================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    ---------
                                    FORM 20-F
                                    ---------

(Mark One)

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

                                       OR

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                  For the fiscal year ended December 31, 2003

                                       OR

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

      For the transition period from              to

                         Commission file number 1-14656
                                  Quinenco S.A.
             (Exact name of Registrant as specified in its charter)
                                       N/A
                 (Translation of Registrant's name into English)
                                Republic of Chile
                 (Jurisdiction of incorporation or organization)

         Enrique Foster Sur 20, 14th Floor, Las Condes, Santiago, Chile
                    (Address of principal executive offices)

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

<TABLE>
<CAPTION>
             Title of each class                          Name of each exchange on which registered
             -------------------                          -----------------------------------------
<S>                                                                 <C>
American Depositary Shares representing Common Stock                New York Stock Exchange
Common Stock, without par value                                     New York Stock Exchange*
</TABLE>

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

 Securities registered or to be registered pursuant to Section 12(g) of the Act.
                                 Not applicable

 Securities for which there is a reporting obligation pursuant to Section 15(d)
                                  of the Act.
                                 Not applicable

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

     Common stock, without par value...........................1,079,740,079

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

                                 Yes |X| No |_|

    Indicate by check mark which financial statement item the registrant has
                               elected to follow.

                             Item 17 |_| Item 18 |X|

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<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

INTRODUCTION..................................................................ii

           INCORPORATION BY REFERENCE........................................iii
           EXCHANGE RATES AND CURRENCY.......................................iii
           PRESENTATION OF MARKET SHARE AND OTHER INFORMATION.................iv
           FORWARD-LOOKING STATEMENTS..........................................v

PART I.........................................................................1

           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.................................8
           Item 5.  Operating and Financial Review and Prospects..............71

Contractual Obligations and Commercial Commitments...........................112

           Contractual Commitments...........................................112
           Commercial Commitments............................................112
           Item 6.  Directors, Senior Management and Employees...............112
           Item 7.  Major Shareholders and Related Party Transactions........123
           Item 8.  Financial Information....................................125
           Item 9.  The Offer and Listing....................................128
           Item 10. Additional Information...................................131
           Item 11. Quantitative and Qualitative Disclosures About
                    Market Risk..............................................142
           Item 12. Description of Securities Other than Equity Securities...145

PART II......................................................................145

           Item 13. Defaults, Dividend Arrearages and Delinquencies..........145
           Item 14. Material Modifications of the Rights of Security
                    Holders and Use of Proceeds..............................145
           Item 15. Controls and Procedures..................................145
           Item 16. (Reserved)...............................................145

PART III.....................................................................146

           Item 17. Financial Statements.....................................146
           Item 18. Financial Statements.....................................146
           Item 19. Exhibits.................................................146


                                       i
<PAGE>

                                  INTRODUCTION

      Quinenco S.A. is a sociedad anonima abierta (open stock corporation)
organized under the laws of the Republic of Chile ("Chile"). Unless the context
otherwise requires, references herein to "Quinenco" are to Quinenco S.A. and
references herein to the "Company" are to Quinenco together with its
consolidated subsidiaries and the companies in which Quinenco holds significant
non-consolidated equity interests. References herein to "intermediate holding
companies" are to subsidiaries of Quinenco through which, in certain cases,
Quinenco holds its interest in the consolidated operating companies and certain
equity investments. Unless the context otherwise requires:

o     "Madeco" refers to Madeco S.A., a consolidated subsidiary 55.2%-owned by
      Quinenco, together with Madeco's consolidated subsidiaries.

o     "Telsur" refers to Compania Nacional de Telefonos, Telefonica del Sur
      S.A., a consolidated subsidiary, 73.6%-owned by Quinenco through its
      subsidiary VTR S.A. ("VTR"), together with Telsur's consolidated
      subsidiaries.

o     "Lucchetti" refers to Empresas Lucchetti S.A., a 95.9%-owned consolidated
      subsidiary of Quinenco, together with Lucchetti's consolidated
      subsidiaries as of December 31, 2003. On May 14, 2004, Lucchetti's name
      was changed to Industria Nacional de Alimentos S.A. All references herein
      will be made to Lucchetti.

o     "Hoteles Carrera" refers to Hoteles Carrera S.A., a 90.0%-owned
      consolidated subsidiary of Quinenco.

o     "CCU" refers to Compania Cervecerias Unidas S.A., in which Quinenco owns
      an indirect 30.8% non-consolidated equity investment, together with CCU's
      consolidated subsidiaries.

o     "LQIF" refers to LQ Inversiones Financieras S.A., a 99.9%-owned
      consolidated subsidiary of Quinenco.

o     "Banco de Chile" refers to Banco de Chile, a 52.2% non-consolidated
      subsidiary of Quinenco, together with its consolidated subsidiaries.

o     "Habitaria" refers to Habitaria S.A., in which Quinenco owns a 50.0%
      non-consolidated equity investment, together with Habitaria's consolidated
      subsidiaries.

o     "Entel" refers to Empresa Nacional de Telecomunicaciones S.A., in which
      Quinenco owns a 5.7% non-consolidated equity interest.

o     "Banco Edwards" refers to Banco de A. Edwards, a 51.2%-owned
      non-consolidated subsidiary of Quinenco, together with its consolidated
      subsidiaries as of December 31, 2001. Effective January 1, 2002, Banco
      Edwards was merged into Banco de Chile, which is the surviving entity.

o     "Plava Laguna" refers to Plava Laguna d.d., in which Quinenco owned a
      39.4% non-consolidated equity investment until August 20, 2001. On that
      date, Quinenco completed the divestiture of its 39.4% interest in Plava
      Laguna.

      Unless otherwise indicated, references herein to Quinenco's percentage
ownership of Madeco, Telsur, Lucchetti, Hoteles Carrera, CCU, Banco Edwards,
Habitaria, Entel and Plava Laguna are to the percentage of the effective
economic interest owned by Quinenco, and in certain cases, by intermediate
holding companies of Quinenco. References herein to Quinenco's percentage
ownership of Banco de Chile are to the percentage of voting rights owned by
Quinenco, either directly or through intermediate holding companies. See "Item
5. Operating and Financial Review and Prospects".

      The condensed financial statements of Banco de Chile, Telsur, Lucchetti,
Hoteles Carrera and Habitaria set forth in Item 4 of this Annual Report are
derived from the financial statements of the respective companies which, as of
and for the years ended December 31, 2001, 2002 and 2003 have been audited by
Ernst & Young Servicios Profesionales de Auditoria y Asesoria Limitada ("Ernst &
Young Limitada"), a member firm of Ernst & Young Global.


                                       ii
<PAGE>

      The condensed financial statements of Madeco set forth in Item 4 of this
Annual Report are derived from the financial statements of Madeco, which, as of
and for the years ended December 31, 2001, 2002 and 2003, have been audited by
Deloitte & Touche.

      The condensed financial statements of CCU set forth in Item 4 of this
Annual Report are derived from the financial statements of CCU, which, as of and
for the years ended December 31, 2001, 2002 and 2003 have been audited by
PricewaterhouseCoopers.

      The condensed financial statements of Entel set forth in Item 4 of this
Annual Report are derived from Entel's Annual Report corresponding to the years
2002 and 2003, the financial statements of which, as of and for the years ended
December 31, 2001, 2002 and 2003 have been audited by Deloitte & Touche.

                            REQUESTS FOR INFORMATION

      Written requests for copies of this Annual Report should be directed to
Quinenco S.A., Enrique Foster Sur 20, 15th Floor, Las Condes, Santiago, Chile,
Attention: Cindi Freeman, Investor Relations Officer. Facsimile requests may be
sent to (56-2) 245-6241. Telephone requests may be directed to (56-2) 750-7221
or (56-2) 750-7100. Email requests may be directed to cfreeman@lq.cl. Additional
information, including this Annual Report, may be found on the Company's website
at www.quinenco.cl or www.quinencogroup.com. The contents of the Company's
website are not incorporated into this Annual Report.

                           INCORPORATION BY REFERENCE

      The Company incorporates by reference into this Annual Report on Form 20-F
(1) Banco de Chile's financial statements at December 31, 2001, 2002 and 2003
and for the years ended December 31, 2001, 2002 and 2003 which are included as
Item 18 of Banco de Chile's Annual Report on Form 20-F for the year ended
December 31, 2003 ("Banco de Chile's Annual Report) and (2) Banco de Chile's
Guide 3 Data which is included in Item 4 of such Annual Report in the section
entitled "Information on the Company - Selected Statistical Information". (3)
Banco Edwards' financial statements at December 31, 2001 and for the year ended
December 31, 2001 which are included as Item 18 of Banco Edwards' Annual Report
on Form 20-F for the year ended December 31, 2001 ("Banco Edwards' Annual
Report"), (4) Banco Edwards' Guide 3 Data which is included in Item 4 of such
Annual Report in the section entitled "Information on the Company - Selected
Statistical Information".

      The Company also incorporates by reference into this Annual Report on Form
20-F (1) CCU's Chile's financial statements at December 31, 2001, 2002 and 2003
and for the years ended December 31, 2001, 2002 and 2003 which are included as
Item 18 of CCU's Annual Report on Form 20-F for the year ended December 31, 2003
("CCU's Annual Report).

                           EXCHANGE RATES AND CURRENCY

      Quinenco prepares its financial statements in Chilean pesos and in
conformity with Chilean generally accepted accounting principles ("Chilean
GAAP"). Chilean GAAP as applied to Quinenco differs in certain important
respects from generally accepted accounting practices in the United States of
America ("U.S. GAAP"). See Note 26 to the audited consolidated financial
statements of the Company at December 31, 2002 and 2003 and for the years ended
December 31, 2001, 2002 and 2003 (together with the notes thereto, the
"Consolidated Financial Statements") contained elsewhere in this Annual Report
for a description of the principal differences between Chilean GAAP and U.S.
GAAP as they relate to the Company and a reconciliation to U.S. GAAP of net
income and total shareholders' equity for the periods and as of the dates
therein indicated.


                                      iii
<PAGE>

      Unless otherwise indicated, financial data for all periods included in the
Consolidated Financial Statements and elsewhere throughout this Annual Report
have been restated in constant Chilean pesos as of December 31, 2003. See Notes
2(b) and 3 to the Consolidated Financial Statements. Transactions which are
described herein and which have taken place during 2004 are stated in Chilean
pesos as of the transaction date, unless otherwise indicated.

      In this Annual Report, references to "U.S. dollars", "dollars", "$" or
"US$" are to United States dollars, references to "pesos" or "Ch$" are to
Chilean pesos, and references to "UF" are to Unidades de Fomento, which are
inflation-indexed, peso-denominated monetary units. The UF rate is set daily in
advance based on changes in the previous month's inflation rate in Chile. See
Note 2(b) to the Consolidated Financial Statements. Percentages and certain
dollar and peso amounts contained herein have been rounded for ease of
presentation. Due to the effects of rounding, certain totals may not appear to
directly reflect the sums of their components. This Annual Report contains
translations of certain peso amounts into U.S. dollars at specified rates solely
for the convenience of the reader. These translations should not be construed as
representations that the peso amounts actually represent such dollar amounts or
could be converted into dollars at the rate indicated. Unless otherwise
indicated, such U.S. dollar amounts have been translated from pesos based on the
Dolar Observado (the "Observed Exchange Rate") reported by the Banco Central de
Chile (the "Central Bank of Chile" or "Central Bank") for December 31, 2003,
which was Ch$593.80 = US$1.00. The Federal Reserve Bank of New York does not
report a noon buying rate for pesos. The Observed Exchange Rate for June 10,
2004 was Ch$649.43 = per US$1.00.

               PRESENTATION OF MARKET SHARE AND OTHER INFORMATION

      The market share and other operating and statistical data contained in
this Annual Report have been compiled by the Company based upon statistics and
other information obtained from several third-party sources.

      Market shares of bank loans, risk indexes and other operating and
statistical data for the financial services industry in Chile are estimated by
the Company based on information published by the Chilean Superintendency of
Banks and Financial Institutions ("SBIF").

      The Company's estimates of CCU's market share are based on estimates made
by CCU of market share data and related sales volume information. These
estimates are based on statistics published or made available to CCU by A.C.
Nielsen Chile S.A., or Nielsen, in the case of beer, soft drinks, mineral water
and wine sales in Chile; the Asociacion Nacional de Bebidas Refrescantes
(National Association of Soft Drinks, or ANBER) in the case of soft drinks and
mineral water; the Servicio Agricola Ganadero (Agricultural and Livestock
Service, or SAG) in the case of wine sales in Chile; and the Asociacion de Vinas
de Chile, A.G. (the Wineries of Chile Association) in the case of Chilean wine
exports. CCU believes that, due to the methodologies used, the statistics
provided by these sources in some cases do not accurately reflect its market
share or industry sales volumes. For example, the Nielsen sampling base includes
only the metropolitan areas of Chile and not the rural areas of the country,
where CCU believes its beer market share is higher than in the metropolitan
areas, due to its distribution system. Similarly, data regarding the size of the
Chilean soft drink and mineral water markets and market shares do not coincide
with publicly available information of CCU's sales volume and its competitors.
As a consequence, CCU has revised the share estimates from the sources
identified above for Chilean beer sales, soft drink and mineral water sales and
wine sales in Chile to reflect what its believes is a more accurate measure of
market shares, taking into account:

o     reports published by the Instituto Nacional de Estadisticas (the Chilean
      National Institute of Statistics, or the INE),

o     CCU's internal sales data,

o     sales information filed publicly by its competitors,


                                       iv
<PAGE>

o     equity research analyst reports, and

o     import and export reports made available by Chilean and Argentine customs
      authorities.

      Most of the above information is also used to estimate Argentine beer
market share.

However, CCU's revised estimates have not been confirmed by independent sources.
Certain amounts, including percentage amounts, which appear in this annual
report have been rounded and may not sum exactly to the totals shown.

      Market share, volume and consumption data with respect to Lucchetti's food
products business in Chile are based on data supplied by Nielsen Chile. Because
Nielsen Chile's reports primarily cover supermarket volume sales in the Santiago
Metropolitan Region and urban centers in the remaining regions of Chile, the
Company's estimates of market share for its food products in the country as a
whole are based in part on information made public by the Company's competitors
and on its own periodic analysis. Consumption and market share data for the
Company's pasta businesses in Peru and Argentina are estimated by the Company on
the basis of information supplied by Samimp S.A. and A.C. Nielsen Argentina
S.A., respectively.

      The Company estimates market share and other operating and statistical
data with respect to its telecommunications business in Chile on the basis of
information supplied by the Chilean Undersecretary of Telecommunications and on
its own analysis of information provided by market participants, primarily
Compania de Telecomunicaciones de Chile ("Telefonica CTC"), the leading fixed
line telephony provider in Chile.

      The Company bases its estimates of market share and other operating and
statistical data with respect to Madeco's manufacturing businesses on its own
analysis of available information which includes: (i) Madeco's internal
production and sales data; (ii) import and export reports made available by
customs' authorities in each country in which Madeco operates; (iii) copper
sales reports from the Corporacion Chilena del Cobre (The Chilean Copper
Corporation); (iv) production reports from Madeco's suppliers of copper rods;
(v) import and export reports provided by Central Banks; (vi) sales information
filed publicly by some of Madeco's competitors; and (vii) information informally
obtained from market participants and Madeco's suppliers. No third parties or
other independent companies have provided estimates or confirmed Madeco's market
share calculations and estimates. Sources that use methodologies which are not
identical to Madeco's may produce different results.

      Occupancy rates and market share data for the Company's hotel business are
estimated by the Company on the basis of information collected from market
participants.

      Habitaria bases its market share estimates on figures provided by the
Camara Chilena de la Construccion (The Chilean Construction Association) and on
reports and analysis generated internally.

      Unless otherwise specified, per capita consumption data for countries in
which the Company operates and all regions within them are based on relevant
volume and consumption information provided by the sources described in this
section and on data derived by the Company from the most recent public censuses
of populations.

      Sources other than the Company use methodologies which are not identical
to the Company's and may produce results that differ from the Company's own
estimates.

                           FORWARD-LOOKING STATEMENTS

      This Annual Report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as


                                       v
<PAGE>

amended. These statements relate to analyses and other information which are
based on forecasts of future results and estimates of amounts not yet
determinable. They also relate to the Company's future prospects, development
and business strategies.

      These forward-looking statements are identified by the use of terms and
phrases such as "anticipates", "believes", "could", "expects", "intends", "may",
"plans", "predicts", "projects", "will" and similar terms and phrases. The
Company cautions the reader that actual results could differ materially from
those expected by the Company, depending on the outcome of certain factors,
including, without limitation (1) adverse changes in the Chilean economy with
respect to rates of inflation and economic growth, currency devaluations and
other factors, (2) adverse changes in the international markets for the
Company's products, including markets in other Latin American countries, such as
Brazil and Argentina, as well as markets in Asia and (3) other factors discussed
under "Item 4B. Business Overview", "Item 5. Operating and Financial Review and
Prospects" and "Item 7A. Major Shareholders" herein. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to release publicly the
result of any revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof, including, without
limitation, changes in the Company's business strategy or planned capital
expenditures, or to reflect the occurrence of unanticipated events.


                                       vi
<PAGE>

                                     PART I

Item 1. Identity of Directors, Senior Management and Advisers

      Not applicable.

Item 2. Offer Statistics and Expected Timetable

      Not applicable.

Item 3. Key Information

A. Selected Financial Data

      The selected consolidated financial information for the Company included
in the following table should be read in conjunction with, and is qualified in
its entirety by reference to, the Consolidated Financial Statements of the
Company, including the notes thereto, appearing elsewhere in this Annual Report.
The summary financial data for the Company as of and for the years ended
December 31, 1999, and 2000 is derived from the Consolidated Financial
Statements of the Company which have been audited by PricewaterhouseCoopers,
independent accountants. The summary financial data for the Company as of and
for the years ended December 31, 2001, 2002 and 2003 is derived from the
Consolidated Financial Statements of the Company, which have been audited by
Ernst & Young Limitada, independent accountants and a member firm of Ernst &
Young International, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such reports given on the authority of
said firm as experts in accounting and auditing.

      The Consolidated Financial Statements of the Company have been prepared in
accordance with Chilean GAAP, which differs in certain material respects from
U.S. GAAP. Note 26 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 net income and
shareholders' equity for the periods and as of the dates covered thereby.

      In accordance with Chilean GAAP, financial data included in the
Consolidated Financial Statements have been restated in constant Chilean pesos
of December 31, 2003. See Notes 2 b) and 3 to the Consolidated Financial
Statements.


                                       1
<PAGE>

<TABLE>
<CAPTION>
                                                                        At or for the Year Ended December 31,
                                        ------------------------------------------------------------------------------------------
                                             1999            2000           2001           2002           2003            2003
                                             ----            ----           ----           ----           ----            ----
                                                                           Restated       Restated
                                              (in millions of constant Ch$ or thousands of U.S. dollars, except per share amounts)
<S>                                     <C>            <C>             <C>            <C>            <C>              <C>
QUINENCO CONSOLIDATED
Income Statement Data:
Chilean GAAP:
Net sales..............................    Ch$456,678     Ch$484,541      Ch$493,141     Ch$400,262     Ch$357,379     US$601,852
Cost of sales..........................      (371,558)      (386,833)       (391,781)      (319,101)      (285,027)      (480,006)
Administrative and selling expenses....      (107,665)       (80,896)        (83,139)       (70,781)       (59,605)      (100,379)
                                           ----------     ----------      ----------     ----------     ----------     ----------
Operating income (loss)................       (22,545)        16,812          18,221         10,380         12,747         21,467
Operating income (loss) per share......     Ch$(20.88)      Ch$15.57        Ch$16.88        Ch$9.61       Ch$11.81        US$0.02
Interest income........................        21,816          9,132           8,259          5,401          2,928          4,932
Non-operating income...................       297,336         35,679         107,084         33,878        119,528        201,292
Interest expense.......................       (44,874)       (39,635)        (61,387)       (51,234)       (35,192)       (59,266)
Non-operating expense..................       (57,125)       (36,501)        (72,597)       (86,545)       (66,439)      (111,887)
Price-level restatement gain (loss)....        14,128         (6,407)        (11,060)        (8,985)         2,876)         4,844
                                           ----------     ----------      ----------     ----------     ----------     ----------
Non-operating results (1)(2)(3)
  (4)(5)(6)............................       231,281        (37,732)        (29,701)      (107,485)        23,701         39,913
                                           ----------     ----------      ----------     ----------     ----------     ----------
Income (loss) before taxes and
  minority interests...................       208,736        (20,920)        (11,480)       (97,105)        36,448         61,380
Income taxes...........................       (24,029)         7,617           4,941            143         (2,569)        (4,326)
                                           ----------     ----------      ----------     ----------     ----------     ----------
Income (loss) before minority interest.       184,707        (13,303)         (6,539)       (96,962)        33,879         57,054
Minority interest......................        (4,685)         7,245          22,673         20,727          3,816          6,427
                                           ----------     ----------      ----------     ----------     ----------     ----------
Net income (loss)......................    Ch$180,022      Ch$(6,058)      Ch$16,134     Ch$(76,235)     Ch$37,695      US$63,481
                                           ==========     ==========       =========    ===========      =========      =========
Net income (loss) per share............     Ch$166.73       Ch$(5.61)       Ch$14.94      Ch$(70.60)      Ch$34.91        US$0.06
Dividends declared per share...........       Ch$8.37       Ch$48.85           Ch$--        Ch$5.95          Ch$--          US$--
U.S. GAAP:
Net sales (Non-financial services)
  from continuing operations...........    Ch$354,709     Ch$381,149      Ch$403,392     Ch$314,975     Ch$298,994     US$503,531
Net interest revenue and expenses
  (Financial services) (2)(3)..........        27,013        109,088         242,605        262,805        227,249        382,703
Net income (loss) from continuing
  operations...........................       203,099        (11,401)         18,732        (48,227)        61,560        103,671
Loss from discontinuing operations,
  net of taxes and minority interest...      (11,797)         (9,297)         (6,118)       (34,863)        (2,543)        (4,283)
Net income (loss) .....................    Ch$191,302     Ch$(20,698)      Ch$12,614     Ch$(83,090)     Ch$59,017      US$99,389
Net income (loss) on continuing
  operations per share.................        188.10         (10.56)          17.35         (44.66)         57.01           0.10
Net income (loss) on discontinued
  operations per share.................        (10.93)         (8.61)          (5.67)        (32.28)         (2.36)         (0.01)
Net income (loss) per share ...........     Ch$177.17      Ch$(19.17)       Ch$11.68      Ch$(76.95)      Ch$54.65        US$0.09
Balance Sheet Data: (at year end)
Chilean GAAP:
Cash and cash equivalents..............    Ch$137,022     Ch$140,893       Ch$55,046      Ch$94,018      Ch$56,309      US$94,828
Total current assets...................       431,409        399,391         276,461        261,177        249,057        419,429
Property, plant and equipment..........       472,922        439,134         434,621        396,391        325,777        548,631
Total assets...........................     1,458,052      1,463,151       1,624,161      1,538,470      1,391,360      2,343,146
Current liabilities....................       330,775        351,755         266,279        306,860        161,911        272,670
Long-term liabilities..................       272,911        318,414         559,712        514,684        499,068        840,464
                                           ----------     ----------      ----------     ----------     ----------     ----------
Total liabilities......................       603,686        670,169         825,991        821,544        660,979      1,113,134
Minority interest......................       111,684        109,751          93,491         80,107         96,359        162,275
Shareholders' equity...................       742,682        683,231         704,679        636,820        634,022      1,067,737
Number of shares ...................... 1,079,740,079  1,079,740,079   1,079,740,079  1,079,740,079  1,079,740,079
U.S. GAAP:
Total assets...........................  Ch$4,079,994   Ch$4,448,287   Ch$10,922,202   Ch$9,653,989  Ch$10,064,751  US$16,949,732
Non-financial services long-term
  liabilities..........................       238,564        292,223         495,569        484,176        463,369        780,345
Financial services borrowings..........     2,351,782      2,499,722       2,123,483      2,727,895      2,820,734      4,750,310
Capital stock..........................       459,292        459,292         459,292        459,292        459,292        773,479
Shareholders' equity...................       728,939        750,372         701,528        622,764        647,965      1,091,218
</TABLE>

                                       2
<PAGE>
-----------------
(1)   In 1999, non-operating results included net gains on the sales of VTR
      Hipercable (Ch$80,615 million) and O'Higgins Central Hispanoamericano
      (OHCH) (Ch$179,472 million). Non-operating results included net gains on
      the sales of shares of Entel of Ch$7,912 million in 2000 and Ch$51,567
      million in 2001.

(2)   In 1999, Quinenco acquired a 51.2% interest in Banco Edwards. The
      consolidated financial statements of the Company under Chilean GAAP did
      not include the financial statements of Banco Edwards because banking
      operations are generally not consolidated with non-financial businesses in
      Chile. Under U.S. GAAP, the financial statements of Banco Edwards were
      consolidated. The income statement information for the Company includes
      the operations of Banco Edwards from the last quarter of 1999 until its
      merger with Banco de Chile on January 1, 2002.

(3)   On March 27, 2001, Quinenco's interest in Banco de Chile reached 52.7%.
      Under Chilean GAAP, the consolidated financial statements of the Company
      do not include the financial statements of Banco de Chile because banking
      operations are generally not consolidated with non-financial businesses in
      Chilean GAAP. Under U.S. GAAP, the financial statements of Banco de Chile
      are consolidated. The income statement information under Chilean GAAP for
      Banco de Chile includes the operations of Banco de Chile from January 1,
      2001.

(4)   For the year ended December 31, 2000, Lucchetti Argentina's balance sheet
      was deconsolidated and the investment was adjusted to net realizable value
      resulting in a loss of Ch$7,618 million.

(5)   For the year ended December 31, 2002, Lucchetti Peru made non-recurring
      charges related to its plant closure in January 2003 of Ch$30,110 million.

(6)   In 2003, Quinenco received an arbitration settlement payment of Ch$36,035
      million, included with non-operating results for the year ended December
      31, 2003.

Dividends

      The following table sets forth a five-year summary of dividends per share:

<TABLE>
<CAPTION>
               Period (1)               Cash Dividend Per Share  Cash Dividend per Share
               ----------               -----------------------  -----------------------
                                           (in constant Ch$)       (U.S. dollars (2))
<C>                                              <C>                      <C>
2000.................................            48.85                    0.08
2001.................................               --                      --
2002.................................             5.95                    0.01
2003.................................               --                      --
2004 (on January 9)..................            11.25                    0.02(3)
2004 (on May 11).....................             6.21                    0.01(4)
</TABLE>

-------------------
(1)   Indicates year of payment. The dividend distribution corresponds to the
      distribution of net income of the previous year.

(2)   Based on the exchange rate in effect on December 31 of each year.

(3)   Based on the exchange rate in effect on January 9, 2004.

(4)   Based on the exchange rate in effect on May 11, 2004.

Exchange Rates

      Prior to 1989, Chilean law permitted the purchase and sale of foreign
currency only in those cases explicitly authorized by the Central Bank of Chile
("the Central Bank"). The Central Bank Act, which was enacted in 1989,
liberalized the rules that govern the ability to buy and sell foreign currency.
The Central Bank Act now empowers the Central Bank to determine that certain
purchases and sales of foreign currency specified by law must be carried out in
the Formal Exchange Market. The Formal Exchange Market is formed by banks and
other entities so authorized by the Central Bank. All payments and distributions
with respect to the Company's American Depositary Shares ("ADSs") referred to in
this Annual Report must be transacted in the Formal Exchange Market.

      For purposes of the operation of the Formal Exchange Market, the Central
Bank sets a reference exchange rate (dolar acuerdo) (the "Reference Exchange
Rate"). The Reference Exchange Rate is reset


                                       3
<PAGE>

monthly by the Central Bank, taking internal and external inflation into
account, and is adjusted daily to reflect variations in parities between the
Chilean peso and each of the U.S. dollar, the Japanese yen and the Euro.
Authorized transactions by banks were generally conducted within a certain band
above or below the Reference Exchange Rate. In January 1992, the Central Bank
reduced the Reference Exchange Rate by 5% and widened the band for transactions
in the Formal Exchange Market from 5% to 10%. In November 1994, the Central Bank
reduced the Reference Exchange Rate by approximately 10%. In November 1995, the
Central Bank reduced the Reference Exchange Rate by approximately 2%. In January
1997, the Central Bank widened the band for transactions in the Formal Exchange
Market to 12.5%. On June 25, 1998, the Central Bank reduced the band for
transactions in the Formal Exchange Market to 2% above and 3.5% below the
Reference Exchange Rate. At that time, the Central Bank also announced the
elimination of a fixed 2% (peso re-valuing) factor which had hitherto been taken
into account in the annual resetting of the Reference Exchange Rate. In
September 1998, the Central Bank began a gradual widening of the exchange rate
band from 3.5% to 5% above and below the Reference Exchange Rate. In December
1998, the Central Bank set the exchange band at 8% above and below the Reference
Exchange Rate and provided for the gradual widening of the limits of the band at
a daily rate of 0.01375%. In order to keep fluctuations in the average exchange
rate within certain limits, the Central Bank intervened by buying or selling
foreign currency on the Formal Exchange Market. In September 1999, the Central
Bank decided to suspend its formal commitment to intervene in the exchange
market to maintain the limits of the band, and decided to intervene in the
market only under extraordinary circumstances and with advance notification. The
Central Bank also committed itself to provide periodic information about the
levels of its international reserves. The Reference Exchange Rate was maintained
as a medium-term reference for the market and to be used in contracts entered
into using such rate. The Observed Exchange Rate is the average exchange rate at
which commercial banks conduct authorized transactions on a given date in Chile,
as determined by the Central Bank. The Central Bank generally carries out its
transactions at the spot market rate. Before the suspension of the band,
however, when commercial banks sought to buy U.S. dollars from the Central Bank,
or sought to sell U.S. dollars to the Central Bank, the Central Bank made such
sales up to 2% over the Reference Exchange Rate and carried out such purchases
at 3.5% under the Reference Exchange Rate. Authorized transactions by banks are
generally conducted at the spot market rate. Historically, such rate fluctuated
within the band set by the Central Bank with respect to the Reference Exchange
Rate. No assurances can be given that the Central Bank will not establish band
limits again.

      Purchases and sales of foreign currency effected outside the Formal
Exchange Market are carried out in the Mercado Cambiario Informal (the "Informal
Exchange Market"). The Informal Exchange Market reflects the supply and demand
for foreign currency. There are no limits imposed on the extent to which the
rate of exchange in the Informal Exchange Market can fluctuate above or below
the Observed Exchange Rate. On June 10, 2004, the average exchange rate in the
Informal Exchange Market was Ch$647.45 per U.S. dollar and the U.S. dollar
Observed Exchange Rate was Ch$649.43 per U.S. dollar.

      The following table sets forth the low, high, average and period-end
Observed Exchange Rates for U.S. dollars for each of the indicated periods
starting in 1998 as reported by the Central Bank the following day. The Federal
Reserve Bank of New York does not report a noon buying rate for Chilean pesos.


                                       4
<PAGE>

                          Daily Observed Exchange Rate
                                  (Ch$ per US$)

Period                              Low(1)   High(1)   Average(2)  Period - end
------                              ------   -------   ----------  ------------
1999 ...........................    468.69    550.93     508.78       530.07
2000 ...........................    501.04    580.37     539.49       573.65
2001 ...........................    557.13    716.62     634.94       654.79
2002 ...........................    641.75    756.56     688.94       718.61
2003 ...........................    593.10    758.21     691.40       593.80
December 2003...................    593.10    617.85     602.90       593.80
January 2004....................    559.21    596.78     573.64       591.42
February 2004...................    571.35    598.60     584.31       592.87
March 2004......................    588.04    623.21     603.91       616.41
April 2004......................    596.61    624.98     608.19       624.98
May 2004........................    622.25    644.42     635.76       636.02
June 2004 (through June 10).....    640.96    649.43     642.90       649.43

---------------------
Source: Central Bank of Chile

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

(2)   The average of monthly average rates during the period reported.

D. Risk Factors

Certain Considerations Relating to Chile and Other Countries in Latin America

      The Company is predominantly engaged in business in Chile. Consequently,
its results of operations and financial condition are to a large extent
dependent on the overall level of economic activity in Chile. The Chilean
economy has had GDP growth rates of (0.8%), 4.2%, 3.1%, 2.1% and 3.2% for the
years 1999, 2000, 2001, 2002 and 2003, respectively. There can be no assurance
regarding future rates of growth relating to the Chilean economy. Some of the
factors that would be likely to have an adverse effect on the Company's business
and results of operations include future downturns in the Chilean economy, a
return to the high inflation experienced by Chile in the 1970s and a devaluation
of the Chilean peso relative to the U.S. dollar.

      In addition to their operations in Chile, some of the Company's businesses
operate in and export to Argentina, Brazil, Peru and other countries in Latin
America that have at various times in the past been characterized by volatile
and frequently unfavorable economic, political and social conditions. The
Company's business, earnings and asset values may be materially and adversely
affected by developments with respect to inflation, interest rates, currency
fluctuations, government policies, price and wage controls, exchange control
regulations, taxation, expropriation, social instability and other political,
economic or diplomatic developments in or affecting the specific countries in
which the Company operates and Latin America in general.

      In recent years, Argentina has suffered a prolonged economic recession
which culminated in an economic crisis in late 2001. During 2003, the Argentine
economy has partially stabilized as a result of measures adopted by the
Argentine government, including restrictions on bank deposits and withdrawals,
exchange controls, suspension of payments of external debt and the abrogation of
Argentine peso convertibility. The economic deterioration in Argentina
materially adversely affected the operations of Quinenco's subsidiary, Madeco,
in Argentina. See "Item 4. Information on the Company - Business Overview -
Manufacturing--Madeco" and "Item 5. Operating and Financial Review and Prospects
- E. Trend Information".

      In recent months, the Argentine government began restricting natural gas
exports to Chile due to supply problems in that country. Prior to this
restriction, Chile imported virtually all of its natural gas needs from
Argentina. While the Argentine gas supply restriction has not to date materially
affected CCU or Madeco's costs, it is not yet clear whether and to what extent
the restriction may affect these companies costs in the future.


                                       5
<PAGE>

Certain Considerations Relating to the Company

      Future Capital Needs

      The Company's operations to date have required substantial amounts of
capital, and Quinenco expects that the Company will be required to contribute
substantial additional amounts of capital to support or expand existing
businesses and to enter additional businesses in the future. In prior periods,
Quinenco and its businesses have met capital needs through internally generated
funds and issuances of debt and equity securities. There can be no assurance
that capital will be available in the future as needed on reasonable terms, and
the inability to obtain capital would constrain the Company's ability to support
and/or expand its existing businesses and to maintain or enter new businesses.
An unavailability of capital on reasonable terms could have a material adverse
effect on the Company's financial condition and results of operations.

      Holding Company Structure

      As a holding company, the level of Quinenco's income and its ability to
pay debt service obligations and dividends depend primarily upon receipt of
dividends and distributions from its subsidiaries, equity investments and
related companies. The payment of dividends by such subsidiaries, equity
investments and related companies is, in certain instances, subject to
restrictions and is contingent upon their earnings and cash flows. In addition,
Quinenco's level of income has largely depended on the periodic sale of assets
held for investment. There can be no assurance that Quinenco will be able to
continue to rely on certain subsidiaries' dividends and distributions, or that
the Company will be able to generate the level of gains on the sale of
investments that it has shown in the past.

      Equity Price Risk

      Many of the Company's businesses are publicly traded entities whose equity
value may vary depending on market value fluctuations. The equity value of
Quinenco's investments could be affected by downturns in the Chilean securities
markets and other securities markets, including the New York Stock Exchange,
where the equity securities of CCU, Madeco and Banco de Chile are also traded.
Quinenco and its businesses may also experience low trading volumes, which could
negatively affect the stocks' share price and liquidity.

      On March 9, 2004, Anheuser-Busch Companies Inc. ("Anheuser- Busch")
informed CCU that it was considering a possible disposition, through an
underwritten secondary offering in Chile and in the international markets, of
the 20% interest it currently holds in CCU. As requested by Anheuser-Busch, CCU
is negotiating the form and conditions under which such possible offering might
be effected with the support of CCU's management. As of the date of this annual
report, there can be no assurance that Anheuser-Busch will consummate a
secondary offering or other disposition of CCU's shares, and what effect, if
any, a disposition could have on CCU's share price.

      The Company's Businesses

      Quinenco believes that its businesses face an increasingly high level of
competition in the industries in which they operate. This increased competition
is in part a result of recent consolidation in some of the industries in which
these businesses operate. Increased competition is manifested in prices, costs
and sales volumes of the products and services produced and marketed by
Quinenco's businesses. While the Company expects that its businesses, based on
their past experience and track records, will be able to continue to
successfully compete within their industries, there is no assurance that
competition will not continue to increase in the future, including a possible
ongoing trend of consolidation in certain industries. Increased competition
could affect the profit margins and results of


                                       6
<PAGE>

operations of Quinenco's businesses, which as a result, could materially and
adversely affect the dividend cash flow Quinenco receives from its businesses.

      Banking Regulation Restrictions

      Banco de Chile is subject to regulation by the SBIF. In addition, it is
subject to regulation by the Central Bank with regard to certain matters,
including interest rates and foreign exchange. Pursuant to the Chilean General
Banking Law, all Chilean banks may engage in additional businesses depending on
the risk of the activity and the strength of the bank. The Banking Law also
applies a modified version of the capital adequacy guidelines issued by the
Basle Committee on Banking Regulation and Supervisory Practices to the Chilean
banking system and limits the discretion of the SBIF to deny new banking
licenses. There can be no assurance that regulators will not in the future
impose more restrictive limitations on the activities of banks, including Banco
de Chile, than those that are currently in effect. Any such change could have a
material adverse effect on Banco de Chile's financial condition and results of
operations.

      Interest Rates and Foreign Currency Positions

      A portion of the Company's debt is subject to variable interest rates,
which could have an impact on the Company in periods in which interest rates
increase. A risk also exists with respect to exchange rate fluctuations on
assets and liabilities, including debt instruments maintained in foreign
currencies. See "Item 11 Quantitative and Qualitative Disclosures About Market
Risk - Interest Rate Risk".

Certain Considerations Relating to the Company's Shares and ADSs

      Majority Shareholder

      As of the date of this Annual Report, the Luksic Group, which consists of
Mr. Andronico Luksic Sr., his sons, Andronico Luksic Craig, Guillermo Luksic
Craig and Jean Paul Luksic Fontbona, and companies they control, beneficially
own approximately 82.4% of the shares of Quinenco. As long as the Luksic Group
beneficially owns a majority of the outstanding shares, they will be able to
elect a majority of the Directors of Quinenco and determine the outcome of the
voting on substantially all actions that require shareholder approval. See "Item
6. Directors, Senior Management and Employees" and "Item 7. Major Shareholders
and Related Party Transactions". There can be no assurance that the Luksic
Group's interests will not differ from the interests of other holders of the
Company's shares.

      Dividends Affected by Exchange Conditions

      The Company's ADSs trade in U.S. dollars. Fluctuations in the exchange
rate between certain Latin American currencies and the U.S. dollar are likely to
affect the market price of the ADSs. For example, since Quinenco's financial
statements are reported in Chilean pesos, a decline in the value of the Chilean
peso against the dollar would reduce the Company's earnings as reported in U.S.
dollars. Any dividend the Company may pay in the future would be denominated in
Chilean pesos. A decline in the value of the Chilean peso against the U.S.
dollar would reduce the U.S. dollar equivalent of any such dividend. A
devaluation of the Brazilian, Argentine and/or Peruvian currency could also
reduce the Company's earnings in Chilean pesos and therefore the earnings
reported in U.S. dollars.

      Holders of ADSs

      Due to the fact that holders of ADSs do not hold their shares directly,
they are subject to the following additional risks:

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


                                       7
<PAGE>

securities at a specific price, or that any of such transactions can be
completed within a specific time period.

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

      ADS holders may not receive copies of all reports from the Company or the
ADS depositary. Holders may have to go the ADS depositary's offices to inspect
any reports issued.

      In the event the Company or its publicly traded subsidiaries fail to meet
any of the continued listing requirements of the New York Stock Exchange or
"NYSE", the Company's or its subsidiaries' ADSs may become subject to delisting
at the option of the NYSE.

      In 2002 and 2003, the Company's subsidiary, Madeco, was not in compliance
with certain of the NYSE's continued listing requirements. However, Madeco was
informed by the NYSE on May 21, 2003 that as a result of actions taken by the
company which included a capital increase and ADR ratio change, among other
actions, Madeco had regained compliance with NYSE continued listing
requirements. There can be no assurance, however, that Madeco will meet the
continued listing requirements of the NYSE in the future.

      Eligibility for Investment by Chilean Pension Funds

      Since July of 2002, the Comision Clasificadora de Riesgo (the "Risk
Classification Commission"), which regulates the investment activities of
pension funds in Chile, has limited the amount of debt securities or common
shares that Chilean pension funds may invest in Madeco. There can be no
assurance regarding the future eligibility for investment in Madeco's financial
instruments and shares by Chilean pension funds.

Item 4. Information on the Company

A. History and Development of the Company

Overview

      The Company is one of the largest diversified companies engaged in the
industrial and services sectors in Chile. It has invested in five main sectors
of the economy: financial services; food and beverage; telecommunications;
manufacturing; and real estate and hotel administration.

      The Company, which is among the market leaders in each of its major
businesses, as of December 31, 2003 provided:

      o     banking and other financial services through Banco de Chile and,
            until it was merged with Banco de Chile on January 1, 2002, through
            Banco Edwards;

      o     beer, wine, soft drinks and other beverage production, bottling and
            distribution through CCU;

      o     food production and distribution through Lucchetti;


                                       8
<PAGE>

      o     fixed line telephony and other telecommunications services through
            Telsur;

      o     copper and aluminum products and flexible packaging products through
            Madeco;

      o     hotel services through Hoteles Carrera; and

      o     residential real estate through Habitaria.

      In addition, the Company holds a financial investment in Entel, a leading
Chilean telecommunications provider, which complements its existing investment
in the telecommunications sector.

      Quinenco, an open stock corporation, operates under the laws of the
Republic of Chile. It was founded in 1957 as Forestal Quinenco S.A., a company
engaged in logging and supplying wood to the Chilean coal mining industry. In
the mid-1960s, Andronico Luksic Sr. acquired a majority interest in the Company.
The Company's registered office is at Enrique Foster Sur 20, 14th Floor, Las
Condes, Santiago, Chile and its telephone number is (56-2) 750-7221. Quinenco's
authorized representative in the United States is CT Corporation System, located
at 111 Eighth Avenue, 13th Floor, New York, New York 10011, U.S.A. CT
Corporation System's phone number is (212) 894-8500.

      The Company's current structure is a result of transfers and
consolidations among Luksic Group companies at various times, principally in
September 1996. Prior to September 1996, the Luksic Group held interests in the
Company's businesses through several entities controlled by the Luksic family.
During September 1996, these interests were combined within Quinenco through a
series of transactions in order to consolidate the holdings of the Luksic Group.
As a result of these transactions, Quinenco became the principal company through
which the Luksic family is active in the industrial and financial sectors,
except that the Luksic Group's interests in mining, railways and water continue
to be held through another company. Although Quinenco continues to be the
principal company through which the Luksic Group participates in the industrial
and financial sectors, individual members of the Luksic family are not
restricted from carrying out investments in these sectors individually or
through other Luksic family companies.

      Companies controlled by Quinenco include Lucchetti, which was acquired in
1965, Hoteles Carrera, acquired in 1979, Madeco, acquired in 1983, and Telsur,
acquired in 1987. Quinenco's interest in CCU was acquired in a joint venture in
1986. Habitaria, a joint venture with Ferrovial Inmobiliaria Chile Ltda., was
established in 1998. The Company acquired control of Banco Edwards in 1999 and
control of Banco de Chile in 2001. Banco Edwards merged into Banco de Chile in
January 2002.

      As of the date of this Annual Report, the Luksic Group, which consists of
Mr. Andronico Luksic Abaroa, his sons, Andronico Luksic Craig, Guillermo Luksic
Craig and Jean Paul Luksic Fontbona, and companies they control, beneficially
own approximately 82.4% of the shares of Quinenco. As long as the Luksic Group
beneficially owns a majority of the outstanding shares, the Luksic Group will be
able to elect a majority of the Directors of Quinenco and to determine the
outcome of the voting on substantially all actions that require shareholder
approval. See "Item 6. Directors, Senior Management and Employees" and "Item 7.
Major Shareholders and Related Party Transactions".

DEVELOPMENTS DURING 2004

      Food and Beverage - Lucchetti

      Pursuant to a Memorandum of Understanding signed on December 22, 2003,
Lucchetti concluded the sale of 100% of the outstanding shares of Lucchetti
Chile S.A. ("Lucchetti Chile"), a wholly-owned subsidiary, to Inversiones y
Servicios Tresmontes Limitada and Inversiones y Servicios Corpora S.A. on March
31, 2004. Net proceeds from the sale amounted to Ch$9,462 million. Lucchetti
reported a gain on sale of Ch$1,276 million in connection with the disposal. The
sale agreement allows


                                       9
<PAGE>

for an adjustment to the final sales price for working capital as of March 31,
2004, the amount of which will be determined by independent auditors within a 90
day period following the closing.

      The assets of Lucchetti Chile represented approximately 85% of Empresas
Lucchetti's total consolidated assets. The company's remaining assets are mainly
composed of the remaining unsold assets of Lucchetti Peru, two commercial real
estate properties, deferred tax credits and a 50% interest in Calaf, a cookie
and candy manufacturer acquired in January 2004. The assets in Peru and the two
real estate properties are currently for sale.

      At Lucchetti's General Ordinary Shareholders' Meeting held on April 28,
2004, shareholders agreed to change Lucchetti's name to Industria Nacional de
Alimentos S.A. The name change became effective on May 14, 2004.

      During January 2004, Lucchetti completed the capital increase initiated in
December 2003. Total funds raised in the capital increase amounted to Ch$15,716
million, divided among 1,048,386,396 shares. Quinenco indirectly subscribed for
and purchased 1,040,000,000 shares for Ch$15,600 million, and as a result, its
interest in Lucchetti increased to 95.6%.

      Chilean corporate law requires that a company purchases the shares of any
shareholder not approving the sale of 50% or more of a company's assets if such
shareholder so chooses. In an extraordinary shareholders meeting held on January
12, 2004, shareholders approved the sale of Lucchetti Chile, which composed
approximately 85% of Lucchetti's total assets. The withdrawal price was
equivalent to the book value of the shares, adjusted for inflation, of Ch$8.5542
pesos per share. Between February 11, 2004 and March 12, 2004, shareholders
representing 60,492,760 shares exercised the option to have their shares
purchased by Lucchetti, including Inversiones Consolidadas S.A., a company
related to Quinenco's controlling shareholders, for 60,276,830 shares. All of
the shares purchased from shareholders were retired and together represented 2%
of the then-outstanding shares of Lucchetti.

      Food and Beverage - Joint Venture Between Lucchetti and CCU

      On January 12, 2004, Lucchetti and Embotelladoras Chilenas Unidas S.A.
("ECUSA"), a wholly-owned subsidiary of CCU, entered into a joint venture to
acquire the assets of Calaf S.A., a cookie and candy manufacturer, for Ch$6,656
million. Distribution of Calaf's products is being managed by ECUSA, utilizing
its existing distribution network for soft drinks. Both ECUSA and Lucchetti will
account for Calaf as an equity-method investment.

      Financial Services - Banco de Chile

      On March 25, 2004, Banco de Chile initiated a tender offer to repurchase
up to 1,701,994,590 shares, equivalent to 2.5% of its outstanding common stock,
for Ch$31 pesos per share. The tender offer expired on April 26, 2004.
Acceptance orders exceeded the share offering, and as a result, shares were
purchased on a pro rata basis of 34.03%. Capital and reserves were reduced by
Ch$52,762 million. Under Chilean regulations, Banco de Chile has up to two years
to resell the shares. As a consequence of the share repurchase and until such
time as Banco de Chile resells the shares, Quinenco's economic rights in Banco
de Chile have increased from 29.2% to 29.9%.

DEVELOPMENTS DURING 2003

      Quinenco

      On January 14, 2003, Quinenco S.A. announced that Quinenco and its joint
venture partner in Inversiones y Rentas S.A. ("IRSA"), the Schorghuber Group,
had agreed to put an end to the arbitration proceedings which had been underway
since 2001. See "Item 8. Financial Information - Legal Proceedings - IRSA". As
part of the agreement, the Schorghuber Group made a US$50 million payment
(historic value) to Quinenco on January 28, 2003.


                                       10
<PAGE>

      The existing shareholders' agreement between the parties was modified on
January 13, 2003 to allow the Schorghuber Group to sell its interest in IRSA to
Heineken International B.V. ("Heineken") within a three-year period provided
that certain conditions were met. On April 17, 2003, the Schorghuber Group gave
Quinenco formal notice of the sale of its interest in IRSA to Heineken Americas
B.V., a subsidiary of Heineken International B.V., in accordance with the terms
and conditions of the amended shareholders' agreement with Quinenco. As a
consequence, Heineken is a 50% partner in IRSA, the entity which holds a 61.6%
controlling interest in CCU.

      Terms of the agreement also specified that IRSA would propose to the Board
of Directors of CCU that it submit for consideration to its shareholders a
dividend distribution equivalent to 100% of its 2002 earnings and an additional
dividend distribution against CCU's retained earnings amounting to Ch$168,700
million (historic value), to be paid within 180 days in single or multiple
distributions. For further information see " - Food and Beverages - CCU".

      Finally, as part of the agreement reached to put an end to the conflict,
Southern Breweries Establishment ("SBE"), a 50%-owned indirect subsidiary of
CCU, agreed in principle to sell its interest in the Croatian brewery,
Karlovacka pivovara d.d. ("Karlovacka"), to Heineken at a sales price equivalent
to ten times its annual earnings from operations. The sale of Karlovacka
received regulatory approval and approval by the Boards of Directors of
Heineken, SBE, and its controlling entities, Lanzville Investments Establishment
and CCU. For further information see "Food and Beverages - CCU".

