluminum profiles.

In 2008, the Company’s net sales decreased 7.5% compared with the previous year, due to a reduction in sales prices for aluminum profiles, counterbalance by a 1.9% increase in sales volume.





PVC Profiles – Summary of Sales

The PVC Profiles division began its commercial activities in 2008.

|     |                                        |                                     
|---- | -------------------------------------- | ------------------------------------
|Year | PVC Profiles
Revenues (in Ch$ million) | PVC Profiles Sales Volumes (in tons)
|2006 | N/A                                    | N/A                                 
|2007 | N/A                                    | N/A                                 
|2008 | 1,276                                  | 291                                 



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 due strategic reasons, became the Company’s main distributor together  with three other small companies. During 2007, Alumco inaugurated three commercial offices in 2007 and five more in 2008, adding up to a total of eight selling points,  servicing approximately 1,900 active clients. 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.

The following chart shows the Company’s sales breakdown by channel for the years 2006, 2007 and 2008 for the Aluminum profiles division:

|                                                       |                 |                 |                
|------------------------------------------------------ | --------------- | --------------- | ---------------
|The Company’s Sales Channels                           | % 2006 Revenues | % 2007 Revenues | % 2008
Revenues
|Retail                                                 | 24%             | 32%             | 40%            
|Independent distributors                               | 45%             | 34%             | 19%            
|Construction companies and durable goods manufacturers | 28%             | 31%             | 36%            
|Exports and others                                     | 3%              | 3%              | 5%             



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 profiles in either cash or deferred payment. Cash payments have a price discount. Payment terms offered by the Company range between 7 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 52 days in 2007 to 62 days in 2008 (these figures do not include non-operating activity nor related party receivables). The Company’s uncollectible accounts as a percentage of net sales decreased from 3.2% in 2007 to  2.5% in 2008.

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, high-end 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.

In 2008, the Almalux, Xelentia Master and Xelentia Legno systems were launched. The Almalux window system has a combination of wood inside and aluminum outside. The Xelentia Master and Xelentia Legno systems, which were designed in 2008 and will be available in early 2009, are aimed at the top segment of the Xelentia market.

PVC Profiles – Marketing, Sales and Distribution

PVTEC has its own branded door and window PVC systems which are aimed at different segments of the market. Its products are custom -made and offer important competitive advantages over those of the competition. In the development of its prodcuts, PVTEC had the support of the Austrian company Greiner, which has designed more than 70% of the PVC systems worldwide.

PVTEC has four window and door systems of which three are European systems and one is an American system.

The European systems are Premium Plus which is a high performance system aimed at the top income segment; OPTIMA which covers the majority of the market demand, having an excellent quality -to -price ratio as well as great flexibility and competitiveness; and SMARTLINE, aimed at the medium- to low-income segment. ECOLINE is its American system which is a low cost system aimed at the low-income segment of the market.

The PVC market’s commercialization chain is structured differently from the aluminum market’s chain. Companies sell directly to window and door fabricators. PVTEC has a national network of window fabricators and installers of PVC doors and windows, plus two production plants of its own, located in Santiago and Osorno.



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 2006, 2007 and 2008:

|     |                                  |                                           
|---- | -------------------------------- | ------------------------------------------
|Year | Industry Size
(ALUMINUM in tons) | Construction Starts Index
(Dec 1996 = 100)
|2006 | 17,800                           | 114.0                                     
|2007 | 17,300                           | 101.4                                     
|2008 | 17,000                           | 104.8                                     



The sales volumes of the Company are closely related to the economy as a whole, as well as reduction in the residential sector. In 2008, GDP in Chile expanded 3.2% while the overall construction sector (including infrastructure) expanded 9.7%, with a 2.7% decrease in the residential sector.





PVC Profiles – Market Demand and Industry Size Estimates

PVC total market is estimated to be about 2,700 tons per year and has been growing during the last five years. Nevertheless, represents 12% of the total aluminum and PVC profile market.

|     |                            
|---- | ---------------------------
|Year | Industry Size
(PVC in tons)
|2006 | 1,390                      
|2007 | 1,980                      
|2008 | 2,700                      



The majority of the PVC profiles sold in the market are imported from different countries. The only two companies that have extrusion plants in Chile are Themco and PVTEC.



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:

|                  |      |      |     
|----------------- | ---- | ---- | ----
|Aluminum Profiles | 2006 | 2007 | 2008
|The Company       | 67%  | 60%  | 61% 
|Alcoa             | 13%  | 10%  | 5%  
|Other Imports     | 20%  | 30%  | 34% 



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 five 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.

In 2008, local production continued to decrease due to imports coming from China, nevertheless, branded systems have increased their sales by more than 30% compared with the previous year. At the end of the year, Alumco had a 50% market share of the profiles imported from China, which increased the Company’s aluminum profiles market share to 60%. This is also a result of the growth in Alumco’s distribution network.



PVC Profiles – Market Share and Description of Competition

There are more than 10 companies that participate in the PVC market, Kömmerling and Veka are the two most important. Both are German companies, with a significant share of the worldwide market. They have operated in Chile for more than 10 years, but it has been only in the last five that their presence and activities have increased substantially.

PVTEC had a very positive entrance in the market, reaching an 11% market share by the end of the year, making it the third-largest company, by market share, in the market.

|              |      |      |     
|------------- | ---- | ---- | ----
|PVC  Profiles | 2006 | 2007 | 2008
|The Company   | N/A  | N/A  | 11% 
|Other Imports | 100% | 100% | 89% 
|Total         | 100% | 100% | 100%



Wire & Cable Unit

This business unit was part of the Company until September 30, 2008, having begun its business in 1944 to supply the domestic market. After consolidating its position as the leading player in the Chilean market, the Wire & Cable unit began its international expansion in 1990 with the purchase of the Argentine company Indelqui. Following the acquisition of the Peruvian company Triple-C, which became Indeco after a merger, it then entered the Brazilian market with the purchase of Ficap in 1997. Finally, its expansion and consolidation of leadership in the region concluded with the entry into the Colombian market in early 2007, with the acquisition of Cedsa.

On November 15, 2007, Nexans agreed to purchase the assets of Madeco’s Wire & Cable unit for US$448 million in cash and 2.5 million Nexans shares. This transaction was successfully completed on September 30, 2008. Upon closing, Madeco became Nexans’ largest shareholder, with an estimated 8.9% stake in the French company.





Wire & Cable - Summary of Sales

Although this unit was sold by the end of the third quarter of 2008, a brief discussion of its sales, during the first nine months of 2008 is presented below. Until September 30, 2008, the Wire & Cable unit was Madeco’s largest business unit in terms of sales. This unit represented 63.1% of the Company’s consolidated revenues for the year 2008. The following tables show Madeco’s annual revenues and sales volume generated by the Wire & Cable business unit for the years 2006, 2007 and 2008:

|                                              |                                      |                                       |                |                        
|--------------------------------------------- | ------------------------------------ | ------------------------------------- | -------------- | -----------------------
|Wire & Cable Unit - Revenues (in Ch$ million)
|Year                                          | Metallic Cable Division Revenues (1) | Optical Fiber Cable Division Revenues | Total Revenues | % Consolidated Revenues
|2006                                          | 419,641                              | 1,671                                 | 421,312        | 64.4%                  
|2007                                          | 445,942                              | 2,559                                 | 448,501        | 64.5%                  
|2008                                          | 435,072                              | 1,882                                 | 436,954        | 63.1%                  



|                                      |                                   |                                           |                        |                      
|------------------------------------- | --------------------------------- | ----------------------------------------- | ---------------------- | ---------------------
|Wire & Cable Unit - Sales Volumes (2)
|Year                                  | Metallic Cable
Division (in tons) | Optical Fiber Cable Division
(in km. (2)) | Total Volume
(in tons) | % Consolidated Volume
|2006                                  | 79,368                            | 2,305                                     | 79,368                 | 58.7%                
|2007                                  | 87,924                            | 3,533                                     | 88,004                 | 55.5%                
|2008                                  | 78,999                            | 2,256                                     | 79,050                 | 52.3%                



(1) Revenues of the Metallic Cable division include copper rod sales. They also include copper sulfate sales from Indeco.

(2) Total sales volume presented in tons include the optical fiber conversion rate of 1 ton = 44 km.

The Company’s Wire & Cable division generated revenues of Ch$435,072 million for the year 2008, a decrease of 2.4% compared to the previous year (but higher in approximately 26.1% if sales are compared for the first nine months of each year). Sales volume of metallic cables decreased by 10.2% compared to the prior year; however, if the first three quarters of 2008 and 2007 are compared, sales volume increased by 17.5%, due to increased sales of aluminum cables in Brazil, copper rods in Chile and copper cables in Peru, offset by a decrease in sales of aluminum cables in Argentina.

Export sales for the Wire & Cable unit represented 10.7% of the unit’s revenues for the year 2008. 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 2006, 2007 and 2008:

|                                                            |        |         |        |               |          |         |                  
|----------------------------------------------------------- | ------ | ------- | ------ | ------------- | -------- | ------- | -----------------
|Wire & Cable Unit – Revenues by Destination(in Ch$ million)
|Year                                                        | Chile  | Brazil  | Peru   | Argentina (1) | Colombia | Exports | Wire & Cable Unit
|2006                                                        | 51,532 | 210,141 | 72,946 | 15,870        | 0        | 70,823  | 421,312          
|2007                                                        | 56,761 | 189,933 | 76,891 | 25,052        | 24,165   | 75,699  | 448,501          
|2008                                                        | 48,671 | 228,454 | 75,192 | 16,372        | 21,478   | 46,787  | 436,954          



|                                                                             |       |        |        |           |          |         |                  
|---------------------------------------------------------------------------- | ----- | ------ | ------ | --------- | -------- | ------- | -----------------
|Wire & Cable Unit – Sales Volumes of Metallic Cable by Destination (in tons)
|Year                                                                         | Chile | Brazil | Peru   | Argentina | Colombia | Exports | Wire & Cable Unit
|2006                                                                         | 8,105 | 41,092 | 11,211 | 3,945     | 0        | 15,015  | 79,368           
|2007                                                                         | 8,634 | 37,785 | 12,196 | 7,529     | 4,031    | 17,749  | 87,924           
|2008                                                                         | 6,808 | 45,727 | 11,007 | 2,908     | 3,026    | 9,523   | 78,999           





(1) In 2006, 2007 and 2008, 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 Indelqui.

The following table shows the Company’s total revenues generated by the Wire & Cable unit for the years 2006, 2007 and 2008, broken down by subsidiary:

|                                              |                               |                        |                         |                                      |                           |                       |               |                  
|--------------------------------------------- | ----------------------------- | ---------------------- | ----------------------- | ------------------------------------ | ------------------------- | --------------------- | ------------- | -----------------
|Wire & Cable Unit – Revenues (in Ch$ million)
|Year                                          | Madeco Chile (metallic cable) | Ficap
(metallic cable) | Indeco
(metallic cable) | Decker-Indelqui
(metallic cable) (1) | Cedsa(2)
(metallic cable) | Optel
(optical fiber) | Inter-company | Wire & Cable Unit
|2006                                          | 154,122                       | 166,602                | 139,261                 | 15,721                               | 0                         | 1,669                 | (56,063)      | 421,312          
|2007                                          | 167,874                       | 177,137                | 135,118                 | 26,816                               | 24,165                    | 2,559                 | (85,168)      | 448,501          
|2008                                          | 127,545                       | 171,179                | 126,431                 | 16,825                               | 21,478                    | 1,886                 | (28,390)      | 436,954          



(1) In 2006, 2007 and 2008, 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 and sold along with its unit in September 30, 2008.



Investment in Nexans

As a result of its investment in 9.2% of the outstanding shares of Nexans S.A., the Company has the ability to appoint a representative to the board of directors of Nexans.  Therefore, under Chile GAAP, it is presumed that the Company has significant influence over the investee and the investment is accounted for using the proportional equity method.  Also, the Company has elected September 30 as the date to record the equity income, which is in accordance with Chilean GAAP as it is within 90 days of the end of the fiscal year.  Since the date of the investment was September 30, the investment is recorded at its initial cost.

Under US GAAP, pursuant to APB Opinion 18, “The Equity Method of Accounting for Investments in Common Stock”, the Company does not have the ability to exercise significant influence in the operation of Nexans.  Therefore, at December 31, 2008, this investment was classified as available-for-sale and is presented at amortized cost adjusted to market value, in accordance with FAS 115 “Accounting for Certain Investments in Debt and Equity Securities”.

Under US GAAP, management evaluated the investment for impairment using the guidelines set forth in FAS 115 and determined that an other-than-temporary impairment has occurred.  As a result, at December 31, 2008, an impairment loss in the amount of Ch$28,154 million has been recorded, with the impact recorded on other comprehensive income in shareholders’ equity.  The effect of this adjustment is presented in Note 35 1o.



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, 2008:





|              |                              |                       |                 
|------------- | ---------------------------- | --------------------- | ----------------
|ADRs (8.3%)   | Quiñenco (1) (47.7%)         | Pension Funds (23.0%) | Others (21.1%)  
|             
|Nexans (9.2%) | Brass Mills                  | Flexible Packaging    | Profiles        
|              | Madeco Brass Mills (100.00%) | Alusa (75.96%)        | Indalum (99.16%)
|              | Decker (99.85%)              | Aluflex (75.96%)      |                 
|              | Armat (100.00%)              | Peruplast (37.98%)    |                 
|              |                              |                       |                 



(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 47.7% of the outstanding shares (2,697,544,042 shares) of common stock as of December 31, 2008.

Quiñenco S.A. is a Chilean holding company engaged in multiple businesses in the region. 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, 2008:

|                   |                                  |                      |                                  |                                
|------------------ | -------------------------------- | -------------------- | -------------------------------- | -------------------------------
|Business Unit      | Name                             | Country of residence | Proportion of ownership interest | Proportion of voting power held
|Corporate          | Nexans                           | France               | 9.2%                             | 8.0%                           
|Corporate          | Soinmad S.A.                     | Chile                | 100.00%                          | 100.00%                        
|Corporate          | Optel Ltda.(1)                   | Brazil               | 100.00%                          | 100.00%                        
|Corporate          | Madeco Brasil Ltda.              | Brazil               | 100.00%                          | 100.00%                        
|Brass Mills        | Metalurgica e Industrial S.A.    | Argentina            | 100.00%                          | 100.00%                        
|Brass Mills        | Metacab S.A.                     | Argentina            | 99.85%                           | 99.85%                         
|Brass Mills        | H.B. San Luis S.A.               | Argentina            | 99.85%                           | 99.85%                         
|Brass Mills        | Comercial Madeco S.A.            | Argentina            | 100.00%                          | 100.00%                        
|Corporate          | Madeco Overseas S.A.             | Cayman Islands       | 100.00%                          | 100.00%                        
|Corporate          | Metal Overseas S.A.              | Cayman Islands       | 100.00%                          | 100.00%                        
|Corporate          | 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 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.(1)                  | Chile                | 75.96%                           | 75.96%                         
|Flexible Packaging | Inversiones Alusa S.A.           | Chile                | 75.96%                           | 75.96%                         
|Flexible Packaging | Peruplast S.A.(2)                | 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%                         
|Profiles           | Indalum S.A.                     | Chile                | 99.16%                           | 99.16%                         
|Profiles           | Alumco S.A.                      | Chile                | 99.16%                           | 99.16%                         
|Profiles           | Inversiones Alumco S.A.          | Chile                | 99.16%                           | 99.16%                         
|Profiles           | Ingewall S.A. (3)                | Chile                | 99.16%                           | 99.16%                         
|Profiles           | PVTEC S.A.                       | Chile                | 99.16%                           | 99.16%                         



(1) Alusa sold certain of Alufoil’s assets, including the trademark, related to its mass consumer products to Cambiaso Hermanos S.A. in November 2004.

(2) 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.)

(3) 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   | Brass Mills | Flexible Packaging | Profiles
|Chile     | X           | X                  | X       
|Argentina | X           | X                  | ---     
|Peru      | ---         | X                  | ---     



The Company’s headquarters are located in Santiago, Chile at San Francisco 4760. The corporate office building contains approximately 1,120 square meters of office space. The Company, as of December 2008, owns plants warehouses and office space in Chile, Argentina, Brazil, and Peru, occupying approximately 210,000 square meters. Total production capacity for Brass Mills unit, Flexible Packaging unit and Profiles unit, including the production capacity of idle plants, amounts to 161,820 tons (including foundries’ capacity), 46,800 tons and 19,190 tons, respectively.

The following table sets forth information concerning the production facilities of the Company as of December 31, 2008. 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) | 2008 Average Capacity Utilization(1)
|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     | 19,700                | 14,400                                    | 89%                                 
|San Luis, Argentina            | Flexible packaging     | 10,800                | 8,400                                     | 86%                                 
|Lima, Peru                     | Flexible packaging     | 42,248                | 24,000                                    | 92%                                 
|                               |                        |                       |                                           |                                     
|Profiles                       |                        |                       |                                           |                                     
|Santiago, Chile                | Aluminum profiles      | 21,300                | 18,190                                    | 51%                                 
|Santiago, Chile                | PVC profiles           | 3,000                 | 1,000                                     | 21%                                 



(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 and Peru, 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 4A. Unresolved Staff Comments

Not applicable.



ITEM 5. Operating and Financial Review and Prospects

Go to Table of Contents

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 35 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, 2006, 2007 and 2008. 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, 2008. See Note 2 to the Consolidated Financial Statements.

Until September 30, 2008, the Company’s principal operating segment was the Wire & Cable business, with production facilities in Chile, Brazil, Peru, Argentina and Colombia. After the sale of this unit, the Company’s principal operating unit became the Flexible Packaging unit, which manufactures printed flexible packaging for use in the packaging of mass consumer products.The Company has flexible packaging facilities in Chile, Argentina and Peru. 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.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, Argentina and Peru.The Company depends specifically on sectors which buy products from its Brass Mills, Flexible Packaging and 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 3.2% in 2008, as compared to 4.7% in 2007, it fell short of projections made earlier in the year by both the Central Bank and a consensus of private analysts. This smaller growth rate is largely explained by the worldwide financial crisis and the decrease of the country’s exports. The unemployment rate has remained steady over the past two years, dropping to 7.0% and 7.4% at the end of 2007 and 2008, respectively. However, the unemployment rate is expected to increase to 9.6% in 2009. During, 2008 the Chilean economy observed a high rate of inflation, explained by increased food, oil and energy prices, reaching a rate of 8.9% compared to 7.4% in 2007. In 2009, economic growth is expected to increase between 0.0% to 0.5% as a result of low export levels, high energy costs and unfavorable worldwide economics conditions.



Peru: With an expansion of 9.8% in 2008, Peru's economy showed, for the fifth 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 2008, the inflation rate increased compared to prior years due to higher international prices for oil and imported products. In addition, the inflation rate was 6.7%, which was higher than the Peruvian’s Central Bank goal of 3.0%. In 2009, 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 to remain strong, producing only moderate economic growth of approximately a 4.0%.

Argentina: In 2008, the Argentine economy grew by 7.0% experiencing robust growth as it had in the preceding years and surpassing the level of activity reached in 1998 prior to the recession, due to robust domestic demand and Governmental expenditures. The unemployment rate rose to 7.9% in 2008, as compared to 7.5% in 2007, and is expected to increase to 9.5% in 2009. The official rate of inflation fell to 7.2% in 2008, as compared to 8.5% in 2007, explained by the government’s efforts to control inflation despite an increase in food, oil and energy prices. GDP growth for 2009 is estimated at -0.7%, explained by several factors such as the fall in the private consumption, low export demand and lack of large -scale projects in the energy sector that are expected to limit the supply of electricity and natural gas.

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 2008, 17.7% 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 LME 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, 2008, except percentages)
|                                                         | 2006      |        |  | 2007      |        |  | 2008      |       
|Net Sales                                                | 653,964   | 100.0% |  | 695,883   | 100.0% |  | 692,958   | 100.0%
|Cost of Goods Sold                                       | (560,196) | -85.7% |  | (614,304) | -88.3% |  | (612,810) | -88.4%
|Gross Income                                             | 93,768    | 14.3%  |  | 81,579    | 11.7%  |  | 80,148    | 11.6% 
|SG&A Expenses                                            | (33,225)  | -5.1%  |  | (37,895)  | -5.4%  |  | (40,134)  | -5.8% 
|Operating Income                                         | 60,543    | 9.3%   |  | 43,684    | 6.3%   |  | 40,014    | 5.8%  
|Non-Operating Income                                     | 2,818     | 0.4%   |  | 3,400     | 0.5%   |  | 166,677   | 24.1% 
|Non-Operating Expenses                                   | (18,694)  | -2.9%  |  | (17,954)  | -2.6%  |  | (63,559)  | -9.2% 
|Price-Level Restatement (1)                              | (1,488)   | -0.2%  |  | (3,044)   | -0.4%  |  | (2,769)   | -0.4% 
|Net Non-Operating Results                                | (17,363)  | -2.7%  |  | (17,599)  | -2.5%  |  | 100,350   | 14.5% 
|Income Taxes                                             | (6,087)   | -0.9%  |  | (1,171)   | -0.2%  |  | (39,709)  | -5.7% 
|Minority Interest                                        | (1,799)   | -0.3%  |  | (3,602)   | -0.5%  |  | (3,684)   | -0.5% 
|Amortization of Negative Goodwill                        | 31        | 0.0%   |  | 97        | 0.0%   |  | 212       | 0.0%  
|Net Income                                               | 35,326    | 5.4%   |  | 21,410    | 3.1%   |  | 97,184    | 14.0% 



(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)
|                              | 2006    |        |  | 2007    |        |  | 2008    |       
|Wire & Cable (1)              | 79,368  | 58.7%  |  | 87,925  | 55.5%  |  | 78,998  | 51.6% 
|Brass Mills                   | 28,011  | 20.7%  |  | 21,831  | 13.8%  |  | 17,510  | 11.4% 
|Flexible Packaging            | 15,649  | 11.6%  |  | 38,259  | 24.2%  |  | 43,689  | 28.5% 
|Profiles                      | 12,262  | 9.1%   |  | 10,354  | 6.5%   |  | 10,851  | 7.1%  
|Total                         | 135,290 | 100.0% |  | 158,369 | 100.0% |  | 153,056 | 100.0%



(1)  Total sales volumes presented in tons exclude optical fiber sales.

|                                                         |         |        |  |         |        |  |         |       
|-------------------------------------------------------- | ------- | ------ |  | ------- | ------ |  | ------- | ------
|Year ended December 31,                                 
|(in Ch$ million as of Dec. 31, 2007, except percentages)
|                                                         | 2006    |        |  | 2007    |        |  | 2008    |       
|Net Sales                                                |         |        |  |         |        |  |         |       
|Wire & Cable                                             | 421,312 | 64.4%  |  | 448,501 | 64.5%  |  | 436,954 | 63.1% 
|Brass Mills                                              | 139,628 | 21.4%  |  | 112,202 | 16.1%  |  | 88,909  | 12.8% 
|Flexible Packaging                                       | 54,033  | 8.3%   |  | 96,921  | 13.9%  |  | 130,445 | 18.8% 
|Profiles                                                 | 38,990  | 6.0%   |  | 38,259  | 5.5%   |  | 36,650  | 5.3%  
|Total                                                    | 653,963 | 100.0% |  | 695,883 | 100.0% |  | 692,958 | 100.0%
|                                                         |         |        |  |         |        |  |         |       
|Operating Income (Loss)                                  |         |        |  |         |        |  |         |       
|Wire & Cable                                             | 40,117  | 66.3%  |  | 33,256  | 76.1%  |  | 30,549  | 76.4% 
|Brass Mills                                              | 11,454  | 18.9%  |  | (1,480) | -3.4%  |  | (6,281) | -15.7%
|Flexible Packaging                                       | 5,613   | 9.3%   |  | 9,565   | 21.9%  |  | 14,828  | 37.1% 
|Profiles                                                 | 3,359   | 5.5%   |  | 2,343   | 5.4%   |  | 918     | 2.3%  
|Total                                                    | 60,543  | 100.0% |  | 43,684  | 100.0% |  | 40,014  | 100.0%





2008 versus 2007

The revenues in 2008 amounted to Ch$692,958 million, which represents a decrease of 0.4% compared to the previous year. The difference between 2008 and 2007 is mainly explained by reduced sales of the Wire & Cable, Profiles and Brass Mills units, offset by an increase of the Flexible Packaging unit’s sales. Revenues decreased by Ch$32,169 million, due to sale of the Wire & Cable unit and a Ch$29,244 million increase in prices. Among the packaging subsidiaries, there were increased sales in the Argentine and Peruvian subsidiaries of Ch$10,373 million and Ch$20,343 million, respectively.

Consolidated sales volumes in 2008 declined by 4.6% from 2007 to 151,048 tonnes, due to a reduction in cable sales and decreases in the Brass Mills unit’s sales. These lower sales were offset by an increase in copper rod sales to third parties by Madeco Chil, higher sales by the Flexible Packaging unit (rotogravure and domestic sales) and increased sales by the Profiles unit.

Gross margin fell to Ch$80,148 million, a 1.8% decrease compared to the previous year, as a result of the sale of the Wire & Cable unit. The reduction in the cost of sales in 2008 of Ch$1,494 million was mainly due to the low volumes of raw materials (copper and aluminum) due to the sale. This was offset by increases in salaries (principally in Brazil and Chile) and manufacturing costs (energy, fuel, spares, etc.) in the Company’s subsidiaries.

Operating income in 2008 was Ch$40,014 million, a reduction of 8.4% compared to 2007. This is due to the sale of the Wire & Cable unit, and, to a lesser extent, lower financial results from the other business units. There was a reduction in gross margin of Ch$1,431 million and an increase in administrative and selling expenses of Ch$2,240 million, both compared to 2007, explained by increases in the gross margin of Ficap, Indeco and Madeco Chile due to higher salaries and general expenses (information technology, advisory services, etc.). The operating income for the Brass Mills unit decreased to Ch$4,802 million, and for the Profiles unit, operating income decreased to Ch$1,424 million. These were offset by the an increase in the Flexible Packaging unit’s [operating income] of Ch$5,264 million.

Net income after taxes and minority interest for 2008 increased to Ch$97,184 million, compared to Ch$21,410 million in 2007. The increase is due to a gain in the non-operating result of Ch$117,949 million, explained by an increase in non-operating income offset by a decrease in the amortization of goodwill; a reduction in operating income of Ch$3,671 million, due to the sale of the Wire & Cable unit; and a higher charge for income tax, minority interest and others of Ch$38,504 million. These effects derived mainly from the sale of the Company’s Wire & Cable unit.





Analysis of Operating Segment Performance: 2008 versus 2007

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

Wire & Cable

|                                               |           |           |          |           |          |               |               |                  
|---------------------------------------------- | --------- | --------- | -------- | --------- | -------- | ------------- | ------------- | -----------------
|Year 2008 (in Ch$ million, except percentages)
|                                               | Chile     | Brazil    | Peru     | Argentina | Colombia | Optical Fiber | Inter-company | Wire & Cable Unit
|Revenues                                       | 127,545   | 207,902   | 89,708   | 16,825    | 21,478   | 1,887         | (28,393)      | 436,954          
|COGS                                           | (118,542) | (186,729) | (75,526) | (14,139)  | (18,566) | (1,810)       | 15,385        | (386,462)        
|Gross Income                                   | 9,003     | 21,173    | 14,182   | 2,686     | 2,912    | 77            | 457           | 50,492           
|Gross Margin                                   | 7.1%      | 10.2%     | 15.8%    | 16.0%     | 13.6%    | 4.1%          | -1.6%         | 11.6%            
|SG&A                                           | (2,833)   | (10,332)  | (3,612)  | (852)     | (1,355)  | (356)         | (603)         | (19,943)         
|Operating Income                               | 6,170     | 10,841    | 10,570   | 1,834     | 1,557    | (279)         | (146)         | 30,549           
|Operating Margin                               | 4.8%      | 5.2%      | 11.8%    | 10.9%     | 7.2%     | -14.8%        | 0.5%          | 7.0%             



|                                               |           |           |          |           |          |               |               |                  
|---------------------------------------------- | --------- | --------- | -------- | --------- | -------- | ------------- | ------------- | -----------------
|Year 2007 (in Ch$ million, except percentages)
|                                               | Chile     | Brazil    | Peru     | Argentina | Colombia | Optical Fiber | Inter-company | Wire & Cable Unit
|Revenues                                       | 167,874   | 217,430   | 94,825   | 26,816    | 24,165   | 2,559         | (85,168)      | 448,501          
|COGS                                           | (158,873) | (194,803) | (79,732) | (23,160)  | (20,096) | (2,593)       | 85,039        | (394,218)        
|Gross Income                                   | 9,001     | 22,627    | 15,093   | 3,656     | 4,069    | (34)          | (129)         | 54,283           
|Gross Margin                                   | 5.4%      | 10.4%     | 15.9%    | 13.6%     | 16.8%    | -1.3%         | 0.2%          | 12.1%            
|SG&A                                           | (2,615)   | (10,944)  | (3,150)  | (1,037)   | (1,155)  | (402)         | (1,724)       | (21,027)         
|Operating Income                               | 6,386     | 11,683    | 11,943   | 2,619     | 2,914    | (436)         | (1,853)       | 33,256           
|Operating Margin                               | 3.8%      | 5.4%      | 12.6%    | 9.8%      | 12.1%    | -17.0%        | 2.2%          | 7.4%             



|                          |        |        |        |           |          |               |                  
|------------------------- | ------ | ------ | ------ | --------- | -------- | ------------- | -----------------
|2008 versus 2007 % change
|                          | Chile  | Brazil | Peru   | Argentina | Colombia | Optical Fiber | Wire & Cable Unit
|Revenues                  | -24.0% | -4.4%  | -5.4%  | -37.3%    | -11.1%   | -26.3%        | -2.6%            
|COGS                      | -25.4% | -4.1%  | -5.3%  | -39.0%    | -7.6%    | -30.2%        | -2.0%            
|Gross Income              | 0.0%   | -6.4%  | -6.0%  | -26.5%    | -28.4%   | -326.5%       | -7.0%            
|SG&A                      | 8.3%   | -5.6%  | 14.7%  | -17.8%    | 17.3%    | -11.4%        | -5.2%            
|Operating Income          | -3.4%  | -7.2%  | -11.5% | -30.0%    | -46.6%   | -36.0%        | -8.1%            



As stated above, the Company’s Wire & Cable unit was sold at the end of the third quarter of 2008, as a result the operating results of this business unit were not included in the Company’s last quarter of 2008.

Revenues in 2008 amounted to Ch$436,954 million, a 2.6% less than in 2007. Sales volumes declined by 10.2% in the same period. If sales up to the third quarter of 2008 are compared to the prior year, sales volumes increased by 17.5%, due to increased sales in Brazil of 4,179 tonnes of aluminum cables, 6,908 tonnes of copper rod in Chile and 1,716 tonnes of copper cable in Peru. These increases were offset by lower sales in Argentina of 3,123 tonnes.

The operating income of this unit was Ch$30,549 million for the year 2008, compared to Ch$33,256 million in 2007. At the end of the third quarter, operating income had increased 2.6%.

Brass Mills

|                                               |          |           |         |               |                 
|---------------------------------------------- | -------- | --------- | ------- | ------------- | ----------------
|Year 2008 (in Ch$ million, except percentages)
|                                               | Chile    | Argentina | Coins   | Inter-company | Brass Mills Unit
|Revenues                                       | 87,632   | 14,232    | 8,312   | (21,267)      | 88,909          
|COGS                                           | (87,351) | (14,539)  | (7,018) | 21,275        | (87,633)        
|Gross Income                                   | 281      | (307)     | 1,294   | 8             | 1,276           
|Gross Margin                                   | 0.3%     | -2.2%     | 15.6%   | 0.0%          | 1.4%            
|SG&A                                           | (4,302)  | (1,379)   | (1,196) | (680)         | (7,557)         
|Operating Income                               | (4,021)  | (1,686)   | 98      | (672)         | (6,281)         
|Operating Margin                               | -4.6%    | -11.8%    | 1.2%    | 3.2%          | -7.1%           



|                                               |           |           |          |               |                 
|---------------------------------------------- | --------- | --------- | -------- | ------------- | ----------------
|Year 2007 (in Ch$ million, except percentages)
|                                               | Chile     | Argentina | Coins    | Inter-company | Brass Mills Unit
|Revenues                                       | 107,060   | 10,447    | 11,000   | (16,305)      | 112,202         
|COGS                                           | (104,438) | (9,579)   | (10,103) | 16,302        | (107,818)       
|Gross Income                                   | 2,622     | 868       | 897      | (3)           | 4,384           
|Gross Margin                                   | 2.4%      | 8.3%      | 8.2%     | 0.0%          | 3.9%            
|SG&A                                           | (4,031)   | (771)     | (490)    | (572)         | (5,864)         
|Operating Income                               | (1,409)   | 97        | 407      | (575)         | (1,480)         
|Operating Margin                               | -1.3%     | 0.9%      | 3.7%     | 3.5%          | -1.3%           



|                          |        |           |        |                 
|------------------------- | ------ | --------- | ------ | ----------------
|2008 versus 2007 % change
|                          | Chile  | Argentina | Coins  | Brass Mills Unit
|Revenues                  | -18.1% | 36.2%     | -24.4% | -20.8%          
|COGS                      | -16.4% | 51.8%     | -30.5% | -18.7%          
|Gross Income              | -89.4% | -135.4%   | 44.3%  | -70.9%          
|SG&A                      | 6.7%   | 78.9%     | 144.1% | 28.9%           
|Operating Income          | 185.3% | -1838.1%  | -75.9% | 324.2%          





Revenues in 2008 amounted to Ch$88,909 million, a reduction of 20.8% compared to the prior year, mainly due to a 19.8% decline in sales volume and a slight 1.2% decrease in the unit’s average sales prices.

Gross margin decreased to Ch$1,274 million, as compared to Ch$4,384 million in 2007, due to the lower price of copper products sold throughout the fourth quarter with a cost tied to a weighted average price over the LME price as a result of the sharp fall in copper prices during the last quarter of 2008 (the average LME copper price in September 2008 was US$6,990/tonne, compared to US$3,071/tonne in December 2008).

Operating income decreased by Ch$6,283 million, compared to Ch$1,480 million in 2007, mainly due to a Ch$3,109 million decrease in gross margin and a Ch$1,693 million increase in administrative and selling expenses due to higher remunerations costs and other expenses.



Flexible Packaging

|                                               |          |           |          |               |                        
|---------------------------------------------- | -------- | --------- | -------- | ------------- | -----------------------
|Year 2008 (in Ch$ million, except percentages)
|                                               | Chile    | Argentina | Peru     | Inter-company | Flexible Packaging Unit
|Revenues                                       | 41,508   | 27,409    | 63,470   | (1,942)       | 130,445                
|COGS                                           | (34,768) | (23,744)  | (51,836) | 1,938         | (108,410)              
|Gross Income                                   | 6,740    | 3,665     | 11,634   | (4)           | 22,035                 
|Gross Margin                                   | 16.2%    | 13.4%     | 18.3%    | 0.2%          | 16.9%                  
|SG&A                                           | (2,428)  | (1,256)   | (2,906)  | (617)         | (7,207)                
|Operating Income                               | 4,312    | 2,409     | 8,728    | (621)         | 14,828                 
|Operating Margin                               | 10.4%    | 8.8%      | 13.8%    | 32.0%         | 11.4%                  



|                                               |          |           |          |               |                        
|---------------------------------------------- | -------- | --------- | -------- | ------------- | -----------------------
|Year 2007 (in Ch$ million, except percentages)
|                                               | Chile    | Argentina | Peru     | Inter-company | Flexible Packaging Unit
|Revenues                                       | 38,510   | 16,114    | 46,314   | (4,017)       | 96,921                 
|COGS                                           | (32,049) | (14,385)  | (39,067) | 3,763         | (81,738)               
|Gross Income                                   | 6,461    | 1,729     | 7,247    | (254)         | 15,183                 
|Gross Margin                                   | 16.8%    | 10.7%     | 15.6%    | 6.3%          | 15.7%                  
|SG&A                                           | (2,136)  | (833)     | (2,365)  | (284)         | (5,618)                
|Operating Income                               | 4,325    | 896       | 4,882    | (538)         | 9,565                  
|Operating Margin                               | 11.2%    | 5.6%      | 10.5%    | 13.4%         | 9.9%                   



|                          |       |           |       |                        
|------------------------- | ----- | --------- | ----- | -----------------------
|2008 versus 2007 % change
|                          | Chile | Argentina | Peru  | Flexible Packaging Unit
|Revenues                  | 7.8%  | 70.1%     | 37.0% | 34.6%                  
|COGS                      | 8.5%  | 65.1%     | 32.7% | 32.6%                  
|Gross Income              | 4.3%  | 112.0%    | 60.5% | 45.1%                  
|SG&A                      | 13.7% | 50.8%     | 22.9% | 28.3%                  
|Operating Income          | -0.3% | 168.9%    | 78.8% | 55.0%                  





Revenues increased by 34.6% to Ch$130,445 million, compared to Ch$96,921 million in 2007. Sales volume in the Peru and Chile operations rose by 2,762 and 1,482 tonnes, respectively. In Argentina, sales volume rose by 1,186 tonnes.

Cost of sales increased by 32.6% to Ch$108,410 million, compared to Ch$81,738 million in 2007, mainly due to higher raw materials prices (oil prices in particular), which were offset by the reduction plans established by the Company.

Gross margin rose to Ch$22,035 million as compared to Ch$15,183 million in 2007. As a proportion of sales, gross margin increased from 15.7% to 16.9%.

Administrative and selling expenses increased by 28.3%, from Ch$5,618 million to Ch$7,207 million, mainly due to higher administrative and selling expenses in Argentina and Peru.

Operating income in 2008 was Ch$14,828 million, 55.0% higher than in 2007.

Profiles



|                                               |          |              
|---------------------------------------------- | -------- | -------------
|Year 2008 (in Ch$ million, except percentages)
|                                               | Chile    | Profiles Unit
|Revenues                                       | 36,650   | 36,650       
|COGS                                           | (30,305) | (30,305)     
|Gross Income                                   | 6,345    | 6,345        
|Gross Margin                                   | 17.3%    | 17.3%        
|SG&A                                           | (5,427)  | (5,427)      
|Operating Income                               | 918      | 918          
|Operating Margin                               | 2.5%     | 2.5%         



|                                               |          |              
|---------------------------------------------- | -------- | -------------
|Year 2007 (in Ch$ million, except percentages)
|                                               | Chile    | Profiles Unit
|Revenues                                       | 38,259   | 38,259       
|COGS                                           | (30,530) | (30,530)     
|Gross Income                                   | 7,729    | 7,729        
|Gross Margin                                   | 20.2%    | 20.2%        
|SG&A                                           | (5,385)  | (5,385)      
|Operating Income                               | 2,3423   | 2,343        
|Operating Margin                               | 6.1%     | 6.1%         



|                          |        |              
|------------------------- | ------ | -------------
|2008 versus 2007 % change
|                          | Chile  | Profiles Unit
|Revenues                  | -4.2%  | -4.2%        
|COGS                      | -0.7%  | -0.7%        
|Gross Income              | -17.9% | -17.9%       
|SG&A                      | 0.8%   | 0.8%         
|Operating Income          | -60.8% | -60.8%       



In 2008, revenues declined by 4.2% to Ch$36,650 million as compared to Ch$38,259 million in 2007. This is the result of a decline in prices which lowered revenues by Ch$3,446 million, which was only partially offset by an increase in sales volumes of Ch$1,836 million.

In 2008, the cost of sales decreased by 0.7% to Ch$30,305 million as compared to Ch$30,530 million in 2007, as a result of reduced sales partly offset by higher manufacturing costs.

In 2008, operating income decreased to Ch$918 million, compared to Ch$2,343 million reported in 2007, mainly due to an 0.8% increase in administrative and selling expenses and a 17.9% decrease in the gross margin.

The Company’s Non-Operating Results

In 2008, non-operating results increased by Ch$117,949 million, from a charge of Ch$17,599 million to a gain of Ch$100,350 million as a result of:

Other non-operating income (net of expenses)increased by Ch$132,603 million due to the gain on the sale of Company’s Wire & Cable unit, plus a revaluation of the assets of Indelqui, which was only partially offset by the liquidation of the equity reserve of the above investments.Amortization of Goodwill: a decrease in the amortization of goodwill of Ch$15,032 million as a result of the sale of the Wire & Cable unit. Income Tax:In 2007, income tax totaled Ch$39,709 million, compared to Ch$1,171 million the year before. This increase is due to the extraordinary gain by the Company on the sale of the Wire & Cable unit, and to a lesser extent the increase in net income for 2008.

Minority Interest and Negative Goodwill:The Company’s minority interest reflects the portion of profits or losses that correspond to the holdings of the minority shareholders in the subsidiaries Alusa, Decker and Indalum (and the subsidiaries of Cables until September 2008). The minority interest in 2008, plus negative goodwill, amounted to Ch$3,471 million, Ch$34 million less than in 2007.



2007 versus 2006

Consolidated financial results as of December 31, 2007, increased by 6.4% over 2006, reaching Ch$695,883 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 Wire & Cable 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 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 income fell to Ch$81,579 million in 2007, a decrease of 13.0% compared to the previous year (Ch$93,768 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$11,011 million, representing 13.5% of the total gross income for 2007. Additionally, the increase in the cost of sales in 2007 of Ch$54,108 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$43,685 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$12,189 million and an increase of Ch$4,671 million in administrative and selling expenses. The latter is essentially due to the expenses incurred by the inclusion of Cedsa and Peruplast (Ch$3,521 million) and the increase in the Profiles unit (Ch$1,304 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                                       | 167,875   | 177,137   | 135,118   | 26,816    | 24,165   | 2,559         | (85,169)      | 448,501          
|COGS                                           | (158,872) | (154,832) | (119,703) | (23,160)  | (20,096) | (2,593)       | 85,039        | (394,217)        
|Gross Income                                   | 9,003     | 22,305    | 15,415    | 3,656     | 4,069    | (34)          | (130)         | 54,284           
|Gross Margin                                   | 5.4%      | 12.6%     | 11.4%     | 13.6%     | 16.8%    | -1.3%         | 0.2%          | 12.1%            
|SG&A                                           | (2,614)   | (10,944)  | (3,150)   | (1,037)   | (1,155)  | (402)         | (1,724)       | (21,026)         
|Operating Income                               | 6,389     | 11,360    | 12,264    | 2,619     | 2,913    | (436)         | (1,853)       | 33,257           
|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                                       | 154,122   | 166,602   | 139,261   | 15,721    | N/C      | 1,668         | (56,063)      | 421,312          
|COGS                                           | (140,053) | (140,191) | (121,500) | (13,106)  | N/C      | (1,790)       | 55,137        | (361,503)        
|Gross Income                                   | 14,069    | 26,410    | 17,762    | 2,615     | N/C      | (122)         | (926)         | 59,8088          
|Gross Margin                                   | 9.1%      | 15.9%     | 12.8%     | 16.6%     | N/C      | -7.3%         | 1.7%          | 14.2%            
|SG&A                                           | (2,544)   | (11,176)  | (3,270)   | (744)     | N/C      | (383)         | (1,574)       | (19,691)         
|Operating Income                               | 11,525    | 15,234    | 14,491    | 1,871     | N/C      | (505)         | (2,499)       | 40,117           
|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$448,501 million, up 6.5% compared to Ch$421,312 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$394,217 million, as compared to Ch$361,503 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$54,284 million, as compared to Ch$59,808 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$21,026 million, as compared to Ch$19,691 million in 2006, due to the inclusion of Cedsa (Ch$1,157 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$33,257 million, as compared to Ch$40,117 million in 2006. This decrease is mainly due to an 86.1% reduction in operating income from copper wire (Ch$6,094 million).

