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As filed  with the Securities and Exchange Commission on June 30, 2003.





SECURITIES  AND EXCHANGE COMMISSION


Washington,  D.C.  20549





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FORM 20-F


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ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES  EXCHANGE ACT OF 1934


For the  fiscal year ended December 31, 2002





Commission  file number 1-12010





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MASISA S.A.


(Exact name of Registrant  as specified in its charter)





MASISA


(Translation of  Registrants name into English)





Republic  of Chile


(Jurisdiction of  incorporation or organization)





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Los  Conquistadores 1700, Piso 12, Santiago, Chile


(Address of principal  executive offices)





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





|Title of Each class        |  | Name of each exchange on which    registered
|-------------------------- |  | --------------------------------------------
|American Depositary Shares |  | New York Stock Exchange                     
|Common Stock               |  | New York Stock Exchange*                    

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*  Listed,  not for trading, but only in connection with the registration of American  Depositary Shares, pursuant to the requirements of the Securities and Exchange  Commission.





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





None





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





None





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:  928,514,743





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 and 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      NO


Indicate by check mark  which financial statements item the registrant has elected to follow:


ITEM  17      ITEM  18





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TABLE OF  CONTENTS





|         |                                                                                 | Page
|-------- | ------------------------------------------------------------------------------- | ----
|         |                                                                                 |     
|PART I  
|         |                                                                                 |     
|Item 1.  | Identity of Directors, Senior    Management and Advisers                        | 1   
|Item 2.  | Offer Statistics and Expected    Timetable                                      | 1   
|Item 3.  | Key Information                                                                 | 1   
|Item 4.  | Information on the Company                                                      | 11  
|         |                                                                                 |     
|PART II 
|         |                                                                                 |     
|Item 5.  | Operating and Financial Review and    Prospects                                 | 44  
|Item 6.  | Directors, Senior Management and    Employees                                   | 55  
|         |                                                                                 |     
|PART III
|         |                                                                                 |     
|Item 7.  | Major Shareholders and Related Party    Transactions                            | 61  
|Item 8.  | Financial Information                                                           | 62  
|Item 9.  | The Offer and Listing                                                           | 63  
|Item 10. | Quantitative and Qualitative    Disclosure About Market Risk                    | 74  
|Item 11. | Description of Securities Other than    Equity Securities                       | 75  
|Item 12. | Default, Dividend Arrearages and    Delinquencies                               | 77  
|Item 13. | Material Modifications to the Rights    of Security Holders and Use of Proceeds | 78  
|Item 14. | Controls and Procedures                                                         | 78  
|Item 15. | Reserved                                                                        | 78  
|         |                                                                                 |     
|PART IV 
|         |                                                                                 |     
|Item 16. | Financial Statements                                                            | 79  
|Item 17. | Financial Statements                                                            | 79  
|Item 18. | Exhibits                                                                        | 80  




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PRESENTATION  OF INFORMATION





Masisa S.A. (Masisa Chile and, together with its  subsidiaries, Masisa or the Company) is a corporation (sociedad anónima abierta)  organized under the laws of the Republic of Chile (Chile).





In this Annual Report, unless otherwise specified, all  references to Chilean pesos, pesos or Ch$ are to Chilean pesos,  references to U.S. dollars, dollars or US$ are to United States dollars,  references to the Consumer Price Index or CPI are to the Indice de  Precios al Consumidor published by the Chilean Instituto Nacional de Estadísticas  and references to UF or Unidades de Fomento are to Unidades de  Fomento, a Chilean financial index adjusted for changes in the  CPI.  The Company publishes its  financial statements in Chilean pesos that are adjusted to reflect changes in  purchasing power due to inflation.  See  Notes 2 and 24 of the audited consolidated financial statements of the Company  included in Item 18 (the Consolidated Financial Statements). 
Unless otherwise specified, financial data  in the Consolidated Financial Statements and elsewhere in this Annual Report  are presented in accordance with accounting principles generally accepted in  Chile (Chilean GAAP) and in constant December 31, 2002 Chilean peso  purchasing power.  Chilean GAAP differs  in certain significant respects from accounting principles generally accepted  in the United States (U.S. GAAP).  Note  24 of the Consolidated Financial Statements (Note 24) provides a description,  and Item 3 herein provides a summary, of the principal differences between  Chilean GAAP and U.S. GAAP, and Note 24 contains a reconciliation to U.S. GAAP  of total shareholders equity as of December 31, 2001 and 2002 and the  Companys net income for each of the last three years in the period ended  December 31, 2002.





From January 1, 1997 to December 31, 2000, the  Company accounted for Forestal Tornagaleones S.A. (Forestal), approximately  54% of which was owned by the Company, as an equity investment rather than a  consolidated subsidiary pursuant to an authorization received by the Superintendencia  de Valores y Seguros (the Superintendency of Securities and  Insurance or SVS).  In July 2001, the  shareholder agreement establishing joint control over Forestal between the  Company and Forestals minority shareholder expired.  As a result, since January 1, 2001, the Company accounts for  Forestal as a consolidated subsidiary, in accordance with Chilean GAAP.  During 2002, in connection with two capital  increases by Forestal, the Company subscribed for additional Forestal common  shares, thereby increasing its aggregate ownership interest in Forestal common  stock to
60.45%.





For the convenience of the reader, certain amounts  have been translated from Chilean pesos into U.S. dollars at the rate specified  herein.  U.S. dollar equivalent  information for information derived from the Consolidated Financial Statements  is based on the Dólar Observado (the Observed Exchange Rate) reported by  Banco Central de Chile (the Central Bank) for December 31, 2002, the  last day in 2002 for which the Observed Exchange Rate was reported, which was  Ch$718.61 = US$1.00.  Other U.S. dollar  equivalent information related to transactions described herein is based on the  Observed Exchange Rate in effect at the relevant time of such  transactions.  No representation is made  that the Ch$ or US$ amounts shown herein could have been or could be converted  into US$ or Ch$, as the case may be, at any particular rate.  The Observed Exchange Rate for June 24,  2003
was Ch$703.12 = US$1.00. See Item 3. Key Information for information  regarding historical exchange rates since January 1998.  The UF on December 31, 2002 had a value  of Ch$16,744.12.





This Annual Report contains statements that constitute  forward looking statements within the meaning of the Private Securities  Litigation Reform Act of 1995.  These  statements appear throughout this Annual Report and include statements  regarding the intent, belief or current expectations of the Company and its  management, including with respect to (i) the Companys business, plans and  operations, (ii) trends affecting the Companys financial condition or results  of such operations and (iii) the future impact of competition and regulations.  Such forward looking statements are not  guarantees of future performance and involve risks and uncertainties.  Actual results may differ from those  described in such forward looking statements included in this Annual Report,  depending upon a number of factors, including without limitation (i) the  Companys ability to implement its business plan, (ii) the
nature and extent of  future competition in the Companys principal markets and (iii) political,  economic and demographic developments in Chile, Argentina, Brazil, Mexico, Peru  and other markets.  See Item 5.  Operating and Financial Review and Prospects for further discussion of factors  that could cause such material differences.





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Each hectare equals approximately 2.471 acres, each  kilometer equals approximately 0.621 miles, each cubic meter equals  approximately 35.315 cubic feet or 1.308 cubic yards and each metric ton  equals 1,000 kilograms or approximately 2,205 pounds.





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Percentages and certain amounts contained in this  Annual Report have been rounded for ease of presentation.  Any discrepancies in any figure between  totals and the sums of the amounts presented are due to rounding.





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PART I





Item 1.  Identity of Directors, Senior Management and Advisers





Not applicable.





Item 2.  Offer Statistics and Expected Timetable





Not applicable.





Item 3.  Key Information





Selected Financial  Data





The table below presents selected consolidated financial  information derived from the consolidated financial statements of the Company  for the years ended December 31, 1998 through 2002.  The following information should be read in  conjunction with and is qualified in its entirety by reference to the Consolidated  Financial Statements, including the Notes thereto, included in Item 18 and  Operating and Financial Review and Prospects included in Item 5.  The consolidated financial statements of the  Company are prepared in accordance with Chilean GAAP. Chilean GAAP differs in  certain significant respects from U.S. GAAP.   Note 24 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 a reconciliation to U.S. GAAP of total  shareholders equity as of December 31, 2001 and 2002 and net income


for  each of the three years in the period ended December 31, 2002.





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SELECTED FINANCIAL INFORMATION(1)





|                                                                                                             |     | As of and    for the year ended December 31, |        
|------------------------------------------------------------------------------------------------------------ | --- | -------------------------------------------- | -------
|                                                                                                             |     |                                              |        
|                                                                                                             |     | 1998                                         |        
|(Millions of constant Ch$ as of December 31, 2002 and US$,    except dividend per share and per ADS amounts) |     |                                              |        
|                                                                                                             | Ch$ |                                              | Ch$    
|                                                                                                             |     |                                              |        
|INCOME STATEMENT DATA                                                                                        |     |                                              |        
|Chilean GAAP;                                                                                                |     |                                              |        
|Net sales                                                                                                    |     |                                              | 102,557
|Operating income                                                                                             |     |                                              | 19,923 
|Non-operating results, net                                                                                   |     |                                              | -1,633 
|Income taxes                                                                                                 |     |                                              | -4,010 
|Net income                                                                                                   |     |                                              | 14,282 
|Net earnings per share in Ch$(3)                                                                             |     |                                              | 17.0   
|Net earnings per ADS in Ch$ (3) (4)                                                                          |     |                                              | 509.7  
|Dividends per share in Ch$ (5)                                                                               |     |                                              | 5.96   
|Dividends per ADS in US$ (4) (6)                                                                             |     |                                              | 0.37   
|U.S. GAAP;                                                                                                   |     |                                              |        
|Net sales                                                                                                    |     |                                              | 102,557
|Operating income                                                                                             |     |                                              | 15,359 
|Non-operating results, net                                                                                   |     |                                              | 2,700  
|Income taxes                                                                                                 |     |                                              | -3,604 
|Net income                                                                                                   |     |                                              | 14,455 
|Basic and diluted earnings per share in Ch$ (3)                                                              |     |                                              | 17.2   
|Net earnings per ADS in Ch$ (4)                                                                              |     |                                              | 515.95 
|Weighted average number of shares (in thousands)                                                             |     |                                              | 840,500
|BALANCE SHEET DATA                                                                                           |     |                                              |        
|Chilean GAAP                                                                                                 |     |                                              |        
|Total assets                                                                                                 |     |                                              | 296,023
|Long-term liabilities                                                                                        |     |                                              | 53,037 
|Shareholders equity                                                                                         |     |                                              | 221,157
|U.S. GAAP                                                                                                    |     |                                              |        
|Total assets                                                                                                 |     |                                              | 290,406
|Long-term liabilities                                                                                        |     |                                              | 62,668 
|Shareholders equity                                                                                         |     |                                              | 201,624
|INFLATION DATA                                                                                               |     |                                              |        
|Yearly change in Consumer Price Index applicable for    the restatement of financial statements (7)          |     |                                              | 4.30   




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|(1) | Financial information for    1998 through 2000 is not consolidated with Forestal.  Effective January 1, 2001, the Company    accounts for Forestal as a consolidated subsidiary in accordance with Chilean    GAAP.  See Note 2 to the Consolidated    Financial Statements.                                                                                                
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Chilean peso amounts, other    than dividends, have been translated into U.S. dollars at the rate of    Ch$718.61 = US$1.00 (the Observed Exchange Rate at December 31, 2002).                                                                                                                                                                                              
|(3) | Under Chilean GAAP, there    are no authoritative pronouncements relating to the calculation of earnings    per share.  For comparative purposes,    the calculation has been based on the same number of weighted average shares    outstanding as used for the U.S. GAAP calculation.  For more information see Note 24(2)(a) to the Consolidated    Financial Statements.
|(4) | Per ADS amounts are    determined by multiplying per share amounts by 30, because one ADS is equal    to 30 shares of Common Stock.                                                                                                                                                                                                                                         
|(5) | Dividends per share    information consists of actual historical amounts not restated in constant    Chilean pesos.                                                                                                                                                                                                                                                         
|(6) | Dividends per ADS in    Chilean pesos have been translated into U.S. dollars at the Observed Exchange    Rate on the payment date of each dividend.                                                                                                                                                                                                                         
|(7) | The CPI used for the    restatement of financial statements under Chilean GAAP is based on a year    ended November 30 rather than on a year ended December 31.                                                                                                                                                                                                             




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Summary of Certain  Differences between Chilean GAAP and U.S. GAAP





The Consolidated Financial Statements have been  prepared and presented in accordance with Chilean GAAP, which differs in  certain significant respects from U.S. GAAP. The principal differences between  Chilean GAAP and U.S. GAAP as they apply to the Company are summarized  below.  See Notes 2 and 24 to the  Consolidated Financial Statements.





Chilean GAAP is documented by way of technical  bulletins which are issued by the Chilean Institute of Accountants (Colegio de  Contadores de Chile) and includes comprehensive price level  restatement of non-monetary assets, liabilities, equity accounts and income and  expense accounts.  For the purposes of  this discussion, Chilean GAAP includes the accounting practices established by  the SVS, which are mandatory for all publicly-held and listed companies in  Chile.





General  Price Level Restatements of Financial Information.  Chilean GAAP requires that financial  statements be restated to recognize the effect of changes in the purchasing  power of the Chilean peso on the financial position and results of operations  of reporting entities. Accordingly, unless otherwise indicated, financial data  in the Consolidated Financial Statements and elsewhere in this Annual Report  are presented in constant Chilean pesos of December 31, 2002 purchasing  power.





Financial statements with regard to prior periods and  information presented for comparative purposes have been updated to reflect the  purchasing power of December 31, 2002 constant Chilean pesos.  The updating is required to make such  statements and information comparable to current information.  It does not change the prior periods statements  or information in any way except to update the amount to constant Chilean pesos  of similar purchasing power.





The general price level gains or losses reflected in  the income statement indicates the effect of inflation on the Companys net  holdings of monetary assets and liabilities.   The Company loses or gains general purchasing power as a result of  holding these assets and liabilities during a period of inflation.  Assets and liabilities are called monetary  for purposes of general price level accounting if their amounts are fixed by contract  or otherwise in terms of numbers of currency units regardless of changes in  specific prices or in the general price level.   Examples of monetary assets and liabilities include account  receivables, account payables and cash.





The inclusion of price level adjustments in the  Consolidated Financial Statements is considered appropriate under the prolonged  inflationary conditions affecting the Chilean economy in the past and is  permitted in those circumstances by the Securities and Exchange  Commission.  Accordingly, the effect of  price level changes is not eliminated in the reconciliation to U.S. GAAP of net  income and shareholders equity included in Note 24 to the Consolidated  Financial Statements.





Revaluation  of Timber Resources.   Under Chilean GAAP, tree development costs and forest maintenance costs  are capitalized as incurred and such costs are adjusted for price level  restatements.  However, at  December 31 of each year, timber resources are adjusted to reflect values  based on technical appraisals performed by specialized forestry engineers.  The carrying value of the forests is charged  to inventories on a unit-of-production basis when cut and to cost of sales when  sold.





The difference between the restated cost and the value  determined by the technical appraisals is credited to the forestry reserve  under Reserves.  The reserve is  reversed and credited as a reduction of cost of sales when the forests which  gave rise to this reserve are sold.





As a result of the above accounting treatment, timber  resources are stated at appraisal value on the balance sheet prior to cutting,  but included in cost of sales at cost plus price level restatements when the  timber is sold.





Revaluation of timber resources is an accounting  principle that is not generally accepted in the United States.





Deferred  Income Taxes.  In  accordance with Chilean GAAP, effective January 1, 2000, the Company began to  apply Technical Bulletin 60 of the Chilean Institute of Accountants, which  requires the recognition of deferred income taxes for all temporary  differences, whether recurring or not, using an asset and liability approach,  which is





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similar to current U.S. GAAP applicable to this matter. Prior to the  implementation of Technical Bulletin 60, 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.  Chilean GAAP permitted the non-recording of  deferred income taxes when the reversal of recurring timing differences was  expected to be offset during the same year by expected similar timing  differences that were expected to arise.   For further information on this pronouncement, see Note 15(c) and Note  24(1)(b) to the Consolidated Financial Statements.





In accordance with U.S. GAAP, companies must account  for deferred income taxes in accordance with Statement of Financial Accounting  Standards No. 109, which requires an asset and liability approach for financial  accounting and reporting for income taxes under the following basic principles:





| | a) | A current tax liability or asset is recognized for    the estimated taxes payable or refundable on the tax returns for the current    year.                                                    
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                
| | b) | A deferred tax liability or asset is recognized for    the estimated future tax effects attributable to temporary differences and    tax loss carryforwards.                                   
| |    |                                                                                                                                                                                                
| | c) | The measurement of current and deferred tax    liabilities and assets is based on provisions of the enacted tax law; the    effects of future changes in tax laws or rates are not anticipated.
| |    |                                                                                                                                                                                                
| | d) | The measurement of deferred tax assets is reduced,    if necessary, by the amount of any benefits that, based on available    evidence, are not expected to be realized.                       




Temporary differences are defined as any difference  between the book basis and the tax basis of an asset or 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.





Accounting  for Investments.   Under Chilean GAAP, investments that represent a greater than 10% but  less than 50% ownership of voting stock of a company must be accounted for  under the equity method.  The equity  method requires investors to recognize their proportionate share of the companys  net income and shareholders equity.   Under U.S. GAAP, absent other issues relating to ownership and/or  control, the equity method of accounting will normally only be applied in those  cases where the investment in voting stock is between 20% and 50%.





Pursuant to Chilean GAAP, the Company accounts for its  investments in majority-owned subsidiaries in the development stage under the  equity method and the Companys proportional share of such subsidiarys results  of operations are included in shareholders equity.  Under U.S. GAAP, the Company would consolidate the results of  majority owned subsidiaries.





Minimum  Dividend.  The Chilean  Companies Act (Ley Sobre Sociedades Anónimas N° 18,046 and Reglamento  de Sociedades Anónimas or collectively, the Chilean Companies Act)  requires companies to distribute a cash dividend in an amount equal to at least  30% of the Companys net income for each year, as determined in accordance with  Chilean GAAP, unless and except to the extent the Company has unabsorbed prior  year losses. Therefore, a provision has been made in the U.S. GAAP  reconciliation in Note 24(1)(l) to the Consolidated Financial Statements, in  order to recognize the corresponding decrease in net equity by December 31  of the year to which the net income is attributed.





Earnings  per Share.  Under  Chilean GAAP, an earnings per share presentation is not required.  U.S. GAAP requires public companies to  report earnings per share based on the weighted average number of shares of  common stock outstanding during each year.





Segment  Information.  In 1998,  the Company adopted SFAS No. 131, Disclosure about Segments of an Enterprise  and Related Information.  SFAS No. 131  establishes standards for the way that public enterprises must determine and  report information about operating segments in their annual and interim  reports. The management approach designates the internal organization that is  used by management for making operating decisions and





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assessing performance as the source of the Companys reportable  segments. The adoption of SFAS No. 131 did not affect results of operations or  financial position.





The Company has determined that the information used  by the Companys key decision makers for making operating decisions and  assessing performance is based on geographical segments.  For 2002, the Companys reportable  geographical segments were Chile, Argentina, Brazil and Mexico.





The Company measures its reportable segments and  evaluates their performance based on operating income (loss), which includes  inter-segment revenues and corporate expenses that are allocated to the  operating segments. The Company is not dependent on any single customer. The  accounting policies underlying the reported segment data are the same as those  described in the summary of significant accounting policies (see Note 2 to the  Consolidated Financial Statements).





Tax  effect of cumulative translation adjustment.  Under Chilean GAAP, the Company does not  record in the cumulative translation adjustment the tax effect of transaction  losses on foreign currency debt that hedges a net investment; such tax effect  is recorded in net income.  Under U.S.  GAAP, as such losses are currently deductible for income tax purposes, the  transaction losses are recorded net of related income taxes in the cumulative  translation adjustment.





Comprehensive  Income.  In 1998, the  Company adopted SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130  establishes guidelines for the reporting and display of comprehensive income  and its components in a full set of general purpose financial statements.  Comprehensive income represents the change in shareholders equity of the  Company during the period from transactions and other events and circumstances  from non-owner sources.  It includes all  changes in equity during a period except those resulting from investments by  owners and distributions to owners.  The  adoption of SFAS No. 130 had no impact on total shareholders equity. The  effect of this standard is shown in paragraph (1)(k) of Note 24 to the  Consolidated Financial Statements.





Business  Combinations.  Under  Chilean GAAP, the difference between the purchase price and the net book value  of an acquired company at the acquisition date is recorded as goodwill and then  amortized to income over periods of ten to twenty years.  Under U.S. GAAP, in a business combination  accounted for under the purchase method of accounting, the acquired companys  assets and liabilities are adjusted to give effect to the purchase price paid  by the acquiring company.  If, after the  adjustment of the assets and liabilities of the acquired company to their fair  value at the acquisition date, the purchase price exceeds the amount of such  fair value, the excess is recorded as goodwill.





Under U.S. GAAP, goodwill is deemed to have an  indefinite life and is not amortized. However, goodwill is tested for  impairment on an annual basis when indicators of impairment are determined to  exist, by applying a fair value based test. If an excess of acquired net assets  over cost arises, the excess is allocated to reduce proportionately the values  assigned to noncurrent assets (except long-term investments in marketable  securities) in determining the fair values. If the allocation reduces the  noncurrent assets to zero value, the remainder of the excess over cost  (negative goodwill) is written off immediately as an extraordinary gain.





Goodwill arising from the purchase of  Masisa Cabrero S.A. (Masisa Cabrero,  formerly Fibranova S.A.) was adjusted to conform Chilean GAAP with U.S. GAAP  and is shown in the reconciliation of net income and shareholders equity in  paragraph (1)(l) of Note 24 to the Consolidated Financial Statements.





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Exchange Rates





The following table sets forth, for the periods  indicated, the low, high and average Observed Exchange Rates as reported by the  Central Bank, expressed in pesos per U.S. dollar.





|Period                  |  | Daily    Observed Exchange Rate Ch$ per US$ |       
|----------------------- |  | ------------------------------------------- | ------
|                        |  |                                             |       
|Year Ended December 31, |  | Low(1)                                      |       
|                        |  |                                             |       
|1998                    |  |                                             | 439.18
|1999                    |  |                                             | 468.69
|2000                    |  |                                             | 501.04
|2001                    |  |                                             | 557.13
|2002                    |  |                                             | 641.75




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Source:  The Central Bank of  Chile.


|(1) | Rates shown are the actual    low and high, on a day-by-day basis, for each period.
|--- | -----------------------------------------------------------------------------------
|(2) | Average of month-end rates.                                                        




The following table sets forth, for the months  indicated, the high and low Observed Exchange Rates as reported by the Central  Bank, expressed in pesos per U.S. dollar.





|         |  | Daily    Observed Exchange Rate Ch$ per US$ |       
|-------- |  | ------------------------------------------- | ------
|         |  |                                             |       
|         |  | Low(1)                                      |       
|         |  |                                             |       
|2002:    |  |                                             |       
|December |  |                                             | 692.94
|2003:    |  |                                             |       
|January  |  |                                             | 709.22
|February |  |                                             | 733.10
|March    |  |                                             | 725.79
|April    |  |                                             | 704.42
|May      |  |                                             | 694.22




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Source:  The Central Bank of  Chile.


|(1) | Rates shown are the actual    low and high, on a day-by-day basis, for each period.
|--- | -----------------------------------------------------------------------------------




On June 24, 2003, the observed exchange rate was  Ch$703.12 to US$1.00.





Risk Factors





Risks Relating to  the Companys Business





The Company is dependent on the  furniture and construction industry





The Companys sales of its products are dependent to a  significant degree on the level of activity in the furniture manufacturing and  construction industries.  The Company  expanded its production capacity for medium-density fiberboard (MDF),  particle board, oriented strand board (OSB) and MDF moldings in the  expectation of growth in demand.   However, there can be no assurance that any such growth in demand from  companies in these industries will occur.   Weakness in the economies of countries in which the Company sells its  products is likely to have a material adverse effect on the construction, home  building and remodeling industries, as well as on the demand for furniture  items manufactured with the Companys products.





The Company may face significant  competition





Currently, the Company produces a significant portion  of the particle board and MDF manufactured in Chile and Argentina, as well as  the MDF manufactured in Brazil and the particle board manufactured in Mexico.  In addition the Company is the only producer of OSB in Brazil.  No assurance can be given that the Company  will not face increased competition in the future in Chile or any other country  in which the Company operates from domestic or foreign competitors, some of  which may have greater financial resources than the Company. Currently the MDF  production capacity in Brazil is increasing as MDF producers enter the market.  Additionally, the new Arauco MDF





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plants in Argentina and Chile, have increased production capacity in  countries in which domestic production already exceeded local sales, thus  increasing market pressure on the Company to export products it produces in  those markets. There can be no assurance that the Company will maintain or  increase its domestic or export market positions. In addition, the Companys  board products compete with other types of board products, such as gypsum,  asbestos-cement and plywood.  There can  be no assurance about how successfully the Companys products will compete with  such other types of board products.  An  increase in competition in the particle board market, the MDF market, the OSB  market or the board products market taken as a whole could adversely affect  both the Companys share of those markets and the price at which the Company is  able to sell its products.





The Company may not be able to  satisfy its financing requirements





The Companys ability to satisfy its capital  expenditure needs and debt service requirements depends in large part on its  ability to generate funds internally.   The Company cannot assure that it will be able to generate internally  any particular amount of funds or, alternatively, to obtain access to capital  markets for sufficient amounts and at acceptable costs to satisfy its capital  expenditure and debt service requirements.





The Company may not be able to  effectively manage its growth





Rapid growth of the Company may strain existing  management resources and operational, financial and management information  systems and controls.  Expansion also  will require additional skilled personnel, equipment and facilities, as well as  upgrading of the internal audit function and the implementation of more detailed  long-term budgeting procedures.  An  inability to hire skilled personnel or to secure the required equipment and  facilities efficiently and in a cost-effective manner may adversely affect the  Companys ability to achieve its growth plans and sustain or increase its  profitability.





The Company could be adversely  affected if it encounters labor relations problems with its unionized employees





Approximately 67% of the Companys employees in Chile  are union members, while in Argentina and Brazil, the Companys employees are  governed by collective bargaining agreements negotiated on an industry-wide  basis. In Mexico 43% of the Companys employees are union members and are  subject to collective bargaining agreements negotiated on an industry wide  basis. Although the Company has never experienced a work stoppage that has had  a material effect on its operations and its relations with unions have  generally been good, future strikes or any other types of conflict with the  unions and/or personnel may have a material adverse effect on the Company.





Increases in the level of  environmental regulation could raise the Companys costs





Environmental regulations may be strengthened over  time in Latin America.  There can be no  assurance that any increased regulation of matters relating to the protection  of the environment will not have a material adverse effect on the Company.





Increases in the level of  environmental concern among the Companys customers and in general could raise  the Companys costs





Environmental concern among the Companys customers  and in general may increase over time in Latin America or in countries to which  the Company exports its products.  There  can be no assurance that any increase in market pressures to produce in a more  environmentally sustainable products will not have a material adverse effect on  the Company.





Risks Related to  the Companys Common Stock and ADSs





The market for the Companys ADSs  and common shares could become illiquid and volatile





The Chilean securities markets are substantially  smaller, less liquid and more volatile than major securities markets in the  United States.  Because of the limited  trading market for the Companys common stock, a holder of





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American Depositary Shares (ADSs) may have a limited ability to sell  ADSs or common stock obtained upon withdrawal from the ADR facility in the  amount and at the price and time that it desires.  This limited trading market may also increase the volatility of  the price of the ADSs.





Holders of ADSs may be adversely  affected by currency devaluations and foreign exchange fluctuations





If the value of the peso falls relative to the U.S.  dollar, the value of the ADSs and any distributions to be received from the  depositary for the ADSs could be adversely affected.  Cash distributions made in respect of the ADSs are received by  the depositary in pesos, are then converted by the depositary into U.S. dollars  at the then prevailing exchange rate and distributed to the holders of the ADRs  evidencing those ADSs.  In addition, the  depositary will incur foreign currency conversion costs (to be borne by the  holders of the ADRs) in connection with the foreign currency conversion and  subsequent distribution of dividends or other payments with respect to ADSs.





Future changes in Chilean foreign  investment controls and withholding taxes could negatively affect non-Chilean  residents that invest in the Companys shares





Equity investments in Chile by persons who are not  Chilean residents are generally subject to various exchange control regulations  that govern the repatriation of investments and the earnings on them.  There can be no assurance that additional  Chilean restrictions applicable to the holders of ADRs, the disposition of  underlying common shares, the repatriation of the proceeds from such  acquisition or disposition or the payment of dividends will not be imposed in  the future, nor can there be any assessment as to the duration or impact of  such restrictions if imposed.





Preemptive rights may be unavailable  to ADS holders in certain circumstances





The Chilean Companies Act requires the Company,  whenever it issues new shares for cash, to grant preemptive rights to all of  its shareholders (which may include holders of ADSs), giving them the right to  purchase a sufficient number of shares to maintain their existing ownership  percentage.





The Company will not be able to offer shares to U.S.  holders of ADSs pursuant to preemptive rights that it grants to its  shareholders in connection with any future issuance of shares unless a  registration statement under the U.S. Securities Act of 1933, as amended (the  Securities Act), is effective with respect to such rights and shares, or an  exemption from the registration requirements of the Securities Act is available.  At the time of any rights offering, the  Company intends to evaluate the costs and potential liabilities associated with  any such registration statement as well as the indirect benefits to the Company  of enabling U.S. holders of ADSs to exercise preemptive rights and any other  factors that it may consider appropriate at the time, and then make a decision  as to whether it will file such a registration statement.





The Company cannot assure that it will file a  registration statement under the Securities Act to allow holders of ADSs or  holders of shares in the United States to participate in a preemptive rights  offering.  As a result, the equity  interest of such holders in the Company may be diluted proportionately.





The market price of the Companys securities  may be adversely affected by developments in other emerging markets





The Company conducts substantially all of its  operations in the emerging markets of Latin America.  As a result, economic and political developments in these  countries, including future economic crises and political instability, could  have a material adverse effect on the Companys business and results of  operations.





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 these other 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.  There  can be no assurance that events in other countries, particularly Argentina and  other emerging market countries, will not adversely affect the market value of,  or market for, the Companys common stock or ADSs.





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A large percentage of the ownership  of Masisa Chile is concentrated in the hands of a single stockholder, whose  interests may differ from those of other stockholders





The controlling shareholder of the Company is Forestal  Terranova S.A. (Forestal Terranova), one of the companies belonging to the  GrupoNueva group. Forestal Terranova has been a shareholder since early 2001  and became the majority and controlling shareholder on July 22, 2002, when  it acquired 43.16% of Masisa Chiles stock from Maspanel S.A. As a result of  that acquisition, a previous subscription for, and subsequent open market  purchases of, shares of Masisa Chile, Forestal Terranova owned   52.43 % of the subscribed and paid Common Stock of Masisa Chile as  of June 20, 2003.  See Major  Shareholders under Item 7.  As a  result, Forestal Terranova has the power to elect a majority of the members of  the Companys Board of Directors and to determine the outcome of other actions  requiring the approval by a simple majority in a shareholder vote.





The Company is not required to  disclose as much information to investors as a U.S. issuer





The corporate disclosure requirements applicable to  the Company may not be equivalent to the requirements applicable to a U.S.  company and, as a result, you may receive less information about the Company  than you might otherwise receive in connection with a comparable U.S.  company.  The Company is subject to the  periodic reporting requirements of the Securities Exchange Act of 1934, as  amended (the Exchange Act).  However,  the periodic disclosure required of foreign issuers under the Exchange Act is  more limited than the periodic disclosure required of U.S. issuers.  Publicly available information about issuers  of securities listed on Chilean stock exchanges also provides less details in  certain respects to the information that is regularly published by or about  listed companies in the United States or in certain other countries.  Furthermore, the regulatory environment of  the Chilean
securities markets and of the activities of investors in such  markets is not as highly regulated and supervised and differs in certain  respects from the regulatory environment of the securities markets in the  United States.





Risks Relating to  Chile





A downturn in the Chilean economy  may adversely affect the Company





The Company conducts a large part of its operations in  Chile, and accordingly, the results of the Companys operations and financial  condition are sensitive to and dependent upon the level of economic activity in  Chile. While Chiles GDP grew at the average rate of approximately 3.3% over  the five-year period from 1997 to 2001 and grew an estimated 2.1% in 2002,  there can be no assurance that such annual growth will continue in the  future.  For example,  the Company believes that the lower than  expected economic growth in the Chilean economy during 2002 adversely affected  its sales.





The Company can give no assurance that Chiles economy  will grow in the future, nor can it give assurances that future developments in  or affecting the Chilean economy will not impair its ability to proceed with  its business plan or materially adversely affect its business, financial  condition or results of operations.





Political developments in Chile may  adversely affect the Company





The business strategies, financial condition and  results of operations of the Company could be adversely affected by changes in  policies of the Chilean government (which has exercised and continues to exercise  a substantial influence over many aspects of the private sector), other  political developments in or affecting Chile, and regulatory and legal changes  or administrative practices of Chilean authorities, over which the Company has  no control.





Currency devaluations and foreign  exchange fluctuations may adversely affect the Company





Changes in the value of the Chilean peso against the  U.S. dollar could adversely affect the Companys financial condition and  results of operations.  The Chilean peso  has been subject to large nominal devaluation events in the past, including an  approximate 9.7% nominal decrease against the U.S. dollar from  December 31, 2001 to December 31, 2002 (the last days in 2001 and  2002, respectively, for which the Observed Exchange Rates were reported).  The value of the Chilean peso against the  U.S. dollar may fluctuate significantly in the future.  See





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Item 3.  Key  InformationExchange Rates.   Historically, a significant part of the Companys indebtedness has been  denominated in U.S. dollars, while a substantial part of its revenues and  operating expenses has been denominated in pesos.  If the pesos value declines against the dollar, the Company will  need more pesos to repay the same amount of dollar-denominated debt.  As a result, fluctuations in the Chilean  peso/U.S. dollar exchange rate may affect the Companys financial condition and  results of operations.





In particular, because the Companys costs are largely  incurred in U.S. dollars (or in Chilean pesos at prices tied to dollar  denominated world prices) and substantially all of its income derived from  Chilean operations is denominated in Chilean pesos, a significant devaluation  of the peso against the dollar could have an adverse impact on the Companys  results of operation to the extent that the Company is unable to pass along  increases in its costs of production in the form of higher prices for its  products.





High levels of inflation in Chile  could adversely affect the Companys business





A recurrence of the high levels of inflation Chile has  experienced in the past could have an adverse impact on the Companys business,  financial condition and results of operations and on the value of the Companys  common shares and of the ADSs representing the common shares.  The annual rate of inflation in Chile (as  measured by changes in the Consumer Price Index of December and as reported by  the Chilean National Institute of Statistics) was 4.7% in 1998, 2.3% in 1999,  4.5% in 2000, 2.6% in 2001 and 2.8% in 2002.   The Company cannot assure you that Chilean inflation will not change  significantly from current levels.





Risks Relating to  the Companys Operations Outside of Chile





The Companys operations outside of  Chile expose us to economic, social, and political instability in foreign  countries





The Company has expanded its operations to Argentina,  Brazil, and Mexico, opened commercial offices in Peru and Ecuador, and manages  operations in Venezuela and may continue expanding its operations in those and  other regional markets, if and when opportunities arise.  The construction and operation of systems in  these markets involve regulatory and governmental requirements that may be  different from those in Chile.   Economic, social, and political instability in foreign countries could  have a material adverse effect on the Companys revenues and  profitability.  The Company may also be  adversely affected by foreign governmental regulations, fluctuations in foreign  currency rates, taxation, and difficulties in managing international operations





Argentinean political and economic  conditions, particularly the current economic crisis, may have a direct impact  on the Companys Argentinean operations





Because a significant part of the Companys operations  and customers are located in Argentina, the Companys financial condition and  results of operations are in part dependent on Argentinas economy.  Since 1999, the Argentinean economy has been  in an economic recession.  In 2002 the  Argentinean economy experienced critical difficulties.  During the first six months of 2002, the  Argentinean government eliminated the U.S. dollar-Argentinean peso parity  resulting in a devaluation of Argentinas currency in 2002 of 237%.  Additionally the Argentinean government imposed  restrictions on cash withdrawals from bank accounts, on transfers of funds from  Argentinean to foreign accounts and publicly announced its inability to pay its  debt to foreign lenders. During 2002 Argentina also experienced higher rates of  unemployment and a general deflation of prices and salaries. Consequently,
Argentinas country risk has risen to record high levels.





Because the Companys business strategy in Argentina  is to some extent focused on anticipated growth in demand for particle board, MDF,  thin-MDF and MDF moldings, rather than seeking to capture market-share from  existing producers and, in spite of the Companys efforts to switch local sales  to exports, if Argentinas economic environment does not improve the Companys  Argentinean operations and Masisas results of operations could be further  negatively affected. Although the economic situation began to show signs of a  slow recovery in the second half of 2002, demand for products and services  remains depressed.  No assurance can be  given that governmental measures or other factors will improve Argentinas  economy or that improvement in Argentinas economy will promote an increase in  the demand for particle board and/or MDF. Moreover, the Company faces direct  competition from other
Argentinean producers of wood board, both in Argentina  or in neighboring markets such as Chile.





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Additionally, there can be no assurance that Argentinean labor laws  will not change in the future or that any such labor or union developments will  not have a material adverse effect on the Company.





Brazilian political and economic  conditions may have a direct impact on the Companys Brazilian operations





Because a significant part of the Companys operations  and customers are located in Brazil, Masisas financial condition and results  of operations are in part dependent on Brazils economy, which has in the past  been characterized by frequent and occasionally drastic intervention by the  Brazilian government and volatile economic cycles.  The Brazilian government often changes monetary, credit and other  policies to influence Brazils economy.





The Companys operations and financial performance in  Brazil may be adversely affected by any of the following factors:





| |  | inflation;                                                                              
| | - | ----------------------------------------------------------------------------------------
| |  | exchange control policies and rates;                                                    
| |  | social instability;                                                                     
| |  | price instability;                                                                      
| |  | energy shortages and rationing;                                                         
| |  | interest rates; and                                                                     
| |  | other political, diplomatic, social and economic    developments in or affecting Brazil.




The Company cannot predict the policies the new  Brazilian administration may take in the future, and whether these policies may  adversely affect Brazilian economic conditions or the Companys  results of operations.





Mexican political and economic  conditions may have a direct impact on the Companys new operations in Mexico





Because a part of the Companys operations and  customers are located in Mexico, Masisas financial condition and results of  operations are in part dependent on the Mexican economy and political climate.





In recent history, Mexico has experienced periods of  slow or negative economic growth, high inflation and large devaluations in the  Mexican peso.  The Company cannot assure  you that similar events will not occur in the future or that such events would  not adversely affect its Mexican operations and Masisas results of operations  or financial condition in general.





Item 4.  Information on the Company





History and  Development of the Company





Masisa S.A., or Masisa Chile, is a sociedad  anónima abierta organized under the laws of Chile and was created in  1964 in the city of Valdivia, Chile as the legal successor to Fábrica de  Maderas Aglomeradas, Ltda.  Masisa  Chiles name was changed from Maderas y Sintéticos Sociedad Anónima Masisa to  Masisa S.A. on May 15, 1998.  From  1986 to July 2002 the Company was controlled by a privately-held Chilean  industrial group consisting of Inversiones Pathfinder Chile S.A. (Pathfinder)  and its subsidiaries (collectively with Pathfinder, the Pathfinder  Group).  From 1986 until 2000, the  Pathfinder Group held its shares in the Company through Pathfinder and its  substantially wholly-owned subsidiary, Inversiones Coigüe Dos S.A.  (Coigüe).  In August 2000, Pathfinder  and Coigüe transferred all of their Masisa S.A. shares to a
wholly-owned  subsidiary of Pathfinder, Maspanel.  On  July 22, 2002 Forestal Terranova, one of the companies belonging to the  GrupoNueva group, acquired 43.16% of the Common Stock of Masisa Chile from  Maspanel S.A. and became Masisa Chiles majority and controlling  shareholder.  As a result of that  acquisition, a previous subscription for, and subsequent open market purchases  of, shares of Masisa Chile, Forestal Terranova owned 52.43 % of the  Common Stock of Masisa Chile as of June 20 , 2003.  Masisa Chiles legal domicile is Valdivia,  Chile, and its principal executive offices are located at Los Conquistadores  1700, Piso 12, Santiago, Chile.  Its  telephone number is 562-707-8800.





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The Company is a leading producer of particle board,  MDF and OSB in Latin America, with US$225.4 million in total net consolidated  sales in 2002.  The Companys production  facilities are located in Chile, Argentina, Brazil and Mexico, and the  principal markets for its products are Chile, Argentina, Brazil, and  Mexico.  The principal consumers for  both particle board and MDF are the furniture manufacturing and construction  industries, and the principal consumers for OSB are the construction and  packaging industries.  Consolidated  sales of particle board accounted for approximately 38.7% of the Companys  total consolidated net sales revenue in 2002, with raw, melamine-laminated and  wood-veneered particle board accounting for approximately 14.1%, 22.3%, and  2.3% of the Companys net sales revenue, respectively.  Consolidated sales of MDF accounted for  approximately 51.2% of the Companys


consolidated net sales revenue in 2002,  with raw and coated (melamine-laminated and wood-veneered) MDF accounting for  approximately 44.1% and 7.1% of the Companys net sales, respectively.  Consolidated sales of OSB accounted for  approximately 3.8% of the Companys consolidated net sales revenue in 2002.





The Company also sells complementary products, such as  board finishes and wood doors.  Though  its subsidiary Forestal, the Company sells timber and other wood products.





According to Company estimates, in Chile, Masisa is a  leading producer of raw, melamine-laminated and wood-veneered particle board,  with its 2002 particle board sales accounting for approximately 84% of total  Chilean particle board sales as of December 31, 2002.





The Company commenced MDF production in Chile in  February 1996 and estimates that as of December 31, 2002, it accounted for  approximately 53% of total MDF sales in Chile. The Company is also a leading  Chilean producer of wood doors for residential and commercial  applications.  Masisas products are  sold in Chile through independent distributors and Company-franchised stores  named Placacentros, primarily to furniture manufacturers and to the  construction industry.





The Companys Argentinean subsidiary, Masisa Argentina  S.A. (Masisa Argentina), produces raw and melamine-laminated particle board,  as well as MDF and thin-MDF boards, in Argentina.  As of December 31, 2002, by its own calculation, Masisa  Argentina had approximately a 37% market share of Argentinas total particle  board sales.  Masisa Argentina commenced  production of particle board in June 1994 and currently has two production  lines with a total installed capacity of 185,000 cubic meters per year.  In September 1995, Masisa Argentina started  producing MDF at a plant with a capacity of 150,000 cubic meters per year.  In October 2001, Masisa Argentina produced  first board at its newly constructed thin-MDF plant, which became fully  operational by mid-2002, and has a capacity of 120,000 cubic meters per year.





Until Celulosa Arauco y Constitución S.A. (Arauco)  opened its new MDF plant in Argentina in April 2002, in addition to the Company  there was only one other producer of MDF in Argentina.  This enabled the Company to rapidly become a  major producer in Argentinas MDF market with its MDF sales accounting for  roughly 73% of Argentinas total MDF sales as of December 31, 2002.  As in Chile, the Company sells its products  in Argentina through both independent distributors and Placacentros.





In addition, during 2002,  approximately 72% (compared to 35% in 2001) of Masisa Argentinas particle  board and MDF consolidated physical volume of sales (in cubic meters) was to  export markets, with approximately 47% (compared to 83% in 2001) of those  export sales going to Brazil.  The  increase in volume and the diversification of the Masisa Argentinas exports in  2002 compared to 2001 was due primarily to the Argentinean economic crisis  during 2002.  As local Argentinean sales  were depressed, the Company was able to offset local sales losses by taking  advantage of the devaluation of the Argentinean peso to increase exports of its  products from Argentina.





The Companys Brazilian subsidiary, Masisa do Brasil  Ltda. (Masisa Brazil), was originally established in 1995 as a subsidiary of  Masisa Argentina to conduct commercial and distribution activities in Brazil  through its warehouses and distribution centers.  During December 2001, Masisa Brazil underwent a corporate  reorganization and became a controlled subsidiary of Masisa Inversiones Ltda.  (Masisa Inversiones), a wholly-owned subsidiary of Masisa.  In 1999, Masisa Brazil began construction on  an MDF plant with a total installed production capacity of 240,000 cubic meters  per year.  The plant began its start-up  phase in December of 2000, and reached full production during the second half  of 2001. During the second half of 2000, Masisa Brazil began construction of an  OSB plant.  This plant, which has a  total installed capacity of 350,000 cubic meters per year, produced its first


OSB boards in





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November 2001.  The OSB plant  became fully operational during the fourth quarter of 2002.  Masisa Brazil estimates that as of  December 31, 2002, it had approximately a 4% and a 31% market share of  Brazils total particle board and MDF sales, respectively.  Masisa Brazil further estimates that, as a  result of being the first to market OSB in Brazil, it currently has the entire  market share of OSB sales in that country.





In August 2001, the  Company established a subsidiary in Mexico, Maderas y Sintéticos de Mexico,  S.A. de C.V. (Masisa Mexico).  On  January 8, 2002, through Masisa Mexico, the Company acquired a particle  board plant located in the city of Durango, Mexico, after agreeing with  Weyerhaeuser Company Limited to purchase the plant from its subsidiary,  MacMillian Guadiana.  The Company acquired  the plant for approximately US$15.4 million which was financed with cash on  hand and short and long-term bank loans.   The Durango plant has two production lines with an aggregate capacity of  120,000 cubic meters per year, and a small melamine-laminating line with a  capacity of approximately 20,000 cubic meters per year.  Through Masisa Mexico the Company also  intends to provide technical support services and to conduct marketing and  distribution activities in Mexico.





In October 2002, the Company entered into a management  contract pursuant to Company manages Fibranova C.A., an indirect Venezuelan  subsidiary of Forestal Terranova.  This  contract became effective in January 1 2003. Under the contract, the Company is  paid for its management services amount equal to 8% of the Fibranova C.A.s annual  operating result. See Related Party Transactions under Item 7.





Corporate Structure





In addition to manufacturing particle board, MDF and  OSB, through subsidiaries and joint ventures, the Company engages in several  related operations.  As indicated in the  following chart, manufacturing operations are conducted by Masisa and a number  of its subsidiaries; however, most of the Companys sales to third parties are  made through Masisa Chile, Masisa Argentina, Masisa Brazil and Masisa Mexico.  The principal exception is Forestal, which  is directly responsible for selling its own products.





MASISA  CORPORATE  STRUCTURE





As of May 15, 2003





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|
|




|(1)  | Parent company which also    owns and operates particle board manufacturing facilities in Valdivia,    Chile.  In Cabrero, the Company also    owns and operates an MDF manufacturing facility. In Valdivia, the Company    owns and operates facilities that produce doors, wood veneer and wood-veneered    particle board.  In Valdivia, the    Company leases a saw mill and remanufacturing plant that produces moldings    and edge-glued panels. The Company also operates Masisa Concepcións    facilities. Masisa S.A. is a corporation organized under the laws of Chile.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  | A special purpose company    for raising funds off-shore.  Masisa    Overseas Ltd. is organized under the laws of the Cayman Islands.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(3)  | A special purpose company    for investment activities, formerly named Inversiones Químicas Limitada.  Masisa Inversiones Ltda. is organized    under the laws of Chile.                                                                                                                                                                                                                                                                                                                                                                                                            
|(4)  | A special purpose company    for investment activities. Inversiones Coronel Ltda. is organized under the    laws of Chile.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(5)  | Owns and manages forest    holdings in Chile. Forestal Tornagaleones S.A. is organized under the laws of    Chile.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(6)  | Owns particle board    facilities in Chiguayante as well as particle board and MDF manufacturing    facilities in Coronel, Chile.  Masisa    Concepción Ltda. is organized under the laws of  Chile.                                                                                                                                                                                                                                                                                                                                                                                
|(7)  | Joint-venture holding    company. Inversiones Industriales S.A., which does business under the name    Indusa, is organized under the laws of Chile.                                                                                                                                                                                                                                                                                                                                                                                                                                
|(8)  | Owns and manages forest    holdings in Argentina.  Forestal    Argentina S.A. is organized under the laws of Argentina.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(9)  | Owns and operates MDF and    particle board manufacturing facilities, as well as melamine-laminating    facilities, in Concordia, Argentina.     Masisa Argentinas headquarters are located in Buenos Aires, where it    also has a commercial warehouse. Masisa Argentina S.A. is organized under the    laws of Argentina.                                                                                                                                                                                                                                                       
|(10) | Owns and operates a    wood-chipping mill in Valdivia, Chile with a capacity of 500,000 metric tons    (two shifts).  Forestal Río    Calle-Calle S.A. is organized under the laws of Chile.                                                                                                                                                                                                                                                                                                                                                                                        
|(11) | A special purpose company    for raising funds off-shore related to Forestal Tornagaleones S.A.  FTG Overseas Ltd. is organized under the    laws of the British Virgin Islands.                                                                                                                                                                                                                                                                                                                                                                                                    
|(12) | Owns and operates MDF and    OSB manufacturing facilities, as well as a melamine-laminating facility in    the state of Paraná, Brazil.  Masisa    do Brasil Ltda. also leases and operates three warehouses and distribution    centers and carries on marketing activities in Brazil.  Masisa do Brasil Ltda. is organized under    the laws of Brazil.                                                                                                                                                                                                                           
|(13) | Owns and operates a    particle board manufacturing facility in Durango, Mexico.  Maderas y Sintéticos de México S.A. de    C.V. is organized under the laws of Mexico.                                                                                                                                                                                                                                                                                                                                                                                                             
|(14) | Created to carry on    marketing activities in Peru. Maderas y Sintéticos del Perú S.A.C. is    organized under the laws of Peru.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(15) | Created to carry on marketing    activities in Ecuador. Masisa Ecuador S.A. is organized under the laws of    Ecuador.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(16) | A joint venture company,    created to carry on business activities related to the wood market, in    Mexico.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(17) | Created to provide various    management and consulting services in Mexico.  Maderas y Sintéticos Servicios S.A. de C.V. is organized under    the laws of Mexico.                                                                                                                                                                                                                                                                                                                                                                                                                  
|(18) | Created to manufacture wooden component
        parts and pieces for the construction and furniture industries. 
        Masisa Partes y Piezas Ltda. is organized under the laws of Chile.                                                                                                                                                                                                                                                                                                                                                                                         




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|(19) | A special purpose company    for investment activities. Inversiones Calle Calle is organized under the    laws of Chile.               
|---- | ---------------------------------------------------------------------------------------------------------------------------------------
|(20) | A joint venture company    created to carry on wood industrial activities. Forestal Calle Calle is    organized under the laws of Chile




Masisa S.A. beneficially owns, directly or indirectly,  100% of its subsidiaries Masisa Overseas Ltd., Masisa Inversiones, Inversiones  Coronel Ltda. (Inversiones  Coronel), Masisa Concepción Ltda. (Masisa Concepción), Masisa Argentina,  Masisa Brazil, Masisa Mexico, Maderas y Sintéticos Servicios S.A. de C.V.  (Masisa Services), Maderas y Sintéticos del Perú S.A.C. (Masisa Peru),  Masisa Ecuador S.A. (Masisa Ecuador) and Masisa Partes y Piezas Ltda. (Masisa  Partes y Piezas).





As of December 31, 2002, the Company had a 60.4%  interest in its formerly wholly owned Chilean subsidiary, Forestal.  The minority ownership interest in Forestal  is shared between Xylem Fund IA, L.P. (Xylem-IA)(34.5%), an investment fund  managed by Xylem Investments Inc. (Xylem Investments), and Fondo de Inversión  de Desarollo de Empresas CMB-Prime (CMB-Prime)(5.1%), a Chilean institutional  investor.  Forestal has operated as a  joint venture holding company for investments in forest properties since June  1995.  In addition to its forest  holdings, Forestal owns, directly or indirectly, 50.1% of its Argentinean  subsidiary, Forestal Argentina S.A. (Forestal Argentina), the primary assets  of which are forest properties in Argentina.   The minority interest in Forestal Argentina is held by Xylem Fund IIA,  Inc.(29.2%), an investment fund also managed by
Xylem Investments and other  minority shareholders (20.7%).  For more  information on the Companys forest holdings, see Forestry and Wood Chipping  Businesses. The Company owns a 50% interest in Masnova de México S.A. de C.V.  (Masnova), a joint venture company created in December 2001 to market and  sell the Companys exports to the Mexican market.  The remaining 50% of Masnova is owned by Forestal Terranova  México S.A. de C.V., an affiliate company of the Companys controlling  shareholder.





The Company also owns a 50% interest in Inversiones  Industriales, S.A. (Indusa), a joint venture holding company, whose  subsidiary, Forestal Río Calle-Calle S.A. (Forestal Rio Calle-Calle) owns a  wood chipping mill in Corral, near Valdivia, Chile. Indusa also participates in  the joint venture company Inversiones Calle Calle S.A. (Inversiones Calle Calle),  in equal parts with Masisa S.A. The remaining 50% of Indusa is owned by  Inversiones Fariza Chile Ltda. (32.5%) and Inversiones Forestales CCA S.A.  (Inversiones Forestales) (17.5%), both companies are not related to Masisa.  Additionally, the Company owns a 9.09% interest in Forestal Calle-Calle  S.A.(Forestal Calle-Calle) through its subsidiary Inversiones Coronel. The  remaining interest in Forestal Calle-Calle is held by Forestal Rio Calle-Calle  (81.82%) and other minority shareholders (9.09%).





