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As filed  with the Securities and Exchange Commission on June 30, 2004.





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, 2003





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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Av. Apoquindo 3650, Piso 10, Las Condes, 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                            | 9

PART II

|Item 5. Operating and Financial Review and Prospects | 38
|---------------------------------------------------- | --
|Item 6. Directors, Senior Management and Employees   | 54

PART III

|Item 7. Major Shareholders and Related Party Transactions                             | 60
|------------------------------------------------------------------------------------- | --
|Item 8. Financial Information                                                         | 61
|Item 9. The Offer and Listing                                                         | 63
|Item 10. Additional Information                                                       | 64
|Item 11. Quantitative and Qualitative Disclosure About Market Risk                    | 75
|Item 12. Description of Securities Other than Equity Securities                       | 78
|Item 13. Default, Dividend Arrearages and Delinquencies                               | 78
|Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds | 78
|Item 15. Controls and Procedures                                                      | 79
|Item 16A. Audit Committee Financial Expert                                            | 79
|Item 16B. Code of Ethics                                                              | 79
|Item 16C. Principal Accountant Fees and Services                                      | 79

PART IV

|Item 17. Financial Statements | 81
|----------------------------- | --
|Item 18. Financial Statements | 81
|Item 19. Exhibits             | 81

-ii-

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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 U.S. dollars, dollars or
US$ are to United States dollars, references to Chilean pesos, pesos or Ch$ are
to Chilean pesos, references to the Consumer Price Index or CPI are to the Indice
de Precios al Consumidorpublished by the Chilean Instituto Nacional de Estadísticasand references to UF or Unidades de Fomento are to Unidades de Fomento, a
Chilean financial index adjusted for changes in the CPI. 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). Chilean GAAP differs in certain significant
respects from accounting principles generally accepted in the United States (U.S.
GAAP). Note 23 of the Consolidated Financial Statements (Note 23) provides a
description of the principal differences between Chilean GAAP and U.S. GAAP and
contains a reconciliation to U.S. GAAP of total shareholders equity as of December
31, 2002 and 2003 and the Companys net income for each of the last three years in the
period ended December 31, 2003.

On
April 10, 2003, the Servicio de Impuestos Internos(the Chilean Internal Revenue
Service or SII) authorized Masisa to maintain its accounting records in U.S.
dollars as of January 1, 2003. On October 10, 2003, the Superintendencia de
Valores y Seguros (the Chilean Securities and Insurance Authority or SVS)
authorized the Company to present its annual and quarterly statutory financial
statements in U.S. dollars. The Companys functional currency has not changed
and remains the U.S. dollar. In accordance with Chilean GAAP, the Consolidated
Balance Sheets, Statements of Income and Cash Flows as of and for the year ended
December 31, 2002 and 2001 previously presented in Chilean pesos were recast in
accordance with accounting principles generally accepted in Chile to be presented
in U.S. dollars using the exchange rates as of December 31, 2002 and 2001,
respectively. The exchange rates used for this purpose as of December 31, 2002 and
2001 were Ch$ 718.61 and Ch$ 654.79, respectively. See Note 23 of the Consolidated
Financial Statements for a description and quantification of the differences
between U.S. GAAP and Chilean GAAP related to the process of recasting the
financial statements for periods prior to January 1, 2003.

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.

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.

-iii-

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Table of Contents

PART I

Table of Contents

Item
1. Identity of Directors, Senior Management and Advisers

Not applicable.

Table of Contents

Item
2. Offer Statistics and Expected Timetable

Not applicable.

Table of Contents

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, 1999
 through  2003.  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 23 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, 2002 and 2003 and net income for
each of the three years in the period ended December 31, 2003.

1

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SELECTED FINANCIAL
INFORMATION(1)

|                                                           | As of and for the year ended December 31,
|---------------------------------------------------------- | -----------------------------------------
|                                                           |                                          
|                                                           | 1999                                     
|                                                           |                                          
|                                                          
|                                                           |                                          
|(in millions of US$, except per share and per ADS amounts) | US$                                      
|                                                           |                                          
|INCOME STATEMENT DATA                                     
|Chilean GAAP;                                             
|Net sales                                                  | 165.7                                    
|Operating income                                           | 31.3                                     
|Non-operating results, net                                 | (5.5)                                    
|Income taxes                                               | (3.4)                                    
|Net income                                                 | 22.5                                     
|Net earnings per share (2)                                 | 0.03                                     
|Net earnings per ADS (3)                                   | 0.80                                     
|Dividends per share (2)                                    | 0.011                                    
|Dividends per ADS (3)                                      | 0.32                                     
|U.S. GAAP;                                                
|Net sales                                                  | 165.7                                    
|Operating income                                           | 30.3                                     
|Non-operating results, net                                 | (4.2)                                    
|Income taxes                                               | (4.7)                                    
|Net income                                                 | 21.3                                     
|Basic and diluted earnings per share                       | 0.03                                     
|Net earnings per ADS (3)                                   | 0.76                                     
|Weighted average number of shares (in
    thousands)       | 840,500                                  
|BALANCE SHEET DATA                                        
|Chilean GAAP                                              
|Total assets                                               | 580.0                                    
|Long-term liabilities                                      | 153.6                                    
|Shareholders equity                                       | 399.5                                    
|U.S. GAAP                                                 
|Total assets                                               | 588.1                                    
|Long-term liabilities                                      | 139.9                                    
|Shareholders equity                                       | 387.1                                    

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|(1) | The  Company  changed its  reporting  currency  to US dollars  beginning  January 1, 2003 (see Note 2 to the
     Consolidated  Financial  Statements).  The Chilean GAAP financial  information  for the periods 1999 to
     2002 has been recast in accordance with Chilean GAAP using year-end  exchange rates of Ch$ 530.07,  Ch$
     573.65,  Ch$ 654.79 and Ch$ 718.61,  respectively.  The historical U.S. GAAP information for the period
     1999 to 2002 has been remeasured in accordance with US GAAP (see Note 23 to the Consolidated  Financial
     Statements).   Financial   information  for  1999  through  2000  is  not  consolidated  with  Forestal
     Tornagaleones S.A.  Effective January 1, 2001, the Company accounts for Forestal  Tornagaleones S.A. as
     a consolidated  subsidiary in accordance  with Chilean GAAP (see Note 2 to the  Consolidated  Financial
     Statements).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | 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 23(2)(a) to the Consolidated
Financial Statements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Per
ADS amounts are determined by multiplying per share amounts by 30, because one ADS is
equal to 30 shares of Common Stock.
|--- | -----------------------------------------------------------------------------------------------------------------------------

2

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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)                                 
|                        |                                         
|1999                    | 468.69                                  
|2000                    | 501.04                                  
|2001                    | 557.13                                  
|2002                    | 641.75                                  
|2003                    | 593.10                                  

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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)                                 
|         |                                         
|2003:   
|        
|December | 593.10                                  
|2004:   
|January  | 559.21                                  
|February | 571.35                                  
|March    | 588.04                                  
|April    | 596.61                                  
|May      | 622.25                                  

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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 17, 2004, the observed exchange rate was Ch$648.16 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,  new MDF plants in

3

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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
 57% 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  40% 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.  See  Item 6.
 Directors,  Senior  Management  and Employees for further discussion on the Companys
employees.

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 American  Depositary  Shares  (ADSs) may
have a limited  ability to sell ADSs or common stock  obtained  upon

4

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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 ADSs
evidencing  those ADSs. In addition,  the depositary will incur foreign  currency
 conversion costs (to be borne by the holders of the ADSs) 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 ADS, 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 Stock  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.

5

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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 Terranova  S.A.  (Terranova),  formerly
 Forestal Terranova  S.A., one of the companies  belonging to the GrupoNueva  group.  See
Item 7 for more  information on the merger of Terranova and Forestal  Terranova  S.A.
 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,  as of June 30,
2004,  Terranova owned 52.43 % of the  subscribed  and paid  Common  Stock of Masisa
 Chile.  See Major  Shareholders  under Item 7. As a result,  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 detail in certain  respects than 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 gross domestic  product (GDP)
grew at the average rate of  approximately 2.5%  over the  five-year  period  from  1997
to 2002 and grew an  estimated  3.3% in 2003,  there can be no assurance  that such
annual  growth will  continue in the future,  or can the Company 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 and other  currencies  in which the  Company
 completes transactions  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 day in 2001 and  2002,  respectively,  for which  the  Observed  Exchange
 Rates  were reported).  The Chilean peso increased  approximately  17.4% nominally
against the U.S. dollar from December 31,  2002 to  December  31,  2003  (the  last day
in 2002 and 2003,  respectively,  for  which the  Observed Exchange  Rates were
 reported.)  The value of

6

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the Chilean  peso  against
 the U.S.  dollar  may  fluctuate significantly in the future.  See Item 3. Key
 InformationExchange  Rates.  Historically,  a significant part of the Companys
 indebtedness  has been denominated in U.S.  dollars,  while a certain 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 certain 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 2.3% in 1999,  4.5% in 2000, 2.6% in
2001, 2.8% in 2002 and 1.1% in 2003.  The Company  cannot  assure you that Chilean
 inflation  will not change  significantly  from current levels.

Energy shortages
and increased energy costs could adversely affect the Companys business

Starting
in April 2004,  Argentina  began  restricting  deliveries  of natural gas to Chile due to
supply and  distribution  problems in  Argentina,  Chiles  principal  supplier.  A
 significant  portion of Chiles  electricity is produced from natural gas. Any shortage
of natural gas could force Chiles  electric utilities to use costlier coal or petroleum
based fuels to produce  electricity or cause  disruptions in the supply of  electricity.
 Higher  electricity  costs or  disruptions  in the supply of electricity or natural gas
could adversely affect the Companys financial condition and results of operations.

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. From 1999 until  2002,  the  Argentinean  economy  was 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.

7

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Consequently,
 Argentinas  country risk has risen to record high  levels.  In 2003,  the economy
 began to recover and some of the  government financial restrictions were lifted.

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 continue to improve,  the  Companys  Argentinean operations and
Masisas results of operations could be further  negatively  affected.  Although the
economic situation began to improve in 2003,  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.  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 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.

8

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Table of Contents

Item
4. Information on the Company

History and
Development of the Company

Masisa
S.A., or Masisa Chile, is a sociedad anónima abiertaorganized 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 S.A. On July 22, 2002, 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, as of June 30, 2004
Terranova owned 52.43 % of the Common Stock of Masisa Chile. Masisa Chiles legal
domicile is Valdivia, Chile, and its principal executive offices are located at Av.
Apoquindo 3650, Piso 10, Las Condes, Santiago, Chile. Its telephone number is (56-2)
707-8800.

The
Company is a leading  producer of particle board,  MDF and OSB in Latin America,  with
US$281.8 million  in total net  consolidated  sales in 2003.  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  32.7% of the Companys total  consolidated  net sales revenue in 2003,
 with raw,  melamine-laminated  and  wood-veneered particle  board  accounting for
 approximately  10.9%,  20.0%,  and 1.8% of the Companys net sales revenue,
respectively.  Consolidated  sales of MDF accounted for  approximately  48.0% of the
Companys  consolidated net sales revenue in 2003, with raw and coated
 (melamine-laminated  and  wood-veneered)  MDF accounting for approximately  36.6%  and
 11.4%  of the  Companys  net  sales,  respectively.  Consolidated  sales  of OSB
accounted for approximately 9.8% of the Companys consolidated net sales revenue in 2003.

The Company also sells complementary  products,  such as board finishes and wood doors. Through its
subsidiary Forestal Tornagaleones S.A. (Forestal), the Company sells timber and other wood products.

According
  to  Company   estimates,   in  Chile,   Masisa  is  the   leading   producer   of  raw,
melamine-laminated and wood-veneered particle board.

The
Company  commenced MDF  production  in Chile in February  1996 and,  according to the
Companys estimates,  is the leading  producer  of MDF 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.  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 the first board at its newly constructed  thin-MDF
plant, which became fully operational by mid-2002 and has a total installed 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.  As in Chile,  the Company sells its products in
Argentina through both independent distributors and Placacentros.

9

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In  addition,  during  2003,  approximately  63%  (compared  to 72% in 2002) of Masisa  Argentinas
particle  board  and  MDF  physical  volume  of  sales  (in  cubic  meters)  was  to  export  markets,  with
approximately  33%  (compared to 47% in 2002) of those  export sales going to Brazil.  The decrease in total
export  volume and export  volume to Brazil as a percentage of total volume in 2003 compared to 2002 was due
primarily to the moderate  recovery of the local market in Argentina in 2003 following the  devaluation  and
crisis in 2002.  The  recovery  in  Argentina,  therefore,  had the effect of  reversing  some of the export
substitution  experienced  in 2002 when local  Argentinean  sales were depressed and 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
November  2001.  The OSB plant became fully  operational  during the fourth quarter of
2002.  Masisa Brazil  estimates that, as a result of being the first to market OSB in
Brazil,  it currently  has  virtually  the entire market share of OSB sales in that
 country.  Additionally,  Masisa  Brazil  significantly  increased  exports  of OSB to
the United States due to significant increases in U.S. pricing in the last half of the
year.

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  21,600 cubic meters per year. Through  Masisa Mexico the
Company  provides  technical  support  services and  marketing  and  distribution
activities in Mexico.

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

10

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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, 2004

|(1) | Parent company which also owns and operates particle board manufacturing facilities in Valdivia, Chile.
In Valdivia, the Company owns and operates facilities that produce doors, wood veneer and wood-veneered
particle board.  The Company also operates Masisa ́s Concepción and Inversiones Coronel facilities.  Masisa
S.A. is a corporation organized under the laws of Chile.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | A
consolidated special-purpose company for raising funds off-shore. Masisa
Overseas Ltd. is organized under the laws of the Cayman Islands.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(3) | A
consolidated special-purpose company for investment activities, formerly named
Inversiones Químicas Limitada. Masisa Inversiones Ltda. is organized under the
laws of Chile.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | A  consolidated  special-purpose  company for  investment  activities  which also owns an MDF  manufacturing
      facility  in  Cabrero  and leases a saw mill and  remanufacturing  plant that  produces  moldings  and
      edge-glued panels.  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.
|--- | ------------------------------------------------------------------------------------------------------------

11

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|(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. Masisa Argentina S.A. is organized under
the laws of Argentina.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Owns
and operates a wood-chipping mill in Valdivia, Chile. Forestal Río Calle-Calle
S.A. is organized under the laws of Chile.
|---- | ------------------------------------------------------------------------------------------------------------------------------

|(11) | A
consolidated 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  two  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) | Established
to conduct marketing activities in Peru. Maderas y Sintéticos del Perú S.A.C.
is organized under the laws of Peru.
|---- | ------------------------------------------------------------------------------------------------------------------------------

|(15) | Established
to conduct marketing activities in Ecuador. Masisa Ecuador S.A. is organized under
the laws of Ecuador.
|---- | -------------------------------------------------------------------------------------------------------------------

|(16) | A
joint venture company organized under the laws of Mexico to conduct business activities
related to the Mexican wood market.
|---- | -----------------------------------------------------------------------------------------------------------------------------

|(17) | Established
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) | Established
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.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(19) | A
consolidated special-purpose company for investment activities. Inversiones Calle
Calle is organized under the laws of Chile.
|---- | -------------------------------------------------------------------------------------------------------------------------------

|(20) | A
joint venture company established 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, 2003,  the Company had a 60.5%  interest in its  formerly  wholly owned
 Chilean subsidiary,  Forestal.  The minority  ownership  interest in Forestal is shared
between OPERS  International Timber Fund IA, L.P.,  formerly  Xylem Fund IA, L.P.  (Xylem-IA)
 (34.5%),  an investment  fund managed by Global Forest  Partners,  LP (Global  Forest),
 and Fondo de Inversión de Desarollo de Empresas  CMB-Prime (CMB-Prime) (5.1%), a
Chilean institutional  investor. 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 Chile  Limitada  (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.  Since
Terranova became the controlling  shareholder of Masisa,  Masnova has not had significant
operating activities and is expected to be dissolved during 2004.

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%); neither company is 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%).

12

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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:

- 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.

- 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.

- Strengthen its existing brand names.

- Focus
 its  product  mix  towards  increasing  sales  of its  higher  margin  products,
 especially                            melamine-laminated particle board and MDF.

- Further develop its Placacentro  program, as set forth below, in Chile,  Brazil,
 Argentina,  Peru,                            Mexico, Ecuador, Panama,  Paraguay,
 Colombia,  Venezuela,  Guatemala and Uruguay                            and extend it to
other Latin American markets.

- 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 Ponta
Grossa.  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  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,  Brazil,  Argentina,  Peru,  Mexico,  Ecuador,  Panama, Paraguay,  Colombia,
 Venezuela,  Guatemala and Uruguay 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,  Guatemala,  Uruguay and Venezuela were added to the
 Placacentro  network in 2003. As of April 30, 2004, 54  Placacentros  stores were open
in Chile,  28 in Argentina,  17 in Peru,  28 in Brazil,  38 in  Mexico,  12 in  Ecuador,
 2 in Panama,  2 in  Paraguay,  4 in Colombia,  5 in  Venezuela,  1 in  Guatemala  and 1
in  Uruguay.  The  Company  expects  to open a total  of approximately  52 stores
 primarily in these and other Latin  American  countries  during 2004.  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.

13

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Facilities and
Offices

THE COMPANYS PRINCIPAL
FACILITIES AND OFFICES

|              | Executive | Production | Distribution
|------------- | --------- | ---------- | ------------
|Location      | Offices   | Facilities | 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      
|             
|Guayaquil     |          |            |            
|             

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 2001,
2002 and 2003.

|THE COMPANYS PRODUCTS(1)                  
|-------------------------------------------
|(as a percentage of consolidated net sales)
|                                           
|                                           
|                                           
|Raw Particle Board                         
|Coated Particle Board (2)                  
|Raw MDF                                    
|Coated MDF (2)                             
|OSB (3)                                    
|Doors                                      
|Timber                                     
|Other Products (4)                         
|                                           
|Total                                      
|                                           

|(1) | The
Companys consolidated net sales for 2001, 2002 and 2003, respectively, were US$236.3
million, US$225.4 million and US$281.8 million.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes
melamine-laminated and wood-veneered boards.
|--- | -----------------------------------------------------

|(3) | OSB
was included in Other Products in 2001.
|--- | -------------------------------------------

|(4) | Other
Products include MDF moldings in 2003. The Company did not produce or sell MDF
moldings prior to 2003.
|--- | ------------------------------------------------------------------------------------------------------------

14

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Particle
Board.In 2003, particle board accounted for approximately 33% 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 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 2003, raw particle board
sales accounted for approximately 11% of the Companys consolidated net sales
revenue and 19% of total board sales by physical volume in cubic meters compared to
14% and 22%, respectively, in 2002. Approximately 50% 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 23% and 24% of raw
particle board sales by volume in 2003 and 2002 respectively. In 2003, most of the
Companys particle board sales in Mexico were supplied by Masisa Mexicos
production facilities.

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
2003, MDF sales represented approximately 48% of the Companys consolidated net sales
and 49% of total board sales by physical volume in cubic meters compared to 51% and
52%, in 2002. Exports of MDF from Chile, Argentina and Brazil to other countries
accounted for 45% of MDF sales by volume in 2003 compared to 40% in 2002.

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. Melamine-laminated MDF is
sold under the brand name 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
2003, melamine-laminated board sales accounted for approximately 31% of the Companys
consolidated net sales revenue and 26% of total board sales by physical volume in
cubic meters. For 2003, approximately 46% of consolidated particle board sales by
volume and 17% of consolidated MDF sales by volume were melamine-laminated. Exports
of melamine-laminated board from Chile and Argentina to other countries accounted
for approximately 27% of melamine-laminated board sales by volume in 2003.

15

---



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. In 2003, sales of wood-veneered board
accounted for approximately 2% of the Companys consolidated net sales by value and
2% 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 2003 (0.6% by volume) was wood-veneered. Approximately 4% of the Companys
particle board sold in 2003 by volume was wood-veneered. Exports of wood-veneered
board from Chile to other countries accounted for approximately 3.6% of wood-veneered
board sales by volume in 2003.

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 2003, OSB
sales represented approximately 10% of the Companys consolidated net sales and
12% of total board sales by physical volume in cubic meters compared to
approximately 4% and 7%, respectively, in 2002. Exports of OSB from Brazil to other
countries accounted for 39% of OSB sales by volume in 2003 compared to 16% in 2002.
This increase in OSB exports from Brazil in 2003 was due primarily to an increase
in exports to the US market where prices for OSB products increased significantly
in the second half of the year. In the first quarter of 2004, OSB sales from
Brazil contributed approximately 23% of the Companys consolidated gross margin.

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 2003, door sales remained
relatively stable, representing approximately 0.8% of the Companys consolidated net
sales revenue compared to 1.0% in 2002. 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, because of an
abundant supply of inexpensive scrap wood, wood shavings and sawdust where the Company
has operating facilities, Forestal now sells most of its timber primarily to
unaffiliated third parties. All of the timber which Forestal currently provides to
the Company is sold at market prices. In 2003, timber sales remained relatively
stable, representing approximately 5.9% of the Companys consolidated net sales revenue
compared to 5.3% in 2002.

Other
Products.The Company also manufactures wood veneer as a complement to its
principal products and distributes furniture hardware. In January 2003, the
Concordia facility in Argentina began producing its first pre-painted MDF moldings
and in the last quarter of 2002, Masisa Partes y Piezas started to sell furniture
parts with custom designs to manufacturers. In 2003, molding sales reached almost
2% of consolidated net sales and other products taken together accounted for 3% of
consolidated net sales.

16

---



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 1999  through
 2003.  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)
|---------------------------------------------------
|                                                   
|                                                   
|                                                   
|                                                   
|Raw Particle Board                                 
|Coated Particle Board(1)                           
|Total Particle Board                               
|                                                   
|Raw MDF                                            
|Coated MDF(1)                                      
|Total MDF                                          
|                                                   
|Oriented Strand Board                              
|                                                   
|                                                   
|Total                                              
|                                                   

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

The
Companys  sales of particle board and MDF, which increased by 4% in volume in 2003 as
compared to 2002,  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,  and
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 three years ended December 31,
2001, 2002 and 2003.

THE COMPANYS
MARKETS(1)(as a percentage of consolidated net sales)


|             
|-------------
|             
|             
|Chile        
|Argentina    
|Brazil       
|Mexico       
|Peru         
|Other Markets
|             
|Total        
|             

|(1) | The
Companys consolidated net sales for 2001, 2002 and 2003, respectively, were US$236.3
million, US$225.4 million and US$281.8 million.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

Chile

General.The Chilean economy increased at a rate of 3.3% in terms of GDP during 2003. Inflation during
2003 was 1.1%, while the trade balance surplus was US$2.7 billion. In 2003, Chiles economy experienced
moderate growth as a result of generally improved global economic conditions. However, the unemployment
rate in Chile remained relatively high, which continued to depress internal consumption. In 2003,
construction GDP growth was 3.6% compared to a 1.7% increase in 2002. The Companys board sales in Chile
decreased from US$74.5 million in 2002 to US$67.4 million in 2003. It is important to note that continued
pressure from imports coming from Argentina during the first half of 2003, due to the dramatic drop of the
Argentine local market in 2002,

17

---



did not allow the Company to maintain  prices in Chile in dollar  terms,  affecting  the  Companys
margins  in  Chile.  However,  improvements  in the  Argentine  economy  in  the  last  half  of  2003  have
contributed  to an increase in Argentine  consumption of particle  board,  thereby  reducing  particle board
exports to Chile.

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(millions of US$)
|-----------------------------------------
|                                         
|                                         
|                                         
|                                         
|Particle Board                           
|MDF                                      
|OSB                                      
|                                         
|Total                                    
|                                         

Marketing
and Distribution.Most of the Companys products are sold in Chile through
approximately 194 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 78% of 2003 sales in Chile. The
largest customer accounted for approximately 14% of such sales. The Companys
principal Chilean customers are: Construmart S.A., Dimad Ltda., Easy S.A., Ebema S.A.,
Electrocom S.A., Ferreterías Weitzler S.A., Homestore S.A., Maderama, Maderas
Imperial Ltda., Mafor S.A., Polincay Export Ltda., Silva y Compañía 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 April  30,  2004,  there
 were 54  Placacentro  stores in Chile.  The  Company  does not expect to open any new
 Placacentro  stores in Chile  during  2004.  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 2003 volume sales in the Chilean market,  approximately
 26% 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.  During 2003, Masisa undertook  projects
aimed at developing  products with higher  added  value.  The  installation  of a new
 melamine  line in Chile  helped meet the more  demanding requirements  for covered
 boards in the local and export  markets.  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  organized  the
eighth Masisa  Design  Contest  for  Students,  which was the first  such  student
 design  competition  held at an international  level by

18

---



Masisa,  and the
 third  Masisa  Design  Contest  for  Professional  RTA  (Ready to Assemble)  Furniture
 Manufacturers.  Works designed by  participants in each such contest were exhibited in
the Third Masisa  Design  Encounter,  which took 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  custom  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. The Companys total 2003
Chilean particle board sales decreased by 9% in dollar terms as compared to 2002, due to
price pressures as explained below. During 2003, sales of raw particle board
decreased at a higher percentage rate than sales of coated particle board. The
Company estimates that consumption of particle board in Chile was 20.3 cubic meters
per thousand inhabitants in 2003. While the total consumption of particle board in
Chile increased by approximately 4% in 2003 from 2002, it has only just recovered to
levels reached in 2000 and is still below its peak reached in 1997.

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.  As a result of its purchase of Nobels  particle  board
 business  and the  Bomasil  fire,  the  Company  believes  that its  production
facilities  account for  approximately  93% of Chiles particle board installed  capacity
and  approximately 82% of the countrys  melamine-laminating  installed 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 2003 was roughly  460,000 cubic meters,  while total  particle
 board  consumption in Chile for 2003 was  estimated to be only 310,000  cubic meters,
 making it  indispensable  to export part of the local production.

Due
to the economic  crisis in Argentina in 2002,  which  reduced  particle  board
 consumption  in Argentina  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 in Chile and the resulting price  pressure,  combined with high
shipping costs for particle board imports,  are the primary  factors that  discouraged
 imports to Chile of particle boards in previous years. The  situation  experienced  in
2002 was unique and as the  Argentinean  economy  and  consumption  began to recover in
the second half of 2003,  the  situation  started to return to prior levels.  However,
 there can be no assurance  that  significant  price  pressure from imports of particle
board into Chile will not occur in the future.

MDF
Market.The Company is a leading manufacturer in Chile MDF board. The Chilean MDF
market is relatively undeveloped compared to the European and North American markets.
Although the first Chilean MDF plant did not begin production until 1988, the
market has exhibited strong growth since then. Nevertheless, Chilean MDF
producers devote most of their production to exports. Masisa Chile sold 48% of its MDF
sales in the local market during 2003. The Company estimates that in 2003 MDF
consumption in Chile was approximately 15.5 cubic meters per thousand inhabitants
compared to 17.0 cubic meters per thousand inhabitants in 2002.

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  installed  capacity at 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

19

---



acquisition  was
financed  internally.  The  Companys  total 2003 Chilean MDF net sales decreased  by 16%
 compared to 2002 as a result of lower  physical  volume  sales and lower  prices.
 During 2003, sales of raw MDF decreased at a higher percentage rate than sales of coated
MDF.

After
the  acquisition in 2000 of Fibranova,  Masisas only  established  competitor in the
Chilean MDF  market  was  Paneles  Arauco  S.A.  (Paneles  Arauco),  which had an
annual  production  capacity  of approximately  140,000 cubic meters.  In the second-half
of 2002,  Paneles Arauco completed  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
2003, door sales decreased by 5% as compared to 2002, totaling US$2.0 million.
This is the result of a 8% decrease in terms of volume partially offset by a small
price rise.

Argentina

General.The Argentinean economy showed strong growth in the last half of 2003 after
several years of economic crisis. After falling by 237% in 2002, the Argentinean
peso stabilized and appreciated slightly in 2003. Additionally, most of the
restrictions imposed on cash withdrawals from bank accounts and on transfers of
funds from Argentinean to foreign accounts had been lifted by the end of 2003.
However, the government still remains in default on most of its debt which was publicly
announced in 2002 because of its inability to repay its debt to foreign lenders. In
2003, Argentinean GDP grew by 8.7% and price level inflation was 3.7%. In addition,
the Argentinean trade balance showed a surplus of US$14.7 billion. Although 2003
demonstrated that the economic situation in Argentina has improved, there still
remain significant economic and political risks. No assurance can be given that
governmental measures or other factors will continue to improve Argentinas economy
or that general improvement in its economy will lead to an increase in the demand for
particle board and/or MDF.

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 Brazil and (iv) directly exported by Masisa Chile into the Argentinean
market.

|ARGENTINA
MASISA BOARD SALES(millions of US$)
|---------------------------------------------
|                                             
|                                             
|                                             
|                                             
|Particle Board                               
|MDF                                          
|OSB                                          
|                                             
|Total                                        
|                                             

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.

20

---



Accordingly,  in 1992,
 the Company established Masisa Argentina, which commenced production of particle board
in June 1994 and of MDF in 1995.

The
 Company  sells  particle  board  and  MDF  to  Argentinean  furniture   manufacturers
 through approximately  150  distributors.  During 2003,  approximately  70% of the
 Companys  sales  revenue in the Argentinean  market  was  generated  by  the 20
 principal  distributors.  The  largest  single  distributor accounted for  approximately
 10% 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.,  Cencosud S.A,  Madergold S.A,  Sacheco
S.A.,  Taru Parq S.R.L.  and Trumar S.A.I.C.

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 April
30, 2004, 28 stores have been opened in  Argentina.  Masisa  Argentina  expects to open
 approximately  6 new stores in  Argentina  during 2004.  Of the Companys 2003 sales in
the Argentinean market, approximately 11% 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.

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
2003, the Argentinean  local market  represented 10% of Masisas total sales as compared
with 7% in 2002 and 21% in 2001 before the crisis and devaluation.