Brass Mills

|                                               |           |           |          |               |                 
|---------------------------------------------- | --------- | --------- | -------- | ------------- | ----------------
|Year 2007 (in Ch$ million, except percentages)
|                                               | Chile     | Argentina | Coins    | Inter-company | Brass Mills Unit
|Revenues                                       | 107,060   | 10,447    | 11,000   | (16,305)      | 112,202         
|COGS                                           | (104,438) | (9,579)   | (10,103) | 16,301        | (107,819)       
|Gross Income                                   | 2,621     | 868       | 897      | (3)           | 4,383           
|Gross Margin                                   | 2.4%      | 8.3%      | 8.2%     | 0.0%          | 3.9%            
|SG&A                                           | (4,031)   | (771)     | (490)    | (572)         | (5,864)         
|Operating Income                               | (1,410)   | 97        | 407      | (575)         | (1,481)         
|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                                       | 128,112   | 11,523    | 13,741   | (13,748)      | 139,628         
|COGS                                           | (115,743) | (9,598)   | (10,500) | 13,725        | (122,117)       
|Gross Income                                   | 12,369    | 1,924     | 3,241    | (23)          | 17,511          
|Gross Margin                                   | 9.7%      | 16.7%     | 23.6%    | 0.2%          | 12.5%           
|SG&A                                           | (4,084)   | (862)     | (638)    | (473)         | (6,057)         
|Operating Income                               | 8,285     | 1,062     | 2,603    | (495)         | 11,454          
|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$112,202 million, compared to Ch$139,628 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 income 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$5,864 million, as compared to Ch$6,057 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$1,481 million from a gain of Ch$11,454 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                                       | 38,509   | 16,114    | 46,314   | (4,016)       | 96,921                 
|COGS                                           | (32,049) | (14,385)  | (39,067) | 3,762         | (81,738)               
|Gross Income                                   | 6,460    | 1,729     | 7,247    | (254)         | 15,183                 
|Gross Margin                                   | 16.8%    | 10.7%     | 15.6%    | 6.3%          | 15.7%                  
|SG&A                                           | (2,136)  | (833)     | (2,365)  | (284)         | (5,618)                
|Operating Income                               | 4,324    | 896       | 4,882    | (538)         | 9,565                  
|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                                       | 36,456   | 18,366    | N/C  | (790)         | 54,033                 
|COGS                                           | (29,794) | (16,005)  | N/C  | 788           | (45,011)               
|Gross Income                                   | 6,662    | 2,361     | N/C  | (1)           | 9,022                  
|Gross Margin                                   | 18.3%    | 12.9%     | N/C  | 0.1%          | 16.7%                  
|SG&A                                           | (2,322)  | (825)     | N/C  | (262)         | (3,410)                
|Operating Income                               | 4,341    | 1,535     | N/C  | (264)         | 5,613                  
|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$96,921 million as compared to Ch$54,033 million in 2006, mainly due to the incorporation of Peruplast (which merged in October 2007 with Tech Pak), whose sales amounted to Ch$46,314 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$81,738 million from Ch$45,011 million in 2006. This includes Peruplast’s cost of sales of Ch$39,067 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$15,183 million as compared to Ch$9,022 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$2,208 million, to negative Ch$5,618 million, from Ch$3,410 million in 2006, including the addition of Peru’s Ch$2,365 million in expenses.  This increase reflects efforts by the Company, 2005 to streamline the business unit’s operations in order to achieve greater efficiency.

In 2007, operating income increased 70.4% to Ch$9,565 million as compared to Ch$5,613 million in 2006, mainly due to the incorporation of Peruplast and the Company’s cost cutting efforts.

Profiles



|                                               |          |              
|---------------------------------------------- | -------- | -------------
|Year 2007 (in Ch$ million, except percentages)
|                                               | Chile    | Profiles Unit
|Revenues                                       | 38,259   | 38,259       
|COGS                                           | (30,530) | (30,530)     
|Gross Income                                   | 7,729    | 7,729        
|Gross Margin                                   | 20.2%    | 20.2%        
|SG&A                                           | (5,385)  | (5,385)      
|Operating Income                               | 2,343    | 2,343        
|Operating Margin                               | 6.1%     | 6.1%         



|                                               |          |              
|---------------------------------------------- | -------- | -------------
|Year 2006 (in Ch$ million, except percentages)
|                                               | Chile    | Profiles Unit
|Revenues                                       | 38,991   | 38,990       
|COGS                                           | (31,565) | (31,565)     
|Gross Income                                   | 7,425    | 7,425        
|Gross Margin                                   | 19.0%    | 19.0%        
|SG&A                                           | (4,066)  | (4,066)      
|Operating Income                               | 3,359    | 3,359        
|Operating Margin                               | 8.6%     | 8.6%         



|                          |        |              
|------------------------- | ------ | -------------
|2007 versus 2006 % change
|                          | Chile  | 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$38,259 million from Ch$38,990 million in 2006. This is mainly due to a positive price effect of Ch$5,334 million and a negative volume effect of Ch$6,067 million.

In 2007, cost of goods sold decreased by 3.3% to Ch$30,530 million as compared to Ch$31,565 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$5,385 million as compared to Ch$4,066 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 profiles decreased by 30.3%, or Ch$1,016 million, to Ch$2,343 million as compared to Ch$3,359 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$17,598 million, as compared to Ch$17,363 million in 2006.For further details regarding the Company’s non-operating results, see Note 24 to the Company’s Consolidated Financial Statements.

- Non-Operating Income:In 2007, the Company’s non-operating income increased by Ch$582 million to Ch$3,400 million as compared to Ch$2,818 million in 2006. The higher non-operating income is mainly due to gains obtained on assets sales and higher gains in financial income as a result of increased interest rates on time deposits, export financing interest and the contributions of Peruplast and Cedsa.
- Non-Operating Expenses: In 2007, the Company’s non-operating expenses decreased by Ch$739 million as compared to the previous year due to less obsolescence and write-offs of long-term assets, reduced devaluation of idle assets and reduced adjustment to realization value of idle fixed assets, despite an increase in financial expenses and a reduction of income in related companies. Financial expenses increased by Ch$634 million in 2007, reflecting borrowings related to acquired companies (Cedsa added Ch$1,204 and Peruplast added Ch$750 million), offset by lower Company’s consolidated financial debt of Ch$753 million.
- Price-Level Restatement: In 2007, price level restatement, which is made up of inflationary adjustments and foreign exchange differences, increased by Ch$1,557 million as compared to the previous year. The price level restatement balance in 2007 reflected a net loss position of Ch$3,045 million compared to a net loss position of Ch$1,488 million in 2006. The higher expenses were due to a higher inflation rate (Chilean CPI), offset by higher profits from foreign exchange differences as a consequence of a revaluation of the Brazilian real, Colombian peso and Peruvian nuevo sol.

Minority Interest: The Company’s minority interest reflects the portion of profits or losses that correspond to the holdings of the minority shareholders in the subsidiaries Alusa, Indeco, Indalum and Cedsa. The minority interest in 2007 amounted to Ch$3,602 million, an increase of Ch$1,803 million over 2006, mainly due to Company’s new acquisitions.



Acquisitions and dispositions

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 2006 in the condensed balance sheet under U.S. GAAP have been sold, and for comparative purpose have been classified as “Assets of disposal groups” and “Liabilities of disposal groups”, respectively, in the respective Consolidated Balance Sheets under U.S. GAAP. Therefore, the Wire & Cable Unit amounts has been reclassified.

For more information on the discontinued operations as presented under U.S. GAAP, including certain selected financial information, see Note 35 of the Consolidated Financial Statements.



Unconsolidated Peruplast

Under Chilean GAAP the Company, as of December 31, 2008, consolidated its 50% ownership interest in Peruplast S.A. Pursuant to a shareholders’ agreement, the Company, through its representatives on the board of directors, can appoint the chief executive officer of Peruplast. Consequently, the Company has the ability to establish financial and operational policies and strategies, which under Chilean GAAP is sufficient to infer control and require consolidation. However, the Company does not exercise control over Peruplast pursuant to U.S. GAAP and the investment is accounted for under the equity method. See Note 35 of the Consolidated Financial Statements.



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 nuevos 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 pesos1 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.



(1) Since the adoption of the IFRS accounting and reporting standards by Madeco on January 1st,  2009, the base currency of the Company was changed from Chilean Peso to U.S. Dollar.



The following table presents the working capital position in local currencies as of December 31, 2008 of the Company’s consolidated foreign subsidiaries. All amounts are expressed in millions of Chilean pesos.

|                                    |             |       |         |         |      |                  |         
|----------------------------------- | ----------- | ----- | ------- | ------- | ---- | ---------------- | --------
|                                    | U.S. Dollar | R$    | AR$     | S$      | Euro | Other currencies | Total   
|Current Assets                      | 102,530     | 473   | 8,040   | 12,790  | 792  | 0                | 124,624 
|Current Liabilities                 | (26,102)    | (418) | (3,861) | (2,250) | (67) | (7)              | (32,705)
|Working Capital in Local Currencies | 76,427      | 55    | 4,179   | 10,540  | 725  | (7)              | 91,919  



The above table only includes the current assets and current liabilities in foreign currencies held by the Company as of December 31, 2008, 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, 2006, 2007 and 2008, the Company’s net charges to income related to allowances amounted to ThCh$395,339, ThCh$346,403 and ThCh$1,385,926, 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, 2006, 2007 and 2008, 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$701,202, ThCh$312,578 and ThCh$72,926, 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, 2006, 2007 and 2008, 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$1,090,765, ThCh$178,424 and ThCh$551,899, respectively.

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$608,156 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 2006 to 2008.

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 three 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 35 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 2006 to 2008.



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 35 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 other currencies 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 600 tons of copper hedged by swaps. For further details see Note 27 of the Consolidated Financial Statements.



Net Realizable Values of Inventories

As of December 2008, before the decrease of the market Copper and Aluminum prices (LME), the Company registered its inventories at net realizable values whereby a charge of Ch$2.180 million was included in the net income of 2008.



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 35 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, 2006, 2007 and 2008 under Chilean GAAP and U.S. GAAP:

|                                    |                                                       |         |        
|----------------------------------- | ----------------------------------------------------- | ------- | -------
|                                    | Year Ended December 31,                              
|                                    | 2006                                                  | 2007    | 2008   
|                                    | (in millions of constant Ch$ as of December 31, 2008)
|Net income (Chilean GAAP)           | 35,326                                                | 21,410  | 97,184 
|Net income (U.S. GAAP)              | 39,814                                                | 23,681  | 73,176 
|Shareholders’ equity (Chilean GAAP) | 294,215                                               | 287,381 | 415,179
|Shareholders’ equity (U.S. GAAP)    | 283,434                                               | 278,944 | 352,607



Significant differences exist between net income and Shareholders’ equity under Chilean GAAP and under U.S. GAAP as presented in Note 35 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.

As part of the adoption of IFRS, the Shareholders’ Equity underwent changes including the revaluation of plant and equipment, changes in goodwill amortization criteria, changes in the staff severance indemnity and changes in deferred taxes.

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, 2008, the Company’s total financial indebtedness wasCh$60,698 million (US$95.4 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$31,603 million (US$49.6 million), and its long-term financial indebtedness was Ch$20,210 million (US$31.8 million). With respect to the Company’s other financial indebtedness, its short-term liabilities were Ch$315 million (US$0.5 million) and its long-term liabilities were Ch$8,570 million (US$13.5 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 2009.



Short Term Financing

On December 31, 2008, the Company’s short-term bank debt (excluding the short-term portion of its long-term bank obligations) was Ch$20,594 million (equivalent to US$32.4 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) of the local part of this credit was paid and in March 2007, the remainder was prepaid for an amount of US$16.4 million or Ch$8,751 million (historic value). As of June 2009, US$6.9 million or Ch$4,256 million (historic value) of the off-shore portion had been paid.

As of March 31, 2009, the Company’s total short-term bank debt (excluding the short-term portion of its long-term bank obligations) was Ch$18,460 million. This amount includes various short-term obligations, mainly from Madeco, Indalum and Alusa group to finance its working capital needs, among others.

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 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, 2008, was approximately Ch$39,789 million .

The Company’s medium-term and long-term bank debt and other loans (including the short-term portion of these loans) outstanding as of March 31, 2009, was approximately Ch$36,734 million .

As of December 31, 2005, the Company’s subsidiary Alusa had a five 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 at least 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 five years (due in 2010). The main covenant agreed upon was that Madeco must own at least 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 2008 and the first quarter 2009, 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. Humphreys Clasificadora de Riesgo Ltda. (“Humphreys Ltda.”) 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 March 2009, these agencies classified the Company’s debt as BBB+ and its shares as First Class Level 3.

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, 2008, 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                          | 49,626 | 29,690   | 15,929    | 3,522     | 758      
|Capital Lease Obligations                              | 10,755 | 2,186    | 3,589     | 3,040     | 1,940    
|Operating Leases                                       | 663    | 346      | 215       | 102       | -        
|Other Long-Term Obligations                            | 261    | -        | 261       | -         | -        
|Service Contracts                                      | -      | -        | -         | -         | -        
|Severance Indemnities                                  | 1,639  | 531      | 66        | 36        | 1006     
|Total Contractual  Obligations                         | 62,944 | 32,753   | 20,060    | 6,700     | 3,704    



As of December 31, 2008, the Company had standby Commercial Commitments and Guarantees amounting to Ch$5,524 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$586 million are scheduled to be released within the upcoming 12 month period.

Liquidity

As of March 31, 2009, the Company had Ch$157,634 million in cash and cash equivalents. The Company’s total short-term indebtedness with banks and financial institutions amounted to Ch$29,946 million. This was comprised of Ch$27,889 million of the current long-term bank debt, Ch$2,058 million in other loans, Ch$18,788 million in various accounts and notes payable and Ch$7 million in payables to related parties. Long-term indebtedness (excluding the current portion thereof) included Ch$16,716 million of long-term obligations with banks and Ch$8,532 million in other loans.

As of December 31, 2008, the Company had Ch$154,563 million in cash and cash equivalents. The Company’s total short-term indebtedness with banks and financial institutions amounted to Ch$31,198 million, composed of Ch$20,594 million of the current portion of bank debt, Ch$8,822 million of the current portion of long-term bond debt, Ch$2,502 million in other loans, Ch$20,673 million in various accounts and notes payable and Ch$442 million in payables to related parties. Long-term indebtedness (excluding the current portion thereof) included Ch$20,210 million of long-term obligations with banks and Ch$8,570 million of other loans.

As of December 31, 2007, the Company had Ch$12,195 million in cash and cash equivalents. The Company’s total short-term indebtedness with banks and financial institutions amounted to Ch$38,023 million, composed of Ch$19,135 million of the current portion of long-term bank debt, Ch$5,508 million of the current portion of long-term bond debt, Ch$2,506 million in other loans, Ch$36,968 million in various accounts and notes payable and Ch$667 million in payables to related parties. Long-term indebtedness (excluding the current portion thereof) included Ch$39,341 million of long-term obligations with banks, Ch$18,019 million of long-term bond obligations, Ch$7,755 million of long-term accounts and notes payable.

Cash Flow

As of December 31, 2008, the Company had cash and cash equivalents totaling Ch$154,563 million compared to Ch$12,196 million as of December 31, 2007, and Ch$20,521 million as of December 31, 2006.

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)                                       | 2006     | 2007     | 2008    
|Cash provided by (used in):                        |          |          |         
|Operating activities                               | 6,916    | 16,487   | 54,028  
|Financing activities                               | 16,898   | 1,026    | (59,521)
|Investing activities                               | (12,198) | (25,622) | 133,845 
|Effect of inflation on cash                        | (399)    | (216)    | 14,015  
|Net change in cash and cash equivalents            | 11,217   | (8,325)  | 142,367 
|Cash and cash equivalents at the beginning of year | 9,304    | 20,521   | 12,196  
|Cash and cash equivalents at the end of the year   | 20,521   | 12,196   | 154,563 



(1) Amounts are stated in million of constant Chilean pesos as of December 31, 2008.

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 believes 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 during 2008 was greater than that in 2007, explained by the generation of EBITDA and reduced working capital needs, offset by the net payment of interest and taxes.

Cash flow from financing activities in 2008 decreased compared to 2007, explained by repayments of bank borrowings (Ch$20,140 million), repayment of bonds (Ch$23,636 million) and the payment of dividends by Madeco (Ch$17,977 million).

Cash flow from investment activities showed a positive balance due to the payment received at the end of the third quarter of 2008, with respect to the sale of the Wire & Cable unit to Nexans.

As of December 31, 2008, the Company held cash and cash equivalents for a total of Ch$154,563 million, compared to Ch$12,196 million at the end of 2007.

The following table summarizes the Company’s assets as well as the scheduled maturities of the Company’s debt as of December 31, 2008:



|                                              |                                           |           |           |           |         |               |            |           
|--------------------------------------------- | ----------------------------------------- | --------- | --------- | --------- | ------- | ------------- | ---------- | ----------
|                                              | As of December 31, 2008 (in Ch$ thousand)
|                                              | Expected Maturity Date                   
|                                              | 2009                                      | 2010      | 2011      | 2012      | 2013    | 2014 & beyond | TOTAL      | FAIR
VALUE
|ASSETS                                        |                                           |           |           |           |         |               |            |           
|Fixed Rate                                    |                                           |           |           |           |         |               |            |           
|Time Deposits (Non-Indexed Ch$)               | 11,350,288                                | -         | -         | -         | -       | -             | 11,350,288 | 11,350,288
|Average Interest Rate (%)                     | 8.88%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 8.88%      | 8.88%     
|Time Deposits (UF)                            | 75,498,017                                | -         | -         | -         | -       | -             | 75,498,017 | 75,498,017
|Average Interest Rate (%)                     | 7.14%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 7.14%      | 7.14%     
|Time Deposits (US$)                           | 45,163,351                                | -         | -         | -         | -       | -             | 45,163,351 | 45,163,351
|Average Interest Rate (%)                     | 2.31%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 2.31%      | 2.31%     
|Marketable securities (Non-Indexed Ch$)       | 57,883                                    | -         | -         | -         | -       | -             | 57,883     | 57,883    
|Average Interest Rate (%)                     | 6.58%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 6.58%      | 6.58%     
|Other Assets (Non-Indexed Ch$)                | 12,070,982                                | -         | -         | -         | -       | -             | 12,070,982 | 12,070,982
|Average Interest Rate (%)                     | 8.76%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 8.76%      | 8.76%     
|                                              |                                           |           |           |           |         |               |            |           
|DEBT                                          |                                           |           |           |           |         |               |            |           
|Fixed Rate                                    |                                           |           |           |           |         |               |            |           
|Bank Debt (US$)                               | 677,823                                   | -         | -         | -         | -       | -             | 677,823    | 700,983   
|WAIR (%)(1)                                   | 8.67%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 8.67%      | 5.08%     
|Bank Debt (Non-Indexed Ch$)                   | 18,027,384                                |           |           |           |         |               | 18,027,384 | 18,563,402
|WAIR (%)                                      | 12.24%                                    | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 12.24%     | 9.00%     
|Bank Debt (UF)                                | 621,778                                   | -         | -         | -         | -       | -             | 621,778    | 621,778   
|WAIR (%)                                      | 4.80%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 4.80%      | 4.80%     
|Bank Debt (US$)                               | 1,564,652                                 | -         | -         | -         | -       | -             | 1,564,652  | 1,564,652 
|WAIR (%)                                      | 6.10%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 6.10%      | 6.10%     
|Dividends  payable (Non-Indexed Ch$)          | 18,555                                    | -         | -         | -         | -       | -             | 18,555     | 18,555    
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Sundry creditors (Non-Indexed Ch$)            | 6,040,737                                 | -         | -         | -         | -       | -             | 6,040,737  | 6,040,737 
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Sundry creditors (UF)                         | 4,832                                     | -         | -         | -         | -       | -             | 4,832      | 4,832     
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Sundry creditors (US$)                        | 10,215,548                                | -         | -         | -         | -       | -             | 10,215,548 | 10,215,548
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Sundry creditors (EUR)                        | 14,302                                    | -         | -         | -         | -       | -             | 14,302     | 14,302    
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Sundry creditors (ARS)                        | 1,359,529                                 | -         | -         | -         | -       | -             | 1,359,529  | 1,359,529 
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Sundry creditors (BRL)                        | 26,943                                    | -         | -         | -         | -       | -             | 26,943     | 26,943    
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Sundry creditors (S$)                         | 104,971                                   | -         | -         | -         | -       | -             | 104,971    | 104,971   
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Sundry creditors (other currencies)           | 6,740                                     | -         | -         | -         | -       | -             | 6,740      | 6,740     
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Accounts payable (Non-Indexed Ch$)            | 7,553                                     | -         | -         | -         | -       | -             | 7,553      | 7,553     
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Accounts payable (US$)                        | 2,628,724                                 | -         | -         | -         | -       | -             | 2,628,724  | 2,628,724 
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Accounts payable (ARS)                        | 244,177                                   | -         | -         | -         | -       | -             | 244,177    | 244,177   
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Other loans (UF)                              | -                                         | 619,299   | 649,382   | 697,467   | 697,467 | 1,940,461     | 4,604,076  | 4,604,076 
|WAIR (%)                                      | 0.00%                                     | 4.80%     | 4.80%     | 4.80%     | 4.80%   | 4.80%         | 4.80%      | 4.80%     
|Other loans (Non-Indexed Ch$)                 | 115,182                                   | -         | -         | -         | -       | -             | 115,182    | 115,182   
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Other loans (US$)                             | 9,272                                     | 1,233,947 | 1,086,457 | 938,967   | 706,490 | -             | 3,975,133  | 3,975,133 
|WAIR (%)                                      | 0.00%                                     | 6.10%     | 6.10%     | 6.10%     | 6.10%   | 0.00%         | 6.09%      | 6.09%     
|Other loans (ARS)                             | 26,813                                    | -         | -         | -         | -       | -             | 26,813     | 26,813    
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Other loans (BRL)                             | 714                                       | -         | -         | -         | -       | -             | 714        | 714       
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Other loans (S$)                              | 163,202                                   | -         | -         | -         | -       | -             | 163,202    | 163,202   
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Due to related companies (Non-Indexed Ch$)    | 441,761                                   | -         | -         | -         | -       | -             | 441,761    | 441,761   
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Provisions and Withholdings (UF)              | 58,063                                    | 17,512    | 20,279    | 17,904    | 17,905  | 368,824       | 500,487    | 500,487   
|WAIR (%)                                      | 6.91%                                     | 7.00%     | 7.00%     | 7.00%     | 7.00%   | 7.00%         | 6.99%      | 6.99%     
|Provisions and Withholdings (Non-Indexed Ch$) | 4,831,483                                 | 809,362   | 15,383    | 13,582    | 13,582  | 279,786       | 5,963,178  | 5,963,178 
|WAIR (%)                                      | 0.00%                                     | 7.00%     | 7.00%     | 7.00%     | 7.00%   | 7.00%         | 1.33%      | 1.33%     
|Provisions and Withholdings (US$)             | 1,602,057                                 | -         | -         | -         | -       | -             | 1,602,057  | 1,602,057 
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Provisions and Withholdings (ARS)             | 1,969,168                                 | 72,184    | -         | -         | -       | -             | 2,041,352  | 2,041,352 
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Provisions and Withholdings (BRL)             | 390,432                                   | -         | -         | -         | -       | -             | 390,432    | 390,432   
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Provisions and Withholdings (S$)              | 1,378,670                                 | -         | -         | -         | -       | -             | 1,378,670  | 1,378,670 
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Unearned income (Non-Indexed Ch$)             | 81,260                                    | -         | -         | -         | -       | -             | 81,260     | 81,260    
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Unearned income (ARS)                         | 136,387                                   | -         | -         | -         | -       | -             | 136,387    | 136,387   
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Unearned income (S$)                          | 20,372                                    | -         | -         | -         | -       | -             | 20,372     | 20,372    
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Unearned income (US$)                         | 369,904                                   | -         | -         | -         | -       | -             | 369,904    | 369,904   
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Deferred Taxes (Non-Indexed Ch$)              | -                                         | 60,522    | -         | -         | -       | -             | 60,522     | 60,522    
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Deferred Taxes (ARS)                          | -                                         | 136,070   | -         | -         | -       | -             | 136,070    | 136,070   
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Deferred Taxes (S$)                           | -                                         | 68,503    | 68,459    | 98,805    | 98,805  | 3,349,028     | 3,683,600  | 3,683,600 
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Other liabilities (ARS)                       | -                                         | 261,325   | -         | -         | -       | -             | 261,325    | 261,325   
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Other liabilities (Non-Indexed Ch$)           | 7,188                                     | -         | -         | -         | -       | -             | 7,188      | 7,188     
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|Other liabilities (US$)                       | 20,268                                    | 8,420     | -         | 8,328     | 8,328   | 74,588        | 119,932    | 119,932   
|WAIR (%)                                      | 0.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 0.00%      | 0.00%     
|                                              |                                           |           |           |           |         |               |            |           
|Variable Rate                                 |                                           |           |           |           |         |               |            |           
|Bank Debt  (UF)                               | 1,550,252                                 | -         | -         | -         | -       | -             | 1,550,252  | 1,481,378 
|Interest Rate Based on                        |                                           |           |           |           |         |               |            |           
|WAIR (%)                                      | 1.87%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 1.87%      | 6.61%     
|Bank Debt  (US$)                              | 9,010,028                                 | -         | -         | -         | -       | -             | 9,010,028  | 9,107,249 
|Interest Rate Based on                        | Libor                                     |           |           |           |         |               |            |           
|WAIR (%)                                      | 4.82%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 4.82%      | 3.70%     
|Bank Debt  (EUR)                              | 52,574                                    | -         | -         | -         | -       | -             | 52,574     | 52,574    
|Interest Rate Based on                        |                                           |           |           |           |         |               |            |           
|WAIR (%)                                      | 7.55%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 7.55%      | 7.50%     
|Bank Debt  (ARS)                              | 98,501                                    | -         | -         | -         | -       | -             | 98,501     | 98,501    
|Interest Rate Based on                        |                                           |           |           |           |         |               |            |           
|WAIR (%)                                      | 6.00%                                     | 0.00%     | 0.00%     | 0.00%     | 0.00%   | 0.00%         | 6.00%      | 6.00%     
|Bank Debt  (UF)                               | -                                         | 1,549,518 | 111,550   | -         | -       | -             | 1,661,068  | 1,525,895 
|Interest Rate Based on                        |                                           |           |           |           |         |               |            |           
|WAIR (%)                                      | 0.00%                                     | 1.87%     | 4.63%     | 0.00%     | 0.00%   | 0.00%         | 2.06%      | 6.61%     
|Bank Debt  (US$)                              | -                                         | 8,046,722 | 4,705,272 | 2,764,013 | -       | -             | 15,516,007 | 15,591,948
|Interest Rate Based on                        |                                           |           |           |           |         |               |            |           
|WAIR (%)                                      | 0.00%                                     | 4.79%     | 5.03%     | 6.42%     | 0.00%   | 0.00%         | 5.15%      | 5.08%     
|Bank Debt  (Non-Indexed Ch$)                  | -                                         | 758,250   | 758,250   | 758,250   | 758,250 | -             | 3,033,000  | 3,120,449 
|Interest Rate Based on                        |                                           |           |           |           |         |               |            |           
|WAIR (%)                                      | 0.00%                                     | 10.10%    | 10.10%    | 10.10%    | 10.10%  | 0.00%         | 10.10%     | 9.00%     



(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 (from January to September 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 represents a significant portion of the Company’s business.

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 investment activities.

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



Capital Expenditures

The investment and financing policy for the current year was presented during the Annual Shareholders’ Meeting that was held on March 25, 2009. 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$32,152 million for the period 2008 to 2010, and are broken down as follows:



|                   |                        |           |       
|------------------ | ---------------------- | --------- | ------
|                   | Amounts in Ch$ million
|Business Unit      | 2008(1)                | 2009-2010 | Total 
|Wire & Cable       | 16,069                 | -         | 16,069
|Brass Mills        | 1,141                  | 546       | 1,687 
|Flexible Packaging | 6,067                  | 6,570     | 12,637
|Profiles           | 1,579                  | 180       | 1,759 
|Total              | 24,856                 | 7,296     | 32,152



(1) Capital expenditures for the Wire & Cable unit are included up to September 30, 2008.



Brass Mills Unit. The Company’s investment plans for the Brass Mills unit amount to Ch$546 million the next years, which includes machinery and overhaul of equipment primarily for its plant facilities in Chile.

Flexible Packaging Unit. Planned capital expenditures for the Company’s Flexible Packaging unit total Ch$6,570 million and include machinery and equipment in Chile, Argentina and Peru, mainly for the acquisition of printers and laminators.

Profiles Unit. Planned capital expenditures for the Aluminum unit amount to Ch$180 million, which include the acquisition of machinery and equipment for its aluminum and PVC profiles plants.

Along with the investments discussed above, from the sale of the Wire & Cable unit, the Company obtained funds that, after the approval of the Company’s shareholders, will be invest in the Flexible Packaging unit, towards enhance its profitability, expand its regional presence and 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, Peru, 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 Company successfully completed its 2006-2008 three-year business plan. The plan included the consolidation of the performance of the Wire and Cable unit (the unit was sold in late September 2008), increasing the profitability of the Flexible Packaging unit, following improvements in its operational and commercial management, maintaining the market leadership of the Profiles unit and the improvement of the Company’s financial position.

In addition the Company also successfully completed the implementation of the corporate management project (integrated through ERP SAP) in the Wire & Cable and Brass Mills units allowing better integration between the companies. At the end of 2008, the Company began working on implementing the corporate management project in its other business units and establishing the groundwork for the transition to the IFRS accounting standards.

Development of the new 2009-2011 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 deteriorated conditions in the regional and worldwide markets as a result of the subprime crisis. Moreover, 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.

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.”



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.



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.



Profiles

Even though the construction sector experienced important growth during 2007, foreign competition (mainly from China at low costs), lower activity in the construction sector by the end of 2008 and substantive increases in aluminum prices, have placed increased pressure on the industry and the Company’s margins. During 2009, the Company expects lower sales due to the deterioration of the Chilean construction sector. At the end of 2007, the Company completed the implementation of its new PVC profiles subsidiary, enhancing its mix of products and allowing it to offer PVC window, door and 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, 2008.



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 as of December 31, 2008:

|                                  |                   |      |               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--------------------------------- | ----------------- | ---- | ------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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, 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 Tarapacá S.A.
Director, Nexans
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)      | Director          | 1958 | 2007          | Director, Banco de Chile
Director, SM Chile S.A.
Director, Compañía Cervecerías Unidas 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,  Foods Compañía de Alimentos CCU S.A. Asesor, Viña San Pedro Tarapacá S.A.                                        
|Alejandro Ferreiro Yazigi (2) (3) | Director          | 1966 | 2008          | Director, compañía de seguros de vida Corpvida. S.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Augusto Iglesias Palau (2) (3)    | Director          | 1956 | 2008          | Director, Compañía Chilena de Fósforos S.A.
Director, PrimAmérica Consultores
Director, Colegios Padre Hurtado y Juanita de los Andes
Director, SCAN
Director, 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) The Company’s Directors’ Committee includes Francisco Pérez Mackenna, Augusto Iglesias Palau and Alejandro Ferreiro Yazigi.

(3) 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

(4) 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

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
|Cristián Montes       | Chief Executive Officer                      | November 2008       | April 2006   
|Enrique Sotomayor (1) | Legal Counsel and Secretary of the Board (2) | Sep. 1974           | Sep. 1974    
|Nicolas Burr          | Chief Financial Officer                      | March 2009          | March 2009   
|Claudio Inglesi       | CEO Alusa Chile                              | November 2008       | November 2008
|Marcelo Carugo        | CEO Aluflex                                  | October 2008        | October 2008 
|Carlos Bragagnini     | CEO Peruplast                                | March 2007          | March 2007   
|Cristian Monsalve     | Chief Executive Officer Madeco Brass Mills   | July 2008           | July 2008    
|Sady Herrera          | Chief Executive Officer Decker-Indelqui      | May 2002            | July 2000    
|Mario Puentes         | Business Unit Manager: Profiles              | Oct. 1999           | Oct. 1999    



(1) Enrique Sotomayor was named Secretary of the Board in November 1986.





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.

Nicolas Burr (born 1975).  Mr. Nicolas Burr joined the Company in March 2009 as Chief  Financial Officer. His previous work experience includes: Alto Parana (2005 - 2009); Dupont (2004); Arauco (1999- 2003). He received his degree in Industrial Engineering from the Universidad Católica de Chile and his MBA from thhe MIT Sloan School of Management, Cambridge MA, USA.

Claudio Inglesi (born 1977).  Mr. Claudio Inglesi was appointed as Business Unit Manager of the Flexible Packaging Unit in Chile in November 2008.  His previous work experience includes: Quiñenco S.A. (2006-2008), The Boston Consulting Group (2006), McKinsey & Co. (2005) and Deutsche Bank (2001-2004).He received his degree in Civil Industrial Engineering from the Universidad Católica de Chile and his MBA from the UCLA Anderson School of Management.

Marcelo Carugo (born 1962).Mr. Marcelo Carugo was appointed as General manager of Aluflex in October 2008. His previous work experience includes: Manuli (2006-2008), Emerson Electric (1998-2006), Honeywell (1990-2006), Philips The Netherlands (1989-1990) and Foxboro (1986-1989).He received his degree in Electrical Engineering from the Universidad de Buenos Aires and a Master degree in Engineering from NUFFIC, The Netherlands.

Carlos Bragagnini (born 1969). Mr. Carlos Bragagnini took over as Chief Executive of Peruplast in Peru in March 2007. Mr. Bragagnini has been working in the Company since 1992 and gained all his previous work experience in the following departments: Quality Control (Inspector), R&D (Technical Service Officer), Printing (Manager), Graphic (Manager) and Sales (Regional Manager). He received his degree in Industrial Engineering from the Universidad de Lima and his MBA from the Universidad del Pacífico.

Cristian Monsalve (Born 1952)Mr. Cristián Monsalve has served as Chief Executive Officer of Madeco Brass Mills S.A. since July 2008. Prior to his current position, he was South American General Manager at Boart Longyear S.A. a multinational mining company for sixteen years. He also works at Pepsi Cola and Cervecerias Polar in Venezuela. He received a degree in Business Administration from the Universidad de Chile and a MBA from Tulane University in New Orleans.

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), and 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.

Mario Puentes (born 1948). Mr. Mario Puentes joined the Company in October 1999 as the Business Unit Manager for the 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.

Compensation

For the year ending December 31, 2008, the total compensation paid by the Company to all directors was Ch$611 million and to all executive officers, Ch$4,056 million (excluding Wire & Cable unit). 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 expired on September 30, 2008. Due to the sale of the Wire & Cable unit, Julio Cordoba left the Company on September 30, 2008. On October 22, 2008, the Board accepted the resignation of Tiberio Dall’Olio and Cristian Montes was designated by the Board as new Chief Executive Officer of Madeco.

Tiberio Dall’Olio and Julio Cordoba were granted stock options during their time at the Company. See Madeco’s 20-F for the fiscal year ended December 31, 2007 for additional disclosure.

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 of the Company’s director of the Board for services rendered in 2008 in thousands of Chilean pesos:

|                                 |                
|-------------------------------- | ---------------
|Director                         | 2008
(In ThCh$)
|Guillermo Luksic Craig (1)       | 69,895         
|Andrónico Luksic Craig (1)       | 63,193         
|Jean-Paul Luksic Fontbona (1)    | 71,019         
|Hernan Büchi Buc                 | 76,198         
|Alessandro Bizzarri Carvallo (2) | 31,597         
|Francisco Pérez Mackenna (2)     | 52,966         
|Felipe Joannon Vergara           | 76,328         
|Alejandro Ferreiro Yazigi        | 22,752         
|Augusto Iglesias Palau           | 22,752         
|Eugenio Valck Varas              | 64,872         
|Oscar Ruiz-Tagle Humeres (3)     | 58,963         
|Total                            | 610,535        



Guillermo Luksic Craig, Andronico Luksic Craig and Jean Paul Luksic Fontbona are brothers.
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.
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 providing for benefits upon termination of employment among any of the directors and the Company..

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$56.2 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 has been 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 disagrees 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 in which it will request information and about 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.

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 Alejandro Ferreiro Yazigi, Augusto Iglesias Palau 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$1,872) 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$74,885).

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 exceptions. 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, 2006, 2007 and 2008 as well as of March 31, 2009:

|                             |              |              |              |               
|---------------------------- | ------------ | ------------ | ------------ | --------------
|Total Number of Employees(1)
|Country                      | Dec 31, 2006 | Dec 31, 2007 | Dec 31, 2008 | March 31, 2009
|Chile                        | 1,555        | 1,554        | 1,280        | 1,216         
|Brazil                       | 731          | 895          | -            | -             
|Peru (2) Peru                | 315          | 1,194        | 301          | 300           
|Argentina                    | 390          | 433          | 836          | 855           
|Colombia                     | -            | 181          | -            | -             
|Total                        | 2,991        | 4,257        | 2,417        | 2,371         



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.
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.As of December 31, 2008, a total of 677 employees, or 28.0% of the Company’s total workforce, were represented by 13 labor unions, which represent their members in collective bargaining negotiations with the Company. Additionally, the Company had a total of 138 temporary employees who were hired for specific time periods to satisfy short-term needs. Management’s relationship with the labor unions representing the employees is generally good.

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, 2006, 2007 and 2008, as well as of March 31, 2009:

|                             |            |               |           |      
|---------------------------- | ---------- | ------------- | --------- | -----
|                             | Executives | Professionals | Employees | Total
|December  31, 2006           |            |               |           |      
|Wire & Cable and Brass Mills | 36         | 511           | 1,563     | 2,110
|Flexible Packaging           | 5          | 158           | 438       | 601  
|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
|Profiles                     | 10         | 105           | 150       | 265  
|Madeco Consolidated          | 82         | 1,145         | 3,030     | 4,257
|                             |            |               |           |      
|December  31, 2008           |            |               |           |      
|Corporate and Brass Mills    | 10         | 88            | 460       | 558  
|Flexible Packaging           | 31         | 428           | 1,039     | 1,498
|Profiles                     | 10         | 150           | 201       | 361  
|Madeco Consolidated          | 51         | 666           | 1,700     | 2,417
|                             |            |               |           |      
|March  31, 2009              |            |               |           |      
|Corporate and Brass Mills    | 11         | 129           | 421       | 561  
|Flexible Packaging           | 18         | 277           | 1,208     | 1,503
|Profiles                     | 12         | 135           | 160       | 307  
|Madeco Consolidated          | 41         | 541           | 1,789     | 2,371



(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.



Corporate and Brass Mills.  The following table sets forth the Company’s human resources as of December 31, 2008 for the Corporate level and Brass Mills business unit. The employees are broken down by employee category and country:

|                                                                        |            |               |           |      
|----------------------------------------------------------------------- | ---------- | ------------- | --------- | -----
|Corporate level and Brass Mills Unit: Employees as of December 31, 2008
|                                                                        | Executives | Professionals | Employees | Total
|Chile                                                                   | 8          | 78            | 396       | 482  
|Argentina                                                               | 2          | 10            | 64        | 76   
|Total                                                                   | 10         | 88            | 460       | 558  



In Chile as of December 2008, the Company had 482 permanent employees and 20 temporary employees. A total of 482 employees were represented by 5 labor unions and two non-unionized labor union (319 and 163 employees, respectively). On November 1, 2007, Madeco Chile reached an agreement with Unions No1, No2 and No3 prior to the expiration of the collective bargaining agreement. The Company also reached an agreement with the non-unionized workers on December 4, 2007. Consequently, the Company and the Unions signed new contracts with a three year term, expiring on October 31, 2010. The last labor strike 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 51 and 24 workers respectively with a 2 year term (expiring on July 31, 2010). Armat’s last labor strike was in 1991 and lasted 12 days.

In Argentina, as of December 2008, the Company had 76 permanent employees and no temporary employees. A total of 63 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. The last labor strike was in 1999 and involved 301 employees from both the Wire & Cable and Brass Mills divisions.

Flexible Packaging. The following table sets forth the Company’s human resources as of December 31, 2008, 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, 2008
|                                                           | Executives | Professionals | Employees | Total
|Chile                                                      | 7          | 107           | 323       | 437  
|Argentina                                                  | 4          | 40            | 181       | 225  
|Peru                                                       | 20         | 281           | 535       | 836  
|Total                                                      | 31         | 428           | 1,039     | 1,498



In Chile as of December 2008, the Company had 437 permanent employees and 4 temporary employees. A total of 246 and 185 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 strike, which occurred on August 1998, lasted 20 days and included 130 employees.

In Argentina as of December 2008, the Company had 225 permanent employees and 23 temporary employees.A total of 52 employees were represented by one labor union in 2008. On June 2006, Aluflex signed a collective bargaining agreement with a union that represented 166 company employees.

In Peru as of December 2008, the Company had 836 permanent employees and 2 temporary employees, none of which were members of labor unions, in 2008. The Company has experienced no strikes in Peru since 1996.

Profiles. The following table sets forth the Company’s personnel at December 31, 2008 for the Profiles unit. Personnel are broken down by employment category:

|                                                 |            |               |           |      
|------------------------------------------------ | ---------- | ------------- | --------- | -----
|Profiles Unit: Employees as of December 31, 2008
|                                                 | Executives | Professionals | Employees | Total
|Total                                            | 10         | 150           | 201       | 361  



The Profilesdivision in Chile had 361 permanent and 25 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, Peru, and Argentina 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$37,068). 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 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.

Pension Plans

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.

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.

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 Management – 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, 2009 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)                           | 2,697,544,042          | 47.650%    
|The Bank of New York                                             | 454,254,630            | 8.024%     
|AFP Provida S.A.                                                 | 359,617,883            | 6.352%     
|AFP Habitat S.A.                                                 | 307,389,895            | 5.430%     
|AFP Cuprum S.A.                                                  | 302,128,629            | 5.337%     
|AFP Capital S.A.                                                 | 298,009,551            | 5.264%     
|Directors, Executive Officers and related parties as a group (3) | 215,766                | 0.004%     



(1) The controlling shareholder of Madeco S.A. is Quiñenco S.A., an open stock corporation.

(2) Quiñenco S.A. directly controls 42.57% of Madeco S.A. (2,410,184,206 shares) and indirectly controls through its subsidiary, Inversiones Río Grande S.A., 5.08% (287,359,836 shares).