Business Strategy





The Companys business strategy is to build and  operate world-class wood panel production facilities in areas of Latin America  where tree-growing conditions can provide an environmentally-friendly,  long-term, low-cost supply of wood.  The  Company is implementing its business strategy by seeking to (i) establish and  maintain market leadership in the markets in which it is present by introducing  high quality products and continuing its ongoing commitment to implementing  high standards of efficiency in the production and delivery of wood panel  products, (ii) expand sales in Latin American and other markets by capitalizing  upon its experience and success over the years in expanding into and  diversifying its export markets, (iii) strengthen its existing brand names,  (iv) focus its product mix towards increasing sales of its higher margin  products, especially melamine-laminated particle board and MDF, (v) further
develop its Placacentro program, as set forth below, in Chile, Brazil,  Argentina, Peru and Mexico, and extend it to other Latin American markets and  (vi) expand into new businesses which have significant synergies with the  Companys core business, such as the production of OSB or other types of wood  boards that can complement the Companys current product mix.





The Company considers Latin America its natural  market.  During 1999, the Company began  construction of a new MDF production facility in Brazil because it believed  that its production facilities in Argentina and Chile, from which the Brazilian  market had been supplied, did not have sufficient production capacity to supply  the expected future growth in Brazilian demand.  The facility started operating in December 2000 and reached full  production by July 2001.  To strengthen  its competitive position in Brazil, the Company decided to build a new OSB  plant in Curitiba.  This new plant  produced its first OSB boards in November 2001, and became fully operational  during the fourth quarter of 2002. In October 2001, the Company started to  operate its new thin-MDF line in





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Argentina.  This plant, which  complements Masisas product mix, became fully operational by mid-2002.  In addition, the Company has organized  Masisa Peru and Masisa Ecuador to conduct the Companys commercial operations  in those countries. Likewise, in August 2001, the Company established its  Mexican subsidiary, Masisa Mexico, and in January 2002 acquired a particle  board plant in that country.  This  acquisition represents Masisas first entry into the direct supply of wood  boards in Mexico.





Masisa is seeking to satisfy consumer needs and offer  solutions to problems in construction and furniture manufacturing in each of  the markets that it services.  The  Company regularly meets with furniture manufacturers in an effort to increase  the usage of its products.  The Company  also intends to further develop its Placacentro program in Chile, Argentina,  Brazil, Peru, Mexico, Ecuador, Panama and Paraguay and also to start developing  it in other countries.  Placacentros are  retail furniture supply stores which are franchised by the Company, but are  independently owned and operated, and which offer a wide variety of products  that can be used by carpenters and artisans to manufacture furniture.  During 2002, the Company started developing  the Placacentro distribution network in Mexico, Ecuador, Panama and  Paraguay.  Colombia was also added to  the Placacentro network in the first quarter of
2003.  As of May 15, 2003, 53 Placacentros stores were open in  Chile, 20 in Argentina, 16 in Peru, 16 in Brazil, 18 in Mexico, 7 in Ecuador, 2  in Panama, 1 in Paraguay and 2 in Colombia. With 135 stores in 9 countries, the  Placacentro network is one of the largest of its kind in Latin America.  The Company expects to open a total of  approximately 80 stores primarily in these and other Latin American countries  during 2003.  The Company believes that  expansion of this program will further enhance its brand names and the  distribution of its products.  The Company  also believes that Argentina, Brazil, Peru and Mexico have housing shortages  and, in general, represent underdeveloped markets for its products





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THE  COMPANYS PRINCIPAL FACILITIES AND OFFICES





|Location      |  | Executive    Offices |  | Production    Facilities |  | Distribution    Centers
|------------- |  | -------------------- |  | ------------------------ |  | -----------------------
|              |  |                      |  |                          |  |                        
|Chile         |  |                      |  |                          |  |                        
|              |  |                      |  |                          |  |                        
|Antofagasta   |  |                      |  |                          |  |                       
|              |  |                      |  |                          |  |                        
|Cabrero       |  |                      |  |                         |  |                        
|              |  |                      |  |                          |  |                        
|Chiguayante   |  |                      |  |                         |  |                        
|              |  |                      |  |                          |  |                        
|Concepción    |  |                      |  |                          |  |                       
|              |  |                      |  |                          |  |                        
|Coronel       |  |                      |  |                         |  |                        
|              |  |                      |  |                          |  |                        
|La Serena     |  |                      |  |                          |  |                       
|              |  |                      |  |                          |  |                        
|Santiago      |  |                     |  |                          |  |                       
|              |  |                      |  |                          |  |                        
|Valdivia      |  |                      |  |                         |  |                       
|Argentina     |  |                      |  |                          |  |                        
|              |  |                      |  |                          |  |                        
|Buenos Aires  |  |                     |  |                          |  |                        
|              |  |                      |  |                          |  |                        
|Concordia     |  |                      |  |                         |  |                       
|Brazil        |  |                      |  |                          |  |                        
|              |  |                      |  |                          |  |                        
|Curitiba      |  |                     |  |                          |  |                       
|              |  |                      |  |                          |  |                        
|Novo Hamburgo |  |                      |  |                          |  |                       
|              |  |                      |  |                          |  |                        
|Ponta Grossa  |  |                      |  |                         |  |                        
|Peru          |  |                      |  |                          |  |                        
|              |  |                      |  |                          |  |                        
|Lima          |  |                     |  |                          |  |                       
|Mexico        |  |                      |  |                          |  |                        
|              |  |                      |  |                          |  |                        
|Durango       |  |                      |  |                         |  |                        
|              |  |                      |  |                          |  |                        
|Mexico City   |  |                     |  |                          |  |                        
|Ecuador       |  |                      |  |                          |  |                        
|              |  |                      |  |                          |  |                        
|Quito         |  |                     |  |                          |  |                       
|              |  |                      |  |                          |  |                        




Principal Products





The following table shows the net sales of each of the  Companys principal products as a percentage of the Companys total  consolidated net sales for the years ended 2000, 2001 and 2002.





THE  COMPANYS PRODUCTS(1)


(as a percentage of 2000,  2001 and 2002 net consolidated sales)





|                          |  | 2000 |       | 2001 |  | 2002  |  
|------------------------- |  | ---- | ----- | ---- |  | ----- | -
|                          |  |      |       |      |  |       |  
|Raw Particle Board        |  |      | 16.9  | %    |  | 12.0  | %
|Coated Particle Board (2) |  |      | 35.4  | %    |  | 25.1  | %
|Raw MDF                   |  |      | 37.0  | %    |  | 47.5  | %
|Coated MDF (2)            |  |      | 9.1   | %    |  | 8.8   | %
|OSB (3)                   |  |      |       |      |  |       |  
|Doors                     |  |      | 1.4   | %    |  | 0.9   | %
|Timber                    |  |      |      |      |  | 5.4   | %
|Other Products            |  |      | 0.3   | %    |  | 0.4   | %
|                          |  |      |       |      |  |       |  
|Total                     |  |      | 100.0 | %    |  | 100.0 | %
|                          |  |      |       |      |  |       |  




---

|(1) | Year 2000 net sales do not    include sales of Forestal.  The    Companys net sales for 2000, 2001 and 2002, respectively, were, Ch$118,345    million,  Ch$159,341 million and    Ch$161,983 million.  Figures are in    constant Ch$as of December 31, 2002.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes melamine-laminated    and wood-veneered boards.                                                                                                                                                                                                       
|(3) | OSB was included in Other    Products in years 2000 and 2001.                                                                                                                                                                                                  




Particle  Board.  In 2002,  particle board accounted for approximately 39% of the Companys net sales  revenue.  The principal types of  particle board produced by the Company are raw particle board,  melamine-laminated particle board and wood-veneered particle board.  Raw particle board is manufactured by mixing  wood chips, wood shavings and sawdust with adhesives and rolling or pressing  the mixture into large flat sheets of varying sizes and thickness, which are  then cut, quality-analyzed and packaged.   Every board is automatically marked to indicate its date of manufacture,  type, facility where produced, dimensions and thickness.  Raw particle board is





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used in a variety of applications in the construction industry, such as  ceilings, walls, floors and closets, and is also widely used in the manufacture  of furniture.  The Company produces  different types of raw particle board that are marketed under the brand names  Placa Masisa, Masisa Panel, Ecoplac, Facilplac, and HR100, each of which  is suited to a different task or market segment.  In 2002, raw particle board sales accounted for approximately 14%  of the Companys consolidated net sales revenue and 22% of total board sales by  physical volume in cubic meters compared to 12% and 23%, respectively, in  2001.  Approximately 46% of the  Companys raw particle board production by volume was used in the production of  melamine-laminated and wood-veneered particle board.  Exports of raw particle board from Chile and Argentina to other  countries accounted for
approximately 24% and 31% of raw particle board sales  by volume in 2002 and 2001 respectively. In 2002 the Mexican market was mainly  supplied by the Companys facility in that country.





Particle board competes, in certain uses, with gypsum  and asbestos-cement boards, as well as solid wood, plywood, fiber board  (including both hard board and MDF) and OSB. MDF and particle board are  competing products in some applications in the furniture industry. Lumber,  asbestos-cement and gypsum board are the main competing products in the  construction industry.  Plywood may also  be substituted for particle board, MDF and OSB in certain applications.





MDF  (Medium Density Fiberboard).   The Company commenced commercial production of MDF in Argentina in September  1995 and in Chile in February 1996.  In  December 2000, the Company began production of MDF in Brazil, and in October  2001, the Companys thin-MDF plant in Argentina produced its first boards.  MDF is manufactured by removing the  cellulose fibers from wood chips, mixing the wood fiber pulp with adhesives and  forming the mixture into flat sheets which are dried, heated, pressed, cooled,  cut to size and finished. MDF has broad applications in furniture, cabinet and  millwork manufacturing.  Machining qualities  make MDF well-suited for the production of pieces with critically shaped and  profiled edges.  Its uniformly dense  surface gives superior results when grain-printed or painted.  MDF shapes and routs with precision, drills  easily and cuts cleanly.  It is an  effective
core material for high-pressure laminates, fast-cycle melamine and  veneers.  MDF is of higher quality and  more versatile than particle board.   However, compared to the production of particle board, the MDF  production process requires higher-quality wood, a greater quantity of  adhesives and more energy.  Due to its  higher production costs, MDF generally commands a higher price than particle  board of the same thickness.  The  Company produces all the standard thicknesses and densities of MDF, including  thin-MDF, some melamine-laminated MDF and a small amount of wood-veneered  MDF.  The Company markets its MDF under  the brand names Fibrofácil and MDF Masisa.   In 2002, MDF sales represented approximately 51% of the Companys  consolidated net sales and 52% of total board sales by physical volume in cubic  meters compared to 56% and 56%, in 2001..   Exports of MDF from Chile, Argentina and Brazil to other countries  accounted
for 40% of MDF sales by volume in 2002 compared to 20% in 2001. This  is due primarily to the increased export by Masisa Argentina in response to  depressed local sales, the commencement of raw MDF export by Masisa Brazil and  the supply of  MDF to Masisa Mexico by  Masisa Chile and Argentina.





Melamine-Laminated  Boards.  Melamine-laminated  boards are either raw particle boards or MDF boards covered on one or both  sides with paper impregnated with melamine, a plastic laminate.  Most melamine-laminated boards sold by the  Company are particle board based and sold under the brand name Masisa  Melamina and MDF Masisa Recubierto.   Melamine-laminated boards are available in a wide variety of colors and  textures, including simulated wood, although white remains the Companys best  seller.  Melamine-laminated boards are  widely used in the manufacture of furniture and cabinets and are also used in  construction for walls, counters and in other applications. In 1997, the  Company introduced a high density MDF to be used for flooring.  Melamine-laminated board sales generate a  higher margin than raw particle board or raw MDF sales.  In 2002, melamine-laminated
board sales  accounted for approximately 29% of the Companys consolidated net sales revenue  and 23% of total board sales by physical volume in cubic meters.  For 2002, approximately 43% of consolidated  particle board sales by volume and 11% of consolidated MDF sales by volume were  melamine-laminated.  Exports of  melamine-laminated board from Chile and Argentina to other countries accounted  for approximately 31% of melamine-laminated board sales by volume in 2002.





Wood-Veneered  Boards.  This product  is only produced by the Company in Chile and consists of raw particle board or  MDF to which a thin layer of natural wood veneer (eucalyptus or other fine  woods) is bonded.  Wood-veneered  particle board is generally used for purposes similar to those of  melamine-laminated particle board, but it is more expensive.  Wood-veneered board is a higher margin  product than melamine-laminated particle board.





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In 2002, sales of wood-veneered board accounted for approximately 3% of  the Companys consolidated net sales by value and 1% of total board sales by  physical volume in cubic meters.   Wood-veneered board  is sold  under the brand name Masisa Enchapada.  Only a small portion of the Companys MDF sold in 2002 (0.3% by  volume) was wood-veneered.   Approximately 3% of the Companys particle board sold in 2002 by volume  was wood-veneered.  Exports of  wood-veneered board from Chile to other countries accounted for approximately  0.6% of wood-veneered board sales by volume in 2002.





OSB  (Oriented Strand Board). OSB boards are structural panel  boards manufactured with aligned wood shavings, which are glued together, mixed  and arranged in several layers using chemical adhesives.  The layers are later hot-pressed, which  offers excellent resistance and strength to the boards.  OSBs outstanding physical-mechanical  properties make the boards highly suitable for use in applications requiring  great structural resistance, such as occur in the construction and packaging  industries.  The Companys OSB boards  are marketed under the Masisa OSB brand name, and are manufactured in the  plant that the Company owns in Brazil. In 2002, OSB sales represented  approximately 4% of the Companys consolidated net sales and 7% of total board  sales by physical volume in cubic meters.   Exports of OSB from Brazil to other countries accounted for 16% of OSB  sales by volume in
2002.





Doors. The Company manufactures doors in Chile,  which are marketed under the brand name Exit.  The manufacture of doors is the most labor intensive of the  Companys businesses.  Most of the  Companys doors consist of plywood bonded to a solid wood frame.  A much smaller percentage is manufactured  using particle board or MDF instead of plywood.  Doors manufactured by the Company are made with a cardboard  honeycomb core.  Doors are mainly sold  plain but certain finishes and enhancements, such as applied wood veneer and  wood moldings, are available upon request.   In 2002, door sales represented approximately 1% of the Companys  consolidated net sales revenue.  There  are no significant export sales of doors.





Timber.  The Company sells timber through its  subsidiary, Forestal.  While Forestal  initially focused its activities on the supply of wood to Masisa, it now sells  timber primarily to unaffiliated third parties. All of the timber which  Forestal currently provides to the Company is sold at market prices.  In 2002, timber sales represented  approximately 5% of the Companys consolidated net sales revenue.





Other  Products.  The Company  also manufactures wood veneer as a complement to its principal products, and  distributes furniture hardware. In 2002, sales of all such products were  insignificant in monetary terms. In January 2003, the Concordia facility in  Argentina began the production of the first pre-painted MDF moldings and in the  last quarter of 2002, Masisa Partes y Piezas started to sell furniture parts  with specified designs to manufacturers.





Board  and Other Wood Products





The following table shows the Companys sales of  particle board, MDF and OSB by physical volume in cubic meters for each year  during the five-year period from 1998 through 2002.  For each year, sales of particle board and MDF are broken down between  raw board sales and coated (including both melamine-laminated and  wood-veneered) board sales.





MASISA


TOTAL  CONSOLIDATED BOARD SALES


(cubic meters)





|                         |  | 1998 |         | 1999 |  | 2000    |  | 2001 |         | 2002 | 
|------------------------ |  | ---- | ------- | ---- |  | ------- |  | ---- | ------- | ---- | 
|                         |  |      |         |      |  |         |  |      |         |      | 
|Raw Particle Board       |  |      | 214,168 |      |  | 214,525 |  |      | 237,252 |      | 
|Coated Particle Board(1) |  |      | 211,401 |      |  | 204,197 |  |      | 238,125 |      | 
|Total Particle Board     |  |      | 425,569 |      |  | 418,723 |  |      | 475,376 |      | 
|Raw MDF                  |  |      | 193,053 |      |  | 199,985 |  |      | 292,092 |      | 
|Coated MDF(1)            |  |      | 35,753  |      |  | 41,772  |  |      | 46,072  |      | 
|Total MDF                |  |      | 228,806 |      |  | 241,757 |  |      | 338,164 |      | 




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|Oriented Strand Board |  |  | 1,889   |  |  | 1,486   |  |  | 2,135   |  |  | 5,561     |  |  | 89,357    | 
|--------------------- |  |  | ------- |  |  | ------- |  |  | ------- |  |  | --------- |  |  | --------- | 
|                      |  |  |         |  |  |         |  |  |         |  |  |           |  |  |           | 
|Total                 |  |  | 656,264 |  |  | 661,966 |  |  | 815,675 |  |  | 1,066,063 |  |  | 1,302,018 | 
|                      |  |  |         |  |  |         |  |  |         |  |  |           |  |  |           | 




---

|(1) | Includes both    melamine-laminated and wood-veneered boards.
|--- | -------------------------------------------------------------




The Companys sales of particle board and MDF, which  increased by 14% in volume in 2002 as compared to 2001, as well as sales of the  Companys other products, are dependent to a significant extent on the state of  the economies in Chile, Argentina, Brazil and Mexico, the Companys principal  markets.  In particular, sales of these  products are related to the levels of activity in the construction and  furniture manufacturing industries in those countries.  An economic downturn in any of those  countries is likely to materially adversely affect its construction industry,  as well as affect demand for furniture products and, accordingly, sales of the  Companys products.  The construction  and furniture manufacturing industries in those countries are the principal  users of the Companys products.  See  Item 5: Operating and Financial Review and Prospects.





The Companys Markets





The following table shows the net sales in each of the  Companys markets as a percentage of the Companys total consolidated net sales  for the years ended 2000, 2001 and 2002.





THE  COMPANYS MARKETS(1)(2)


(as a percentage of net  consolidated sales)





|              |  | 2000 |       | 2001 |  | 2002  |  
|------------- |  | ---- | ----- | ---- |  | ----- | -
|              |  |      |       |      |  |       |  
|Chile         |  |      | 45.1  | %    |  | 44.3  | %
|Argentina     |  |      | 27.1  | %    |  | 21.3  | %
|Brazil        |  |      | 16.7  | %    |  | 19.5  | %
|Mexico        |  |      | 0.6   | %    |  | 1.9   | %
|Peru          |  |      | 1.5   | %    |  | 1.5   | %
|Uruguay       |  |      | 1.5   | %    |  | 1.1   | %
|Other Markets |  |      | 7.5   | %    |  | 10.5  | %
|              |  |      |       |      |  |       |  
|Total         |  |      | 100.0 | %    |  | 100.0 | %
|              |  |      |       |      |  |       |  




---

|(1) | Year 2000 does not include    sales of Forestal.                                                                                                                                                
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The Companys net sales for    2000, 2001 and 2002, were Ch$118,345 million, Ch$159,341 million and Ch$161,983    million, respectively.  Figures are in    constant Ch$as of December 31, 2002.




Chile





General.  The Chilean economy increased at a rate of  2.1% in terms of GDP during 2002.   Inflation during 2002 was 2.8%, while the trade balance surplus was  US$2.5 billion. In 2002 Chiles economy was adversely affected by the economic  crisis and slowdowns faced by Argentina, and, to a lesser extent, its other  Latin American neighbors. The significant reduction of cash flow to the region  resulted in a relatively high unemployment rate, which kept internal  consumption fairly depressed. In 2002, construction GDP growth was only 2.1%  adversely compared to the 3.0% increase of 2001. This drop in consumption and  in the growth of the construction industry, combined with pressure from imports  coming from Argentina, due to the dramatical drop of their local market, did  not allow the Company to maintain prices in dollar terms, affecting the local  market margins of the Company in this country. The following table


shows the  Companys sales of particle board, MDF and OSB in Chile in dollars for the  years indicated.





CHILE


MASISA  BOARD SALES


(thousands of US$)(1)





|                                  |  | For the    year ended December 31, |       
|--------------------------------- |  | ---------------------------------- | ------
|                                  |  |                                    |       
|                                  |  | 1999                               |       
|                                  |  |                                    |       
|Raw Particle Board                |  |                                    | 19,912
|Coated Particle Board-melamine    |  |                                    | 30,592
|Coated Particle Board-wood veneer |  |                                    | 8,744 
|Total Particle Board              |  |                                    | 59,248




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|Raw MDF        |  |  | 9,209  |  |  | 19,685 |  |  | 36,626 |  |  | 25,431 | 
|-------------- |  |  | ------ |  |  | ------ |  |  | ------ |  |  | ------ | 
|Coated MDF (2) |  |  | 1,479  |  |  | 2,153  |  |  | 2,311  |  |  | 1,698  | 
|Total MDF      |  |  | 10,688 |  |  | 21,838 |  |  | 38,937 |  |  | 27,129 | 
|OSB            |  |  | 426    |  |  | 640    |  |  | 353    |  |  | 1,020  | 
|               |  |  |        |  |  |        |  |  |        |  |  |        | 
|Total          |  |  | 70,363 |  |  | 84,996 |  |  | 91,624 |  |  | 74,465 | 
|               |  |  |        |  |  |        |  |  |        |  |  |        | 




---

|(1) | Dollar amounts have been    compiled using historical year-end exchange rates during the period indicated    and have not been adjusted to reflect changes in purchasing power.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes both    melamine-laminated and wood-veneered boards.                                                                                                                  




Marketing  and Distribution.   Most of the Companys products are sold in Chile through approximately  205 independent distributors serving the construction and furniture  manufacturing industries.  A small  portion of the Companys products are sold directly to furniture manufacturers.  The Companys 30 largest customers (in terms of sales revenue) accounted for  approximately 82% of 2002 sales in Chile.   The largest customer accounted for approximately 9% of such sales. The  Companys principal Chilean customers are: Comercial Corza S.A., Comercial  Viñuela y Cía. Ltda., Construmart S.A., Easy S.A., Ebema S.A., Electrocom S.A.,  Ferreterías Weitzler S.A., Maderama, Maderas Imperial Ltda., Mafor S.A.,  Polincay Export Ltda., Silva y Compañia Ltda., Sodimac S.A., and Youseff  Comercial Ltda.  Although the Company  believes that, under current market conditions, the loss


of any one distributor  or customer would not have a material adverse effect on the Company, there can  be no assurance that any such loss in the future will not have such a material  adverse effect.  The Companys products  are stored in five warehouses and sales offices throughout Chile and are  shipped mainly by truck to domestic customer locations.  Shipments to the Antofagasta warehouse, in  the northern part of Chile, are also delivered by ship.





In 1991, the Company commenced its Placacentro program  in order to broaden its distribution channels, increase demand for its products  and remain in close contact with its customers.  Placacentros are independently owned and operated retail  furniture supply stores that are franchised by the Company.  Placacentro stores are required to carry the  full range of the Companys products and to display such products in the manner  directed by the Company.  Placacentro  owners receive technical assistance from the Company and are permitted to carry  other manufacturers products with certain limitations.  The Company derives no license fees or  revenues from Placacentro stores other than through the sale of its products.





Placacentros are an important part of the Companys  marketing strategy of maintaining close ties to furniture manufacturers and  retail customers. The goal of this strategy is to increase the per capita  consumption of the Companys products and to create competitive advantages to  address current and future competition.   As of May 15, 2003, there were 53 Placacentro stores in Chile. The  Company expects to open approximately 9 new Placacentro stores in Chile during  2003.  The Placacentro chain is the largest  chain of stores in the country in terms of sales to furniture manufacturers and  small contractors. Of the Companys 2002 volume sales in the Chilean market,  approximately 33% were to Placacentros, the remainder being direct sales and  sales to other distributors. As part of its marketing strategy, the Company  emphasizes technical assistance to customers and the development of new  products. In 2002,
Masisa introduced five new melamine designs to the Chilean  market, strengthening its leadership in terms of design diversity with more  than 40 different alternatives. Moreover, as part of its policy to provide  ongoing encouragement and support for the development of the industry in Chile,  Masisa manages a wide range of melamine designs which have been exclusively  supplied to the most important furniture industries in the region.    The principal melamine designs are also  applied, using finish foil, to MDF, with a thickness of 3 millimeters, and used  as backings for furniture and the bottoms of drawers. Other products developed  in 2002 in Chile are overlay boards, a system that offers a considerably higher  resistance compared to melamine coatings, and grooved MDF boards, widely used  in the manufacturing of promotional displays and commercial facilities. The grooved  MDF board is the only MDF board available in all of the Companys melamine  designs.





The Company is in regular contact with builders and  furniture manufacturers to encourage additional sales of its products.  The Companys policy is to provide customers  with service, technical and product development assistance, and to attempt to  anticipate customer needs and offer solutions to problems in construction and  furniture manufacturing.





To promote creativity and develop new product  applications, the Company will organize the eighth Masisa Design Contest for  Students, which will be the first such student design competition held at an  international level by Masisa, and the third Masisa Design Contest for  Professional RTA (Ready to Assemble) Furniture Manufacturers.  Works designed by participants in each such  contest will be exhibited in the Third Masisa Design Encounter, which





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will take place at the National Museum of Arts of Chile in November  2003.  These contests are also intended  to promote creativity and innovation in the use of Masisas products.





In 2002 the Company also formed a new Chilean  subsidiary, Masisa Partes y Piezas Ltda. (Masisa Partes y Piezas), as part of  the Companys plan to keep abreast of trends and developments in the furniture  industry.  Masisa Partes y Piezas  supplies component parts and services to the furniture manufacturing industry  in Chile where it is the first company of its kind. This new companys aim is  to develop and introduce clearly defined products and services that are  competitive, modern, innovative, capable of being standardized and which  increase the quality of the final product.   Masisa Partes & Piezas currently provides local and foreign  furniture manufacturers a means to improve their efficiency and costs by  outsourcing the molding of the boards to Masisa Partes & Piezas.  Masisa Partes & Piezas products compete  in the market by offering greater added value, both in standard and
special  formats and by providing innovative solutions to architects, designers,  manufacturers and industrialists for their board product needs.





Particle  Board Market.  The  Company is a leading manufacturer in Chile of raw, melamine-laminated and  wood-veneered particle board.  According  to company statistics, the Companys 2002 sales of particle board accounted for  approximately 84% of the particle board sold in Chile.  The Companys total 2002 Chilean particle  board sales decreased by 12% in dollar terms as compared to 2001, this due to  price pressures as explained below. Also in 2002, the Companys Chilean raw  particle board sales decreased by 9%, melamine-laminated particle board sales  decreased by 7% and wood-veneered particle board sales decreased by 34%.  The Company estimates that consumption of  particle board in Chile was 19.7 cubic meters per thousand inhabitants in  2002.  While the total consumption of  particle board in Chile increased by approximately 2% in 2002 from 2001, it is  still below levels reached in
2000 mainly because of the slow recovery of the  global economy.





In 1998, the Company purchased a particle board  production and laminating facility from its competitor, Nobel, in Valdivia,  Chile.  In September 1998, a fire  severely damaged and rendered inoperable the particle board and board  laminating facility of its competitor Bomasil.   Based on its purchase of Nobels particle board business and the Bomasil  fire, the Company believes that its production facilities account for  approximately 91% of Chiles particle board installed capacity and  approximately 74% of the countrys melamine-laminating capacity.  Río Itata, which has an installed production  capacity of approximately 30,000 cubic meters per year, is the only remaining  competitor in the particle board production industry in Chile.





The Company believes that the Chilean particle board  manufacturers aggregate annual production capacity for 2002 was roughly  470,000 cubic meters, while total particle board consumption in Chile for 2002  was estimated to be only 287,000 cubic meters, making indispensable to export  part of the local production.





Due to the economic crisis in Argentina in 2002, which  reduced particle board consumption to nearly half that of 2001, and the  devaluation of the Argentinean peso, some Argentinean manufacturers decided to  export part of their production to the Chilean market.  This resulted in price pressure for all  competitors in Chile.  The Company  believes that the excess capacity in particle board production and the  resulting price pressure, combined with high shipping costs for particle board  imports, are the primary factors that discouraged imports of particle boards in  previous years. The situation experienced in 2002 was unique and as the  Argentinean economy and consumption begin to recover, the situation should  return to prior levels.   However, there  can be no assurance that significant pressure from imports of particle board  into Chile will not occur in the future.





MDF  Market.  The Chilean  MDF market is relatively undeveloped compared to the European and North  American markets.  Although the first  Chilean MDF plant commenced production in 1988, and the market has exhibited  strong growth since that time, Chilean MDF producers devote most of their  production to exports. Masisa Chile sold 47% of its MDF sales in the local  market during 2002. The Company estimates that in 2002 MDF consumption in Chile  was approximately 17.0 cubic meters per thousand inhabitants.





In February 1996, commercial production of MDF  commenced at the Companys MDF facility in Coronel, Chile.  In September 2000, the Company acquired  92.61% of its competitor Fibranova S.A. (Fibranova), increasing its MDF  production facilities from 140,000 to 300,000 cubic meters per year.  In September 2001, the Company acquired the  remaining 7.39% of Fibranova from the Sumitomo Corporation.  This acquisition was financed  internally.  The Company estimates that  as of December 31, 2002, it has captured a 53% share of the Chilean MDF  market.  The Companys MDF sales in  Chile, as recorded by the Company, decreased in dollar terms





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by 30% in 2002.  However, sales  to a Chilean export agent for direct export in the amount of US$ 14.5 million  were classified as domestic sales in 2001.   Adjusting these 2001 MDF sales to account for them as exports, MDF  domestic sales increased by 11% in dollar terms in 2002.  This increase was due principally to  increased sales of MDF to molding manufacturers. These manufacturers are  mid-sized companies that make moldings with the Companys MDF, principally for  export to the United States. After the acquisition in 2000 of Fibranova,  Masisas only established competitor in the Chilean MDF market was Paneles  Arauco S.A. (Paneles Arauco), that had an annual production capacity of  approximately 140,000 cubic meters. In the second-half of 2002, Paneles Arauco  completed the construction of a new MDF plant in Chile with an estimated annual  installed capacity of 250,000 cubic meters, that became operational in
October 2002.





Doors  Market.  The majority  of the Companys door sales are in the Chilean domestic market.  Complete statistics on the overall Chilean  door market are not available.  The  Company believes that until 1997 it controlled a substantial percentage of the smaller  Chilean market for highly decorated doors. However, due to that markets  limited size, the Company decided in 1998 to simplify its product assortment by  concentrating on doors that could be produced with more automated procedures.  During 2002, door sales increased 1% in  dollar terms as compared to 2001, totaling US$2.2 million.  This is the result of a 7% increase in terms  of volume partially offset by a decrease in prices in dollar terms as a result  of the devaluation of the Chilean peso.





Argentina





General.  The Argentinean economy continued to experience significant difficulties in  2002. During the first six months of 2002, the Argentinean government  eliminated the U.S. dollar Argentinean peso parity after which the Argentinean  peso decreased in value by 237% as of the end of 2002. Additionally, the  Argentinean government imposed restrictions on cash withdrawals from bank  accounts and on transfers of funds from Argentinean to foreign accounts and  government publicly announced its inability to repay its debt to foreign  lenders.  In 2002 Argentina experienced  a 10.9% drop in gross GDP, a rise in the wholesale price index of 118.2% and  price level inflation of 41.0%.  In addition,  the Argentinean trade balance showed a surplus of US$16.4 billion.  Although the economic situation began to  show signs of a slow recovery in the second half of 2002, demand for products  and services remains
depressed.  No  assurance can be given that governmental measures or other factors will improve  Argentinas economy or that general improvement in its economy would lead to an  increase in the demand for particle board and/or MDF.





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The following table shows the Companys board sales in  the Argentinean market for the years indicated.  These figures include sales of particle board and MDF: (i)  produced in Argentina, (ii) imported by Masisa Argentina from Chile (iii)  imported by Masisa Argentina from Brasil and (iv) directly exported by Masisa  Chile into the Argentinean market.





ARGENTINA


MASISA  BOARD SALES


(thousands of US$)(1)





|                                  |  | For the    year ended December 31, |       
|--------------------------------- |  | ---------------------------------- | ------
|                                  |  |                                    |       
|                                  |  | 1999                               |       
|                                  |  |                                    |       
|Particle Board                    |  |                                    | 8,888 
|Coated Particle Board-melamine    |  |                                    | 16,404
|Coated Particle Board-wood veneer |  |                                    |       
|Total Particle Board              |  |                                    | 25,292
|Raw MDF                           |  |                                    | 21,633
|Coated MDF-melamine               |  |                                    | 10,399
|Total MDF                         |  |                                    | 32,032
|OSB                               |  |                                    |       
|                                  |  |                                    |       
|Total                             |  |                                    | 57,324
|                                  |  |                                    |       




---

|(1) | Dollar amounts have been    compiled using historical year-end exchange rates during the period indicated    and have not been adjusted to reflect changes in purchasing power.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Marketing  and Distribution.   Despite the cost and difficulty of shipping goods across the Andes  mountain range (where the mountain road passes are frequently closed during  winter) and the import tariffs to which the Companys goods were subject when  shipped into Argentina, the Company exported from Chile small quantities of  particle board to Argentina for a number of years prior to the establishment of  Masisa Argentina and its commencement of particle board production in  Argentina.  The costs and difficulties  of doing business in Argentina from Chile, coupled with the Companys  expectations regarding the Argentinean economy and favorable tree-growing  conditions, convinced the Company that it would be better positioned to exploit  what it believed to be an underdeveloped market by producing particle board and  MDF in Argentina.  Moreover, the Company  believed that if it did not serve the
Argentinean market through production facilities  in Argentina, other producers would be more likely to enter the market (thereby  diminishing the Companys ability to export Chilean production to Argentina and  enter the market in the future) and possibly compete with the Company in its  principal market in Chile.  Accordingly,  in 1992, the Company established Masisa Argentina, which commenced production  of particle board in June 1994 and of MDF in 1995.





Currently, the Company sells particle board and MDF to  Argentinean furniture manufacturers through approximately 150  distributors.  During 2002,  approximately 70% of the Companys sales revenue in the Argentinean market was  generated by the 10 principal distributors, and the largest single distributor  accounted for approximately 15% of these sales.  The Companys principal distributors in Argentina are: Amiano  S.R.L., Distribuidora Aglolam S.A., Distribuidora Argentina de Chapas S.A.C.,  Distribuidora Placasur S.A., Dolinsky S.A., Easy S.A, Madergold S.A, Mocona  S.R.L., Oblak Hmnos. S.A.C.I. F.E.I. and Sacheco S.A.





Given the successful development of the Companys  Placacentro program in Chile and Peru, Masisa Argentina started to develop this  distribution channel in 2000.  As of May  15, 2003, 20 stores have been opened in Argentina.  Masisa Argentina expects to open approximately 8 new stores in  Argentina during 2003. Of the Companys 2002 sales in the Argentinean market,  approximately 10% were through Placacentros. The Company is pursuing several  strategies in Argentina to encourage the use of the Companys particle board  and MDF products in lieu of other materials.   As in Chile, the Company holds regular meetings with Argentinean  furniture manufacturers, offers service and technical assistance to these  consumers and regularly participates in trade fairs and furniture shows.  In addition, the Company offers technical  training courses for Masisa-product installers through an agreement with the
Construction Workers Training Foundation of Argentina.





In Argentina, the Company sells directly from its  Concordia production facility. The Company previously held a commercial  warehouse located in Buenos Aires that was closed in May 2001 because of  improvements in the distribution system.   Products are shipped mainly by truck to customer locations in Argentina.





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The Company has focused its marketing efforts on  furniture and cabinet manufacturers and on the construction industry.  After devaluation of the Argentinean peso  and in response to the adverse macroeconomic scenario in Argentina, Masisa  Argentina has redirected the majority of production from its Argentinean  operations to export markets primarily in Brazil, Mexico, the U.S. and the Far  East.  As a result, in 2002, the  Argentinean local market represented only 7% of Masisas total sales as compared  with 21% in 2001.





Particle  Board Market.   Argentina has more than twice the population of Chile and has a housing  deficit estimated at over three million. However, following the devaluation of  its currency, Argentinas per capita income has been reduced to half of its  pre-devaluation levels.  Accordingly,  Argentinas current domestic particle board consumption has fallen to  approximately 3.1 cubic meters per thousand persons as compared with 6.0 cubic  meters per thousand persons in 2001.   This substantial decrease is primarily the result of Argentinas current  economic crisis and the Company expects that future demand for its products in  Argentina will be largely dependent upon the growth of the Argentinean economy  and particularly on the growth of the Argentinean construction and furniture  manufacturing industries.





The Company estimates that it held approximately a 37%  share of the total Argentinean particle board market as of December 31,  2002.  The Companys principal  Argentinean competitors in particle board are Faplac S.A., which has an  estimated production capacity of 210,000 cubic meters, Sadepan Latinoamericana  S.A. and Cuyoplacas S.A., each of which has an estimated capacity of 100,000  cubic meters.  The other smaller  Argentinean particle board producers, such as Tableros del Paraná S.A. have a  minimal market presence and use older and less efficient technology than the  Company utilizes at its Concordia facility.   The Company also believes its cost of production is lower than that of  its Argentinean competitors.  As in  Chile, however, particle board products compete with other types of board  products, such as gypsum and asbestos-cement board, as well as solid wood and  plywood.





During 2002, Masisas sales  of particle board in Argentina decreased in dollar terms by 65%,  and its raw particle board and melamine-laminated particle board sales  decreased by 67% and 65%, respectively.   This decrease in both raw and melamine-laminated particle board sales  was due to a lower demand for these products as a result of the overall  Argentinean economic crisis held in 2002. In order to minimize the impact of  this decline, Masisa Argentina shifted the main part of its domestic sales of  particle board to exports, resulting in an 8% decrease in volume sales in 2002 compared  to 2001.





MDF  Market.  The Company  has continued to actively develop the market for this product through  advertising campaigns, events held directly with the customers and the  Companys participation in trade shows, all of which are designed to demonstrate  the boards quality and multiple uses for furniture manufacturers, architects  and decorators.





Masisa is the largest MDF manufacturer in the  Argentinean market, with an estimated market share of 73% as of December 31,  2002.  The Companys Argentinean MDF  sales were US$8.6 million in 2002, which represents a 73% decrease compared to  2001.  As in the particle board case,  this decrease in sales was due to a lower demand, as a result of the overall  Argentinean economic crisis, and Masisa Argentina shifted domestic sales to  exports ending with an 33% increase in MDF volume sales in 2002 compared to  2001. The Argentinean MDF market was a fast-growing market that expanded from  approximately 24,000 cubic meters in 1995 to 151,000 cubic meters in 1999. However,  the economic slowdown of the past two years has adversely affected the market,  which decreased to approximately 131,000 cubic meters in 2001, and to  approximately 60,000 cubic meters in 2002.   The Company estimates that total consumption of MDF in
Argentina was  approximately 1.7 cubic meters per thousand inhabitants in 2002, as compared to  3.4 cubic meters in 2001.





During 2002, due primarily to its increased  competitiveness in foreign markets as a result of Argentinas currency  devaluation and Masisa Argentinas ability to utilize the Companys business  networks abroad, approximately 72% of Masisa Argentinas consolidated sales by  volume of particle boards and MDF were exports, primarily to Brazil, as well as  other export markets. Although this allowed the Company to partially offset the  effects of the Argentinean crisis and avoid shutting down any of its production  lines, due to the lower margins for Masisa Argentinas products in exports  markets compared with domestic markets in a normal condition, the Company will  return to domestic sales when the Argentinean market begins to recover.  There can be no assurance that favorable  economic conditions in Argentina will enable the Companys profits to recover  their pre-crisis levels.





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In 2000, Masisa Argentina began construction of a new  thin-MDF plant at the Concordia Industrial Complex in Argentina.  The new plant has an installed production  capacity of 120,000 cubic meters per year.   The plant produced its first boards in October 2001 and became fully  operational by mid-2002 .  The plants  thin-MDF production has been directed at local and export markets, producing  82,865 cubic meters during 2002.  By  2002, the Company had approximately 270,000 cubic meters of total MDF installed  capacity in Argentina, including capacity from the new thin-MDF plant.





In March 2001, Masisa Argentina commenced construction  of its first line of pre-painted MDF moldings in Argentina at the Concordia  Complex. The molding line, with an estimated production capacity of 36,000  cubic meters per year, started its production in January 2003 and reached full  production capacity during the second quarter of 2003. Production at the  molding plant will primarily be directed to export markets. For the first four  months through April 2003, the Concordia facilities produced 2,821 cubic meters  of molding with more than the half of them produced during April.





Although this plant began operating at a difficult  time for the Argentinean economy, the facilitys geographic location, the  Companys export experience and the favorable exports conditions created by the  devaluation of the Argentinean peso provide a favorable scenario for export to  Latin American and world markets generally.





In the first half of 2002 Paneles Arauco began  operations at its new MDF plant in Argentina with an estimated annual capacity  of 240,000 cubic meters.  At the present  time, in addition to Paneles Arauco, there is only one other competitor in this  market, Tableros Guillermina S.A., which has an annual production capacity of  approximately 40,000 cubic meters. Although the Company believes that market  prospects for wood-board products in Argentina will improve, there can be no  assurance that the Company will be able to operate its Argentinean plants  profitably.





Uruguay





The Uruguayan market is accessed by the Company  through the Companys Argentinean marketing and distribution operations and is  served from Masisa Argentinas plant in Concordia.  Although Uruguay is a small market, and has no significant impact  on Masisas results, the Company believes it is the leader in this market for  both MDF and particle board products.   The Companys sales in this market decreased by approximately 53% in  2002 from US$1.7 million in MDF and US$0.9 million in particle board in 2001 to  US$0.8 million and US$0.4 million, respectively, in 2002.  This decrease was primarily due to the  influence that the Argentinean economy has on Uruguay.





Brazil





General.  In  2002 Brazils GDP reached 1.5% for the second consecutive year, demonstrating  how the pre-electoral uncertainty, the considerable drop in trade with  Argentina and the adverse conditions of world and regional markets keep  Brazilians economy in a slow growth. The inflation rate reached 12.5%.  The trade surplus was approximately US$13.1  billion and the local currency dropped from 2.3 Real per U.S. dollar on  December 31, 2001 to 3.5 Real per US$ on December 31, 2002.  During 2003 the new elected President of  Brazil announced measures intended to stabilize markets, resulting in a  valuation of the Brazilian Real against US$, which as of June 23, 2003 was at  2.9 Real per US$ as issued by the U.S. Federal Reserve Bank of New York.





The following table shows the Companys board sales in  the Brazilian market in dollar terms for the years indicated.  The figures reflect exports from the  Companys Chilean and Argentinean production facilities sold in Brazil, as well  as the production from Masisa Brazils MDF and OSB plants, which commenced  operations in December 2000 and November 2001 respectively.





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BRAZIL


MASISA  BOARD SALES


(thousands of US$)(1)





|                         |  | For the    year ended December 31, |       
|------------------------ |  | ---------------------------------- | ------
|                         |  |                                    |       
|                         |  | 1999                               |       
|                         |  |                                    |       
|Raw Particle Board       |  |                                    | 909   
|Coated Particle Board(2) |  |                                    | 5,804 
|Total Particle Board     |  |                                    | 6,712 
|Raw MDF                  |  |                                    | 10,424
|Coated MDF(2)            |  |                                    | 5,063 
|Total MDF                |  |                                    | 15,486
|OSB                      |  |                                    |      
|                         |  |                                    |       
|Total                    |  |                                    | 22,199
|                         |  |                                    |       




---

|(1) | Dollar amounts have been    compiled using historical year-end exchange rates during the period indicated    and have not been adjusted to reflect changes in purchasing power.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes both    melamine-laminated and wood-veneered boards.                                                                                                                  




Marketing  and Distribution.  The  Company established Masisa Brazil in 1995.   Masisa Brazil has already achieved a significant position as a particle  board and MDF supplier to southern Brazils furniture industry.





Particle board is supplied and delivered to the  Brazilian market principally by truck from Masisa Argentinas Concordia plant.  The strategic location of the Concordia Plant and the establishment of MERCOSUR  have made Brazil a favored market for Masisa Argentinas exports.  In the past, MDF was supplied to the  Brazilian market from both the Argentinean Concordia plant and the Chilean  Coronel plant, but since 2001 these exports were gradually replaced by  production from the new MDF plant located in Ponta Grossa, Brazil.  During 2002, only the Concordia plant  continued to export MDF boards to Brazil, taking advantage of the favorable  commercial balance resulting from the Argentinean Peso devaluation. The Ponta  Grossa plant has an installed capacity of 240,000 cubic meters per year and was  inaugurated in April 2001.  During 2002  Masisa Brazil produced 214,423 cubic meters of MDF.





The Companys combined sales in Brazil of particle  board, MDF and OSB reached US$49.3 million in 2002, representing an 5% increase  compared to 2001. Particle board sales remained relatively stable, increasing  by 1% to US$9.3 million in 2002 from US$9.2 million in 2001.  MDF sales decreased by 9% to US$32.9 million  in 2002. Particle board and MDF sales by volume increased by 31% and 21%,  respectively, in 2002 compared to 2001. This increase is not reflected in net  sales however, because the depreciation of the local currency resulted in lower  prices in U.S. dollar terms and the Company has been enable to adjust prices as  a result of increase competition. OSB sales increased to US$6.1 million in 2002  compared to the US$ 0.5 in 2001 primarily due to the start of production at the  Brazilian OSB plant.





The Company has a commercial office located in Bento  Gonçalves, state of Rio Grande do Sul, approximately 900 kilometers from  Concordia.  A significant portion of the  Brazilian furniture manufacturing industry is concentrated in the Bento Gonçalves  region.





During 1998, the Company closed a distribution  warehouse in Bento Gonçalves, but three new distribution warehouses were opened  in the cities of Novo Hamburgo, Curitiba and Vitória, in the states of Rio  Grande do Sul, Paraná and Espírito Santo, respectively.  This shift in warehousing was undertaken in  order to implement a more effective distribution system within Brazil.  During 2002, the Company closed the Vitoria  warehouse to finish improvements in the distribution system.





In order to participate in the fast-growing Brazilian  market and to be cost-competitive, the Company opened an MDF production  facility in Brazil.  The facility is  located in the city of Ponta Grossa, Paraná State, in the Southeastern part of  Brazil and has an installed capacity of 240,000 cubic meters of MDF per  year.  Masisa began construction of the  Ponta Grossa MDF plant in July 1999 and commenced production testing in  December 2000.





In November 2001, Masisa began test production of the  first OSB boards in a new plant in the Ponta Grossa industrial complex.  This OSB plant, which Masisa started to  construct in mid-2000, has an annual installed capacity of 350,000 cubic meters  and required an investment of approximately US$64 million, all of which was  financed internally. The Ponta Grossa OSB plant is the first of its type in  Brazil.





Due to the large size of Brazilian manufacturers,  sales in Brazil are primarily made directly to the manufacturers.  There are generally no independent  distributor chains for these materials.   However, in order to meet





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the needs of carpenters, architects and decorators, Masisa has  established a sales and marketing network that has been in place since  1996.  In addition, in 2002 the Company  opened nine new Placacentro stores in the central and southern regions of  Brazil, following its policy of developing distribution networks as a strategy  for penetrating the markets where it is present.  The Company has opened 16 Placacentro stores in Brazil as of May  15, 2003, and expects to open approximately 14 new stores in Brazil during  2003. During 2002, 4.4% of all the Masisa Brazils volume sales were through  Placacentros. Currently, the Company sells particle board, MDF and OSB in the  Brazilian market through 24 commercial representatives distributed throughout  Brazil.  During 2002, approximately 50%  of the Companys sales revenue in the Brazilian market was generated by 117 of  its 1,859 customers, and the largest single customer accounted for


approximately 1.9% of these sales.  The  Companys principal customers in Brazil are: A Medida Certa Ind. E Com. Ltda., Artel e Móveis Ltda.,  Artesano Móveis e Decor. Ltda.,  A.R. Valle & Cía Ltda., Bertolini S.A., Centro Oeste Suprim., Imcal, Ind. Móveis Arca Ltda., Leo Madeiras,  Madesa S.A., Móveis Dalla Costa Ltda., Moveis Germai, Robel Ind. Móveis Ltda.,  Souza e Silvera Ltda. and Todeschini S.A.





The Company also believes that adapting finance and  administrative management to local conditions is necessary to successfully  compete in Brazil.  Accordingly, in late  1997, the Company established a finance and administrative office in Curitiba,  Paraná State.  In August 1999, Mr. Italo  Rossi was appointed as Masisa Brazils Chief Executive Officer.  Prior to that date, Mr. Rossi was the  Companys Chief Sales and Marketing Officer in Chile.





The Company is expending considerable effort to  develop its sales in Brazil by, among other activities, opening distribution  warehouses, expanding its client base and participating in promotional  activities, expositions and trade shows.   Although the Company believes that market prospects for MDF and OSB in  Brazil are good, there can be no assurance that the Company will be able to  operate its Brazilian plants profitably





Particle  Board Market.   Particle board consumption in Brazil is relatively low, estimated by the  Company to be 10.8 cubic meters per thousand inhabitants in 2002 (compared to  consumption levels of 19.7 cubic meters per thousand inhabitants in  Chile).  Since Brazil has a population  more than ten times greater than that of Chile, the Company views Brazil as an  attractive market for particle board.   Currently, there are a number of Brazilian of particle board producers  with efficient operations, including Duratex, (644,000 cubic meters of  capacity), Satipel (570,000 cubic meters), Berneck (530,000 cubic meters),  Placas do Paraná (300,000 cubic meters), Eucatex (270,000 cubic meters), and  Tafisa (239,000 cubic meters). Nevertheless, the Company estimates particle board  consumption in Brazil increased by approximately 13% in 2002 compared to 2001  levels, and that long-term market prospects for this
product in the Brazil are  good. Although no accurate information is available on overall market size, the  Company believes that it held approximately 4% of the Brazilian particle board  market share as of December 31, 2002.





MDF  Market.  Before the  commencement of test production at its MDF plant in Ponta Grossa, Brazil, the  Company only supplied the Brazilian market with imports from Chile and  Argentina.  Since the MDF plant became  fully operational in the third quarter of 2001, the Company has significantly  increased MDF sales in Brazil.  As of December  31, 2002, the Company believes that it holds an approximate 31% share of the  Brazilian MDF Market.  As regards  competitors, the first Brazilian producer of MDF, Duratex, began production in  1997 and currently has an annual production capacity of approximately 230,000  cubic meters.  In late 1998, Tafisa  Brasil opened an MDF facility with an annual production capacity of 145,000  cubic meters, and during 2001 increased their capacity to 350,000 cubic meters  through the addition of a new plant.   Another competitor, Placas do Paraná, began operating a
new MDF plant  during December 2001, with an estimated installed capacity of 200,000 cubic  meters per year.  During 2003 two new  plants will begin operations in Brazil.   The first belongs to the Isdra Group and will have an annual capacity of  180,000 cubic meters.  The second, with  an annual capacity of 400,000 cubic meters, belongs to Duratex and will replace  part of their current hardboard production. Since the third quarter of 1997,  the MDF production from these competitor plants has adversely affected the  Companys sales to Brazil.  Nevertheless,  the Company estimates that total market consumption of MDF in 2002 reached  approximately 730,000 cubic meters, which represents approximately a 28%  increase compared to 2001 levels.   Therefore, the Company believes that long-term market prospects for this  product in the Brazilian market are good.   The Company estimates that MDF consumption in Brazil was approximately  4.2 cubic meters per thousand
inhabitants in 2002.  Based in part on its experience in the Argentinean market, the  Company believes that the MDF market will expand rapidly in Brazil as MDF  becomes more widely available as a result of the new domestic MDF production  capacity in Brazil.





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OSB  Market. In December 2001, Masisa began test production of the  first OSB boards in a new plant in the Ponta Grossa industrial complex.  This OSB plant, which Masisa started to  construct in mid-2000, has an annual installed capacity of 350,000 cubic  meters.  The plant, which involved an  internally financed investment of nearly US$64 million, is the first of its  type in Brazil.  OSB boards are used in  the construction, packing and furniture industry and in applications that  require great structural strength.  The  Ponta Grossa plants production targets both internal consumption and exports.  Masisa do Brasil 2002 sales were 74,397 cubic meters in the local market and  14,591 cubic meters of exports to Chile, Argentina, Mexico, Venezuela, Uruguay  and Korea (including sales to Masisa in Chile, Argentina and Mexico). As the  first producer of this kind of boards in Brazil, the Company is actually


 involved in the introduction phase for this product, keeping margins low in  order to encourage volume sales to create a market.





Mexico





Following its 6.9% growth in GDP in 2000, Mexico began  to experience a slowdown in its economy as reflected in the 0.2% contraction  in 2001 GDP and the relatively small 0.7% growth in 2002 GDP. In 2002,  inflation in Mexico was 5.7%, while the trade balance deficit was US$ 8.0 billion.





Marketing  and Distribution.  In  August 2001, the Company established Masisa Mexico as a vehicle for entering  the Mexican wood products market.  On  January 8, 2002, Masisa Mexico acquired a particle board plant located in  Durango, Mexico, from MacMillan Guadiana, a subsidiary of the US forestry  company Weyerhaeuser Company Limited.   This plant has an installed capacity of 120,000 cubic meters per  year.  With this acquisition, the  Company now supplies particle boards to the Mexican market mainly from the  Durango plants production.  The Company  imports MDF and OSB into the Mexican market from its plants in Chile, Argentina  and Brazil, and also from the Fibranova plant in Venezuela.  During this first year of  production at facilities in Mexico, Masisa  believes that it has captured 20% of the Mexican particle board and MDF market,  with 2002 sales in Mexico representing 12% of
the Companys total sales.  Because Mexico has a population more than  six times greater than Chiles, board consumption levels that are currently  substantially smaller than Chiles and a growing scarcity and increasing cost  of a direct competitor of the Companys boards, sawn lumber, the Company  believes the Mexican market has substantial potential for increased consumption  of wood boards, whether produced locally at the Durango plant or imported from  Masisa plants in Chile, Argentina or Brazil.





Currently, the Company sells particle board and MDF to  Mexican furniture manufacturers through approximately 177 distributors.  During 2002, approximately 80% of the  Companys sales revenue in the Mexican market was generated by the 46 principal  distributors, and the largest single distributor accounted for approximately  9.7% of these sales.  The Companys principal distributors in  Mexico are: Industrial Maderera Puente de Vigas, Materiales Comsa Torreón S.A.  de C.V., Maderas y Aglomerados Tovalo S.A. de C.V., Maderas y Puertas Gavilán  S.A. de C.V., Mayoristas en Triplay y Maderas de La Laguna S.A. de C.V.,  Mexicana Pacific S.A. de C.V., Mexlam S.A. de C.V., Promotora Groce S.A. de  C.V., Representaciones Forestales S.A. de C.V. and Tableros Industrializados  S.A. de C.V.