Particle
Board Market.Argentina has more than twice the population of Chile and has
a significant housing deficit. However, following the devaluation of its currency,
Argentinas per capita income was reduced to half of its pre-devaluation levels.
Argentinas domestic particle board consumption was approximately 5.3 cubic meters per
thousand persons in 2003, a substantial increase from the 3.0 cubic meters per thousand
persons registered in 2002 but still below its pre-devaluation levels. The low per
capita consumption is primarily the result of Argentinas 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.

Masisa
is one of the three largest  particle board  manufacturers  in the Argentinean  market.
 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
 production  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
2003,  Masisas  sales of particle  board in Argentina  increased in dollar terms by 86%.
In 2003 compared to 2002,  sales of coated particle board  increased at a higher
 percentage rate than sales of raw particle  board.  This  increase  was due to higher
 demand for this product as a result of the economic recovery in Argentina  during  2003.
 The large  increase in sales in 2003 follows a steep  decline in 2002, when,  in order
to minimize the impact of the  devaluation,  Masisa  Argentina  shifted the main part of
its domestic sales of particle board to exports.

21

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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.  The Companys  Argentinean
MDF sales were US$14.7 million in 2003,  which  represents a 71% increase  compared to
2002. In 2003 compared to 2002,  sales of coated MDF increased at a higher  percentage
 rate than sales of raw MDF. As in the particle board case,  the increase in sales was
due to higher  demand for these  products as a result of the economic recovery in
Argentina  during 2003.  The large  increase in sales in 2003  followed a steep decline
in 2002, when,  in order to minimize the impact of the  devaluation,  Masisa  Argentina
 shifted the main part of its domestic  sales of MDF to exports.  The  Argentinean  MDF
market was a  fast-growing  market  that  expanded approximately  530%  between 1995 and
1999.  However,  the economic  crisis of 2002  adversely  affected the market.  In 2003,
 the market  experienced  an increase  of  approximately  83%  compared  to
2002. However,  consumption is still below its pre-crisis  levels and historic highs.
 The Company  estimates that total consumption of MDF in Argentina was  approximately 2.7
cubic meters per thousand  inhabitants in 2003, as compared to 1.6 cubic meters in 2002.

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  68% of Masisa  Argentinas
 consolidated  net sales 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 Argentinean markets under normal economic  conditions,
 the Company has returned and will continue to return to domestic  Argentinean sales as
the Argentinean  market continues its recovery.  There can be no assurance that
 favorable  economic  conditions  in  Argentina  will  enable the  Companys  profits to
recover  their pre-crisis levels.

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.  By 2003,  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  2002,  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.

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
export conditions created by the  devaluation  of the  Argentinean  peso  provide a
favorable  market  conditions  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.

Brazil

General.In 2003, Brazils GDP shrank by 0.2% after two years of slow growth, demonstrating
how the post-electoral uncertainty, the considerable drop in trade with Argentina and
the adverse conditions of world and regional markets affected Brazils economy. Brazils
inflation rate reached 9.3% in 2003, with a trade surplus of approximately US$24.8
billion. During 2003, the newly elected President of Brazil announced measures
intended to stabilize markets, resulting in an increase in the valuation of the
Brazilian Real against the U.S. dollar, which as of

22

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May 3, 2004 was at a
noon buying rate of 2.96 Reals per U.S. dollar, 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.

|BRAZIL
MASISA BOARD SALES(millions of US$)
|------------------------------------------
|                                          
|                                          
|                                          
|                                          
|Particle Board                            
|MDF                                       
|OSB                                       
|                                          
|Total                                     
|                                          

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  have been  gradually  replaced by  production  from the new MDF plant  located
in Ponta Grossa,  Brazil.  The Ponta Grossa MDF plant has an installed  capacity of
240,000 cubic meters per year and was inaugurated in April 2001.

The
Companys  combined sales in Brazil of particle  board,  MDF and OSB reached US$71.8
million in 2003,  representing  a 49%  increase  compared to 2002.  Particle  board sales
 increased  by 20% to US$11.1 million in 2003 from US$9.3  million in 2002.  MDF sales
 increased by 43% to US$47.0  million in 2003.  OSB sales  increased  to US$13.6  million
in 2003  compared to the US$6.1  million in 2002.  The increase in net sales reflects
 mostly a recovery in the price of MDF boards in the domestic  market and a sales
increase of OSB boards in Brazil,  taking  advantage of significant  price increases in
the US market towards the end of the year.

From
2001 to 2002,  there was a slight  increase  in total  sales of  particle  board.  During
this period there was a  substantial  decrease in sales of raw particle  board which was
offset by an increase in sales of coated  particle board.  From 2002 to 2003,  total
sales of particle board  increased,  principally as a result of an  increase in sales of
coated  particle  board.  From 2001 to 2002 sales of MDF  decreased, but during  that
 period a decrease  in sales of raw MDF was offset by an  increase  of sales of coated
MDF. From 2002 to 2003,  there was an  increase in sales of both raw and coated  MDF,
 although  coated MDF sales increased at a higher rate.

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.  There were no warehouses
opened or closed during 2003.

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.

23

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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 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 2003 the  Company  opened 14 new Placacentro
 stores in the  central  and  southern  regions of Brazil,  as part of its policy of
 developing distribution  networks  as a strategy  for  penetrating  the markets  where
it is  present.  The Company has opened 28  Placacentro  stores in Brazil as of April 30,
 2004,  and  expects  to open  approximately  6 new stores  in  Brazil  during  2004.
 During  2003,  12.0%  of all  the  Masisa  Brazils  sales  were  through Placacentros.

Currently,
 the Company  sells  particle  board,  MDF and OSB in the  Brazilian  market  through 28
commercial  representatives  distributed throughout Brazil. During 2003,  approximately
50% of the Companys sales revenue in the Brazilian  market was generated by 89 of its
1,569  customers,  with the largest single customer  accounting for approximately 7% of
those 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.,  Bertolini S.A.,
Centro Oeste Suprim.,  Imcal, Ind. Móveis Arca Ltda., Leo Madeiras,  Ludival,  Madecomp,
 Móveis Dalla Costa Ltda., Moveis Germai, 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.

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 11.0 cubic meters per thousand inhabitants in 2003 (compared to
consumption levels of 20.3 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 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 3% in 2003 compared to 2002 levels, and that long-term market prospects
for this product in the Brazil are good.

MDF
Market.Before the commencement of test production at its MDF plant in Ponta Grossa,
Brazil, the Company supplied the Brazilian market solely through 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 regards to
competitors, the first Brazilian producer of MDF, Duratex, began production in
1997 and currently has an annual production capacity of approximately 630,000 cubic
meters of which 400,000 was added in 2003. 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. The Isdra Group opened a new plant in 2003 with an estimated annual capacity
of 180,000 cubic meters. 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 2003
reached approximately 898,000 cubic meters, which represents approximately a 23%
increase compared to 2002 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 5.1 cubic meters per
thousand inhabitants in 2003. 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.

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

24

---



US$64  million,  is
the first of its type in Brazil.  OSB boards are used in the construction,  packing and
furniture  industry in applications  that require great structural  strength. The Ponta
Grossa plants  production targets both internal  consumption and exports.  This increase
in sales of OSB in 2003  compared to 2002 was due primarily to an increase in exports of
OSB to the U.S.  market.  As the first producer of this kind of boards in Brazil,  the
Company is actually  involved in the  introduction phase for this product.

Mexico

General.Following an economic contraction in 2001, Mexico continued a slow recovery
registering GDP growth of 1.2% in 2003. In 2003, inflation in Mexico was 4.0%, while
the trade balance deficit was US$5.7 billion.

|MEXICO(1)
MASISA BOARD SALES(millions of US$)
|---------------------------------------------
|                                             
|                                             
|                                             
|                                             
|Particle Board                               
|MDF                                          
|OSB                                          
|                                             
|Total                                        
|                                             

|(1) | Sales
in Mexico were insignificant prior to 2001.
|--- | -------------------------------------------------

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. The Companys net sales in Mexico during 2003 represented 13% of the
Companys consolidated net 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 the growing scarcity and increasing cost of
sawn lumber, the principal competing product of the Companys wood boards, 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  251  distributors.  During 2003,  approximately  80% of the  Companys
 sales  revenue in the Mexican  market  was  generated  by the 63  principal
 distributors,  and  the  largest  single  distributor accounted  for  approximately  7%
of these  sales.  The  Companys  principal  distributors  in Mexico  are: Aglomerados y
Triplay Vic S.A. de C.V.,  Industria  Forestal de Occidente S.A. de C.V.,  Industria
 Maderera Puente de Vigas S.A. de C.V.,  Maximaderas,  Mexicana Pacific S.A. de C.V.,
 Mexlam S.A. de C.V.,  Promotora Grocer S.A. de C.V., Rodríguez Gamboa Francisco Javier
and Tableros del Norte S.A. de C.V.

In
2003,  Masisa  successfully  expanded  its  Placacentros  network in Mexico.  Masisa
 Mexico had opened 38 stores  throughout  the country as of April 30,  2004,  and expects
to open  approximately  12 new stores in Mexico  during the  remainder  of 2004.  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.
 During 2003, 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 4.9 cubic meters per thousand inhabitants in 2003. 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).

25

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From
2002 to 2003,  total  sales by the  Company of particle  board  increased,  with a
decrease in sales of raw  particle  board  being  offset by an  increase  in sales of
 coated  particle  board.  In 2003 compared to 2002,  particle  board  physical  volume
 sales  decreased  but total  sales of  particle  board increased due to increases in
sales prices.

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 exported MDF to Mexico. Currently, there is
only one MDF plant in Mexico (60,000 cubic meters installed capacity) which is
owned by Maderas Conglomeradas S.A. de C.V. The Company believes Mexicos MDF
consumption per thousand inhabitants was 2.3 cubic meters in 2003.

Peru

During
2003,  the Peruvian  economy  grew at a rate of 4.0%.  Inflation  increased to 2.5 % in
2003 from 1.5% in 2002.  The Peruvian trade surplus was an estimated US$710 million in
2003.

Marketing
and Distribution.The Company serves the Peruvian market with particle board and MDF
products mainly through exports from Masisa Chile. The Company established its
Peruvian subsidiary, Masisa Peru, in 1999 to conduct commercial and distribution
activities in that country. As of December 31, 2003, almost all products sold by the
Company in Peru were imported from Chile.

During
1999, the  Placacentro  network was extended to Peru. As of April 30, 2004,  Masisa Peru
had opened a total of 17 stores.  Masisa Peru expects to open  approximately  4 new
stores  during the remainder of 2004, increasing the total number of Placacentros in Peru
to 21.

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 0.4 cubic meters per thousand inhabitants, respectively, in 2003. The Companys
Peruvian board sales increased by 33% in dollar terms, from US$6.9 million in 2002
to US$9.2 million in 2003 principally due to deeper market penetration of MDF board
products, the per capita consumption of which increased by 30%, and an increase in
the Companys share of the particle board market, which increased by 5% in terms
of per capita consumption.

In
Peru, there is currently only one local producer of particle board,  Tableros Peruanos,
 with an annual installed  capacity of 20,000 cubic meters per year;  imported particle
board comes mainly from Chile (Masisa) and Ecuador  (Aglomerados  Cotopaxi S.A. and
Novopan del Ecuador  S.A.).  Because there is no local producer  of MDF in Peru,  it is
also  imported  from  producers  in Chile  (Masisa  and Arauco) and Ecuador (Cotopaxi).

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 and
Mexico) 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 market  conditions
 in Chile,  Argentina,  Brazil, Peru and  Mexico.  After the  political  and  economical
 crisis  began in  Argentina  in 2002,  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  20% of the Companys total 2003  consolidated  revenues were derived from
 Chilean,  Argentinean,  Brazilian  and Mexican  export sales to markets other than
Chile,  Argentina,  Brazil,  Peru and Mexico,  compared to the approximately 19%
represented by such sales in 2002.

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  mainly  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.

26

---



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.
Since 1999, the Company  continues to recover its exports to Asian  countries,  which
 decreased  significantly  in 1998 and 1999 as a result of the crisis in certain  Asian
 countries  that  commenced in 1997.  Thus,  the Companys  sales to Asian  countries in
2003 accounted  for  8.8%  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 until 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
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

27

---



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.

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.

|CHILE
PRODUCTION LINES     
|---------------------------
|                           
|                           
|Plant                      
|                           
|Coronel                    
|                           
|                           
|                           
|                           
|                           
|Chiguayante                
|                           
|                           
|Cabrero(formerly Fibranova)
|                           
|Valdivia                   
|                           
|                           
|                           
|                           
|Puschmann                  
|(located in Valdivia)      
|                           
|Total                      
|                           
|                           

|(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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 two
melamine-laminating lines (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).

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
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 of its total  particle board and MDF production.  Coronels  original
 melamine-laminating  line has an estimated annual production capacity of 60,000 cubic
meters.

A
new  melamine-laminating  line in the Coronel plant with an annual production capacity of
110,000 cubic meters came into full  operation in 2003.  This plant  increases  melamine
 production  in response to increased  supply needs resulting from the  development of
the  Placacentros  network and other  anticipated needs  for such  boards in

28

---



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.

Cabrero.This 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. Additionally, in an
effort to produce more higher value added products, the Company is incorporating an
MDF moldings line with 23,000 cubic meter capacity that is scheduled to begin
producing in 2004.

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.

From
May to November of 2003,  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
 cubic  meters.  Actual production  can exceed  capacity  because  capacity is estimated
 assuming an average  board  thickness  and actual board  thickness may vary.  In the
same  facility,  the Company  operates its door  production  line, with an estimated
annual capacity of 500,000 square meters.

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 the outstanding portion was repaid in 2003. 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 did not meet the
Companys quality standards at the time of its  acquisition.  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  completed  during the first
 quarter of 2000,  and the plant  started  production  in May 2000.  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

29

---



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.

The
capacity  utilization rate for Masisa Chiles  particle board production  facilities was
75% in 2003 compared to 84% in 2002. The capacity  utilization  rate for Masisa  Chiles
MDF production  facilities was 94% in 2003 compared to 98% in 2002.

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                     
|                          
|Concordia                 
|                          
|                          
|                          
|                          
|                          
|                          
|                          
|Total                     
|                          
|                          

|(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  thickness
 has an annual  capacity of 160,000  cubic meters per year.  The  Concordia  facility
 commenced  operations in June 1994. The capacity  utilization rate for Masisa  Argentinas
 particle board  production  facilities was 77% in 2003 compared to 73% in 2002.

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.

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 thin-MDF boards in
October 2001, and became fully  operational by mid-2002.  The capacity  utilization  rate
for Masisa Argentinas MDF production facilities was 85% in 2003 compared to 77% in 2002.

The
Concordia plant also includes a melamine-laminating  line with an installed capacity of
200,000 cubic meters per year, and a new foil lining  process with an installed  capacity
of 48,000 cubic meters per year.

In
March  2002,  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

30

---



US$1.8  million and
was financed  internally.  Production at the molding plant will  primarily  be  directed
 to  export  markets.  This line was not fully  operational  until the  second quarter of
2003.

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.

|BRAZILPRODUCTION LINES
|----------------------
|                      
|                      
|                      
|Plant                 
|                      
|Ponta Grossa          
|                      
|                      
|                      
|Total                 
|                      
|                      

|(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.  The capacity utilization  rate for Masisa
 Brazils MDF  production  facilities was 101% in 2003 compared to 89% in 2002. Actual
 production can exceed  capacity  because  capacity is estimated  assuming an average
board thickness and actual board thickness may vary. 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
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. The capacity  utilization  rate for Masisa Brazils OSB production  facilities
was 48% in 2003. The capacity  utilization rate in 2002 is not meaningful  because the
plant was not fully  operational until the fourth  quarter of 2002.  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.

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
21,600 cubic meters per year.

31

---



|MEXICO
PRODUCTION LINES
|-----------------------
|                       
|                       
|                       
|Plant                  
|                       
|Durango                
|                       
|                       
|                       
|Total                  
|                       

|(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
 quality.  The Durango  acquisition was financed with cash on hand and short and
long-term  bank  financing.  The capacity  utilization  rate for Masisa  Mexicos
particle  board  production  facilities  was  94% in  2003.  The  capacity  utilization
 rate in 2002 is not meaningful  because the plant was not fully  operational  during all
of 2002. Most of the 2003 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$10.0  million of  third-party  liability  insurance  for Chile,  US$1.0
 million for Argentina and US$1.0 million for Brazil,  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 20 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 20 day deductible per interruption  caused by any one  event.  In
Brazil,  such  insurance  provides  coverage  for  business  interruption  at any of the
Companys Brazilian  facilities for a period of up to 12 months with a 21 day deductible
if the interruption is caused by events other than  machinery  breakdown,  and with a 14
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
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,  2004,  the  aggregate  amount of  insurance  carried  by the  Company  for its
 Chilean facilities  was  approximately  US$261.2  million,  US$208.8  million which was
carried in respect of Masisa S.A. and the  remaining  US$52.3  million of which  insured
 Forestal.  In  Argentina,  the Company  carried insurance in an aggregate  amount of
US$245.4  million,  US$210.8  million of which insured Masisa Argentina and the remaining
 US$34.6 million of which insured  Forestal  Argentina.  In addition,  the Company
carried an aggregate  amount of US$189.4  million in insurance  for its  Brazilian
 properties  and  operations  and US$25.5 million for its properties and operations in
Mexico.

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.

32

---



During
2003, 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 catalysts  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.

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.

Historically,
 Forestal  provided the Companys  Chilean  plants with small  supplies of wood,  but
since 2000 no wood has been  purchased by the Company from Forestal in Chile.  In
 Argentina,  approximately 89% of the wood  consumed by Masisa  Argentina in 2003 was
 purchased  from several  unrelated saw mills and forest  growers and the other 11% of
the wood 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.

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
Company has  long-term  resin supply  contract with Georgia  Pacific  Resins Ltd. to
ensure the normal  supply of resins for existing and future  operations,  taking into
account the future  growth of the Company.  The  estimated  amount of payments to be made
under the  contract  in 2004 is US$17  million.  The contract is not a  financial
 obligation  since it does not oblige the Company to purchase a minimum  amount from
Georgia Pacific Resins Ltd.

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:

33

---



|PRINCIPAL SUPPLIERS OF RAW MATERIALS 
|-------------------------------------
|                                     
|                                     
|CHILE                                
|                                     
|Andinos S.A.                         
|Aserraderos Arauco S.A.              
|Derquim S.A.                         
|Interforest S.A.                     
|Georgia  Pacific Resinas Ltda.      
|Heninrich Wemhöner GMBH &CO.KG       
|Lamigraf S.A.                        
|Masa Decor S.A.                      
|Oxiquim S.A.                         
|Technocell Dekor                     
|                                     
|                                     
|BRAZIL                               
|                                     
|Aguia Florestal Industria de Madeira 
|Araupel S.A.                         
|Bayer do Brasil                      
|Borden Química e Industria e Com Ltd.
|Dynea Brasil S.A.                    
|Isogama Industria Qupimica LTDA.     
|Madereira Rickli LTDA                
|Magor LTDA                           
|Synteko Produtos Químicos S.A.       
|Terranova Brasil                     
|                                     

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 2001,  2002  and  2003,  the  Company   invested
  approximately   US$26,800,   US$290,000  and  US$304,900, 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 branches which have relatively low
commercial value. Forestal sells its higher value products primarily to third

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parties. In 2003, Forestal Argentina sold approximately 31% of its Argentinean
timber production to the Company, while no significant production was sold by
Forestal to Masisa Chile . During 2003, only 11% of the wood consumed by the
Company in Argentina was purchased from Forestal Argentina. In 2003, Forestal
had sales of US$15.7 million on a consolidated basis (including Forestal Argentina).

For the
reasons explained above and in order to enhance Forestal's timberland in Chile
and to create Forestal's Argentinean subsidiary, in 1995 the Company sold a
41% interest in Forestal to Xylem-IA for US$35 million. 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 Xylem-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 invested
in forest properties for the purpose of gaining profits through the sale of
timber and forest. As a result, Forestal has increased the scope of its activities
in Chile and changed its forestry management criteria. By the end of 2003, Forestal's
total forestry plantations in southern Chile reached 22,588 hectares, of which
approximately 18,920 hectares are Radiata , Oregon and other Pine species and
3,668 hectares are Eucalyptus globulus and Eucalyptus nitens. The total volume
of Forestal's log sales in Chile in 2003 was 249,570 cubic meters, harvesting
the same amount of cubic meters. In 2002, Forestal's log sales were 195,916
cubic meters in Chile . The total forest land holdings of Forestal in Chile
as of December 31, 2003 were approximately 44,376 hectares.

Forestal Argentina S.A. 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, 2003. Forestal Argentina 's total forest holdings in Argentina
at the end of 2003 consisted of 22,549 hectares of Eucalyptus plantations, 10,757
hectares of Taedi and Eliotti Pine plantations, 6,401 hectares of land for new
plantations and 8,273 hectares of ecological reserved areas, firebreaks and
roads. Forestal Argentina harvested and sold a total of 341,171 cubic meters
of logs in 2003, of which approximately 36% were Eucalyptus and 64% were Pine.

Masisa do Brasil Ltd. As of December 31, 2001, Masisa had become directly
involved in the forestry business in Brazil , directly managing approximately
13,871 hectares there. As of December 31, 2003, Masisa owned 11,995 hectares
in Brazil , including 8,521 hectares are of Taedi and Eliotti Pine plantations,
14 hectares of

35

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Eucalyptus and 4,766 hectares of ecological reserved areas, firebreaks and
roads. Masisa Brazil harvested 115,078 cubic meters of logs in 2003.

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. (50.0%).
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
at a cost of approximately US$4 million. The plant has a total installed
capacity of 500,000 metric tons per year. 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. Indusa utilized
the proceeds from these sales to repay bank debt and debt to related companies,
including Masisa, and to finance its wood chipping operations.

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 issues.
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) 14,001. The
ISO 14,001 certification is a voluntary procedure in which an operation's environmental
practices are evaluated against a specified set of criteria. By the end 2003,
Masisa had completed the implementation of the ISO 14,001 in all of its industrial
operations in Argentina , Brazil and Chile , in addition to the forests in Brazil
and in its Chilean subsidiary Forestal Tornagaleones, which also obtained the
Forest Stewardship Council (the FSC) certification for its plantations. FSC
certification is a voluntary procedure in which the ecological, economic
and social aspects of forest management are evaluated against a specified
set of criteria.

36

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In addition, in 2003,
all of the Company's MDF production plants obtained 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 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 commitment, 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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Table of Contents

PART II

Table of Contents

Item 5. Operating and Financial
Review and Prospects

Introduction

The  Operating and Financial  Review and  Prospects  begins with a brief  Overview of the Companys
business and products,  the most  important  events  affecting its financial  performance  in 2003 and other
issues  which are  material to a readers  understanding  of the material  presented  in this  section.  The
Overview  concludes with the Companys  business  outlook for 2004.  This is followed by a discussion of the
Companys  Results  of  Operations  for 2003  compared  to 2002,  and for 2002  compared  to 2001.  The next
section  provides an analysis of the Companys  Liquidity and Capital  Resources,  including  changes in its
balance sheet and cash flows,  and discusses its financial  commitments.  The last two sections  discuss the
impact of currency devaluation on the Companys results and the Companys critical accounting policies.

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 various sections of Item 5 contain a number of forward-looking
statements, all of which are based on the Company's current expectations and
could be affected by the uncertainties and risk factors described throughout
this filing and particularly in the Business Outlook section.
These uncertainties and risk factors could cause actual results to differ
materially from those described in the forward-looking statements.

Overview

Business and Products

The
Companys primary source of revenue is the sale of particle board, MDF and OSB woods
products.The Companys business strategy is to be the leader and world-class producer of wood board in
Latin America while expanding and diversifying its export markets. The Companys operations are located
in regions with access to environmentally-friendly, long-term, low cost supplies of wood. Recently, the
Company has sought to focus its product mix to include higher margin products such as melamine-laminated
wood paneling and expand into new products, such as OSB, that have significant synergies with the
Companys core business.

The Company has designed a focused medium and long-term strategy.The
specific focus of the Company's medium and long-term strategy is to:

- Strengthen
commercial and production leadership in the Latin America board industry
- Further develop
distribution channels and market segments to increase the value provided
to clients
- Offer a greater
variety of products and higher value products that meet clients needs
and conform to international standards

The Company generates revenue
and has production facilities in four principal markets  Chile,
Argentina, Brazil and Mexico.While the Company also exports to other Latin American and world wide
markets, its performance in its principal markets is, and will continue to be, fundamental to its strategy
and results of operations. In an effort to diversify, the Company has recently expanded its distribution
channels to non-principal markets by opening new commercial offices and increasing the number of
Placacentro stores throughout Latin America.

Regional economic conditions have a significant impact on the Company's business.
Demand for the Company's products is influenced significantly by growth in the
construction and furniture industries, which are highly correlated with regional
economic conditions. During the recent economic weakness in Argentina , the construction
sector was, in particular, significantly affected. Also, in Chile , the construction
sector has, until

38

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recently, lagged GDP growth. Economic conditions in two of the Company's primary
markets, Argentina and Brazil , while improving, remain uncertain.

Most of the Company's products are commodity products and subject to competition
from manufacturers in the region and to a certain extent worldwide. In
particular, supply factors that have affected or are likely to affect the results
of operations are the increased MDF installed capacity of competitors in Chile
and Brazil and continued import substitution of particle board from Argentina
.. Also, in Brazil , the Company has experienced strong growth in OSB sales
where it is the only OSB producer. There can be no assurance that competitors
will not enter this market and adversely affect the OSB prices and the Company's
results.

Prices for the Company's products have historically been volatile and the
Company, like other competitors in the industry, has limited control over the
degree and timing of price fluctuations of its products. To a certain
extent, product pricing depends on the supply of building products in the Company's
region. Recently, the Company has experienced price pressure on the Chilean
particle board market due to imports from Argentina and industry over capacity
in certain regions such as Chile . In addition, prices for its products are
also influenced by worldwide prices, which until the second half of 2003, were
relatively depressed. Towards the end of 2003, the Company benefited from a
positive OSB price cycle in the US market.

The Company's sales and transactions occur in an array of markets and represent
a portfolio of currencies. The majority of the Company's sales and transactions
are indexed to U.S. dollars in the short- and medium-term, although, currency
depreciation in any particular market can significantly decrease net sales
when translated into U.S. dollars. However, devaluation can also increase competitiveness
and ability to export, although at generally lower prices than in the local
market. Currency exchange volatility significantly influences the Company's
results of operations and has, in recent years, been especially volatile and
had a negative impact on the Company's performance. Currency volatility is
often correlated with regional economic conditions but can also be affected
by world events such as terrorism and global economic shocks.

Financial Performance

Performance Summary

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,
|--------------------------- | -----------------------
|                            |                        
|                            | 2001                   
|                            |                        
|Net Sales (millions of US$) | 236.3                  
|                            |                        
|Net Sales Growth %          | -                      
|Gross Margin % *            | 33.8%                  
|Operating Income Margin % * | 18.3%                  
|Net Income Margin % *       | 13.3%                  

|* Amounts are expressed as percentages of net sales.
|----------------------------------------------------

Significant Factors Affecting Performance.The most important factors
affecting the Company's operating and financial performance in 2003 were the
following:

- Pricing pressure in particle board and MDF during the first half
of the year.
- Economic recovery in Argentina and stabilization of regional
currencies.
- Higher OSB price cycles in the US in the second half of 2003.

Summary.Despite
an improvement in regional economic conditions in 2003, the Company continued
to face a challenging business environment with pricing pressure and increased
costs offsetting higher physical volume sales. In 2003, net sales increased
25.0% to US$281.8 million compared to net sales of US$225.4 million in 2002.
However, gross margins and operating margins decreased from 26.3% and 13.2%,
respectively, to 23.5% and 9.0%,

39

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respectively. The decline in gross and operating margins is due primarily
to pricing pressure, temporarily higher operating costs and an increase in
sales of lower margin products.

Impact of General Economic Conditions

As mentioned previously, regional economic conditions have a significant
    impact on the Company's results of operations. In the table below are GDP
    growth rates in the Company's most important markets in addition to forecasts
    for growth in 2004 by the International Monetary Fund.

|          | Year ended
    December 31, |         | Projected
(1)
|--------- | --------------------------- | ------- | -------------
|          |                             |         |              
|          | 2001                        | 2002    | 2003         
|          |                             |         |              
|Chile     | 3.1%                        | 2.1%    | 3.3%         
|Argentina | (4.4)%                      | (10.9)% | 8.7%         
|Brazil    | 1.3%                        | 1.9%    | (0.2)%       
|Mexico    | (0.2)%                      | 0.7%    | 1.2%         

|(1) | Projected GDP growth by the International Monetary
Fund as of April 2004.
|--- | -------------------------------------------------------------------------

Other Developments Affecting Performance

Change in Reporting Currency.On April 10, 2003, the Servicio
    de Impuestos Internos (the Chilean Internal Revenue Service or SII)
    authorized Masisa to maintain its accounting records in US dollars
    as of January 1, 2003. On October 10, 2003, the Superintendencia de Valores
    y Seguros (the Chilean Securities and Insurance Authority or SVS)
    authorized the Company to present its annual and quarterly statutory
    financial statements in US dollars. The Company's functional currency
    has not changed and remains the US dollar. In accordance with Chilean GAAP,
    the Consolidated Balance Sheets, Statements of Income and Cash Flows
    as of and for the year ended December 31, 2002 and 2001 previously presented
    in Chilean pesos were recast in accordance with accounting principles
    generally accepted in Chile to be presented in U.S. dollars using the exchange
    rates as of December 31, 2002 and 2001, respectively. The exchange rates
    used for this purpose as of December 31, 2002 and 2001 were Ch$ 718.61
    and Ch$ 654.79, respectively. See Note 23 of the Consolidated Financial
    Statements for a description and quantification of the differences between
    U.S. GAAP and Chilean GAAP related to the process of recasting the financial
    statements for periods prior to January 1, 2003. As a result of this change
    in the reporting currency, certain year-over-year comparisons previously
    reported may have changed due to the process of recasting financial
    information in accordance with accounting principles generally accepted
    in Chile . However, the Company does not believe the impact of the year-over-year
comparisons are significant.