(3) Includes shares owned by Executives, Directors, 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 100.0% 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 99.76% 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 2006, 2007 or 2008. The following table sets forth information concerning ownership of the shares with respect to the Luksic Group’s companies as of December 31, 2008:

|               |                                                                                                                                                                                                                  |                                                                                |                                       
|-------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | --------------------------------------
|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, 2008. 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, 2009 an aggregate of 47.65% of the outstanding shares (2,697,544,042 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, 2006, 2007 and 2008:

|                                                    |               |               |              
|--------------------------------------------------- | ------------- | ------------- | -------------
|                                                    | 2006          | 2007          | 2008         
|Common Stock
(number of shares authorized and paid) | 5,541,192,887 | 5,661,192,887 | 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 2006, 2007 and 2008, demonstrating the significant changes in ownership percentages during the past three years:

|                                              |                   |                   |                   |        |               |       
|--------------------------------------------- | ----------------- | ----------------- | ----------------- | ------ | ------------- | ------
|Shareholder                                   | December 31, 2006 | December 31, 2007 | December 31, 2008
|Quiñenco S.A. and related parties (1)         | 2,557,255,382     | 46.15%            | 2,557,255,382     | 45.17% | 2,697,544,042 | 47.65%
|The Bank Of New York                          | 318,509,330       | 5.75%             | 216,157,030       | 3.82%  | 467,223,430   | 8.25% 
|AFP Provida S.A.                              | 150,227,032       | 2.71%             | 387214179         | 6.84%  | 359,617,883   | 6.35% 
|AFP Cuprum S.A.                               | 145,647,038       | 2.63%             | 183,066,962       | 3.23%  | 314,406,502   | 5.55% 
|AFP Habitat S.A.                              | 313,895,523       | 5.66%             | 334545142         | 5.91%  | 308,711,981   | 5.45% 
|AFP Capital S.A.                              | 362,700,584       | 6.55%             | 331,175,012       | 5.85%  | 298,009,551   | 5.26% 
|Bolsa Electronica de Chile Bolsa de Valores   | 49,135,641        | 0.89%             | 60,400,432        | 1.07%  | 180,487,515   | 3.19% 
|Banchile Corredores de Bolsa S.A.             | 163,733,746       | 2.95%             | 118,248,424       | 2.09%  | 174,136,254   | 3.08% 
|Banco de Chile por cuenta de terceros         | 113,360,357       | 2.05%             | 174,654,001       | 3.09%  | 115,584,759   | 2.04% 
|Celfin Capital S.A. corredores de bolsa       | 103,510,306       | 1.87%             | 104,170,529       | 1.84%  | 88,038,749    | 1.56% 
|Larrain Vial S.A. corredora de bolsa          | 83,606,732        | 1.51%             | 56,048,158        | 0.99%  | 80,246,545    | 1.42% 
|Santander Investment S.A. corredores de bolsa | 17,369,475        | 0.31%             | 52,321,356        | 0.92%  | 68,990,905    | 1.22% 
|Others                                        | 1,162,241,741     | 20.97%            | 1,085,936,280     | 19.18% | 508,194,771   | 8.98% 



(1) Quiñenco S.A. directly controls 42.57% of Madeco S.A. (2,410,184,206 shares) and indirectly controls through its subsidiary, Inversiones Río Grande S.A., 5.08% (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$74,885) and exceeds 1% of the consolidated assets of the corporation, or if the amount exceeds UF20,000 (as of May 31, 2008, approximately US$748,845) 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, 2006, 2007 and 2008 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 2006, 2007 and 2008 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        
|                                | 2006   | 2007    | 2008  
|                                | Volume | % total | Volume | % total | Volume | % total
|Wire & Cable (in tons)(2)       | 15,405 | 19.10%  | 18,212 | 20.00%  | 9,523  | 11.72% 
|Pipes Bars and Sheets (in tons) | 17,031 | 64.50%  | 11,188 | 54.50%  | 8,868  | 51.53% 
|Coins (in tons)                 | 1,572  | 97.60%  | 1,255  | 95.00%  | 273    | 91.00% 
|Brass Mills(in tons)            | 18,603 | 66.40%  | 12,443 | 57.00%  | 9,141  | 52.21% 
|Flexible Packaging(in tons)     | 2,674  | 17.10%  | 6,159  | 16.10%  | 10,814 | 24.75% 
|Profiles(in tons)               | 484    | 3.90%   | 389    | 3.80%   | 604    | 5.57%  
|Total (in equivalent tons)      | 37,166 | 27.20%  | 37,203 | 23.10%  | 30,082 | 13.52% 



|                      |             |         |             |         |             |        
|--------------------- | ----------- | ------- | ----------- | ------- | ----------- | -------
|Export (1) Revenues  
|                      | 2006        | 2007    | 2008       
|                      | Ch$ million | % total | Ch$ million | % total | Ch$ million | % total
|Wire & Cable          | 70,823      | 16.81%  | 75,699      | 16.88%  | 46,787      | 10.71% 
|Pipes Bars and Sheets | 80,436      | 62.73%  | 54,900      | 54.05%  | 38,513      | 47.12% 
|Coins                 | 8,173       | 71.72%  | 8,888       | 83.65%  | 2,307       | 32.14% 
|Brass Mills           | 88,609      | 63.46%  | 63,788      | 56.85%  | 40,820      | 45.91% 
|Flexible Packaging    | 7,913       | 14.64%  | 15,636      | 16.13%  | 34,512      | 26.46% 
|Profiles              | 1,083       | 2.78%   | 996         | 2.60%   | 1301        | 3.55%  
|Total                 | 168,428     | 25.75%  | 156,119     | 22.43%  | 123,420     | 17.81% 





(1) 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 Profiles 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.



PBS.In 2008, the PBS division of the Brass Mills business unit generated export sales, which amounted to 8,868 tons or 51.5% of the total division’s sales volume. Export revenues as a percentage of the PBS division’s revenues amounted to 45.91% or Ch$40,820 million. With regard to exports, a total of 58.0% and 22.7% of products were sold in North America and Europe, respectively.

Coins. In 2008, export sales volume amounted to 273 tons or 91.0% 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 and South America and Europe, which represent 50.0% and 43.2% of total export revenues, respectively.

Flexible Packaging.  In 2008, export sales volume amounted to 10,814 tons or 25.75% of the Flexible Packaging business unit’s total sales volume. Export sales as a percentage of total in revenues represent 26.46% or Ch$34,512 million in. Principal export customers for the Flexible Packaging unit are located in other Latin American countries. In 2008, exports to South and Central America represented 70.8 % of total export sales volumes for the unit.

Profiles. Export sales for the Aluminum Business unit include sales made to customers in countries other than Chile. In 2008, export sales volume amounted to 604 tons or 5.57% of the Profiles business unit’s total sales volume, or Ch$,301 million represented 3.55% of the unit’s revenues.

Wire & Cable.Export sales for the Wire & Cable amounted to 9,523 tons or 10.71% of the total business unit’s sales volume.



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., arising prior to Madeco’s purchase of 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.

On July 19, 2006, Ficap S.A. received a demand from the Rio Janeiro state treasury authority for the tax years 2001, 2002, 2003, 2004 and 2005, corresponding to income tax differences totaling ThR$18,550 (ThUS$8,571 historic approx.) which, according to the company’s legal advisers, do not present risks of significant losses. However, following the same criteria for the tax years 2006 onward, Ficap S.A. made judicial deposits amounting to ThUS$9,555 in order to avoid paying interest and fines on any income tax differences that it might have to pay should the law be interpreted in the manner stated in the demand. Although the deposits were made by a company sold to Nexans, the judicial deposits have been shown as an asset (see Note 15) as these assets were excluded from the sale price and therefore Madeco retains control over the demand.

On November 12, 2008, Armat S.A. brought legal proceedings against the Real Casa de Moneda de España, Spain, for €876,739 before the court of first instance of Madrid, Spain. This demand arises from the unjustified, illegal and arbitrary withholding of the amount payable for invoices relating to the supply of blanks for minting euro coins.

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.

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 and was ratified by the Annual Shareholder's Meeting held on March 25, 2008.

Despite the 30% dividend policy, on April 23, 2008, the Board of Directors of the Company agreed to ask shareholders at the next Annual Shareholders’ Meeting, to approve the distribution of an extraordinary dividend of 76% of the net profit (up to US$165) expected from sale of the Wire & Cable unit to Nexans. As agreed, on February 24, 2009, the Board proposed a dividend of Ch$15 per share, exceeding the net profit percentage of the Nexans transaction and the current dividend policy of 30%. The Board'’s proposal was approved at the Annual Shareholders'’ Meeting held on March 25, 2009, and the dividend was paid on April 3, 2009 (US$146.3 million in total).

In spite of both dividends mentioned above, 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 been 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)
|2004                          | 35.5                    | 62.9          | 5.78  | 10.95
|2005                          | 40.9                    | 61.8          | 7.77  | 11.10
|2006                          | 41.0                    | 59.3          | 7.67  | 11.29
|2007                          | 56.9                    | 82.1          | 10.99 | 15.90
|2008                          | 34.0                    | 56.7          | 5.03  | 12.25
|                              |                         |               |       |      
|Quarters                      |                         |               |       |      
|2007                          |                         |               |       |      
|First Quarter                 | 57.7                    | 68.9          | 10.99 | 12.75
|Second Quarter                | 62.4                    | 75.0          | 11.36 | 13.99
|Third Quarter                 | 61.5                    | 82.1          | 11.35 | 15.90
|Fourth Quarter                | 56.9                    | 68.4          | 11.02 | 13.74
|2008                          |                         |               |       |      
|First Quarter                 | 40.3                    | 56.7          | 8.51  | 11.63
|Second Quarter                | 47.4                    | 56.0          | 9.25  | 12.25
|Third Quarter                 | 43.3                    | 50.0          | 8.00  | 9.74 
|Fourth Quarter                | 34.0                    | 47.6          | 5.03  | 8.20 
|2009                          |                         |               |       |      
|First Quarter                 | 28.1                    | 44.3          | 4.70  | 7.59 
|Second Quarter through May 31 | 26.9                    | 35.5          | 4.58  | 6.45 
|                              |                         |               |       |      
|Months                        |                         |               |       |      
|December 2008                 | 37.4                    | 44.6          | 5.04  | 6.98 
|January 2009                  | 39.9                    | 43.1          | 6.21  | 6.74 
|February 2009                 | 40.7                    | 44.3          | 6.52  | 7.39 
|March 2009                    | 28.1                    | 43.8          | 4.70  | 7.59 
|April 2009                    | 26.9                    | 28.1          | 4.58  | 4.97 
|May 2009                      | 29.2                    | 35.5          | 4.95  | 6.45 



(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 result of a decrease in 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 of its non-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. Madeco successfully completed its capital increase and indebtedness restructuring in the first quarter of 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 per 10 shares of common stock to 1 ADS per 100 shares of common stock. This ratio change, together with the capital increase discussed above was implemented by Madeco 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 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.

Due to the high cost of complying with U.S. reporting obligations and the small percentage of Madeco’s outstanding shares that are held as ADSs, Madeco’s Board of Directors resolved on June 22, 2009 to delist its ADSs from The New York Stock Exchange and to deregister Madeco under the Exchange Act if it meets the criteria for deregistration set forth by the U.S. Securities and Exchange Commission.  Madeco expects that the liquidity of its ADSs will decrease as a result of the delisting and if it deregisters investors will have less information about the company available to it.  Madeco intends to maintain its listing on the Chilean stock exchange and to provide the information and disclosure required under Chilean law.

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 at 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 30% 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

On June 5, 2006, the Company refinanced a total of US$50 million or Ch$26,680 million (historic value) of its financial debt by means of a five-year term club deal loan, (US$ 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 used to finance working capital requirements. During 2006, US$12.2 million or Ch$6,510 million (historic value) was paid of the local portion 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 protion 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.

Madeco prepaid all local Series D bonds on 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 included an option for Madeco to refinance with a long-term loan with a structure similar to that of the Series D bond. The loan that was paid with cash received from the sale of the Company’s Wire & Cable business unit.

On September 30, 2008 the company concluded the sale of its Wire & Cable unit’s assets to Nexans. Pursuant to the terms of the Purchase Agreement that had been signed on February 21, 2008, Madeco received in exchange a US$393 million cash payment (US$448 million minus minority interest, working capital and financial debt), plus 2.5 million shares of Nexans common stock (with an approximate market value of US$218 million, representing 8.9% of Nexan’s share capital). The amount of the cash payment was subject to adjustment to reflect any differences between the pro-forma financial statements as of September 30, 2008, and the accounting books at the end of the same period. In order to fund such adjustment, Madeco opened an escrow account of US$37 million for the benefit of Nexans. On November 12, 2008, Nexans sent a letter to Madeco summarizing the accounts, as of September 30, 2008, of the companies sold and providing Nexans’ estimate of the necessary adjustment to the cash payment amount. Madeco responded with a letter dated November 26, 2008, expressing its disagreement with respect to the amounts held in the accounts, as well as the basis for determining those amounts, and therefore to Nexans’ estimate of the necessary adjustment to the cash payment. The difference between the parties’ estimates does not exceed the escrow account of US$37 million mentioned above. At the time of the publication of this Annual Report, the parties continue to try to resolve these issues. A copy of the Purchase Agreement was included as an exhibit to the 20-F for the fiscal year ended December 31, 2007, and a copy of the First Amendment to the Purchase Agreement is annexed as Exhibit 4.2 hereto.

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 – this registration 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, and 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 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:

|                                          |                                                   
|----------------------------------------- | --------------------------------------------------
|Effective Dividend Withholding Tax Rate = | (Withholding Tax Rate) - (First Category 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, 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 SVS. 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 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 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 the 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 outside 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 may have been a passive foreign investment company (a “PFIC”) for United States federal income tax purposes for its taxable year ending December 31, 2008.  Based on current business plans and financial projections, the Company believes that it may be a PFIC for its current taxable year ending December 31, 2009.  The Company expects that it may also be a PFIC for subsequent years.  However, this is a factual determination made annually and thus is subject to change.  Moreover, the Company believes that it was not a PFIC for its taxable years ending before January 1, 2008, although this conclusion is subject to some uncertainty.

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 that were 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. Even if 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 PFIC 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 IFS 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 San Francisco 4760, 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 “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, 2008.

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 2009 of the Chilean peso/U.S. dollar exchange rate with respect to 2008 year-end balances, the impact on equity would be an increase in the Company’s cumulative translation adjustment account of approximately Ch$1,941 million.

The Company’s net exposure in Chile to U.S. dollar exchange rate risk in Chilean pesos as of December 31, 2008 was Ch$82,236 million (equivalent to US$129.341 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$8,234 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, and Peru, 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, and Peru of their respective local currencies in relation to the U.S. dollar during 2008 would result in a net loss of Ch$505 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, 2008, approximately 36.6% 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, 2008 was Ch$22,240 million. Assuming a 100 basis point, or “b.p.”, increase during 2009 in the weighted average interest rate with respect to 2008 year-end balances, the result would be an increase in net annual interest expenses of approximately Ch$118 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, 2008, the Company had 600 tons of copper hedged and as of March 31, 2009, the Company had 773 tons of copper hedged by derivatives contracts.

During 2008, the Company sold on a consolidated basis 76,394 tons of copper and 31,763 tons of aluminum. As of December 31, 2008, the Company held inventories of copper and aluminum of 4,378 and 5,974 tons, respectively.

The following table presents the commodity inventories held by the Company for non-trading purposes as of December 31, 2008.

|                        |                 |           
|----------------------- | --------------- | ----------
|As of December 31, 2008
|                        | Carrying Amount | Fair Value
|Copper                  |                 |           
|Tons                    | 4,378           |           
|Value (in Ch$ million)  | 8,618           | 8,618     
|Aluminum                |                 |           
|Tons                    | 5,974           |           
|Value (in Ch$ million)  | 10,579          | 5,667     



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

Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of December 31, 2008 (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chief Executive Officer has concluded that as of December 31, 2008, the Company’s disclosure controls and procedures are effective.

Management’s Report on Internal Control over Financial Reporting.

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) or 15d-15(f) under the Securities Exchange Act. The Company’s internal control over financial reporting are 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 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 may provide only a reasonable assurance of achieving their control objectives.

With the Chief Executive Officer’s participation, the Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008, based on the structure and criteria set forth in the Committee of Sponsoring Organizations of the Treadway Commission’s Internal Control-Integrated Framework.

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 such controls. Based on its assessment, Management has concluded and hereby reports that as of December 31, 2008, 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 corresponding regulations and forms, which is gathered and communicated to the Company’s Management, including the Chief Executive Officer to allow for 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, 2008.

Attestation Report by the Independent Auditors

See page F-2 of the Company’s audited consolidated financial statements.



Changes to Internal Controls over Financial Statements

During the Fiscal Year covered by this annual report, the following changes affecting the internalcontrol over Madeco S.A. financial reports have been made:

Within the SAP integrated system at corporate level, the implementation of the Human Resources (HCM) and Production (PP) modules were carry out in order to strengthen the internal control over financial reporting through programmed controls.



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 2008, 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 2008.

Item 16C.  Principal Accountant Fees and Services

In 2006, 2007 and 2008, 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 2008, respectively:

|                   |                       |        
|------------------ | --------------------- | -------
|                   | (in thousands of Ch$)
|                   | 2007                  | 2008   
|Audit Fees         | 535,021               | 431,951
|Audit-Related Fees | 123,287               | 108,817
|Tax Fees           | 84,170                | 42,875 
|All Other Fees     | 156,238               | 453    
|Total Fees         | 898,716               | 584,095



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 2007 and 2008 include fees associated with SOX consulting, due diligence and translations.

Tax Fees

Tax fees in 2007 and 2008 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 2008, 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

The table below sets forth, for the periods indicated, the total number of shares of Madeco purchased by the Company or on our behalf, or by an affiliated purchaser or on behalf of an affiliated purchaser, the average price paid per share, the total number of shares purchased as a part of a publicly announced repurchase plan or program and the maximum number (or approximate value) of shares that may yet be purchased under our plans and programs.

|              |                                     |                                  |                                       |                                            
|------------- | ----------------------------------- | -------------------------------- | ------------------------------------- | -------------------------------------------
|Period (2008) | Totel Number of Shares Purchased(1) | Average Price Paid per Share Ch$ | Cumulative Number of Shares Purchased | Approximate value of shares purchased ThCh$
|June 2008     | 167,516                             | 50.83                            | 167,516                               | 8,515                                      
|Total         | 167,516                             | 50.83                            | 167,516                               | 8,515                                      



(1) Under Chilean law Madeco was required to offer its shareholders a right to withdraw after the approval of the Wire & Cable unit’s sale. The total number of shares repurchased amounted to less than 0.003% of the Company’s share capital.



Item 16G. Corporate Governance

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 exceptions. 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).





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-116



ITEM 19. Exhibits

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Exhibit  Description

1.1 Articles of Incorporation and Bylaws

4.1 * 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, 2007.









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/Cristián Montes

Chief Executive Officer



Date: June 30, 2009







Madeco S.A. and Subsidiaries





Audited Consolidated Financial Statements as of

December 31, 2007 and 2008 and for each of the three years in the period ended December 31, 2008

together with the Reports of Independent Registered Public Accounting Firm







Madeco S.A. and subsidiaries



Index to the Audited Consolidated Financial Statements













|                                                                                                          
|----------------------------------------------------------------------------------------------------------
|Reports of Independent Registered Public Accounting Firm:                                                 
|Report of Independent Registered Public Accounting Firm for the years 2006, 2007 and 2008                 
|Report of Independent Registered Public Accounting Firm
      on Internal Control over Financial Reporting
|                                                                                                          
|Consolidated Financial Statements:                                                                        
|Consolidated Balance Sheets as of December 31, 2007 and 2008                                              
|Consolidated Statements of Income for the years ended December 31, 2006, 2007 and 2008                    
|Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2007 and 2008                
|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.



Report of Independent Registered Public Accounting Firm



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 as of December 31, 2007 and 2008, and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 2008. 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.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as 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, 2007 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 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 35 to the consolidated financial statements).



We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Madeco S.A.’s internal control over financial reporting as of December 31, 2008, 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 20, 2009, except for internal control over financial reporting related to Notes 30 and 35 of the 2008 consolidated financial statements for which the date is June 28, 2009, expressed an unqualified opinion thereon.









|                    | 
|------------------- | 
|ERNST & YOUNG LTDA. | 



Santiago, Chile

February 20, 2009

(Except for Notes 30 and 35 for which the date is June 28, 2009)



Report of Independent Registered Public Accounting Firm





To the Board of Directors and Shareholders of Madeco S.A. and Subsidiaries:



We have audited Madeco S.A.’s internal control over financial reporting as of December 31, 2008, 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.



In our opinion, Madeco S.A. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.



We have also 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, 2007 and 2008, and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 2008 and our report dated February 20, 2009, except for Notes 30 and 35 for which the date is June 28, 2009, expressed an unqualified opinion thereon.



|                    | 
|------------------- | 
|ERNST & YOUNG LTDA. | 



Santiago, Chile

February 20, 2009

(except for Notes 30 and 35 for which the date is June 28, 2009)





Application of Constant Chilean Pesos



The December 31, 2006 and 2007 consolidated financial statements have been restated for general price-level changes and expressed in constant Chilean pesos of December 31, 2008 purchasing power.













|                                                     |       |  |                    |  |             |  |             
|---------------------------------------------------- | ----- |  | ------------------ |  | ----------- |  | ------------
|                                                     |       |  | As of December 31,
|                                                     |       |  | 2007               |  | 2008        |  | 2008        
|ASSETS                                               | Notes |  | ThCh$              |  | ThCh$       |  | ThUS$       
|                                                     |       |  |                    |  |             |  | (Note 2 (c))
|Current assets:                                      |       |  |                    |  |             |  |             
|Cash                                                 |       |  | 11,336,562         |  | 10,422,209  |  | 16,376      
|Time deposits                                        | 5     |  | 8,585              |  | 132,011,656 |  | 207,419     
|Marketable securities                                | 6     |  | 850,296            |  | 57,883      |  | 91          
|Accounts receivable, net                             | 7     |  | 116,800,760        |  | 56,980,652  |  | 89,529      
|Notes and accounts receivable from related companies | 25    |  | 1,940,435          |  | 489,410     |  | 769         
|Inventories, net                                     | 8     |  | 146,884,031        |  | 54,957,466  |  | 86,350      
|Recoverable taxes, net                               | 20    |  | 14,439,851         |  | 3,840,566   |  | 6,034       
|Prepaid expenses                                     |       |  | 1,099,201          |  | 609,753     |  | 958         
|Deferred income taxes, net                           | 20    |  | 11,796,936         |  | 1,488,395   |  | 2,339       
|Other current assets                                 | 9     |  | 4,796,163          |  | 41,773,392  |  | 65,635      
|Total current assets                                 |       |  | 309,952,820        |  | 302,631,382 |  | 475,500     
|                                                     |       |  |                    |  |             |  |             
|Property, Plant and Equipment, net                   | 10    |  | 181,807,567        |  | 115,534,508 |  | 181,530     
|                                                     |       |  |                    |  |             |  |             
|Other assets:                                        |       |  |                    |  |             |  |             
|                                                     |       |  |                    |  |             |  |             
|Investments in related companies                     | 11    |  | 2,382,957          |  | -           |  | -           
|Investments in other companies                       | 12    |  | 4,796,723          |  | 124,811,289 |  | 196,105     
|Goodwill, net                                        | 13    |  | 17,254,969         |  | 987,627     |  | 1,552       
|Negative goodwill, net                               | 13    |  | (1,941,396)        |  | (2,071,335) |  | (3,255)     
|Long-term notes and accounts receivable              |       |  | 268,302            |  | 177,108     |  | 278         
|Intangible assets, net                               |       |  | 1,311,687          |  | 504,886     |  | 793         
|Other                                                | 14    |  | 14,615,366         |  | 9,066,221   |  | 14,245      
|Total other assets                                   |       |  | 38,688,608         |  | 133,475,796 |  | 209,718     
|Total assets                                         |       |  | 530,448,995        |  | 551,641,686 |  | 866,748     















The accompanying notes form an integral part of these consolidated financial statements.



|                                                |       |  |                    |  |             |  |             
|----------------------------------------------- | ----- |  | ------------------ |  | ----------- |  | ------------
|                                                |       |  |                   
|                                                |       |  | As of December 31,
|                                                |       |  | 2007               |  | 2008        |  | 2008        
|LIABILITIES AND SHAREHOLDERS’ EQUITY            | Notes |  | ThCh$              |  | ThCh$       |  | ThUS$       
|                                                |       |  |                    |  |             |  | (Note 2 (c))
|Current liabilities:                            |       |  |                    |  |             |  |             
|Short-term bank loans                           | 15    |  | 38,198,953         |  | 20,594,332  |  | 32,358      
|Current portion of long-term debt               | 15    |  | 19,222,949         |  | 8,822,230   |  | 13,862      
|Current portion of bonds payable                | 18    |  | 5,533,510          |  | -           |  | -           
|Long-term obligations, current portion          |       |  | 2,518,233          |  | 2,186,430   |  | 3,435       
|Dividends payable                               |       |  | 16,390,400         |  | 18,555      |  | 29          
|Accounts and notes payable                      |       |  | 37,137,522         |  | 20,969,239  |  | 32,947      
|Notes and accounts payable to related companies | 25    |  | 669,836            |  | 441,761     |  | 694         
|Accrued liabilities and provisions              | 16    |  | 13,192,979         |  | 8,340,292   |  | 13,104      
|Withholdings                                    |       |  | 3,960,343          |  | 1,889,581   |  | 2,969       
|Income taxes                                    |       |  | -                  |  | 12,342,191  |  | 19,392      
|Unearned revenues                               |       |  | 4,932,324          |  | 607,923     |  | 955         
|Other current liabilities                       |       |  | 1,417,976          |  | 31,623      |  | 50          
|Total current liabilities                       |       |  | 143,175,025        |  | 76,244,157  |  | 119,795     
|                                                |       |  |                    |  |             |  |             
|Long-term liabilities:                         
|Long-term debt                                  | 18    |  | 39,521,470         |  | 20,210,075  |  | 31,754      
|Bonds payable                                   | 18    |  | 18,102,519         |  | -           |  | -           
|Miscellaneous payables                          | 19    |  | 7,790,886          |  | 8,569,937   |  | 13,465      
|Accrued liabilities and provisions              | 16    |  | 4,888,639          |  | 1,646,303   |  | 2,587       
|Deferred income taxes                           | 20    |  | 4,102,385          |  | 3,880,192   |  | 6,097       
|Other long-term liabilities                     |       |  | 926,655            |  | 360,989     |  | 567         
|Total long-term liabilities                     |       |  | 75,332,554         |  | 34,667,496  |  | 54,470      
|                                                |       |  |                    |  |             |  |             
|Minority interest                               | 26    |  | 24,561,208         |  | 25,551,417  |  | 40,147      
|                                                | 23    |  | -                  |  | -           |  | -           
|Contingencies and commitments                  
|                                                |       |  |                    |  |             |  |             
|Shareholders’ equity:                           | 21    |  |                    |  |             |  |             
|Paid-in capital, no par value                   |       |  | 255,184,488        |  | 255,184,488 |  | 400,950     
|Reserves                                        |       |  | 27,123,264         |  | 57,737,805  |  | 90,719      
|Retained earnings                               |       |  | -                  |  | 5,072,456   |  | 7,970       
|Net income for the year                         |       |  | 21,409,810         |  | 97,183,867  |  | 152,697     
|Provisional dividends                           |       |  | (16,337,354)       |  | -           |  | -           
|Total Shareholders’ equity                      |       |  | 287,380,208        |  | 415,178,616 |  | 652,336     
|Total liabilities and Shareholders’ equity      |       |  | 530,448,995        |  | 551,641,686 |  | 866,748     







The accompanying notes form an integral part of these consolidated financial statements.



|                                                                                    |      |  |                                 |  |               |  |               |  |              | 
|----------------------------------------------------------------------------------- | ---- |  | ------------------------------- |  | ------------- |  | ------------- |  | ------------ | 
|                                                                                    |      |  | For the year ended December 31,
|                                                                                    | Note |  | 2006                            |  | 2007          |  | 2008          |  | 2008        
|                                                                                    |      |  | ThCh$                           |  | ThCh$         |  | ThCh$         |  | ThUS$       
|                                                                                    |      |  |                                 |  |               |  |               |  | (Note 2 (c))
|Operating income:                                                                   |      |  |                                 |  |               |  |               |  |             
|Net sales                                                                           |      |  | 653,964,041                     |  | 695,882,988   |  | 692,957,616   |  | 1,088,786   
|Cost of sales                                                                       |      |  | (560,195,897)                   |  | (614,304,128) |  | (612,809,965) |  | (962,856)   
|Gross profit                                                                        |      |  | 93,768,144                      |  | 81,578,860    |  | 80,147,651    |  | 125,930     
|Administrative and selling expenses                                                 |      |  | (33,223,664)                    |  | (37,894,138)  |  | (40,133,861)  |  | (63,059)    
|Operating income                                                                    |      |  | 60,544,480                      |  | 43,684,722    |  | 40,013,790    |  | 62,871      
|                                                                                    |      |  |                                 |  |               |  |               |  |             
|Non-operating income and expense:                                                   |      |  |                                 |  |               |  |               |  |             
|Interest income                                                                     |      |  | 1,877,064                       |  | 2,570,842     |  | 5,092,954     |  | 8,003       
|Other non-operating income                                                          | 24   |  | 136,434                         |  | 890,164       |  | 161,585,000   |  | 253,885     
|Equity participation in income of related companies                                 | 11   |  | 804,995                         |  | -             |  | 527           |  | 1           
|Interest expense                                                                    |      |  | (13,345,485)                    |  | (13,979,501)  |  | (16,459,844)  |  | (25,862)    
|Equity participation in losses of related companies                                 | 11   |  | -                               |  | (61,147)      |  | (1,091)       |  | (2)         
|Amortization of goodwill                                                            | 13   |  | (2,013,132)                     |  | (1,822,648)   |  | (16,854,812)  |  | (26,483)    
|Other non-operating expenses                                                        | 24   |  | (3,335,171)                     |  | (2,152,001)   |  | (30,243,891)  |  | (47,520)    
|Price-level restatement, net                                                        | 3    |  | (1,879,202)                     |  | (7,328,773)   |  | (6,886,036)   |  | (10,819)    
|Foreign exchange (loss) gain, net                                                   | 4    |  | 391,387                         |  | 4,284,394     |  | 4,117,278     |  | 6,469       
|Non-operating loss                                                                  |      |  | (17,363,111)                    |  | (17,598,670)  |  | 100,350,085   |  | 157,672     
|                                                                                    |      |  |                                 |  |               |  |               |  |             
|Income before income taxes, minority interest and amortization of negative goodwill |      |  | 43,181,369                      |  | 26,086,052    |  | 140,363,875   |  | 220,543     
|Income taxes                                                                        | 20   |  | (6,087,159)                     |  | (1,171,227)   |  | (39,708,550)  |  | (62,391)    
|Income before minority interest and amortization of negative goodwill               |      |  | 37,094,210                      |  | 24,914,825    |  | 100,655,325   |  | 158,152     
|Minority interest                                                                   | 26   |  | (1,799,002)                     |  | (3,602,141)   |  | (3,683,567)   |  | (5,788)     
|Income before amortization of negative goodwill                                     |      |  | 35,295,208                      |  | 21,312,684    |  | 96,971,758    |  | 152,364     
|Amortization of negative goodwill                                                   | 13   |  | 30,937                          |  | 97,126        |  | 212,109       |  | 333         
|Net income                                                                          |      |  | 35,326,145                      |  | 21,409,810    |  | 97,183,867    |  | 152,697     











The accompanying notes form an integral part of these consolidated financial statements.





|                                                               |                                  |  |               |  |               |  |              | 
|-------------------------------------------------------------- | -------------------------------- |  | ------------- |  | ------------- |  | ------------ | 
|                                                               | For the years ended December 31,
|                                                               | 2006                             |  | 2007          |  | 2008          |  | 2008        
|                                                               | ThCh$                            |  | ThCh$         |  | ThCh$         |  | ThUS$       
|                                                               |                                  |  |               |  |               |  | (Note 2 (c))
|Cash flow from operating activities:                           |                                  |  |               |  |               |  |             
|Collection of accounts receivable                              | 748,302,204                      |  | 841,965,486   |  | 800,285,920   |  | 1,257,422   
|Financial income received                                      | 1,191,961                        |  | 4,880,939     |  | 4,942,140     |  | 7,765       
|Dividends and other distributions received                     | 60,728                           |  | -             |  | -             |  | -           
|Other income received                                          | 9,081,729                        |  | 11,102,916    |  | 24,852,648    |  | 39,049      
|Payments to suppliers and personnel                            | (729,858,897)                    |  | (812,395,957) |  | (747,164,765) |  | (1,173,957) 
|Interest paid                                                  | (10,916,653)                     |  | (12,579,627)  |  | (10,129,898)  |  | (15,916)    
|Income taxes paid                                              | (5,815,195)                      |  | (7,185,752)   |  | (9,075,677)   |  | (14,260)    
|Other expenses                                                 | (335,470)                        |  | (5,985,447)   |  | (3,796,415)   |  | (5,965)     
|Value added taxes and other similar items paid                 | (4,794,289)                      |  | (3,315,568)   |  | (5,885,919)   |  | (9,248)     
|Net cash provided by operating activities                      | 6,916,118                        |  | 16,486,990    |  | 54,028,034    |  | 84,890      
|                                                               |                                  |  |               |  |               |  |             
|Cash flow from investing activities:                           |                                  |  |               |  |               |  |             
|Proceeds from sales of investments                             | -                                |  | 115           |  | 192,630,118   |  | 302,663     
|Proceeds from sales of property, plant and equipment           | 2,902,628                        |  | 1,017,855     |  | 140,516       |  | 221         
|Additions to property, plant and equipment                     | (16,764,385)                     |  | (20,393,582)  |  | (24,855,902)  |  | (39,054)    
|Investments in Cedsa S.A. and Peruplast S.A.                   | -                                |  | (10,702,885)  |  | (4,075,387)   |  | (6,403)     
|Additions to cash from acquired companies                      | -                                |  | 4,485,947     |  | -             |  | -           
|Investments in other companies                                 | (4,981)                          |  | -             |  | -             |  | -           
|Decrease in accounts receivable from related companies         | 98,732                           |  | -             |  | -             |  | -           
|Other investing activities (net)                               | 1,570,252                        |  | -             |  | -             |  | -           
|Other disbursements for investment                             | -                                |  | (29,444)      |  | (29,994,329)  |  | (47,128)    
|Net used in provided by investing activities                   | (12,197,754)                     |  | (25,621,994)  |  | 133,845,016   |  | 210,299     
|                                                               |                                  |  |               |  |               |  |             
|Cash flow from financing activities:                           |                                  |  |               |  |               |  |             
|Borrowings from banks and others                               | 163,956,780                      |  | 244,073,119   |  | 234,957,031   |  | 369,168     
|Proportion of dividends paid to minority shareholders          | (710,172)                        |  | (738,086)     |  | (17,977,224)  |  | (28,246)    
|Payments of loans                                              | (149,393,067)                    |  | (238,542,867) |  | (255,097,351) |  | (400,813)   
|Payment of loans from related parties                          | (1,816,029)                      |  | -             |  | -             |  | -           
|Capital distributions                                          | -                                |  | (5,531,911)   |  | -             |  | -           
|Decrease in bonds payable                                      | (4,978,251)                      |  | (5,275,317)   |  | (23,381,944)  |  | (36,738)    
|Capital increase in subsidiaries contributed                   | 11,067,962                       |  | 7,040,654     |  | 1,978,431     |  | 3,109       
|by minority shareholders                                      
|Other financing disbursements                                  | (1,229,742)                      |  | -             |  | -             |  | -           
|Net cash (used in) provided by financing activities            | 16,897,480                       |  | 1,025,592     |  | (59,521,057)  |  | (93,520)    
|Net (decrease) increase in cash and cash equivalents           | 11,615,845                       |  | (8,109,412)   |  | 128,351,993   |  | 201,669     
|Effect of price-level restatement on cash and cash equivalents | (398,721)                        |  | (215,903)     |  | 14,015,294    |  | 22,021      
|Net (decrease) increase of cash and cash equivalents           | 11,217,124                       |  | (8,325,315)   |  | 142,367,287   |  | 223,690     
|Cash and cash equivalents at the beginning of year             | 9,303,634                        |  | 20,520,758    |  | 12,195,443    |  | 19,162      
|Cash and cash equivalents at the end of year                   | 20,520,758                       |  | 12,195,443    |  | 154,562,730   |  | 242,852     

















The accompanying notes form an integral part of these consolidated financial statements.





|                                                                                 |                                  |  |              |  |               |  |              |  |  |  |  | 
|-------------------------------------------------------------------------------- | -------------------------------- |  | ------------ |  | ------------- |  | ------------ |  |  |  |  | 
|                                                                                 | For the years ended December 31,
|                                                                                 | 2006                             |  | 2007         |  | 2008          |  | 2008        
|                                                                                 | 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                                                          | 35,326,145                       |  | 21,409,810   |  | 97,183,867    |  | 152,697     
|Items that do not represent cash flows:                                          |                                  |  |              |  |               |  |             
|Depreciation                                                                     | 15,662,161                       |  | 17,189,921   |  | 14,585,599    |  | 22,917      
|Amortization of goodwill                                                         | 2,013,132                        |  | 1,822,648    |  | 16,854,812    |  | 26,483      
|Amortization of negative goodwill                                                | (30,937)                         |  | (97,126)     |  | (212,109)     |  | (333)       
|Minority interest                                                                | 1,799,002                        |  | 3,602,141    |  | 3,683,567     |  | 5,788       
|Price-level restatement, net                                                     | 1,879,202                        |  | 7,328,773    |  | 6,886,036     |  | 10,819      
|Foreign exchange loss (gain), net                                                | (391,387)                        |  | (4,284,394)  |  | (4,117,278)   |  | (6,469)     
|Gain on sales of property, plant and equipment                                   | (19,469)                         |  | (479,477)    |  | (539,331)     |  | (847)       
|Loss (gain) on sale of investments                                               | -                                |  | 36,392       |  | (156,358,790) |  | (245,673)   
|Equity participation in net losses (income)                                      | (804,995)                        |  | -            |  | (527)         |  | (1)         
|of investments under equity method, net                                         
|Accrued equity participation in loss of related companies                        | -                                |  | 61,147       |  | 1,091         |  | 2           
|Losses (gains) on sales of investments                                           | (36,990)                         |  | 11,273       |  | -             |  | -           
|Write-offs and provisions                                                        | 7,285,678                        |  | 1,120,733    |  | 1,896,946     |  | 2,981       
|Other charges to income which do not                                             | 8,599,425                        |  | 9,802,299    |  | 45,936,624    |  | 72,175      
|represent cash flows (1)                                                        
|Net changes in operating assets and liabilities:                                 |                                  |  |              |  |               |  |             
|Increase in accounts and notes receivable                                        | (30,266,358)                     |  | (2,066,576)  |  | (1,678,565)   |  | (2,637)     
|Increase in inventories                                                          | (29,803,463)                     |  | (18,084,097) |  | 2,537,138     |  | 3,986       
|Increase in other assets                                                         | (1,859,430)                      |  | (10,081,273) |  | 8,706,549     |  | 13,680      
|(Decrease) increase in accounts and notes payable                                | 5,370,169                        |  | (7,941,932)  |  | 20,940,002    |  | 32,901      
|Increase (decrease) in other current liabilities                                 | (7,805,766)                      |  | (2,863,272)  |  | (2,277,597)   |  | (3,579)     
|Net cash flow (used in) provided by operating activities                         | 6,916,118                        |  | 16,486,990   |  | 54,028,034    |  | 84,890      
|                                                                                 |                                  |  |              |  |               |  |             
|                                                                                 |                                  |  |              |  |               |  |             
|                                                                                 |                                  |  |              |  |               |  |             
|                                                                                 | For the years ended December 31,
|                                                                                 | 2006                             |  | 2007         |  | 2008          |  | 2008        
|                                                                                 | ThCh$                            |  | ThCh$        |  | ThCh$         |  | ThUS$       
|                                                                                 |                                  |  |              |  |               |  | (Note 2 (c))
|Supplemental Cash Flow Information:                                              |                                  |  |              |  |               |  |             
|Assets acquired under capital leases                                             | 497,617                          |  | 446,148      |  | -             |  | -           
|                                                                                 |                                  |  |              |  |               |  |             
|                                                                                 |                                  |  |              |  |               |  |             



(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.

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 divested this segment as of September 30, 2008. 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 Profiles. The 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



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 35.



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, 2007 and 2008 and for the years ended December 31, 2006, 2007 and 2008 include the following subsidiaries:



|                                                      |         |                    |  |       |  |      
|----------------------------------------------------- | ------- | ------------------ |  | ----- |  | -----
|                                                      |         | As of December 31,
|                                                      |         | 2006               |  | 2007  |  | 2008 
|                                                      |         | %                  |  | %     |  | %    
|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 |  | -    
|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) | (9)     | 100                |  | 100   |  | 100  
|Indelqui S.A. and Subsidiary (Argentina)              | (6)     | -                  |  | 100   |  | -    
|Madeco Brass Mills S.A.                               | (7)     | -                  |  | 100   |  | 100  
|Invercables S.A.                                      | (10)    | -                  |  | 100   |  | -    
|Madeco Cables S.A.                                    | (7)     | -                  |  | 100   |  | -    
|Cedsa S.A.                                            | (8)     | -                  |  | 80    |  | -    



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%.

Indalum S.A. and subsidiaries include the consolidation of PVTEC S.A., Alumco S.A. and subsidiaries and Inversiones Alumco S.A. and subsidiaries.

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.







The consolidated financial statements of Soinmad S.A. include the direct subsidiaries Cotelsa S.A. and Inmobiliaria e Industrial Cotelsa S.A.

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.

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.

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.

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 27 of the financial statements.

During June 2008, Metal Overseas decreased its capital by US$114.175.582 paying that subscription to Madeco S.A. using the shares of Ficap S.A...

During 2008, Invercable S.A. participated in the capital increase of Indeco S.A. for US$86.5 million obtaining, through this transaction majority ownership interest. Accordingly, beginning on the aforementioned date, it will be incorporated into the consolidation of Invercable S.A..







During June 2008, Madeco Cables S.A. increased its capital by 4,303,526 shares where Madeco S.A. participated in the subscription of 4,188,640 shares and paid this contribution through the delivery of net assets and liabilities of its Cable Business Unit for an amount equivalent to ThCh$42,766,014.  Additionally, Soinmad S.A. participated in this increase paying this subscription of shares through the shares of Cotelsa S.A.. Therefore, the financial statements of Madeco Cables S.A. and subsidiaries include the consolidation of the direct subsidiary Cotelsa S.A..



On September 17, 2008, the shareholders at the General Meeting of Shareholders of Soinmad S.A. agreed to increase capital by ThCh$ 127,262.484 equivalent to 107,639,522 shares.  This increase is subscribed and paid by Madeco S.A. through the capitalization of 2,500,000 shares of Nexans S.A. (France) and 6,658,650 shares of Sociedad Metalúrgica e Industrial S.A. Argentina.



The operations indicated above related to company reorganization were treated in accordance with Technical Bulletin No. 72, Number 28.

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, 2008 was approximately 8.9%.



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, 2006 ..................... | 86.52  | 2.1%                              
|November 30, 2007 ..................... | 92.95  | 7.4%                              
|November 30, 2008 ..................... | 101.21 | 8.9%                              



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, 2006 ..................... | 86.60  | 2.6%                             
|December 31, 2007 ..................... | 93.38  | 7.8%                             
|December 31, 2008 ..................... | 100.00 | 7.1%                             



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, 2006 ............ | 18,336.38
|December 31, 2007 ............ | 19,622.66
|December 31, 2008............  | 21,452.57





Comparative financial statements



For comparative purposes, the historical December 31, 2006 and 2007 consolidated financial statements and their accompanying notes have been presented in constant Chilean pesos as of December 31, 2008. 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, 2008 as follows:





|             |                
|------------ | ---------------
|Year         | Change in Index
|             |                
|2007........................ | 7.4%  (1)      
|2008........................ | 8.9%  (2)      





(1) Equivalent to the change in the CPI for 2007 multiplied with the change in the CPI for 2008.

(2) Equivalent to the change in the CPI for 2008.



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 22 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 2006, 2007 and 2008 the foreign exchange rates of most relevant foreign currencies were as follows:



|                           |  |                    |  |        |  |       
|-------------------------- |  | ------------------ |  | ------ |  | ------
|                           |  | As of December 31,
|                           |  | 2006               |  | 2007   |  | 2008  
|Currency                   |  |                    |  |        |  |       
|United States dollar (US$) |  | 532.39             |  | 496.89 |  | 636.45
|Argentine peso (AR$)       |  | 173.93             |  | 157.79 |  | 184.48
|Brazilian real (BR$)       |  | 248.78             |  | 280.32 |  | 271.99
|Peruvian sol (S$)          |  | 166.89             |  | 167.40 |  | 202.69



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, 2008 of Ch$ 636.45 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,
|                                                      |  | 2006               |  | 2007       |  | 2008       
|                                                      |  | ThCh$              |  | ThCh$      |  | ThCh$      
|Cash and Cash Equivalents                             |  |                    |  |            |  |            
|Cash                                                  |  | 5,536,430          |  | 11,336,562 |  | 10,422,209 
|Time deposits (Note 5)                                |  | 305,908            |  | 8,585      |  | 132,011,656
|Mutual funds (Note 6)                                 |  | 357,915            |  | 850,296    |  | 57,883     
|Securities purchased under resell agreements (Note 9) |  | 14,320,505         |  | -          |  | 12,070,982 
|Total                                                 |  | 20,520,758         |  | 12,195,443 |  | 154,562,730







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.