In 2002, Masisa successfully expanded its Placacentros  network into Mexico.  Masisa Mexico  opened 18 stores throughout the country as of May 15, 2003, and expects to open  approximately 12 new stores in Mexico during the remainder of 2003.  The Company estimates that the furniture  industry in Mexico represents approximately 80% of particle board and MDF  consumption in that country, and that approximately 50% of the furniture market  is comprised of small and medium-sized manufacturers. Although the Company  believes that both conditions are favorable for the introduction of the  Placacentro concept in Mexico, no assurance can be given that the program will  succeed in the Mexican market. During 2002, 23% of Masisa Mexicos total volume  sales were made through Placacentros.





Particle  Board Market.   Particle board consumption in Mexico is relatively low, estimated by the  Company to be 5.5 cubic meters per thousand inhabitants in 2002. Currently,  there are a number of Mexican producers of particle board with efficient  operations, including Paneles Ponderosa S.A de C.V. (200,000 cubic meters of  capacity), Rexcel S.A. de C.V. (180,000 cubic meters), Duraplay S.A. de C.V.  (90,000 cubic meters), and Maderas Conglomeradas S.A. de C.V. (50,000 cubic  meters).  Since the establishment of  Masisa Mexico in August 2001 and the subsequent acquisition of the Durango plant,  the Company has significantly increased sales in Mexico. Total





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particle board sales grew from 172 cubic meters in 2001 to 87,692 cubic  meters in 2002. Of the 2002 particle board sales, 21,143 cubic meters were  melamine-laminated and 48 cubic meters were wood-veneered.





MDF  Market.  The Company  has traditionally supplied the Mexican MDF market from its Chilean, and to a  lesser degree, Argentinean facilities. Since 2002, the Fibranova plant in  Venezuela has also supplied the Company with MDF. During 2002 the Company sold  58,002 cubic meters of MDF in Mexico compared to 22,039 cubic meters in 2001,  representing an increase of 163% by physical volume and 184% in U.S. dollar  terms.  Currently there is only one MDF  plant in Mexico (60,000 cubic meters) which is owned by Maderas Conglomeradas  S.A. de C.V. The Company believes Mexicos consumption per thousand inhabitants  was 1.8 cubic meters combined for MDF and hardboard in 2001 and that this  amount remained basically unchanged in 2002.





Peru





During 2002, the Peruvian economy grew at a rate of  5.2%.  Inflation decreased to 1.5 %  in 2002 from 2.0% in 2001.  The Peruvian  trade surplus was an estimated US$ 71 million in 2002





Marketing  and Distribution.  The  Company serves the Peruvian market with particle board and MDF products through  exports from Masisa Chile.  The Company  established its Peruvian subsidiary, Masisa Peru, in 1997 to conduct commercial  and distribution activities in that country.   As of December 31, 2002, all products sold by the Company in Peru were  imported from Chile.





During 1997, the Placacentro network was extended to  Peru.  In 2002, Masisa Peru opened six  new stores in Peru bringing the total number of stores to 16.  Masisa Peru expects to open approximately  three new stores during 2003, increasing the total number of Placacentros in  Peru to 19.





Particle  Board and MDF Markets.   Consumption of particle board and MDF in Peru is relatively low.  The Company estimates that total particle  board and MDF consumption in Peru was 1.6 and 0.3 cubic meters per thousand  inhabitants, respectively, in 2002.  The  Companys Peruvian board sales increased by 97% in dollar terms, from US$3.5  million in 2001 to US$6.9 million in 2002.   Total board volume sales increased by 68% during 2002, principally due  to deeper market penetration of MDF board products, the per capita consumption  of which increased by 28%, and an increase in the Companys share of the  particle board market, which increased by 2% in terms of per capita  consumption.





In Peru, there is currently only one local producer of  particle board, Tableros Peruanos, with an annual capacity of 20,000 cubic  meters per year; imported particle board comes mainly from Chile (Masisa) and  Ecuador (Cotopaxi and Novopan).  Because  there is no local producer of MDF in Peru, it is also imported from producers  in Chile (Masisa and Arauco) and Ecuador (Cotopaxi).  The Company estimates that as of December 31, 2002, it held  approximately 49% and 71% of the Peruvian particle board and MDF markets, respectively.





Other Markets





The Company generally achieves higher margins from the  sale of its principal products in the markets in which it participates directly  (Chile, Argentina, Brazil, Peru, Mexico and Uruguay) than from exports through  third parties. Accordingly, the Company has traditionally preferred to satisfy  demand in these markets first, and then export any surplus products. Despite  this policy, Masisa has constructed a solid business network outside the  markets in which it directly participates in order to diversify its market risk  and to enable it to respond promptly to changes in markets conditions. After  the political and economical crisis began in Argentina, the Company utilized  this export network and experience to substitute sales to foreign markets for  lost sales in the Argentinean market.   This was possible as a result of the increased competitiveness of  products produced in Argentina resulting from the currency devaluation in


that  country.  Approximately 19% of the  Companys total 2002 consolidated revenues were derived from Chilean,  Argentinean and Brazilian export sales to markets other than Chile, Argentina,  Brazil, Peru, Mexico and Uruguay, compared to the approximately 11% represented  by such sales in 2001. Masisa Brazils raw MDF exports and the increase in  exports from Chile have a lower effect, than Argentinean increase of exports,  on this figure. The main destinations of these exports were Japan, Korea,  Taiwan, the United States, Ecuador and Saudi Arabia.





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The Company established its Ecuadorian subsidiary,  Masisa Ecuador, in October 2002 to conduct commercial and distribution  activities in that country. The Company serves the Ecuadorian market with  particle board and MDF products through exports from Masisa Chile. There are  two producers of particle boards in Ecuador, Aglomerados Cotopaxi S.A. and  Novopan del Ecuador S.A., each with an annual installed capacity of 40,000  cubic meters. The only MDF producer is Cotopaxi, also with an annual capacity  of 40,000 cubic meters.





Masisa has faced intense market competition, as well  as excess supply of some board products, in its export markets.  This has encouraged the Company to follow a  strategy of emphasizing product quality and market segmentation for both  particle board and MDF. From 1999, the Company has started to recover its  exports to Asian countries, which decreased significantly in 1998 and 1999 as a  result of the currency crisis in certain Asian countries that commenced in 1997.  Thus, the Companys sales to Asian countries in 2002 accounted for 12% of the  net consolidated sales of the Company.   As previously mentioned, because Argentinean and Brazilian demand  consumed virtually all of the production of Masisa Argentina and Masisa Brazil  during 2001, most of the products exported to these other markets that year  came from the Companys Chilean plants.   After the devaluation of the Argentinean peso in January 2002
and the  increased cost benefit to the Company from producing boards in Argentina,  Masisa Argentina began exporting its products to new markets, including  Asia.





Production





The Company owns and operates production facilities in  Chile, Argentina, Brazil and Mexico.   Its Chilean production facilities are located in Valdivia, Coronel,  Cabrero and Chiguayante.  Its  Argentinean production facilities are located in Concordia. Its Brazilian  production facilities are located in Ponta Grossa.  Its Mexican production facilities are located in Durango.  Together, these facilities have a  consolidated annual production capacity of 735,000 cubic meters of particle  board, 810,000 cubic meters of MDF and 350,000 cubic meters of OSB.





Production  Processes





The following is a brief description of production  processes for the Companys principal products.





Particle  Board.  The production  process employed to manufacture raw particle board varies to some degree at  each of the Companys particle board facilities.  The following is a description of the production process employed  at Masisas Coronel facility, which is the same process used at its Valdivia  and Concordia facilities. The first step is the purchase of wood particles in  the form of chips, wood shavings and sawdust or their production by the Company  from scraps of lumber and small logs.   The wood particles are then put into drying machines to remove  water.  The dried wood particles are  then placed into a gluing machine where they are mixed with chemical adhesives.  The mass of wood particles mixed with  adhesives is then formed into boards, with the larger particles positioned in  the inside of the board and the smaller particles dispersed on the top and  bottom surfaces of the
board.  Depending  upon which production line is utilized, the formed boards are then either  rolled or pressed in order to compress the particles to the desired board  thickness and then heated to 190 degrees Celsius (374 degrees Fahrenheit) by  steam heat.  The compressed and heated  particle board is then cooled.  After  cooling, the particle board is cut to size, stored to facilitate adhesive  stabilization and then sanded.  Before  and after sanding, the particle boards are visually inspected and graded for  quality.  Any damaged boards are removed  and burned by the Company as fuel or used as packaging material.





MDF.  The production process for MDF starts with  clean chips and a small proportion of sawdust and wood shavings that are  defibrated.  The result is a fiber pulp  that is then mixed with chemical adhesives.   The wood-fiber and adhesive mixture is dried in a high temperature  flash-tube.  The fiber is then  distributed uniformly in a mat forming station.  The boards produced by the forming station are passed through a  precompressor to a continuous hot press.   The compressed MDF is then cooled.   After cooling, the MDF board is cut to size, stored for 48 hours to  facilitate adhesive stabilization and sanded.





Oriented  Strand Boards (OSB).   The production process for OSB begins with obtaining small logs and  lumber scraps.  Logs are debarked, sawn  and reduced to thin wood strands.  The  strands are put into a drying machine to remove humidity from the wood, so as  to avoid shrinkage and swelling during use.   The dried wood strands are placed into a blending machine where they are  mixed with chemical adhesives.  The  resin-blended





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strands are then mechanically aligned into several layers in a forming  line, with each layer laid down separately along the conveyor belt, to build up  a mat.  This mat is compressed and  heated in the main press to form the boards.   The compressed and heated boards are then cooled, and after passing  through a finishing line, are packaged ready for sale.





Melamine  Lamination Process.   The melamine lamination process is a separate manufacturing process in  which raw particle and MDF boards produced by the Company are hot pressed with  melamine-impregnated paper prepared on a melamine impregnation line.  This process requires special quality  control procedures, both in the production of the raw materials and in the  process itself, to obtain a correctly finished product.





Wood  Veneering Process.   The production of wood-veneered boards is also a separate process  similar to the melamine-laminating process, but instead of melamine-impregnated  paper the raw boards are covered by a thin layer of natural wood (veneer).  This process is more expensive than melamine  lamination.





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Chilean Production  Facilities





The Companys Chilean board manufacturing facilities  in Cabrero, Coronel, Chiguayante and Valdivia currently have an aggregate  annual production capacity of approximately 430,000 cubic meters of particle  board and 300,000 cubic meters of MDF.





The following table shows the product produced and the  installed annual production capacity in cubic meters as of December 31, 2002,  for each of the Companys Chilean production lines, except for doors, for which  capacity is expressed in square meters.





CHILE


PRODUCTION  LINES





|Plant                          |  | Line          |  | Product             |  | Annual    installed    capacity(1) | 
|------------------------------ |  | ------------- |  | ------------------- |  | ---------------------------------- | 
|                               |  |               |  |                     |  |                                    | 
|Coronel                        |  | Line 1        |  | Particle Board      |  | 95,000                             | 
|                               |  | Line 2        |  | Particle Board      |  | 65,000                             | 
|                               |  | MDF           |  | MDF                 |  | 140,000                            | 
|                               |  | Laminating    |  | Melamine Board      |  | 60,000                             | 
|                               |  | Laminating(2) |  | Melamine Board      |  | 110,000                            | 
|                               |  |               |  |                     |  |                                    | 
|Chiguayante                    |  | Line 1        |  | Particle Board      |  | 90,000                             | 
|                               |  | Laminating    |  | Melamine Board      |  | 45,000                             | 
|                               |  |               |  |                     |  |                                    | 
|Cabrero(formerly    Fibranova) |  | MDF           |  | MDF                 |  | 160,000                            | 
|                               |  |               |  |                     |  |                                    | 
|Valdivia                       |  | Line 1        |  | Particle Board      |  | 90,000                             | 
|                               |  | Laminating    |  | Melamine Board      |  | 35,000                             | 
|                               |  | Veneering     |  | Wood-Veneered Board |  | 40,000                             | 
|                               |  | Doors         |  | Doors               |  | 500,000                            | 
|                               |  |               |  |                     |  |                                    | 
|Puschmann                      |  |               |  |                     |  |                                    | 
|(located in Valdivia)          |  | Line 1        |  | Particle Board      |  | 90,000                             | 
|                               |  |               |  |                     |  |                                    | 
|Total                          |  |               |  | Raw Particle Board  |  | 430,000                            | 
|                               |  |               |  | Raw MDF             |  | 300,000                            | 
|                               |  |               |  |                     |  |                                    | 




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|(1) | Units are in cubic meters,    except doors, which are in square meters. The annual installed capacity may    vary slightly depending upon the thickness of the boards produced and other    production factors.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | As of June 2003, this line    was in its start up phase.                                                                                                                                                       




Coronel.  The Companys Coronel industrial site, which  is located near the city of Concepción, 320 miles south of Santiago, has two  particle board lines, one MDF line and one melamine-laminating line (which  includes a melamine impregnating line).





The Companys Coronel facility has two particle board  production lines having an aggregate annual production capacity of  approximately 160,000 cubic meters: one for thin particle board (65,000 cubic  meters per year capacity) and another for thicker boards (95,000 cubic meters  per year capacity). Total particle board production from these two lines was  134,473 cubic meters in 2002 and 135,939 cubic meters in 2001.





The Coronel MDF facility commenced operations in  January 1996, and has a production capacity of approximately 140,000 cubic  meters of MDF per year.  The facility  produced an aggregate of 137,903 and 142,570 cubic meters of MDF in 2002 and  2001, respectively.





The melamine paper impregnating line produces all the  melamine paper used by both the Coronel and Chiguayante melamine-laminating  lines.  The Coronel facility laminates a  portion (14% in 2002) of its total particle board and MDF production.  Coronels melamine-laminating line has an  estimated annual production capacity of 60,000 cubic meters.  In 2002, 38,139 cubic meters of  melamine-laminated boards were produced at Coronel as compared to 20,000 cubic  meters in 2001.  A small portion  (approximately 2% in 2002 and 2001) of Coronels MDF production was  melamine-laminated.





A new melamine-laminating line in the Cabrero plant  with an annual production capacity of 110,000 cubic meters is, as June 2003,  currently in its start up phase.  This  plant will increase melamine production in response to increased supply needs  resulting from the development of the Placacentros network and other  anticipated needs for





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such boards in local and export markets.  The total cost of the new line was approximately US$ 3.3 million,  all of which was internally financed.





Chiguayante.  The Companys Chiguayante facility is only  16 miles from its Coronel facility.  The  Chiguayante facility has a single particle board line with the capacity to  produce approximately 90,000 cubic meters per year.  An upgrade of the facility in 1994 converted the Chiguayante  facility into a modern and efficient facility which manufactures particle board  of similar quality to that produced at the Coronel facility.  During 1998, automation and improvements to  instruments were made in order to allow the facilitys production lines to  operate with greater electronic support.





The Chiguayante plant also possesses a  melamine-laminating line that has an annual capacity of approximately 45,000  cubic meters.  During 2002, this plant  produced 67,953 cubic meters of raw particle board, approximately 68% of which  was melamine-laminated on the Chiguayante melamine-laminating line. This  compares with production of 62,073 cubic meters in 2001, 65% of which was  melamine-laminated.





Valdivia.  The Company has two production complexes in  Valdivia, a city located approximately 520 miles south of Santiago.  The main facility is referred to as the  Valdivia plant, which has an annual capacity of approximately 90,000 cubic  meters of particle board.  The second  facility is named Puschmann, in memory of Carlos Puschmann, a distinguished  employee who passed away in 1999.





The Valdivia plants machinery employs a process  similar to the particle board production facilities in Coronel and Concordia,  Argentina.  In addition to producing raw  particle board, the Valdivia plant produces melamine-laminated boards,  wood-veneered particle board and all of the doors and strips of wood veneer  produced by Masisa Chile.  Additionally,  the melamine-laminating line purchased from Infodema was moved to the Companys  Valdivia plant and has been operating at full capacity since February 1999.





Masisa produced 78,682 cubic meters of particle board  at the Valdivia plant during 2002 compared to 37,587 cubic meters in 2001. From  May to October of 2001, the Company stopped this particle board line to adjust  particle board production in light of lower market demand. Both the  melamine-laminating line and the wood-veneering line use raw boards produced in  the Companys other plants to produce coated boards from time to time.  The melamine-laminating line has an estimated  annual capacity of 35,000 cubic meters per year, and the wood-veneering line  has an estimated annual capacity of 40,000.   In 2002, the melamine-laminating line produced 42,256 cubic meters of  melamine-laminated particle board, while the wood-veneering line produced  22,129 and 1,808 cubic meters of wood-veneered particle board and wood-veneered  MDF respectively. This compares with 46,100 cubic meters of melamine-laminated  particle board,
while the wood-veneering line produced 26,721 and 2,348 cubic meters  of wood-veneered particle board and wood-veneered MDF respectively, in 2001. In  the same facility, the Company operates its door production line, with an  estimated annual capacity of 500,000 square meters.  This line produced 402,182 and 340,781 square meters in 2002 and  2001, respectively.





Cabrero.  This MDF plant, formerly called Fibranova,  was acquired by the Company in September 2000 from Forestal Terranova S.A.  The facility is located 60 miles from the  Coronel facility and has been operating since August 1992.  It has a single MDF board line with an  annual production capacity of 160,000 cubic meters.  During 2002, the Cabrero plant produced 156,758 cubic meters of MDF,  compared to 165,019 cubic meters in 2001.





Puschmann.  The Puschmann plant was acquired in August  1998 when the Company purchased the assets of Tableros Nobel S.A. (Nobel),  which was a wholly-owned subsidiary of Infodema S.A. (Infodema) for US$17  million.  The Nobel assets included a particle  board plant and a melamine-laminating line, which was moved to the Valdivia  plant after the acquisition.  The  acquisition was internally financed.  As  part of the transaction, the Company also extended loans to Infodema for an  aggregate amount of US$4.5 million, which were guaranteed by Infodemas  manufacturing board facilities and forestry lands, of which approximately  US$0.15 million is currently outstanding.   This facility is now named Puschmann, in memory of a former employee  of the Company.





The particle board plant, while under the operation of  Infodema, possessed technical problems preventing its operation at design  installed capacity, and the plant did not meet the Companys quality  standards.  In April 1999, the Companys  Board of Directors approved an investment of approximately US$7.0 million to  solve these technical problems.  The  Company invested approximately US$4.0 million in the first stage of the  improvement program, which allowed production capacity to increase up to 90,000  cubic meters per year  The improvements  were





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completed during the first quarter of 2000, and the plant started  production in May 2000.  During 2002,  this facility produced 79,844 cubic meters of particle board, compared to the  77,198 cubic meters produced during 2001.   The Board of Directors will consider development of the second stage  based on future market performance and prospects.  However, there is no assurance that the Company will develop this  second stage.





Other.  Masisa Chiles former subsidiary, Aragón,  was merged into Masisa Chile in December 1997.   Production at its saw mill, molding and Edge Glued Panel (EGP)  facilities was temporarily halted during the first half of 1998 because the  principal markets for these products virtually disappeared as a result of the  Asian currency crisis.  These facilities  are now owned by Masisa Chile.  During  the second half of 1998, the saw mill was leased to Aserraderos Paillaco S.A.  (APSA), a local saw milling company that is currently operating the facilities.  During the first half of 1998, the molding  and EGP facilities were leased to Procesadora de Maderas Lignex Ltda.  (Lignex), a local wood processing company, although that contract was  terminated in August 1999.  In April  2000 and through the present time, the molding and EGP facilities were leased
to APSA.





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Argentinean  Production Facilities





Masisa Argentinas board manufacturing lines currently  have an aggregate annual production capacity of approximately 185,000 and  270,000 cubic meters of particle board and MDF, respectively, as indicated in  the table below.





ARGENTINA


PRODUCTION  LINES


|Plant     |  | Line       |  | Product                 |  | Annual installed     capacity (1)    (cubic meters)
|--------- |  | ---------- |  | ----------------------- |  | ---------------------------------------------------
|          |  |            |  |                         |  |                                                    
|Concordia |  | Line 1     |  | Particle Board          |  | 160,000                                            
|          |  | Line 2     |  | Particle Board          |  | 25,000                                             
|          |  | MDF        |  | MDF                     |  | 150,000                                            
|          |  | Thin-MDF   |  | Thin-MDF                |  | 120,000                                            
|          |  | Laminating |  | Melamine Board          |  | 200,000                                            
|          |  | Foil       |  | Foil Lined Board        |  | 48,000                                             
|          |  | Molding    |  | Prepainted MDF Moldings |  | 36,000                                             
|          |  |            |  |                         |  |                                                    
|Total     |  |            |  | Particle Board          |  | 185,000                                            
|          |  |            |  | MDF                     |  | 270,000                                            
|          |  |            |  |                         |  |                                                    




---

|(1) | The annual installed capacity    may vary slightly depending upon the thickness of the boards and other    production factors.
|--- | ------------------------------------------------------------------------------------------------------------------------------




Masisa Argentinas production facilities are located  in Concordia, an industrial town in the Province of Entre Ríos on the Uruguay  River, approximately 250 miles north of Buenos Aires.  The Concordia particle board production facility has the capacity  to produce 185,000 cubic meters per year of raw particle board in two  lines.  The particle board line for thin  particle board (under 9 mm) has an annual capacity of 25,000 cubic meters per  year.  The particle board line for  greater board thicknesses has an annual capacity of 160,000 cubic meters per  year.  The Concordia facility commenced  operations in June 1994.  In 2002, the  Concordia facility produced 134,907 cubic meters of particle board compared to  142,820 cubic meters in 2001.





In September 1995, Masisa Argentina completed the  installation of an MDF facility adjacent to its particle board facilities.  This MDF facilitys capacity was increased  from 120,000 cubic meters to 138,000 cubic meters during 1997 and its  production capacity was again increased to 150,000 cubic meters during  1999.  During 2002, this MDF line  produced an aggregate of 124,097 cubic meters of MDF, compared to 143,570 cubic  meters in 2001.





In October 2001, Masisa Argentina began the start-up  phase of its new thin-MDF plant located in the Concordia Industrial  Complex.  This plant, which began  operating two months ahead of its scheduled start-up date, has an installed  capacity of 120,000 cubic meters per year, and represents an investment of  approximately US$30 million, which was financed internally.  The Concordia plant produced its first MDF  boards in October 2001, and became fully operational by mid-2002.  In 2002 the thin-MDF plant produced 82,865  cubic meters.





The Concordia plant also includes a  melamine-laminating line with a capacity to produce 200,000 cubic meters per  year, and a new foil lining process with a capacity to produce 48,000 cubic  meters per year.  In 2002, of total board  production at the Concordia facility, 28% was melamine-laminated.  The foil lining process started test  production in November 2001 and 1% of the boards were foiled during 2002.





In March 2001, Masisa Argentina commenced construction  of its first line of pre-painted MDF moldings in Argentina at the Concordia  Complex.  The molding line, with an  estimated production capacity of 36,000 cubic meters per year, started its  production in January 2003.  The molding  line represents an investment of approximately US$1.8 million and was financed  internally.  Production at the molding  plant will primarily be directed to export markets. In the first four months of  2003, 2,821 cubic meters of molding were produced at the Concordia facilities,  with more than the half of such production occurring during April. This line  became fully operational in the second quarter of 2003.





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Brazilian  Production Facilities





Masisa Brazil board manufacturing lines currently have  an aggregate annual production capacity of approximately 240,000 cubic meters  of MDF and 350,000 cubic meters of OSB, as indicated in the table below.





BRAZIL


PRODUCTION  LINES


|Plant        |  | Line       |  | Product        |  | Annual installed    capacity (1)(cubic meters)
|------------ |  | ---------- |  | -------------- |  | ----------------------------------------------
|             |  |            |  |                |  |                                               
|Ponta Grossa |  | Line 1     |  | MDF            |  | 240,000                                       
|             |  | OSB        |  | OSB            |  | 350,000                                       
|             |  | Laminating |  | Melamine Board |  | 110,000                                       
|             |  |            |  |                |  |                                               
|Total        |  |            |  | MDF            |  | 240,000                                       
|             |  |            |  | OSB            |  | 350,000                                       
|             |  |            |  |                |  |                                               




---

|(1) | The annual installed    capacity may vary slightly depending upon the thickness of the boards and other    production factors.
|--- | ------------------------------------------------------------------------------------------------------------------------------




In December 2000, Masisa Brazil finished the  construction of its MDF production facility, located in the city of Ponta  Grossa, in the State of Paraná.  This  facility has an annual installed capacity of 240,000 cubic meters per year and  reached full production during the second half of 2001.  During 2002, the Ponta Grossa facility  produced an aggregate of  214,423 cubic  meters of MDF.  In the same complex,  Masisa Brazil finished construction in May 2001 of a melamine-laminating plant  that is used for coating MDF and particle board at an estimated total cost of  US$4 million.  The MDF plant was  financed with cash on hand and short- and long-term bank financing.  This laminating plant has a production  capacity of approximately 110,000 cubic meters per year.  In 2002, of the total MDF board production  at the Ponta Grossa facility, 27% was melamine-laminated.





In December 2001, Masisa Brazil produced the first OSB  boards in its new plant in the Ponta Grossa Industrial Complex.  The plant cost approximately US$64 million,  has an annual installed capacity of 350,000 cubic meters and became fully  operational during the fourth quarter of 2002.   The OSB plant was financed with cash on hand and short and long-term  bank financing.  In 2001 this plant had  no significant production of OSB.  In  2002, this plant produced 107,612 cubic meters which was directed at both local  and export markets. The OSB plants production was adjusted to correspond to  the demand generated by this product.   Because OSB is a new product in Brazil, the Company expects demand to  increase as the market becomes better educated about its various uses.





Although the Company believes that market prospects  for MDF and OSB in Brazil are good, there can be no assurance that the Company  will be able to profitably operate its Brazilian plants or that an economic,  political or market event will not adversely affect its development or  operation.





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Mexican Production  Facilities





In December 2001, Masisa reached an agreement with  Weyerhaeuser Company Limited, a United States Company engaged in the forestry  business, to purchase the particle board plant of its subsidiary, MacMillan  Guadiana, located in the city of Durango, Mexico.  The plant has a total installed capacity of 120,000 cubic meters  per year in two independent production lines, as indicated in the table  below.  The acquired plant also includes  a small melamine-laminating line, with a total installed capacity of 20,000  cubic meters per year.





MEXICO


PRODUCTION  LINES


|Plant   |  | Line       |  | Product        |  | Annual installed    capacity(1)(cubic meters)
|------- |  | ---------- |  | -------------- |  | ---------------------------------------------
|        |  |            |  |                |  |                                              
|Durango |  | Line 1     |  | Particle Board |  | 60,000                                       
|        |  | Line 2     |  | Particle Board |  | 60,000                                       
|        |  | Laminating |  | Melamine Board |  | 20,000                                       
|        |  |            |  |                |  |                                              
|Total   |  |            |  | Particle Board |  | 120,000                                      
|        |  |            |  |                |  |                                              




---

|(1) | The annual installed    capacity may vary slightly depending upon the thickness of the boards and    other production factors.
|--- | ------------------------------------------------------------------------------------------------------------------------------




The Company, through Masisa Mexico, purchased the  Durango plant on January 8, 2002 for approximately US$ 15.4 million. In 2002  the Company invested approximately US$ 4 million in technology and equipment in  order to increase production and improve market quality. The Durango  acquisition was financed with cash on hand and short and long-term bank financing.  During 2002, the Durango facility produced  97,773 cubic meters of particle board, 20% of which was melamine-laminated on  the plants melamine laminating line.   All of the 2002 production at this plant was directed toward the local  market.  Although the Company believes  that market prospects for particle board in Mexico are good, there can be no  assurance that the Company will be able to profitably operate its Mexican plant  or that economic, political or market events will not adversely affect the plants  development or operation.





Insurance





The Company insures all of its production facilities,  inventories, timberland and other assets in Chile, Brazil, Argentina and Mexico  against damage due to earthquakes, fires, floods and other similar occurrences  and against damage due to third-party actions, based on the appraised value of  the facilities as determined from time to time by independent appraisers.  Claims under the Companys insurance  policies are subject to customary deductibles and other conditions.  As of May 2003, the Company also maintains  US$5.0 million of third-party liability insurance for Chile, US$5.3 million for  Argentina, US$1.2 million for Brazil and US$2.5 million for Mexico, as well as  business interruption insurance for Chile, Brazil, Argentina and Mexico.  In Chile, such insurance provides coverage  for business interruption at any of the Companys Chilean facilities for a  period of up to 12 months with a 15 day
deductible per interruption caused by  any one event. In Argentina, such insurance provides coverage for interruption  at any of the Companys Argentinean facilities for a period of up to 12 months  with a 14 day deductible per interruption caused by any one event. In Brazil,  such insurance provides coverage for the business interruption at any of the  Companys Brazilian facilities for a period of up to 12 months with a 14 day  deductible if the interruption is caused by events other than machinery  breakdown, and with a 21 day deductible if the interruption is caused by  machinery breakdown. In Mexico, the insurance provides coverage for  interruption at any of the Companys Mexican facilities for a period of up to 6  months commencing 7 days after occurrence of the interruption.





The Company, through third parties, also carries insurance  in Peru and Ecuador for the value of its products located in those countries.





As of May, 2003, the aggregate amount of insurance  carried by the Company for its Chilean facilities was approximately US$362  million, US$308 million which was carried in respect of Masisa S.A. and the  remaining US$54 million of which insured Forestal. In Argentina, the Company  carried insurance in an aggregate amount of US$264 million, US$ 231 million of  which insured Masisa Argentina and the remaining US$33 million of which insured  Forestal Argentina. In addition the Company carried an aggregate amount of  US$187 million in insurance for its Brazilian properties and operations and  US$25 million for its properties and operations in Mexico.





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Raw  Materials and Suppliers





The most significant direct costs associated with the  production of particle board, MDF and OSB are chemicals, wood, labor and  energy.





During 2002, the principal chemical adhesives used in  the production of particle board and MDF in Chile and Argentina were  manufactured by the chemical plants of Georgia Pacific Resinas Ltda. (formerly  GPM) and Resinas Concordia S.A., respectively.   These two plants also manufactured most of the chemical catalyzers used  by the Company in those countries.   Until early 2001, Masisa had a 50% interest in both companies, under a  joint venture with Georgia-Pacific.  In  January 2001 the Company sold its participation in those companies to  Georgia-Pacific.  However, before this  transaction, Masisa Chile and Masisa Argentina reached long-term resin supply  contracts with GPM and Resinas Concordia S.A: to ensure the normal supply of  resins for existing and future operations, including calculations for future  growth of the Company in Chile and Argentina.   In Brazil, the principal chemical adhesives used in
the production of  MDF and OSB were supplied by Borden Química Indústria e Com. Ltd. and Synteko  Produtos Químicos S.A. In Mexico, the principal chemical adhesives used in the  production of the particle boards were supplied by Dynea Mexico S.A. de C.V.





Historically, Forestal provided the Companys Chilean  plants with small supplies of wood, but since 2000 no appreciable amount of  wood has been purchased by the Company from Forestal.  In Argentina, approximately 12% of the wood consumed by the  Company in 2002 was purchased from Forestal Argentina.  The wood consumed by the Company for the  production of MDF in Brazil was purchased from several unrelated saw mills and  forest growers.  With respect to the  particle board plant in Mexico, the Company obtains wood from suppliers that  serviced the plant under its previous ownership. Due to this relationship, the  Company manufactures this kind of board with wood chips, shavings and sawdust.  The Company buys these supplies mainly from  the mills and forest growers located nearest to the Companys facilities.





The Company believes that the market for the chemicals  it needs is sufficiently competitive and accessible such that it could satisfy  its chemical requirements through other suppliers on terms similar to those  obtained from its current suppliers.   There is more than one producer of chemical raw materials in each  country in which the Company has industrial facilities, granting the Company  flexibility as to its suppliers.  The  Company also has a number of suppliers for the raw materials used in its  production processes.  The Company  believes that the loss of any one of these suppliers, individually, would not  have a material adverse effect on the Company.   Raw materials are also available from countries in the region as well as  more distant ones, such as the U.S. and Japan.





The Company believes that abundant supplies of wood  are readily available.  The Company does  not use material amounts of native wood for its production processes.  With respect to wood supply, the Company has  several alternatives in forestry companies, including its subsidiaries Forestal  and Forestal Argentina.  The Company may  also obtain supplies from the forest plantations that it owns in Brazil.





The steam used by the Company in its manufacturing  operations is largely generated by burning its own scrap wood and defective  wood products.  Other energy  requirements, such as electricity, are obtained from commercial suppliers.





In general, the prices of raw materials used by the  Company depend on factors such as pulp and oil prices and tend to fluctuate  according to economic cycles and world supply.





The Companys principal suppliers in Chile, Argentina,  Brazil and Mexico and the products or raw materials they supply to the Company  are listed in the following table:





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PRINCIPAL  SUPPLIERS OF RAW MATERIALS





|CHILE                           |  |                      |  | ARGENTINA               |  |              
|------------------------------- |  | -------------------- |  | ----------------------- |  | -------------
|                                |  |                      |  |                         |  |              
|Andinos S.A.                    |  | Wood                 |  | Forestal Argentina S.A. |  | Wood         
|Aserraderos Paillaco S.A.       |  | Wood                 |  | Jose Albors             |  | Wood         
|Derquim S.A.                    |  | Paraffin Emulsion    |  | Lamigraf S.A.           |  | Paper        
|Forestal Río Reno S.A.          |  | Wood                 |  | Masa Decor S.A.         |  | Paper        
|Georgia  Pacific Resinas Ltda. |  | Resins               |  | MD Papéis Ltda.         |  | Paper        
|Heninrich Wemhöner GMBH &CO. KG |  | Industrial Machinery |  | Michael Weining         |  | Accessories  
|Lamigraf     S.A.               |  | Paper                |  | Resinas Concordia       |  | Resins       
|Masa Decor S.A.                 |  | Paper                |  | Schattdecor             |  | Paper        
|Oxiquim S.A.                    |  | Resins               |  | SIA Ltd.                |  | Sanding Belts
|Technocell Dekor                |  | Paper                |  | YPF                     |  | Fuel         




|BRAZIL                                   |  |                     |  | MEXICO                               |  |                  
|---------------------------------------- |  | ------------------- |  | ------------------------------------ |  | -----------------
|                                         |  |                     |  |                                      |  |                  
|Aguia Florestal Industria de    Madeira  |  | Wood                |  | Aprovechamientos Forestales Auro     |  | Wood             
|Araupel S.A.                             |  | Wood                |  | Binos Technologies GMBH & CO         |  | Sanding Equipment
|Bayer do Brasil                          |  | Polyurethane Resins |  | Casco Impregnated Papers             |  | Impregnated Paper
|Berneck Aglomerados S.A.                 |  | Boards              |  | Combustibles Industriales De Durango |  | Fuel             
|Borden Química e Industria e    Com Ltd. |  | Resins              |  | Dynea Mexico S.A. De C.V.            |  | Resins           
|Dynea Brasil S.A.                        |  | Impregnated Paper   |  | Exxonmobil De Mexico S.A. De    C.V. |  | Paraffin Emulsion
|Isogama Industria Química LTDA.          |  | Paraffin Emulsion   |  | Interprint Inc.                      |  | Paper            
|Madereira Rickli LTDA                    |  | Wood                |  | Masa Decor S.A.                      |  | Paper            
|Magor LTDA                               |  | Wood                |  | Printchem                            |  | Paper            
|Synteko Produtos Químicos    S.A.        |  | Resins              |  | Vizcarra Padilla Adolfo              |  | Wood             




Research and Development





The Company has reduced its particle board production  costs by using cheaper raw materials in the particle board production  process.  In particular, the Company is  gradually replacing more expensive wood chips and logs with less expensive  sawdust and wood flakes for the manufacture of particle board.  Accordingly, the Company uses sawdust and  wood flakes exclusively in the production process on its principal particle  board production lines, and uses a combination of sawdust, wood flakes, wood chips  and logs on its other particle board production lines.  The Company intends to continue modifying  its other particle board production lines in order to use sawdust and wood  flakes.





Masisa has also been successful in incorporating  limited amounts of sawdust and wood shavings in its MDF production process and  is actively engaged in a program to increase the usage of sawdust and wood  shavings in the production of MDF.  The  use of sawdust in the production of MDF is not widespread among MDF producers,  and the Company believes it is at the forefront of this effort.  Although there can be no assurance that the  Company will be able to successfully apply this research to its MDF production  process, the Company expects to be able to shift partially from its current  reliance on relatively higher cost wood chips (approximately four times the  cost of sawdust) to sawdust in its MDF production process.  Although the shift will result in higher  energy costs, the net result of the partial shift to sawdust will be to reduce  MDF production costs.





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.  During 2000, 2001 and 2002, the Company  invested approximately Ch$202 million, Ch$17 million and Ch$60 million,  respectively, in research and development.





Forestry and Wood Chipping Businesses





Forestal  Tornagaleones S.A.   The Company currently owns a 60.45% interest in Forestal, which was  created in 1967 for the purpose of planting, managing and harvesting forests on  properties owned both by the Company and third parties in Chile.  Originally, the Company sought to utilize  Forestals holdings of forest lands as insurance against decreases in the  supply or increases in the market price of wood needed for its production  facilities in Chile.  However, due to  the abundant supply of inexpensive scrap wood, wood shavings and sawdust for  use in its operations in Chile, the Company purchases from Forestal and uses,  for the most part, only small logs and tree





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branches which have relatively low commercial value.  Forestal sells its higher value products  primarily to third parties.  In 2002,  Forestal Argentina sold approximately 32% of its Argentinean timber production  to the Company, while no significant production was sold by Forestal to Masisa  Chile. During 2002, only 12% of the wood consumed by the Company in Argentina  was purchased from Forestal Argentina.   In 2002, Forestal had sales of Ch$8,588 million (US$12.0 million) on a  consolidated basis (including Forestal Argentina).





Due to the reasons explained above, the Company  decided to sell part of its interests in Forestal to third parties in 1995.  This in order to enhance Forestals timberland in Chile and to create  Forestals Argentinean subsidiary. Accordingly, in June 1995 Xylem-IA acquired  a 41% interest in Forestal for US$35 million.   Pursuant to a shareholders agreement between Masisa Chile and Xylem-IA  dated July 6, 1995, as amended on June 17, 1996, the bylaws of Forestal were  amended to require major board and shareholder decisions to be approved by  special majorities in order to protect the interests of Xylem-IA.  Under the agreement, Masisa Chile had to  maintain a majority of the equity of Forestal until July 2001.  The agreement expired in July 2001 and was  not renewed.  In March 1996, Masisa  Chile reduced its holdings of Forestal to 54.0% when it sold a 5% interest in  Forestal to CMB-Prime, a Chilean
institutional investor, for approximately  US$4.3 million.  In August 1996, Masisa  Chile sold a 0.5% interest in Forestal to Rawson Investment Limited (Rawson),  a private foreign investor, for approximately US$475,000.  In May 1998, Rawson sold the 0.5% interest  in Forestal back to Masisa Chile for approximately US$522,060.  On June 27, 2002, after Forestals capital  increase, Masisa increased its interest in Forestal to 57.89%of Forestal common  stock, at a cost of US$ 4.3 million.. On August 14, 2002, following an  additional capital increase by Forestal, Masisa increased its participation in  Forestal to 60.45%of its outstanding common stock, at a cost of US$ 3.0  million. Forestals two minority shareholders, Xylem-IA and CBM-Prime hold,  respectively, 34.45% and 5.09% of Forestals capital stock.





In addition to serving as a potential source of raw  materials for the Company in the event of a wood shortage in Chile and prior to  Xylen-IAs investment, Forestal acted as a vehicle through which the Company  could invest in forest properties and aim to achieve profits from the sale of  timber and/or land from the harvesting of trees.  Since the Xylem-IA investment, Forestal has operated as a joint  venture, investing in forest properties for the purpose of gaining profits  through the sale of timber and land.  As  a result, Forestal has increased the scope of its activities in Chile and  changed its forestry management criteria.   By the end of 2002, Forestals total forestry plantations in the VIII,  IX and X Regions of Chile reached 22,234 hectares, of which approximately  18,562 hectares are Radiata, Oregon and other Pine species, 3,672 hectares are  Eucalyptus globulus and Eucalyptus nitens and 696
hectares are Douglas Fir and  Poplar.  The total volume of Forestals  log sales in 2002 was 195,916 cubic meters, harvesting the same amount of cubic  meters. In 2001, Forestals log sales were 274,885 cubic meters. The total  forest land holdings of Forestal in Chile as of December 31, 2002 were  approximately 44,355 hectares.





As concerns forestry operations outside of Chile, by  the end of 1995, Masisa Argentina owned approximately 10,885 hectares of forest  plantations and fallow land in Argentina.   In December 1995, Masisa Argentinas Board of Directors approved the  sale of all of its forest holdings to Forestal Argentina S.A., then a  wholly-owned subsidiary of Forestal.   This sale was completed in March 1996 for a purchase price of  approximately US$28.5 million.





In November 1996, Forestal Argentina increased its  capital by approximately US$11.0 million through investments by Chilean private  and institutional investors. As a result, Forestals interest in Forestal  Argentina was reduced to 64.5%.





In November 1997, Forestal Argentina increased its  capital by US$24.2 million, US$17.0 million of which was subscribed by  Xylem-IIA and US$7.2 million of which was subscribed by Forestal.  As a result, Forestals interest in Forestal  Argentina was reduced to 50.1%.   Additionally,  in November 1997,  Forestal, along with the other shareholders of Forestal Argentina, entered into  a Shareholders Agreement providing for (i) Forestal to maintain control of  Forestal Argentina until November 6, 2007, (ii) a right of first purchase for  Forestal Argentina shareholders if any other shareholder sells its shares and  (iii) other related matters.





Since 1996, Forestal Argentina has increased its  forest holdings from the original 10,885 hectares purchased from Masisa to a  total of 47,980 hectares as of December 31, 2002.  Forestal Argentinas total forest holdings in Argentina at the  end of 2002 consisted of 22,017 hectares of Eucalyptus plantations, 10,644  hectares of Taedi and Eliotti Pine plantations, 7,909 hectares of land for new  plantations and 7,411 hectares of ecological





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reserved areas, firebreaks and roads.   Forestal Argentina harvested and sold a total of 262,432 cubic meters of  logs in 2002, of which approximately 55% were Eucalyptus and 45% were Pine.





As of December 31, 2001, Masisa had become directly  involved in the forestry business in Brazil, directly managing approximately  12,398 hectares there. As of December 31, 2002 Masisa managed 11,915 hectares  in Brazil, including 7,501 hectares are of Taedi and Eliotti Pine plantations,  14 hectares of Eucalyptus and 4,400 hectares of ecological reserved areas,  firebreaks and roads. Masisa Brazil harvested 87,484 cubic meters of logs in  2002.





Inversiones  Industriales.  Indusa  is a joint venture holding company in which the Company has a 50%  interest.  The remaining interest is  owned by Inversiones Fariza Chile Ltda. (32.5%) and Inversiones Forestales CCA  S.A. (17.5%).  The Company has the right  to appoint three of the six directors of Indusa.  Indusas subsidiary, Forestal Río Calle-Calle, operates a wood  chipping plant in Valdivia that was constructed near the port at a cost of  approximately US$4 million.  The  chipping facility produces wood chips from the abundant supply of wood scraps  in the Valdivia area.  In March 2002, Indusa  sold its 99.99% interest in its former subsidiary, Portuaria Corral S.A., and  its 50% interest in its former subsidiary, Transportes Fluviales Corral S.A.,  which operated a general cargo port and barges for transport, respectively, for  an aggregate amount of US$6.1 million.   The
Company has utilized proceeds from these sales to finance operations  relating to its core wood board business





Chemical Business





Chemical supplies are a significant cost in  manufacturing particle board and MDF and are an important factor in  establishing the quality of the Companys products.  The Company was involved in a joint venture started in September  1998 with Georgia-Pacific, Inc., a subsidiary of the Georgia-Pacific  Corporation.  The joint venture was  conducted through two companies, GPM in Chile and Resinas Concordia in  Argentina, in which Masisa and Georgia-Pacific Corporation (Georgia Pacific)  both had a 50% interest.  The Company  was also party to a shareholders agreement with Georgia-Pacific, which  included an option for Masisa to sell, and an option for Georgia-Pacific to  purchase, the remaining 50% of the shares of the joint venture entities under  certain conditions on terms similar to the original share purchase and other  customary provisions.  In January 2001,  Masisa decided to execute its
option to sell its participation in the joint  venture chemical business to Georgia-Pacific.   On January 17, 2001, Inversiones Coronel Ltda. and Masisa Inversiones  sold to Georgia-Pacific Resins Inc., a subsidiary of Georgia-Pacific, their  participation in GPM in Chile and Resinas Concordia in Argentina for US$28.9  million.  The Company has utilized  proceeds from these sales to finance operations relating to its core wood board  business.





Masisa Chile and Masisa Argentina executed long-term  resins supply contracts with GPM and Resinas Concordia, respectively, to ensure  the normal supply of resins for existing operations and for future growth of  the Companys operations.  The  agreements also grant the joint venture entities the first option to supply  resins to future Masisa projects in Latin America.  The supply contracts remain in full force after the sale of  Masisas participation in the joint venture.





At present, all of the adhesives and chemical products  needed for the melamine impregnating line of Masisa in Chile and Argentina are  mainly purchased from GPM and Resinas Concordia.  Certain adhesives needed for door production are purchased from  other sources in Chile.





Environmental Concerns





The Companys policy is to maintain high standards of  environmental performance and to comply with all applicable environmental laws  and regulations. Together with the start up phase of the MDF lines in Chile in  1996, the Company created an Environmental Department in response for Companys  growing concern for environmental issue. The Company has developed primary  waste water treatment processes in certain plants to reduce its production  processes environmental impact.  During  1999, new special ventilation insulation systems were completed in the  Chiguayante plant in Chile, and a secondary waste treatment plant for the MDF  line in Argentina was completed in 2000.   In addition, in 2001 Masisa began working toward compliance with  International Organization for Standardization (the ISO) 14,000 at its  Cabrero plant.  In 2002 the Puschmann  plant also undertook this initiative which has
since been extended to all of  the Companys Chilean facilities.  The  goal of this initiative is to ultimately obtain ISO 14,000 certification of all  the Companys plants in each country where Masisa operates. Masisa Brazils  plants began work on this initiative in January 2003.  In April 2003, the Puschmann plant





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approved the final audit process necessary in order to obtain the ISO  certification. the remainder of the Chilean plants are expected to approve the  audit process in the second half of 2003.





In addition, all of the Companys MDF production  plants are currently in the process of obtaining the Certificate for Recycled  Content granted by the Scientific Certification System (SCS).  This certificate confirms that the raw  material used in production comes from material recycled from other forestry  processes. This practice helps reduce the demand for forestry resources,  recycle materials considered waste in other lines of business and reduce  manufacturing costs. The Company expects that its MDF production plants will  obtain this certification in 2003.





The MDF and OSB facilities constructed in Brazil include  state-of-the-art solid and liquid waste treatment plants. Based on these  investments, the Environmental Institute of Paraná issued an Installation  Authorization, certifying that all the current Brazilian environmental  requirements have been met.  The Company  believes that it is in material compliance with all environmental laws and  regulations affecting its facilities and products.  In addition, because the Companys production processes are based  on wood from planted trees and because substantially all of its forestry  operations (including those of Forestal) involve planted trees, the Company  does not believe that there are any material environmental concerns applicable  to it that result from the use of natural forest resources.





The Company, as part of the GrupoNueva group, is  dedicated to the sustainable growth of all its operations, including economic,  social and environmental endeavors. As a result of this concern, Masisa is  preparing the publication of its Sustainability Report for 2004, which will  bring the Company up to the standards of the other companies in the GrupoNueva  group.





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PART II





Item 5.  Operating and Financial Review and Prospects





General





The following discussion is based upon, and should be  read in conjunction with, the Consolidated Financial Statements, including the  Notes thereto, included in this Annual Report under Item 18.  The Consolidated Financial Statements have  been prepared and presented in accordance with Chilean GAAP and the accounting  regulations of the SVS, which differ in certain significant respects from U.S.  GAAP.  Note 24 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 a reconciliation  to U.S. GAAP of total shareholders equity as of December 31, 2001 and 2002 and  net income for each of the last three years of the period ended December 31,  2002.





According to the Central Bank of Chile, during 2002, the  Chilean gross domestic product increased by 2.1% compared to an increase  of 3.1% in 2001, measured in constant Chilean pesos of 1996.  According to the Central Bank of Chile, the  construction sector of the Chilean economy increase by 2.1% in 2002 compared to  an increase of 3.0% in 2001.  Adjusting  exchange rates to reflect Chilean inflation, in 2002 the real purchasing power  of the Chilean peso decreased approximately 6.7% against the U.S. dollar  compared to a depreciation of 11.2% against the U.S. dollar in 2001.  The increase in the CPI for 2002 was 2.8%  compared to increases of 2.6% in 2001 and 4.5% for 2000.





The table below sets forth, for each of the years  indicated, the percentage growth in net sales from the prior years and the  Companys gross margin, operating income margin and net income margin for such  years.





|                        |  | Year ended December 31, |     
|----------------------- |  | ----------------------- | ----
|                        |  |                         |     
|                        |  | 2000                    |     
|                        |  |                         |     
|Net Sales Growth        |  |                         | 21.2
|Gross Margin            |  |                         | 38.8
|Operating Income Margin |  |                         | 23.6
|Net Income Margin       |  |                         | 15.2




Factors that have affected or are likely to affect the  results of operations in 2003 include the weakness of the Argentinean economy,  the increased MDF installed capacity of competitors in Chile, Argentina and  Brazil, the price pressure on the Chilean particle board market due to imports  from Argentina and the increase on OSB sales from the Brazilian OSB line.





Results of Operations





Year  ended December 31, 2002 Compared to Year ended December 31, 2001.  The Company reported net income of Ch$10,477  million (or 6.5% of net sales) in 2002 compared to net income of Ch$21,157  million (or 13.3% of net sales) in 2001.





The 50.5% decrease in net income in 2002 compared to  2001 reflects, among other things, an increase in income taxes, price-level  restatement loss, and lower operating income. The decrease in income taxes  resulted from a benefit of Ch$412 million in 2001 compared to a provision of  Ch$5,045 million in 2002. Price level restatement loss increased 53.7% from  Ch$2,441 million in 2001 to Ch$3,752 million in 2002, mainly as a result of the  depreciation of the Argentinean and Brazilian currencies.  Operating income decreased 26.4% from  Ch$29,109 million in 2001 to Ch$21,432 million in 2002. The decrease in  operating income resulted mainly from by the lower prices in dollar terms due  to the devaluation of Latin American currencies and weaker regional  economies.  Argentina is the most  dramatic example.





Net sales increased 1.7% to Ch$161,983 million in 2002  compared to Ch$159,341 million in 2001.   The slight increase in net sales is attributable to the sale of a larger  volume of product, primarily as a result of the incorporation of the new  particle board plant in Mexico and the start up of the Brazilian OSB plant.  This was partially offset by price weakness resulting from the generally  depressed Latin American economy.  As a  result, in 2002 net sales of the Chilean and Argentinean operations decreased,  those of the Brazilian operations increased and the Mexican operations began  production.  Consolidated board sales by  physical volume reached 1,302,018 cubic





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meters in 2002, compared to 1,066,063 cubic meters in 2001.  The average consolidated board price in 2002  was US$162 per cubic meter, compared to US$208 per cubic meter in 2001. Total  board sales in 2002 increased to Ch$151,814 million or 93.7% of net sales from  Ch$149,446 million or 93.8% of net sales in 2001.





Particle board sales generated Ch$62,754 million (or  38.7% of the Companys total net sales) for 2002 compared to Ch$58,705 million  (or 36.8% of net sales) for 2001.   Particle board volume sales increased by 15.7% from 465,227 cubic meters  in 2001 to 538,258 cubic meters in 2002.   This increase in physical volume is mainly attributable to the  production from the newly acquired Mexican particle board plant in Durango.  Average price in US$ for consolidated particle board sales decreased 13.7% to  US$162 per cubic meter in 2002, compared to US$188 in 2001. The decrease in  particle board prices is mainly due to the devaluation of local currencies in  Chile, Brazil and Argentina.  Following  the devaluations, the Company could not able to fully compensate for the  resulting decreases in prices in the short term.





MDF sales reached Ch$82,969 million, representing  51.2% of total net sales for 2002.  In  2001, MDF sales totaled Ch$90,142 million or 56.6% of total net sales.  MDF volume sales increased 13.3% from  595,275 cubic meters in 2001 to 674,403 cubic meters in 2002. The increase in  volume was mainly due to an increase of 127% of MDF export sales to markets  where the Company has no MDF facilities. Average price in US$ for consolidated  MDF sales decreased 23.4% to US$171 per cubic meter in 2002, compared to US$223  in 2001. The decrease in MDF prices is due to the devaluation of the local  currencies in Chile, Brazil and Argentina and the higher proportion of MDF  export sales over total MDF sales, which normally command lower prices compared  to domestic sales.  The Company was not  able to fully compensate for these developments through price level adjustments  in the short-term. The average price for MDF exports in 2002
was US$164 per  cubic meters, and average price for domestic sales was US$174 per cubic meter.





OSB sales in 2002 reached Ch$6,090 million or 3.8% of  Companys net sales compared to only Ch$600 million or 0.4% of net sales in  2001. This represents an increase of 915.5% in monetary sales and an increase  of 1,506.9% in sales by volume. In 2002 the Company sold 89,357 cubic meters of  OSB compared to 5,561 cubic meters in 2001. This increase was due to production  from the new Brazilian OSB plant which produced its first boards in November  2001 and became fully operational in the fourth quarter of 2002.