      On April 10, 2003, Quinenco announced that its wholly-owned subsidiary,
Hidroindustriales Overseas Company, had obtained a US$19 million loan (historic
value) from Andsberg Finance Corporation Ltd., a financial entity organized
under the laws of Bermuda, related to Quinenco's controlling shareholder, Mr.
Andronico Luksic Abaroa. For further information see "Item 7. Majority
Shareholders and Related Party Transactions - Related Party Transactions".

      Food and Beverage - CCU

      On February 27, 2003, CCU announced that pursuant to an extraordinary
shareholders' meeting held on February 26, 2003, it would pay from retained
earnings an extraordinary dividend amounting to Ch$168,700 million (historic
value). The extraordinary dividend was paid in three distributions between March
14, 2003 and October 10, 2003.

      On April 1, 2003, CCU announced that its 50%-owned indirect subsidiary,
SBE, had sold the 68.8% interest it held in a Croatian brewery, Karlovacka, to
Heineken. As a result of the divestiture, CCU reported an extraordinary gain of
Ch$20,114 million.

      At CCU's General Ordinary Shareholders' Meeting held on April 24, 2003,
pursuant to the agreement reached between Quinenco and the Schorghuber Group on
January 13, 2003, CCU's Board of Directors proposed a dividend distribution
equivalent to 100% of CCU's 2002 net distributable income. The dividend was
approved by shareholders, and the definitive distribution was paid on May 9,
2003.

      Food and Beverage - Lucchetti

      On January 6, 2003, Lucchetti's wholly-owned Peruvian subsidiary,
Lucchetti Peru S.A. ("Lucchetti Peru"), was notified by an official of the
Municipality of Chorrillos of the revocation of its license to operate its
industrial plant which lies adjacent to the Pantanos de Villa ecological reserve
on the outskirts of Lima, for alleged environmental violations. As a consequence
of the forced closing of the plant facilities, Lucchetti terminated its
activities in Peru. The company's book value of its Peruvian investment was
Ch$30,110 million as of December 31, 2002 (in constant pesos as of December 31,
2003), and the entire amount was charged against 2002 results from operations,
in accordance with Chilean GAAP. Lucchetti is currently attempting to sell its
Peruvian plant facilities. For further information, see "Business Overview -
Food & Beverage - Lucchetti".


                                       11
<PAGE>

      Lucchetti is seeking damages under an existing treaty between Peru and
Chile, which establishes that unsettled conflicts are subject to arbitration
under the auspices of the International Centre for Settlement of Investment
Disputes ("ICSID") in Washington, D.C. For further information, see "Legal
Proceedings- Lucchetti".

      Manufacturing - Madeco

      On February 18, 2003, pursuant to approval by shareholders at an
extraordinary shareholders' meeting held on November 14, 2002, Madeco initiated
a Ch$101,380 million (historic value) capital increase. On March 4, 2003,
Quinenco directly and indirectly subscribed for and purchased 2,058,353,792
shares for Ch$49,400 million (historic value).

      The voluntary offering period concluded on March 22, 2003. Subscribed and
paid capital amounted to Ch$51,314 million (historic value), divided in
2,138,097,727 shares. Following the close of the pre-emptive rights offering
period, Madeco initiated a bond capitalization process that concluded on March
31, 2003. Madeco's Series A and Series C bondholders capitalized a total of
154,876,051 shares at Ch$24 per share for an amount equivalent to Ch$3,717
million (historic value).

      As a result of the capital increase, Madeco issued a total of
2,292,973,778 shares. Total subscribed and paid capital as of April 1, 2003
amounted to 2,698,484,806 shares. As a result of the capital increase,
Quinenco's interest in Madeco increased from 53.4% to 84.3%.

      An additional 264,800,000 shares were sold in a public auction on the
Santiago Stock Exchange on June 6, 2003 for Ch$7,680 million (historic value).
As a result of the sale, Madeco's total outstanding shares increased to
2,963,284,806 shares. Quinenco did not subscribe for additional shares. As a
consequence, its interest in Madeco decreased from 84.3% to 76.8% as of the same
date.

      On August 20, 2003, in a public auction on the Santiago Stock Exchange, an
additional 1,156,803,602 shares were sold for Ch$32,403 million (historic
value), increasing total outstanding shares to 4,120,088,408. Quinenco did not
subscribe for additional shares, and as a consequence, its interest in Madeco
decreased to 55.2%.

      Funds raised in the capital increase, which in total amounted to Ch$95,114
million (historic value), were used to reduce liabilities and provide additional
working capital for the company.

      In June 2002, Madeco announced that it had been notified by Corning Inc.,
Madeco's joint venture partner in Optel, an optical fiber cable producer in
Brazil and Argentina, of Corning Inc.'s desire to liquidate the joint venture.
Madeco believed that Corning was attempting to unjustifiably terminate its
agreements with Madeco and filed an arbitration suit against its partner to
resolve the dispute. On November 11, 2003, Madeco was notified that the
arbitrators had resolved the dispute in favor of Corning. The arbitral decision
provided for the termination of the investment agreement governing the joint
venture, and as a result, Madeco lost certain rights over the appointment of
Optel's management and its rights to exercise a put option to sell its Optel
shares to Corning for US$18 million between January 2004 and December 2005
(consequently, the subsidiary was not consolidated with Madeco in its December
31, 2003 financial statements). In addition, the decision obliges the company to
agree to the liquidation of Optel at Corning's request. As a consequence of this
unfavorable ruling, Madeco recognized provisions of Ch$4,917 million in the
fourth quarter of 2003 in order to reflect the value of its 50% equity share in
Optel and costs associated with the ruling.

      Real Estate/Hotel Administration - Carrera

      On November 20, 2003, Hoteles Carrera sold its Santiago hotel and grounds
for UF832,000 (Ch$14,125 million) to the Chilean Ministry of Foreign Affairs.
Carrera recognized a loss on the sale of Ch$4,713 million.


                                       12
<PAGE>

      For additional information on the Company's capital expenditures and other
investments, see "Item 5 - Operating and Financial Review and Prospects -
Capital Expenditures and Other Investments".

B. Business Overview

Financial Services - LQIF

      The Company's investments in the financial services sector are held by a
99.9%-owned intermediate holding company of Quinenco, LQIF. LQIF was formed on
August 15, 2000 with initial capital of Ch$10 million (historic value). Since
its creation, it has served as the vehicle for the Company's investments in the
financial services sector, which, until their merger on January 1, 2002,
included a 51.2% interest in Banco Edwards and a 52.7% interest in Banco de
Chile. As a consequence of the merger, LQIF's interest in Banco de Chile, the
surviving entity, is now 52.2%.

      LQIF's interest in Banco de Chile is currently being accounted for as a
non-consolidated equity-method interest under Chilean GAAP, in accordance with
authorization from the Superintendency of Securities and Insurance ("SVS"). For
further information regarding the results of Banco de Chile, whose results are
not consolidated into the Company's financial statements, reference is made to
Banco de Chile's Annual Report on Form 20-F for the fiscal year ended December
31, 2003.

      At December 31, 2003, as a percentage of Quinenco's total investments, the
investment in Banco de Chile represented approximately 69% of total investments
at the corporate level, and as a percentage of total consolidated assets, the
investment represented 45% of total consolidated assets.

      LQIF Capital Increase. On January 3, 2002, the Board of Directors of
Quinenco's wholly-owned subsidiary, LQIF, approved a capital increase of
Ch$484,000 million (historic value) through the issuance of 500,000,000 new
shares. On January 22, 2002, Quinenco subscribed for 273,768,064 shares for
Ch$265,007 million (historic value). Proceeds from the capital increase were
used to reduce a portion of the indebtedness incurred as part of the Banco de
Chile acquisition.

      Prepayment of Obligation with Former Controlling Shareholders of Banco de
Chile. On June 3, 2002, Quinenco announced that its wholly-owned subsidiary,
LQIF, had prepaid a two-year note that had been granted by the ex-controlling
shareholders of Banco de Chile as part of the Banco de Chile share acquisition
in March of 2001. The obligation, which was originally scheduled to become due
in March of 2003, had an initial face value of UF12,437,783. The note was
prepaid with long-term financing obtained from national and international banks,
the proceeds from Quinenco's bond offering in 2001, dividend income received
from Quinenco's main operating companies and a US$70 million loan (historic
value) granted by a company related to Quinenco's controlling shareholder, the
Luksic Group.

      Creation of Inversiones LQ-SM S.A. On July 18, 2002, as part of an
organizational restructuring of LQIF, the Board of Directors of LQIF approved
the creation of a wholly-owned intermediate subsidiary, Inversiones LQ-SM S.A
("LQ-SM"). LQ-SM was subsequently formed on August 26, 2002. On the same date,
LQIF contributed 377,528,973 SM Chile Series A shares valued at Ch$7,721 million
(historic value) to LQ-SM as an initial capital contribution.

Financial Services - Banco de Chile

      The Company had a 52.2% interest in Banco de Chile's voting rights and
29.2% of the corresponding dividend rights as of December 31, 2003 and 2002. The
Company does not consolidate Banco de Chile's results, which are accounted for
on an equity-method investment basis in the consolidated financial statements of
Quinenco. For further information regarding the results of Banco de Chile,
reference is made to Banco de Chile's Annual Reports on Form 20-F for the fiscal
year ended December 31, 2003.

      Banco de Chile reported net income of Ch$130,553 million, of which
Ch$38,047 million corresponded to Quinenco's interest in 2003.


                                       13
<PAGE>

      Quinenco began acquiring shares of Banco de Chile in 1999, and as of
December 31, 1999 it had an 8% interest, through shares held directly in Banco
de Chile and through SM Chile, the holding company which, as of December 31,
2001, directly owned a 28% interest in Banco de Chile and indirectly owned an
additional 63.6% through its subsidiary, SAOS S.A. Quinenco continued to acquire
shares during 2000, and at December 31, 2000 it had a 12.3% interest.

      On December 14, 2000, Quinenco announced that it had entered into an
agreement with the controlling shareholder group of Banco de Chile, led by
Empresas Penta, to acquire, through its wholly-owned subsidiary, LQIF, an
additional 35.8% interest in Banco de Chile for UF19,766,052 (equivalent to
US$541.3 million on the announcement date). The acquisition was completed on
March 27, 2001.

      On February 6, 2001, the Company launched a tender offer on the Chilean
Stock Exchanges to acquire 5% of the outstanding shares of SM Chile S.A. ("SM
Chile"). The tender offer was successfully concluded on February 28, 2001. The
shares purchased included 28.4 million shares of SM Chile's Series A shares, 550
million shares of SM Chile's Series B shares, 21.5 million shares of SM Chile's
Series D shares and 29.2 million shares of SM Chile's Series E shares. The
shares acquired during the tender offer represented 5% of the outstanding shares
of each series of SM Chile. The cost of the share acquisition in connection with
the tender offer was Ch$36,212 million (pesos as of March 31, 2001).

      On March 27, 2001, Quinenco, through its wholly-owned subsidiary, LQIF,
acquired an additional 35.8% interest in Banco de Chile, pursuant to a purchase
agreement signed by Quinenco and the controlling shareholder group of Banco de
Chile on February 2, 2001. The interest in Banco de Chile was acquired through
the purchase of shares of Banco de Chile and SM Chile S.A. The total purchase
price was Ch$304,128 million (pesos as of March 31,2001).

      The shares purchased included 1,466.8 million ordinary shares of Banco de
Chile, which represented 3.3% of the outstanding shares of Banco de Chile, 79.5
million shares of SM Chile's Series A shares, which represented 14.0% of the
outstanding Series A shares of SM Chile, 4,144.1 million shares of SM Chile's
Series B shares, which represented 37.7% of the outstanding Series B shares of
SM Chile, 90.7 million shares of SM Chile's Series D shares, which represented
21.1% of the outstanding Series D shares of SM Chile and 18.6 million shares of
SM Chile's Series E shares, which represented 3.2% of the outstanding Series E
shares of SM Chile.

      The transaction was financed in part pursuant to a direct financing
agreement with the controlling shareholder group for UF12,437,783. Quinenco
obtained financing from local and international banks for the remaining amount.

      Combined with prior share purchases carried out in 1999 and 2000, the
Company's aggregate interest in Banco de Chile, as of March 27, 2001, reached
52.7%. As a consequence, Quinenco, through LQIF, became the bank's largest
shareholder. The carrying cost of the aggregate investment in Banco de Chile was
Ch$411,398 million as of March 31, 2001 (historic value).

      The dividend rights associated with Quinenco's 52.7% interest in Banco de
Chile represented 17.8% of the total dividend rights between March 27, 2001, and
December 31, 2001. See "- Business Overview, Banco de Chile" for a description
of the rights of the Central Bank over cash dividend distributions in connection
with Banco de Chile's subordinated debt obligation to the Chilean Central Bank.

      Merger of Banco Edwards with Banco de Chile. Pursuant to authorizations
from the SBIF and a majority of the shareholders from both banks, Banco de
Chile, a 52.7%-owned subsidiary of the Company and Banco Edwards, a 51.2%-owned
subsidiary of the Company, merged operations effective January 1, 2002. As a
consequence of the merger, Banco Edwards was absorbed by Banco de Chile, the
surviving entity and legal successor.


                                       14
<PAGE>

      Under the terms of exchange, Banco Edwards constituted 34% of the equity
of the surviving entity and Banco de Chile, 66% of the surviving entity. Each
Banco Edwards share was exchanged for 3.135826295 shares of Banco de Chile
common stock. Following the merger, Banco de Chile had 68,079,783,605 shares of
common stock outstanding, all of the same series.

      Following the merger, the Company, through LQIF, has a 52.2% interest in
the voting rights of Banco de Chile and a 29.2% economic interest corresponding
to dividend rights. Its interest includes 13,762.3 million ordinary shares of
Banco de Chile, which represent 20.2% of the outstanding shares of Banco de
Chile, 377.5 million shares of SM Chile's Series A shares, which represent 66.5%
of the outstanding Series A shares of SM Chile, 5,811.6 million shares of SM
Chile's Series B shares, which represent 52.8% of the outstanding Series B
shares of SM Chile, 223.4 million shares of SM Chile's Series D shares, which
represent 52.0% of the outstanding Series D shares of SM Chile and 47.9 million
shares of SM Chile's Series E shares, which represent 8.2% of the outstanding
Series E shares of SM Chile. As part of the merger agreement and an earlier
agreement with the Central Bank of Chile (the "Central Bank"), the Central Bank
has the rights to 42.8% of future cash distributions in connection with the
subordinated debt obligation Banco de Chile maintains with the Central Bank. See
"- Subordinated debt", below, for a description of the subordinated debt
obligation to the Central Bank.

      Founded in 1893, Banco de Chile, for much of its history, has been one of
the largest and most profitable Chilean banks in terms of return on assets and
shareholders' equity. It is a full-service financial institution engaged
principally in commercial banking in Chile, providing general banking services
to a diverse customer base through a wide variety of credit and non-credit
products, servicing all segments of the Chilean financial market. Its operations
are organized in six principal business areas - large corporations, middle
market companies, retail banking, international banking, treasury and money
market operations and operations through subsidiaries. Banco de Chile offers
international banking services through its branch in New York, its agency in
Miami, representative offices in Buenos Aires, Sao Paulo and Mexico City and a
worldwide network of correspondent banks. It also offers, through its
subsidiaries, a variety of non-banking financial services including securities
brokerage, mutual fund management, financial advisory services, factoring,
insurance brokerage, securitization, collection and sales services.

      According to information provided by the SBIF, Banco de Chile was the
second largest private bank in Chile in terms of total lending (net of interbank
loans), with an 18.5% market share as of December 31, 2003.

      Share Repurchase Program. On March 20, 2003, at an extraordinary
shareholders' meeting, Banco de Chile's shareholders approved the establishment
of a share repurchase program to be conducted on the various Chilean stock
exchanges on which the bank's shares are listed and/or through a tender offer
conducted in accordance with the Chilean Corporations Law. Up to one percent of
the bank's issued shares may be bought directly in the Chilean stock exchanges
in a twelve-month period, without requiring a tender offer. The repurchase
program has a duration of two years starting June 5, 2003.

      Under the terms of the share repurchase program, the maximum percentage of
shares to be repurchased cannot exceed the equivalent of three percent of issued
and outstanding shares and the minimum price that the bank can pay for the
shares is the weighted average of the closing prices of the shares as quoted by
the Santiago Stock Exchange for the 45 business days preceding the repurchase.
The maximum price that the bank can pay for the shares is 15% in excess of that
average. The Central Bank authorized the program on June 2, 2003, subject to
certain conditions and the SBIF authorized the program on July 2, 2003.

      On March 25, 2004, Banco de Chile's board of directors resolved to make a
tender offer for 1,701,994,590 of its shares, representing 2.5% of total capital
at a purchase price of Ch$31 per share. The tender offer expired on April 26,
2004. Before the expiration of the tender offer, Banco de Chile received


                                       15
<PAGE>

acceptance orders for a total of 5,000,844,940 shares. Given that the number of
acceptance orders received exceeded the number of shares, the bank was
authorized to repurchase, pursuant to the terms of the offer, shares on a
pro-rata basis. As a consequence of the share repurchase and until which time
Banco de Chile resells the shares, Quinenco's economic rights in Banco de Chile
increased from 29.2% to 29.9%.

      Any shares bought under the program must be sold within 24 months of their
respective acquisition. Otherwise, paid-in capital must be reduced by the amount
of the repurchased shares that were not so resold. Shareholders will have a
preferential right to acquire the repurchased shares if the bank decides to sell
them. However, shareholders will not have the benefit of this preferential right
if the board of directors approves the sale of up to one percent of issued
shares during a twelve-month period on any stock exchange inside or outside of
Chile.

      Subordinated debt. During the 1982-1983 economic crisis, the Chilean
banking system experienced significant instability due to, among other things, a
recession in most of the world's major economies accompanied by high
international interest rates, an overvalued peso, a lack of stringent banking
regulation and ineffective credit policies at most Chilean banking
organizations. The financial crisis required that the Central Bank and the
Chilean government provide assistance to most Chilean private-sector banks,
including Banco de Chile.

      During this period, Banco de Chile experienced significant financial
difficulties, and as a result, the Chilean government assumed administrative
control. In 1985 and 1986, Banco de Chile increased its capital and sold shares
representing 88% of its capital to more than 30,000 new shareholders. In 1987,
the SBIF returned control and administration of the bank to its shareholders.

      Subsequent to the 1982-1983 economic crisis, Banco de Chile sold certain
non-performing loans to the Central Bank at face value on terms that included a
repurchase obligation. The repurchase obligation was later exchanged for
subordinated debt issued in favor of the Central Bank. In November 1989,
pursuant to Law No.18,818, banks were permitted to repurchase the portfolio of
non-performing loans previously sold to the Central Bank for a price equal to
the economic value of such loans, provided that the bank assumed a subordinated
debt obligation equal to the difference between the face value of the loans and
the economic value paid. In November 1989, Banco de Chile repurchased its
portfolio of non-performing loans from the Central Bank and assumed the Central
Bank subordinated debt.

      The repayment terms of Banco de Chile's Central Bank subordinated debt,
which at December 31, 1989 equaled approximately US$1.75 billion, required that
a certain percentage of its income before provisions for the subordinated debt
be applied to repay the obligation. The Central Bank subordinated debt did not
have a fixed maturity and payments were to be made only to the extent that the
bank earned income before provisions for the Central Bank subordinated debt.

      In November 1996, pursuant to Law 19,396, Banco de Chile's shareholders
approved a reorganization by which Banco de Chile was converted to a holding
company named SM Chile S.A. that in turn organized a new wholly-owned banking
subsidiary named Banco de Chile to which it contributed all of its assets and
liabilities other than the Central Bank subordinated debt. SM Chile then created
a second wholly-owned subsidiary, Sociedad Administradora de la Obligacion
Subordinada S.A., or SAOS, that, pursuant to a prior agreement with the Central
Bank, assumed a new repayment obligation in favor of the Central Bank which
replaced the Central Bank subordinated debt in its entirety.

      This Central Bank indebtedness, for which SAOS is solely responsible and
for which there is no recourse to Banco de Chile or SM Chile, was equal to the
unpaid principal of the Central Bank subordinated debt that it replaced but had
terms that differed in certain respects, including a rescheduling of the debt
for a term of 40 years providing for equal annual installments and a pledge of
Banco de Chile shares as collateral for such debt. The Central Bank indebtedness
bears interest at a rate of 5.0% per year and is denominated in UF. SAOS is not
required to record the entire balance of the subordinated debt


                                       16
<PAGE>

obligation as a liability, but instead accrues a liability equal to its share of
dividends receivable from Banco de Chile. As a result, the subordinated debt is
not included under equity method investments in the Chilean GAAP financial
statements of Quinenco. The balance of the subordinated debt as of April 30,
2004, including accrued interest, was UF52,163,360.

      In exchange for assuming the Central Bank indebtedness, SAOS received from
SM Chile 63.6% of the shares of Banco de Chile, which serve as collateral for
the Central Bank indebtedness. As a result of its merger with Banco Edwards
effective on January 1, 2002, the percentage of Banco de Chile shares held by
SAOS decreased to 42%. Dividends received from Banco de Chile are the sole
source of SAOS's revenue, which it must apply to repay the Central Bank
indebtedness. However, under SAOS's agreement with the Central Bank regarding
SAOS's Central Bank indebtedness, Banco de Chile has no obligation to distribute
dividends to shareholders. To the extent dividend revenues are not sufficient to
pay the amount due on any installment, SAOS is permitted to maintain a
cumulative deficit balance with the Central Bank that SAOS commits to pay with
future dividends. In the event the cumulative deficit balance exceeds an amount
equal to 20% of the total capital of Banco de Chile, SAOS will be required by
the Central Bank to sell a sufficient number of shares of the stock owned by
SAOS to pay the entire deficit amount accumulated. In the event of any such sale
of shares, the shareholders of SM Chile have the right of first refusal with
respect to those shares. As of April 30, 2004, SAOS maintained a deficit balance
with the Central Bank of Ch$37,080 million, equivalent to 7.2% of Banco de
Chile's capital and reserves. As of the same date, Ch$102,438 million would have
represented 20% of the bank's capital and reserves.

      In the event that Banco de Chile's shareholders decide to retain and
capitalize all or part of its annual net income by distributing stock dividends
among its shareholders, the Central Bank has the option to require that the part
of such net income corresponding to the shares owned by SAOS be paid in cash to
SAOS. If Banco de Chile distributes stock dividends and the Central Bank does
not exercise the option to require cash, the resulting shares received by SAOS
are required to be sold by SAOS in the following 12 months. The shareholders of
SAOS have the right of first refusal with respect to such shares.

      The following diagram presents in summary form the ownership structure of
Banco de Chile as of December 31, 2003:

                                -----------------
                                  SM Chile S.A.
                                -----------------
                                       |      |
                                       |      |
                                       |      |  100%
                                       |       -------------------|
                                       |                          |
                                       |                          |
      ----------------                 |                  ---------------
           Public                      |  18.48%
        Shareholders                   |                     SAOS S.A.
      ----------------                 |                  ---------------
             |                         |                         |
             |                         |                         |
             |-------------------      |      -------------------|
                      39.52%    |             | 42.0%
                                |             |
                                |             |
                                ----------------
                                    BANCO DE
                                     CHILE
                                ----------------

      Strategy. Banco de Chile's long-term strategy is to maintain its position
as a leading bank in Chile, providing a broad range of financial products and
services to large corporations, small and mid-sized companies and individuals
nationwide. As part of its strategy, Banco de Chile operates under a


                                       17
<PAGE>

multi-brand approach in order to target its different market segments. The
strategy focuses on: (i) delivering superior service that responds to the
specific needs of its customers in each market segment; (ii) enhancing
profitability by increasing revenues from fee-based services through development
of new services and active cross-selling of such services to customers; (iii)
continuing to focus on measures that control costs and otherwise enhance
productivity to improve its existing efficiency standards; and (iv) further
developing its international products and services.


                                       18
<PAGE>

      The following table shows selected financial information of Banco de Chile
and its subsidiaries at or for the years ended December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
             Banco de Chile and subsidiaries (1)              2001                      2002                   2003
                                                              ----                      ----                   ----
                                                             (in millions of constant Ch$, except percentages)
<S>                                                   <C>                       <C>                    <C>
Interest revenue....................................    Ch$536,330                Ch$696,603             Ch$428,704
Interest expense....................................      (312,813)                 (325,338)              (204,234)
                                                      ------------              ------------           ------------
Net interest revenue................................       223,517                   371,265                224,470
Net interest margin.................................           3.9%                      4.5%                   2.7%

Provisions for loan losses..........................       (47,736)                 (101,650)               (60,069)
Total fees and income from services, net............        44,598                    79,407                103,389
Total other operating income, net...................         8,677                   (30,850)                96,391
Total Other income and expenses (net):
     Loan loss recoveries...........................        10,035                    12,033                 25,391
     Other income and expenses, net.................           132                   (17,999)               (16,643)
Minority interest...................................            (1)                       (1)                    (2)
Total operating expenses............................      (144,145)                 (250,517)              (224,436)
Loss from price-level restatement...................        (6,010)                   (9,692)                (4,036)
Income taxes........................................         1,406                     1,165                (13,902)
                                                      ------------              ------------           ------------
Net income..........................................     Ch$90,473                 Ch$53,161             Ch$130,553
                                                      ============              ============           ============

Total assets........................................  Ch$6,332,778              Ch$8,679,770           Ch$9,249,902
Total liabilities...................................     5,918,459                 8,055,358              8,554,226
Shareholders' equity................................       414,319                   624,412                695,676
Quinenco's interest % (2)...........................          52.7%                     52.2%                  52.2%
</TABLE>

------------------
(1)   Banco de Chile merged with Banco Edwards on January 1, 2002.

(2)   Corresponds to voting rights in Banco de Chile.

      The following table provides information on the composition of Banco de
Chile's loan portfolio and contribution to consolidated net income before tax by
segment for the year ended December 31, 2003:

<TABLE>
<CAPTION>
                                                                                           Consolidated net income
                                                           Loans                                before tax (1)
                                            ------------------------------------------     ------------------------
                                                 (in millions of constant Ch$, except for percentages)
<S>                                         <C>                                <C>                <C>
Large corporations.......................   Ch$2,606,504                         41.8%              Ch$50,583
Middle market companies..................      1,559,263                         24.9                  38,155
International banking....................        270,717                          4.3                  12,202
Retail banking...........................      1,732,369                         27.7                  36,561
Treasury and money market operations.....          8,501                          0.1                  19,142
Subsidiaries.............................         77,992                          1.2                  21,266
Other (adjustments and eliminations).....             --                           --                 (33,454)
                                            ------------                 -------------             ----------
   Total.................................   Ch$6,255,346                        100.0%             Ch$144,455
                                            ============                 =============             ==========
</TABLE>

------------------------
(1)   Consolidated net income before tax consists of the sum of operating
      revenues and other income and expenses, net, and the deduction for
      operating expenses and provisions for loan losses.

      The following table provides consolidated operating revenues allocated
among Banco de Chile's principal business areas:


                                       19
<PAGE>

<TABLE>
<CAPTION>
Banco de Chile and subsidiaries                                            Operating Revenues
                                                          -----------------------------------------------------
                                                                       2001        2002         2003
                                                          (in millions of constant Ch$, except for percentages)
<S>                                                                <C>          <C>         <C>
Large corporations..................................                Ch$61,991   Ch$91,578    Ch$88,286
Middle market companies.............................                   86,222     111,021      106,078
International banking...............................                   18,567       2,615       16,377
Retail banking......................................                   86,801     147,112      145,572
Treasury and money market operations................                   17,251      25,389       22,768
Subsidiaries........................................                   20,848      41,787       52,900
Other (adjustments and eliminations)................                  (14,888)        320       (7,731)
                                                                   ----------   ---------   ----------
   Total............................................               Ch$276,792     419,822   Ch$424,250
                                                                   ==========   =========   ==========
</TABLE>

      The following table provides a geographical market breakdown of Banco de
Chile's operating revenues:

<TABLE>
<CAPTION>

Banco de Chile and subsidiaries                                            Operating Revenues
                                                          -----------------------------------------------------
                                                                      2001         2002          2003
                                                          (in millions of constant Ch$, except for percentages)
<S>                                                                <C>          <C>          <C>
Chile                                                              Ch$262,263   Ch$418,701   Ch$409,587
     Banking operations.............................                  241,415      376,914      356,687
     Operations through subsidiaries................                   20,848       41,787       52,900
Foreign branch operations...........................                   14,529        1,121       14,663
     New York.......................................                   11,220      (1,473)       11,834
     Miami..........................................                    3,309        2,594        2,829
                                                                   ----------   ----------  -----------
Total                                                              Ch$276,792      419,822   Ch$424,250
                                                                   ==========   ==========  ===========
</TABLE>

      Large Corporations

      At December 31, 2003, Banco de Chile had approximately 2,117 large
corporate customers. Loans to large corporations totaled approximately
Ch$2,606,504 million at December 31, 2003, representing 41.8% of total loans at
that date. The Large Corporations area accounted for Ch$50,583 million of
consolidated net income before tax for the year ended December 31, 2003.

      In general, the Large Corporations area services domestic companies with
annual sales in excess of Ch$12,000 million, multinational corporations,
financial institutions, governmental entities and companies affiliated with
Chile's largest conglomerates (regardless of size). The Large Corporations area
offers companies a broad range of products and services, including
deposit-taking and lending in both pesos and foreign currency, trade and project
financing, and various non-credit services, such as collection, supplier
payments and payroll management. In addition, the Large Corporations area offers
a broad range of banking products and services including working capital
financing, lines of credit, commercial loans, leasing, corporate financial
services, foreign trade financing, letters of credit in domestic and foreign
currencies, mortgage loans, payment and asset management services, checking
accounts and time deposits, and, through the bank's subsidiaries, brokerage,
mutual funds and investment fund management services. All of the bank's branches
except the Credichile branches provide services to the Large Corporations area
customers directly and indirectly.

      Large corporate customers are engaged in a wide spectrum of industry
sectors, including, among others, financial services (approximately 30.1% of all
loans made by the area), manufacturing (approximately 13.8% of all loans made by
the area), construction (approximately 15.4% of all loans made by the area),
trade (approximately 12.4% of all loans made by the area), and agriculture
(approximately 8.8% of all loans made by the area).


                                       20
<PAGE>

      The following table sets forth the composition of Banco de Chile's
portfolio of loans to large corporations as of December 31, 2003:

                                          As of December 31, 2003
                                 --------------------------------------------
                                 (in millions of Ch$, except for percentages)
      Commercial loans.........       Ch$1,625,068                    62.4%
      Foreign trade loans......            432,204                    16.6
      Contingent loans.........            247,802                     9.5
      Leasing contracts........            124,956                     4.8
      Mortgage loans...........             70,920                     2.7
      Consumer loans...........                274                     0.0
      Other loans..............            105,280                     4.0
                                      ------------              ----------
      Total                           Ch$2,606,504                   100.0%
                                      ============              ==========

      The Large Corporations area's loan portfolio consists principally of
unsecured loans with maturities between one and six months and of medium and
long-term loans to finance fixed assets, investment projects and infrastructure
projects. In addition, the Large Corporations area issues contingent credit
obligations in the form of letters of credit, bank guarantees and similar
obligations in support of the operations of its large corporate customers.

      The market for loans to large corporations in Chile in recent years has
been characterized by reduced profit margins, due in part to the greater direct
access of such customers to domestic and international capital markets and other
sources of funds. As a result, Banco de Chile has increasingly focused on
generating fee services, such as payroll processing, dividend payments and
billing services as well as computer banking services.

      Banco de Chile is party to approximately 3,414 payment service contracts
and approximately 839 collection service contracts. Under these payment
contracts, the bank provides large corporate clients with a system to manage
their accounts and make payments to suppliers, pension funds and employees.
Under collection contracts, the bank acts as a collection agent for its large
corporate customers, providing centralized collection services for their
accounts receivables and other similar payments.

      Middle Market Banking

      As of December 31, 2003, the Middle Market Banking area maintained
outstanding loans in the amount of Ch$1,559,263 million, which represented 24.9%
of the total loans granted by the bank. The Middle Market Banking area accounted
for Ch$38,155 million of the bank's total consolidated net income before tax for
the year ended December 31, 2003.

      Through the Middle Market Banking area, Banco de Chile services small and
medium-size Chilean companies. Medium-size companies are generally defined as
those with annual sales of between Ch$300 million and Ch$12,000 million and
small or emerging companies as those with sales between Ch$45 million and Ch$300
million. The Middle Market Banking area had approximately 66,765 checking
account holders, of which approximately 74% are small or emerging companies. In
terms of loans, however, 60.9% of the business area's total loan portfolio is
comprised of medium-size companies.

      Middle Market customers are engaged in a wide spectrum of industry
sectors, including, among others, trade (approximately 23.9% of all loans made
by the area), financial services (approximately 18.2% of all loans made by the
area), agriculture (approximately 16.5% of all loans made by the area),
manufacturing (approximately 15.6% of all loans made by the area), transport and
storage (approximately 5.9% of all loans made by the area) and construction
(5.9% of all loans made by the area).


                                       21
<PAGE>

      The Middle Market Banking area offers a broad range of financial products,
including project financing, working capital financing, mortgage loans and debt
rescheduling, as well as other alternatives such as leasing operations and
factoring, mutual funds, insurance and securities brokerage services and
collection services (through subsidiary operations). With respect to foreign
trade, the bank offers advisory services as well as comprehensive financing and
service alternatives.

      Other services, which include the payment of compensation, taxes and
employee benefits, payments to suppliers, and automated bill payments, are
mainly provided through remote service channels (Internet) and are made to
approximately 24,400 customers. Through other subsidiaries, Banco de Chile
offers customers full-range services in financial advisory, stock brokerage,
mutual fund management, and general and life insurance brokerage.

      The following table shows the composition of the Middle Market loan
portfolio as of December 31, 2003:

                                              As of December 31, 2003
                                   -------------------------------------------
                                   (in millions of Ch$, except for percentages)
      Commercial loans..........          Ch$749,408               48.2%
      Mortgage loans............             315,641               20.2
      Leasing contracts.........             139,278                8.9
      Foreign trade loans.......             119,210                7.6
      Contingent loans..........              98,498                6.3
      Consumer loans(1).........              11,098                0.7
      Other loans...............             126,130                8.1
                                        ------------        -----------
         Total..................        Ch$1,559,263              100.0%
                                        ============        ===========

-----------
(1)   Certain commercial loans to individuals are classified as consumer loans.

      International Banking

      As of December 31, 2003, Banco de Chile had approximately Ch$658,280
million in foreign trade loans, representing 10.5% of its total loans as of that
date and Ch$106,810 million in letters of credit and other contingent
obligations related to foreign trade operations, representing 1.7% of its loan
portfolio. The International Banking area accounted for 8.4% of the bank's total
consolidated net income before tax for the year ended December 31, 2003.

      Banco de Chile offers all of its customers a wide range of international
banking facilities, including those related to import and export financing,
issuing letters of credit, guarantees and other forms of credit support, as well
as currency swaps, banking and treasury services for corporate customers, both
in Chile and abroad. The International Banking area has two main lines of
business. The first is related to all banking products that involve foreign
currency, including those related to foreign trade. The second main line of
business is that of managing the Banco de Chile international network. This
network is made up of a branch in New York and an agency in Miami; three
representative offices located in Mexico City, Sao Paulo and Buenos Aires;
approximately 700 correspondent banks, of which 200 have established a credit
relationship with Banco de Chile and 43 of which have established account
relationships with the bank.


                                       22
<PAGE>

      The following table sets forth the composition of Banco de Chile's
portfolio of loans originated through its New York branch and Miami agency, as
of December 31, 2003:

                                               As of December 31, 2003
                                    ------------------------------------------
                                    New York Branch               Miami Agency
                                    ---------------             --------------
                                                (in millions of Ch$)

      Foreign trade loans.......          Ch$29,673                  Ch$31,141
      Commercial loans..........             58,264                     37,494
      Interbank loans...........                391                      4,331
      Contingent loans..........              3,045                      4,337
      Other loans...............                799                        209
                                          ---------                  ---------
         Total..................          Ch$92,172                  Ch$77,512
                                          =========                  =========

      Retail Banking

      At December 31, 2003, loans made by the Retail Banking area amounted to
Ch$1,732,369 million, which represented 27.7% of the total loan portfolio of
Banco de Chile. The Retail Banking area accounted for approximately Ch$36,561
million of consolidated net income before tax for the year ended December 31,
2003.

      The following table sets forth information on the composition of the
portfolio of loans of the Retail Banking area for the year ended December 31,
2003:

                                               As of December 31, 2003
                                   --------------------------------------------
                                   (in millions of Ch$, except for percentages)
       Mortgage loans...........        Ch$741,469                  42.8%
       Consumer loans...........           466,721                  26.9
       Commercial loans.........            86,766                   5.0
       Leasing contracts........             4,722                   0.3
       Contingent loans.........               912                   0.1
       Foreign trade loans......                37                   0.0
       Other loans (1)..........           431,742                  24.9
                                      ------------          ------------
           Total................      Ch$1,732,369                 100.0%
                                      ============          ============

(1)   Other loans are mainly composed by mortgage loans financed by the bank's
      general borrowings and lines of credits.

      High- and Middle-Income Individuals. High-and middle-income individuals
are offered a broad range of retail banking products, including residential
mortgage loans, lines of credit and other consumer loans, credit cards, checking
accounts, savings accounts and time deposits. Mutual funds and brokerage
services are provided to individuals through subsidiaries. At December 31, 2003,
Banco de Chile had outstanding extensions of credit to approximately 259,141
high- and middle-income individuals, including approximately 35,361 residential
loans, 223,785 lines of credit, 110,838 other consumer loans and 237,758 credit
card accounts. At the same date, 302,487 checking accounts, 123,213 savings
accounts and 59,743 time deposits corresponded to this segment (the bank defines
high- and middle-income individuals as those with annual income in excess of
Ch$5.4 million (approximately US$9,100) compared to per capita annual income in
Chile of approximately US$4,200).

      Residential Mortgage Loans. Outstanding residential mortgage loans were
Ch$687,602 million as of December 31, 2003, which represented 39.7% of the
Retail Banking business area's total loans and 11% of total loans.

      Residential mortgage loans generally have maturities between five and 30
years and are denominated in UF. To reduce exposure to interest rate
fluctuations and inflation with respect to the residential loan portfolio, a
majority of the residential loans are currently funded through the issuance of
mortgage finance bonds, which are recourse obligations with payment terms that
are matched to the


                                       23
<PAGE>

residential loans and which bear a real market interest rate plus a fixed spread
over the rate of change in the UF.

      At December 31, 2003, Banco de Chile was Chile's second largest private
sector bank in terms of residential mortgage loans and, based on information
prepared by the SBIF, accounted for approximately 17.3% of the residential
mortgage loans in the Chilean banking system and approximately 23.3% of such
loans made by Chilean private-sector banks.

      Credit Cards. The product portfolio includes both personal and corporate
credit cards. As of December 31, 2003, Banco de Chile had 260,305 valid
accounts, with 399,005 cards in the high-and middle-income individuals sub
segment. Total charges on credit cards during 2003 amounted to Ch$335,234
million, with Ch$288,256 million corresponding to purchases and service payments
in Chile and abroad and Ch$46,978 million corresponding to cash advances (both
domestic and international). As of December 31, 2003, the bank's credit card
loans in the high-and middle-income individuals sub segment amounted to
Ch$61,461 million and represented 13.2% of the retail banking area's consumer
loans.

      Processing services are provided by two companies affiliated with Banco de
Chile, Transbank and Nexus S.A.. As of December 31, 2002, Transbank had 18
shareholders and Nexus had 7 shareholders, all of them banks. Banco de Chile's
equity ownership in Transbank and Nexus was 17.4% and 25.8%, respectively.

      Debit Cards. Banco de Chile has different types of cards with debit
options. Depending on the category, these can be used on the automated teller
machines that operate on the local network (Redbanc S.A.), on the Visa
International PLUS network, on the local network of merchants participating in
the local Redcompra debit program and/or on international merchants associated
with Electron. During 2003, more than 10.1 million transactions related to Banco
de Chile's debit cards were performed, which represented a 30.3% market share of
debit card transactions.

      Installment Loans. Consumer installment loans to individuals are generally
incurred, up to a customer's approved credit limit, to finance the cost of goods
or services, such as cars, travel and household furnishings. Consumer loans are
denominated in both pesos and UF, bear interest at fixed or variable rates of
interest and generally are repayable in installments of up to 36 months.

      At December 31, 2003, outstanding installment loans were Ch$309,318
million, accounting for 66.3% of the Retail Banking business area's consumer
loans. A majority of the installment loans are denominated in pesos and are
payable monthly.

      Lines of Credit. As of December 31, 2003, the bank had 223,785 approved
lines of credit to customers in the high-and middle-income individuals sub
segment and outstanding advances to 164,544 individuals totaling Ch$89,299
million or 5.2% of the retail banking area's total lines. Individual lines of
credit are generally available on a revolving basis up to an approved credit
limit, and may be used for any purpose. Advances under lines of credit are
denominated in pesos and bear interest at a rate that is set monthly. At the
customer's option, such loan may be renewed and re-priced for successive monthly
periods, in each case subject to minimum monthly payments.

      Deposit Products. The bank offers a broad range of checking accounts, time
deposits and savings accounts to retail customers. Checking accounts are
peso-denominated and mostly non-interest bearing. Savings accounts are
denominated in UF and bear interest at a fixed rate of interest. Time deposits
are denominated in pesos, UF and U.S. dollars and most bear interest at a fixed
rate with a term of 30 to 360 days. At December 31, 2003, 302,487 checking
accounts for approximately 293,509 customers with an aggregate balance of
Ch$324,902 million were maintained with the bank. At such date, checking account
balances totaled approximately Ch$1,227,877 million and represented 14.4% of the
bank's total liabilities.


                                       24
<PAGE>

      Lower Income Individuals - Credichile. Products and services to the
lower-middle to middle income segments of the Chilean population are offered
through a network of 52 Credichile branches and 9 other credit centers.
Lower-middle income individuals are defined as persons with annual income
between Ch$1.8 million and Ch$5.4 million. Credichile offers its customers a
range of products, including consumer loans, credit cards, auto loans and
residential mortgage loans and a special demand deposit account targeted at
low-income customers. At December 31, 2003, Credichile had 142,783 customers and
total loans outstanding of Ch$159,552 million, representing 2.6% of the total
loan portfolio. Credichile provides short to medium-term consumer loans and
credit lines. Credichile had approximately 125,071 short to medium-term consumer
loans that totaled Ch$90,096 million at December 31, 2003. Credichile customers
had 28,404 valid credit card accounts, with loans of Ch$5,846 million and total
charges of Ch$2,378 million.

      The SBIF requires a greater allowance for loan losses with lower credit
classifications, such as those of Credichile. Credichile has rigorous procedures
for collection of past due loans. Collection services are provided by Socofin, a
subsidiary of the bank specialized in account collections.

      Bancuenta. The Bancuenta account is a non-interest bearing demand deposit
account without checking privileges targeted at customers who want a secure and
comfortable means of managing and accessing their money. The customer may use
the ATM card linked to the Bancuenta account (which may include a revolving line
of credit) to make deposits or automatic payments to other Credichile accounts
through a network of ATMs available through the Redbanc system.

      At December 31, 2003, Credichile had 451,207 Bancuenta accounts, each of
which pays an annual fee, a fee each time the customer draws on the Bancuenta
line of credit and interest on any outstanding balance under the line of credit.
All fees and interest due on a Bancuenta account are withdrawn automatically on
a monthly basis from funds available in the account. Bancuenta also offers large
corporate customers the ability to pay their employees by direct deposit of
funds into the individual employee's account at Credichile.

      Treasury and Money Market Operations

      The bank offers currency intermediation, forwards contracts, interest rate
swaps, transactions under repurchase agreements and investment products based on
bonds, mortgage notes and deposits. Also available are investments in mutual
funds and stock brokerage services. Other services are oriented towards managing
currency, interest rate and maturity gaps and the intermediation of fixed-income
instruments, currencies and derivatives.

      Banco de Chile's investment portfolio as of December 31, 2003 amounted to
Ch$1,916,324 million, of which 71.2% corresponded to instruments issued by the
Central Bank and the Chilean government, 14.2% to securities from foreign
issuers, 12.1% from local financial institutions and 2.5% from local
corporations.

      Operations Through Subsidiaries

      These products and services, which may not be offered directly by banks
under Chilean Law, include financial advisory services, mutual and investment
funds, securities brokerage, factoring, securitization, collection, sales and
insurance brokerage services. Consolidated net income from securities brokerage
services was Ch$9,010 million, which represented 6.9% of the bank's consolidated
net income in 2003 and net income from mutual funds services was Ch$5,767
million, which represented 4.4% of consolidated net income for the same period.

      Distribution Channels and Electronic Banking. The bank's distribution
network includes branches, ATMs, Call Centers and Internet banking. As of
December 31, 2003, the bank's branch network consisted of 224 retail branches
and it owned and operated 823 ATMs connected to Redbanc, the national ATM
network, covering 2,970 ATMs. In addition, Banco de Chile is interconnected to
Banco del Estado's network of 801 ATMs. A wide array of services are also
provided by Banco de


                                       25
<PAGE>

Chile's Internet-based service network. As of December 31, 2003, approximately
124,900 individual customers and 26,600 corporate customers performed close to
8.4 million transactions on a monthly basis.

      Customers are provided access to a 24-hour phone banking call center,
which permits a varied range of services. This service received approximately
1,146,000 calls per month in 2003. Together with 13 other Chilean banks, Banco
de Chile is a shareholder of Redbank S.A., a corporation that executes
electronic transfer services and provides support to the operations performed by
banks through the installation, operation, maintenance and development of the
systems and equipment involved in automated electronic fund transfers.

      Competition. The Chilean market for banking and other financial services
is highly competitive, and the bank faces significant competition in each of its
principal areas of operation. The Chilean financial services market consists of
a number of distinct sectors. The most important sector, commercial banking,
includes 25 privately owned banks and one public-sector bank, Banco del Estado.
The privately owned banks have traditionally been divided between those that are
principally Chilean-owned, of which there are twelve, and those that are
principally foreign-owned, of which there are 13. At December 31, 2003, three
banks, Banco Santander-Chile (22.6%), Banco de Chile (18.5%) and the
public-sector bank, Banco del Estado (13.0%), together accounted for 54.1% of
all outstanding loans by Chilean financial institutions, net of interbank loans.
All of the Chilean-owned banks together accounted for 60.1% of total loans
outstanding while foreign-owned banks accounted for 39.9% of total loans
outstanding.

      As a commercial bank offering a range of services to all types of
businesses and individual customers, Banco de Chile faces a variety of
competitors, ranging from other large, privately owned commercial banks to more
specialized entities like "niche" banks. The principal commercial banks in Chile
include Banco Santander-Chile, Banco de Credito e Inversiones and BBVA Banco
BHIF, which Banco de Chile considers to be its primary competitors.
Nevertheless, Banco de Chile also faces competition from Banco del Estado, which
has a larger distribution network and larger customer base. Banco del Estado,
which operates under the same regulatory regime as Chilean private sector banks,
was the third largest bank in Chile at December 31, 2003, with outstanding
loans, net of interbank loans, of Ch$4,255,307 million, representing a 13.0%
market share, according to data published by the Chilean SBIF.

      In both the Large Corporations and Middle Market Banking business areas,
Banco de Chile considers its strongest competitors to be Banco Santander-Chile,
Banco de Credito e Inversiones and BBVA Banco BHIF.

      In the retail banking business area, Banco de Chile competes with other
private sector Chilean banks, as well as with Banco del Estado. Among private
Chilean banks, Banco de Chile considers its strongest competitors to be Banco
Santander-Chile and Banco de Credito e Inversiones, as each of these banks has
developed business strategies that focus on the lower-middle to middle income
sub segments of the Chilean population. In the individual banking sector,
particularly with respect to high-income individuals, Banco de Chile competes
with both private Chilean and foreign-owned banks and considers its strongest
competitors in this market to be Banco Santander-Chile and Citibank.

      The Chilean banking industry has experienced increased levels of
competition in recent years, including competition from foreign banks, which has
led to, among other things, consolidation in the industry. Consequently,
strategies have, on an overall basis, been aimed at reducing costs and improving
efficiency standards. Banco de Chile's income may decrease due to the extent and
intensity of competition.

      Banco de Chile expects the trend of increased competition and
consolidation to continue, particularly in connection with the formation of new
large financial groups and the creation of new niche banks. In this regard, in
mid-1996 Banco Santander of Spain took control of Banco Osorno and merged it


                                       26
<PAGE>

into its Chilean operations, changing its name to Banco Santander-Chile. In
addition, Banco O' Higgins and Banco de Santiago merged in January 1997, forming
Banco Santiago. In 1999, Banco Santander of Spain took control of Banco
Santiago. In August 2002, Banco Santiago and Banco Santander-Chile, the second
and fourth largest banks in Chile at that date, respectively, merged and became
Chile's largest bank. In 2003, Banco del Desarrollo merged with Banco Sudameris.
Although Banco de Chile believes that it is currently large enough to compete
effectively in its target markets, any further consolidation in the Chilean
financial system may adversely affect its competitive position in the Chilean
financial services industry.

      Historically, commercial banks in Chile have competed in the retail market
against each other, with finance companies and with department stores, the
latter two having traditionally been focused on consumer loans to middle- and
low-income sub segments. However, finance companies have gradually disappeared
as most of them have been merged into the largest banks.

      Non-bank competition from large department stores has become increasingly
significant in the consumer lending sector. Two new consumer-oriented banks
affiliated with Chile's largest department stores have been established during
recent years. Although these new banks had a market share of less than 1% as of
December 31, 2003, according to the SBIF, the opening of these banks is likely
to bring increased competition into the consumer banking business.

      In addition, some local investor groups have announced their intention to
incorporate new banks in 2004. Banco de Chile expects that the addition of these
new banks will lead to greater competition, particularly in banking services
directed to middle-income individuals.