Note 2 – Summary of significant accounting policies, continued





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.



The investment in shares maintained on the French company Nexans S.A. has been valued at restated cost with no prejudice that this investment has been considered by the parent company Madeco S.A. as a permanent investment with ability to have significant influence. The valuation of this investment according to the proportional equity method using the acquisition method as basis to adjust the equity of the acquiree, would be applied upon having the information required to apply this mechanism. Accordingly, the first proportional equity value would be applied as of March 31, 2009 on the financial statements as of December 31, 2008 of its affiliate Nexans. This criterion was authorized by the SVS through excerpt 2.953 dated February 5, 2009, as indicated in Note 12.









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.

Derivative contracts 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,
|                                                       | 2006                               |  | 2007         |  | 2008        
|                                                       | ThCh$                              |  | ThCh$        |  | ThCh$       
|                                                       |                                    |  |              |  |             
|Property, plant and equipment, net                     | 1,956,118                          |  | 6,580,216    |  | 7,230,410   
|Inventories, net                                       | 192,738                            |  | 125,348      |  | 522,221     
|Other current assets                                   | 183,410                            |  | 710,644      |  | 823,914     
|Other assets                                           | 2,555,850                          |  | 9,899,427    |  | 12,782,272  
|Other liabilities and minority interest                | (212,134)                          |  | (1,005,344)  |  | (2,165,151) 
|Shareholders’ equity, net                              | (5,125,617)                        |  | (20,322,549) |  | (23,486,537)
|Income and expense accounts                            | (349,739)                          |  | (635,745)    |  | (1,894,695) 
|Net adjustment of assets and liabilities indexed to UF | (1,079,828)                        |  | (2,680,770)  |  | (698,470)   
|Price-level restatement, net                           | (1,879,202)                        |  | (7,328,773)  |  | (6,886,036) 





Note 4 - Foreign exchange differences



Foreign exchange differences are summarized as follows:



|                                                     |                                    |  |             |  |              | 
|---------------------------------------------------- | ---------------------------------- |  | ----------- |  | ------------ | 
|                                                     | Credit (charge) as of December 31,
|                                                     | 2006                               |  | 2007        |  | 2008        
|                                                     | ThCh$                              |  | ThCh$       |  | ThCh$       
|                                                     |                                    |  |             |  |             
|Cash and short-term investments                      | 372,736                            |  | (6,163)     |  | 4,949,895   
|Accounts receivable                                  | 643,894                            |  | (1,759,543) |  | 3,896,646   
|Other assets                                         | 284,322                            |  | (279,933)   |  | 19,316,863  
|Bank loans                                           | (614,829)                          |  | 663,532     |  | (11,802,338)
|Other liabilities                                    | (449,254)                          |  | 1,049,696   |  | (5,613,027) 
|Loss on hedging transactions                         | (2,567,617)                        |  | (1,190,688) |  | (538,994)   
|Translation adjustments in foreign subsidiaries, net | 2,722,134                          |  | 5,807,493   |  | (6,091,767) 
|                                                     | (391,387)                          |  | 4,284,394   |  | 4,117,278   





Note 5 – Time deposits



Time deposits are summarized as follows:



|                                          |                    |  |            
|----------------------------------------- | ------------------ |  | -----------
|                                          | As of December 31,
|                                          | 2007               |  | 2008       
|                                          | ThCh$              |  | ThCh$      
|                                          |                    |  |            
|Time deposits in other foreign currencies | 8,585              |  | 132,011,656
|Total time deposits                       | 8,585              |  | 132,011,656





Note 6 – Marketable securities



Marketable securities are summarized as follows:



|                            |                    |  |       
|--------------------------- | ------------------ |  | ------
|                            | As of December 31,
|                            | 2007               |  | 2008  
|                            | ThCh$              |  | ThCh$ 
|                            |                    |  |       
|Mutual funds                | 850,296            |  | 57,883
|Total marketable securities | 850,296            |  | 57,883



Note 7 - Accounts receivable



a) Accounts receivable, net of allowances for doubtful accounts, are summarized as follows:



|                                                 |                    |  |            
|------------------------------------------------ | ------------------ |  | -----------
|                                                 | As of December 31,
|                                                 | 2007               |  | 2008       
|                                                 | ThCh$              |  | ThCh$      
|Trade accounts receivable                        | 101,924,567        |  | 42,484,936 
|Allowance for doubtful trade accounts receivable | (3,897,662)        |  | (2,391,396)
|Notes receivable                                 | 13,426,001         |  | 15,333,033 
|Allowance for doubtful notes receivables         | (1,732,112)        |  | (1,210,681)
|Other accounts receivable                        | 9,533,233          |  | 5,241,433  
|Allowance for doubtful other accounts            | (2,453,267)        |  | (2,476,673)
|Total accounts receivable, net                   | 116,800,760        |  | 56,980,652 





b) Changes in the allowance for doubtful accounts receivable for the years ended December 31, 2006, 2007 and 2008 are as follows:



|                                            |                    |  |             |  |            
|------------------------------------------- | ------------------ |  | ----------- |  | -----------
|                                            | As of December 31,
|                                            | 2006               |  | 2007        |  | 2008       
|                                            | ThCh$              |  | ThCh$       |  | ThCh$      
|Balance at the beginning of the year        | 9,802,799          |  | 9,768,668   |  | 8,083,042  
|Price-level restatement                     | (169,367)          |  | (348,373)   |  | (91,421)   
|Companies Disposed Of                       | -                  |  | -           |  | (3,072,966)
|Effect of devaluation of foreign currencies | 62,941             |  | 210,390     |  | 267,170    
|Allowance established, net                  | 395,335            |  | 346,403     |  | 1,385,926  
|Write-offs                                  | (323,041)          |  | (1,894,046) |  | (493.001)  
|Balance at the end of the year              | 9,768,668          |  | 8,083,042   |  | 6,078,750  









Note 8 - Inventories



a) Inventories are summarized as follows:



|                           |                    |  |            
|-------------------------- | ------------------ |  | -----------
|                           | As of December 31,
|                           | 2007               |  | 2008       
|                           | ThCh$              |  | ThCh$      
|                           |                    |  |            
|Raw materials              | 37,517,357         |  | 19,796,314 
|Finished goods             | 48,980,112         |  | 10,953,840 
|Work-in-progress           | 26,410,859         |  | 7,114,410  
|Consumable materials       | 9,641,194          |  | 5,033,287  
|Supplies in transit        | 19,692,853         |  | 6,396,566  
|Supplies                   | 7,390,324          |  | 7,200,197  
|Sub-total                  | 149,632,699        |  | 56,494,614 
|Allowance for obsolescence | (2,748,668)        |  | (1,537,148)
|Inventories, net           | 146,884,031        |  | 54,957,466 





b) Changes in the allowance for obsolescence for the years ended December 31, 2006, 2007 and 2008 are as follows:



|                                            |                    |  |           |  |            
|------------------------------------------- | ------------------ |  | --------- |  | -----------
|                                            | As of December 31,
|                                            | 2006               |  | 2007      |  | 2008       
|                                            | ThCh$              |  | ThCh$     |  | ThCh$      
|                                            |                    |  |           |  |            
|Balance at beginning of year                | 3,313,372          |  | 3,278,169 |  | 2,748,668  
|Price-level restatement                     | (68,150)           |  | (225,869) |  | (224,639)  
|Effect of devaluation of foreign currencies | 125,261            |  | (31,664)  |  | 45,129     
|Companies Disposed Of                       | -                  |  | -         |  | (1,341,963)
|Allowance established                       | 608,887            |  | 327,487   |  | 382,879    
|Allowance released (1)                      | (701,202)          |  | (312,578) |  | (72,926)   
|Write-offs                                  | -                  |  | (286,877) |  | -          
|Balance at end of year                      | 3,278,169          |  | 2,748,668 |  | 1,537,148  





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 29) 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,
|                                                                    | 2007               |  | 2008      
|                                                                    | ThCh$              |  | ThCh$     
|Deposit in guarantee                                                | 1,483              |  | 2,840     
|Property, plant and equipment to be disposed of, net  (2) and (3)   | 2,565,430          |  | 5,156,194 
|Discount on bond issuance                                           | 183,373            |  | -         
|Instruments acquired under resele agreements                        | -                  |  | 12,070,982
|Guarantees for the sale of the Cables Business (escrow account) (1) | -                  |  | 23,645,300
|Copper hedging agreement at fair value (4)                          | 1,882,518          |  | 875,377   
|Other                                                               | 163,359            |  | 22,699    
|Total                                                               | 4,796,163          |  | 41,773,392





1. Cash balances and marketable securities (escrow account) maintained in guarantee which have the restrictions indicated in Note 23 Number 3 letter a)
2. Shown net of adjustment to realization value of ThCh$ 230,254 (ThCh$ 299,978 as of December 31,  2007).
3. During 2007, the subsidiary Optel Brasil Ltda. reclassified assets in the amount of ThCh$ 1,165,572 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 29 “Derivative Contracts”.







The detail of securities purchased under resell agreements to resell as of December 31, 2008 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 9, 2008  | January 8, 2009  | Banchile Corredores de Bolsa S.A. | Ch$      | 6,000,000,  | 8,76     | 6,043,800 | Non-indexed promissory note | 6,032,120 
|December 16, 2008 | January 15, 2009 | Banchile Corredores de Bolsa S.A. | Ch$      | 299,062     | 8,76     | 301,245   | Non-indexed promissory note | 300,154   
|December 16, 2008 | January 15, 2009 | Banchile Corredores de Bolsa S.A. | Ch$      | 5,602,009   | 8,76     | 5,642,903 | Non-indexed promissory note | 5,622,455 
|December 16, 2008 | January 15, 2009 | Banchile Corredores de Bolsa S.A. | Ch$      | 115,829     | 8,76     | 116,675   | Non-indexed promissory note | 116,253   
|                  |                  |                                   |          |             |          |           | Total                       | 12,070,982





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$ 2,506,495 and ThCh$ 2,608,561 as of December 31, 2007 and 2008, respectively, and are summarized as follows:



|                                                        |                    |  |              
|------------------------------------------------------- | ------------------ |  | -------------
|                                                        | As of December 31,
|                                                        | 2007               |  | 2008         
|                                                        | ThCh$              |  | ThCh$        
|                                                        |                    |  |              
|Land                                                    | 16,296,420         |  | 10,312,525   
|Buildings and Infrastructure (2)                        |                    |  |              
|Buildings and infrastructure (2)                        | 67,552,040         |  | 49,733,586   
|Accumulated depreciation (2)                            | (21,376,087)       |  | (14,977,326) 
|Subtotal buildings and infrastructure, net (2)          | 46,175,953         |  | 34,756,260   
|Machinery and Equipment                                 |                    |  |              
|Machinery and equipment (2)                             | 264,794,488        |  | 164,408,780  
|Accumulated depreciation (2)                            | (163,016,871)      |  | (109,383,270)
|Subtotal machinery and equipment, net (2)               | 101,777,617        |  | 55,025,510   
|Other Property, Plant and Equipment                     |                    |  |              
|Leased assets (2)                                       | 22,517,938         |  | 20,424,575   
|Furniture and fixtures (2)                              | 4,191,621          |  | 3,763,629    
|Office equipment (2)                                    | 7,657,473          |  | 4,598,948    
|Tools and others (2)                                    | 1,804,603          |  | 1,555,067    
|Other property, plant and equipment (2)                 | 7,674,326          |  | 7,521,373    
|Accumulated depreciation (1)                            | (17,040,947)       |  | (13,081,743) 
|Subtotal other property, plant and equipment, net (2)   | 26,805,014         |  | 24,781,849   
|Revaluation from technical appraisals                   |                    |  |              
|Land (2)                                                | 3,386,781          |  | 1,486,936    
|Buildings and infrastructure (2)                        | 8,690,603          |  | 1,585,716    
|Machinery and equipment (2)                             | 1,981,825          |  | -            
|Accumulated depreciation (2)                            | (5,529,610)        |  | (990,993)    
|Subtotal revaluation from technical appraisals, net (2) | 8,529,599          |  | 2,081,659    
|Total depreciation                                      | (17,777,036)       |  | (11,423,295) 
|Total property, plant and equipement,net                | 181,807,567        |  | 115,534,508  







1. The total accumulated depreciation includes accumulated depreciation of leased assets of ThCh$ 3,337,908 and ThCh$ 3,502,229 as of December 31, 2007 and 2008, respectively.
2. The decrease in these balances is explained by the disposal of the cable unit companies as described in Note 28

























Depreciation expense is summarized as follows:



|                                                        |                                 |  |            |  |            | 
|------------------------------------------------------- | ------------------------------- |  | ---------- |  | ---------- | 
|                                                        | For the year ended December 31,
|                                                        | 2006                            |  | 2007       |  | 2008      
|Included within the following income statement caption: | ThCh$                           |  | ThCh$      |  | ThCh$     
|                                                        |                                 |  |            |  |           
|Cost of sales                                           | 13,992,085                      |  | 15,723,928 |  | 10,205,955
|Administrative and selling expenses                     | 1,670,076                       |  | 1,465,993  |  | 1,173,713 
|Sub total                                               | 15,662,161                      |  | 17,189,921 |  | 11,379,668
|                                                        |                                 |  |            |  |           
|Non-operating expense                                   | 1,060,309                       |  | 587,115    |  | 43,628    
|Total                                                   | 16,722,470                      |  | 17,777,036 |  | 11,423,295



No financing costs were capitalized to property, plant and equipment during 2006, 2007 and 2008. The Company recorded impairment losses related to its property, plant and equipment amounting to ThCh$ 1,090,765, ThCh$ 178,424 and ThCh$ 551,899 during 2006, 2007 and 2008, respectively.







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, 2007 and 2008, the detail of property, plant and equipment held for sale, after adjustments to net realizable value was as follows:



|                                                           |                    |  |          
|---------------------------------------------------------- | ------------------ |  | ---------
|                                                           | As of December 31,
|                                                           | 2007               |  | 2008     
|                                                           | ThCh$              |  | ThCh$    
|                                                           |                    |  |          
|Building Vitacura (Chile)                                  | 1,194,512          |  | 1,199,179
|Land in Via Matoim 902 (Aratú plant) (Brazil) (1)          | -                  |  | 2,471,037
|Machinery and equipment Optel Ltda. (Brazil)               | 1,039,809          |  | 1,223,008
|Other                                                      | 331,109            |  | 262,970  
|Subtotal current assets (Note 9)                           | 2,565,430          |  | 5,156,194
|                                                           |                    |  |          
|Land at Vicuña Mackenna 4665 (Chile)                       | 1,151,002          |  | 918,026  
|Land and building at Lomas de Zamora (Argentina)           | 1,165,265          |  | 734,166  
|San Luis plant (Argentina)                                 | 222,727            |  | 261,969  
|Land in Via Matoim 902 (Aratú plant) (Brazil) (1)          | 1,165,572          |  | -        
|Machinery and equipment Laton (Chile)                      | 368,379            |  | 436,595  
|Other                                                      | 480,902            |  | 6,060    
|Subtotal non-current assets (Note 14)                      | 4,553,847          |  | 2,356,816
|Total property, plant and equipment to be disposed of, net | 7,119,277          |  | 7,513,010



Property, plant and equipment held for sale are recorded at their net realizable values and include allowances of ThCh$ 299,978 and ThCh$ 230,254 related to current assets, and of ThCh$ 5,183,709 and ThCh$ 5,528,811 related to non-current assets as of December 31, 2007 and 2008, respectively.



For the years ended December 31, 2006, 2007 and 2008, the Company recognized impairment charges (net realizable value) related to its Property, plant and equipment held for sale of ThCh$ 343,495, ThCh$ 0 and for ThCh$ 0, respectively.



(1)  During 2007, the amount of ThCh$ 1,165,572, related to assets for sale of the subsidiary Ficap S.A., was reclassified to Other assets.







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%



On January 11, 2008, the related agreement was amended in respect al saldo insluto. 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. 268,403

Nominal value of agreement  :  U.F. 330,034

No. of installments   :  17 (semi-annually)

Period     :  December 28, 2007 to May 15, 2016

Fixed interest rate   :  4.80%







c) Leased property, plant  and equipment



c.1 Crédito Leasing S.A. Leasing Contract



On June 1,2006, Peruplast S.A.negotiated a Coextrusor Carnevalli machinery leasing contract with Crédito Leasing for a term of 48 months,as follows.



Lessor     :  Crédito Leasing S.A.

Lessee      :  Peruplast S.A.

Assets covered    :  Carnevalli co extruser

Purchase price    :  ThCh$510,469

Number of installments   :  48 months

Term of the contract   :  01/06/2006 to 01/05/2010

Interest rate    :  7.30% anually



c.2 Crédito Leasing S.A. Leasing Contract



On June 26,2007, Peruplast S.A.negotiated a Schiavi press leasing contract with Crédito Leasing for a term of 60 months,as follows.



Lessor     :  Crédito Leasing S.A.

Lessee      :  Peruplast S.A.

Assets covered    :  Schiavi flexo press

Purchase price    :  ThCh$1,053,201

Number of installments   :  60 months

Term of the contract   :  26/06/2007 to 01/07/2012

Interest rate    :  7.00% anually



c.3 Crédito Leasing S.A. Leasing Contract



On February 1, 2003, Tech Pak S.A.(absorbed by Peruplast S.A) negotiated an Avanti press leasing contract with Crédito Leasing for a term of 60 months,as follows.



Lessor     :  Crédito Leasing S.A.

Lessee      :  Tech Pak S.A.

Assets covered    :  Avanti press

Purchase price    :  ThCh$203,381

Number of installments   :  60 months

Term of the contract   :  01/02/2003 to 01/01/2008

Interest rate    :  6.00% anually



As of December 31,2008, the purchase option over this asset was exercised and this was re-classified as Machinery and equipment.











c.4 Crédito Leasing S.A. Leasing Contract



On October 1, 2006, Tech Pak S.A.(absorbed by Peruplast S.A) negotiated a press chamber leasing contract with Crédito Leasing for a term of 24 months,as follows.



Lessor     :  Crédito Leasing S.A.

Lesse      :  Tech Pak S.A.

Assets covered    :  BST video camera for press vision

Purchase price    :  ThCh$33,832

Number of installments   :  24 months

Term of the contract   :  01/10/2006 to 01/10/2008

Interest rate    :  8.00% anually



As of December 31,2008, the purchase option over this asset was exercised and this was re-classified as Machinery and equipment.



c.5 Crédito Leasing S.A. Leasing Contract



On June 26, 2007, Tech Pak S.A.(absorbed by Peruplast S.A) negotiated a Comexi press leasing contract with Crédito Leasing for a term of 48 months,as follows.



Lessor     :  Crédito Leasing S.A.

Lessee      :  Tech Pack S.A.

Assets covered    :  Comexi flexo press

Purchase price    :  ThCh$930,084

Number of installments   :  48 months

Term of the contract   :  26/06/2007 to 01/07/2011

Interest rate    :  7.30% anually



c.6 Citibank Leasing Contract



On February 28, 2005, Peruplast S.A. negotiated a Schiavi press leasing contract with Citibank for a term of 48 months,as follows.



Lessor     :  Citibank

Lessee      :  Peruplast S.A.

Assets covered    :  Schiavi press

Purchase price    :  ThCh$371,233

Number of installments   :  48 months

Term of the contract   :  28/02/2005 to 25/02/2009

Interest rate    :  6.70% anually















c.7 Interbank. Leasing Contract



On March 22, 2006, Peruplast S.A. negotiated a Pouchera sealing machine leasing contract with Interbank for a term of 24 months,as follows.



Lessor     :  Interbank

Lessee      :  Peruplast S.A.

Assets covered    :  Ponchera sealer

Purchase price    :  ThCh$41,667

Number of installments   :  24 months

Term of the contract   :  22/03/2006 to 10/02/2008

Interest rate    :  6.80% anually



As of December 31,2008, the purchase option over this asset was exercised and this was re-classified as Machinery and equipment.



c.8 Interbank  Leasing Contract



On June 22, 2006, Peruplast S.A. negotiated a Schiavi laminating machine leasing contract with Interbank for a term of 48 months,as follows.



Lessor     :  Interbank

Lesse      :  Peruplast S.A.

Assets covered    :  Schiavi laminator

Purchase price    :  ThCh$243,410

Number of installments   :  48 months

Term of the contract   :  22/06/2006 to 01/06/2010

Interest rate    :  7.40% anually



c.9 Interbank  Leasing Contract



On September 26, 2005, Tech Pak (absorbed by Peruplast S.A.) negotiated a Flexo Visión press machine leasing contract with Interbank for a term of 48 months,as follows.



Lessor     :  Interbank

Lessee      :  Tech Pak S.A.

Assets covered    :  Flexo Visión press

Purchase price    :  ThCh$518,280

Number of installments   :  48 months

Term of the contract   :  26/09/2005 to 26/09/2009

Interest rate    :  7.30% anually

















c.10 Interbank Leasing S.A. Contract



On February 25, 2008, Peruplast S.A. negotiated a Primaflex press, a Nordmeccánica laminator and sleeves leasing contract with Interbank for a term of 60 months,as follows.



Lessor     :  Interbank

Lessee      :  Peruplast S.A.

Assets covered    :  Primaflex press, Nordmeccánica laminator and

sleeves

Purchase price    :  ThCh$1,237,964

Number of installments   :  60 months

Term of the contract   :  01/08/2008 to 01/07/2013

Interest rate    :  6.65% anually



c.11 Banco de Crédito Leasing Contract



On April 25, 2008, Peruplast S.A. negotiated a real estate leasing contract with Banco de Crédito for a term of 72 months,as follows.



Lessor     :  Banco de Crédito

Lessee      :  Peruplast S.A.

Assets covered    :  Real stateLos Plasticos street

Purchase price    :  ThCh$1,157,310

Number of installments   :  72 months

Term of the contract   :  01/08/2008 to 01/07/2014

Interest rate    :  6.80% anually



c.12 Banco de Crédito Leasing Contract



On May 14, 2008, Peruplast S.A. negotiated a Hino truck and Toyota loader leasing contract with Banco de Crédito for a term of 48 months,as follows.



Lessor     :  Banco de Crédito

Lessee      :  Peruplast S.A.

Assets covered    :  Hino truck and Toyota loader

Purchase price    :  ThCh$47,985

Number of installments   :  48 months

Term of the contract   :  01/07/2008 to 01/06/2012

Interest rate    :  8.00% anually





















c.13 Banco de Crédito Leasing Contract



On May 14, 2008, Peruplast S.A. negotiated a OHIO eléctro magnetic engraver machine leasing contract with Banco de Crédito for a term of 48 months,as follows.



Lessor     :  Banco de Crédito

Lessee      :  Peruplast S.A.

Assets covered    :  OHIO eléctro magnetic engraver

Purchase price    :  ThCh$89,143

Number of installments   :  48 months

Term of the contract   :  01/08/2008 to 01/07/2012

Interest rate    :  8.00% anually





Note 11 – Investments in related companies



The participation owned and carrying values of investments in related companies as of December 31, 2007 and 2008 are as follows:



|                             |                  |  |                    |  |           |  |      
|---------------------------- | ---------------- |  | ------------------ |  | --------- |  | -----
|                             | Percentage owned |  | As of December 31,
|                             | 2007             |  | 2008               |  | 2007      |  | 2008 
|                             | %                |  | %                  |  | ThCh$     |  | ThCh$
|Related company              |                  |  |                    |  |           |  |      
|Colada Continua Chilena S.A. | 41.00%           |  | -                  |  | 1,713,599 |  | -    
|Cobrecon Perú S.A.           | 33.33%           |  | -                  |  | 669,358   |  | -    
|Total                        |                  |  |                    |  | 2,382,957 |  | -    





The Company’s equity participation in the net income of the investees is as follows:



|                             |                                  |  |          |  |        
|---------------------------- | -------------------------------- |  | -------- |  | -------
|                             | For the years ended December 31,
|                             | 2006                             |  | 2007     |  | 2008   
|                             | ThCh$                            |  | ThCh$    |  | ThCh$  
|Related company              |                                  |  |          |  |        
|                             |                                  |  |          |  |        
|Peruplast S.A.               | 444,170                          |  | -        |  | -      
|Tech Pak S.A.                | 350,102                          |  | -        |  | -      
|Colada Continua Chilena S.A. | 552                              |  | (55,359) |  | 527    
|Cobrecon Peru S.A.           | 10,171                           |  | (5,788)  |  | (1,091)
|Total                        | 804,995                          |  | (61,147) |  | (564)  







Note 12 – Investments in other companies



The detail of investments in other companies as of December 31, 2008 and 2007, as described in Note 2 j), is as follows:







|                     |         |               |                      |                |           
|-------------------- | ------- | ------------- | -------------------- | -------------- | ----------
|                     |         |               |                      | Carrying value
|Tax Registration No. | Company | No. of shares | Ownership percentage | 2007
ThCh$     | 2008
ThCh$



|             |                                          |           |        |           |            
|------------ | ---------------------------------------- | --------- | ------ | --------- | -----------
|0-E          | Nexans (France) (1) and (2)              | 2,568,726 | 9.2047 | -         | 124,786,341
|96.612.850-K | Inmobiliaria del Plástico S.A.           | 110       | 9.16   | 18,179    | 17,204     
|0-E          | Promotora Club Empresarial               | 1         | 0.53   | 17,512    | 6,067      
|0-E          | Telefónica del Perú S.A.                 | 44        | 9.16   | -         | 1,677      
|0-E          | Fondo de Investimentos (FIDC Banco Itaú) | 1,289,733 | 24.50  | 4,761,032 | -          
|Total        |                                          |           |        | 4,796,723 | 124,811,289



1) As indicated in Note 28 No. 4, as part of the sales operation of the cable unit, on September 30, 2008, 2,500,000 shares were received of Nexans (France) at a market value of €61.98 per share.



Additionally, on November 26 and 28, 2008, the Company acquired a package of shares equivalent to 68,726 shares of Nexans (France) for US$ 3,799,238.



2) As indicated in Note 2 j), with no prejudice that the investment which Madeco S.A. has in the French company Nexans, has been considered as a permanent investment with the ability to exercise significant influence, the management of Madeco S.A. requested an authorization to the SVS to value this investment in shares at restated cost considering that the financial information of the aforementioned company would be available subsequent to the issuance of these financial statements.



On February 5, 2009 and through Excerpt No. 2.953, the SVS authorized the parent company Madeco S.A. to record the investment as indicated in the preceding paragraph.



In respect to that indicated above, the application of the investment valuation according to the proportional equity method using the acquisition method as basis to adjust the shareholders’ equity of the acquiree to fair value will be applied in accordance with the terms established by Technical Bulletin No. 72 paragraph 44 issued by the Chilean Association of Accountants.





Note 13 – Goodwill and Negative goodwill



Goodwill as of December 31, 2007 and 2008 and related amortization charges in the years ended December 31, 2006, 2007 and 2008 are as follows:



|                     |                                              |  |                                |  |            |  |            |  |        
|-------------------- | -------------------------------------------- |  | ------------------------------ |  | ---------- |  | ---------- |  | -------
|                     | Amortization for the year ended December 31, |  | Net Balance as of December 31,
|Company              | 2006                                         |  | 2007                           |  | 2008       |  | 2007       |  | 2008   
|                     | ThCh$                                        |  | ThCh$                          |  | ThCh$      |  | ThCh$      |  | ThCh$  
|                     |                                              |  |                                |  |            |  |            |  |        
|Alumco S.A.          | 102,329                                      |  | 102,329                        |  | 102,330    |  | 728,443    |  | 626,112
|Alupack S.A. (1)     | 12,481                                       |  | 12,481                         |  | 12,481     |  | 24,963     |  | 12,482 
|Ficap S.A.  (3)      | 1,606,844                                    |  | 1,396,368                      |  | 13,947,353 |  | 13,498,221 |  | -      
|Cedsa S.A. (2) y (3) | -                                            |  | 48,108                         |  | 1,147,620  |  | 1,106,478  |  | -      
|Indeco S.A.  (3)     | 165,137                                      |  | 143,508                        |  | 1,517,277  |  | 1,462,881  |  | -      
|Peruplast S.A. (2)   | 20,485                                       |  | -                              |  | -          |  | -          |  | -      
|Tech Pak S.A. (2)    | 10,332                                       |  | 24,330                         |  | 32,227     |  | 242,935    |  | 253,509
|Vigaflex S.A. (1)    | 95,524                                       |  | 95,524                         |  | 95,524     |  | 191,048    |  | 95,524 
|Total                | 2,013,132                                    |  | 1,822,648                      |  | 16,854,812 |  | 17,254,969 |  | 987,627



Negative goodwill as of December 31, 2007 and 2008 and related amortization in the years ended December 31, 2006, 2007 and 2008 are as follows:



|                   |                                              |  |                                |  |         |  |           |  |          
|------------------ | -------------------------------------------- |  | ------------------------------ |  | ------- |  | --------- |  | ---------
|                   | Amortization for the year ended December 31, |  | Net Balance as of December 31,
|Company            | 2006                                         |  | 2007                           |  | 2008    |  | 2007      |  | 2008     
|                   | ThCh$                                        |  | ThCh$                          |  | ThCh$   |  | ThCh$     |  | ThCh$    
|Peruplast S.A. (2) | -                                            |  | 70,241                         |  | 180,486 |  | 1,477,618 |  | 1,557,468
|Optel Brasil Ltda. | 30,937                                       |  | 26,885                         |  | 31,623  |  | 463,778   |  | 513,867  
|Total              | 30,937                                       |  | 97,126                         |  | 212,109 |  | 1,941,396 |  | 2,071,335







1. Effective January 1, 2005, the amortization period of goodwill was changed from 10 to 5 years. 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.



1. As a result of the disposal of the cable unit on September 30, 2008 the Company recognized with a charge to net income the balance pending amortization of minor amounts generated by the acquisition of these investments.  This is generated by the disposal of cable unit companies as described in Note 28.





Note 14 – Other non-current assets



Other non-current assets are summarized as follows:



|                                                                         |                    |  |          
|------------------------------------------------------------------------ | ------------------ |  | ---------
|                                                                         | As of December 31,
|                                                                         | 2007               |  | 2008     
|                                                                         | ThCh$              |  | ThCh$    
|                                                                         |                    |  |          
|Recoverable tax incentives in Argentina (1)                              | 687,688            |  | -        
|Bond discount                                                            | 550,119            |  | -        
|Property, plant and equipment to be disposed of (held-for-sale), net (2) | 4,553,847          |  | 2,356,816
|Lawsuit deposits (4)                                                     | 8,066,272          |  | 6,081,535
|Bond issuance cost                                                       | 169,653            |  | 78,072   
|Recoverable minimum tax in Argentina                                     | 184,347            |  | 93,762   
|Inventories, net (3)                                                     | 332,110            |  | 424,753  
|Other                                                                    | 71,330             |  | 31,283   
|Total other non-current assets                                           | 14,615,366         |  | 9,066,221





1. These amounts are presented net of an allowance for doubtful accounts of ThCh$ 0 as of December 31, 2008 (ThCh$ 117,122 as of December 31, 2007).
2. These amounts are presented net of adjustments to realizable value of ThCh$ 5,028,741 and ThCh$ 5,528,811 as of December 31, 2007 and 2008, respectively.
3. These inventories have a rotation of more than one year and are presented at net realizable values.

indicated in Note 29,5), Ficap S.A made judicial deposits for MM$/ThCh$6,081,535 and estimated

reduced value of judicial deposit Brazil for MM$/ThCh$372.936















Note 15 – Short-term bank loans



a) Short-term bank loans are summarized as follows:



|                             |                    |  |           
|---------------------------- | ------------------ |  | ----------
|                             | As of December 31,
|                             | 2007               |  | 2008      
|                             | ThCh$              |  | ThCh$     
|Payable in:                  |                    |  |           
|Chilean pesos                | 4,294,361          |  | 18,026,532
|United States dollars        | 27,809,489         |  | 2,416,725 
|Loans in Euros               | -                  |  | 52,574    
|Inflation-indexed units (UF) | 1,282,580          |  | -         
|Other foreign currencies     | 4,812,523          |  | 98,501    
|Total short-term bank loans  | 38,198,953         |  | 20,594,332
|Total outstanding principal  | 37,634,944         |  | 20,348,578





|                                          |                    |  |      
|----------------------------------------- | ------------------ |  | -----
|                                          | As of December 31,
|                                          | 2007               |  | 2008 
|                                          | %                  |  | %    
|Year-end weighted average interest rates: |                    |  |      
|Loans in Chilean pesos                    | 7.43               |  | 12.24
|Loans in United States dollars            | 6.63               |  | 6.79 
|Loans in UF                               | 4.08               |  | -    
|Loans in Euros                            | -                  |  | 7.55 
|Loans in other foreign currencies         | 13.77              |  | 6.00 



b) Current portion of long-term liabilities is summarized as follows:



|                                              |                    |  |           |  | 
|--------------------------------------------- | ------------------ |  | --------- |  | 
|                                              | As of December 31,
|                                              | 2007               |  | 2008     
|                                              | ThCh$              |  | ThCh$    
|Payable in:                                   |                    |  |          
|Inflation-indexed units (UF)                  | 1,810,407          |  | 1,550,252
|United States dollars                         | 5,895,752          |  | 7,271,126
|Chilean pesos                                 | -                  |  | 852      
|Other foreign currencies                      | 11,516,790         |  | -        
|Total current portion of long-term bank loans | 19,222,949         |  | 8,822,230
|Total outstanding principal                   | 19,042,418         |  | 8,341,525
|                                              |                    |  |          









Note 16 – Accrued liabilities and provisions



a) Current accrued liabilities and provisions are as follows:



|                                                 |                    |  |          
|------------------------------------------------ | ------------------ |  | ---------
|                                                 | As of December 31,
|                                                 | 2007               |  | 2008     
|                                                 | ThCh$              |  | ThCh$    
|                                                 |                    |  |          
|Accrued employee vacation expenses               | 2,995,764          |  | 1,460,719
|Remuneration and consulting services             | 3,733,929          |  | 3,184,412
|Staff severance indemnities, short-term          | 1,105,686          |  | 531,099  
|Project expenses, suppliers and other            | 1,086,328          |  | 699,782  
|Municipal taxes and others                       | 729,655            |  | 765,685  
|Freight                                          | 389,702            |  | 88,692   
|Electricity consumed and other basic services    | 499,153            |  | 288,436  
|Import and export costs                          | 274,995            |  | 184,177  
|Lawsuits pending (Argentina)                     | 1,598,809          |  | 305,976  
|Directors’ benefits                              | 535,246            |  | 715,457  
|Others                                           | 243,712            |  | 115,857  
|Total current accrued liabilities and provisions | 13,192,979         |  | 8,340,292



b) Long-term accrued liabilities and provisions are as follows:



|                                                   |                    |  |          
|-------------------------------------------------- | ------------------ |  | ---------
|                                                   | As of December 31,
|                                                   | 2007               |  | 2008     
|                                                   | ThCh$              |  | ThCh$    
|                                                   |                    |  |          
|Staff severance indemnities, long-term             | 1,126,932          |  | 1,107,565
|Provisions for pending lawsuits (1)                | 2,906,685          |  | 394,035  
|Municipal taxes and others                         | 834,843            |  | 128,894  
|Other                                              | 20,179             |  | 15,809   
|Total long-term accrued liabilities and provisions | 4,888,639          |  | 1,646,303



(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.



c) The write offs made during the year are as follows:

c,1 Irrecoverable debts of ThCh$ 493,001 (ThCh$378,748 in 2007) have been written off during 2008.

c,2 Irrecoverable Sundry debtors were written off in 2007 amounting to ThCh$1,153,402.









Note 17 – Staff severance indemnities



Staff severances indemnities are presented as described in Note 2 o) and are summarized as follow:



|                                                           |                    |  |            
|---------------------------------------------------------- | ------------------ |  | -----------
|                                                           | As of December 31,
|                                                           | 2007               |  | 2008       
|                                                           | ThCh$              |  | ThCh$      
|                                                           |                    |  |            
|Balance at the beginning of period                         | 2,237,226          |  | 2,050,154  
|Price-level restatement                                    | 4,904              |  | 5,460      
|Decrease for sold companies                                | -                  |  | (1,010,129)
|Provisions established                                     | 2,523,703          |  | 2,115,609  
|Payments during the period                                 | (2,533,215)        |  | (1,522,430)
|Balance at the period-end                                  | 2,232,618          |  | 1,638,664  
|                                                           |                    |  |            
|Presented in balance sheet in:                             |                    |  |            
|Current liabilities - accrued liabilities and provisions   | 1,105,686          |  | 531,099    
|Long-term liabilities - accrued liabilities and provisions | 1,126,932          |  | 1,107,565  
|Total                                                      | 2,232,618          |  | 1,638,664  







Note 18 – Long-term debt and bonds payable



a) Long-term liabilities with banks and financial institutions as of December 31, 2007 and 2008 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, 2008       | 31, 2007      
|                               |                       | %             | ThCh$         | ThCh$         | ThCh$         | ThCh$     | ThCh$          | ThCh$         
|                               |                       |               |               |               |               |           |                |               
|Banks in Chile                
|Banco Estado de Chile          | Indexed Chilean Pesos | 3.09          | 531.414       | 111,550       | -             | -         | 642,964        | 1,169,795     
|Banco Estado de Chile          | Indexed Chilean Pesos | 10.10         | 758,250       | 758,250       | 758,250       | 758,250   | 3,033,000      | -             
|Banco de Crédito e Inversiones | Indexed Chilean Pesos | 1.41          | 276,158       | -             | -             | -         | 276,158        | 550,166       
|Banco de Chile                 | Indexed Chilean Pesos | 1.41          | 403,190       | -             | -             | -         | 403,190        | 803,240       
|Banco del Desarrollo           | US dollars            | 6.37          | 1,400,190     | -             | -             | -         | 1,400,190      | 1,515,117     
|Corpbanca-Chile                | US dollars            | 7..32         | 727,370       | 727,370       | 727,373       | -         | 2,182,113      |               
|Banco Security                 | Indexed Chilean Pesos | 1.41          | 338,756       | -             | -             | -         | 338,756        | 1,450,578     
|Banks in Brazil:               |                       |               |               |               |               |           |                |               
|Banco Itaú                     | Other currency        | -             | -             | -             | -             | -         | -              | 5,116,744     
|Bndes                          | Other currency        | -             | -             | -             | -             | -         | -              | 2,755,627     
|Citibank                       | US dollars            | -             | -             | -             | -             | -         | -              | 1,612,482     
|Unibanco                       | US dollars            | -             | -             | -             | -             | -         | -              | 2,920,845     
|                               |                       |               |               |               |               |           |                |               
|Banks in other countries:      |                       |               |               |               |               |           |                |               
|Banco Estado New York          | US dollars            | 3.05          | 1,954,810     | 977,405       | -             | -         | 2,932,215      | 4,154,975     
|Itaú Bahamas                   | US dollars            | 3.05          | 973,036       | 486,519       | -             | -         | 1,459,555      | 2,068,202     
|Scotiabank - Peru              | US dollars            | 6.10          | 1,018,320     | 1,018,320     | 1,018,320     | -         | 3,054,960      | 3,463,125     
|Crédito Peru                   | US dollars            | 6.10          | 1,018,320     | 1,018,320     | 1,018,320     | -         | 3,054,960      | 9,911,397     
|BBVA - Cayman Islands          | US dollars            | 3.05          | 954,676       | 477,338       | -             | -         | 1,432,014      | 2,029,177     
|                               |                       |               |               |               |               |           |                |               
|Total                          |                       |               | 10,354,490    | 5,575,072     | 3,522,263     | 758,250   | 20,210,075     | 39,521,470    



- 



b) Bonds have been issued and are payable by the following Group companies:



|                      |                    |  |      
|--------------------- | ------------------ |  | -----
|                      | As of December 31,
|                      | 2007               |  | 2008 
|                      | ThCh$              |  | ThCh$
|Company               |                    |  |      
|Madeco                | 23,636,028         |  | -    
|Total                 | 23,636,028         |  | -    
|Less: Current portion | (5,533,510)        |  | -    
|Long-term portion     | 18,102,519         |  | -    



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.



During 2008, all these bonds were paid.



The scheduled principal payments on long-term debt, bonds payable, capital lease obligations and other long-term liabilities at December 31, 2008 are summarized as follows:



|                                                               |  |                   
|-------------------------------------------------------------- |  | ------------------
|                                                               |  | As of December 31,
|                                                               |  | 2008              
|Principal payments during the fiscal years ending December 31, |  | ThCh$             
|2009                                                           |  | 28,690,103        
|2010                                                           |  | 8,317,850         
|2011                                                           |  | 3,979,182         
|2012                                                           |  | 7,595,543         
|2013 and thereafter                                            |  | 317,500           
|Total                                                          |  | 48,900,178        









Note 19 – Miscellaneous payables



Miscellaneous long-term payables as of December 31, 2007 and 2008 are summarized as follows:



|                          |                    |  |          
|------------------------- | ------------------ |  | ---------
|                          | As of December 31,
|                          | 2007               |  | 2008     
|                          | ThCh$              |  | ThCh$    
|                          |                    |  |          
|Capital lease obligations | 7,790,886          |  | 8,569,937
|Total                     | 7,790,886          |  | 8,569,937





Note 20 – Income taxes and other taxes



a) Net recoverable taxes are summarized as follows:



|                                       |                    |  |          
|-------------------------------------- | ------------------ |  | ---------
|                                       | As of December 31,
|                                       | 2007               |  | 2008     
|                                       | ThCh$              |  | ThCh$    
|Income taxes payable                   | (7,038,943)        |  | -        
|Monthly income tax payments            | 8,436,665          |  | -        
|Other credits against income taxes (1) | 12,167,181         |  | 3,840,566
|Other recoverable taxes (2)            | 874,948            |  | -        
|Recoverable income taxes, net          | 14,439,851         |  | 3,840,566





1. The balance of other recoverable taxes is shown net of an allowance for unrecoverable taxes in Uruguay and Argentina of ThCh$0 as of December 31, 2008 (ThCh$1,694,104 as of December 31, 2007).