2003 Bond Issuance.The Company issued a two series bond in December
    2003 in order to pay down existing debt maturing in 2003 and 2004. The principal
    amount of the issuance was US$91.2 million and effectively increases the
    duration of the Company's financial liabilities in order to better match
    the duration of its assets. The Company, which has historically secured
    financing in U.S. dollars, chose to issue the bond in UF in order to take
    advantage of positive market conditions in the local Chilean capital markets.

Business Outlook

The Company believes market conditions in 2004 will continue the improvement
    that began in the second half of 2003. In particular, it is expected that
    continued stability and recovery in Argentina will improve product pricing
    by increasing demand in Argentina and reducing import pressure in Chile
    . Also, in Brazil the Company believes that performance will continue the
    strength demonstrated in 2003 as a result of greater demand for its MDF
    products and higher OSB price cycles in the US leading to greater export
    volumes.

However, several factors could negatively impact the Company's performance
    in 2004. Product price cycles, especially OSB, are cyclical and highly unpredictable.
    Given that a significant part of the Company's growth has come from export
    sales of OSB, a decline in OSB prices could adversely affect the Company's
    results of operations. Also, due to significant economic growth in Asia and
    especially China , worldwide demand for shipping has increased dramatically.
    The Company has at times experienced difficulty in arranging shipping from
    its Latin American operations to export markets. Given that exports have
    recently contributed significantly to the Company's growth, further difficulty
    to arrange adequate shipping for its products could adversely affect its
    results of operations.

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Results Of Operations

Consolidated

The discussion below analyses and compares on a consolidated level the results
of operation comparing 2003 to 2002 and 2002 to 2001. The following table summarizes
the consolidated results of operations for the years indicated.

|                                                  | Year ended December
31,
|------------------------------------------------- | -----------------------
|                                                  |                        
|                                                  | 2001                   
|                                                  |                        
|Net Sales (millions of US$)                       | 236.3                  
|Gross Margin (millions of US$)                    | 79.9                   
|Operating Income (millions of US$)                | 43.2                   
|Net Income (millions of US$)                      | 31.4                   
|                                                  |                        
|Physical Board Volume (thousands of cubic meters) | 1,066.1                
|Average Board Price per Cubic Meter (US$)         | 208                    
|                                                  |                        
|Net Sales Growth %                                | -                      
|Gross Margin % *                                  | 33.8%                  
|Operating Income Margin % *                       | 18.3%                  
|Net Income Margin % *                             | 13.3%                  

|* Amounts are expressed as percentages of net sales.
|----------------------------------------------------

2003 compared to 2002

Net sales increased 25.0% to US$281.8 million in 2003 compared to US$225.4
million in 2002. The increase in net sales is attributable to generally improved
market conditions in three of the Company's four principal markets. Argentina
, Brazil and Mexico showed strong sales volume growth and moderate price improvement.
Improvement in these markets was offset partially by a decline in net sales
in Chile due to greater competition and lingering import substitution coming
from Argentina . Physical board volume sales increased by 10.2% from 1,302.0
thousand cubic meters in 2002 to 1,435.4 thousand meters in 2002. Average board
prices increased 9.6 % to US$178 in 2003 compared to US$162 in 2002.

Gross margin increased 11.6% from US$59.4 million in 2002 to US$66.3 million
in 2003 due to higher overall sales. However, margins declined from 26.3% of
net sales in 2002 to 23.5% of net sales in 2003 mainly due to an increase in
sales of lower margin products as well as higher costs of sales that were not
wholly offset by higher product prices. Some of the higher costs of sales can
be attributed to problems introducing new MDF technology in Chile in the first
quarter of 2003. During January and February of 2003, the Company faced difficulties
introducing a new resin gluing technology on its MDF line in Cabrero which both
increased costs and resulted in lost export sales. The Company estimates the
these problems increased average production costs by approximately 11% in the
first two months of 2003.

Selling and administrative
expenses increased 38.5% to US$41.0 million in 2003 from US$29.6 million in
2002. This increase was due primarily to the fact that: (i) the Company's operating expense are to a certain extent variable
and therefore increase when sales increase and (ii) the local currencies
where the Company operates appreciated, on average, relative to the U.S.
dollar, thereby increasing operating expenses when translated into U.S. dollars.
Additionally, in 2003 there were two one-time consulting projects totaling
US$1.0 million. The first project, amounting to approximately US$0.6 million,
was undertaken with the help of a globally recognized consulting firm to improve
the Company's long-term business strategy. The second project, amounting to
approximately US$0.4 million, was undertaken, with the help of an investment
bank, to analyze the Company's optimum corporate ownership structure.

Operating income decreased by 15.1% to US$25.3 million in 2003 compared to
US$29.8 million in 2002 due to the decrease in gross margin and higher selling
and administrative expenses as described above.

Non-operating results decreased from a loss of US$9.6 million in 2002 to a loss
of US$12.7 million in 2003, a variation of 31.9%, despite a US$6.6 million decrease
in price-level restatement losses. Non-operating

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income declined 36.7% from US$7.7 million in 2002 to US$4.9 million in 2003
principally due to a non-recurring reversal of the allowance for doubtful accounts
of US$2.8 million in 2002. Non-operating expenses increased by 48.5% from US$12.1
million in 2002 to US$17.9 million in 2003 principally due to an increase in
interest expense as a result of the expensing of previously capitalized interest
expense associated with the OSB plant in Brazil . Interest expense associated
with the OSB plant in Brazil was capitalized in 2001 and 2002 because it was
in a construction and start-up phase.

The Company reported net income of US$9.6 million, or 3.4% of net sales, in
2003 compared to net income of US$14.6 million, or 6.5% of net sales, in 2002.
The 34.1% decrease in net income in 2003 compared to 2002 reflects, among other
things, lower gross margin and operating income and lower non-operating results
as discussed above.

2002 compared to 2001

Net sales decreased 4.6% to US$225.4 million in 2002 compared to US$236.3 million in 2001,  despite
a 22.1% increase in physical  volume sales.  The decrease in net sales in U.S.  dollar terms is attributable
to price weakness  resulting from the generally  depressed  Latin American  economy and the  depreciation of
the regions  currencies,  especially the Argentinean  peso. These factors were partially offset by 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.  In  addition,  the  Company  was able to export a
higher  percentage of its  production.  The average board price per cubic meter in 2002 was US$162  compared
to US$208 per cubic meter in 2001.  Consolidated  sales by physical board volume  increased 22.1% to 1,302.0
thousand cubic meters in 2002, compared to 1,066.1 thousand cubic meters in 2001.

Gross margin decreased 25.6% from US$79.9 million, or 33.8% of net sales,
in 2001 to US$59.4 million, or 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 resulted in devaluations in Latin
American countries' currencies. However, while such devaluations had the effect
of lowering prices for the Company's products in terms of U.S. dollars, there
was not an equally corresponding reduction in the Company's cost of sales since
a significant portion of the raw materials used by the Company are priced in
U.S. dollars and determined on world markets. Average domestic prices for raw
particle board and raw MDF in Argentina , Chile , 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 US$29.6 million, or 13.1% of net
sales, for 2002, representing a 19.4% decrease from US$36.7 million, or 15.5%
of net sales, for 2001. This decrease was due primarily to the general currency
devaluation in the Latin American 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 U.S. dollars for the preparation of the consolidated financial statements.
Brazilian expenses in local currency terms increased mainly due to the increased
sales of OSB.

Operating income decreased by 30.9% to US$29.8 million, or 13.2% of net sales,
in 2002 compared to US$43.2 million, or 18.3% of net sales, in 2001. The decrease
in operating income is attributable mainly to the decrease in gross margin which
was partially offset by lower selling and administrative expenses as discussed
above.

Non-operating results increased from a loss of US$13.7 million in 2001 to
a loss of US$9.6 million in 2002, a variation of 29.9%, despite an increase
in price-level restatement losses. Price-level restatement loss totaled US$6.3
million in 2002 compared to a loss of US$0.7 million in 2001, mainly due to
the effect of the devaluation of the Argentinean peso recorded during 2002.
There were no gains on sales of investments during 2002, but in 2001 gains on
the sale of investments totaled US$11.0 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. There were no non-operating write downs
in 2002 compared to the US$8.3 million in 2001 resulting from the impairment
of a particle board line in Chile to reflect its current value. Net interest
expense decreased moderately from US$10.2 million in 2001 to US$8.2 million
in 2002.

The Company reported net income of US$14.6 million, or 6.5% of net sales, in
2002 compared to net income of US$31.4 million, or 13.3% of net sales, in 2001.
The 53.5% decrease in net income in 2002 compared to

42

---



2001 reflects, among other things, lower gross margin, lower operating income
and higher taxes which were partially offset by lower non-operating losses.
Income taxes increased from a benefit of US$0.6 in 2001 to an expense of US$7.0
million in 2002. The large increase is due to the deceleration of depreciation
expense based on an accelerated depreciation schedule and the resulting increase
in tax liability.

Geographic Segments

The following discusses geographic segments based on the location in which
the sale is originated, as reported in Note 23(2)(f) of the Consolidated Financial
Statements.

Chile

|                                                      | Year ended December
31,
|----------------------------------------------------- | -----------------------
|                                                      |                        
|                                                      | 2001                   
|                                                      |                        
|Net Sales (millions of US$)                           | 141.0                  
|Gross Margin (millions of US$)                        | 43.7                   
|Selling and Administrative Expenses (millions
of US$) | (17.4)                 
|Operating Income (millions of US$)                    | 26.3                   
|Depreciation (millions of US$)                        | 11.9                   
|                                                      |                        
|Net Sales Growth %                                    | -                      
|Gross Margin % *                                      | 31.0%                  
|Operating Income Margin % *                           | 18.7%                  

|* Amounts are expressed as percentages of net sales.
|----------------------------------------------------

2003 compared to 2002.In Chile , net sales increased 1.0% to US$117.5
million in 2003 compared to US$116.3 million in 2002. Forestry and wood chip
sales increased moderately. However, the increase was offset by a decline in
board sales due mainly to lower average prices and lower physical volume sales
resulting from continued import pressure from Argentina , especially from particle
board imports during the first half of 2003, and a larger capacity in the board
market. Production problems in the MDF board plants, as a result of introducing
new technology in the first quarter of the year, prevented exports from compensating
for part of this drop. Gross margin declined from US$39.0 million, or 33.5% of net sales,
in 2002 to US$27.9 million, or 23.8% of net sales, in 2003. This decrease is
due mainly to lower physical volume sales and lower prices as discussed above
while average raw material costs, which are priced in dollars and determined
by world markets, were either flat or increased. Operating income decreased
to US$10.0 million, or 8.5% of net sales, in 2003 compared to US$23.0 million,
or 19.8% of net sales, in 2002. The decrease in operating income is attributable
to the decrease in gross margin as discussed above and higher selling and administrative
expenses due mainly to certain non-recurring expenses including consulting projects
undertaken in 2003 to improve the Company's long-term business strategy and
operations. These consulting projects amounted to approximately US$1.0 million.
The first project, amounting to approximately US$0.6 million, was undertaken
with the help a globally recognized consulting firm to improve the Company's
long-term business strategy. The second project, amounting to approximately
US$0.4 million, was undertaken, with the help of an investment bank, to analyze
the Company's optimum corporate ownership structure. Additionally, selling and
administrative expenses were higher in 2003 compared to 2002 because of local
currency appreciation, additional costs of storing unsold product, additional
insurance and higher provision for doubtful accounts.

2002 compared to 2001.In Chile , net sales declined 17.5% to US$116.3
million in 2002 compared to US$141.0 million in 2001. This was due mainly to
lower average prices as a result of import pressure from Argentina following
the devaluation. In Chile , in U.S. dollar terms, average prices for raw and
coated particle board and MDF decreased approximately 7.4% in 2002 as compared
to 2001 levels. Physical volume sales declined moderately in the local market
but export sales increased. Gross margin declined from US$43.7 million, or 31.0%
of net sales, in 2001 to US$39.0 million, or 33.5% of net sales, in 2002. This
was due mainly to the decline in net sales discussed above. Operating income
decreased to US$23.0 million, or 19.8% of net sales, in 2002 compared to US$26.3
million, or 18.7% of net sales, in 2001. This was mainly due to lower gross margins.
However, lower gross margins were partially offset by a decrease in selling and
administrative expenses from US$17.4 million in 2001 to US$16.0 million in 2002
as a result of the local currency devaluation.

43

---



Argentina

|                                                      | Year ended December
31,
|----------------------------------------------------- | -----------------------
|                                                      |                        
|                                                      | 2001                   
|                                                      |                        
|Net Sales (millions of US$)                           | 70.5                   
|Gross Margin (millions of US$)                        | 23.2                   
|Selling and Administrative Expenses (millions
of US$) | (13.8)                 
|Operating Income (millions of US$)                    | 9.3                    
|Depreciation (millions of US$)                        | 7.4                    
|                                                      |                        
|Net Sales Growth %                                    | -                      
|Gross Margin % *                                      | 32.8%                  
|Operating Income Margin % *                           | 13.2%                  

|*


 Amounts are expressed as percentages of net sales.
|-------------------------------------------------------

2003 compared to 2002.In Argentina , net sales increased 40.0% to
US$68.9 million in 2003 compared to US$49.2 million in 2002. The increase is
due mainly to a recovery in the Argentinean market, especially in the second
half of 2003, after the economic crisis in 2002. Industries such as construction,
which suffered greatly during the crisis, improved in 2003. Both average prices
and physical volume sales increased during 2003 compared to 2002. Gross margin
increased from US$7.8 million, or 15.9% of net sales, in 2002 to US$12.0 million,
or 17.4% of net sales, in 2003. This increase is due mainly to higher net sales
resulting from the recovery of the local market, that replaced lower margin
exports sales. However, margins remained below pre-2002 levels because of higher
raw material costs and continued excess capacity in the industry. Operating
income increased to US$4.5 million, or 6.5% of net sales, in 2003 compared to
US$0.7 million, or 1.5% of net sales, in 2002. The increase in operating income
is attributable to the increase in gross margin as described above while selling
and administrative expenses increased only slightly due to a moderate appreciation
of the Argentinean peso.

2002 compared to 2001.In Argentina , net sales decreased 30.3% to
US$49.2 million in 2002 compared to US$70.5 million in 2001. The decline was
due mainly to lower average prices and lower physical volume sales resulting
from the severe economic crisis and devaluation experienced during 2002. Average
prices for raw and coated particle board and MDF decreased approximately 39.3%,
in dollar terms, in 2002 compared to 2001. Local market demand dropped substantially
as the economic crisis affected the construction and furniture industries. The
Company was, however, able to compensate for the decline in local market sales
by increasing export sales. Accordingly, the Company began to export the majority
of its Argentinean production previously destined for sale in Argentina , to
other markets. In general, under normal market conditions, 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 gross margin, as a percentage of net sales, on its export sales is
in general lower than for sales of its products in its domestic markets. Gross
margin declined from US$23.2 million, or 32.8% of net sales, in 2001 to US$7.8
million, or 15.9% of net sales, in 2002. This decrease is due mainly to the
substantial decrease in net sales as discussed above while average raw material
costs declined only moderately. Operating income declined to US$0.7 million,
or 1.5% of net sales, in 2002 compared to US$9.3 million, or 13.2% of net sales,
in 2001. The decrease in operating income is attributable to the decrease in
gross margin that was partially offset by significantly lower selling and administrative
expenses due to the devaluation of the local currency.

Brazil

|                                                      | Year ended December
31,
|----------------------------------------------------- | -----------------------
|                                                      |                        
|                                                      | 2001                   
|                                                      |                        
|Net
Sales (millions of US$)                           | 38.8                   
|Gross
Margin (millions of US$)                        | 12.1                   
|Selling and Administrative Expenses (millions
of US$) | (4.7)                  
|Operating
Income (millions of US$)                    | 7.4                    
|Depreciation (millions of US$)                        | 2.6                    
|                                                      |                        
|Net
Sales Growth %                                    | -                      
|Gross
Margin % *                                      | 31.2%                  
|Operating
Income Margin % *                           | 19.1%                  

|* Amounts are expressed as percentages of net sales.
|----------------------------------------------------

44

---



2003 compared to 2002.In Brazil , net sales increased 59.7% to US$73.8
million in 2003 compared to US$46.2 million in 2002. This increase occurred
despite no growth in GDP in the Brazilian market in 2003 and a decline in both
consumption and internal demand following pre- and post-election uncertainty.
The increase is due mainly to a significant recovery in the price of MDF boards
in the domestic market and a sales increase of OSB boards both in Brazil as
well as abroad, taking advantage of substantial OSB price increases in the US
market towards the end of 2003. Both average prices and physical volume sales
increased during 2003 compared to 2002. Gross margin increased from US$9.5 million,
or 20.7% of net sales, in 2002 to US$19.3 million, or 26.2% of net sales, in
2003. This increase is due mainly to higher physical volume sales, especially
OSB exports, and higher sales prices relative to raw material costs. Operating
income increased to US$12.9 million, or 17.4% of net sales, in 2003 compared
to US$5.7 million, or 12.4% of net sales, in 2002. The increase in operating
income is attributable to the increase in gross margin as described above, however,
the increase was partially offset by higher selling and administrative expenses.
In 2002, indirect expenses associated with the construction and start-up of
the OSB plant were capitalized. Starting in 2003, with the OSB plant fully operating,
these indirect expenses are no longer capitalized thus increasing selling and
administrative expenses compared to 2002. Also, depreciation expense increased
in 2003 due to additional capital investments made in the OSB plant in 2002.

2002 compared to 2001.In Brazil , net sales increased 18.9% to US$46.2
million in 2002 compared to US$38.8 million in 2001. The increase is due mainly
to increased physical volume sales which offset lower average prices. Pre-election
uncertainty and reverberations from the Argentinean economic crisis led to the
depreciation of the local currency. Prices for raw and coated particle board
and MDF declined approximately 25.0% in dollar terms. However, strong demand
for laminated particle board and MDF board and the successful introduction of
OSB significantly increased physical volume sales and more than compensated for
price declines. In addition, Brazil was able to increase exports. Gross margin
decreased from US$12.1 million, or 31.2% of net sales, in 2001 to US$9.5 million,
or 20.7% of net sales, in 2002. This decrease is due mainly to lower prices as
discussed above without a corresponding decline in per unit raw material costs.
Operating income decreased to US$5.7 million, or 12.4% of net sales, in 2002
compared to US$7.4 million, or 19.1% of net sales, in 2001. The decrease in operating
income is attributable to the decrease in gross margin which was partially offset
by a decline in selling and administrative expenses due to the devaluation of
the local currency.

Mexico

|                                                      | Year ended December
31,
|----------------------------------------------------- | -----------------------
|                                                      |                        
|                                                      | 2002 (1)               
|                                                      |                        
|Net
Sales (millions of US$)                           | 17.0                   
|Gross
Margin (millions of US$)                        | 2.9                    
|Selling and Administrative Expenses (millions
of US$) | (2.7)                  
|Operating
Income (millions of US$)                    | 0.2                    
|Depreciation (millions of US$)                        | 0.7                    
|                                                      |                        
|Net
Sales Growth %                                    | -                      
|Gross
Margin % *                                      | 17.2%                  
|Operating
Income Margin % *                           | 1.2%                   

|(1)                                                  | The Company acquired its Mexico Operation in January 2002.
|---------------------------------------------------- | ----------------------------------------------------------
|* Amounts are expressed as percentages of net sales.

2003 compared to 2002.In
Mexico , net sales increased 105.6% to US$34.9 million in 2003 compared
to US$17.0 million in 2002. The increase is due mainly to Masisa Mexico production
replacing Mexican sales that previously were filled by imports from other
Masisa countries and an increase in exports. The Company acquired its Mexico
Operations on January 8, 2002. See Mexican
Production Facilities under Item 4 for more detailed information on the acquisition.
Gross margin increased from US$2.9 million, or 17.2% of net sales, in 2002
to US$5.0 million, or 14.4% of net sales, in 2003. This increase is due mainly
to higher net sales as discussed above. Operating income decreased from US$0.2
million, or 1.2% of net sales, in 2002 to a loss of US$1.8 million, or 5.2%
of net sales, in 2003. The decrease in operating income is attributable to
significantly higher selling and administrative expenses due mainly to non-recurring
costs associated with developing Masisa Mexico 's administrative infrastructure
and incorporating Masisa Mexico into the Company's global operations. Some
of Masisa Mexico 's selling and administrative expenses are variable and would
be expected to increase if sales were to increase.

45

---



The Company acquired its Mexico operations in 2002 and therefore year-over-year
comparisons between 2001 and 2002 are not meaningful. In addition, although
the company acquired its Mexico operations in January of 2002, the facilities
acquired went through a startup and adjustment period during the first part
of 2002 and therefore were not in full operation for the entire year.

Product Segments

Particle Board

|                                                  | Year ended December
31,
|------------------------------------------------- | -----------------------
|                                                  |                        
|                                                  | 2001                   
|                                                  |                        
|Net Sales (millions of US$)                       | 88.8                   
|Physical Volume Sales (thousands of cubic meters) | 465.2                  
|Average Price per Cubic Meter (US$)               | 191                    
|                                                  |                        
|% of Consolidated Net Sales                       | 37.6%                  
|Net Sales Growth %                                | -                      
|Volume Growth %                                   | -                      
|Price Change %                                    | -                      

2003 compared to 2002.Particle board sales generated US$92.2 million,
or 32.7% of the Company's total net sales, for 2003 compared to US$87.5 million,
or 38.8% of net sales, for 2002. Particle board physical volume sales increased
by 2.6% from 538.3 thousand cubic meters in 2002 to 552.0 thousand cubic meters
in 2003. This increase in physical volume is mainly attributable to a recovery
in the Argentinean market and strong growth in Peru . However, the strength
in these two markets was partially offset by weakness in Chile where both volume
and average prices declined. Averages price in U.S. dollars for consolidated
particle board sales increased 2.7% to US$167 per cubic meter in 2003, compared
to US$163 in 2002. The increase in particle board prices is mainly due to higher
prices in Argentina and Brazil and a moderate appreciation of currencies in
those local markets.

2002 compared to 2001.Particle board sales generated US$87.5 million,
or 38.8% of the Company's total net sales, for 2002 compared to US$88.8 million,
or 37.6% of net sales, for 2001. Particle board physical volume sales increased
by 15.7% from 465.2 thousand cubic meters in 2001 to 538.3 thousand 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 prices in U.S. dollars for consolidated particle board sales decreased
14.8% to US$163 per cubic meter in 2002, compared to US$191 in 2001. The decrease
in particle board prices is mainly due to the devaluation of local currencies
in Chile , Brazil and Argentina.

MDF

|                                                  | Year ended December
31,
|------------------------------------------------- | -----------------------
|                                                  |                        
|                                                  | 2001                   
|                                                  |                        
|Net Sales (millions of US$)                       | 134.9                  
|Physical Volume Sales (thousands of cubic meters) | 595.3                  
|Average Price per Cubic Meter (US$)               | 227                    
|                                                  |                        
|% of Consolidated Net Sales                       | 57.1%                  
|Net Sales Growth %                                | -                      
|Volume Growth %                                   | -                      
|Price Change %                                    | -                      

2003 compared to 2002.MDF sales reached US$135.3 million, representing
48.0% of total net sales for 2003. In 2002, MDF sales totaled US$119.8 million
or 53.1% of total net sales. MDF physical volume sales increased 4.6% from 674.4
thousand cubic meters in 2002 to 705.4 thousand cubic meters in 2003. MDF sales
do not include moldings made from MDF which are included in Other Products. The
increase in volume was mainly due to a recovery in the Argentinean local market
and continued growth in Brazil which offset weakness in Chile . Prices recovered
strongly in both Argentina and Brazil , as a result of strong demand and currency
appreciation in the local markets. Average prices in U.S. dollars for consolidated
MDF sales increased 8.0% to US$192 per cubic meter in 2003, compared to US$178
in 2002.

46

---



2002
compared to 2001.MDF sales reached US$119.8 million, representing
53.1% of total net sales for 2002. In 2001, MDF sales totaled US$134.9 million
or 57.1% of total net sales. MDF physical volume sales increased 13.3% from
595.3 thousand cubic meters in 2001 to 674.4 thousand 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
U.S. dollars for consolidated MDF sales decreased 21.6% to US$178 per cubic
meter in 2002, compared to US$227 in 2001. The decrease in MDF prices was
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.

OSB

|                                                  | Year ended December
31,
|------------------------------------------------- | -----------------------
|                                                  |                        
|                                                  | 2001                   
|                                                  |                        
|Net Sales (millions of US$)                       | -                      
|Physical Volume Sales (thousands of cubic meters) | -                      
|Average Price per Cubic Meter (US$)               | -                      
|                                                  |                        
|% of Consolidated Net Sales                       | -                      
|Net Sales Growth %                                | -                      
|Volume Growth %                                   | -                      
|Price Change %                                    | -                      

2003 compared to 2002.OSB sales in 2003 reached US$27.7 million or
9.8% of the Company's net sales compared to only US$9.0 million or 4.0% of net
sales in 2002. This represents an increase of 206.7% in net sales and an increase
of 99.3% in physical volume sales. In 2003, the Company sold 178.1 thousand
cubic meters of OSB compared to 89.4 thousand cubic meters in 2002. This increase
was mainly due to increased production and sales from the Brazilian OSB plant
which became fully operational in the fourth quarter of 2002. Also, the Company
was able to take advantage of a an increase in OSB prices in the U.S. market
towards the end of the year to increase export sales.

2002 compared to 2001.
In 2001, OSB sales were included in Other Products and therefore do not
appear in the table above. OSB sales in 2002 reached US$9.0 million or 4.0% of Companys net sales
compared to only US$0.9 million or 0.4% of net sales in 2001. In 2002, the Company sold 89.4 thousand
cubic meters of OSB compared to 5.6 thousand 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.

Other Products

Other products include principally timber and wood chips, molding and doors.

|                            | Year ended December
31,
|--------------------------- | -----------------------
|                            |                        
|                            | 2001                   
|                            |                        
|Net Sales (millions of US$) | 12.6                   
|                            |                        
|% of Consolidated Net Sales | 5.3%                   
|Net Sales Growth %          | -                      
|                            |                        

2003 compared to 2002.Other products net sales increased 193.0% to US$26.7
million or 9.5% of the Company's net sales in 2003 from US$9.1 million or 4.0%
of the Company's net sales in 2002. The increase was primarily due to the addition
of a pre-painted MDF moldings product line produced in Argentina starting in
2003 and a large increase in timber and wood sales. The MDF moldings are sold
almost exclusively in exports markets and reached net sales of US$4.7 million
in 2003 compared to no sales in 2002. The increase in timber and wood chips sales
was due mainly to higher physical volume sales, especially in Argentina , and
increased trading revenue which were partially offset by lower prices. Part of
timber and wood chips net sales are derived from low margin trading activities
that can fluctuate significantly depending on market conditions and Masisa's
ability to exploit market opportunities. In 2003, trading revenue more than doubled
to approximately US$4.5 million compared to US$2.0 million in 2002. Door sales
in 2003 were flat compared to 2002.

47

---



2002 compared to 2001.Other products net sales decreased to US$9.1 million or 4.0% of the
Companys net sales in 2002 compared US$12.6 million or 5.3% of the Companys net sales in 2001. This was
due primarily to a decrease in timber and wood chip sales due to weak demand and lower trading activity.
Additionally, OSB sales were included in Other Products in 2001 but not in 2002. OSB sales in 2001 were
US$0.9 million. Door sales in 2002 were flat compared to 2001.

Forestry Business

The Company operates and manages its forestry business in Chile and Argentina
through its subsidiary Forestal. In the Geographic Segments discussion above,
Forestal's results of operations are included in Chile and Argentina in accordance
with the origin of sale. Forestal's net sales and operating income, respectively,
represent less than 10% of the Company's results of operations. However, the
Company believes that a separate discussion and analysis of its forestry business
is useful.

|                                                      | Year ended December
31,
|----------------------------------------------------- | -----------------------
|                                                      |                        
|                                                      | 2001                   
|                                                      |                        
|Net Sales (millions of US$)                           | 15.2                   
|Gross Margin (millions of US$)                        | 2.4                    
|Selling and Administrative Expenses (millions
of US$) | (1.1)                  
|Operating Income (millions of US$)                    | 1.3                    
|Depreciation (millions of US$)                        | 0.1                    
|                                                      |                        
|Net Sales Growth %                                    | -                      
|Gross Margin % *                                      | 15.5%                  
|Operating Income Margin % *                           | 8.5%                   

|* Amounts are expressed as percentages of net sales.
|----------------------------------------------------

2003 compared to 2002.Forestal's net sales increased 31.3% to US$15.7
million in 2003 compared to US$11.9 million in 2002. The increase was due mainly
to higher physical volume sales, especially in Argentina , and increased trading
revenue which were partially offset by lower prices. Part of Forestal's net
sales are derived from low margin trading activities that can fluctuate significantly
depending on market conditions and Masisa's ability to exploit market opportunities.
In 2003, trading revenue more than doubled to approximately US$4.5 million compared
to US$2.0 million in 2002; however, average prices declined moderately primarily
as a result of local market oversupply in Chile . Gross margin increased from
US$1.2 million, or 10.1% of net sales, in 2002 to US$2.8 million, or 17.9% of
net sales, in 2003. This increase was due mainly to the higher net sales discussed
above. Operating income increased to US$2.2 million, or 14.2% of net sales,
in 2003 compared to US$0.7 million, or 6.1%% of net sales, in 2002. The increase
in operating income is attributable to higher net sales and gross margins. Selling
and administrative expenses increased moderately in dollar terms as a result
of the appreciation of local currencies.