      Loans

      The following table sets forth Banco de Chile's market share in terms of
loans (excluding interbank loans), and that of its principal private-sector
competitors in the Chilean financial system, in each case at December 31 in each
of the last five years, according to information published by the SBIF:

<TABLE>
<CAPTION>
                                                          Bank Loans (1)
                                            -----------------------------------------
                                                        As of December 31,
                                            -----------------------------------------
                                            1999     2000     2001     2002     2003
                                            -----    -----    -----    -----    -----
<S>                                          <C>      <C>      <C>      <C>      <C>
Banco Santander-Chile ...................    12.3%    11.5%    11.7%    24.7%    22.6%
Banco de Chile ..........................    12.4     12.7     12.1     18.7     18.5
Banco de Credito e Inversiones ..........     8.1      7.9      9.0     10.4     11.2
BBVA Banco BHIF .........................     5.4      5.8      6.0      6.7      7.3
Banco Santiago (2) ......................    16.1     15.8     16.1       --       --
Banco de A. Edwards (3) .................     7.7      8.3      7.4       --       --
                                            -----    -----    -----    -----    -----
   Total market share for six banks .....    62.0%    62.0%    62.3%    60.5%    59.6%
                                            =====    =====    =====    =====    =====
</TABLE>

--------------
Source: SBIF

(1)   For ease of comparison, interbank loans have been eliminated.

(2)   Banco Santiago merged with Banco Santander-Chile in August, 2002.

(3)   Banco Edwards merged with Banco de Chile on January 1, 2002.

      Risk Index. At October 31, 2003, Banco de Chile's unconsolidated risk
index was 2.40%, compared to the financial system's risk index of 1.82%.

      Credit Quality. At December 31, 2003, Banco de Chile had an unconsolidated
ratio of past due loans of 1.74%.

      Deposits. Banco de Chile had deposits of Ch$4,867,113 million at December
31, 2003 on an unconsolidated basis, with a 17.3% market share, the
second-largest among private sector banks, according to the SBIF.


                                       27
<PAGE>

      Shareholders' Equity. Banco de Chile had Ch$565,123 in shareholders'
equity as of December 31, 2003 (not including net income), making it the
second-largest private-sector commercial bank in Chile in terms of shareholders'
equity. Return on average shareholders' equity (including net income for the
year) for the year ended December 31, 2003 was 20.4%, according to information
published by the SBIF.

      Efficiency. For the year ended December 31, 2003, the bank's efficiency
ratio was 55.4%, mainly as the result of non-recurring expenses incurred in
connection with the merger.

Food and Beverage - CCU

      The Company does not consolidate CCU's results, which are accounted for on
an equity-method investment basis. In 2003, CCU's net income was Ch$54,088
million, of which 30.8% corresponded to Quinenco's proportional share, included
in other non-operating income in its consolidated income statement. Quinenco's
economic interest in CCU as of December 31, 2003, 2002 and 2001 was 30.8%. The
Company's interest in CCU is held through a holding company, Inversiones y
Rentas S.A. (IRSA), in which the Company holds a 50% interest.

      CCU, a diversified beverage company, was founded in 1902 and is now the
largest Chilean brewer, the second largest brewer in Argentina, the third
largest Chilean soft drink producer, the largest Chilean mineral water and
bottled nectar producer, the second largest Chilean wine producer and the third
largest pisco producer in Chile. CCU had a domestic beer market share of
approximately 89% in 2003, and 88% in 2002 and 2001, and a market share in
Argentina of approximately 14% in 2003, 13% in 2002 and 12% in 2001.

      In Chile, CCU's beer division produces, markets, sells and distributes
seven proprietary brands, including Cristal, the country's best-selling beer in
2003 which accounted for 59% of all beer sales by volume. CCU is the exclusive
producer in Chile of Heineken brand beer, the exclusive distributor in Chile of
the imported Budweiser brand beer and the exclusive local producer and importer
of Paulaner brand beers. CCU also produces under license the Austral beer brand
and distributes the Kunstmann beer brand. In Argentina, CCU produces, markets,
sells and distributes Budweiser and Heineken brand beers as well as proprietary
brands.

      Through its wholly-owned subsidiary ECUSA, CCU produces, markets, sells
and distributes proprietary brands, PepsiCo and Schweppes Holdings Ltd. soft
drink brands and Watt's nectars. In addition, CCU has proprietary brands of
mineral water which it bottles and distributes in Chile. CCU also owns a
majority interest in Vina San Pedro, Chile's second-largest winery. CCU also
produces plastic bottles for use in its businesses.

      Acquisition of 50% of Calaf. On January 12, 2004, Lucchetti and ECUSA
entered into a joint venture to acquire the assets of Calaf S.A., a cookie and
candy manufacturer, for Ch$6,656 million. Distribution of Calaf's products is
being managed by ECUSA, utilizing its existing distribution network for soft
drinks. Both ECUSA and Lucchetti will account for Calaf as an equity-method
investment.

      Settlement of Dispute and Change of Partners in IRSA. During 2001 and
2002, Quinenco was involved in arbitration proceedings under the rules of the
International Chamber of Commerce in connection with its 50% interest in IRSA, a
joint venture formed in 1986 between Quinenco and the Schorghuber Group of
Germany. IRSA is the controlling entity of CCU with a 61.6% interest. In early
2001, the Schorghuber Group announced that it had sold 49.9% of its interest in
IRSA to the Dutch brewer, Heineken International B.V. Although the exact terms
of the Schorghuber Group's agreement with Heineken were not known, Quinenco
believed the sales represented a violation of the existing shareholders'
agreement with the Schorghuber Group.


                                       28
<PAGE>

      On January 14, 2003, Quinenco S.A. announced that Quinenco and the
Schorghuber Group had come to an agreement and that the arbitration proceedings
had been terminated. As part of the agreement, the Schorghuber Group made a
US$50 million payment to Quinenco on January 28, 2003.

      The existing shareholders' agreement between the parties was modified on
January 13, 2003 to allow the Schorghuber Group to sell its interest in IRSA to
Heineken within a three-year period provided that certain conditions were met.
Subsequently on April 17, 2003, the Schorghuber Group gave Quinenco formal
notice of the sale of its interest in IRSA to Heineken Americas B.V., a
subsidiary of Heineken International B.V., in accordance with the terms and
conditions of the amended shareholders' agreement with Quinenco. As a
consequence, Heineken is currently a 50% partner in IRSA.

      Terms of the agreement also specified that IRSA would propose to the Board
of Directors of CCU that it submit for consideration to its shareholders a
dividend distribution equivalent to 100% of its 2002 earnings and an additional
dividend distribution against CCU's retained earnings amounting to Ch$168,700
million (historic value), to be paid within 180 days in single or multiple
distributions.

      Finally, as part of the agreement reached to put an end to the conflict,
Southern Breweries Establishment, a 50%-owned indirect subsidiary of CCU, agreed
in principle to sell its interest in the Croatian brewery, Karlovacka, to
Heineken at a sales price equivalent to ten times its annual earnings from
operations. The sale of Karlovacka received regulatory approval and approval by
the Boards of Directors of Heineken, SBE, and its controlling entities,
Lanzville Investments Establishment and CCU.

      Extraordinary Dividend Payment. On February 27, 2003, CCU announced that
pursuant to an extraordinary shareholders meeting held on February 26, 2003, it
would pay from retained earnings an extraordinary dividend amounting to
Ch$168,700 million (historic value). The extraordinary dividend was paid in
three distributions between March 14, 2003 and October 10, 2003.

      Sale of Interest in the Karlovacka Pivovara Brewer in Croatia. On April 1,
2003, CCU announced that its 50%-owned indirect subsidiary, SBE, had sold the
68.8% interest it held in a Croatian brewery, Karlovacka, to Heineken. As a
result of the divestiture, CCU reported an extraordinary gain of Ch$20,114
million.

      Dividend Distribution Corresponding to 2002 Net Income. At CCU's General
Ordinary Shareholders' Meeting held on April 24, 2003, pursuant to the agreement
reached between Quinenco and the Schorghuber Group on January 13, 2003, CCU's
Board of Directors proposed a dividend distribution equivalent to 100% of CCU's
2002 net distributable income. The dividend was approved by shareholders, and
the definitive distribution was paid on May 9, 2003.

      Syndicated Bank Loan. On May 9, 2003, CCU (Cayman Islands Branch)
subscribed to a US$135 million (historic value) five-year syndicated bank credit
agreement with a group of national and international lenders.

      Purchase of Kunstmann Microbrewery. On May 10, 2002, CCU announced that it
had acquired a 50% interest in Kunstmann, a small premium brand brewer in the
south of Chile.

      Sale of 6.7% interest in Backus y Johnston. On March 20, 2001, CCU
announced that it had sold a 6.7% interest it held in Union de Cervecerias
Peruanas Backus y Johnston S.A.A., the leading beer producer in Peru. The
pre-tax gain on the sale was Ch$17,371 million.

      Strategy. CCU's strategic plan for 2002-2004 is built on three fundamental
pillars: (i) profitability, through the optimization of expenses, margins and
capital employed; (ii) growth in the company's current businesses and expansion
into new businesses and product categories and; (iii) sustainability, both
internal, in the management of the company's current brands, human resources and
corporate image, and external, in relationships with the company's customers,
consumers, suppliers and society as a whole. From these pillars, the company
focuses on six strategic objectives: (1) to make


                                       29
<PAGE>

current businesses more profitable; (2) to grow and innovate in current
businesses; (3) to achieve operational excellence in the sales and distribution
processes; (4) to increase knowledge of general consumer habits and trends,
along with those of the specific consumers of each of the company's brands; (5)
to implement strategic human resources management; and (6) to expand into new
product categories and consider the development of new beverages.


                                       30
<PAGE>

      The following table shows selected financial information of CCU and its
subsidiaries at or for the years ended December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                     CCU and subsidiaries

                                                                         2001                    2002                     2003
                                                                         ----                    ----                     ----
                                                                           (in millions of constant Ch$, except percentages)
<S>                                                                   <C>                     <C>                      <C>
Net Sales:
      Beer (1)
            Chile                                                     Ch$135,234              Ch$135,820               Ch$149,672
            Argentina .........................................           55,271                  25,130                   31,576
                                                                     -----------             -----------              -----------
      Total Beer...............................................          190,505                 160,950                  181,248

      Soft drinks and mineral water (2)........................          112,862                 111,875                  115,282
      Wine (3)                                                            70,288                  75,909                   82,568
      Other (4)................................................              433                     616                    4,966
                                                                     -----------             -----------              -----------
                  Total net sales..............................       Ch$374,088              Ch$349,350               Ch$384,064
                                                                     ===========             ===========              ===========
Operating Income:
      Beer (1)
            Chile                                                      Ch$30,054               Ch$27,272                Ch$36,753
            Argentina..........................................           (7,059)                (11,175)                  (3,665)
      Soft drinks and mineral water (2)........................            8,878                   9,649                    8,656
      Wine (3)                                                             9,676                   9,163                    3,801
      Other (4)................................................            3,862                   3,233                      318
                                                                     -----------             -----------              -----------
                  Total operating income.......................        Ch$45,411               Ch$38,142                Ch$45,863
                                                                     -----------             -----------              -----------

Non-operating results .........................................            3,858                  (7,081)                  13,642
Minority interest                                                         (1,912)                 (1,264)                    (440)
Income taxes   ................................................           (7,434)                 (7,511)                  (4,977)
                                                                     -----------             -----------              -----------
Net income                                                             Ch$39,924               Ch$22,286                Ch$54,088
                                                                     ===========             ===========              ===========

Total assets...................................................       Ch$654,768              Ch$658,647               Ch$576,598
Bank debt and bond obligations.................................           73,666                  71,783                  140,005
Other liabilities..............................................          152,941                 149,044                  157,821
Shareholders' equity...........................................          428,161                 437,820                  278,772
Quinenco's effective economic interest.........................             30.8%                   30.8%                    30.8%
</TABLE>

---------------------
(1)   Includes sales of beer, beer by-products and other products such as malt,
      spent grain and yeast.

(2)   Includes sales of carbonated and non-carbonated soft drinks, nectars,
      mineral water and related merchandise.

(3)   Includes sales of wine, wine by-products and other products such as labels
      and corks.

(4)   Includes sales of pisco, crates and other packaging.


                                       31
<PAGE>

      The following table shows certain operating and statistical data regarding
CCU's beer segment at or for the years ended December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                         CCU - Beer Segment                                   2001                  2002                  2003
                                                                              ----                  ----                  ----
                                                                                 (in millions of liters, except per capita
                                                                                         information and percentages)
<S>                                                                           <C>                    <C>                  <C>
Chile
      Total Market Volume Sold.......................................           397                    398                  419
      CCU Volume Sold................................................           348                    350                  371
      CCU Market Share...............................................            88%                    88%                  89%
      Beer Consumption per Capita (liters)...........................            27                     26                   27
      CCU Average Beer Production Capacity Utilization...............            55%                    54%                  58%

Argentina
      Total Market Volume Sold.......................................         1,233                  1,221                1,292
      CCU Volume Sold excluding exports..............................           147                    157                  185
      CCU Market Share ..............................................            12%                    13%                  14%
      Beer Consumption per Capita (liters)...........................            34                     34                   36
      CCU Average Beer Production Capacity Utilization...............            52%                    54%                  66%
</TABLE>

      Beer Business in Chile. CCU is the largest producer, bottler and
distributor of beer in Chile, accounting for approximately 89% of all beer sales
by volume in Chile during 2003. The production and marketing of beer in Chile is
CCU's principal activity, generating net sales of Ch$149,672 million, or 39.0%
of CCU's total net sales in 2003.

      CCU produces and markets super-premium, premium, medium-priced, and
popular-priced beers. CCU's premium brand, Cristal, a premium-priced beer, is
Chile's best selling brand, accounting for approximately 59% of all 2003 beer
sales by volume in Chile. Royal Guard is CCU's proprietary super-premium brand.
Royal Light is a light beer extension of the Royal Guard line, and contains a
lower alcohol content. Escudo, a premium-priced beer, is the second best selling
beer in Chile. Morenita, a dark beer, is a medium-priced beer, and Dorada and
Aysen are popular-priced beers. Lemon Stones is a special lemon sweetened
low-alcohol content beer. In addition, CCU owns a 50% interest in Austral and
Kunstmann and produces Austral beer and distributes Kunstmann beer under license
with these breweries.

      CCU also produces, imports and markets Paulaner brand beer and distributes
other Paulaner products in Chile under an exclusive five-year license from
Paulaner Brauerei AG ("Paulaner"), renewable in 2005. CCU also has long-standing
exclusive rights to distribute Budweiser in Chile, the terms and conditions of
which are currently being renegotiated.

      On April 28, 2003, CCU and Heineken International signed licensing and
technical assistance agreements which provide the Company with the exclusive
rights to produce, sell and distribute Heineken beer in Chile commencing June
18, 2003. These agreements have an initial term of 10 years beginning in June
2003 and are renewable for subsequent periods of five years. Heineken is the
leading brand in the premium segment, the beer segment with the highest growth
in Chile in the last years.

      Distribution. CCU distributes beer directly throughout Chile to (i) small-
and medium-sized retail outlets, which, in turn, sell beer to consumers for
take-out consumption (representing 38% of total volume sold by CCU in Chile in
2003), (ii) retail establishments, such as restaurants, hotels and bars, for
on-premises consumption (representing 18% of total volume sold by CCU in Chile
in 2003), (iii) wholesalers (representing 23% of total volume sold by CCU in
Chile in 2003) and (iv) supermarket chains (representing 21% of total volume
sold by CCU in Chile in 2003). CCU had more than 36,500 customers for its beer
products in 2003, none of which accounted for more than 2% of its total beer
sales by volume with the exception of a large supermarket chain that represented
6% of sales. CCU does not maintain any long-term contractual arrangements for
the sale of beer with any of its customers.


                                       32
<PAGE>

      Production Facilities. CCU centralizes its beer production in two plants.
CCU also has a bottling facility in Antofagasta. The Santiago production
facility, located on the outskirts of Santiago, has a production capacity of 43
million liters per month. The Temuco production facility in Temuco, Chile was
completed during 1999, with a production capacity of 12 million liters per
month. The Antofagasta plant bottles approximately 4 million liters per month.

      Beer Business in Argentina. CCU is the second largest beer producer in
Argentina, with a 2003 market share of approximately 14%. In 2003, CCU's beer
operations in Argentina generated net sales of Ch$31,576 million, which
represented 8.2% of CCU's consolidated net sales for the year.

      CCU established CCU Argentina at the end of 1994, and in 1995, CCU
Argentina acquired a 62.7% interest in Compania Industrial Cervecera S.A.
("CICSA"), a brewer located in the city of Salta, and a 98.8% interest in
Cerveceria Santa Fe S.A. ("CSF"), located in the city of Santa Fe. In January
1998, CCU Argentina merged CICSA and CSF, and CCU Argentina currently holds a
99.2% interest in the combined entity.

      In December 1995, CCU Argentina and Anheuser-Busch entered into a license
agreement which provides for CCU Argentina's exclusive right to produce, market,
sell and distribute Budweiser brand beer in Argentina. In connection with the
license agreement, Anheuser-Busch acquired approximately 4.4% of CCU Argentina,
with an option until 2005 to increase its aggregate ownership interest to 20%.
In November 1999, Anheuser-Busch increased its ownership interest to 10.8%
through a capital increase, and CCU reduced its participation to 89.2%. Since
1996, CCU and Anheuser-Busch have invested approximately US$189 million and
US$23 million (historic values), respectively, in CCU Argentina. In April 1998,
CCU Argentina paid approximately US$8 million (historic value) to acquire the
brands and assets of Cerveceria Cordoba, a regional brewer in Argentina, to
further strengthen its presence and portfolio of brands.

      In Argentina, CCU produces and markets super premium-priced, medium-priced
and popular-priced beers. The super premium-priced beers are Heineken, which has
been produced in Argentina under license since 2003, Corona and Guinness, both
of which are imported and distributed by CCU Argentina. The premium -priced
beers are Budweiser, Salta and Santa Fe brands. The medium-priced beer brands in
Argentina are Schneider and Cordoba and the popular-priced beer brands are Rio
Segundo and Rosario brands. Schneider is CCU's principal beer brand in
Argentina, comprising 42% of total sales volume by CCU's Argentine subsidiary in
2003.

      CCU began local production of Budweiser brand beer in December 1996, and
sales of Budweiser brand beer have since grown to represent 22% of CCU's
Argentine sales volume in 2003. On April 28, 2003, CCU and Heineken
International signed licensing and technical assistance agreements, which
provide the Company with the exclusive rights to produce, sell and distribute
Heineken beer in Argentina commencing June 18, 2003. These agreements have an
initial term of 10 years beginning in June 2003 and are renewable for subsequent
periods of five years. Export sales represented 2.7% of CCU Argentina's beer
sales volume in 2003.

      Distribution. During 2003, approximately 75% of CCU's beer volume in
Argentina was sold through wholesalers, with supermarkets and retailers
accounting for approximately 10% and 15%, respectively. In 2003, CCU sold its
products to approximately 16,300 customers in Argentina, none of which
individually accounted for more than 3% of its total beer sales by volume.

      CCU estimates that total beer consumption in Argentina increased at a
four-year compounded annual growth rate of 0.5% between 1999 and 2003. Beer
consumption rose by 5.8% in 2003, mostly explained by a recovery in consumption
levels and the relatively low price of beer to other product categories
following the culmination of the economic crisis at the end of 2001.


                                       33
<PAGE>

      Beer Business in Croatia. Until March 31, 2003 CCU had an indirect 34.4%
interest in a Croatian brewery, Karlovacka, through SBE, a joint venture with
another Luksic Group company. On March 31, 2003, SBE sold its interest in
Karlovacka to the Dutch brewer, Heineken. CCU reported an extraordinary gain on
sale of its interest in SBE of Ch$20,114 million for the period ended March 31,
2003.

      Soft Drinks. CCU is the third largest soft drink producer in Chile. CCU's
line of soft drink and mineral water products includes its own proprietary
brands of soft drinks in addition to brands produced under license from other
beverage manufacturers. Under a licensing agreement with Watt's, a local fruit
related products company, CCU has bottled and distributed Watt's nectar products
in Chile since 1987. In 2003, CCU's soft drink, nectar and mineral water
products business in Chile generated net sales of Ch$115,282 million,
representing 30.0% of CCU's total consolidated net sales.

      The following table shows certain operating and statistical data regarding
CCU's soft drink and mineral water segment at and for the years ended December
31, 2001, 2002 and 2003.

<TABLE>
<CAPTION>
                CCU - Soft Drinks and Mineral Water Segment
                                                                     2001                  2002                2003
                                                                     ----                  ----                ----
                                                                        (in millions of liters, except per capita
                                                                             information and percentages)
<S>                                                                 <C>                   <C>                 <C>
      Soft Drinks
            Total market volume sold (1)......................      1,484                 1,535               1,606
            CCU volume sold (2)...............................        340                   339                 352
            CCU market share (1)..............................         21%                   20%                 20%
            Chilean consumption per capita (liters)...........         99                   102                 105
            CCU average production capacity utilization.......         34%                   34%                 35%

      Mineral Water
            Total market volume sold (1)......................        127                   130                 135
            CCU volume sold...................................         72                    74                  76
            CCU market share (1)..............................         57%                   57%                 56%
            Chilean consumption per capita (liters)...........          9                     9                   9
            CCU average production capacity utilization.......         28%                   31%                 29%
</TABLE>

(1)   CCU company estimates.

(2)   Volume sold includes nectars.

      ECUSA, CCU's wholly-owned subsidiary, is the exclusive producer, bottler
and distributor in Chile of CCU's proprietary soft drink and mineral water
brands, soft drink brands produced under license from PepsiCo and Schweppes
Holdings Ltd. and bottled fruit juice nectars produced under license from
Watt's. ECUSA has two soft drink production facilities located in Chile and
operates two mineral water bottling plants in the central region of Chile. The
two water sources for these products are owned by CCU. In addition, CCU bottles
soft drinks at one of its facilities in the northern city of Antofagasta.

      Distribution. ECUSA operates its own sales force in Santiago, Vina del
Mar, Rancagua, Melipilla, Arica, Concepcion and other major cities in the south
and uses CCU's beer sales system in the outlying northern and southern regions
of Chile. CCU distributes its soft drink and mineral water products throughout
Chile to (i) small and medium-sized retail establishments, that in turn sell the
beverages to consumers for take-out consumption (50% of 2003 segment volume),
(ii) restaurants, hotels, kiosks, and bars for on-premises consumption (9% of
2003 segment volume), (iii) wholesalers (10% of segment volume) and (iv)
supermarkets (31% of segment volume).

      Wine. CCU's total wine segment sales amounted to Ch$82,568 million in
2003. Of the total wine segment sales, 94.5% are made through CCU's subsidiary,
Vina San Pedro ("VSP"), the second-largest winery in Chile in terms of domestic
and export sales. In 2003, VSP generated consolidated net sales of Ch$78,031
million or 20.3% of CCU's total net consolidated sales.


                                       34
<PAGE>

      CCU first invested in Vina San Pedro in 1994 with the purchase of 48.4% of
Vina San Pedro's equity for approximately US$17.1 million (historic value).
Through subsequent capital increases and purchases of shares on the Santiago
stock market, CCU's share in Vina San Pedro is 60.3% at December 31, 2003. Vina
San Pedro is a publicly traded company, listed on Chile's principal stock
exchanges.

      The following table shows certain operating and statistical data regarding
CCU's wine segment at and for the years ended December 31, 2001, 2002 and 2003.

<TABLE>
<CAPTION>
                        CCU - Wine Segment                                  2001                  2002                   2003
                                                                            ----                  ----                   ----
                                                                                (in millions of liters, except per capita
                                                                                       information and percentages)
<S>                                                                          <C>                    <C>                   <C>
Total domestic market volume sold................................            43                     51                    53
Total export market volume sold (1)..............................            41                     45                    68
Vina San Pedro's domestic market share (2) ......................            17%                    19%                   18%
Vina San Pedro's share of total Chilean wine exports ............            13%                    13%                   13%
Chilean consumption per capita (liters)..........................            17                     17                    19
</TABLE>

----------------------
(1)   Does not include sparkling wine.

(2)   CCU company estimate.

      Vina San Pedro is one of Chile's largest producers and distributors of
wine in terms of volume and revenues. Vina San Pedro produces and markets a full
range of wine products for both the domestic and export markets. Vina San
Pedro's business includes operation of its own vineyards as well as mixing,
packaging and reselling wines produced by independent Chilean vineyards. Vina
San Pedro exports wine products to a total of 70 countries worldwide. Vina San
Pedro's total export sales in 2003 were Ch$57,333 million. Its primary export
markets included the United Kingdom, Sweden, the United States, Demark and
Japan. Exports to Europe accounted for 65% of total exports in 2003, followed by
South America (13%), North America (11%), Asia (11%) and others (less than 1%).
According to industry sources, exports of Chilean wine (excluding champagne)
increased from approximately 43 million liters in 1990 to 394 million liters in
2003, a compounded annual growth rate of 18.6%. Vina San Pedro believes that
wine exports from Chile have grown steadily due to their comparatively low price
and high quality.

      VSP's wines are segmented by product type. VSP produces and sells premium
wines, varietals and popular-priced wines within the domestic market and export
market. In addition, VSP sell bulk wine in the export market. Premium wines and
many of the varietal wines are produced from high quality grapes, aged and then
packaged in glass bottles. Popular-priced wines are usually produced using
non-varietal grapes and are not aged. These products are generally sold in
either cartons or jug packaging.

      Vina Santa Helena. In December 2001, VSP's subsidiary, Vina Santa Helena
S.A. created a commercial and productive winemaking operation under the Vina
Santa Helena wine label.

      Joint venture with Chateau Dassault. In October 2001, Vina San Pedro
created a new subsidiary, Vina Dassault San Pedro S.A. (formerly Totihue S.A.),
as part of a joint venture agreement with Chateau Dassault, a French wine
producer, to produce and commercialize premium quality wines.

      Distribution. Vina San Pedro sells its wines directly in the major cities
of Chile and through CCU's sales system in the rest of the country. In the
domestic Chilean market in 2003, Vina San Pedro sold its wines through the
following channels: retailers (29% of all domestic sales); wholesalers (23% of
all domestic sales); supermarkets (41% of all domestic sales); and bars and
restaurants (7% of all domestic sales). San Pedro had approximately 17,700
customers in the domestic market, none of which accounted for more than 3% of
total wine sales by volume, with the exception of two supermarket chains that
represented 17% of total wine sales by volume.


                                       35
<PAGE>

      Vina San Pedro has arrangements with 214 international agents, who
facilitate the export of its wine to 70 countries. CCU has signed distribution
agreements with Schenk, one of the largest distributors in Europe, Asian
Breweries, one of the largest beverage companies in Asia, and Shaw Ross
International, a subsidiary of Southern Wines and Spirits, the main liquor
wholesale distributor for the United States, as well as other distributors. In
2002, VSP signed a distribution agreement with Vin & Sprit AB, a Swedish
company, to distribute VSP's wines in Sweden, Finland, Norway and Estonia.

      Raw Materials. The principal raw materials used in CCU's production of
beer are malt, rice, water and hops. CCU obtains its supply of malt from local
growers and in the international market. In 2003, CCU signed long-term contracts
with local malt producers for 50% of its requirements. Rice is obtained from
local and international suppliers in spot transactions and/or annual contract
agreements. CCU imports hops mainly pursuant to contracts with international
suppliers, primarily in the United States and Europe, which permits CCU to
secure supplies for periods of up to four years. Water used in the production of
beer is obtained from CCU's wells at its plant facilities and/or from public
utilities.

      The principal raw materials in the production of soft drinks and nectars
are water, sugar, flavoring concentrates, and carbon dioxide gas. Water is
obtained from wells located at CCU's plants and/or public utilities in Chile.
CCU generally purchases all of its sugar requirements from Empresas Iansa S.A.,
the sole producer of sugar in Chile. CCU purchases flavoring concentrates for
the soft drink brands it produces under license from the respective licensing
companies. The flavoring concentrates for CCU's proprietary brands are purchased
from third party suppliers in Chile and Germany, which manufacture the
concentrates under contract with CCU. CCU obtains carbon dioxide gas for the
production of both its soft drinks and its mineral water from local suppliers in
Chile. CCU owns two mineral water sources in Chile from which its branded
mineral water products are obtained.

      The principal raw materials that Vina San Pedro uses in its production
process are grapes, wine and packaging. Vina San Pedro obtains 42% of the grapes
used for export wines from its own vineyards. The majority of the wine sold in
the domestic market is purchased from third parties.

      Historically, CCU has not experienced difficulty in obtaining adequate
supplies of raw materials at satisfactory prices and does not expect to in the
near term.

      Competition. Although there are currently no significant legal or
regulatory barriers to entering the Chilean beer market, substantial investment
would be required to establish or acquire production and distribution facilities
and bottles for use in Chile's proprietary returnable bottling system, and to
establish a critical mass in sales volumes. CCU believes that these factors,
together with import tariffs, provide significant barriers to large-scale entry
of new competitors and large-scale expansion by existing competitors. There are
currently no legal or regulatory barriers to enter the beer market in Chile.
Substantial capital investment is required, however, to establish or acquire
production and distribution facilities and market share. However, it is
conceivable that other competitors may enter the beer market.

      CCU's principal competitor in the Chilean beer business is Cerveceria
Chile, a subsidiary of Quilmes Industrial S.A. ("Quilmes"), the largest beer
production company in Argentina. Due to the high cost of shipping beer to Chile
and the competitive advantage inherent to domestic producers in Chile's
proprietary returnable glass bottle system, imported beer does not represent
significant competition in the Chilean market. Cerveceria Chile is estimated to
have an approximately 10% share of the Chilean beer market. CCU's beer brands
also compete directly against soft drinks, wine and other beverages and
alcoholic drinks.

      Quilmes is the market leader in beer in Argentina and CCU's Argentina's
principal competitor. It had an estimated 78% market share during 2003
(including the Brahma brand). CCU Argentina estimates that its own market share
is approximately 14%. CCU also competes with Warsteiner (7%) and Estrella
Galicia (less than 1%). Due to the high cost of shipping beer to Argentina and
the competitive advantage


                                       36
<PAGE>

inherent to domestic producers as a result of Argentina's returnable glass
bottle system, imported beer does not represent significant competition in the
Argentine market.

      In recent years, the beer industry in Latin America has experienced
greater consolidation and is expected to continue to experience further
consolidation in the future. In May 2002, AmBev and Quilmes announced a merger,
which was conditionally approved by regulatory authorities in January 2003. In
March 2004, Ambev and Interbrew announced an agreement to merge both companies,
which, if approved, will create the world's largest brewer (InterbrewAmbev). As
of the date of this annual report, the transaction is still pending.
Consolidation in the beer industry could change the current market conditions
under which CCU operates.

      CCU's principal competitors in the soft-drink business are companies which
produce, bottle and distribute soft drinks in Chile under licenses from The
Coca-Cola Company and its affiliates. The Coca-Cola Company's products are
produced, bottled and distributed in Chile through three separate licensees
which market soft drinks under the Coca-Cola, Coca-Cola Light, Fanta, Fanta
Light, Sprite, Sprite Light, Quatro Balance, Nordic Mist, Andina nectars and
juices, and Kapo juices brand names. According to store audits conducted by
Nielsen Chile, Coca-Cola and related brands accounted for 65% of total
carbonated soft drink sales in Chile in 2003. However, figures calculated by CCU
are higher than Nielsen Chile estimates. CCU expects that soft drinks marketed
under private labels could experience further growth from the approximately 12%
market share (according to Nielsen estimates) they have obtained as of 2003.

      CCU is the largest producer of mineral water in Chile and the market
leader. CCU's main competitor in the mineral water business is Vital S.A. (a
subsidiary of one of The Coca-Cola Company licensees). According to Nielsen
estimates, CCU's mineral water products in 2003 accounted for approximately 62%
of mineral water sales by volume. CCU's estimates are lower. CCU estimates that
its market share by volume accounted for 56%, while Vital accounted for
approximately 35%.

      The wine industry is very competitive in both the domestic and the export
markets. In the domestic market, Vina San Pedro competes directly against all
other major Chilean wineries, including Concha y Toro and Santa Rita, the market
leaders with 22% and 23% estimated market shares, respectively. CCU estimates
that VSP's market share in the Chilean market was approximately 18% in 2003
making it the third largest domestic producer. In the export wine market, Concha
y Toro is the market leader with an estimated 17% market share. According to
industry sources, in 2003, Vina San Pedro was the second-largest exporter of
Chilean wines by volume with an estimated market share of 13%. Santa Rita has an
estimated 4% market share in the export wine market. Vina San Pedro also
competes internationally against other Chilean producers, as well as with wine
producers from other parts of the world.

      Pisco. In February 2003, CCU entered the pisco business under the brand
Ruta Norte. Pisco is a grape-based liquor very popular in Chile. During 2003,
CCU sold 3.2 million liters of pisco. According to Nielsen, Ruta Norte's market
share reached 8% by the end of 2003.

      Seasonality. CCU's beer, soft drink and mineral water business is
seasonal, with lower sales and earnings during the Southern hemisphere winter
season of June through August.

Food and Beverage - Lucchetti

      At December 31, 2003, Lucchetti was a 95.9%-owned consolidated subsidiary
of the Company. As of the same date, Quinenco's ownership interest in Lucchetti
was held through an intermediate holding company, Inversiones Rio Bravo Limitada
in which Quinenco had an effective economic interest as of December 31, 2003 of
100.0%. Quinenco's economic interest in Lucchetti was approximately 93.7% and
93.3% at December 31, 2002 and 2001, respectively. Lucchetti and its
subsidiaries accounted for 16.5% of Quinenco's consolidated sales in 2003, 21.1%
in 2002 and 18.2% in 2001.


                                       37
<PAGE>

      Lucchetti has operated in Chile since 1904, its principal activity being
the production of pasta and other foodstuffs, mainly edible oils and soups,
broths and creams. The company was acquired by the Luksic Group in 1965 and was
transferred to form part of Quinenco in 1996 when the Luksic Group's industrial
and financial holdings were reorganized. In Chile, Lucchetti became the second
largest producer of pasta with an approximate 34% share of the domestic market
as of December 31, 2003, and the leading domestic producer of edible oils
(principally sunflower and soy oils), with an approximate 17% market share as of
December 31, 2003. Lucchetti also produces packaged soups, creams and broths,
with an approximate 19% share of the domestic soup market as of the same date.

      In order to take advantage of growth opportunities in neighboring
countries during the 1990s, Lucchetti developed additional production facilities
and distribution channels for its products in Argentina and Peru. Lucchetti
constructed a pasta plant in Argentina which was operational from 1997 until
2001 when it was sold to an Argentine competitor. Lucchetti also constructed a
pasta plant on the outskirts of Lima, Peru, which was operational until early
2003 when it was closed for alleged environmental violations.

      In the Chilean pasta market, Lucchetti's principal competition comes from
one strong local competitor, which as of December 31, 2003 accounted for 48% of
volume sales. In the last two years, the edible oils market has experienced an
important increase in imports from Argentina, which as of December 31, 2003
accounted for more than 49% of total volume sales and put considerable downward
pressure on prices. Lucchetti believes that these factors limited its future
growth potential, both in terms of volume sales and price increases.
Furthermore, the company believes that distribution channels, increasingly
concentrated in local supermarket chains (which now comprise approximately 51%
of total sales) were likely to further reduce the company's margins in the
future.

      In consideration of the current operating scenario and limited growth
potential, Lucchetti decided to accept an offer to sell its Chilean-based pasta,
edible oils and soup operations to a local food distribution company in December
2003.

      Pursuant to a Memorandum of Understanding signed on December 22, 2003,
Lucchetti concluded the sale of 100% of the outstanding shares of Lucchetti
Chile S.A., a wholly-owned subsidiary, to Inversiones y Servicios Tresmontes
Limitada and Inversiones y Servicios Corpora S.A. on March 31, 2004. Proceeds
from the sale (net of financial debt) amounted to Ch$9,462 million. Lucchetti
reported a gain on sale of Ch$1,276 million in connection with the disposal. The
sale agreement allows for an adjustment to the final sales price for working
capital as of March 31, 2004, the amount of which will be determined by
independent auditors within a 90 day period following the closing.

      The assets of Lucchetti Chile represented approximately 85% of Empresas
Lucchetti's total consolidated assets. The company's remaining assets are mainly
composed of the remaining unsold assets of Lucchetti Peru, two commercial real
estate properties, deferred tax credits and a 50% interest in Calaf, a cookie
and candy manufacturer acquired in January 2004. The assets in Peru and the two
real estate properties are currently for sale.

      Following the disposal of Lucchetti Chile, Lucchetti's consolidated bank
debt, which amounted to Ch$45,277 million as of December 31, 2003, was reduced
to Ch$2,004 million as of March 31, 2004.

      Given that the Lucchetti brand name in Chile was sold as part of the sale
of Lucchetti Chile, shareholders agreed to change Lucchetti's name to Industria
Nacional de Alimentos S.A. at the General Ordinary Shareholders' Meeting held on
April 28, 2004, The name change became effective on May 14, 2004.

      Chilean corporate law requires that a company purchases the shares of any
shareholder not approving the sale of 50% or more of a company's assets if such
shareholder so chooses. In an extraordinary shareholders meeting held on January
12, 2004, shareholders approved the sale of Lucchetti Chile, which composed
approximately 85% of Lucchetti's total assets. The withdrawl price


                                       38
<PAGE>

was equivalent to the book value of the shares, adjusted for inflation, of
Ch$8.5542 pesos per share. Between February 11, 2004 and March 12, 2004,
shareholders representing 60,492,760 shares exercised the option to have their
shares purchased by Lucchetti, including Inversiones Consolidadas S.A., a
company related to Quinenco's controlling shareholders, for 60,276,830 shares.
All of the shares purchased from shareholders were retired and together
represented 2% of the then-outstanding shares of Lucchetti.

      Joint Venture Between Lucchetti and CCU. On January 12, 2004, Lucchetti
and ECUSA, a wholly-owned subsidiary of CCU, entered into a joint venture to
acquire the assets of Calaf S.A., a cookie and candy manufacturer, for Ch$6,656
million. Distribution of Calaf's products is being handled by ECUSA, utilizing
its existing distribution network for soft drinks. Both ECUSA and Lucchetti will
account for Calaf as an equity-method investment.

      2003-2004 Capital Increase. During January 2004, Lucchetti completed a
capital increase initiated in December 2003. Total funds raised in the capital
increase amounted to Ch$15,726 million, divided among 1,048,386,396 shares.
Quinenco indirectly subscribed for 1,040,000,000 shares for Ch$15,600 million,
and as a result, its interest in Lucchetti increased to 95.6%. Proceeds were
used to reduce indebtedness and fund the acquisition of Lucchetti's 50% interest
in Calaf.

      January 2003 Closure of Lucchetti Peru. Lucchetti began to export its
pasta products to the Peruvian market in 1995. In 1998, it constructed a
state-of-the-art plant facility in Peru in order to further develop its position
in the Peruvian pasta market. Between 1995 and 2000, Lucchetti gained a
significant share of the pasta market in Peru, becoming the second leading pasta
producer in the country. In addition, Lucchetti sold edible oils in the Peruvian
market and distributed third party products.

      The Lucchetti plant is located outside of Lima adjacent to a wetlands area
which is, at present, considered to be of ecological significance. Alleging that
the operation of the plant interfered with the special characteristics of the
wetlands area, in August 2001, the Concejo Municipal Metropolitano de Lima
("Municipal Council of Lima") adopted an "Acuerdo de Concejo" or resolution to
revoke the Lucchetti operating license that had been previously granted by the
Municipality of Chorrillos and require Lucchetti to close the plant operations
within 12 months.

      On January 6, 2003, Lucchetti was notified by an official of the
Municipality of Chorrillos of the immediate revocation of Lucchetti's operating
license. In compliance with this order, Lucchetti Peru began an orderly
evacuation of the plant and is currently in the process of liquidating its
assets. Lucchetti recorded an impairment provision in its 2002 financial
statements equivalent to 100% of the book value of its investment in the
Peruvian operations of Ch$30,110 million, in accordance with Chilean GAAP.

      Lucchetti is seeking damages under an existing treaty between Peru and
Chile, which establishes that unsettled conflicts are subject to arbitration
under the auspices of the International Centre for Settlement of Investment
Disputes ("ICSID") in Washington, D.C. For further information, see "Item 8. -
Financial Information - Legal Proceedings - Lucchetti".

      2002 Capital Increase. On January 23, 2002, Lucchetti completed a capital
increase approved and partially carried out in 2001. On this date, Lucchetti
issued 128,757,805 new shares for Ch$2,706 million (historic value). Quinenco
subscribed to 128,610,448 shares for Ch$2,701 million (historic value).
Quinenco's economic interest in Lucchetti increased from 93.3% to 93.7%
following the capital increase. Proceeds were used to reduce indebtedness.

      2001 Capital increase. During Lucchetti's expansion process during the
1990s, Lucchetti incurred significant indebtedness. As part of an effort to
reduce indebtedness, on April 26, 2001, Lucchetti's Board of Directors approved
a capital increase of Ch$21,000 million (historic value) through the issuance of
1,000,000,000 new shares. The capital increase was carried out in the second
half of 2001 and as of December 31, 2001, Lucchetti had issued 871,242,195 new
shares for Ch$18,294 million


                                       39
<PAGE>

(historic value). Quinenco subscribed to 869,708,297 shares for Ch$18,264
million (historic value). Quinenco's economic interest in Lucchetti increased
from 87.0% to 93.3% following the capital increase.

      2001 Sale of 100% of Lucchetti Argentina S.A. On June 25, 2001, Lucchetti
sold its subsidiary, Lucchetti Argentina S.A, to Molinos Rio de la Plata S.A.
("Molinos"), an Argentina-based food producer for US$29.7 million (value on
transaction date, net of debt). The terms of the sale agreement also grant
Molinos the right to use the Lucchetti trademark in Argentina for 25 years and
in Uruguay for five years. Lucchetti reported a loss provision on the sale of
its subsidiary of Ch$7,618 million in its financial statements for the year
ended December 31, 2000. Proceeds from the sale were used to reduce Lucchetti's
indebtedness.

      2001 Financial restructuring. During 2001, Lucchetti carried out a
financial restructuring of short-term debt into a seven-year syndicated credit
facility with a group of banks for UF2,369,359.

      The following table shows net sales for each of Lucchetti's principal
business segments for the years ended December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                      Lucchetti and subsidiaries                      2001                2002            2003
                                                                      ----                ----            ----
                                                                          (in millions of constant Ch$)
<S>                                                              <C>                 <C>             <C>
Net sales:
Pasta (1).................................................       Ch$45,955           Ch$43,130       Ch$33,534
Edible oils...............................................          35,553              31,853          21,225
Soups and broths..........................................           1,764               3,569           4,356
Other (2).................................................           6,459               6,085               -
                                                                 ---------           ---------       ---------
                    Total                                        Ch$89,731           Ch$84,637       Ch$59,115
                                                                 =========           =========       =========
</TABLE>
-----------------
(1)   Includes the sale of wheat by-products

(2)   Other includes the sale of canned food and third party distribution.


                                       40
<PAGE>

      The following table shows selected consolidated financial information for
Lucchetti and its subsidiaries at and for the years ended December 31, 2001,
2002 and 2003:

<TABLE>
<CAPTION>
              Lucchetti and subsidiaries
                                                                2001                       2002                      2003
                                                                ----                       ----                      ----
                                                                  (in millions of constant Ch$, except percentages)
<S>                                                       <C>                        <C>                       <C>
Net sales (1)(2):
Chile..............................................        Ch$59,720                  Ch$65,656                 Ch$59,115
Argentina..........................................            6,725                         --                        --
Peru...............................................           23,286                     18,981                        --
                                                          ----------                -----------                ----------
Total net sales....................................        Ch$89,731                  Ch$84,637                 Ch$59,115
                                                          ==========                ===========                ==========

Gross margin ......................................        Ch$26,816                  Ch$22,639                 Ch$18,311

Operating income (loss) ...........................            2,753                      2,705                     2,894
Non-operating income (loss)........................          (12,316)                   (40,119)                   (6,733)
Minority interest .................................               --                         --                        --
Income taxes.......................................            2,898                       (181)                    1,703
                                                          ----------                -----------                ----------
Net income (loss) .................................        Ch$(6,665)                Ch$(37,595)                Ch$(2,136)
                                                          ==========                ===========                ==========

Total assets.......................................       Ch$124,035                  Ch$77,108                 Ch$79,457
Bank debt..........................................           50,283                     49,601                    45,277
Other liabilities..................................           24,729                     11,156                     6,293
Shareholders equity................................           49,023                     16,351                    27,887
Quinenco's effective economic interest.............             93.3%                      93.7%                     95.9%
</TABLE>

--------------------------
(1)   Export sales accounted for 3% of consolidated net sales in 2003 and 2% of
      consolidated sales in 2002 and 2001, respectively.

(2)   Lucchetti's consolidated income statements in 2002 included results from
      Lucchetti Peru. Lucchetti's consolidated balance sheet as of December 31,
      2002 accounted for Lucchetti Peru under the equity method and did not
      consolidate Lucchetti Peru on a line by line basis, in accordance with
      Chilean GAAP and express instructions from the SVS.

      The following table shows selected statistical data for Lucchetti at and
for the years ended December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                  Lucchetti and subsidiaries
                                                                    2001              2002              2003
                                                                    ----              ----              ----
                                                                          (in thousands of metric tons)
<S>                                                                <C>               <C>                <C>
Production Volumes:
Pasta (1)(2) .................................................      95.5              87.0              57.9
Edible Oils...................................................      50.5              47.0              44.7
Soups, Creams and Broths......................................       1.2               2.4               3.1
Production Capacity: (3)
Pasta (4) ....................................................     128.0             128.0              64.9
Edible Oils...................................................      85.0              85.0              81.9
Soups, Creams and Broths (5)..................................       8.9               7.5               5.3
</TABLE>

--------------------------
(1)   Lucchetti Argentina was sold in June 2001. Prior to its sale, Lucchetti
      Argentina produced 15 thousand metric tons.

(2)   Lucchetti Peru's productive activities were discontinued in January 2003.
      Prior to the closure, Lucchetti's average production in Peru was 33
      thousand metric tons.

(3)   Based on three shifts of eight hours per day for a 360-day year.

(4)   In 2003, 15% corresponded to production for third parties.

(5)   In 2003, 55% corresponded to production for third parties.


                                       41
<PAGE>

      Chile

      Until the disposal of Lucchetti Chile on March 31, 2004, Chile was
Lucchetti's main market, accounting for 100%, 77.6% and 66.6% of consolidated
sales of pastas, edible oils, soups and broths in 2003, 2002 and 2001,
respectively.

      Pasta. Chile is one of the largest markets in South America for dry pasta
on a per capita basis with an estimated consumer market size of 109,000 metric
tons per year and estimated market value of US$110 million as of December 31,
2003. The production and marketing of pasta in Chile generated sales of
Ch$33,534 million, or 56.7% of Lucchetti Chile's total net sales in 2003
(including export pasta sales).

      Lucchetti produces and markets premium, medium-priced, and popular-priced
pasta under the brands Talliani, Lucchetti, Napoli and Romano. Among these
brands, Lucchetti is Chile's second best-selling pasta brand, accounting for
approximately 34% of all 2003 sales by volume in Chile. Talliani is Lucchetti's
premium pasta, which is made entirely from higher-quality durum wheat. Napoli
and Romano are medium-priced and popular-priced pastas, which are made of a mix
of durum wheat and wheat flour. In addition, Lucchetti produces pastas for third
parties, mainly Chilean supermarket chains. In 2003, revenues related to third
party production of pastas represented approximately 4.4% of total sales for the
year.

      Edible Oils. Lucchetti is the largest Chilean producer of edible oils,
principally sunflower and soy oils, with a market share of approximately 17% for
the year ended December 31, 2003. Lucchetti's edible oils business in Chile
generated Ch$21,225 million, or 35.9% of Lucchetti Chile's total net sales in
2003.

      Lucchetti produces and sells four types of edible oils: olive oil,
sunflower, vegetable and mixed oils under the brands Talliani Oliva, Miraflores,
Oro Vegetal, Dona Flor, Dona Sofia, El Dorado and Protal. Talliani is
Lucchetti's leading premium brand for sales of olive oil. The Protal, Dona Flor,
Dona Sofia, El Dorado and Oro Vegetal brands are vegetable oils targeted at the
medium-income and low-income markets. The bulk edible oil market in Chile is
mainly comprised of supply to producers of mass consumption products such as
mayonnaise and fried potatoes as well as paints.

      Packaged Soups, Creams and Broths. Lucchetti is the second-largest
producer of packaged soups, creams and broths in Chile, with a market share of
approximately 19% in soups and creams. Lucchetti's packaged soups, creams and
broths business generated Ch$4,356 million, or 7.4% of Lucchetti's total net
sales in 2003. In addition, Lucchetti produces soups, creams and broths for
Knorr and others. In 2003, revenues related to third party production of soups
for third parties represented approximately 2.7% of total sales for the year.

      Customers. As of December 31, 2003, Lucchetti's principal customers in
Chile were supermarkets, distributors and other retailers, representing 51%, 31%
and 18% of 2003 net sales, respectively.

      Competition. Lucchetti's principal competitor in the Chilean pasta
business is Carozzi. Carozzi's market share was approximately 48% compared to
Lucchetti's 34% as of December 31, 2003. Imports of pasta represented
approximately 10% of the total market as of the same date.

      Lucchetti is the largest producer of edible oils in the Chilean market.
Lucchetti's principal competitors in the edible oils business are Malloa, a
subsidiary of Unilever BestFood Chile, and Watts with estimated market shares of
15% and 16%, respectively. Lucchetti estimates that its sales accounted for
approximately 17% of total Chilean sales of edible oils for the year ended
December 31, 2003. Foreign competition mostly comes from Argentine producers,
mainly as a result of the economic crisis in that country, which has led
Argentine producers to seek other markets and capitalize on favorable


                                       42
<PAGE>

exchange rates following the devaluation of the Argentine peso in 2001. Edible
oils imports from Argentina represented approximately 49% of total sales by
volume in the Chilean market in 2003.

      Lucchetti's principal competitor in the dry soup and cream business is
Maggi, a brand associated with Nestle, with an estimated market share of 72%.
Lucchetti estimates that its net sales accounted for approximately 19% of total
Chilean sales of packaged soups in 2003.