1. During 2007, minimal income taxes in Argentina of ThCh$ 1,694,104 were 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,
|                                                  | 2006                             |  | 2007  |             | 2008 
|                                                  | ThCh$                            |  | ThCh$ |             | ThCh$
|Current year provision for income tax             | (8,414,975)                      |  |       | (7,038,943) |       | (29,722,617)
|Income tax from previous year                     | (26,471)                         |  |       | 199,290     |       | (2,514,415) 
|Deferred income tax                               | 316,762                          |  |       | (442,827)   |       | 565,759     
|Tax benefit from (use of) tax loss carry forwards | (2,753,445)                      |  |       | (2,632,603) |       | (9,573,856) 
|Amortization of complementary accounts            | (465,818)                        |  |       | (620,657)   |       | (1,047,659) 
|Valuation allowance on deferred tax assets        | 5,012,129                        |  |       | 9,135,737   |       | 2,773,389   
|Other                                             | 244,659                          |  |       | 228,776     |       | (189,151)   
|Net income tax expense                            | (6,087,159)                      |  |       | (1,171,227) |       | (39,708,550)



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                                               | 2007               |   | 2008              |  | 2007         |  | 2008       
|                                                                 | ThCh$              |   | ThCh$             |  | ThCh$        |  | ThCh$      
|Accrued vacation expense                                         | 323,864            |   | 173,268           |  | -            |  | -          
|Unearned revenues                                                | 115,828            |   | 12,555            |  | -            |  | -          
|Allowance for doubtful accounts                                  | 1,359,709          |   | 647,460           |  | 3,370        |  | 3,617      
|Allowance for obsolescence of inventories                        | 714,608            |   | 470,794           |  | 20,602       |  | 18,737     
|Property, plant and equipment held for sale                      | 21,246             |   | 16,100            |  | 25,572       |  | -          
|Write-downs of property, plant and equipment                     | 535,155            |   | 42,079            |  | 507,704      |  | 478,539    
|Impairment of investment in Brazil                               | 2,077,644          |   | -                 |  | 4,033,074    |  | -          
|Allowances for other current and long-term receivables           | 385,442            |   | 345,937           |  | -            |  | -          
|Adjustment to realization value of property, plant and equipment | 33,322             |   | 16,699            |  | -            |  | -          
|Allowance long term assets                                       | 78,861             |   | 84,614            |  | 383,695      |  | 413,428    
|Other provisions                                                 | 1,797,053          |   | 846,167           |  | 98,683       |  | 111,018    
|Property, plant and equipment in leasing                         | (111,314)          |   | (742)             |  | (5,116,538)  |  | (5,174,729)
|Accelerated depreciation of property, plant and equipment        | (52,893)           | ) | (50,654)          |  | (5,616,574)  |  | (3,629,003)
|Staff severance indemnities                                      | -                  |   | -                 |  | (614,916)    |  | (470,730)  
|Production costs                                                 | (542,708)          |   | (582,163)         |  | -            |  | -          
|Negotiation of bonds                                             | (86,684)           |   | (31,087)          |  | (28,841)     |  | (11,220)   
|Bond issuance costs                                              | -                  |   | -                 |  | (124,694)    |  | -          
|Other                                                            | 156,122            |   | 22,971            |  | (163,335)    |  | (36,865)   
|Subtotal                                                         | 6,805,255          |   | 2,013,998         |  | (6,592,198)  |  | (8,297,208)
|Complementary accounts, net of amortization                      | -                  |   | -                 |  | 3,807,176    |  | 2,253,522  
|Valuation allowance                                              | (3,099,494)        |   | (1,649,915)       |  | (19,276,758) |  | (3,354,018)
|Tax loss carry forwards                                          | 8,091,175          |   | 1,124,312         |  | 17,959,395   |  | 5,517,512  
|Total deferred income taxes, net                                 | 11,796,936         |   | 1,488,395         |  | (4,102,385)  |  | (3,880,192)









Note 21 – Shareholders’ equity



a) The changes in Shareholders’ equity during each of the years 2006, 2007 and 2008 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, 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, 2008 constant pesos | -                | 308,855,331     | 46,888,292          | 12,067,094     | (13,533,137)                      | (95,388,307)        | -            | 35,326,145                     | 294,215,418 
|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 
|Restatement of December 31, 2007 balances to December 31, 2008 constant pesos | -                | 255,184,488     | 46,888,293          | 12,516,370     | (32,281,400)                      | -                   | (16,337,354) | 21,409,810                     | 287,380,208 
|Balances as of January 1, 2008                                                | 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 
|Allocation of 2007 net income                                                 | -                | -               | -                   | -              | -                                 | 19,660,064          | -            | (19,660,064)                   | -           
|Capital increase                                                              | -                | -               | -                   | -              | -                                 | -                   | -            | -                              | -           
|Absorption of accumulated deficit                                             | -                | -               | -                   | -              | -                                 | -                   | -            | -                              | -           
|Interim dividend paid 2007                                                    | -                | -               | -                   | -              | -                                 | (15,002,161)        | 15,002,161   | -                              | -           
|Acquisition of own shares                                                     | -                | -               | -                   | (8,515)        | -                                 | -                   | -            | -                              | (8,515)     
|Price-level restatement of equity accounts                                    | -                | 20,855,298      | 3,832,010           | 1,022,918      | (2,638,242)                       | 414,553             | -            | -                              | 23,486,537  
|Cumulative translation adjustments, net                                       | -                | -               | -                   | -              | 30,623,056                        | -                   | -            | -                              | 30,623,056  
|Net income for the year                                                       | -                | -               | -                   | -              | -                                 | -                   | -            | 97,183,867                     | 97,183,867  
|Balances as of December 31, 2008                                              | 5,661,192,887    | 255,184,488     | 46,888,293          | 12,507,856     | (1,658,344)                       | 5,072,456           | -            | 97,183,867                     | 415,178,616 









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                                      | 2006                                                |  | 2007          |  | 2008         |  | 2007         |  | 2008       
|                                          | ThCh$                                               |  | ThCh$         |  | ThCh$        |  | ThCh$        |  | ThCh$      
|Alusa S.A.                                | 225,370                                             |  | (1,999,693)   |  | -            |  | (4,989,205)  |  | (2,972,229)
|Comercial Madeco S.A. (Argentina)         | 156,047                                             |  | 765,079       |  | 1,416,588    |  | 579,133      |  | 575,538    
|Indeco S.A. (Peru).                       | 312,086                                             |  | (3,021,181)   |  | 10,998,376   |  | (4,726,041)  |  | -          
|Metalúrgica e Industrial S.A. (Argentina) | 65,419                                              |  | 478,511       |  | (7,174,751)  |  | 12,762,968   |  | 5,038,635  
|Metal Overseas S.A. (Cayman Islands)      | 1,348,693                                           |  | (9,318,221)   |  | 29,997,380   |  | (8,328,834)  |  | (186,788)  
|Cedsa Colombia                            | -                                                   |  | (675,879)     |  | 454,661      |  | (675,879 )   |  | -          
|Indalum S.A.                              | -                                                   |  | -             |  | -            |  | 2,296        |  | 2,295      
|Decker-Indelqui S.A. (Argentina)          | 153,471                                             |  | (1,156,703)   |  | -            |  | (1,941,782)  |  | (1,941,782)
|Indelqui S.A. Argentina                   | -                                                   |  | (3,578,042)   |  | 708,496      |  | (3,578,042)  |  | -          
|Indeco S.A. (Peru)                        | 34,523                                              |  | (242,133)     |  | 261,088      |  | (315,521)    |  | -          
|Exchange gain (loss) on debt              | -                                                   |  | -             |  | (11,854,249) |  | (21,070,493) |  | (2,174,013)
|Total                                     | 2,295,609                                           |  | (18,748,262)  |  | 24,807,589   |  | (32,281,400) |  | (1,658,344)









d) Capital increases and decreases



On November 25, 2005, the Company subscribed and paid 907,197,242 shares for a total of ThCh$ 44,017,210 at a value of Ch$ 48.52 per share (historical). This capital increase did not affect the contributed surplus.



In May 2006, the Company subscribed and paid 192,802,758 shares for a total of ThCh$ 9,350,934 (historical)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) 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.
Theses options were recorded at the grant date at their fair value of ThCh$ 263,500 determined using the Black-Scholes-Merton model. Volatility was estimated using historical data in the absence of a market for these options that would enable an empirical estimation. The fair value determined was to be amortized on a straight line basis as a charge to remunerations cost and credit to Other reserves in Shareholders’ equity over the period between the granting of the options and the date that these became vested.



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, in historic pesos.





Note 22 – Foreign currency, UF indexed and CPI restated assets and liabilities



Balances denominated or measured in foreign currencies (principally US dollars) at December 31, 2007 and 2008 are included in these financial statements in thousands of Chilean pesos equivalents as follows:



|                                                                   |                     |  |            
|------------------------------------------------------------------ | ------------------- |  | -----------
|                                                                   | As of December  31,
|                                                                   | 2007                |  | 2008       
|                                                                   | ThCh$               |  | ThCh$      
|Assets                                                             |                     |  |            
|Cash, Time deposits and marketable securities                      | 9,815,598           |  | 52,685,235 
|Accounts receivable, net                                           | 85,855,152          |  | 32,414,541 
|Notes and account receivable from related companies                | 8,928               |  | -          
|Inventories, net                                                   | 97,129,013          |  | 12,982,559 
|Other current assets                                               | 16,323,147          |  | 26,541,784 
|Property, plant and equipment and other non-monetary assets        | 95,480,265          |  | 43,678,049 
|Other monetary assets                                              | 31,848,018          |  | 5,389,377  
|Total assets                                                       | 336,460,121         |  | 173,691,545
|Liabilities                                                        |                     |  |            
|Short-term bank loans and current portion of long-term liabilities | 51,954,476          |  | 11,403,578 
|Accounts and notes payable                                         | 29,436,952          |  | 14,800,935 
|Notes and account payable to related companies                     | 33,894              |  | -          
|Other current liabilities                                          | 17,506,096          |  | 6,500,565  
|Long-term debt                                                     | 35,547,692          |  | 15,516,007 
|Other long-term liabilities                                        | 10,387,316          |  | 8,218,704  
|Total liabilities                                                  | 144,866,426         |  | 56,439,789 
|Net asset position                                                 | 191,593,695         |  | 117,251,756



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,
|                                                                   | 2007                |  | 2008       
|                                                                   | ThCh$               |  | ThCh$      
|Assets                                                             |                     |  |            
|Cash, Time deposits and marketable securities                      | 2,379,845           |  | 89,806,513 
|Accounts receivable, net                                           | 30,945,608          |  | 24,566,111 
|Notes and account receivable from related companies                | 1,931,507           |  | 489,410    
|Inventories, net                                                   | 49,755,018          |  | 41,974,907 
|Other current assets                                               | 15,809,004          |  | 21,170,322 
|Property, plant and equipment and other non-monetary assets        | 86,327,302          |  | 71,856,549 
|Other assets                                                       | 6,840,590           |  | 128,086,419
|Total assets                                                       | 193,988,874         |  | 377,950,141
|Liabilities                                                        |                     |  |            
|Short-term bank loans and current portion of long-term liabilities | 7,985,659           |  | 20,199,414 
|Bonds payable                                                      | 23,636,029          |  | -          
|Accounts and notes payable                                         | 24,090,970          |  | 6,186,859  
|Notes and account payable to related companies                     | 635,942             |  | 441,761    
|Other current liabilities                                          | 5,997,525           |  | 16,711,045 
|Long-term debt                                                     | 3,973,778           |  | 4,694,068  
|Other long-term liabilities                                        | 7,321,249           |  | 6,238,717  
|Total liabilities                                                  | 73,641,153          |  | 54,471,864 
|Net asset position in UF or indexed to Chilean CPI                 | 120,347,721         |  | 323,478,277





Note 23 – 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) Bank Loans



As of December 31, 2008, 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 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.) 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.



2) As of December 31, 2008, the Company meets all covenants required in subordinated loan agreements.







3) Purchase and Sale Agreement of the Cable Unit to Nexans.



At the Extraordinary Shareholders’ Meeting held on April 25, 2008, the shareholders approved the transaction with Nexans; the purchase and sale agreement which contained this transaction through which Madeco would transfer to Nexans its cable unit, was perfected on September 30, 2008 upon satisfactorily meeting the suspensive conditions which this contained.



In addition, at the aforementioned Meeting, the main matters in the purchase and sale agreement referred to above can be summarized as follows:



a) Price



On February 21, 2008, Madeco and Nexans entered a purchase and sale agreement by which Madeco agreed to transfer to Nexans the assets of its cable unit in Chile, Peru, Brazil, Argentina and Colombia in exchange for the payment in cash of US$448 million (subject to price variations) and 2.5 million of shares of Nexans.



Upon completion of all the conditions provided in the purchase and sale agreement, on September 30, 2008, Madeco received: i) US$393 million in cash, obtained from US$448 million agreed, discounting debt, minority interests of those companies sold, transfer taxes which the buyer must withhold in Brazil and variations in working capital, among others; and ii) 2.5 million of shares of Nexans valued as of September 30, 2008 for approximately US$218 million.



The payment was subject to the adjustment of differences between the estimated proforma balance as of September 30, 2008 and the accounting records at period-end. Because of these possible changes, Madeco left deposits in guarantee of US$37 million ("escrow") in favor of Nexans.



In conformity with this and according to that provided in the purchase and sale agreement, on November 12, 2008, Nexans sent to Madeco a letter which indicated closing accounts as of September 30 of this year of the companies sold and its estimate of adjustments which should be made to price. In addition, on November 26, 2008, through a letter addressed to the aforementioned French company, Madeco indicated it does not agree both with respect to the amounts reported and of the bases to determine them and; therefore, also of the adjustments that should be made to price. Differences between both parties (Madeco-Nexans) do not exceed the deposit in guarantee of US$37 million indicated in the preceding paragraph. Up to the date of issuance of this FECU form, the parties are still trying to resolve these differences in consumption. (Refer to Note 30.)





3) Purchase and Sale Agreement of the Cable Unit to Nexans,continued.



b) Declarations and Safeties



The purchase and sale agreement entered with Nexans provides declarations and safeties which are usual to this type of agreements. These declarations and safeties essentially refer to the ownership by Madeco and its subsidiaries of cable assets which are transferred to Nexans, to compliance with current regulations and to the absence of contingencies, save for those declared in the same agreement. In this sense, Madeco as the seller became responsible for contingencies which may arise subsequent to September 30, 2008 the origin of which is prior to that date.



Declarations and safeties performed by Madeco will be in force up to December 2009 save for: i) labor and tax statements the life of which will expire upon the end of the respective prescription terms; ii) environmental statements will expire on September 30, 2011; and statements relative to the property of companies disposed of and the titles of properties which will expire on September 30, 2018.



c) Covenants and restrictions for Madeco



Madeco will mainly submit to the following covenants and restrictions: i) to maintain equity not lower than US$ 250 million during the life of the statements and safeties; ii) to compensate Nexans in the event of a breach of these; iii) to grant to Nexans the same actual guarantees which it may grant in the future to its creditors; iv) not to compete with Nexans in the cable business for 3 years from September 30, 2008; and v) to maintain the confidentiality of information which is not of public knowledge.



Additionally, the purchase and sale agreement provides additional obligations for Madeco of not transferring (save to subsidiaries) the shares of Nexans received as part of the price within the 12 months following September 30, 2008 and not disposing of more than 50% of these shares between 12 and 18 months following the aforementioned date.



d) Compensations



Nexans will be entitled to compensation for any breach to statements and safeties and the remaining obligations in the purchase and sale agreement.



Likewise, Nexans will be entitled to compensation: i) for the payments of taxes it has to assume for the business, the causes of which are prior than September 30, 2008 save the processes declared with respect to Chile, Peru and Colombia in statements and safeties; ii) civil and labor lawsuits in Brazil; iii) responsibilities in environmental matters not declared; and iv) the obligations of companies disposed of not related to their lines of business.





3) Purchase and Sale Agreement of the Cable Unit to Nexans,continued.



e) Limitation of responsibility of Madeco



The purchase and sale agreement provides that Madeco will not be liable for damages caused by individual events when these are not greater than US$73 thousand; and nor it will be liable for cumulative damages without considering the aforementioned individual damages, which do not exceed US$ 1.46 million and if they do exceed this amount Madeco will have to be liable in conformity with the agreement.



f) Limitation of responsibility of Madeco



The purchase and sale agreement also provides that Madeco's responsibility, in the event of tax contingencies and of breaches to statements and safeties and remaining obligations assumed by virtue of this agreement is limited to a limit of: i) US$350 million with respect to tax contingencies; ii) US$146 million, with respect to the remaining matters with a sub-limit on environmental matters of US$30 million. All the sub-limits will discount the upper limit and therefore, will not be liable in no event beyond US$350 million.







4) On July 19, 2006, Ficap S.A. received a breach proceeding from Receita Federal de Brasil the Brazilian IRS for tax years 2001, 2002, 2003, 2004 and 2005 related to income tax differences for a total sum of ThR$18,550 (approximately ThUS$8,571 at historical value), which according to the legal advisors does not present any risk of significant loss. However, when Ficap S.A. applied the same criterion for tax years 2006 and following years, made all legal deposits for ThUS$9,555 with the purpose of not paying interests and fines on the income tax difference which could have been paid in the event of interpreting the law in the aforementioned method by the breach proceeding. With no prejudice of being deposits made by a company sold to Nexans, legal deposits have been recognized as an asset (refer to Note 14), given that these assets were excluded from its price and; therefore, Madeco has the control of the lawsuit.



Armat S.A.



On November 12, 2008, a claim for the collection of money filed by ARMAT S.A. against the “Real Casa de Moneda de España” (The Mint in Spain or the Spanish MintAssay Office) was admitted for processing by the First Instance Court of Madrid, Spain for € 876,739. This claim is generated by the unjustified, illegal and arbitrary withholding of the amount payable for invoices related to the token supply for the manufacture of Euros. At the closing date of the financial statements, the Company has made the respective provisions for this lawsuit.



As of December 31, 2008, the Company has pending lawsuits filed against it for claims related to its normal line of business, which according to the Company’s legal advisors present no risk of significant losses.







Indalum S.A.



A former distributor with a debt pending payment with Indalum S.A. denounced the Company before the Chilean National Economic Office of the Public Prosecutor in November 2007.  The Company believes this claim should not prosper.



a) There are no other lawsuits or other legal proceeding against the Company and its subsidiaries.



b) In conformity with the negotiation performed by the Parent Company on December 29, 2003 with Banco de Chile, Banco de Crédito e Inversiones, BancoEstado and Banco Security the following restrictions were established which are applied from the present date and up to December 26, 2010.



1. Maintain in June and December of each year, based on consolidated financial statements, according to the respective FECU format dated June 30 and December 31 of each year, the following financial ratios:



a) Indebtedness level or leverage not greater than 1.2 times.

b) Minimal restated capital for an amount equivalent to UF 1,630,000.



2. Maintain the ownership of property, plant and equipment which are required for the normal development of its line of business and businesses and maintain the ownership of the subsidiary Alumco S.A.

3. Not pledging, mortgaging or constituting any guarantee or actual right on any fixed asset owned by Indalum S.A. or of its subsidiaries except for those guarantees on assets acquired in the future and which are granted as guarantee for the financing with which these assets are acquired.







4. Not granting any personal guarantee or collateral to ensure compliance with any obligation, debt, liability or commitment assumed by a person or entity other than Indalum S.A. or its subsidiaries without the prior and written consent of its creditors.



5. Not paying or distributing dividends which exceed 30% of net income for each year except when having the prior and written consent of the creditors.



6. Not granting direct financing to third parties not related to the line of business.  Direct financing will not include the mercantile accounts receivable of Indalum S.A. with its customers or loans to their executives and employees of Indalum S.A. or its subsidiaries.



7. In the event of a disposal of the property located at Avda. Vitacura N0 2736, Office 301 in the commune of Vitacura in Santiago, Chile, the debtor will have to destine the total sales price of these properties to the prepayment at prorate of the balance of restructured obligations.



8. During the life of the agreement, Madeco S.A. must have direct or indirect control of the ownership of Indalum S.A. or participation of at least 50.1% on its ownership.



As of December 31, 2008, the Company has fully complied with the aforementioned restrictions.







c) Tax Contingencies



Indalum S.A.



As of December 31, 2008, Indalum S.A. has received liquidations from the Chilean IRS for tax years 1999 to 2003 related to first category income tax differences and income tax reimbursement             ThCh$ 327,810 (tax amount.) Through its legal advisors, the Company’s management, according to the complaint terms, has filed the administrative proceedings required to question in the first instance before the Tax Court the liquidations performed, as it considers that these are not applicable.



Ingewall S.A.



1. As of December 31, 2008, the Chilean IRS questioned tax information and issued a liquidation in respect to Ingewall S.A. related to VAT reimbursements related to the period between July and December 1999 and between February and August 2001 for a net amount alter first instance ruling of ThCh$ 366,423. Through its legal advisors, the Company’s management is performing the required actions and expects a favorable outcome.



2. As of December 31, 2008, Ingewall S.A. has received a tax liquidation from the Chilean IRS, which determines income tax for tax year 2007 with interests and restatements for ThCh$97,959. The Company’s management has answered this case by defending and sustaining its positions with applicable de facto and legal arguments requesting administrative reconsideration.  The outcome of this defense is still pending.







Alusa S.A. and subsidiaries



As of December 31, 2008, Alusa S.A. has the following contingencies and/or restrictions:



The Company is subject to the following commitments with financial institutions:



- Loans for exporters with Banco Security for UF 163,000 (historical amount.)



- Loan with Banco Estado for UF 52,000 (historical amount.)



To guarantee these loans, Alusa S.A. Hill have to meet the following restriction:



Madeco S.A. must be the direct or indirect owner of at least fifty point one per cent of voting right share capital of Alusa S.A. during the lives of loans.



Loan with Banco del Desarrollo.



On December 26, 2006, Alusa S.A. has become the guarantor and co-debtor of Aluflex S.A. for a loan with Banco del Desarrollo for US$4,000,000 with one year grace period, semi-annual payments and final expiration date in July 2010.













Loan with Corpbanca.



On September 2, 2008, Alusa S.A. has become the guarantor and co-debtor of Aluflex S.A. for a loan with Corpbanca o for US$4,000,000 with semi-annual payments and final expiration date in September 2012.

Loan with Banco Security.



On September 30, 2008, the Company postponed the loan and changed the currency of principal owed for this loan from UF to Chilean pesos.



Principal owed amounts to ThCh$331,616.



As of December 31, 2008, Peruplast S.A has the following contingencies and/or restrictions:



On November 6, 2007, it assumed the following commitments related to two long-term bank loans for US$8,000,000 each:



SCOTIABANK



Peruplast S.A. assumes before Scotiabank the obligation to maintain the following indexes at the end of each quarter:









Maintain Indebtedness index (Total Liabilities less Deferred Income Taxes between Net Equity less Intangible Assets less Non-Commercial Accounts Receivable from Affiliates of Peruplast) no greater than 1.50 times from December 2007 to September 2009 and no greater than 1.25 times from December 2009 and thereafter.



Maintain Debt Coverage Ratio (Financial Debt between EBITDA) no greater than 2.00 time from December 2007 to September 2009 and no greater than 1.75 times from December 2009 and thereafter.



Maintain a Debt Servicing Coverage Ratio (EBITDA between the sum of the Current portion of Long-Term Debt plus Financial Expenses) no lower than 1.50 times.



BCP - BANCO DE CREDITO DEL PERU



The Company is obligated to maintain the following financial ratios:



Leverage ratio [(Total liabilities less Deferred taxes and participations) on Equity] lower than 1.50x (one point fifty times.)



For the measurement of this ratio, liabilities will include all collaterals and guarantees granted by the Company in favor of third parties.



Debt Servicing Coverage [(Operating income plus Depreciation and Amortization less Income Tax and Distributions to Shareholders less loans to affiliated companies less Capital Investments net of Financing plus Opening Cash) on Debt Servicing] greater than 1.25x (one point twenty-five times.)





As of December 31, 2008, Peruplast S.A. meets all ratios for each loan operations described above.



Alusa S.A. has received liquidations from the Chilean IRS for tax years 2001, 2002 and 2003 related to first category income tax differences and tax reimbursements.



Through its legal advisors, the Company’s management, according to the complaint terms established in the Tax Code, has filed the administrative proceedings required to question in the first instance before the Tax Court the liquidations performed, as it considers that these are not applicable.

Comercial Madeco S.A. and subsidiaries



There have been certain claims filed against Metacab S.A. (a subsidiary of Decker S.A.) generated within the Employee Stock Ownership Plan (ESOP), according to the purchase agreement entered with the former company ECA, a company owned by the State of Argentina. The by-laws of Metacab S.A. provided that the holders of six per cent of share capital must be organized under a Employee Stock Ownership Plan, to which the company’s employees who met certain requirements could adhere. This plan was never implemented.  Currently, certain claims have been filed by this company's former employees who state that inadequate business management generated the company's losses in the past and damaged the beneficiaries of this Program. As a result of these claims, among other restrictions, there were garnishments on the Lomas de Zamora plant and certain machineries.  Through the present date, the company’s legal advisors believe an estimate of the probable resolution of this contingency is not possible and have also indicated that they cannot determine the amount related to this case.



Direct Guarantees

|                       |      |              |      |                |                         |                       |       |        |      |        |      |        | 
|---------------------- | ---- | ------------ | ---- | -------------- | ----------------------- | --------------------- | ----- | ------ | ---- | ------ | ---- | ------ | 
|                       |      |              |      |                | Balance pending payment | Release of guarantees
|                       | Name | Relationship | Type | Carrying value | 2008                    | 2007                  | 2009  | Assets | 2010 | Assets | 2011 | Assets
|                       |      |              |      |                |                         |                       |       |        |      |        |      |        | 
|1.1) Direct guarantees |      |              |      |                | ThCh$                   | ThCh$                 | ThCh$ | ThCh$  |      | ThCh$  |      | ThCh$  | 



|                                                                             |             |           |                             |   |   |         |         |         |   |        |   |       |  
|---------------------------------------------------------------------------- | ----------- | --------- | --------------------------- | - | - | ------- | ------- | ------- | - | ------ | - | ----- | -
|Aguas Andinas                                                                | Madeco S.A. | Parent co | Compliance with sales order | - | - | 5,000   | -       | 5,000   | - | -      | - | -     | -
|Atacama Minerals Chile SCM                                                   | Madeco S.A. | Parent co | Compliance with sales order | - | - | -       | 712     | -       | - | -      | - | -     | -
|Casa Moneda de Chile SA. (The Mint in Chile or the Chilean MintAssay Office) | Madeco S.A. | Parent co | Compliance with sales order | - | - | -       | 103,102 | -       | - | -      | - | -     | -
|Cía. de Telecomunicaciones de Chile S.A.                                     | Madeco S.A. | Parent co | Compliance with sales order | - | - | -       | 37,977  | -       | - | -      | - | -     | -
|Cía.Minera Doña Inés de Collahuasi SCM                                       | Madeco S.A. | Parent co | Compliance with sales order | - | - | 8,823   | -       | 8,823   | - | -      | - | -     | -
|Cía.Telecomunicaciones de Chile SA.                                          | Madeco S.A. | Parent co | Compliance with sales order | - | - | -       | 1.954   | -       | - | -      | - | -     | -
|Comercial y Logística General SA.                                            | Madeco S.A. | Parent co | Compliance with sales order | - | - | -       | 46,742  | -       | - | -      | - | -     | -
|Corporación Nacional del Cobre                                               | Madeco S.A. | Parent co | Compliance with sales order | - | - | 67,311  | -       | 67,311  | - | -      | - | -     | -
|Corporación Nacional del Cobre                                               | Madeco S.A. | Parent co | Compliance with sales order | - | - | 96,429  | 91,460  | -       | - | 91,817 | - | 4,612 | -
|Corporación Nacional del Cobre                                               | Madeco S.A. | Parent co | Compliance with sales order | - | - | 120,376 | 11,786  | 120,376 | - | -      | - | -     | -
|Costanera Center SA.                                                         | Madeco S.A. | Parent co | Compliance with sales order | - | - | -       | 5,411   | -       | - | -      | - | -     | -
|Fam America Latina                                                           | Madeco S.A. | Parent co | Compliance with sales order | - | - | 61,507  | -       | 61,507  | - | -      | - | -     | -
|Fam America Latina                                                           | Madeco S.A. | Parent co | Compliance with sales order | - | - | -       | 34,828  | -       | - | -      | - | -     | -
|Fisco de Chile                                                               | Madeco S.A. | Parent co | Compliance with sales order | - | - | 27,877  | -       | 27,877  | - | -      | - | -     | -
|Metso Paper                                                                  | Madeco S.A. | Parent co | Compliance with sales order | - | - | 34,175  | 29,056  | 34,175  | - | -      | - | -     | -
|Minera Escondida Ltda.                                                       | Madeco S.A. | Parent co | Compliance with sales order | - | - | -       | 62739   | -       | - | -      | - | -     | -
|Minera Esperanza                                                             | Madeco S.A. | Parent co | Compliance with sales order | - | - | 15,384  | -       | -       | - | 15,384 | - | -     | -
|Minera Los Pelambres                                                         | Madeco S.A. | Parent co | Compliance with sales order | - | - | 37,099  | 99,945  | 37,099  | - | -      | - | -     | -
|Minera San Cristóbal                                                         | Madeco S.A. | Parent co | Compliance with sales order | - | - | -       | 173,027 | -       | - | -      | - | -     | -
|Mitsubishi Corp. Sucursal Chile Const. Y Proyectos                           | Madeco S.A. | Parent co | Compliance with sales order | - | - | -       | 69,966  | -       | - | -      | - | -     | -
|S.Q. M. Industrial S.A.                                                      | Madeco S.A. | Parent co | Compliance with sales order | - | - | -       | 3,844   | -       | - | -      | - | -     | -
|SQM Salar S.A.                                                               | Madeco S.A. | Parent co | Compliance with sales order | - | - | -       | 1,414   | -       | - | -      | - | -     | -
|Techint Chile SA.                                                            | Madeco S.A. | Parent co | Compliance with sales order | - | - | 854     | 930     | 854     | - | -      | - | -     | -









Indirect guarantees

|                      |        |                   |                 |                                                                          |                       |      |      |      |        |      |        |      |       
|--------------------- | ------ | ----------------- | --------------- | ------------------------------------------------------------------------ | --------------------- | ---- | ---- | ---- | ------ | ---- | ------ | ---- | ------
|Creditor of guarantee | Debtor | Type of guarantee | Assets involved | Balances pending payment at the closing date of the financial statements | Release of guarantees
|                      | Name   | Relationship      |                 | Type                                                                     | Carrying value        | 2008 | 2007 | 2009 | Assets | 2010 | Assets | 2011 | Assets



|                                                    |             |         |                                                     |   |   |           |           |           |   |         |   |   |  
|--------------------------------------------------- | ----------- | ------- | --------------------------------------------------- | - | - | --------- | --------- | --------- | - | ------- | - | - | -
|11a Vara de Fazenda RJ                              | Ficap S.A.  | Subsid. | Guarantee for breach proceeding 401.273-8           | - | - | -         | 358,791   | -         | - | -       | - | - | -
|11a Vara de Fazenda RJ                              | Ficap S.A.  | Subsid. | Guarantee for breach proceeding 427.606-9           | - | - | -         | 792,331   | -         | - | -       | - | - | -
|11a Vara de Fazenda RJ                              | Ficap S.A.  | Subsid. | Guarantee for breach proceeding 505.512-4           | - | - | -         | 776,597   | -         | - | -       | - | - | -
|11a Vara de Fazenda RJ                              | Ficap S.A.  | Subsid. | Guarantee for breach proceeding 531.840-7           | - | - | -         | 561,190   | -         | - | -       | - | - | -
|11a Vara de Fazenda RJ                              | Ficap S.A.  | Subsid. | Guarantee for breach proceeding 427.430-4           | - | - | -         | 157,822   | -         | - | -       | - | - | -
|Alstom Brasil Ltda                                  | Ficap S.A.  | Subsid. | Guarantee of 10%for compliance with agreement       | - | - | -         | 87,697    | -         | - | -       | - | - | -
|ATE II Trans. de Energia S/A                        | Ficap S.A.  | Subsid. | Guarantee of 5% for compliance with agreement       | - | - | -         | 35,410    | -         | - | -       | - | - | -
|ATE III Trans. de Energia S/A                       | Ficap S.A.  | Subsid. | Guarantee of 5% for compliance with agreement       | - | - | -         | 62,681    | -         | - | -       | - | - | -
|Central Bank of Argentina                           | Armat S.A.  | Subsid. | Compliance with sales order                         | - | - | -         | 919,892   | -         | - | -       | - | - | -
|Central Bank of the Dominican Republic              | Armat S.A.  | Subsid. | Compliance with sales order                         | - | - | 835,735   | 189,747   | 835,735   | - | -       | - | - | -
|Banco de Guatemala                                  | Armat S.A.  | Subsid. | Compliance with sales order                         | - | - | 366,595   | 391,734   | 366,595   | - | -       | - | - | -
|Canala Com. Electrica Cia. Ltda. / American Express | Indeco S.A. | Subsid. | Guarantee                                           | - | - | -         | 60,064    | -         | - | -       | - | - | -
|Casa de Moneda de chile                             | Armat S.A.  | Subsid. | Compliance with sales order                         | - | - | 3.158,294 | 1,017,887 | 2,571,847 | - | 586,447 | - | - | -
|Cia. Americana de Multicservicios                   | Ficap S.A.  | Subsid. | Guarantee of 10,.60%  for compliance with agreement | - | - | -         | 21,104    | -         | - | -       | - | - | -
|Codelco                                             | Armat S.A.  | Subsid. | Compliance with sales order                         | - | - | 1.750     | 4,174     | 1,750     | - | -       | - | - | -
|Comercial Iquitos S.A. / BBVA                       | Indeco S.A. | Subsid. | Guarantee                                           | - | - | -         | 10,822    | -         | - | -       | - | - | -
|Condumax S.A  /  BBVA                               | Indeco S.A. | Subsid. | Guarantee                                           | - | - | -         | 2,706     | -         | - | -       | - | - | -
|Condumax S.A  /  BBVA                               | Indeco S.A. | Subsid. | Guarantee                                           | - | - | -         | 32,467    | -         | - | -       | - | - | -
|Condutek S.A. y/o Condumax S.A.   /  BBVA           | Indeco S.A. | Subsid. | Guarantee                                           | - | - | -         | 54,111    | -         | - | -       | - | - | -
|Conséorcio PRA 1                                    | Ficap S.A.  | Subsid. | Guarantee of 20%  for compliance with agreement     | - | - | -         | 8,471     | -         | - | -       | - | - | -
|Coverteam Brasil Ltda.                              | Ficap S.A.  | Subsid. | Guarantee of 30%  for compliance with agreement     | - | - | -         | 321,196   | -         | - | -       | - | - | -









|                      |        |                   |                 |                                                                          |                       |      |      |      |        |      |        |      |       
|--------------------- | ------ | ----------------- | --------------- | ------------------------------------------------------------------------ | --------------------- | ---- | ---- | ---- | ------ | ---- | ------ | ---- | ------
|Creditor of guarantee | Debtor | Type of guarantee | Assets involved | Balances pending payment at the closing date of the financial statements | Release of guarantees
|                      | Name   | Relationship      |                 | Type                                                                     | Carrying value        | 2008 | 2007 | 2009 | Assets | 2010 | Assets | 2011 | Assets



|                                               |              |         |                                                 |   |   |     |           |     |   |   |   |   |  
|---------------------------------------------- | ------------ | ------- | ----------------------------------------------- | - | - | --- | --------- | --- | - | - | - | - | -
|Dimex S.A.C  / BBVA                            | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 12,639    | -   | - | - | - | - | -
|Railroad Director's Office                     | Indalum S.A. | Subsid. | Certificate of deposit                          | - | - | 917 | 929       | 917 | - | - | - | - | -
|Distribuidora Incoresa S.A.  / BCP             | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 18,939    | -   | - | - | - | - | -
|Distribuidora Incoresa S.A.  / BCP             | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 10,822    | -   | - | - | - | - | -
|Distribuidora Incoresa S.A.  / BCP             | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 8,117     | -   | - | - | - | - | -
|Distribuidora Romero S.R.L  / BCP              | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 5,411     | -   | - | - | - | - | -
|Distribuidora Romero S.R.L  / BCP              | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 5,411     | -   | - | - | - | - | -
|Distribuidora Romero S.R.L.  / BBVA            | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 27,056    | -   | - | - | - | - | -
|Distribuidora Romero S.R.L.  / BBVA            | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 10,822    | -   | - | - | - | - | -
|Distribuidora Romero S.R.L  / BCP              | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 5,411     | -   | - | - | - | - | -
|Distribuidora Romero S.R.L  / BCP              | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 5,411     | -   | - | - | - | - | -
|Distribuidora Romero S.R.L  / BCP              | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 10,822    | -   | - | - | - | - | -
|Elecnor S/A                                    | Ficap S.A.   | Subsid. | Guarantee of 10% for compliance with agreement  | - | - | -   | 51,127    | -   | - | - | - | - | -
|Energ Power Ltda                               | Ficap S.A.   | Subsid. | Guarantee of 10% for compliance with agreement  | - | - | -   | 20,313    | -   | - | - | - | - | -
|Furnas Centrais eletricas                      | Ficap S.A.   | Subsid. | Guarantee of 5%  for compliance with agreement  | - | - | -   | 10,005    | -   | - | - | - | - | -
|Huemura Representaciones S.R.L. /  BCP         | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 5,411     | -   | - | - | - | - | -
|Huemura Representaciones S.R.L. /  BCP         | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 10,822    | -   | - | - | - | - | -
|Huemura Representaciones S.R.L. /  SCOTIABANK  | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 10,822    | -   | - | - | - | - | -
|IEMG                                           | Ficap S.A.   | Subsid. | Guarantee of 10%  for compliance with agreement | - | - | -   | 1,444,984 | -   | - | - | - | - | -
|Industrial Comercial Santa Adelaida S.A. / BCP | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 13,528    | -   | - | - | - | - | -
|Ingenieria Sociedad Anonima Norte / BCP        | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 5,411     | -   | - | - | - | - | -









|                      |        |                   |                 |                                                                          |                       |      |      |      |        |      |        |      |       
|--------------------- | ------ | ----------------- | --------------- | ------------------------------------------------------------------------ | --------------------- | ---- | ---- | ---- | ------ | ---- | ------ | ---- | ------
|Creditor of guarantee | Debtor | Type of guarantee | Assets involved | Balances pending payment at the closing date of the financial statements | Release of guarantees
|                      | Name   | Relationship      |                 | Type                                                                     | Carrying value        | 2008 | 2007 | 2009 | Assets | 2010 | Assets | 2011 | Assets



|                                                  |              |         |                                                 |   |   |     |           |     |   |   |   |   |  
|------------------------------------------------- | ------------ | ------- | ----------------------------------------------- | - | - | --- | --------- | --- | - | - | - | - | -
|Itumbiara Transms. de Energía                     | Ficap S.A.   | Subsid. | Guarantee of 5% for compliance with agreement   | - | - | -   | 35,832    | -   | - | - | - | - | -
|Jorvex S.A  /   BCP                               | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 162,334   | -   | - | - | - | - | -
|Jorvex S.A.   /   SCOTIABANK                      | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 54,111    | -   | - | - | - | - | -
|Jorvex S.A.   /  BANCO CONTINENTAL                | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 162,334   | -   | - | - | - | - | -
|Koller S.R.L. / BBVA                              | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 54,111    | -   | - | - | - | - | -
|Marinha do Brasil                                 | Ficap S.A.   | Subsid. | Guarantee for compliance with agreement         | - | - | -   | 8,860     | -   | - | - | - | - | -
|Ministry of Finance                               | Ficap S.A.   | Subsid. | Property, plant and equipment (labor claims)    | - | - | -   | 135,693   | -   | - | - | - | - | -
|Ministry of Finance                               | Ficap S.A.   | Subsid. | Property, plant and equipment (taxes)           | - | - | -   | 5,534,148 | -   | - | - | - | - | -
|Obras y Desarollo S/A                             | Ficap S.A.   | Subsid. | Guarantee of 10%  for compliance with agreement | - | - | -   | 13,815    | -   | - | - | - | - | -
|Outotec Tec. Brasil                               | Ficap S.A.   | Subsid. | Guarantee of 10% for compliance with agreement  | - | - | -   | 130,763   | -   | - | - | - | - | -
|Poços de Caldas  transm. Energía                  | Ficap S.A.   | Subsid. | Certificate of deposit for prepayment (5%)      | - | - | -   | 263,933   | -   | - | - | - | - | -
|Poços de Caldas  transm. Energía                  | Ficap S.A.   | Subsid. | Guarantee of 10% for compliance with agreement  | - | - | -   | 529,711   | -   | - | - | - | - | -
|Porto Primavera Transm. Energía                   | Ficap S.A.   | Subsid. | Guarantee of 5% for compliance with agreement   | - | - | -   | 14,143    | -   | - | - | - | - | -
|Poyry Empreend. Ind.                              | Ficap S.A.   | Subsid. | Guarantee for compliance with agreement         | - | - | -   | 103,698   | -   | - | - | - | - | -
|Promon Eng Ltda                                   | Ficap S.A.   | Subsid. | Guarantee of 10% for compliance with agreement  | - | - | -   | 17,571    | -   | - | - | - | - | -
|Rensa Ventas y Servicios S.R.L. / BCP             | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 1,623     | -   | - | - | - | - | -
|Serra da Mesa Transm. Energia                     | Ficap S.A.   | Subsid. | Guarantee of 10%  for compliance with agreement | - | - | -   | 250,601   | -   | - | - | - | - | -
|Serra da Mesa Transm. Energia                     | Ficap S.A.   | Subsid. | Guarantee of 10%  for compliance with agreement | - | - | -   | 45,015    | -   | - | - | - | - | -
|Dwelling Unit Service for the Metropolitan Region | Indalum S.A. | Subsid. | Certificate of deposit                          | - | - | 103 | 102       | 103 | - | - | - | - | -
|UTE                                               | Ficap S.A.   | Subsid. | Guarantee of 5%  for compliance with agreement  | - | - | -   | 5,784     | -   | - | - | - | - | -
|V y F Tecnología Comercial S.A.C  / SCOTIABANK    | Indeco S.A.  | Subsid. | Guarantee                                       | - | - | -   | 27,056    | -   | - | - | - | - | -













Note 24 – 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,
|                                                                  | 2006                             |  | 2007      |  | 2008       
|                                                                  | ThCh$                            |  | ThCh$     |  | ThCh$      
|                                                                  |                                  |  |           |  |            
|Other non-operating income                                        |                                  |  |           |  |            
|Asset rental                                                      | -                                |  | 153,098   |  | 153,923    
|Gain on sale of property, plant and equipment                     | 19,469                           |  | 479,477   |  | 539,331    
|Net gain from sale of disposable assets                           | 36,990                           |  | 9,245     |  | -          
|Recovery of tax benefits in foreign subsidiaries                  | -                                |  | 30,854    |  | 11,377     
|Gain from sale of investments (1)                                 | -                                |  | -         |  | 156,358,790
|Performance of transfer of assets to Indekqui at market value (1) | -                                |  | -         |  | 3,977,152  
|Indemnities received                                              | -                                |  | 49,595    |  | 278,066    
|Others                                                            | 79,975                           |  | 167,895   |  | 266,361    
|Total                                                             | 136,434                          |  | 890,164   |  | 161,585,000
|                                                                  |                                  |  |           |  |            
|                                                                  |                                  |  |           |  |            
|Other non-operating expenses                                      |                                  |  |           |  |            
|Staff severance indemnity payments related to restructuring       | -                                |  | 500,615   |  | 283,602    
|Obsolescence and write-offs of other long-term assets             | 1,090,765                        |  | 178,424   |  | 551,899    
|Adjustment to realizable value of assets held for sale (Note 10)  | 343,495                          |  | -         |  | -          
|Provision for closure and valuation on assets Aratú               | -                                |  | -         |  | 862,891    
|Provision for lawsuit s                                           | 20,265                           |  | 70,988    |  | 82,073     
|Appraisal of assets to be disposed of                             | -                                |  | 130,458   |  | -          
|Net loss on sale of investments                                   | -                                |  | 36,392    |  | -          
|Directors’ benefits                                               | -                                |  | 481,721   |  | 776,518    
|Depreciation of inactive assets – Argentina (2)                   | 1,099,951                        |  | 682,947   |  | 732,801    
|Government fines, taxes and interest from foreign subsidiaries    | 760 ,865                         |  | 44,813    |  | 330,099    
|Change in ownership in Indeco S.A.                                | -                                |  | -         |  | 1,238,252  
|Equity reserve liquidation (1) & (3)                              | -                                |  | -         |  | 24,807,589 
|Other                                                             | 19,830                           |  | 25,643    |  | 578,167    
|Total                                                             | 3,335,171                        |  | 2,152,001 |  | 30,243,891 



(1)  The result of the diposal of the Cables unit companies, as described in Note 28.

(2)  Relates to the devaluation of property, plant & equipment (Note 10) and unused assets (Note 14).

(3)  Liquidation related to the disposal of the foreign companies (Note 21 c).