Door sales increased slightly to Ch$1,582 million or  1.0% of the Companys net sales in 2002 from Ch$1,456 million or 0.9% of the  Companys net sales in 2001.  This was  due to an increase in volume sales, which increased by 8.1% to 391,344 square  meters in 2002 from 362,176 square meters in 2001.





Export sales (sales to markets other than Chile,  Argentina, Brazil and Mexico, in which the Company has operating production  facilities) for 2002 reached Ch$36,590 million, or 22.6% of total net sales,  compared to export sales of Ch$23,788 million, or 14.9% of total net sales, in  2001.  Particle board and MDF sales  represented 22.1% and 68.8% of consolidated export sales for 2002,  respectively, compared to 25.5% and 74.5%, respectively, in 2001. Export sales by  physical volume increased 51.8% from 195,200 cubic meters in 2001 to 296,342  cubic meters in 2002, mainly due to the shift of Argentinean domestic sales to  exports and increased exports from Chile to others countries.





Gross margin decreased 20.8% from Ch$53.857 million  (33.8% of net sales) in 2001 to Ch$42,678 million (26.3% of net sales) in  2002.  This decrease is due to lower  prices mainly as a result of the Argentinean economic crisis, which adversely  impacted the regional economy and commanded devaluation in Latin American  countries currencies. In Chile, in US dollar terms, average prices for raw and  coated particle board and MDF decreased approximately 7.4% in 2002 as compared  to 2001 levels.  A similar situation  occurred in Brazil, where prices for raw and coated particle board and MDF  declined approximately 25.0% in dollar terms, mainly due to the depreciation of  the local currency experienced during 2002.   In Argentina, average prices for raw and coated particle board and MDF  decreased approximately 39.3%, in dollar terms, in 2002 compared to 2001, also  as a result of the depreciation of the local currency and the
turnover in the  economy. With respect to exports, in response to the Argentinean economic  crisis the Company began to export the majority of its Argentinean production  previously destined for sale in Argentina, to other markets. In general, the  prices at which the Company can sell its products in its export markets are  lower than the prices at which it can sell those products in the countries in  which they are produced.  In addition, the cost of sales incurred by the  Company with respect to such products in its domestic and export markets are  comparable.  As a result, the Company's margin on its export sales is  lower than for sales of its products in its domestic markets. Average domestic  prices for raw particle board and raw MDF in Argentina, Chile,





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Brazil and Mexico in 2002 were US$115 and US$167 per cubic meter  respectively, compared to average export prices to other markets of US$90 and  US$162 per cubic meter respectively.





Selling and administrative expenses totaled Ch$21,246  million (13.1% of net sales) for 2002, representing a 14.2% decrease from Ch$  24,749 million (15.5% of net sales) for 2001.   This decrease was due primarily to the general currency devaluation in  the whole region and reductions in administration costs resulting from the  centralization of certain corporate responsibilities. Currency devaluation  reduced foreign subsidiaries local currency expenses when translated to  Chilean pesos for the preparation of the consolidated financial statements. For  accounting purposes in Chile, the Argentinean peso decreased from AR$1.7 in  2001 per US$ to AR$3.3 per US$ in 2002, and Brazilian Real decrease from R$2.3  per US$ in 2001 to R$3.5 per US$ in 2002. Accordingly, while selling and  administrative expenses of Masisa Argentina and Masisa Brazil increased 0.9%  and 23.6%, respectively, in their local currency, in Chilean peso
terms they  decreased 44.3% and 13.8%, respectively. Selling and administrative expenses of  Masisa Argentina and Masisa Brazil reached Ch$4,928 million and Ch$2,737  million, respectively, in 2002, compared to Ch$8,845 and Ch$3,177,  respectively, in 2001. The increase in Brazilian expenses in local currency  terms is mainly explained by the increased sales of OSB discussed in the  preceding paragraphs.





Operating income decreased by 26.4% to Ch$21,432  million (or 13.2% of net sales) in 2002 compared to Ch$29,109 million (or 18.3%  of net sales) in 2001.  The decrease in  operating income is attributable to the decrease in gross margin described in  the preceding paragraph.





Non-operating losses decreased from Ch$9,233 million  in 2001 to Ch$6,901 million in 2002, a variation of 25.3%, despite a 53.7%  increase in price level restatement losses. Price level restatement losses  reached Ch$3,752 million in 2002 compared to Ch$2,441 million in 2001, mainly  due to the effect of the devaluation of the Argentinean peso recorded during  2002.  The decrease in non-operating  losses resulted primarily from a 53.6% decrease in net non-operating expenses.  Non-operating income decreased from Ch$18,740 million in 2001 to Ch$13,748  million in 2002, representing a 26.6% decrease. This decrease is mainly  explained by a decrease in gain on sales of investments and an increase in  interest and other financial income.   There was no gain on sales of investments during 2002, but in 2001 it  accounted for Ch$7,452 million.  The  gain realized in 2001 was due to the sale by Masisa of its 50% stake in the
chemical joint venture with Georgia Pacific in January of that year.  In 2002, interest and other financial income  rose 16.4%, from Ch$8,638 million in 2001 to Ch$10,053 million in 2002 due to  an increase in cash and securities held by the Company.  Non-operating expenses in 2002 decreased by  33.8% as compared to 2001, from Ch$25,532 million in 2001 to Ch$16,897 million  in 2002, mainly due to a decrease in non-operating write downs. There were no  non-operating write downs in 2002 compared to the Ch$5,571 million in 2001  resulting from the adjustment of the book value of a particle board line in  Chile to reflect its current value.   (See Notes 12 and 9 to the Consolidated Financial Statements.).  Interest expense increased 2.6% from  Ch$15,539 million in 2001 to Ch$15,945 million in 2002 due principally to  increased indebtedness of the Company. For more information on the elements of  non-operating income and expenses, see Notes 20 and 21 to the Consolidated Financial
Statements.





Year  ended December 31, 2001 Compared to Year ended December 31, 2000.  The Company reported net income of Ch$21,157  million (or 13.2% of net sales) in 2001 compared to net income of Ch$17,995  million (or 15.2% of net sales) in 2000.





The 17.6% increase in net income in 2001 compared to  2000 reflects a 1,055% decrease in income taxes from a provision of Ch$4,760  million in 2000 to a benefit of Ch$412 million in 2001, and an 86.0% increase  in non-operating losses from Ch$4,964 million in 2000 to Ch$9,233 million in  2001.





Net sales increased 34.6% to Ch$159,341 million in  2001 compared to Ch$118,345 million in 2000.   The increase in net sales resulted primarily from increased sales of the  new Masisa Cabrero (formerly Fibranova) and Brazil MDF lines, and the  consolidation of Forestal.





Total board sales in 2001 increased to Ch$149,446  million or 93.8% of net sales from Ch$116,745 million or 98.6% of net sales in  2000.  Particle board sales generated  Ch$58,705 million (or 36.8% of the Companys total net sales) for 2001 compared  to Ch$61,864 million (or 52.3% of net sales) for 2000.  Particle board sales decreased in physical  volume by 2.1% from 475,376 cubic meters in 2000 to 465,227 cubic meters in 2001.  This decrease is mainly explained by the  overall lower economic activity of the region.





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MDF sales reached Ch$90,142 million, representing  56.6% of total net sales for 2001.  In  2000, MDF sales totaled Ch$54,492 million or 46.0% of total net sales.  MDF sales by physical volume increased by  76.0% from 338,164 cubic meters in 2000 to 595,275 cubic meters in 2001.  MDF sales by volume in the Chilean and  Brazilian domestic markets increased by 135.7%, from 158,748 cubic meters in  2000 to 374,137 cubic meters in 2001, mainly due to increased sales of the new  Cabrero and Brazil MDF lines.





Door sales decreased to 0.9% of the Companys net  sales in 2001 from 1.4% of the Companys net sales in 2000.  This was primarily due to lower prices in  the market resulting from stronger competition.  On a volume basis, door sales increased by 12.9% to 362,176  square meters in 2001 from 320,722 square meters in 2000.





Export sales (sales to markets other than Chile,  Argentina and Brazil, in which the Company had operating production facilities)  for 2001 reached Ch$23, 788 million, or 14.9% of total net sales, compared to  export sales of Ch$13,077 million, or 11.1% of total net sales, in 2000.  Particle board and MDF sales represented  25.5% and 74.5% of consolidated export sales for 2001, respectively, compared  to 30.6% and 69.4%, respectively, in 2000.





Gross margin increased 17.4% from Ch$45,893 million  (38.8% of net sales) in 2000 to Ch$53,857 million (33.8% of net sales) in  2001.  This increase is mainly due to  higher sales volume resulting from the Companys new installed production in  Brazil and to the production of Masisa Cabrero, as 2001 was its first full year  of production contributing to the Companys results since its acquisition in  September 2000.  In Chile, in US dollar  terms, average prices for raw and coated particle board and MDF showed a  decrease of approximately 11.8% in 2001 as compared to 2000 levels.  A similar situation occurred in Brazil,  where prices for raw and coated particle board and MDF declined approximately  23.8% in dollar terms, mainly due to the depreciation in the local currency  experienced during the year.  In  Argentina, average prices for raw and coated particle board and MDF showed a decrease  of
approximately 2% in 2001 compared to 2000, in dollar terms.





Selling and administrative expenses totaled Ch$24,749  million for 2001, representing a 37.6% increase from 2000.  This increase is mainly explained by a  higher sales volume in 2001.  In 2001,  selling and administrative expenses constituted 15.5% of net sales as compared  to 15.2% in 2000.  Operating income  increased by 4.3% to Ch$29,109 million (or 18.3% of net sales) in 2001 compared  to Ch$27,904 million (or 23.6% of net sales) in 2000.  The increase in operating income is attributable to the increase  in both sales and the gross margin described in the preceding paragraphs.





Non-operating losses increased from Ch$4,964 million  in 2000 to Ch$9,233 million in 2001, a variation of 86.0%, despite a 156.6%  increase in non-operating income.  The  increase in non-operating losses primarily resulted from a 117.2% increase in  non-operating expenses and a 376.8% increase in losses from price level  restatement.  Non-operating income  increased from Ch$7,303 million in 2000 to Ch$18,740 million in 2001.  This increase is mainly explained by an  increase in gain on sales of investments and an increase in interest and other  financial income.  Gain on sales of  investments increased 1,397.9% from Ch$497 million in 2000 to Ch$7,452 million  in 2001.  This increase is mainly due to  the gain realized on the sale by Masisa of its 50% stake in the chemical joint  venture with Georgia Pacific.  In 2001,  interest and other financial income rose 46.6%, from Ch$5,894 million in 2000  to
Ch$8,638 million in 2001 due to an increase in cash and securities held by  the Company.  Non-operating expenses in  2001 increased by 117.2% as compared to 2000, from Ch$11,754 million in 2000 to  Ch$25,532 million in 2001, mainly due to an increase in interest expense and an  increase in non-operating write downs.   Interest expense increased 90.6% from Ch$8,150 million in 2000 to  Ch$15,539 million in 2001 due principally to increased indebtedness of the  Company, and the limited capitalization of interest expenses relating to the  new Brazilian MDF line which came on line at the end of 2000.  Non-operating write downs increased 132.4%  from Ch$2,397 million in 2000 to Ch$5,571 million in 2001 resulting from the  adjustment of the book value of a particle board line in Chile to reflect its  current value.  (See Notes 12 and 9 to  the Consolidated Financial Statements.)   Price level restatement losses increased from a loss of Ch$512 million  in 2000 to a loss of Ch$2,441
million in 2001, mainly due to the effect of the  devaluation of the Argentinean peso recorded in December 2001.  The Company recognized a charge in its  financial statements for 2001 of Ch$6,398 million relating to this matter.  For more information on the elements of  non-operating income and expenses, see Notes 20 and 21 to the Consolidated  Financial Statements.





Liquidity and Capital Resources





Most of the capital expenditures incurred during 2000,  2001 and 2002 were funded with internal cash generation, short-term bank loans  and a capital increase that was concluded in January 2001.  Forestals capital





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investment program is funded independently by Forestal through bank  loans or capital contributions from the Company and Forestals other  shareholders.





Capital expenditures in Chile in 2002 were as follows:  approximately US$1.28 million for the construction of administration and  services buildings; US$0.39 million for several information systems related to  SAP, including expenses related to the unification of the SAP systems used by  Companys Chilean and international subsidiaries; US$1.23 million for a  dry gluer press at the Coronel's facility;  US$0.26 million for a  new laminating  line, with an annual capacity of 110,000 cubic meters, at Coronel; US$0.28  million for development and planning of the Companys supply chain model;  US$3.44 million for the acquisition, planting and maintenance of timberland, at  Forestal as well as US$0.68 million for machinery, equipment, land and other  projects.





In Argentina, the investments in 2002 were: US$1.85  million for construction of the new prepainted MDF molding line with a total  installed capacity of 36,000 cubic meters per year, in the Concordia plant  (production commenced in January 2003); US$0.55 million in investments in  sanding.; US$0.60 million for improvements in particle board line number 2 at  the Concordia facility; US$0.96 million in machinery and equipment; US$0.74  million in land, buildings, information systems and other projects; and US$0.76  million for the acquisition, planting and maintenance of timberland, through  the subsidiary Forestal Argentina.





During 2002, the Companys capital investments in  Brazil were: US$13.33 million in equipment and investments related to the  start-up phase of the new OSB plant; US$1.05  million for machinery, equipment and facilities; US$1.48 million for  vehicles, information systems and other related expenses and US$3.73 million  for the acquisition and planting of timberland in Brazil.





On January 8, 2002, the Company acquired a particle  board plant in Durango, Mexico, with an annual capacity of 120,000 cubic meters  per year and a small laminating line with an annual capacity of  more than 21,000 cubic meters per year. The  Companys capital investments in Mexico during 2002 were related mainly to this  acquisition and were as follows: US$2.35 million for the land on which the  Durango plant is located; US$1.95 million in buildings at the Durango facility;  US$3.96 million in presses and prepresses; US$0.90 million for the impregnating  line; US$6.75 million for other machinery and equipment and US$0.98 million for  vehicles, furniture, information systems and other projects.





Significant capital expenditures in Chile in 2001 were  as follows: approximately US$900,000 for saws, fire and quality control devices  and a particle board post-forming machine at the Companys Valdivia plant;  US$1.4 million on information systems and computer hardware and software in  connection with the integration of all of the Companys subsidiaries under the  same computer network and SAP System, as well as developing a data storage  system and B2B tools to support the Placacentro network; US$300,000 in land and  building improvements; US$2.2 million on new forest plantings by Forestal.





In Argentina, the most significant investments in 2001  were US$30.4 million on the construction of the new thin-MDF line at the  Companys Concordia plant (which has an installed capacity of 120,000 cubic  meters per year and produced its first boards in October 2001); US$1.7 million  on a new folio-coating line; US$1.2 million on an expansion of a particle board  storage facility; and US$6.4 million for the acquisition, planting and  maintenance of timberland by Forestal Argentina.





During 2001, the Companys capital investments in  Brazil were US$7.0 million on the completion of the MDF project; US$3.7 on a  new melamine-coating line (which became operational in April 2001 with a  production capacity of 110,000 cubic meters per year); US$57.8 million on the  new OSB plant (which has an installed capacity of 350,000 cubic meters per year  and produced its first board in November 2001); and US$4.8 million for the  acquisition, planting and maintenance of timberland in Brazil.





Significant capital expenditures in Chile in 2000 were  as follows: US$2.2 million to finish the upgrade of the Puschmann particle  board line, which began in 1999; US$0.4 million for several information systems  related to SAP, including the upgrade to the newest version of SAP, equipment  acquisition and the development of B2B tools; US$1.4 million for the  acquisition and planting of timberland in the area of Valdivia; US$0.4 million  on the Ranco particle board plant, for the acquisition of fire-detecting  systems and an upgrade of the sanding line; US$0.1 million was invested in the  MDF line in Mapal, to improve the use of resins and lower production costs;  US$0.15 million was invested in the takeover of Fibranova; and US$0.8 million  was invested in spare parts.  Most of  these





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investments were financed with cash on hand.  The largest investment Masisa Chile made in 2000 was US$40  million for the acquisition of the Fibranova MDF plant in Southern Chile.  This plant doubled Masisas capacity of MDF  production in Chile.  This investment  was financed with a capital increase that was conducted in January 2001, with  short-term financing provided via bridge loans.  In addition, US$2.8 million was invested in various parts and  equipment for capital improvements.  In  Argentina, the most significant investments in 2000 were as follows: US$6.2  million was invested in initial expenses for the new thin-MDF line in  Concordia; US$0.96 million was invested in the new forming line of the particle  board plant in Concordia to improve product quality and to reduce costs by  decreasing the use of resins; US$0.6 million was invested in equipment and  merchandising support for the Placacentro franchise; US$0.2 was
spent on the  new water treatment plant located at the Concordia facility to improve the  quality of outgoing water.  In addition,  Masisa Argentina invested US$0.3 million invested in spare parts and material  for capital improvement.  All of Masisa  Argentinas investments were financed with cash on hand.  During 2000, the Company directed US$46  towards the completion of the MDF plant in Brazil, which started production in  November 2000.  This plant has a total  production capacity of 240,000 cubic meters.   Masisa also invested US$8.4 million in the construction of a new OSB  plant in Brazil that should come online by the first quarter of 2002.  The investment in Brazil was financed with  cash on hand and with short-term and long-term bank financing.





On November 13, 2000, an Extraordinary Shareholders  Meeting was held in Valdivia, and the shareholders of Masisa S.A. agreed to a  capital increase of 182,441,061 shares of common stock, at  a price of Ch$280 per share.  The Chilean Companies Act requires that a  Chilean company offer its existing shareholders the right to purchase a  sufficient number of shares to maintain their existing ownership percentage  upon the issuance of new shares through a preemptive rights offering.  Maspanel, Masisas largest shareholder at  that time, transferred its preemptive rights to subscribe the shares issued in  the capital increase to Forestal Terranova, the Companys current majority and  controlling shareholder, and the former owner of Fibranova before its  acquisition by the Company in 2000.  The  Company, pursuant to certain Central Bank of Chile rulings, could not extend  the preemptive rights offering to
the holders of ADRs.  On January 12, 2001, when the preemptive  rights offering period ended, 81,088,294 shares were subscribed and paid in  full for a total of Ch$22,705 million (equivalent to approximately US$39.6  million).  On September 14, 2001 the  Sumitomo Corporation subscribed 6,926,084 new shares for a total of Ch$2,147  million (approximately US$3.2 million).   The proceeds from this capital increase were used to repay a portion of  the Companys short term bank loans.  As  of June 2003, there are still 94,426,683 shares issued but not subscribed,  which can be sold by Company for not less than Ch$280 per share.





Total liabilities as of December 31, 2002, amounted to  Ch$299,402 million.  In addition, total  financial liabilities, calculated as total debt to banks, plus outstanding  bonds and commercial paper, less financial assets (time deposits and fixed rate  securities), amounted to Ch$164,663 million.





During 2003, the Company plans to make capital  investments of approximately US$3.0 million in Chile, US$2.1 million in  Argentina, US$2.2 million in Brazil and US$1.2 million in Mexico.  All of these investments were internally  financed.   In Chile, the investments  are expected to include, among others, environmental improvements some of them  related to bringing the Companys facilities into compliance with ISO 14,001,  information systems upgrades and maintenance projects.  In Argentina, the investment plan includes  improvements to the MDF lines, environmental and ISO 14,001 related investments  and improvements to the SAP systems.  In  Brazil, the Company will invest primarily in improvements to the MDF lines, the  OSB line and the SAP system. In Mexico, the principal planned investment  included improvements in the particle board front end, other operational items,  the SAP system and environmental
measures.





At December 31, 2002, 2001 and 2000, the Companys  ratio of current assets to current liabilities was 1.34:1.00, 1.88:1.00 and  1.13:1.00 , respectively.  Total current  assets were Ch$99,476, Ch$91,917 million and Ch$85,141 million on December 31,  2002, 2001 and 2000, respectively.  The  Companys current assets increased by 8.2% between December 31, 2001 and  December 31, 2002.  Cash and time  deposits decreased by 66.8%, which was partially offset by an 8.7% increase in  account receivables.  Notes and account  receivables from related companies decreased by 63.4% mainly due to the  repayment by Andinos S.A. of its debt.   At the same time, inventories increased by 49.2% in 2002, mainly due to  the start up of the OSB plant in Brazil and the particle board plant in Mexico  during the same year. Recoverable taxes increased 69.1%, reaching Ch$5,776 in  2002 compared to Ch$3,415 in 2001, mainly due
to the Value Added recoverable  resulting from the acquisition of the Mexican plant. The Companys current  assets increased by 8.2% between December 31, 2000 and December 31, 2001. Cash,  time





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deposits, marketable securities and securities purchased under resale  agreements decreased by 8.9%, which was partially offset by a 9.0% increase in  accounts receivable.  Notes and accounts  receivable from related companies decreased by 58.3% mainly due to the  financial consolidation of Forestal.  At  the same time, inventories increased by 32.9% in 2001, while recoverable taxes  increased to Ch$3,315. The slight increase of 1.1% in current assets between  December 31, 1999 and December 31, 2000 was principally attributable to a 40%  decrease in the amount of cash, time deposits, marketable securities and  securities purchased under a resale agreement owned by the Company, a 8.6%  increase in its accounts receivables and an increase of 44.3% in notes and  accounts receivable from related companies.





As of December 31, 2002, the Companys liabilities  totaled Ch$299,402 million, of which Ch$74,451 million were current  liabilities.  The largest components of  current liabilities were short-term bank loans, other long term liabilities due  within one year, accounts payable and current portion of long-term bank loans,  which accounted for 31.0%, 25.2%, 19.7% and 17.2% of total current liabilities,  respectively.  The increase of 52.0% in  current liabilities between December 31, 2001 and December 31, 2002 was mainly  due to the classification in the short term of US$25 million of debt maturing  in May 2003, corresponding to the US$70 million Series A Senior Note from the  Companys private placement in May 1996. This debt was repaid in May 2003 with  funds from a new long-term loan of US$25 million from The Bank of Nova Scotia.  This loan matures in five years and is payable in six semi-annual installments  ending
in January 2008.





As of December 31, 2002, the Companys total debt,  calculated as the sum of short-term bank loans, current portion of long-term  bank loans, other long-term liabilities due within one year, long term bank  loans and loans obtained under private placements was Ch$269,133 million,  compared to total debt of Ch$226,157 million as of December 31, 2001. Of the  total debt in 2002, Ch$ 54,612 million was short-term debt plus the current  portion of long-term debt, compared to Ch$27,293 million in 2001. The increase  in total debt is mainly explained by the subscription of two long term bank  loans, one with Comerica Bank for US$15 millions destined to finance the  acquisition of the Mexican particle board plant and one with Banco Chile New  York For US$15 millions destined to prepay short term debt. For more details  regarding short and long term financing and their respective restrictive covenants  please see Note 14 of the
Consolidated Financial Statements





The Companys net cash provided by operating  activities was Ch$3,257 million for 2002, Ch$39,575 million for 2001 and  Ch$37,218 million for 2000. The 91.8% decrease in net cash provided by  operating activities in 2002 compared to 2001 is mainly explained by an  increase in inventories and account receivables, mainly due to the start up of  the OSB plant in Brazil and the particle board plant in Mexico in 2002. The  6.3% increase in net cash provided by operating activities in 2001 compared to  2000 was mainly due to the new installed capacity added during 2001.  The 32.4% increase in net cash provided by  operating activities in 2000 compared to 1999 was mainly due to an increase in  net cash income for the year.





Impact of Inflation and Devaluation





As explained in Note 2 to the Consolidated Financial  Statements, the Company is required to restate non-monetary assets and  liabilities, equity and income and expense accounts to reflect the effect of  variations in the purchasing power of the Chilean peso, unless not required by  Technical Bulletin 64 (TB 64) issued by the Chilean Institute of  Accountants.  The restatement  essentially reflects the reporting by an indirect method of the gains or losses  resulting from holding or owing monetary assets and liabilities,  respectively.  For substantially all of  the above balances, the restatement is based on the variation of the CPI, with  the exception of assets and liabilities in foreign currencies, which are  adjusted to closing exchange rates, and UF-denominated assets and liabilities,  which are adjusted to the closing index value.





Because of Chiles history of relatively high  inflation, the financial markets have developed a system of borrowing and lending  in UFs. A UF is a daily indexed, peso-denominated unit. 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 restatement account.





It is common in Chile to finance certain current  assets and fixed assets with short-term and long-term liabilities denominated  in foreign currency. Because fixed assets are generally restated using the CPI  and liabilities in foreign currency are restated to closing exchange rates, the  price level restatement line in the income statement is affected by the  relationship between local inflation and the exchange rate of the Chilean peso.





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In general, inflation has the adverse effect of diminishing  the purchasing power of the Companys peso-denominated monetary assets, which  are not price level indexed, and has the positive effect of reducing the real  value of the Companys peso-denominated monetary liabilities, which are not  price level indexed.





Most of the Companys costs of production, including  some of its wood supplies, adhesives, energy and equipment are either priced in  U.S. dollars or are priced in Chilean pesos or Argentinean pesos, but tied to  dollar-denominated international prices.   However, most of the Companys sales are made in Chile and Argentina in  Chilean pesos and Argentinean pesos, respectively. To the extent that the  Company is unable to pass along increases in its costs of production in the  form of higher Chilean peso and Argentinean peso prices for its products,  earnings will be adversely affected.





The pricing of the Companys products primarily  depends upon market conditions in each market into which its products are  sold.  High rates of inflation or large  changes in the relative value of the currencies of Chile, Argentina or Brazil  against the dollar could have a variety of unpredictable effects upon the  Company and could adversely affect its operations.  See Note 24 to the Consolidated Financial Statements for additional  information on the determination of the price level restatement.





Masisa Argentinas financial statements are prepared  in accordance with generally accepted accounting principles in Argentina.  Notwithstanding the foregoing, the financial statements of Masisa Argentina  required for inclusion in the Companys consolidated financial statements are  prepared in accordance with Chilean GAAP and the accounting regulations of the  SVS.





At December 31, 1996 and 1997, the Company accounted  for its foreign subsidiaries and equity investments in foreign countries  (primarily Masisa Argentina and Masisa Brazil) in accordance with Technical  Bulletin 51 (TB 51) that was issued by the Chilean Institute of Accountants  and entitled Investments in Foreign Countries. Under TB 51, the Company  remeasured the financial statements of its foreign subsidiaries and equity  investments in foreign countries (primarily Masisa Argentina and Masisa Brazil)  using the Chilean peso as the functional currency.  In accordance with TB 51, the Companys foreign subsidiaries or  equity investments in foreign countries that are subject to significant risks,  restrictions or material distortions due to inflationary or exchange effects  must remeasure their financial statements in Chilean pesos. Accordingly, the  financial statements of Masisa Argentina and Masisa


Brazil were prepared in  accordance with Chilean GAAP and then remeasured into Chilean pesos as follows:





| | 1. | Monetary assets and liabilities at year end rates of    exchange between the Chilean peso and the local currency.                                                                                                                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                            
| | 2. | All non-monetary assets and liabilities and    shareholders equity at historical rates of exchange between the Chilean peso    and the local currency.                                                                                    
| |    |                                                                                                                                                                                                                                            
| | 3. | Income and expense accounts at average rates of    exchange between the Chilean peso and the local currency for the period,    except for those arising from non-monetary accounts, which were included at    historical rates of exchange.
| |    |                                                                                                                                                                                                                                            
| | 4. | Any exchange differences that arose were included in    the results of operations for such period.                                                                                                                                         




Price level restatements based on Chilean inflation  were applied to all non-monetary asset and liability accounts, shareholders  equity and income and expense accounts after they were expressed in historical  Chilean pesos as described above.





TB 51 provided that upon adoption of the new  accounting policy in 1996, the non-monetary assets and liabilities at December  31, 1995 had to be translated from U.S. dollars to Chilean pesos at the  exchange rate in effect at that date, and those amounts became the new  accounting bases for the non-monetary assets and liabilities.  Accordingly, there was no effect on the  financial statements of the Company on the date of adoption of the new  accounting standard, but changes resulting from variations in the inflation and  exchange rates were recorded in income subsequent to that date.





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Beginning January 1, 1998, and in accordance with TB  64, the Company has remeasured its financial statements of certain foreign  subsidiaries and equity investments (primarily Masisa Argentina) using the U.S.  dollar as the functional currency. In accordance with TB 64, the financial  statements of foreign subsidiaries and equity investments in foreign countries  that are subject to significant risks, restrictions or material distortions due  to inflationary or exchange effects (not stable countries) and considered as  not extensions of the investors operations, must be remeasured in U.S.  dollars.  Accordingly, the financial  statements of Masisa Argentina and Masisa Brazil have been prepared in  accordance with Chilean GAAP and then re-measured into U.S. dollars as follows:





| | 1. | Monetary assets and liabilities were converted at    year-end rates of exchange between the U.S. dollar and the local currency.                                                                                                                         
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                         
| | 2. | All non-monetary assets and liabilities and    shareholders equity were converted at historical rates of exchange between    the U.S. dollar and the local currency.                                                                                   
| |    |                                                                                                                                                                                                                                                         
| | 3. | Income and expense accounts were converted at    average rates of exchange between the U.S. dollar and the local currency for    the period, except for those arising from non-monetary accounts, which are    included at historical rates of exchange.
| |    |                                                                                                                                                                                                                                                         
| | 4. | Any exchange differences which arose were included    in the results of operations for the period.                                                                                                                                                      




The difference between the investments equity value  from the remeasured financial statements, as explained above, and the net  equity value at the beginning of the year restated by Chilean inflation, plus  the proportional share of the investments net income for the year, is recorded  in the account Cumulative translation adjustment in shareholders equity.





The account Cumulative translation adjustment also  includes exchange differences (netted from Chilean inflation) qualified as  foreign currency hedge of the foreign investments mentioned above.





Critical Accounting Policies





A summary of the Companys significant accounting  policies is included in Note 2 to its audited consolidated financial  statements, which are included elsewhere in this annual report.  The Company believes that the consistent  application of these policies enables it and its subsidiaries to provide  readers of the financial statements with more useful and reliable information  about Companys operating results and financial condition.  The following are the accounting policies  that the Company believes are the most important to the portrayal of its  financial condition and results of operations and require its most difficult,  subjective or complex judgments.





Property, plant and equipment





The key judgments the Company  must make under the property, plant, and equipment policy include the  estimation of the useful lives of its various asset types, the election to  utilize primarily the straight-line method for recording depreciation,  managements judgment regarding appropriate capitalization or expensing of  costs related to fixed assets, and its determination that no impairment exists.





Property, plant, and equipment  is stated on Companys balance sheet at inflation adjusted cost less  accumulated depreciation.  Depreciation  of buildings, equipment, and other depreciable assets is determined using  primarily the straight-line method.  The  estimation of useful lives for fixed assets impacts the level of annual depreciation  expense recorded. Utilization of the straight-line method for recording  depreciation or any of the other acceptable methods for depreciating assets  will result in the same amount of depreciation over the life of an asset;  however, the amount of annual depreciation expense and the resulting carrying  amount of net property, plant, and equipment can vary significantly depending  on the method elected.





Property, plant, and equipment  assets are evaluated for possible impairment on a specific asset basis or in  groups of similar assets, as applicable.   This process requires the Companys estimate of future cash flows  generated by each asset or group of assets. For any instance where this  evaluation process indicates impairment, the





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appropriate assets carrying values are written  down to net realizable value and the amount of the write-down is charged  against the results of continuing operations.





Expenditures that substantially  improve and/or increase the useful life of facilities or equipment are  capitalized. Maintenance and repair costs are expensed as incurred. Companys  evaluation of whether an expenditure related to property, plant, and equipment  substantially improves and/or increases the useful life of an asset and is  appropriately capitalized as an addition to the assets cost basis or is  expensed as normal maintenance and repair expense can significantly affect  results of operations for a given period, as well as its financial position.





Investments





Investments in foreign subsidiaries are valued in U.S.  dollars, adjusting the financial statements of the foreign company to Chilean  GAAP. Exchange adjustments are charged or credited to shareholders  equity.  The Company has foreign  investments in Latin America, which include companies in Argentina, Brazil and  Mexico. These investments are subject to risk and certain restrictions due to  potential inflationary and exchange risk. Impairment tests are performed on  these investments when facts and circumstances indicate that there may be  impairment. This process requires managements assessment of current conditions  and managements estimate of future cash flows and future economic conditions.  Any impairment loss is measured based on the difference between the carrying  value and the fair value of these investments.





Forests





The Company  determines the value of its forests by a technical appraisal process.  The Company appraise the value of its  forests annually, based on the expected present value of future cash flows to  be generated by its forests.  This  discounted cash flow analysis takes into account the forecasted harvests for  the upcoming years based on tree growth and fluctuations in the cost and price  of wood products.





The Company  initially carries a new plantation at the historical cost including tree  development and forest maintenance. When technical appraisal indicates that the  value of a plantation has changed, the Company accounts for this by increasing  or decreasing, as the case may be, forestry plantations (which is a part of  property, plant and equipment) and making a corresponding increase or decrease,  as the case may be, to the forestry reserves component of shareholders equity.





At the end of each  quarter, the Company moves to inventory the appraised value of trees it expects  to harvest in the next 12 months.  The  Company carries these trees in inventory at appraised value until  harvesting.  No reduction in shareholders  equity is made when standing trees are moved to inventory in anticipation of  harvesting.





The reserve is  reversed from shareholders equity and from the Companys assets when the  forestry plantation is sold.





When the Company appraises the  value of its forests it make judgements about estimated growth rates, current  market conditions and statistical techniques.   The value of the Companys forests is significant and, accordingly, the  results of these judgements can have material affects on the reported amounts  of assets and shareholders equity on the Companys balance sheet.





Inventories





Inventories of finished goods,  work in process, materials and supplies are stated at the lower of  inflation-adjusted direct production cost or market (net realizable value),  primarily using the average cost method. Finished goods include certain  indirect costs as appropriate. Determination of the net realizable value of  each component of inventory is based on the current invoice price.  Work-in-process inventories require estimation of the future cost per unit to  complete manufacturing from each stage of processing, using historical  manufacturing costs.  These estimates  can affect the carrying value for inventories, and any required inventory  write-down can affect results of operations in both current and future periods.





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Goodwill





Management also must exercise judgment in assessing  goodwill and negative goodwill assets for impairment.  The Company amortizes costs in excess of book value of net assets  (and the excess of book value over cost) of its businesses using the  straight-line method over a period not to exceed 20 years. This period is based  on managements assumption regarding the useful life of industrial plants  acquired and estimated periods of forestry growth and replantation. The Company  reviews the recorded value of its goodwill annually or sooner if changes in  circumstances indicate that the carrying amount may exceed fair value.  Recoverability of the carrying value of the  asset is determined by comparing to net book value, including goodwill and the  estimated future net cash flows of the relevant assets.





Deferred income tax





Effective January 1, 2000, the effects of deferred income taxes arising  from temporary differences between the basis of assets and liabilities for tax  and financial statement purposes are recorded in accordance with Technical  Bulletin No. 60 of the Chilean Institute of Accountants.  The effects of deferred income taxes at  January 1, 2000, which were not previously recorded, are recognized in income  beginning in 2000 as the temporary differences reverse.  Under Technical Bulletin No. 60, deferred  tax assets are reduced by a valuation allowance if it is more likely than not  that some portion or all of the deferred tax asset will be realized.  In making this determination, the Company  considers both positive and negative evidence and make certain assumptions,  including projections of taxable income.   Changes in these assumptions may have a material impact on results.





Changes in Accounting Standards





During 2001, no new accounting standards were issued  in Chile that affect Chilean GAAP financial statements.  However, certain new standards were issued  in the United States that may affect the reconciliation of our net income and  shareholders equity to U.S. GAAP in the future.  In July 2001, the FASB issued SFAS No. 141, Business Combinations (SFAS No. 141) and  SFAS No. 142, Goodwill and Other Intangible  Assets (SFAS No. 142).





In July 2001, the FASB (Financial Accounting Standards  Board) issued SFAS No. 143, Accounting for  Asset Retirement Obligations (SFAS No. 143).  SFAS No. 143 requires entities to record the  fair value of a liability for an asset retirement obligation in the period in  which it is incurred.  When the liability  is initially recorded, the entity capitalizes the cost by increasing the  carrying amount of the related long-lived asset.  Subsequently, the liability is accreted to its present value as  of each recording period and the capitalized cost is depreciated over the  useful life of the related asset.  Upon  settlement of the liability, the entity either settles the obligation for the  amount recorded or incurs a gain or loss.   SFAS No. 143 is effective for fiscal years beginning after June 15,  2002.  Management is evaluating the  effect of this statement on Masisas U.S. GAAP
net income and shareholders  equity.





In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of  Long-Lived Assets (SFAS No. 144).   SFAS No. 144 supersedes FASB statement No. 121, Accounting for the Impairment of Long-Lived Assets  and for Long-Lived Assets to Be Disposed Of (SFAS No. 121), and  the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of OperationsReporting the  Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and  Infrequently Occurring Events and Transactions (Opinion 30) for  the disposal of a segment of a business (as previously defined in Opinion 30).  The FASB issued SFAS No. 144 to establish a single accounting model, based on  the framework established in SFAS No. 121, for long-lived assets to be disposed  of by sale.  SFAS No. 144 broadens the  presentation of discontinued operations in the


income statement to include a  component of an entity (rather than a segment of a business).  A component of an entity comprises  operations and cash flows that can be clearly distinguished, operationally and  for financial reporting purposes, from the rest of the entity.  SFAS No. 144 also requires that discontinued  operations be measured at the lower of the carrying amount or fair value less  cost to sell.  SFAS No. 144 is effective  for fiscal years beginning after December 15, 2001 and should be applied  prospectively.





In November 2002, the FASB issued FASB Interpretation  No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees,  Including Indirect Guarantees of Indebtedness of Others (FIN 45). FIN 45  requires that upon issuance of a guarantee, a guarantor must recognize a  liability for the fair value of an obligation assumed under a guarantee. FIN 45  also requires additional disclosures by a guarantor in its interim and annual  financial





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statements about the obligations associated with guarantees issued. The  recognition provisions of FIN 45 is effective for any guarantees that are  issued or modified after December 31, 2002.





In January 2003, the FASB issued Interpretation 46,  Consolidation of Variable Interest Entities (FIN 46). FIN 46 requires that  companies that control another entity through interests other than voting  interests should consolidate the controlled entity. FIN 46 applies to variable  interest entities created after January 31, 2003, and to variable interest  entities in which an enterprise obtains an interest after that date.  The related disclosure requirements are  effective immediately.  The Company has  evaluated the impact of the new interpretation and the adoption will not have a  material impact on its results of operations or financial position.





Item 6.  Directors, Senior Management and Employees





Directors





Masisa S.A. is managed by its Board of Directors,  which, in accordance with the bylaws of Company, consists of seven directors  who are elected at the ordinary annual shareholders meeting.  Directors are not required to be  shareholders.  The entire Board is  elected every three years, and cumulative voting is permitted for the election  of directors.  The Board may appoint  replacements to fill any vacancies that occur during periods between elections.  The bylaws provide that a resignation  triggers an election for all Board members at the next annual meeting.  The Board of Directors, as set forth below,  was elected at the Masisa Ordinary Shareholders Meeting held on April 24, 2003  and the term of each of the current directors will expire at the shareholders  meeting scheduled for the first quarter of 2006. The election on April 24, 2003  was held one year early due to the resignation of Mr. Juan
Obach, Mr. Félix  Bacigalupo, Mr. José Ignacio Letamendi and Mr. Scott Perry upon the acquisition  by Forestal Terranova of the Pathfinder Groups entire 43.16% interest in  Masisa Chile.  (See Item 4. Information  on the CompanyHistory and Development of the Company).  There are regularly scheduled meetings of  the Board once a month, and extraordinary meetings are called when needed by  the Chairman.





The names and positions of the current members of the  Board, their age and information on their principal business activities outside  Masisa are as follows:





Julio  Moura, 51 years old, has been the Companys Chairman of the  Board of Directors since 2002. Mr. Moura is also Chairman of the Board of  Directors and CEO of GrupoNueva group, and President of Terranova. He has  served as Director, Member of the Executive Committee and Executive  Vice-president for the Schindler Group and Sika Finanz in Switzerland among  others. From 1980 until 1983 he was Senior Associate of the Consulting Company  Booz Allen & Hamilton. Mr. Moura obtained a degree in mechanical engineering  from the Swiss Federal Institute of Technology (ETH) in Zurich, Switzerland and  holds an MBA from M.I.T., Sloan Management School of Management, USA.





Gonzalo  Zegers R-T., 42 years old, joined the Company in 1996 and has  served on the Board of Directors as Vice-President since March 2003. Prior to  that he was the Companys Chief Executive Officer from 1997 until March 2003.  He also served as the Companys Chief Financial Officer from 1996 to 1997.  Mr. Zegers previously served as Chief  Executive Officer of C&D Agrofruta Ltda. and is currently on the Board of  Directors of several companies related to Masisa.  Mr. Zegers holds a business degree from Santiago University.





Jaime  Fernández Hernández, 60 years old, has been a Director of the  Company, since March 2003. Prior to that he had served as the Companys  Vice-president since July 2002. Mr. Fernández also serves as Vice Chairman of  the Board of Forestal Terranova S.A. and has been employed by Forestal  Terranova and its subsidiaries since 1984. From 1971 to 1984, Mr. Fernández  worked as a forestry consultant. Mr. Fernández holds a degree in forestry  engineering from the University of Chile.





Patrick  A. Nielson,52 years old, became a Director of Masisa in July  2002.  He is Vice-president, General  Counsel and Secretary of GrupoNueva. He also serves on the Board of Directors  of Forestal Terranova. Prior to that, he was Vice President, General  Counsel--Food Operations and Vice President International Legal and Regulatory  Affairs of Dole Food Company, Inc. He has also been a member of the Board of  Directors of Pascual Hermanos,





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S.A. of Spain and The Western Growers Association. Mr. Nielson holds a  Bachelor of Arts from Lewis & Clark College and a Juris Doctor from  Hastings College of the Law, University of California.





Isidoro  Palma P., 56 years old, joined the Company in 1988 and served  on the Board of Directors from 1988 to 1991 and again from 1993 through the  present.  Mr. Palma served from 1980 to  1991 as Vice-President of Citicorp/Citibank Chile and was a member of the Board  of Directors of several Chilean companies.   He is currently a member of the Board of Directors of Cintac S.A. and  Comisión Clasificadora de Riesgos.  Mr.  Palma is also the principal partner and Executive Director of Inversiones y  Asesorías Prime Ltda.  Mr. Palma holds a  business degree from the Catholic University of Chile, an MBA from Stanford  University and is a Ph.D. candidate in Economics at the University of  Minnesota.





Jorge  Carey, 61 years old, has served as a Director on the  Companys Board since July 2002. He is also the Chairman of Chile's largest law  firm, Carey & Co. and of Empresas Melón, Chiles largest cement company. He  is a board member of several Chilean corporations and institutions, including  ING Chile S.A., Enaex S.A., CCU,  Hogar  de Cristo and CIC S.A. and of several non Chilean organizations, including  Aur Resources Inc. in Canada and the Chile  Moneda Fund in Bermuda. Mr. Carey worked early in his career for three years as  an attorney in Washington D.C. for the International Monetary Fund and the  International Finance Corporation. He has been a professor of law at the  Catholic University of Chile Law School and chairman of both the Chilean  British Chamber of Commerce and the Chile Canada Chamber of Commerce in  Santiago, Chile. He received his law degree from the Catholic University of
Chile Law School and a Masters degree in Comparative Jurisprudence from the  School of Law of New York University where he was a Fulbright scholar.





Ignacio  Guerrero G., 50 years old, joined the Company in 2000 and has  served on the Board of Directors since then.   Prior to 2000, he was CFO of Codelco Chile and Vice-President of  Citibank Citicorp Chile.  Mr. Guerrero  serves on the Board of Directors of Rebrisa S.A., Zalaquett S.A., Besalco S.A.,  Nibsa and AFI CMB Prime.  He is  currently Executive Director of CMB Chile S.A. and is also a professor at  Adolfo Ibañez University.  Mr. Guerrero  holds an MBA from Harvard University.





Mr. Moura, Mr. Zegers, Mr. Fernández, and Mr. Nielson  are directors or executive officers of affiliates of the Company within the  GrupoNueva group. During the period between the resignation of the former Board  of Directors on July 22, 2002 and the Shareholders Meeting held in April 24,  2003, the Board of Directors was formed by the current Directors, except for  Mr. Zegers who replaced Mr. Fernández as the Board Vice-president on March 5,  2003. Mr. Fernández replaced Mr. Patricio Reyes as Director on March 5, 2003.





Patricio  Reyes U., 35 years old, has served as Secretary of the  Companys Board of Directors since March 2003. Mr. Reyes also served as  Director of the Company from July 2002 to March 2003. He worked in the Offices  of Arturo Alessandri from 1993 through 1998. He is currently General Counsel of  Forestal Terranova, as well as Secretary of its Board. Mr. Reyes is also a  Director and the Legal Representative of Inversiones Suizandina S.A. He holds a  law degree from the Catholic University of Chile.





A Directors Committee, composed of three directors,  was created in April 2001, pursuant to a requirement of the Chilean Companies  Act.  In August, 2002, due to the  acquisition by Forestal Terranova of its majority and controlling interest in  Masisa, Mr. Juan Obach was replaced on the committee by Mr. Jaime  Fernández.  The other two members of the  committee were Mr. Isidoro Palma and Mr. Ignacio Guerrero. In an Extraordinary  Meeting of the Board of Directors held on May 28, 2003, Mr. Palma, Mr. Guerrero  and Mr. Zegers were designated as the members of the Directors Committee. The  Committee is responsible for: (i) examining and commenting on the  financial statements and external auditors report that is delivered to the  Company prior to the final presentation of such financial information at the  annual shareholders meeting; (ii) nominating the external auditors and  rating agencies that will


be presented for approval at the annual shareholders  meeting; (iii) evaluating and reporting to the Board of Directors on  transactions with related parties pursuant to Article 89 of the Chilean  Companies Act as well as transactions in which a director, manager or executive  officer of the Company has an interest as required by Article 44 of the Chilean  Companies Act; and (iv) advising on the compensation of the Companys senior  management





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Senior Management





Masisas executive officers are appointed by the Board  and hold office at the discretion of the Board.  The names, ages, responsibilities and prior business experience  of Masisas senior officers are as follows:





Eduardo  Vial R-T., 49 years old, is the Companys Chief Executive  Officer, a position he has held since March 2003. Prior to his current position  he was Companys Chief Operating Officer from 1986 through March 2003.  Before joining the Company, he was in charge  of INFORSAs sawmill operations.  Mr.  Vial holds a degree in Forestry Engineering from the University of Chile.





Carlos  Marín O., 32 years old, is the Companys Chief Financial  Officer, a position he has held since January 2002.  Mr. Marín joined the Company in 1996 as Head of Investor  Relations and was named Chief Project Officer in 2000.  Prior to that, he served as Equity Research  Analyst at Santiago S.A. Servicios y Asesorías Financieras.  Mr. Marín holds a business degree from  Adolfo Ibañez University and an MBA from Stanford University.





Sebastián  Vicuña R., 40 years old, is the Companys Chief Commercial  Officer, a position he has held since 1999.   Prior to that, he was the Companys   Chief Financial Officer from 1998 through 1999.  Mr. Vicuña was also Chief Financial Officer  of Y.P.F Chile S.A., and deputy Chief Financial Officer and Chief Marketing  Officer of ESSO Chile.  He is currently  a member of the Board of Directors of ASIMAD (Industrialized Wood Producers  Association), Manu and companies related to Masisa.  Mr. Vicuña holds a business degree from the Catholic University  of Chile.





Cristián  Valenzuela R., 43 years old, is the Companys Chief Operating  Officer since March 2003. Mr. Valenzuela joined the Company in 1994 as Planning  and Development Deputy Manager and held that position until March 2003.  Mr. Valenzuela holds a degree in Industrial  Engineering from the University of Chile and an MBA from Adolfo Ibáñez  University.





Manfred  Timmermann B., 52 years old, is the Companys Chief  Engineering Officer, a position he has held since 1993.  Mr. Timmermann joined the Company in 1978 as  Head of Technology of the Valdivia Plant and was named Head of Technology of  the Chiguayante plant in 1993.  In 1987,  he was named Deputy Production Officer of the Mapal plant and was named Masisa  Concepcións Deputy Engineering Officer in 1990.  Mr. Timmermann holds a degree in Civil Mechanical Engineering  from the University of Chile.





Miguel  Oneto R., 47 years old, is the Companys Chief Human  Resources Officer, a position he has held since 1994.  Prior to joining the Company, he was Head of McKays Holding  Training Department, Head of  the  Training Department of Banco BHIF and Deputy Human Resources and Administration  Officer of AFP Habitat S.A., Laboratorio Ballerina and First National Bank of  Boston.  Mr. Oneto received a degree in  Business Administration from the University of Santiago and a postgraduate  degree in Human Relations and Labor Psychology from the Catholic University of  Chile.





Martin  Köster, 42 years old, is the Chief Export Officer, a position  he has held since July 2001.  Prior to  that he was Export Manager, a position he held from August 1992, when he joined  the Company, until July 2001.  Mr.  Köster holds a degree in Forestry Engineering from the University of Chile.





Compensation





For the year ended December 31, 2002, the aggregate  amount of compensation paid by Masisa S.A. to its directors and executive officers  was approximately Ch$1,504 million Members of the Companys Board received per diem fees as well as a participation  in Masisas net profits.  In 2001, the  directors as a group received 2% of net profits.  The Company and its subsidiaries do not maintain any pension or  retirement programs for its directors or executive officers.





The table below sets forth compensation paid to  directors during 2002.





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DIRECTOR  COMPENSATION





|Directors (1)          |  | Per Diem for attendance    at board meetings    Ch$ thousands |        | Profit sharing    Ch$ thousands |  | Per Diem for     attendance at     directors     committee    Ch$ thousands | 
|---------------------- |  | ------------------------------------------------------------- | ------ | ------------------------------- |  | --------------------------------------------------------------------------- | 
|Juan Obach             |  |                                                               | 2,931  |                                 |  | 93,340                                                                      | 
|Félix Bacigalupo       |  |                                                               | 2,931  |                                 |  | 70,005                                                                      | 
|Ignacio Guerrero       |  |                                                               | 5,239  |                                 |  | 46,670                                                                      | 
|José Ignacio Letamendi |  |                                                               | 2,931  |                                 |  | 46,670                                                                      | 
|Isidoro Palma          |  |                                                               | 5,239  |                                 |  | 46,670                                                                      | 
|Scott Perry            |  |                                                               | 2,117  |                                 |  | 33,706                                                                      | 
|Julián Sánchez         |  |                                                               | 2,931  |                                 |  | 46,670                                                                      | 
|Julio Moura            |  |                                                               | 2,051  |                                 |  |                                                                             | 
|Jaime Fernandez        |  |                                                               | 2,307  |                                 |  |                                                                             | 
|Jorge Carey            |  |                                                               | 2,307  |                                 |  |                                                                             | 
|Patrick Nielson        |  |                                                               | 2,051  |                                 |  |                                                                             | 
|Total                  |  |                                                               | 33,035 |                                 |  | 383,731                                                                     | 




---

|(1) | Mr. Obach, Mr. Bacigalupo,    Mr. Letamendi, Mr. Perry and Mr. Sanchez are no longer Directors of the    Company. For more information on the composition of the Board see Item    6.  Directors, Senior Management and    Employees  Directors
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The executives of Masisa S.A. received an aggregate  amount of compensation of approximately Ch$1,077 million and severance payments  of Ch$ 8 million, during the year 2002.





Employees





As of December 31, 2002, the Company had 1,161  employees, including employees of all of its Chilean, Argentinean, Brazilian,  Peruvian and Mexican subsidiaries, but excluding employees of Forestal and  Forestal Argentina.  The following table  sets forth the number of employees by main category of activity and geographic  location as of the end of each year in the three-year period ended December 31,  2002:





EMPLOYEES  BY JOB-CATEGORY(1) AND LOCATION (2)





|          |  | Executives |    | Professionals |  | Workers |  | Consolidated |   
|--------- |  | ---------- | -- | ------------- |  | ------- |  | ------------ | --
|          |  |            |    |               |  |         |  |              |   
|          |  | 2000       |    | 2001          |  | 2002    |  | 2000         |   
|          |  |            |    |               |  |         |  |              |   
|Masisa    |  |            |    |               |  |         |  |              |   
|Chile     |  |            | 20 |               |  | 20      |  |              | 20
|Argentina |  |            | 16 |               |  | 16      |  |              | 14
|Brazil    |  |            | 6  |               |  | 7       |  |              | 7 
|Peru      |  |            | 1  |               |  |         |  |              | 1 
|Mexico    |  |            |    |               |  |         |  |              | 4 
|          |  |            |    |               |  |         |  |              |   
|Total     |  |            | 43 |               |  | 44      |  |              | 46
|          |  |            |    |               |  |         |  |              |   




|                              |  | Executives |   | Professionals |  | Workers |  | Consolidated |    
|----------------------------- |  | ---------- | - | ------------- |  | ------- |  | ------------ | ---
|                              |  |            |   |               |  |         |  |              |    
|                              |  | 2000       |   | 2001          |  | 2002    |  | 2000         |    
|                              |  |            |   |               |  |         |  |              |    
|Affiliated Companies          |  |            |   |               |  |         |  |              |    
|Forestal and Subsidiaries (2) |  |            | 1 |               |  | 1       |  |              | 1  
|Forestal Argentina S.A. (2)   |  |            | 1 |               |  | 1       |  |              | 1  
|Resinas Concordia S.A. (3)    |  |            | 1 |               |  | N/A     |  |              | N/A
|GPM (3)                       |  |            | 2 |               |  | N/A     |  |              | N/A
|                              |  |            |   |               |  |         |  |              |    
|Total                         |  |            | 5 |               |  | 2       |  |              | 2  
|                              |  |            |   |               |  |         |  |              |    




---

|(1) | Job categories are defined    as follows: Executives: CEO, Chief Managers, Deputy Chief Managers and    Plants Head Managers. Professionals: Middle Managers, Supervisors and    professionals in positions without supervision. Workers: all other employees    that dont meet other categories standards.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Effective January 1, 2001    the Company accounted for Forestal and its subsidiaries on a consolidated    basis.                                                                                                                                                                                             
|(3) | On January 17, 2001 GPM and    Resinas Concordia were sold to Georgia Pacific.  The Company does not include those entities as affiliates for    periods after that date.                                                                                                                                    




Chile.  As of December 31, 2002, the Company had 649  permanent employees in Chile, excluding Forestal, representing a decrease of 6%  compared to 2001 due principally to the incorporation of new technologies into  the Companys operations and corporate reorganizations in order to achieve  higher efficiency. Forestal had 21





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employees and Masisa Peru had two employees as of December 31, 2002.  Approximately 67% of Masisas Chilean  employees are represented by six labor unions.   The Company also employs subcontractors for numerous tasks.