      Manufacturing facilities. Lucchetti manufactures pasta products for
domestic and export sales at its plant in Santiago. The Santiago pasta and mill
facilities consist of storage silos, a production and packaging plant and a
finished products warehouse. Pasta is produced in eleven lines: four dedicated
to long pasta products and seven dedicated to cut products. Pasta production
capacity is approximately 64,900 metric tons per year. Capacity utilization was
89% in 2003 of which approximately 15% corresponded to third party production.

      Lucchetti's edible oil plant is located in Maipu, near Santiago. The plant
consists of installations for crushing, solvent extraction, oil refining and
bottling. Lucchetti offers its competitors the use of this facility on a fee
basis. Oil processing capacity is approximately 82,000 metric tons per year.
Capacity utilization was 55% in 2003.

      Lucchetti's plant for the production of soups, creams and broths is
located in Santiago. The plant consists of installations for dehydration and
packaging. Soup, cream and broth production capacity is approximately 5,300
metric tons per year. Capacity utilization was approximately 59% in 2003, of
which approximately 55% corresponded to third party production.

      Raw Materials. The principal raw material that Lucchetti uses in the
production of pasta is wheat, which represents approximately 67% of production
costs. Lucchetti purchases approximately 40%-60% of its durum wheat from Canada,
principally through a joint venture with Carozzi, which was formed to procure
wheat for the venture owners under mutually advantageous terms. The remainder of
Lucchetti's wheat requirements have been satisfied in recent years through
domestic purchases pursuant to annual contracts under which, in some cases,
Lucchetti provides working capital to local farmers to encourage a continuing
local source for raw materials. Lucchetti has never experienced significant
difficulties in obtaining adequate supplies of wheat on satisfactory terms.
Lucchetti has facilities in its Santiago pasta plant for the storage of up to
29,700 metric tons of unprocessed wheat.

      For the production of edible oils, Lucchetti purchases 100% of its crude
oil requirements from suppliers in Argentina. Lucchetti has facilities in its
Santiago oil plant for the storage of up to 2,700 tons of seeds, 4,800 tons of
crude oils and 1,000 tons of refined oil.

      The principal materials that Lucchetti uses in the production and
distribution of its soups, creams and broths are flour, fat and packaging
materials. Lucchetti purchases all these raw materials from local suppliers.
Historically, Lucchetti has not experienced any difficulty in obtaining raw
materials at satisfactory prices.

      Peru

      Until January 2003, Lucchetti manufactured and sold pasta products and
imported and sold edible oils in the Peruvian market. It also distributed third
party products to the Peruvian market. Approximately 22.4% of Lucchetti's
consolidated sales were made in Peru in 2002. Lucchetti's Peruvian operations
were closed by municipal authorities in January 2003 for alleged environmental
violations.

      Lucchetti has no plans to restart its manufacturing activities in Peru in
the future. It is currently in the process of liquidating its manufacturing
plant and machinery in Peru. Lucchetti's subsidiary in Peru began local
distribution of Lucchetti's pasta products in 1995, and in 1998 began local
production. During the time it operated in Peru, Lucchetti's products reached a
market share of 25.4% in 1998, its first year of local production. This market
share gradually fell to


                                       43
<PAGE>

12.4% in 2002, as a consequence of the negative public relations stemming from
accusations made by Peruvian authorities concerning alleged environmental
violations.

      Lucchetti's Peruvian operation generated sales of Ch$18,981 million in
2002, of which 59.0% or Ch$11,206 million corresponded to pasta sales. The
remaining sales corresponded to edible oils and sales of third party products.

      The estimated consumer market size was approximately 231,000 tons per
year, and the estimated market value was US$127 million (historic value) in Peru
as of December 2002.

      Customers. Lucchetti's principal customers in Peru were major
distributors, representing 56% of 2002 net sales and small distributors who
represented approximately 39% of net sales. Supermarkets represented only a
small percentage of 2002 net sales.

      Competition. Lucchetti's main competitors in the Peruvian packaged pasta
market were Alicorp S.A. (formed from the merger of Consorcio de Alimentos
Fabril-Pacifico S.A. and Nicolini S.A. in October 1996) and Molitalia S.A, a
company related to Carozzi, Lucchetti's principal competitor in Chile.

      Manufacturing facilities. Lucchetti manufactured pasta products for the
Peruvian market at its plant on the outskirts of Lima, which is now closed. The
Peruvian facilities consist of a mill, storage silos, a production and packaging
plant and a finished products warehouse. Pasta was produced in three lines.
Pasta production capacity was approximately 48,000 metric tons. The capacity
utilization rate of the plant in Peru was 57% in 2002.

      Raw materials. Lucchetti Peru purchased all of its wheat from the main
supplier in the Peruvian market, Cargill U.S.A, which imports wheat from Canada
and the United States. Raw oil was imported from one main supplier in Argentina.

      Financial Liabilities. In accordance with Chilean GAAP and instructions
from the SVS, Lucchetti did not consolidate its Peruvian subsidiary in its
balance sheet as of December 31, 2002 or periods thereafter. At year-end 2003,
Lucchetti Peru had outstanding liabilities of Ch$12,318 million, including
financial debt of Ch$8,780 million. Of the financial debt outstanding, Lucchetti
Chile was a co-debtor on a Ch$6,156 million leasing obligation. Since the
disposal of Lucchetti Chile in March 2004, the leasing obligation is being
guaranteed by time deposits made by Empresas Lucchetti.

      Lucchetti believes that the value of the assets of Lucchetti Peru with
third parties exceeds the value of the remaining liabilities in Peru. However,
there can be no assurance as to the timing of such sale or the sales value of
any remaining unsold asset.

      Legal Proceedings. For a discussion of material legal proceedings
involving Lucchetti Peru, see "Item 8. Financial Information - Legal Proceedings
- Lucchetti".

      Argentina

      Between 1993 and 2001, Lucchetti competed in the Argentine market with its
pasta products. In 2001, Lucchetti decided to divest its Argentine-based
operations, mainly associated with its limited in- house distribution
capability, which resulted in less profitable operations than originally
expected. As a consequence, Lucchetti entered into an agreement to sell its
operations in Argentina to its largest competitor in the Argentine market in
early 2001. The sale was concluded on June 25, 2001, following the approval of
the Argentine antitrust authorities. In 2001, approximately 7.5% of Lucchetti's
2001 consolidated sales were made in Argentina.

Telecommunications - Telefonica del Sur


                                       44
<PAGE>

      At December 31, 2003, Telsur was a 73.6%-owned consolidated subsidiary of
the Company. The Company's interest in Telsur is held through a wholly-owned
subsidiary, VTR. Telsur is the principal provider of local telephone service in
Regions X and XI and the second largest provider of telephone services in the
city of Temuco, in the south of Chile. Since the year 2000, Telsur also provides
local telephone service in some cities of Region VIII of Chile, including the
city of Concepcion, the second largest city in the country. In addition to local
telephone services, Telsur is also a provider of nationwide domestic and
international long distance telephone services, Internet services and other
non-regulated telecommunications services. Quinenco's economic interest in
Telsur was 73.6% at December 31, 2001, 2002 and 2003, respectively. Telsur's net
sales as a percentage of Quinenco's total consolidated net sales was 14.4% in
2003, 11.8% in 2002 and 9.6% in 2001.

      2002 Reorganization. With the objective of fortifying its base for future
growth, Telsur restructured its operations in 2002. The reorganization involved
a change in the company's management structure and a 12% cut in personnel, which
were designed to reduce costs and raise efficiency levels. The restructuring
process resulted in a cash outlay of US$2.1 million (historic value) in 2002.
The plan was oriented towards centralizing functions, optimizing resources,
modernizing processes, outsourcing services and redesigning information
technology.

      2001 Bond Issue in the Chilean market. In May 2001, Telsur issued bonds in
the Chilean market in the amount of UF1,000,000. The bond issue consisted of two
series. Series G, which amounted to UF400,000, matures in 2005, and Series H,
which amounted to UF600,000, matures in 2021.

      Strategy. Due to the dynamic nature of the telecommunications business in
Chile, which in recent years has been subject to high levels of competition in
all business areas and a diminishing tariff base for long distance and Internet
services, Telsur has revised its strategic plan. Telsur's revised strategy is:
1) to strengthen the bases for growth of non-traditional services, 2) to expand
its geographical coverage, 3) to focus on improving the operating efficiency of
its business units and 4) to improve the profitability on invested capital.

      Local Exchange Telephony. Telsur is the leading provider of local
telephone service in the X and XI Regions in the south of Chile, which include
the cities of Puerto Montt, Valdivia, Osorno, Chiloe and Coyhaique. Telsur began
providing telephone service in the IX Region, which includes the city of Temuco,
during the first quarter of 1997 and currently has an estimated 47% market share
in that city. In addition, Telsur expanded to the VIII Region, which includes
Concepcion, in late 2000, where it currently has a 12% market share. Telsur is a
facility carrier in Regions IX, X and XI (where it operates over its own
network); in the rest of Chile it is a non-facility carrier, renting capacity
from other networks.


                                       45
<PAGE>

      The following table shows selected financial information of Telsur and its
subsidiaries at or for the years ended December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
             Telsur and subsidiaries                   2001             2002             2003
                                                       ----             ----             ----
                                                          (in millions of constant Ch$)
<S>                                              <C>              <C>              <C>
Net Revenues ...............................      Ch$47,168        Ch$49,270        Ch$51,469
Gross margin ...............................         28,052           27,415           26,204
Operating income ...........................         13,983           13,230           12,317
Non-operating results ......................         (3,129)          (3,668)          (2,692)
Minority interest ..........................           (167)            (135)            (154)
Income taxes ...............................         (1,863)          (1,798)          (2,041)
Extraordinary items ........................             --           (1,541)              --
                                               ------------     ------------     ------------
Net income .................................       Ch$8,824         Ch$6,088         Ch$7,430
                                               ============     ============     ============

Total assets ...............................     Ch$137,040       Ch$139,754       Ch$131,796
Bank debt & bond obligations ...............         68,100           67,794           58,285
Other liabilities ..........................         11,727           14,077           12,594
Shareholders' equity .......................         57,213           57,883           60,917
Quinenco's effective economic interest .....           73.6%            73.6%            73.6%
</TABLE>

      Tariff Structure. On December 20, 1999 and April 27, 2000, the Ministry of
Economy, in conjunction with the Ministry of Transportation and
Telecommunications, published in the Official Gazette the decree setting forth
the rates for the regulated services of Telsur and Telcoy, an 88.7%-owned
subsidiary of Telsur, for the period December 1999 - December 2004. The effect
of the new tariff structure on Telsur was to reduce access charges and alter the
structure of per minute charges to per second charges for basic telephony usage.

      The tariff structure for the next five year period will be established in
December 2004. Whereas tariffs were previously 100% variable, consisting of a
monthly fixed rate plus variable charges per minute, the new tariff structure
that will be established at the end of 2004 will also incorporate tariffs for
fixed rate monthly plans with prepayment or post payment options. The effect of
the tariffs set to take effect in December 2004 will be reflected in Telsur's
revenue base starting in 2005.

      Revenue from Telsur's local exchange telephony business, which for the
year ended December 31, 2003 accounted for 52% of total revenues, is generated
principally by fixed monthly fees and per minute charges, the price of which
depends on the time of the day in which calls are made (utilizing peak and
off-peak rates). In addition, Telsur offers prepaid fixed cost telephone
services (included with basic telephony revenues). Access charges from other
carriers in 2003 accounted for 11.2% of total revenues.

      Telsur's concession requires it to provide telephone service to any
requesting party within areas designated as "mandatory service areas" in the
Technical Plan prepared by the Chilean Undersecretary of Telecommunications
every five years. Outside of these "mandatory service areas", parties requesting
new telephone line installation must pay for the cost of extending the network
to the point of connection to their premises.


                                       46
<PAGE>

      The following table shows certain statistical data for Telsur's local
exchange telephone operations at or for the years ended December 31, 2001, 2002
and 2003:

<TABLE>
<CAPTION>
              Telsur and subsidiaries
                                                          2001           2002          2003
                                                          ----           ----          ----
<S>                                                    <C>            <C>           <C>
Lines in Service....................................   177,304        172,093       178,168
% Growth from prior period..........................        11%            -3%            4%
Lines installed.....................................   194,842        200,470       198,600
% Growth from prior period..........................         9%             3%           -1%
Utilization Ratio(1)................................      0.91           0.86          0.90
Digitalization (2)..................................       100%           100%          100%
Automation (3)......................................       100%           100%          100%
</TABLE>

--------------------
(1)   Ratio of lines in service at the end of the period to lines installed at
      the end of the period.

(2)   Percentage of lines in service connected to digital exchanges at the end
      of the period.

(3)   Percentage of lines installed connected to automatic exchanges at the end
      of the period.

      Telsur owns approximately 82% of the telephone lines in service in the X
and XI Regions, 47% of the telephone lines in service in Temuco and 12% of the
telephone lines in service in Concepcion, with a total of 178,168 lines in
service as of December 31, 2003. 64.8% of its lines are residential, 31.9% are
commercial, 1.7% are public telephones and 1.6% are used in Telsur's businesses.
During 2003, 26,394 new lines were placed in service and 20,319 existing lines
were retired, representing an increase in the total number of lines in services
of 4% from the prior year. Telsur's local telephone system penetration in recent
years has increased to an estimated 13.9 lines per 100 inhabitants at December
31, 2003, from 4.7 lines per 100 inhabitants at December 31, 1993. These
penetration levels are lower than those for Chile as a whole (21.7 lines per 100
inhabitants at March 31, 2003), reflecting the rural character of Telsur's
concession area.

      As a result of its extensive addition of digital exchange technology in
the last decade, Telsur achieved full digitalization of its network, with all of
its lines connected to digital exchanges. The digitalization of its network has
allowed Telsur to provide additional non-regulated services, including ISP, web
hosting, call waiting, voice mail, call transfer, conference calling and call
blocking. Digitalization also allows for more efficient utilization and
maintenance of the network through automatic testing and traffic control. Other
unregulated services include public telephony services, domestic and
international long distance services. Non-regulated services accounted for 36.8%
of Telsur's revenues as of December 31, 2003.

      Telsur's internet service subsidiary has implemented a broadband network,
which offers high speed access to the Internet, network connections and video
conferencing services, among others. As of December 31, 2003, Telsur had 9,941
Internet subscribers and 13,297 subscribers to high-speed wide band services
with revenues of Ch$4,384 million in 2003, equivalent to 8.5% of total
consolidated revenues.

      Telsur's security related services subsidiary offers alarm and
telemonitoring services and access control services, oriented to individual
consumers and businesses. As of December 31, 2003, the subsidiary had 9,890
clients, equivalent to a 60% market share between Concepcion and Coyhaique with
revenues of Ch$1,372 million in 2003.

      Subsidiaries in Start-Up Phase. In connection with the expansion of its
business, Telsur's subsidiaries Telefonica del Sur Net, Telefonica del Sur
Seguridad and Telsur Call Center were in the development stage until 2002 when
they began to consolidate with Telsur. Start-up losses incurred by Telsur in
relation to these subsidiaries amounted to Ch$2,522 million in 2001 and Ch$898
million in 2002. The losses were recorded as a charge to Telsur's net worth in
2001 and 2002 and did not affect Telsur's results from operations.


                                       47
<PAGE>

      In October 2002, Telsur formed a new subsidiary, Blue Two Chile S.A. in
order to develop the first public network of wireless wide band for Internet
utilizing Bluetooth and wireless LAN technology. This subsidiary is currently in
the development stage. The start-up loss associated with Blue Two's activities
in 2003 was Ch$292 million. The loss was recorded as a charge to Telsur's net
worth in 2003 and did not affect Telsur's results from operations.

      Long Distance Telephony. Through Telefonica del Sur Carrier S.A., a
wholly-owned subsidiary of Telsur, Telsur provides domestic long distance and
international long distance services. In 2003, this subsidiary reported net
revenues of Ch$4,719 million (approximately 9% of total consolidated revenues).

      On March 10, 1994, an amendment to Chile's Telecommunications Law was
enacted, establishing a multiple long distance carrier system in Chile, thereby
permitting customers in Chile to select long distance carriers for provision of
both international long distance and domestic long distance telephone services.
The multi-carrier system (i) requires local telephone companies to install
switches and equipment and to provide any licensed long distance carrier equal
access to the local telephone system; (ii) requires local telephone companies
that provide long distance services to do so only through subsidiaries
constituted as open stock (publicly traded) corporations, in order to prevent
cross-subsidies; and (iii) imposes temporary market limitations for the first
few years of the system's operation to prevent any single carrier from
establishing immediate dominance in the market.

      Competition. Telsur has faced and continues to face intense competition in
every aspect of its business activities. In local telephony, Telsur faces
competition from Telefonica CTC, which entered Telsur's concession area in
Regions X and XI in 1996 and is the incumbent competitor in the VIII and IX
Regions. Telefonica CTC, which operates approximately 80% of installed local
service telephone lines in Chile, is expected to continue as a strong
competitor. In long distance telephony, Telsur competes with other national
carriers, including Entel, Telefonica CTC Mundo, Chilesat and Bellsouth, among
others. In Internet services, Telsur competes with Entel, Terra, a subsidiary of
Telefonica of Spain, VTR Hipercable and Telefonica CTC. This intense competition
has led to recent consolidation in the Chilean telecommunications industry.
Telsur expects that consolidation in the industry will continue as several
acquisitions by major telecommunications operators have been announced and are
pending regulatory and/or shareholder approval at the current time.

      Mobile telephony has experienced dramatic growth rates in Chile in recent
years, and its subscriber base now exceeds that of fixed line telephony.
However, traffic in minutes is inferior to that of fixed line telephony mainly
due to the high per minute cost associated with mobile telephony. Telsur
believes that in the past the growth of mobile telephony has been stimulated by
artificially high access charges placed on fixed line telephony users when they
make calls to mobile phones. Starting in 2004, access charges paid to mobile
telephony operators will be reduced by approximately 28% in accordance with new
tariff structures, which will be in place until 2009. The lower access charges
could, in Telsur's opinion, result in higher prices to consumers as mobile
operators seek ways to compensate for lower revenues from access charges. Telsur
believes that lower access charges will allow fixed line telephony operators to
better compete against mobile telephony operators on a price basis and could
revert the declining growth tendencies seen in fixed line telephony in recent
years.

      Regulatory Factors. Substantially all of Telsur's telecommunications
business is conducted pursuant to non-exclusive concessions granted by the
Chilean government or its instrumentalities. Obtaining the requisite government
concessions and licenses is not considered a significant barrier to entry under
Chile's current telecommunications regulatory regime.

      Telecommunications authorities recently set Telefonica CTC's tariffs
related to access charges and charges to the public for the next five year
period. In general terms, new tariffs incorporate fixed monthly pricing options
for fixed line telephony service and higher access charges for the use of
Telefonica CTC's network.


                                       48
<PAGE>

      The telecommunications industry as a whole has traditionally been, and is
likely to continue to be, subject to rapid and significant changes in
technology. Although Telsur does not generally view the requirement to obtain
necessary concessions and licenses as presenting significant risks, and does not
believe that the current regulatory environment poses significant restrictions
on its prospects, there can be no assurance that it will be able to obtain or
maintain all required concessions and licenses, or that amendments to the
applicable laws or regulations will not occur that could adversely affect its
business, results of operations, financial conditions or prospects.

Telecommunications - Entel

      As of December 31, 2003, Quinenco owns a 5.7% interest in Entel, a leading
telecommunications provider in Chile. The interest in Entel is held through
wholly-owned intermediate holding companies, VTR S.A. and Comatel S.A. In 2003,
the Company's equity participation in Entel's net income was Ch$3,414 million.

      During 1999, through privately negotiated transactions and purchases on
the open market, Quinenco acquired a 14.3% interest in Entel. During the first
half of 2000, additional purchases were carried out on the open market and the
Company's interest in Entel reached 14.5%. In August 2000, the Company sold a
0.8% interest in Entel. During 2001, the Company sold an additional 8% interest
in Entel for Ch$92,401 million. The pre-tax gain on the sale amounted to
Ch$51,567 million in 2001. Quinenco does not consolidate Entel's results, which
are accounted for as an equity-method investment. Entel is traded on the Chilean
stock exchanges.

      Founded in 1964, Entel is the largest provider of cellular telephony
services in Chile with approximately 2.7 million clients. In addition, Entel's
digital network allows it to offer integrated telecommunications services which
include national and international long distance multi-carrier services,
Internet services, voice, data and video communication services. Entel also
operates public telephones and call centers throughout the country. Entel's
subsidiary in the United States, Americatel, offers specialized long distance
services oriented to Spanish speaking customers in that country.


                                       49
<PAGE>

      The following table contains selected financial information derived from
Entel's 2002 and 2003 Annual Report relating to Entel and its subsidiaries at or
for the years ended December 2001, 2002 and 2003:

<TABLE>
<CAPTION>
               Entel and subsidiaries
                                                                      2001             2002              2003
                                                                      ----             ----              ----
                                                              (in millions of constant Ch$, except percentages)
<S>                                                           <C>              <C>              <C>
Net Sales .................................................     Ch$738,412       Ch$812,809       Ch$729,252
Gross margin ..............................................        312,483          333,002          321,623

Operating income ..........................................         86,518           98,536          108,212
Non-operating results .....................................        (49,204)         (51,388)         (40,078)
Minority interests ........................................           (924)          (1,302)             (86)
Income taxes ..............................................           (808)          (4,339)          (8,071)
                                                              ------------     ------------     ------------
Net income ................................................      Ch$35,582        Ch$41,507        Ch$59,977
                                                              ============     ============     ============

Total assets...............................................   Ch$1,246,178     Ch$1,303,468     Ch$1,231,936
Bank debt & bond obligations ..............................        331,266          447,152          367,644
Other liabilities .........................................        392,805          305,970          280,477
Shareholders' equity ......................................        522,107          550,346          583,815
Quinenco's effective economic interest ....................            5.7%             5.7%             5.7%
</TABLE>

      The following table shows the composition of Entel's consolidated sales
and certain statistical data pertaining to Entel's telecommunications operations
at or for the year ended December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                  Entel and subsidiaries                               2001              2002              2003
                                                                       ----              ----              ----
                                                                        (in millions of constant $0$)
<S>                                                              <C>               <C>               <C>
Net Sales:
Telephony services (including long distance & Internet) .        Ch$162,938        Ch$182,942        Ch$155,004
Private business network services .......................            63,845            63,516            59,898
Wireless telephony services .............................           266,567           324,903           342,764
Local telephony services ................................            27,110            27,007            27,073
International subsidiaries ..............................           217,952           214,441           144,513
                                                                -----------       -----------       -----------
Total net sales .........................................        Ch$738,412        Ch$812,809        Ch$729,252
                                                                ===========       ===========       ===========

National multi-carrier traffic (millions of minutes) ....             793.2             698.9             613.7
International multi-carrier traffic (millions of minutes)              91.8              91.7              90.3
Americatel multi-carrier national & international traffic
(millions of minutes) ...................................               987               937               674
Number of cellular telephone subscribers ................         1,938,846         2,292,536         2,684,214
</TABLE>

Manufacturing - Madeco

      Madeco was a 55.2%-owned consolidated subsidiary of the Company for the
year ended December 31, 2003 and a 53.4%-owned and 56.1%-owned subsidiary for
the years ended December 31, 2002 and 2001. Madeco's net consolidated sales as a
percentage of the Company's consolidated net sales was 66.5% in 2003, 64.7% in
2002 and 70.0% in 2001.

      Madeco is a leading diversified manufacturer of finished and semi-finished
non-ferrous products based on copper, copper alloys and aluminum. Additionally,
Madeco is also a leading producer of flexible packaging products for large
consumer industries. Madeco has a significant presence throughout Chile, Brazil,
Argentina and Peru with production and sales activities in these countries.

      Historically, the prices for copper and aluminum, the principal raw
materials used by Madeco, have fluctuated greatly. Madeco's price policy is to
sell based on the quantity of metal contained in a product, valued at the London
Metals Exchange, or "LME", prices. Madeco generally has been able to increase
its selling prices in response to increases in costs of copper and/or aluminum.
There can be no


                                       50
<PAGE>

assurance, however, that Madeco will be able to recover increases in the cost of
copper and/or aluminum in the future. Further, while Madeco has not experienced
significant difficulty in obtaining raw materials in the past, there can be no
assurance that the materials it uses will remain available in the future. For
further information, see "Item 11. - Quantitative and Qualitative Disclosures
About Market Risk - Commodity Price Risk".

      Madeco's business and results of operations in all of its lines of
businesses are also to a large extent dependent on the overall level of economic
activity and growth in Chile, Brazil, Peru and Argentina, and specifically on
the level of growth in the telecommunications, electricity, mining and general
construction sectors, as well as levels of economic activity in its principal
export markets. Because Madeco's businesses, in large part, depend on capital
planning and capital expenditures, its sales and financial results are sensitive
to economic cycles, particularly downturns in economic activity.

      Madeco's principal activity, which accounted for 57.6%, 51.2% and 46.5% of
Madeco's consolidated sales in 2001, 2002 and 2003, respectively, is the wire
and cable business. Since 1997, Madeco has participated in the wire and cable
business in Brazil through its subsidiaries, Ficap S.A. ("Ficap"), which
produces copper and aluminum cables, and Optel Ltda. ("Optel"), a producer of
optical fiber cable. For the year 2003, sales in Brazil generated 49.5% of the
total revenues of the wire and cable business segment and 23.0% of Madeco's
total consolidated revenue. Madeco's revenues are dependent on the overall level
of economic activity and investment in Brazil and demand from its main
customers, currently energy transmission and distribution companies and durable
goods manufacturers. Demand for metallic and fiber optic cables by telecom
customers, which in prior years represented an important part of the unit's
sales, only accounted for 1% of sales in 2003 and is not expected to recover in
the foreseeable future due to, among other things, a lack of investment by
telecom operators, the substitution with optical fiber cables and a growing use
of wireless telephone communications. Although Madeco continues to produce
telecom cables in Brazil, plant capacity for telecom cables is largely
under-utilized. This downturn continued in 2003 and was further exacerbated by
lower demand for cable products by customers in the energy transmission and
distribution sector, mainly as a result of the postponement of electric sector
investments, which in turn is mainly due to the low level of economic activity
and the current regulatory environment. In order to achieve production
efficiencies in 2003, Madeco concentrated aluminum plant production in Rio de
Janeiro and Sao Paulo.

      In addition, Madeco's businesses in Argentina, which in 2001 generated
approximately 14.7% of Madeco's consolidated sales, were deeply affected by the
economic deterioration in Argentina in 2001. At the beginning of the year 2002,
as a consequence of Argentina's tumultuous economic environment and political
instability, Madeco suspended its Argentine wire and cable and brass mills
operations. It has since partially reopened brass mills production at the
Barracas plant in September 2003 and foundry activities at the Llavallol plant
in November 2003. Madeco expects to reopen its remaining Argentine facilities
when levels of demand have the scale to operate efficiently and when Madeco
believes such levels are sustainable.

      As a result of the material adverse effect on Madeco of the deep economic
recession in Argentina and other adverse economic developments in the markets in
which it operates, Madeco developed and implemented in 2002 and 2003 a
refinancing plan to fortify its capital structure and improve its debt repayment
capacity.

      Capital Increase and Debt Restructuring. On July 10, 2002 at an
extraordinary shareholders' meeting, Madeco's shareholders approved a capital
increase of Ch$63 billion (historic value), divided into 1.8 billion shares at
Ch$35 per share. Shareholders agreed that the capital increase would be
conditioned upon a minimum capital subscription of Ch$47 billion (historic
value) as well as the successful renegotiation of the company's bank facilities
under terms more favorable to Madeco and compatible with its estimated cash
generation capacity. Shareholders were offered the option to subscribe to the
capital increase under a mandate with Banchile Corredores de Bolsa, a
99.7%-owned stock brokerage subsidiary of Banco de Chile, which would monitor
the process and only allow for the final subscription and payment of shares once
the minimum conditions of the capital increase were met.


                                       51
<PAGE>

      On October 8, 2002, the preferential rights offering period of the capital
increase was concluded, and 19,511,028 shares for Ch$683 million (historic
value) were subscribed and paid for outside of the mandate option. An additional
1,057,082,454 shares for Ch$36,998 million (historic value) were subscribed
under the mandate agreement and held in escrow. On October 15, 2002, the company
announced that the minimum conditions established for the capital increase had
not been met and the funds held in escrow were returned to shareholders.

      Quinenco directly and indirectly subscribed to 1,009,989,363 shares for
Ch$35,350 million (historic value) during the preferential rights offering
period of Madeco's capital increase, but due to the failure to meet the minimum
conditions, its subscription was returned under the mandate agreement. As a
result, Quinenco's interest in Madeco decreased from 56.1% to 53.4%.

      On December 18, 2002, Madeco reached agreements with fourteen of its bank
lenders to amend certain of its credit facilities. The terms of the agreements
provided for a US$120 million debt (historic value) restructuring over seven
years, conditioned upon a repayment of 30% of the loan balances at the time of
signing amended and modified loan agreements. The agreements were also
conditioned upon a minimum capital increase of Ch$49,400 million (historic
value) on or before March 31, 2003.

      On February 18, 2003, Madeco initiated a Ch$101,380 million (historic
value) capital increase. On March 4, 2003, Quinenco directly and indirectly
subscribed and paid for 2,058,353,792 shares for Ch$49,400 million (historic
value).

      The voluntary offering period concluded on March 22, 2003. Subscribed and
paid capital amounted to Ch$51,314 million (historic value), divided in
2,138,097,727 shares. Following the close of the pre-emptive rights offering
period, Madeco initiated a bond capitalization process that concluded on March
31, 2003. Series A and Series C bondholders capitalized a total of 154,876,051
shares at Ch$24 per share for an amount equivalent to Ch$3,717 million (historic
value).

      As a result of the capital increase, Madeco issued a total of
2,292,973,778 shares. Total subscribed and paid capital as of April 1, 2003
amounted to 2,698,484,806 shares. As a result of the capital increase,
Quinenco's interest in Madeco increased from 53.4% to 84.3%.

      With the proceeds of the capital increase, Madeco paid 14 of its bank
lenders Ch$28,847 million (historic value), equivalent to 30% of the outstanding
debt with those lenders. The remaining 70% of outstanding debt, which amounted
to Ch$63,403 million (historic value), was refinanced over seven years with a
three year grace period.

      An additional 264,800,000 shares were sold in a public auction on the
Santiago Stock exchange on June 6, 2003 for Ch$7,679 million (historic value).
As a result of the sale, Madeco's total outstanding shares increased to
2,963,284,806 shares. Quinenco did not subscribe for any of these additional
shares. As a consequence, its interest in Madeco decreased from 84.3% to 76.8%
as of the same date.

      On August 20, 2003, in a public auction on the Santiago Stock Exchange, an
additional 1,156,803,602 shares were sold for Ch$32,403 million (historic
value), increasing total outstanding shares to 4,120,088,408. Quinenco did not
subscribe to additional shares, and as a consequence, its interest in Madeco
decreased to 55.2%.

      Total funds raised in the capital increase amounted to Ch$95,114 million
(historic value). Proceeds were used to reduce liabilities and provide
additional working capital for the company.

      Arbitration with Corning Inc. In June 2002, Madeco announced that it had
been notified by Corning Inc., Madeco's joint venture partner in Optel, an
optical fiber cable producer in Brazil and Argentina, of Corning Inc.'s desire
to liquidate the joint venture. Madeco believed that Corning was attempting to
unjustifiably terminate its agreements with Madeco and filed an arbitration suit
against its partner to resolve the dispute. On November 11, 2003, Madeco was
notified that the arbitrators had


                                       52
<PAGE>

resolved the dispute in favor of Corning. The arbitral decision provided for the
termination of the investment agreement governing the joint venture, and as a
result, Madeco lost certain rights over the appointment of Optel's management
and its rights to exercise a put option to sell its Optel shares to Corning for
US$18 million between January 2004 and December 2005 (consequently, the
subsidiary was not consolidated with Madeco in its December 31, 2003 financial
statements). In addition, the decision obliges the company to agree to the
liquidation of Optel at Corning's request. As a consequence of this unfavorable
ruling, Madeco recognized provisions of Ch$4,917 million in the fourth quarter
of 2003 in order to reflect the value of its 50% equity share in Optel and costs
associated with the ruling.

      2001 Bond Issue. On August 3, 2001, Madeco issued bonds in the Chilean
market for UF1,500,000 (equivalent to US$35.5 million on the transaction date).
The bond issue consisted of one series maturing in 2004. The proceeds from the
bond issue were used to refinance existing debt.

      Sale of 25% Interest of Ficap Optel. On March 27, 2001, Madeco announced
that it had sold a 25% interest in Optel to Corning International Corporation,
for US$20 million (historic value). The pre-tax gain on the sale of its interest
was Ch$3,264 million. Following the sale of this interest, Madeco and Corning
both owned a 50% interest in Optel. Also, as part of the joint venture
arrangement, Optel purchased 99.9% of Corning Argentina for US$10 million
(historic value) and expanded its optical fiber business into Argentina.

      Strategy. Madeco's current business plan is based on improvements in the
marketing, production, and administrative areas of the company, with particular
emphasis on the wire and cable business unit and its largest operation, Ficap in
Brazil. Madeco's management is focused on the following areas:

            o     increasing revenues through a reorganization of commercial
                  activities in order to recover market share, development of
                  export markets and coordination of commercial activities among
                  subsidiaries;

            o     development of a specialty cable niche market in Brazil;

            o     improvement in operating efficiencies in Madeco's production
                  facilities by means of: efficient use of assets in each
                  country, reductions in personnel and in overtime hours and
                  reductions in manufacturing costs and scrap rates;

            o     optimization of the level of selling, general and
                  administrative expenses through austerity measures and
                  synergies; and

            o     capitalizing on assets through maximizing capacity
                  utilization, minimizing capital expenditures and selling off
                  disposable assets.

      In 2003, Madeco's consolidated net sales were Ch$237,666 million, of which
46.5% corresponded to sales of wire and cable products, 23.6% to brass mills
products, 12.3% to aluminum profile products, and 17.6% to flexible packaging
products. Export sales amounted to Ch$52,420 million, accounting for 22.1% of
consolidated sales in 2003. Export sales volume amounted to 30,838 equivalent
tons, which represented 28.2% of the total 109,315 equivalent tons sold in 2003.


                                       53
<PAGE>

      The following table shows selected financial information of Madeco and its
subsidiaries at or for the years ended December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
               Madeco and subsidiaries
                                                                   2001                 2002                2003
                                                                   ----                 ----                ----
                                                              (in millions of constant Ch$, except percentages)
<S>                                                          <C>                  <C>                 <C>
Net sales:
      Wire and Cable.................................        Ch$198,749           Ch$132,402          Ch$110,526
      Brass Mills....................................            72,632               57,127              56,177
      Aluminum Profiles..............................            29,881               28,377              29,226
      Flexible Packaging ............................            44,026               40,939              41,737
                                                             ----------           ----------          ----------
            Total net sales..........................        Ch$345,288           Ch$258,845          Ch$237,666
                                                             ==========           ==========          ==========
Operating income (loss):
      Wire and Cable ................................          Ch$9,946            Ch$(2,959)          Ch$(1,021)
      Brass Mills....................................               668                1,074               1,448
      Aluminum Profiles..............................               508                3,655               3,773
      Flexible Packaging............................               (26)                2,273               3,257
                                                             ----------           ----------          ----------
            Total  operating income (loss) ..........         Ch$11,096             Ch$4,043            Ch$7,457

Non-operating results................................           (64,110)             (48,045)            (22,020)
Income taxes                                                       (435)               1,416              (1,593)
Minority interest....................................             1,334                2,018                (578)
                                                             ----------           ----------          ----------
Net income (loss) ...................................        Ch$(52,115)          Ch$(40,568)         Ch$(16,734)
                                                            ===========          ===========         ===========

Total assets ........................................        Ch$421,008           Ch$381,934          Ch$353,676
Bank debt & bond obligations.........................           218,282              217,895             146,525
Other liabilities....................................            74,413               63,815              59,582
Shareholders' equity.................................           128,313              100,224             147,569
Quinenco's effective economic interest ..............             56.1%                53.4%               55.2%
</TABLE>


                                       54
<PAGE>

      The following table shows selected information regarding Madeco's plant
facilities, installed capacity, and average utilization in 2003:

<TABLE>
<CAPTION>

                                                       Plant size        Installed Production           Avg. Capacity
            Production facility                   (in square meters)  Capacity (in tons per year)   Utilization in 2003(1)
            -------------------                   ------------------  ---------------------------   ----------------------
<S>                                                       <C>                   <C>                           <C>
Wire and Cable (4):
San Miguel, Chile .........................               27,650                15,100                        48%
Sao Paulo, Brazil .........................               28,300                29,100                        75%
Rio de Janeiro, Brazil ....................               58,000                20,760                        20%
Bahia, Brazil (5) .........................               19,000                12,360                        20%
Lima, Peru ................................               49,150                12,000                        75%
Lima, Peru ................................                  770                 3,120                        77%
Llavallol, Argentina (2) ..................               18,162                10,800                         0%
Quilmes, Argentina (2) ....................               39,850                 6,890                         0%
Average capacity utilization of Wire and
Cable production facilities ...............                                                                   41%

Brass Mills:
San Miguel, Chile .........................               32,400                38,530                        75%
Lo Espejo, Chile ..........................               21,500                78,200                        64%
Quilpue, Chile ............................               12,100                 9,000                        40%
Llavallol, Argentina (2)(3) ...............               31,887                 6,883                         0%
Barracas, Argentina (2)(3) ................               15,800                 8,400                         5%
San Luis, Argentina (2) ...................                3,450                 3,300                         0%
Average capacity utilization of Brass
Mills production facilities ...............                                                                   58%

Flexible Packaging:
Santiago, Chile ...........................               16,600                13,600                        83%
San Luis, Argentina .......................                7,500                 5,900                        67%
Average capacity utilization of Flexible
Packaging production facilities
                                                                                                              78%
Aluminum Profiles:
Santiago, Chile ...........................               33,200                16,800                        64%
</TABLE>

----------------------
(1)   Average Capacity Utilization: total real production output as a percentage
      of installed annual production capacity.

(2)   In 2002, as a consequence of the economic crisis, Madeco closed its wire
      and cable and brass mills production facilities in Argentina.

(3)   The brass mills facility, in Barracas Argentina was reopened in September
      2003 and the Llavallol foundry activities were reopened in November 2003.

(4)   Through its 50% investment in Optel, Madeco had optical fiber cable
      production capacity of 420,000 kms. in Argentina and 1,000,000 kms. in
      Brazil. Madeco was involved in an arbitration suit with its joint venture
      partner in optical fiber production. The suit was resolved against Madeco
      at the end of 2003. See "Item 8. Financial Information - Legal
      Proceedings".

(5)   In 2003, aluminum cable production was transferred to the Sao Paulo and
      Rio de Janeiro plants.


                                       55
<PAGE>

      The following table shows Madeco's sales volumes, in metric tons, by
business segment, in 2001, 2002 and 2003:

      Sales Volume (in metric tons):            2001         2002         2003
                                                ----         ----         ----
      Wire & Cable (1) ................       75,853       60,415       53,923
      Brass Mills .....................       36,833       29,353       30,360
      Flexible Packaging ..............       14,013       13,912       14,821
      Aluminum Profiles ...............       10,258        9,978       10,211
                                             -------      -------      -------
      Total ...........................      136,957      113,658      109,315
                                             =======      =======      =======

      Optical Fiber cables (in kms) (2)      555,202       65,452           --
                                             =======      =======      =======

      Total equivalent tons ...........      149,575      115,146      109,315
                                             =======      =======      =======

(1)   Volume sales of the wire and cable unit in 2001, 2002 and 2003 include
      metal only. Figures presented above differ from those presented in
      Madeco's Annual Report on Form 20-F in 2002 and 2001 due to a change in
      measurement standards. Volume sales of the wire and cable unit in 2002 and
      2001 included metal and insulating materials.

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

      Wire and Cable Business Unit

      Madeco's principal activity is its wire and cable business, which
accounted for 46.5% of consolidated sales in 2003. Madeco's wire and cable
business expanded from Chile to Argentina in 1990, to Peru in 1994, and to
Brazil in 1997. The Brazilian wire and cable operation, which in 2003 included
the production and commercialization of copper and aluminum wire and cables, is
Madeco's largest operation in this business segment with sales in 2003 of
Ch$54,671 million, representing 49.5% of the total wire and cable segment sales
of Ch$110,526 million in 2003.

      Madeco produces a wide variety of wire and cable products for the
telecommunications, energy, mining, industry and construction sectors, the most
generalized characteristics being: singular strand (wire) versus multiple,
twisted strands (cable), bare or insulated and non-magnetic or magnetic strands.
In addition to production facilities for the manufacturing of copper and/or
aluminum wire and cable products in Chile, Brazil, Peru and Argentina. Madeco
supplies the telecommunications, energy transmission and distribution, mining,
general industry and construction sectors.

      Madeco, through an investment in Optel, also has production facilities in
Brazil and Argentina for the production of optical fiber cables in a joint
venture with Corning. Madeco was involved in an arbitration suit with its joint
venture partner and the arbitration was resolved against Madeco at the end of
2003. For further information, see "Item 8. Financial Information - Legal
Proceedings".

      Sales of the wire and cable business unit decreased by 16.5% in 2003
mainly as a result of a 12.9% decline in sales volumes, mainly due to 23.5%
lower sales of aluminum cables to customers in the energy transmission and
distribution sector in Brazil. Revenues were also impacted by the appreciation
of the Chilean peso vis-a-vis the U.S. dollar on the sales of foreign
subsidiaries. The decline in unit sales was partially offset by 14.2% average
higher prices in U.S. dollars of metallic cables as a consequence of higher
average copper costs. Export sales accounted for 12.9% of the wire and cable
unit's revenue in 2003.


                                       56
<PAGE>

<TABLE>
<CAPTION>
                        Madeco and subsidiaries                                                 Wire and Cable Unit
                                                                                     2001                2002              2003
                                                                                     ----                ----              ----
<S>                                                                            <C>                 <C>               <C>
Revenues (in millions of constant Ch$):
Chile...................................................................        Ch$19,750           Ch$20,607         Ch$19,072
Brazil..................................................................          122,260              71,444            54,671
Argentina...............................................................           15,425               2,124             2,147
Peru....................................................................           18,853              18,358            20,419
Exports (1) ............................................................           22,461              19,869            14,217
                                                                               ----------          ----------        ----------
Total...................................................................       Ch$198,749          Ch$132,402        Ch$110,526
                                                                               ==========          ==========        ==========

Sales Volume of Copper & Aluminum Cable
 (in metric tons) (2)
Chile...................................................................            7,318               7,269             6,580
Brazil..................................................................           43,387              32,722            28,135
Argentina...............................................................            3,449               1,325             1,138
Peru....................................................................            6,686               6,123             7,799
Exports (1).............................................................           15,013              12,976            10,271
                                                                               ----------          ----------        ----------
Total...................................................................           75,853              60,415            53,923
                                                                               ==========          ==========        ==========

Sales Volume of Optical Fiber Cable (in kms) (3)
Chile...................................................................              253               3,174                --
Brazil..................................................................          473,779               2,128                --
Argentina...............................................................           32,377               3,525                --
Peru....................................................................            6,346                  72                --
Exports (1).............................................................           42,447              56,553                --
                                                                               ----------          ----------        ----------
Total...................................................................          555,202              65,452                --
                                                                               ==========          ==========        ==========
</TABLE>

----------------------
(1)   Exports for the wire and cable unit are considered to be all sales to
      customers in any country other than Chile, Brazil, Argentina and Peru.

(2)   Volume sales of the wire and cable unit in 2001, 2002 and 2003 include
      metal only. Figures presented above differ from those presented in
      Madeco's Annual Report on Form 20-F in 2002 and 2001 due to a change in
      measurement standards. Volume sales of the wire and cable unit in 2002 and
      2001 included metal and insulating materials.

(3)   Optical fiber cable sales volumes are not included in 2003 as Madeco did
      not consolidate with Optel. For further information see "Item 8. Financial
      Information - Legal Proceedings".

      Wire and Cable - Chile

      Madeco produces copper wires and cables in Chile. The Chilean operations
accounted for 17.3% of the total wire and cable segment sales and 8.0% of total
consolidated sales in 2003.

      Customers. Madeco has approximately 360 clients in Chile. In 2003,
products were sold to durable goods manufacturers (55%), distributors (16%),
energy transmission and distribution companies (12%), mining businesses (8%),
telecom operators (6%) and others (3%). There was no significant concentration
of sales made to any one client in 2003.

      Competition. The total market size of the wire and cable industry, (metal
estimates only; does not include insulating materials) in Chile is estimated to
be 23,863 metric tons as of December 31, 2003. Madeco estimates that its market
share in Chile was 30% in 2003. Madeco has two main competitors in the Chilean
wire and cable industry, Cocesa, a subsidiary of Phelps Dodge Corporation with
an estimated market share of 29%, and Covisa, a local producer with an estimated
market share of 16%. In addition, there are other domestic and international
competitors in the Chilean market with market shares of 7% and 18%,
respectively.

      Manufacturing facilities. Production is carried out in Madeco's plant
facilities located in Santiago. Manufacturing activities are dedicated to the
production of copper wire and cable products. The Chilean facility does not
currently produce aluminum or optical fiber wire and cables.


                                       57
<PAGE>

      Raw materials. Madeco purchases copper supplies for its wire and cable
operations in Chile from two large Chilean mining companies, Codelco and Enami.
Madeco has many suppliers for both PVC and polyethylene, and believes it is
currently not dependent on any one supplier.

      Wire and Cable - Argentina

      Madeco's Argentine wire and cable operation are operated through its
wholly-owned subsidiary Decker-Indelqui. Until early 2002, Madeco manufactured a
wide variety of copper, aluminum and optical fiber wire and cable products in
Argentina. At the beginning of the year 2002, as a consequence of Argentina's
economic environment and political instability, the company suspended its
Argentine wire and cable production operations. Madeco intends to reinitiate
wire and cable production in Argentina when levels of demand have the scale to
operate efficiently and when Madeco believes such levels are sustainable.
Further, since 2002, Madeco and its joint venture partner, Corning, have
minimized the operations of their optical fiber joint venture, Optel, in
Argentina. At present, Optel commercializes optical fiber cable imported from
Brazil. Madeco cannot assure the future Argentine operations of Optel. See "Item
8. Financial Information - Legal Proceedings - Madeco".

      The Argentine operations accounted for 1.9% of wire and cable segment
sales in 2003 and 0.9% of Madeco's consolidated sales.

      Customers. In 2003, Madeco's copper and aluminum wire and cable operation
had approximately 90 clients in Argentina. Products were sold to distributors
(66%), energy transmission and distribution companies (25%), durable goods
manufacturers (1%) and exports and others (8%). There was no significant
concentration of sales made to any one client in 2003.

      Competition. The total market size of the wire and cable industry in
Argentina (metal estimates only; does not include insulating materials) is
estimated to be 31,700 metric tons as of December 31, 2003. Madeco estimates
that its market share in Argentina was 4% in 2003. Madeco's main competitors in
the Argentine wire and cable industry are Pirelli (25%), Imsa (18%) and Cimet
(10%). In addition, there are other domestic and international competitors in
Argentina which have estimated market shares of 40% and 3%, respectively.

      Manufacturing facilities. Production facilities for copper and aluminum
cables are located in Quilmes and Llavallol, on the outskirts of Buenos Aires.
Due to the ongoing economic crisis in Argentina, production for cable and
aluminum wire and cables has been ceased and commercial activities are conducted
through imports from Madeco's Chilean and Brazilian operations. Optical fiber
production has been minimized in Argentina. For further information, see "Item
8. Financial Information - Legal Proceedings - Madeco".

      Raw materials. Madeco purchased its copper supplies for the Argentine
operations from two large Chilean mining companies, Codelco and Enami. Madeco
had many suppliers for both plastic and rubber materials. Optical fiber was
supplied by Corning according to the terms established in the joint venture
agreement with Madeco. At present, wire and cable products are imported from
Madeco's Chilean and Brazilian operations.

      Wire and Cable - Brazil

      In Brazil, Madeco has operated in the copper and aluminum wire and cable
segment through its wholly-owned subsidiary, Ficap, since 1997. In 1999, Ficap
formed Optel, a joint venture with Corning to produce and commercialize optical
fiber cable. Since 2003, Madeco and its joint venture partner, Corning, have
minimized the operations of their optical fiber joint venture, Optel, in Brazil.
Madeco cannot assure the future Brazilian operations of Optel. See "Item 8.
Financial Information - Legal Proceedings - Madeco".


                                       58
<PAGE>

      The Brazilian operations accounted for 49.5% of wire and cable segment
sales in 2003 and 23.0% of Madeco's consolidated sales.

      Customers. Madeco's copper and aluminum wire and cable operation had
approximately 2,580 clients in Brazil in 2003. Products are sold to durable
goods manufacturers (50%), distributors (36%), energy transmission and
distribution companies (4%), telecom operators (1%) and others (9%). The largest
customer in Brazil, a telecom operator, accounted for 8.7% of total wire and
cable segment sales in 2003.

      Competition. The total market size of the wire and cable industry in
Brazil (metal estimates only; does not include insulating materials) is
estimated to be 149,644 metric tons as of December 31, 2003, a contraction of
52.7% from the 2001 level. Madeco estimates that its market share in Brazil was
18% in 2003. Madeco's main competitors in the Brazilian wire and cable industry
are Pirelli (21%), Alcoa/Phelps Dodge (11%) and Furukawa (5%). In addition,
there are many other domestic and international competitors in Brazil, which
have estimated market shares of 43% and 2%, respectively.

      Manufacturing facilities. Madeco has four plant facilities in Brazil, a
copper cable and an optical fiber cable plant in Rio de Janeiro, a copper cable
plant in Sao Paulo and an aluminum plant in Bahia. For efficiency reasons,
production of aluminum cables is currently being carried out at the Sao Paolo
and Rio de Janeiro plants. Optical fiber production has been minimized in
Brazil. For further information, see "Item 8. Financial Information - Legal
Proceedings - Madeco".