2002
compared to 2001.Forestal's net sales decreased 21.6% to US$11.9
million in 2002 compared to US$15.2 million in 2001. The decline is due mainly
to a decrease in physical volume sales and prices due to the devaluation and
economic crisis in Argentina as well as a decrease in trading revenue. Part
of Forestal's net sales are derived from low margin trading activities that
can fluctuate significantly depending on market conditions and Masisa's ability
to exploit market opportunities. In 2002, trading revenue declined significantly
to approximately US$2.0 million compared to US$4.8 million in 2001. Gross margin
decreased from US$2.4 million, or 15.5% of net sales, in 2002 to US$1.2 million,
or 10.1% of net sales, in 2002. This decrease is due mainly to lower net sales
discussed above. Operating income declined to a loss of US$2.2 million, or 18.6%
of net sales, in 2002 compared to a profit of US$1.3 million, or 8.5% of net
sales, in 2001. The decrease in operating income is attributable to lower gross
margin which were partially offset by lower selling and administrative expenses
due to the devaluation of the local currencies, especially the Argentinean peso.

Liquidity And Capital Resources

Overview

The
Company's principal sources of liquidity are existing cash balances, cash generated
from operations and its ability to borrow under credit facilities. In general,
the Company is not seeking to raise new net long-term capital as it believes
current cash reserves and operating sources are sufficient to cover its planned
capital

48

---



expenditures and working capital requirements. Therefore, the Company's financing
activities relate principally to replacing its existing long-term credit sources
as they periodically mature. The most significant financing event during 2003
involved the issuance of a public bond with two series totaling US$91.2 million
in December 2003 for the purpose of repaying previous bank borrowings with December
2003 and 2004 maturities.

Operating Activities

The Company's net cash provided by operating activities was US$17.8 million
for 2003, US$4.5 million for 2002 and US$58.7 million for 2001. The increase
in net cash provided by operating activities in 2003 compared to 2002 is due
mainly to a smaller increase in inventories and a decrease in other assets.
The decrease in net cash provided by operating activities in 2002 compared to
2001 was mainly due to a decrease in net income, lower write-offs and provisions,
and an increase in inventories and accounts receivables as a result of the start
up of the OSB plant in Brazil and the particle board plant in Mexico in 2002.
Additionally, there was a large decrease in accounts payable.

Investing Activities

The table below summarizes the Company's significant capital spending by geographic
segment.

|                       | Year ended December
31,   
|---------------------- | --------------------------
|                       |                           
|                       | 2001                      
|                       |                           
|                       | (millions of U.S.
dollars)
|Chile (1)              | 4.5                       
|Argentina (1)          | 33.7                      
|Brazil                 | 73.9                      
|Mexico (2)             | -                         
|Forestal Tornagaleones | 8.6                       
|                       |                           
|                       |                           
|Total                  | 120.7                     
|                       |                           

|(1) | Chile and Argentina 's capital spending figures do not include
Forestal which is shown separately.
|--- | --------------------------------------------------------------------------------------------------
|(2) | Mexican operations acquired in January 2002.                                                      

Most of the capital  expenditures  incurred  during 2001,  2002 and 2003 were funded with  internal
cash  generation,  short-term  and long-term bank loans and a capital  increase in January 2001.  Forestals
capital investment program is funded  independently by Forestal through bank loans or capital  contributions
from the Company and Forestals other shareholders.

The Company's significant capital expenditures in 2003 were as follows: approximately
US$4.4 million for the planting of timberland in Brazil; US$3.8 million for
the acquisition, planting and maintenance of timberland in Chile; US$2.8 million
for the addition of a new melamine line in the Coronel, Chile plant; US$1.9
million for the acquisition, planting and maintenance of timberland in Argentina
and US$2.4 million for machinery and equipment in Mexico. The remaining capital
expenditures were related to various smaller projects.

Significant capital  expenditures in 2002 were as follows:  US$16.9 million to acquire the particle
board plant in Durango,  Mexico,  with an annual  installed  capacity of 120,000 cubic meters per year and a
small laminating line with an annual installed  capacity of more than 21,000 cubic meters per year;  US$13.3
million in equipment and  investments  related to the start-up  phase of the new OSB plant;  US$3.7  million
for the acquisition and planting of timberland in Brazil;  US$3.4 million for the acquisition,  planting and
maintenance  of timberland in Chile;  US$1.9 million for  construction  of the new  pre-painted  MDF molding
line with an annual installed capacity of 36,000 cubic meters in the Concordia, Argentina plant.

In 2001, significant capital expenditures were as follows were: US$57.8 million
for the construction of an OSB plant in Brazil, which has an annual installed
capacity of 350,000 cubic meters; US$30.4 million on the construction of the
new thin-MDF line at the Company's Concordia, Argentina plant, which has an annual
installed capacity of 120,000 cubic meters; US$7.0 million on the completion
of the MDF project in Brazil; US$6.4 million for the acquisition, planting and
maintenance of timberland in Argentina; US$4.8 million for the acquisition, planting
and maintenance of timberland in Brazil; US$3.7 on a new melamine-coating line
in Brazil, with a production capacity of 110,000 cubic meters per year; US$2.2
million on new forest plantings in Chile and US$1.4 million on information systems
and computer hardware and software in connection with the integration of all
of the

49

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Company's subsidiaries under the same computer network and SAP System, as
well as developing a data storage system and business-to-business tools to support
the Placacentro network.

During 2004, the Company plans to make capital investments of approximately
US$4.3 million in Chile , US$2.6 million in Argentina , US$4.3 million in Brazil
and US$1.1 million in Mexico . All of these investments will be financed from
operating cash flow. In Chile , the investments are expected to include, among
others, a molding line, a fiber bin and a plant security infrastructure. In
Argentina , the investment plan includes increasing molding capacity and adding
a chip washer. In Brazil , the Company's primary investment will be for the
installation of a second defibrator. In Mexico , the principal planned investments
include increasing laminating capacity, installing a particleboard mat former
and environmental improvements, relating to bringing the company's facilities
into compliance with ISO 14,001 and ISO 18,001.

Financing Activities

The Company's financing activities in 2003 related mainly to replacing existing
long-term borrowings maturing in late 2003 and 2004. The largest new borrowing
was the successful public issuance of two series of fixed rate bonds totaling
US$91.2 million in December 2003. In addition, the Company obtained a new loan
from The Bank of Nova Scotia for US$25.0 million. The remainder of new borrowings
related to various short-term debt obligations. Significant repayments of long-term
borrowings during 2003 included the US$49.7 million Citibank N.A. bank borrowing
and US$25.0 million for promissory notes.

The Company's principal financing activities in 2002 were the subscription
of two long-term bank loans, one with Comerica Bank for US$15 million used to
finance the acquisition of the Mexican particle board plant, and one with Banco
Chile New York for US$15 million used to prepay short term debt.

As of December 31, 2003,  US$11.1  million in excess  proceeds from the bond offering were invested
in  short-term  deposits  that  will be used to  repay  existing  borrowings  maturing  during  2004.  As of
December  31,  2003,  the current  portion of  long-term  borrowings  expected to mature in 2004 was US$52.3
million.

There were no common stock capital increases in 2002 or 2003. 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 Stock 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 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 ADSs. 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. In November 2003, the offering period expired for 94,426,683
shares issued but not subscribed and therefore as of June 2004, there are no
outstanding shares issued but not subscribed.

As of December 31, 2003, the Company's total debt, calculated as the sum of
short-term bank borrowings, current portion of long-term bank borrowings, other
long-term borrowings due within one year, long-term bank borrowings and other
long-term borrowings was US$291.8 million, compared to total debt of US$255.7
million as of December 31, 2002. Of the total debt in 2003, US$90.1 million
was short-term borrowings compared to US$73.3 million in 2002.

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 US$255.7 million, compared to total debt of US$152.6 million as of December
31, 2001. Of the total debt in 2002, US$73.3 million was short-term debt plus
the current portion of long-term debt, compared to US$36.2 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 million used to finance the

50

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acquisition of the Mexican particle board plant, and one with Banco Chile
New York for US$15 million used to prepay short term debt. For more details
regarding short- and long-term financings and their respective restrictive covenants
please see Notes 10, 11, 12 and 14 of the Consolidated Financial Statements.

In addition, total financial liabilities, calculated as total debt to banks,
less financial assets (cash, time deposits and fixed rate securities), amounted
to US$242.9 million as of December 31, 2003.

Liquidity

At December 31, 2003, 2002 and 2001, the Company's ratio of current assets
to current liabilities was 1.74:1.00, 1.35:1.00 and 1.95:1.00, respectively.

Total current assets were
US$215.7 million, US$135.7 million and US$130.8 million on December 31, 2003,
2002 and 2001, respectively. The 60% increase in current assets between December
31, 2002 and December 31, 2003 was mainly due to (i) an increase in cash and
deposit reserves held from a bond the Company issued in December 2003 specifically
to repay bank borrowings, some of which were paid in the first quarter
of 2004 and (ii) an increase in working
capital, specifically accounts receivable and inventories, due to higher
sales. The Company does not expect to maintain such high levels of cash
and deposits on an ongoing basis. The 3.7% increase in current assets between
December 31, 2001 and December 31, 2002 was mainly due to increased cash and
deposits as well as increased inventories mainly due to the start up of the
OSB plant in Brazil and the particle board plant in Mexico during the same
year.

Total current liabilities were US$124.1 million, US$100.9 million and US$67.1
million on December 31, 2003, 2002 and 2001, respectively. The increase of 23.0%
of current liabilities between December 31, 2002 and December 31, 2003 was mainly
due to an increase in short-term bank borrowings and the classification in the
short-term of long-term bank borrowings, principally the approximately US$30
million Rabobank Ireland PLC loan. The increase of 50.3% 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.

Off-balance Sheet Arrangements

The Company does not have any off-balance sheet arrangement including any
transactions, agreements or other contractual arrangements involving an unconsolidated
entity under which it has:

| | made
guarantees;
| | ----------------

| | a
retained or a contingent interest in transferred assets;
| | ----------------------------------------------------------

| | an
obligation under derivative instruments classified as equity; or
| | -------------------------------------------------------------------

| | any
obligation arising out of a material variable interest in an unconsolidated entity that
provides financing, liquidity, market risk or credit risk support to the Company, or that
engages in leasing, hedging or research and development arrangements with the Company.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See Notes 1 and 23 to the audited consolidated financial statements for a more
detailed discussion of contingencies, including guarantees.

51

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Contractual Obligations

The
 following table summarizes the companies significant long-term contractual
obligations as of December 31, 2003.

|                                                                         | Payments Due
by Period (millions of U.S. dollars)
|------------------------------------------------------------------------ | -------------------------------------------------
|                                                                         |                                                  
|                                                                         | Total                                            
|                                                                         |                                                  
|Long-term debt obligations                                               | 253.5                                            
|Capital lease obligations                                                | 0.4                                              
|Operating lease obligations                                              | -                                                
|Purchase obligations                                                     | -                                                
|Other long-term liabilities on the registrant's
balance sheet under GAAP | -                                                
|                                                                         |                                                  
|Total Contractual Obligations                                            | 253.9                                            

The Company has long-term resin supply contract with Georgia Pacific Resins
 Ltd. to ensure the normal supply of resins for existing and future operations,
 including calculations for future growth of the Company. The estimated amount
 of the contract for 2004 is US$17 million. The contract is not a financial
 obligation since it does not oblige the Company to purchase a minimum amount
 from Georgia Pacific Resins Ltd.

Impact Of Inflation And Devaluation

The
 functional currency of the Company is the U.S. dollar. Portions of the
 Company's operating costs are denominated in Chilean pesos, Argentine pesos,
 Brazilian reales and Mexican pesos. Since the revenues of the Company are
 primarily denominated in U.S. dollars, when inflation/deflation in these countries
 is not offset by a change in the exchange rate to the U.S. dollar, the financial
 position, results of operations and cash flows of the Company could be adversely
 affected. The value of the net assets of the Company not denominated in U.S.
 dollars can also be affected by devaluation of these currencies.

Critical Accounting Policies

A summary of the Company's significant accounting policies is included in
 Note 2 of the Consolidated Financial Statements, which are included in this
 annual report. The preparation of financial statements requires the Company's
 management to make estimates and assumptions that affect the amounts reported
 in the consolidated financial statements and accompanying footnotes. The Company's
 estimates and assumptions are based on historical experiences and changes in
 the business environment. However, actual results may differ from estimates
 under different conditions, sometimes materially. Critical accounting policies
 and estimates are defined as those that are both most important to the portrayal
 of the Company's financial condition and results and require management's most
 subjective judgements. The Company's most critical accounting policies and
 estimates are described below.

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 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. In estimating the useful lives and expected residual value
 of fixed assets, the Company has primarily relied on actual experience with
 similar plant and equipment and recommendations from engineers and manufacturers.
 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

52

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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 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. The 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.

Forests

The Company determines the value of its forests by a technical appraisal
 process. The Company appraises 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 the technical appraisal indicates
 that the value of a plantation has changed, the Company accounts for this by
 increasing or decreasing forestry plantations (which is a part of property,
 plant and equipment) and making a corresponding increase or decrease to the
 forestry reserves component of shareholders' equity.

At the end of each year, the Company moves to inventory the appraised value
 of trees it expects to harvest in the next twelve 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 makes 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, forests and plantations in the process of
 exploitation, materials and supplies are stated at the lower 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. Forests and plantations in the process of exploitation
 are stated at the commercially appraised value at which these forests were
 transferred from fixed assets. 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.

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

53

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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.



Table of Contents

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 21, 2004 and the term of each of
 the current directors will expire at the shareholders meeting scheduled for
 the first quarter of 2007. The election on April 21, 2004 was held two years
 early due to the resignation of Mr. Jaime Fernandez. 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,
 52 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
 and Chairman of the Board of Directors of Terranova. He has served as Member
 of the Executive Management 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 a MS from
M.I.T., Sloan Management School of Management, USA.

Gonzalo Zegers R-T.,
 43 years old, joined the Company in 1996 and has served on the Board of Directors
 as Executive 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 is currently
 the Chief Executive Officer of Terranova. 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 .

Patrick A. Nielson,
 53 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 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, 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.,
 58 years old, has served on the Board of Directors from 1988 to 1991 and again
 from 1993 through the present. Since 2001, he has served as Chairman of Masisa'a
 Directors Committee. 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., Iutasa S.A. , Inversiones Juan Yarur S.A and is a member of 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,
 62 years old, has served as a Director on the Company's Board since July 2002.
 Mr. Carey also serves on the Board of Directors of Terranova. 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

54

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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.

Ronald Degen,
 60 years old, became a Director of the Company's Board in December 2003. Mr.
 Degen is also Vice President for Merger and Acquisitions of the GrupoNueva,
 Vice President of the Board of Terranova and Chairman of the Board of Amanco
 Brasil. He was the President and CEO of Amanco Brasil, President and CEO of
 Companhia Paulista de Força e Luz (CPFL), Director
 of the Board of Bandeirantes de Energia, Director of the Board of Mercado Atacadista
 de Energia (MAE), President and CEO of Schindler Brasil, Vice President of
 Grupo Abril, Executive Director and COO of Editora Abril, Executive Director
 of Industria Villares and Director of Booz Allen & Hamilton International.
 He has a Professional Electrical Engineering Degree from Escola de Engenharia
 Mauá Brazil, is Graduate in Automation from the Swiss Federal Institute
 of Technology (ETH), Switzerland, and has an MBA from the University of Michigan,
 USA.

Ignacio Guerrero,
 51 years old, joined the Company in 2000 and has served on the Board of Directors
 since then. He is also Managing Director of CMB Chile S.A., and serves on
 the Board of Directors of Rebrisa S.A., Zalaquett S.A., Nibsa S.A., Polo Ralph
 Lauren Chile, Axxion S.A. and A.F.I. CMB Prime. Prior to 2000 he was CFO of
 Codelco Chile , and Vicepresident of Citibank New York and of Citibank Chile
 . He has been a professor of Economics and Business at the Catholic University
 of Chile and at the Adolfo Ibañez
 University Business Schools. Mr. Guerero holds an economics degree from
the Catholic University of Chile and an MBA from Harvard University.

Mr. Moura, Mr. Zegers, Mr. Degen, Mr. Nielson and Mr. Carey are directors
 or executive officers of affiliates of the Company within the GrupoNueva group.
 During the period between the resignation of the former Board Member, Mr. Jaime
 Fernandez on December 18, 2003 and the Shareholders Meeting held in April 21,
 2004, the Board of Directors was formed by the current Directors.

A Directors Committee,
 composed of three directors, was created in April 2001, pursuant to a requirement
 of the Chilean Stock Companies Act. In August, 2002, due to the acquisition
 by 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. They were redesignated as members of the Directors
 committee in an Ordinary Meeting of the Board of Directors on May 18, 2004.
 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 Stock 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 Stock
 Companies Act; and (iv) advising on the compensation of the Company's senior
management

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., 50 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 .

55

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Carlos Marín
 O.,
 33 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
 .

Italo Rossi B., 50 years old, is the Company's Chief Corporate Marketing
 Officer, a position he has held since May 2004. Mr. Rossi joined the Company
 in 1989 as Chief Sales and Marketing Officer. In 1999, he was named Chief Executive
 Officer of Masisa do Brasil. Before joining Masisa, he was Forestry Director
 at Fundacion Chile . Mr. Rossi holds a degree in Forestry Engineering from
 the University of Chile .

Claudio Cerda H., 37 years old, has been the Company's Chief Sales
 and Marketing Officer since he joined the Company in February 2004. Prior to
 that he served as Director International Projects and Director Loyalty, Research
 and Direct Marketing among other management positions at LanChile Airlines
 and as Project Manager and Sales Consultant at IBM Chile. Mr. Cerda holds a
 degree in Industrial Engineering from the Catholic University of Chile and
 a Master of Science in Management from Stanford University .

Cristián Valenzuela
 R., 44 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.,
 53 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., 48 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 Human Resources and Administration Manager 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,
 43 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, 2003, the aggregate amount of compensation
 paid by Masisa S.A. to its directors and executive officers was approximately
 US$1,848,652. Members of the Company's Board received per diem fees
 as well as a participation in Masisa's net profits. In 2003, 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 2003.

56

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DIRECTOR COMPESATION

|Directors (1)          | Per Diem for attendance at board meetings | Profit sharing | Per Diem for attendance at directors committee
|---------------------- | ----------------------------------------- | -------------- | ----------------------------------------------
|                       | US$                                       | US$            | US$                                           
|Isidoro Palma          | 7,726                                     | 31,241         | 1,332                                         
|Ignacio Guerrero       | 7,726                                     | 31,241         | 1,332                                         
|Julio Moura            | 6,868                                     | 24,651         | -                                             
|Jaime Fernández        | 7,726                                     | 20,799         | 629                                           
|Jorge Carey            | 7,726                                     | 13,866         | -                                             
|Patrick Arthur Nielson | 6,868                                     | 12,325         | -                                             
|Gonzalo Zegers         | -                                         | -              | -                                             
|Ronald Degen           | -                                         | -              | -                                             
|Felix Bacigalupo       | -                                         | 26,063         | -                                             
|Juan Obach             | -                                         | 34,751         | -                                             
|Scott Perry            | -                                         | 12,549         | -                                             
|José Ignacio Letamendi | -                                         | 17,375         | -                                             
|Julian Sanchez         | -                                         | 17,375         | -                                             
|Patricio Reyes         | -                                         | 13,866         | -                                             
|                      
|Total                  | 44,640                                    | 256,102        | 3,273                                         

|(1) | Mr.
Fernandez, Mr. Bacigalupo, Mr. Obach, Mr. Perry, Mr. Letamendi, Mr. Sanchez and Mr. Reyes
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 US$1,544,637 and severance payments of US$53,670, during the year 2003.

The
Company does not provide  benefits upon termination of employment under any service
contract or plan for directors.

Employees

As of
December 31, 2003, the Company had 1,159 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, 2003:

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

|          | Executives | Professionals | Workers | Consolidated
|--------- | ---------- | ------------- | ------- | ------------
|         
|          | 2001       | 2002          | 2003    | 2001        
|         
|Masisa    |            |               |         |             
|Chile     | 20         | 20            | 20      | 122         
|Argentina | 16         | 14            | 8       | 52          
|Brazil    | 7          | 7             | 7       | 53          
|Peru      | -          | 1             | 1       | 2           
|Mexico    | -          | 4             | 6       |             
|         
|Total     | 43         | 46            | 42      | 229         
|         

|                              | Executives | Professionals | Workers | Consolidated
|----------------------------- | ---------- | ------------- | ------- | ------------
|                             
|                              | 2001       | 2002          | 2003    | 2001        
|                             
|Affiliated Companies          |            |               |         |             
|Forestal and Subsidiaries (2) | 1          | 1             | 1       | 6           
|Forestal Argentina S.A. (2)   | 1          | 1             | 1       | 3           
|                             
|                             
|Total                         | 2          | 2             | 2       | 9           
|                             

|(1) | Executives
 include the CEO,  Chief  Managers,  Deputy  Chief  Managers and Plant Head  Managers.
 Professionals  include  Middle       Managers,  Supervisors and  professionals in
positions without  supervision.  Workers include all employees other than executives
      and professionals.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Effective
January 1, 2001 the Company accounted for Forestal and its subsidiaries on a consolidated
basis.
|--- | ----------------------------------------------------------------------------------------------------------

57

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Chile. As of December 31, 2003, the Company had 647 permanent employees
 in Chile , excluding Forestal, representing a decrease of 0.3% compared to
 2002. Forestal had 22 employees and Masisa Peru had six employees as of December
 31, 2003. The increase in employees in Peru is due to new commercial office
 opened in Ecuador in 2003. Employees in Ecuador are included in Peru since
 they are managed through Peru 's commercial offices. Approximately 57% 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 2003, 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 2007,
 with the exception of one agreement which expires in 2006. In November 2003,
 Masisa Cabrero and the union which represents its employees entered into a
 collective bargaining agreement that will expire in 2006. This agreement was
 renewed with mutually satisfactory conditions. 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$2,575 as of December 31, 2003) 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, 2003, Masisa Argentina had 190 employees,
 which represents a decrease of 7% as compared to 2002, principally due to the
 concentration in Chile of certain key administrative activities that can be
 better developed through centralization. Forestal Argentina had six employees
 as of December 31, 2003.

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.

58

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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.

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, 2003, Masisa Brazil had 164 employees, representing an
increase of 11% compared to 2002 due principally to an increase in administrative staff
accompanying strong growth in that market.

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, 2003, the Company had 152 permanent employees in Mexico,
representing a 4% decrease compared to 2002 due principally to continued improvements
in efficiency.

In
Mexico, as in Argentina and Brazil, collective bargaining agreements are negotiated on an
industry-wide basis.  Employees at Maderas y Sintéticos de México S.A. de C.V. and
Maderas y Sintéticos Servicios S.A. de C.V. are members of one industry-wide union.
Therefore, all of the collective bargaining agreements between them and the union are the
result of industry-wide collective bargaining.  However, only 40% 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 2004.

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.

Share Ownership

Mr.
Carlos Marín, Mr. Isidoro Palma and Mr. Cristián Valenzuela own shares of Masisa.
 However, none of the Companys directors or executive officers own one percent or more
of the shares of the Company as of May 28, 2004.  The Company has no stock option plan
for its directors, executive officers or employees.

59

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Table of Contents

PART III

Table of Contents

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 April  30,  2004,  there  were
 928,514,743  shares  of Common  Stock  issued  and outstanding.

The
table below shows, as of April 30, 2004, 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.  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                      
|                                 
|Terranova S.A                    
|The Bank of New York (1)         
|AFP Provida S.A.                 
|AFP Habitat S.A.                 
|AFP Cuprum S.A.                  
|Banchile Corredores de Bolsa S.A.
|AFP Santa María S.A.             
|AFP Summa Bansander S.A.         
|Moneda S.A.                      
|Citicorp                         
|Citibank                         
|AFP Planvital S.A.               
|                                 

|(1) | 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, 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,  Terranova  acquired  Maspanels  43.16%  stake in  Masisa  thus  becoming
 the controlling  shareholder of the Company with 51.90% of the Companys total shares
paid and  outstanding.  As of June 30,  2004,  as a result of open market  purchases
 made on the  Santiago  Stock  Exchange on May 27, 2003, Terranova owned 486,861,555
shares (52.43%) of Common Stock.

At an
Extraordinary Shareholders Meeting held on October 31, 2003, the merger of Forestal
Terranova S.A. and Terranova S.A. was approved, with Forestal Terranova S.A. being
incorporated into Terranova S.A. Therefore Forestal Terranova S.A. was dissolved and
Terranova S.A. acquired all its assets and liabilities.  Included in the assets of
Forestal Terranova S.A., there were 486,861,555 Masisa S.A. shares, which as a result of
the merger, were automatically transferred to the ownership of Terranova S.A.  At the
time of the merger, on October 31, 2003, Forestal Terranova S.A. owned 99.9% of the
Terranova S.A. shareholders equity.

60

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Through
 ownership of Masisa S.A.s Common Stock, the GrupoNueva  group (through its
 substantially owned  subsidiary,  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 Report,  five of the seven members of the Companys  Board of Directors are
related to the GrupoNueva Group,  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  Stock  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  Stock  Companies  Act provides that a Company may enter into
transactions in which a director,  manager or executive officer has a personal interest,
 only 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 any
 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
2003, the Company engaged in certain  transactions with related  companies and persons.
 The majority of these  transactions  involved  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
Terranova for the management by the Company of Terranovas  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  has  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.  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 Terranova intends to sell any such shares or assets
to third parties.

Because
the contract relating to the management of Fibranova C.V. 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 standard
market terms.

Table of Contents

Item 8.
Financial Information

Consolidated Financial
Statements

See Item
18.  Financial Statements and pages F-1 through F-48.

61

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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  and 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 Stock  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  21,  2004,  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
2003 and for future  years.  In  addition,  the Companys shareholders approved a
dividend equal to 40% of the Companys 2003 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.

Significant Changes

There
have been no significant changes since the date of the Companys most recent financial
statements.

62

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Table of Contents

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 ADS (2)        
|                         |                          |                        
|Years ended December 31, | Low                      | High                   
|                         |                          |                        
|                        
|1999                     | 90.00                    | 237.00                 
|2000                     | 203.00                   | 295.00                 
|2001                     | 221.00                   | 325.00                 
|2002                    
|First Quarter            | 244.00                   | 282.00                 
|Second Quarter           | 188.00                   | 255.00                 
|Third Quarter            | 130.00                   | 188.00                 
|Fourth Quarter           | 135.00                   | 180.00                 
|2003                    
|First Quarter            | 155.00                   | 185.00                 
|Second Quarter           | 174.00                   | 207.00                 
|Third Quarter            | 165.00                   | 200.00                 
|Fourth Quarter           | 182.00                   | 242.01                 
|2004                    
|First Quarter            | 215.00                   | 260.00                 
|Monthly Prices          
|December, 2003           | 223.00                   | 242.01                 
|January, 2004            | 215.00                   | 260.00                 
|February, 2004           | 219.99                   | 257.50                 
|March, 2004              | 224.90                   | 257.00                 
|April, 2004              | 229.00                   | 276.01                 
|May, 2004                | 254.00                   | 270.10                 
|June, 2004(3)            | 256.00                   | 261.00                 

|(1) | Chilean
pesos are reflected at historical values and therefore are not adjusted to reflect
changes in purchasing power.
|--- | -----------------------------------------------------------------------------------------------------------------------

|(2) | 1
ADS = 30 shares of Common Stock.
|--- | ----------------------------------

|(3) | Exchange
share prices through June 18, 2004.
|--- | --------------------------------------------

Markets

The
Companys 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

63

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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  45  shareholders.   The  Santiago  Stock  Exchange  is  Chiles  principal
 exchange  and  accounts  for approximately  76.5%  of  securities  traded  in Chile in
2003.  In the same  year,  approximately  22.9% 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 U.S. 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 159 issues and is broken into five main sectors:  banks and finance, farming and
forest products, mining, industrial, and miscellaneous.  The IPSA 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 69.7% of the
entire market capitalization.  The Common Stock is included in both indices.

Table of Contents

Item 10. Additional Information

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 143 No.  52 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.

64

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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.

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.

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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) 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.

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.

Pursuant
to the Chilean Stock Companies Act, if the bylaws of a company establish compensation for
directors, such compensation must be agreed to in a Shareholders Meeting.  The companys
bylaws establish that the directors will be compensated in an amount determined by the
Annual Shareholders Meeting, notwithstanding the right of the Board to agree to
compensate a director for the performance of any other duty different from his or her
duty as a director.

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.

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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  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.

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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
granting of guarantees exceeding 50% of the companys assets to guarantee
obligations of third                   parties, except subsidiaries;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------

| | e) | 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;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | f) | A
resolution passed with a vote at an Extraordinary Shareholder Meeting, from which a
shareholder                   dissented, which amends the bylaws of a company that are
null and void due to formal                   defects (i) in the companys
incorporation or (ii) in any modification of the companys                   bylaws
that would grant a shareholder a right to withdraw;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | g) | Such
other causes as may be established by Chilean law and the companys bylaws (the
Bylaws                   currently do not establish any instances); and
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| | h) | 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.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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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 was incorporated in the Foreign Investment Contract and 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 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.

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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  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.  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
income tax considerations relevant to the purchase, ownership and disposition of shares
of Common Stock or ADSs. This

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description is based, in part, on the representations of
the depositary and the assumption that each obligation in the Deposit Agreement and any
related agreement will be performed in accordance with its terms.

The
 discussion  summarizes  the principal  Chilean  income tax  consequences  of the
 acquisition, ownership and  disposition  of shares 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 shares of Common Stock or ADSs to a holder that is both an
initial purchaser of Common Stock or ADSs at the initial issue price and, for U.S. federal income tax
purposes, is: (i) a citizen or resident of the United States, (ii) a partnership or corporation or other
entity taxable as a corporation created or organized in or under the laws of the U.S. or any state thereof
(including the District of Columbia), (iii) an estate the income of which is subject to U.S. federal
income taxation regardless of its source or (iv) a trust, if such trust validly elects to be treated as a
U.S. person for U.S. federal income tax purposes or if (A) a court within the U.S. is able to exercise
primary supervision over its administration and (B) one or more U.S. persons have the authority to control
all of the substantial decisions of such trust (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 may be subject to special tax rules, such as banks, financial
institutions, dealers or traders in securities and currencies, tax-exempt entities, pension funds,
insurance companies, real estate investment trusts, regulated investment companies, grantor trusts,
persons that received the Companys Common Stock or ADSs pursuant to an exercise of employee stock options
or rights or otherwise as compensation for the performance of services, partnerships or other entities
taxable as partnerships for U.S. federal income tax purposes, holders subject to the alternative minimum
tax, individual holders subject to the tax on expatriates and persons that will hold Common Stock or ADSs
as a position in a straddle in a hedging or conversion transaction or as part of a synthetic security
or other integrated financial transaction.