Chilean law protects the rights of the Companys  workers, whether unionized or specially organized as a group (i.e.,  Negotiating Group), for the purpose of the collective bargaining process and  to strike in the event that an agreement on labor contracts is not  reached.  Labor relations for unionized  and non-unionized employees in each of the Companys facilities are governed by  one or more separate collective bargaining agreements between Masisa or its  relevant subsidiary and one or more of the unions or Negotiating Groups of  which the employees at the facility are members.





During 1999, the Company and six unions negotiated  collective bargaining agreements. Mutually satisfactory agreements were reached  with the six unions without a work stoppage.   The terms of the agreements were 48 months, with the exception of one  unions agreement that has a term of 40 months.  Thus, most of the Companys agreements with its Chilean unions  will expire during 2003, with the exception of one agreement which expired in  2002.  In June 2000, Masisa Cabrero and  the union which represents its employees entered into a collective bargaining  agreement that expired in May 2003. This agreement was renewed in November 2002  with mutually satisfactory conditions and will expire in October 2006. On the  basis of the first agreement, the Company negotiated new agreements with its  administrative employees in September 2002 and with two of Valdivias unions in  April 2003, in each case reaching
mutually satisfactory agreements with 48  month terms.  None of the Companys  agreements with its unions have expired as the Companys policy has been to establish  a long-term strategic alliance with its employees.  The Company believes it has good relationships with the labor  unions.  The Company has no reason to  believe that future collective bargaining processes will not follow past  practice and does not anticipate any work stoppages at any of its facilities.  Compensation for unionized personnel and employees is established in accordance  with the relevant collective bargaining agreements.  Pursuant to these agreements, employees receive a salary  according to a scale that is based upon job function, performance and  seniority. Unionized employees also receive certain benefits provided for by  law and certain benefits that vary depending upon the terms of their collective  bargaining agreement.





All employees who are dismissed for reasons other than  misconduct are entitled by law to severance pay.  Non-unionized permanent employees are entitled to a basic payment  of one months salary (with a maximum of UF90, equivalent to US$2,235 as of  December 31, 2001) for each year or fraction thereof worked, provided that the  fraction is at least six months.  This  benefit is subject to a limitation of a total payment of no more than 11  months salary for employees hired after August 14, 1981 (severance payments to  employees hired before August 14, 1981 are not subject to this limitation).  Although Masisa Chile could apply this limitation to the severance pay it pays  to its employees, the Company voluntarily pays severance payments calculated  based upon the total time such employees have been employed by the Company,  without regard to the statutory limitation.   This method of determining severance
payments, however, has not been  made a part of the Companys employment contracts.





The Company does not maintain any pension or retirement  programs for its employees.  Workers in  Chile are subject to a national pension law that establishes a system of  independent pension plans which are administered by Administradoras de Fondos  de Pensiones (Pension Fund Administrators).   The Company has no liability for the performance of the pension plans or  any pension payments to be made to the employees in Chile.





Argentina.  As of December 31, 2002, Masisa Argentina  had 204 employees, which represents a decrease of 9% as compared to 2001,  principally due to the concentration in Chile of certain key activities that  can be better developed through centralization.  Forestal Argentina had six employees as of December 31, 2002.





In Argentina, collective bargaining agreements are  negotiated on an industry-wide basis.   Employees at Concordia are members of two industry-wide unions.  Therefore, all the collective bargaining  agreements between Masisa Argentina and the unions are the result of  industry-wide bargaining.  The  collective bargaining agreements are renewed on an annual basis.  Masisa Argentina believes its relationship  with its employees is good.





All employees who are dismissed without cause are  entitled by law to severance pay, which is based, among other things, on length  of service.  These severance payments  are subject to a minimum of at least two months salary.





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Masisa Argentina does not maintain any pension or  retirement programs for its employees. As in Chile, pension plans in Argentina  are administered by an independent Administradoras de Fondos de Jubilaciones y  Pensiones (Pension Fund Managers).  The  Company has no liability for the performance of the pension plans or any  pension payments to be made to the employees in Argentina.





Brazil.  As of December 31, 2002, Masisa Brazil had  148 employees, representing an increase of 4% compared to 2001 due principally  to the operations of the new OSB plant.





In Brazil, as in Argentina, collective bargaining  agreements are negotiated on an industry-wide basis.  Employees at Masisa Brazil are members of one industry-wide  union.  Therefore, all of the collective  bargaining agreements between Masisa Brazil and the union are the result of  industry-wide collective bargaining.   The collective bargaining agreements are renewed on an annual  basis.  Masisa Brazil believes its  relationship with its employees is good.





Masisa Brazil does not maintain any pension or  retirement programs for its employees.   Based on total payroll, Masisa Brazil makes monthly contributions to  severance indemnity plans, government pension and social security, and such  payments are expensed as incurred.  The  Company has no liability for the performance of the pension plans or any  pension payments to be made to the employees in Brazil.





Mexico.  As of December 31, 2002, the Company had 158  permanent employees in Mexico, due to the acquisition of the particle board  plant in Durango.





In Mexico, as in Argentina and Brazil, collective  bargaining agreements are negotiated on an industry-wide basis.  Employees at Maderas y Sintéticos de México  are members of one industry-wide union.   Therefore, all of the collective bargaining agreements between Maderas y  Sintéticos de México and the union are the result of  industry-wide collective bargaining. However, only 43% of the  Companys employees in Mexico are union members.  The collective bargaining agreements are renewed each year.  The current collective bargaining agreement  was entered into in January 2003.





All employees who are dismissed for reasons other than  misconduct are entitled by law to severance pay, which corresponds to a three  months salary plus twelve days salary per year or fraction thereof worked.





Maderas y Sintéticos
  de Mexico does not maintain any pension or retirement programs for its employees.
  As in Brazil, Maderas y Sintéticos de Mexico makes monthly contributions
  to severance indemnity plans, government pension and social security, and such
  payments are expensed as incurred.  The Company has no liability for the
  performance of the pension plans or any pension payments to be made to the employees
  in Mexico.





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PART III





Item 7.  Major Shareholders and Related Party Transactions





Major Shareholders





Masisa S.A.s only outstanding voting securities are  shares of its common stock without nominal (par) value (Common Stock).  As of May 16, 2003, there were 928,514,743  shares of Common Stock issued and outstanding.





The table below shows, as of May 16, 2003, the number  and percentage of shares owned by each person known by the Company to own more  than five percent of Masisa S.A.s outstanding Common Stock.  No director or executive officer of Masisa  S.A. owned more than five percent of the Companys Common Stock as of May 16,  2003. The Company is required under Chilean regulations to disclose its twelve  largest shareholders, and this information is also included in the table.





MAJOR  SHAREHOLDERS





|Shareholder                        |  | Number of    shares |             | % | 
|---------------------------------- |  | ------------------- | ----------- | - | 
|                                   |  |                     |             |   | 
|Forestal    Terranova (1)          |  |                     | 481,861,555 |   | 
|The Bank of New York (2)           |  |                     | 81,914,040  |   | 
|AFP    Provida S.A.                |  |                     | 60,006,831  |   | 
|AFP    Cuprum S.A.                 |  |                     | 52,258,614  |   | 
|AFP    Habitat S.A.                |  |                     | 47,348,552  |   | 
|AFP    Santa Maria S.A.            |  |                     | 35,952,356  |   | 
|Moneda    S.A.                     |  |                     | 21,495,865  |   | 
|Larrain    Vial S.A.               |  |                     | 14,046,341  |   | 
|AFP    Summabansander S.A.         |  |                     | 13,465,569  |   | 
|Sumitomo    Corporation            |  |                     | 6,926,084   |   | 
|The Emerging Markets Chile    Fund |  |                     | 6,623,537   |   | 
|AFP    Planvital S.A.              |  |                     | 5,440,831   |   | 




---

|(1) | As of June 20, 2003, Forestal    Terranova owned 486,861,555 shares (52.43%) of Common Stock as a result of an    open market purchase of 5 millionn shares, made on the Santiago Stock    Exchange on May 27, 2003.                  
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Pursuant to the    requirements of Chilean law, all Common Stock represented by American    Depositary Shares is owned of record by The Bank of New York, as    Depositary.  See Item 10.  Additional InformationExchange Controls.




As of May 31, 1999, Pathfinder and Inversiones Coigüe  Ltda. (Coigüe) increased their respective ownership to 19.96% and 23.18%,  respectively.  In December 30, 1999,  Coigüe Dos purchased all of the Common Stock held by Coigüe, which was 25.36%  of the Common Stock.  In August 2000,  Coigüe Dos and Pathfinder transferred their holdings of Common Stock to Maspanel  S.A. (Maspanel), a subsidiary of Pathfinder.   On December 13, 2001, Maspanel purchased 13,105,000 shares in the  Chilean Stock Market.  In January 2002,  Maspanel purchased 251,543 shares and 500,000 shares, respectively, in the  Chilean Stock Market.  As a consequence,  Maspanels ownership increased to 43.16% of the Common Stock.





In January 2001,
  Forestal Terranova subscribed 81,084,916 shares of Common Stock resulting from
  the capital increase approved during the Extraordinary Shareholders Meeting
  held on November 13, 2000, thus acquiring an 8.8% stake in Masisa.  In
  September 2001, the Japanese company Sumitomo Corporation subscribed 6,926,084
  shares of Common Stock resulting from the same capital increase, acquiring a
  0.75% interest in Masisa.





On July 22, 2002, Forestal Terranova acquired Maspanel  43.16% stake in Masisa becoming the controlling shareholder of the Company with  the 51.90% of the Companys total shares paid and outstanding.  As of June 20, 2003, as a result of open  market purchases made on the Santiago Stock Exchange in May 27, 2003, Forestal  Terranova owned 481,861,555 shares (52.43%) of Common Stock.





Through ownership of Masisa S.A.s Common Stock, the  GrupoNueva Group (through its substantially owned subsidiary, Forestal  Terranova) has the ability to control the election of a majority of the members  of the Board of Directors of Masisa S.A. and have substantial influence over  any other matter determined by a shareholders vote as well as the direction  and future operations of the Company.   As of the date of this Annual





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Report, five of the seven members of the Companys Board of Directors  are related to the GrupoNueva Group, with four of them been having served as  directors or executive officers of affiliates or related companies within the  GrupoNueva group.





None of the major shareholders have voting rights  different than those corresponding to minority shareholders.





Related Party  Transactions





Article 89 of the Chilean Companies Act requires that  the Companys transactions with related parties shall fulfill equity  conditions, similar to those usually prevailing in the market. Directors and  executive officers of companies that violate Article 89 are liable for losses  resulting from such violation. In addition, Article 44 of the Chilean Companies  Act provides that a Company may exclusively enter into transactions in which a  director, manager or executive officer has a personal interest, if such  operations are previously known and approved by the Board of Directors and the  terms of such transaction are similar to those prevailing in the market. In  circumstances where it is not possible to determine if the terms of such  transaction are similar to those prevailing in the market, Chilean law requires  the Board to approve or reject such transaction with the abstention of the  director with an interest on such a
transaction. Resolutions approving such  transactions must be reported to the Companys shareholders at the next  shareholders meeting. Violation of Article 44 may result in administrative or  criminal sanctions for the Company, and shareholders or interested third  parties who suffer losses as a result of such violation have the right to  receive compensation in certain situations. During 2002, the Company engaged in  certain transactions with related companies and persons.  The majority of these transactions involve  the sale of products and/or services between subsidiaries at market prices.  For details of such transactions, see Note  19 to the Consolidated Financial Statements.





With effect as of January 1 2003, the Company entered  into a management contract with Forestal Terranovas for the management by the  Company of Forestal Terranova indirect subsidiary, Fibranova C.A. Fibranova  C.A. owns industrial installations in Puerto Ordaz, Venezuela, which consist of  two board production lines (particle board and MDF), a melamine board  recovering line and a molding MDF line. Fibranovas production is marketed to  end-users mainly in Venezuela and Colombia.





Pursuant to the contract the Company administrative  control of Fibranovas operations, including, with some restrictions,  management of all areas of that company, including senior management, finance  and administration, marketing, commercial and human resources are carried out  by the Company.  The contract has a term  of three years.  Under the contract, the  Company is paid for its services an amount equal to 8% of  Fibranovas annual operating result.





Additionally, during the term of the contract and for  a period of up to three years thereafter the Company has a preferential and  irrevocable option to acquire shares and assets of Fibranova, exercisable in  the event Forestal Terranova intends to sell any such shares or assets to third  parties.





Because this transaction involves a majority  shareholder of the Company, it was reviewed by the Companys Directors  Committee at a meeting held on October 22, 2002.  The Committee informed the Board of Directors that, in the  unanimous opinion of its members, the terms of the transaction were in  accordance with market conditions.





Item 8.  Financial Information





Consolidated  Financial Statements





See Item
  18. Financial Statements and pages F-1 through F-54.





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Export Sales





For a discussion of the Companys export sales, see  Item 5. Operating and Financial Review and ProspectsResults of Operations.





Legal and  Arbitration Proceedings





The Company is party to certain legal proceedings  arising in the normal course of its business, none of which management  considers, individually or in the aggregate, to be material.





Dividend Policy





The Companys dividend policy is determined from time  to time by its Board of Directors announced at the annual ordinary shareholders  meeting, which is generally held in March or April.  Shareholder approval of the dividend policy is not required.  However, each year the Board must submit for  approval at the annual ordinary shareholders meeting a declaration of the  final dividend corresponding to the preceding year.  Dividends are not price level adjusted between the end of the  preceding year and the date of the declaration of the final dividend.  As required by the Chilean Companies Act,  unless otherwise decided by unanimous vote of the issued and subscribed shares  of Common Stock, the Company must distribute a cash dividend in an amount equal  to at least 30% of the Companys net income for that year (on a Chilean GAAP  basis), unless and except to the extent the Company has a deficit
in retained  earnings.





At the Companys Annual General Shareholders Meeting  held on April 30, 2002, the Board of Directors proposed, and the shareholders  approved, a dividend policy calling for dividends not lower than 30% and not  higher than 50% of the Companys net income in 2002 and for future years.  At the meeting held on April 24th 2003, the  Companys shareholders approved a dividend equal to 30% of the Companys 2002  net income.





Dividends are paid to shareholders of record on the  fifth business day preceding the date set for payment of the dividend.  The holders of the ADRs on the applicable  record dates for the ADSs are entitled to participate fully in all dividends  declared after their acquisitions of the ADSs, subject to payment of the applicable  taxes.  For additional information, see  Item 10.  Additional  InformationTaxation.





Item 9.  The Offer and Listing





Stock Price History





The table below shows, for the periods indicated, the high and low  closing prices, in Chilean pesos, for a share of Common Stock on the Santiago  Stock Exchange and the high and low closing sales prices per ADS, in U.S.  dollars, as reported by the NYSE.





|                            |  | Santiago Stock Exchange  |        | New York Stock Exchange | 
|--------------------------- |  | ------------------------ | ------ | ----------------------- | 
|                            |  |                          |        |                         | 
|                            |  | Ch$ per Common Share (1) |        | US$ per ADR (2)         | 
|                            |  |                          |        |                         | 
|Years    ended December 31, |  | Low                      |        | High                    | 
|                            |  |                          |        |                         | 
|1998                        |  |                          | 71.00  |                         | 
|1999                        |  |                          | 90.00  |                         | 
|2000                        |  |                          | 203.00 |                         | 
|2001                        |  |                          |        |                         | 
|First Quarter               |  |                          | 238.00 |                         | 
|Second Quarter              |  |                          | 255.00 |                         | 
|Third Quarter               |  |                          | 235.00 |                         | 
|Fourth Quarter              |  |                          | 221.00 |                         | 
|2002                        |  |                          |        |                         | 
|First Quarter               |  |                          | 244.00 |                         | 
|Second Quarter              |  |                          | 188.00 |                         | 
|Third Quarter               |  |                          | 130.00 |                         | 
|Fourth Quarter              |  |                          | 135.00 |                         | 
|2003                        |  |                          |        |                         | 




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|First Quarter   |  |  | 155.00 |  |  | 184.00 |  |  | 5.90 |  |  | 7.80 | 
|--------------- |  |  | ------ |  |  | ------ |  |  | ---- |  |  | ---- | 
|Monthly Prices  |  |  |        |  |  |        |  |  |      |  |  |      | 
|December, 2002  |  |  | 163.00 |  |  | 172.49 |  |  | 6.80 |  |  | 7.62 | 
|January, 2003   |  |  | 160.00 |  |  | 178.33 |  |  | 6.55 |  |  | 7.80 | 
|February, 2003  |  |  | 155.00 |  |  | 159.33 |  |  | 5.90 |  |  | 6.63 | 
|March, 2003     |  |  | 155.20 |  |  | 170.48 |  |  | 6.30 |  |  | 7.50 | 
|April, 2003     |  |  | 174.00 |  |  | 182.69 |  |  | 7.23 |  |  | 7.99 | 
|May, 2003       |  |  | 178.00 |  |  | 207.00 |  |  | 7.50 |  |  | 8.70 | 
|June, 2003  (3) |  |  | 182.00 |  |  | 203.00 |  |  | 7.60 |  |  | 9.15 | 




|(1) | Chilean pesos are reflected    at historical values rather than at December 31, 2001 purchasing power.
|--- | ------------------------------------------------------------------------------------------------------
|(2) | 1 ADS = 30 shares of Common    Stock.                                                                 
|(3) | Exchange share prices    through June 25, 2003.                                                       




Markets





The Common Stock is traded on the Santiago Stock  Exchange, the Bolsa Electrónica de Chile,  Bolsa de Valores (the Electronic  Stock Exchange of Chile) and the Bolsa de  Corredores, Bolsa de Valores  (the Valparaiso Stock Exchange).  The  Company conducted a preemptive rights offering in Chile and an international  offering of American Depositary Shares (ADSs), evidenced by American  Depositary Receipts (ADRs), in June 1993 (the 1993 Offerings).  Since the consummation of the 1993  Offerings, the ADSs (each ADS represents 30 shares of Common Stock) have been  traded in the United States on the New York Stock Exchange (NYSE) under the  symbol MYS.  The ADRs are outstanding  under a Deposit Agreement dated June 17, 1993 (the Deposit Agreement) among  the Company, The Bank of New York, as depositary (the
Depositary), and the  holders, from time to time, of such ADRs.   The Company believes that, at the present time, the NYSE is the  principal trading market for the Common Stock in the form of ADSs.  The Company believes that the principal  non-United States trading market for the Common Stock is the Santiago Stock  Exchange.





The Chilean stock market, which is regulated by the Superintendencia de Valores y Seguros (the  Superintendency of Securities and Insurance, or the SVS) under Law 18,045,  as amended, which is called the Securities Market Law, is one of the most  developed among emerging markets, reflecting the particular economic history  and development of Chile.  The Chilean  governments policy of privatizing state-owned companies, implemented during  the 1980s, has led to an expansion of private ownership of shares, resulting in  an increase in the importance of stock markets.  Privatization extended to the social security system, which was  converted into a privately managed pension fund system.  These pension funds have been allowed,  subject to certain limitations, to invest in stocks and are currently major  investors in the stock market.  Some  market participants, including pension fund
administrators, are highly  regulated with respect to investment and remuneration criteria, but the general  market is less regulated than the U.S. market with respect to disclosure  requirements and information usage.





The Santiago Stock Exchange was established in 1893  and is a private company whose equity is held by 46 shareholders. The Santiago  Stock Exchange is Chiles principal exchange and accounts for approximately  72.5% of securities traded in Chile in 2002.   In the same year, approximately 26.3% of equity trading was conducted on  the Chilean Electronic Stock Exchange, an electronic trading market created by  banks and non-member brokerage houses.   The remaining equity trading was conducted on the Valparaíso Stock Exchange.  Equities, closed-end funds, fixed-income securities, short-term and money  market securities, gold and U.S. dollars are traded on the Santiago Stock  Exchange.  In 1991, the Santiago Stock  Exchange initiated a futures market with two instruments:  U.S. dollar futures and Selective Shares  Price Index, or IPSA, futures.  In 1994,  the Santiago Stock Exchange initiated an options
market with options of  Compañía de Telecomunicaciones de Chile S.A. and Empresa Nacional de  Electricidad S.A.  Securities are traded  primarily through an open voice auction system, a firm offers system or the  daily auction.  Trading through the open  voice system occurs on each business day between 9:30 a.m. and 4:30 p.m.  The Santiago Stock Exchange has an  electronic system of trade, called Telepregón, which operates continuously for  stocks trading in high volumes from 9:30 a.m. to 4:30 p.m.  Telepregón operates for stocks trading in  low volumes from 12:00 p.m. to 1:20 p.m.   The Chilean Electronic Stock Exchange operates continuously from 9:30  a.m. to 4:30 p.m. on each business day.   In February 2000, the Santiago Stock Exchange Off-Shore Market began  operations.  In the Off-Shore Market,  publicly-offered foreign securities are traded and quoted in United States  dollars.





There are two principal share price indices for the  Santiago Stock Exchange:  The General  Share Price Index and the IPSA.  The  General Share Price Index is calculated using the prices of 163 issues and is  broken into five main sectors:  banks  and finance, farming and forest products, mining, industrial, and  miscellaneous.  The IPSA





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is a major company index, currently including the Exchanges 40 most  active stocks.  Shares included in the  IPSA are weighted according to the value of shares traded and account for 79.0%  of the entire market capitalization.   The Common Stock is included in both indices.





Memorandum and  Articles of Association





Set forth below is certain information concerning  Masisa S.A.s capital stock and a brief summary of certain significant  provisions of its estatutos (the  Bylaws) and Chilean law.  This  description does not purport to be complete and is qualified in its entirety by  reference to the Bylaws, which are included in Exhibit 1.1 to this Annual  Report.





Organization and Register





Masisa S.A. is a publicly-held stock corporation  (sociedad anónima abierta) organized under the laws of Chile.  Masisa was incorporated by a public deed  dated January 31, 1964, an abstract of which was published in the Diario  Oficial de la República de Chile No. 25.897 (Official Gazette of Chile No.  25.897) on July 23, 1964.  This  publication is recorded on page 71 No. 41 of the Registro de Comercio del  Conservador de Bienes Raices y Comercio de Valdivia (Real Estate and Commercial  Registry of Valdivia) for the year 1964.   The corporate purpose of Masisa, as stated in its Bylaws, is broadly  defined to include the production and sale of wood products, as more fully set  forth in the Third Article of its Bylaws.   Masisa S.A. has an indefinite corporate duration.





Shareholder Rights





Shareholder rights in Chilean companies are governed  generally by a companys bylaws  (which  effectively serve the purpose of both the articles, or certificate, of  incorporation, and the bylaws of a United States company).  Additionally, the Corporations Law and the  Chilean Corporations Law Regulations, Supreme Decree 587 (the Regulations on  Corporations) govern the operation of Chilean companies and provide for  certain shareholder rights.





Shareholder rights can be amended through an agreement  adopted in an Extraordinary Shareholders Meeting, which shall subsequently  agree upon the corresponding amendment to the bylaws.  However, there are certain provisions of Chilean law that cannot  be waived by the shareholders.





The Chilean securities markets are principally  regulated by the SVS under the Securities Market Law and the Chilean  Corporations Law.  These two laws  provide for disclosure requirements, restrictions on insider trading and price  manipulation, and protection of minority investors.  The Chilean Corporations Law clarifies rules and requirements for  establishing publicly-held stock corporations while eliminating government  supervision of privately-held companies.   The Securities Market Law establishes requirements for public offerings,  stock exchanges and brokers, and outlines disclosure requirements for companies  that issue publicly offered securities.





Under Articles 12 and 54 and Title XV of the  Securities Market Law, certain information regarding transactions in shares of  publicly-held corporations must be reported to the SVS and the Chilean  exchanges on which such shares are listed.   Holders of shares of publicly-held corporations are required to report  to the SVS and the Chilean exchanges:





(i)        any  acquisition or sale of shares that results in the holders acquiring or  disposing of 10% or more of the corporations capital; and





(ii)        any  acquisition or sale of shares or options to buy or sell shares, in any amount,  if made by a holder of 10% or more of the corporations capital or if made by a  director, liquidator, main officer, general manager or manager of such  corporation.





Persons or entities intending to acquire control of a  publicly-held corporation are also required to inform the public in advance  through a notice published in a Chilean newspaper, which must disclose the  price and conditions of any negotiations.   Prior to such publication, a written communication to such effect must  be sent to the SVS and the Chilean exchanges.





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Chilean law does not contain any provision that  discriminates against shareholders or prospective shareholders who own a  substantial number of shares. However, a special public offering procedure  applies should the controller of a company decide to increase its stock in the  company, according to which the offer must be made to all shareholders on a pro  rata basis in proportion to their respective stock.





Capitalization





Under Chilean law, a corporation issues its stock as  soon as the shareholders authorize an increase in such corporations capital,  provided that the minutes of the corresponding shareholders meeting are put  into a public deed, and an abstract of said deed is published in the Official  Gazette and registered in the Commercial Registry corresponding to the  companys domicile.  In addition, in the  case of publicly-held stock corporations, the SVS must authorize the issuance  of the new shares and must register them in the Securities Registry. When a  shareholder subscribes for shares, the shares are transferred to such  shareholders name, and the shareholder is treated as a shareholder for all  purposes, except receipt of dividends, unless otherwise stipulated in the  bylaws of the corporation.  The  shareholder becomes eligible to receive dividends once such shareholder has  paid for the
shares.  If a shareholder  does not pay for shares for which such shareholder has subscribed on or prior  to the date agreed upon for payment, the corporation is entitled to auction the  shares on the stock exchange, and has a cause of action against the shareholder  for the difference between the subscription price and the price received at  auction.  However, until such shares are  sold at auction, the shareholder continues to exercise all the rights of a  shareholder (except the right to receive dividends).  Authorized shares which have not been paid for within the period  ending three years from the date when the capital increase agreement was made  at the shareholders meeting, are deemed cancelled under Chilean law and are no  longer available for sale by the Chilean corporation.  At that time, the capital of the corporation is automatically  reduced to the amount effectively paid within such period.





The Bylaws authorize a single series of common stock,  without par value.





Director Requirements





The Bylaws require the board to consist of seven  directors.  The entire board is elected  every three years.  There is no  requirement that a director be a stockholder of Masisa.





The Bylaws of Masisa do not contain any provision  regarding a mandatory retirement age for the Companys directors, nor does  Chilean law contain any provision in this respect.





According to Law No. 18.046, a company can only  execute transactions wherein one or more directors have material interest,  provided that such contracts are previously known and approved by the Board and  correspond to an arms-length transaction.   Board agreements thereto must be informed in the next shareholders meeting.  For this purpose, the law assumes that a  director has an interest in any transaction in which he or she intervenes  personally or through his or her spouse or relatives up to second degree  (brothers or sisters, parents, grandparents, sons or daughters and grandsons or  granddaughters); or through the companies or partnerships in which the director  owns more than 10% of their capital; or through the companies or partnerships  wherein any of the aforementioned persons is a director, or directly or indirectly  own more than 10% of its capital; or if the director acts as attorney-in-fact  of the
companys counterpart; or if the director or his or her related parties  act as counsel in connection with the transaction.





If the transaction wherein the director has a material  interest involves a relevant amount (more than 1% of the companys equity or in  any case more than approximately US$465,800), and the Board considers that it  is not possible to determine if it is an arms-length transaction, the Board  may approve or reject the execution of the transaction, with the abstention of  the interested director, or appoint an independent team of evaluators.  The evaluators report shall be made  available to the shareholders. If shareholders representing at least 5% of the companys  voting stock consider that the transaction is not in the companys best  interest, or if the evaluators report differ considerably, they may request  that the Board call for an Extraordinary Shareholders Meeting in order to  approve or reject the execution of such transaction, in the former case by at  least 2/3 of the companys
voting stock.   The related party that intends to carry out the operation with the  company must provide to the Board all relevant information pertaining to such  operation.





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Any borrowing from the Company by a director is  treated under Chilean law as a related party transaction and is subject to the  rules set forth above.





Preemptive Rights and Increases of  Share Capital





The Chilean Corporations Law and the Regulations on  Corporations grant certain preemptive rights to shareholders of all Chilean  companies.  The Chilean Corporations Law  and Regulations on Corporations generally require Chilean companies to offer to  shareholders the right to purchase a sufficient number of shares or convertible  securities to maintain their existing ownership percentage in the company  whenever it issues new shares or convertible securities.





Dividend and Liquidation Rights





In accordance with Chilean law, Masisa must distribute  mandatory cash dividends of 30% of its net income calculated in accordance with  Chilean GAAP unless otherwise decided by a unanimous vote of the holders of the  Shares.  See Item 3.  Key InformationDividends and Item 8.  Financial InformationDividends.





At the option of Masisa, the portion of any dividend  which exceeds the mandatory limits established pursuant to Chilean law may be  paid in cash, in shares of Masisa or in shares of corporations owned by  it.  Shareholders who do not expressly  elect to receive a dividend other than in cash are legally presumed to have  decided to receive the dividend in cash.





Those dividends not collected by the shareholders  entitled thereto within 5 years as of payment date, must be donated by Masisa  to the Chilean Firemen Corps.





In the event of a liquidation of Masisa, the holders  of fully paid shares of Common Stock would participate in the assets available  after payment of all creditors in proportion to the number of shares held by them.





Shareholders Meetings and Voting  Rights





The general annual meeting of the shareholders (a  General Annual Shareholders Meeting) of the Company is held during the first  fourth months of each year.  Special  meetings (an Extraordinary Shareholders Meeting) may be called by the board  of directors when deemed appropriate or when requested by shareholders  representing at least 10% of the issued voting shares or by the SVS.  Notice to convene the General Annual Shareholders  Meeting or a special meeting is given by means of a notice in a newspaper  published in Masisas corporate domicile (currently Valdivia) or in the  Official Gazette in a prescribed manner.   Notice must also be mailed to each shareholder and given to the SVS 15  days in advance of the meeting.





The quorum for a shareholders meeting is established  by the presence, in person or by proxy, of shareholders representing at least  the absolute majority of the issued voting shares of Masisa; 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 shares  represented.  However, if a shareholders  meeting is called for the purpose of (i) considering a change of organization,  merger or division of Masisa, (ii) an amendment to the term of duration or  early dissolution, (iii) a change in corporate domicile, (iv) a decrease of  corporate capital, (v) approval of capital contributions or assessments of  assets other than cash, (vi) modification of the authority reserved to  shareholders meetings or limitations on the Board of Directors, (vii)
reduction  in the number of the Board of Directors, (viii) the sale, transfer or  disposition of 50% or more of Masisas assets, either including or excluding  its corresponding liability, or the formulation or modification of any business  plan which contemplates the sale, transfer or disposition of assets in such  amount, (ix) the form of distributing corporate benefits, (x) a guaranty by  Masisa of liabilities of any third-party other than a subsidiary, in an amount  exceeding 50% of Masisas total assets, (xi) the purchase by Masisa of its  issued stock in accordance with articles 27A and 27B of Law 18,046, (xii) the  amendment of any formal defects in the companys bylaws which may nullify its  incorporation, or (xiii) other matters as may be set forth in the companys  bylaws, the vote required at such meeting is a two-thirds majority of the  issued Common Stock.





Chilean law does not require a publicly-held Chilean  company to provide the level and type of information that United States  securities laws require a reporting company to provide to its shareholders in  connection with a





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solicitation of proxies.  Under  Chilean law, a notice of a shareholders meeting listing the matters to be  addressed must be mailed to shareholders not fewer than 15 days prior to the  date of a meeting.  In cases of a  General Annual Shareholders Meeting, an annual report of the companys  activities which includes audited financial statements for the company must  also be mailed to shareholders.





The Chilean Corporations Law provides that whenever  shareholders representing 10% or more of the issued voting shares so request, a  Chilean companys annual report must include within the materials dispatched by  the board of directors to shareholders, the boards comments and proposals in  relation to the companys affairs.   Similarly, the Chilean Corporations Law provides that whenever the board  of directors of a publicly-held company convenes a general meeting of  shareholders and solicits proxies for the meeting, information supporting its  decisions or other similar materials, it is obligated to include the pertinent  comments and proposals that may have been made by shareholders owning 10% or  more of the companys voting shares who request that such comments and  proposals be so included.





Only shareholders registered as such with Masisa Chile  at least five days prior to the date of a shareholders meeting are entitled to  attend and vote their shares.  A  shareholder may appoint another individual (who need not be a shareholder) as  his proxy to attend and vote on his behalf.   Every shareholder entitled to attend and vote at a shareholders meeting  shall have one vote for every share subscribed.





Right of Dissenting Shareholders to  Tender Their Shares





The Chilean Corporations Law provides that upon the  adoption at an Extraordinary Shareholders Meeting of any of the resolutions  enumerated below, dissenting shareholders acquire the right to withdraw from a  Chilean company and to compel that company to repurchase their shares, subject  to the fulfillment of certain terms and conditions.





Dissenting shareholders are defined as those which  vote against a resolution which results in the withdrawal right, or if absent  at such a meeting, those who state in writing to the company their opposition  to the respective resolution.   Dissenting shareholders must perfect their withdrawal rights by  tendering their stock to the company within 30 days of the resolution (except  in the case of pension fund shareholders as discussed below).





The price paid to a dissenting shareholder of a  publicly-held company for such shares is the weighted average of the closing  sales prices for the shares as reported on the stock exchanges for the 60-day  period preceding the event giving rise to the withdrawal right.





The resolutions that result in a shareholders right  to withdraw are the following:





| | a) | The transformation of the company;                                                                                                                                                                                                                         
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                            
| | b) | The merger of the company;                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                            
| | c) | The disposition of 50% or more of the corporate    assets under the terms described in (viii) of Shareholders Meetings and    Voting Rights;                                                                                                              
| |    |                                                                                                                                                                                                                                                            
| | d) | The creation of preferential rights for a class of    shares or an amendment to those already existing; in which case the right to    withdraw only accrues to the dissenting shareholder of the class or classes    of shares adversely affected;         
| |    |                                                                                                                                                                                                                                                            
| | e) | Such other causes as may be established by Chilean    law and the companys bylaws (the Bylaws currently do not establish any    instances); and                                                                                                           
| |    |                                                                                                                                                                                                                                                            
| | f) | If a shareholder who acquired 2/3 of the voting    stock of the company does not make an offer to buy the shares of the    remaining shareholders within 30 days as of such acquisition, then said    remaining shareholders may withdraw from the company.




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Material Contracts





The Company entered into a contract to sell its entire  ownership interest in GPM and Resinas Concordia to a subsidiary of Georgia  Pacific for US$28.9 million on January 17, 2001.  See Chemical Business under Item 4.





The Company entered into a management contract with  its majority shareholder Forestal Terranova, for the management of Forestal  Terranovas Venezuelan subsidiary, Fibranova C.A. Fibranova produces MDF and  particle board. This contract became effective on January 1, 2003.  For more information, see Related Party Transactions  under Item 7.





Exchange Controls





The Central Bank of Chile, among other things, is  responsible for monetary policies and for exchange controls in Chile.  As of April 19, 2001, Chapter XXVI of Title  I of the Compendio de Normas de Cambios Internacionales of the Central Bank of  Chile was eliminated and new investments in ADRs by non-residents of Chile,  are now governed by Chapter XIV of the Compendio de Normas de Cambios  Internacionales of the Central Bank of Chile.   According to the new regulations, such investments must be carried out  through Chiles Mercado Cambiario Formal (the Formal Exchange Market) and  reported to the Central Bank of Chile.   Foreign investments may still be registered with the Foreign Investment  Committee under Decree-Law 600 of 1974, as amended, (Decree-Law 600) and  obtain the benefits of the contract executed under Decree-Law 600.





Notwithstanding these new foreign exchange regulations  of the Central Bank and the elimination of Chapter XXVI of the Compendio de  Normas de Cambios Internacionales, the ADSs representing shares of Common Stock  are the subject of and regulated by a contract dated June 16, 1993 (the  Foreign Investment Contract) among the Depositary, the Company and the  Central Bank, pursuant to Article 47 of the Central Bank Act and the regulations  of Chapter XXVI of Title I of the Compendio de Normas de Cambios  Internacionales of the Central Bank (Chapter XXVI), which addresses the  issuance of ADSs by Chilean corporations.   Under the Foreign Investment Contract, investors are granted access to the  Formal Exchange Market for the purpose of converting amounts from pesos to  dollars and repatriating from Chile amounts received with respect to deposited  shares of Common Stock or shares of Common Stock withdrawn from
deposit or the  surrender of ADRs (including amounts received as cash dividends and proceeds  from the sale in Chile of the underlying shares of Common Stock and rights  arising therefrom).  The following is a  summary of the material provisions contained in the Foreign Investment  Contract.  This summary does not purport  to be complete and is qualified in its entirety by reference to Chapter XXVI  and the Foreign Investment Contract, a form of which was filed as an exhibit to  the Registration Statement on Form F-1 filed by the Company in connection with  the 1993 Offerings.





Under Chapter XXVI and the Foreign Investment  Contract, the Central Bank agrees to grant the Depositary, on behalf of ADR  holders, and to any investor not residing or domiciled in Chile who withdraws  shares of Common Stock upon delivery of ADRs (such shares of Common Stock being  referred to herein as Withdrawn Shares), access to the Formal Exchange Market  to convert pesos to dollars (and remit such dollars outside of Chile) in  respect of the shares of Common Stock represented by ADSs or Withdrawn Shares,  including amounts received as (i) cash dividends and (ii) proceeds from the  sale in Chile of Withdrawn Shares, subject to certain formalities.  In addition, the following also benefit from  such access: stock dividends; shares originating from the exercise of a right  to subscribe to a capital increase or from the transfer of options or preferred  rights; capital repayments originating from capital reductions or


the  liquidation of the Company; and dividends or shares originating from  recapitalizations, mergers, liquidations or any other similar transaction.  Investors receiving Withdrawn Shares in  exchange for ADRs have the right to redeposit these shares in exchange for  ADRs, provided that certain conditions are satisfied.





Chapter XXVI provides that access to the Formal  Exchange Market in connection with dividend payments are conditioned upon  certification by Masisa to the Central Bank that a dividend payment has been  made and any applicable tax has been withheld.   Chapter XXVI also provides that access to the Formal Exchange Market in  connection with the sale of Withdrawn Shares or distributions thereon are  conditioned upon receipt by the Central Bank of certification from the  Depositary that such shares of Common Stock have been withdrawn in exchange for





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ADRs, as well as a waiver of the benefit of the Foreign Investment  Contract with respect thereto until such Withdrawn Shares are re-deposited.





Chapter XXVI and the Foreign Investment Contract  provide that a person who brings foreign currency into Chile must convert it  into pesos in the Formal Exchange Market on the same date and has five days to  invest in shares of Common Stock in order to receive the benefits of the  Foreign Investment Contract.  If such  person decides within such period not to acquire shares of Common Stock, he can  access the Formal Exchange Market to reacquire dollars, provided that the  applicable request is presented to the Central Bank within seven days of the  initial conversion into pesos.  Shares  of Common Stock acquired as described above may be deposited for ADRs and  receive the benefits of the Foreign Investment Contract subject to receipt by  the Central Bank, within 60 days from the acquisition of the shares, of a  certificate from the Depositary that such deposit has been effected and that  the related ADRs have been issued, as
well as a declaration from the person  making such deposit waiving the benefits of the Foreign Investment Contract  with respect to the deposited shares of Common Stock.





In August 1997 and May 1998, the Central Bank amended  Chapter XXVI in order to clarify that shares of Common Stock acquired by the  Depositary upon the exercise of preemptive rights are also subject to the  Foreign Investment Contract.  If the  Depositary or any shareholder transfers all or part of its preemptive rights to  investors not residing or domiciled in Chile, the shares of Common Stock  acquired by such investors upon the exercise of their preemptive rights will  also be subject to the Foreign Investment Contract.  For these purposes, an amendment of the Foreign Investment  Contract must be executed among the Central Bank, the Company and the  Depositary during the preemptive rights option period, prior to the entry into  Chile of the required foreign currency.   Pursuant to the amendment of the Foreign Investment Contract, the  current issuance of ADSs, together with those ADSs issued as a result of the
exercise of the preferred preemptive rights, shall all be governed by the rules  stated in Chapter XXVI as from the date of the amendment of the Foreign  Investment Contract.





In addition, the Central Bank stated that those shares  of Common Stock issued as a result of a capital increase that were not acquired  during the preemptive rights option period nor during an international offering  authorized by the Central Bank may be directly acquired by the ADR holders or  investors not residing or domiciled in Chile, whether through the Company or in  a Chilean stock exchange transaction.   On July 3, 1995 and June 26, 1998, the Central Bank changed the  regulations applicable to persons bringing foreign currency into Chile for the  purpose of acquiring pesos to purchase securities.  Under such regulations, those persons were required to either (i)  establish a non-interest bearing deposit with the Central Bank for a one-year  term in an amount equal to 10% of the foreign currency brought into Chile  (until June 26, 1998, the percentage required to be deposited was 30%) or (ii)  pay a charge to the
Central Bank at the time the foreign currency is converted  into pesos in an amount equal to the interest on such deposit at the rate of  12-month LIBOR plus 4% for one year (the Mandatory Deposit Requirement or  Encaje).  On October 23 and December  5, 1996, the Central Bank further amended these regulations by establishing  certain exemptions not applicable to ADR holders.  On September 16, 1998, the Central Bank further amended the above  regulations by reducing the Encaje to 0% and, on April 19, 2001 the Central  Bank eliminated the Encaje on foreign currency brought into Chile for the  purpose of purchasing shares of capital stock of a Chilean issuer, regardless  if the issuer is or is not party to a Foreign Investment Contract.





Access to the Formal Exchange Market under any of the  circumstances described above is not automatic.  Pursuant to Chapter XXVI, such access requires Central Bank  approval based on a request therefor presented through a banking institution  established in Chile.  The Foreign Investment  Contract provides that if the Central Bank has not acted on such request within  seven banking days, the request will 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  additional Chilean restrictions applicable to the holders of ADRs, the  disposition of underlying shares of Common Stock or the repatriation of the  proceeds from such disposition could not be imposed in the future, nor can  there be any assessment of the duration or impact of such restrictions if  imposed.





The Central Bank Act has liberalized the rules that  govern the ability to buy and sell foreign exchange.  Prior to 1989, the law permitted the purchase and sale of foreign  exchange only in those cases explicitly authorized by the Central Bank.  The Central Bank Act now provides that the  Central Bank is empowered to determine that certain purchases and sales of  foreign exchange specified by law must be carried out in the Formal Exchange  Market.  The Formal Exchange Market is  formed by the banks and other entities authorized by the Central Bank to





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participate.  All payments and  distributions with respect to the ADSs must be transacted in the Formal  Exchange Market.





For the purposes of the operation of the Formal  Exchange Market, the Central Bank sets a dólar acuerdo or reference exchange  rate (the Reference Exchange Rate).   The Reference Exchange Rate is reset daily by the Central Bank, taking  internal and external inflation into account, and adjusted daily to reflect  variations in parities among the U.S. dollar, the Japanese yen and the  Euro.  Under current Central Bank  exchange policy, participants in the Formal Exchange Market trade U.S. dollars  freely, while the Central Bank may, under certain circumstances, sell or buy  dollars in order to control exchange rate volatility. The daily Observed  Exchange Rate is the average rate at which banks conduct authorized  transactions the day before its publication.





Purchases and sales of foreign exchange that can be  conducted outside the Formal Exchange Market are carried out in the Mercado  Cambiario Informal (the Informal Exchange Market).  The Informal Exchange Market and its predecessor, the unofficial  market, reflect the supply and demand for pesos.  For the last two years, rates in the Formal and Informal Exchange  Markets have varied within a narrow band.   On November 16, 1999, the Central Bank authorized the purchase of  foreign currency in the Informal Exchange Market within 5 banking days  following the sale of the shares in a stock exchange market, but its remittance  abroad may be done only through the Formal Exchange Market.  This requirement of remitting abroad through  the Formal Exchange Market has been maintained primarily for statistical  purposes of the Central Bank, even after the enactment of the April 19, 2001  new regulatory
regime.





Taxation





The following discussion contains a description of the  principal Chilean and U.S. federal tax considerations relevant to the purchase,  ownership and disposition of Common Stock or ADSs.





The discussion summarizes the principal Chilean income  tax consequences of the acquisition, ownership and disposition of Common Stock  or ADSs to an individual holder who is not domiciled in or a resident of Chile  or a legal entity that is not organized under the laws of Chile and does not  have a permanent establishment in Chile (a Foreign Holder).  For Chilean taxation purposes, 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 a total of more than six months,  whether consecutive or not, in two consecutive tax years.





The discussion also summarizes the principal U.S.  federal income tax considerations relevant to the acquisition, ownership and  disposition of Common Stock or ADSs to a holder that is a citizen or resident  of the United States or a U.S. domestic corporation or that otherwise will be  subject to U.S. federal income tax on a net income basis in respect to Common  Stock or ADSs (a U.S. Holder), but it does not purport to be a comprehensive  description of all the tax considerations that may be relevant to a decision to  purchase Common Stock or ADSs.  In  particular, the discussion is directed only to U.S. Holders that hold Common  Stock or ADSs as capital assets and that have the U.S. dollar as their  functional currency, and does not address the tax treatment of a U.S. Holder  that owns 10% or more of the voting shares (including Common Stock and ADSs) of  the Company.  Additionally, the summary  does not address
the U.S. federal tax considerations relevant to investors that  are subject to special tax rules, such as banks, dealers in securities and currencies,  traders in securities electing to mark to market, tax-exempt entities,  insurance companies and persons that will hold Common Stock or ADSs as a  position in a straddle or conversion transaction or as part of a synthetic  security or other integrated financial transaction.





The discussion is based upon the tax laws of Chile and  the United States as in effect on the date of this Annual Report (including  applicable regulations, rulings and court decisions, and including ruling No.  324 of January 29, 1990 of the Chilean Internal Revenue Service), which are  subject to change.  Under Chilean law,  provisions contained in such statutes such as tax rates applicable to Foreign  Holders, 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, Chilean tax  authorities issue rulings and regulations of either general or specific  application and interpret the provisions of Chilean tax law.  Chilean taxes 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.  There is no income tax treaty in force  between Chile and the United States.





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In general, for U.S. federal income tax purposes, ADR  holders evidencing ADSs will be treated as the owners of the Common Stock  represented by those ADSs.





The discussion of Chilean and United States tax  considerations is only intended to provide a general description of the  principal relevant factors.  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.  Holders of Common Stock or ADSs should  consult their own tax advisers as to the Chilean, U.S. or other tax  consequences of the purchase, ownership and disposition of Common Stock or  ADSs, including, in particular, the effect of any foreign, state or local tax  laws.





Taxation of  Dividends





Chilean Tax Considerations.  Cash dividends paid by the Company with respect to the Common  Stock or ADSs held by Foreign Holders will be subject to a Chilean withholding  tax at a rate of 35%, which is withheld and paid over to the Chilean tax  authorities by the Company (the Withholding Tax).  A credit against the Withholding Tax is available based on the  amount of corporate income tax actually paid by the Company on the income to be  distributed (the First Category Tax).





When the First Category Tax credit is available it  does not reduce the Withholding Tax on a dollar-for-dollar basis because it  also increases the base on which the Withholding Tax is imposed.  In addition, if the Company distributes less  than all of its distributable income, the credit for First Category Tax paid by  the Company is proportionately reduced.





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  15% and a distribution of 100% of the net income of the Company distributable  after payment of the First Category Tax.





|Company taxable income                                                         |  |  | 100           | 
|------------------------------------------------------------------------------ |  |  | ------------- | 
|First Category Tax (15% of Ch$100)                                             |  |  | (15)          | 
|Net distributable income                                                       |  |  | 85            | 
|Dividend distributed by the Company                                            |  |  | 85            | 
|Additional Tax (35% of the sum of Ch$85 plus Ch$15    First Category Tax paid) |  |  | (35)          | 
|Credit for First Category Tax                                                  |  |  | 15            | 
|Net Additional Tax withheld                                                    |  |  | (20)          | 
|Net dividend received                                                          |  |  | 65            | 
|Effective dividend withholding tax rate                                        |  |  | 20/85 = 23.5% | 




For purposes of determining the level of the First  Category Tax that has been paid by the Company, dividends under Chilean income  tax law are assumed to have been paid out of the Companys oldest retained  profits. The Companys retained profits as of December 31, 2001, have paid  different First Category Tax rates ranging from 0% to 16%.  For more details see Note 17(i) to the  Consolidated Financial Statements.





Dividend distributions made in property (other than  shares of Common Stock) will be subject to the same Chilean tax rules as cash  dividends.  Stock dividends are not  subject to Chilean taxation upon distribution.   The exercise of preemptive rights relating to Common Stock will not be  subject to Chilean taxation.  Gains from  the sale of preemptive rights relating to Common Stock will be subject to both  the First Category Tax and the Withholding Tax (subject to the credits outlined  above).





U.S.  Tax Considerations.   The gross amount of cash distributions with respect to the Common Stock  or ADSs, to the extent paid out of current or accumulated earnings and profits  of the Company (as determined under U.S. federal income tax principles),  including the net amount of the Chilean Withholding Tax withheld on the  distribution (after taking into account the credit for the First Category Tax),  will be included as a dividend in the gross income of a U.S. Holder as ordinary  income when the dividends are received by the Depositary or the holder, as the  case may be.  Such distributions will  not be eligible for the dividends-received deduction allowed to corporations  under the Internal Revenue Code of 1986, as amended (the Code).  Dividends paid in Chilean pesos will be  included in the income of a U.S. Holder in a U.S. dollar amount calculated by  reference to the exchange rate in effect on
the day they are received by the  Depositary or the holder, as the case may be.   U.S. Holders should consult their own tax advisors regarding the  treatment of foreign currency gain or loss, if any, on any Chilean pesos





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received that are converted into U.S. dollars on a date subsequent to  receipt.  The Chilean Withholding Tax  (after taking into account the credit for the First Category Tax) will be  treated as a foreign income tax that a U.S. Holder may elect to deduct in  computing its income tax or, subject to generally applicable limitations and  conditions under the Code, to credit against its U.S. federal income tax  liability.  Dividends generally will  constitute foreign source passive income or financial services income for  U.S. tax purposes.  Foreign tax credits  may not be allowed for withholding taxes imposed in respect of certain  short-term or hedged positions in securities or in respect of arrangements in  which a U.S. Holders expected economic profit is insubstantial.  U.S. Holders should consult their own advisors  concerning the implications of these rules in light of their particular
circumstances.





Distributions of additional shares to holders with  respect to the ADSs that are made as part of a pro rata distribution to all  shareholders of the Company generally will not be subject to U.S. federal income  tax.





A holder of Common Stock or ADSs that is, with respect  to the United States, a foreign corporation or a nonresident alien individual  (a Non-U.S. Holder) generally will not be subject to U.S. federal income or  withholding tax on dividends received on Common Stock or ADSs, unless such  income is effectively connected with the conduct by the holder of a trade or  business in the United States.





Taxation of Capital  Gains





Chilean  Tax Considerations.   Gains realized on the sale, exchange or other disposition by a Foreign  Holder of the ADSs (or ADRs evidencing ADSs) will not be subject to any Chilean  taxes, provided that such sale, exchange or other disposition occurs outside  Chile.  The deposit and withdrawal of Common  Stock in exchange for ADRs is not subject to any Chilean taxes.





The tax basis of shares of Common Stock received in  exchange for ADSs will be the acquisition value of the shares adjusted to the  CPI variation between the month preceding the exchange and the month preceding  the sale. The valuation procedure set forth in the Deposit Agreement, which  values shares of Common Stock that are being exchanged at the highest reported  sales 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 conversion of ADSs into Common Stock and the immediate sale  of such Common Stock for the value established under the Deposit Agreement will  not generate a capital gain subject to taxation in Chile.





Gain recognized on a sale or exchange of Common Stock  (as distinguished from a sale or exchange of ADSs representing such Common  Stock) held by Foreign Holders will be subject to Chilean income taxes at an  effective rate of 35% if either (i) the Foreign Holder has held Common Stock  for less than one year since exchanging the ADSs for such Common Stock, (ii)  the Foreign Holder acquired and disposed of the Common Stock in the ordinary  course of its business or as a regular trader of shares, or (iii) the sale is  made to a related entity.  In all other  cases, gain on the disposition of Common Stock will be subject only to the  First Category Tax currently imposed at a rate of 16.5%.





Pursuant to Law No. 19,753 dated September 9, 2001,  the First Category tax rate has been increased to 16% for the fiscal year 2002,  16,5% for the fiscal year 2003 and 17% for the fiscal year 2004 onwards.





In certain cases, capital gains made on the sale  of  highly traded stock of Chilean  public companies traded at a stock exchange may not be subject to First  Category and/or Withholding Tax.





U.S.  Tax Considerations.   Gains or losses realized by a U.S. Holder on the sale, exchange or other  disposition of Common Stock or ADSs will be subject to U.S. federal income  taxation as capital gains or losses in an amount equal to the difference  between such Holders adjusted basis in the Common Stock or the ADSs and the  amount realized on the disposition.  Any  such gains or losses generally will be long-term capital gains or losses if the  U.S. Holder has held the Common Stock or ADSs for more than one year at the  time of disposition.  Long-term capital  gains recognized by an individual U.S. Holder generally will be subject to a  reduced rate of tax.