      Raw materials. Most of the Brazilian operations' copper requirements are
purchased from Caraiba Metais, the main local supplier, and the remainder is
supplied by Madeco's suppliers in Chile, as well as Madeco's Chilean and
Peruvian operations. Aluminum is purchased from Companhia Brasileira de
Aluminio, a large local supplier in Brazil. Optical fiber was supplied by
Corning according to terms established in the joint venture agreement.

      Wire and Cable - Peru

      In Peru, Madeco produces a variety of copper and aluminum wire and cable
products, excluding plastic insulated aluminum products. The Peruvian operations
of the wire and cable segment accounted for 18.5% of wire and cable segment
sales and 8.6% of consolidated sales in 2003. In Peru, Madeco operates in the
copper and aluminum wire and cable segment through its subsidiary, Indeco.

      Customers. Madeco's copper and aluminum wire and cable operation had
approximately 1,160 clients in Peru in 2003. Products are sold to distributors
(25%), energy transmission and distribution companies (11%), telecom operators
(11%), retailers (7%), durable goods manufacturers (4%), mining (4%) and exports
and others (38%). There was no significant concentration of sales made to any
one client in 2003.

      Competition. The total market size of the wire and cable industry in Peru
(metal estimates only; does not include insulating materials) is estimated to be
12,200 metric tons as of December 31, 2003. Madeco estimates that its market
share in Peru was 64% in 2003. Madeco's main competitors in the Peruvian wire
and cable industry are Ceper (11%) and Celsa (10%). In addition, there are other
domestic and international competitors with estimated market shares of 9% and
6%, respectively.

      Manufacturing facilities. Manufacturing activities of copper and aluminum
wire and cable products are carried out in Indeco's plant, located in Lima.

      Raw materials. The main raw material, copper, is purchased from two main
suppliers, Southern Peru Copper Corporation and Sociedad Minera Cerro Verde.
Aluminum is purchased from three suppliers, Aluminios Pianmeca, Siderugica del
Norte and Conductores de Aluminio del Caroni. Madeco


                                       59
<PAGE>

has many suppliers for both plastic and rubber materials, and believes it is not
dependent on any one supplier.

      Brass Mills Business Unit

      Sales of the brass mills segment amounted to Ch$56,177 million, accounting
for 23.6% of Madeco's consolidated sales in 2003. Madeco has been operating in
the brass mills business in Chile since 1944. Business expanded from Chile to
Argentina in 1994 and brass mill operations in Argentina have been conducted
through Madeco's subsidiary, Decker-Indelqui. As a consequence of Argentina's
unstable economic and political environment, Madeco halted its brass mills
production in Argentina in early 2002. As a result of a gradual recovery of the
Argentine market, Madeco reopened certain of its brass mills production
operations at the Barracas plant and smelting production at the Llavallol
facility in the second half of 2003 and is also currently supplying the
Argentine market through imports from subsidiaries in Chile and Brazil. Madeco
intends to reinitiate its remaining inoperative brass mills production when
levels of demand have the scale to operate efficiently and when Madeco believes
such levels are sustainable.

      Madeco's brass mills business unit is composed of: (1) pipes, bars and
sheets and (2) coin blanks and minted coins. Pipes, bars and sheets are
manufactured in Chile and in Argentina from copper, copper alloys, brass and
aluminum and are used by other industrial firms and in the construction sector.
Madeco, through its Chilean subsidiary, Armat, also produces coin blanks and
minted coins in Chile. Madeco's brass mills products are sold in 27 countries
with exports accounting for 57.0% of total sales revenue and 62.0% of total
sales volume of the brass mills business unit in 2003.

      Sales of the brass mills business unit decreased by 1.7% in 2003, mainly
attributable to a 32.9% reduction in revenues associated with the coin division.
Coin division sales were affected by lower export volume and lower average
prices. The decrease in sales of the coin division was partially offset by a
5.1% increase in pipes, bars and sheets primarily due to higher volume sales of
copper pipes in Chile and Argentina as well as higher average prices in Chile.

<TABLE>
<CAPTION>
                         Madeco and subsidiaries                                                Brass Mills Unit
                                                                                      2001               2002                2003
                                                                                      ----               ----                ----
<S>                                                                                <C>                <C>                 <C>
Revenues (in millions of constant Ch$):
Pipes, Bars and Sheets
Chile.....................................................................       Ch$18,995          Ch$18,340           Ch$19,432
Argentina.................................................................           8,529              2,683              4,093
Exports (1)...............................................................          30,979             25,963              25,852
                                                                                 ---------          ---------           ---------
Total Pipes, Bars and Sheets..............................................       Ch$58,503          Ch$46,986           Ch$49,377
Coins Chile...............................................................        Ch$1,078           Ch$1,254              Ch$629
Exports (2)...............................................................          13,051              8,887               6,171
                                                                                 ---------          ---------           ---------
Total Coins..............................................................        Ch$14,129          Ch$10,141            Ch$6,800
Total Brass Mills Unit                                                           Ch$72,632          Ch$57,127           Ch$56,177
                                                                                 =========          =========           =========

Sales Volume of Pipes, Bars and Sheets (in metric tons)
Chile.....................................................................           8,978              8,494               9,134
Argentina.................................................................           3,927              1,113               2,318
Exports (1)...............................................................          19,236             16,164              15,923
                                                                                 ---------          ---------           ---------
Total.....................................................................          32,141             25,771              27,375
                                                                                 =========          =========           =========

Sales Volume of Coins (in metric tons)
Chile.....................................................................              39                 92                  71
Exports (2)...............................................................           4,653              3,490               2,914
                                                                                 ---------          ---------           ---------
Total.....................................................................           4,692              3,582               2,985
                                                                                 =========          =========           =========
</TABLE>
----------------------
(1)   Exports for the pipes, bars and sheets sub-unit are considered to be all
      sales to customers in any country other than Chile and Argentina.


                                       60
<PAGE>

(2)   Exports for the coins sub-unit are considered to be all sales to customers
      in any country other than Chile.

      Brass Mills - Pipes, Bars and Sheets

      Sales of the pipes, bars and sheets sub-unit, which includes the
manufacturing of pipes, bars, bus bars and sheets in copper, copper alloy,
brass, aluminum and aluminum alloy amounted to Ch$49,377 million in 2003,
accounting for 87.9% of the total brass mills business unit's sales and 20.8% of
consolidated sales in 2003. Sales in Chile accounted for 39.4% of pipes, bars
and sheets revenue in 2003, sales in Argentina accounted for 8.3%, and exports
accounted for 52.3%.

      Customers. In 2003, Madeco had 635 customers in Chile, 492 in Argentina
and 135 customers in its export markets. The largest customer, a brass mills
products distributor in Austria, accounted for 13.8% of the total pipes, bars
and sheets sales in 2003. In Chile, pipes, bars and sheets are sold to retailers
(68%), durable goods manufacturers (13%), electric appliance manufacturers (5%),
aluminum manufacturers (4%) and others (10%). In Argentina, pipes, bars and
sheets are sold to distributors (59%), durable goods manufacturers (26%) and
construction companies (15%).

      Competition. Madeco estimates that the total market size for pipes, bars
and sheets was approximately 16,734 metric tons in Chile and 17,000 metric tons
in Argentina, as of December 31, 2003. Madeco estimates that it has a 55% market
share in Chile and a 13% market share in Argentina. There are four main
competitors in the Chilean pipes, bars and sheets market, including Cembrass
(7%), Tecob (2%), Conmetal (8%) and Offermanns (2%). In addition, there are
other domestic and international competitors in the Chilean pipes, bars and
sheets market, which have estimated market shares of 2% and 24%, respectively.
There are four main competitors in the Argentine pipes, bars and sheets market,
including Pajarbol-Cembrass (15%), Sotyl (12%), Vaspia (7%) and Quimetal (7%).
In addition, there are other domestic and international competitors in the
Argentine pipes, bars and sheets market, which have estimated market shares of
34% and 12%, respectively. While Madeco does not collect extensive market share
information regarding the global brass mills industry, it estimates that the
size of the global market exceeds 4 million metric tons and that Madeco's market
share represents less than 1%.

      Manufacturing facilities. Manufacturing activities of pipes, bars and
sheets are carried out in Chile at Madeco's plant located in San Miguel, near
Santiago. In addition, Madeco has a smelting facility in Lo Espejo, near
Santiago. Manufacturing in Argentina, which was halted in early 2002, was
carried out in three brass mills facilities in Argentina, in San Luis, Llavallol
and Barracas. The manufacturing plant at Barracas was reopened in September 2003
and the smelting facility at Llavallol in November 2003.

      Raw materials. The primary raw materials used in the production of pipes,
bars and sheets are copper, aluminum, zinc, nickel and tin. Copper supplies are
purchased for both Argentina and Chile from two large Chilean mining companies,
Codelco and Enami. In 2003, Madeco obtained most of its aluminum requirements
from Aluminios Argentinos in Argentina. Zinc is purchased from two Peruvian
suppliers, Doe Run Peru and Cajamarquilla.

      Brass Mills - Coin Blanks and Minted Coins

      Sales of the coins sub-unit, which includes the manufacture of coin blanks
and minted coins, amounted to Ch$6,800 million in 2003, accounting for 12.1% of
the total brass mills business unit's sales and 2.9% of consolidated sales in
2003. Sales in Chile accounted for 9.3% of coins revenue in 2003 and exports
accounted for 90.7% of coins revenue. Sales of coins and coin blanks declined by
32.9% in 2003, primarily attributable to lower export sales volume and lower
average prices in response to a glut on the world market of coin suppliers now
that the Euro coin production has dropped off.

      Coin blanks and minted coins are produced by Madeco's wholly-owned Chilean
subsidiary, Armat. Production involves the use of four copper-based alloys. The
exact alloy mix is determined according to customer specifications.


                                       61
<PAGE>

      Customers. The company's largest customers in 2003 were the Central Bank
of Indonesia, which accounted for 27% of total coin sales and the Central Bank
of Ireland, which accounted for 12%.

      Competition. Madeco estimates that the international demand for newly
minted coins was 65,200 metric tons in 2003. The size of the world industry
remained flat in 2003 as demand from European Central Banks has stagnated
following the initial launch of the Euro coin. Madeco estimates that it had a 5%
market share worldwide in 2003. Madeco's main competitors in coins are Poongsan
(39%),VDN (25%), Royal Mint of England (2%) and Royal Canadian of Canada (3%).
In addition, there are other competitors that are estimated to have had a market
share of approximately 26% in 2003.

      Raw materials. Madeco purchases its copper supplies from Codelco and
Enami, and most of its aluminum requirements from Aluminios Argentinos in
Argentina. Zinc is principally purchased from two Peruvian suppliers, Roe Run
Peru and Cajamarquilla.

      Flexible Packaging Business Unit

      Sales of the flexible packaging business unit amounted to Ch$41,737
million in 2003, accounting for 17.6% of Madeco's 2003 consolidated sales.
Madeco is a manufacturer of printed flexible packaging for use in the packaging
of consumer products. It also produces aluminum foil and plastic wrap for both
commercial and home use. Madeco participates in the flexible packaging industry
in Chile through its subsidiaries, Alusa and Alufoil. In Argentina, Madeco has
operated since 1993 through its subsidiary, Aluflex. Additionally, Madeco owns a
25% and a 25.6% stake in two manufacturers in Peru, Peruplast and Tech Pack,
respectively, which together comprise the largest flexible packaging operation
in that country. Export sales amounted to Ch$3,417 million, accounting for 8.2%
of total sales of the flexible packaging business unit.

      In 2003, sales of the flexible packaging segment increased by 1.9%
compared to 2002, mainly due to an increase in volume sales in Chile, Argentina
and exports, the effect of which was partially offset by the appreciation of the
Chilean peso vis-a-vis the U.S. dollar in 2003.

<TABLE>
<CAPTION>
                         Madeco and subsidiaries                                          Flexible Packaging Unit
                                                                                     2001           2002            2003
                                                                                     ----           ----            ----
           Revenues (in millions of constant Ch$):
<S>                                                                             <C>           <C>              <C>
Chile.....................................................................      Ch$26,363      Ch$26,607       Ch$27,503
Argentina.................................................................         14,415          9,913           9,172
Exports (1)...............................................................          3,248          4,419           5,062
                                                                                ---------      ---------       ---------
Total.....................................................................      Ch$44,026      Ch$40,939       Ch$41,737
                                                                                =========      =========       =========

Sales Volume (in metric tons)
Chile.....................................................................          9,379          9,319           9,674
Argentina.................................................................          3,746          3,222           3,417
Exports (1)...............................................................            888          1,371           1,730
                                                                                ---------      ---------       ---------
Total.....................................................................         14,013         13,912          14,821
                                                                                =========      =========       =========
</TABLE>
----------------------
(1)   Exports for the flexible packaging unit are considered to be all sales to
      customers in any country other than Chile and Argentina.

      Flexible Packaging - Chile

      Sales of the Chilean flexible packaging operations amounted to Ch$27,503
million, accounting for 65.9% of total flexible packaging segment sales and
11.6% of Madeco's consolidated sales in 2003.

      Customers. The Chilean flexible packaging operations have 270 customers,
including 113 mass consumer product manufacturers and 157 retail customers.
Exports from Chile and Argentina are made to approximately 45 customers.

      Competition. Madeco estimates that the total market in Chile for flexible
packaging products was approximately 37,850 metric tons in 2003. Madeco
estimates that it has a market share in Chile of


                                       62
<PAGE>

approximately 26%. The main competitor in the Chilean flexible packaging market
is Edelpa, which had an estimated market share of 30% in 2003. In addition,
other competitors in the Chilean market have an estimated 44% market share.

      Manufacturing facilities. Manufacturing in Chile is carried out in two
plant facilities located near Santiago.

      Raw materials. Madeco's plastics suppliers include Vitopel, Terphane, Dow
Chemical and Sigdopack. Madeco currently purchases approximately 40% of its
plastic raw material requirements from these suppliers. Madeco obtains most of
its aluminum requirements from Aluminios Argentinos and Hydro Aluminum
Deutschland GMBH. Ink is purchased from Sun Chemical. Paper is purchased from
suppliers in Chile, Brazil, the United States and Sweden. Madeco purchases its
various adhesives from Henkel and Rhom & Hass.

      Flexible Packaging - Argentina

      Sales of the Argentine flexible packaging operations amounted to Ch$9,172
million, accounting for 22.0% of total flexible packaging segment sales in 2003.

      Customers. The Argentine flexible packaging operations have approximately
26 customers. The main customers in Argentina include biscuit and cookie
producers (46%), pet food producers (25%) and other mass consumer product
producers (29%). Exports from Chile and Argentina are made to approximately 45
customers.

      Competition. Madeco estimates that the total market in Argentina for
flexible packaging products was approximately 48,580 metric tons in 2003. Based
on its own internal analysis, Madeco estimates that its market share is probably
around 8% as of December 31, 2003. Madeco's main competitor in Argentina is
Converflex with an estimated 13% market share. Madeco estimates that its other
main competitors have a 19% share of the market. Due to a lack of public
information, Madeco is unable to estimate the market share of other flexible
packaging products competitors in Argentina - Dinan-Alvher, Fleximat and
Zaniello. In addition, there are more than 90 small competitors which together
represent a large portion of the flexible packaging market.

      Manufacturing facilities. Manufacturing activities are carried out in
Argentina at a plant facility located in San Luis.

      Raw materials. Madeco's plastics suppliers include Vitopel, Terphane, PBB
Polisur and Sigdopack. Madeco currently purchases approximately 40% of its
plastic raw material requirements from these suppliers. Madeco obtains most of
its aluminum requirements from Aluminios Argentinos and Hydro Aluminum
Deutschland GMBH. Ink is purchased from Sun Chemical. Paper is purchased from
suppliers in Chile, Brazil, the United States and Sweden. Madeco purchases its
various adhesives from Henkel and Rhom & Hass.

      Aluminum Profiles Business Unit

      Sales of the aluminum profiles segment amounted to Ch$29,226 million in
2003, accounting for 12.3% of Madeco's 2003 consolidated sales. Madeco is the
sole Chilean manufacturer of aluminum profiles, the foundation of window frames
and doorframes. In addition, it produces profiles which are used in the
manufacture of industrial durable goods such as refrigerators and ovens. Between
1991 and early 2002, Madeco also operated in the curtain wall installation
business, which involved the engineering and installation of curtain walls in
large commercial real estate projects. In early 2002, as part of a strategic
decision, Madeco exited from this business.

      Madeco operates in the aluminum profiles segment through its subsidiary,
Indalum. Through Indalum, Madeco also owns Alumco, the largest Chilean aluminum
profiles distributor. Madeco also distributes aluminum profiles in Bolivia
through its proprietary company, Distribuidora Boliviana.


                                       63
<PAGE>

      Sales of the aluminum profiles segment increased by 3% in 2003 mainly due
to higher sales volume and higher average prices.

<TABLE>
<CAPTION>
                     Madeco and subsidiaries                                        Aluminum Profiles
                                                                           2001             2002               2003
                                                                           ----             ----               ----
           Revenues (in millions of constant Ch$):
<S>                                                                   <C>              <C>                <C>
Aluminum profiles.................................................    Ch$29,291        Ch$26,977          Ch$28,108
Exports...........................................................          590            1,400              1,118
                                                                      ---------        ---------          ---------
Total.............................................................    Ch$29,881        Ch$28,377          Ch$29,226
                                                                      =========        =========          =========

Sales Volume (in metric tons)
Aluminum profiles.................................................       10,257            9,978             10,211
Exports...........................................................            1               74                 --
                                                                      ---------        ---------          ---------
Total.............................................................       10,258            9,978             10,211
                                                                      =========        =========          =========
</TABLE>

      Customers. In 2003, the aluminum profiles operation had approximately 50
active customers, of which 13 were distributors for Madeco. In 2003, Madeco's
main customers in the aluminum profiles segment were retailers (22%),
independent distributors (52%), construction companies and durable goods
manufacturers (22%) and distribution offices in Bolivia (4%).

      Competition. The size of the aluminum profiles market in Chile was
estimated to be 12,820 metric tons per year as of December 31, 2003. Madeco
estimates that it had a 76% market share in the aluminum profiles segment in
Chile, and that its main competitor, Alcoa, had a 14% market share in 2003.
International aluminum profiles manufacturers also compete in Chile through
imported products with an estimated market share of 10%.

      Manufacturing facilities. Manufacturing activities are carried out in
Chile at a plant facility located in San Bernardo, on the outskirts of Santiago.

      Raw Materials. Aluminum, which represents approximately 70% of the cost of
raw materials used in the production of aluminum profiles, is purchased from the
Argentine supplier, Aluminios Argentinos. Madeco purchases paint from two
painting companies, Pinturas Tricolor and Dupont Powder Coating Andina. Chemical
products are purchased from four suppliers, Harting Representaciones, Quimica
del Sur, Chemal Katschmareck- GMBH and Goldschmidt Quimica.

Real Estate/Hotel Administration - Hoteles Carrera

      Hoteles Carrera was a 90.0%-owned consolidated subsidiary of the Company
in 2003 and a 89.9%-owned consolidated subsidiary in 2002 and 2001. Quinenco's
interest in Hoteles Carrera is held through an intermediate holding company,
Agricola El Penon S.A., a 96.2%-owned subsidiary of Quinenco. Hoteles Carrera
accounted for approximately 1.9% of the Company's consolidated sales in 2003,
1.8% of consolidated sales in 2002 and 1.6% of consolidated sales in 2001.

      Sale of Santiago Hotel Carrera. On November 20, 2003, Hoteles Carrera sold
its Santiago hotel and grounds for UF832,000 (Ch$14,125 million) to the Chilean
Ministry of Foreign Affairs through a financial leasing operation with Banco
Santander. Carrera recognized a loss on the sale of Ch$4,713 million.

      Capital increase. On May 17, 2001, Hoteles Carrera's Board of Directors
approved a capital increase of Ch$4,287 million (historic value) through the
issuance of 5,358,920 new shares. The capital increase was carried out in the
last quarter of 2001 and as of December 31, 2001, Carrera had issued 2,827,221
new shares for Ch$2,261 million (historic value). Quinenco subscribed to
2,825,264 shares for Ch$2,260 million (historic value). Quinenco's economic
interest in Carrera increased from 87.2% to 89.9% following the capital
increase. Proceeds from the capital increase were used to reduce liabilities.

      Following the November 2003 sale of the Hotel Carrera in Santiago, Hoteles
Carrera operated four hotels in Chile. The four-star Hotel El Araucano in
Concepcion is owned and operated by Hoteles


                                       64
<PAGE>

Carrera and the three remaining hotels, located in the north of Chile in the
cities of La Serena, Iquique and Antofagasta, are leased and operated by Hoteles
Carrera.

      In recent years, competition in the hotel industry in Santiago increased
greatly, resulting in an oversupply in room availability, particularly in the
five-star hotel category. In addition, new five-star hotels have been
established on the eastern edge of Santiago, closer to business districts which
have also migrated to the eastern part of the city. The increased competition in
the hotel industry led to a general reduction in the Hotel Carrera's room rates
as well as lower occupancy rates. This, coupled with rising costs associated
with the maintenance and running of the hotel, also affected the hotel's
operating margins. As a consequence, Quinenco decided to accept an offer to sell
the Santiago hotel to the Ministry of Foreign Affairs in November 2003. The
Santiago Hotel Carrera accounted for approximately 60% of Hoteles Carrera's
total revenues prior to its sale.

      In consideration of the low returns that Hoteles Carrera has also
experienced on the operation of the three hotels located in the north of Chile
over the last five years, Hoteles Carrera has decided not to renew the leases on
these hotels as they come due during 2004.

      The remaining hotel, the four-star hotel El Araucano in Concepcion will
continue being owned and operated by Hoteles Carrera. Hoteles Carrera has no
plans at this time to further develop its interest in the hotel industry in
Chile.

      The following table shows selected statistical data for Hoteles Carrera's
hotel business at and for the years ended December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                               Hoteles Carrera
                                                                                     2001            2002           2003
                                                                                     ----            ----           ----
<S>                                                                              <C>              <C>            <C>
Average daily number of available rooms
      Hotel Carrera..........................................................         307             305            305
      Hotel El Araucano......................................................         144             139            135
      La Serena Club Resort..................................................          95              95             96
      Carrera Club Hotel Iquique.............................................          77              76             76
      Carrera Club Hotel Antofagasta.........................................         137             137            137
                                                                                      ---             ---            ---
            Total............................................................         760             752            749
                                                                                      ===             ===            ===
Occupancy rate (1)
      Hotel Carrera..........................................................        31.7%           30.0%          29.2%
      Hotel El Araucano......................................................        32.0%           29.7%          32.2%
      La Serena Club Resort .................................................        46.0%           34.8%          35.8%
      Carrera Club Hotel Iquique.............................................        33.2%           32.2%          52.2%
      Carrera Club Hotel Antofagasta.........................................        27.2%           22.8%          27.1%
            Weighted Average.................................................        32.9%           29.5%          32.5%
Average daily rate (2)
      Hotel Carrera..........................................................    US$105.0         US$91.8        US$88.1
      Hotel El Araucano......................................................        45.7            42.2           42.7
      La Serena Club Resort .................................................        53.0            60.1           47.6
      Carrera Club Hotel Iquique.............................................        45.7            41.5           36.4
      Carrera Club Hotel Antofagasta.........................................        53.3            49.3           46.0
            Weighted Average.................................................        71.2            66.3           59.5
Average revenue per available room (REVPAR)(3)
      Hotel Carrera..........................................................     US$33.3         US$27.5        US$25.7
      Hotel El Araucano......................................................        14.6            12.6           13.8
      La Serena Club Resort .................................................        24.4            20.9           17.0
      Carrera Club Hotel Iquique.............................................        15.2            13.4           19.0
      Carrera Club Hotel Antofagasta.........................................        14.4            11.2           12.4
            Weighted Average.................................................        23.4            19.5           19.3
</TABLE>

----------------------
(1)   Occupancy is determined for a period by dividing total room nights sold
      during the period by total rooms available for each day during the period.

(2)   Average daily rate is determined by dividing total room revenues plus
      breakfast by total room nights sold.


                                       65
<PAGE>

(3)   Average revenue per available room is calculated as the average daily rate
      per room multiplied by the occupancy rate (equivalent to dividing total
      room revenues by total room nights available for sale).


                                       66
<PAGE>

      The following table shows selected financial information of Hoteles
Carrera at and for the years ended December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                      Hoteles Carrera                                      2001                    2002                     2003
                                                                           ----                    ----                     ----
                                                                            (in millions of constant Ch$, except percentages)
<S>                                                                   <C>                     <C>                       <C>
Net Revenues.............................................              Ch$7,655                Ch$7,086                  Ch$6,671
Gross margin.............................................                 1,245                   1,027                     1,034

Operating income.........................................                  (562)                   (382)                     (211)
Non-operating results....................................                  (633)                   (623)                   (5,068)
Income taxes.............................................                     9                      (1)                      (36)
                                                                      ---------               ---------                 ---------
Net income...............................................             Ch$(1,186)              Ch$(1,006)                Ch$(5,315)
                                                                      =========               =========                 =========

Total assets.............................................             Ch$24,446               Ch$23,438                 Ch$11,610
Bank debt................................................                 5,193                   4,682                       293
Other liabilities........................................                 3,580                   4,090                     2,778
Shareholders' equity.....................................                15,673                  14,666                     8,539
Quinenco's effective economic interest...................                  89.9%                   89.9%                    90.0%
</TABLE>

      Hoteles Carrera's main establishment, Hotel Carrera, was sold in November
2003.

      La Serena Club Resort is located in a popular holiday destination located
325 miles north of Santiago. This property is operated by Hoteles Carrera under
a five-year renewable lease that commenced in December 1995. La Serena Club
Resort has 96 guest rooms and since 1999, a convention center that holds 1,200
people. The five-year lease/management contract on the convention center began
in 1999 and ends in June 2004. Hoteles Carrera does not intend to renew the
lease/management contract at its expiration date.

      Carrera Club Hotel Iquique is a small hotel located in the seaside resort
city of Iquique, in Northern Chile. The hotel has 76 rooms. It is being operated
under a five year lease/management contract which began in 1999 and ends in
August 2004. Hoteles Carrera does not intend to renew the lease/management
contract at its expiration date.

      Carrera Club Hotel Antofagasta is a medium sized hotel located in the
northern coastal city of Antofagasta. The hotel has 137 rooms. Hoteles Carrera
was awarded the lease/management contract in 1999 which establishes a five year
contract period. The five-year lease/management contract, which ends in August
2004 will not be renewed at its expiration date.

      Hotel El Araucano is the largest and best known four-star hotel in
Concepcion, which is the second-largest city in Chile. Hotel El Araucano serves
mostly business travelers, and has 135 guest rooms and eleven meeting rooms.
Hoteles Carrera will continuing owning and operating this hotel although it has
no plans to further develop its interest in the hotel industry in Chile.

      Competition. Hotel Carrera in Santiago competed directly with numerous
four-star and five-star hotels in Santiago, including international hotels such
as the Santiago Hyatt Regency, the Marriott, the Santiago Sheraton, The Crowne
Plaza, The Ritz Carlton, and the Radisson Hotel. Management estimates that Hotel
Carrera ranked fourth in 2003 among Santiago's five-star hotels with respect to
share of room-nights sold, with an approximate 7% market share during the year.

      Hotel El Araucano is the largest four-star hotel in Concepcion, where
there are no five-star hotels, and, according to management estimates, ranked
second in Concepcion with respect to occupancy in 2003 with a 16% share of the
market. The first ranked hotel in Concepcion is believed by management to be the
Diego de Almagro hotel.


                                       67
<PAGE>

      La Serena Club Resort's principal competitor is Hotel Francisco de
Aguirre, another large resort complex in La Serena. In addition, La Serena Club
Resort competes against smaller hotels and guest houses. Though there are no
comparable convention centers located in or near La Serena, the convention
center faces competition from other established convention sites, located in
Santiago, Vina del Mar, Marbella and Pucon. Management estimates that its share
of the hotel markets in La Serena is 11%.

      The two hotels in Iquique and Antofagasta compete in their respective
cities with hotels of similar characteristics. The hotel business in Iquique is
considered more developed than that in Antofagasta as it attracts many tourists
from Chile, neighboring Argentina and Bolivia. In Iquique, there are several
hotels of four-star and one of five-star quality against which the hotel
competes. In Antofagasta, which is considered less developed in terms of hotel
and tourist-related infrastructure, there is one four-star hotel which competes
with the Carrera Club Hotel Antofagasta. Management estimates that its shares of
the hotel markets in Iquique and Antofagasta are 17% and 16%, respectively.

      Real Estate/Hotel Administration - Habitaria

      Since 1998, Quinenco has owned a 50% equity interest in Habitaria, a
developer of residential real estate for Chilean families in the middle-income
and upper middle-income segments. Habitaria was formed in June 1998 through a
joint venture between the Company and Ferrovial Inmobiliaria Chile Ltda.
("Ferrovial"), an indirect subsidiary of Ferrovial S.A. (listed on the Madrid
Stock Exchange), which is among the three largest construction firms in Spain.
Quinenco and Ferrovial jointly control Habitaria through a shareholders'
agreement. The Company does not consolidate Habitaria's results, which are
accounted for as an equity-method investment. In 2003, Habitaria reported a net
loss of Ch$672 million, of which Ch$336 million corresponded to Quinenco's
proportional share.

      Habitaria was initially capitalized in 1998 with an amount equivalent to
US$20 million (historic value), of which Quinenco and Ferrovial each contributed
US$10 million (historic value). In order to continue acquiring properties for
future development, there was an additional capital increase of UF300,000 in
2000 and UF120,000 in 2001. In 2001, Quinenco subscribed to 50% of the 4,180,600
shares issued for UF60,000. In the past, Habitaria has financed purchases of
land, as well as expenditures on professional services (such as architects and
licenses) from equity capital, and construction costs have been financed with
bank debt. Based on the current level of sales and projections for the real
estate market for the types of projects that Habitaria specializes in, the
company has not purchased additional land for future development. At this time,
there are no further plans to contribute additional capital.

      Habitaria was originally formed with the goal of becoming a leading
residential real estate developer, capitalizing on the experience that Ferrovial
has gained in Spain as a developer of residential real estate with a
brand-oriented, customer-focused strategy. Although the shareholders' agreement
between Quinenco and Ferrovial allows for the possibility of expansion to other
countries in South America, it is expected that Habitaria will confine its
activities to developing the remaining phases of existing projects in the
Chilean market.

      As a real estate developer, Habitaria purchases land, supervises the
design and construction of residential projects, secures financing for the
projects, and markets and sells the projects to consumers. Before financing
costs, projects cost between US$13.4 million and US$32.4 million, on average, to
develop and construct. Habitaria's middle-class apartment units are priced
between UF1,300 (approximately US$37,000) and UF2,500 (approximately US$71,000)
depending on the number of bedrooms, the quality of finishings, and the
location. Units targeted towards the upper-middle-class segment are priced
between UF3,300 (approximately US$94,000) and UF7,800 (approximately US$222,000)
depending on the number of bedrooms and the location. Habitaria's middle-class
houses are priced between UF2,000 (approximately US$57,000) and UF3,300
(approximately US$94,000) and upper-middle-class houses between UF3,600
(approximately US$103,000) and UF5,300 (approximately US$151,000).


                                       68
<PAGE>

      As of December 2003, Habitaria has nine projects under development, of
which eight are located in the greater Santiago metropolitan region and one is
located in Valparaiso, the most important port city in Chile.

      For the year ended and as of December 31, 2003, 275 units were delivered
to their owners and an additional 52 have been pre-sold for future delivery.
Stock as of December 31, 2003 included 218 finished units and 149 units which
will be completed in future periods. Sales revenue or revenue from deposits is
recognized as income for a given period when the sales agreement has been
executed.

      The following table contains selected financial information of Habitaria
at or for the years ended December 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                         Habitaria                                      2001                   2002                    2003
                                                                        ----                   ----                    ----
                                                                      (in millions of constant Ch$, except percentages)
<S>                                                                <C>                    <C>                      <C>
Net revenues............................................           Ch$20,259              Ch$23,236                Ch$18,066
Gross margin............................................               3,669                  3,744                    2,132

Operating income........................................               1,036                  1,409                       50
Non-operating results...................................               (583)                   (466)                    (743)
Income taxes............................................                (19)                    (36)                      21
                                                                   ---------              ---------                ---------
Net income..............................................              Ch$434                 Ch$907                  Ch$(672)
                                                                   =========              =========                =========

Total assets............................................              50,869                 47,408                   35,464
Bank debt...............................................              31,533                 26,618                   16,348
Other liabilities.......................................               2,662                  3,225                    2,223
Shareholders' equity....................................              16,674                 17,565                   16,893
Quinenco's effective economic interest..................                 50%                     50%                      50%
</TABLE>

      Competition. The Chilean real estate development industry is fragmented,
with no developer controlling a significant share of the residential market.
Therefore, Habitaria competes with a variety of real estate developers, the
largest of which include Socovesa, ENACO, Almagro, Inmobiliaria P&Y,
Inmobiliaria Manquehue and Geosal, among others. According to information
provided by Camara Chilena de la Construccion (the Chilean Construction
Association), Habitaria estimates that in 2003 it had an approximate 13% share
in homes and a 2% share in apartments of the real estate development industry in
those communities where it has projects.

      Sensitivity to Economic Activity. Habitaria expects that its operations
will continue to be sensitive to Chile's economic cycles. At present, the slow
recovery of the Chilean economy has created, in the view of Habitaria's
management, conditions of oversupply. Though Habitaria's management believes
that the economic conditions experienced since 1997 have reduced land prices and
construction costs, sales have also been adversely impacted as a result of the
oversupply discussed above. The Company cannot assure or predict the timing of
any improvement in the market for residential real estate.

      Sensitivity to Interest Rates and Credit Availability. As a developer of
real estate, Habitaria is highly dependent on its ability to procure financing
for its projects. In the past, Habitaria has financed its projects with a mix of
30% equity and 70% debt, typically in the form of bank loans. Bank financing has
historically been available to Habitaria, however, there can be no assurance
that Habitaria will be able to obtain the necessary financing to complete the
remaining phases of its projects. Of equal importance are the terms and
availability of mortgage financing for home-buyers. Habitaria expects that its
sales will be sensitive to fluctuations in interest rates and mortgage
availability and cannot guarantee that mortgages will be available on terms
acceptable to home-buyers.


                                       69
<PAGE>

C.    Organizational Structure

      The following table shows the percentage interests directly and indirectly
owned by Quinenco in each of its main businesses as of December 31, 2003:

<TABLE>
<CAPTION>
                                                                         Percentage of Economic Interest
                                                                                Owned by Quinenco
                                                                --------------------------------------------------
                                                                               At December 31, 2003
                                                                --------------------------------------------------
                                                                  Country of        Economic         Control Of
                                                                Incorporation       Ownership       Voting Shares
                                                                -------------       ---------       -------------
<S>                                                                 <C>                  <C>                <C>
Financial
              Banco de Chile (1).......................             Chile                29.2%              52.2%
Food and Beverage
              Lucchetti ...............................             Chile                95.9%              95.9%
              CCU .....................................             Chile                30.8%              30.8%
Telecommunications
              Telsur...................................             Chile                73.6%              73.6%
              Entel....................................             Chile                 5.7%               5.7%
Manufacturing
              Madeco ..................................             Chile                55.2%              55.2%
Real Estate/Hotel Administration
              Hoteles Carrera..........................             Chile                90.0%              93.5%
              Habitaria................................             Chile                50.0%              50.0%
</TABLE>

------------------
(1)   On January 1, 2002, Banco de Chile merged with Banco Edwards. As a result,
      Quinenco's economic interest in Banco de Chile increased from 17.8% to
      29.2% and its control of the voting rights of Banco de Chile decreased
      from to 52.7% to 52.2%. Economic ownership corresponds to dividend rights.
      Under the terms of its agreement, and prior to its merger with Banco
      Edwards on January 1, 2002, Banco de Chile paid 64.9% of all declared
      dividends directly to the Central Bank. The terms of its agreement with
      the Central Bank have been modified as of January 1, 2002 and until its
      subordinated debt with the Central Bank of Chile has been fully
      extinguished, Banco de Chile will pay 42.8% of all declared dividends
      directly to the Central Bank.

D. Property, Plant and Equipment

      Quinenco's principal executive offices are located in Santiago at Enrique
Foster Sur 20, Floor 14, Las Condes, and occupy approximately 2,500 square
meters of office space owned by Quinenco.

      Madeco's headquarters are located in Santiago, in a building containing
approximately 3,524 square meters of office space. In addition, Madeco owns
plants, warehouses and office space occupying a total of approximately 423,219
square meters in various locations in Chile, Argentina, Peru and Brazil. In
Chile, Madeco owns plants, warehouses and office space in and around Santiago.
In Argentina, Madeco owns plants in the Greater Buenos Aires area, San Luis and
Llavallol. In Peru, Madeco owns plants and offices in Lima. In Brazil, Madeco
owns production plants in Sao Paulo and Rio de Janeiro. In 2003, the Bahia
operations were moved to Sao Paulo and Rio de Janeiro plants.

      Telsur has its own headquarters in the city of Valdivia (approximately 520
miles south of Santiago). In addition, Telsur owns office space, switch sites
and customer service facilities in most of the cities in Regions VIII, IX, X and
XI, particularly in major cities such as Puerto Montt, Coyhaique, Osorno, Temuco
and Concepcion.

      Lucchetti's main operations were sold on March 31, 2004. As of December
31, 2003 and until the time of sale, Lucchetti's headquarters were located in
Santiago, in Lucchetti's pasta manufacturing facilities. In Chile, Lucchetti
owned manufacturing plants, warehouses and office space occupying a total of
approximately 47,600 square meters in various locations in the Santiago
Metropolitan Region. Following the disposal of Lucchetti Chile in March 2004,
Lucchetti's main assets in Chile are an edible oil processing plant and storage
facilities, both of which the company is attempting to sell. In Peru, Lucchetti
owns a 17,000 square meter pasta plant near Lima, which was placed in service in
December 1998. Lucchetti is currently in the process of liquidating its assets
in Peru. See "Item 4. Information on


                                       70
<PAGE>

the Company - Business Overview - Food and Beverages - Lucchetti" and "Item 8.
Financial Information - Legal Proceedings - Lucchetti".

      CCU's headquarters are located in Santiago. In addition, CCU owns and
leases manufacturing plants and warehouses in various locations in the Santiago
Metropolitan Region and throughout Chile. In Argentina, CCU owns and leases
manufacturing plants, warehouses, commercial offices and vineyards in various
locations, including the Greater Buenos Aires areas.

      Banco de Chile owns an approximately 71,000 square meter building and the
underlying land located in Santiago that serves as executive offices for the
bank and most of its subsidiaries. In addition, it owns a 15,000 square meter
building in Santiago where the remainder of its executive offices are located.
As of December 31, 2003, Banco de Chile owned the properties of 125 full service
branches (approximately 98,000 square meters of office space). It leases office
space for the remaining 99 full service branches and for the New York branch and
Miami agency, as well as representative offices. The bank also owns properties
throughout Chile for back office and administrative operations including
document storage facilities as well as a 140,000 square meter recreational
facility for employee use.

      Following the sale of the Santiago hotel in November 2003, Hoteles Carrera
currently owns the Hotel El Araucano in Concepcion, Chile, which occupies a
total of approximately 8,840 square meters. The La Serena Club Resort and
convention center, which occupies a total of approximately 10,914 square meters,
is leased pursuant to a four-year renewable lease that commenced in 2000. In
July 1999, Hoteles Carrera signed a five-year lease/management contract to
operate two hotels in Iquique and Antofagasta. Hoteles Carrera does not intend
to renew the leases/management contracts on the three hotels in the north of
Chile at their respective dates in 2004.

      Habitaria's headquarters are located in Santiago, in 667 square meters of
leased office space. The lease expires in June 2005.

      For further information on future investments in property, plant and
equipment, see Note 9 to the Consolidated Financial Statements and "Item 5.
Operating and Financial Review and Prospects - Liquidity and Capital Resources".

Item 5. Operating and Financial Review and Prospects

Executive Overview

      The Company is one of the largest diversified companies engaged in the
industrial and services sectors in Chile. It has invested in five main sectors
of the economy: financial services; food and beverage; telecommunications;
manufacturing; and real estate and hotel administration.

      The Company conducts its operations through various consolidated
subsidiaries (in which, in certain cases, minority shareholders hold significant
interests), and through significant equity investments in certain other
companies. The Consolidated Financial Statements as of December 31, 2003
consolidate the results of Madeco, Lucchetti, Telsur and Hoteles Carrera. The
Company's majority-owned investment in Banco de Chile, and its equity
investments in CCU, Entel and Habitaria are accounted for under the equity
method, and the Company's share of the net income (or loss) thereof is included
under the caption "Non-operating results" in the Company's income statement.

      The Company's consolidated net income for any period is a function of: (i)
the relative level of income (or loss) generated by Quinenco and its
consolidated subsidiaries and Quinenco's economic interest in each such
consolidated subsidiary, (ii) the relative level of income (or loss) generated
by the companies accounted for under the equity method and Quinenco's economic
interest in each such company, (iii) adjustments for income items of
intermediate holding companies, (iv) dividends from other investments accounted
for by the cost method and (v) the level of income (or loss) generated by
Quinenco on the sale of investments.


                                       71
<PAGE>

      As a holding company, the level of Quinenco's income and cash flow and its
ability to pay debt service obligations and dividends depends primarily upon the
receipt of dividends and distributions from its subsidiaries, equity investments
and related companies and, to a certain extent, on the periodic sale of
investments. The payment of dividends by such subsidiaries, equity investments
and related companies is in certain instances subject to restrictions and is
contingent upon their earnings and cash flows.

      As of December 31, 2003, investments in the financial services sector,
represented by Quinenco's controlling interest in Banco de Chile, made up
approximately 69% of Quinenco's total investments and 63% of total assets at the
corporate level. Due to the importance of Quinenco's investments in the
financial services sector, Quinenco's level of income from dividends and
participation in net income will depend, to a large extent, on results from this
investment. In addition, the Food and Beverage sector investment, CCU, also
contributes significantly to Quinenco's level of income from dividends and
participation in net income. For further information regarding these entities,
whose results are not consolidated into the Company's financial statements under
Chilean GAAP, see Banco de Chile's and CCU's respective Annual Reports on Form
20-F for the fiscal year ended December 31, 2003.

      The Banco de Chile share acquisition in 2001 involved significant cash
outlays, which were financed with debt. Although the initial debt incurred in
connection with the acquisition has been partially reduced through sales of
non-strategic assets, dividend income and other resources, the Company will
continue to incur interest expense associated with the remaining debt until the
debt level is reduced, either by payments at scheduled amortization dates or
through the sale of non-strategic assets. In addition, in connection with the
acquisition of Banco de Chile, the Company recognized goodwill in the amount of
Ch$247,779 million (historic value). The goodwill is being amortized over a
period of 20 years, in accordance with Chilean GAAP and the related expense will
represent a charge to income in future periods.

      The Company's lines of business and results of operations are, to a large
extent, dependent on the overall level of economic activity and growth in Chile.
Of the total aggregate revenues of the Company's main operating companies
(excluding Banco de Chile), which amounted to Ch$741,444 million in 2003,
approximately 82% were from operations in Chile. In addition, Banco de Chile
mainly operates in Chile, deriving approximately 91% of its net income from
domestic operations. In addition to Chile, Madeco is dependent on the overall
level of economic activity and growth in Brazil, Argentina and Peru, and CCU is
dependent on the overall level of economic activity in Argentina.

      The competitive environment in Chile has increased significantly in recent
years. As a result, the Company's main operating companies face high levels of
competition in their lines of business. In particular, Banco de Chile and CCU,
the most significant contributors to the Company's dividend cash flow and
results of operations, are subject to intense competition from domestic and
multinational competitors, which has led to consolidation in their respective
industries. Quinenco expects the trend of consolidation to continue, which could
affect profit margins.

      See "- D. Trend Information" for further information regarding economic
and industry-wide-factors relevant to the Company and its subsidiaries.

      OVERVIEW OF 2003 RESULTS OF OPERATIONS

      Consolidated sales decreased by 10.7% compared to 2002, mainly due to the
discontinuation of Lucchetti's production activities in Peru following the
forced closure of its facilities in January 2003, a reduction in Madeco's sales
as it continued to suffer from the downturn in investment levels in its
principal markets and the effect of the appreciation of the Chilean peso during
the year. In spite of the decline in consolidated sales, which directly
translated into a 10.9% reduction in gross income (defined as net revenues less
cost of sales), operating profit rose by 22.8% to Ch$12,747 million. The
improvement in consolidated operating profit was mainly attributable to
reductions in selling, general and administrative expenses of the main operating
companies, most notably Madeco and Lucchetti.


                                       72
<PAGE>

      Quinenco reported non-operating income in 2003 of Ch$23,701 million,
compared to 2002<180>s non-operating losses of Ch$107,485 million. The
improvement in non-operating results was attributable to a series of factors,
the most relevant being the increase in income from equity investments, which
rose by over 123% to Ch$57,995 million, mostly in connection with Quinenco's
interest in Banco de Chile and CCU. Banco de Chile finished its first full year
following the merger with net profit of Ch$130,553 million, of which Ch$38,047
million corresponded to Quinenco's interest. CCU divested its interest in a
Croatian brewery in 2003, generating a significant extraordinary gain on sale.
This, coupled with a 20.2% increase in operating income, led CCU to report net
profits of Ch$54,088 million, of which Quinenco's share was Ch$16,657 million.

      In addition, a one-time Ch$36,035 million arbitration settlement received
from Quinenco's ex-partners in IRSA, the company which controls 61.6% of CCU,
also contributed significantly to the improvement in non-operating results in
2003. Other non-operating expenses, interest expense and foreign currency
translation losses were also reduced considerably in 2003, further benefiting
non-operating performance.

      Dividend cash flow amounted to Ch$74,553 million in 2003, up by 152% from
the Ch$29,560 million received in 2002. Dividends mostly corresponded to
distributions paid to Quinenco and intermediate holding companies by CCU, Banco
de Chile and, to a lesser extent, Entel. In addition, Telefonica del Sur
distributed dividends of Ch$3,021 million to Quinenco. Dividend cash flow
facilitated debt service and reduction during the period. At the corporate
level, indebtedness was reduced by 18.4% to Ch$330,038 million. Similarly,
consolidated indebtedness was also reduced significantly in 2003, decreasing by
22.0% to Ch$580,419 million.

      The following discussion analyzes the consolidated results of the Company
for the years ended December 31, 2001, 2002 and 2003. See "Item 4. Information
on the Company" for certain data regarding revenues and operating income of
major product segments of the Company's principal businesses

      In the following discussion the term "holding company" refers to Quinenco
S.A. and the intermediate level holding companies through which, in certain
cases, Quinenco holds its interest in the Company's consolidated operating
companies and certain equity investments.


                                       73
<PAGE>

      The following table shows the percentage interests directly and indirectly
owned by Quinenco in each of the main sectors in which it participates at
December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                                                     Percentage of Economic Interest Owned by Quinenco
                                                     -------------------------------------------------
                                                                     as of December 31,
                                                           2001             2002             2003
                                                           ----             ----             ----
<S>                                                        <C>              <C>              <C>
Financial Services
           Banco Edwards (1).......................        51.2%              --               --
           Banco de Chile (2) .....................        52.7%            52.2%            52.2%
Food and Beverage
           Lucchetti (3) ..........................        93.3%            93.7%            95.9%
           CCU ....................................        30.8%            30.8%            30.8%
Telecommunications
           Telsur .................................        73.6%            73.6%            73.6%
           Entel...................................         5.7%             5.7%             5.7%
Manufacturing
           Madeco (4)..............................        56.1%            53.4%            55.2%
Real Estate/Hotel Administration
           Hoteles Carrera.........................        89.9%            89.9%            90.0%
           Habitaria...............................        50.0%            50.0%            50.0%
</TABLE>

---------------------
(1)   In 2001, through an exception granted by the SVS, the Company's interest
      in Banco Edwards was accounted for as a long-term investment under the
      equity-investment method. Banco Edwards merged with Banco de Chile on
      January 1, 2002.

(2)   On March 27, 2001, Quinenco's interest in Banco de Chile, which is held
      through an intermediate holding company, LQIF, was increased from 12.3% to
      52.7% (as a percentage of the outstanding voting rights). Through an
      exception granted by the SVS, Banco de Chile is accounted for as an equity
      method investment. On January 1, 2002, Banco de Chile absorbed Banco
      Edwards through a merger process, and as a result, Quinenco's interest in
      Banco de Chile decreased to 52.2%.

(3)   In January 2002 and December 2003, the Company subscribed to capital
      increases at Lucchetti. As a consequence, Quinenco's effective economic
      interest increased to 93.7% and 95.9% in 2002 and 2003, respectively.

(4)   In October 2002, Madeco completed a capital increase in which the Company
      did not subscribe for any shares. As a result, the Company's ownership
      interest in Madeco decreased from 56.1% to 53.4% as of December 31, 2002.
      Madeco completed a capital increase in 2003 to which Quinenco subscribed
      2,058,353,792 shares. As a consequence, Quinenco's effective economic
      interest in Madeco increased to 55.2%.

RESULTS OF OPERATIONS

      The following discussion should be read in conjunction with the
Consolidated Financial Statements included elsewhere herein. The Consolidated
Financial Statements have been prepared in accordance with Chilean GAAP, which
differs in significant respects from U.S. GAAP. Note 26 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 shareholders' equity as of December 31, 2002 and 2003 and net
income (loss) for the years ended December 31, 2001, 2002 and 2003.

      In accordance with Chilean GAAP, financial data included in the
Consolidated Financial Statements have been restated in constant Chilean pesos
of December 31, 2003. See Notes 2(b) and 3 to the Consolidated Financial
Statements.