Note 25 – 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,
|                                    |                                        |                       | 2007               |  | 2008   
|Company                             | Nature of relationship                 | Nature of transaction | ThCh$              |  | ThCh$  
|                                    |                                        |                       |                    |  |        
|Cobrecon S.A.                       | Equity method investment               | Loan                  | 8,928              |  | -      
|Embotelladoras Chilenas Unidas S.A. | Member of Controlling Group            | Sales                 | 150,459            |  | 131,002
|Sodimac S.A.                        | Member of Controlling Group            | Sales                 | 1,404,871          |  | 237,872
|Aguas CCU Nestlé S.A.               | Member of Controlling Group            | Sales                 | -                  |  | 66,980 
|Calaf S.A.                          | Member of Controlling Group            | Sales                 | 45,032             |  | -      
|Minera Michilla S.A.                | Member of Controlling Group            | Sales                 | 2,699              |  | -      
|Minera Los Pelambre S.A.            | Member of Controlling Group            | Sales                 | 280,774            |  | -      
|Alte S.A.                           | Controlled by Minority Interest Holder | Sales                 | 37,416             |  | 44,328 
|Other related Companies             | Various                                | Various               | 10,256             |  | 9,228  
|Total                               |                                        |                       | 1,940,435          |  | 489,410



b)  Current liabilities

|                             |                             |                       |                    |  |        
|---------------------------- | --------------------------- | --------------------- | ------------------ |  | -------
|                             |                             |                       | As of December 31,
|                             |                             |                       | 2007               |  | 2008   
|Company                      | Nature of relationship      | Nature of transaction | ThCh$              |  | ThCh$  
|                             |                             |                       |                    |  |        
|Colada Continua Chilena S.A. | Equity method investment    | Commercial            | 450,131            |  | -      
|Minera Michilla S.A.         | Shareholder                 | Commercial            | 111,074            |  | 434,961
|Cobrecon S.A.                | Equity method investment    | Loan                  | 33,894             |  | -      
|Sodimac S.A.                 | Member of Controlling Group | Loan                  | 63,273             |  | -      
|Other related Companies      | Various                     | Various               | 11,464             |  | 6,800  
|Total                        |                             |                       | 669,836            |  | 441,761



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.

The above transactions are subject to indexation and interest, which are calculated at market rates.

Transactions with related companies are carried out on general market and equitable conditions at the time they are made.

Other short and long term balances receivable and payable relate to trading current accounts and accrue no interest.











c) Significant transactions with related parties are summarized as follows:

|                                    |                                         |                                |                                                     |  |           |  |          
|----------------------------------- | --------------------------------------- | ------------------------------ | --------------------------------------------------- |  | --------- |  | ---------
|                                    |                                         |                                | Revenue (Expenses) for the years ended December 31,
|Company                             | Nature of relationship                  | Transaction                    | 2006                                                |  | 2007      |  | 2008     
|                                    |                                         |                                | ThCh$                                               |  | ThCh$     |  | ThCh$    
|                                    |                                         |                                |                                                     |  |           |  |          
|Alte S.A.                           | Member of Group of Minority Shareholder | Services                       | (19,115)                                            |  | (8,782)   |  | (708)    
|                                    |                                         | Sales of products and services | 188,435                                             |  | 181,,620  |  | 198,165  
|Aguas CCU Nestlé Chile              | Member of Controlling Group             | Products purchase              |                                                     |  | -         |  | 237,025  
|Artikos Chile S.A. .                | Member of Controlling Group             | Services                       | (1,347)                                             |  | (1,222)   |  | (770)    
|Banchile Corredores de Bolsa.       | Member of Controlling Group             | Interest                       | 31,959                                              |  | 35,302    |  | 109,317  
|Banco de Chile                      | Member of Controlling Group             | Interest from investments      | (293,140)                                           |  | 6,246     |  | 488,732  
|Banco Latinoamericano - Bladex      | Member of Controlling Group             | Interest from investments      | (173,177)                                           |  | (148,619) |  | -        
|Interbank                           | Shareholder                             | Interest from investments      | -                                                   |  | (118,371) |  | (10,929) 
|Nessus S.A.                         | Shareholder                             | Sales of products and services | -                                                   |  | (41,555)  |  | -        
|Calaf S.A.                          | Member of Controlling Group             | Sales of products and services | 62,445                                              |  | 143,709   |  | (366)    
|CNT Telefónica del Sur S.A.         | Member of Controlling Group             | Sales of products and services | 127,669                                             |  | 98,746    |  | 67,071   
|Cobrecon                            | Equity method investment                | Sales                          | 33,418                                              |  | 38,797    |  | 30,192   
|Colada Continua Chilena S.A.        | Equity method investment                | Sales of products and services | 209,123                                             |  | 161,436   |  | 89,276   
|Embotelladoras Chilenas Unidas S.A. | Member of Controlling Group             | Sales of products and services | 945,567                                             |  | 858,353   |  | 714,024  
|                                    |                                         | Services                       | (7,298)                                             |  | (4,520)   |  | (3,675)  
|Entel S.A.                          | Member of Controlling Group             | Services                       | (16,997)                                            |  | (58,038)  |  | 2,956    
|Falabella S.A.C.I.                  | Member of Controlling Group             | Services                       | (480)                                               |  | (1,246)   |  | -        
|Sodimac S.A.                        | Member of Controlling Group             | Sales of products and services | 6,661,446                                           |  | 6,192,492 |  | 5,137,755
|Minera El Tesoro                    | Member of Controlling Group             | Sales of products and services | 53,860                                              |  | 136,341   |  | 63,934   
|Minera Los Pelambres S.A.           | Member of Controlling Group             | Sales of products and services | 1,438,157                                           |  | 417,806   |  | 232,653  
|Minera Michilla S.A.                | Shareholder                             | Sales of products and services | 79,450                                              |  | 50,242    |  | 138,968  
|Quiñenco S.A.                       | Parent Company                          | Loan indexation                | (70,728)                                            |  | -         |  | -        
|                                    |                                         | Interest and expenses          | (177,346)                                           |  | -         |  | -        
|Transportes CCU Ltda.               | Member of Controlling Group             | Sales of products and services | 211,401                                             |  | -         |  | -        
|Vending y Servicios CC              | Member of Controlling Group             | Services                       | (2,359)                                             |  | (5,138)   |  | -        
|Viña San Pedro S.A.                 | Member of Controlling Group             | Sales of products and services | 3,142                                               |  | (754)     |  | -        
|                                    |                                         |                                |                                                     |  |           |  |          
|Inmobiliaria Norte Verde S.A.       | Member of Controlling Group             | Services                       | (13,103)                                            |  | (16,426)  |  | -        
|                                    |                                         |                                |                                                     |  |           |  |          
|Others                              | Member of Group of Minority Shareholder | Various                        | 5,912                                               |  | 8,171     |  | 59,081   



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 26 – 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,
|                   | 2007               |  | 2008      
|                   | ThCh$              |  | ThCh$     
|Balance Sheet      |                    |  |           
|Alusa S.A.         | 11,476,499         |  | 13,036,191
|Indalum S.A.       | 294,488            |  | 293,218   
|Indeco S.A.        | 1,756,277          |  | -         
|Cedsa S.A. (1)     | 1,343,892          |  | -         
|Peruplast S.A. (1) | 9,690,052          |  | 12,222,008
|Total              | 24,561,208         |  | 25,551,417



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,
|                                            | 2006               |  | 2007        |  | 2008       
|                                            | ThCh$              |  | ThCh$       |  | ThCh$      
|Income Statement                            |                    |  |             |  |            
|Alusa S.A.                                  | (1,195,431)        |  | (1,025,088) |  | (1,226,364)
|Distribuidora Boliviana Indalum S.A. (2)    | 805                |  | -           |  | -          
|Indalum S.A.                                | (13,255)           |  | (7,566)     |  | 1,270      
|Indeco S.A.                                 | (591,121)          |  | (454,309)   |  | (329,245)  
|Cedsa S.A. (1)                              | -                  |  | (304,420)   |  | 99,475     
|Peruplast S.A. (1)                          | -                  |  | (1,810,758) |  | (2,228,703)
|Minority interest participation in net loss | (1,799,002)        |  | (3,602,141) |  | (3,683,567)





1. In May 2008, a 2,03% holding in Indeco S.A. was acquired from minority shareholders.
2. These companies were disposed of as of September 30, as described in Note 32.























Note 27 – 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:



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.

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                                                                         | 15,872,148 | 24,915,331    
|Property, plant and equipment                                                          | 3,709,470  | 17,317,599    
|Other assets                                                                           | 42,220     | (1,106,926)   
|Total Assets                                                                           | 19,623,838 | 41,126,004    
|                                                                                       |            |               
|Liabilities                                                                            |            |               
|Current liabilities                                                                    | 13,340,462 | 11,681,222    
|Long-term liabilities                                                                  | 234,986    | 12,362,735    
|Shareholders’ equity                                                                   | 6,048,390  | 17,082,047    
|Total Liabilities and Shareholders equity                                              | 19,623,838 | 41,126,004    
|                                                                                       |            |               
|c.2) Summarized statement of income of incorporated companies as of December 31, 2007:
|                                                                                       |            |               
|                                                                                       | Cedsa S.A. | Peruplast S.A.
|                                                                                       | ThCh$      | ThCh$         
|                                                                                       |            |               
|Sales                                                                                  | 24,164,914 | 49,580,858    
|Gross margin                                                                           | 4,068,713  | 7,247,239     
|Operating income, net                                                                  | 2,913,237  | 4,881,925     
|Non-operating loss, net                                                                | (477,398)  | (41,023)      
|Income taxes                                                                           | (749,194)  | (1,280,696)   
|Net income                                                                             | 1,686,645  | 3,560,206     
|                                                                                       |            |               
|                                                                                       |            |               
|At carrying value recognized by the acquired company:                                  |            |               
|                                                                                       |            |               
|                                                                                       | Cedsa S.A. |               
|                                                                                       | ThCh$      |               
|                                                                                       |            |               
|Property, plant and equipment at fair value                                            | 3,709,470  |               
|Property, plant and equipment at fair value recorded by the acquired company           | 4,081,215  |               
|Net difference of assets and liabilities at fair value vs. carrying value              | (371,745)  |               
|Less: difference which does not affect minority interest                               | 74,349     |               
|                                                                                       |            |               
|Fair value difference affecting the investor as of December 31, 2007                   | (297,396)  |               
|                                                                                       |            |               





Note 28 – Companies Disposed Of



As of December 31, 2008, as a result of the purchase and sale agreement  with Nexans (refer to Note 23 No. 3) the following companies were disposed of by the parent company Madeco S.A. and its subsidiaries Soinmad S.A., MISA and HB San Luis S.A.:



a) Cedsa S.A. - Colombia

b) Ficap S.A. - Brazil

c) Indelqui S.A. - Argentina and subsidiary (including the ownership in Optel S.A., company in operation)

d) Invercable S.A. and subsidiary - Chile (including the ownership in Indeco S.A., company in operation)

e) Madeco Cables S.A. and subsidiary - Chile (including the ownership in Cotelsa S.A. company in operation.)



The disposal of these companies is the result of the following events:



1. Through the Essential Event dated November 15, 2007, the Company communicated that on that same date MADECO S.A. entered a Framework Agreement with NEXANS from France, by virtue of which the transfer to the latter of all the assets of the cable unit of MADECO S.A. in Chile, Argentina, Peru, Brazil and Colombia was agreed at an initial price of US$ 448 million plus 2.5 million shares of NEXANS. The cash portion of the price was left to usual adjustments for this type of transactions, such as variation in working capital and such deductions as debt and minority interest in each of the companies subject to the transaction.



2. Beginning on the date of entering this agreement, the parties began a reciprocal due diligence process, which ended on February 21, 2008 through entering the purchase agreement, which was communicated as an Essential Event on that same date.  This agreement maintained the aforementioned initial price.



3. The formalization of the aforementioned transfer of assets was scheduled to be performed no later than on September 30, 2008, in conformity with a proforma balance sheet at that date and with the prior compliance of the conditions agreed for these purposes, which were communicated in the same Essential Event on February 21, 2008.







4. Having met each and every conditions agreed, on September 30, 2008, this operation was closed through the transfer to NEXANS of all the assets of the cable unit of MADECO S.A. in Chile, Argentina, Peru, Brazil and Colombia.



The cash price of US$ 448 million after deducting debt, minority interest of companies sold, transfer taxes, which the buyer has to withhold in Brazil and the variation in working capital, among others, gave rise to a total sum of US$ 393 million. Additionally, MADECO S.A. received as payment 2.5 million shares of NEXANS, which amount to US$218 million as of September 30, 2008.



The payment of the price may vary according to possible differences between the proforma balance and the final accounting close.  Given these potential variations, MADECO S.A. has left deposits in guarantees ("escrow") in favor of NEXANS. These adjustments are being negotiated by the parties involved (refer to Note 23 No. 3 letter a).



The financial statements which result from this operation have been recorded preliminarily as of September 30, 2008.  Upon end of the aforementioned adjustment process, the final result of the operation will be determined.



5 Below, we show the summarize balances of each company as of September 30, 2008 the assets and liabilities of which were not included in the consolidated balance sheet of Madeco S.A. as of December 31, 2008:





|                                           |             |             |            |             |              
|------------------------------------------ | ----------- | ----------- | ---------- | ----------- | -------------
|                                           | Ficap S.A.  | Indeco S.A. | Cedsa S.A. | Mad. Cables | Indelqui S.A.
|                                           | ThCh$       | ThCh$       | ThCh$      | ThCh$       | ThCh$        
|Assets                                     |             |             |            |             |              
|Current assets                             | 78,866,863  | 55,851,468  | 18,285,435 | 42,627,126  | 15,395,790   
|Property, plant and equipment              | 42,438,854  | 13,421,140  | 5,363,602  | 12,199,447  | 7,656,115    
|Other assets                               | 8,539,093   | 1,014,753   | 140,160    | 4,105,452   | 1,095,674    
|Total Assets                               | 129,844,810 | 70,287,361  | 23,789,197 | 58,932,025  | 24,147,579   
|Liabilities                                |             |             |            |             |              
|Current liabilities                        | 53,483,947  | 8,213,002   | 17,940,759 | 12,543,152  | 4,650,548    
|Long-term liabilities                      | 10,537,792  | 4,109,050   | 159,380    | 996,074     | 1,207,465    
|Shareholders’ equity and minority interest | 65,823,071  | 57,965,309  | 5,689,058  | 45,392,799  | 18,289,566   
|Total Liabilities and Shareholders’ Equity | 129,844,810 | 70,287,361  | 23,789,197 | 58,932,025  | 24,147,579   









6. The effects on the statement of income and cash flows have been considered for the period between January 1 and September 30, 2008.



7. The effects generated by the sale of the Cable Unit and which affect the amounts reported in each line in the statement of income as of December 31, 2008 are as follows:





|                                                |             
|----------------------------------------------- | ------------
|Statement of income                             | 2008        
|                                                | ThCh$       
|Cost of sales (realization of unrealized gains) | 1,188,829   
|Other non-operating income (Note 24)            | 160,335,942 
|Amortization of goodwill (Note 13)              | (15,188,363)
|Other non-operating expenses (Note 24)          | (24,807,589)
|Price-level restatement (Note 24)               | (2,356,057) 
|Income tax (Note 8)                             | (29,607,857)
|Net gain from sale of the Cable Unit            | 89,564,905  







Note 29 – Derivative Contracts



As of December 31, 2007 and 2008 the details of derivative contracts, recorded in conformity with Note 2 t), are as follows:



|        |                |                    |               |                  |                   |                         |                  |                 
|------- | -------------- | ------------------ | ------------- | ---------------- | ----------------- | ----------------------- | ---------------- | ----------------
|        |                |                    |               |                  |                   | 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    | 1,206,271      | 2nd  Quarter 08    | Exchange rate | Purchase         | debt              | 1,206,271               | (596,326)        | -               
|Swap    | 340,422        | 1st  Quarter 08    | Exchange rate | Purchase         | debt              | 340,422                 | (95,501)         | -               
|Swap    | 2,842,728      | 3rd  Quarter 09    | Exchange rate | Purchase         | debt              | 2,842,728               | (268,853)        | -               
|Swap    | 877,729        | 4th  Quarter 08    | Exchange rate | Purchase         | debt              | 877,729                 | (91,774)         | -               
|Swap    | 761,498        | 1st  Quarter 09    | Exchange rate | Purchase         | debt              | 761,498                 | (79,621)         | -               
|Swap    | 717,046        | 4th  Quarter 09    | Exchange rate | Purchase         | debt              | 717,046                 | (74,973)         | -               
|Swap    | 2,705,566      | 4th  Quarter 08    | Exchange rate | Purchase         | debt              | 2,705,566               | (39,560)         | -               
|Swap    | 1,604,151      | 1st  Quarter 08    | Exchange rate | Purchase         | debt              | 1,604,151               | 4,066            | -               
|Swap    | 1,672,207      | 1st  Quarter 08    | Exchange rate | Purchase         | debt              | 1,672,207               | 4,238            | -               
|Swap    | 557,286        | 1st  Quarter 09    | Exchange rate | Purchase         | debt              | 557,286                 | (47,074)         | -               
|Forward | 167,474        | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 167,474                 | -                | (8,570)         
|Forward | 197,506        | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 197,506                 | -                | (10,132)        
|Forward | 141,771        | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 141,771                 | -                | (7,302)         
|Forward | 483,756        | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 483,756                 | -                | 7,009           
|Forward | 58,981         | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 58,981                  | -                | 443             
|Forward | 235,384        | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 235,384                 | -                | 2,559           
|Forward | 54,235         | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 54,235                  | -                | (2,345)         
|Forward | 90,514         | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 90,514                  | -                | (4,004)         
|Forward | 91,150         | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 91,150                  | -                | (4,097)         
|Forward | 54,691         | 3rd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 54,691                  | -                | (2,488)         
|Forward | 72,726         | 3rd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 72,726                  | -                | (3,378)         
|Forward | 145,559        | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 145,559                 | -                | (2,366)         
|Forward | 36,796         | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 36,796                  | -                | (540)           
|Forward | 121,209        | 2nd  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 121,209                 | -                | (1,926)         
|Forward | 3,517,236      | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 3,517,236               | (38,861)         | -               
|Forward | 5,681,688      | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 5,681,688               | (100,753)        | -               
|Forward | 2,976,123      | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 2,976,123               | (50,653)         | -               
|Forward | 1,623,340      | 1st  Quarter 08    | Exchange rate | Purchase         | Supplier purchase | 1,623,340               | (7,809)          | -               









|        |                |                    |        |                  |             |                         |                  |                 
|------- | -------------- | ------------------ | ------ | ---------------- | ----------- | ----------------------- | ---------------- | ----------------
|        |                |                    |        |                  |             | 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 | 1,038,991      | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 1,038,991               | -                | (128,959)       
|Forward | 1,001,884      | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 1,001,884               | -                | (118,199)       
|Forward | 593,710        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 593,710                 | -                | (81,089)        
|Forward | 445,282        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 445,282                 | -                | (57,867)        
|Forward | 580,452        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 580,452                 | -                | (35,793)        
|Forward | 546,308        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 546,308                 | -                | (29,755)        
|Forward | 546,308        | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 546,308                 | -                | (26,290)        
|Forward | 546,308        | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 546,308                 | -                | (22,642)        
|Forward | 546,308        | 3rd  Quarter 08    | LME AL | Purchase         | Cash flow   | 546,308                 | -                | (19,008)        
|Forward | 546,308        | 3rd  Quarter 08    | LME AL | Purchase         | Cash flow   | 546,308                 | -                | (15,504)        
|Forward | 710,211        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 710,211                 | -                | (37,397)        
|Forward | 710,211        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 710,211                 | -                | (32,325)        
|Forward | 710,211        | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 710,211                 | -                | (27,687)        
|Forward | 710,211        | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 710,211                 | -                | (22,901)        
|Forward | 731,028        | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 731,028                 | -                | (18,908)        
|Forward | 33,414         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 33,414                  | (1,152)          | -               
|Forward | 228,593        | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 228,593                 | (9,223)          | -               
|Forward | 34,357         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 34,357                  | -                | (464)           
|Forward | 78,034         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 78,034                  | (4,517)          | -               
|Forward | 67,825         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 67,825                  | (4,930)          | -               
|Forward | 95,530         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 95,530                  | (9,045)          | -               
|Forward | 79,977         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 79,977                  | (6,400)          | -               
|Forward | 45,281         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 45,981                  | (3,949)          | -               
|Forward | 51,467         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 51,467                  | -                | (2,486)         
|Forward | 35,102         | 2nd  Quarter 08    | LME AL | Purchase         | Cash flow   | 35,102                  | (1,533)          | -               
|Forward | 37,651         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 37,651                  | -                | (1,197)         
|Forward | 80,940         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 80,940                  | -                | (2,835)         
|Forward | 71,784         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 71,784                  | -                | (383)           















|        |                |                    |        |                  |             |                         |                  |                 
|------- | -------------- | ------------------ | ------ | ---------------- | ----------- | ----------------------- | ---------------- | ----------------
|        |                |                    |        |                  |             | 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 | 97,793         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 97,793                  | -                | (1,677)         
|Forward | 65,421         | 1st  Quarter 08    | LME AL | Purchase         | Cash flow   | 65,421                  | -                | (852)           
|Forward | 604,921        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 604,921                 | (80,380)         | -               
|Forward | 197,512        | 2nd  Quarter 08    | LME CU | Purchase         | Cash flow   | 197,512                 | -                | (34,889)        
|Forward | 141,693        | 2nd  Quarter 08    | LME CU | Purchase         | Cash flow   | 141,693                 | -                | (25,191)        
|Forward | 167,456        | 2nd  Quarter 08    | LME CU | Purchase         | Cash flow   | 167,456                 | -                | (29,309)        
|Forward | 105,111        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 105,111                 | (15,947)         | -               
|Forward | 476,839        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 476,839                 | -                | (63,891)        
|Forward | 123,558        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 123,558                 | (23,736)         | -               
|Forward | 109,643        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 109,643                 | -                | (19,476)        
|Forward | 104,384        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 104,384                 | -                | 915             
|Forward | 160,467        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 160,467                 | (482)            | -               
|Forward | 162,416        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 162,416                 | -                | (1,966)         
|Forward | 163,389        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 163,389                 | (2,840)          | -               
|Forward | 75,793         | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 75,793                  | (890)            | -               
|Forward | 116,483        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 116,483                 | (5,807)          | -               
|Forward | 90,392         | 2nd  Quarter 08    | LME CU | Purchase         | Cash flow   | 90,392                  | -                | 1,440           
|Forward | 90,514         | 2nd  Quarter 08    | LME CU | Purchase         | Cash flow   | 90,514                  | -                | 1,488           
|Forward | 91,150         | 3rd  Quarter 08    | LME CU | Purchase         | Cash flow   | 91,150                  | -                | 1,441           
|Forward | 91,150         | 3rd  Quarter 08    | LME CU | Purchase         | Cash flow   | 91,150                  | -                | 1,493           
|Forward | 90,908         | 4th  Quarter 08    | LME CU | Purchase         | Cash flow   | 90,908                  | -                | 1,587           
|Forward | 101,229        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 101,229                 | (6,936)          | -               
|Forward | 146,198        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 146,198                 | (17,814)         | -               
|Forward | 95,778         | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 95,778                  | (6,617)          | -               
|Forward | 75,646         | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 75,646                  | (5,218)          | -               
|Forward | 383,757        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 383,757                 | -                | (20,791)        
|Forward | 385,219        | 1st  Quarter 08    | LME CU | Purchase         | Cash flow   | 385,219                 | -                | (20,887)        
|Forward | 96,048         | 2nd  Quarter 08    | LME CU | Purchase         | Cash flow   | 96,048                  | (6,758)          | -               











|        |                |                    |               |                  |              |                         |                  |                 
|------- | -------------- | ------------------ | ------------- | ---------------- | ------------ | ----------------------- | ---------------- | ----------------
|        |                |                    |               |                  |              | 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 | 97,969         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 97,969                  | -                | (7,991)         
|Forward | 604,451        | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 604,451                 | -                | (62,865)        
|Forward | 489,911        | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 489,911                 | -                | (37,778)        
|Forward | 91,516         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 91,516                  | (2,100)          | -               
|Forward | 91,150         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 91,150                  | -                | 413             
|Forward | 115,841        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 115,841                 | -                | 1,659           
|Forward | 89,960         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 89,960                  | -                | 1,724           
|Forward | 142,096        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 142,096                 | -                | 4,564           
|Forward | 125,355        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 125,355                 | -                | 5,693           
|Forward | 138,075        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 138,075                 | -                | 1,641           
|Forward | 91,692         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 91,692                  | -                | (118)           
|Forward | 280,756        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 280,756                 | -                | (8,079)         
|Forward | 90,299         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 90,299                  | -                | (222)           
|Forward | 90,383         | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 90,383                  | -                | (195)           
|Forward | 90,449         | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 90,449                  | -                | (84)            
|Forward | 181,060        | 3rd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 181,060                 | -                | (237)           
|Forward | 175,862        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 175,862                 | -                | 4,094           
|Forward | 88,536         | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 88,536                  | -                | 1,443           
|Forward | 175,862        | 1st  Quarter 08    | LME CU        | Purchase         | Cash flow    | 175,862                 | -                | 4,462           
|Forward | 175,862        | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 175,862                 | -                | 4,666           
|Forward | 175,862        | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 175,862                 | -                | 4,850           
|Forward | 175,862        | 2nd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 175,862                 | -                | 4,991           
|Forward | 175,862        | 3rd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 175,862                 | -                | 5,105           
|Forward | 175,862        | 3rd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 175,862                 | -                | 5,163           
|Forward | 175,862        | 3rd  Quarter 08    | LME CU        | Purchase         | Cash flow    | 175,862                 | -                | 5,162           
|Forward | 175,862        | 4th  Quarter 08    | LME CU        | Purchase         | Cash flow    | 175,862                 | -                | 5,108           
|Forward | 175,862        | 4th  Quarter 08    | LME CU        | Purchase         | Cash flow    | 175,862                 | -                | 5,019           
|Forward | 175,862        | 4th  Quarter 08    | LME CU        | Purchase         | Cash flow    | 175,862                 | -                | 4,915           
|Forward | 175,862        | 1st  Quarter 09    | LME CU        | Purchase         | Cash flow    | 175,862                 | -                | 4,721           
|Swap    | 11,988,557     | 2nd  Quarter 11    | Interest rate | Purchase         | Loans in USD | 11,553,295              | (4,589)          | -               
|Swap    | 1,122,180      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 903,186                 | (25,725)         | -               
|Swap    | 1,110,827      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 903,186                 | (2,593)          | -               
|Swap    | 1,118,077      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 903,186                 | (5,569)          | -               
|Swap    | 1,110,524      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 903,186                 | (365)            | -               
|Swap    | 1,116,616      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 903,186                 | (4,368)          | -               
|Swap    | 1,115,985      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 903,186                 | (3,153)          | -               
|Swap    | 1,108,954      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 903,186                 | (19,395)         | -               
|Swap    | 1,113,459      | 2nd  Quarter 08    | Copper        | Purchase         | Inventory    | 903,186                 | (5,126)          | -               
|Swap    | 1,123,931      | 1st  Quarter 08    | Copper        | Purchase         | Inventory    | 903,186                 | (11,820)         | -               
|        |                |                    |               |                  |              |                         | (1,782,432)      | (971,482)       











|     |                |                    |               |                  |              |                         |                  |                 
|---- | -------------- | ------------------ | ------------- | ---------------- | ------------ | ----------------------- | ---------------- | ----------------
|     |                |                    |               |                  |              | As of December 31, 2008
|Type | Nominal amount | Period of maturity | Item          | Sales / Purchase | Hedged item  | Amount                  | Effect in Income | Effect in Income
|     | ThCh$          |                    |               |                  |              | ThCh$                   | ThCh$            | ThCh$           
|Swap | 7,863,412      | 2nd  Quarter 09    | Interest rate | Purchase         | Loans in USD | 7,863,412               | (20,268)         | -               
|Swap | 386,423        | 4st  Quarter 08    | Copper        | Purchase         | Inventory    | 386,423                 | 281,821          | -               
|Swap | 396,171        | 4rd  Quarter 08    | Copper        | Purchase         | Inventory    | 396,171                 | 289,459          | -               
|Swap | 305,415        | 1rd  Quarter 09    | Copper        | Purchase         | Inventory    | 305,415                 | -                | 305,415         
|Swap | 304,362        | 1rd  Quarter 09    | Copper        | Purchase         | Inventory    | 304,362                 | -                | 304,362         
|Swap | 303,314        | 1rd  Quarter 09    | Copper        | Purchase         | Inventory    | 303,314                 | -                | 303,314         
|Swap | 302,407        | 2rd  Quarter 09    | Copper        | Purchase         | Inventory    | 302,407                 | -                | 302,407         
|Swap | 301,704        | 2rd  Quarter 09    | Copper        | Purchase         | Inventory    | 301,704                 | -                | 301,704         
|Swap | 300,973        | 2rd  Quarter 09    | Copper        | Purchase         | Inventory    | 300,973                 | -                | 300,973         
|Swap | 521,687        | 4rd  Quarter 098   | Copper        | Purchase         | Inventory    | 521,687                 | 304,097          | -               
|     |                |                    |               |                  |              |                         | 855,109          | 1,818,175       







Note 30 – Subsequent events



1. Purchase and Sales Agreement of the Cable Unit to Nexans.

Complementing that indicated in Note 23 No. 3 (letter a), on January 30, 2009, Madeco sent a letter to Nexans in which it explains in detail the rationale and arguments for which it indicates it does not agree with the adjustments indicated by Nexans, which are supported by the Company’s financial and legal advisors.

In the event that no agreement is reached, the purchase and sale agreement contemplates the performance of an arbitrage before the International Chamber of Commerce of New York to resolve the differences between both parties, which must be resolved, in conformity with laws applicable in Chile.

2. Capital increase at Madeco Brass Mills S.A.

In line with the company reorganization process approved by the shareholders at the Extraordinary Shareholders’ Meeting held on April 24, 2008, the Company began the process of separating the Pipelines and Plates business unit to its subsidiary Madeco Brass Mills S.A. Accordingly, on January 5, 2009, this company increased its share capital to Ch$12,911 million divided into 1,291,100 shares, which was paid by Madeco S.A. through the contribution in title ay their carrying values of the assets which compose a portion of the activities of its pipelines and plates business unit in Chile.

3. Dividends of Nexans

On February 12, 2009, Nexans reported that it will propose to the shareholders at the Ordinary Shareholders’ Meeting the distribution of a dividend of € 2 per share.

There have been no other significant subsequent events between January 1, 2009 and the date of issuance of these financial statements.





Note 31 – Guarantees received from third parties



As of December 31, 2007 and 2008, the Company holds the following guarantees from third parties:



|                                       |              |                   |          |      
|-------------------------------------- | ------------ | ----------------- | -------- | -----
|Guarantees received from third parties | Relationship | Type of guarantee | Balances
|                                       |              |                   | 2007     | 2008 
|                                       |              |                   | ThCh$    | ThCh$



|                                                                                 |          |                                     |         |        
|-------------------------------------------------------------------------------- | -------- | ----------------------------------- | ------- | -------
|Alucenter                                                                        | Customer | Mortgage                            | -       | 16,000 
|Angel Aravena                                                                    | Customer | Pledge                              | 23,120  | 30,200 
|Angel Aravena                                                                    | Customer | 2 Vehicles                          | 11,445  | -      
|Arriaza Romo Luis                                                                | Customer | Credit limit guarantee              | 10,890  | 10,000 
|Cam Perú S.R.L. - Banco de Crédito.                                              | Supplier | Letter of guarantee                 | 34,562  | -      
|Cam Perú S.R.L. - Interbank                                                      | Supplier | Letter of guarantee                 | 67,947  | -      
|Cammesa S.A.                                                                     | Customer | Compliance with purchase order      | 17,674  | -      
|Centelha equipamientos eléctricos Ltda.                                          | Customer | Bank guarantee                      | 305,489 | -      
|Administrative Committee for the trust fund for Federal electric transport (CAF) | Customer | Maintaining offer guarantee         | 657,825 | -      
|Consorcio Alfa Tarapoto - Interbank                                              | Supplier | Letter of guarantee                 | 59,220  | -      
|Construcciones Termicas SA                                                       | Customer | Advance guarantee                   | 76,166  | -      
|Coop. Pop. de Electr., Obras y Serv. Pub. de Santa Rosa  LTDA                    | Customer | Maintaining offer guarantee         | 189     | -      
|Coop. Pop. de Electr., Obras y Serv. Pub. de Santa Rosa LTDA                     | Customer | Compliance with purchase order      | 1,426   | -      
|Cristales y Aluminio S.A.                                                        | Customer | Mortgage                            | 205,144 | 205,945
|Daniel Valverde                                                                  | Customer | Mortgage                            | 132,822 | 136,427
|Project Executive Management of the Ministry of                                  | Supplier | Letter of guarantee                 | 6,021   | -      
|Project Executive Management of the Ministry of                                  | Supplier | Letter of guarantee                 | 12,917  | -      
|Executive Management of Energy Projects in Mine Sites                            | Supplier | Letter of guarantee                 | 5,250   | -      
|Edelnor S.A.A. - Banco de Crédito                                                | Supplier | Letter of guarantee                 | 739     | -      
|Edelnor S.A.A. - Interbank                                                       | Supplier | Letter of guarantee                 | 698,892 | -      
|Edesur SA                                                                        | Customer | Acquisition of wires and conductors | 143,268 | -      
|Edesur SA                                                                        | Customer | Compliance with purchase order      | 2,783   | -      
|Edesur SA                                                                        | Customer | Maintaining offer guarantee         | 5,567   | -      
|Electro Oriente - Interbank                                                      | Supplier | Letter of guarantee                 | 9,348   | -      
|Electro Oriente - Interbank                                                      | Supplier | Letter of guarantee                 | 10,535  | -      
|Electro Puno S.A. - Interbank                                                    | Supplier | Letter of guarantee                 | 9,704   | -      
|Electro Sur Este S.A. - Interbank                                                | Supplier | Letter of guarantee                 | 27,124  | -      
|Electro Sur Este S.A. - Interbank                                                | Customer | Letter of guarantee                 | 9,764   | -      
|Electrocentro S.A. - Interbank                                                   | Supplier | Letter of guarantee                 | 13,584  | -      
|Electromecanica Industrial                                                       | Customer | Rent guarantee                      | 8,548   | 8,581  
|Electronoroeste - Interbank                                                      | Supplier | Letter of guarantee                 | 806     | -      
|Electronoroeste S.A. - Interbank                                                 | Supplier | Letter of guarantee                 | 22,918  | -      
|Electronorte S.A. - Interbank                                                    | Supplier | Letter of guarantee                 | 39,170  | -      
|Electroucayali S.A.                                                              | Supplier | Letter of guarantee                 | 8,673   | -      
|Elfle Comercial Ltda.                                                            | Customer | Credit limit guarantee              | 76,230  | 70,000 
|Empresa Brasil central de Eng. Ltda.                                             | Customer | Bank guarantee                      | 702,625 | -      
|Empresa Provincial de Energía de Córdoba                                         | Customer | Maintaining offer guarantee         | 2,828   | -      
|Empresa Provincial de Energía de Córdoba                                         | Customer | Agreement guarantee                 | 896     | -      
|Empresa Provincial de Energía de Sta. Fe.                                        | Customer | Maintaining offer guarantee         | 2,040   | -      
|Empresa Provincial de Energía de Sta. Fe.                                        | Customer | Compliance with purchase order      | 354     | -      
|Erneso Retamal                                                                   | Customer | Mortgage                            | 3,131   | 2,736  
|Febras S.A.                                                                      | Customer | Checks                              | 130,680 | 120,000
|Gas Natural de Lima y Callao - Interbank                                         | Supplier | Letter of guarantee                 | 11418   | -      









|                                       |              |                   |          |      
|-------------------------------------- | ------------ | ----------------- | -------- | -----
|Guarantees received from third parties | Relationship | Type of guarantee | Balances
|                                       |              |                   | 2007     | 2008 
|                                       |              |                   | ThCh$    | ThCh$



|                                                          |          |                                            |            |          
|--------------------------------------------------------- | -------- | ------------------------------------------ | ---------- | ---------
|Arequipa Regional Government                              | Supplier | Letter of guarantee                        | 1,064      | -        
|Guarantee from Business Recovery Ltda                     | Customer | Rent guarantee                             | 8,168      | 7,500    
|Heat Transfer                                             | Customer | Letters of credit                          | 5,464      | 5,485    
|Hidrandina S.A -  Interbank                               | Supplier | Letter of guarantee                        | 80,008     | -        
|Incosyp Ingen. y construcciones Ltda.                     | Customer | Certificate of deposit                     | 25,099     | -        
|Ind. Nac. De Piezas Y Partes                              | Customer | Credit limit guarantee                     | 41,476     | 38,086   
|Ind. Radiadores Gallardo Ltda.                            | Customer | Credit limit guarantee                     | 32,670     | 30,000   
|Interbank                                                 | Supplier | Letter of guarantee                        | 32,993     | -        
|Ivan Maturana                                             | Customer | Pledge                                     | 2,289      | 2,000    
|Juan C. Inostroza Carrasco                                | Customer | Checks                                     | 6,534      | 6,000    
|Kitchen Pack Ltda.                                        | Customer | Creedit limit guarantee                    | 88,430     | 81,203   
|Lima Airport Partners - Interbank                         | Supplier | Letter of guarantee                        | 22,522     | -        
|Lima Airport Partners S.R.L.                              | Supplier | Letter of guarantee                        | 5,464      | -        
|Lima Airport Partners S.R.L. - Banco de Credito           | Supplier | Letter of guarantee                        | 10,926     | -        
|Lineas Mesopotamicas SA                                   | Customer | Repair fund substitution guarantee         | 365,885    | -        
|Lineas Mesopotamicas SA                                   | Customer | Advance guarantee                          | 4,764,040  | -        
|Lineas Mesopotamicas SA                                   | Customer | Financial advance                          | 295,654    | -        
|Lineas Mesopotamicas SA                                   | Customer | Guarantee                                  | 721,309    | -        
|Luigi Lotito y Cia. Ltda.                                 | Customer | Credit limit pledge                        | 37,941     | 44,626   
|Luz del Sur S.A.A. - Interbank                            | Supplier | Letter of guarantee                        | 934        | -        
|Luz del Sur S.A.A. - Interbank                            | Supplier | Letter of guarantee                        | 21,466     | -        
|Municipalidad Distrital de Coronel Gregorio - Inte        | Supplier | Letter of guarantee                        | 9,488      | -        
|Municipalidad Distrital Santa Rita de Siguas-Inter        | Supplier | Letter of guarantee                        | 2,813      | -        
|Pedro Gajardo                                             | Customer | Mortgage                                   | 3,080      | 2,691    
|Progos                                                    | Customer | Letter of guarantee                        | 3,182      | -        
|Puerto L SA                                               | Customer | Compliance with purchase order             | 194,856    | -        
|Red de Energía del Perú S.A. - Interbank                  | Supplier | Letter of guarantee                        | 1,900      | -        
|Renovación Cam Peru - Interbank                           | Supplier | Letter of guarantee                        | 5,801      | -        
|Ruben Riojas                                              | Customer | Pledge                                     | 1,145      | 1,000    
|Servicios Energéticos del Chaco-Empresa Estado Provincial | Customer | Compkliance with purchase order            | 5,532      | -        
|Sialum S.A.                                               | Customer | Mortgage                                   | 2,746      | 2,399    
|Soc.e Ing. Y Cont. Inducom                                | Customer | Mortgage                                   | 41,928     | 25,197   
|Soc.e Ing. Contruccion                                    | Customer | Mortgage                                   | -          | 36,633   
|Sociedad Electrica del Sur Oeste - Interbank              | Supplier | Letter of guarantee                        | 68,654     | -        
|Sunat- Banco Interamericano de Finanzas                   | Supplier | Letter of guarantee                        | 938,868    | -        
|Techint - Panedile - U.T.E.                               | Customer | Guarantee for repairment fund substitution | 23,378     | -        
|Tito Alvarado                                             | Supplier | Letters of credit                          | 108,983    | 109,408  
|Transportel Minera 2 SA                                   | Customer | Compliance with purchase order             | 94,310     | -        
|Turbogeneradores del Peru S.A.C - Banco de Crédito        | Supplier | Letter of guarantee                        | 11,160     | -        
|Turbogeneradores del Peru S.A.C - Interbank               | Supplier | Letter of guarantee                        | 38,351     | -        
|Unid. ejecutora del programa de la interconexión NEA-NOA  | Customer | Offer maintenance guarantee                | 1,610,981  | -        
|Vidrios y aluminios Alucenter                             | Customer | Mortgage                                   | 18,313     | -        
|Wood-Es Ing. Plásticos Ltda.                              | Customer | Credit limit guarantee                     | 21,780     | 20,000   
|Total                                                     |          |                                            | 13,347,317 | 1,012,117