Chilean taxes imposed on a sale or other disposition  of Common Stock or ADSs, net of any refund available to the U.S. Holder,  generally will be treated as foreign income taxes eligible for credit against a  U.S. Holders U.S. federal income tax liability. Gain realized by a U.S. Holder  on a sale or other disposition of Common Stock or ADSs generally will be  treated as U.S. source income.  Since a  U.S. Holder generally may not use a foreign





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tax credit to reduce its U.S. federal income tax liability in respect  of its U.S. source income, in the case of a disposition of Common Stock (which,  unlike a disposition of ADSs, would be taxable in Chile), such a U.S. Holder  generally will not be able to utilize foreign tax credits in respect of Chilean  tax imposed on such a disposition unless such holder has other income from  foreign sources, in the appropriate category, for purposes of the foreign tax  credit limitation rules. U.S. Holders should consult their tax advisors  regarding the application of the foreign tax credit limitation rules to their  investment in and disposition of the Shares.





Deposits and withdrawals of Common Stock by U.S.  Holders in exchange for ADRs will not result in the realization of gains or  losses for U.S. federal income tax purposes.





A Non-U.S. Holder of Common Stock or ADSs will not be  subject to U.S. federal income or withholding tax on gains realized on the sale  of Common Stock or ADSs, unless (i) such gains are effectively connected with  the conduct by the holder of a trade or business in the United States or (ii)  in the case of gains realized by an individual Non-U.S. Holder, such Non-U.S.  Holder is present in the United States for 183 days or more in the taxable year  of the sale and certain other conditions are met.





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 transfers from inheritance,  gifts or successions if the transferor acquired the ADSs with Chilean-source  resources.  There are no Chilean stamp,  issue, registration or similar taxes or duties payable by holders of Common  Stock or ADSs.





Withholding Tax Certificates





Upon request, the Company will provide to Foreign  Holders appropriate documentation evidencing the payment of the Withholding Tax  (net of applicable First Category Tax).





Item 10.  Additional Information.





Documents on  Display





Masisa S.A. is subject to the information requirements  of the Securities Exchange Act of 1934 applicable to foreign private issuers,  and accordingly Masisa S.A. files or furnishes reports, information statements  and other information with the U.S. Securities and Exchange Commission.  These reports and other information filed by  Masisa S.A. can be inspected at, and subject to the payment of any required  fees, copies may be obtained from, the public Reference Section of the U.S.  Securities and Exchange Commission, 450 Fifth Street, N.W., Room 1024,  Washington, D.C. 20549, and at the U. S. Securities and Exchange Commissions  Regional Offices located at 233 Broadway, New York, New York 10279 and at  Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois  60661.  These reports and other  information may also be inspected and copied at the offices of the New York  Stock Exchange, 20 Broad Street, New
York, New York 10005.





Masisa S.A.s SEC filings and submissions are also  available from commercial retrieval services and, with respect to filings and  submissions made after November 2002, may be obtained over the Internet at the  website maintained by the SEC at www.sec.gov.   As a foreign private issuer, Masisa S.A. was not required to make  filings with the SEC by electronic means prior to November 2002.





As a foreign private issuer, Masisa S.A. is exempt  from the proxy requirements of Section 14 of the Exchange Act and from the  short-swing profit recovery rules of Section 16 of the Exchange Act, although  the rules of the New York Stock Exchange may require Masisa S.A. to solicit  proxies from its shareholders under some circumstances.





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Item 11.  Quantitative and Qualitative Disclosure About Market Risk





Qualitative  Disclosure





Market risk generally represents the risk that losses  may occur in the values of financial instruments from fluctuations in interest  rates, foreign currency exchange rates and commodity prices.  The Company is exposed to market risk in the  normal course of its business due to its use of certain financial instruments  and transactions in various foreign currencies.





Based on current market conditions, the Companys  Chief Executive Officer and Chief Financial Officer, from time to time,  establish policies for new loans, time deposits, marketable securities and  securities with resale agreements and policies for entering into derivative  instruments.  Depending on the amount of  each transaction, the Board of Directors may approve these transactions prior  to their execution.





New long-term loans for financing new investments, or  refinancing existing long-term loans, must be approved by the Companys Board  of Directors.  In each country where the  Company has operations, management can incur new short-term loans to finance  working capital needs in the normal course of business.  The Board of Directors, in its meetings, is  informed of these loans, and in certain cases, must approve these loans.





Intercompany loans between Masisa and its  subsidiaries, or within its subsidiaries, are settled with fixed interest  rates, on a case by case basis.





The Companys Chief Executive Officer and Chief  Financial Officer from time to time establish policies to manage the Companys  financial risk.  Hedging interest rate  exposure through the use of swaps and options and hedging foreign exchange  exposure through the use of forward contracts is specifically considered for  purposes of managing such risks.   Derivative instruments, such as swaps, forwards, options or futures,  which are based directly or indirectly upon interest rates and currencies, may  be used by the Company to manage and reduce the risk inherent in currency and  interest rate fluctuations.





The Company does not utilize derivative instruments  for speculative purposes. Derivative instruments utilized by the Company are  transaction-specific so that a specific debt instrument or contract determines  the amount, maturity and other terms of the hedge.





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Quantitative  Disclosure





Interest Rate Risk





The Companys primary interest rate risk exposures arise  from its U.S. dollar long-term fixed rate bond liabilities and other variable  long-term liabilities.  The following  table provides information as of December 31, 2002 about the Companys  interest-earning assets and liabilities, including its long-term debt and its  private placement with U.S. insurance companies and other institutional  investors, which are sensitive to changes in interest rates, based upon their  respective contractual maturity dates:





|(Amounts in million of Ch$)            |  | 2003 |        | 2004 |  | 2005   |   | 2006 |        | 2007 |  | Thereafter |   | Total |       | Estimated    fair    Market Value | 
|-------------------------------------- |  | ---- | ------ | ---- |  | ------ | - | ---- | ------ | ---- |  | ---------- | - | ----- | ----- | --------------------------------- | 
|                                       |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|INTEREST EARNING ASSETS                |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|US$ denominated fixed rate (long-term) |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|Time    deposits                       |  |      |        |      |  | 60,723 |   |      | 37,744 |      |  | 5,748      |   |       |       |                                   | 
|Weighted    average interest rate      |  |      |        |      |  | 9.00   | % |      | 11.03  | %    |  | 10.90      | % |       |       |                                   | 
|Reais denominated                      |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|Time    deposits                       |  |      | 229    |      |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|Weighted    average interest rate      |  |      | 11.5   | %    |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|INTEREST BEARING LIABILITIES           |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|Short and    Long-term debt            |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|Fixed Rate                             |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|US$ denominated Bank and other    debt |  |      | 28,125 |      |  | 62,169 |   |      | 39,171 |      |  | 7,176      |   |       |       |                                   | 
|Weighted    average interest rate      |  |      | 3.26   | %    |  | 10.09  | % |      | 11.11  | %    |  | 8.75       | % |       |       |                                   | 
|Variable Rate                          |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|US$    denominated Bank                |  |      | 7,755  |      |  | 18,641 |   |      | 22,342 |      |  | 23,420     |   |       | 9,264 |                                   | 
|Weighted    average interest rate      |  |      | 2.49   | %    |  | 2.71   | % |      | 2.81   | %    |  | 2.84       | % |       | 3.25  | %                                 | 
|Ch$    denominated Bank                |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|Weighted    average interest rate      |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|Other    foreign currencies            |  |      | 863    |      |  |        |   |      |        |      |  |            |   |       |       |                                   | 
|Weighted    average interest rate      |  |      | 2.8    | %    |  |        |   |      |        |      |  |            |   |       |       |                                   | 




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Foreign Currency Risk





The Company is subject to foreign currency exchange  rate risks associated with transactions in financial instruments. The following  table summarizes the financial instruments, denominated in the stated  non-Chilean currencies, held by the Company as of December 31, 2002, based upon  their respective contractual maturity dates:





|(Amounts in million of Ch$)                   |  | 2003 |        | 2004 |  | 2005   |   | 2006 |        | 2007 |  | Thereafter |   | Total |       | Estimated    fair Market Value | 
|--------------------------------------------- |  | ---- | ------ | ---- |  | ------ | - | ---- | ------ | ---- |  | ---------- | - | ----- | ----- | ------------------------------ | 
|                                              |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|ASSETS                                        |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|US$ denominated fixed rate (long - term)      |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Time    Deposits                              |  |      |        |      |  | 60,723 |   |      | 37,744 |      |  | 5,748      |   |       |       |                                | 
|Weighted    average interest rate             |  |      |        |      |  | 9.0    | % |      | 11.03  | %    |  | 10.90      | % |       |       |                                | 
|Reais denominated fixed rate                  |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Time Deposits and Marketable    Securities    |  |      | 229    |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Weihted    average interest rate              |  |      | 11.5   | %    |  |        |   |      |        |      |  |            |   |       |       |                                | 
|LIABILIITIES                                  |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Short - term    liabilities - Long- term debt |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|US$ denominated                               |  |      | 35,880 |      |  | 80,810 |   |      | 61,513 |      |  | 30,596     |   |       | 9,264 |                                | 
|Weighted    average interest rate             |  |      | 3.09   | %    |  | 8.39   | % |      | 8.09   | %    |  | 4.23       | % |       | 3.25  | %                              | 
|Other foreign currencies                      |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Weihted    average interest rate              |  |      | 863    |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|                                              |  |      | 2.8    | %    |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Derivative contracts                          |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Forward foreign currency exchange contracts   |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Receive Reais / Pay US$                       |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Notional    amount                            |  |      | 10,012 |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Average    contractual exchange  rate         |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Interest rate swaps                           |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Notional    amount                            |  |      | 12,864 |      |  |        |   |      |        |      |  |            |   |       |       |                                | 
|Average    contractual exchange rate          |  |      |        |      |  |        |   |      |        |      |  |            |   |       |       |                                | 




For additional information regarding the foreign  currency risk, including as it relates to trade receivables and payables and  fixed assets, see Note 5 to the Consolidated Financial Statements.





Item 12.  Description of Securities Other than Equity Securities





Not applicable.





Item 13.  Default, Dividend Arrearages and Delinquencies





Not applicable.





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





Not applicable.





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Item 15.  Controls and Procedures





Within 90 days prior to the filing date of this report  (the Evaluation Date), the Companys Chief Executive Officer and Chief  Financial Officer evaluated the effectiveness of the design and operation of  the Companys disclosure controls and procedures (as defined in the  Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c) under the  Securities Exchange Act of 1934). Based on that evaluation, these officers have  concluded that as of the Evaluation Date, the Companys disclosure controls and  procedures were effective to ensure that material information relating to the  Company and the Companys consolidated subsidiaries would be made known to them  by others within those entities.





Changes in Internal Controls





There were no significant changes in the Companys  internal controls or, to the Companys knowledge, in other factors that could  significantly affect the Companys internal controls subsequent to the  Evaluation Date. There were no significant deficiencies or material weaknesses  in the Companys internal controls and as a result, no corrective actions were  required or undertaken.





Item 16.  Reserved





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PART IV





Item 17.  Financial Statements





The Companys financial statements have been prepared  in accordance with Item 18.





Item 18.  Financial Statements





See pages F-1
  through F-54, incorporated herein by reference.  The following is an index
  to the financial statements:





|                                                                                                           | Page
|---------------------------------------------------------------------------------------------------------- | ----
|                                                                                                           |     
|Consolidated Financial Statements    for Masisa S.A. and Subsidiaries                                      |     
|                                                                                                           |     
|Report of independent accountants                                                                          | F-2 
|                                                                                                           |     
|Consolidated balance sheets as of    December 31, 2000 and 2001                                            | F-3 
|                                                                                                           |     
|Consolidated statements of income for    each of the three years ended December 31, 1999, 2000 and 2001    | F-4 
|                                                                                                           |     
|Consolidated statement of cash flows    for each of the three years ended December 31, 1999, 2000 and 2001 | F-5 
|                                                                                                           |     
|Notes to Consolidated Financial    Statements                                                              | F-7 




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Item 19.  Exhibits





Documents filed as exhibits to this Annual Report:





|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                       
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                                                                                   
|1.1         |  | Bylaws (estatutos sociales) of Masisa S.A., together    with an English translation (previously filed with the Securities and    Exchange Commission as Exhibit 1.1 on Form 20-F dated June 29, 2001 and    incorporated by reference herein).                                                                                    
|            |  |                                                                                                                                                                                                                                                                                                                                   
|2.1         |  | Form of Deposit Agreement among the Company, Bank of    New York and holders from time to time of American Depositary Receipts issued    thereunder, including the form of the Depositary Receipt (incorporated by    reference to the statement on Form F-6, Registration No. 33-63154, filed by    Masisa S.A. on May 21, 1993).
|            |  |                                                                                                                                                                                                                                                                                                                                   
|8.1         |  | List of subsidiaries of the Company.                                                                                                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                                                   
|12.1        |  | Certification pursuant to Section 906 of the    Sarbanes-Oxley Act of 2002 (furnished under Section 18 of the Securities    Exchange Act of 1934).                                                                                                                                                                                




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SIGNATURE





Pursuant to the requirements of Section 12 of the  Securities Exchange Act of 1934, the Registrant certifies that it meets all of  the requirements for filing on Form 20-F and has duly caused this annual report  to be signed on its behalf by the undersigned, thereunto duly authorized.





Date:    June 30, 2003





| | MASISA S.A.
| | -----------
| |            
| | By:        
| |            
| |            




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Annual  Certifications


Pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002





I, Carlos Marín, certify that:





1.  I have reviewed this annual report of  Form 20-F of Masisa S.A.;





2.  Based on my knowledge, this annual  report does not contain any untrue statement of a material fact or omit to  state a material fact necessary to make the statements made, in light of the  circumstances under which such statements were made, not misleading with  respect to the period covered by this annual report;





3.  Based on my knowledge, the financial  statements, and other financial information included in this annual report,  fairly present in all material respects the financial condition, results of operations  and cash flows of the registrant as of, and for, the periods presented in this  annual report;





4.  The registrants other certifying  officers and I are responsible for establishing and maintaining disclosure  controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)  for the registrant and we have:





a)  designed such disclosure controls and  procedures to ensure that material information relating to the registrant,  including its consolidated subsidiaries, is made known to us by others within  those entities, particularly during the period in which this annual report is  being prepared;





b)  evaluated the effectiveness of the  registrants disclosure controls and procedures as of a date within 90 days  prior to the filing date of this annual report (the Evaluation Date); and





c)  presented in this annual report our  conclusions about the effectiveness of the disclosure controls and procedures  based on our evaluation as of the Evaluation Date;





5.  The registrants other certifying officers  and I have disclosed, based on our most recent evaluation, to the registrants  auditors and the audit committee of registrants board of directors (or persons  performing the equivalent function):





a)  all significant deficiencies in the  design or operation of internal controls which could adversely affect the  registrants ability to record, process, summarize and report financial data  and have identified for the registrants auditors any material weaknesses in  internal controls; and





b)  any fraud, whether or not material, that  involves management or other employees who have a significant role in the  registrants internal controls; and





6.  The registrants other certifying  officers and I have indicated in this annual report whether or not there were  significant changes in internal controls or in other factors that could  significantly affect internal controls subsequent to the date of our most  recent evaluation, including any corrective actions with regard to significant  deficiencies and material weaknesses.





Date: June 30, 2003





| | /s/ CARLOS MARÍN       
| | -----------------------
| | Carlos Marín           
| | Chief Financial Officer




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Annual  Certifications  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002





I, Eduardo Vial, certify that:





1.  I have reviewed this annual report of  Form 20-F of Masisa S.A.;





2.  Based on my knowledge, this annual  report does not contain any untrue statement of a material fact or omit to  state a material fact necessary to make the statements made, in light of the  circumstances under which such statements were made, not misleading with  respect to the period covered by this annual report;





3.  Based on my knowledge, the financial  statements, and other financial information included in this annual report,  fairly present in all material respects the financial condition, results of  operations and cash flows of the registrant as of, and for, the periods  presented in this annual report;





4.  The registrants other certifying officers  and I are responsible for establishing and maintaining disclosure controls and  procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant and we have:





a)  designed such disclosure controls and  procedures to ensure that material information relating to the registrant,  including its consolidated subsidiaries, is made known to us by others within  those entities, particularly during the period in which this annual report is  being prepared;





b)  evaluated the effectiveness of the registrants  disclosure controls and procedures as of a date within 90 days prior to the  filing date of this annual report (the Evaluation Date); and





c)  presented in this annual report our  conclusions about the effectiveness of the disclosure controls and procedures  based on our evaluation as of the Evaluation Date;





5.  The registrants other certifying  officers and I have disclosed, based on our most recent evaluation, to the  registrants auditors and the audit committee of registrants board of directors  (or persons performing the equivalent function):





a)  all significant deficiencies in the  design or operation of internal controls which could adversely affect the  registrants ability to record, process, summarize and report financial data  and have identified for the registrants auditors any material weaknesses in  internal controls; and





b)  any fraud, whether or not material, that  involves management or other employees who have a significant role in the  registrants internal controls; and





6.  The registrants other certifying  officers and I have indicated in this annual report whether or not there were  significant changes in internal controls or in other factors that could  significantly affect internal controls subsequent to the date of our most  recent evaluation, including any corrective actions with regard to significant  deficiencies and material weaknesses.





Date: June 30, 2003





| | /s/ EDUARDO VIAL       
| | -----------------------
| | Eduardo Vial           
| | Chief Executive Officer




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MASISA S.A.





Consolidated financial statements





December 31, 2002





CONTENTS





Report of independent accountants


Consolidated balance sheets


Consolidated statements of income


Consolidated statements of cash flows


Notes to the consolidated financial statements





|Ch$   | - | Chilean pesos                                                                                                                                                            
|----- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ThCh$ | - | Thousands of Chilean pesos                                                                                                                                               
|MCh$  | - | Millions of Chilean pesos                                                                                                                                                
|US$   | - | United States dollars                                                                                                                                                    
|ThUS$ | - | Thousands of United States dollars                                                                                                                                       
|MUS$  | - | Millions of United States dollars                                                                                                                                        
|ThRe$ | - | Thousands of Brazilian Reais                                                                                                                                             
|ThPa$ | - | Thousands of Argentine Pesos                                                                                                                                             
|UF    | - | A UF (Unidad de Fomento) is an inflation-indexed    peso-denominated monetary unit.  The    UF rate is set daily in advance based on the previous months inflation rate.







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|  | REPORT OF INDEPENDENT ACCOUNTANTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  | To the Board of Directors and Shareholders of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  | MASISA S.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|1 | We have audited the accompanying consolidated    balance sheets of MASISA S.A. and its subsidiaries (the Company) as of    December 31, 2001 and 2002 and the related consolidated statements of income    and of cash flows for each of the three years in the period ended December    31, 2002, all expressed in thousands of constant Chilean pesos.  These financial statements are the    responsibility of the management of the Company.  Our responsibility is to express an opinion on these financial    statements based on our audits.                                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2 | We conducted our audits in accordance with auditing    standards generally accepted in both Chile and the United States of    America.  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.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3 | In our opinion, the consolidated financial    statements referred to above present fairly, in all material respects, the    financial position of MASISA S.A. and its subsidiaries as of December 31,    2001 and 2002 and the results of their operations and their cash flows for    each of the three years in the period ended December 31, 2002, in conformity    with accounting principles generally accepted in Chile.                                                                                                                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4 | Accounting principles generally accepted in Chile    vary in certain important respects from accounting principles generally    accepted in the United States of America and as allowed by Item 18 to Form    20-F.  The application of the latter    would have affected the determination of consolidated net income expressed in    constant Chilean pesos for each of the three years in the period ended    December 31, 2002 and the determination of consolidated shareholders equity,    also expressed in constant Chilean pesos, as of December 31, 2001 and 2002 to    the extent summarized in Note 24 to the consolidated financial statements.                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  | Santiago, Chile                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  | February 7, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          




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MASISA  S.A. AND SUBSIDIARIES





CONSOLIDATED  BALANCE SHEETS





Restated for general  price-level changes and expressed in thousands of


constant Chilean pesos of  December 31, 2002





|                                                                  |  | At    December 31, |            
|----------------------------------------------------------------- |  | ------------------ | -----------
|                                                                  |  | 2001               |            
|                                                                  |  |                    |            
|                                                                  |  | ThCh$              |            
|ASSETS                                                            |  |                    |            
|CURRENTS ASSETS                                                   |  |                    |            
|Cash                                                              |  |                    | 5,223,149  
|Time deposits                                                     |  |                    | 9,806,026  
|Accounts receivable    (Note 4)                                   |  |                    | 36,784,784 
|Notes and accounts    receivable from related companies (Note 19) |  |                    | 4,220,540  
|Inventories (Note 6)                                              |  |                    | 30,917,938 
|Recoverable taxes (Note    15 b)                                  |  |                    | 3,415,370  
|Other current assets    (Note 7)                                  |  |                    | 1,548,719  
|                                                                  |  |                    |            
|Total current assets                                              |  |                    | 91,916,526 
|                                                                  |  |                    |            
|PROPERTY, PLANT AND EQUIPMENT (net) (Note 9)                      |  |                    | 404,665,771
|                                                                  |  |                    |            
|OTHER ASSETS                                                      |  |                    |            
|Investments in related    companies (Note 10)                     |  |                    | 269,570    
|Goodwill and negative    goodwill, net (Note 11)                  |  |                    | 1,214,540  
|Long-term receivables                                             |  |                    | 1,318,566  
|Notes and accounts    receivable from related companies (Note 19) |  |                    | 2,037,685  
|Other assets (Note 12)                                            |  |                    | 95,277,123 
|                                                                  |  |                    |            
|Total other assets                                                |  |                    | 100,117,484
|                                                                  |  |                    |            
|Total assets                                                      |  |                    | 596,699,781
|                                                                  |  |                    |            




|                                                                                                       |  | At    December 31, |            
|------------------------------------------------------------------------------------------------------ |  | ------------------ | -----------
|                                                                                                       |  | 2001               |            
|                                                                                                       |  |                    |            
|                                                                                                       |  | ThCh$              |            
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                   |  |                    |            
|CURRENT LIABILITIES                                                                                    |  |                    |            
|Short-term bank loans    (Note 13)                                                                     |  |                    | 17,571,279 
|Current portion of    long-term bank loans (Note 14 a)                                                 |  |                    | 7,631,452  
|Other long-term    liabilities due within one year (Note 14 b)                                         |  |                    | 2,090,003  
|Dividends payable                                                                                      |  |                    | 106,523    
|Accounts payable                                                                                       |  |                    | 14,659,267 
|Notes and accounts    payable to related companies (Note 19)                                           |  |                    | 109,962    
|Accrued liabilities    (Note 16)                                                                       |  |                    | 5,777,181  
|Withholdings payable                                                                                   |  |                    | 979,682    
|Other current    liabilities                                                                           |  |                    | 41,708     
|                                                                                                       |  |                    |            
|Total current    liabilities                                                                           |  |                    | 48,967,057 
|                                                                                                       |  |                    |            
|LONG-TERM LIABILITIES                                                                                  |  |                    |            
|Long-term bank loans    (Note 14 a)                                                                    |  |                    | 151,654,129
|Deferred income taxes    (Note 15 c)                                                                   |  |                    | 5,175,944  
|Other long-term    liabilities (Note 14 b)                                                             |  |                    | 50,845,727 
|                                                                                                       |  |                    |            
|Total long-term    liabilities                                                                         |  |                    | 207,675,800
|                                                                                                       |  |                    |            
|MINORITY INTEREST (Note 22)                                                                            |  |                    | 42,854,497 
|                                                                                                       |  |                    |            
|COMMITMENTS AND CONTINGENCIES (Note 18)                                                                |  |                    |            
|SHAREHOLDERS EQUITY (Note 17)                                                                         |  |                    |            
|Common stock    (928,514,743 shares in 2002 and 2001, authorized and outstanding with no par    value) |  |                    | 170,326,091
|Reserves                                                                                               |  |                    | 23,008,720 
|Retained earnings                                                                                      |  |                    | 103,867,616
|                                                                                                       |  |                    |            
|Total shareholders    equity                                                                          |  |                    | 297,202,427
|                                                                                                       |  |                    |            
|Total liabilities and    shareholders equity                                                          |  |                    | 596,699,781
|                                                                                                       |  |                    |            




The accompanying Notes 1  to 24 form an integral part of these consolidated financial statements.





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MASISA  S.A. AND SUBSIDIARIES





CONSOLIDATED  STATEMENTS OF INCOME





Restated for general  price-level changes and expressed in thousands of


constant Chilean pesos of  December 31, 2002





|                                                    |  | For the    years ended December 31, |            
|--------------------------------------------------- |  | ----------------------------------- | -----------
|                                                    |  | 2000                                |            
|                                                    |  |                                     |            
|                                                    |  | ThCh$                               |            
|OPERATING RESULTS                                   |  |                                     |            
|Net sales                                           |  |                                     | 118,344,708
|Cost of sales                                       |  |                                     | (72,451,892
|                                                    |  |                                     |            
|Gross margin                                        |  |                                     | 45,892,816 
|Selling and    administrative expenses              |  |                                     | (17,989,012
|                                                    |  |                                     |            
|Operating income                                    |  |                                     | 27,903,804 
|                                                    |  |                                     |            
|NON-OPERATING RESULTS                               |  |                                     |            
|Non-operating income    (Note 20)                   |  |                                     | 7,302,295  
|Non-operating expenses    (Note 21)                 |  |                                     | (11,754,467
|Price-level restatement    (Note 24 a)              |  |                                     | (511,885   
|                                                    |  |                                     |            
|Non-operating results                               |  |                                     | (4,964,057 
|                                                    |  |                                     |            
|                                                    |  |                                     |            
|Income before income    taxes and minority interest |  |                                     | 22,939,747 
|Income taxes (Note 15 a)                            |  |                                     | (4,759,144 
|                                                    |  |                                     |            
|Income before minority    interest                  |  |                                     | 18,180,603 
|Minority interest                                   |  |                                     | (185,430   
|                                                    |  |                                     |            
|NET INCOME                                          |  |                                     | 17,995,173 
|                                                    |  |                                     |            




The accompanying Notes 1  to 24 form an integral part of these consolidated financial statements.





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MASISA  S.A. AND SUBSIDIARIES





CONSOLIDATED  STATEMENTS OF CASH FLOWS





Restated for general  price-level changes and expressed in thousands of


constant Chilean pesos of  December 31, 2002





|                                                                         |  | For the    years ended December 31, |             
|------------------------------------------------------------------------ |  | ----------------------------------- | ------------
|                                                                         |  | 2000                                |             
|                                                                         |  |                                     |             
|                                                                         |  | ThCh$                               |             
|CASH FLOWS FROM OPERATING ACTIVITIES                                     |  |                                     |             
|Net income for the year                                                  |  |                                     | 17,995,173  
|Charges (credits) to    income which do not represent movement of funds: |  |                                     |             
|Depreciation                                                             |  |                                     | 10,871,146  
|Amortization of    intangibles and goodwill                              |  |                                     | 199,583     
|Write-offs and    provisions                                             |  |                                     | 2,893,129   
|Provision for deferred    income taxes                                   |  |                                     | 575,525     
|Equity in losses    (earnings) of equity method investments              |  |                                     | 182,988     
|Gain on sale of shares    of subsidiaries and investments                |  |                                     | (497,993    
|Price-level restatement                                                  |  |                                     | 511,885     
|Minority interest                                                        |  |                                     | 185,430     
|Other                                                                    |  |                                     | (656,035    
|Changes in assets that    affect the movement of cash flows:             |  |                                     |             
|Increase in trade    accounts receivable                                 |  |                                     | (2,573,758  
|(Increase) in    inventories                                             |  |                                     | (1,152,970  
|(Increase) decrease in    other assets                                   |  |                                     | 830,152     
|Changes in liabilities    that affect the movement of cash flows:        |  |                                     |             
|(Decrease) increase in    accounts payable                               |  |                                     | 951,382     
|Increase in other    accounts payable                                    |  |                                     | 2,260,685   
|Increase (decrease) in    Value-added tax recoverable and other taxes    |  |                                     | 4,641,275   
|                                                                         |  |                                     |             
|Net cash provided by    operating activities                             |  |                                     | 37,217,597  
|                                                                         |  |                                     |             
|CASH FLOWS FROM INVESTING ACTIVITIES                                     |  |                                     |             
|Proceeds from sale of    property, plant and equipment                   |  |                                     | 614,903     
|Proceeds from sale of    subsidiaries and investments                    |  |                                     | 5,077,871   
|Purchase of property,    plant and equipment                             |  |                                     | (57,006,339 
|Acquisition of subsidiary,    net cash acquired                          |  |                                     | (24,241,735 
|Investment in related    company                                         |  |                                     |            
|Long-term receivables                                                    |  |                                     |            
|Investment in time    deposits                                           |  |                                     | (34,113,864 
|Increase in accounts    receivable from related companies                |  |                                     | (2,681,954  
|Other investing    activities                                            |  |                                     |            
|                                                                         |  |                                     |             
|Net cash used in    investing activities                                 |  |                                     | (112,351,118
|                                                                         |  |                                     |             




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Page 2





MASISA  S.A. AND SUBSIDIARIES





CONSOLIDATED  STATEMENTS OF CASH FLOWS





Restated for general  price-level changes and expressed in thousands of


constant Chilean pesos of  December 31, 2002





|                                               |  | For the    years ended December 31, |           
|---------------------------------------------- |  | ----------------------------------- | ----------
|                                               |  | 2000                                |           
|                                               |  |                                     |           
|                                               |  | ThCh$                               |           
|CASH FLOW FROM FINANCING ACTIVITIES            |  |                                     |           
|Capital increase                               |  |                                     | 110       
|Dividends paid                                 |  |                                     | (5,159,272
|Borrowings from banks    and others            |  |                                     | 88,113,225
|Payment of loans from    related companies     |  |                                     | (7,724,686
|Payment of loans                               |  |                                     | (8,540,124
|Other financing    activities                  |  |                                     |          
|                                               |  |                                     |           
|Net cash provided by    financing activities   |  |                                     | 66,689,253
|                                               |  |                                     |           
|INFLATION EFFECT ON CASH AND CASH EQUIVALENTS  |  |                                     | (1,501,534
|                                               |  |                                     |           
|NET DECREASE IN CASH AND CASH EQUIVALENTS      |  |                                     | (9,945,802
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR |  |                                     | 24,881,998
|                                               |  |                                     |           
|CASH AND CASH EQUIVALENTS AT END OF YEAR       |  |                                     | 14,936,196
|                                               |  |                                     |           




Supplemental disclosure of cash flow information:





|                                                   |  | 2000  |             | 2001  |  | 2002      | 
|-------------------------------------------------- |  | ----- | ----------- | ----- |  | --------- | 
|                                                   |  |       |             |       |  |           | 
|                                                   |  | ThCh$ |             | ThCh$ |  | ThCh$     | 
|Cash paid during the year for:                     |  |       |             |       |  |           | 
|Interest (net of amount    capitalized)            |  |       | 5,605,636   |       |  | 7,889,242 | 
|Income taxes                                       |  |       | 1,826,217   |       |  | 4,175,943 | 
|Acquisition of subsidiary:                         |  |       |             |       |  |           | 
|Current assets,    excluding cash acquired         |  |       | 10,072,164  |       |  |          | 
|Non current assets                                 |  |       | 27,992,252  |       |  |          | 
|Current liabilities                                |  |       | (14,692,858 | )     |  |          | 
|Deferred income taxes                              |  |       | (100,376    | )     |  |          | 
|Non current liabilities                            |  |       | (35,332     | )     |  |          | 
|Net assets acquired in    excess of purchase price |  |       | 1,005,885   |       |  |          | 
|                                                   |  |       |             |       |  |           | 
|Net cash used in    acquisition                    |  |       | 24,241,735  |       |  |          | 
|                                                   |  |       |             |       |  |           | 




The accompanying Notes 1 to 24 form an integral part of these  consolidated financial statements.





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MASISA  S.A. AND SUBSIDIARIES





NOTES TO  THE CONSOLIDATED FINANCIAL STATEMENTS





Restated for price-level  changes and expressed in thousands of constant


Chilean pesos of December  31, 2002





NOTE 1 - THE COMPANY





MASISA S.A. (Masisa and together with its controlled subsidiaries,  the Company) is a sociedad anónima abierta (a public corporation) whose  stocks are quoted on the Chilean stock exchanges and whose American Depository  Receipts are traded on the New York Stock Exchange.  It is regulated by the Superintendency of Securities and  Insurance in Chile and the Securities and Exchange Commission in the United  States of America.  The Company  manufactures particle board, medium density fiberboards (MDF), Oriented Strand  Boards (OSB) and wood doors for residential and commercial applications.  The Company sells its products mainly in  Chile, Mexico, Argentina and Brazil.





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





|a) | Basis of preparation of consolidated financial    statements
|-- | ------------------------------------------------------------




The consolidated financial statements have been prepared in accordance  with accounting principles generally accepted in Chile and the accounting  regulations of the Chilean Superintendency of Securities and Insurance.  Where differences exist between the  standards of the Superintendency of Securities and Insurance and the Chilean  Institute of Accountants, the standards of the former will prevail.  The consolidated financial statements  include the accounts of Masisa and the following subsidiaries which it  controls:





|                                                    |  |                                                      |  | Ownership    at December 31, |         
|--------------------------------------------------- |  | ---------------------------------------------------- |  | ---------------------------- | --------
|Company                                             |  | Business                                             |  | 2001                         |         
|                                                    |  |                                                      |  |                              |         
|                                                    |  |                                                      |  | %                            |         
|Masisa Argentina S.A.                               |  | Production of wood products and forestry by-products |  |                              | 100.0000
|Masisa Overseas Ltd.                                |  | Investments                                          |  |                              | 100.0000
|Masisa Inversiones Ltda.                            |  | Investments                                          |  |                              | 100.0000
|Inversiones Coronel Ltda.                           |  | Investments                                          |  |                              | 100.0000
|Masisa do Brasil Ltda.                              |  | Production of wood products and forestry by-products |  |                              | 100.0000
|Masisa Cabrero S.A. (1)                             |  | Production of wood products and forestry by-products |  |                              | 100.0000
|Forestal Tornagaleones S.A. and subsidiaries    (2) |  | Forestry                                             |  |                              | 53.9956 
|Maderas y Sintéticos del Perú S.A.C. (3)            |  | Sales of wood products                               |  |                              | 99.9011 
|C y D Agrofruta Ltda. (4)                           |  | Investments                                          |  |                              | 100.0000
|Maderas y Sintéticos Servicios S.A. de C.V. (5)     |  | Services                                             |  |                              | 100.0000
|Maderas y Sintéticos México S.A.  de C.V. (5)       |  | Sales of products                                    |  |                              | 100.0000
|Masisa Partes y Piezas Ltda. (6)                    |  | Production of wood products                          |  |                              |        
|Masisa Ecuador S.A. (7)                             |  | Sales of wood products                               |  |                              |        




|(1) | On August 22, 2001, the    Company purchased the remaining 7.39% of the outstanding shares of Masisa    Cabrero S.A.
|--- | --------------------------------------------------------------------------------------------------------------------




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|(2) | On June 27, 2002 the    Company made a capital infusion of ThCh$5,142,995 in its subsidiary  Forestal Tornagaleones S.A    (Tornagaleones), which increased its ownership by 6.45%.                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Effective January 1, 2001,    Tornagaleones and its subsidiaries were incorporated in the financial    statement consolidation as restrictions relative to the control of the above    subsidiarys operations expired during the period.                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Until December 31, 2000 the    Company did not consolidate Tornagaleones, despite its 54% ownership, based    on authorization received from the Superintendency of Securities and    Insurance in 1997. An agreement with the minority shareholder, which expired    in 2001, established joint control over Tornagaleones.  Accordingly, the investment in    Tornagaleones was accounted under the equity method of accounting prior to    January 1, 2001.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(3) | The Company did not    consolidate Maderas y Sintéticos del Perú S.A.C. as it was in the development    stage at December 31, 2000 and 1999.                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | On January 1, 2001, Maderas    y Sintéticos del Perú S.A.C. began operation, which consisted of product    trading.  Therefore as of December 31,    2001 its financial statements have been included in the consolidation of Masisa    S.A. and subsidiaries.                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(4) | On November 19, 2001, the    Company purchased 100% of the equity of C y D Agrofruta Ltda.                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(5) | On August 23, 2001, the    Company incorporated these subsidiaries and there were no operations in    2001.  Operations began in 2002.                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(6) | On June 26, 2002, the Company    incorporated and initiated operations of this subsidiary.                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(7) | On October 23, 2002, the    Company incorporated and initiated operations of this subsidiary.                                                                                                                                                                                                                                                                                                                                                                 




All significant balances and transactions among the companies have been  eliminated in consolidation, as well as unrealized gains or losses arising from  such transactions.  The participation of  minority shareholders in subsidiaries has been given effect in the consolidated  financial statements under Minority interest.





|b) | Price-level restatements
|-- | ------------------------




The consolidated financial statements, which are expressed in Chilean  pesos, have been restated to reflect the effects of variations in the  purchasing power of the local currency during each year.  For this purpose, and in accordance with  current Chilean regulations, non-monetary assets, liabilities and equity  accounts and the income and expense accounts have been restated in terms of  year-end constant pesos, unless not required by Technical Bulletin No. 64 (see  Note 2 n)).  The resulting net charge or  credit to income arises as a result of the gain or loss in purchasing power  from the holding of monetary assets and liabilities exposed to the effects of  inflation.





In accordance with Chilean tax regulations and accounting practices,  the restatements were calculated based on the official Consumer Price Index of  the National Institute of Statistics, which was 4.7%, 3.1% and 3.0% for the  years ended November 30, 2000, 2001 and 2002, respectively.  This index is considered by the business  community, the accounting profession and the Chilean government to be the index  which most closely complies with the technical requirement to reflect the  variation in the general level of prices in the country and, consequently, is  widely used for financial reporting purposes in Chile. For comparative  purposes, the consolidated financial statements for the year ended  December 31, 2000 and as of and for the year ended December 31, 2001 and  amounts disclosed in the related footnotes have been restated in terms of  Chilean pesos of December 31, 2002 purchasing power.





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The above-mentioned price-level restatements do not purport to present  appraised 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 the net result 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.





|c) | Assets and liabilities in foreign currency and    indexed units
|-- | ---------------------------------------------------------------




Assets and liabilities in foreign currency included in the consolidated  balance sheet and detailed in Note 5 have been translated into Chilean  pesos at the Observed Exchange Rates determined by the Central Bank of Chile in  effect at each year end (historical rates of Ch$573.65. per US$1 in 2000,  Ch$654.79 per US$1 in 2001 and Ch$718.61 per US$1 in 2002).  Transaction gains and losses are recorded in  income.





Certain assets and liabilities are denominated in index-linked Unidades  de Fomento units (UF).  Each UF was  equivalent to Ch$15,769.92 at December 31, 2000, Ch$16,262.66 at December 31,  2001 and Ch$16,744.12 at December 31, 2002.





|d) | Time deposits and marketable securities
|-- | ---------------------------------------




Time deposits are recorded at cost plus accrued interest and  price-level restatements at each year end.





Marketable securities are comprised of shares in money market mutual  funds which are stated at quoted values at the end of each year.





|e) | Allowance for doubtful accounts
|-- | -------------------------------




The Company has recorded allowances to cover the possible  non-collection of accounts receivable, which are shown as a deduction from  accounts receivable.  These allowances  are established at 1% of receivables from Chilean customers plus additional  allowances for specific customer where collection is doubtful.





|f) | Inventories
|-- | -----------




Inventories are valued at the lower of price-level restated production  or acquisition cost, including indirect manufacturing costs, and market  value.  Costs are removed from  inventories using the average cost method.   Reserves for obsolete inventories are recorded to cover inherent losses  as a result of obsolescence.





As of December 31 of each year, inventory of forests and plantation in  exploitation are stated at the commercially appraised value at which these  forests were transferred from fixed assets.





|g) | Other current assets
|-- | --------------------




Prepaid expenses are stated at cost plus price-level restatements.  Prepaid expenses include current deferred  income taxes that are recorded as described in Note 2 k).





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|h) | Property, plant and equipment
|-- | -----------------------------




Property, plant and equipment, except timber resources, are stated at  cost, which includes capitalized interest and price-level restatements. Depreciation  for each year is calculated by the straight-line method based on the estimated  useful life of each asset.





Financing costs of projects requiring major investments in long-term  construction and those incurred from financing of specific projects are  capitalized and amortized over the estimated useful lives of the related  assets.





Other fixed assets include spare parts inventories without significant  turnover within a one-year period that are valued as described in Note 2  f).  Those items with significant  relative value are depreciated in the same period of time as the asset with  which they are associated, while those items with frequent use are charged to  cost of production when used.





In the case of Tornagaleones, tree development costs and forest maintenance  costs are capitalized as incurred and such costs are adjusted for price-level  restatements.  However, at  December 31 of each year, timber resources are adjusted to reflect values  based on technical appraisals performed by specialized forestry engineers.  The carrying values of the forests are  allocated to Inventories on a unit-of-production basis when cut and to Cost of  sales when sold.





As a result of the above accounting treatment, Tornagaleones records  timber resources at appraisal value prior to cutting, and records them in Cost  of sales when the timber is cut and sold.





Timber resources include financing costs during the planting and growth  period.





Assets purchased under financing leases are recorded at the current  value of the contract, calculated by discounting the installment payments and  the purchase option at the interest rate established in the related  contract.  The related obligation is  presented in short and long-term liabilities, net of accrued interest.





Assets to be disposed of at year-end have been recorded under Other  assets at fair value based on an independent appraisal.





|i) | Investments in affiliated companies
|-- | -----------------------------------




Investments in affiliated companies are recorded under the equity  method when they represent a non-controlling ownership interest in excess of  10% of the investee.  Accordingly, the  Companys proportional share in the net income of the investee is recognized in  the consolidated statement of income on an accrual basis, after eliminating any  unrealized profits from transactions with affiliated companies.





|j) | Goodwill
|-- | --------




The difference between the cost and net book value of an acquired  company or an investment in an affiliated company at the acquisition date is  recorded as goodwill (positive or negative) and then amortized to income over  periods of ten to twenty years.





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|k) | Income taxes and deferred income taxes
|-- | --------------------------------------




The Company has recognized its current tax obligations in conformity  with current legislation.





As from January 1, 2000, the effects of deferred income taxes arising  from temporary differences between the basis of assets and liabilities for tax  and financial statement purposes are recorded in accordance with Technical  Bulletins Nos. 60, 68 and 69 of the Chilean Institute of Accountants and  Circular No. 1,466 of the Superintendency of Securities an Insurance.  The effects of deferred income taxes at  January 1, 2000 that were not previously recorded are recognized in income beginning  in 2001 as the temporary differences are reversed.





|l) | Revenue recognition
|-- | -------------------




Revenues are recognized when products are shipped.  Revenues which the Company has billed and  collected in advance are deferred until the related products are shipped.





|m) | Employee vacations
|-- | ------------------




Vacations are accrued as a liability when earned by employees.





|n) | Translation of foreign currency financial statements
|-- | ----------------------------------------------------




The investments in subsidiaries located outside of Chile are recorded  in accordance with Technical Bulletin No. 64 of the Chilean Institute of  Accountants.





In accordance with Technical Bulletin No. 64, the financial  statements of investees in foreign countries that are subject to significant  risks, restrictions or inflation/exchange fluctuations (so called not stable  countries) and that are considered as not extensions of the investors  operations must be remeasured in US dollars.   Accordingly, the financial statements of Masisa Argentina S.A., Maderas  y Sintéticos Mexico S.A. and Masisa do Brasil Ltda. are prepared in accordance  with Chilean GAAP and are then remeasured into US dollars as follows:





|1 | Monetary assets and liabilities were translated at    year-end rates of exchange between the US dollar and the local currency.                                                                                                                       
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                      
|2 | All non-monetary assets and liabilities and    shareholders equity were translated at historical rates of exchange between    the US dollar and the local currency.                                                                                 
|  |                                                                                                                                                                                                                                                      
|3 | Income and expense accounts were translated at    average rates of exchange between the US dollar and the local currency for    the period, except for those arising from non-monetary accounts, which are    included at historic rates of exchange.
|  |                                                                                                                                                                                                                                                      
|4 | Any exchange differences which arise are included in    the results of operations for the period.                                                                                                                                                    




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The difference between the investments equity value arising from the  financial statements remeasured as explained above and the net equity value at  the beginning of the year restated by Chilean inflation, plus the proportional  share of the investments net income for the year, is recorded in the account  Cumulative Translation Adjustment in shareholders equity.





In addition, exchange differences (netted from Chilean inflation)  arising from debt obligations that qualify as foreign currency hedges of the  foreign investments mentioned above are also recorded in the account  Cumulative Translation Adjustment.





Subsidiaries in Peru and Ecuador are considered an extension of  Masisas operations and therefore are controlled in Chilean pesos.





|o) | Use of estimates
|-- | ----------------




The preparation of financial statements in conformity with generally  accepted accounting principles requires management to make estimates and  assumptions that affect the reported amounts of assets and liabilities and  disclosure of contingent assets and liabilities at the date of the financial  statements and the reported amounts of revenues and expenses during the  reporting period.  Significant items  subject to such estimates and assumptions include the carrying value of  property, plant and equipment; allowance for doubtful accounts; inventories;  deferred income tax assets and liabilities for potential litigation claims.  Actual results could differ from those estimates.





|p) | Cash equivalents
|-- | ----------------




For purposes of the consolidated statements of cash flows, the Company  considers all highly liquid debt instruments purchased with a maturity of three  months or less, to be cash equivalents.





Cash flows from operating activities include all cash flows related to  the primary operating activities of the Company and include interest paid,  interest income and, in general, all cash flows that are not defined as  investing or financing activities.  The  concept of operations used in this statement is broader than that used in the  consolidated statement of income.





The balances of cash and cash equivalents were as follows:





|                                           |  | At    December 31, |           
|------------------------------------------ |  | ------------------ | ----------
|                                           |  | 2000               |           
|                                           |  |                    |           
|                                           |  | ThCh$              |           
|Cash                                       |  |                    | 1,482,749 
|Time deposits                              |  |                    | 12,402,961
|Marketable securities (money market funds) |  |                    | 1,050,486 
|                                           |  |                    |           
|Total                                      |  |                    | 14,936,196
|                                           |  |                    |           




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|q) | Impairment of long-lived    assets
|-- | ----------------------------------




The Company periodically evaluates the carrying value of its long-lived  assets for impairment.  The carrying  value of a long-lived asset is considered impaired by the Company when the  expected undiscounted cash flows from such asset are separately identifiable  and less than its carrying value.  In  that event, a loss would be recognized based on the amount by which the  carrying value exceeds the fair market value of the long-lived asset.  Fair market value is determined primarily  using the anticipated cash flows discounted at a rate commensurate with the  risk involved or based on independent appraisals. (see Note 12.)





The Company has performed an evaluation of the assets value of its  subsidiaries in Argentina, Mexico and Brazil.   The Company determined the value of such subsidiaries based on  appraisals which compared the carrying amount of the assets to the net future  undiscounted cash flows that the subsidiaries are expected to generate.  The Company concluded that as of December  31, 2002, no impairment in asset value exists and no adjustments are required.





|r) | Derivative contracts
|-- | --------------------




These contracts are used by the Company to hedge existing items in  order to eliminate or reduce the current exchange rate risk.  In addition, the Company holds swap  contracts to partially cover the risk of fluctuations in the Libor interest  rate.  The hedge instruments are  recorded at their market values at the closing date of financial  statements.  Unrealized losses are  recognized as a change to income and gains are deferred and included in current  portion of long term bank loans.





|s) | Reclassifications
|-- | -----------------




Certain balances from prior years have been reclassified to conform  with current year presentation.





|t) | Computer software
|-- | -----------------




Computer software consists of costs incurred to acquire a SAP R/3  system, Version 4.6C and are depreciated over a period of 4 years.





|u) | Research and development expenses
|-- | ---------------------------------




Research and development expenses are charged to income in the year in  which they occur.  The Company has not  incurred significant expenses during the years ended December 31, 2000, 2001  and 2002.





NOTE 3 - ACCOUNTING CHANGES





Until December 31, 2000 the financial statements of the subsidiary  Maderas y Sintéticos del Perú S.A.C. were excluded from consolidation as the  subsidiary was in a preoperating stage. On January 1, 2001, Maderas y  Sintéticos del Perú S.A.C. began operation, which consisted of product  trading.  Therefore, effective January  1, 2001, its financial statements have been included in the financial  statements of the Company.  Effective  January 1, 2001, the subsidiary Tornagaleones was incorporated in the financial  statement consolidation as restrictions relative to the control of the above  subsidiarys operations expired during the period.





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NOTE 4 - ACCOUNTS RECEIVABLE





Accounts receivable were as follows:





|                                           |  | Accounts    Receivable Aging |            | Totalsat December 31, | 
|------------------------------------------ |  | ---------------------------- | ---------- | --------------------- | 
|                                           |  |                              |            |                      
|                                           |  | 1-90 days                    |            | 91-360 days           | 
|                                           |  | 2001                         |            | 2002                  | 
|                                           |  |                              |            |                       | 
|                                           |  | ThCh$                        |            | ThCh$                 | 
|Trade accounts receivable                  |  |                              | 25,712,757 |                       | 
|Notes receivable                           |  |                              | 8,900,824  |                       | 
|Other accounts receivable                  |  |                              | 1,787,505  |                       | 
|Less:     Allowances for doubtful accounts |  |                              |            |                       | 
|                                           |  |                              |            |                       | 
|Total                                      |  |                              |            |                       | 
|                                           |  |                              |            |                       | 




NOTE 5 - FOREIGN CURRENCY ASSETS AND LIABILITIES





Balances denominated in foreign currencies at each year-end were  included in these financial statements at the following Chilean peso  equivalents:





|                                            |  | At    December 31, |            
|------------------------------------------- |  | ------------------ | -----------
|                                            |  | 2001               |            
|                                            |  |                    |            
|                                            |  | ThCh$              |            
|Assets                                      |  |                    |            
|Current assets                              |  |                    |            
|United States dollars                       |  |                    | 21,297,365 
|Argentine pesos                             |  |                    | 21,013,474 
|Brazilian reais                             |  |                    | 11,641,868 
|Other                                       |  |                    | 2,181,330  
|Property, plant and equipment               |  |                    |            
|United States dollars                       |  |                    | 259,989,977
|Other non-current assets                    |  |                    |            
|United States dollars                       |  |                    | 92,876,664 
|Argentine pesos                             |  |                    | 2,397,385  
|Brazilian reais                             |  |                    | 432,531    
|Other                                       |  |                    |           
|                                            |  |                    |            
|Total assets                                |  |                    | 411,830,594
|                                            |  |                    |            
|Liabilities                                 |  |                    |            
|Short-term bank loans and other liabilities |  |                    |            
|United States dollars                       |  |                    | 31,991,133 
|Argentine pesos                             |  |                    | 3,826,132  
|Brazilian reais                             |  |                    | 1,546,134  
|Other                                       |  |                    | 663,495    
|Other long-term liabilities                 |  |                    |            
|United States dollars                       |  |                    | 193,676,889
|Argentine pesos                             |  |                    | 3,175,051  
|Brazilian reais                             |  |                    | 1,247,345  
|                                            |  |                    |            
|Total liabilities                           |  |                    | 236,126,179
|                                            |  |                    |            
|Net asset position                          |  |                    | 175,704,415
|                                            |  |                    |            




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The principal exchange rates at each year-end used to translate foreign  currency balances to Chilean pesos were as follows:





|                     |  | At    December 31, |       
|-------------------- |  | ------------------ | ------
|                     |  | 2001               |       
|                     |  |                    |       
|                     |  | Ch$                |       
|United States dollar |  |                    | 654.79
|Argentine peso       |  |                    | 385.17
|Brazilian reais      |  |                    | 282.97




NOTE 6 - INVENTORIES





The principal components of inventories were as follows:





|                                                          |  | At    December 31, |           
|--------------------------------------------------------- |  | ------------------ | ----------
|                                                          |  | 2001               |           
|                                                          |  |                    |           
|                                                          |  | Ch$                |           
|Finished goods                                            |  |                    | 14,740,979
|Raw materials                                             |  |                    | 5,591,902 
|Other materials                                           |  |                    | 2,559,198 
|Spare parts                                               |  |                    | 4,029,429 
|Forests and plantations in the process of    exploitation |  |                    | 4,438,429 
|Reserve for obsolescence                                  |  |                    | (441,999  
|                                                          |  |                    |           
|Total                                                     |  |                    | 30,917,938
|                                                          |  |                    |           




NOTE 7 - OTHER CURRENT ASSETS





These assets were as follows:





|                                  |  | At    December 31, |          
|--------------------------------- |  | ------------------ | ---------
|                                  |  | 2001               |          
|                                  |  |                    |          
|                                  |  | ThCh$              |          
|Deferred income taxes (Note 15 c) |  |                    | 1,049,442
|Prepaid expenses                  |  |                    | 499,277  
|                                  |  |                    |          
|Total                             |  |                    | 1,548,719
|                                  |  |                    |          




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NOTE 8 - DERIVATIVES





The Company has the following forward foreign exchange contracts:





|2002                |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  |         |  
|------------------- |  | ------------ | -------- | ------------ |  | -------- |  | -------- | --- | ------------- | ----- | --------- |  |  | --- | ----- |  | --------- |  |  | ------- | -
|                    |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  |         |  
|Forward             |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  |         |  
|                    |  | Purchasedate |          | Maturitydate |  | Purchase |  | Sale     |     | Netdifference |      
|Bank                |  |              |          | Currency     |  | Amount   |  | Currency |     | Amount        |       |          
|                    |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  |         |  
|                    |  |              |          |              |  |          |  |          |     |               | ThCh$ |           |  |  |     | ThCh$ |  | ThCh$     | 
|BankBoston S.A.     |  |              | 16/10/02 |              |  | 14/04/03 |  |          | US$ |               |       | 6,249,788 |  |  | Re$ |       |  | 5,748,880 |  |  | 500,908 |  
|B.B.A. Creditanstal |  |              | 20/12/02 |              |  | 07/01/03 |  |          | US$ |               |       | 315,602   |  |  | Re$ |       |  | 323,375   |  |  | (7,773  | )
|B.B.A. Creditanstal |  |              | 20/12/02 |              |  | 06/02/03 |  |          | US$ |               |       | 539,559   |  |  | Re$ |       |  | 546,144   |  |  | (6,585  | )
|Comerica Bank       |  |              | 18/07/02 |              |  | 22/01/03 |  |          | US$ |               |       | 3,593,050 |  |  | Mx$ |       |  | 3,493,193 |  |  | 99,857  |  
|                    |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  |         |  
|Total               |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  | 586,407 |  
|                    |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  |         |  




|Swap          |  |                  |          |                  |  |                    |  |                   |            |       |  |         |  
|------------- |  | ---------------- | -------- | ---------------- |  | ------------------ |  | ----------------- | ---------- | ----- |  | ------- | -
|              |  | Purchase    date |          | Maturity    date |  | Amount    contract |  | Net    difference |           
|Bank          |  |                  |          |                  | 
|              |  |                  |          |                  |  |                    |  |                   |            |       |  |         |  
|              |  |                  |          |                  |  |                    |  | ThCh$             |            | ThCh$ | 
|Citibank N.Y. |  |                  | 24/10/02 |                  |  | 24/10/06           |  |                   | 12,934,980 |       |  | (70,488 | )
|              |  |                  |          |                  |  |                    |  |                   |            |       |  |         |  




|2001             |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  |           | 
|---------------- |  | ------------ | -------- | ------------ |  | -------- |  | -------- | --- | ------------- | ----- | --------- |  |  | --- | ----- |  | --------- |  |  | --------- | 
|                 |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  |           | 
|Forward          |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  |           | 
|                 |  | Purchasedate |          | Maturitydate |  | Purchase |  | Sale     |     | Netdifference |      
|Bank             |  |              |          | Currency     |  | Amount   |  | Currency |     | Amount        |       |          
|                 |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  |           | 
|                 |  |              |          |              |  |          |  |          |     |               | ThCh$ |           |  |  |     | ThCh$ |  | ThCh$     | 
|Bank Boston S.A. |  |              | 08/06/01 |              |  | 02/04/02 |  |          | US$ |               |       | 6,856,753 |  |  | Re$ |       |  | 5,817,337 |  |  | 1,039,416 | 
|                 |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  |           | 
|Total            |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  | 1,039,416 | 
|                 |  |              |          |              |  |          |  |          |     |               |       |           |  |  |     |       |  |           |  |  |           | 




|Swap          |  |                  |          |                  |  |                    |  |                   |            |       |  |         |  
|------------- |  | ---------------- | -------- | ---------------- |  | ------------------ |  | ----------------- | ---------- | ----- |  | ------- | -
|              |  | Purchase    date |          | Maturity    date |  | Amount    contract |  | Net    difference |           
|Bank          |  |                  |          |                  | 
|              |  |                  |          |                  |  |                    |  |                   |            |       |  |         |  
|              |  |                  |          |                  |  |                    |  | ThCh$             |            | ThCh$ | 
|Citibank N.A. |  |                  | 09/05/01 |                  |  | 05/09/03           |  |                   | 12,139,806 |       |  | (48,546 | )
|              |  |                  |          |                  |  |                    |  |                   |            |       |  |         |  
|Total         |  |                  |          |                  |  |                    |  |                   |            |       |  | (48,546 | )
|              |  |                  |          |                  |  |                    |  |                   |            |       |  |         |  




The Company uses forward foreign exchange contracts to hedge the  effects of fluctuations in exchange rates related to obligations denominated in  U.S. dollars and the interest-rate swap contract.