This
 discussion  does  not  address  any  state,  local  or  non-U.S.  (other  than  Chilean)
 tax consequences  of the  acquisition,  ownership and  disposition of shares of Common
Stock or ADSs.  Moreover, this  discussion  does not  address  the  consequences  of any
U.S.  federal  tax other than the income tax, including but not limited to the U.S.
federal estate and gift taxes.

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 in the case of U.S. law, the Internal Revenue Code
of 1986, as amended (the Code), existing, proposed and temporary U.S. Treasury
Regulations and judicial and administrative interpretations thereof, in each case as in
effect and available on the date of this Annual Report and, in the case of Chilean law,
applicable regulations, rulings and court decisions, and including ruling No. 324 of
January 29, 1990 of the Chilean Internal Revenue Service).  All of the foregoing are
subject to change, which change could apply retroactively and could materially affect the
tax consequences described below. 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.

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.

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The
U.S. Treasury Department has expressed concern that depositaries for American Depositary
Receipts, or other intermediaries between the holders of shares of an issuer and the
issuer, may be taking actions that are inconsistent with the claiming of U.S. foreign tax
credits by U.S. holders of such receipts or shares.  Accordingly, the analysis regarding
the availability of a U.S. foreign tax credit for Chilean taxes and sourcing rules
described below could be affected by future actions that may be taken by the U.S.
Treasury Department.

For
purposes of this  discussion,  a Non-U.S.  Holder is a  beneficial  owner of shares of
Common Stock or ADSs that is not a U.S. Holder.

If a
 partnership  (or any other  entity  treated  as a  partnership  for U.S.  federal
 income tax purposes)  holds shares of Common Stock or ADSs,  then the tax treatment of
the  partnership or of a partner in such  partnership  generally  will  depend  upon the
 status of the  partner  and the  activities  of the partnership.  A partnership  or a
partner in a partnership  that holds shares of Common Stock or ADSs should consult its
own tax advisor.

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.

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 17% 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 (17% of US$100)                 | (17)         
|Net distributable income                           | 83           
|Dividend distributed by the Company                | 83           
|Additional Tax (35% of the sum of US$83 plus US$17 |              
|First Category Tax paid)                           | (35)         
|Credit for First Category Tax                      | 17           
|Net Additional Tax withheld                        | (20)         
|Net dividend received                              | 65           
|Effective dividend withholding tax rate            | 20/83 = 24.1%

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,
2003,  have paid different  First Category Tax rates ranging from 0% to 16.5%.  For more
details see Note 17(g) 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 or property distributions
(other than certain distributions, if any, of shares of Common Stock or ADSs distributed
pro ratato all the Companys shareholders,

72

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including holders of ADSs) 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 generally allowed to corporations under the Code.
To the extent, if any, that the amount of any distribution by the Company exceeds the
Companys current or accumulated earnings and profits as determined under U.S. federal
income tax principles, such distribution will be treated first as a tax-free return of
the U.S. holders adjusted tax basis in its shares of Common Stock or ADSs and,
thereafter, as capital gain. The Company does not maintain calculations of its earnings
and profits for U.S. federal income tax purposes.

Under
recently enacted tax legislation,  eligible dividends received by a non-corporate U.S.
Holder in tax years  beginning  on or before  December  31, 2008 in respect of shares of
Common  Stock or ADSs will generally be taxed at a special  reduced  rate,  provided
 that certain  requirements  are met,  including a requirement  that the U.S.  Holder
hold its shares of Common Stock or ADSs, as applicable,  for more than 60 days during the
120-day period beginning 60 days before the ex-dividend date.

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  received that are converted into U.S.
 dollars on a date  subsequent to receipt.  The amount of any  distribution  of property
other than cash will be the fair  market  value of such  property on the date of
 distribution.  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 certain complex
 limitations and conditions  generally  applicable to foreign tax credits under the Code,
to credit against its U.S.  federal income tax liability.  Dividends  generally will
constitute  foreign source passive  income  or, in the case of  certain  U.S.  Holders,
 financial  services  income,  which may be relevant for purposes of determining a U.S.
 Holders  foreign tax credit  limitation.  U.S.  Holders should consult  their own
 advisors  concerning  the  availability  of, and  limitations  on, any such  foreign tax
credits in light of their particular circumstances.

A
holder of Common Stock or ADSs that is a Non-U.S. Holder generally will not be subject to
U.S. federal income or withholding tax on dividends received with respect to its shares
of Common Stock or ADSs, unless such income is effectively connected with the conduct by
such 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

73

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other cases, gain on the disposition of Common Stock will be subject only
to the First Category Tax currently imposed at a rate of 17%.

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
the amount realized on the disposition and such holders adjusted basis in the
Common Stock or the ADSs. 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. The
deductibility of capital losses is subject to limitations.

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  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.

Subject
to the  discussion  below under U.S.  Backup  Withholding  Tax and  Information
 Reporting Requirements,  a Non-U.S.  Holder of Common  Stock or ADSs will  generally
 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.

Chilean 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).

U.S. Backup Withholding
Tax and Information Reporting Requirements

U.S.
backup withholding tax and information reporting requirements generally apply to certain
payments to certain non-corporate holders of stock.  Information reporting generally will
apply to payments of dividends on, and to proceeds from the sale or other disposition of,
shares of Common Stock or ADSs made within the U.S. to a holder of shares or ADSs (other
than an exempt recipient, including a corporation, a payee that is not a U.S. person
that provides an appropriate certification and certain other persons).

74

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A payor
will be  generally  required  to  withhold  backup  withholding  tax from any  payments
 of dividends  on, or the proceeds  from the sale or  redemption  of,  shares of Common
Stock or ADSs within the U.S. to a holder (other than an exempt  recipient),  if such
holder fails to furnish its correct  taxpayer identification  number  and  certain  other
 information  or  otherwise  fails to  comply  with  the  backup withholding tax
 requirements.  The current backup  withholding tax rate is 28 percent.  Amounts withheld
as backup  withholding  are allowable as a credit against the holders U.S.  federal
income tax upon furnishing certain required information to the IRS.

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.

Summary of significant
differences between the Companys corporate governance practices and the NYSEs Corporate
Governance Standards

A
general summary of the significant differences between the corporate governance practices
followed by the Company under Chilean Law and guidelines and those required by the
listing standards of the New York Stock Exchange (NYSE) for U.S. companies that have
common stock listed on the NYSE may be found only on the Companys website at
www.masisa.com.

Table of Contents

Item 11. Quantitative and Qualitative Disclosure About Market Risk

Qualitative Disclosure

The
Company is subject to market 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  these  risks  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  establish  policies for new
loans,  time deposits,  marketable  securities  and  securities  with resale  agreements
 and policies for entering  into derivative instruments.

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.  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

75

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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 bank borrowings and bond liabilities and other variable long-term liabilities.
 Assuming other factors are held constant, interest rate changes generally affect the
fair value of fixed rate debt, but do not impact the carrying value, earnings or cash
flows.  The company has entered into an interest rate swap on a portion of it variable
debt for a notional amount of US$18 million.  The company pays a fixed rate of 5.2% under
the terms of the agreement, which expires in October 2006.  At December 31, 2003, the
fair value of swap was a liability of US$984,000.  The following table provides
information as of December 31, 2003 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 thousands of US$)                        
|                                                     
|INTEREST EARNING ASSETS                              
|                                                     
|                                                     
|US$ denominated fixed rate                           
|(short-term and long-term)                           
|Time deposits                                        
|Weighted average interest rate                       
|                                                     
|Chilean peso denominated                             
|Securities purchased under resale agreements         
|Weighted average interest rate                       
|                                                     
|                                                     
|INTEREST BEARING LIABILITIES                         
|                                                     
|Fixed Rate :                                         
|US$ denominated bank debt                            
|Weighted average interest rate                       
|                                                     
|Chilean peso denominated bank debt                   
|Weighted average interest rate                       
|                                                     
|Chilean peso - UF denominated bank debt              
|Weighted average interest rate                       
|                                                     
|Brazilian reales bank debt                           
|Weighted average interest rate                       
|                                                     
|Bonds and other long-term Borrowings:                
|Chilean peso  UF denominated                        
|Weighted average interest rate                       
|                                                     
|Promissory notes and other long-term Borrowings  US$
|Weighted average interest rate                       
|                                                     
|Variable Rate :                                      
|US$ denominated bank debt                            
|Weighted average interest rate                       
|                                                     

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Foreign Currency Risk

The
Company is subject to foreign currency exchange rate risks associated with assets and
liabilities and transactions in currencies other than the Companys functional currency.
 The company periodically enters into foreign exchange forward contracts when deemed
necessary to hedge currency fluctuations of assets and liabilities and transactions
denominated in foreign currencies.  At December 31, 2003, the Company did not have any
foreign currency hedges.  When hedging foreign currency exposures, the Companys practice
is to hedge such exposures with foreign exchange forward contracts denominated in the
same currency and with similar critical terms as the underlying exposure, and therefore,
the instruments are effective at generating offsetting changes in the earnings and fair
value The following table summarizes the financial instruments, denominated in the stated
currencies, held by the Company as of December 31, 2003, based upon their respective
contractual maturity dates:

|                                            
|--------------------------------------------
|(Amounts in thousands of US$)               
|                                            
|ASSETS:                                     
|                                            
|                                            
|Chilean peso                                
|Securities purchased under resale agreements
|Weighted average interest rate              
|                                            
|LIABILITIES:                                
|                                            
|Chilean peso denominated bank debt          
|Weighted average interest rate              
|                                            
|Chilean peso - UF denominated bank debt     
|Weighted average interest rate              
|                                            
|Brazilian reales denominated bank debt      
|Weighted average interest rate              
|                                            
|Bonds and other long-term Borrowings        
|Chilean peso  UF denominated               
|                                            
|Weighted average interest rate              
|                                            

Table of Contents

Item 12.
            Description of Securities Other than Equity Securities

Not applicable.

Table of Contents

Item 13.             Default,
Dividend Arrearages and Delinquencies

Not applicable.

Table of Contents

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

Not applicable.

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Table of Contents

Item 15.
            Controls and Procedures

The
Company  maintains a set of disclosure  controls and procedures  designed to ensure that
 information  required to be disclosed by the Company in reports that it files or submits
under the Securities Exchange Act of 1934 is recorded,  processed,  summarized and
reported within the time periods  specified in Securities and Exchange  Commission  rules
and forms. As of the end of the period covered by this Annual Report, an evaluation of
the effectiveness of the Companys  disclosure controls and procedures was carried out
under the supervision and with the participation of the Companys  management,  including
the Chief Executive Officer and the Chief Financial Officer.  Based on that evaluation,
 the Chief Executive Officer and the Chief Financial Officer have concluded that the
Companys  disclosure controls and procedures are effective as of the end of the period
covered by this Annual Report.

Subsequent
to the date of the evaluation referred to above, there have been no changes in the Companys
internal control over financial reporting that have materially  affected,  or are
reasonably likely to materially affect, the Companys internal control over financial
reporting.

Table of Contents

Item 16A.  Audit Committee
Financial Expert

The
Board of Directors of the Company has determined that it has at least one audit
committee  financial  expert, as defined in Item 16A of Form 20-F,  serving on the Audit
Committee. Isidoro Palma is the director whom the Board of Directors has determined to
be an audit committee  financial  expert.  Holders of ADSs should  understand that this
designation is a disclosure  requirement of the SEC related to Mr. Palmas experience and
understanding  with respect to certain accounting and auditing matters.  The designation
does not impose on Mr. Palma any duties,  obligations or liability that are greater than
are generally imposed on him as a member of the Audit Committee and Board of Directors,
 and his designation as an audit committee  financial  expert pursuant to this SEC
requirement  does not affect the duties,  obligations or liability of any other member of
the Audit Committee or Board of Directors.

Table of Contents

Item 16B.  Code of Ethics

The
Company has adopted a code of ethics that applies to all of its employees and directors,
including its principal executive officer, principal financial officer and principal
accounting officer.  The code of ethics is available at the Companys website at
http://www.masisa.com.

Table of Contents

Item 16C.  Principal
Accountant Fees and Services

Audit
Fees. Fees paid to PricewaterhouseCoopers for the audit of the annual consolidated
financial statements included in the Companys Annual Report on Form 20-F in the years
ended 2002 and 2003 were $284,060 and US$357,190, respectively.

Audit-Related
Fees. Fees paid to PricewaterhouseCoopers for audit-related services, including
consultations regarding the Sarbanes-Oxley Act and other items, were US$20,020
and US$37,370, respectively, for the years ended 2002 and 2003.

Tax
Fees. Fees paid to PricewaterhouseCoopers associated with tax compliance and tax
consultation were US$68,280 and US$69,660, respectively, for the years ended 2002 and
2003.

All
Other Fees. Fees paid to PricewaterhouseCoopers for other services, including services
related to information technology services and the issuance of legal and accounting
documents, were US$91,860 and US$8,210, respectively, for the years ended 2002 and
2003. In 2002, these fees include advice regarding the consolidation of the Companys
administrative services in Chile ($68,344) and systems consulting related to SAP
($15,046).

The
Audit Committee has adopted a formal policy on auditor independence requiring the
approval by the Audit Committee of all professional services rendered by the Companys
independent auditor prior to the commencement of the specified services.  The Audit
Committee will consider annually and, if appropriate, approve the provision of audit
services by Companys independent auditor and consider and, if appropriate, pre-approve
the

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provision of certain defined audit and non-audit services.  The Audit Committee will
also consider on a case-by-case basis and, if appropriate, approve specific engagements
that are not otherwise pre-approved.

Any
 proposed  engagement  that does not fit within the  definition  of a  pre-approved
 service may be presented  to the Audit  Committee  for  consideration  at its next
regular  meeting or, if earlier consideration  is required,  to the Audit  Committee for
action by written  consent.  The Audit  Committee has also delegated to the Chair of the
Audit  Committee the authority to pre-approve  audit-related  and non-audit services not
prohibited by law to be performed by the Companys  independent  auditors and associated
fees up to a maximum for any one non-audit  service of $100,000,  provided that the Chair
shall report any decisions to pre-approve such audit-related or non-audit services and
fees to the full Audit Committee at its next regular meeting.

100% of
the services described in Audit-Related Fees, Tax Fees and All Other Fees, were
approved by the Audit Committee in accordance with the Companys formal policy on auditor
independence.

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Table of Contents

PART IV

Table of Contents

Item 17. Financial Statements

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

Table of Contents

Item 18. Financial Statements

See
pages F-1 through F-48, incorporated herein by reference.  The following is an index to
the financial statements:

|Consolidated Financial Statements for Masisa S.A. and Subsidiaries                                      | Page
|------------------------------------------------------------------------------------------------------- | ----
|                                                                                                        |     
|Report of independent auditors                                                                          | F-2 
|                                                                                                        |     
|Consolidated balance sheets as of December 31, 2002 and 2003                                            | F-3 
|                                                                                                        |     
|Consolidated statements of income for each of the three years ended December 31, 2001, 2002 and 2003    | F-4 
|                                                                                                        |     
|Consolidated statement of cash flows for each of the three years ended December 31, 2001, 2002 and 2003 | F-5 
|                                                                                                        |     
|Notes to Consolidated Financial Statements                                                              | F-7 

Table of Contents

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 significant subsidiaries of the Company.                                                                                                                                                                                                                                                                      
|12.1        | Certification by Chief Executive Officer of Masisa S.A. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                    
|12.2        | Certification by Chief Financial Officer of Masisa S.A. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                    
|13          | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished under Section 18 of the Securities Exchange Act of 1934).                                                                                                                                                                          

81

---



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, 2004

| | MASISA S.A.            
| | -----------------------
|
|
| | By: /s/ Carlos Marín.  
| | Carlos Marín           
| | Chief Financial Officer

---



Report of Independent Auditors 
                                                                                                             on 
                                                                                                Financial
Statement Schedules

To the Board of Directors  of
Masisa S.A:

Our audits of the consolidated
 financial  statements  referred to in our report dated January 30, 2004 appearing in the
2003 Form 20-F also include an audit of the financial  statement  schedules listed in
Schedule II of this Form 20-F.  In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.

PricewaterhouseCoopers
 Santiago, Chile  June 24, 2004

---



MASISA S.A.

SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

Accounts receivable  Reserves

|Year Ended        | Balance at Beginning of Period | Charge to Costs and Expenses | Amounts Written Off | Exchange Rate Impact | Balance at End of Period
|----------------- | ------------------------------ | ---------------------------- | ------------------- | -------------------- | ------------------------
|                  |                                | (thousands of US dollars)    |                     |                     
|                 
|December 31, 2003 | 2,603                          | 377                          | (189)               | 1,226                | 4,017                   
|December 31, 2002 | 4,402                          | 333                          | (28)                | (2,104)              | 2,603                   
|December 31, 2001 | 3,318                          | 1,795                        | (259)               | (452)                | 4,402                   

Inventories  Reserves

|Year Ended        | Balance at Beginning of Period | Charge to Costs and Expenses | Amounts Written Off | Exchange Rate Impact | Balance at End of Period
|----------------- | ------------------------------ | ---------------------------- | ------------------- | -------------------- | ------------------------
|                  |                                | (thousands of US dollars)    |                     |                     
|December 31, 2003 | 676                            | 350                          | -                   | (30)                 | 996                     
|December 31, 2002 | 429                            | 443                          | -                   | (197)                | 676                     
|December 31, 2001 | 180                            | 372                          | (123)               | -                    | 429                     

---



MASISA S.A.

Consolidated financial
statements

December 31, 2003

CONTENTS

Report of Independent
Auditors


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                                       
|US$   | - | United States dollars                                            
|ThUS$ | - | Thousands of United States dollars                               
|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.                                 

---



REPORT OF INDEPENDENT
AUDITORS

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,  2002 and 2003 and the related
 consolidated  statements of income and of      cash  flows for each of the three  years
in the  period  ended  December 31,  2003,  all  expressed  in      thousands  of  United
 States  dollars.  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  of the Public  Company
 Accounting      Oversight Board of 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,  based on our audits, 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,  2002 and 2003 and the  results of their
 operations  and their cash flows for each of the      three years in the period ended
December 31,  2003, in conformity with accounting  principles generally      accepted in
Chile.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4 | The
Company  changed its reporting  currency to U.S.  dollars as of January 1, 2003.  The
 consolidated      financial  statements as of and for the years ended December 31, 2002
and 2001  previously  reported in      Chilean pesos have been recast in accordance with
accounting  principles generally accepted in Chile as      if the U.S.  dollar was the
Companys  reporting  currency for all periods  presented.  The methodology      used to
recast previously reported consolidated financial statements is described in Note 2 b).
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5 | Accounting
 principles  generally  accepted in Chile vary in certain important respects from
accounting      principles  generally accepted in the United States of America.
 Information relating to the nature and      effect of such differences is presented in
Note 23 to the consolidated financial statements.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Santiago, Chile
  January 30, 2004

F-2

---



MASISA S.A. AND
SUBSIDIARIES

CONSOLIDATED
BALANCE SHEETS

(Expressed in thousands
of United States Dollars)

|                                             | At December 31,
|-------------------------------------------- | ---------------
|ASSETS                                       | 2002           
|                                             |                
|CURRENT ASSETS                              
|Cash                                         | 1,916          
|Time deposits and securities purchased       |                
|under resale agreements                      | 318            
|Accounts receivable (Note 3)                 | 55,625         
|Notes and accounts receivable from           |                
|related companies (Note 19)                  | 2,148          
|Inventories (Note 4)                         | 64,177         
|Recoverable taxes (Note 15 b)                | 8,037          
|Other current assets (Note 5)                | 3,496          
|                                             |                
|Total current assets                         | 135,717        
|                                             |                
|                                             |                
|PROPERTY, PLANT AND EQUIPMENT                |                
|(net) (Note 6)                               | 620,862        
|                                             |                
|                                             |                
|OTHER ASSETS                                
|Investments in                               |                
|unconsolidated affiliates (Note 7)           | 175            
|Goodwill and negative goodwill, net (Note 8) | (572)          
|Long-term receivables                        | 1,465          
|Notes and accounts receivable from           |                
|related companies (Note 19)                  | 3,026          
|Other assets (Note 9)                        | 32,873         
|                                             |                
|Total other assets                           | 36,967         
|                                             |                
|                                             |                
|Total assets                                 | 793,546        
|                                             |                

|                                             | A tDecember 31,
|-------------------------------------------- | ---------------
|LIABILITIES AND SHAREHOLDERS EQUITY         | 2002           
|                                             |                
|CURRENT LIABILITIES                         
|Short-term bank borrowings (Note 10)         | 32,084         
|Current portion of long-term bank borrowings
|(Note 11)                                    | 15,133         
|Other long-term borrowings due within        |                
|one year (Note 12)                           | 26,067         
|Dividends payable                            | 160            
|Accounts payable                             | 20,363         
|Notes and accounts payable                   |                
|to related companies (Note 19)               | 779            
|Accrued liabilities (Note 16)                | 4,357          
|Other current liabilities                    | 1,951          
|                                             |                
|Total current liabilities                    | 100,894        
|                                             |                
|                                             |                
|LONG-TERM LIABILITIES                        |                
|Long-term bank borrowings (Note 11)          | 136,999        
|Deferred income taxes (Note 15 c)            | 7,923          
|Other long-term borrowings (Note 12)         | 45,416         
|Other long-term liabilities (Note 13)        | 6,176          
|                                             |                
|Total long-term liabilities                  | 196,514        
|                                             |                
|                                             |                
|MINORITY INTEREST                            | 60,822         
|                                             |                
|                                             |                
|COMMITMENTS AND CONTINGENCIES (Note 18)     
|                                             |                
|SHAREHOLDERS' EQUITY (Note 17)              
|Common stock (928,514,743 shares in          |                
|2003 and 2002, authorized and outstanding   
|with no par value)                           | 237,022        
|Reserves                                     | 47,991         
|Retained earnings                            | 150,303        
|                                             |                
|Total shareholders equity                   | 435,316        
|                                             |                
|Total liabilities and shareholders equity   | 793,546        
|                                             |                

The accompanying Notes
1 to 23 form an integral part of these consolidated financial statements.

F-3

---



MASISA S.A. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS
OF INCOME

(Expressed in thousands
of United States Dollars)

|                                    | For
         the year sended December 31,
|----------------------------------- | -----------------------------------------
|                                    |                                          
|                                    | 2001                                     
|                                    |                                          
|OPERATING RESULTS                   |                                          
|Net sales                           | 236,259                                  
|Cost of sales                       | (156,404)                                
|                                    |                                          
|Gross margin                        | 79,855                                   
|Selling and administrative expenses | (36,695)                                 
|                                    |                                          
|Operating income                    | 43,160                                   
|                                    |                                          
|NON-OPERATING RESULTS              
|Non-operating income (Note 20)      | 20,818                                   
|Non-operating expenses (Note 21)    | (30,889)                                 
|Price-level restatements            | (745)                                    
|Foreign exchange gains (losses)     | (2,874)                                  
|                                    |                                          
|Non-operating results               | (13,690)                                 
|                                    |                                          
|Income before income taxes         
|and minority interest               | 29,470                                   
|Minority interest                   | 1,289                                    
|Income taxes (Note 15 a)            | 612                                      
|                                    |                                          
|NET INCOME                          | 31,371                                   
|                                    |                                          

The accompanying Notes
1 to 23 form an integral part of these consolidated financial statements.

F-4

---



MASISA S.A. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS
OF CASH FLOWS

(Expressed in thousands
of United States Dollars)

|                                                         | For the years ended December 31,
|-------------------------------------------------------- | --------------------------------
|                                                         |                                 
|                                                         | 2001                            
|                                                         |                                 
|CASH FLOWS FROM OPERATING ACTIVITIES                    
|Net income for the year                                  | 31,371                          
|Adjustments to reconcile net income to net cash         
|provided by operating activities:                       
|Depreciation                                             | 21,924                          
|Amortization of goodwill                                 | 1,434                           
|Write-offs and provisions                                | 14,668                          
|Provision for deferred income taxes                      | (5,027)                         
|Equity in losses (earnings) of unconsolidated affiliates | 147                             
|Gain on sale of subsidiaries and investments             | (13,839)                        
|Price-level restatements                                 | 745                             
|Foreign exchange gain (loss)                             | 2,874                           
|Minority interest                                        | (1,289)                         
|Other                                                    | 843                             
|                                                         |                                 
|Changes in assets and liabilities:                      
|Increase in trade accounts receivable                    | (1,172)                         
|Increase in inventories                                  | (9,229)                         
|(Increase) decrease in other assets                      | (6,949)                         
|                                                         |                                 
|Increase (decrease) in accounts payable                  | 23,023                          
|Increase in other liabilities                            | 4,715                           
|(Decrease) in recoverable and other taxes                | (5,560)                         
|                                                         |                                 
|Net cash provided by operating activities                | 58,679                          
|                                                         |                                 
|                                                         |                                 
|CASH FLOWS FROM INVESTING ACTIVITIES                    
|Purchase of property, plant and equipment                | (120,692)                       
|Proceeds from sale of property, plant and equipment      | 140                             
|Proceeds from sale of subsidiaries and investments       | 26,784                          
|Investment in related company                            | (4,435)                         
|Other investing activities                               | (20,906)                        
|Other loans to related companies                         | -                               
|                                                         |                                 
|Net cash used in investing activities                    | (119,109)                       
|                                                         |                                 

F-5

---



MASISA S.A. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS
OF CASH FLOWS

(Expressed in thousands
of United States Dollars)

|                                                     | For
         the years ended December 31,
|---------------------------------------------------- | -----------------------------------------
|                                                     |                                          
|                                                     | 2001                                     
|                                                     |                                          
|CASH FLOWS FROM FINANCING ACTIVITIES                
|Proceeds from sale of common shares                  | 39,023                                   
|Dividends paid                                       | (11,905)                                 
|Borrowings from banks and others                     | 239,286                                  
|Loans from related companies                         | -                                        
|Payment of borrowings                                | (207,311)                                
|Payment of bonds                                     | -                                        
|Other financing activities                           | -                                        
|                                                     |                                          
|Net cash provided by financing activities            | 59,093                                   
|                                                     |                                          
|INFLATION EFFECT ON CASH AND CASH EQUIVALENTS        | (1,829)                                  
|                                                     |                                          
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (3,166)                                  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR       | 22,146                                   
|                                                     |                                          
|CASH AND CASH EQUIVALENTS AT END OF YEAR             | 18,980                                   
|                                                     |                                          
|                                                     |                                          
|CASH AND CASH EQUIVALENTS RECAST TO                 
|DECEMBER 31, 2002 PRESENTATION (See Note 2 o)        | 17,813                                   
|                                                     |                                          
|                                                     |                                          
|Supplemental disclosure of cash flow information:   
|                                                     | 2001                                     
|                                                     |                                          
|                                                     | ThUS$                                    
|Cash paid during the year for:                      
|Interest (net of capitalized amount)                 | 11,698                                   
|Income taxes                                         | 6,192                                    

The accompanying Notes
1 to 23 form an integral part of these consolidated financial statements.

F-6

---



MASISA S.A. AND
SUBSIDIARIES

NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS

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 Common stock is listed on the Santiago Stock
 Exchange,  the Valparaiso  Stock Exchange and the Chilean  Electronic Stock  Exchange
 and whose  American  Depository  Receipts  are  traded on the New York Stock  Exchange.
 Accordingly,  the  Company is subject to the  regulations  of both the  Superintendency
 of  Securities  and  Insurance  in Chile (SVS) and the  U.S. Securities  and Exchange
 Commission  (SEC) in the United  States of America.  The  Company  manufactures  raw,
 melamine-laminated  and  wood-veneered particle  board,  medium-density  fiberboard (MDF),
 oriented  - strand  board  (OSB) and wood  doors for  residential  and  commercial
applications.  The Companys principal markets include Chile, Argentina, Brazil and
Mexico.

NOTE 2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

a)   Presentation

The consolidated
 financial statements have been prepared in accordance with accounting  principles
generally accepted in Chile and the accounting  regulations  of the  SVS.  Where
 differences  exist  between  the  standards  of the  SVS  and the  Chilean  Institute
 of Accountants, the standards of the SVS will prevail.

The preparation of the
Companys  consolidated  financial  statements requires management to make estimates and
assumptions that affect the amounts  reported in the  consolidated  financial  statements
and  accompanying  notes.  Management  makes its best estimate of the ultimate  outcome
for these items  based on  historical  trends and other  information  available  when the
 financial  statements  are prepared.  Although these  estimates are based on managements
best knowledge of current events and actions that may impact the Company in the future,
 actual results may be different from the estimates.  The Companys critical  accounting
 policies are those that affect its  financial  statements  materially  and involve
 difficult,  subjective  or complex  judgments by  management.  Those  policies and
assumptions are valuation of long-lived  assets,  valuation of accounts  receivable,
 valuation of inventory,  assumptions  used in the valuation  and  accounting  for timber
 resources,  accounting  for income taxes and  accounting  for potential  litigation
 claims and contingencies.

The Company has issued
its  statutory  consolidated  financial  statements  in Spanish and in  conformity  with
 accounting  principles generally  accepted in Chile,  which  include  certain notes and
 additional  information  required by the SVS for statutory  purposes. Management
 believes that these additional  notes and information are not essential for the complete
 understanding of the consolidated financial  statements and,  accordingly,  these notes
and additional  information  have been excluded from the  accompanying  financial
statements.

b)   Currency

Change in Reporting
Currency

On April 10,  2003,
 the Chilean IRS  authorized  Masisa to maintain its  accounting  records in US dollars
as of  January 1,  2003. On October 10,  2003,  the SVS authorized the Company to present
its annual and quarterly  statutory  financial  statements in US dollars. Given this
approval,  in November 2003, the Company restated its statutory financial  statements for
the quarters ended March 31,  2003 and June 30,  2003 to be reported in  US dollars  and
all future  filings with the SVS will be reported in  US dollars.  The  Companys
functional currency has not changed and remains the US dollar.