Note 32 – Local and foreign currency



As of December 31, 2007 and 2008, foreign currency denominated assets and liabilities are as follows:



|               |          |       |      
|-------------- | -------- | ----- | -----
|Current assets | Currency | 2007  | 2008 
|               |          | ThCh$ | ThCh$



|                               |                |            |           
|------------------------------ | -------------- | ---------- | ----------
|Cash                           | Ch$            | 1,799,555  | 2,900,325 
|Cash                           | US$            | 6,200,652  | 5,054,522 
|Cash                           | ARS            | 1,396,957  | 1,551,029 
|Cash                           | Brazilian Real | 944,448    | 356,487   
|Cash                           | Peruvian soles | 317,320    | 195,195   
|Cash                           | Euros          | 188,939    | 364,651   
|Cash                           | Colombian peso | 488,691    | -         
|Time deposits                  | Ch$            | -          | 11,350,288
|Time deposits                  | Adjustable Ch$ | -          | 75,498,017
|Time deposits                  | US$            | -          | 45,163,351
|Time deposits                  | Brazilian Real | 8,585      | -         
|Marketable securities, net     | Ch$            | 580,290    | 57,883    
|Marketable securities, net     | Colombian peso | 270,006    | -         
|Trade accounts receivable, net | Ch$            | 26,072,415 | 17,807,027
|Trade accounts receivable, net | US$            | 37,494,633 | 20,438,674
|Trade accounts receivable, net | ARS            | 4,418,719  | 961,257   
|Trade accounts receivable, net | Brazilian Real | 24,203,136 | -         
|Trade accounts receivable, net | Peruvian soles | 847,169    | 549,095   
|Trade accounts receivable, net | Euros          | 1,534,707  | 337,487   
|Trade accounts receivable, net | Colombian peso | 3,456,126  | -         
|Notes receivable, net          | Ch$            | 4,076,672  | 5,871,660 
|Notes receivable, net          | US$            | 5,736,298  | 5,884,236 
|Notes receivable, net          | ARS            | 1,869,643  | 2,346,909 
|Notes receivable, net          | Peruvian soles | 11,276     | 19,547    
|Miscellaneous receivables, net | Ch$            | 791,051    | 882,232   
|Miscellaneous receivables, net | Adjustable Ch$ | 5,470      | 5,192     
|Miscellaneous receivables, net | US$            | 3,891,747  | 245,093   
|Miscellaneous receivables, net | ARS            | 847,979    | 1,140,525 
|Miscellaneous receivables, net | Brazilian Real | 518,792    | 55        
|Miscellaneous receivables, net | Peruvian soles | 502,744    | 402,082   
|Miscellaneous receivables, net | Euros          | 52,214     | 89,581    
|Miscellaneous receivables, net | Colombian peso | 469,969    | -         









|               |          |       |      
|-------------- | -------- | ----- | -----
|Current assets | Currency | 2007  | 2008 
|               |          | ThCh$ | ThCh$



|                                                     |                |            |           
|---------------------------------------------------- | -------------- | ---------- | ----------
|Notes and accounts receivable from related companies | Ch$            | 1,931,507  | 489,410   
|Notes and accounts receivable from related companies | US$            | 8,928      | -         
|Inventories, net                                     | Ch$            | 49,755,018 | 41,974,907
|Inventories, net                                     | US$            | 7,203,066  | -         
|Inventories, net                                     | ARS            | 10,342,546 | 1,597,724 
|Inventories, net                                     | Brazilian Real | 36,358,236 | -         
|Inventories, net                                     | Soles          | 32,901,663 | 11,384,835
|Inventories, net                                     | Colombian peso | 10,323,502 | -         
|Income taxes recoverable                             | Ch$            | 4,920,901  | 3,586,513 
|Income taxes recoverable                             | Brazilian Real | 3,821,646  | 116,270   
|Income taxes recoverable                             | Peruvian soles | 5,273,926  | 137,783   
|Income taxes recoverable                             | Colombian peso | 423,378    | -         
|Prepaid expenses                                     | Ch$            | 647,464    | 426,173   
|Prepaid expenses                                     | Adjustable Ch$ | 17,750     | -         
|Prepaid expenses                                     | US$            | 46,023     | -         
|Prepaid expenses                                     | ARS            | 70,433     | 89,574    
|Prepaid expenses                                     | Brazilian Real | 129,594    | -         
|Prepaid expenses                                     | Peruvian soles | 63,684     | 94,006    
|Prepaid expenses                                     | Colombian peso | 124,253    | -         
|Deferred income taxes                                | Ch$            | 8,501,692  | 1,150,628 
|Deferred income taxes                                | ARS            | 611,501    | 330,283   
|Deferred income taxes                                | Brazilian Real | 2,574,371  | -         
|Deferred income taxes                                | Peruvian soles | 100,509    | 7,484     
|Deferred income taxes                                | Colombian peso | 8,863      | -         
|Other current assets                                 | Ch$            | 1,327,509  | 15,882,583
|Other current assets                                 | Adjustable Ch$ | 393,688    | 124,425   
|Other current assets                                 | US$            | 2,922,327  | 25,743,685
|Other current assets                                 | ARS            | 18,559     | 22,699    
|Other current assets                                 | Brazilian Real | 134,080    | -         



|               |             |            
|-------------- | ----------- | -----------
|Current assets | 302,631,382 | 309,952,820









|                           |          |       |      
|-------------------------- | -------- | ----- | -----
|Current assets (continued) | Currency | 2007  | 2008 
|                           |          | ThCh$ | ThCh$



|                                                 |     |               |             
|------------------------------------------------ | --- | ------------- | ------------
|Land                                             | Ch$ | 5,472,411     | 3,710,737   
|Land                                             | US$ | 10,824,009    | 6,601,788   
|Buildings and infrastructure                     | Ch$ | 26,982,227    | 24,424,424  
|Buildings and infrastructure                     | US$ | 40,569,813    | 25,309,162  
|Machinery and equipment                          | Ch$ | 115,838,218   | 90,028,285  
|Machinery and equipment                          | US$ | 148,956,270   | 74,380,495  
|Other property, plant and equipment              | Ch$ | 25,636,964    | 26,278,878  
|Other property, plant and equipment              | US$ | 18,208,997    | 11,584,714  
|Revaluation from fixed asset technical appraisal | Ch$ | 6,108,886     | 3,072,652   
|Revaluation from fixed asset technical appraisal | US$ | 7,950,323     | -           
|Depreciation                                     | Ch$ | (93,711,404)  | (75,658,517)
|Depreciation                                     | US$ | (131,029,147) | (74,198,110)



|                              |  |             |            
|----------------------------- |  | ----------- | -----------
|Property, plant and equipment |  | 181,807,567 | 115,534,508



|                            |          |       |      
|--------------------------- | -------- | ----- | -----
|Currents Assets (continued) | Currency | 2007  | 2008 
|                            |          | ThCh$ | ThCh$



|                                 |                |             |            
|-------------------------------- | -------------- | ----------- | -----------
|Investments in related companies | Ch$            | 1,713,599   | -          
|Investments in related companies | US$            | 669,358     | -          
|Investments in other companies   | Ch$            | 18,179      | 124,811,289
|Investments in other companies   | Brazilian Real | 4,761,032   | -          
|Investments in other companies   | Peruvian soles | 17,512      | -          
|Goodwill                         | Ch$            | 944,455     | 734,118    
|Goodwill                         | US$            | 16,310,514  | 253,509    
|Negative goodwill                | US$            | (1,941,396) | (2,071,335)
|Long-term accounts receivable    | Ch$            | 263,168     | 137,619    
|Long-term accounts receivable    | Adjustable Ch$ | -           | 33,981     
|Long-term accounts receivable    | ARS            | 5,134       | 5,508      
|Intangible assets                | Ch$            | 977,316     | 709,377    
|Intangible assets                | US$            | 6,635       | 7,804      
|Intangible assets                | ARS            | 50,066      | -          
|Intangible assets                | Brazilian Real | 71,081      | 4,109      
|Intangible assets                | Peruvian soles | 579,011     | -          
|Amortization                     | Ch$            | (192,030)   | (208,600)  
|Amortization                     | US$            | (5,434)     | (7,804)    
|Amortization                     | Peruvian soles | (174,958)   | -          
|Other                            | Ch$            | 2,396,131   | 1,868,635  
|Other                            | Adjustable Ch$ | 719,772     | -          
|Other                            | US$            | 2,553,562   | 996,401    
|Other                            | ARS            | 191,938     | 102,432    
|Other                            | Brazilian Real | 8,753,963   | 6,098,753  



|             |            |            
|------------ | ---------- | -----------
|Other Assets | 38,688,608 | 133,475,796



|             |              |            
|------------ | ------------ | -----------
|Total Assets | 530,448,.995 | 551,545,036



| |                |             |            
| | -------------- | ----------- | -----------
| | Ch$            | 192,852,194 | 302,288,526
| | Adjustable Ch$ | 1,136,680   | 75,661,615 
| | ARS            | 19,823,475  | 8,147,940  
| | US$            | 176,577,178 | 145,386,185
| | Euros          | 1,775,860   | 791,719    
| | Brazilian Real | 82,278,964  | 6,575,674  
| | Peruvian soles | 40,439,856  | 12,790,027 
| | Colombian peso | 15.564.788  | -          





|                    |          |         |        |                            |        |      |        |      |        | 
|------------------- | -------- | ------- | ------ | -------------------------- | ------ | ---- | ------ | ---- | ------ | 
|Current liabilities |          | 90 days |        | Between 90 days and 1 year
|                    |          | 2008    | Rate
% | 2007                       | Rate
% | 2008 | Rate
% | 2007 | Rate
%
|                    | Currency | ThCh$   | ThCh$  | ThCh$                      | ThCh$ 



|                                                    |                  |            |      |            |      |           |      |            |     
|--------------------------------------------------- | ---------------- | ---------- | ---- | ---------- | ---- | --------- | ---- | ---------- | ----
|Short-term obligations with banks                   | Ch$              | 17,625,368 | 12,1 | 3,615,835  | 7,4  | 401,164   | 19,8 | 678,521    | 7,4 
|Short-term obligations with banks                   | Adjustable Ch$   | -          | -    | -          | -    | -         | -    | 1,282,581  | 4,1 
|Short-term obligations with banks                   | US$              | 759,732    | 6,0  | 18,307,806 | 6,6  | 1,656,993 | 3,4  | 9,501,688  | 6,6 
|Short-term obligations with banks                   | ARS              | 98,501     | 6,0  | -          | -    | -         | -    | -          | -   
|Short-term obligations with banks                   | Euros            | 52,574     | 7,6  | -          | -    | -         | -    | -          | -   
|Short-term obligations with banks                   | Colombian peso   | -          | -    | 4,812,522  | 13,0 | -         | -    | -          | -   
|Current portion of long-term obligations with banks | Ch$              | -          | -    | -          | -    | 852       | -    | -          | -   
|Current portion of long-term obligations with banks | Adjustable Ch$   | 55,987     | 2,3  | 319,453    | 5,2  | 1,494,265 | 1,9  | 1,490,953  | 5,2 
|Current portion of long-term obligations with banks | US$              | 1,026,550  | 5,3  | 388,811    | 5,0  | 6,244,576 | 5,4  | 5,506,941  | 5,0 
|Current portion of long-term obligations with banks | Brazilian Real   | -          | -    | 916,886    | 12,1 | -         | -    | 10,599,905 | 11,3
|Bonds payable                                       | Adjustable Ch$   | -          | -    | -          | -    | -         | -    | 5,533,510  | 5,0 
|Obligations maturing within one year                | Adjustable Ch$   | -          | -    | -          | -    | 621,778   | 4,8  | 598,316    | 4,8 
|Obligations maturing within one year                | US$              | 372,290    | 6,1  | 961,509    | 7,6  | 1,192,362 | 6,1  | 776,483    | -   
|Obligations maturing within one year                | Colombian peso   | -          | -    | 181,925    | -    | -         | -    | -          | -   
|Dividends payable                                   | Ch$              | 18,555     | -    | 16,337,353 | -    | -         | -    | -          | -   
|Dividends payable                                   | Soles            | -          | -    | 53,047     | -    | -         | -    | -          | -   
|Accounts payable                                    | Ch$              | 6,040,737  | -    | 6,957,832  | -    | -         | -    | -          | -   
|Accounts payable                                    | Adjustable Ch$   | 4,832      | -    | 609,459    | -    | -         | -    | -          | -   
|Accounts payable                                    | US$              | 10,215,548 | -    | 19,961,602 | -    | -         | -    | -          | -   
|Accounts payable                                    | ARS              | 1,359,529  | -    | 322,248    | -    | -         | -    | -          | -   
|Accounts payable                                    | Brazilian Real   | 26,943     | -    | 4,383,807  | -    | -         | -    | -          | -   
|Accounts payable                                    | Peruvian soles   | 104,971    | -    | 624,508    | -    | -         | -    | -          | -   
|Accounts payable                                    | Euros            | 14,302     | -    | 168,083    | -    | -         | -    | -          | -   
|Accounts payable                                    | Colombian peso   | -          | -    | 247,179    | -    | -         | -    | -          | -   
|Accounts payable                                    | Other currencies | 6,740      | -    | 1,608      | -    | -         | -    | -          | -   
|Notes payable                                       | Ch$              | 7,553      | -    | 4,965      | -    | -         | -    | -          | -   
|Notes payable                                       | US$              | 2,628,724  | -    | 3,166,818  | -    | -         | -    | -          | -   
|Notes payable                                       | ARS              | 244,177    | -    | 373,477    | -    | -         | -    | -          | -   
|Miscellaneous payables                              | Ch$              | 115,182    | -    | 169,935    | -    | -         | -    | -          | -   
|Miscellaneous payables                              | Adjustable Ch$   | -          | -    | 11,426     | -    | -         | -    | -          | -   
|Miscellaneous payables                              | US$              | 9,272      | -    | 20,307     | 3,5  | -         | -    | -          | -   
|Miscellaneous payables                              | ARS              | 26,813     | -    | 24,288     | -    | -         | -    | -          | -   
|Miscellaneous payables                              | Brazilian Real   | 714        | -    | 70,842     | -    | -         | -    | -          | -   
|Miscellaneous payables                              | Peruvian soles   | 163.202    | -    | 19,138     | -    | -         | -    | -          | -   
|Notes and accounts payable to related companies     | Ch$              | 441.761    | -    | 635,942    | -    | -         | -    | -          | -   
|Notes and accounts payable to related companies     | US$              | -          | -    | 33,894     | -    | -         | -    | -          | -   
|Notes and accounts payable to related companies     | Ch$              | 441.761    | -    | 635,942    | -    | -         | -    | -          | -   
|Notes and accounts payable to related companies     | US$              | -          | -    | 33,894     | -    | -         | -    | -          | -   
|Accrued expenses                                    | Ch$              | 3.554.166  | -    | 3,913,274  | -    | 527,154   | -    | 686,606    | -   









|                                |          |         |        |       |                            |      |        |      |        |  |  | 
|------------------------------- | -------- | ------- | ------ | ----- | -------------------------- | ---- | ------ | ---- | ------ |  |  | 
|Current liabilities (continued) |          | 90 days |        |       | Between 91 days and 1 year
|                                |          | 2008    | Rate
% | 2007  | Rate
%                     | 2008 | Rate
% | 2007 | Rate
%
|                                | Currency | ThCh$   | ThCh$  | ThCh$ | ThCh$                     



|                          |                |           |             |           |            |            |            |           |  
|------------------------- | -------------- | --------- | ----------- | --------- | ---------- | ---------- | ---------- | --------- | -
|Accrued expenses          | Adjustable Ch$ | 58,063    | 6,9         | 116,574   | -          | -          | -          | -         | -
|Accrued expenses          | US$            | 1,602,057 | -           | 263,280   | -          | -          | -          | -         | -
|Accrued expenses          | ARS            | 1,165,839 | -           | 1,037,662 | -          | -          | -          | 1,160,072 | -
|Accrued expenses          | Brazilian Real | 388,528   | -           | 3,496,081 | -          | -          | -          | -         | -
|Accrued expenses          | Peruvian soles | 1,044,485 | -           | 2,235,512 | -          | -          | -          | -         | -
|Accrued expenses          | Colombian peso | -         | -           | 283,918   | -          | -          | -          | -         | -
|Withholdings              | Ch$            | 750,163   | -           | 1,045,313 | -          | -          | -          | -         | -
|Withholdings              | ARS            | 803,329   | -           | 1,929,058 | -          | -          | -          | -         | -
|Withholdings              | Brazilian Real | 1,904     | -           | 512,653   | -          | -          | -          | -         | -
|Withholdings              | Peruvian soles | 334,185   | -           | 363,676   | -          | -          | -          | -         | -
|Withholdings              | Colombian peso | -         | -           | 109,643   | -          | -          | -          | -         | -
|Income taxes payable      | Ch$            | 251,388   | -           | -         | -          | 11,481,663 | -          | -         | -
|Income taxes payable      | ARS            | 26,729    | -           | -         | -          | -          | -          | -         | -
|Income taxes payable      | Peruvian soles | 582,411   | -           | -         | -          | -          | -          | -         | -
|Unearned income           | Ch$            | 81,260    | -           | 102,879   | -          | -          | -          | -         | -
|Unearned income           | US$            | 369,904   | -           | 1,529,981 | -          | -          | -          | -         | -
|Unearned income           | ARS            | 136,387   | -           | 1,325,705 | -          | -          | -          | -         | -
|Unearned income           | Brazilian Real | -         | -           | 1,440,745 | -          | -          | -          | -         | -
|Unearned income           | Peruvian soles | 20,372    | -           | 73,351    | -          | -          | -          | -         | -
|Unearned income           | Colombian peso | -         | -           | 459,663   | -          | -          | -          | -         | -
|Other current liabilities | Ch$            | 7,188     | -           | 132,880   | -          | -          | -          | -         | -
|Other current liabilities | US$            | 20,268    | -           | 4,589     | -          | 4,167      | -          | -         | -
|Other current liabilities | Brazilian Real | -         | -           | 1,280,507 | -          | -          | -          | -         | -
|Total current liabilities | 52,619,183     |           | 105,359,449 |           | 23,624,974 |            | 37,815,576 |          



| |                  |            |  |            |  |            |  |            |  | 
| | ---------------- | ---------- |  | ---------- |  | ---------- |  | ---------- |  | 
| | Ch$              | 28,893,321 |  | 32,916,208 |  | 12,410,833 |  | 1,365,127  |  | 
| | Adjustable Ch$   | 118,882    |  | 1,056,912  |  | 2,116,043  |  | 8,905,360  |  | 
| | ARS              | 3,861,304  |  | 5,012,438  |  | -          |  | 1,160,072  |  | 
| | US$              | 17,004,345 |  | 44,638,597 |  | 9,098,098  |  | 15,785,112 |  | 
| | Euros            | 66,876     |  | 168,083    |  | -          |  | -          |  | 
| | Brazilian Real   | 418,089    |  | 12,101,521 |  | -          |  | 10,599,905 |  | 
| | Peruvian soles   | 2,249,626  |  | 3,369,232  |  | -          |  | -          |  | 
| | Colombian peso   | -          |  | 6,094,850  |  | -          |  | -          |  | 
| | Other currencies | 6,740      |  | 1,608      |  | -          |  | -          |  | 







c) Long-term liabilities, current period



|     |          |              |              |               |                    |        |      |        |     
|---- | -------- | ------------ | ------------ | ------------- | ------------------ | ------ | ---- | ------ | ----
|Item | 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$  | %   



|                                        |                  |            |       |           |       |           |       |           |     
|--------------------------------------- | ---------------- | ---------- | ----- | --------- | ----- | --------- | ----- | --------- | ----
|Obligations with banks and finan. inst. | Ch$              | 1,516,500  | 10.10 | 758,250   | 10.10 | 758,250   | 10.10 | -         | -   
|Obligations with banks and finan. inst. | Adjustable Ch$   | 1,661,068  | 2.05  | -         | -     | -         | -     | -         | -   
|Obligations with banks and finan. inst. | US$              | 12,751,994 | 5.00  | 2,764,013 | 6.70  | -         | -     | -         | -   
|Miscellaneous payables                  | Adjustable Ch$   | 1,268,681  | 4.80  | 1,394,934 | 4.80  | 1,940,461 | 4.80  | -         | -   
|Miscellaneous payables                  | US$              | 2,320,404  | 6.10  | 1,645,457 | 6.10  | -         | -     | -         | -   
|Accrued expenses                        | Ch$              | 824,745    | 0.24  | 27,164    | 7.00  | 48,173    | 7.00  | 231,613   | 7.00
|Accrued expenses                        | Adjustable Ch$   | 37,791     | 7.00  | 35,809    | 7.00  | 63,503    | 7.00  | 305,321   | 7.00
|Accrued expenses                        | ARS              | 72,184     | -     | -         | -     | -         | -     | -         | -   
|Deferred income taxes                   | Ch$              | 60,522     | -     | -         | -     | -         | -     | -         | -   
|Deferred income taxes                   | ARS              | 136,070    | -     | -         | -     | -         | -     | -         | -   
|Deferred income taxes                   | Peruvian soles   | 136,962    | -     | 197,610   | -     | 1,172,001 | -     | 2,177,027 | -   
|Other liabilities                       | US$              | 8,420      | -     | 16,656    | -     | 41,637    | -     | 32,951    | -   
|Other liabilities                       | ARS              | 261,325    | -     | -         | -     | -         | -     | -         | -   
|Other liabilities                       | Other currencies | -          | -     | -         | -     | -         | -     | -         | -   
|Total long-term liabilities             |                  | 21,056,666 |       | 6,839,893 |       | 4,024,025 |       | 2,746,912 |     



| |                |            |  |           |  |           |  |           | 
| | -------------- | ---------- |  | --------- |  | --------- |  | --------- | 
| | Ch$            | 2,401,767  |  | 785,414   |  | 806,423   |  | 231,613   | 
| | Adjustable Ch$ | 2,967,540  |  | 1,430,743 |  | 2,003,964 |  | 305,321   | 
| | ARS            | 469,579    |  | -         |  | -         |  | -         | 
| | US$            | 15,080,818 |  | 4,426,126 |  | 41,637    |  | 32,951    | 
| | Peruvian soles | 136,962    |  | 197,.610  |  | 1,172,001 |  | 2,177,027 | 







d) Long-term liabilities, prior period



|     |          |              |              |               |                    |        |      |        |     
|---- | -------- | ------------ | ------------ | ------------- | ------------------ | ------ | ---- | ------ | ----
|Item | 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$  | %   



|                                        |                |            |       |            |      |           |      |           |     
|--------------------------------------- | -------------- | ---------- | ----- | ---------- | ---- | --------- | ---- | --------- | ----
|Obligations with banks and finan. inst. | Adjustable Ch$ | 3,862,668  | 5.16  | 111,110    | 4.63 | -         | -    | -         | -   
|Obligations with banks and finan. inst. | US$            | 20,803,103 | 6.25  | 6,872,213  | 6.30 | -         | -    | -         | -   
|Obligations with banks and finan. inst. | Brazilian Real | 6,320,189  | 11.39 | 1,552,187  | 8.73 | -         | -    | -         | -   
|Bonds payable                           | Adjustable Ch$ | 11,771,662 | 5.00  | 6,330,857  | 5.00 | -         | -    | -         | -   
|Miscellaneous payables                  | Adjustable Ch$ | 1,210,959  | 4.80  | 1,331,464  | 4.80 | 2,656,762 | 4.80 | -         | -   
|Miscellaneous payables                  | US$            | 1,773,096  | 1.08  | 456,340    | -    | 170,519   | -    | -         | -   
|Miscellaneous payables                  | Colombian peso | 191,746    | 12.21 | -          | -    | -         | -    | -         | -   
|Accrued expenses                        | Ch$            | 176,038    | 2.01  | 45,036     | 7.00 | 78,812    | 7.00 | 952,421   | 2.85
|Accrued expenses                        | Adjustable Ch$ | 85,203     | 5.59  | 60.434     | 7.00 | 105,759   | 7.00 | 521,241   | 7.00
|Accrued expenses                        | ARS            | 131,075    | -     | -          | -    | -         | -    | -         | -   
|Accrued expenses                        | Brazilian Real | 2,732,620  | -     | -          | -    | -         | -    | -         | -   
|Deferred income taxes                   | Ch$            | -          | -     | -          | -    | -         | -    | 97,120    | -   
|Deferred income taxes                   | US$            | 788,582    | -     | -          | -    | -         | -    | -         | -   
|Deferred income taxes                   | ARS            | 48,767     | -     | -          | -    | -         | -    | -         | -   
|Deferred income taxes                   | Soles          | 435,395    | -     | 216,123    | -    | 2,473,157 | -    | -         | -   
|Deferred income taxes                   | Colombian peso | 43,241     | -     | -          | -    | -         | -    | -         | -   
|Other liabilities                       | ARS            | 204,391    | -     | -          | -    | -         | -    | -         | -   
|Other liabilities                       | Brazilian Real | 470,524    | -     | -          | -    | -         | -    | -         | -   
|Other liabilities                       | Peruvian soles | 251,740    | -     | -          | -    | -         | -    | -         | -   
|Total long-term liabilities             |                | 51,300,999 |       | 16,975,764 |      | 5,485,009 |      | 1,570,782 |     



| |                |            |  |           |  |           |  |           | 
| | -------------- | ---------- |  | --------- |  | --------- |  | --------- | 
| | Ch$            | 176,038    |  | 45,036    |  | 78,812    |  | 1,049,541 | 
| | Adjustable Ch$ | 16,930.492 |  | 7,833,865 |  | 2,762,521 |  | 521,241   | 
| | ARS            |            |  |           |  |           |  |           | 
| | US$            | 23,364,781 |  | 7,328,553 |  | 170,519   |  | -         | 
| | Peruvian soles | 687,135    |  | 216,123   |  | 2,473,157 |  |           | 
| | Brazilian Real | 9,523,333  |  | 1,552,187 |  | -         |  | -         | 
| | Colombian peso | 234,987    |  | -         |  | -         |  | -         | 











Note 33 - Sanctions



The Company and its directors has not been the subject of sanctions by the SVS nor by any other administrative authorities.





Note 34 – Adoption of International Financial Reporting Standards



In conformity with that established on this matter by the Chilean Association of Accountants and the Chilean Superintendency of Securities and Insurance (SVS), the Company and its subsidiaries will adopt in full IFRS beginning in 2009.  Consequently, there will be changes in the opening balance of shareholders’ equity as of January 1, 2009 and there will also be an effect on the determination of net income for future years. Likewise, for comparative purposes, the 2008 financial statements will have to be presented in accordance with the new standards, which, defined as such, may differ from those presented herein.  The preliminary effects of this change in applying the new standards for the presentation of the Company’s financial statements have been quantified and noticed to the SVS in accordance with Circular No. 457 dated June 20, 2008.



Note 35-  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.



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.r) 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.q) 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:



A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and tax loss carry-forwards.
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.
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:



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,
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.r) 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            |  | 2006-2008                       
|Brazil           |  | 2000-2005                       













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, 2007 and 2008, 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, other than recorded impairment in financial statements.



The following effects are included in the net income (loss) and Shareholders’ equity reconciliation to US GAAP under paragraph (1.r) 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, 2006, 2007 and 2008, by segment of operation is as follows:



|                   |                 |                                 |                  
|------------------ | --------------- | ------------------------------- | -----------------
|                   | January 1, 2006 | Currency translation adjustment | December 31, 2006
|                   | ThCh$           | ThCh$                           | ThCh$            
|Wire and Cable     | 21,850,372      | 372,675                         | 22,223,047       
|Flexible Packaging | 1,137,760       | 5,529                           | 1,143,289        
|Profiles           | 1,369,061       | -                               | 1,369,061        
|Total              | 24,357,193      | 378,204                         | 24,735,397       















|                   |                 |              |                        |                                 |                  
|------------------ | --------------- | ------------ | ---------------------- | ------------------------------- | -----------------
|                   | January 1, 2007 | Acquisitions | Discontinued Operation | Currency translation adjustment | December 31, 2007
|                   | ThCh$           | ThCh$        | ThCh$                  | ThCh$                           | ThCh$            
|Wire and Cable     | 22,223,047      | 1,363,897    | (20,545,500)           | (3,041,444)                     | -                
|Flexible Packaging | 1,143,289       | 190,947      | -                      | (310,771)                       | 1,023,465        
|Profiles           | 1,369,061       | -            | -                      | -                               | 1,369,061        
|Total              | 24,735,397      | 1,554,844    | (20,545,500)           | (3,352,215)                     | 2,392,526        





|                   |                   |                                 |             |                  
|------------------ | ----------------- | ------------------------------- | ----------- | -----------------
|                   | December 31, 2007 | Currency translation adjustment | Impairment  | December 31, 2008
|                   | ThCh$             | ThCh$                           | ThCh$       | ThCh$            
|Wire and Cable     | -                 | -                               | -           | -                
|Flexible Packaging | 1,023,465         | 56,164                          | -           | 1,079,629        
|Profiles           | 1,369,061         | -                               | (1,342,422) | 26,639           
|Total              | 2,392,526         | 56,164                          | (1,342,422) | 1,106,268        





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.r) below and are as follows:



The reversal of negative goodwill and its amortization recorded under Chilean GAAP;
(ii)   The reversal of the impairment write-up recognized under Chilean GAAP;

(iii)  The effects of reducing depreciation expense, due to the proportionate allocation of the excess of acquisition cost (including effect of elimination of intercompany balances and its effect in income) to property, plant and equipment.



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 period 2007. For 2008, the Company recognized a minimum adjustment dividend as it had earnings for distribution, paragraph (1.r.)









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.r) 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 derivative 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.



(ii)  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.

(iii) 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 balance sheet.



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, 2006 and 2007, 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 and 2007, the Company entered into cash flow hedges and deferred an unrealized gain related to these derivatives.  For 2008, derivatives recognized by the Company meet the formal requirements of SFAS 133 for their classification as hedging derivatives. The effect of recognizing this gain for the year 2006, 2007 and 2008 is included in the reconciliation to US GAAP under paragraph (1.q) 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.q) below.







i)  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.r) below.



j)  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)
|                            | 2006                             |  | 2007                      |  | 2008   |  | 2006        |  | 2007          |  | 2008  
|                            | Number                           |  | Number                    |  | Number |  | Number      |  | Number        |  | Number
|                            |                                  |  |                           |  |        |  |             |  |               |  |       
|Balance as of January 1,    | 338,881,855                      |  | 338,881,855               |  |        |  | -           |  | 130,680,000   |  | -     
|Granted during the period   | -                                |  | -                         |  | -      |  | 130,680,000 |  |               |  | -     
|Cancelled during the period | -                                |  | (208,201,855)             |  |        |  | -           |  | -             |  | -     
|Exercised during the period | -                                |  | (130,680,000)             |  |        |  | -           |  | (130,680,000) |  | -     
|Balance as of December 31,  | 338,881,855                      |  | 0                         |  | -      |  | 130,680,000 |  | 0             |  | -     



Under US GAAP, the Company applied until December 31, 2006 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.r) below.



As of January 1, 2007, 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.r) for the year 2007.



There are no stock options authorized or granted by the Company as of December 31, 2008 and 2007.



k) 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 2006, 2007 and 2008, 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.q) below.





|                                   |  |                                  |  |             
|---------------------------------- |  | -------------------------------- |  | ------------
|                                   |  | For the years ended December 31,
|                                   |  | 2007                             |  | 2008        
|                                   |  | ThCh$                            |  | ThCh$       
|                                   |  |                                  |  |             
|Interest cost incurred             |  | (13,979,501)                     |  | (16,459,844)
|Interest capitalized under US GAAP |  | 145,248                          |  | 25,333      





l)  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.q) below.



m)  Elimination of discontinued operations





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.









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, 2008, 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.



The transaction closed on September 30, 2008.



Pursuant to SFAS 144 “Accounting for the Impairment or Disposal of Long Lived Assets”, the Wire and Cable segment was considered as "discontinued" and the results of operations of the unit have been reclassified to discontinued operations for all years presented. The effect of reclassifying discontinued operations is included in the reconciliation of net income to US GAAP under paragraph (1.q) below.



n)  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.q) below.







o)  Investment in Nexans S.A.



As a result of its investment in 9.2% of the outstanding shares of Nexans S.A., the Company has the ability to appoint a representative to the board of directors of Nexans.  Therefore, under Chile GAAP, it is concluded the Company has significant influence over the investee and the investment is accounted for using the proportional equity method.  Also, the Company has elected September 30 as the date to record the equity income, which is in accordance with Chilean GAAP as it is within 90 days of its fiscal year end.  Since the date of investment was September 30, the investment is recorded at its initial cost.

Under US GAAP, pursuant to APB Opinion 18, “The Equity Method of Accounting for Investments in Common Stock”, the Company does not have the ability to exercise significant influence in the operation of Nexans.  Therefore, at December 31, 2008, this investment is classified as available-for-sale and is presented at amortized cost adjusted to market value, in accordance with FAS 115 “Accounting for Certain Investments in Debt and Equity Securities”.

Under US GAAP, management evaluated the investment for impairment using the guidelines set forth in FAS 115 and determined that an other-than-temporary impairment has occurred.  As a result, at December 31, 2008, an impairment loss in the amount of ThCh$ 28,154,314 has been recorded.   The effect of this adjustment is presented in Note 1q.





p)  Impairment Alumco S.A.



Under Chilean GAAP, goodwill associated with the acquisition of Alumco S.A. is amortized over a period of 20 years recognizing the effects of the amortization in net income for the year.

For US GAAP purposes, in accordance with SFAS 144 goodwill must not be amortized and the Company must recognize the effects of impairment.  In performing a study, it has been concluded that goodwill of Alumco S.A. is affected by impairment. The effect of recognizing the impairment under US GAAP is recognized in the reconciliation note under paragraph (1 q) below.











q)  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,
|                                                                                              | 2006                             |  | 2007         |  | 2008         
|                                                                                              | ThCh$                            |  | ThCh$        |  | ThCh$        
|                                                                                              |                                  |  |              |  |              
|Net (loss) income in accordance with Chilean GAAP                                             | 35,326,145                       |  | 21,409,810   |  | 97,183,867   
|Reversal of depreciation on revaluation increment of fixed assets (par. 1b)                   | 58,863                           |  | 59,404       |  | 21,175       
|Deferred income taxes (par. 1c)                                                               |                                  |  |              |  |              
|c.i Reversal of amortization of complementary accounts                                        | 310,999                          |  | 313,974      |  | 1,673,918    
|c.ii Deferred tax effects of US GAAP adjustments                                              | 6,329,151                        |  | 4,246,281    |  | 2,870,511    
|Amortization of goodwill (par. 1d)                                                            | 241,150                          |  | 234,664      |  | 242,562      
|Staff severance indemnities (par. 1g) .                                                       | (12,762)                         |  | 136,170      |  | (184,129)    
|Reversal of impairment loss (par. 1j)                                                         | 231,421                          |  | 287,954      |  | 220,989      
|Capitalized interests (par. 1k)                                                               |                                  |  |              |  |              
|k.i  Capitalized interest                                                                     | 136,318                          |  | 40,793       |  | -            
|k.ii Accumulated depreciation                                                                 | (5,995)                          |  | (6,945)      |  | (15,890)     
|Impairment Alumco S.A. (par. 1p)                                                              | -                                |  | -            |  | (1,342,422)  
|Derivative Instruments (par. 1h)                                                              | -                                |  | -            |  | 242,488      
|Minority interest (par. 1l)                                                                   | 535,029                          |  | 700,553      |  | (91,700)     
|Impairment Investment in Nexans S.A. (par. 1o)                                                | -                                |  | -            |  | (28,154,314) 
|Elimination of discontinued operations (par. 1m)                                              | (29,150,968)                     |  | (28,665,300) |  | (100,130,081)
|Investment in related company (par. 1n)                                                       | -                                |  | 20,228       |  | 11,538       
|Net income (loss) from continuing operations in accordance with US GAAP                       | 13,999,351                       |  | (1,222,414)  |  | (27,451,488) 
|Income from discontinued operations, net of taxes
and minority interest (par. 1m)             | 25,814,510                       |  | 24,903,793   |  | 100,627,785  
|Net income in accordance with US GAAP                                                         | 39,813,861                       |  | 23,681,379   |  | 73,176,297   
|                                                                                              |                                  |  |              |  |              
|Other comprehensive income:                                                                   |                                  |  |              |  |              
|Foreign currency translation adjustment, net of taxes                                         | (81,693)                         |  | 49,510       |  | (562,471)    
|Loss (gain) on hedge of the foreign currency exposure of net investment
in foreign operations | 2,295,609                        |  | (18,748,262) |  | 30,623,056   
|Derivative Instruments (par. 1h)                                                              | -                                |  | -            |  | (409,334)    
|Comprehensive income in accordance with US GAAP                                               | 42,027,777                       |  | 4,982,627    |  | 102,827,548  







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,
|                                                                   |  | 2007               |  | 2008        
|                                                                   |  | ThCh$              |  | ThCh$       
|                                                                   |  |                    |  |             
|                                                                   |  |                    |  |             
|Shareholder’s Equity in accordance with Chilean GAAP               |  | 287,380,208        |  | 415,178,616 
|Reversal of revaluation of property, plant and equipment (par. 1b) |  |                    |  |             
|b.i Property, plant and equipment                                  |  | (6,108,886)        |  | (3,072,651) 
|b.ii Accumulated depreciation                                      |  | 3,270,721          |  | 1,057,874   
|Deferred income taxes (par. 1c)                                    |  |                    |  |             
|c.i Reversal of complementary accounts                             |  | (5,070,909)        |  | (2,253,522) 
|c.ii Deferred tax effects of US GAAP adjustments                   |  | 1,645,098          |  | 4,156,521   
|Amortization of goodwill (par. 1d)                                 |  | 11,094,193         |  | 1,461,062   
|Acquisition of Optel (par. 1e)                                     |  |                    |  |             
|e.i Reversal of negative goodwill amortization                     |  | (73,935)           |  | (118,587)   
|e.i Reversal of negative goodwill                                  |  | 537,714            |  | 632,453     
|e.ii-iii New basis of property, plant and equipment                |  | (1,675,074)        |  | (1,281,573) 
|e.iii Accumulated depreciation of property, plant and equipment    |  | 305,337            |  | 310,930     
|Staff severance indemnities (par. 1g)                              |  | (4,052,736)        |  | (3,244,018) 
|Derivative instruments (par. 1h)                                   |  | (971,479)          |  | (250,686)   
|Reversal of impairment loss (par. 1i)                              |  | (2,661,122)        |  | (1,771,934) 
|Impairment of goodwill Ficap (par. 1d)                             |  | (5,411,134)        |  | -           
|Capitalized interests (par 1k)                                     |  |                    |  |             
|k.i  Capitalized interest                                          |  | 438,446            |  | 234,767     
|k.ii Accumulated depreciation                                      |  | (33,448)           |  | (30,327)    
|Minority interest (par. 1l)                                        |  | 310,397            |  | 218,697     
|Impairment Investment in Nexans S.A. (par. 1o)                     |  | -                  |  | (28,154,314)
|Impairment Alumco S.A. (par. 1p)                                   |  | -                  |  | (1,342,422) 
|Minimum dividend (par. 1f)                                         |  | -                  |  | (29,155,160)
|Investment in related company (par. 1n)                            |  | 20,228             |  | 31,767      
|Shareholder’s Equity in accordance with US GAAP                    |  | 278,943,619        |  | 352,607,493 









The following summarizes the changes in shareholders’ equity under US GAAP during the years ended December 31, 2006, 2007 and 2008:



|                                                 |                    |  |              |  |             
|------------------------------------------------ | ------------------ |  | ------------ |  | ------------
|                                                 | As of December 31,
|                                                 | 2006               |  | 2007         |  | 2008        
|                                                 | ThCh$              |  | ThCh$        |  | ThCh$       
|                                                 |                    |  |              |  |             
|Beginning balance                                | 230,066,223        |  | 283,433,613  |  | 278,943,619 
|Capital increase                                 | 10,936,721         |  | 6,340,594    |  | -           
|Issuance of stock options                        | 321,683            |  | 449,278      |  | (8,514)     
|Cumulative translation adjustment                | 2,213,916          |  | (18,698,752) |  | 30,060,585  
|Derivative instruments (par. 1i).............................................. | -                  |  | -            |  | (409,334)   
|Interim dividend                                 | -                  |  | (16,337,353) |  | -           
|Minimum dividend                                 | -                  |  | -            |  | (29,155,160)
|Price-level restatement                          | 81,209             |  | 74,860       |  | -           
|Net income for the year                          | 39,813,861         |  | 23,681,379   |  | 73,176,297  
|Ending balance                                   | 283,433,613        |  | 278,943,619  |  | 352,607,493 





Additional disclosure requirements

Earnings (loss) per share

|                                                               |                                  |  |           |  |          
|-------------------------------------------------------------- | -------------------------------- |  | --------- |  | ---------
|                                                               | For the years ended December 31,
|                                                               | 2006                             |  | 2007      |  | 2008     
|                                                               | Ch$                              |  | Ch$       |  | Ch$      
|                                                               |                                  |  |           |  |          
|Earnings (loss) per share from continuing operations
(US GAAP) | 2.56                             |  | (0.22)    |  | (4,57)   
|Earnings per share from discontinued operations
(US GAAP)      | 4.70                             |  | 4.47      |  | 17,49    
|Net earnings (loss) per share (US GAAP)                        | 7.27                             |  | 4.26      |  | 12,93    
|Net earnings (loss) per share (Chilean GAAP)                   | 6.45                             |  | 3.86      |  | 17,17    
|                                                               |                                  |  |           |  |          
|Weighted average number of common stock                        |                                  |  |           |  |          
|outstanding (in thousands)                                     | 5,471,995                        |  | 5,558,289 |  | 5,661,193



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.