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NOTE 9 - PROPERTY, PLANT AND EQUIPMENT





|a) | Property, plant and equipment were as follows:
|-- | ----------------------------------------------




|                                          |  | At    December 31, |            
|----------------------------------------- |  | ------------------ | -----------
|                                          |  | 2001               |            
|                                          |  |                    |            
|                                          |  | ThCh$              |            
|Land                                      |  |                    | 38,998,287 
|Plants, buildings and other installations |  |                    | 60,980,615 
|Machinery and equipment                   |  |                    | 288,136,046
|Other fixed assets:                       |  |                    |            
|Timber resources                          |  |                    | 64,944,408 
|Furniture, fixtures and    other          |  |                    | 5,806,893  
|Spare parts on hand                       |  |                    | 6,805,749  
|Construction in    progress (c)           |  |                    | 29,384,102 
|Assets under leasing    contracts         |  |                    | 1,167,376  
|Software                                  |  |                    | 2,598,114  
|Other                                     |  |                    | 3,786,379  
|                                          |  |                    |            
|                                          |  |                    | 502,607,969
|Accumulated depreciation                  |  |                    | (97,942,198
|                                          |  |                    |            
|Property, plant and    equipment (net)    |  |                    | 404,665,771
|                                          |  |                    |            
|                                          |  |                    |            




|b) | Depreciation for 2000, 2001 and 2002 amounted to    ThCh$10,871,146, ThCh$14,786,302 and ThCh$17,265,206, respectively.    Depreciation is determined by the straight-line method based on the estimated    useful lives of the revalued assets, which were as follows:
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|                                          |  | Years |      
|----------------------------------------- |  | ----- | -----
|                                          |  |       |      
|Plants, buildings and other installations |  |       | 25-40
|Machinery and equipment                   |  |       | 10-20
|Other fixed assets                        |  |       | 1-10 




|c) | In 2001 the Construction in progress consisted    primarily of the medium density fiberboard (MDF) plant project in Argentina    and Oriented Strand Board (OSB) in Brazil.     These projects were completed during 2002.                                                                                      
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                 
|d) | Assets acquired under finance leases are not, from a    legal point of view, Companys property until the purchase option is    exercised.                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                 
|e) | The Company has capitalized interest amounting to    ThCh$7,649,311 and ThCh$3,899,862 during the years ended December 31, 2001    and 2002, corresponding to the construction of the MDF and OSB plants in    Brazil and in Argentina.  No interest    was capitalized during the year ended December 31, 2000.




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|f) | As described in Note 2 h), Tornagaleones and its    subsidiary Forestal Argentina S.A. have recorded the increased value of their    forests and plantations at year end based on technical appraisals. The    adjustment in value amounted to ThCh$18,949,329 (ThCh$15,632,510 in 2001) and    is included in Timber resources.  The    Company has recognized its proportionate share of the Forestry reserve in    Shareholders equity.  The remaining    balance is included in Minority interests.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | As stated in Note 2 h), Tornagaleones and its    subsidiary Forestal Argentina S.A. have capitalized interest related to    plantation financing in property, plant and equipment totaling ThCh$1,279,724    and ThCh$1,617,451 for the years ended December 31, 2002 and 2001,    respectively.                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|g) | In 2001, the Company recorded a provision to adjust    the net book value of one its Particle board lines, according to projections,    cash flows generated by this line in the future would not cover the related    depreciation charges. Accordingly, the Company recorded a charge to income    for the year ended December 31, 2001 of ThCh$5,570,842, which is shown in the    statement of income under Non-operating expenses (see note 21.)                                                   




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NOTE 10 - INVESTMENTS IN RELATED COMPANIES





|a) | Investments were as follows:
|-- | ----------------------------




|                                             |  | At December 31, |        
|-------------------------------------------- |  | --------------- | -------
|                                             |  |                 |        
|                                             |  | 2000            |        
|                                             |  |                 |        
|                                             |  | Participation   |        
|                                             |  |                 |        
|                                             |  | %               |        
|Investments in affiliated companies:         |  |                 |        
|Forestal Tornagaleones    S.A. (1)           |  |                 | 53.9956
|Georgia - Pacific    Masisa Resina Ltda. (2) |  |                 | 50.0000
|Inversiones    Industriales S.A.             |  |                 | 50.0000
|Portuaria Corral S.A.    (9)                 |  |                 | 0.0025 
|Forestal Río Calle    Calle S.A. (5)         |  |                 | 0.0017 
|Resinas Concordia (3)                        |  |                 | 50.0000
|Maderas y Sintéticos    del Perú S.A.C. (4)  |  |                 | 99.0114
|Masnova S.A. (6)                             |  |                 |       
|Inversiones Calle Calle    S.A. (7)          |  |                 |       
|Forestal Calle Calle    S.A. (8)             |  |                 |       
|Other investments                            |  |                 |        
|                                             |  |                 |        
|Total                                        |  |                 |        
|                                             |  |                 |        




|                                             |  | At    December 31, |        
|-------------------------------------------- |  | ------------------ | -------
|                                             |  |                    |        
|                                             |  | 2002               |        
|                                             |  |                    |        
|                                             |  | Participation      |        
|                                             |  |                    |        
|                                             |  | %                  |        
|Investments in affiliated companies:         |  |                    |        
|Forestal Tornagaleones    S.A. (1)           |  |                    |       
|Georgia - Pacific Masisa    Resina Ltda. (2) |  |                    |       
|Inversiones    Industriales S.A.             |  |                    | 50.0000
|Portuaria Corral S.A.    (9)                 |  |                    |       
|Forestal Río Calle    Calle S.A. (5)         |  |                    | 0.0012 
|Resinas Concordia (3)                        |  |                    |       
|Maderas y Sintéticos    del Perú S.A.C. (4)  |  |                    |       
|Masnova S.A. (6)                             |  |                    | 50.0000
|Inversiones Calle Calle    S.A. (7)          |  |                    | 50.0000
|Forestal Calle Calle    S.A. (8)             |  |                    | 50.0000
|Other investments                            |  |                    |       
|                                             |  |                    |        
|Total                                        |  |                    |        
|                                             |  |                    |        




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|(1) | As described in Note 2 a),    prior to January 1, 2001 the Company did not consolidate Tornagaleones.  At December 31, 2000 the book value of the    investment is presented net of unrealized profits of ThCh$958,508, resulting    from the sale of land and forestry plantations. Summarized balance sheet data    at December 31, 2000 was as follows:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|                   |  | At    December 31,    2000 |            |  |  |                                               | At    December 31,    2000 | 
|------------------ |  | -------------------------- | ---------- |  |  | --------------------------------------------- | -------------------------- | 
|                   |  |                            |            |  |  |                                               |                            | 
|                   |  | ThCh$                      |            |  |  |                                               | ThCh$                      | 
|Assets             |  |                            |            |  |  | Liabilities                                   |                            | 
|Current assets     |  |                            | 6,485,216  |  |  | Current liabilities                           |                            | 
|Land               |  |                            | 32,559,620 |  |  | Long - term liabilities                       |                            | 
|Timber resources   |  |                            | 48,746,172 |  |  | Minority interest                             |                            | 
|Other fixes assets |  |                            | 1,272,324  |  |  | Shareholders equity                          |                            | 
|Other assets       |  |                            | 2,695,294  |  |  |                                               |                            | 
|                   |  |                            |            |  |  |                                               |                            | 
|Total assets       |  |                            | 91,758,626 |  |  | Total liabilities and    shareholders equity |                            | 
|                   |  |                            |            |  |  |                                               |                            | 




|(2) | Net of unrealized profits    of ThCh$691,927 in 2000.                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3) | Net of unrealized profits    of ThCh$656,179 in 2000.                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(4) | Until December 31, 2000 the    financial statements of the subsidiary Maderas y Sintéticos del Perú S.A.C.    were excluded from consolidation as the subsidiary was in a preoperating    stage.  On January 1, 2001 Maderas y Sintéticos    del Perú S.A.C. began operation, which consisted of product trading.  Therefore, effective January 1, 2001, its    financial statements have been included in the consolidation of Masisa S.A.    and subsidiaries.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Summarized balance sheet    information at December 31, 2000 was as follows:                                                                                                                                                                                                                                                                                                                                                                                    




|               |  | At    December 31,    2000 |           |  |  |                                               | At    December 31,    2000 | 
|-------------- |  | -------------------------- | --------- |  |  | --------------------------------------------- | -------------------------- | 
|               |  |                            |           |  |  |                                               |                            | 
|               |  | ThCh$                      |           |  |  |                                               | ThCh$                      | 
|Assets         |  |                            |           |  |  | Liabilities                                   |                            | 
|Current assets |  |                            | 2,173,473 |  |  | Current liabilities                           |                            | 
|Fixes assets   |  |                            | 3,174     |  |  | Shareholders equity:                         |                            | 
|               |  |                            |           |  |  | Capital                                       |                            | 
|               |  |                            |           |  |  | Development period    deficit                 |                            | 
|               |  |                            |           |  |  |                                               |                            | 
|Total assets   |  |                            | 2,176,647 |  |  | Total liabilities and    shareholders equity |                            | 
|               |  |                            |           |  |  |                                               |                            | 




|(5) | This investment has    negative equity at the end of the fiscal year and the Company has therefore    discontinued the equity method, which recognizes the results of the period    (losses) up to the investment amount.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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|(6) | On December 14, 2001, the    Company invested US$2,726.52 in a new company, Masnova de Mexico S.A. de C.V.    The Company owns 50% and Terranova Internacional S.A. owns the remaining 50%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                            
|(7) | On December 9, 2002, the    Company invested ThCh$100 in a new company, Inversiones Calle Calle S.A. The    Company owns 50% and Inversiones Industriales S.A. owns the remaining 50%.     
|    |                                                                                                                                                                                            
|(8) | On November 6, 2002, the    Company invested ThCh$100 in a new company, Forestal Calle Calle S.A. The    Company owns 50% and Jaime Vial Vial owns the remaining 50%.                      
|    |                                                                                                                                                                                            
|(9) | This company was sold on March    14, 2002 for ThCh$57 (historical pesos).                                                                                                                 




|b) | Georgia Pacific Joint Ventures
|-- | ------------------------------




On July 21 1998, the Company signed an Agreement  Memorandum with Georgia Pacific Inc., a subsidiary of Georgia Pacific  Corporation, to create joint ventures to manufacture and develop resins and  chemical products in Chile and Argentina.





In September of 1998, the Company, through its  subsidiaries Inversiones Químicas Limitada and Inversiones Coronel Limitada,  established Georgia Pacific Masisa Resinas Limitada with a capital contribution  of ThCh$ 7,080,000 (historical pesos) to develop the business in Chile.  It also established Resinas Concordia S.A.  with a capital contribution of ThCh$ 7,735,695 (historical pesos) to develop  the business in Argentina. On September 30, 1998, Georgia Pacific Inc. paid  ThCh$ 11,230,105 (historical pesos) for 50% of the shares of these companies.





These joint ventures included, among other  things, the signing of resin supply contracts in Chile and Argentina to ensure  the normal supply of resin for the present and future needs of the Company in  Chile and Argentina, the signing of a shareholders agreement which included an  option to sell, by Masisa S.A., and to purchase, by Georgia Pacific Inc., the  remaining 50% of the shares under conditions similar to the original share  purchase and other stipulations common to these types of agreements.





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On January 17, 2001 the Company sold to Georgia Pacific Inc. its  interest in the joint ventures in which it participated through its  subsidiaries Masisa Inversiones Limitada and Inversiones Coronel Limitada.  This transaction generated a gain of ThCh$  7,451,932.  In addition, a gain of  ThCh$ 1,859,312 was generated as a result of the reversal of the corresponding  accumulated translation adjustment reserve (see Note 20.)





|c) | Forestal Tornagaleones S.A.
|-- | ---------------------------




|Effective January 1, 2001 the subsidiary Forestal    Tornagaleones S.A. was incorporated in the financial statement consolidation    as restrictions relative to the control of this subsidiarys operations    expired during the period.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|d) | Liabilities hedging foreign investments in related    companies
|-- | ---------------------------------------------------------------




|The liabilities contracted by the Company and used    to hedge foreign exchange related to foreign investments were as follows:
|-------------------------------------------------------------------------------------------------------------------------------




|Investment    abroad    |  | Subsidiary    recording    liabilities at year end |                             | Bank or    Institution |  | Amount    in US$          | 
|----------------------- |  | -------------------------------------------------- | --------------------------- | ---------------------- |  | ------------------------- | 
|                        |  |                                                    |                             |                        |  |                           | 
|Masisa Argentina S.A.   |  |                                                    | Masisa Overseas Ltd.        |                        |  | Private Placement         | 
|Forestal Argentina S.A. |  |                                                    | Forestal Tornagaleones S.A. |                        |  | Raboinvestment Chile S.A. | 
|Masisa do Brasil Ltda.  |  |                                                    | Masisa Overseas Ltd.        |                        |  | Private Placement         | 
|Masisa do Brasil Ltda.  |  |                                                    | Masisa Overseas Ltd.        |                        |  | Banco Chile               | 
|Masisa do Brasil Ltda.  |  |                                                    | Masisa Overseas Ltd.        |                        |  | Citibank N.A.             | 




NOTE 11 - GOODWILL AND NEGATIVE GOODWILL, NET





Goodwill and negative goodwill, net of accumulated amortization, were  as follows:





|                                |  | At    December 31, |          
|------------------------------- |  | ------------------ | ---------
|                                |  | 2001               |          
|                                |  |                    |          
|                                |  | ThCh$              |          
|Maderas y Paneles S.A. (1)      |  |                    | 283,459  
|Masisa Cabrero S.A. (2)         |  |                    | 931,081  
|Forestal Tornagaleones S.A. (3) |  |                    |         
|                                |  |                    |          
|Total                           |  |                    | 1,214,540
|                                |  |                    |          




|(1) | On August 16, 1993, the    Company purchased an additional 3.8% interest in its subsidiary Maderas y    Paneles S.A. from Inversiones Pathfinder S.A. (at that time the majority    shareholder of the company) for ThCh$2,770,057, which resulted in an excess    of the purchase price over the net book value of the assets acquired    (goodwill) of ThCh$1,933,399.  The    goodwill is being amortized over a term of ten years.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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|(2) | During 2000, the Company    purchased a 92.61% interest in its subsidiary Masisa Cabrero S.A. from    Forestal Terranova S.A. and Fibras del Noreste S.A. for ThCh$24,935,912,    which resulted in goodwill of ThCh$1,005,885.  The goodwill is being amortized over a term of twenty years.                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                              
|(3) | On June 27, 2002, the    Company made a capital infusion of ThCh$5,142,995 (historical pesos) in its subsidiary    Forestal Tornagaleones S.A., which increased its ownership by 6.45%. This    resulted in a negative goodwill of ThCh$1,403,711.  This negative goodwill is being amortized over a term of twenty    years.
|    |                                                                                                                                                                                                                                                                                                                              
|    | Accumulated amortization    was ThCh$1,500,649 and ThCh$1,724,743 at December 31, 2001 and 2002,    respectively.                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                              
|    | The company C y D Agrofruta    Ltda. was acquired in November 2001.     The excess of the amount paid for this company over the net assets    acquired (which was nil) generated goodwill of ThCh$743,366 that was charged    to income for the year.                                                                        




NOTE 12 - OTHER ASSETS





|                                  |  | At    December 31, |           
|--------------------------------- |  | ------------------ | ----------
|                                  |  | 2001               |           
|                                  |  |                    |           
|                                  |  | ThCh$              |           
|Time deposits (1)                 |  |                    | 92,413,077
|Assets for disposal (2)           |  |                    | 649,720   
|Recoverable taxes (See Note 15 b) |  |                    | 1,900,623 
|Other                             |  |                    | 313,703   
|                                  |  |                    |           
|Total                             |  |                    | 95,277,123
|                                  |  |                    |           




|(1) | Corresponds to long-term    time deposits with maturities ranging from 2004 to 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2) | As a result of a decline in    market prices during 1997, management decided to close down its plywood line    operations.  Consequently, the Company    ceased depreciation on the related machinery and equipment and recorded these    assets at fair value less costs to sell based on an independent appraisal    during 1998.  The remaining balance of    ThCh$454,547 is recorded at the Companys estimate of fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | In addition, in 1998 the    Company decided to temporarily suspend the saw-mill production operation of    its former subsidiary Aserraderos Aragón S.A., now merged with the    Company.  The Company rented the    facility on a temporary basis until market conditions improved.  Management took this decision in view of    the prolonged crisis affecting the Asiatic markets which had significantly    affected other markets in America, Europe and Chile.  Orders from the Asiatic market disappeared    completely by the end of 1997.     In 2000, the Company decided to close down this operation as it    believed that market conditions would not sufficiently improve in the near    future to enable productive saw-mill activities to be relaunched.  Therefore, fixed assets related to the    Aragón plant were reclassified to Other assets and are recorded at their net    realizable value of ThCh$1,606,987 resulting in a write-down
of    ThCh$2,396,817 (see Note 21).  During    2001 the operations were rented at amounts sufficient to recover the    remaining cost of the assets and the balance was reclassified to property    plant and equipment.




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NOTE 13 - SHORT-TERM BANK LOANS





Short-term bank loans were denominated in the following currencies:





|                         |  | At    December 31, |           
|------------------------ |  | ------------------ | ----------
|                         |  | 2001               |           
|                         |  |                    |           
|                         |  | ThCh$              |           
|US dollars               |  |                    | 16,150,604
|Chilean pesos            |  |                    | 730,880   
|Other foreign currencies |  |                    | 689,795   
|                         |  |                    |           
|Total                    |  |                    | 17,571,279
|                         |  |                    |           




At December 31, 2002, the Company had MCh$ 23,145 of short-term  lines of credit, of which Ch$ 19,097 million were unused and available for  borrowing on an unsecured basis.





During 2002, the average annual interest rate was 2.8%.  During 2001 and 2000, the average annual  interest rates were 4.0% and 7.3%, respectively.





Accrued interest totaling ThCh$ 203,448 and ThCh$ 512,023 at  December 31, 2002 and 2001, respectively, is included in the outstanding  balances.





NOTE 14 - LONG-TERM LIABILITIES





|a) | Long-term bank liabilities were as follows:
|-- | -------------------------------------------




|                                   |  | Denominated    currency in    2002 |     | Interest    rate |      | Interest    rate    at December 31,    2002 |      | At    December 31, |       
|---------------------------------- |  | ---------------------------------- | --- | ---------------- | ---- | ------------------------------------------- | ---- | ------------------ | ------
|                                   |  |                                    |     |                  | 2001 |                                             | 2002 |                   
|                                   |  |                                    |     |                  |      |                                             |      |                    |       
|                                   |  |                                    |     |                  |      |                                             |      | %                  |       
|BankBoston (1)                     |  |                                    | US$ |                  |      | Fixed rate                                  |      |                    | 12.00 
|BankBoston N.A. (2)                |  |                                    | US$ |                  |      | Fixed rate                                  |      |                    | 11.275
|Rabobank Ireland PLC (2)           |  |                                    | US$ |                  |      | Fixed rate                                  |      |                    | 8.00  
|Raboinvestments Chile S.A (4)      |  |                                    | US$ |                  |      | Libor+1.875                                 |      |                    | 3.71  
|Banco de Crédito e Inversiones (3) |  |                                    | UF  |                  |      | Fixed rate                                  |      |                    | 6.70  
|Security Bank (5)                  |  |                                    | US$ |                  |      | Libor+2.15                                  |      |                    | 3.85  
|Citibank N.A (6)                   |  |                                    | US$ |                  |      | Libor+1.00                                  |      |                    | 2.82  
|Comerica Bank (7)                  |  |                                    | US$ |                  |      | Libor+1.35                                  |      |                    | 3.17  
|Banco de Chile NY (8)              |  |                                    | US$ |                  |      | Libor+1.25                                  |      |                    | 3.10  
|BankBoston Banco Multiplo (9)      |  |                                    | US$ |                  |      | Fixed rate                                  |      |                    | 9.26  
|Dresdner Bank Lateiamerica (2)     |  |                                    | US$ |                  |      | Libor+1.9                                   |      |                    | 3.85  
|                                   |  |                                    |     |                  |      |                                             |      |                    |       
|Total                              |  |                                    |     |                  |      |                                             |      |                    |       
|Less:     Current portion (10)     |  |                                    |     |                  |      |                                             |      |                    |       
|                                   |  |                                    |     |                  |      |                                             |      |                    |       
|Long-term portion                  |  |                                    |     |                  |      |                                             |      |                    |       
|                                   |  |                                    |     |                  |      |                                             |      |                    |       




|(1) | This loan is repayable in    monthly installments of principal and interest.                                                
|--- | ----------------------------------------------------------------------------------------------------------------------------
|(2) | This loan is repayable in    one lump sum payment in 2004, with interest payments semi-annually.                            
|(3) | This loan is repayable in    10 semi - annual installments, starting on April 2003, with interest payments    semi-annually.




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|(4)  | This loan is repayable in 8    semi-annual installments, starting on February 2003, with interest payments    semi-annually.   
|---- | -------------------------------------------------------------------------------------------------------------------------------
|(5)  | This loan is repayable in 6    semi-annual installments, starting on March 2004, with interest payments    semi-annually.      
|(6)  | This loan is repayable in 7    semi-annual installments, starting on October 2003, with interest payments    semi-annually.    
|(7)  | This loan is repayable in 7    semi-annual installments, starting on April 2004, with interest payments    semi-annually.      
|(8)  | This loan is repayable in 7    semi-annual installments, starting on October 2004, with interest payments semi-annually.       
|(9)  | This loan is repayable in 6    semi-annual installments, starting on July 2004, with interest payments    semi-annually.       
|(10) | Includes ThCh$4,215,599 and    ThCh$4,724,356 corresponding to accrued interest at December 31, 2001 and    2002, respectively.




Scheduled payments of the long-term portion of bank  loans at December 31, 2002 were as follows:





|Amounts payable during the years ending December 31, |  | ThCh$ |            
|---------------------------------------------------- |  | ----- | -----------
|                                                     |  |       |            
|2004                                                 |  |       | 80,810,645 
|2005                                                 |  |       | 61,512,846 
|2006                                                 |  |       | 39,860,253 
|                                                     |  |       |            
|Total                                                |  |       | 182,183,744
|                                                     |  |       |            




|b) | Other long-term liabilities are summarized as    follows:
|-- | ---------------------------------------------------------




|                                                                     |  | At    December 31, |           
|-------------------------------------------------------------------- |  | ------------------ | ----------
|                                                                     |  | 2001               |           
|                                                                     |  |                    |           
|                                                                     |  | ThCh$              |           
|Treasury of the Republic of Chile (2)                                |  |                    | 1,474,137 
|Notes payable                                                        |  |                    | 1,904,775 
|Tax payable                                                          |  |                    |          
|Promissory notes with interest of 7.82% per annum    due in 2003 (1) |  |                    | 17,029,320
|Promissory notes with interest at 8.06% per annum    due in 2008 (1) |  |                    | 30,662,083
|Forest subsidy                                                       |  |                    | 1,865,415 
|Deficit in investments under the equity method                       |  |                    |          
|                                                                     |  |                    |           
|Total                                                                |  |                    | 52,935,730
|Less: Current portion (3)                                            |  |                    | (2,090,003
|                                                                     |  |                    |           
|Long-term portion                                                    |  |                    | 50,845,727
|                                                                     |  |                    |           




|(1) | Loans obtained by Masisa    Overseas Ltd. in a private placement with financial institutions in the    United States.                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The liability to the    Treasury of the Republic of Chile at December 31, 2002 is payable in    US dollars and bears interest at 11.0% per annum.
|(3) | Includes ThCh$481,044 and    ThCh$429,966 corresponding to accrued interest at December 31, 2001 and 2002,    respectively.                      




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Scheduled maturities of other long-term liabilities at December 31,  2002 are as follows:





|Maturities during the years ending December 31, |  | ThCh$ |           
|----------------------------------------------- |  | ----- | ----------
|                                                |  |       |           
|2004                                            |  |       | 6,766,225 
|2005                                            |  |       | 8,835,425 
|2006                                            |  |       | 6,467,490 
|2007                                            |  |       | 6,467,490 
|2008                                            |  |       | 8,417,299 
|No maturity date                                |  |       | 120,353   
|                                                |  |       |           
|Total                                           |  |       | 37,074,282
|                                                |  |       |           




|c) | Certain loan agreements include restrictive    covenants.  The more restrictive    covenants are as indicated below:
|-- | --------------------------------------------------------------------------------------------------------------------




| | i)   | The Company must maintain a net shareholders equity    of not less than an amount equal to UF 14,800,000.                                                                                                                                                                                                                                                                                                                                            
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ii)  | Indebtedness ratio equal to or lower than .7.                                                                                                                                                                                                                                                                                                                                                                                                         
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | iii) | Interest coverage ratio equal to or lower than 1.5.                                                                                                                                                                                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | iv)  | Masisa S.A. will at all times own 100% of the    outstanding equity securities of Masisa Overseas Ltd.                                                                                                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | v)   | Masisa S.A. will at all times own at least 66 2/3%    of the outstanding voting securities of Masisa Argentina S.A.                                                                                                                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | vi)  | In addition, the subsidiary Forestal Argentina S.A    must comply with the following covenants:                                                                                                                                                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -    | An EBITDA to financial expenses ratio equal to or    higher than  1.8;                                                                                                                                                                                                                                                                                                                                                                                
| | -    | Maintain an indebtedness ratio equal to or lower    than .5; and                                                                                                                                                                                                                                                                                                                                                                                      
| | -    | maintain a net shareholders equity of at least    US$50,000,000                                                                                                                                                                                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | These covenants are determined based on the    financial statements of Forestal Argentina S.A. as of December 31, 2002,    which have been prepared in accordance with accounting principles generally    accepted in Argentina. As net shareholders equity was lower than    US$50,000,000, the Company has requested, and the bank has granted, a waiver    that releases the Company from compliance with this covenant through April    30, 2003.




The Company was in compliance with all of these covenants, as amended,  as of December 31, 2002.





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NOTE 15 - INCOME TAXES





|a) | The income tax provisions in the Statements of    income were as follows:
|-- | -------------------------------------------------------------------------




|                                           |  | Year ended    December 31, |          
|------------------------------------------ |  | -------------------------- | ---------
|                                           |  | 2000                       |          
|                                           |  |                            |          
|                                           |  | ThCh$                      |          
|Current year provision for income tax      |  |                            | 4,175,943
|Deferred income taxes                      |  |                            | 575,525  
|Adjustments of income taxes of prior years |  |                            | 7,676    
|                                           |  |                            |          
|Total provision    (benefit)               |  |                            | 4,759,144
|                                           |  |                            |          




|b) | Recoverable and payable taxes were as follows:
|-- | ----------------------------------------------




|                                           |  | At    December 31, |           
|------------------------------------------ |  | ------------------ | ----------
|                                           |  | 2001               |           
|                                           |  |                    |           
|                                           |  | ThCh$              |           
|Provisional monthly income tax prepayments |  |                    | 982,443   
|Income tax provision                       |  |                    | (2,318,635
|Value-added taxes recoverable              |  |                    | 6,311,948 
|Value-added taxes payable                  |  |                    |          
|Others                                     |  |                    | 340,237   
|                                           |  |                    |           
|Total                                      |  |                    | 5,315,993 
|                                           |  |                    |           
|Tax recoverable (payable) short-term       |  |                    | 3,415,370 
|Tax recoverable long-term                  |  |                    | 1,900,623 
|Tax payable long-term (Note 14 b)          |  |                    |          
|                                           |  |                    |           
|Total                                      |  |                    | 5,315,993 
|                                           |  |                    |           




|c) | Deferred income taxes
|-- | ---------------------




Effective January 1, 2000, the Company began applying Technical  Bulletin No. 60 of the Chilean Institute of Accountants concerning deferred  income taxes.  Deferred income tax  balances were as follows:





|Temporary differences                            |  |                         |           |                         |  |            |   |           |           |   |  |            |  
|------------------------------------------------ |  | ----------------------- | --------- | ----------------------- |  | ---------- | - | --------- | --------- | - |  | ---------- | -
|                                                 |  |                         |           |                         |  |            |   |           |           |   |  |            |  
|                                                 |  | At    December 31, 2001 |           | At    December 31, 2002 | 
|                                                 |  | Short-term              |           | Long-term               |  | Short-term |   | Long-term |          
|                                                 |  |                         |           |                         |  |            |   |           |           |   |  |            |  
|                                                 |  | ThCh$                   |           | ThCh$                   |  | ThCh$      |   | ThCh$     |          
|Assets                                           |  |                         |           |                         |  |            |   |           |           |   |  |            |  
|Allowance for doubtful    accounts               |  |                         | 692,115   |                         |  | 346,407    |   |           | 415,236   |   |  | 33,100     |  
|Deferred revenue                                 |  |                         | 305       |                         |  |           |   |           | 260       |   |  |           |  
|Accrued vacations                                |  |                         | 132,187   |                         |  |           |   |           | 138,919   |   |  |           |  
|Leasing obligations                              |  |                         |          |                         |  | 111,763    |   |           |          |   |  | 84,703     |  
|Tax loss carry-forwards                          |  |                         | 729,956   |                         |  | 6,272,191  |   |           | 268,027   |   |  | 15,471,793 |  
|Other provision                                  |  |                         | 337,596   |                         |  | 1,036,234  |   |           | 372,567   |   |  | 935,710    |  
|                                                 |  |                         |           |                         |  |            |   |           |           |   |  |            |  
|Total                                            |  |                         | 1,892,159 |                         |  | 7,766,595  |   |           | 1,195,009 |   |  | 16,525,306 |  
|Less:  Unamortized offsetting liability accounts |  |                         | (49,061   | )                       |  | (996,280   | ) |           | (18,826   | ) |  | (905,080   | )
|Valuation allowance                              |  |                         | (361,020  | )                       |  | (2,134,277 | ) |           |          |   |  | (9,019,776 | )
|                                                 |  |                         |           |                         |  |            |   |           |           |   |  |            |  
|Net assets                                       |  |                         | 1,482,078 |                         |  | 4,636,038  |   |           | 1,176,183 |   |  | 6,600,450  |  
|                                                 |  |                         |           |                         |  |            |   |           |           |   |  |            |  




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|Liabilities                                      |  |  |           |   |  |             |   |  |          |   |  |             |  
|------------------------------------------------ |  |  | --------- | - |  | ----------- | - |  | -------- | - |  | ----------- | -
|Overhead costs in inventories                    |  |  | (425,971  | ) |  | (1,221,456  | ) |  | (590,098 | ) |  | (2,552,503  | )
|Unrealized tax gains                             |  |  | (6,665    | ) |  |            |   |  |         |   |  |            |  
|Forest reserve                                   |  |  |          |   |  | (2,810,064  | ) |  |         |   |  | (3,047,259  | )
|Depreciation of    property, plant and equipment |  |  |          |   |  | (17,199,144 | ) |  | (62,987  | ) |  | (16,756,544 | )
|                                                 |  |  |           |   |  |             |   |  |          |   |  |             |  
|Total                                            |  |  | (432,636  | ) |  | (21,230,664 | ) |  | (653,085 | ) |  | (22,356,306 | )
|Less:  Unamortized offsetting asset accounts     |  |  |          |   |  | 11,418,682  |   |  |         |   |  | 10,062,512  |  
|                                                 |  |  |           |   |  |             |   |  |          |   |  |             |  
|Net liability                                    |  |  | (432,636  | ) |  | (9,811,982  | ) |  | (653,085 | ) |  | (12,293,794 | )
|                                                 |  |  |           |   |  |             |   |  |          |   |  |             |  
|Total net deferred    income tax liability       |  |  | 1,049,442 |   |  | (5,175,944  | ) |  | 523,098  |   |  | (5,693,344  | )
|                                                 |  |  |           |   |  |             |   |  |          |   |  |             |  




The unamortized offsetting accounts correspond to the accumulated  effect of deferred income taxes which were not recorded until January 1, 2000  when the Technical Bulletin No. 60 was adopted.  These offsetting asset and liability accounts are amortized over  the weighted average terms of reversal of the corresponding temporary  differences, which are estimated at 7 and 20 years, respectively.





NOTE 16 - ACCRUED LIABILITIES





Accrued liabilities at December 31 of each year were as follows:





|                                                           |  | At    December 31, |          
|---------------------------------------------------------- |  | ------------------ | ---------
|                                                           |  | 2001               |          
|                                                           |  |                    |          
|                                                           |  | ThCh$              |          
|Provision for accounts receivable non-operating            |  |                    | 2,037,685
|Participation of Directors and management in net    income |  |                    | 923,989  
|Accrued vacations                                          |  |                    | 974,277  
|Accrued commissions                                        |  |                    | 842,168  
|Other provisions                                           |  |                    | 999,062  
|                                                           |  |                    |          
|Total                                                      |  |                    | 5,777,181
|                                                           |  |                    |          




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NOTE 17 - SHAREHOLDERS EQUITY





|a) | Changes in capital and reserve accounts in 2000,    2001 and 2002 were as follows (in historical amounts, with restatement of    balances at December 31, 2000 and 2001 to constant pesos of December 31, 2002    for comparative purposes):
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|                                                                                 |  |                            |             |                 |  |                     |  | Reserves                                               |          
|-------------------------------------------------------------------------------- |  | -------------------------- | ----------- | --------------- |  | ------------------- |  | ------------------------------------------------------ | ---------
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |          
|                                                                                 |  | Number of    shares issued |             | Common    stock |  | Forestry    reserve |  | Accumulated    deficit during    development    period |          
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |          
|                                                                                 |  |                            |             | ThCh$           |  | ThCh$               |  | ThCh$                                                  |          
|Balances at December 31, 1999                                                    |  |                            | 840,500,365 |                 |  | 129,521,476         |  |                                                        | 6,614,979
|Allocation of 1999 net income                                                    |  |                            |            |                 |  |                    |  |                                                        |         
|Payment of dividend of    Ch$ 5.6 per share                                      |  |                            |            |                 |  |                    |  |                                                        |         
|Increase in Capital                                                              |  |                            | 375         |                 |  | 104                 |  |                                                        |         
|Increase in forestry reserve    due to appraisal                                 |  |                            |            |                 |  |                    |  |                                                        | 295,662  
|Deficit during subsidiary    development period                                  |  |                            |            |                 |  |                    |  |                                                        |         
|Cumulative translation    adjustment                                             |  |                            |            |                 |  |                    |  |                                                        |         
|Price-level restatement of    equity                                             |  |                            |            |                 |  | 6,087,509           |  |                                                        | 310,904  
|Net income for the year                                                          |  |                            |            |                 |  |                    |  |                                                        |         
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |          
|Balances at December 31, 2000                                                    |  |                            | 840,500,740 |                 |  | 135,609,089         |  |                                                        | 7,221,545
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |          
|Balances at December 31, 2000    restated to constant pesos of December 31, 2002 |  |                            |             |                 |  | 144,007,360         |  |                                                        | 7,668,775
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |          
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |          




|                                                                                 |  | Retained    earnings               |           
|-------------------------------------------------------------------------------- |  | ---------------------------------- | ----------
|                                                                                 |  |                                    |           
|                                                                                 |  | Reserve    for future    dividends |           
|                                                                                 |  |                                    |           
|                                                                                 |  |                                    |           
|Balances at December 31, 1999                                                    |  |                                    | 46,362,307
|Allocation of 1999 net income                                                    |  |                                    | 11,790,578
|Payment of dividend of    Ch$ 5.6 per share                                      |  |                                    | (4,716,232
|Increase in Capital                                                              |  |                                    |          
|Increase in forestry reserve    due to appraisal                                 |  |                                    |          
|Deficit during subsidiary    development period                                  |  |                                    |          
|Cumulative translation adjustment                                                |  |                                    |          
|Price-level restatement of    equity                                             |  |                                    | 2,596,415 
|Net income for the year                                                          |  |                                    |          
|                                                                                 |  |                                    |           
|Balances at December 31, 2000                                                    |  |                                    | 56,033,068
|                                                                                 |  |                                    |           
|Balances at December 31, 2000    restated to constant pesos of December 31, 2002 |  |                                    | 59,503,196
|                                                                                 |  |                                    |           
|                                                                                 |  |                                    |           




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|                                                                                 |  |                            |             |                 |  |                     |  | Reserves                                               |           
|-------------------------------------------------------------------------------- |  | -------------------------- | ----------- | --------------- |  | ------------------- |  | ------------------------------------------------------ | ----------
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |           
|                                                                                 |  | Number of    shares issued |             | Common    stock |  | Forestry    reserve |  | Accumulated    deficit during    development    period |           
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |           
|                                                                                 |  |                            |             | ThCh$           |  | ThCh$               |  | ThCh$                                                  |           
|Balances at December 31, 2000                                                    |  |                            | 840,500,740 |                 |  | 135,609,089         |  |                                                        | 7,221,545 
|Allocation of 2000 net income                                                    |  |                            |            |                 |  |                    |  |                                                        |          
|Payment of dividend of    Ch$ 8.2 per share                                      |  |                            |            |                 |  |                    |  |                                                        |          
|Increase in capital                                                              |  |                            | 88,014,003  |                 |  | 24,851,704          |  |                                                        |          
|Increase in forestry reserve    due to appraisal                                 |  |                            |            |                 |  |                    |  |                                                        | 198,935   
|Cumulative translation    adjustment                                             |  |                            |            |                 |  |                    |  |                                                        |          
|Price-level restatement of    equity                                             |  |                            |            |                 |  | 4,904,344           |  |                                                        | 223,869   
|Net income for the year                                                          |  |                            |            |                 |  |                    |  |                                                        |          
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |           
|Balances at December 31, 2001                                                    |  |                            | 928,514,743 |                 |  | 165,365,137         |  |                                                        | 7,644,349 
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |           
|Balances at December 31, 2001    restated to constant pesos of December 31, 2002 |  |                            |             |                 |  | 170,326,091         |  |                                                        | 7,873,679 
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |           
|Balances at December 31, 2001                                                    |  |                            | 928,514,743 |                 |  | 165,365,137         |  |                                                        | 7,644,349 
|Allocation of 2001 net income                                                    |  |                            |             |                 |  |                    |  |                                                        |          
|Payment of dividend of    Ch$ 6.64 per share                                     |  |                            |             |                 |  |                    |  |                                                        |          
|Increase in capital                                                              |  |                            |             |                 |  |                    |  |                                                        |          
|Increase in forestry reserve    due to appraisal                                 |  |                            |             |                 |  |                    |  |                                                        | 3,482,911 
|Cumulative translation    adjustment                                             |  |                            |             |                 |  |                    |  |                                                        |          
|Price-level restatement of    equity                                             |  |                            |             |                 |  | 4,960,954           |  |                                                        | 229,330   
|Net income for the year                                                          |  |                            |            |                 |  |                    |  |                                                        |          
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |           
|Balances at December 31, 2002                                                    |  |                            | 928,514,743 |                 |  | 170,326,091         |  |                                                        | 11,356,590
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |           
|                                                                                 |  |                            |             |                 |  |                     |  |                                                        |           




|                                                                                 |  | Retained    earnings               |           
|-------------------------------------------------------------------------------- |  | ---------------------------------- | ----------
|                                                                                 |  |                                    |           
|                                                                                 |  | Reserve    for future    dividends |           
|                                                                                 |  |                                    |           
|                                                                                 |  | ThCh$                              |           
|Balances at December 31, 2000                                                    |  |                                    | 56,033,068
|Allocation of 2000 net income                                                    |  |                                    | 16,795,625
|Payment of dividend of    Ch$ 8.2 per share                                      |  |                                    | (7,558,031
|Increase in capital                                                              |  |                                    |          
|Increase in forestry reserve    due to appraisal                                 |  |                                    |          
|Cumulative translation    adjustment                                             |  |                                    |          
|Price-level restatement of    equity                                             |  |                                    | 2,076,297 
|Net income for the year                                                          |  |                                    |          
|                                                                                 |  |                                    |           
|Balances at December 31, 2001                                                    |  |                                    | 67,346,959
|                                                                                 |  |                                    |           
|Balances at December 31, 2001    restated to constant pesos of December 31, 2002 |  |                                    | 69,367,368
|                                                                                 |  |                                    |           
|Balances at December 31, 2001                                                    |  |                                    | 67,346,959
|Allocation of 2001 net income                                                    |  |                                    | 20,541,207
|Payment of dividend of    Ch$ 6.64 per share                                     |  |                                    | (6,162,362
|Increase in capital                                                              |  |                                    |          
|Increase in forestry reserve    due to appraisal                                 |  |                                    |          
|Cumulative translation adjustment                                                |  |                                    |          
|Price-level restatement of    equity                                             |  |                                    | 2,464,099 
|Net income for the year                                                          |  |                                    |          
|                                                                                 |  |                                    |           
|Balances at December 31, 2002                                                    |  |                                    | 84,189,903
|                                                                                 |  |                                    |           
|                                                                                 |  |                                    |           




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|b) | Common stock
|-- | ------------




As established under Chilean law, at December 31  of each year Common stock includes the price-level restatement of that capital  account.





|c) | Capital increases
|-- | -----------------




At an Extraordinary Shareholders Meeting held on  November 13, 2000, the shareholders agreed to increase the share capital of the  Masisa S.A. by ThCh$52,667,085 (historical value) through the issuance of  182,441,061 shares of no-par value stock.   As of December 31, 2001, 88,014,378 shares were subscribed and paid in  full for a total of ThCh$24,851,808 (historical value). (In 2000, 375 shares  were subscribed and paid in full for a total of ThCh$104).





|d) | Principal shareholders
|-- | ----------------------




At December 31, 2002, Forestal Terranova S.A. had  51.90% of the shares issued and were the principal shareholders of Masisa.





|e) | Dividends
|-- | ---------




At the Annual General Meeting held on April, 30  2002, the shareholders approved a final dividend on account of 2002 net income  of Ch$6.64 per share, for an aggregate amount of ThCh$6,162,362 (historical  value).  The shareholders also agreed to  a minimum dividend policy ranging from 30% to 50% of net income.





At the Annual General Meeting held on April 26,  2001, the shareholders approved a final dividend on account of 2001 net income  of Ch$8.2 per share, for an aggregate amount of ThCh$7,558,032 (historical  value).





At the Annual General Meeting held on April 30,  2000, the shareholders approved a final dividend on account of 2000 net income  of Ch$5.6 per share, for an aggregate amount of ThCh$4,716,232 (historical  value).





|f) | Forestry reserve
|-- | ----------------




The forestry reserve represents amounts recorded  by the Company related to the forestry reserve of Tornagaleones (see Note 2 h).





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|g) | Accumulated deficit of subsidiaries during    development period
|-- | ----------------------------------------------------------------




This reserve is related to the following affiliated company:





|                                     |  | At    December 31, |        
|------------------------------------ |  | ------------------ | -------
|                                     |  | 2000               |        
|                                     |  |                    |        
|                                     |  | ThCh$              |        
|Maderas y Sintéticos del Perú S.A.C. |  |                    | 159,396
|                                     |  |                    |        
|Total                                |  |                    | 159,396
|                                     |  |                    |        




|h) | Cumulative translation adjustment
|-- | ---------------------------------




This account corresponds to the year-end US dollar exchange difference  (net of Chilean inflation) from investments in related companies abroad and the  liabilities associated with these investments, in accordance with Technical  Bulletin No. 64.





|2002                                              |  |                      |            |                                         |             |                         |  |                          |            |       |  |   |  |  |            | 
|------------------------------------------------- |  | -------------------- | ---------- | --------------------------------------- | ----------- | ----------------------- |  | ------------------------ | ---------- | ----- |  | - |  |  | ---------- | 
|                                                  |  |                      |            |                                         |             |                         |  |                          |            |       |  |   |  |  |            | 
|                                                  |  | Beginning    balance |            | Exchange gain (loss)    attributable to |             | Realization    reserves |  | Balance at    31/12/2002 |           
|Company                                           |  |                      | Investment |                                         | Liabilities |                         |  |                         
|                                                  |  |                      |            |                                         |             |                         |  |                          |            |       |  |   |  |  |            | 
|                                                  |  | ThCh$                |            | ThCh$                                   |             | ThCh$                   |  | ThCh$                    |            | ThCh$ | 
|Masisa Argentina S.A.                             |  |                      | 13,377,360 |                                         |             | 6,728,338               |  |                          | (1,372,804 | )     |  |  |  |  | 18,732,894 | 
|Forestal Argentina S.A.                           |  |                      | 1,689,535  |                                         |             | 734,452                 |  |                          | (200,282   | )     |  |  |  |  | 2,223,705  | 
|Maderas y Sintéticos de    Mexico S.A. de C.V.    |  |                      |           |                                         |             | 407,202                 |  |                          | (271,114   | )     |  |  |  |  | 136,088    | 
|Maderas y Sintéticos    de Servicios S.A. de C.V. |  |                      |           |                                         |             | 3                       |  |                          |           |       |  |  |  |  | 3          | 
|Masisa do Brasil Ltda.                            |  |                      |           |                                         |             | 7,789,075               |  |                          | (5,819,374 | )     |  |  |  |  | 1,969,701  | 
|Masisa Cabrero S.A.                               |  |                      | 68,146     |                                         |             |                        |  |                          |           |       |  |  |  |  | 68,146     | 
|                                                  |  |                      |            |                                         |             |                         |  |                          |            |       |  |   |  |  |            | 
|Total                                             |  |                      | 15,135,041 |                                         |             | 15,659,070              |  |                          | (7,663,574 | )     |  |  |  |  | 23,130,537 | 
|                                                  |  |                      |            |                                         |             |                         |  |                          |            |       |  |   |  |  |            | 




|2001                    |  |                      |            |                                            |             |                         |  |                          |            |       |  |          |   |  |            | 
|----------------------- |  | -------------------- | ---------- | ------------------------------------------ | ----------- | ----------------------- |  | ------------------------ | ---------- | ----- |  | -------- | - |  | ---------- | 
|                        |  |                      |            |                                            |             |                         |  |                          |            |       |  |          |   |  |            | 
|                        |  | Beginning    balance |            | Exchange    gain (loss)    attributable to |             | Realization    reserves |  | Balance at    31/12/2001 |           
|Company                 |  |                      | Investment |                                            | Liabilities |                         |  |                         
|                        |  |                      |            |                                            |             |                         |  |                          |            |       |  |          |   |  |            | 
|                        |  | ThCh$                |            | ThCh$                                      |             | ThCh$                   |  | ThCh$                    |            | ThCh$ | 
|Masisa Argentina S.A.   |  |                      | 5,908,375  |                                            |             | 9,496,902               |  |                          | (2,027,917 | )     |  |         |   |  | 13,377,360 | 
|Forestal Argentina S.A. |  |                      | 947,018    |                                            |             | 1,006,789               |  |                          | (264,272   | )     |  |         |   |  | 1,689,535  | 
|Resinas Concordia S.A.  |  |                      | 559,641    |                                            |             |                        |  |                          |           |       |  | (559,641 | ) |  |           | 
|Masisa do Brasil Ltda.  |  |                      |           |                                            |             | 6,185,511               |  |                          | (6,185,511 | )     |  |         |   |  |           | 
|Masisa Cabrero S.A.     |  |                      | 68,146     |                                            |             |                        |  |                          |           |       |  |         |   |  | 68,146     | 
|                        |  |                      |            |                                            |             |                         |  |                          |            |       |  |          |   |  |            | 
|Total                   |  |                      | 7,483,180  |                                            |             | 16,689,202              |  |                          | (8,477,700 | )     |  | (559,641 | ) |  | 15,135,041 | 
|                        |  |                      |            |                                            |             |                         |  |                          |            |       |  |          |   |  |            | 




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|2000                    |  |                      |            |                                            |             |                          |  |       |            |   |  |           | 
|----------------------- |  | -------------------- | ---------- | ------------------------------------------ | ----------- | ------------------------ |  | ----- | ---------- | - |  | --------- | 
|                        |  |                      |            |                                            |             |                          |  |       |            |   |  |           | 
|                        |  | Beginning    balance |            | Exchange    gain (loss)    attributable to |             | Balance at    31/12/2000 | 
|Company                 |  |                      | Investment |                                            | Liabilities |                          | 
|                        |  |                      |            |                                            |             |                          |  |       |            |   |  |           | 
|                        |  | ThCh$                |            | ThCh$                                      |             | ThCh$                    |  | ThCh$ |           
|Masisa Argentina S.A.   |  |                      | 4,980,228  |                                            |             | 1,637,358                |  |       | (709,211   | ) |  | 5,908,375 | 
|Forestal Argentina S.A. |  |                      | 725,636    |                                            |             | 301,659                  |  |       | (80,277    | ) |  | 947,018   | 
|Resinas Concordia S.A.  |  |                      | 394,924    |                                            |             | 164,717                  |  |       |           |   |  | 559,641   | 
|Masisa do Brasil Ltda.  |  |                      |           |                                            |             | 1,427,770                |  |       | (1,427,770 | ) |  |          | 
|Masisa Cabrero S.A.     |  |                      |           |                                            |             | 68,146                   |  |       |           |   |  | 68,146    | 
|                        |  |                      |            |                                            |             |                          |  |       |            |   |  |           | 
|Total                   |  |                      | 6,100,788  |                                            |             | 3,599,650                |  |       | (2,217,258 | ) |  | 7,483,180 | 
|                        |  |                      |            |                                            |             |                          |  |       |            |   |  |           | 




|i) | Tax credits on dividends declared
|-- | ---------------------------------




Retained earnings at December 31, 2002 have the following tax credits  available to shareholders when distributed:





|Earnings of the year |  | Amount |            | Tax credit    available on    distribution | 
|-------------------- |  | ------ | ---------- | ------------------------------------------ | 
|                     |  |        |            |                                            | 
|                     |  | ThCh$  |            | %                                          | 
|2002                 |  |        | 20,963,489 |                                            | 
|2002                 |  |        | 1,950,367  |                                            | 
|2001                 |  |        | 3,468,862  |                                            | 
|2000                 |  |        | 1,211,555  |                                            | 




Under Chilean tax laws, distributions must be made on a first-in  first-out basis.