F-7

---



Presentation of
2002 and 2001 Financial Statements

In accordance  with
Chilean GAAP, the  Consolidated  Balance  Sheets,  Statements of Income and Cash Flows as
of and for the year ended December 31,  2002 and 2001  previously  presented in Chilean
 pesos were recast in accordance  with  accounting  principles  generally accepted  in
Chile to be  presented  in  US dollars  using the  exchange  rates as of  December 31,
 2002 and 2001,  respectively.  The exchange rates used for this purpose as of December 31,
2002 and 2001 were Ch$ 718.61 and Ch$ 654.79, respectively.

Foreign Currency
Translation of Stable Currencies

Commencing  January 1,
 2003, for Masisa and those  subsidiaries  authorized to maintain their accounting
records in US dollars as well as those foreign  subsidiaries  considered as an extension
of the parent  Companys  operation,  assets and liabilities  denominated in other
 currencies  are remeasured to US dollars at the exchange rates  prevailing on  December 31st
 of each year except for inventory, property  plant and equipment  and certain other
assets and  liabilities.  Inventory,  property,  plant and equipment and certain other
assets and liabilities are remeasured at either; (1) the historical exchange rates if the
corresponding  asset or liability  originated subsequent to January 1, 2003; or (2) the
January 1,  2003 exchange rate,  representing  the effective date of the approval to
maintain the Companys  accounting records in US dollars.  Commencing  January 1,  2003,
 revenues and expenses are generally  translated at the exchange rates on the dates of
the  transactions.  Gains or losses from foreign  currency  remeasurement as described
above for periods subsequent to January 1, 2003 are included in Consolidated net income.

Commencing  January 1,
 2003, for those subsidiaries that maintain their accounting records in currencies others
than the US dollar and are not  extensions of the parent  Companys  operations
 (Forestal  Tornagaleones  S.A. and its subsidiary FTG Overseas  Ltd.),  all assets,
 liabilities,  revenues and expenses are translated into US dollar using the exchange
rates prevailing on December 31st of each year. The  translation  adjustment  derived
from the effect of the variation of the exchange rate between the beginning and the
closing of the year over  beginning  of the year  Shareholders  equity is  reported  as
a  Cumulative  translation  gain/(loss)  as a separate component of Shareholders equity.

Foreign Currency
Translation of Not Stable Currencies

In  accordance  with
 Technical  Bulletin No. 64  of the Chilean  Institute of  Accountants  for all periods
 presented,  the financial statements  of  subsidiaries  located  in  countries  that are
 subject to  significant  risks,  restrictions  or  fluctuations  due to inflationary  or
exchange  effects (so called not stable  countries)  must be  remeasured in US dollars.
 Accordingly,  the financial statements  of  Forestal  Argentina,  Masisa  Argentina S.A.,
 Maderas  y  Sintéticos  de Mexico  S.A.  de C.V.,  Maderas y  Sintéticos Servicios S.A.
de C.V. and Masisa do Brasil Ltda. are remeasured in 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 were included in the results of operations for the
period.

F-8

---



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, plus the
 proportional  share of the  investments  net income for the year, was recorded in the
account, Cumulative translation gain/(loss) as a separate component of 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 were also
recorded in the account Cumulative Translation Adjustment.

c)   Consolidation

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.             | Sales of wood products      | 99.9011                  
|Masisa Concepción Ltda. (3)                      | Investments                 | 100.0000                 
|Maderas y Sintéticos Servicios S.A. de C.V.      | Services                    | 100.0000                 
|Maderas y Sintéticos de México S.A. de C.V.      | Production of wood products
|                                                 | and forestry by-products    | 100.0000                 
|Masisa Partes y Piezas Ltda. (4)                 | Production of wood products
|                                                 | and forestry by-products    | -                        
|Masisa Ecuador S.A. (4)                          | Sales of wood products      | -                        

|(1) | On
January 3, 2003 Masisa Cabrero S.A. merged with Inversiones Coronel Limitada, another
consolidated subsidiary.
|--- | -----------------------------------------------------------------------------------------------------------------

|(2) | On
June 27,  2002,  the Company made a capital  investment of  ThUS$ 7,372 in its
 subsidiary  Forestal  Tornagaleones  S.A, which      increased its ownership by 6.45%
(See Note 8 for additional detail).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | On
February 5, 2003 the subsidiary CyD Agrofruta Limitada changed its name to Masisa Concepción
Ltda.
|--- | -----------------------------------------------------------------------------------------------------

|(4) | During 2002,
the Company incorporated and initiated operations of these subsidiaries.
|--- | -------------------------------------------------------------------------------------

All significant
 balances and transactions  between the consolidated  subsidiaries have been eliminated.
 The participation of minority shareholders in subsidiaries is reflected in the
Consolidated Balance Sheets under Minority interest.

F-9

---



d)   Price-level
restatements

As discused in Note 2 b),
until January 1,  2003, the Companys consolidated financial statements,  were expressed
in Chilean pesos and restated on an annual basis to reflect the effects of variations in
the  purchasing  power of the local  currency  during each year. As of January 1,  2003,
Masisa and certain authorized  subsidiaries  maintain  accounting records in US dollars
and therefore  price-level restatements  commencing on January 1,  2003 are no longer
applicable for these  subsidiaries.  Certain Masisas  subsidiaries have not received
approval to maintain their accounting  records in US dollars.  Forestal  Tornagaleones
 S.A. and FTG Overseas Ltd. continue to maintain  Chilean peso  accounting  records and
apply the principle of price-level  restatements  in accordance  with Chilean GAAP. For
this purpose,  non-monetary  assets,  liabilities  and equity  accounts have been
restated by charges or credits to income,  unless not required by Technical  Bulletin No. 64
 (see  Note 2 b).  Furthermore,  the income and expense  accounts have been restated in
terms of year-end constant pesos.

In accordance with
Chilean tax regulations and accounting  practices,  the restatements  are calculated
based on the official  Consumer Price Index of the National  Institute of Statistics,
 applied one month in arrears,  which was 4.7%, 3.1% and 1.0% for the years ended November 30,
 2001, 2002 and 2003 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.

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.

e)   Time deposits and
securities purchased under resale agreements

Time  deposits  are
 recorded at cost plus  accrued  interest at each  year-end.  Securities  purchased
 under  resale  agreements  are presented at cost plus accrued interest at the year-end.
 The value of these  investments do not exceed their respective  market values at December 31,
2002 and 2003.

f)   Allowance for
doubtful accounts

The Company has
recorded an allowance for doubtful  accounts for possible  non-collection of accounts
 receivable,  which is shown as a deduction from accounts  receivable.  The allowance is
established as 1% of receivables  from local customers plus  additional  amounts for
specific  customers,  where  collection is doubtful based on an analysis of the aging of
the outstanding  balances as well as other relevant information.

g)   Inventories

Inventories  are
valued at the lower of production or  acquisition  cost,  including  indirect
 manufacturing  costs,  or market value. Inventory  costs are  determined  using the
average cost method.  The  valuation  of  inventories  are  periodically  assessed  and,
if necessary,  a write-down of the value for estimated  excess and obsolete  inventory is
recorded based on estimates  about future demand and actual usage.

As of  December 31st
 of each year,  forests and plantation  inventories in the process of exploitation  are
stated at the commercially appraised  value at which these forests were  transferred
 from fixed assets in conjunction  with the  revaluation of timber  resources described
in Note 2 h) below.

F-10

---



h)   Property, plant
and equipment

Property,
     plant and equipment, except timber resources, are stated at cost, which
    includes capitalized interest. Depreciation is calculated using the straight-line
    method based on the estimated useful life of each asset, which were as follows:

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

Depreciation for 2001,
2002 and 2003 amounted to ThUS$ 21,924, ThUS$ 24,026 and ThUS$ 25,814, respectively.

Timber  resources  are
 included  in  Property,  plant and  equipment  and  recorded  by the  subsidiary  Masisa
do  Brasil  Ltda.  and Tornagaleones  and  subsidiaries.  Timber resources are initially
 recorded at the cost of development.  Timber costs consist primarily of purchased
timber,  planting,  maintenance,  protection,  and other direct costs related to the
development of the forest. Direct and indirect  interest costs of developing timber are
capitalized  until the timber is deemed to have reached an exploitable  stage.  These
capitalized  interest costs are included in the historical  cost of the timber.  At
 December 31st  of each year, the timber  resources are adjusted to reflect values based
on technical appraisals performed by specialized forestry engineers.

The cost of timber
 harvested  is based on the  volume of timber  harvested  in  relation  to the  estimated
 volume  recoverable.  The Companys  estimated  volume  recoverable is based on
statistical  information and data obtained from physical  measurements  and other
information  gathering techniques.  Such information gathered and data used requires,  to
a certain extent,  estimates and judgments in determining   the  amount  of  forest
  recoverable.   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,  Masisa do Brasil Ltda. and Tornagaleones and subsidiaries
 records timber resources at appraisal value prior to cutting and records them in Cost of
sales when the timber is cut and sold.

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

Other fixed assets
include spare parts  inventories  with turnover of less than  one-year.  These are valued
as described in Note 2 g). Those  items with  significant  value and with an ongoing
 benefit 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.

Assets  purchased
under financing  leases are recorded at their fair value on the date of the lease
 agreement,  which is determined by discounting the amounts payable in installments and
the bargain purchase  option,  if any, at the interest rate implicit,  or explicit, in
the contract.  These assets are not legally considered property of the Company until the
purchase option is exercised.

Disbursements  for the
 development  of internal use software are charged to the results of  operations  as
incurred.  External  direct costs of materials and services  rendered in developing an
enterprise  resource  planning system (an SAP R/3 system) and interest costs incurred
during  development are capitalized.  Payroll related costs were not material and have
been expensed.  Training costs and data conversion costs are expensed as incurred.

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

F-11

---



i)   Investments in
unconsolidated affiliates

Investments  in
 unconsolidated  affiliates  are accounted for using the equity method when they
 represent  between 10% and 50% of the voting  stock of the  investee.  Accordingly,  the
 Companys  proportional  share in the net  income  (or  loss) of each  investee  is
recognized  on an accrual  basis,  after  eliminating  any  unrealized  profits  or
losses  from  transactions  with the  investees  in Non-operating income in the
Consolidated Statements of Income.

j)   Goodwill and
negative goodwill

Under Chilean GAAP,
 goodwill  arises from the excess of the purchase price of companies  acquired over their
net book value;  negative goodwill  arises when net book value of the acquired  company
exceeds the purchase price of companies  acquired.  Goodwill and negative goodwill also
arise from the purchase of investments accounted for by the equity method.

Goodwill and negative
 goodwill are amortized over ten to twenty years  considering  the expected  period of
return of the  investment. The Company evaluates the recoverability of goodwill on a
periodic basis.

k)   Bonds

Bonds are recorded at
face value plus accrued  interest.  The  discount  on, and  expenses  incurred,  in the
issuance of the bonds are included in Other current assets and Other assets in the
 Consolidated  Balance Sheets and are amortized  using the interest  method of
amortization  over the term of the instruments.  Total  capitalized  costs associated
with bonds were ThUS$ 6,634 in December 31,  2003 and ThUS$ 46 was amortized to expense
in the year ended December 31, 2003.

l)   Income taxes and
deferred income taxes

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  Bulletins Nos. 60,  68 and 69 of the Chilean
 Institute of  Accountants  and  Circular No. 1,466  of the SVS. The effects of deferred
 income taxes at January 1,  2000 that were not previously  recorded,  were recognized,
 in accordance with the  transitional  period provided by Technical  Bulletin No.  60,
against a contra asset or liability  account  (complementary  accounts)  and were
 recorded to offset the effects of the deferred tax assets and  liabilities  not recorded
 prior to  January 1,  2000.  Complementary  accounts are  amortized to income over the
estimated average  reversal  periods  corresponding  to underlying  temporary
 differences to which the deferred tax asset or liability  relates. Deferred income taxes
at January 1, 2000 are recognized in income beginning in 2001 as the temporary
differences are reversed.

Deferred income tax
assets are reduced by a valuation allowance if, based on the weight of available
 evidence,  it is more likely than not that some portion or all of the deferred income
tax assets will not be realized.  The valuation  allowance  should be sufficient to
reduce the deferred income tax asset to an amount that is more likely than not to be
realized.

F-12

---



m)   Revenue
recognition

Revenues are recorded
at the time of shipment of products to the  customer.  The  following  criteria must be
met in order to recognize revenue:  (1) persuasive  evidence of an arrangement  exists;
 (2) delivery has occurred or services have been rendered;  (3) the price to the  buyer
is fixed or  determinable;  and  (4) collection  is  reasonably  assured.  Revenues
 which the  Company  has  billed  and collected in advance are deferred until the related
products are shipped and the criteria above have been met.

n)   Employee vacations

The cost of employee
 vacations is  recognized  as an expense on an accrual  basis as the  vacations  are
earned by  employees  and are included in Accrued liabilities in the Consolidated Balance
Sheets.

o)   Cash and cash
equivalents

As a result of
recasting the financial  statements which were originally  presented in Chilean pesos to
US dollars as described in Note 2b), Cash and cash  equivalents  at December 31, 2001
 included in the  Consolidated  Balance  Sheets does not agree with Cash and cash
equivalents  at the  beginning of the year  (January 1, 2002) as presented in the
 Statement of Cash Flows for the year ended  December 31, 2002. The amounts do not agree
due to the  methodology of recasting  required by the accounting  principles  generally
 accepted in Chile in which the  Consolidated  Balance  Sheets,  Statements of Income and
Cash Flows as of and for the year ended  December 31, 2002 and 2001  previously  reported
in Chilean pesos are recast to US dollars using the respective  year-end  exchange
 rates.  Accordingly, Cash and cash  equivalents  at December  31, 2001 will not agree
with Cash and cash  equivalents  at January 1, 2002 as the  previously reported amounts
in Chilean pesos are recast at different rates at December 31, 2001 and 2002.

The Company considers
all short-term  highly-liquid  investment  securities  purchased with original maturities
of three months or less to be cash equivalents for purposes of the Consolidated Statement
of Cash Flows.

The balances of cash
and cash equivalents were as follows:

|                                             | At December 31,
|-------------------------------------------- | ---------------
|                                             |                
|                                             | 2001           
|                                             |                
|                                             | ThUS$          
|Cash                                         | 7,745          
|Time deposits                                | 11,235         
|Securities purchased under resale agreements | -              
|                                             |                
|Total                                        | 18,980         
|                                             |                

F-13

---



p)   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.

q)   Derivative
contracts

The Company enters
into hedging contracts  including  interest rate swap agreements and forward exchange
 contracts.  The contracts are accounted  for in  accordance  with  Technical  Bulletin No. 57,
 Accounting  for  Derivative  Contracts.  (TB 57)  of the  Chilean Institute of
 Accountants.  Under TB 57 all  derivative  financial  instruments  are recognized on the
 Consolidated  Balance Sheets at their fair value. Derivative instruments are accounted
for as follows:

| | Hedges
of forecasted transactions:
| | ----------------------------------

| | The
 derivative  instrument  is stated at its fair value on the  Consolidated  Balance
 Sheets and any change in the fair value is      recognized on the balance sheet as an
unrealized gain or loss in Other current  liabilities or in Other assets.  When the
contract      is settled,  the unrealized gain or loss on the instrument is recognized in
earnings in  Non-operating  income in the Consolidated      Statements of Income.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Firm
commitments hedging contracts (Hedges of existing items):
| | ----------------------------------------------------------------

| | The
hedged  item and  derivative  instrument  are  measured at fair value on the balance
 sheet.  Unrealized  gains and losses are      recorded in earnings in  Non-operating
 income in the  Consolidated  Statements of Income if the net effect is a loss and
deferred      and recognized when the contract is settled if it is a gain. The
 unrecognized  gains  associated  with the derivative  instrument      are included in
Other current liabilities in the Consolidated Balance Sheets.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The impact of the
Companys  hedging  activities  included in  Non-operating  expenses for the years ended
2001,  2002 and 2003 totaled ThUS$ 1,613,  ThUS$ 795 and ThUS$ 678,  respectively.  The
unrealized  gains  included in Other current  liabilities as of December 31, 2003 and
2002 totaled ThUS$ 984 and ThUS$ 795,  respectively.  The unrealized  losses  included in
Other assets as of December 31, 2002 and 2001 totaled ThUS$ 306 and ThUS$ 159,
respectively.

r)   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 research and development
    expenses during the years ended December 31, 2001, 2002 and 2003.

s)   Reclassifications

Certain 2001 and  2002 amounts
in the accompanying  financial  statements have been  reclassified to conform to the 2003
 presentation. The  reclassifications  had no material effect on the previously reported
 presentation of assets and liabilities,  previously reported net income, cash flows or
shareholders equity.

F-14

---



NOTE 3 - ACCOUNTS
RECEIVABLE

Accounts receivable
include the following:

|                                       | Accounts receivable aging |                     
|-------------------------------------- | ------------------------- | --------------------
|                                       |                          
|                                       | 1-90 days                 | 91-360
         days
|                                       |                           |                     
|                                       | ThUS$                     | ThUS$               
|                                      
|Trade accounts receivable              | 59,897                    | 1,467               
|Notes receivable                       | 8,324                     | 575                 
|Other accounts receivable              | 5,825                     | 149                 
|Less: Allowances for doubtful accounts |                           |                     
|                                       |                           |                     
|Total                                  |                           |                     
|                                       |                           |                     

|                                       | Accounts receivable aging |            
|-------------------------------------- | ------------------------- | -----------
|                                       |                          
|                                       | 1-90 days                 | 91-360 days
|                                       |                           |            
|                                       | ThUS$                     | ThUS$      
|Trades accounts receivable             | 44,722                    | 959        
|Notes receivable                       | 6,317                     | 722        
|Other accounts receivable              | 5,259                     | 249        
|Less: Allowances for doubtful accounts |                           |            
|                                       |                           |            
|Total                                  |                           |            
|                                       |                           |            

NOTE 4 - INVENTORIES

Inventories include
the following:

|                                                       | At December 31,
|------------------------------------------------------ | ---------------
|                                                       | 2002           
|                                                       |                
|                                                       | ThUS$          
|Finished goods                                         | 38,263         
|Raw materials                                          | 9,239          
|Other materials                                        | 3,305          
|Spare parts                                            | 6,947          
|Forests and plantations in the process of exploitation | 7,099          
|Reserve for obsolescence                               | (676)          
|                                                       |                
|Total                                                  | 64,177         
|                                                       |                

F-15

---



NOTE 5 - OTHER CURRENT
ASSETS

Other current assets
include the following:

|                                  | At December 31,
|--------------------------------- | ---------------
|                                  | 2002           
|                                  |                
|                                  | ThUS$          
|Deposits                          | 2,001          
|Deferred income taxes (Note 15 c) | 728            
|Prepaid expenses                  | 767            
|Bond issuance costs               | -              
|                                  |                
|Total                             | 3,496          
|                                  |                

NOTE 6 - PROPERTY,
PLANT AND EQUIPMENT (NET)

a)   Property, plant
and equipment include the following:

|                                          | At December 31,
|----------------------------------------- | ---------------
|                                          | 2002           
|                                          |                
|                                          | ThUS$          
|Land                                      | 62,529         
|Plants, buildings and other installations | 102,123        
|Machinery and equipment                   | 476,912        
|Timber resources                          | 101,628        
|Construction in progress                  | 10,773         
|Other fixed assets:                      
|Furniture, fixtures and other             | 10,291         
|Spare parts                               | 10,541         
|Assets under leasing contracts            | 1,624          
|Software                                  | 4,247          
|Other                                     | 2,482          
|                                          |                
|                                          | 783,150        
|Accumulated depreciation                  | (162,288)      
|                                          |                
|Property, plant and equipment (net)       | 620,862        
|                                          |                

b)   The  Company
 capitalized  interest  amounting  to  ThUS$ 5,426  during the year ended  December 31,
 2002,  corresponding  to the      construction of the MDF and OSB plants in Brazil and
in Argentina.

As stated in Note 2 h),
 Tornagaleones  and its subsidiary  Forestal  Argentina S.A.  capitalized  interest
 related to plantation      financing  in property,  plant and  equipment.  Tornagaleones
 capitalized  interest  under this concept  totaling  ThUS$ 155  and      ThUS$ 974 for
the years ended December 31,  2003 and 2002,  respectively.  Masisa do Brasil Ltda.
 capitalized interest related to      plantation  financing  included  in  property,
 plant and  equipment  totaling  ThUS$ 2,536  and  ThUS$ 1,942  for the years ended
     December 31, 2003 and 2002, respectively.

F-16

---



Tornagaleones  has
outstanding debt in US dollars.  As a result of this,  Tornagaleones  incurred an
exchange gain of ThUS$ 864 in      2003 and an exchange  loss of ThUS$ 694 in 2002
 associated  with this debt. As permitted  under Chilean GAAP,  this exchange gain
     and loss was netted against capitalized interest.

c)   As described in
Note 2 h),  Masisa do Brasil Ltda.,  Tornagaleones and its subsidiary  Forestal Argentina
S.A. have revalued their      forests and plantations at year end based on technical
 appraisals.  The accumulated  adjustment in value amounted to ThUS$ 31,144      in 2003
 (ThUS$ 29,637 in 2002) and is included in Timber resources.  The Company has recognized
it proportionate  share in Forest      reserves in Shareholders Equity and the balance
is included in Minority interest on the Consolidated Balance Sheets.

d)   In 2001,  the
Company recorded an impairment for one of its particle board lines in the amount of ThUS$ 8,260
which is included in      the Consolidated Statement of Income under Non-operating
operating expenses (see Note 21).

NOTE 7 -
INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Companys
investments in unconsolidated  affiliates totaled ThUS$ 12,  ThUS$ 175 and ThUS$ 10 at
December 31,  2001, 2002 and 2003. The Companys  proportional  share in the net income
(or loss) of  unconsolidated  affiliates  totaled a loss of  ThUS$ 147,  a gain of ThUS$ 16
and a loss of ThUS$ 685 for 2001, 2002 and 2003, respectively.

As of  December 31,
 2003 and 2002, the Company has recorded a provision for  investments in  unconsolidated
 affiliates  with negative equity at year-end  totaling  ThUS$ 167 at December 31,  2002
and ThUS$ 666 at December 31,  2003, which is included in Other long-term liabilities (see Note 13).

NOTE 8 - GOODWILL
AND NEGATIVE GOODWILL, NET

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

|                                | At December 31,
|------------------------------- | ---------------
|                                | 2002           
|                                |                
|                                | ThUS$          
|Maderas y Paneles S.A. (1)      | 151            
|Masisa Cabrero S.A. (2)         | 1,230          
|Forestal Tornagaleones S.A. (3) | (1,953)        
|                                |                
|Total                           | (572)          
|                                |                

|(1) | On
August 16,  1993, the Company purchased a 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  ThUS$ 3,855,  which  resulted in goodwill of  ThUS$ 2,690.
 The      goodwill was fully amortized over a term of ten years.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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 ThUS$ 43,469,  which
resulted in goodwill of ThUS$ 1,753.  The goodwill is being amortized over twenty
     years.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | On
June 27,  2002,  the Company made a capital  investment of ThUS$ 7,372 in its subsidiary
 Forestal  Tornagaleones  S.A.,  which      increased its ownership by 6.45%. This
investment  resulted in negative  goodwill of ThUS$ 2,012.  This negative goodwill is
being      amortized to income over twenty years.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-17

---



Masisa  Concepción
 Ltda.  was  acquired in  November 2001.  The excess of the amount paid for this  company
 over the net assets value generated  goodwill of ThUS$ 1,135  that was charged to income
for the year. The Company  concurrently  recognized a deferred tax asset for ThUS$ 1,444
which reduced income tax expense by the same amount.

Goodwill amortization,
net totaled ThUS$  1,434, ThUS$  265 and ThUS$ 142 in 2001, 2002 and 2003 respectively.

NOTE 9 - OTHER
ASSETS

|                                  | At December 31,
|--------------------------------- | ---------------
|                                  | 2002           
|                                  |                
|                                  | ThUS$          
|Deposits                          | 28,500         
|Assets for disposal               | 633            
|Recoverable taxes (See Note 15 b) | 3,113          
|Bond issuance costs               | -              
|Other                             | 627            
|                                  |                
|Total                             | 32,873         
|                                  |                

NOTE 10 -
SHORT-TERM BANK BORROWINGS

Short-term bank
borrowings maturing in one year or less include the following:

|                               | Foreign       |                   |        |       
|------------------------------ | ------------- | ----------------- | ------ | ------
|                               | Currency in   | Interest rate at  |        |       
|                               | 2003          | December 31, 2003 | 2002   | 2003  
|                               |               |                   |        |       
|                               |               | %                 | ThUS$  | ThUS$ 
|Banco de Chile                 | US$           | 1.95              | 9,463  | 9,133 
|Banco de Chile                 | Chilean Pesos | -                 | 455    | 2,512 
|Banco de Crédito e Inversiones | US$           | -                 | 6,066  | -     
|BankBoston N.A.                | US$           | -                 | 9,579  | -     
|ABN AMRO Bank                  | Chilean Pesos | 4.77              | 1,694  | 1,155 
|ABN AMRO Bank                  | Other         | 11.28             | 1,202  | 1,056 
|HSBC Bank Chile                | US$           | 2.30              | 3,610  | 3,609 
|Bancoestado                    | US$           | 2.19              | -      | 3,043 
|CorpBanca                      | US$           | 2.43              | -      | 5,080 
|Banco Del Desarrollo           | US$           | 2.65              | -      | 5,511 
|Rabobank Curacao N.V           | US$           | 2.05              | -      | 5,075 
|Banco de Chile NY              | US$           | -                 | 15     | -     
|ITAU BBA Other                 | Other         | 11.28             | -      | 1,709 
|                               |               |                   |        |       
|Total                          |               |                   | 32,084 | 37,883
|                               |               |                   |        |       

F-18

---



During 2003,  the
average annual  interest rate was 2.3%.  During 2002  and 2001, the average annual
interest rates were 2.8% and 4.0%, respectively.  Accrued  interest  totaling  ThUS$ 340
 and  ThUS$ 283 at December 31, 2003 and 2002,  respectively,  is included in the
outstanding balances.

At December 31,  2003,
the Company had ThUS$ 92,926 of short-term lines of credit, of which  ThUS$ 27,101 were
unused and available for borrowing on an unsecured basis.

NOTE 11 - LONG-TERM
BANK BORROWINGS

Long-term bank
borrowings include the following:

|                                   | Foreign Currency in |               | Interest rateat December 31, | At December 31,
|---------------------------------- | ------------------- | ------------- | ---------------------------- | ---------------
|                                   | 2003                | Interest rate | 2003                         | 2002           
|                                   |                     |               |                              |                
|                                   |                     |               | %                            | ThUS$          
|                                  
|BankBoston (1)                     | US$                 | Fixed rate    | 12.0000                      | 120            
|BankBoston N.A. (2)                | US$                 | Fixed rate    | 11.2750                      | 981            
|Rabobank Ireland PLC (3)           | US$                 | Fixed rate    | 8.0000                       | 30,280         
|Dresdner Bank Lateinamerika (4)    | US$                 | Libor+1.90    | 3.1125                       | 6,080          
|Banco de Credito e Inversiones (5) | UF                  | Fixed rate    | 6.7000                       | 8,123          
|Raboinvestments Chile S.A (6)      | US$                 | Libor+1.875   | 3.0875                       | 15,110         
|Security Bank (7)                  | US$                 | Libor+1.50    | 2.7125                       | 2,833          
|Citibank N.A (8)                   | US$                 | Fixed rate    | 5.2000                       | 58,309         
|Comerica Bank (9)                  | US$                 | Libor+1.35    | 2.5625                       | 15,091         
|Banco de Chile NY (10)             | US$                 | Libor+1.25    | 2.4625                       | 15,205         
|The Bank of Nova Scotia (11)       | US$                 | Libor+1.15    | 2.3625                       | -              
|                                   |                     |               |                              |                
|Total                              |                     |               |                              | 152,132        
|Less: Current portion (12)         |                     |               |                              | (15,133)       
|                                   |                     |               |                              |                
|Long-term portion                  |                     |               |                              | 136,999        
|                                   |                     |               |                              |                

|(1) | This
loan is repayable in monthly installments of principal and interest.
|--- | -------------------------------------------------------------------------

|(2) | The
balance of this loan is repayable in 2004 and the balance is included in Current portion
of long-term liabilities.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(3) | This
loan is repayable in March 2004. Interest is paid semi-annually.
|--- | ---------------------------------------------------------------------

|(4) | This
loan is repayable in six semi-annual installments, starting on July 2004. Interest is
paid semi-annually.
|--- | --------------------------------------------------------------------------------------------------------------

|(5) | The
outstanding balance of this loan as of December 31, 2003 is repayable in six semi-annual
installments, starting on February 2004, with interest payments semi-annually.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | The
outstanding balance of this loan as of December 31, 2003 is repayable in eight
semi-annual installments starting on April 2004, with interest payments
semi-annually.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | The
outstanding balance of this loan as of December 31, 2003 is repayable in six
semi-annual installments, commencing March 2004, with interest payments to be
made semi-annually.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | The
Company prepaid the outstanding balance of the loan ThUS$ 49,720 with proceeds from
the bond offering included in Other Borrowings in the Consolidated Balance Sheets.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | This
loan is repayable in seven semi-annual installments, commencing April 2004,
with interest payments to be made semi-annually.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(10) | This
loan is repayable in seven semi-annual installments, commencing October 2004,
with interest payments to be made semi-annually.
|---- | -----------------------------------------------------------------------------------------------------------------------------------

|(11) | The
Company entered into this loan in January, 2003. This loan is repayable in six
semi-annual installments, commencing July 2005, with interest payments to be
made semi-annually.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Includes
ThUS$ 5,866 and ThUS$ 1,871 corresponding to accrued interest at December 31, 2002 and
2003, respectively.
|---- | -------------------------------------------------------------------------------------------------------------------

F-19

---



Scheduled payments of
the long-term portion of long-term bank borrowings at December 31, 2003 are as follows:

|Amounts payable during the |  |       
|-------------------------- |  | ------
|years ending December 31,  |  | ThUS$ 
|                           |  |       
|2005                       |  | 21,034
|2006                       |  | 26,609
|2007                       |  | 20,392
|2008                       |  | 6,250 
|                           |  |       
|Total                      |  | 74,285
|                           |  |       

NOTE 12 - OTHER
LONG-TERM BORROWINGS

Other long-term
borrowings include the following:

|                                               | At December 31,
|---------------------------------------------- | ---------------
|                                               | 2002           
|                                               |                
|                                               | ThUS$          
|                                              
|Bonds payable                                  | -              
|Promissory notes (8.06% per annum due in 2008) | 45,474         
|Promissory notes (7.82% per annum due in 2003) | 25,255         
|Leases payable                                 | 699            
|Other                                          | 55             
|                                               |                
|Total                                          | 71,483         
|Less: Current portion                          | (26,067)       
|                                               |                
|Long-term portion                              | 45,416         
|                                               |                

Bonds

In December 2003, the
Company issued ThUS$ 91,453 of fixed rate bonds in the Chilean market. Series A bonds
of ThUS$ 71,394 mature in seven years and pay interest at 5.0%. Series B bonds of
ThUS$ 20,059 mature in twenty one years and pay interest at 6.25%. Interest is
payable on both Series A and B bonds on June 15th and December 15thof each year with
the first payment due on June 15, 2004.