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, 2006
|                                                                           | Chile                                |  | Argentina |  | Peru        |  | Brazil      |  | Total      
|                                                                           | ThCh$                                |  | ThCh$     |  | ThCh$       |  | ThCh$       |  | ThCh$      
|                                                                           |                                      |  |           |  |             |  |             |  |            
|Income (loss) before income taxes and minority interest
under Chilean GAAP | 18,486,654                           |  | 1,440,184 |  | 13,991,817  |  | 9,293,651   |  | 43,212,306 
|Current income taxes as determined under Chilean GAAP                      | (876,275)                            |  | (790,306) |  | (4,068,582) |  | (2,679,811) |  | (8,414,974)
|Deferred income taxes as determined under Chilean GAAP                     | 2,760,749                            |  | 106,782   |  | (121,287)   |  | (418,429)   |  | 2,327,815  
|Subtotal                                                                   | 1,884,474                            |  | (683,524) |  | (4,189,869) |  | (3,098,240) |  | (6,087,159)
|US GAAP adjustments:                                                       |                                      |  |           |  |             |  |             |  |            
|Deferred tax effects of applying SFAS No. 109                              | 448,069                              |  | -         |  | 85,388      |  | -           |  | 533,457    
|Deferred tax effects of US GAAP adjustments                                | (29,270)                             |  | 96,129    |  | (1,025)     |  | 86,194      |  | 152,028    
|Reclassification of income of discontinued operations                      | (1,408,151)                          |  | 245,264   |  | 4,105,506   |  | 3,012,046   |  | 5,954,665  
|Expense (benefit) for the year under US GAAP                               | 895,122                              |  | (342,131) |  | -           |  | -           |  | 552,991    



|                                                                    |                                      |  |             |  |             |  |            |  |           |             |              |  |  |  |  |  |  |  |  | 
|------------------------------------------------------------------- | ------------------------------------ |  | ----------- |  | ----------- |  | ---------- |  | --------- | ----------- | ------------ |  |  |  |  |  |  |  |  | 
|                                                                    | 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 | (2,625,294)                          |  | (36,122)    |  | 15,794,212  |  | 10,614,544 |  | 2,435,838 | 26,183,178 
|Current income taxes as determined under Chilean GAAP               | (452,698)                            |  | (150,195)   |  | (4,322,462) |  | (827,803)  |  | (749,194) | (6,502,352)
|Deferred income taxes as determined under Chilean GAAP              | 5,971,389                            |  | (383,306)   |  | (307,988)   |  | 51,030     |  |           | 5,331,125  
|Subtotal                                                            | 5,518,691                            |  | (533,501)   |  | (4,630,450) |  | (776,773)  |  | (749,194) | (1,171,227)
|US GAAP adjustments:                                                |                                      |  |             |  |             |  |            |  |           |            
|Deferred tax effects of applying SFAS No. 109                       | 432,782                              |  | -           |  | 106,877     |  | -          |  | -         | 539,659    
|Deferred tax effects of US GAAP adjustments                         | (63,971)                             |  | 256,732     |  | (7,065)     |  | 343,647    |  |           | 529,343    
|Reclassification of income of discontinued operations               | (801,622)                            |  | (155,028)   |  | 3,249,942   |  | 433,126    |  | 749,194   | 3,475,612  
|Deconsolidation Peruplast                                           |                                      |  |             |  | 1,280,696   |  |            |  |           | 1,280,696  
|Expense (benefit) for the year under US GAAP                        | 5,085,880                            |  | (431,797)   |  | -           |  | -          |  | -         | 4,654,083  
|                                                                    |                                      |  |             |  |             |  |            |  |           |            
|                                                                    | For the year ended December 31, 2008
|                                                                    | Chile                                |  | Argentina   |  | Peru        |  | Brazil     |  | Colombia  |             | Total       
|                                                                    | ThCh$                                |  | ThCh$       |  | ThCh$       |  | ThCh$      |  | ThCh$     |             | ThCh$       
|                                                                    |                                      |  |             |  |             |  |            |  |           |             |             
|Income before income taxes and minority interest
under Chilean GAAP | 119,548,878                          |  | 3,472,076   |  | 15,880,197  |  | 2,046,751  |  | (371,918) |             | 140,575,984 
|Current income taxes as determined under Chilean GAAP               | (25,728,452)                         |  | (75,707)    |  | (2,848,317) |  | (534,861)  |  | (55,038)  |             | (29,242,375)
|Deferred income taxes as determined under Chilean GAAP              | (9,985,252)                          |  | (940,718)   |  | (11,460)    |  | 517,607    |  | (46,352)  |             | (10,466,175)
|Subtotal                                                            | (35,713,704)                         |  | (1,016,425) |  | (2,859,777) |  | (17,254)   |  | (101,390) |             | (39,708,550)
|US GAAP adjustments:                                                |                                      |  |             |  |             |  |            |  |           |             |             
|Deferred tax effects of applying SFAS No. 109                       | 977,611                              |  | 263,132     |  | 855,111     |  | -          |  | -         |             | 2,095,854   
|Deferred tax effects of US GAAP adjustments                         | 2,261,409                            |  | -           |  | 653,950     |  | 331,729    |  | -         |             | 3,247,088   
|Reclassification of income of discontinued operations               | 32,591,210                           |  | 889,968     |  | (553,205)   |  | (314,475)  |  | 101,390   |             | 32.714,888  
|Deconsolidation Peruplast                                           | -                                    |  | -           |  | 1,903,921   |  | -          |  | -         |             | 1,903,921   
|Expense (benefit) for the year under US GAAP                        | 116,526                              |  | 136,675     |  | -           |  | -          |  | -         |             | 253,201     







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                                       | 1,359,709                       |  | -                                           |  | 1,359,709                  |  | 3,371                           |  | -                                           |  | 3,371                     
|Tax loss carry forwards                                               | 8,091,175                       |  | -                                           |  | 8,091,175                  |  | 16,695,662                      |  | -                                           |  | 16,695,662                
|Valuation allowance                                                   | (3,099,494)                     |  | -                                           |  | (3,099,494)                |  | (19,276,758)                    |  | (573,482)                                   |  | (19,850,240)              
|Accrued vacation expense                                              | 323,864                         |  | -                                           |  | 323,864                    |  | -                               |  | -                                           |  | -                         
|Property, plant and equipment
held for sale                           | 21,246                          |  | -                                           |  | 21,246                     |  | 25,572                          |  | -                                           |  | 25,572                    
|Impairment of investment in Decker                                    | -                               |  | -                                           |  | -                          |  | -                               |  | 931,393                                     |  | 931,393                   
|Impairment of investment in Brazil                                    | 2,077,644                       |  | -                                           |  | 2,077,644                  |  | 4,033,074                       |  | -                                           |  | 4,033,074                 
|Adjustment to realizable value
for property, plant and equipment      | 33,322                          |  | -                                           |  | 33,322                     |  | -                               |  | -                                           |  | -                         
|Allowance for obsolescence
of inventories                             | 714,608                         |  | -                                           |  | 714,608                    |  | 20,602                          |  | -                                           |  | 20,602                    
|Allowances for other current
and long-term receivables                | 385,442                         |  | -                                           |  | 385,442                    |  | -                               |  | -                                           |  | -                         
|Write-downs of property, plant
and equipment                          | 535,155                         |  | -                                           |  | 535,155                    |  | 507,704                         |  | -                                           |  | 507,704                   
|Provision for unused property,
plant and equipment                    | 78,861                          |  | -                                           |  | 78,861                     |  | 383,695                         |  | 33,116                                      |  | 416,811                   
|Other                                                                 | 2,069,826                       |  | -                                           |  | 2,069,826                  |  | 166,090                         |  | 64,949                                      |  | 231,039                   
|Gross deferred tax assets                                             | 12,591,358                      |  | -                                           |  | 12,591,358                 |  | 2,559,012                       |  | 455,976                                     |  | 3,014,988                 
|                                                                      |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Deferred tax liabilities                                              |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Property, plant and equipment in
leasing and accelerated
depreciation | 164,207                         |  | -                                           |  | 164,207                    |  | 5,704,224                       |  | 4,630,853                                   |  | 10,335,077                
|Manufacturing expenses                                                | 542,708                         |  | -                                           |  | 542,708                    |  | -                               |  | -                                           |  | -                         
|Staff Severance Indemnities                                           | -                               |  | -                                           |  | -                          |  | 474,830                         |  | (436,395)                                   |  | 38,435                    
|Negotiation of bonds                                                  | 86,684                          |  | -                                           |  | 86,684                     |  | 28,841                          |  | -                                           |  | 28,841                    
|Bond issuance costs                                                   | -                               |  | -                                           |  | -                          |  | 124,694                         |  | -                                           |  | 124,694                   
|Other                                                                 | 823                             |  | -                                           |  | 823                        |  | 328,808                         |  | (297,029)                                   |  | 31,779                    
|Gross deferred tax liabilities                                        | 794,422                         |  | -                                           |  | 794,422                    |  | 6,661,397                       |  | 3,897,429                                   |  | 10,558,826                
|                                                                      |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Net assets (liabilities) deferred taxes                               | 11,796,936                      |  | -                                           |  | 11,796,936                 |  | (4,102,385)                     |  | (3,441,453)                                 |  | (7,543,838)               











Deferred tax assets (liabilities) as of December 31, 2008 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                                       | 647,460                         |  | (108)                                       |  | 647,352                    |  | 3,617                           |  | -                                           |  | 3,617                     
|Tax loss carry forwards                                               | 1,124,312                       |  | -                                           |  | 1,124,312                  |  | 5,517,512                       |  | -                                           |  | 5,517,512                 
|Valuation allowance                                                   | (1,649,915)                     |  | -                                           |  | (1,649,915)                |  | (3,354,018)                     |  | (2,135,299)                                 |  | (5,489,317)               
|Accrued vacation expense                                              | 173,268                         |  | (13,929)                                    |  | 159,339                    |  | -                               |  | -                                           |  | -                         
|Property, plant and equipment
held for sale                           | 16,100                          |  | -                                           |  | 16,100                     |  | -                               |  | -                                           |  | -                         
|Impairment of investment in Decker                                    | -                               |  | -                                           |  | -                          |  | -                               |  | 620,177                                     |  | 620,177                   
|Impairment of investment in Nexans                                    | -                               |  | -                                           |  | -                          |  | -                               |  | 4,786,233                                   |  | 4,786,233                 
|Adjustment to realizable value
for property, plant and equipment      | 16,699                          |  | -                                           |  | 16,699                     |  | -                               |  | -                                           |  | -                         
|Allowance for obsolescence
of inventories                             | 470,794                         |  | (2,764)                                     |  | 468,030                    |  | 18,737                          |  | -                                           |  | 18,737                    
|Allowances for other current
and long-term receivables                | 345,937                         |  | -                                           |  | 345,937                    |  | -                               |  | -                                           |  | -                         
|Write-downs of property, plant
and equipment                          | 42,079                          |  | (42,079)                                    |  | -                          |  | 478,539                         |  | -                                           |  | 478,539                   
|Staff Severance Indemnities                                           | -                               |  | -                                           |  | -                          |  | (470,730)                       |  | 551,484                                     |  | 80,754                    
|Provision for unused property,
plant and equipment                    | 84,614                          |  | -                                           |  | 84,614                     |  | 413,428                         |  | -                                           |  | 413,428                   
|Other                                                                 | 881,693                         |  | -                                           |  | 881,693                    |  | 111,018                         |  | -                                           |  | 111,018                   
|Gross deferred tax assets                                             | 2,153,041                       |  | (58,880)                                    |  | 2,094,161                  |  | 2,718,103                       |  | 3,822,595                                   |  | 6,540,698                 
|                                                                      |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Deferred tax liabilities                                              |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Property, plant and equipment in
leasing and accelerated
depreciation | 51,396                          |  | (51,396)                                    |  | -                          |  | 8,803,732                       |  | (4,104,734)                                 |  | 4,698,998                 
|Derivates                                                             | -                               |  | (42,617)                                    |  | (42,617)                   |  | -                               |  | -                                           |  | -                         
|Manufacturing expenses                                                | 582,163                         |  | -                                           |  | 582,163                    |  | -                               |  | -                                           |  | -                         
|Negotiation of bonds                                                  | 31,087                          |  | -                                           |  | 31,087                     |  | 11,220                          |  | -                                           |  | 11,220                    
|Bond issuance costs                                                   | -                               |  | -                                           |  | -                          |  | -                               |  | -                                           |  | -                         
|Other                                                                 | -                               |  | -                                           |  | -                          |  | 36,865                          |  | 168,209                                     |  | 205,074                   
|Gross deferred tax liabilities                                        | 664,646                         |  | (94,013)                                    |  | 570,633                    |  | 8,851,817                       |  | (3,936,525)                                 |  | 4,915,292                 
|                                                                      |                                 |  |                                             |  |                            |  |                                 |  |                                             |  |                           
|Net assets (liabilities) deferred taxes                               | 1,488,395                       |  | 35,133                                      |  | 1,523,528                  |  | (6,133,714)                     |  | 7,759,120                                   |  | 1,625,406                 









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,
|                                                                     | 2006                             |   | 2007        |  | 2008        
|                                                                     | ThCh$                            |   | ThCh$       |  | ThCh$       
|                                                                     |                                  |   |             |  |             
|Pretax (loss) income in accordance with US GAAP                      | 13,916,060                       |   | (6,587,260) |  | (26,829,711)
|                                                                     |                                  |   |             |  |             
|Statutory tax rate                                                   | 17.0%                            |   | 17.0%       |  | 17.0%       
|                                                                     |                                  |   |             |  |             
|Statutory tax rate applied to pretax (loss) income                   | (2,365,730)                      |   | 1,119,834   |  | 4,867,051   
|Effect on tax and financial equity restatement (1)                   | 35,690                           |   | 886,920     |  | 3,328,986   
|Non-taxable income                                                   | 820,799                          |   | 4,606,736   |  | 8,092,410   
|Non-deductible expenses                                              | (660,398)                        |   | (2,678,664) |  | (13,898,234)
|Adjustments for application of BT 64                                 | (643,111)                        |   | (7,760,569) |  | (3,021,382) 
|Other local taxes                                                    | (29,563)                         |   | (17,385)    |  | (12,766)    
|Foreign taxes in excess of domestic rate                             | 1,054,716                        |   | 436,957     |  | (172,069)   
|Valuation allowance changes affecting the provision
for income taxes | 2,732,623                        |   | 8,043,707   |  | 3,753,570   
|Other                                                                | (392,035                         | ) | 16,547      |  | (2,684,365) 
|At effective tax rate                                                | 552,991                          |   | 4,654,083   |  | 253,201     
|                                                                     |                                  |   |             |  |             



(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.



In accordance with Chilean law, the Company and each of its subsidiaries compute and pay tax on a separate return basis and not on a consolidated basis.



Expiration dates of the tax loss carry-forwards as of December 31, 2008 are as follows:



|              |  |         |  |         |  |         |  |       |  |           |  |           
|------------- |  | ------- |  | ------- |  | ------- |  | ----- |  | --------- |  | ----------
|Country       |  | 2009    |  | 2010    |  | 2011    |  | 2012  |  | 2013      |  | Total     
|              |  | ThCh$   |  | ThCh$   |  | ThCh$   |  | ThCh$ |  | ThCh$     |  | ThCh$     
|Argentina (1) |  | 438,798 |  | 119,189 |  | 526,014 |  | -     |  | 2,602,657 |  | 3,686,658 
|Chile (2)     |  | -       |  | -       |  | -       |  | -     |  | -         |  | 31,479,371
|Total         |  | 438,798 |  | 119,189 |  | 526,014 |  | -     |  | 2,602,657 |  | 35,166,029
|              |  |         |  |         |  |         |  |       |  |           |  |           



(1) Tax-loss carry-forwards in Argentina expire in 5 years under current tax legislation.

(2) Tax loss carry-forwards do not expire in Chile under current tax legislation.



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 78.47% and 84.11% as of December 31, 2007 and 2008 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.









Collective bargaining agreements

As of December 31, 2008, approximately 41.87% of the Company’s employees are covered by collective bargaining agreements. Of the employees covered by collective bargaining agreements, 38.44% 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, 2008 were as follows:



|                  |                        
|----------------- | -----------------------
|                  | As of December 31, 2008
|                  | ThCh$                  
|                  |                        
|2009              | 2,186,430              
|2010              | 1,886,246              
|2011              | 1,723,984              
|2012              | 1,486,914              
|2013              | 1,251,041              
|Due after 5 years | 2,221,750              
|Total             | 10,756,365             



The present value of net long-term minimum lease payments totaled ThCh$ 9,052,025 as of December 31, 2008. The imputed interest totals ThCh$ 1,704,340.



Operating lease and related future minimum payments as of December 31, 2008 are presented as follows:



|                                     |                        
|------------------------------------ | -----------------------
|                                     | As of December 31, 2008
|                                     | ThCh$                  
|                                     |                        
|Due within 1 year                    | 345,543                
|Due after 1 year but within 2 years  | 148,231                
|Due after 2 years but within 3 years | 67,361                 
|Due after 3 years but within 4 years | 64,358                 
|Due after 4 years but within 5 years | 37,542                 
|Due after 5 years                    | -                      
|Total                                | 663,035                



Cash paid for operating leases for the years ended December 31, 2006, 2007 and 2008 was ThCh$ 426,927, ThCh$ 672,037 and ThCh$ 298,122. respectively. The Company did not incur contingent rental expenses and did not receive sublease rentals.







Advertising Costs

The Company expenses advertising costs when the related advertising has been published or aired. Advertising expenses amounted to ThCh$ 1,385,215, ThCh$ 981,459 and ThCh$ 431,153 for the years ended December 31, 2006, 2007 and 2008, 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, 2007 and 2008, 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 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, 2007, and 2008 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, 2007 and 2008,



|                                                                             |                    |  |            |  |             |  |            
|---------------------------------------------------------------------------- | ------------------ |  | ---------- |  | ----------- |  | -----------
|                                                                             | As of December 31,
|                                                                             | 2007               |  | 2008      
|                                                                             | Carrying           |  | Fair       |  | Carrying    |  | Fair       
|                                                                             | Amount             |  | value      |  | Amount      |  | Value      
|                                                                             | ThCh$              |  | ThCh$      |  | ThCh$       |  | ThCh$      
|Assets:                                                                      |                    |  |            |  |             |  |            
|Cash                                                                         | 11,336,562         |  | 11,336,562 |  | 10,422,209  |  | 10,422,209 
|Time deposits and marketable securities                                      | 858,881            |  | 858,881    |  | 132,069,539 |  | 132,069,539
|Securities purchased under agreements to resell                              | -                  |  | -          |  | 12.070.982  |  | 12.070.982 
|Derivative financial instruments                                             | 1,781,247          |  | -          |  | 2,693,552   |  | 2,693,552  
|Financial assets:                                                            |                    |  |            |  |             |  |            
|Long-term accounts receivable                                                | 268,302            |  | 268,302    |  | 177,108     |  | 177,108    
|Derivative financial instruments                                             | 4,721              |  | -          |  | -           |  | -          
|Short-term debt:                                                             |                    |  |            |  |             |  |            
|Short-term bank borrowings (includes current portion
of long-term liability) | 57,421,902         |  | 57,591,715 |  | 29,416,562  |  | 30,472,771 
|Current portion of bonds payable                                             | 5,533,510          |  | 5,602,339  |  | -           |  | -          
|Current portion of long-term liabilities                                     | 2,518,233          |  | 2,518,233  |  | 2,186,430   |  | 2,186,430  
|Derivative financial instruments                                             | 1,417,976          |  | -          |  | 2,089,130   |  | 2,089,130  
|Long-term debt:                                                              |                    |  |            |  |             |  |            
|Bonds payable                                                                | 18,102,519         |  | 24,433,376 |  | -           |  | -          
|Long-term bank liabilities                                                   | 39,521,470         |  | 39,847,587 |  | 20,210,075  |  | 20,555,858 
|Derivative financial instruments                                             | 470,524            |  | -          |  | -           |  | -          







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, 2008 are as follows:



|             |                                             
|------------ | --------------------------------------------
|             | Proportionate share
of restricted net assets
|Legal Entity | as of December 31, 2008                     
|             | ThCh$                                       
|             |                                             
|Alusa S.A.   | 28,761,466                                  
|Indalum S.A. | 34,674,122                                  



The consolidated retained earnings which represent undistributed earnings of investees accounted for using the equity method as of December 31, 2008 ThCh$ 0 ( December 2007 ThCh$ 20,857).



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, 2006, 2007 and 2008:



|                               |                                      |  |                                                |  |                                                                    |  |                                              
|------------------------------ | ------------------------------------ |  | ---------------------------------------------- |  | ------------------------------------------------------------------ |  | ---------------------------------------------
|                               | For the year ended December 31, 2006
|                               |                                      |  | Chilean GAAP cumulative translation adjustment |  | Effect of US GAAP adjustments on cumulative translation adjustment |  | Accumulated
Other Comprehensive
Income (Loss)
|                               |                                      | 
|                               |                                      | 
|Beginning balance              |                                      |  | (15,778,722)                                   |  | 2,533,660                                                          |  | (13,245,062)                                 
|Credit (charge) for the period |                                      |  | 2,295,609                                      |  | (81,693)                                                           |  | 2,213,916                                    
|Price-level restatement        |                                      |  | (50,025)                                       |  | -                                                                  |  | (50,025)                                     
|Ending balance                 |                                      |  | (13,533,138)                                   |  | 2,451,967                                                          |  | (11,081,171)                                 









|                               |                                      |  |                                                |  |                                                                    |  |                                              
|------------------------------ | ------------------------------------ |  | ---------------------------------------------- |  | ------------------------------------------------------------------ |  | ---------------------------------------------
|                               | For the year ended December 31, 2007
|                               |                                      |  | Chilean GAAP cumulative translation adjustment |  | Effect of US GAAP adjustments on cumulative translation adjustment |  | Accumulated
Other Comprehensive
Income (Loss)
|                               |                                      | 
|                               |                                      | 
|Beginning balance              |                                      |  | (13,533,138)                                   |  | 2,451,967                                                          |  | (11,081,171)                                 
|Credit (charge) for the period |                                      |  | (18,748,262)                                   |  | 49,510                                                             |  | (18,698,752)                                 
|Ending balance                 |                                      |  | (32,281,400)                                   |  | 2,501,477                                                          |  | (29,779,923)                                 



|                               |                                      |  |                                                |  |                                                                    |  |                                              
|------------------------------ | ------------------------------------ |  | ---------------------------------------------- |  | ------------------------------------------------------------------ |  | ---------------------------------------------
|                               | For the year ended December 31, 2008
|                               |                                      |  | Chilean GAAP cumulative translation adjustment |  | Effect of US GAAP adjustments on cumulative translation adjustment |  | Accumulated
Other Comprehensive
Income (Loss)
|                               |                                      | 
|                               |                                      | 
|Beginning balance              |                                      |  | (32,281,400)                                   |  | 2,501,477                                                          |  | (29,779,923)                                 
|Derivative Instruments         |                                      |  | -                                              |  | (409,334)                                                          |  | (409,334)                                    
|Equity reserve liquidation     |                                      |  | 24,807,589                                     |  | -                                                                  |  | 24,807,589                                   
|Credit (charge) for the period |                                      |  | 5,815,467                                      |  | (562,471)                                                          |  | 5,252,996                                    
|Ending balance                 |                                      |  | (1,658,344)                                    |  | 1,529,672                                                          |  | (128,672)                                    









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,
|                                                               | 2006                             |  | 2007      |  | 2008      
|                                                               | ThCh$                            |  | ThCh$     |  | ThCh$     
|                                                               |                                  |  |           |  |           
|Gain on sale of property, plant and equipment                  | (349,224)                        |  | -         |  | (496,528) 
|Recovery of tax benefits in foreign subsidiaries               | -                                |  | (14,515)  |  | (11,377)  
|Asset rental                                                   | -                                |  | (144,927) |  | (153,923) 
|Indemnities received                                           | -                                |  | (1,362)   |  | (268,793) 
|Other non-operating income                                     | (32,032)                         |  | (4,882)   |  | 55,983    
|Amortization of negative goodwill                              | -                                |  | (70,241)  |  | (212,109) 
|Amortization of goodwill                                       | 241,151                          |  | 234,664   |  | 16,854,812
|Obsolescence and write-offs of other long-term assets          | 636,128                          |  | -         |  | 545,578   
|Provision for lawsuits settlements                             | 1,592                            |  | -         |  | 54,849    
|Adjustment to realizable value of assets held for sale         | 343,495                          |  | -         |  | -         
|Depreciation of inactive assets (Argentina)                    | 549,975                          |  | 341,473   |  | 609,306   
|Government fines, taxes and interest from foreign subsidiaries | 427,682                          |  | 11,273    |  | 328,092   
|Indemnity Cost                                                 | -                                |  | 313,573   |  | 283,602   
|Directors’ profit sharing                                      | -                                |  | 477,799   |  | 776,518   
|Disposable asset appraisal cost                                | -                                |  | 130,458   |  | -         
|Deconsolidation Peruplast...........................................................                 | -                                |  | (399,701) |  | (131,581) 
|Other non-operating expense                                    | 5,847                            |  | 2,394     |  | 494,163   
|                                                               |                                  |  |           |  |           
|Total                                                          | 1,824,614                        |  | 876,006   |  | 18,728,592











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,
|                                                                                       | 2006                             |  | 2007          |  | 2008         
|                                                                                       | ThCh$                            |  | ThCh$         |  | ThCh$        
|                                                                                       |                                  |  |               |  |              
|Sales                                                                                  | 232,652,142                      |  | 201,068,032   |  | 193,526,597  
|Cost of sales                                                                          | (200,074,025)                    |  | (179,654,996) |  | (176,749,968)
|Gross Margin                                                                           | 32,578,117                       |  | 21,413,036    |  | 16,776,629   
|Administrative and selling expenses                                                    | (14,499,500)                     |  | (15,052,177)  |  | (17,284,943) 
|Operating (loss) income...  ......                                                           | 18,078,617                       |  | 6,360,859     |  | (508,314)    
|Non-operating income and expenses, net                                                 | (4,162,557)                      |  | (12,948,119)  |  | (28,121,397) 
|Income (loss) before income taxes
and minority interest  interest                      | 13,916,060                       |  | (6,587,260)   |  | (28,629,711) 
|Income taxes                                                                           | 552,991                          |  | 4,654,083     |  | 253,201      
|Equity in participation on (loss) income
of related companies, net                     | 794,274                          |  | 1,809,376     |  | 2,240,768    
|Income (loss) before minority interest                                                 | 15,263,325                       |  | (123,801)     |  | (26,135,742) 
|Minority interest                                                                      | (1,263,974)                      |  | (1,098,613)   |  | (1,315,746)  
|Income (loss) from continuing operations                                               | 13,999,351                       |  | (1,222,414)   |  | (27,451,488 )
|Income (loss) from discontinued operations                                             | 25,814,510                       |  | 24,903,793    |  | 100,627,785  
|Net (loss) income                                                                      | 39,813,861                       |  | 23,681,379    |  | 73,176,297   
|                                                                                       |                                  |  |               |  |              
|Other comprehensive income (loss):                                                     |                                  |  |               |  |              
|Loss on hedge of the foreign currency exposure
of net investment in foreign operations | 2,295,609                        |  | (18,748,262)  |  | 30,623,056   
|Derivative Instruments                                                                 | -                                |  | -             |  | (409,334)    
|Cumulative translation adjustment                                                      | (81,693)                         |  | 49,510        |  | (562,471)    
|Comprehensive net (loss) income                                                        | 42,027,777                       |  | 4,982,627     |  | 102,827,548  



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,
|                                                          | 2007               |  | 2008         
|                                                          | ThCh$              |  | ThCh$        
|                                                          |                    |  |              
|Current assets                                            | 103,117,736        |  | 274,339,952  
|Assets of disposal group                                  | 287,439,933        |  | -            
|Property, plant, and equipment                            | 201,477,022        |  | 204,376,916  
|Accumulated depreciation of property, plant and equipment | (111,236,458)      |  | (117,387,304)
|Property, plant, and equipment, net                       | 90,240,564         |  | 86,989,612   
|Goodwill, net                                             | 2,392,526          |  | 1,106,267    
|Investments in other companies                            | 8,561,448          |  | 108,903,006  
|Other assets                                              | 5,179,418          |  | 11,373,621   
|Total assets                                              | 496,931,625        |  | 482,712,458  
|                                                          |                    |  |              
|Current liabilities                                       | 59,819,085         |  | 93,238,132   
|Liabilities of disposal group                             | 103,303,486        |  | -            
|Long-term liabilities                                     | 42,224,952         |  | 23,756,391   
|Minority interest                                         | 12,640,483         |  | 13,110,442   
|Shareholders’ equity                                      | 278,943,619        |  | 352,607,493  
|Total Liabilities and Shareholders’ equity                | 496,931,625        |  | 482,712,458  







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,
|                                                                   | 2006                             |  | 2007         |  | 2008        
|                                                                   | ThCh$                            |  | ThCh$        |  | ThCh$       
|                                                                   |                                  |  |              |  |             
|Cash provided by operating activities under Chilean GAAP           | 6,916,118                        |  | 16,486,990   |  | 54,028,034  
|                                                                   |                                  |  |              |  |             
|Cash provided by operating activities under US GAAP                | 6,916,118                        |  | 16,486,990   |  | 54,028,034  
|                                                                   |                                  |  |              |  |             
|Cash provided by (used in) financing activities under Chilean GAAP | 16,897,480                       |  | 1,025,592    |  | (59,521,057)
|                                                                   |                                  |  |              |  |             
|Cash provided by (used in) financing activities under US GAAP      | 16,897,480                       |  | 1,025,592    |  | (59,521,057)
|                                                                   |                                  |  |              |  |             
|Cash used in investing activities under Chilean GAAP               | (12,197,754)                     |  | (25,621,994) |  | 133,845,016 
|Purchase of time deposits and marketable securities                | (663,823)                        |  | (858,880)    |  | (57,883)    
|Sale of time deposits and marketable securities                    | 291,525                          |  | 663,823      |  | 858,880     
|Cash used in investing activities under US GAAP                    | (11,825,456)                     |  | (25,426,937) |  | 133,044,019 



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,
|                                                | 2007               |  | 2008       
|                                                | ThCh$              |  | ThCh$      
|                                                |                    |  |            
|Cash in banks                                   | 11,336,562         |  | 10,422,209 
|Time deposits                                   | -                  |  | 132,011,656
|Securities purchased under agreements to resell | -                  |  | 12,070,982 
|Total                                           | 11,336,562         |  | 154,504,847



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 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 produced and sold in Chile, Colombia, 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 was discontinued as of September 30, 2008, and is presented as discontinued operations in accordance with SFAS 144 as detailed in Note 35, 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 Peruplast S.A. that operates 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





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.









Segment Reporting

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, 2006
|                                                        | Wire and                             |  | Brass       |  | Flexible    |  |            |  |             |  |              |  |             
|                                                        | Cable                                |  | Mills       |  | Packaging   |  | Profiles   |  | Unallocated |  | Elimination  |  | Consolidated
|                                                        | ThCh$                                |  | ThCh$       |  | ThCh$       |  | ThCh$      |  | ThCh$       |  | ThCh$        |  | ThCh$       
|                                                        |                                      |  |             |  |             |  |            |  |             |  |              |  |             
|Sales to external customers                             | 421,311,897                          |  | 139,628,683 |  | 54,033,247  |  | 38,990,214 |  | -           |  | -            |  | 653,964,041 
|Intersegment sales                                      | 56,065,621                           |  | 13,744,809  |  | 20,997      |  | -          |  | -           |  | (69,831,427) |  | -           
|Total revenues                                          | 477,377,518                          |  | 153,373,492 |  | 54,054,244  |  | 38,990,214 |  | -           |  | (69,831,427) |  | 653,964,041 
|Interest income                                         | 1,134,001                            |  | 595,593     |  | 65,947      |  | 78,362     |  | 3,161       |  | -            |  | 1,877,064   
|Interest expense                                        | (8,702,576)                          |  | (2,818,103) |  | (1,201,830) |  | (617,833)  |  | (5,143)     |  | -            |  | (13,345,485)
|Income taxes                                            | (6,287,740)                          |  | 1,385,030   |  | (639,883)   |  | (428,931)  |  | (115,635)   |  | -            |  | (6,087,159) 
|Equity participation in net income of related companies | 10,722                               |  |             |  | 794,273     |  | -          |  | -           |  | -            |  | 804,995     
|Depreciation expense                                    | 8,706,105                            |  | 2,768,909   |  | 2,946,726   |  | 1,240,421  |  | -           |  | -            |  | 15,662,161  
|Operating income                                        | 40,118,759                           |  | 11,454,240  |  | 5,612,967   |  | 3,358,514  |  | -           |  | -            |  | 60,544,480  
|                                                        |                                      |  |             |  |             |  |            |  |             |  |              |  |             
|Investments in related companies                        | 2,487,391                            |  |             |  | 7,962,398   |  |            |  | -           |  | -            |  | 10,449,789  
|Identifiable assets at December 31, 2006                | 260,596,586                          |  | 91,600,729  |  | 76,105,884  |  | 45,658,388 |  | 13,500,597  |  | -            |  | 487,462,184 
|Capital expenditures                                    | 5,022,858                            |  | 601,789     |  | 7,732,379   |  | 3,407,359  |  | -           |  | -            |  | 16,764,385  





|                                                        |                                      |  |             |  |             |  |            |  |             |  |               |  |             
|------------------------------------------------------- | ------------------------------------ |  | ----------- |  | ----------- |  | ---------- |  | ----------- |  | ------------- |  | ------------
|                                                        | For the year ended December 31, 2007
|                                                        | Wire and                             |  | Brass       |  | Flexible    |  |            |  |             |  |               |  |             
|                                                        | Cable                                |  | Mills       |  | Packaging   |  | Profiles   |  | Unallocated |  | Elimination   |  | Consolidated
|                                                        | ThCh$                                |  | ThCh$       |  | ThCh$       |  | ThCh$      |  | ThCh$       |  | ThCh$         |  | ThCh$       
|                                                        |                                      |  |             |  |             |  |            |  |             |  |               |  |             
|Sales to external customers                             | 448,501,098                          |  | 112,202,078 |  | 96,921,363  |  | 38,258,450 |  | -           |  | -             |  | 695,882,988 
|Intersegment sales                                      | 85,170,589                           |  | 16,303,784  |  | 55,402      |  | -          |  | -           |  | (101,529,775) |  | -           
|Total revenues                                          | 533,671,687                          |  | 128,505,862 |  | 96,976,765  |  | 38,258,450 |  | -           |  | (101,529,775) |  | 695,882,988 
|Interest income                                         | 668,116                              |  | 464,357     |  | 226,089     |  | 92,408     |  | 1,119,872   |  | -             |  | 2,570,842   
|Interest expense                                        | (9,346,800)                          |  | (887,336)   |  | (2,145,319) |  | (653,791)  |  | (946,255)   |  | -             |  | (13,979,501)
|Income taxes                                            | (4,346,738)                          |  | 532,611     |  | (1,560,830) |  | (201,046)  |  | 4,404,776   |  | -             |  | (1,171,227) 
|Equity participation in net income of related companies | (61,147)                             |  |             |  |             |  | -          |  | -           |  | -             |  | (61,147)    
|Depreciation expense                                    | 7,890,364                            |  | 2,711,938   |  | 5,179,529   |  | 1,408,091  |  | -           |  | -             |  | 17,189,922  
|Operating income                                        | 33,257,486                           |  | (1,481,827) |  | 9,565,438   |  | 2,343,625  |  | -           |  | -             |  | 43,684,722  
|                                                        |                                      |  |             |  |             |  |            |  |             |  |               |  |             
|Investments in related companies                        | 2,382,957                            |  |             |  |             |  | -          |  | -           |  | -             |  | 2,382,957   
|Identifiable assets at December 31, 2007                | 285,604,842                          |  | 72,889,287  |  | 107,192,386 |  | 44,038,065 |  | 20,724,415  |  | -             |  | 530,448,995 
|Capital expenditures                                    | 10,468,062                           |  | 1,034,475   |  | 4,549,975   |  | 4,341,070  |  | -           |  | -             |  | 20,393,582  











|                                                        |                                      |  |             |  |             |  |            |  |             |  |              |  |             
|------------------------------------------------------- | ------------------------------------ |  | ----------- |  | ----------- |  | ---------- |  | ----------- |  | ------------ |  | ------------
|                                                        | For the year ended December 31, 2008
|                                                        | Wire and                             |  | Brass       |  | Flexible    |  |            |  |             |  |              |  |             
|                                                        | Cable                                |  | Mills       |  | Packaging   |  | Profiles   |  | Unallocated |  | Elimination  |  | Consolidated
|                                                        | ThCh$                                |  | ThCh$       |  | ThCh$       |  | ThCh$      |  | ThCh$       |  | ThCh$        |  | ThCh$       
|                                                        |                                      |  |             |  |             |  |            |  |             |  |              |  |             
|Sales to external customers                             | 436,954,376                          |  | 88,908,483  |  | 130,444,871 |  | 36,649,886 |  | -           |  | -            |  | 692,957,616 
|Intersegment sales                                      | 28,396,800                           |  | 21,265,671  |  | 56,238      |  | -          |  | -           |  | (49,718,709) |  | -           
|Total revenues                                          | 465,351,176                          |  | 110,174,154 |  | 130,501,109 |  | 36,649,886 |  | -           |  | (49,718,709) |  | 692,957,616 
|Interest income                                         | 1,963,612                            |  | 2,521,051   |  | 91,612      |  | 95,956     |  | 420,723     |  | -            |  | 5,092,954   
|Interest expense                                        | 7,553,069                            |  | 453,669     |  | 2,746,708   |  | 1,112,906  |  | 4,593,492   |  | -            |  | 16,459,844  
|Income taxes                                            | (33,513,401)                         |  | 741,591     |  | (3,809,127) |  | (15,399)   |  | (3,112,214) |  |              |  | (39,708,550)
|Equity participation in net income of related companies | (564)                                |  | -           |  | -           |  | -          |  | -           |  | -            |  | (564)       
|Depreciation expense                                    | 4,578,232                            |  | 2,341,808   |  | 5,942,105   |  | 1,723,454  |  | -           |  | -            |  | 14,585,599  
|Operating income                                        | 30,550,523                           |  | (6,281,986) |  | 14,828,041  |  | 917,209    |  | -           |  | -            |  | 40,013,787  
|                                                        |                                      |  |             |  |             |  |            |  |             |  |              |  |             
|Investments in related companies                        | -                                    |  |             |  |             |  |            |  |             |  |              |  | -           
|Identifiable assets at December 31, 2008                | 124,786,341                          |  | 235,004,680 |  | 125,185,108 |  | 50,245,004 |  | 16,420,553  |  | -            |  | 551,641,686 
|Capital expenditures 259                                | 16,069,016                           |  | 1,140,820   |  | 6,067,076   |  | 1,578,990  |  | -           |  | -            |  | 24,855,902  



The following represents sales data for the years ended December 31, 2006, 2007 and 2008 and property, plant and equipment information by geographic area as of December 31, 2007 and 2008:



|          |             |  |               |  |             |  |                 |  |            
|--------- | ----------- |  | ------------- |  | ----------- |  | --------------- |  | -----------
|          |             |  |               |  |             |  | Property, plant
|          | Sales       |  | and equipment
|          | 2006        |  | 2007          |  | 2008        |  | 2007            |  | 2008       
|          | ThCh$       |  | ThCh$         |  | ThCh$       |  | ThCh$           |  | ThCh$      
|          |             |  |               |  |             |  |                 |  |            
|Chile     | 306,851,488 |  | 272,544,187   |  | 259,166,148 |  | 87,375,378      |  | 71,852,872 
|Brazil    | 163,560,268 |  | 173,099,106   |  | 167,695,743 |  | 38,194,230      |  | -          
|Argentina | 45,965,019  |  | 51,896,351    |  | 56,822,525  |  | 23,063,059      |  | 21,370,657 
|Peru      | 137,587,266 |  | 174,178,430   |  | 187,791,514 |  | 29,604,254      |  | 22,310,979 
|Colombia  | -           |  | 24,164,914    |  | 21,481,686  |  | 3,570,646       |  | -          
|Total     | 653,964,041 |  | 695,882,988   |  | 692,957,616 |  | 181,807,567     |  | 115,534,508













m) Discontinued Operations



As described in Note 35 par.m) 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 operations 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,
|                                                          | 2007               |  | 2008 
|                                                          | ThCh$              |  | ThCh$
|                                                          |                    |  |      
|Current assets                                            | 179,170,948        |  | -    
|Property, plant, and equipment                            | 161,067,614        |  | -    
|Accumulated depreciation of property, plant and equipment | (90,986,399)       |  | -    
|Property, plant, and equipment, net                       | 70,081,215         |  | -    
|Goodwill, net                                             | 20,545,500         |  | -    
|Other assets                                              | 17,642,269         |  | -    
|Total assets                                              | 287,439,932        |  | -    
|                                                          |                    |  |      
|Current liabilities                                       | 72,462,822         |  | -    
|Long-term liabilities                                     | 27,771,359         |  | -    
|Minority interest                                         | 3,069,305          |  | -    
|Shareholders’ equity                                      | 184,136,446        |  | -    
|Total liabilities and shareholders’ equity                | 287,439,932        |  | -    







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,
|                                                          | 2006                             |  | 2007          |  | 2008         
|                                                          | ThCh$                            |  | ThCh$         |  | ThCh$        
|                                                          |                                  |  |               |  |              
|Sales                                                     | 421,311,899                      |  | 448,501,098   |  | 436,954,376  
|Costs of sales                                            | (361,966,811)                    |  | (395,793,038) |  | (384,436,633)
|Gross Margin                                              | 59,345,088                       |  | 52,708,060    |  | 52,517,743   
|Administrative and selling expenses                       | (19,405,053)                     |  | (21,053,190)  |  | (19,942,922) 
|Operating  income                                         | 39,940,035                       |  | 31,654,870    |  | 32,574,821   
|Non-operating income and expenses, net                    | (7,585,207)                      |  | (2,446,832)   |  | 100,999,760  
|Net income before income taxes and minority  interest     | 32,354,828                       |  | 29,208,038    |  | 133,574,581  
|Income taxes                                              | (5,954,665)                      |  | (3,475,612)   |  | (32,714,888) 
|Equity in participation in income of related companies... | 10,722                           |  | (61,147)      |  | (1,090)      
|Income before minority interest                           | 26,410,885                       |  | 25,671,279    |  | 100,858,603  
|Minority interest                                         | (596,375)                        |  | (767,486)     |  | (230,818)    
|Net income from discontinued operations                   | 25,814,510                       |  | 24,903,793    |  | 100,627,785  









n)  Recent accounting pronouncements

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 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|On September 15, 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) N° 157, “Fair Value Measurements,” which enhances existing guidance for measuring assets and liabilities using fair value. Prior to the issuance of SFAS N° 157, guidance for applying fair value was incorporated in several accounting pronouncements. SFAS N° 157 provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. SFAS N° 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. Under SFAS N° 157, fair value measurements are disclosed by level within that hierarchy. SFAS N° 157 is effective for our fiscal year beginning January 1, 2008, and requires that the cumulative effect of the adoption of SFAS N° 157 be reflected as an adjustment to the beginning balance of retained earnings in the year of adoption. The Company is currently evaluating the impact of the adoption of SFAS N°157 on our consolidated financial condition, operating results and cash flows.
On February, 2007, the FASB issued SFAS N° 159 “The Fair Value Option for Financial Liabilities” including an amendment of FASB Statement N° 115. These statements permit entities to choose to measure at fair value many financial instruments and certain other items. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. These Statements are expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company does not believe these pronouncements will have a material effect on its results of operations, cash flows, or financial position.
On February 2008, the FASB issued FASB Staff Position 157-1 Application of FASB Statement N° 157 to FASB Statement N° 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13. This FASB Staff Position (FSP) amends FASB Statement N° 157, Fair Value Measurements, to exclude FASB Statement N° 13, Accounting for Leases, and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under Statement 13. However, this scope exception does not apply to assets acquired and liabilities assumed in a business combination that are required to be measured at fair value under FASB Statement N° 141, Business Combinations, or N° 141 (revised 2007), Business Combinations, regardless of whether those assets and liabilities are related to leases. The Company understand that this pronouncement will not have an effect in it’s consolidated financial statements because this pronouncement was issued to exclude the leases from the scope of the FAS 157 Fair Value Measurements, thus, no adjustment or changes would be necessary in the actual policy for lease contracts.
On November 5, 2007, the SEC issued Staff Accounting Bulletin N° 109 (SAB 109), written loan commitments recorded at fair value through earnings which requires that the fair value of a written loan commitment that is marked to market through earnings should include the future cash flows related to the loan’s servicing rights. However, the fair value measurement of a written loan commitment still must exclude the expected net cash flows related to internally-developed intangible assets (such as customer relationship intangible assets). SAB 109 applies to two types of loan commitments: (1) written mortgage loan commitments for loans that will be held-for-sale when funded that are marked to market as derivatives under FAS 133 (derivative loan commitments); and (2) other written loan commitments that are accounted for at fair value through earnings under Statement 159’s fair-value election. SAB 109 supersedes SAB 105, which applied only to derivative loan commitments and allowed the expected future cash flows related to the associated servicing of the loan to be recognized only after the servicing asset had been contractually separated from the underlying loan by sale or securitization of the loan with servicing retained. The staff expects registrants to apply the views in Question 1 of SAB 109 on a prospective basis to derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. The Company is evaluating the impact, if any, that the adoption of SAB 109 may have on its consolidated financial statements and disclosures.
On December 2007, the FASB issued SFAS N° 141 (revised 2007) “Business Combinations” which is a revision of SFAS 141.SFAS 141(R) defines the acquirer in a business combination as the entity that obtains control of one or more businesses in thebusiness combination and establishes the acquisition date as the date that the acquirer achieves control. The scope of SFAS 141 has also been extended to include all business combinations and not just those where control is obtained by transferring consideration. Assets acquired, liabilities assumed and any noncontrolling interest at the acquisition date must be recognized at their fair value, with limited exceptions, and contingencies are also recognized at fair value if it is more likely than not that they meet the definition of an asset or a liability. Contingent consideration should be measured initially and at each subsequent accounting period at fair value and all acquisition related costs should be expensed in the period in which the costs were incurred or the services received. SFAS 141(R) applies prospectively to business combinations where the acquisition date is on or after
December 15, 2008. As SFAS 141(R) will be prospectively applied; its adoption will have no effect on the business combinations already recognized in the financial statements at the balance sheet date. amendment of ARB N° 51 “Consolidated Financial Statements”. The Statement requires that minority interests are presented in equity and on the face of the income statement separately from equity and income attributable to the parent. Changes in ownership interests without a change in control are accounted for as equity transactions and no gain or loss recognized in the income  statement. When a subsidiary is deconsolidated any remaining minority interest should be initially measured at fair value
and any gain or loss based on that value. SFAS 160 should be applied prospectively for fiscal years and interim periods
beginning on or after December 15, 2008 except for the presentation and disclosure requirements which should be applied retrospectively for all periods presented. The Company is evaluating the impact, if any, of the adoption of this new pronouncement.
On February 2008, the FASB issued FASB Staff Position (FSP) FAS 140-3, “Accounting for Transfers of Financial Assets andRepurchase Financing Transactions”. The objective of this FSP is to provide implementation guidance on whether the security transfer and contemporaneous repurchase financing involving the transferred financial asset must be evaluated as one linked transaction or two separate de-linked transactions. Current practice records the transfer as a sale and the repurchase agreement as a financing. The FSP requires the recognition of the transfer and the repurchase agreement as one linked transaction, unless all of the following criteria are met: (1) the initial transfer and the repurchase financing are not contractually contingent on one another; (2) the initial transferor has full recourse upon default, and the repurchase agreement’s price is fixed and not at fair value; (3) the financial asset is readily obtainable in the marketplace and the transfer and repurchase financing are executed at market rates; and (4) the maturity of the repurchase financing is before the maturity of the financial asset. The scope of this FSP is limited to transfers and subsequent repurchase financings that are entered into contemporaneously or in contemplation of one another. The FSP will be effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early adoption is prohibited. The Company is evaluating the impact, if any, that the adoption of this new pronouncement.
On March 2008, the FASB released SFAS N° 161 “Disclosures About Derivative Instruments and Hedging Activities” (SFAS 161), an amendment of SFAS N° 133 “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133). SFAS 161 applies to all entities with derivative instruments subject to SFAS 133 as well as hedged items, bifurcated derivatives and nonderivative instruments that are designated and qualify as hedging instruments. The statement requires an entity to make certain qualitative disclosures about the derivative instruments it holds including, how and why they are used and the volume of activity, distinguishing between instruments used for risk management and those used for other purposes. There is also a requirement to disclose quantitative information regarding derivative instruments, in a tabular format, in order to highlight the effect that the use of these instruments has on the income statement, the balance sheet and the entity’s cashflows. An entity can elect not to disclose gains and losses on derivatives classified as trading, though alternative disclosures must be made. The effect of credit-riskcontingent features is also required to be disclosed. The adoption of SFAS 161 is not expected to have a material impact on the Company’s financial position or results of operations.
In May 2008, the FASB issued SFAS N° 162, The Hierarchy of Generally Accepted Accounting Principles. This Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This Statement applies to financial statements of nongovernmental entities that are presented in conformity with GAAP. This Statement shall be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company will adopt this Statement, upon its effective date, for the preparation of its consolidated financial statements in future fiscal years.