NOTE 18 - COMMITMENTS AND CONTINGENCIES





|a) | Guarantees
|-- | ----------




At December 31, 2002, the Company had provided the following  guarantees:





|Beneficiary                       |  | Nature of    security interest |                                                                        | Amount of    obligation    guaranteed |      
|--------------------------------- |  | ------------------------------ | ---------------------------------------------------------------------- | ------------------------------------- | -----
|                                  |  |                                |                                                                        |                                       |      
|                                  |  |                                |                                                                        |                                       | ThCh$
|Treasury of The Republic of Chile |  |                                | Restriction on sale of imported equipment subject to    customs duties |                                       |      
|                                  |  |                                |                                                                        |                                       |      




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Rabobank Investments Chile S.A.





On October 15, 1999, Tornagaleones received a loan from Raboinvestments  Chile S.A., for which the Company mortgaged plantations and land for a term of  eight years.  The book value of the  mortgaged plantations is ThCh$ 10,316,021 at December 31, 2002 and the book  value of the land is ThCh$ 2,862,940.





|b) | Contingencies
|-- | -------------




The Company is involved in legal proceedings, claims and litigation  arising in the ordinary course of business.   In the opinion of management, these matters will not materially affect  the Companys consolidated financial position, operating results or cash flows  when resolved in a future period.





|c) | Lawsuits
|-- | --------




Forestal Tornagaleones S.A.





As of December 31, 2002, there is a lawsuit for damages brought against  this subsidiary. The plaintiff is claiming payment of ThCh$ 404,000 for damages  to property caused by Forestal Tornagaleones S.A. The Company and its legal  counsel, believe the plaintiff is very unlikely to win the lawsuit.





Inversiones Coronel Limitada





On May 30, 2002, the Internal Revenue Service sent a tax assessment  amounting to ThCh$406,545 for alleged differences in the determination of  income taxes. The subsidiary has made no allowances for this matter since it  considers, together with legal counsel, that the claim has no merit.





|d) | Indirect guarantees
|-- | -------------------




On January 5, 2002, this subsidiary became a joint and several debtor  in favor of the Dresdner Bank to guarantee a loan of ThUS$ 6,000 issued to the  subsidiary Forestal Argentina S.A.  The  loan was used to finance new plantations, purchase of land and rescheduling of  its financial debt. (See Note 14 c))





|e) | Guarantees from third parties
|-- | -----------------------------




At December 31, 2002, the Company has received guarantees, such as  pledges, mortgages, endorsements of loan insurance policies, special mandates,  surety bonds to guarantee repayment to clients and fulfillment of obligations  related to the Companys business activities amounting to ThCh$ 3,678,807  (ThCh$ 4,265,760 in 2001).





Tornagaleones has received guarantees to secure repayment to clients  and fulfillment of obligations related to the Companys business activities  amounting to ThCh$ 211,242 in 2002 (ThCh$ 163,364 in 2001).





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NOTE 19 - BALANCES AND TRANSACTIONS WITH RELATED  PARTIES





Accounts receivable balances with related parties at each year end were  as follows:





|                          |  |                        |  | At    December 31, |          
|------------------------- |  | ---------------------- |  | ------------------ | ---------
|Name                      |  | Relationship           |  | 2001               |          
|                          |  |                        |  |                    |          
|                          |  |                        |  | ThCh$              |          
|Short-term                |  |                        |  |                    |          
|Andinos S.A.              |  | Shareholders in common |  |                    | 2,918,246
|Forestal Terranova México |  | Shareholders in common |  |                    | 1,302,294
|Terranova Colombia        |  | Shareholders in common |  |                    |         
|Terranova Costa Rica      |  | Shareholders in common |  |                    |         
|Masnova S.A. de C.V.      |  | Equity investment      |  |                    |         
|                          |  |                        |  |                    |          
|Total                     |  |                        |  |                    | 4,220,540
|                          |  |                        |  |                    |          




|                              |  |                   |  | At    December 31, |          
|----------------------------- |  | ----------------- |  | ------------------ | ---------
|Name                          |  | Relationship      |  | 2001               |          
|                              |  |                   |  |                    |          
|                              |  |                   |  |                    | ThCh$    
|Long-term                     |  |                   |  |                    |          
|Forestal Río Calle Calle S.A. |  | Equity investment |  |                    | 2,037,685
|                              |  |                   |  |                    |          




Outstanding accounts payable balances with related parties at the end  of each year were as follows:





|                              |  |                        |  | At    December 31, |        
|----------------------------- |  | ---------------------- |  | ------------------ | -------
|Name                          |  | Relationship           |  | 2001               |        
|                              |  |                        |  |                    |        
|                              |  |                        |  | ThCh$              |        
|Forestal Río Calle Calle S.A. |  | Equity investment      |  |                    | 109,962
|Andinos S.A.                  |  | Shareholders in common |  |                    |       
|Forestal Millalemu S.A.       |  | Shareholders in common |  |                    |       
|Fibranova C.V.                |  | Shareholders in common |  |                    |       
|                              |  |                        |  |                    |        
|Total                         |  |                        |  |                    | 109,962
|                              |  |                        |  |                    |        




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Significant transactions with related parties were as follows:





|                                     |  |                     |  | Year ended    December 31, |            |       | 
|------------------------------------ |  | ------------------- |  | -------------------------- | ---------- | ----- | 
|Name                                 |  | Relationship        |  | 2000                       |            | 2001  | 
|                                     |  |                     |  |                            |            |       | 
|                                     |  |                     |  | ThCh$                      |            | ThCh$ | 
|Forestal Río Calle Calle S.A.        |  | Equity investment   |  |                            | 204,658    |       | 
|Forestal Tornagaleones S.A.          |  | Equity investment   |  |                            | 2,945,973  |       | 
|                                     |  |                     |  |                            | 1,106,701  |       | 
|                                     |  |                     |  |                            | 329,390    |       | 
|Forestal Argentina S.A.              |  | Equity investment   |  |                            | 1,869,669  |       | 
|Georgia Pacific Masisas Resinas Ltda |  | Equity investment   |  |                            | 10,372,306 |       | 
|Resinas Concordia S.A.               |  | Equity investment   |  |                            | 6,082,422  |       | 
|Andinos S.A.                         |  | Directors in common |  |                            | 4,375,102  |       | 
|                                     |  |                     |  |                            | 2,437,922  |       | 
|                                     |  |                     |  |                            |           |       | 
|Forestal Terranova                   |  |                     |  |                            |            |       | 
|Mexico de C.V.                       |  | Directors in common |  |                            |           |       | 
|Masnova S.A.                         |  | Equity investment   |  |                            |           |       | 
|Terranova Costa Rica S.A.            |  | Equity investment   |  |                            |           |       | 
|Terranova Colombia S.A.              |  | Equity investment   |  |                            |           |       | 




NOTE 20 - NON-OPERATING INCOME





Non-operating income during each year was as follows:





|                                                                             |  | 2000  |           | 2001  |  | 2002       | 
|---------------------------------------------------------------------------- |  | ----- | --------- | ----- |  | ---------- | 
|                                                                             |  |       |           |       |  |            | 
|                                                                             |  | ThCh$ |           | ThCh$ |  | ThCh$      | 
|Gain on sales of discontinued inventory and    property, plant and equipment |  |       | 230,598   |       |  | 694,703    | 
|Gain on sales of investments (Note 10)                                       |  |       | 497,993   |       |  | 7,451,932  | 
|Equity in earnings of equity investments (Note 10)                           |  |       | 473,324   |       |  | 19         | 
|Interest and other financial income                                          |  |       | 5,894,111 |       |  | 8,638,083  | 
|Reversal of allowance for doubtful accounts                                  |  |       |          |       |  |           | 
|Realization of translation reserves (Note 10)                                |  |       |          |       |  | 1,915,097  | 
|Forgiveness of notes payables                                                |  |       |          |       |  |           | 
|Other                                                                        |  |       | 206,269   |       |  | 40,040     | 
|                                                                             |  |       |           |       |  |            | 
|Total                                                                        |  |       | 7,302,295 |       |  | 18,739,874 | 
|                                                                             |  |       |           |       |  |            | 




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NOTE 21 - NON-OPERATING EXPENSES





Non-operating expenses during each year were  as follows:


|                                                             |  | Year ended December 31, |           
|------------------------------------------------------------ |  | ----------------------- | ----------
|                                                             |  | 2000                    |           
|                                                             |  |                         |           
|                                                             |  | ThCh$                   |           
|Interest expense                                             |  |                         | 8,150,499 
|Write-down of other assets to fair value (Notes 12    and 9) |  |                         | 2,396,817 
|Amortization of goodwill and negative goodwill  (Note 11)    |  |                         | 199,583   
|Equity in losses on equity investments (Note 10)             |  |                         | 656,312   
|Donations                                                    |  |                         | 85,511    
|Write-downs of fixed assets                                  |  |                         | 16,639    
|Provision for doubtful accounts                              |  |                         |          
|Losses on sales of property, plant and equipment             |  |                         | 22,963    
|Depreciation of equipment temporarily out of service         |  |                         | 120,454   
|Other                                                        |  |                         | 105,689   
|                                                             |  |                         |           
|Total                                                        |  |                         | 11,754,467
|                                                             |  |                         |           




NOTE 22 - MINORITY INTEREST





The participation of minority shareholders in each subsidiary company  was a follows:





|                                     |  | 2001  |            | 2002  | 
|------------------------------------ |  | ----- | ---------- | ----- | 
|                                     |  |       |            |       | 
|                                     |  | ThCh$ |            | ThCh$ | 
|Forestal Tornagaleones S.A.          |  |       | 24,383,583 |       | 
|Maderas y Sintéticos del Perú S.A.C. |  |       | (405       | )     | 
|Forestal Argentina S.A.              |  |       | 18,471,319 |       | 
|                                     |  |       |            |       | 
|Total                                |  |       | 42,854,497 |       | 
|                                     |  |       |            |       | 




NOTE 23 - SUBSEQUENTS EVENTS





On January 21, 2003, the subsidiary Masisa Overseas Limited obtained  from The Bank of Nova Scotia, a long-term note in the amount of US$25,000,000,  in which Scotiabank Sudamericano takes part as an Agent. This loan will be used  for the pre-payment of bank liabilities of the Company. This loan is guaranteed  by Masisa and Masisa Argentina S.A.





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NOTE 24  -  DIFFERENCES BETWEEN  CHILEAN AND UNITED STATES GENERALLY ACCEPTED


ACCOUNTING  PRINCIPLES





Accounting principles generally accepted in Chile (Chilean GAAP) vary  in certain important respects from the accounting principles generally accepted  in the United States of America.  Such  differences involve certain methods for measuring the amounts shown in the  financial statements, as well as additional disclosures required by generally  accepted accounting principles in the United States of America (US GAAP).





|1 | Differences in measurement methods
|- | ----------------------------------




The principal methods applied in the preparation of the accompanying  financial statements which have resulted in amounts which differ from those  that would have otherwise been determined under accounting principles generally  accepted in the United States are as follows:





|a) | Inflation accounting
|-- | --------------------




Chilean accounting principles require that financial statements be  restated to reflect the full effects of the loss in the purchasing power of the  Chilean peso on the financial position and results of operations of reporting  entities.  The method, described in Note  2 b), is based on a model which enables calculation of net inflation gains or  losses caused by monetary assets and liabilities exposed to changes in the  purchasing power of the local currency by restating all non-monetary accounts  in the financial statements.





The model prescribes that the historical cost of such accounts be  restated for general price-level changes between the date of origin of each  item and the year-end, and allows direct utilization of replacement values for  the restatement of inventories as an alternative to the price-level restatement  of those assets, but only if the resulting variation is not material.





The cumulative inflation rate in Chile as measured by the Consumer  Price Index  for the three-year period  ended December 31, 2002 was approximately 10.8% and, accordingly, Chile is not  presently considered to have a highly inflationary economy (defined as an  economy that has cumulative inflation of approximately 100% or more over a  three-year period).  However, the  inclusion of price-level adjustments in the accompanying financial statements is  considered appropriate under the prolonged inflationary conditions which  affected the Chilean economy in the past. Accordingly, the effect of  price-level changes is not eliminated in the reconciliation to US GAAP included  in paragraph 1 l) below.





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The price-level restatement, as determined under Chilean GAAP by  restating non-monetary assets and liabilities, was as follows:





|                                                                                                            |  | Year ended    December 31, |            
|----------------------------------------------------------------------------------------------------------- |  | -------------------------- | -----------
|                                                                                                            |  | 2000                       |            
|                                                                                                            |  |                            |            
|                                                                                                            |  | ThCh$                      |            
|Restatement of non-monetary accounts based on    Consumer Price Index:                                      |  |                            |            
|Inventories                                                                                                 |  |                            | 204,355    
|Property, plant and    equipment                                                                            |  |                            | 3,391,843  
|Investments in related    companies                                                                         |  |                            | 5,056,930  
|Other assets                                                                                                |  |                            | 14,717     
|Shareholders equity                                                                                        |  |                            | (10,424,703
|Increase in assets and liabilities due to indexation    of UFs and balances denominated in foreign currency |  |                            | 1,578,790  
|Restatement of income and expense accounts in terms    of year-end constant pesos                           |  |                            | (333,817   
|                                                                                                            |  |                            |            
|Price-level restatement    loss                                                                             |  |                            | (511,885   
|                                                                                                            |  |                            |            




|b) | Income taxes
|-- | ------------




Under Chilean GAAP, effective January 1, 2000, the Company began  applying Technical Bulletin No. 60 of the Chilean Institute of Accountants  concerning deferred income taxes.   Technical Bulletin No. 60 requires the recognition of deferred income  taxes for all temporary differences, whether recurring or not, using an asset  and liability approach.  For US GAAP  purposes, in prior years the Company applied SFAS No. 109, Accounting for  Income Taxes, whereby income taxes are also recognized using substantially the  same asset and liability approach, with deferred income tax assets and  liabilities established for temporary differences between the financial  reporting basis and tax basis of the Companys assets and liabilities at  enacted rates expected to be in effect when such amounts will be realized.  Deferred tax assets must be reduced by a  valuation allowance when it is more likely than not such assets will not be
realized.  After the year ended December  31, 1999, Chilean GAAP and US GAAP differ due to the recognition for US GAAP  purposes of the reversal of deferred income taxes included in the US GAAP  reconciliation in prior years.





Prior to the implementation of Technical Bulletin No. 60, no deferred  income taxes were recorded if the related timing differences were expected to  be offset in the year that they were projected to reverse by new timing  differences of a similar nature.





The effect of providing for deferred income taxes for the differences  between the amounts shown for assets and liabilities in the balance sheet and  the tax basis of those assets and liabilities is included in paragraph  1 l) below and certain disclosures required under SFAS No. 109 are set  forth in paragraph 2 b) below.





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|c) | 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 the  Companys net income for each year, as determined in accordance with Chilean  GAAP, unless and except to the extent the Company has unabsorbed prior year  losses.  Since the payment of  the 30% dividend out of each years income is a legal requirement in  Chile, provision has been made in the accompanying US GAAP reconciliation in paragraph  1 l) below to recognize the corresponding decrease in Shareholders equity at  December 31 of the year to which the net income is attributed.





|d) | Development stage results of operations
|-- | ---------------------------------------




For Chilean GAAP purposes, investments in majority-owned subsidiaries  in the development stage are recorded by the equity method and the investors  proportional share of the investees results of operations are taken to a  reserve which forms part of the investors shareholders equity.  For US GAAP purposes, majority-owned  subsidiaries in the development stage are consolidated and charge the results  of their operations directly to income.   Until January 1, 2001, Maderas y Sintéticos del Perú S.A.C. was in the  development stage.  The difference  between charging development stage results to equity under Chilean GAAP and to  income under US GAAP has been included in the reconciliation of net income in  paragraph 1 l) below.





|e) | Investments accounted for    using the equity method
|-- | ----------------------------------------------------




In accordance with US GAAP, accounting for investments under the equity  method requires that the earnings or losses and the financial position of an  investee be determined in accordance with US GAAP. Thus, in determining  the difference between the cost of an investment and the underlying equity in  investee net assets, it is first necessary to adjust the investees financial  statements to eliminate any material variances from US GAAP.  Until January 1, 2001, and with respect to  the Companys investment in Tornagaleones, differences between Chilean and US  GAAP mainly related to the revaluation of timber resources as described in  paragraph 1 g) and capitalization of interest costs from financing such  resources as described in paragraph 1 h) and differences in accounting  treatment for deferred income taxes between Chilean GAAP and US GAAP as  described in paragraph 1 b).  The  effect of these differences as they
relate to capitalization of interest costs  and deferred income taxes for investments accounted for under the equity method  are shown below in the reconciliation of net income and shareholders equity in  paragraph 1 l) below.





|f) | Consolidation
|-- | -------------




For purposes of US GAAP, consolidation is required when there is an  ability of an entity to direct the policies and management that guide the  ongoing activities of another entity so as to increase its benefits and limit  its losses from that other entitys activities.  Masnova de Mexico S.A. de CV is 50% owned by Masisa de Mexico  S.A. de C.V. and 50% owned by a related party and the Company has the ability  to control the entities operations.    For Chilean GAAP purposes, however, Masnova de Mexico S.A. de CV is not  consolidated.  The effects of not  consolidating Masnova under Chilean GAAP are not material and accordingly are  not included in the reconciliation of net income and net equity  accounts.  Masnova de Mexico S.A. de  CVs balance sheet includes total assets of ThCh$ 2,010,968, total liabilities  of ThCh$ 1,984,258, and stockholders equity of ThCh$ 26,710.  Masnova de México S.A. de
CVs has no  material commitments or contingencies.





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|g) | Revaluation of timber    resources
|-- | ----------------------------------




As mentioned in  Note 2 h), certain timber assets are reported in the financial  statements at amounts determined in accordance with a technical appraisal.  Revaluation of property, plant and equipment  is an accounting principle that is not generally accepted in the United  States.  The effects of the reversal of  this revaluation for both equity investments and consolidated subsidiaries are  shown in the reconciliation of shareholders equity in paragraph 1 l)  below.  As previously indicated in Note  2 h) the revaluation of timber resources is not given effect in the  statement of income under Chilean GAAP.





|h) | Capitalization of interest    costs
|-- | -----------------------------------




Under Chilean GAAP, the capitalization of interest costs is  optional.  However, as described in Note  2 h), the Company capitalizes financing costs on long term investment  projects in a manner consistent with US GAAP.   Tornagaleones, which was accounted for under the equity method for the  year ended December 31, 2000 and which was consolidated at and for the years  ended December 31, 2001 and 2002, capitalized interest costs incurred in  connection with the development of forests.   Under US GAAP interest costs incurred to finance the development of  forests are not normally capitalized.   The effect of capitalizing interest costs under Chilean GAAP is shown in  the reconciliations of net income and shareholders equity in paragraph  1 l) below.





|i) | Business combinations
|-- | ---------------------




Under US GAAP the purchase method is used for all business  combinations.  The acquired companys  assets and liabilities are adjusted to give effect to the purchase price paid  by the acquiring company.  If, after the  assets, including intangibles, 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.  SFAS No. 141 establishes specific criteria  for the recognition of intangible assets separately from goodwill and it  requires unallocated negative goodwill to be allocated pro rata to the acquired  assets or written off immediately as an extraordinary gain.  Goodwill and certain specifically identified  intangibles are assigned an indefinite useful life.  Accordingly, no goodwill amortization expense was recorded for US  GAAP purposes in 2002. Goodwill and indefinite life intangibles
are subject to  annual impairment tests based on the fair value method.





Under Chilean GAAP, as disclosed in Note 2 j) the difference between  the purchase price and net book value of an acquired company at the acquisition  date is recorded as goodwill and then amortized to income over periods of ten  to twenty years.





Goodwill arising from the purchase of Masisa Cabrero S.A. was adjusted  to conform Chilean purchase accounting with US GAAP and is shown in the  reconciliation of net income and shareholders equity in paragraph 1 l) below.





Goodwill arising from the acquisition of C y D Agrofruta Ltda. of ThCh$  743,366 was charged directly to expense in 2001 as described in Note 11.  The Company concurrently recognized a  deferred tax asset, which was the only asset acquired, for ThCh$ 945,550 which  reduced the Companys income tax expense by the same amount.  The Company does not consider the net impact  to be material to the consolidated financial statements.  Under US GAAP, neither goodwill expense nor  an income tax benefit would have been recognized.  Accordingly, a reclassification of the charge to goodwill against  income tax expense would be required for a proper presentation under US  GAAP.  The Company does not consider the  remaining impact on income tax expense to be material to the US GAAP results.  Accordingly, there is no net impact on either  net income or shareholders equity.





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Negative Goodwill resulting from the purchase of additional shares of  Forestal Tornagaleones is being amortized over 20 years under Chilean GAAP.  Under US GAAP, this negative goodwill would have been allocated pro rata to the  acquired noncurrent assets as of the acquisition date resulting in lower  depreciation expense.  The difference  between amortizing the negative goodwill to income over 20 years under Chilean  GAAP and the depreciation expense impact under the full allocation of US GAAP  has not been included in the reconciliation of net income and shareholders`  equity as the net impact is not material.





|j) | Tax effect of cumulative translation adjustment
|-- | -----------------------------------------------




Under Chilean GAAP, the Company does not record  in the cumulative translation adjustment the tax effect of transaction losses  on foreign currency debt that hedges a net investment; such tax effect is  recorded in net income. Under US GAAP, as such losses are currently deductible  for income tax purposes, the transaction losses are recorded net of related  income taxes in the cumulative translation adjustment.  The effect of this adjustment is shown in  the reconciliation of net income and shareholders equity under paragraph 1 l).





|k) | Comprehensive income
|-- | --------------------




In 1998, the Company adopted SFAS No. 130, Reporting Comprehensive  Income. SFAS No. 130 establishes guidelines for the reporting and display of  comprehensive income and its components in a full set of general purpose  financial statements. Comprehensive income represents the change in  shareholders equity of the Company during the period from transactions and  other events and circumstances from non-owner sources. It includes all changes  in equity during a period except those resulting from investments by owners and  distributions to owners. The adoption of SFAS No. 130 had no impact on total  shareholders equity.  The effect of  this new standard is shown in paragraph 1 l).





|l) | Effects of conforming to US GAAP
|-- | --------------------------------




The adjustments to reported net income and comprehensive income  required to conform with accounting principles generally accepted in the United  States of America were as follows (all amounts are expressed in thousands of  Chilean pesos of December 31, 2002 purchasing power):





|                                                                                   |  | Year ended    December 31, |           
|---------------------------------------------------------------------------------- |  | -------------------------- | ----------
|                                                                                   |  | 2000                       |           
|                                                                                   |  |                            |           
|                                                                                   |  | ThCh$                      |           
|Net income as shown in the Chilean GAAP financial    statements                    |  |                            | 17,995,173
|Deferred income taxes    (par. 1 b)                                                |  |                            | (406,133  
|Development stage    results of operations (par. 1 d)                              |  |                            | (159,395  
|Investments accounted    for using the equity method (par. 1 e)                    |  |                            | (280,167  
|Goodwill amortization    (par. 1 i)                                                |  |                            | (26,889   
|Capitalization of    interest (par. 1 h)                                           |  |                            |          
|Net effects of US GAAP    adjustment for capitalized interest on minority interest |  |                            |          
|Tax effect of    cumulative translation adjustment (par. 1 j)                      |  |                            | (332,589  
|                                                                                   |  |                            |           
|Net income in accordance with US GAAP                                              |  |                            | 16,790,000
|                                                                                   |  |                            |           
|Other comprehensive income:                                                        |  |                            |           
|Change in the    cumulative translation adjustment                                 |  |                            | 1,714,983 
|                                                                                   |  |                            |           
|Comprehensive income in accordance with US GAAP    (par. 1 k)                      |  |                            | 18,504,983
|                                                                                   |  |                            |           
|Accumulated other comprehensive income                                             |  |                            | 48,650,106
|                                                                                   |  |                            |           




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The adjustments required to conform shareholders equity to US GAAP  were as follows (all amounts are expressed in thousands of Chilean pesos of  December 31, 2002 purchasing power):





|                                                                                         |  | At    December 31, |            
|---------------------------------------------------------------------------------------- |  | ------------------ | -----------
|                                                                                         |  | 2001               |            
|                                                                                         |  |                    |            
|                                                                                         |  | ThCh$              |            
|Shareholders equity as shown in the Chilean GAAP    financial statements                |  |                    | 297,202,427
|Deferred income taxes (par.1 b)                                                          |  |                    | (10,373,342
|Minimum dividend (par. 1 c)                                                              |  |                    | (6,347,233 
|Investments accounted for using the equity method    (par. 1 e)                          |  |                    | (898,124   
|Reversal of revaluation of timber resources (par. 1    g)                                |  |                    | (7,873,679 
|Capitalization of interest  (par. 1 h)                                                   |  |                    | (1,275,377 
|Accumulated goodwill amortization (par. 1 i)                                             |  |                    | (129,604   
|Net effects of US GAAP adjustment for capitalization    of interest on minority interest |  |                    | 673,821    
|                                                                                         |  |                    |            
|Shareholders equity in accordance with US GAAP                                          |  |                    | 270,978,889
|                                                                                         |  |                    |            




The changes in shareholders equity determined under US GAAP were as  follows (all amounts are expressed in thousands of Chilean pesos at  December 31, 2002):





|                                                                             |  | ThCh$ |            
|---------------------------------------------------------------------------- |  | ----- | -----------
|                                                                             |  |       |            
|Balance at December 31, 1999                                                 |  |       | 213,565,781
|Reversal of accrual of    minimum dividend required by law at prior year end |  |       | 3,970,603  
|Distribution of    dividends                                                 |  |       | (5,153,438 
|Increase in cumulative    translation adjustment                             |  |       | 1,714,983  
|Accrual of minimum    dividend required by law                               |  |       | (5,402,800 
|Net income for the year                                                      |  |       | 16,790,000 
|                                                                             |  |       |            
|Balance at December 31, 2000                                                 |  |       | 225,485,129
|Reversal of accrual of    minimum dividend required by law at prior year end |  |       | 5,402,800  
|Increase capital                                                             |  |       | 26,376,423 
|Distribution of    dividends                                                 |  |       | (8,029,299 
|Increase in cumulative    translation adjustment                             |  |       | 8,923,517  
|Accrual of minimum    dividend required by law                               |  |       | (6,347,233 
|Net income for the year                                                      |  |       | 19,167,552 
|                                                                             |  |       |            
|Balance at December 31, 2001                                                 |  |       | 270,978,889
|Reversal of accrual of    minimum dividend required by law at prior year end |  |       | 6,347,233  
|Increase capital                                                             |  |       |           
|Distribution of    dividends                                                 |  |       | (6,334,908 
|Increase in cumulative    translation adjustment                             |  |       | 9,221,668  
|Accrual of minimum    dividend required by law                               |  |       | (3,143,064 
|Net income for the year                                                      |  |       | 10,190,878 
|                                                                             |  |       |            
|Balance at December 31, 2002                                                 |  |       | 287,260,696
|                                                                             |  |       |            




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|m) | Income statement and balance sheet classifications    under US GAAP
|-- | -------------------------------------------------------------------




As disclosed in Notes 20 and 21, under Chilean GAAP, the Company has  classified certain items in non-operating results (i.e. certain gains and  losses on sales of property, plant and equipment; write-downs of property,  plant and equipment; depreciation of equipment temporarily out of service,  provisions for accounts receivable losses, etc.) that under US GAAP, are  included in operating income. In addition, differences in classification of  income and expenses and goodwill as well as other differences between Chilean  GAAP and US GAAP exist as summarized in Note 1 l).  Consequently, under US GAAP, operating income amounted to ThCh$  25,276,764, ThCh$ 19,960,779, and ThCh$ 24,107,106 for the years ended  December 31, 2000, 2001 and 2002, respectively.





As disclosed in Note 14 c) the Company has been released from the  compliance of certain covenants regarding loans in the amount of US$ 4,369,475  contracted with Forestal Argentina S.A.   The Company has received a letter releasing it from compliance until  April 30, 2003.  For Chilean GAAP purpose  this loan continues to be classified as a long-term obligation.  For US GAAP disclosure purposes this loan  would be reclassified to current obligations.   However, subsequent to the fiscal year-end, and before issuance of these  financial statements, the Company received additional long-term funding in the  amount of US$ 25,000,000 (see Note 23 subsequent events) of which the resources  will be used for the pre-payment of the Forestal obligation and other bank  liabilities if needed.  Accordingly, for  US GAAP purpose we have not reclassified this note to short-term  obligations.  The effect of including  this obligation in
long-term obligations has no impact on other loan covenants.





In addition, as described in 1 e) above, the Company consolidated  Tornagaleones effective January 1, 2001.   Under US GAAP, consolidation would have occurred prospectively from the  date that restrictions lapsed, which was near June 30, 2001.  Presented below is an income statement  presented in accordance with Chilean GAAP that shows the results for  Tornagaleones for the first six months as allowed under Chilean GAAP.  These amounts would be accounted for on an  equity basis for US GAAP.





|                                                 |  | ThCh$ |           
|------------------------------------------------ |  | ----- | ----------
|                                                 |  |       |           
|OPERATING RESULT                                 |  |       |           
|Net sales                                        |  |       | 4,477,365 
|Cost of sales                                    |  |       | (3,788,445
|Selling and    administrative expenses           |  |       | (370,103  
|                                                 |  |       |           
|Operating income                                 |  |       | 318,817   
|                                                 |  |       |           
|NON OPERATING RESULTS                            |  |       |           
|Interest financial    income                     |  |       | 15,127    
|Other income                                     |  |       | 69,229    
|                                                 |  |       |           
|Non operating income                             |  |       | 84,356    
|                                                 |  |       |           
|NON OPERATING EXPENSES                           |  |       |           
|Interest expense                                 |  |       | (610,695  
|Other expenses                                   |  |       | (38,048   
|Price level    restatements                      |  |       | (839,693  
|                                                 |  |       |           
|Non operating expenses                           |  |       | (1,488,436
|                                                 |  |       |           
|Income before income taxes and minority interest |  |       | (1,085,263
|Income taxes                                     |  |       | (35,937   
|Minority interest                                |  |       | 91,368    
|                                                 |  |       |           
|NET LOSS                                         |  |       | (1,029,832
|                                                 |  |       |           




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|2  | Additional disclosure requirements
|-- | ----------------------------------
|   |                                   
|a) | Earnings per share                




In 1998, the Company adopted SFAS No. 128, Earnings Per Share.  SFAS No. 128 requires the disclosure of  Basic and Diluted Earnings Per Share (EPS).   Basic EPS is calculated using income available to common stockholders  divided by the weighted average of common shares outstanding during the  year.  Diluted EPS is similar to Basic  EPS except that the weighted average of common shares outstanding is increased  to include the number of additional common shares that would have been  outstanding if the dilutive potential common shares, such as options, had been  issued.  The treasury stock method is  used to calculate dilutive shares which reduces the gross number of dilutive  shares by the number of shares purchasable from the proceeds of the options  assumed to be exercised. Diluted EPS is equal to Basic EPS for all periods  presented as the Company did not have any potentially dilutive securities.  The following
disclosure of earnings per  share information is not generally required for presentation in the financial  statements under Chilean accounting principles but is required under US GAAP:





|                                                                                |  | Year ended    December 31, |        
|------------------------------------------------------------------------------- |  | -------------------------- | -------
|                                                                                |  | 2000                       |        
|                                                                                |  |                            |        
|                                                                                |  | Ch$                        |        
|Basic and diluted earnings per share under Chilean    GAAP                      |  |                            | 21.40  
|                                                                                |  |                            |        
|Basic and diluted earnings per share under US GAAP                              |  |                            | 19.97  
|                                                                                |  |                            |        
|Weighted average number of shares of Common Stock    outstanding (in thousands) |  |                            | 840,500
|                                                                                |  |                            |        




|b) | Income taxes
|-- | ------------




The provisions for income taxes charged to the results of operations  were as follows:





|                                                            |  | 2000  |           | 2001  |  | 2002       |  
|----------------------------------------------------------- |  | ----- | --------- | ----- |  | ---------- | -
|                                                            |  |       |           |       |  |            |  
|                                                            |  | ThCh$ |           | ThCh$ |  | ThCh$      |  
|Deferred tax expense (benefit) under Chilean GAAP:          |  |       |           |       |  |            |  
|Chile                                                       |  |       | 992,436   |       |  | (1,111,052 | )
|Foreign                                                     |  |       | (409,235  | )     |  | (2,266,880 | )
|Additional deferred tax expense (benefit) under US    GAAP: |  |       |           |       |  |            |  
|Chile adjustment                                            |  |       | 238,696   |       |  | 13,966     |  
|Chile reclassification                                      |  |       |          |       |  | 743,366    |  
|Foreign                                                     |  |       | 167,436   |       |  |           |  
|                                                            |  |       |           |       |  |            |  
|Total deferred tax    provision                             |  |       | 989,333   |       |  | (2,620,600 | )
|                                                            |  |       |           |       |  |            |  
|Current tax provision:                                      |  |       |           |       |  |            |  
|Chile                                                       |  |       | 1,254,692 |       |  | 1,388,578  |  
|Foreign                                                     |  |       | 2,921,250 |       |  | 1,576,927  |  
|Adjustment to current tax provision under US GAAP           |  |       | 332,589   |       |  | 1,271,654  |  
|                                                            |  |       |           |       |  |            |  
|Total income tax    provision                               |  |       | 5,497,864 |       |  | 1,616,559  |  
|                                                            |  |       |           |       |  |            |  




All of the income tax provision in each year arises from Chilean,  Argentine, Mexico, Peru, and Brazilian sources.





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Deferred tax assets (liabilities) are summarized as follows at December  31:





|                                                         |  | 2001  |             | 2002  | 
|-------------------------------------------------------- |  | ----- | ----------- | ----- | 
|                                                         |  |       |             |       | 
|                                                         |  | ThCh$ |             | ThCh$ | 
|Property, plant and equipment (1)                        |  |       | (20,009,207 | )     | 
|Inventories                                              |  |       | (1,654,093  | )     | 
|                                                         |  |       |             |       | 
|Gross deferred tax    liabilities                        |  |       | (21,663,300 | )     | 
|                                                         |  |       |             |       | 
|Tax loss carryforwards (2)                               |  |       | 4,506,850   |       | 
|Notes and accounts receivable                            |  |       | 1,038,521   |       | 
|Deferred revenues                                        |  |       | 305         |       | 
|Accounts payable                                         |  |       | 111,763     |       | 
|Accrued vacations                                        |  |       | 132,188     |       | 
|Other provisions                                         |  |       | 1,373,829   |       | 
|                                                         |  |       |             |       | 
|Gross deferred tax    assets                             |  |       | 7,163,456   |       | 
|                                                         |  |       |             |       | 
|Net deferred tax liabilities                             |  |       | (14,499,844 | )     | 
|                                                         |  |       |             |       | 
|Net deferred tax liabilities under Chilean GAAP          |  |       | (4,126,502  | )     | 
|Additional net deferred tax liabilities under US    GAAP |  |       | (10,373,342 | )     | 
|                                                         |  |       |             |       | 
|Total net deferred tax    liabilities as indicated above |  |       | (14,499,844 | )     | 
|                                                         |  |       |             |       | 




|(1) | Includes tax benefits from    Argentina that consist of  the    deferral of income tax on gains arising from the sales of fixed assets when    those assets are subsequently replaced by new similar assets.  For tax purpose, the gains are credited    against the tax basis of the new assets.                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2) | The tax loss carryforwards    at December 31, 2002 originated in Masisa Argentina S.A. and Forestal    Argentina S.A. during 2002 and have a five year expiration date.  The tax loss carry forwards originating in    C y D Agrofruta Ltda. and Brazil have no expiration date.  The asset for tax loss carryforwards is    net of a valuation allowance of ThCh$9,019,776 related to losses in Argentina    that the Company does not believe are more likely than not of recovery    based on the economic situation.




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The provision for income taxes differs from the amount of income tax  determined by applying the applicable Chilean statutory income tax rate (15% in  2000 and 2001, 16% in 2002) to US GAAP pretax income as a result of the  following differences:





|                                                               |  | Year ended    December 31, |           
|-------------------------------------------------------------- |  | -------------------------- | ----------
|                                                               |  | 2000                       |           
|                                                               |  |                            |           
|                                                               |  | ThCh$                      |           
|US GAAP pretax income                                          |  |                            |           
|Chile                                                          |  |                            | 12,884,134
|Foreign                                                        |  |                            | 9,403,731 
|                                                               |  |                            |           
|Total                                                          |  |                            | 22,287,865
|                                                               |  |                            |           
|At statutory Chilean tax rates                                 |  |                            |           
|Chile                                                          |  |                            | 1,932,620 
|Foreign                                                        |  |                            | 1,410,559 
|                                                               |  |                            |           
|Total                                                          |  |                            | 3,343,179 
|                                                               |  |                            |           
|Increase (decrease) in rates resulting from:                   |  |                            |           
|Price-level restatement    not accepted for tax purposes       |  |                            | 81,632    
|Non-taxable income                                             |  |                            | (8,674    
|Non-deductible expenses                                        |  |                            | 479,721   
|Adjustments of income    tax provision of prior year           |  |                            | 7,676     
|Other local income    taxes                                    |  |                            | 22,319    
|Difference between tax    rate in Argentina, Mexico and Brazil |  |                            | 1,495,910 
|Change in valuation    allowance                               |  |                            |          
|Other                                                          |  |                            | 76,101    
|                                                               |  |                            |           
|At effective tax rates                                         |  |                            | 5,497,864 
|                                                               |  |                            |           




|c)  | Other disclosures                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                             
|i)  | Net foreign exchange adjustments were a loss of    ThCh$1,938,388 in 2002 and gains of ThCh$3,189,296 and ThCh$1,578,790, in    2000 and 2001, respectively.
|    |                                                                                                                                                             
|ii) | Disclosures about fair value of financial    instruments and derivatives.                                                                                   




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|a) | The following methods and assumptions were used to    estimate the fair value of each class of financial instrument at December 31,    2001 and 2002 for which it is practicable to estimate that value:
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | For cash, short-term time deposits, short-term bank    loans, current accounts receivable and current accounts payable, the carrying    amounts approximate fair value due to the short-term maturity of these    instruments.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                               
| |  | For long-term receivables, the fair values were    estimated using the interest rate the Company could obtain on long-term time    deposits with a term similar to the estimated collection period of the    receivable.      
| |   |                                                                                                                                                                                                                               
| |  | For long-term time deposits, the fair values were    estimated using interest rates available for time deposits with similar    remaining terms.                                                                              
| |   |                                                                                                                                                                                                                               
| |  | For long-term debt obligations, the fair values were    estimated based on rates available to the Company for debt with similar terms    and remaining maturities.                                                            
| |   |                                                                                                                                                                                                                               
| |  | For foreign currency forward contracts and interest    rate swaps, fair values were estimated based on quotes obtained from brokers    for derivatives with similar terms and remaining maturities.                           




|                               |  | At    December 31, 2001 |             | At    December 31, 2002 | 
|------------------------------ |  | ----------------------- | ----------- | ----------------------- | 
|                               |  | Carrying amount         |             | Fair value              | 
|                               |  |                         |             |                         | 
|                               |  | ThCh$                   |             | ThCh$                   | 
|Assets                         |  |                         |             |                         | 
|Cash                           |  |                         | 5,223,149   |                         | 
|Time deposits (short-term)     |  |                         | 9,806,026   |                         | 
|Accounts receivable (current)  |  |                         | 36,784,784  |                         | 
|Accounts receivable(long-term) |  |                         | 1,318,566   |                         | 
|Time deposits (long-term)      |  |                         | 92,413,077  |                         | 
|Liabilities                    |  |                         |             |                         | 
|Short-term bank loans          |  |                         | 17,571,279  |                         | 
|Accounts payable (current)     |  |                         | 14,659,267  |                         | 
|Long-term bank loans           |  |                         | 159,285,581 |                         | 
|Long-term liabilities          |  |                         | 52,935,730  |                         | 
|Forward contracts              |  |                         | 4,777,921   |                         | 
|Interest rate swaps            |  |                         | 12,091,261  |                         | 




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|b) | Derivatives
|-- | -----------




See Note 8 for disclosures related to the Companys derivatives as of  December 31, 2001 and 2002.





The Company adopted Statement of Financial Accounting Standards No.  133, Accounting for Derivative Instruments and Hedging Activities, as  amended, effective January 1, 2001.   This standard requires recognition of all derivatives as either assets  or liabilities in the balance sheet and measurement of those investments at  fair value.  Generally, changes in the  fair value of derivatives must be recognized in income unless the derivatives  qualify as a hedge in accordance with the standard.  If the derivative qualifies as a hedge, the accounting for changes  in fair value will depend on intended use of the derivative and the designation  as either a fair value hedge, cash flow hedge, or a hedge of the foreign  currency exposure.  In order to be  eligible for hedge accounting strict contemporaneous documentation requirements  including the method of measuring hedge effectiveness must be net.





The Company does use derivatives from time to time to manage foreign  currency risk with respect to forecasted transactions and to manage interest  rate risk.  The Company does not make  regular use of derivative instruments and hedging activities are generally not  significant.





The Companys policy, described in Note 2 n), for recording losses on  the debt obligations described in Note 10 is considered part of the Companys  translation policy under Chilean Technical Bulletin No. 64 and consistent with  SFAS No. 133.





The Company has not designated any of the derivatives outstanding at  December 31, 2001 or 2002 as hedges for US GAAP.  Accordingly, the Company considers the difference in accounting  between Chilean GAAP and US GAAP for these derivatives to be immaterial.





|iii) | Concentration of credit risk
|---- | ----------------------------




Financial instruments which potentially subject the Company to  significant concentrations of credit risk consist principally of cash and cash  equivalents and accounts receivable.





The Company maintains cash and cash equivalents with various major  financial institutions.  The Company  performs periodic evaluations of the relative credit standing of these  financial institutions and limits the amount of credit exposure with any  institution.





With respect to accounts receivable, approximately 36.1% of the  Companys sales in 2002, 44.3% in 2001 and 45.1% in 2000 were to customers  located in Chile.  A significant portion  of its customers are in the Chilean furniture manufacturing and construction  industries.  Approximately 40.7% of the  Companys sales were attributable to the Argentine and Brazil subsidiaries  in 2001, 43.8% in 2000.  In 2002  the Company added a subsidiary in Mexico, and the compound sales of this three  markets sums 41.2% of the Companys sales.   The remaining sales were to other foreign countries.





|iv) | Segment information
|--- | -------------------




In 1998, the Company adopted SFAS No. 131,  Disclosures about Segments of an Enterprise and Related Information.  SFAS No. 131 establishes standards  for public enterprises to determine and report information about operating  segments in their annual and interim reports.   The management approach designates the internal organization that is  used by management for making operating decisions and assessing performance as  the source of the Companys reportable segments.





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The Company has determined that the information  used by the Companys key decision makers for making operating decisions and  assessing performance is based on geographical segments.  The Companys reportable geographical  segments are Chile, Mexico, Argentina and Brazil. In year 2002 the Company  started operations in Mexico.   Management views this segment as a key component of the entitys  business and expects the segment to meet the quantitative thresholds in future  years.





The Company measures its reportable segments and  evaluates their performance based on operating income (loss), which includes  inter-segment revenues and corporate expenses that are allocated to the  operating segments.  The Company is not  dependent on any single customer.  The  accounting policies underlying the reported segment data are the same as those  described in the summary of significant accounting policies (see Note 2).





The table below presents information in millions of Chilean pesos about  reportable segments for the years ending December 31.





(In millions of Chilean pesos)





|2002             |  | Chile |        | Argentina |  | Brazil |  | Mexico |        | Other (2) |  |        | Total | 
|---------------- |  | ----- | ------ | --------- |  | ------ |  | ------ | ------ | --------- |  | ------ | ----- | 
|                 |  |       |        |           |  |        |  |        |        |           |  |        |       | 
|Sales (1)        |  |       | 88,555 |           |  | 35,331 |  |        | 33,180 |           |  | 12,191 |       | 
|Operating income |  |       | 16,731 |           |  | 537    |  |        | 4,123  |           |  | 151    |       | 
|2001             |  |       |        |           |  |        |  |        |        |           |  |        |       | 
|                 |  |       |        |           |  |        |  |        |        |           |  |        |       | 
|Sales (1)        |  |       | 95,069 |           |  | 47,548 |  |        | 26,188 |           |  |       |       | 
|Operating income |  |       | 17,757 |           |  | 6,283  |  |        | 4,996  |           |  |       |       | 
|2000             |  |       |        |           |  |        |  |        |        |           |  |        |       | 
|                 |  |       |        |           |  |        |  |        |        |           |  |        |       | 
|Sales (1)        |  |       | 70,558 |           |  | 46,417 |  |        | 12,161 |           |  |       |       | 
|Operating income |  |       | 16,213 |           |  | 11,028 |  |        | (150   | )         |  |       |       | 
|                 |  |       |        |           |  |        |  |        |        |           |  |        |       | 




|(1) | Sales figures are based on    the location in which the sale is originated.
|--- | ---------------------------------------------------------------------------
|(2) | Other includes other    countries and inter-company elimination.           




The following is sales information based on the location to which the  product is shipped and long-lived asset information by geographic area:





|                               |  | Sales |         | Property,    plant and equipment    year ended December 31, | 
|------------------------------ |  | ----- | ------- | ----------------------------------------------------------- | 
|                               |  |       |         |                                                             | 
|                               |  | 2000  |         | 2001                                                        | 
|(In millions of Chilean pesos) |  |       |         |                                                             | 
|Domestic:                      |  |       |         |                                                             | 
|Chile                          |  |       | 53,400  |                                                             | 
|Argentina                      |  |       | 32,053  |                                                             | 
|Brazil                         |  |       | 19,821  |                                                             | 
|Mexico                         |  |       |        |                                                             | 
|Foreign                        |  |       | 13,071  |                                                             | 
|                               |  |       |         |                                                             | 
|Total                          |  |       | 118,345 |                                                             | 
|                               |  |       |         |                                                             | 




The remaining long-lived assets not allocated represent primarily  long-term time deposits that are held by the Company in Chile.





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Enterprise wide sales information based on the Companys products is as  follows:





|                               |  | SalesYear ended December 31, |        
|------------------------------ |  | ---------------------------- | -------
|                               |  | 2000                         |        
|                               |  |                              |        
|(In millions of Chilean pesos) |  |                              |        
|Raw particle board             |  |                              | 20,021 
|Coated particle board          |  |                              | 41,842 
|Raw MDF                        |  |                              | 43,744 
|Coated MDF                     |  |                              | 10,749 
|Oriented Strand Board (OSB)    |  |                              |       
|Others                         |  |                              | 1,989  
|                               |  |                              |        
|Total                          |  |                              | 118,345
|                               |  |                              |        




Foreign revenue includes export sales from Chile, Mexico, Argentina and  Brazil to other countries.  Below, such  amounts are detailed by major geographic area:





|                                                                                       |  | 2000 |        | 2001 |  | 2002   |  
|-------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ------ | -
|                                                                                       |  |      |        |      |  |        |  
|(In millions of Chilean pesos)                                                         |  |      |        |      |  |        |  
|North America                                                                          |  |      | 1,134  |      |  | 1,144  |  
|Central and South America                                                              |  |      | 8,057  |      |  | 14,590 |  
|Asia                                                                                   |  |      | 2,808  |      |  | 7,065  |  
|Europe                                                                                 |  |      | 1,072  |      |  | 989    |  
|                                                                                       |  |      |        |      |  |        |  
|Total export sales from    Chile, Mexico, Argentina and Brazil                         |  |      | 13,071 |      |  | 23,788 |  
|                                                                                       |  |      |        |      |  |        |  
|Export sales from Chile, Mexico Argentina and Brazil    as a percentage of total sales |  |      | 11.04  | %    |  | 14.93  | %
|                                                                                       |  |      |        |      |  |        |  




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|v) | Investment in unconsolidated subsidiaries and joint    ventures.
|-- | ----------------------------------------------------------------




Below is summarized financial information on the following significant  unconsolidated subsidiaries and joint ventures.  All of these companies were either consolidated or sold by  December 31, 2002.





|Forestal    Tornagaleones S.A. and subsidiaries |  | At and for    the year end December 31, 2000 |       
|----------------------------------------------- |  | -------------------------------------------- | ------
|                                                |  |                                              |       
|(In millions of constant Chilean pesos)         |  |                                              |       
|Current assets                                  |  |                                              | 6,485 
|Non current assets                              |  |                                              | 85,273
|Current liabilities                             |  |                                              | 6,408 
|Non current liabilities                         |  |                                              | 33,049
|Revenues                                        |  |                                              | 6,503 
|Net income (loss)                               |  |                                              | 156   
|Resinas    Concordia S.A.                       |  |                                              |       
|                                                |  |                                              |       
|(In millions of constant Chilean pesos)         |  |                                              |       
|Current assets                                  |  |                                              | 2,323 
|Non current assets                              |  |                                              | 10,715
|Current liabilities                             |  |                                              | 2,524 
|Non current liabilities                         |  |                                              | 203   
|Revenues                                        |  |                                              | 6,935 
|Net income                                      |  |                                              | 186   
|Georgia-Pacific    Masisa Resinas Ltda.         |  |                                              |       
|                                                |  |                                              |       
|(In millions of constant Chilean pesos)         |  |                                              |       
|Current assets                                  |  |                                              | 3,457 
|Non current assets                              |  |                                              | 10,527
|Current liabilities                             |  |                                              | 740   
|Non current liabilities                         |  |                                              | 3,807 
|Revenues                                        |  |                                              | 8,722 
|Net income                                      |  |                                              | 745   
|Maderas y    Sintéticos del Perú S.A.C.         |  |                                              |       
|                                                |  |                                              |       
|(In millions of constant Chilean pesos)         |  |                                              |       
|Current assets                                  |  |                                              | 2,173 
|Non current assets                              |  |                                              | 3     
|Current liabilities                             |  |                                              | 2,460 
|Non current liabilities                         |  |                                              |      
|Revenues                                        |  |                                              | 2,506 
|Net loss                                        |  |                                              | 160   




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|vi) | Pro Forma Condensed Income Statement
|--- | ------------------------------------




APB No. 16 Business Combinations, required the disclosure of certain  pro forma information concerning to results of operations of the Company as  though its acquisition of Masisa Cabrero S.A. had occurred as of the beginning  of 2000.





The following unaudited pro forma information has been prepared for  comparative purposes only and does not purport to be indicative of the results  of operations which actually would have been resulted had the acquisition  occurred on the date indicated, or which may result in the future:





|                                                           |  | Year ended     December 31, |        
|---------------------------------------------------------- |  | --------------------------- | -------
|                                                           |  |                             |        
|(In millions of constant Chilean pesos)                    |  | 2000                        |        
|Net sales                                                  |  |                             | 144,626
|Chilean GAAP net income                                    |  |                             | 21,830 
|Basic and diluted earnings per share under Chilean    GAAP |  |                             | 25.19  




|d) | Accounting developments
|-- | -----------------------




In July 2001, the FASB issued SFAS No. 143, Accounting for Asset  Retirement Obligations.  FAS No. 143  requires entities to record the fair value of a liability for an asset  retirement obligation in the period in which it is incurred.  When the liability is initially recorded,  the entity capitalizes the cost by increasing the carrying amount of the related  long-lived asset.  Over time, the  liability is accreted to its present value each period and the capitalized cost  is depreciated over the useful life of the related asset.  Upon settlement of the liability, the entity  either settles the obligation for the amount recorded or incurs a gain or  loss.  FAS No. 143 is effective for  fiscal years beginning after June 15, 2002.   Although the Company is evaluating the effects of this Statement on its  financial position and results of operations, management does not believe that  the adoption of this Statement will
have a material impact on the results of  its operations.





In June 2002, the FASB issued SFAS No. 146 Accounting for Costs  Associated with Exit or Disposal Activities (FAS 146). This statement  supersedes Emerging Issues Task Force (EITF) Issue No. 94-3 Liability  Recognition for Certain Employee Termination Benefits and Other Costs to Exit  an Activity (including Certain Costs Incurred in a Restructuring).  FAS 146 requires that a liability for a cost  associated with an exit or disposal activity be recognized when the liability  is incurred. Under EITF 94-3, a liability is recognized at the date an entity  commits to an exit plan. FAS 146 also establishes that the liability should  initially be measured and recorded at fair value. The provisions of FAS 146  will be effective for any exit and disposal activities initiated after December  31, 2002. The Company is evaluating the effect of this statement on its  financial position and results of operations, however, it does not expect the



adoption will have a material impact on the Companys results of operations or  financial position.





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In November 2002, the FASB issued FASB Interpretation No. 45,  Guarantors Accounting and Disclosure Requirements for Guarantees, Including  Indirect Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires that  upon issuance of a guarantee, a guarantor must recognize a liability for the  fair value of an obligation assumed under a guarantee. FIN 45 also requires  additional disclosures by a guarantor in its interim and annual financial  statements about the obligations associated with guarantees issued. Initial  recognition and measurement provisions of FIN 45 are applicable on a prospective  basis to guarantees issued or modified.   The Company is evaluating the impact of the new interpretation, however,  the adoption of FIN 45 is not expected to have a material impact on the  Companys results of operations or financial position.





In December 2002, the FASB issued SFAS No. 148 Accounting for Stock-  Based Compensation- Transition and Disclosure- an amendment of FASB Statement  No. 123 (FAS 148). This statement, which is effective for financial statements  for fiscal years ending after December 15, 2002, amends SFAS No. 123  Accounting for Stock Based Compensation (FAS 123) to provide alternative  methods of voluntarily transitioning to the fair value based method of  accounting for stock-based employee compensation. FAS 148 also amends the  disclosure requirements of FAS 123 to require disclosure of the method used to  account for stock-based employee compensation and the effect of the method on  reported results in both annual and interim financial statements. The Company  is evaluating the effect of this statement on its financial position and  results operations, however, management does not expect that the adoption will  have a material impact on its results



of operations or financial position.





In January 2003, the FASB issued Interpretation 46, Consolidation of  Variable Interest Entities (FIN 46). FIN 46 requires that companies that  control another entity through interests other than voting interests should  consolidate the controlled entity. FIN 46 applies to variable interest entities  created after January 31, 2003, and to variable interest entities in which an  enterprise obtains an interest in after that date.  The related disclosure requirements are effective immediately.  The Company is presently evaluating the  impact of the new interpretation, however, management does not expect that the  adoption will have a material impact on its results of operations or financial  position.





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