As stipulated in the
contract, the proceeds of the bond issuance were used to prepay short and long term bank
borrowings.

F-20

---



Scheduled maturities
of other long-term borrowings at December 31, 2003 are as follows:

|Maturities during the     |  |        
|------------------------- |  | -------
|years ending December 31, |  | ThUS$  
|                          |  |        
|2005                      |  | 9,127  
|2006                      |  | 23,247 
|2007                      |  | 23,247 
|2008                      |  | 23,247 
|2009                      |  | 14,247 
|2010 and beyond           |  | 34,251 
|                          |  |        
|Total                     |  | 127,366
|                          |  |        

NOTE 13 - OTHER
LONG-TERM LIABILITIES

Other long-term
liabilities include the following:

|                                                             | At December 31,
|------------------------------------------------------------ | ---------------
|                                                             | 2002           
|                                                             |                
|                                                             | ThUS$          
|                                                            
|Taxes payable                                                | 3,295          
|Forest subsidy                                               | 2,714          
|Deficit in investments accounted for under the equity method | 167            
|                                                             |                
|Total                                                        | 6,176          
|                                                             |                

NOTE 14 - COVENANTS

Certain of the Companys
borrowing agreements include restrictive covenants.  The more restrictive covenants
include the following:

Masisa S.A.

The bonds issued in
2003 contain  covenants  establishing  certain  obligations  for the Company and its
 subsidiaries,  including  the following:  maintenance of insurance on the principal
 assets of the Company in accordance with the industrys  standards;  issuance of
quarterly and annual financial  statements to the representative of the bondholders,
 both individual and consolidated,  abiding by the standards  applicable to public
 corporations;  the obligation to provide copies of risk rating  reports;  the obligation
to update the accounting  books of the  Company  and its  subsidiaries;  the  obligation
 to perform  transactions  with  subsidiaries  under  market conditions;  the
 prohibition  of  providing  financing  to any  entity of the  business  group,  other
 than the  issuer or any of its subsidiaries  or  investees;  and the  requirement  to
maintain a  quarterly  leverage  ratio  (defined  as the ratio  between  current
liabilities  and equity based on the  consolidated  financial  statements)  not higher
than  0.9 times.  As of December  31, 2003,  the Company was in compliance with all
covenants.

F-21

---



The Bank of Nova Scotia

In connection  with
the loan of  US$ 25 million  granted by The Bank of Nova Scotia,  in which  Scotiabank
 Sud  Americano  acted as an agent,  the Company  and/or its  subsidiaries  are obligated
to the following  covenants:  maintaining a leverage ratio (defined as the ratio of
 consolidated  net liabilities to  consolidated  tangible net worth) not higher than 1;
 maintaining a coverage over financial expenses not lower than 3;  maintaining a
consolidated  equity not lower then UF 14,800.000  (ThUS$ 421,718 at December 31,  2003);
the Company can not sell,  transfer,  dispose of,  promise to sell or dispose of its
current  stake in the  ownership of its  subsidiaries, with the  exceptions  set forth in
the contract;  the Company can not pledge assets that are essential for the normal
 operation of the business,  except in the conditions  provided for in the contract;  the
Company can not grant loans to its  shareholders for operations outside the regular
course of business.  As of December 31, 2003, the Company is in compliance with all
covenants.

Comerica Bank

The Company has the
following  covenants  associated  with its loan of US$ 15  million  granted by Comerica
Bank.  Convenants  include: maintenance of insurance on the principal  assets in
accordance  with industry  standards;  updating  accounting  records of the Parent
company and its  subsidiaries;  compliance with current laws and regulations;  compliance
with the payment of every obligation  derived from debt contracts;  maintenance of the
Companys line of business;  prohibition of issuing certain  guarantees on its assets,
 except for those  existing  upon  signature of the  agreement  and other such as chattel
 mortgage on new assets  purchased  in the  Companys ordinary line of business;
 performance of transactions with the subsidiaries  under market  conditions;
 prohibition of merging of the Company with any other company, or liquidating or
dissolving it, and selling or renting its assets,  property or businesses,  except in the
terms agreed upon in the contract;  limitation to the debt  contracted and loans granted
in conformity  with the conditions  stated in the agreement;  maintenance of a
consolidated equity not lower than UF 14,800,000 (ThUS$ 421,718 at December 31,  2003);
maintenance of an interest  coverage  ratio  (defined as operating  cash flow over net
 financial  expenses) of at least 3;  and  maintenance  of a leverage ratio (defined as
the ratio of  consolidated  net  liabilities to  consolidated  tangible net worth) not
higher than 1.  As of December 31, 2003, the Company was in compliance with all covenants.

Banco de Chile

The Company has the
 following  covenants  associated  with its credit line for US$ 15  million  granted by
Banco de Chile.  Convenants include:  maintenance of a leverage ratio (defined as the
ratio of consolidated  net  liabilities to  consolidated  tangible net worth) not higher
than 1;  maintenance of a coverage ratio against financial expenses of at least 3;
 maintenance of a consolidated  equity of at least  UF 14,800,000  (ThUS$ 421,718  at
 December 31,  2003);  and the  prohibition of selling,  transferring,  pledging to sell
or disposing of, in any way or manner,  its present equity investment in the property of
its subsidiaries  except in the terms agreed upon in the contract.  As of December 31,
2003 the Company was in compliance with all covenants.

Dresdner Bank L.A. -
Forestal Argentina S.A.

In accordance  with
loans  contracted by this  subsidiary,  the company is obligated to comply with certain
 covenants that are derived from the financial statements of this subsidiary issued in
accordance with accounting principles generally accepted in Argentina.

F-22

---



These covenants
include the maintenance of:

- A ratio
of earnings before interest,  taxes,  depreciation and amortization (EBITDA) to financial
expenses equal to or higher than      1.8 times;
- Debt
leverage lower or equal to 0.50; and
- Net
equity of at least US$ 50 million.

Non-compliance  with
any of the above  obligations can require the immediate payment of the quantities owed,
as if they had matured and were currently collectable.

The company was not in
compliance  with its net equity covenant based on its  subsidiarys  financial
 statements at December 31,  2003 and 2002. On August 27,  2002,  Dresdner Bank L.A.
 released the Company from its  obligation to comply with the financial  covenantsset
forth in its loan contract.  On  January 28,  2003, the bank extended the release from
complying with the covenant of maintaining a minimal  equity until  April 30,  2003.  On
May 12,  2003 the bank  reported in writing to Forestal  Argentina  S.A. that it was in
the process of studying the balance sheets  audited at  December 31,  2002. It also
advised that, as long as such analysis,  as well as the restructuring of the covenant of
minimum equity is not concluded,  it would not declare a default event for  non-complying
 with such covenant.  On  August 22,  2003,  the bank advised the company  that it was
still  studying  such balance  sheets and, as long as the examination  has not been
 concluded,  it would not declare a default event for  non-compliance  of covenant.  On
January 8,  2004, the bank reported to the Company that, with retroactive effect to June 30,
 2003 and until February 29,  2004, it released the Company from complying with the
obligation to maintain a minimum equity as outlined in the borrowing documents.

Promissory Notes from
Private Placement

In connection with
notes issued in a private placement in the United States during 1996,  Masisa and its
subsidiaries,  Masisa Overseas Ltd. and Masisa Argentina S.A., are contractually
committed to maintain certain covenants, which are summarized as follows:

- Compliance with all laws
- Maintenance of insurance on properties and businesses
- Maintenance of properties in good repair, working order and condition
- Payment
of taxes and claims
- Maintenance of financial covenants as follows:

| | a) | The
Company must maintain Consolidated  Tangible Net Worth (defined as consolidated
 stockholders equity less intangible               assets) of not less than an
amount equal to the sum of  (a) ThCh$ 140,493,573  (ThUS$ 236,601  at December 31,  2003)
and               (b) an amount equal to 40% of the cumulative amount of Recurring Net
Income (defined as net income less  extraordinary or               non-recurring  gains)
 of the  Company  for  each  fiscal  year  commencing  after  December 31,  1996  (as
 shown on the               consolidated financial statements).
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | The
 Company  will not at any time  permit the  Leverage  Ratio  (defined as the ratio of
 consolidated  indebtedness  to               Consolidated Tangible Net Worth) to exceed
1 to 1.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) | The
Company  will not at any time permit the  Interest  Charges  Coverage  Ratio (the ratio
of  consolidated  income plus               interest expense and income taxes to interest
expense) to be less than 1.5 to 1.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-23

---



- Ownership
obligations

| | a) | The
Parent Company will at all times own 100% of the outstanding equity securities of Masisa
Overseas Ltd.
| | -- | ----------------------------------------------------------------------------------------------------------

| | b) | The
Parent Company will at all times own at least 66 2/3% of the outstanding voting
securities of Masisa Argentina S.A.
| | -- | -----------------------------------------------------------------------------------------------------------------------

As of December 31,
2003, the Company will in compliance with all covenants.

NOTE 15 - INCOME TAXES

a)   The income tax
provisions in the Consolidated Statements of Income were as follows:

|                                           | Year ended December 31,
|------------------------------------------ | -----------------------
|                                           |                        
|                                           | 2001                   
|                                           |                        
|                                           | ThUS$                  
|                                          
|Current year provision for income tax      | 4,397                  
|Deferred income taxes                      | (5,027)                
|Adjustments of income taxes of prior years | 18                     
|                                           |                        
|Total (benefit) provision                  | (612)                  
|                                           |                        

b)   Recoverable and
taxes payable were as follows:

|                                                                                                              | At December 31,
|------------------------------------------------------------------------------------------------------------- | ---------------
|                                                                                                              | 2002           
|                                                                                                              |                
|                                                                                                              | ThUS$          
|                                                                                                             
|Provisional monthly income tax prepayments                                                                    | 1,349          
|Income tax provision                                                                                          | (5,781)        
|Value-added taxes recoverable                                                                                 | 15,034         
|Value-added taxes payable                                                                                     | (3,295)        
|Others                                                                                                        | 548            
|                                                                                                              |                
|Total                                                                                                         | 7,855          
|                                                                                                              |                
|                                                                                                             
|Recoverable and taxes payable as outlined above are classified in the Consolidated Balance Sheets as follows:
|                                                                                                             
|                                                                                                              | ThUS$          
|                                                                                                              |                
|                                                                                                             
|Recoverable tax                                                                                               | 8,037          
|Tax recoverable long-term included in long-term Other Assets                                                  | 3,113          
|Tax payable long-term included in Other long-term liabilities                                                 | (3,295)        
|                                                                                                              |                
|Total                                                                                                         | 7,855          
|                                                                                                              |                

F-24

---



c)   Deferred income
taxes

At December 31, 2002
and 2003, the accumulated balances from deferred taxes originating from temporary
differences were as follows:

|                                                       | At December 31, 2002 | At December 31, 2003
|------------------------------------------------------ | -------------------- | --------------------
|Assets                                                 | Short-term           | Long-term           
|                                                       |                      |                     
|                                                       | ThUS$                | ThUS$               
|                                                      
|Allowance for doubtful accounts                        | 579                  | 46                  
|Provision for vacations                                | 193                  | -                   
|Leasing obligations                                    | -                    | 118                 
|Tax loss carry-forwards                                | 373                  | 21,530              
|Other provisions                                       | 518                  | 1,302               
|                                                       |                      |                     
|Total                                                  | 1,663                | 22,996              
|Less: Complementary liability account                  | (26)                 | (1,259)             
|Valuation allowance                                    | -                    | (12,552)            
|                                                       |                      |                     
|Net assets                                             | 1,637                | 9,185               
|                                                       |                      |                     
|Liabilities                                           
|                                                      
|Overhead costs in inventories                          | (821)                | (3,552)             
|Forest reserve                                         | -                    | (4,240)             
|Depreciation of property, plant and equipment          | (88)                 | (23,318)            
|                                                       |                      |                     
|Total                                                  | (909)                | (31,110)            
|Less: Complementary asset account                      | -                    | 14,002              
|                                                       |                      |                     
|Net liability                                          | (909)                | (17,108)            
|                                                       |                      |                     
|Total net deferred
income tax asset        (liability) | 728                  | (7,923)             
|                                                       |                      |                     

NOTE 16 - ACCRUED
LIABILITIES

Accrued liabilities
include the following:

|                      | At December 31,
|--------------------- | ---------------
|                      | 2002           
|                      |                
|                      | ThUS$          
|                     
|Accrued vacations     | 1,307          
|Accrued commissions   | 1,455          
|Provision for bonuses | 463            
|Other provisions      | 1,132          
|                      |                
|Total                 | 4,357          
|                      |                

F-25

---



NOTE 17 - SHAREHOLDERS EQUITY

a)   Changes in
capital and reserve accounts in 2001, 2002 and 2003 were as follows:

|                                                   | Reserves                | Retained earnings
|-------------------------------------------------- | ----------------------- | -----------------
|                                                   |                         |                  
|                                                   | Number of shares issued | Common stock     
|                                                   |                         |                  
|                                                   |                         | ThUS$            
|                                                  
|Balances at December 31, 2000                      | 840,500,740             | 207,103          
|Allocation of 1999 net income                      | -                       | -                
|Payment of dividends of US$ 0.012523 per    share  | -                       | -                
|Sale of common shares                              | 88,014,003              | 37,954           
|Increase in forestry reserve due to appraisal      | -                       | -                
|Cumulative translation adjustment                  | -                       | -                
|Price-level restatement of equity                  | -                       | 7,490            
|Net income for the year                            | -                       | -                
|                                                   |                         |                  
|Balances at December 31, 2001                      | 928,514,743             | 252,547          
|                                                   |                         |                  
|Balances at December 31, 2001 restated to         
|United States dollars of December 31,     2002 (1) |                         | 230,118          
|                                                   |                         |                  

F-26

---



|                                              | Reserves                | Retained earnings
|--------------------------------------------- | ----------------------- | -----------------
|                                              |                         |                  
|                                              | Number of shares issued | Common stock     
|                                              |                         |                  
|                                              |                         | ThUS$            
|                                             
|Balances at December 31, 2001                 | 928,514,743             | 230,118          
|Allocation of 2001 net income                 | -                       | -                
|Payment of dividends of US$ 0.00924 per share | -                       | -                
|Increase in forestry reserve due to appraisal | -                       | -                
|Cumulative translation adjustment             | -                       | -                
|Price-level restatement of equity             | -                       | 6,904            
|Net income for the year                       | -                       | -                
|                                              |                         |                  
|Balances at December 31, 2002                 | 928,514,743             | 237,022          
|                                              |                         |                  
|Balances at December 31, 2002                 | 928,514,743             | 237,022          
|Allocation of 2002 net income                 |                         | -                
|Payment of dividends of US$ 0.00476 per share |                         | -                
|Increase in forestry reserve due to appraisal |                         | -                
|Cumulative translation adjustment             |                         | -                
|Net income for the year                       | -                       | -                
|                                              |                         |                  
|Balances at December 31, 2003                 | 928,514,743             | 237,022          
|                                              |                         |                  

|(1) | As
a result of recasting the financial statements which were originally presented in
Chilean pesos to US dollars as described in Note 2b), Shareholders equity
balances at December 31, 2001 included in the Consolidated Balance Sheets do not
agree with Shareholders equity balances at the beginning of the year (January 1, 2002)
as presented in the reconciliation of Shareholders equity for 2001 and 2002. The
balances do not agree due to the methodology of recasting required by the accounting
principles generally accepted in Chile in which the Consolidated Balance Sheets,
Statements of Income and Cash Flows as of and for the year ended December 31, 2002
and 2001 previously reported in Chilean pesos are recast to US dollars using the
respective year-end exchange rates. Accordingly, Shareholders equity at
December 31, 2001 will not agree with Shareholders equity as January 1, 2002 as
the previously reported amounts in Chilean pesos are recast at different rates at
December 31, 2001 and 2002.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-27

---



b)   Capital increases

At an extraordinary
 Shareholders  Meeting held on November 13,  2000 the shareholders  agreed to increase
the share capital of Masisa S.A. by ThUS$ 91,582  through the issuance of  182,441,061 shares
 of no-par value stock. As of  December 31,  2001,  88,014,003 shares were subscribed and
paid in full for a total ThUS$ 37,954.

c)   Principal
shareholders

At December 31, 2003,
Masisa was controlled by Terranova S.A., which owns 52.4% of the shares issued and
outstanding.

d)   Dividends

At the Annual  General
 Meeting held on April 30,  2003, the  shareholders  approved a final dividend on 2003
net income of US$ 0.00476 per share,  for an aggregate amount of ThUS$ 4,420.  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 30,  2002, the  shareholders  approved a final dividend  on 2002
net income of US$ 0.00924 per share, for an aggregate amount of ThUS$  8,575.

At the Annual General
 Meeting held on April 26,  2001, the  shareholders  approved a final dividend of 2001
net income of US$ 0.012523 per share, for an aggregate amount of ThUS$ 11,543.

e)   Forestry reserve

The  forestry  reserve
 represents  amounts  recorded  by the  Companys  subsidiaries  Tornagaleones  and
Masisa do Brasil  Ltda.  See Note 2 h) for the accounting policy regarding this reserve.

F-28

---



f)   Cumulative
translation adjustment

In accordance with
Technical  Bulletin No. 64  this account  corresponds to the year-end US dollar exchange
 difference (net of Chilean inflation) from investments in related  companies and related
 liabilities that continue to maintain  accounting  records in currencies other than the
US dollar as of January 1,  2003 and for periods prior to January 1,  2003 for
subsidiaries  that maintained  accounting records in currencies other than the Chilean
peso.

|2003                         | Beginning | Exchange gain (loss)attributable to | Realization | Balance at  December 31,
|---------------------------- | --------- | ----------------------------------- | ----------- | ------------------------
|Company                      | balance   | Investment                          | Liabilities | reserves                
|                             |           |                                     |             |                         
|                             | ThUS$     | ThUS$                               | ThUS$       | ThUS$                   
|                            
|Masisa Argentina S.A.        | 26,068    | -                                   | -           | -                       
|Forestal Argentina S.A.      | 3,094     | (3,693)                             | 944         | -                       
|Maderas y Sintéticos de     
|Mexico S.A. de C.V.          | 190       | -                                   | -           | -                       
|Masisa Partes y Piezas Ltda. | -         | (23)                                | -           | -                       
|Forestal Tornagaleones S.A.  | -         | 11,363                              | -           | -                       
|Masisa do Brasil Ltda.       | 2,741     | -                                   | -           | -                       
|Masisa Cabrero S.A.          | 95        | -                                   | -           | -                       
|                             |           |                                     |             |                         
|Total                        | 32,188    | 7,647                               | 944         | -                       
|                             |           |                                     |             |                         

|2002                    | Beginning | Exchange gain (loss)attributable to | Realization | Balance at  December 31,
|----------------------- | --------- | ----------------------------------- | ----------- | ------------------------
|Company                 | balance   | Investment                          | Liabilities | reserves                
|                        |           |                                     |             |                         
|                        | ThUS$     | ThUS$                               | ThUS$       | ThUS$                   
|                       
|Masisa Argentina S.A.   | 18,616    | 9,362                               | (1,910)     | -                       
|Forestal Argentina S.A. | 2,351     | 1,022                               | (279)       | -                       
|Maderas y Sintéticos de
|Mexico S.A. de C.V.     | -         | 567                                 | (377)       | -                       
|Masisa do Brasil Ltda.  | -         | 10,839                              | (8,098)     | -                       
|Masisa Cabrero S.A.     | 95        | -                                   | -           | -                       
|                        |           |                                     |             |                         
|Total                   | 21,062    | 21,790                              | (10,664)    | -                       
|                        |           |                                     |             |                         

|2001                    | Beginning | Exchange gain (loss)attributable to | Realization | Balance at  December 31,
|----------------------- | --------- | ----------------------------------- | ----------- | ------------------------
|Company                 | balance   | Investment                          | Liabilities | reserves                
|                        |           |                                     |             |                         
|                        | ThUS$     | ThUS$                               | ThUS$       | ThUS$                   
|                       
|Masisa Argentina S.A.   | 8,761     | 14,081                              | (3,007)     | -                       
|Forestal Argentina S.A. | 1,404     | 1,493                               | (392)       | -                       
|Resinas Concordia S.A.  | 830       | -                                   | -           | (830)                   
|Masisa do Brasil Ltda.  | -         | 9,171                               | (9,171)     | -                       
|Masisa Cabrero S.A.     | 101       | -                                   | -           | -                       
|                        |           |                                     |             |                         
|Total                   | 11,096    | 24,745                              | (12,570)    | (830)                   
|                        |           |                                     |             |                         

|(1) | As
a result of recasting the financial statements which were originally presented in
Chilean pesos to US dollars as described in Note 2b), the Cumulative translation
adjustment at December 31, 2001 included in the Consolidated Balance Sheets do not
agree with the Cumulative translation adjustment at the beginning of the year
(January 1, 2002) as presented in the reconciliation of the Cumulative
translation adjustment for 2001 and 2002. The adjustments do not agree due to the
methodology of recasting required by the accounting principles generally accepted
in Chile in which the Consolidated Balance Sheets, Statements of Income and Cash
Flows as of and for the year ended December 31, 2002 and 2001 previously reported in
Chilean pesos are recast to US dollars using the respective year-end exchange
rates. Accordingly, the Cumulative translation adjustment at December 31, 2001
will not agree with the Cumulative translation adjustment as January 1, 2002 as
the previously reported amounts in Chilean pesos are recast at different rates at
December 31, 2001 and 2002.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-29

---



g)   Tax credits on
declared dividends

Retained earnings at
December 31, 2003 have the following tax credits available to shareholders when
distributed:

|                     |        | Tax credit  
|-------------------- | ------ | ------------
|                     |        | available on
|Earnings of the year | Amount | distribution
|                     |        |             
|                     | ThUS$  | %           
|2003                 | 10,540 | 16.5        
|2002                 | 30,066 | 16.0        
|2002                 | 2,318  | 15.0        
|2001                 | 5,124  | 15.0        
|2000                 | 4,189  | 15.0        

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

NOTE 18 - COMMITMENTS
AND CONTINGENCIES

a)   Guarantees

On October 15,  1999,
 Tornagaleones  entered into a loan agreement with  Raboinvestments  Chile S.A. for ThUS$ 15,826.
 Under terms of the agreement  the company  collateralized  the loan with  plantations
 and land for the term of the loan that expires in 3 years.  The book value of the
plantations is ThUS$ 17,658 and the book value of the land is ThUS$ 4,879 at December 31,
2003.

At December 31, 2003,
the Company has received  guarantees,  including  pledges,  mortgages,  endorsements of
loan insurance  policies, special mandates and surety bonds to guarantee  repayment to
clients and fulfillment of obligations  related to the Companys  business activities
amounting to ThUS$ 7,583 (ThUS$ 5,119 in 2002).

Tornagaleones has
received  guarantees to secure repayment to clients and fulfillment of obligations
 related to the Companys business activities amounting to ThUS$ 705 in 2003 (ThUS$ 294
in 2002).

b)   Lawsuits

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.

F-30

---



As of December 31,
2003,  there is an  outstanding  complaint  amounting to ThUS$ 680 for damages to
property  caused in opinion of the complaint by Forestal  Tornagaleones.  On  September 22,
 2003, an appealable  judgement was issued against the Company,  which limited the scope
of the claimed  damages but did not fix the amount  payable.  Such  judgement  was
 appealed by the  Company.  On  January 9, 2004,  the Court of Appeals of Valdivia
 accepted the appeal,  by annulling the  judgement  and refusing to accept the complaint
 filed against the Company in all its parts,  including legal costs.  The complainant
 filed a motion to appeal,  which remains pending at the date of issuance of these
consolidated  financial statements.  Given the judgement pronounced by the Court of
Appeals of Valdivia,  the Company believes that the likelihood of success for the
complainant is minimal.

On May 30,  2002, the
Chilean  Internal Revenue Service issued a tax assessment  amounting to ThCh$ 406,545
 (ThUS$ 685 at December 31, 2003) for  alleged  differences  in the  determination  of
income  taxes by  Inversiones  Coronel  Limitada.  The  Company  has made no provision
for this assessment as management believes it will prevail in this case.

NOTE 19 - BALANCES AND
TRANSACTIONS WITH RELATED PARTIES

Notes and accounts
receivable from related companies at each year included the following:

|                               |                        | At December 31,
|------------------------------ | ---------------------- | ---------------
|Name                           | Relationship           | 2002           
|                               |                        |                
|                               |                        | ThUS$          
|Short-term                    
|Forestal Terranova México      | Shareholders in common | 606            
|Terranova Colombia             | Shareholders in common | 710            
|Terranova Costa Rica           | Shareholders in common | 117            
|Masnova S.A. de C.V            | Equity investment      | 715            
|Amanco Costa Rica S.A.         | Directors in common    | -              
|Amanco El Salvador             | Directors in common    | -              
|Terranova Forest Products, INC | Directors in common    | -              
|Amanco Guatemala S.A.          | Directors in common    | -              
|                               |                        |                
|Total                          |                        | 2,148          
|                               |                        |                

|                              |                   | At December 31,
|----------------------------- | ----------------- | ---------------
|Name                          | Relationship      | 2002           
|                              |                   |                
|                              |                   | ThUS$          
|Long-term                    
|Forestal Río Calle Calle S.A. | Equity investment | 3,026          
|                              |                   |                

F-31

---



Outstanding notes and
accounts payable balances to related companies at the end of each year included the
following:

|                                | At December 31,       
|------------------------------- | ----------------------
|Name                            | Relationship          
|                                |                       
|                                |                       
|Forestal Río Calle Calle S.A.   | Equity investment     
|Terranova S.A.                  | Principal shareholder 
|Andinos S.A.                    | Shareholders in common
|Forestal Millalemu S.A.         | Shareholders in common
|Fibranova C.V                   | Shareholders in common
|Terranova Brasil Ltda.          | Shareholders in common
|Forestal Terranova Mexico S.A.  | Shareholders in common
|Hondilut S.A. (Amanco Honduras) | Directors in common   
|Nicalit S.A. (Amanco Nicaragua) | Directors in common   
|                                |                       
|Total                           |                       
|                                |                       

Significant
transactions with related parties included the following:

|                                     |                        | Year ended December 31,
|------------------------------------ | ---------------------- | -----------------------
|                                     |                        |                        
|Name                                 | Relationship           | 2001                   
|                                     |                        |                        
|                                     |                        | ThUS$                  
|                                    
|Forestal Río Calle Calle S.A.        | Equity investment      | 11                     
|                                     |                        | -                      
|                                     |                        | -                      
|Terranova S.A.                       | Principal shareholder  | 21,092                 
|                                     |                        | 1,861                  
|                                     |                        | 937                    
|Forestal Terranova Mexico de C.V.    | Shareholders in common | 1,900                  
|                                     |                        | -                      
|                                     |                        | -                      
|Masnova de MéxicoS.A.                | Equity investment      | -                      
|Terranova Costa Rica S.A.            | Shareholders in common | -                      
|Terranova Colombia S.A.              | Shareholders in common | -                      
|Fibranova C.V.                       | Shareholders in common | -                      
|                                     |                        | -                      
|                                     |                        | -                      
|Terranova Forest Products, INC       | Directors in common    | -                      
|Forestal Terranova de Guatemala S.A. | Shareholders in common | -                      
|Amanco Costa Rica S.A.               | Directors in common    | -                      
|Amanco El Salvador S.A.              | Directors in common    | -                      
|Amanco Guatemala S.A.                | Directors in common    | -                      
|Hondilut S.A. (Amanco Honduras)      | Directors in common    | -                      
|Nicalit S.A. (Amanco Nicaragua)      | Directors in common    | -                      
|Forestal Terranova de Brasil         | Shareholders in common | -                      

F-32

---



NOTE 20 -
NON-OPERATING INCOME

Non-operating income
during each year includes the following:

|                                                         | 2001   | 2002  | 2003 
|-------------------------------------------------------- | ------ | ----- | -----
|                                                         |        |       |      
|                                                         | ThUS$  | ThUS$ | ThUS$
|                                                        
|Gain on sales of property, plant and equipment           | 1,030  | 1,279 | 938  
|Gain on sales of investments                             | 11,049 | -     | 44   
|Equity in earnings of unconsolidated affiliates (Note 7) | -      | 16    | -    
|Interest and other financial income                      | 5,840  | 2,534 | 3,329
|Reversal of allowance for doubtful accounts              | -      | 2,847 | -    
|Realization of translation reserves                      | 2,840  | -     | -    
|Forgiveness of notes payable                             | -      | 709   | -    
|Other                                                    | 59     | 292   | 548  
|                                                         |        |       |      
|Total                                                    | 20,818 | 7,677 | 4,859
|                                                         |        |       |      

NOTE 21 -
NON-OPERATING EXPENSES

Non-operating expenses
during each year includes the following:

|                                                        | Year ended December 31,
|------------------------------------------------------- | -----------------------
|                                                        |                        
|                                                        | 2001                   
|                                                        |                        
|                                                        | ThUS$                  
|                                                       
|Interest expense                                        | 16,071                 
|Write-down of other assets to fair value (Note 6)       | 8,260                  
|Amortization of goodwill and negative goodwill (Note 8) | 1,434                  
|Equity in losses of unconsolidated affiliates (Note 7)  | 147                    
|Donations                                               | 86                     
|Provision for doubtful accounts                         | 2,948                  
|Losses on sales of property, plant and equipment        | 94                     
|Depreciation of equipment temporarily out of service    | 964                    
|Other                                                   | 885                    
|                                                        |                        
|Total                                                   | 30,889                 
|                                                        |                        

NOTE 22 -
SUBSEQUENTS EVENTS

There have been no
subsequent  accounting or financial events during the period from December 31,  2003
through the date on which these financial statements were prepared, January 30, 2004,
which could significantly affect their interpretation.