NET SALES

<TABLE>
<CAPTION>
                                        2001     Variation  % change        2002  Variation   % change       2003
                                        ----     ---------  --------        ----  ---------   --------       ----
                                                  (in millions of constant Ch$, except percentages)
<S>                                  <C>           <C>         <C>       <C>        <C>          <C>      <C>
Madeco ..........................    345,288       (86,443)    (25.0)    258,845    (21,179)      (8.2)   237,666
Lucchetti .......................     89,731        (5,094)     (5.7)     84,637    (25,522)     (30.2)    59,115
Telsur ..........................     47,168         2,102       4.5      49,270      2,199        4.5     51,469
Hoteles Carrera .................      7,655          (569)     (7.4)      7,086       (415)      (5.9)     6,671
Holding Co. & eliminations ......      3,299        (2,875)    (87.1)        424      2,034      479.7      2,458
                                     -------       -------               -------    -------               -------
Total net sales .................    493,141       (92,879)    (18.8)    400,262    (42,883)     (10.7)   357,379
                                     =======       =======               =======    =======               =======
</TABLE>


                                       74
<PAGE>

      2003 Compared to 2002

      In 2003, the Company reported net consolidated sales of Ch$357,379
million, a 10.7% decrease from the net sales of Ch$400,262 million in 2002. The
decrease was mainly attributable to lower sales at Lucchetti and Madeco.

      Lucchetti's sales, which accounted for 16.5% of Quinenco's consolidated
sales in 2003, decreased by 30.2%, mainly as a result of the discontinuation of
its activities in Peru following the forced closure of its plant facilities in
January 2003 by Peruvian authorities for alleged environmental violations. The
reduction in sales of the Peruvian operation accounted for Ch$18,981 million of
the total Ch$25,522 million reduction in sales. In addition, the decrease in
sales included a 10.0% decline in sales of the Chilean operations. Lucchetti's
sales in Chile decreased as a result of a 43.4% reduction in the sales volumes
of edible oils, explained by an oversupply of imports from Argentina. The
decline in edible oil sales was partially offset by higher sales of pastas and
soups, which rose 5.2% and 22.1%, respectively.

      Madeco's sales, which accounted for 66.5% of Quinenco's consolidated sales
in 2003, decreased by 8.2%. The deterioration in sales in 2003 was mainly
attributable to lower sales of the wire and cable business unit, particularly in
Brazil. Sales of the wire and cable business unit, which amounted to Ch$110,526
million, represent Madeco's main business, accounting for 46.5% of Madeco's
consolidated sales in 2003. Sales of this business unit experienced a decline of
16.5%, mainly as a result of weak demand for metal cables in Brazil, which
reduced sales volumes of the unit by approximately 12.9%. Additionally, the
17.4% appreciation of the Chilean peso vis-a-vis the U.S. dollar also affected
the level of revenues reported from foreign wire & cable operations. These
effects were partially offset by a 14.2% increase in the wire and cable business
unit's average U.S. dollar price of metallic cables. To a lesser extent, the
deconsolidation of Optel, a optical fiber cable producer in Brazil also
contributed to Madeco's decline in sales in 2003, further reducing sales by
Ch$2,202 million. In addition, sales of the brass mills unit declined by 1.7%,
mainly due to the effect of the appreciation of the Chilean peso on the sales of
its foreign subsidiaries and a 13.0% reduction in the sales volume of coin
blanks. An increase in the sales of the flexible packaging and aluminum profiles
business units of 1.9% and 3.0% respectively, partially compensated for the
reduction in consolidated sales.

      2002 Compared to 2001

      In 2002, the Company reported net consolidated sales of Ch$400,262
million, an 18.8% decrease from the net sales of Ch$493,141 million in 2001. The
decrease was mainly attributable to lower sales at Madeco and to a lesser
extent, at Lucchetti.

      Madeco's sales, which accounted for 64.7% of Quinenco's consolidated sales
in 2002, decreased by 25% in 2002, mainly due to a reduction in sales of the
wire and cable and brass mills business units. The wire and cable segment, which
is Madeco's main business representing 51.2% of Madeco's consolidated sales in
2002, experienced a decline in sales in 2002 of 33.4%, mainly as a result of
lower demand by the telecommunications and energy sectors for copper, aluminum
and optic fiber cable products in Brazil. In addition, wire and cable sales in
Argentina were practically non-existent in 2002 following the temporary closure
of Madeco's production facilities in the beginning of the year. The reduction in
sales of the wire and cable business unit accounted for approximately 77% of the
total downturn in Madeco's consolidated sales in 2002. Sales of the brass mills
business unit, which represented 22.1% of total sales, also declined by 21.3%
during the year due to a general slowdown in exports and coin sales. To a lesser
extent, the shutdown of production activities in Argentina also impacted the
level of brass mills sales. The reduction in sales of brass mills products
accounted for approximately 18% of Madeco's total sales decline in 2002. Sales
of Madeco's other two business units, flexible packaging and aluminum profiles,
also decreased by 7% and 5%, respectively, although the impact on consolidated
sales was marginal, accounting for 5.3% of the total downturn.

      Lucchetti's sales, which accounted for 21.1% of Quinenco's consolidated
sales in 2002, decreased by 5.7%, mainly as a result of the divestment of its
Argentine operations in the first half of 2001. In addition, the decrease in
sales corresponded to an 18.5% reduction in sales of the Peruvian


                                       75
<PAGE>

operations, partially offset by a 9.9% increase in sales of Lucchetti's Chilean
operations. Lucchetti's sales in Chile, which accounted for 77.6% of
consolidated sales in 2002, increased due to higher pasta volume sold and new
product launches in the soups, creams and broths product line. Sales in Peru,
which accounted for the remaining 22.4% of consolidated sales, were negatively
affected by an ongoing public dispute with Peruvian authorities concerning
alleged environmental violations related to the plant location on the outskirts
of Lima. As a consequence, Lucchetti Peru experienced a sharp drop in the volume
sold and lower average prices of its pasta products.

COST OF SALES

<TABLE>
<CAPTION>
                                    2001    Variation       % change           2002    Variation        % change        2003
                                    ----    ---------       --------           ----    ---------        --------        ----
                                                        (in millions of constant Ch$, except percentages)
<S>                             <C>           <C>              <C>         <C>           <C>               <C>       <C>
Madeco........................  (298,449)     (71,616)         (24.0)      (226,833)     (18,396)           (8.1)    (208,437)
Lucchetti.....................   (62,915)        (917)          (1.5)       (61,998)     (21,193)          (34.2)     (40,805)
Telsur........................   (19,116)       2,739           14.3        (21,855)       3,409            15.6      (25,264)
Hoteles Carrera...............    (6,410)        (352)          (5.5)        (6,058)        (422)           (7.0)      (5,636)
Holding Co. & eliminations....    (4,891)      (2,534)         (51.8)        (2,357)       2,528           107.3       (4,885)
                                --------      -------                      --------      -------                     --------
Total cost of  sales..........  (391,781)     (72,680)         (18.6)      (319,101)     (34,074)          (10.7)    (285,027)
                                ========      =======                      ========      =======                     ========
</TABLE>

      2003 Compared to 2002

      In 2003, the Company's cost of sales was Ch$285,027 million, compared to
cost of sales of Ch$319,101 million in 2002, a decrease of 10.7%. The decrease
in consolidated cost of sales was in line with the decrease of 10.7% in
consolidated sales and was mainly attributable to a decrease in cost of sales at
Lucchetti and Madeco.

      At Lucchetti, the decrease in cost of sales of 34.2% was almost entirely
related to the discontinuation of its activities in Peru in January 2003.

      At Madeco, the decrease in cost of sales of 8.1% was in line with its
sales revenue decrease of 8.2% in 2003. As a percentage of sales, cost of sales
in 2003 remained practically unchanged at 87.7%.

      2002 Compared to 2001

      In 2002, the Company's cost of sales was Ch$319,101 million, compared to
cost of sales of Ch$391,781 million in 2001, a decrease of 18.6%. The decrease
in consolidated cost of sales was in line with the decrease of 18.8% in
consolidated sales and was mainly attributable to a decrease in cost of sales at
Madeco.

      At Madeco, the decrease in cost of sales of 24% was in line with its sales
revenue decrease of 25% in 2002. As a percentage of sales, cost of sales
increased slightly from 86.4% to 87.6% in 2002.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                      2001     Variation      % change         2002     Variation       % change         2003
                                      ----     ---------      --------         ----     ---------       --------         ----
                                                         (in millions of constant Ch$, except percentages)
<S>                               <C>            <C>            <C>        <C>            <C>              <C>       <C>
Madeco.......................     (35,743)       (7,774)        (21.7)     (27,969)       (6,197)          (22.2)    (21,772)
Lucchetti....................     (24,063)       (4,129)        (17.2)     (19,934)       (4,518)          (22.7)    (15,416)
Telsur.......................     (14,069)          116           0.8      (14,185)         (297)           (2.1)    (13,888)
Hoteles Carrera..............      (1,807)         (397)        (22.0)      (1,410)         (165)          (11.7)     (1,245)
Holding Co. & eliminations...      (7,457)         (174)         (2.3)      (7,283)            1              --      (7.284)
                                  -------       -------                    -------       -------                     -------
Total SG&A expenses..........     (83,139)      (12,358)        (14.9)     (70,781)      (11,176)          (15.8)    (59,605)
                                  =======       =======                    =======       =======                     =======
</TABLE>


                                       76
<PAGE>

      2003 Compared to 2002

      In 2003, the Company's selling, general and administrative expenses or
SG&A expenses were Ch$59,605 million, compared to Ch$70,781 million in 2002, a
decrease of 15.8%. The decrease was mainly due to lower selling, general and
administrative expenses at Madeco and Lucchetti.

      The decrease in Madeco's SG&A expenses of Ch$6,197 million was related to
a company-wide reduction in SG&A expenses. In addition, Madeco's SG&A expenses
decreased by Ch$1,450 million due to the effect on non-Chilean subsidiaries of
the appreciation of the Chilean peso relative to the U.S. dollar.

      The reduction of Ch$4,518 million in Lucchetti's selling, general and
administrative expenses in 2003 was attributable to the discontinuation of
Lucchetti's activities in Peru in January 2003.

      2002 Compared to 2001

      In 2002, the Company's selling, general and administrative expenses were
Ch$70,781 million, compared to Ch$83,139 million in 2001, a decrease of 14.9%.
The decrease was mainly due to lower selling, general and administrative
expenses at Madeco and to a lesser extent, at Lucchetti.

      The decrease in selling, general and administrative expenses from
Ch$35,743 million to Ch$27,969 million at Madeco was related to various factors,
which included the closure of production facilities in Argentina, the exit from
the curtain wall business (part of the aluminum profiles business unit) and a
company wide personnel reduction.

      The reduction of Ch$4,129 million in Lucchetti's selling, general and
administrative expenses in 2002 was mainly due to the divestiture of its
Argentine operations, which accounted for Ch$2,890 million of the total
reduction. SG&A expenses corresponding to the Peruvian operation decreased in
line with the sales decrease experienced during the year. In absolute terms,
selling, general and administrative expenses of the Chilean operation remained
constant between 2001 and 2002, although as a percentage of sales, they fell
from 25.9% to 23.5%, thereby contributing to a reduction in SG&A expenses as a
percentage of sales at the consolidated level.

OPERATING INCOME (LOSS)

<TABLE>
<CAPTION>
                                      2001   Variation     % change          2002        Variation    % change        2003
                                      ----   ---------     --------          ----        ---------    --------        ----
                                                         (in millions of constant Ch$, except percentages)
<S>                                 <C>         <C>           <C>           <C>              <C>          <C>         <C>
Madeco..........................    11,096      (7,053)       (63.6)        4,043            3.414        84.4        7,457
Lucchetti.......................     2,753         (48)        (1.7)        2,705              189         7.0        2,894
Telsur..........................    13,983        (753)        (5.4)       13,230             (913)       (6.9)      12,317
Hoteles Carrera.................      (562)        180        (32.0)         (382)             172       (45.0)        (210)
Holding Co. & eliminations......    (9,049)       (167)         1.8        (9,216)            (495)        5.4       (9,711)
                                    ------      ------                     ------            -----                   ------
Total operating income (loss)...    18,221      (7,841)       (43.0)       10,380            2,367        22.8       12,747
                                    ======      ======                     ======            =====                   ======
</TABLE>

      2003 Compared to 2002

      In 2003, the Company reported operating income of Ch$12,747 million,
compared to operating income of Ch$10,380 million in 2002. The increase of 22.8%
in 2003 was primarily due to an improvement in the operating performance of
Madeco, the effect of which was partially offset by a reduction in Telsur's
operating income.

      Madeco's operating income increased by 84.4% to Ch$7,457 million. The
increase in Madeco's operating results was mainly attributable to the 22.2%
reduction in selling, general and administrative expenses which led to an
improvement in the operating results of all of Madeco's business units, the
effect of which more than offset the decline in gross profit associated with the
company's lower sales level. To a lesser extent, the exclusion of Optel's
operating results also contributed to the increase in operating income as the
subsidiary produced an operating loss in 2002 amounting to Ch$1,332 million.


                                       77
<PAGE>

      Telsur reported a 6.9% decrease in operating profit in 2003. In spite of
an increase in sales of 4.5% and a 2.1% reduction in SG&A expenses, Telsur's
operating profit was affected by the sales mix which favored newly consolidated
internet, security and other non-regulated services, the associated margins of
which do not yet compensate for the reduction the company has experienced in
sales of its higher margin fixed line telephony products. Fixed line telephony
traffic has declined as a consequence of consumer substitution of mobile and
other telecommunications alternatives for fixed line telephony.

      2002 Compared to 2001

      In 2002, the Company reported operating income of Ch$10,380 million,
compared to operating income of Ch$18,221 million in 2001. The decrease of 43%
in 2002 was primarily due to deterioration in the operating performance of
Madeco, which accounted for 90% of the total reduction, and to a lesser extent,
Telsur.

      The decrease in Madeco's operating profit of 63.6% in 2002 was mainly
attributable to the wire and cable business unit, which suffered from a lack of
demand for its products in Brazil by the telecommunications sector, thereby
generating operating losses for the year.

      Telsur reported a 5.4% decrease in operating profit in 2002. The decrease
in operating profit was mainly due to the consolidation of non-regulated
services in 2002 which do not yet generate sufficient revenue to cover their
cost of operations as well as a reduction in basic telephony traffic as a
consequence of low economic activity in the south of Chile and the effect of
substitution of mobile alternatives for fixed line telephony.

NON - OPERATING RESULTS

INTEREST INCOME

      2003 Compared to 2002

      In 2003, interest income amounted to Ch$2,928 million, compared to
Ch$5,401 million in 2002, a reduction of 45.8%. The decrease in interest income
was primarily attributable to a lower average level of interest-bearing cash and
cash equivalents, as well as lower prevailing interest rates on cash deposits.

      2002 Compared to 2001

      In 2002, interest income amounted to Ch$5,401 million, compared to
Ch$8,259 million in 2001, a reduction of 34.6%. The decrease in interest income
was primarily attributable to a reduction in interest rates on cash deposits.


                                       78
<PAGE>

NON - OPERATING INCOME

<TABLE>
<CAPTION>
                                                                          2001       2002       2003
                                                                          ----       ----       ----
<S>                                                                    <C>         <C>       <C>
                                                                      (in millions of constant Ch$)
Gain on sale of investments:
     Gain on sale of Entel shares .................................     51,567         --         --
     Gain on sale of other investments ............................      6,271        435         18
                                                                      --------   --------   --------
Total gain on sale of investments .................................     57,838        435         18
Proportional share of net income of equity method investments:
     Banco Edwards ................................................      5,378         --         --
     Banco de Chile ...............................................     16,153     15,578     38,047
     CCU ..........................................................     12,293      6,862     16,657
     Entel ........................................................      3,206      2,361      3,414
     Habitaria (1) ................................................        217        453         --
     Others .......................................................        608        679       (123)
                                                                      --------   --------   --------
Total proportional share of net income of equity method investments     37,855     25,933     57,995
                                                                      --------   --------   --------
Other non-operating income ........................................     11,391      7,510     61,515
                                                                      --------   --------   --------
Total non-operating income ........................................    107,084     33,878    119,528
                                                                      ========   ========   ========
</TABLE>

(1)   Quinenco's proportional share of the net loss corresponding to its
      interest in Habitaria amounted to Ch$336 million in 2003. For a discussion
      of Habitaria's results in 2003 compared to 2002, see "- Non-operating
      expenses - Proportional share of net income - main equity investments" in
      this section.

      2003 Compared to 2002

      In 2003, non-operating income was Ch$119,528 million compared to Ch$33,878
million reported in 2002, an increase of 252.8%. The increase in non-operating
income in 2003 was due to various factors, which included significantly higher
results from equity investments and a non-recurring arbitration settlement
payment of Ch$36,035 million received from Quinenco's ex-partners in IRSA, the
controlling entity of CCU. In addition, negative goodwill amortization of
Ch$21,130 million associated with Quinenco's non-subscription to Madeco's
capital increase in June and August of 2003 also contributed to the increase in
non-operating income for the year, although this credit was entirely offset by a
charge of Ch$21,130 million to other non-operating expenses in connection with
the non-subscription.

      2002 Compared to 2001

      In 2002, non-operating income was Ch$33,878 million compared to Ch$107,084
million reported in 2001, a decrease of 68.4%. The reduction in non-operating
income in 2002 was primarily due to the absence of gains on the sale of
investments and to a lesser extent, a reduction in the proportional share of net
income of equity method investments, which fell by 31.5% to Ch$25,933 million.
Quinenco's proportional share of net income was affected by lower net income
corresponding to its investments in CCU and the banking sector, which following
the merger of Banco Edwards and Banco de Chile, only included Banco de Chile in
2002.

GAIN ON SALE OF INVESTMENTS

      2003 Compared to 2002

      In 2002 and 2003, gains on the sale of investments were immaterial to the
Company's results.

      2002 Compared to 2001

      In 2002, gains on the sale of investments amounted to Ch$435 million,
compared to Ch$57,838 million in 2001. In 2001, gains on the sale of investments
were mostly made up of the gain on the sale of 8% of the outstanding shares of
Entel and a 39.4% interest in Plava Laguna, which amounted to Ch$51,567 million
and Ch$1,331 million, respectively.


                                       79
<PAGE>

PROPORTIONAL SHARE OF NET INCOME OF EQUITY METHOD INVESTMENTS

      2003 compared to 2002

      The proportional share of net income of equity method investments was
Ch$57,995 million in 2003, compared to Ch$25,933 million in 2002, an increase of
123.6%. The increase can mainly be explained by a higher proportional share of
net income from Quinenco's investments in Banco de Chile, CCU, and to a lesser
extent, Entel.

      2002 compared to 2001

      Quinenco's proportional share of net income of equity method investments
was Ch$25,933 million in 2002, compared to Ch$37,855 million in 2001, a decrease
of 31.5%. The decrease can mainly be explained by a lower proportional share of
net income from Quinenco's investments in CCU and the banking sector, which
following the merger of Banco Edwards and Banco de Chile in 2002, only included
Banco de Chile.

      Quinenco's Proportional Share of Net Income of Equity Method Investments

      Banco de Chile - 2003 compared to 2002

      Quinenco's investment in Banco de Chile is currently being accounted for
as a non-consolidated equity-method interest, in accordance with an express
authorization from the SVS. Until it merged with Banco de Chile on January 1,
2002, Quinenco's interest in Banco Edwards was also accounted for as a
non-consolidated equity-method interest.

      Quinenco's proportional share of net income from its investments in the
financial services sector was Ch$38,047 million and Ch$15,518 million in 2003
and 2002, respectively, which represented 29.2% of the net income of Banco de
Chile in both years.

      Banco de Chile's net income was Ch$130,553 million in 2003, an increase of
145.6% from the net income of Ch$53,161 million reported in 2002. The increase
in net income was attributable to various factors, including a growth in fee
income of 30.2%, lower provisions for loan losses, higher loan recoveries and a
decrease in the bank's operating expenses. These increases more than offset the
effect on net income of the reduction in the bank's net financial income and
higher income taxes incurred during the year.

      Operating revenues increased by 1.1% to Ch$424,250 million in 2003 ,
mainly due to strong growth in fee income, which increased by Ch$23,982 million
to Ch$103,389 million. The growth in fee income was mainly attributable to
traditional banking services as well as stock brokerage services. Operating
revenues further benefited from gains on the sales of financial instruments,
which increased by Ch$4,200 million to Ch$5,330 million as a result of the sale
of Argentine securities. These increases more than offset the decline in net
financial income, which decreased by 7% to Ch$315,531 million, mostly as a
consequence of the lower inflation experienced during the period of 1%, which
decreased the amount of interest income earned on UF-based assets. Net financial
income, which is calculated as the sum of net interest revenue and net foreign
exchange transactions, accounted for 74.4% of total operating revenues

      Loan loss provisions decreased from Ch$101,650 million (adjusted by
including voluntary provisions) in 2002 to Ch$60,069 million in 2003, a
reduction of 59.1%. The level of loan loss provisions in 2003 reflected the
improvement in economic indicators and overall performance of the Chilean
economy, as well as a lower level of loan loss provisions on foreign denominated
loans in general as a consequence of the appreciation of the Chilean peso.


                                       80
<PAGE>

      Other income and expenses improved from an expense (net) of Ch$5,967
million in 2002 to income (net) of Ch$8,746 million, primarily attributable to a
higher recovery level of previously charged off loans.

      Operating expenses declined by 10.4% to Ch$224,436 million, mainly in
connection with synergies and cost savings which resulted from the bank's
merger.

      The net charge for price-level restatement was reduced from Ch$9,692
million to Ch$4,036 million, reflecting the slowdown in inflation which fell to
1% for the twelve month period.

      Income tax expense rose sharply in 2003 to Ch$13,902 million from a tax
credit of Ch$1,165 million in 2002, as a result of the higher income level
reported, an increase in the tax rate of 0.5% and lower tax credits.

      Banco de Chile - 2002 compared to 2001

      Quinenco's proportional share of Banco de Chile's net income was Ch$15,578
million in 2002 and Ch$16,153 million in 2001. The Company's economic interest
(dividend rights) in Banco de Chile was 29.2% and 17.8% as of December 31, 2002
and 2001, respectively.

      Banco de Chile's net income was Ch$53,161 million in 2002, a decrease of
41.2% from the Ch$90,473 million reported in 2001. The reduction in net income
was primarily attributable to an increase in merger related expenses, higher
provisions for loan losses and to a lesser extent, the recognition of marked to
market losses on Argentine securities accounted for as available for sale. These
were partially offset by higher net interest revenue and fee income.

      Net interest revenue increased by 66.1% from Ch$223,517 million to
Ch$371,265 million, mainly due to a 41.8% increase in average interest earning
assets as a result of the merger and an increase of 65 basis points in the net
interest margin. The net interest margin, which rose from 3.9% in 2001 to 4.5%
in 2002, benefited from higher lender spreads, repricing, a better funding mix
and a net position in Chilean pesos readjusted in accordance with changes in
assets denominated in U.S. dollars (during 2002, the U.S. dollar appreciated by
8.6% against the Chilean peso).

      Fee income increased by 78.1% from Ch$44,598 million in 2001 to Ch$79,407
million in 2002. The increase was primarily a result of the merger although
higher fees earned in connection with traditional banking services and at the
subsidiary level also contributed to the growth experienced during the year.

      Loan loss provisions increased by 112.9% from Ch$47,736 million in 2001 to
Ch$101,650 million in 2002. The increase in loan provisions was primarily
related to the merger and a leveling of the credit risk classifications of the
portfolios of Banco Edwards and Banco de Chile. In addition, uniform risk
criteria were applied to both banks' loan portfolios, which also contributed to
a higher level of provisions.

      Banco de Chile's operating expenses increased from Ch$144,145 million in
2001 to Ch$250,517 million in 2002. The increase was mainly a result of the
merger with Banco Edwards, mainly related to personnel and administrative
expense. Merger-related operating expenses included severance payments,
technological developments, outplacement, financial advisory and branch
refurbishment costs.

      CCU - 2003 compared to 2002

      Quinenco's proportional share of CCU's income was Ch$16,657 million in
2003 and Ch$6,862 million in 2002, which represented its 30.8% economic interest
in CCU's net income in both years.


                                       81
<PAGE>

      CCU's consolidated sales increased by 9.9% to Ch$384,064 million in 2003,
compared to Ch$349,350 million in 2002. The increase in CCU's consolidated sales
was mainly due to a 9.0% increase in volumes sold. With the exception of
domestic wines, all of CCU's beverage segments experienced volume increases in
2003, most notably beer in Chile and Argentina. In general terms, volumes were
favorably influenced by the economic reactivation underway in Chile, and to a
certain extent, in Argentina, as well as the addition of new products to the
company's beverage portfolio. Higher average beer prices in Chile and Argentina
more than compensated for the sharp reduction in export wine prices. Sales by
segment were as follows in 2003: beer Chile (39.0%), beer Argentina (8.2%), soft
drinks/mineral waters (30.0%), wine (21.5%) and others (1.3%).

      Operating income increased by 20.2% to Ch$45,863 million in 2003, mainly
due to the strong growth in revenues associated with the beer segment in Chile,
both in terms of volume and average prices, as well as lower cost of sales and
selling, general and administrative expenses. Likewise, the Argentine beer
segment benefited from a somewhat improved economic scenario, reducing its
operating losses by 67.2% to Ch$3,665 million. These improvements were partially
offset by a decline in the operating income associated with the wine segment,
which decreased by 58.5% to Ch$3,801 million as a result of lower average wine
prices, as well as the soft drinks segment, which was affected by higher cost of
sales. As a percentage of sales, the operating margin increased from 10.9% in
2002 to 11.9% in 2003.

      Non-operating income amounted to Ch$13,601 million in 2003, compared to
non-operating losses of Ch$7,131 million in 2002. The variation in non-operating
results can mostly be explained by the non-recurring gain of Ch$20,114 million
on the sale of CCU's interest in Karlovacka, a Croatian brewery. Net income in
2003 amounted to Ch$54,088 million, an increase of 142.7% from the net income of
Ch$22,286 million reported in 2002, as a result of the aforementioned increases
in operating and non-operating results.

      CCU - 2002 compared to 2001

      Quinenco's proportional share of CCU's income was Ch$6,862 million in 2002
and Ch$12,293 million in 2001, which represented its 30.8% economic interest in
CCU's net income in both years.

      CCU's consolidated sales decreased by 6.6% to Ch$349,350 million in 2002,
compared to Ch$374,088 million in 2001. The decrease in CCU's consolidated sales
was mainly due to an 8.8% decrease in average prices, partially offset by a 2.4%
increase in volumes sold. The decrease in revenues was primarily attributable to
the Argentine beer segment, which declined by 54.5% due to Argentina's ongoing
economic crisis and currency devaluation, partially offset by an increase of
2.2% in revenues corresponding to the Chilean operations. Sales by segment were
as follows in 2002: beer Chile (38.9%), beer Argentina (7.2%), soft
drinks/mineral waters (32.0%), wine (21.7%) and others (0.2%).

      Operating income decreased by 16.0% to Ch$38,142 million in 2002, of which
Ch$5,080 million is explained by a decline in operating profit in Argentina, and
the remaining Ch$2,190 million to the Chilean operations. As a percentage of
sales, the operating margin fell from 12.1% in 2001 to 10.9% in 2002.

      Non-operating losses amounted to Ch$6,960 million in 2002, compared to
non-operating income of Ch$3,811 million in 2001. The variation in non-operating
results can mostly be explained by the non-recurring gain on the sale of a 6.7%
interest in Backus & Johnston in 2001, which amounted to Ch$17,371 million. Net
income in 2002 amounted to Ch$22,286 million, a decrease of 44.2% from the net
income of Ch$39,924 million reported in 2001, as a result of the aforementioned
decreases in operating and non-operating results.


                                       82
<PAGE>

      Entel - 2003 compared to 2002

      Quinenco's proportional share of Entel's net income was Ch$3,414 million
in 2003 and Ch$2,361 million in 2002. Its economic interest in Entel was 5.7% as
of December 31, 2002 and 2003.

      Entel's consolidated revenues decreased by 10.3% in 2003 to Ch$729,252
million, mostly explained by a 32.6% decrease in revenues related to Entel's
international operations, which were affected by the appreciation of the Chilean
peso, as well as changes in the regulatory environment in the United States. The
mobile telephony segment, which is Entel's most important business segment and
which accounted for 47.0% of total revenues in 2003, grew by 5.5%, partially
offsetting the reduction in revenues from international subsidiaries.

      Operating income amounted to Ch$108,212 million in 2003, compared to
Ch$98,536 million in 2002, an increase of 9.8%. The increase in operating income
was the result of lower cost of sales and selling, general and administrative
expenses, which collectively declined by 13.1% as part of a company-wide effort
to produce cost savings. The operating margin increased from 12.1% in 2002 to
14.8% in 2003.

      Non-operating losses amounted to Ch$40,113 million in 2003, compared to
non-operating losses of Ch$51,389 million in 2002. Non-operating losses
decreased mainly due to a reduction in interest expense as a consequence of a
lower indebtedness level, as well as a decline in expenses related to personnel
severance indemnities.

      Entel reported net income of Ch$59,977 million in 2003, compared to
Ch$41,507 million in 2002, an increase of 44.5%, attributable to the
aforementioned improvements in the company's operating and non-operating results
during the year.

      Entel - 2002 compared to 2001

      Quinenco's proportional share of Entel's net income was Ch$2,360 million
in 2002 and Ch$3,206 million in 2001. Its economic interest in Entel was 5.7% as
of December 31, 2001 and 2002.

      Entel's consolidated sales increased by 10.1% in 2002 to Ch$812,809
million, mostly explained by an increase in revenues related to Entel's cellular
telephony business unit. Operating income amounted to Ch$98,536 million in 2002,
compared to Ch$86,518 million in 2001, an increase of 13.9%. The increase in
operating income was a result of the higher overall sales level which outpaced
cost increases in the same period, resulting in a higher operating margin,
equivalent to 12.1% of sales.

      Non-operating losses amounted to Ch$51,389 million in 2002, compared to
non-operating losses of Ch$49,203 million in 2001. Non-operating losses
increased due to higher expenses related to personnel severance indemnities,
partially offset by a lower level of interest expense for the year.

      Entel reported net income of Ch$41,507 million in 2002, compared to
Ch$35,582 million in 2001, an increase of 16.7%, attributable to the
aforementioned improvements in the company's operating performance in the year.

      Habitaria - 2003 compared to 2002

      In 2003, Habitaria reported a net loss of Ch$336 million, of which 50%
corresponded to Quinenco's proportional share. For a discussion of Habitaria's
2003 results compared to 2002, see "- Non-Operating Expenses".


                                       83
<PAGE>

      Habitaria - 2002 compared to 2001

      Quinenco's proportional share of Habitaria's net income was 50%, or Ch$453
million in 2002 and Ch$217 million in 2001.

      Habitaria reported net income in 2002 of Ch$ 907 million, compared to a
net income of Ch$434 million in 2001, an increase of 108.8%. Sales revenues
reached Ch$23,236 million in 2002, compared to Ch$20,260 million in 2001,
reflecting a relatively dynamic real estate market, stimulated by low prevailing
interest rates as well as an increase in Habitaria's housing stock available for
sale. Habitaria sold and delivered 436 apartments in 2002. In comparison, 2001
sales revenues corresponded to the sale and delivery of 398 apartments.
Operating income was Ch$1,409 million in 2002, compared to operating income of
Ch$1,036 million in 2001, an increase of 36%.

OTHER NON - OPERATING INCOME

      2003 compared to 2002

      Other non-operating income was Ch$61,515 million in 2003, compared to
Ch$7,510 million in 2002. The increase in 2003 is mainly attributable to several
factors, including a non-recurring gain of Ch$36,035 million related to the
settlement of arbitration with Quinenco's ex-partners in IRSA, the controlling
entity which holds a 61.6% interest in CCU, and an extraordinary credit of
Ch$21,130 million to negative goodwill amortization associated with Quinenco's
non-subscription in Madeco's capital increase in June and August of 2003. This
credit was offset by a charge to other non-operating expenses of Ch$21,130
million related to the non-subscription and the net effect on income was zero in
2003.

      2002 compared to 2001

      Other non-operating income was Ch$7,510 million in 2002, compared to
Ch$11,391 million in 2001, a decrease of 34.1%. The decrease in 2002 is mainly
explained by a reduction of Ch$7,371 million in negative goodwill amortization
associated with the original Entel share purchases disposed of during 2001. The
reduction in negative goodwill amortization was partially offset by an increase
in other non-operating income of Ch$3,489 million, mainly composed of the
reversal of a loss contingency provision made in connection with the purchase
from SBC of its interest in VTR, a subsidiary of Quinenco, in 1999.

INTEREST EXPENSE

      2003 Compared to 2002

      Interest expense was Ch$35,192 million in 2003, a 31.3% decrease from the
Ch$51,234 million reported in 2002. The decrease in interest expense is
explained by a reduction in the Company's indebtedness level as well as lower
prevailing interest rates. In addition, the deconsolidation of Lucchetti's
Chilean operations also served to reduce interest expense in 2003. Consolidated
interest expense in 2003 is principally composed of interest expense incurred by
Quinenco and intermediate holding companies (46.5%), Madeco (35.4%), Lucchetti
(8.2%), Telsur (8.6%) and others (1.3%).

      2002 Compared to 2001

      Interest expense was Ch$51,234 million in 2002, a 16.5% decrease from the
Ch$61,387 million reported in 2001. The decrease in interest expense is
primarily explained by lower prevailing interest rates during the twelve-month
period. Quinenco's consolidated interest expense in 2002 is principally composed
of interest expense incurred by Quinenco and intermediate holding companies
(45.3%), Madeco (37.6%), Lucchetti (9.7%), Telsur (6.4%) and others (1.0%).


                                       84
<PAGE>

NON - OPERATING EXPENSES

<TABLE>
<CAPTION>
                                                                            2001     2002     2003
                                                                            ----     ----     ----
                                                                        (in millions of constant Ch$)
<S>                                                                       <C>      <C>      <C>
Proportional share of net loss of equity method investments:
      Habitaria (1) ...................................................       --       --      336
      Others ..........................................................      141      498      262
                                                                          ------   ------   ------
      Total proportional share of net loss of equity method investments      141      498      598
Other non-operating expenses ..........................................   72,456   86,047   65,841
                                                                          ------   ------   ------
Total non-operating expenses ..........................................   72,597   86,545   66,439
                                                                          ======   ======   ======
</TABLE>

----------------
(1)   Quinenco's proportional share of net income corresponding to its interest
      in Habitaria amounted to Ch$215 million in 2001 and Ch$449 million in
      2002. For a discussion of Habitaria's results in 2002 compared to 2001,
      see "- Non-operating income - Proportional share of net income - main
      equity investments" in this section.

      2003 Compared to 2002

      In 2003, non-operating expenses were Ch$66,439 million, compared to
Ch$86,545 million in 2002, a decrease of 23.2%. The decrease in non-operating
expenses was mainly attributable to a reduction in other non-operating expenses,
which declined from Ch$86,047 million in 2002 to Ch$65,841 million in 2003. In
2002, other non-operating expenses included loss provisions of Ch$30,110 million
related to the forced closure of Lucchetti's Peruvian operations. In addition,
other non-operating expenses in 2002 included significant charges related to the
write-down of Madeco's operations in Argentina in connection with the economic
crisis in that country ,as well as charges for restructuring and personnel
severance indemnities. The absence of these non-recurring expenses largely
explains the variation between the two years.

      2002 Compared to 2001

      In 2002, non-operating expenses were Ch$86,545 million compared to
Ch$72,597 million in 2001, an increase of 19.2%. The increase in non-operating
expenses was mainly attributable to a significant increase in Lucchetti's
non-operating expenses which included loss provisions of Ch$30,110 million
related to the forced closure of its Peruvian operations. The increase in
non-operating expenses was partially offset by a reduction in Madeco's
non-operating expenses and a decrease in goodwill amortization expense at the
Quinenco corporate level.

PROPORTIONAL SHARE OF NET LOSS OF EQUITY METHOD INVESTMENTS

      2003 compared to 2002

      The proportional share of the net loss of equity method investments was
Ch$598 million in 2003, compared to Ch$498 million in 2002.

      Habitaria - 2003 compared to 2002

      Quinenco's proportional share of Habitaria's net loss was 50%, or Ch$336
million in 2003, compared to a proportional share of Habitaria's net income of
Ch$453 million in 2002.

      Habitaria reported a net loss in 2003 of Ch$672 million, compared to a net
income of Ch$907 million in 2002. Sales revenues reached Ch$18,066 million in
2003, compared to Ch$23,236 million in 2002, reflecting weak demand for housing
units as well as a reduction in the number of new units Habitaria had available
for sale in 2003. Habitaria sold and delivered 275 apartments in 2003. In
comparison, 2002 sales revenues corresponded to the sale and delivery of 436
apartments. Operating income was Ch$50 million in 2003, compared to operating
income of Ch$1,409 million in 2002.


                                       85
<PAGE>

      Habitaria - 2002 compared to 2001

      In 2002, Habitaria reported net income of Ch$453 million, of which 50%
corresponded to Quinenco's proportional share. For a discussion of Habitaria's
2002 results compared to 2001, see "- Non-Operating Income".

OTHER NON - OPERATING EXPENSES

      2003 compared to 2002

      In 2003, other non-operating expenses were Ch$65,841 million, compared to
Ch$86,047 million in 2002, a decrease of 23.5%. The variation is explained by
several factors, including a significant charge to income in 2002 of Ch$30,110
million in relation to the forced closure of Lucchetti's plant facilities in
Peru. In addition, Madeco wrote-down its operations in Argentina as a
consequence of the economic crisis and incurred restructuring and personnel
severance indemnities amounting to Ch$17,333 million in 2002. The reduction in
other non-operating expenses in 2003 was partially offset by a charge to income
of Ch$21,130 million related to Quinenco's non-subscription to Madeco's capital
increase in June and August 2003 (offset by a credit to negative goodwill
amortization for the same amount), a loss provision of Ch$4,917 million made in
connection with the liquidation of Madeco's fiber optic cable subsidiary in
Brazil and a loss on the sale of the Hotel Carrera in Santiago of Ch$4,713
million.

      2002 compared to 2001

      In 2002, other non-operating expenses were Ch$86,047 million, compared to
Ch$72,456 million in 2001, an increase of 18.8%. The increase in other
non-operating expenses was mainly due to an increase in other non-operating
expenses at Lucchetti. The increase in other non-operating expenses was
partially offset by a reduction of other non-operating expenses at Madeco and a
decrease in goodwill amortization expense at the Quinenco corporate level.

      Lucchetti's other non-operating expenses amounted to Ch$35,004 million in
2002, compared to Ch$5,755 million in 2001. In 2002, Lucchetti made charges to
2002 results of Ch$30,110 million in connection with its forced plant closure in
Peru.

      Madeco's other non-operating expenses amounted to Ch$20,211 million in
2002, compared to Ch$31,638 million in 2001. In 2001, Madeco reported
significant non-recurring charges, including severance payments, restructuring
costs, provisions for accounts receivable and write-offs of fixed assets in
Argentina. In 2002, other non-operating expenses consisted mainly of charges for
obsolescence of inventories and supplies, severance pay and provisions for
accounts receivable as well as additional asset write-downs in Argentina.

      Goodwill expense amortization, included with other non-operating expenses,
amounted to Ch$20,737 million in 2002, compared to Ch$28,513 million in 2001.
The decrease of 27.3% is explained by the reduction in goodwill amortization
associated with purchases of shares of Entel, which were disposed of in 2001.

PRICE - LEVEL RESTATEMENT

      2003 Compared to 2002

      Price-level restatement gains, which also include results from exchange
rate translation differences, amounted to Ch$2,876 million in 2003, compared to
price-level restatement losses of Ch$8,985 million in 2002. In 2003, the net
credit to income to adjust for the change in purchasing power of the Chilean
peso on the Company's net non-monetary asset position and income and expense
accounts amounted to Ch$1,892 million, compared to a net charge to income of
Ch$5,073 million in 2002. The variation is mostly attributable to Madeco's
operations, which in 2002 incurred significant exchange rate translation losses
as a result of the devaluation of the Chilean peso, Argentine peso and Brazilian
real vis-a-vis the U.S. dollar in that year. In 2003 exchange rate translation
gains mostly correspond to the appreciation of the Chilean peso vis-a-vis the
U.S. dollar.


                                       86
<PAGE>

      2002 Compared to 2001

      Price-level restatement losses amounted to Ch$8,985 million in 2002,
compared to price-level restatement losses of Ch$11,060 million in 2001, a
decrease of 18.8%. In 2002, the net credit to income to adjust for the change in
purchasing power of the Chilean peso on the Company's net non-monetary asset
position and income and expense accounts amounted to Ch$5,073 million, compared
to a net charge to income of Ch$3,935 million in 2001. Exchange rate translation
losses, also included with price-level restatement, increased from Ch$7,125
million in 2001 to Ch$14,058 million in 2002. Exchange rate translation losses
mostly corresponded to Madeco's businesses and reflect the devaluation of the
Chilean peso, Brazilian real and the Argentine peso vis-a-vis the United States
dollar in 2002.

NON - OPERATING RESULTS (NET)

      2003 Compared to 2002

      Non-operating income (net) amounted to Ch$23,701 million in 2003, compared
to a non-operating loss of Ch$107,485 million in 2002.

      The main items which contributed to the improvement in non-operating
income in 2003 were significantly higher results from equity method investments,
the non-recurring arbitration settlement payment received by Quinenco from its
ex-partners in IRSA, a lower level of interest expense and a reduction of 23.2%
in other non-operating expenses.

      The main items which contributed to a non-operating loss in 2002 were
other non-operating expenses, which included non-recurring charges related to
Lucchetti's operations in Peru and to Madeco's operations in Argentina.

      2002 Compared to 2001

      There was a non-operating loss of Ch$107,485 million in 2002, compared to
a non-operating loss of Ch$29,701 million in 2001. The main items which
contributed to a non-operating loss in 2002 were other non-operating expenses,
which included non-recurring charges related to Lucchetti's operations in Peru
and for Madeco's operations in Argentina, interest expense and goodwill expense
incurred during the period. In 2001, the main items which contributed to a
non-operating loss were other non-operating expenses, goodwill expense and
interest expense incurred during the period. These expenses were partially
offset by a large non-recurring gain resulting from the sale of a portion of the
Company's interest in Entel.


                                       87
<PAGE>

MINORITY INTEREST

                                             2001         2002        2003
                                            -----         ----        ----
                                            (in millions of constant Ch$)
          Madeco & subsidiaries .....      24,187       20,043       5,440
          Telsur & subsidiaries .....      (2,500)      (1,745)     (2,116)
          Lucchetti & subsidiaries ..         699        2,371         104
          Hoteles Carrera ...........         102           65         345
          Other .....................         185           (7)         43
                                          -------      -------      ------
          Total minority interest ...      22,673       20,727       3,816
                                          =======      =======      ======

      2003 Compared to 2002

      In 2003, minority interest amounted to a credit to income of Ch$3,816
million, compared to a credit to income of Ch$20,727 million in 2002. Madeco
reported a net loss of Ch$16,734 million in 2003, which resulted in an add-back
to income of the net loss which did not correspond to Quinenco of Ch$5,440
million. The deduction from income of Ch$2,116 million corresponding to Telsur
was related to the portion of Telsur's net income which did not correspond to
the Company's interest.

      2002 Compared to 2001

      In 2002, minority interest amounted to a credit to income of Ch$20,727
million, compared to a credit to income of Ch$22,673 million in 2001. Madeco and
Lucchetti reported a net loss in 2002 which resulted in an add-back to income of
the net loss which did not correspond to Quinenco of Ch$20,043 million and
Ch$2,371 million, respectively. The deduction from income of Ch$1,745 million
corresponding to Telsur was related to the portion of Telsur's net income which
did not correspond to the Company's interest.

NET INCOME

      2003 Compared to 2002

      In 2003, the company reported net income of Ch$37,695 million, compared to
a net loss of Ch$76,235 million in 2002. The variation is largely explained by
the improvement in the net income contribution from the main operating companies
of the group, particularly Banco de Chile, CCU, Lucchetti and Madeco. At the
corporate level, the non-recurring settlement payment of Ch$36,035 million
received by Quinenco from its ex-partners in IRSA also contributed significantly
to the increase in net income in 2003.

      2002 Compared to 2001

      In 2002, the company reported a net loss of Ch$76,235 million, compared to
net income of Ch$16,134 million in 2001. The variation is largely explained by a
reduction in the net income contribution from the main operating companies of
the group, principally Lucchetti, which reported non-recurring charges of
Ch$30,110 million in connection with the forced closure of its plant facilities
in Peru, in addition to the reduction in the net income contribution from
investments in the banking sector and CCU which fell by Ch$11,384 million. The
variation in net earnings between 2002 and 2001 is also explained by the absence
of extraordinary gains on sales of investments in 2002. In 2001, Quinenco
reported a gain on the sale of shares of Entel and the divestment of its stake
in Plava Laguna, boosting non-operating results by Ch$52,898 million in that
year.

IMPACT OF INFLATION AND PRICE - LEVEL RESTATEMENT

      As explained in detail in Notes 2(b) and 3 to the Consolidated Financial
Statements, the Company is required to restate non-monetary assets and
liabilities, equity and income and expense accounts to reflect the effect of
variations in the purchasing power of the Chilean peso, thus reflecting by an
indirect method the gain or loss resulting from holding or owning monetary
assets and liabilities. For all the above balances, the restatement is based on
the variation of the official Consumer Price Index


                                       88
<PAGE>

("CPI") of the National Institute of Statistics, with the exception of assets
and liabilities in foreign currencies, and inventories, which are adjusted in
accordance with their replacement value.

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

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

      The restatement of the principal non-monetary assets and liabilities,
equity and income and expense accounts and the corresponding effect on the
Company's results of operations is set forth in the following table:

<TABLE>
<CAPTION>
                                                                                           Credit (charge)
                                                                                        Year Ended December 31,
                                                                                        -----------------------
                                                                              2001                2002                  2003
                                                                              ----                ----                  ----
                                                                                      (in millions of constant Ch$)
<S>                                                                     <C>                  <C>                    <C>
Property, plant and equipment....................................         Ch$8,716            Ch$8,098              Ch$2,677
Shareholders' equity accounts....................................          (20,543)            (20,349)               (6,305)
Other assets and liabilities.....................................           23,145              29,507                11,102
Income and expense accounts in terms of period-end
   constant Chilean pesos........................................              (98)                847                  (537)
Net adjustment of assets and liabilities indexed in UFs..........          (15,155)            (13,030)               (5,045)
Net adjustment of assets and liabilities denominated in
   foreign currency..............................................           (7,125)            (14,058)                  984
                                                                        ----------           ----------             --------
Price-level restatement..........................................       Ch$(11,060)          Ch$(8,985)             Ch$2,876
                                                                        ==========           ==========             ========
</TABLE>

WORKING CAPITAL IN FOREIGN CURRENCIES

      The Company's operating results and investments are exposed to
fluctuations of foreign currency exchange rates principally as a result of
carrying working capital in local currencies. According to Chilean GAAP, the
Company's financial statements are expressed in Chilean pesos which result from
the consolidation of financial statements of Chilean subsidiaries expressed in
Chilean pesos and the translation of the foreign subsidiaries' financial
statements expressed in local currencies to Chilean pesos. In 2003,
approximately 25.8% of the Company's consolidated revenues were from sales made
outside of Chile and investments in subsidiaries outside of Chile represented
approximately 12.5% of the Company's total investments at December 31, 2003.

      The Company maintains foreign exchange forward and swap contracts to hedge
against the risk of fluctuations in foreign currencies. For discussion of the
Company's use of hedging instruments, see "Item 11. Quantitative and Qualitative
Disclosures About Market Risk - Foreign Currency Exchange Rate Risk".


                                       89
<PAGE>

      The following table presents the working capital position (net) in local
currencies as of December 31, 2003. All amounts are expressed in thousands of
Chilean pesos.

<TABLE>
<CAPTION>
                                                                 Other        Argentine      Peruvian    Brazilian
                                  U.S. dollars     Euros      currencies        pesos          sols        reals
                                  ------------     -----      ----------        -----          ----        -----
                                                            (in thousands of constant Ch$)
<S>                                <C>            <C>            <C>           <C>            <C>        <C>
Working capital in foreign
currencies (net)............       44,974,350     757,634        978,504       994,742        357,478    7,443,249
</TABLE>

      In addition, CCU, an equity-method investment, maintains working capital
in foreign currencies. As of December 31, 2003, CCU's working capital in foreign
currencies (net) was Ch$21,606 million in U.S. dollars (net liabilities),
Ch$2,755 million in Argentine pesos and Ch$3,538 million in other foreign
currencies.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, which would potentially result in
materially different results under different assumptions and conditions. The
Company principally operates in five operating segments, Manufacturing, Food and
Beverage, Telecommunications, Financial Services and Real estate/hotel
administration, each with different critical accounting policies and estimates
described below.

      The Company believes that its critical accounting policies in the
preparation of its Chilean GAAP financial statements are limited to those
described below. It should be noted that in many cases, Chilean GAAP
specifically dictates the accounting treatment of a particular transaction, with
no need for management's judgment in their application. Additionally,
significant differences can exist between Chilean GAAP and U.S. GAAP, as
explained in Note 26 of the financial statements. There are also areas in which
management's judgment in selecting available alternatives would not produce
materially different results. For a summary of significant accounting policies
and methods used in the preparation of the financial statements, see Note 2 and
Note 26 to the consolidated financial statements.

Financial Services

      Banco de Chile prepares its financial statements in accordance with
Chilean GAAP and the rules of the SBIF. It is required to make estimates and
assumptions in the application of certain rules because they are related to
matters that are inherently uncertain. Banco de Chile believes that the
following are the more critical judgment areas or are those accounting policies
that involve a higher degree of complexity and affect the bank's financial
condition and results of operations.

      Allowance for Loan Losses

      Under the regulations of the SBIF, banks must classify their loan
portfolio into five categories of payment capability. The minimum amount of
required loan loss allowances are determined based on fixed percentages of
estimated loan losses assigned to each category.

      Additionally, Chilean banks may also maintain voluntary reserves in excess
of the minimum required amount so as to provide additional coverage for
potential loan losses. Classification of the bank's loan portfolio is determined
based on a systematic ongoing review and evaluation performed as part of the
credit-risk evaluation process, estimated fair value and adequacy of collateral
and other pertinent factors. Beginning January 1, 2004, Chilean banks are
required to reassess their allowance for loan losses. The number of categories
of payment capability will be increased with the aim of more closely aligning
the allowance with the likely cash flows to be received in the future. Also, the
use of the voluntary reserve will be ended in order to remove a strong level of
subjectivity from the allowance.


                                       90
<PAGE>

      Investment securities

      Investment portfolios principally include debt securities purchased in
connection with the bank's balance sheet management activities. These securities
are classified at the time of purchase, based on management's intentions, as
either trading or permanent.

      The bank accounts for financial investments that have a secondary market
at fair value with unrealized gains and losses included in other operating
income (expenses) for those classified as trading investments, and unrealized
gains and losses are included in a separate component of shareholders' equity
for those classified as permanent, in accordance with the regulations of the
SBIF. All other financial investments are carried at acquisition cost plus
accrued interest and UF indexation adjustments, as applicable.

      If available, quoted market prices provide the best indication of value.
If quoted market prices are not available for fixed maturity securities, the
bank discounts the expected cash flows using market interest rates commensurate
with the credit quality and maturity of the investment. Alternatively, matrix or
model pricing may be used to determine an appropriate fair value.

Food and Beverage

      Allowance for Doubtful Accounts

      The allowance for doubtful accounts is based upon the assessment of
probable loss related to overdue accounts receivable. A 100% provision is
applied for those customers that are 180 days overdue in the case of CCU and 90
days overdue in respect of Lucchetti.

      Accounting for bottles

      CCU incurs a liability for the deposits on bottles in circulation paid by
its customers. Its recorded liability for such deposits is based on an annual
inventory of the bottles and cases in the possession of customers along with an
independent statistical analysis of the number of deposits that have not been
reclaimed.

      Bottles are included in fixed assets and depreciated over the estimate of
their useful life. For glass bottles, CCU estimates the useful life to be eight
years while for plastic bottles, it estimates the useful life to be four years.

      Inventory

      CCU's inventories of finished and in-process goods, raw materials and
supplies are stated at replacement cost, as defined in the Chilean Income Tax
Law, including solely the cost of raw materials added to the products. The
resulting value of inventories does not exceed their estimated net realizable
values.

      At December 31, 2002, CCU's subsidiaries Cervecera CCU Chile Ltda., ECUSA,
Plasco S.A. and Compania Industrial Cervecera S.A. changed the method used to
value their finished products from direct cost including only raw materials to a
method that includes raw materials, labor and overhead costs.


                                       91
<PAGE>

Telecommunications

      Revenue Recognition

Telsur's revenues include income from contract fees and services rendered but
not billed at each period end, which have been valued at contracted rates
existing at each respective period end.

Manufacturing

      Revenue Recognition

      Madeco recognizes revenues when goods are shipped or services are provided
and recognizes provisions for anticipated losses on contracts at the time they
become known.

      Inventories

      Inventories of finished products, work in progress and by-products are
valued at production cost including direct manufacturing costs plus price-level
restatement ("restated cost"). Inventories of goods for resale, raw materials,
other materials and materials in transit are valued at restated cost. Work in
progress and finished goods include direct and indirect manufacturing costs.
Madeco regularly reviews inventory quantities on hand and records a provision
for excess and obsolete inventory based primarily on an estimated forecast of
product demand and production requirements. Inventory values do not exceed their
estimated net realizable value. Additionally, Madeco's estimates of future
product demand may prove to be inaccurate, in which case the company may have
understated or overstated the provision required for excess and obsolete
inventory. In the future, if inventory is determined to be overvalued, Madeco
would be required to recognize such costs in cost of goods sold at the time of
such determination. Likewise, if inventory is determined to be undervalued,
Madeco may have over-reported costs of goods sold in previous periods and would
be required to recognize such additional operating income at the time of sale.
Therefore, although Madeco makes every an effort to ensure the accuracy of its
forecasts of future product demand, any significant unanticipated changes in
demand or technological developments could have a significant impact on the
value of its inventory and reported operating results.

Accounting policies common to all segments and areas of accounting to which a
U.S. reader may not be accustomed.

      Accounting for Argentine operations

      Since 1991, the Argentine peso had been pegged to the U.S. dollar at a
rate of 1 Argentine peso to 1 U.S. dollar. In early December 2001, restrictions
were put in place that prohibited cash withdrawals above a certain amount and
foreign money transfers, with certain limited exceptions. While the legal
exchange rate remained at 1 peso to 1 U.S. dollar, financial institutions were
allowed to conduct only limited activity due to these controls, and currency
exchange activity was effectively halted except for personal transactions in
small amounts.

      In January 2002, the Argentine government announced its intent to create a
dual currency system with an "official" fixed exchange rate of 1.4 pesos to 1
U.S. dollar for import and export transactions, and a "free" floating exchange
rate for other transactions. On January 11, 2002, the exchange rate market
holiday ended. The new "free" floating exchange rates ranged from 1.6 to 1.7
pesos to 1 U.S. dollar. On February 3, 2002, the Argentine government issued a
decree to (1) eliminate the fixed exchange rate of 1 to 1; (2) establish one
"free" floating exchange rate for the Argentine peso; and (3) require that U.S.
dollar-denominated obligations be converted to peso-denominated obligations
using mandated conversion rates, depending on the type of obligation. The "free"
floating exchange rate was 1.7 Argentine pesos per U.S. dollar on the day the
market opened on February 11, 2002.


                                       92
<PAGE>

      The financial statements of the Company's Argentine operations are
remeasured into U.S. dollars under Chilean GAAP in accordance with Technical
Bulletin 64 ("BT 64"), which requires remeasurement of financial statements of
foreign subsidiaries that operate in countries exposed to significant risks
("unstable" countries), and that are not considered to be an extension of the
parent company's operations. The Company has remeasured its Argentine subsidiary
financial statements in accordance with SVS Circular No. 81 using the conversion
rate of 1.7 Argentine pesos per U.S. dollar for the year ended December 31, 2001
and thereafter has used the floating market exchange rate.

      Price-level restatement

      Chilean GAAP requires that financial statements be restated to reflect the
full effects of the loss in the purchasing power of the Chilean peso on the
financial position and results of operations of reporting entities. The method
prescribes that the historical cost of all non-monetary accounts be restated for
general price-level changes between the date of origin of each item and the
year-end. The Company's consolidated financial statements have been price-level
restated in order to reflect the effects of the changes in the purchasing power
of the Chilean currency during each year. All non-monetary assets and
liabilities and all equity accounts have been restated to reflect the changes in
the CPI from the date they were acquired or incurred to year-end. The purchasing
power gain or loss included in net income reflects the effects of Chilean
inflation on monetary assets and liabilities. For comparative purposes, the
historical December 31, 2001 and 2002 consolidated financial statements and
their accompanying notes have been presented in constant Chilean pesos as of
December 31, 2003. This updating does not change the prior years' statements or
information in any way except to update the amounts to constant pesos of similar
purchasing power.

      The price-level adjusted consolidated financial statements do not purport
to represent appraised values, replacement cost, or any other current value of
assets at which transactions would take place currently and are only intended to
restate all non-monetary consolidated 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. In the
financial statements, price level restatement also includes foreign exchange
differences.

      Technical Bulletin No. 64

      In October 1998, the Chilean Association of Accountants (Colegio de
Contadores de Chile) issued Technical Bulletin No. 64, Accounting for Permanent
Foreign Investments. Technical Bulletin No. 64 replaced Technical Bulletin No.
51, which was effective as from January 1, 1996. As required by Chilean GAAP,
Technical Bulletin No. 64 has been applied prospectively from January 1, 1998.
Technical Bulletin No. 64 differs from the foreign currency translation
procedures to which a U.S. investor is accustomed under Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation" issued by the
Financial Accounting Standards Board. Technical Bulletin No. 64 changes the
method used to restate the foreign investments, by first translating foreign
currency amounts in respect of foreign subsidiaries and investees to U.S.
dollars at historical rates of exchange and then translating the U.S. dollar
amounts to Chilean pesos at the period-end rate of exchange. In effect, the
foreign investments are adopting the U.S. dollar as their "functional currency",
because the Chilean peso is not considered to be a stable currency.

      The application of Technical Bulletin No. 64 results in the comprehensive
separation of the effects of inflation in Chile (for financial accounting
purposes) from the changes in foreign currency translation, with respect to
non-Chilean investments. Under Chilean GAAP, the amount of the net foreign
investment as of the opening balance sheet date is price-level restated for the
effects of inflation in Chile, thereby increasing net income due to price-level
restatement. Changes in the opening balance sheet balance of the net foreign
investment due to movements in the Chilean peso to U.S. dollar exchange rates
are recorded net of the effects of price-level restatement mentioned above in


                                       93
<PAGE>

shareholders' equity under the caption "cumulative translation adjustments." As
a result, during periods when the Chilean peso depreciates in excess of
inflation in Chile, compared to the U.S. dollar, shareholders' equity would
increase. Conversely, during periods in which the Chilean peso appreciates in
excess of inflation in Chile, as compared to the U.S. dollar, shareholders'
equity would decrease.

      The application of Chilean foreign currency translation standard Technical
Bulletin No. 64 with respect to the translation of non-Chilean operations is
part of the comprehensive basis of preparing of price-level adjusted financial
statements required by Chilean GAAP. The inclusion of inflation and translation
effects in the financial statements is considered appropriate under the
inflationary conditions that have historically affected the Chilean economy and,
accordingly, have not been eliminated. The U.S. Securities Exchange Commission
has confirmed that they do not object to the view that the adjustments made in
respect of investments in unstable countries are part of a comprehensive basis
of adjusting for inflation. Accordingly, differences between Technical Bulletin
No. 64 and SFAS No. 52 do not need to be eliminated in the reconciliation to US
GAAP. If the Company applied SFAS No. 52 instead of Technical Bulletin No. 64,
significant differences would result:

      o     As the methodology used to determine both the Company's and its
            subsidiaries functional currencies differs under SFAS No. 52, it is
            probable that the local currency would be considered the functional
            currency of the Company's foreign subsidiaries instead of the U.S.
            dollar.

      o     Income statement amounts would be translated using the actual or
            average exchange rates instead of the closing rates.

      o     Gains or losses recorded in net income for the period related to
            foreign currency denominated assets and liabilities may vary
            significantly.

      Recoverability of Tangible Assets

      The Company assesses the permanent impairment of tangible assets and
investments whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Factors it considers important which
could trigger an impairment review include the following:

      o     significant underperformance relative to expected historical or
            projected future operating results;

      o     significant changes in the use of the acquired assets or the
            strategy for the overall business;

      o     significant negative industry or economic trends.

      When the Company determines that the carrying value of tangible assets and
investments may not be recoverable based upon the existence of one or more of
the above indicators of impairment, it evaluates the future cash flows to
determine if it needs to write down the asset or the investment. If the sum of
the expected future cash flows (undiscounted and without interest charges) is
less than the carrying amount of the assets, the Company would recognize an
impairment loss. The measurement of the impairment loss is based on the fair
value of the asset, which is generally determined using a discounted cash flow
approach and recent comparable transactions in the market.

      Derivative Contracts

      The Company maintains foreign exchange forward and swap contracts to hedge
against the risk of fluctuations in foreign currencies. These contracts are
recorded at fair value with losses recognized in earnings. Generally, fair
values under Chilean GAAP are estimated using the closing spot exchange rate and
interest rate differential at the period end, because listed forward market
prices between these currencies are not widely available in the Chilean market,
and spot rates and interest rate differentials are the accepted local standard
to estimate fair value.


                                       94
<PAGE>

      The Company's estimates of fair value are based on assumptions about
market variables that may change in the future. Changes in assumptions could
have a significant impact on the estimates. As a result, such fair value amounts
are subject to volatility and are dependent on the quality of the assumptions
used.

      Income and Deferred Taxes

      In accordance with Chilean law, the Company and each of its subsidiaries
compute and pay tax on a separate basis. The Company estimates its actual
current tax exposure together with assessing temporary differences resulting
from differing treatment of items, such as depreciation, for tax and accounting
purposes. These differences result in deferred tax assets and liabilities, which
are included within the consolidated balance sheet.

      Prior to January 1, 2000 deferred taxes were not recorded under Chilean
GAAP. As a transitional provision, the Company recorded a contra asset or
liability offsetting the effects of the deferred tax assets and liabilities not
recorded prior to that date. These asset or liability amounts must be amortized
to income over the estimated average reversal periods corresponding to the
underlying temporary differences to which the deferred tax asset or liability
relates calculated using the tax rates in effect at the time of reversal. The
Company then assesses the likelihood that its deferred tax assets will be
recovered from future taxable income and to the extent it believes that recovery
is unlikely, it establishes a valuation allowance. Revisions to the estimated
realizable value of deferred tax assets or estimated average reversal periods of
contra assets or liabilities could cause the provision for income taxes to vary
significantly from period to period.

Changes in Accounting Principles

      Financial Services - Banco de Chile and Banco Edwards

      During 2000 for Banco Edwards and 2001 for Banco de Chile, the banks began
to write-off assets received or awarded in lieu of payment, and assets recovered
from leasing operations, on a straight-line basis over 18 months if they are not
sold within one year. Previously, they were required to write-off completely
those assets received in lieu of payment that were not sold within one year.

      Also during 2000 for Banco Edwards and 2001 for Banco de Chile, the banks
modified the accounting treatment of fees and expenses related to the
origination of loans, as well as fees for services rendered, to be deferred and
recognized in income over the term of the loans to which they relate, and over
the period that the services are performed. Previously, these fees and expenses
were recognized in income as the fees were received or the expenses incurred.

      The changes in accounting principles described above were made in order to
comply with regulations issued by the SBIF.

      For US GAAP purposes, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets", as of January 1, 2002, which applies to all goodwill
and identified intangible assets acquired in a business combination. Under the
new standard, all goodwill, including that acquired before initial application
of the standard, and indefinite-lived intangible assets are not amortized, but
must be tested for impairment at least annually. In addition to the transitional
impairment test required by the standard, which was performed during 2002 and
which did not result in any impairment, the Company must perform the required
impairment test annually. The Company is required to apply the new standard
prospectively.


                                       95
<PAGE>

US GAAP RECONCILIATION

      The differences between Chilean GAAP and US GAAP as they affected the
Company's results for the three years in the period ended December 31, 2003
principally related to accounting for (i) the consolidation of banking
operations, (ii) the recognition of goodwill and other purchase accounting
adjustments resulting from the step acquisitions of Banco de Chile and Banco
Edwards and their subsequent merger and the subsequent amortization of such
differences, (iii) investments accounted for by the equity method, (iv)
price-level restatement, (v) investment securities, and (vi) deferred income
taxes.

      Consolidation of Banking Operations

      Under Chilean GAAP, banking operations are not generally consolidated with
non-financial businesses in Chile primarily due to the dissimilarity of both the
nature of the businesses and the related accounting policies. However, under US
GAAP, all majority-owned subsidiaries, including the Company's banking
subsidiaries, must be consolidated. Note 26 to the financial statements presents
the effects of consolidating the Company's banking operations under Chilean
GAAP.

      The recognition of goodwill and other purchase accounting and merger
adjustments

      Under Chilean GAAP, the Company recorded assets acquired and liabilities
assumed from the step acquisitions of Banco de Chile and Banco Edwards at their
historical carrying values. The excess of the purchase price over carrying
values is recorded as goodwill. Under US GAAP, the Company has allocated the
purchase price between the fair value of the identifiable assets assumed and
identifiable liabilities acquired as of the acquisition date. Any remaining
unidentifiable excess amount of the purchase price is recorded as goodwill.
Included in the fair value of the assets are identifiable intangible assets,
such as the brand name and the value of the banks' long-term customer
relationships.

      Investments accounted for by the equity method

      The Company records certain investments using the equity method under both
Chilean and US GAAP. Under the equity method, the carrying amount of an
investment is initially recorded at cost and is displayed in a separate caption
on the balance sheet and income statement of the investor. The carrying value is
adjusted to recognize the investor's share of changes in the carrying amount of
the investee determined subsequent to the date of investment. The Company's
equity participation in the increases or decreases in the carrying value of such
investments is generally included in the determination of net income by the
investor. However, the Company is required to adjust an investee's Chilean GAAP
financial statements to US GAAP in order to determine its equity participation
in the net income of the investment under US GAAP. There are significant
differences in accounting criteria applied under Chilean GAAP as compared to US
GAAP in the Company's equity method investments in CCU and Banco de Chile.

      In CCU, the main US GAAP differences in accounting criteria relate
primarily to deferred income taxes, goodwill and trademark amortization,
employee severance indemnities and the capitalization of interest cost. During
the period in which the Company held less than a majority interest in SM Chile
and Banco de Chile, which were the years ended December 31, 1999 and 2000 and
the three-month period ended March 27, 2001, the primary US GAAP differences
relate to the subordinated debt obligation, goodwill amortization, purchase
accounting differences, loan loss allowances, deferred income taxes, recognition
of interest income, and employee severance indemnities. After March 27, 2001,
Quinenco started to consolidate SM Chile and Banco de Chile under US GAAP so
they were no longer considered equity method investments.


                                       96
<PAGE>

      Similarly, due to basis differences that exist in the carrying values of
investments in other companies that the Company holds, differences exist in the
amount of gain or loss that is recorded under US GAAP and Chilean GAAP when the
investment is sold.

      Price-level restatement

      Chilean accounting principles require that financial statements be
restated to reflect the full effects of loss in the purchasing power of the
Chilean peso on the financial position and results of operations of reporting
entities. The method, which is described in more detail in note 2(b) to the
Company's consolidated financial statements, is based on a model that requires
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.

      Although the cumulative inflation rate in Chile as measured by the
Consumer Price Index for the three-year period ended December 31, 2003 was only
approximately 7.25%, the inclusion of price-level adjustments in the Company's
consolidated financial statements is considered appropriate under the prolonged
inflationary conditions that have affected the Chilean economy in the past.
Therefore, the Company has not eliminated the effect of price-level changes in
its reconciliation to US GAAP.

      Investment Securities

      The Company held a 5.7% ownership interest in Entel as of December 31,
2001, 2002 and 2003. Under Chilean GAAP, this investment is recorded based on
the Company's equity participation in the net income and net equity of Entel.
Under US GAAP, these investments would be classified as available-for-sale
marketable securities with unrealized gains and losses included in a separate
component of shareholders' equity, while realized gains and losses on sale of
such investment securities are included in the results from operations.

      Deferred Income Taxes

      On January 1, 2000, the Company began to apply Technical Bulletin No. 60
of the Chilean Association of Accountants concerning deferred taxes. Technical
Bulletin No. 60 requires the recognition of deferred income taxes for all
temporary differences arising after January 1, 2000, whether recurring or not,
using an asset and liability approach. For US GAAP purposes, in prior years the
Company had applied SFAS 109, "Accounting for Income Taxes", whereby income
taxes are also recognized using substantially the same asset and liability
approach, with deferred income tax assets and liabilities established for
temporary differences between the financial reporting basis and tax basis of the
assets and liabilities based on rates at the time that the temporary differences
are expected to reverse.

      Prior to the implementation of Technical Bulletin No. 60, the Company had
not recorded deferred income taxes under Chilean GAAP to the extent that the
timing differences were expected to be offset in the year that they were
projected to reverse by new timing differences of a similar nature. Because the
effects of deferred income taxes are only recognized in the results of
operations for temporary differences arising after January 1, 2000, after that
date, Chilean GAAP and US GAAP differ primarily due to the recognition for US
GAAP purposes of the reversal of deferred income taxes included in the US GAAP
reconciliation in prior years.

      Investments held in other companies and sales of interests in other
companies

      Under Chilean GAAP, the investments held in other companies are reported
in the financial statements at the lower of restated cost or market value.
Unrealized losses on such investments are reflected in the statements of income.


                                       97
<PAGE>

      Under US GAAP, investments in other companies are classified as
available-for-sale securities and are reported at fair value, with unrealized
gains and losses excluded from earnings and reported in other comprehensive
income, a separate component of shareholders' equity, net of the deferred income
tax effects.

      Due to differences in carrying value in the interests in other companies
that the Company holds, when the Company sells such investments, there is a
difference in the amount of gain or loss that is recorded under US GAAP and
Chilean GAAP.

B. LIQUIDITY AND CAPITAL RESOURCES

General

      As a holding company, the level of Quinenco's income and cash flow and its
ability to pay debt service obligations and dividends depends primarily upon the
receipt of dividends and distributions from its subsidiaries, equity investments
and related companies and, to a certain extent, on the periodic sale of
investments. The payment of dividends by such subsidiaries, equity investments
and related companies is in certain instances subject to restrictions and is
contingent upon their earnings and cash flows.

      Some of the Company's loan agreements contain contractual restrictions on
the ability of subsidiaries to transfer funds to the parent company in certain
specific situations, such as negative covenants on the payment of dividends or
advances. However, Quinenco does not believe that any of these covenants or
restrictions will have any material impact on its ability to meet its cash
obligations.

      Quinenco owns a controlling interest in most of the companies in which it
invests and has in the past and expects in the future to influence the dividend
policies of its subsidiaries and affiliates in order to retain resources within
such companies where it is deemed necessary or appropriate to further these
entities' individual business plans and strategies. In addition, certain of
Quinenco's non-consolidated subsidiaries and related companies, and their
respective subsidiaries, are operated pursuant to shareholders' agreements that
require unanimous consent of the parties thereto to pay dividends beyond the
minimum required by law, and in some cases, the parties have agreed not to pay
dividends for certain periods.

      In addition to funds used for its own operations, Quinenco's primary use
of funds has been oriented to investments in consolidated investments and
unconsolidated equity investments. Quinenco believes that its working capital is
sufficient to meet its present working capital requirements.


                                       98
<PAGE>

CASH AND CASH EQUIVALENTS

                                                  2001         2002         2003
                                                  ----         ----         ----
                                                  (in millions of constant Ch$)
Madeco ..................................        4,625        7,836        5,421
Lucchetti ...............................        2,422           89        8,057
Telsur ..................................          804        1,963        1,897
Carrera .................................          104          171        6,088
Quinenco & intermediate holding co. .....       47,090       83,959       34,846
                                                ------       ------       ------
        Total ...........................       55,046       94,018       56,309

      At December 31, 2003, the Company had cash and cash equivalents totaling
Ch$56,309 million on a consolidated basis and Ch$27,919 million on a
non-consolidated basis. This compares to Ch$94,018 million on a consolidated
basis and Ch$60,579 million on a non-consolidated basis at December 31, 2002 and
Ch$55,046 million on a consolidated basis and Ch$24,217 million on a
non-consolidated basis at December 31, 2001.

DIVIDEND INCOME

      The following table shows dividends received by the Company from its
investments in 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                                                                % of Economic          Amount Corresponding to
                                                               Interest Owned by         Quinenco's Economic
                                        Dividends Paid           Quinenco (1)                  Interest
                                        --------------           ------------                  --------
                                                (in millions of constant Ch$, except percentages)
<S>                                          <C>                         <C>                   <C>
                    2003
Banco de Chile.........................      Ch$52,632                   29.2%                 Ch$15,498
CCU....................................        188,292                   30.8                     58,107
Telsur.................................          4,221                   73.6                      3,021
Entel..................................         15,613                    5.7                        870
Others.................................            n/a                    n/a                         78
Eliminations...........................            n/a                    n/a                     (3,021)
                                                                                               ---------
        Total..........................            n/a                    n/a                  Ch$74,553
                                                                                               =========

                    2002
Banco de Chile.........................      Ch$98,039                   29.2%                 Ch$21,581
CCU....................................         23,330                   30.8                      6,687
Telsur.................................          4,863                   73.6                      3,325
Entel..................................         11,897                    5.7                        599
Others.................................            n/a                    n/a                        693
Eliminations...........................            n/a                    n/a                     (3,325)
                                                                                               ---------
        Total..........................            n/a                    n/a                  Ch$29,560
                                                                                               =========

                    2001
Banco de Chile.........................      Ch$85,260                   17.8%                  Ch$4,515
Banco Edwards (2) .....................          1,652                   51.2                        870
CCU....................................         44,617                   30.8                     13,738
Telsur.................................          5,086                   73.6                      3,663
Entel..................................          9,603                    5.7                      1,171
Others.................................            n/a                    n/a                        235
Eliminations...........................            n/a                    n/a                     (3,663)
                                                                                               ---------
        Total..........................            n/a                    n/a                  Ch$20,529
                                                                                               =========
</TABLE>

(1)   Directly or indirectly

(2)   Banco Edwards merged with Banco de Chile on January 1, 2002.


                                       99
<PAGE>

OPERATING ACTIVITIES

      Consolidated cash flow provided by operating activities was Ch$64,842
million in 2003, compared to cash flow provided by operating activities of
Ch$30,307 million and Ch$14,269 million in 2002 and 2001, respectively.

      Operating Activities - 2003

      In 2003, cash flow provided by operating activities totaled Ch$64,842
million. The main components of cash flow generated by operating activities in
2003 mainly consisted of dividend income of Ch$74,553 million (see "Dividend
Income" table in this section) and collection of accounts receivable (net of
payments to suppliers and personnel) of Ch$38,149 million. Collection of
accounts receivable (net), of which Ch$42,165 million corresponded to Telsur's
and Madeco's operations, were partially offset by net payments to suppliers and
personnel of Ch$7,117 million made by Quinenco. Cash flow provided by operating
activities was partially offset by cash flow used in operating activities, which
mainly consisted of interest paid of Ch$31,015 million and VAT taxes and other
similar items paid of Ch$14,249 million.

      The variation of Ch$34,535 million in cash flow provided by operating
activities between 2003 and 2002 is attributable to various factors, the most
relevant of which was an increase in dividend income of Ch$44,993 million,
mainly attributable to an extraordinary dividend paid by CCU. In addition,
interest paid decreased by Ch$12,980 million, mainly in relation to Madeco as a
result of its financial restructuring, and to Quinenco and intermediate holding
companies, as well as the deconsolidation of Lucchetti's Chilean operations.
Quinenco and intermediate holding companies decreased the amount of interest
paid as a result of lower indebtedness levels and a decline in prevailing
interest rates, as. VAT taxes and other similar items paid decreased by Ch$8,865
million, almost entirely attributable to Madeco's operations.

      The increase in cash flow provided by operating activities was partially
offset by a decrease in collection of accounts receivable (net of payments to
suppliers and personnel) of Ch$19,181 million and a reduction in financial
income of Ch$11,412 million. The decrease in collection of accounts receivable
(net of payments to suppliers and personnel) mainly corresponded to Madeco's
operations as a consequence of its lower sales level and slower turnover,
partially offset by an increase in collection of accounts receivable (net of
payments to suppliers and personnel) due to the deconsolidation of Lucchetti's
Chilean operations. The decline in financial income was mostly attributable to
Quinenco's and Madeco's operations in connection with lower average cash and
cash equivalent balances maintained throughout 2003, as well as lower prevailing
interest rates.

      Operating Activities - 2002

      In 2002, cash flow provided by operating activities totaled Ch$30,307
million. The main components of cash flow generated by operating activities in
2002 mainly consisted of dividend income of Ch$29,560 million (see "Dividend
Income" table in this section), collection of accounts receivable (net of
payments to suppliers and personnel) of Ch$57,330 million and financial income
of Ch$14,218 million. Collection of accounts receivable (net of payments to
suppliers and personnel) mainly corresponded to Madeco's and Telsur's operations
of Ch$68,407 million, partially offset by net payments to suppliers and
personnel made by Quinenco and intermediate holding companies of Ch$11,177
million. Financial income was mostly attributable to Quinenco's and Madeco's
operations. Cash flow provided by operating activities was partially offset by
cash flow used in operating activities which mainly consisted of interest paid
of Ch$43,995 million and VAT taxes and other similar items paid of Ch$23,114
million.

      The variation of Ch$16,038 million in cash flow provided by operating
activities between 2002 and 2001 is attributable to various factors, the most
relevant of which was a decrease in interest paid of Ch$14,361 million, mostly
attributable to Madeco's operations as well as the disposal of Lucchetti's
Argentine operations. An increase in dividend income of Ch$9,031 million also
contributed to the


                                      100
<PAGE>

increase in cash flow provided by operating activities, although the overall
increase was partially offset by an increase of Ch$5,001 million in VAT taxes
and other similar items paid at Telsur and Madeco.

      Operating Activities - 2001

      In 2001, cash flow provided by operating activities totaled Ch$14,269
million. The main components of cash flow generated by operating activities in
2003 mainly consisted of collection of accounts receivable (net of payments to
suppliers and personnel) of Ch$60,806 million, dividend income of Ch$20,529
million (see "Dividend Income" table in this section), and financial income of
Ch$13,645 million. Collection of accounts receivable (net of payments to
suppliers and personnel), which mainly corresponded to Madeco's and Telsur's
operations of Ch$58,665 million. Financial income was mostly attributable to
Quinenco's and Madeco's operations. Cash flow provided by operating activities
was partially offset by cash flow used in operating activities which mainly
consisted of interest paid of Ch$58,356 million mainly corresponding to Quinenco
and intermediate holding companies, Madeco and Lucchetti. VAT taxes and other
similar items paid of Ch$18,113 million were mainly comprised of payments made
by Madeco, Lucchetti and to a lesser extent, Telsur.

INVESTING ACTIVITIES

      In 2003, consolidated cash flow provided by investing activities was
Ch$11,961 million, compared to cash flow provided by investing activities of
Ch$886 million in 2002 and cash flow used in investing activities of Ch$38,005
million in 2001.

      Investing Activities - 2003

      In 2003, the main components of cash flow provided by investing activities
were funds provided by other investing activities (net) of Ch$37,729 million,
proceeds from the sale of other investments of Ch$20,330 million and proceeds
from the sale of property, plant and equipment of Ch$15,758 million (see table
"Proceeds from Sales of Property, Plant and Equipment" in this section). Cash
flow provided by other investing activities (net) mostly consisted of a
settlement payment of Ch$36,035 million received by Quinenco from its ex-partner
in IRSA in connection with the arbitration process that was concluded in early
2003. Proceeds from the sale of other investments were almost entirely
attributable to the liquidation of financial instruments held by Madeco.
Proceeds from the sale of property, plant and equipment mainly corresponded to
the sale of the Hotel Carrera building and grounds in November 2003 for
Ch$14,125 million.

      Cash flow provided by investing activities was partially offset by
investments in financial instruments of Ch$48,833 million, of which Ch$48,762
million corresponded to Madeco, and additions to property, plant and equipment
of Ch$12,153 million of which Ch$7,311 million and Ch$3,479 million corresponded
to fixed asset additions at Telsur and Madeco, respectively.

      Investing Activities - 2002

      In 2002, the main components of cash flow provided by investing activities
were funds provided by other investing activities (net) of Ch$21,468 million and
proceeds from the sale of property, plant and equipment of Ch$2,799 million (see
table "Proceeds from the Sale of Property, Plant and Equipment" in this
section), partially offset by additions to property, plant and equipment of
Ch$23,114 million. Cash flow provided by other investing activities (net) mostly
consisted of a receipt of a note receivable at Quinenco for Ch$20,886 million
related to the Banco Edwards share acquisition in 1999. Cash flow used in
investing activities in 2002 was primarily related to additions to plant,
property and equipment of Ch$14,507 million at Telsur and Ch$6,465 million at
Madeco.

      Investing Activities - 2001

In 2001, the main components of cash flow provided by investing activities were
proceeds from the sale of other investments of Ch$147,510 million (see table
"Proceeds from Sales of Permanent Investments" table in this section), which
included proceeds from the sale of shares of Entel for Ch$92,401 million, the


                                      101
<PAGE>

sale of Plava Laguna for Ch$20,179 million, the sale of a partial interest in
Ficap Optel (subsidiary of Madeco in Brazil) for Ch$12,850 million and the sale
of Lucchetti Argentina (subsidiary of Lucchetti in Argentina) for Ch$18,648
million. Proceeds from sales of other investments included Ch$17,314 million
corresponding to the liquidation of time deposits held by VTR. Cash flow used in
investing activities in 2001 was mostly related to investments in other
companies of Ch$163,857 million, which included the investments made in Banco de
Chile of Ch$153,920 million and in Ficap Optel (subsidiary of Madeco in
Argentina) of Ch$6,810 million. Additions to plant, property and equipment of
Ch$32,406 million were mainly composed of fixed asset additions of Telsur for
Ch$21,247 million and of Madeco for Ch$8,745 million.

PROCEEDS FROM SALES OF PROPERTY, PLANT AND EQUIPMENT

      The following table shows proceeds received by the Company from the sales
of property, plant and equipment in 2001, 2002 and 2003:

                                             2001         2002          2003
                                             ----         ----          ----
                                               (in millions of constant Ch$)
  Madeco.................................    Ch$167       Ch$813      Ch$1,072
  Lucchetti..............................       682           88            46
  Telsur.................................       736        1,617            36
  Carrera................................        11          206        14,125
  Quinenco & intermediate holding co. ...       (8)           75           479
                                           --------     ---------    ---------
          Total..........................  Ch$1,588     Ch$2,799     Ch$15,758
                                           ========     ========     =========

PROCEEDS FROM SALES OF PERMANENT INVESTMENTS

      The following table shows proceeds received by the Company from the sales
of permanent investments in 2001, 2002 and 2003:

                                                2001      2002         2003
                                                ----      ----         ----
                                                   (in millions of Ch$)
  Madeco.................................    Ch$12,850     Ch$--       Ch$136
  Lucchetti..............................       18,648        --           --
  Telsur.................................           --        --           --
  Carrera................................           --        --           --
  Quinenco & intermediate holding co. ...      116,012       605          (63)
                                               -------       ---          ----
          Total..........................   Ch$147,510    Ch$605         Ch$73
                                            ==========    ======         =====

FINANCING ACTIVITIES

      Telsur, Madeco, Lucchetti, Hoteles Carrera, Banco de Chile, CCU, Entel and
Habitaria generally do not rely on each other or on Quinenco for financing
except that they may rely on Quinenco when significant new capital or other
expenditures are to be made. When intercompany financing is needed, it is
generally provided by Quinenco to such companies (or to intermediate holding
companies) by means of capital contributions or loans. Quinenco, its
intermediate holding companies, subsidiaries and affiliates may periodically
borrow from the Company's bank in the ordinary course of business on commercial
terms and on an arms' length basis.

      Quinenco believes that it has access to local and international funding
such as short-term and long-term bank borrowings, bonds and capital markets in
order to fund its investment programs.

      The cash flows of Banco de Chile (which was merged with Banco Edwards on
January 1, 2002), CCU, Entel and Habitaria, which are accounted for under the
equity method, are not included in the Company's consolidated statements of cash
flows.


                                      102
<PAGE>

      In 2003, consolidated cash flow used by financing activities was Ch$99,694
million, compared to cash flow provided by financing activities of Ch$5,181
million in 2002 and cash flow used in financing activities of Ch$61,146 million
in 2001.

      Financing Activities - 2003

      The treasury policy of the Company is to invest in highly liquid financial
instruments issued by first class financial institutions. Investments are
primarily made in Chilean pesos and U.S. dollars.

      In 2003, the main use of cash flow from financing activities was payments
of loans and bonds (net of new borrowings and issuances), which amounted to
Ch$156,867 million and mainly corresponded to payments made by Madeco, Quinenco
and intermediate holding companies. Net cash flow used in financing activities
was partially offset by contributions by minority shareholders to Madeco's 2003
capital increase of Ch$44,812 million. Cash flow provided by financing
activities also included an increase of Ch$13,796 million in accounts payable to
related companies, mainly consisting of a US$19 million loan made by a financial
entity related to Quinenco's controlling shareholder, Andsberg Finance
Corporation Ltd., to an intermediate holding company of Quinenco.

      Financing Activities - 2002

      In 2002, the main source of cash flow provided by financing activities was
borrowings from banks, which amounted to Ch$141,994 million, mostly
corresponding to loans obtained by intermediate holdings companies related to
the acquisition of Banco de Chile and the restructuring of Madeco's debt. Other
sources of cash flow provided by financing activities included related party
financing for Ch$45,923 million. The main uses of cash flow from financing
activities were reductions in the bank borrowings of intermediate holding
companies and Madeco of Ch$162,052 million, dividends paid of Ch$7,990 million
and a net decrease in bonds payable totaling Ch$17,444 million, of which
Ch$6,821 million corresponded to repayments made by Quinenco and Ch$8,731
million to repayments made by Telsur.

      Related party financing of Ch$45,923 primarily consisted of a loan made by
a financial entity related to Quinenco's controlling shareholder, Andsberg
Finance Corporation Ltd., to LQ Inversiones Financieras, a wholly-owned
subsidiary of Quinenco. Dividend payments, which amounted to Ch$7,990 million in
2002, are mainly attributable to dividend payments made by Quinenco of Ch$6,424
million and dividend payments by Telsur to minority shareholders of Ch$1,538
million.

      Financing Activities - 2001

      In 2001, the main sources of cash flow provided by financing activities
were an increase in net bonds payable of Ch$141,972 million, and capital
increases in subsidiaries contributed by minority shareholders of Ch$753
million. In 2001, the main uses of cash flow from financing activities were
reductions in bank borrowings of Ch$193,504 million, dividends paid of Ch$1,763
million, a decrease in accounts payable to related companies of Ch$1,098 million
and other financing activities (net) of Ch$7,505 million.

      The increase in net bonds payable of Ch$141,972 million on a consolidated
basis in 2001 was mainly attributable to bonds issued by Quinenco in the amount
of Ch$108,381 million, by Madeco in the amount of Ch$25,106 million and by
Telsur in the amount of Ch$16,577 million. Madeco and Telsur's bond obligations
were partially reduced by payments of Ch$1,445 million and Ch$6,648 million,
respectively.

      The net decrease in bank borrowings of Ch$193,504 million was composed of
a net decrease in bank borrowings of Quinenco and its intermediate holding
companies of Ch$135,458 million, a net decrease in bank borrowings of Madeco of
Ch$28,560 million and of Lucchetti of Ch$29,485 million.


                                      103
<PAGE>

      Dividend payments, which amounted to Ch$1,763 million in 2001, are mostly
attributable to dividend payments made by Telsur to minority shareholders of
Ch$1,429 million.

DEBT STRUCTURE

      As of December 31, 2003, approximately 74.2% of the Company's Ch$660,979
million in outstanding liabilities consisted of long-term interest bearing debt.
The Company's outstanding long-term bank loans (excluding the current portion of
long-term debt of Ch$32,214 million) which totaled Ch$332,855 million in 2003,
generally consist of borrowings by Quinenco and intermediate holding companies,
Madeco and Telsur for periods up to five years. Approximately 26% of these
long-term bank facilities were dollar-denominated with interest rates averaging
3.1%, 73.9% were Chilean UF-denominated with interest rates averaging 4.5% and
0.1% were long-term loans denominated in currencies other than the U.S. dollar
or the Chilean peso with interest rates averaging 17.0%. The average interest
rate of U.S. dollar-denominated debt was 3.5% and the average interest rate of
Chilean UF-denominated debt was 4.2% in the year 2002. Additionally, the Company
has long-term bond obligations denominated in Chilean UF, which at December 31,
2003 amounted to Ch$148,057 million. The average terms of the bond obligations
are between five and twenty-one years. The average interest rate of long term
bond obligations was 6.2% in 2003. 58.1% of the Company's bond obligations will
mature within the next three years.

      As of December 31, 2003, the Company's outstanding short-term bank loans
totaled approximately Ch$18,712 million, which represented 2.8% of the Company's
outstanding liabilities. The Company's outstanding short-term bank loans mostly
consist of borrowings by Madeco and Quinenco and intermediate holding companies
under unsecured revolving credit facilities provided by Chilean and U.S.
commercial banks. At December 31, 2003, the Company had no committed credit
lines. Approximately 30.4% of short-term facilities were dollar-denominated with
interest rates which averaged 3.6% and 39.5% were Chilean UF-denominated with
interest rates which averaged 5.0%. In 2002, approximately 59.7% of these
short-term facilities were dollar-denominated with interest rates which averaged
5.0% and 38.5% were Chilean UF-denominated with interest rates which averaged
4.2%.

      The Company's total dollar-denominated liabilities amounted to Ch$112,450
million at December 31, 2003, compared to Ch$265,544 million at December 31,
2002. The Company's total debt to capitalization ratio decreased to 44.7% at
December 31, 2003 from 51.2% at December 31, 2002.

      At December 31, 2003, the Company's net consolidated dollar-denominated
assets (after deducting dollar-denominated liabilities) were Ch$79,362 million,
compared to net consolidated dollar-denominated liabilities of Ch$6,481 million
in 2002.

      There is no seasonality with respect to Quinenco's borrowings. For a
summary of the maturities of the Company's long-term debt, see "Item 11.
Quantitative and Qualitative Disclosures About Market Risk".

      The Company utilizes foreign exchange forward contracts and swap exchange
currency contracts in order to hedge its currency exchange exposure as part of
its asset and liability management. Investment contracts (for speculative
purposes) are recorded at the closing spot exchange rate and gains and losses
are included in earnings as Other non-operating income and expenses. For a
summary of Foreign Exchange Rate Exposure, see "Item 11. Foreign Currency
Exchange Rate Risk".

      The following table shows the Company's financial debt structure
consisting of interest bearing bank debt and bond debt in 2001, 2002 and 2003:


                                      104
<PAGE>

<TABLE>
<CAPTION>
                                                         2001             2002            2003
                                                         ----             ----            ----
                                                           (in millions of constant Ch$)
<S>                                                <C>              <C>             <C>
  Madeco......................................     Ch$217,314       Ch$217,894      Ch$146,526
  Lucchetti...................................         50,282           49,601          45,277
  Telsur......................................         68,100           67,795          58,285
  Carrera.....................................          5,194            4,682             293
  Quinenco & intermediate holding co. ........        292,134          404,324         330,038
                                                      -------          -------         -------
          Total...............................     Ch$633,024       Ch$744,296      Ch$580,419
                                                   ==========       ==========      ==========
</TABLE>

FINANCIAL COVENANTS AND OTHER RESTRICTIONS

      The Company is subject to certain financial covenants and restrictions
with respect to its existing agreements with banks and bondholders. The Company
believes that it is in compliance with all of the financial covenants and
restrictions associated with its credit facilities and bond issuances as of
December 31, 2003. For further information on financial covenants and other
restrictions, see Note 15 d) to the Consolidated Financial Statements.

CAPITAL EXPENDITURES AND OTHER INVESTMENTS

      The following table sets forth the capital expenditures and other
investments made by each of the Company's principal businesses for the years
ended December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
   Capital Expenditures and Other Investments                      2001          2002          2003
                                                                   ----          ----          ----
                                                                 (in millions of constant Ch$)
<S>                                                           <C>            <C>           <C>
   Quinenco and Consolidated Subsidiaries
   Madeco (Manufacturing) ...............................     Ch$15,556      Ch$6,465      Ch$3,497
   Telsur (Telecommunications) ..........................        21,549        14,505         7,485
   LucChetti (Food and Beverage) ........................         1,820         1,819           325
   Hoteles Carrera (Real Estate and Hotel Administration)           298           145           259
   Quinenco and others ..................................       157,040           791           778
                                                              ---------     ---------     ---------
   Total ................................................     Ch$196,263    Ch$23,725     Ch$12,344
                                                              =========     =========     =========
   Main Equity Investments (1)
   CCU (Food and Beverage) ..............................        38,744        34,941        58,935
   Banco de Chile (Financial Services) ..................        11,167        15,387        11,213
   Banco Edwards (Financial Services) (2) ...............         6,998            --            --
                                                              ---------     ---------     ---------
   Total ................................................     Ch$56,909     Ch$50,328     Ch$70,148
                                                              =========     =========     =========
</TABLE>

------------------
(1)   Represents Quinenco's main equity investments, all of which are either
      controlled directly by Quinenco or indirectly by Quinenco in conjunction
      with strategic partners.

(2)   Banco Edwards was merged with Banco de Chile on January 1, 2002.


                                      105
<PAGE>

EXPANSION PLANS; FUTURE CAPITAL EXPENDITURES

      The following table sets forth the total capital expenditures currently
planned to be made by the Company and its principal businesses for the years
ending December 31, 2004, 2005 and 2006:

<TABLE>
<CAPTION>
Planned Capital Expenditures 2004 - 2006                                             2004                 2005             2006
                                                                                     ----                 ----             ----
                                                                                       (in millions of constant Ch$)
<S>                                                                             <C>                  <C>               <C>
Quinenco and Consolidated Subsidiaries
Madeco (Manufacturing)......................................................     Ch$4,712             Ch$5,815          Ch$6,531
Telsur (Telecommunications).................................................       13,498                6,645             5,770
Lucchetti (Food and Beverage)...............................................           --                   --                --
Hoteles Carrera (Real Estate/Hotel Administration)..........................           48                  128                98
Quinenco and others (1).....................................................           --                   --                --
                                                                                ---------            ---------         ---------
Total.......................................................................    Ch$18,258            Ch$12,588         Ch$12,399
                                                                                =========            =========         =========
Main Equity Investments
CCU (Food and Beverage).....................................................    Ch$30,964            Ch$46,035         Ch$33,570
Banco de Chile (Financial Services).........................................       25,834               26,822            24,713
                                                                                ---------            ---------         ---------
Total.......................................................................    Ch$56,798            Ch$71,857         Ch$58,283
                                                                                =========            ---------         ---------
</TABLE>

(1)   Capital expenditures for Quinenco and other intermediate holding companies
      for the years 2003-2005 do not include future acquisitions. Historically,
      capital expenditures used for acquisitions have been significant, though
      they may vary.

      Quinenco, its subsidiaries and equity investments review their capital
expenditures program periodically and changes are made as needed and
appropriate. Accordingly, there can be no assurance that the Company will make
the capital expenditures described herein. The actual amount of future capital
expenditures, which could vary significantly from those planned, will depend on
a variety of factors, many of which are beyond the Company's control.

      If necessary, Quinenco intends to provide or actively participate in
obtaining financing (whether equity, debt or a combination thereof) to support
the planned future capital expenditures and expansion of its principal
businesses. The amounts and terms of any such debt or equity financing from
Quinenco will depend, among other things, on the terms and conditions of
financing available to its businesses from third parties and international
capital markets, as well as Quinenco's strategy to maintain control of its
businesses. In addition, Quinenco may participate in the planned capital
increases of its principal businesses, depending on the terms, timing, and other
investment considerations relevant to Quinenco.

      Quinenco. Capital expenditures in 2004 through 2006 do not include further
acquisitions that could be made by Quinenco or its intermediate holding
companies as these amounts are not readily estimated and depend on many factors
outside of the Company's control.

      Banco de Chile. Banco de Chile has planned capital expenditures amounting
to Ch$77,369 million for the three year period 2004-2006. Planned capital
expenditures are related to investment in technology, including an upgrade of
the core technology system. In addition, Banco de Chile plans to maintain and
improve its existing branch network infrastructure. Capital expenditures for the
three-year period will be financed with internally generated funds.

      CCU. CCU plans to make an aggregate of approximately Ch$110,569 million in
capital expenditures over the 2004-2006 period, mainly to adapt, update and
increase production capacity, install new bottling lines, enhance environmental
protection, optimize its distribution system and warehouse facilities, invest in
additional returnable bottles and crates to replace obsolete inventories, adapt
to new packaging formats and support industry volume growth. Capital
expenditures are also focused on improving management information systems and
making additional investments in marketing assets. CCU expects to fund its
capital expenditures through a combination of internally generated funds and
long term indebtedness.


                                      106
<PAGE>

      Lucchetti. Following the sales of Lucchetti's main business in March 2004,
it has no immediate investment plans.

      Telsur. Telsur's capital expenditures planned for 2004, 2005 and 2006
relate to the expansion of its telephony business based in the south of Chile.
Telsur plans to continue investing in the development of businesses related to
Internet, wide band wireless networks utilizing WIFI and Bluetooth technology,
data networks and telesecurity services. It will also continue to invest in its
geographic expansion in those areas where its considers that growth potential
exits. This includes expansion of telephone lines, transmission equipment,
infrastructure and buildings. Telsur expects to finance its capital expenditures
mainly through internally generated funds.

      Madeco. Madeco's capital expenditures for the years 2004 to 2006 are
estimated to total Ch$17,058 million. Capital expenditures for the three year
period related to the company's wire and cable business unit are expected to be
Ch$5,984 million, to the brass mills business unit, Ch$2,017 million, to the
flexible packaging business unit, Ch$8,276 million and to the aluminum profiles
business unit, Ch$781 million. The planned capital expenditures are generally to
maintain and upgrade production facilities and machinery and equipment used in
production processes.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

      The Company does not own patents, licenses to technology, copyrights or
other intellectual property, nor is it involved in any research and development.
The Company has not spent any money on research and development during the three
year period immediately preceding the date of this annual report.

D. TREND INFORMATION

      Economic Overview

      The Company's lines of business and results of operations are, to a large
extent, dependent on the overall level of economic activity and growth in Chile.
Of the total aggregate revenues of the Company's main operating companies
(excluding Banco de Chile), which amounted to Ch$741,444 million in 2003,
approximately 82% were made in Chile. In addition, Banco de Chile mainly
operates in Chile, deriving approximately 91% of its net income from domestic
operations. In addition to Chile, Madeco is dependent on the overall level of
economic activity and growth in Brazil, Argentina and Peru, and CCU is dependent
on the overall level of economic activity in Argentina.

      Chile. The Chilean economy experienced moderate growth of 3.3% in 2003. It
is beginning to feel the rebound of the global economy and growth estimates for
2004 are between 4,5% and 5,5%. Higher demand from China and other world regions
has boosted the price of copper to its highest level since 1995 and other export
growth has been robust. On the domestic side of the economy, consumer demand has
increased over the last year, growing by 3,7% in 2003, and interest rates are at
historically low levels. In spite of the favorable economic climate, growth
rates are still well below the 7.7% average the country experienced between 1990
and 1997.

      Argentina. In recent years, Argentina has suffered from a prolonged
recession, culminating in the fourth quarter of 2001 in an economic crisis
driven by economic and political instability. As a result of measures adopted by
the Argentine government, the economy collapsed in 2002 but started to recover,
growing 8,7%, in 2003. Nevertheless, further recovery in Argentina is believed
to depend on deep structural reforms in many areas, including the relationship
between the federal government and the provinces, regulations in many markets
and the resumption of external debt service.