F-33

---



NOTE 23 -
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 US GAAP
are as follows:

a)   Reporting
currency and inflation accounting

For the year ended
 December 31, 2003, the reporting  currency for the Company is the US dollar.  Prior to
January 1, 2003, the Company reported its financial  statements in Chilean Pesos.
 Effective  January 1, 2003 and following the approval of the appropriate  Chilean
regulatory  authorities,  the Company  changed its  reporting  currency to the US dollar
in order to be  consistent  with its majority shareholders  financial  reporting
 currency  and to  facilitate  its  majority  shareholders  consolidation  process for
 financial reporting purposes.  The Companys functional currency has not changed and
remains the US dollar.

For the years prior to
the 2003, the Company  presented  financial  statements in Chilean pesos restated to
reflect the full effects of the change 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 d), is based on a model which  enables the  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.

In accordance  with
Item 18 of Form 20-F for periods prior to December 31, 2003,  the Company was not
required to include an adjustment to  eliminate  price-level  restatements  in the
 reconciliation  of net income and equity from  Chilean GAAP to US GAAP as the Company
prepared its financial statements in accordance with Chilean GAAP and the
inflation-adjusted Chilean peso was the reporting currency.

As a result of
changing its reporting  currency to US dollars  beginning  January 1, 2003,  the Company
recast its prior year financial statements  to US dollars in  accordance  with Chilean
 GAAP and  therefore  no longer  qualified  for the  exemption  described  above
associated  with the US GAAP  reconciliation.  For the  presentation  of financial
 statements  in accordance  with Chilean  GAAP,  the Consolidated  Balance  Sheets,
 Statements  of Income and Cash Flows at and for the years ended  December 31, 2001 and
2002 were recast into US dollars using the historical year-end exchange rates as
described in Note 2 b) above.

F-34

---



Pursuant to Item 18 of
Form 20-F and SEC regulations,  a change in reporting currency from a price-level
 adjusted currency such as the Chilean peso to the US dollar  requires the financial
 statements  for all periods  presented to be recast as if the US dollar had been used
for all periods.  Accordingly,  for the  reconciliation  of net income and equity from
Chilean GAAP to US GAAP for the years ended December 31, 2001 and 2002,  the Company has
(1)  eliminated  all  price-level  adjustments;  (2)  remeasured  all monetary  assets
and liabilities at current exchange rates;  (3) remeasured  non-monetary  assets,
 liabilities and  shareholders  equity accounts based on historical exchange rates; and
(4) remeasured revenues and expenses at the weighted-average of the exchange rates in the
period.

Translation of the
Companys investment in Tornagaleones:

The Companys
 subsidiary,  Tornagaleones,  maintains its  accounting  records in Chilean  pesos.
 Commencing  January 1, 2003 with the approval to report the  Companys  financial
 statements  in  US dollars,  in  accordance  with  Chilean  GAAP,  the Company  records
a translation  adjustment  included in  shareholders  equity derived from the net
difference  between the value of its investment in its subsidiary  resulting  from the
movement in the exchange  rate between the Chilean  peso and the US dollar,  the  Companys
 functional currency (see Note 17 f).

Under US GAAP,
 subsidiaries  which  maintain  their records in a currency other than its  functional
 currency,  must remeasure  their financial  statements into the functional  currency
before translating to the reporting  currency.  All monetary assets and liabilities are
remeasured  based on current  exchange rates and all non-monetary  assets and liabilities
and  shareholders  equity are remeasured based on  historical  exchange  rates.
 Revenues and expenses  are  remeasured  at the  weighted-average  of the exchange  rates
in the period.  All remeasurement effects are recorded as a component of net income.

In accordance with
Chilean GAAP, for subsidiaries  that maintain  accounting  records in Chilean pesos,
 monetary assets or liabilities denominated in US dollars are translated to Chilean pesos
at year-end  exchange rates and the  corresponding  adjustment is included in net income
for the subsidiary.  Pursuant to US GAAP,  this  adjustment is not required for monetary
assets and liabilities  denominated in US dollars as the Companys functional currency is
the US dollar.

The effects resulting
from the above differences  between the Chilean GAAP financial  statement  presentation
and currency  translation and the methods  described  above for US GAAP purposes are
presented net of the  corresponding  tax effects as an adjustment to Chilean GAAP net
income.  The cumulative  effect of these  adjustments has been presented net of the
 corresponding tax effect as an adjustment to Chilean GAAP net equity. The adjustments
are included in paragraph j) below.

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 Statement of Financial  Accounting
Standard (SFAS) No. 109,  Accounting for Income Taxes,  whereby income taxes are also
recognized using substantially the same asset and liability approach.  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
 are based on enacted rates at the dates that the temporary  differences  are expected to
reverse.  The effect of changes in tax rates is included in income for the period that
includes the enactment date.

F-35

---



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 reconciliations
in years prior to 2000.

Prior to the
 implementation  of Technical  Bulletin No. 60,  no deferred  income taxes were recorded
under Chilean GAAP 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.

Furthermore,  deferred
 income tax assets  under both Chilean and US GAAP should be reduced by a valuation
 allowance  if, based on the weight of  available  evidence,  it is more  likely  than
not that some  portion or all of the  deferred  income tax assets will not be realized.
 The valuation  allowance  should be sufficient to reduce the deferred income tax asset
to an amount that is more likely than not to be realized.

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 j)  below and certain  disclosures  required under
SFAS No. 109 are set forth in paragraph 2 b) below.

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 a provision has been made in the
 accompanying US GAAP  reconciliation in paragraph 1 j)  below to recognize the
 corresponding  decrease in Shareholders  equity at December 31st of the year to which
the minimum dividend is attributed.

d)   Consolidation

As mentioned in  Note 2 i),
 for Chilean GAAP  purposes,  investments  in related  companies  are  accounted for
pursuant to the equity method when the companys  investment  represents  between 10% and
50% of the voting stock of the investee.  For US GAAP purposes prior to February 1,
 2003,  investments in related  companies  required the use of the equity method of
accounting for investments that give the investor the ability to exercise significant
 influence over operating and financial policies of the investee.  For those companies
which were determined to be controlled  through the Companys  investment  (generally,
 ownership of over 50% of the outstanding voting shares),  US GAAP required
 consolidation.  Subsequent to February 1,  2003,  US GAAP  requires the  determination
of whether an entity should be consolidated  in accordance with FASB  Interpretation  No.
46,  Consolidation  of Variable  Interest  Entities  (FIN 46). FIN 46 is discussed in
more detail under paragraph 2 g) below.

Masnova de Mexico S.A.
de C.V. 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  C.V.  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
 from  Chilean  GAAP to US GAAP.  Masnova de Mexico  S.A.  de C.V.s  balance  sheet at
December 31,  2003,  includes  total assets of  ThUS$ 591,  total  liabilities  of  ThUS$ 1,924,
 and negative  stockholders  equity of ThUS$ 1,333.  Masnova de México S.A. de C.V.s has
no material commitments or contingencies.

F-36

---



Relative to the Companys
 investments in unconsolidated  affiliates,  there are no differences in the application
of the equity method or consolidation between Chilean GAAP and US GAAP.

e)   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  investments in  unconsolidated
 affiliates and  consolidated subsidiaries are shown in the  reconciliation of shareholders
 equity in paragraph 1 j)  below. As previously  indicated in Note 2 h), the  revaluation
of timber  resources is not given effect in the  Consolidated  Statement of Income under
Chilean GAAP and therefore no US GAAP adjustment is necessary.

f)   Capitalization of
interest and other costs

Under Chilean GAAP,
the  capitalization  of interest costs is optional.  As described in Note 2 h), the
Company  capitalizes  financing costs on long-term investment projects in a manner
consistent with US GAAP.

Under Chilean GAAP,
foreign exchange gains and losses associated with  foreign-currency  denominated debt,
which qualifies for interest capitalization,  can be netted  against the  corresponding
 capitalized  interest.  Under US GAAP,  only the interest on the qualifying debt related
to investment  projects is capitalized  and foreign  currency  gains and losses on
 foreign-currency  denominated  debt is recorded in income as a non-operating gain or
loss.

Tornagaleones,  which
is 60.4% owned by the Company and  consolidated,  capitalized  interest  costs  incurred
in  connection  with the development  of its  forests.  Under US GAAP,  interest  costs
 incurred  to  finance  the  development  of  forests  are not  normally capitalized.

The  adjustments  for
the reversal of  capitalizing  interest  costs  incurred in connection  with the
 development  of forests and the netting of foreign-currency  gains and losses against
interest  capitalized pursuant to Chilean GAAP is shown in the reconciliations of net
income and shareholders equity in paragraph 1 j) below.

g)   Business
combinations and goodwill

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,
 Business  Combinations,  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 is
recorded for US GAAP  purposes.  Goodwill and indefinite life intangibles are subject to
annual impairment tests based on the fair value method.

F-37

---



Under  Chilean  GAAP,
 the excess of cost over the net book  value of a  purchased  company is  recorded  as
 goodwill  (the book value purchase  method),  which is then  amortized  to  income  over
a maximum  period  of twenty  years.  Amortization  of  goodwill  may be accelerated if
the acquired company  generates  sufficient  income to absorb the additional
 amortization in any given year. The excess of net book value over the cost of an
 investment is considered  to be negative  goodwill  under Chilean GAAP and is also
 amortized to income over a maximum  period of twenty  years.  The  amortization  of
negative  goodwill may be  accelerated  if the acquired  company sustains losses.

Goodwill  arising from
the purchase of Masisa Cabrero S.A. in 2000 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 j) below.

During 2001,  goodwill
 arising from the acquisition of C y D Agrofruta Ltda. of ThUS$ 1,135 was charged
directly to expense in 2001 as described in Note 8.  The Company  concurrently
 recognized a deferred tax asset,  for ThUS$ 1,444  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,  the  goodwill
 would not have been  written  off nor would an income tax  benefit  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 in the US GAAP reconciliation.

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  non-current  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 impact under the
full  allocation  pursuant to US GAAP has not been included in the  reconciliation of net
income and shareholders equity as the net impact is not material.

h)   Minority interest

The  proportional
 effects of the US GAAP adjustments  described above related to the Companys
 subsidiary,  Tornagaleones,  have been included in the reconciliation of net income and
shareholders equity in paragraph j) below.

i)   Comprehensive
income

SFAS No. 130,  Reporting
 Comprehensive  Income,  establishes  guidelines  for  the  presentation  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.  There are no
differences between net income in accordance with US GAAP and  comprehensive  income in
accordance with US GAAP.  Additionally,  there are no items impacting accumulated
comprehensive income.

F-38

---



j)   Effects of
conforming to US GAAP

The adjustments to
reported net income pursuant to Chilean GAAP required to conform with accounting
 principles  generally  accepted in the United States of America include the following:

|                                                                   | Year ended December 31,
|------------------------------------------------------------------ | -----------------------
|                                                                   |                        
|                                                                   | 2001                   
|                                                                   |                        
|                                                                   | ThUS$                  
|                                                                  
|Net income as shown in the Chilean GAAP financial statements       | 31,371                 
|Net effect for change in reporting currency and inflation         
|adjustments (par. 1 a)                                             | (732)                  
|Deferred income taxes (par. 1 b)                                   | (21)                   
|Capitalization of interest and exchange difference (par. 1 f)      | (1,891)                
|Goodwill amortization (par. 1 g)                                   | (152)                  
|Net effects of US GAAP adjustments on minority interest (par. 1 h) | 999                    
|                                                                   |                        
|Net income in accordance with US GAAP                              | 29,574                 
|                                                                   |                        

The adjustments
required to conform shareholders equity to US GAAP include the following:

|                                                                       | At December 31,
|---------------------------------------------------------------------- | ---------------
|                                                                       | 2002           
|                                                                       |                
|                                                                       | ThUS$          
|                                                                      
|Shareholders equity as shown in the Chilean GAAP financial statements | 435,316        
|Net effect for change in reporting currency (par. 1 a)                 | 77,402         
|Inflation adjustments (par. 1 a)                                       | (46,798)       
|Deferred income taxes (par. 1 b)                                       | (12,717)       
|Minimum dividend (par. 1 c)                                            | (4,374)        
|Reversal of revaluation of timber resources (par. 1 e)                 | (26,116)       
|Capitalization of interest and exchange differences (par. 1 f)         | (5,557)        
|Goodwill amortization (par. 1 g)                                       | 128            
|Net effect of US GAAP adjustments on minority interest (par. 1 h)      | 10,829         
|                                                                       |                
|Shareholders equity in accordance with US GAAP                        | 428,113        
|                                                                       |                

F-39

---



The changes in
shareholders equity determined under US GAAP were as follows:

|                                                                          | ThUS$   
|------------------------------------------------------------------------- | --------
|                                                                          |         
|                                                                         
|Balance at December 31, 2000                                              | 354,539 
|Reversal of accrual of minimum dividend required by law at prior year end | 8,869   
|Proceeds from sale of common shares                                       | 44,251  
|Distribution of dividends                                                 | (12,541)
|Accrual of minimum dividend required by law                               | (9,411) 
|Net income for the year                                                   | 29,574  
|                                                                          |         
|Balance at December 31, 2001                                              | 415,281 
|                                                                          |         
|Reversal of accrual of minimum dividend required by law at prior year end | 9,411   
|Distribution of dividends                                                 | (9,532) 
|Accrual of minimum dividend required by law                               | (4,374) 
|Net income for the year                                                   | 17,327  
|                                                                          |         
|Balance at December 31, 2002                                              | 428,113 
|                                                                          |         
|Reversal of accrual of minimum dividend required by law at prior year end | 4,374   
|Distribution of dividends                                                 | (4,420) 
|Accrual of minimum dividend required by law                               | (2,884) 
|Net income for the year                                                   | 11,095  
|                                                                          |         
|Balance at December 31, 2003                                              | 436,278 
|                                                                          |         

k)   Income statement
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 j).  As a result of these  reclassifications  pursuant to US GAAP,
 operating  income amounted to ThUS$ 27,980, ThUS$ 30,959, and ThUS$ 24,140, for the
years ended December 31, 2001, 2002 and 2003, respectively.

F-40

---



2    Additional US
GAAP disclosure requirements

a)   Earnings per share

SFAS No. 128,  Earning
Per Share,  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 that can be acquired  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 GAAP but is
required under US GAAP:

|                                                        | Year ended December 31,
|------------------------------------------------------- | -----------------------
|                                                        |                        
|                                                        | 2001                   
|                                                        |                        
|                                                        | US$                    
|                                                       
|Basic and diluted earnings per share under Chilean GAAP | 0.0340                 
|                                                        |                        
|Basic and diluted earnings per share under US GAAP      | 0.0320                 
|                                                        |                        
|Weighted average number of shares of                   
|common stock outstanding (in thousands)                 | 923,141                
|                                                        |                        

b)   Income taxes

The provisions for
income taxes charged to the results of operations pursuant to US GAAP were as follows:

|                                                         | 2001    | 2002    | 2003   
|-------------------------------------------------------- | ------- | ------- | -------
|                                                         |         |         |        
|                                                         | ThUS$   | ThUS$   | ThUS$  
|Deferred tax expense (benefit) under Chilean GAAP:      
|Chile                                                    | (1,648) | 1,604   | 328    
|Foreign                                                  | (3,361) | (352)   | (1,449)
|                                                        
|Additional deferred tax expense (benefit) under US GAAP:
|Chile adjustment                                         | 21      | (1,718) | (2,785)
|Chile reclassification                                   | 1,102   | -       | -      
|                                                         |         |         |        
|Total deferred tax provision under US GAAP               | (3,886) | (466)   | (3,906)
|                                                         |         |         |        
|                                                        
|Current year provision for income tax:                  
|Chile                                                    | 2,059   | 5,781   | 2,108  
|Foreign                                                  | 2,338   | -       | 708    
|                                                         |         |         |        
|Total current income tax provision under US GAAP         | 4,397   | 5,781   | 2,816  
|                                                         |         |         |        
|                                                        
|Total provision (benefit) under US GAAP                  | 511     | 5,315   | (1,090)
|                                                         |         |         |        

F-41

---



All components of the
income tax provision arise from Chilean, Argentine, Mexican, Ecuadorian, Peruvian, and
Brazilian sources.

Deferred tax assets
(liabilities) are summarized as of follows at December 31:

|                                           | 2002     | 2003    
|------------------------------------------ | -------- | --------
|                                           |          |         
|                                           | ThUS$    | ThUS$   
|                                          
|Property, plant and equipment (1)          | (27,646) | (24,058)
|Inventories                                | (4,070)  | (8,262) 
|Other                                      | -        | (271)   
|                                           |          |         
|Gross deferred tax liabilities             | (31,716) | (32,591)
|                                           |          |         
|Tax loss carryforwards (2)                 | 9,352    | 9,272   
|Notes and accounts receivable              | 624      | 624     
|Deferred revenues                          | -        | -       
|Accounts payable                           | 118      | 72      
|Accrued vacations                          | 193      | 237     
|Other provisions                           | 1,517    | 1,760   
|                                           |          |         
|Gross deferred tax assets                  | 11,804   | 11,965  
|                                           |          |         
|Net deferred tax liabilities under US GAAP | (19,912) | (20,626)
|                                           |          |         

|(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  purposes,  the gains are credited  against the tax
     basis of the new assets.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The
tax loss  carryforwards at December 31,  2003 originating in Masisa Argentina S.A. and
Forestal Argentina S.A. expire in 2007.      The tax loss carry forwards  originating  in
Masisa  Concepción  Ltda. and Brazil have no expiration  date. The asset for tax loss
     carryforwards is net of a valuation  allowance of ThUS$ 5,441 related to losses in
Argentina that the Company does not believe are      more likely than not to be
recovered based on the economic situation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-42

---



The provision for
income taxes differs from the amount of income tax determined by applying the  applicable
 Chilean  statutory  income tax rate (15% in 2001, 16% in 2002 and 16.5% in 2003) to US GAAP
pretax income as a result of the following differences:

|                                                         | Year ended December 31,
|-------------------------------------------------------- | -----------------------
|                                                         |                        
|                                                         | 2001                   
|                                                         |                        
|                                                         | ThUS$                  
|                                                        
|US GAAP pretax income                                   
|Chile                                                    | 23,843                 
|Foreign                                                  | 6,242                  
|                                                         |                        
|Total                                                    | 30,085                 
|                                                         |                        
|At statutory Chilean tax rates                          
|Chile                                                    | 3,576                  
|Foreign                                                  | 937                    
|                                                         |                        
|Total                                                    | 4,513                  
|                                                         |                        
|Increase (decrease) in rates resulting from:            
|Price-level restatement not accepted for tax purposes    | (830)                  
|Non-taxable income                                       | (3,785)                
|Non-deductible expenses                                  | 1,397                  
|Adjustments of income tax provision of prior year        | 19                     
|Other local income taxes                                 | -                      
|Difference between tax rate in Argentina, Peru, Ecuador,
|Mexico and Brazil                                        | (450)                  
|Change in valuation allowance                            | -                      
|Other                                                    | (353)                  
|                                                         |                        
|At effective tax rates                                   | 511                    
|                                                         |                        

c)   The following
 methods and assumptions were used to estimate the fair value of each class of financial
 instrument at December 31,      2002 and 2003 for which it is practicable to estimate
that value:

- For cash, time
deposits,  securities  purchased under resale agreements,  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.

F-43

---



- 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, 2002 | At December 31, 2003
|-------------------------------------------- | -------------------- | --------------------
|                                             |                      |                     
|                                             | Carrying             | Fair                
|                                             | amount               | value               
|                                             |                      |                     
|                                             | ThUS$                | ThUS$               
|                                            
|Assets                                      
|                                            
|Cash                                         | 1,916                | 1,916               
|Time deposits (short-term)                   | 2,319                | 2,319               
|Securities purchased under resale agreements | -                    | -                   
|Accounts receivable (current)                | 55,625               | 55,625              
|Accounts receivable (long-term)              | 1,465                | 1,465               
|Time deposits (long-term)                    | 28,500               | 30,074              
|                                            
|Liabilities                                 
|                                            
|Short-term bank borrowings                   | 32,084               | 32,084              
|Accounts payable (current)                   | 20,363               | 20,363              
|Long-term bank borrowings (including        
|current portion)                             | 152,132              | 153,276             
|Other long-term liabilities                  | 6,176                | 6,176               
|Other long-term borrowings                   | 45,416               | 48,011              
|Forward contracts                            | 538                  | 538                 
|Interest rate swaps                          | 98                   | 98                  

d)   Derivatives

See Note 2 q) for
disclosures related to the Companys derivatives as of December 31, 2002 and 2003.

The Company
 recognizes all derivative  instruments  as either assets or  liabilities in the
 Consolidated  Balance Sheets and measures these  investments  at fair  value.
 Generally,  changes in the fair  value of  derivatives  must be  recognized  in income
 unless the derivatives  qualify as a hedge.  If the derivative  qualifies as a hedge,
 the accounting for changes in fair value will depend on the 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 met.

From time to time the
Company uses  derivatives 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 q),  for recording losses on the debt obligations described in Notes
10 and 11 is considered part of the Companys translation policy under Chilean Technical
Bulletin No. 64 and is consistent with US GAAP.

F-44

---



The Company has not
designated any of the  derivatives  outstanding at  December 31,  2002 or 2003 as hedges
for US GAAP.  Accordingly, the Company considers the difference in accounting between
Chilean GAAP and US GAAP for these derivatives to be insignificant.

e)   Concentration of
credit risk

Financial  instruments
which potentially  subject the Company to significant  concentrations of credit risk
consist principally of cash and cash equivalents, time deposits, securities purchased
under resale agreements 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 27.2%  of the  Companys  sales  in 2003,  36.1% in
2002 and 44.3% in 2001 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  Brazilian  subsidiaries  in 2001. In 2002,  the Company  added a
subsidiary  in Mexico,  and the compound  sales of these three  markets  totaled 41.2%
 and 49.9% of the Companys sales, in 2002 and 2003, respectively.  The remaining sales
were to other foreign countries.

f)   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.

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 2002,  the Company  started  operations in Mexico.  Management  views
these  segments as key components of the entitys business and expects the segments 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).

F-45

---



The following table
below presents sales  information  about reportable  segments based on the location in
which the sale is originated for the years ending December 31.

|2003             | Chile   | Argentina | Brazil | Mexico  | Other (1) | Total  
|---------------- | ------- | --------- | ------ | ------- | --------- | -------
|                 |         |           |        |         |           |        
|                 | ThUS$   | ThUS$     | ThUS$  | ThUS$   | ThUS$     | ThUS$  
|                
|Sales            | 117,477 | 68,854    | 73,756 | 34,885  | (13,146)  | 281,826
|Operating income | 10,007  | 4,453     | 12,867 | (1,812) | (189)     | 25,326 
|                
|2002            
|                
|Sales            | 116,296 | 49,166    | 46,172 | 16,965  | (3,187)   | 225,412
|Operating income | 23,004  | 747       | 5,737  | 210     | 126       | 29,824 
|                
|2001            
|                
|Sales            | 140,961 | 70,500    | 38,829 | -       | (14,031)  | 236,259
|Operating income | 26,329  | 9,316     | 7,407  | -       | 108       | 43,160 

|(1) | Other
includes inter-company eliminations.
|--- | ------------------------------------------

The following table
presents 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,
|--------- | ------- | -----------------------------------------------------------------------------------------------------------------------------------
|          |         |                                                                                                                                    
|          | 2001    | 2002                                                                                                                               
|          |         |                                                                                                                                    
|          | ThUS$   | ThUS$                                                                                                                              
|Domestic:
|Chile     | 104,779 | 81,433                                                                                                                             
|Argentina | 50,228  | 15,847                                                                                                                             
|Brazil    | 45,980  | 49,760                                                                                                                             
|Mexico    | -       | 27,454                                                                                                                             
|Foreign   | 35,272  | 50,918                                                                                                                             
|          |         |                                                                                                                                    
|Total     | 236,259 | 225,412                                                                                                                            
|          |         |                                                                                                                                    

Foreign  revenue in
the table above  includes  sales from Chile,  Mexico,  Argentina  and Brazil to other
 countries.  Such amounts are detailed by major geographic area as follows:

|                                                            | 2001   | 2002   | 2003  
|----------------------------------------------------------- | ------ | ------ | ------
|                                                            |        |        |       
|                                                            | ThUS$  | ThUS$  | ThUS$ 
|                                                           
|North America                                               | 1,696  | 3,309  | 13,412
|Central and South America                                   | 21,635 | 18,652 | 24,409
|Asia                                                        | 10,476 | 27,269 | 24,731
|                                                            |        |        |       
|Europe                                                      | 1,465  | 1,688  | 4,141 
|                                                            |        |        |       
|Total export sales from Chile, Mexico, Argentina and Brazil | 35,272 | 50,918 | 64,693
|                                                            |        |        |       
|Export sales from Chile, Mexico Argentina and Brazil as a  
|percentage of total sales                                   | 14.93% | 22.58% | 22.95%
|                                                            |        |        |       

F-46

---



Enterprise wide sales
information based on the Companys products follows:

|                            | Sales year ended December 31,
|--------------------------- | -----------------------------
|                            |                              
|                            | 2001                         
|                            |                              
|                            | ThUS$                        
|                           
|Raw particle board          | 28,703                       
|Coated particle board       | 60,055                       
|Raw MDF                     | 113,821                      
|Coated MDF                  | 21,110                       
|Oriented Strand Board (OSB) | -                            
|Others                      | 12,570                       
|                            |                              
|Total                       | 236,259                      
|                            |                              

g)   Accounting
developments

Effective  January 1,
2003, the Company  adopted SFAS No. 146,  Accounting  for Costs  Associated  with Exit
or Disposal  Activities,which  addresses  financial  accounting and reporting for costs
 associated  with exit or disposal  activities  and nullifies  Emerging Issues Task Force
(EITF) Issue No. 94-3,  Liability  Recognition for Certain Employees Termination
Benefits and Other costs to Exit an Activity  (including  Certain Costs Incurred in a
 Restructuring).  The adoption of SFAS No. 146 did not have a material effect on the
Companys consolidated financial position, results of operation or cash flows.

Effective January 1,
2003, the Company adopted 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,
the Company must  disclose  and may be required to recognize a liability  for the fair
value of the  obligation  it assumes  under that guarantee.  The initial  recognition
 and  measurement  requirement  of FIN 45 is effective  for  guarantees  issued or
modified  after December 31, 2002. The adoption of FIN 45 did not have a material  effect
on the Companys  consolidated  financial  position,  results of operation or cash flows.

Effective February 1,
2003, the Company adopted FASB  Interpretation No. 46,  Consolidation of Variable
Interest Entities (FIN 46). FIN 46 addresses  consolidation by business  enterprises
of variable interest  entities.  Under this  interpretation,  certain entities known as
Variable  Interest Entities (VIEs) must be consolidated by the primary  beneficiary of
the entity.  The primary  beneficiary is generally  defined as having the majority of the
risks and rewards  arising from the VIE. For VIEs in which a  significant  (but not
majority)  variable  interest is held,  certain  disclosures are required.  FIN 46, as
revised by FIN 46R, was effective on February 1, 2003 for new transactions and is
effective for reporting  periods after March 15, 2004 for transactions  entered into
prior to February 1, 2003.  The Company has not entered into any new transactions subject
to FIN 46 since February 1, 2003.

In April 2003,  the
FASB issued SFAS No. 149,  Amendment of Statement  133 on Derivative  Instruments  and
Hedging  Activities.  This Statement  amends  and  clarifies  financial  accounting  and
 reporting  for  derivative  instruments,  including  certain  derivative instruments
 embedded in other contracts  (collectively  referred to as derivatives)  and for hedging
 activities  under FASB Statement No. 133,  Accounting for Derivative  Instruments and
Hedging  Activities.  The Company adopted the provisions of SFAS No. 149 on July 1,
2003, which did not have a material effect on the Companys consolidated financial
position, results of operation or cash flows.

F-47

---



In May 2003, the FASB
issued SFAS No. 150,  Accounting for Certain Financial  Instruments with Characteristics
of both Liabilities and Equity.  This  Statement  establishes  standards  of  how an
 issuer  classifies  and  measures  certain  financial  instruments  with characteristics
 of both  liabilities and equity.  It requires that an issuer classify a financial
 instrument that is within its scope as a liability (or an asset in some  circumstances).
 This  Statement is effective for financial  instruments  entered into or modified after
May 31, 2003,  and  otherwise is effective  July 1, 2003.  The Company  adopted the
 provisions  of SFAS No. 150 on July 1, 2003, which did not have a material effect on the
Companys consolidated financial position, results of operation or cash flows.

F-48

---