      Brazil. With the exception of a moderate 4.5% GDP growth in 2000, Brazil
has experienced low economic growth since the mid 1990s. In 2003, Brazil
experienced an economic contraction of 0.2%. Consumption and investment remain
low and only exports have provided a buffer from further contractions in
economic activity. Significant reductions in interest rates have been
established by


                                      107
<PAGE>

monetary authorities that are expected to help stimulate demand and investment
in 2004, but inflation remains a challenge as does the likely increase in U.S.
interest rates, which would affect debt service capacity.

      Quinenco

      Since 2001, Quinenco has held a controlling interest in Banco de Chile. As
of December 31, 2003, investments in the Financial Services Sector represented
approximately 69% of Quinenco's total investments and 63% of total assets at the
corporate level. Due to the importance of Quinenco's investments in the
financial services sector, the level of income from dividends and participation
in net income will depend, to a large extent, on results from this sector.

      The share acquisition involved significant cash outlays during 2001, which
amounted to Ch$340,340 million (historic value) in 2001, which were financed
with debt. Although the initial debt incurred in connection with the acquisition
has been partially reduced through sales of non-strategic assets, dividend
income and other resources, the Company will continue to incur interest expense
associated with the remaining debt until the debt level is reduced, either by
payments at scheduled amortization dates or through the sale of non-strategic
assets.

      In connection with the acquisition of Banco de Chile, the Company
recognized goodwill in the amount of Ch$247,779 million (historic value). The
goodwill is being amortized over a period of 20 years, in accordance with
Chilean GAAP and the related expense will represent a charge to income in future
periods.

      Financial Services - Banco de Chile

      The Chilean banking industry has become increasingly competitive in recent
years, which has led to, among other things, increased consolidation in the
industry and reduction of margins. Limited barriers to entry, as a consequence
of greater flexibility in the regulatory framework of the Chilean financial
system, and continued consolidation of the Chilean banking industry have
intensified this competition. Banco de Chile expects the trend of increased
competition to continue, particularly in connection with the formation of new
large financial groups and the creation of new niche banks. The Bank also faces
competition from non-bank competitors with respect to some of its credit
products, such as credit cards and consumer loans, mainly from large department
stores. Although the Company believes that Banco de Chile is currently large
enough to compete effectively in its target markets, the continued consolidation
may materially and adversely affect Banco de Chile's financial condition and
results of operations by affecting the net interest margins it is able to
generate and creating further efficiency pressures.

      Food and Beverage - CCU

      The most significant trends affecting CCU's results of operations
currently and during the past five fiscal years has been the prolonged recession
in Argentina which culminated in an economic crisis in late 2001, and the
stagnated consumption due to the weak economic recovery after its 1999 recession
in Chile.

      After four years of recession in Argentina, during 2003 the economy
stabilized, evidenced by significant increases in consumption and prices in the
beer industry. However, current prices in U.S. dollar terms are still
significantly lower than those prevailing in December 2001, before the Argentine
peso devaluation and economic crisis. This positive tendency has continued
throughout the first five months of 2004. Nevertheless, further recovery in
Argentina will depend on deep structural reforms in many areas, including the
relationship between the federal government and the provinces, regulations in
many markets, the resumption of external debt service, as well as the solution
of the energy crisis.


                                      108
<PAGE>

      Revenues from CCU Argentina in Chilean pesos are also subject to the
volatility of exchange rates of the Chilean peso, U.S. dollar and Argentine peso
in any given period, which may also affect the level of income reported from
CCU's foreign operations under Chilean GAAP.

      The Chilean economy experienced moderate growth of 3.3% in 2003. It is
beginning to feel the rebound of the global economy, and growth estimates for
2004 are between 4.5% and 5.5%. On the domestic side of the economy, consumer
demand has increased over the last year, growing by 3.7% in 2003, and interest
rates are at historically low levels. In spite of the favorable economic
climate, there can be no assurance that consumption of CCU's products will grow
in the same proportion. CCU's margins in the domestic businesses should benefit
from the current lower average exchange rate as compared with 2003, if the
exchange rate follows the same tendency throughout the remainder of the year.
CCU expects that its wine business should improve its profitability level, both
in domestic and export markets, due to the measures the company has implemented
to rationalize costs and expenses, reduce SKUs, optimize prices and focus on its
main export markets.

      In addition, CCU's beer brands in Chile may face increased competition
from other brewers as well as from alcoholic beverages such as wine and spirits,
and non-alcoholic beverages such as soft drinks. Beer consumption in Chile
historically has been influenced by changes in domestic wine prices. Increases
in domestic wine prices have tended to lead to increases in beer consumption,
while reductions in wine prices have tended to reduce or slow the growth of beer
consumption. However, this correlation has not been observed clearly in the past
five years due to the low level of wine consumption and factors like higher wine
quality and awareness of the positive effects of moderate wine consumption on
health. Similarly, the price of soft drinks has decreased relative to the price
of beer over the past few years, due to lower packaging costs and the
introduction of larger packaging formats, which may also affect further growth
in beer consumption.

      In recent months, the Argentine government began restricting gas exports
to Chile due to supply problems in that country. This situation will have a cost
effect on CCU's beer production plants in Chile and Argentina, as well as its
soft drinks plants in Chile. Additionally, CCU expects an increase in electrical
power costs, related to these same gas restrictions. CCU does not need
additional investments because its boilers can work with gas or with alternative
fuels, such as diesel oil. Considering the current energy prices, CCU estimates
that the higher costs at a consolidated level should not exceed Ch$1,100 million
for 2004.

      Food and Beverage - Lucchetti

      On December 22, 2003, Empresas Lucchetti signed a Memorandum of
Understanding (MOU) to sell its wholly-owned subsidiary, Lucchetti Chile, to a
local food distribution company for a gross amount of Ch$60 billion. The sale
was concluded on March 31, 2004. The disposal, which consisted of approximately
85% of the consolidated assets of Empresas Lucchetti, included Lucchetti's
Chilean pasta, edible oil and soup operations. Following the sale of Lucchetti's
Argentine operations in 2001, the discontinuation of Lucchetti 's Peruvian
operations in early 2003 and the sale of Lucchetti's Chilean operations in March
2004, Lucchetti's sole activity is a 50% investment in Calaf, a cookie and candy
manufacturer purchased for Ch$6,656 million (historic value) in January 2004.

      For the year ended December 31, 2003, Lucchetti comprised 18.2%, 21.1% and
16.5% of the Company's consolidated revenues and 15.1%, 26.1% and 22.7% of
operating income for the years 2001, 2002 and 2003, respectively. Cash flow from
Lucchetti's operations was negative, amounting to Ch$5,204 million, Ch$11,908
million and Ch$563 million in 2001, 2002 and 2003, respectively.

      Telecommunications - Telsur

      In recent years, the rate of growth of mobile telephony has exceeded that
of fixed line telephony, and the number of mobile subscribers in Chile is now
greater than the number of fixed line telephony subscribers. This substitution
from fixed line telephony has tended to diminish Telsur's traditional fixed line
telephony revenue base. As a consequence, Telsur has attempted to develop new
products and


                                      109
<PAGE>

services to compensate for the decline in its basic telephony services revenues.
Although Telsur has been able to provide new products and services, which in
2003 accounted for approximately 18% of its total revenue, further strong growth
of mobile telephony could negatively affect the company's future revenues
associated with basic telephony services.

      In addition, increased competition in the telecommunications industry has
led to, among other things, increased consolidation in the industry. Telsur
expects the trend in increased competition to continue, particularly in
connection with the formation of large telecommunications groups. Certain
competitors in the Chilean telecommunications industry continue to expand their
operations geographically in order to capture a larger subscriber base. This
geographic expansion could lead to higher competition in Telsur's traditional
market in Regions X and XI of Chile. Although Telsur believes that it will
compete effectively in its target markets, the continued consolidation and
competition may materially and adversely affect Telsur's financial condition and
results of operations by affecting the margins it is able to generate, resulting
in further efficiency pressures.

      In December 2004, the Ministry of Economy, in conjunction with the
Ministry of Transportation and Telecommunications, will set forth the rates for
the regulated services of Telsur and its subsidiary, Telcoy for the period
December 2004 - December 2009. The effect of the new tariff structure, which
will be reflected in the company's results starting in 2005, is as yet unknown.

      Manufacturing - Madeco

      In 2003, Madeco underwent a debt restructuring process and a capital
increase. Proceeds obtained from the capital increase were used to reduce
indebtedness, resulting in a significant improvement in the company's capital
structure. In addition, Madeco has taken measures to improve the profitability
of its production and commercial operations in its main markets. The company
believes that these steps will improve its results from operations. However, to
date Madeco's results continue to be affected by a reduction in investment
levels in the main markets in which it operates, and at this time it cannot be
determined when a recovery of its main markets may occur.

      In 2003, Madeco's Brazilian wire and cable business unit generated 49.5%
of total wire and cable segment sales and 23.0% of Madeco's total consolidated
revenues. Madeco's revenues are dependent on the overall level of economic
activity and investment in Brazil and demand from its main customers. Demand for
metallic cables by telecom customers, which in prior years represented an
important part of the unit's sales, only accounted for less than 1% of sales in
2003 and is not expected to recover in the foreseeable future due to, among
other things, a lack of investment by telecom operators, the substitution with
optical fiber cables and a growing use of wireless telephone communications.
Although Madeco's telecom production operations in Brazil continue to operate,
plant capacity for telecom cables is largely under-utilized. This downturn
continued in 2003 and was exacerbated by lower demand for cable products by
customers in the energy transmission and distribution sector, mainly as a result
of the postponement of energy transmission and distribution sector investments
mainly due to the low level of economic activity and the current regulatory
environment, further affecting sales and profitability levels. Madeco believes
that demand for aluminum cables in 2004 will pick up as energy companies
replenish stock levels that have been depleted over the last several years. It
is also currently attempting to participate more actively in the
commercialization of special cables, which are higher added value products, such
as cables for industrial use and the shipping industry.

      At the beginning of 2002, Madeco closed its cable and brass mills
operations in Argentina as a consequence of the economic deterioration and
currency devaluation in that country. In 2001, Madeco had 19.2% of its
consolidated assets in Argentina and derived 14.7% of its revenue from its
Argentine operations. In comparison, in 2002 and 2003, revenues derived from
Argentine operations represented 5.8% and 6.9% of revenues, respectively. During
September 2003, Madeco reinitiated brass mills production in the Barracas plant
in Argentina and in November 2003, it reopened its foundry plant at Llavallol.
Madeco intends to reopen its other Argentine operations when levels of demand
have the scale to operate efficiently and when Madeco believes such levels are
sustainable.


                                      110
<PAGE>

      Revenues from Madeco's foreign operations in Chilean pesos are also
subject to the volatility of exchange rates of the Chilean peso, U.S. dollar,
the Brazilian real, the Argentine peso and Peruvian Sole in any given period,
which may also affect the level of income reported from Madeco's foreign
operations under Chilean GAAP.

      Considering current energy prices, its access to alternative energy
sources and the low incidence of energy costs on Madeco's total cost of sales,
Madeco does not foresee that the current gas restrictions on natural gas exports
from Argentina to Chile will have a material effect on its cost of sales.

      Hotel Administration - Hoteles Carrera

      In November 2003, Hoteles Carrera sold its main hotel, which is located in
the center of Santiago. The Santiago Hotel Carrera accounted for approximately
60% of Hoteles Carrera's total revenues prior to its sale. Additionally, Hoteles
Carrera has decided not to renew the leases on the three hotels it operates in
the north of Chile. The one remaining hotel, the four-star hotel El Araucano in
Concepcion, will continue to be owned and operated by Hoteles Carrera. Revenue
from Hoteles Carrera accounted for approximately 1.9% of the Company's total
consolidated revenues in 2003. As a consequence of the sale of the main Hotel
Carrera in Santiago and the non-renewal of the leased hotels in the north of
Chile, it is expected that future revenues from Hoteles Carrera will be
insignificant to the Company's results of operations. Hoteles Carrera has no
plans at this time to further develop its interest in the hotel industry in
Chile.

E. OFF-BALANCE SHEET ARRANGEMENTS

      The Company does not have any off-balance sheet arrangements as of
December 31, 2003.


                                      111
<PAGE>

 CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

      The following tables summarize the Company's contractual and commercial
obligations as of December 31, 2003:

<TABLE>
<CAPTION>
                                                                 (in millions of constant Ch$
Contractual Commitments                    Total      Less than 1 year      1-3 years      4-5 years     More than 5 years
<S>                                      <C>                    <C>           <C>            <C>                    <C>
Short term and long term debt            580,681                99,770        234,520        156,401                89,990
Capital lease obligations                  7,638                   456          2,480            912                 3,790
Operating leases                             628                   627              1             --                    --
Unconditional purchase obligations           486                   486             --             --                    --
Other short term and long term            63,770                61,685          1,928            116                    41
obligations
                                        ----------------------------------------------------------------------------------
Total contractual cash obligations       653,203               163,024        238,929        157,429                93,821
                                        ==================================================================================

<CAPTION>

Commercial Commitments                     Total      Less than 1 year      1-3 years      4-5 years     More than 5 years
<S>                                      <C>                    <C>           <C>              <C>                  <C>
Lines of credit                           12,811                 7,250          3,794          1,767                    --
Stand by letters of credit                 4,673                 4,673             --             --                    --
Guarantees                               234,642                42,366        113,459             --                78,817
Stand by repurchase obligations               --                    --             --             --                    --
Other commercial commitments               1,771                 1,525             --             --                   246
                                        ----------------------------------------------------------------------------------
Total commercial commitments             253,897                55,814        117,253          1,767                79,063
                                        ==================================================================================
</TABLE>

In addition, Lucchetti has a contractual commitment related to the sale of its
subsidiary, Lucchetti Chile, on March 31, 2004 of up to Ch$25,000 million in
relation to representations and guarantees made to the buyer.

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Directors

      Quinenco is managed by its Board of Directors which, in accordance with
Quinenco's By-laws, consists of nine directors who are elected at the Annual
General Shareholders' Meeting. The entire Board of Directors is elected every
three years. The last election was held on April 30, 2003. The entire board was
reelected except for Mr. Philip Adeane who was replaced by Mr. Matko Koljatic.
The next election will be held in April 2006. The Board of Directors may appoint
replacements to fill any vacancies that occur during periods between elections.
Quinenco's Chief Executive Officer is appointed by the Board of Directors. There
are regularly scheduled meetings of the Board of Directors at least once a month
on dates predetermined by the Board; extraordinary meetings are called by the
Chairman of the Board or when requested by an absolute majority of directors.


                                      112
<PAGE>

      The following table sets forth information with regard to Quinenco's
directors as of December 31, 2003:

<TABLE>
<CAPTION>
                                                         Year         First
Name                           Position in Quinenco      Born         Elected     Principal Directorships
----                           --------------------      ----         -------     -----------------------
<S>                            <C>                       <C>          <C>         <C>
Guillermo Luksic ............  Chairman of the Board     1956         1982        CCU (1)(3)
                                                                                  Telsur (1)(3)
                                                                                  Madeco (1)(3)
                                                                                  Lucchetti (1)
                                                                                  Banco de Chile (1)

Andronico Luksic ............  Vice Chairman of the      1954         1978        Banco de Chile (1)
                               Board .................                            Madeco (1)
                                                                                  CCU (1)
                                                                                  Lucchetti (1)

Hernan Buchi ................  Director...............   1949         1990        Madeco (1)
                                                                                  Lucchetti  (1)(3)
                                                                                  CCU (advisor) (1)
                                                                                  Soquimich S.A.
                                                                                  Falabella S.A.
                                                                                  Parque Arauco S.A.
                                                                                  Pilmaiquen S.A.
                                                                                  P&S S.A.
                                                                                  Alto Palermo (Argentina)

Joaquin Errazuriz ...........  Director...............   1953         1984        Hoteles Carrera (1)
                                                                                  JAL Fisheries S.A.
                                                                                  Com. E Ind. Hochschild S.A.

Juan Andres Fontaine ........  Director...............   1954         1997        Banco Santander Chile
                                                                                  Mall Plaza Vespucio S.A.
                                                                                  Mall Plaza Tobalaba S.A.
                                                                                  Mall Plaza La Serena S.A.
                                                                                  Mall Plaza Norte S.A.
                                                                                  Plaza El Trebol S.A.
                                                                                  Plaza Oeste S.A.

Matko Koljatic (4)...........  Director...............   1944         2003        Lucchetti (1)
                                                                                  Almagro S.A.
                                                                                  AIG Chile

Jean Paul Luksic.............  Director...............   1964         1993        Madeco (1)
                                                                                  Antofagasta plc (2)
                                                                                  Antofagasta Minerals S.A. (2)
                                                                                  Antofagasta Railway Co. (2)
                                                                                  Minera Los Pelambres Ltd.(2)(3)
                                                                                  Minera Michilla S.A. (2)(3)
                                                                                  Minera El Tesoro S.A.(2)(3)

Gonzalo Menendez ............  Director...............   1949         1996        Telsur (1)
                                                                                  Inversiones Vita  S.A. (1)
                                                                                  Banco de Chile (1)
                                                                                  SM Chile S.A. (1)
                                                                                  Banchile Seguros de Vida S.A. (1)
                                                                                  Antofagasta plc (2)
                                                                                  Antofagasta Minerals S.A.(2)
                                                                                  Minera Michilla S.A.(2)
                                                                                  Socofin S.A.
                                                                                  Banco Latinoamericano de Exportaciones (3)
                                                                                  Fundacion Andronico Luksic A.(2)

Vladimir Radic ..............  Director...............   1933         1981        Hoteles Carrera (1)(3)
</TABLE>


                                      113
<PAGE>

-------------------
(1)   Subsidiary or affiliate of Quinenco.

(2)   Company associated with the Luksic Group.

(3)   Chairman of the Board.

(4)   Since April 2003.

      Guillermo Luksic, Andronico Luksic and Jean Paul Luksic are brothers.
Other than such relationships, there is no family relationship between any
director or executive officer and any other director or officer of Quinenco.

      The following table sets forth Quinenco's key executive officers as of
December 31, 2003, their positions and years of service with Quinenco and with
the Luksic Group:

<TABLE>
<CAPTION>

                                                                           Years with    Years with
Name of Executive Officer                  Position                         Quinenco     Luksic Group
-------------------------                  --------                         --------     ------------
<S>                                        <C>                                 <C>            <C>
Francisco Perez Mackenna ..............    Chief Executive Officer              6             13
Luis Fernando Antunez .................    Chief Financial Officer              8             17
Manuel Jose Noguera ...................    Chief Legal Counsel                  4             29
Felipe Joannon.........................    Business Development Manager         5              5
Martin Rodriguez.......................    Strategic Development Manager        5              5
Sergio Cavagnaro.......................    Human Resources Manager              7             18
Fernando Silva.........................    Controller                          23             23
</TABLE>

      Francisco Perez Mackenna,(46) Francisco Perez Mackenna has served as Chief
Executive Officer of the Company since 1998. He is also a Director of many
Quinenco group companies, including Banco de Chile, CCU, Inversiones y Rentas,
LQIF, Hoteles Carrera, ECUSA, Vina San Pedro, CCU Argentina, Lucchetti and
Calaf. Prior to joining Quinenco, between 1991 and 1998, Mr. Perez Mackenna was
CEO of CCU. Prior to his experience with the Luksic Group, he worked in key
positions at Bankers Trust and Citicorp Chile. Mr. Perez attended the Catholic
University of Chile, majoring in Business Administration. He holds a
postgraduate degree (MBA) from the University of Chicago.

      Luis Fernando Antunez Bories,(48) Luis Fernando Antunez has served as
Chief Financial Officer of Quinenco since 1996. In addition, he is General
Manager of Quinenco's wholly-owned subsidiary, LQIF. Prior to joining Quinenco,
between 1985 and 1996, Mr. Antunez was CFO of CCU. Prior to his experience with
the Luksic Group, he worked in COPEC as a financial analyst. Mr. Antunez
attended the Catholic University of Chile, majoring in Industrial Engineering.
He holds a postgraduate degree (MBA) from Georgia State University.

      Manuel Jose Noguera Eyzaguirre,(54) Manuel Jose Noguera has served as
Chief Legal Counsel of Quinenco since 2000. He is also a Director of several
Quinenco group companies, including CCU, Inversiones y Rentas and LQIF, and an
advisor to the Board of Madeco. In his capacity as Chief Legal Counsel, he
serves as an advisor to the board of Quinenco. Prior to joining Quinenco, Mr.
Noguera developed his career in other Luksic group companies for over 29 years.
He is also a partner at the law firm of Morales, Noguera, Valdivieso y Besa. Mr.
Noguera received his law degree from the Catholic University of Chile.

      Felipe Joannon Vergara,(44) Felipe Joannon has served as Business
Development Manager of Quinenco since 1999. He is also currently a Director of
Madeco, Habitaria, Hoteles Carrera, Entel and LQIF. Prior to joining Quinenco,
Mr. Joannon was General Manager and CEO of Vina Santa Rita, CFO of Cristalerias
Chile and Resident Vice President of the Corporate Finance Area of Citicorp
Chile. He has also been a Professor at the Business School of the Catholic
University of Chile and Universidad de Los Andes. He received a degree in
Economics from the Catholic University of Chile and holds an MBA degree from the
Wharton School, University of Pennsylvania.

      Martin Rodriguez Guiraldes,(43) Martin Rodriguez has been with Quinenco
since 1999 as Manager of Mergers and Acquisitions and since late 2003, as
Manager of Strategic Development. He is also currently a Director of Banchile
Seguros de Vida and Empresas Lucchetti. Prior to joining


                                      114
<PAGE>

Quinenco, Mr. Rodriguez worked in key positions in Bankers Trust in Chile and
the United States between 1993 and 1998. Other work experience includes
Santander Investment where he worked in the Corporate Finance and M&A areas,
Procter and Gamble (marketing), Inverchile (debt to equity swaps) and Citibank
Chile (executive trainee program). Mr. Rodriguez holds an MBA degree from the
Anderson Graduate School of Management at UCLA and an undergraduate and master
degree in economics from the Catholic University of Chile.

      Sergio Cavagnaro Santa Maria,(49) Sergio Cavagnaro has served as Human
Resources Manager for Quinenco since 2000. Mr. Cavagnaro's experience with the
Luksic Group dates back 18 years. During his career with the group, he has
served as Chief Executive Officer of VTR Celular S.A., and Chief Executive
Officer of VTR Telefonica S.A. He is currently on the boards of Habitaria and
VTR. He also serves as CEO of VTR. Mr. Cavagnaro received his degree in Civil
Industrial Engineering from the Catholic University of Chile, and he has a
postgraduate degree from Adolfo Ibanez University.

      Fernando Silva Lavin,(56) Fernando Silva has worked with the Luksic Group
since 1981, occupying key positions such as General Manager of Quinenco, Mergers
& Acquisitons Manager, Business Development Manager and Consultant to the Board
of Directors. He has held the position of Controller since late 2003. Mr. Silva
is also currently a member of the board of several Quinenco companies, including
Habitaria and Lucchetti Peru. Mr. Silva received his degree in business
administration from the Catholic University of Chile.

      The following table shows the Chief Executive Officer and Chief Financial
Officer of the principal businesses of the group as of December 31, 2003:

<TABLE>
<CAPTION>
                                                                                                   Years with
                                                                                                     Current    Years with
             Name                                           Position                                 Company   Luksic Group
             ----                                           --------                                 -------   ------------
<S>                               <C>                                                                   <C>         <C>
Pablo Granifo .................   Chief Executive Officer of Banco de Chile                              2           8
Arturo Concha..................   Manager of the Financial Division of Banco de Chile                   17           2
Arturo Tagle...................   Manager of the Planning and Research Division of Banco de Chile        8           2
Patricio Jottar ...............   Chief Executive Officer of CCU                                         5           5
Ricardo Reyes (1) .............   Chief Financial Officer of CCU                                         7           7
Fernando Pacheco...............   Chief Executive Officer of Lucchetti                                  10          10
Eduardo Saez (2) ..............   Chief Financial Officer of Lucchetti                                   8           8
Jorge Atton ...................   Chief Executive Officer of  Telsur                                    19          17
Luis Vidal (3) ................   Chief Financial Officer of Telsur                                     17          17
Tiberio Dall'Olio..............   Chief Executive Officer of Madeco                                      1          10
Jorge Tagle....................   Chief Financial Officer of Madeco                                      1           4
Gloria Vergara (4) ............   Chief Executive Officer of Hoteles Carrera                            14          14
Rafael Valderrabano (5)........   Chief Executive Officer of Habitaria                                   5           5
David Perez (6)................   Chief Financial Officer of Habitaria                                   1           4
</TABLE>

---------------------
(1)   Until May 2004.

(2)   Until March 2004.

(3)   Since April 2003.

(4)   Ms. Vergara was promoted to CEO in December 2003.

(5)   Until February 2004.

(6)   Between January 2003 and April 2004.

      Pablo Granifo Lavin, (45) was appointed Chief Executive Officer of Banco
de Chile in October 2001. He was Chief Executive Officer of Banco Edwards from
November 2000 to October 2001, after having been Commercial Manager at Banco
Santiago from 1995 to 1999 and Corporate Manager at Banco Santiago from 1999 to
2000. Mr. Granifo is a member of the board of directors of Banchile
Administradora General de Fondos, Banchile Asesoria Financiera and Banchile
Factoring, and he is a member of the executive committee of Banchile Corredores
de Seguros Ltda. He holds a degree in business from the Pontificia Universidad
Catolica de Chile.


                                      115
<PAGE>

      Patricio Jottar Nasrallah,(41) Patricio Jottar has served as Chief
Executive Officer of CCU S.A. since 1998. He is also currently a Director of CCU
Argentina, ECUSA, Austral and Kunstmann and is Chairman of the Board of Vina San
Pedro. Prior to joining CCU, he was Chief Executive Officer of Santander Chile
Holding. He received a degree in Business Administration from the Catholic
University of Chile, and a Masters degree in Economics and Business
Administration from IESE, in Barcelona, Spain.

      Fernando Pacheco Novoa, (49) Fernando Pacheco has served as Chief
Executive Officer of Empresas Lucchetti S.A. since 1998. Previously, he was the
Finance and Administration Manager of Empresas Lucchetti S.A. Prior to joining
Lucchetti, he was Studies and Development Manager at Vidrios Lirquen, Finance
Manager of Vina Santa Carolina, Pesquera Eicomar (Pathfinder) and El Tattersal.
He received a degree in Business Administration from the Catholic University of
Chile.

      Jorge Atton Palma,(50) Jorge Atton has served as Chief Executive Officer
of Telefonica del Sur S.A. and Telefonica de Coyhaique S.A. since 1998. He is
also currently Chairman of the Board of Telefonica del Sur Servicios Intermedios
S.A, Telefonica del Sur Seguridad S.A, Telsur Call Center S.A. and Blue Two
Chile S.A., all of which are subsidiaries of Telsur. He is a member of the board
of Compania de Telecomunicaciones Llanquihue S.A. During his career with Telsur,
he has been Operations Manager and Client Service Manager of Telefonica de
Coyhaique. He received his degree in Electronic Engineering, specializing in
telecommunications, from the Universidad de Concepcion, and a degree in
Electronic Engineering from Universidad Austral de Chile.

      Tiberio Dall'Olio,(67) Tiberio Dall'Olio was named Chief Executive Officer
of Madeco S.A. in October of 2002. He has a long career in the cable industry,
having served as General Manager and CEO of Teleco Cable Italia (subsidiary of
the Siemens Group of companies) between 1991 and 2000. Mr. Dall'Olio was General
Manager and CEO of Madeco earlier in his career from 1980 to 1986. He also was
General Manager and CEO of CCU between 1986 and 1990. Mr. Dall'Olio holds a
degree in law from the Universidad de Padua in Italy.

      Gloria Vergara,(35) Gloria Vergara has developed her career with Hoteles
Carrera since 1990. She was promoted to the position of CEO in March 2004. Prior
to this, Ms. Vergara was Chief Financial Officer of Hoteles Carrera in Santiago
and CFO of the Hotel El Araucano in Concepcion. She holds a degree in Business
Administration from San Sebastian University.

      Rafael Valderrabano,(36) Rafael Valderrabano was Chief Executive Officer
of Habitaria between 1998 and February 2004. Prior to this, he was Commercial
Manager of Ferrovial Inmobiliaria in Madrid, Spain and General Manager of
Ferrovial Inmobiliaria Chile Limitada. Mr. Valderrabano holds a degree in
Economics and Business Administration from ICADE and an MBA from IESE, in Spain.


                                      116
<PAGE>

B. Compensation

      Director Compensation

      For the year ended December 31, 2003, compensation paid to each of the
Company's Directors in connection with their service on Quinenco and subsidiary
boards was the following:

 Director                                               Total Compensation
 --------                                               ------------------
                                                  (in millions of constant Ch$)
Guillermo Luksic............................                Ch$1,069
Andronico Luksic............................                   1,065
Jean Paul Luksic............................                       2
Gonzalo Menendez............................                     251
Hernan Buchi................................                      25
Juan Andres Fontaine........................                       2
Joaquin Errazuriz...........................                       8
Vladimir Radic..............................                       9
Matko Koljatic..............................                       3
                                                            --------
   Total....................................                Ch$2,434
                                                            ========

      Executive Officer Compensation

      For the year ended December 31, 2003, the aggregate amount of compensation
paid to officers and key executives of Quinenco, including bonuses, was Ch$3,615
million. For the year ended December 31, 2003 and prior years, Quinenco did not
disclose to its shareholders or otherwise make publicly available information as
to the compensation of its individual executive officers.

      Each executive officer of the Company receives a fixed monthly salary and
benefit package. In addition, the Company may, at its discretion, compensate
executive officers with an annual bonus, depending on individual performance and
adherence to predefined goals.

      In addition, in accordance with approval granted by the Board of Directors
on March 8, 2000, a long-term executive incentive plan was established by the
Company in March 2000 for qualified executives. In accordance with this plan,
shares of Quinenco and its principal operating companies were purchased by a
group of qualified executives and each executive was offered a predetermined
number of shares, approved in each case by the Board of Directors. Financing was
provided by the Company through non-interest bearing loans to each executive,
the total of which amounted to Ch$3,149 million as of December 31, 2003. Total
shares purchased as of the same date amounted to 3,694,729 shares of Quinenco,
292,632 shares of Telsur, 163,697 shares of CCU, 21,537,265 shares of Banco de
Chile, 369,598 shares of Madeco and 22,733 shares of Lucchetti.

      The loans, which are expressed in Unidades de Fomento (UF), are repayable
in annual installments beginning in 2003 and maturing in 2006. The individual
shares are pledged as collateral during the loan period. At each installment
date, the pledged shares may be delivered as full payment for such installment
or the entire loan. To the extent that the value of the shares exceeds the loan
value, the executive will be entitled to the difference as compensation. The
first two loan installments came due in the first half of 2003 and 2004 for
UF69,210.33 and UF62,068.31, respectively. At this time, each of the
participating executives determined to deliver shares in full payment for such
loan installment or a combination of shares and money in full payment for the
loan installment. The terms and conditions of the loans may not be modified and
once an installment is paid, the loan may not be renewed.

      The Company does not maintain any pension plans or retirement programs for
its directors or executive officers.


                                      117
<PAGE>

C. Board Practices

      The current term of office for each director expired in April 2003. At the
Annual Shareholders' Meeting held on April 30, 2004, the entire board was
reelected for a new term of three years. There are no service contracts among
the Company and any of the directors providing for any additional benefits upon
termination of employment.

      Audit Committee

      The Chilean Corporations Act was amended effective December 20, 2000. The
following is a summary of the main provisions of the amendment. Under the
amendment, the boards of directors of corporations whose market capitalization
reaches or exceeds UF1.5 million shall designate an audit committee (the "Audit
Committee"). If the market capitalization falls below this threshold, the
obligation to designate an Audit Committee disappears. However, corporations
which do not reach the threshold may voluntarily assume the obligations
concerning the Audit Committee, in which case they shall strictly follow the
provisions of the amendment.

      The Audit Committee, as defined and mandated under the Chilean
Corporations Act, does not satisfy the Audit Committee requirements of Rule
10A-3 under the Exchange Act and certain additional requirements under NYSE Rule
303A, with which the Company will be required to comply by July 31, 2005.

      The Audit Committee shall have the following powers and duties:

      (1)   to examine the independent accountants' reports, the balance sheets,
            and other financial statements submitted by the corporation's
            managers or liquidators to the shareholders, and issue an opinion
            about them prior to their submission for shareholder approval;

      (2)   to propose to the Board of Directors the independent accountants and
            the risk rating agencies, which the Board must then propose to the
            shareholders. Should the Board disagree with the Audit Committee's
            proposal, the Board shall be entitled to make its own proposal,
            submitting both to the shareholders for their consideration;

      (3)   to examine the documentation concerning (i) contracts or agreements
            in which directors have an interest and (ii) transactions between
            related or affiliated companies, and to produce a written report on
            such documentation. A copy of the report shall be delivered to the
            Chairman of the Board, who shall read it at the Board meeting in
            which the relevant transaction is presented for approval or
            rejection;

      (4)   to examine the managers' and chief executives' remuneration policies
            and compensation plans; and

      (5)   all other matters contemplated in the company's bylaws or entrusted
            to the Audit Committee by a shareholders' meeting or the Board of
            Directors.

      For purposes of the related party transactions mentioned in paragraph (3)
above, the following persons are considered by the Securities Market Law and the
Chilean Corporation Act to be related to a company:

      (a)   any entities within the financial conglomerate to which the company
            belongs;

      (b)   corporate entities that have, with respect to the company, the
            character of parent company, affiliated company, subsidiary or
            related company. Parent companies are those that control directly or
            indirectly more than 50% of the subsidiary's voting stock (or
            participations, in the case of business organizations other than
            stock companies), or that may otherwise elect or appoint, or cause
            the election or appointment, of the majority of the directors or
            officers.


                                      118
<PAGE>

            Limited partnerships (sociedades en comandita) may likewise be
            affiliates of a corporation, whenever the latter has the power to
            direct or guide the administration of the general partner (gestor)
            thereof. Related companies are those that, without actually
            controlling the affiliate, own directly or indirectly 10% or more of
            the affiliate's voting stock (or participations, in the case of
            business organizations other than stock companies), or that may
            otherwise elect or appoint, or cause the election or appointment of
            at least one board member or manager;

      (c)   persons who are directors, managers, administrators or liquidators
            of the company, and their spouses or their close relatives (i.e.,
            parents, father/mother in law, sisters, brothers, sisters/brothers
            in law); and

      (d)   any person who, whether acting alone or in agreement with others,
            may appoint at least one member of the management of the company or
            controls 10% or more of the capital of the company.

      In addition, the Superintendency of Securities and Insurance may create a
presumption that any individual or corporate entity is related with a company
if, because of relationships of equity, administration, kinship, responsibility
or subordination, the person:

      (i)   whether acting alone or in agreement with others, has sufficient
            voting power to influence the company's management;

      (ii)  creates conflicts of interest in doing business with the company;

      (iii) in the case of a corporate entity, is influenced in its management
            by the company; or

      (iv)  holds an employment position, which affords the person access to
            non-public information about the company and its business which
            renders the person capable of influencing the value of the company's
            securities.

      However, a person shall not be considered to be related to a company by
the mere fact of owning up to 5% of the company, or if the person is only an
employee of the company without managerial responsibilities.

      The Audit Committee's discussions, agreements, and organization are
regulated, in every applicable matter, by the Chilean Corporations Act
provisions relating to board of directors' meetings. The Audit Committee shall
inform the Board of Directors about the manner in which it will request
information and about its resolutions.

      In addition to the general liabilities imputable to any director, the
directors that compose the Audit Committee shall, in the exercise of their
duties, be jointly and severally liable for any damage caused to the corporation
or the shareholders.

      The Audit Committee shall be composed of three members, the majority of
which shall be independent. Independent directors are those that would have been
elected even if the votes cast in that director's favor by the controlling
shareholder and its related persons had not been counted. However, a majority of
directors related to the controlling shareholder is permissible if there is an
insufficient number of independent directors. Should there be more than three
directors entitled to participate in the Audit Committee, the Board of Directors
shall elect the members of the Audit Committee by unanimous vote.

      Should the Board fail to reach an agreement, the matter shall be decided
by drawing. The Company's Audit Committee is composed of Gonzalo Menendez,
Vladimir Radic and Joaquin Errazuriz.

      The members of the Audit Committee shall be remunerated. The amount of
such remuneration shall be established annually by the shareholders, taking into
consideration the duties that the Audit


                                      119
<PAGE>

      Committee members shall perform. The remuneration of the members of the
Company's Audit Committee was UF25 per session in 2003.

      The shareholders shall determine the budget of the Audit Committee and its
advisors, and the Audit Committee shall be allowed to request the recruitment of
professionals to fulfill its duties, within the limits imposed by the budget.
The activities of the Audit Committee and its expenses, including those of its
advisors, shall be included in the annual report and made known to the
shareholders. The annual budget of the Company's Audit Committee and its
advisors was UF2,000 in 2003.

      General summary of significant differences with regard to corporate
government standards.

      The following paragraphs provide a brief, general summary of significant
differences between corporate government practices followed by Quinenco pursuant
to its home-country rules and those applicable to U.S. domestic issuers under
New York Stock Exchange ("NYSE") listing standards.

      Composition of the board of directors; independence. The NYSE listing
standards provide that listed companies must have a majority of independent
directors and that certain board committees must consist solely of independent
directors. Under NYSE rule 303A.02, a director qualifies as independent only if
the board affirmatively determines that such director has no material
relationship with the company, either directly or indirectly. In addition, the
NYSE listing standards enumerate a number of relationships that preclude
independence.

      Under Chilean law there is no legal obligation to have independent
directors. However, Chilean law establishes a number of principles of general
applicability designed to avoid conflicts of interests and to establish
standards for related party transactions. Specifically, directors elected by a
group or class of shareholders have the same duties to the company and to the
other shareholders as the rest of the directors, and all transactions with the
company in which a director has an interest, either personally (which includes
the director's spouse and certain relatives) or as a representative of a third
party, require prior approval by the board of directors and must be entered into
on market terms and conditions. Furthermore, such transactions must be reviewed
by the Audit Committee (as defined below) and disclosed at the next meeting of
shareholders. Pursuant to NYSE rule 303A.00, Quinenco may follow Chilean
practices and is not required to have a majority of independent directors.

      Committees. The NYSE listing standards require that listed companies have
a Nominating/Corporate Governance Committee, a Compensation Committee and an
Audit Committee. Each of these committees must consist solely of independent
directors and must have a written charter that addresses certain matters
specified by the listing standards.

      Under Chilean law, the only board committee that is required is the Audit
Committee, composed of three members, such committee having a direct
responsibility to (a) review the company's financial statements and the
independent auditors' report and issue an opinion on such financial statements
and report prior to their submission for shareholders' approval, (b) make
recommendations to the board of directors with respect to the appointment of
independent auditors and risk rating agencies, (c) review transactions in which
directors have an interest and transactions between affiliated companies, and
issue a report on such transactions, (d) review the Chief Executive Officer's
("CEO") and principal executive officers, compensation policies and plans and
(e) perform other duties as defined by the company's charter, by the general
shareholders' meeting or by the board. A director who is a member of the Audit
Committee is "independent" if, subtracting the votes of the controlling
shareholder and its affiliates from the total number of votes given in favor of
such director, he or she would have been nevertheless elected. Directors elected
with the votes of the controlling shareholder and its affiliates may constitute
the majority of the Audit Committee if there are not enough independent
directors on the board.


                                      120
<PAGE>

      However, pursuant to NYSE Rule 303A.06, Quinenco must have an audit
committee that satisfies the requirements of Rule 10A-3 under the Exchange Act
and the additional requirements under NYSE Rule 303A by July 31, 2005.
Therefore, the company must establish an independent audit committee and a
written audit committee charter addressing the audit committee's purpose and
responsibilities by July 31, 2005.

      Shareholder approval of equity-compensation plans. Under NYSE listing
standards, shareholders must be given the opportunity to vote on all
equity-compensation plans and material revisions thereto, with limited
exemptions. An "equity-compensation plan" is a plan or other arrangement that
provides for the delivery of equity securities of the listed company to any
employee, director or other service provider as compensation for services.

      Under Chilean law, if previously approved by shareholders at an
extraordinary shareholders' meeting, up to ten percent of a capital increase in
a publicly traded company may be set aside to fund equity-compensation plans for
the company's employees and/or for the employees of the company's subsidiaries.
Pursuant to NYSE rule 303A.00, as a foreign issuer, Quinenco may follow Chilean
practices and is not required to comply with the NYSE listing standards with
respect to shareholder approval of equity-compensation plans.

      Corporate Governance Guidelines. The NYSE listing standards provide that
listed companies must adopt and disclose corporate governance guidelines with
regard to (a) director qualifications standards; (b) director responsibilities;
(c) director access to management and independent advisors; (d) director
compensation; (e) director orientation and continuing education; (f) management
succession; and (g) annual performance evaluation of the board.

      Chilean law does not require that such corporate governance guidelines be
adopted. Director responsibilities and access to management and independent
advisors are directly provided for by applicable law. Director compensation is
approved by the annual meeting of shareholders pursuant to applicable law. As a
foreign issuer, Quinenco may follow Chilean practices and is not required to
adopt and disclose corporate governance guidelines.

      Code of Business Conduct and Ethics. The NYSE listing standards require
that listed companies adopt and disclose a code of business conduct and ethics
for directors, officers and employees, and promptly disclose any waivers of the
code for directors or executive officers.

      Quinenco has adopted a code of business conduct and ethics that applies
generally to all of its executive officers and employees. A copy of the code of
ethics is filed as an exhibit to this annual report.

      Executive Sessions. To empower non-management directors to serve as a more
effective check on management, NYSE listing standards provide that
non-management directors of each company must meet at regularly scheduled
executive sessions without management.

      Under Chilean law, the office of director is not legally compatible with
that of a company officer in publicly traded companies. The board of directors
exercises its functions as a collective body and may partially delegate its
powers to executive officers, attorneys, a director or a board commission of the
company, and for specific purposes to other persons. As a foreign issuer,
Quinenco may follow Chilean practices and is not required to comply with the
NYSE listing standard for executive sessions.

      Certification Requirements. Under the NYSE listing standards, Section
303A.12(a) requires that each listed company CEO must certify to the NYSE each
year that he or she is not aware of any violation by the company of NYSE
corporate governance listing standards and Section 303A.12(b) requires that each
listed company CEO must promptly notify the NYSE in writing after any executive
officer of the listed company becomes aware of any material non-compliance with
any applicable provisions of Section 303A.


                                      121
<PAGE>

      As a foreign private issuer, Quinenco is required to comply with Section
303A.12(b), but is not required to comply with the certifications requirements
set forth in Section 303A.12(a).

D. Employees

      The following table sets forth the number of employees of Quinenco and its
subsidiaries as of December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
 2003                             Executives        Professional/Technical       Other Personnel       Total
                                  ----------        ----------------------       ---------------       -----
<S>                                      <C>                         <C>                   <C>        <C>
Quinenco                                  12                            15                    10          37
Banco de Chile                           300                         4,515                 4,318       9,133
Madeco                                    43                           294                 2,414       2,751
Telsur                                    33                           276                   203         512
Lucchetti                                 17                           129                   317         463
Hoteles Carrera                            7                            52                   225         284
Other subsidiaries                        14                            93                    41         148
                                         ---                         -----                 -----      ------
Total employees                          426                         5,374                 7,528      13,328
                                         ===                         =====                 =====      ======

<CAPTION>

2002                              Executives        Professional/Technical       Other Personnel       Total
                                  ----------        ----------------------       ---------------       -----
<S>                                      <C>                         <C>                   <C>        <C>
Quinenco                                  12                            17                    10          39
Banco de Chile                           279                         4,239                 4,137       8,655
Madeco                                    52                           331                 2,405       2,788
Telsur                                    26                           298                   212         536
Lucchetti                                 24                           151                   406         581
Hoteles Carrera                           10                            25                   242         277
Other subsidiaries                        13                            76                    33         122
                                         ---                         -----                 -----      ------
Total employees                          416                         5,137                 7,445      12,998
                                         ===                         =====                 =====      ======

<CAPTION>

2001                              Executives        Professional/Technical       Other Personnel       Total
                                  ----------        ----------------------       ---------------       -----
<S>                                      <C>                         <C>                   <C>        <C>
Quinenco                                  14                            16                    10          40
Banco de Chile                           168                         2,975                 1,392       4,535
Banco Edwards                            122                         1,713                 1,008       2,843
Madeco                                    60                           385                 2,869       3,314
Telsur                                    28                           353                   249         630
Lucchetti                                 17                           148                   793         958
Hoteles Carrera                            8                            54                   271         333
Other subsidiaries                        16                            74                    65         155
                                         ---                         -----                 -----      ------
Total employees                          433                         5,718                 6,657      12,808
                                         ===                         =====                 =====      ======
</TABLE>

      In addition, at December 31, 2001, 2002 and 2003, CCU had 3,892, 3,908 and
3,901 employees, respectively. For the same years ended, Habitaria had 83, 85
and 59 employees, respectively.

      The Company believes that its subsidiaries maintain productive
relationships with their employees' respective unions. Specific information
regarding labor relationships of CCU, Madeco and Banco Chile is set forth below.

      At December 31, 2003, CCU's unionized employees in Chile represented
approximately 65% of the total permanent workforce. CCU's unionized employees,
including permanent and temporary employees, are subject to collectively
negotiated agreements. During 2003, 1,438 employees renewed their collective
contracts, all for a period of two years.

      At December 31, 2003, Madeco's unionized employees represented
approximately 43% of the total workforce. Madeco's unionized employees are
subject to collectively negotiated agreements. During 2003, 240 employees in
Chile renewed their collective contracts for a period of three years.

      At December 31, 2003, 1,667 employees of Banco de Chile were unionized.
All management positions are held by non-union employees. Banco de Chile is
party to four collective bargaining agreements (one of which was assumed as part
of the merger with Banco Edwards) covering the unionized employees. Three
collective bargaining agreements were signed in September 2001 and expire in
December 2005 and the other was signed in January 2003 and expires in December
2006.


                                      122
<PAGE>

E. Share Ownership

      As of December 31, 2003, except as disclosed in "Item 7. Major
Shareholders and Related Party Transactions - Principal Shareholders", none of
the Company's directors or executive officers beneficially owned more than one
percent of the outstanding stock. Excluding members of the Luksic Group, the
directors and executive officers collectively held 0.4% of the Company's shares
as of December 31, 2003. As of May 31, 2004, the percentage of shares
collectively held by directors and executive officers was 0.3%.

      Other than the long-term incentive plan for qualified executives of
Quinenco described in " - B. Compensation", the Company does not have any stock
option or other programs involving employees in the capital of the Company.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

      As of the date of this Annual Report, members of the Luksic Group, which
consists of Mr. Andronico Luksic Sr. and his sons, Andronico Luksic Craig,
Guillermo Luksic Craig and Jean Paul Luksic Fontbona, beneficially own
approximately 82.4% of the outstanding shares of common stock of Quinenco and
thereby control the Company. Guillermo Luksic, Andronico Luksic and Jean Paul
Luksic are all directors on the Company's Board of Directors.

      Control by the Luksic Group is exercised through the Luksic Group's
control of Inversiones Antofagasta Ltda., Ruana Copper A.G. Agencia Chile,
Inversiones Consolidadas S.A., Sociedad Inmobiliaria y de Inversiones Rio Claro
Ltda. and Inversiones Salta S.A., which are the Luksic Group companies that hold
shares of Quinenco. Although there are no formal agreements as to the voting or
disposition of shares known to Quinenco, Quinenco believes that the members of
the Luksic Group generally consult with each other regarding actions to be taken
by shareholders of Quinenco. Consequently, the Luksic Group has the power to
elect a majority of Quinenco's directors and to determine the outcome of
substantially all matters to be decided by a vote of shareholders.

      Quinenco's only outstanding voting securities are its shares of common
stock. There was no significant change in the share ownership of the Company in
2001, 2002 or 2003. The following table sets forth certain information
concerning ownership of the shares with respect to the Luksic Group's companies
at December 31, 2003:

<TABLE>
<CAPTION>
      Title of Class                        Identity of Person or Group                        Amount Owned        Percent of Class
      --------------                        ---------------------------                        ------------        ----------------
<S>                       <C>                                                                    <C>                     <C>
       Common Stock       Inversiones Antofagasta Ltda....................................       362,757,196             33.6%
                          Ruana Copper A.G. Agencia Chile.................................       240,938,000             22.3%
                          Sociedad Inmobiliaria y de Inversiones Rio Claro Ltda...........       142,819,109             13.2%
                          Inversiones Consolidadas S.A....................................       124,819,108             11.6%
                          Inversiones Salta S.A. .........................................        18,000,000              1.7%
</TABLE>

      In addition, the Fundacion Andronico Luksic A., a charity foundation
presided over by Mr. Andronico Luksic, owned 1,348,247 shares of Quinenco
equivalent to a 0.1% interest as of December 31, 2003.

      Registration Rights Agreement with Antofagasta. In connection with the
reorganization of Quinenco during 1996, Quinenco entered into a registration
rights agreement with Antofagasta plc ("Antofagasta"), pursuant to which
Antofagasta has the right to demand up to five registered offerings in the
United States in respect of the common stock of Quinenco held by Antofagasta and
its subsidiaries pursuant to the 1996 reorganization. In addition, Antofagasta
has "piggy-back" rights in connection with its shares which permit Antofagasta,
subject to certain conditions and limitations, to include shares received by its
subsidiaries in connection with the 1996 reorganization and held by Antofagasta
and its affiliates in any future registered public offerings of shares (or ADSs
representing shares) in the United States.


                                      123
<PAGE>

      On September 2, 2003, Antofagasta announced its intention to transfer its
33.6% interest in Quinenco's shares to a wholly-owned holding company, Andsberg
Ltd. ("Andsberg"). Following shareholder approval on October 1, 2003, each
ordinary shareholder of Antofagasta shares received one share of Andsberg for
every share held of Antofagasta on the record date. In addition, shareholders
were granted a share redemption right by Dolberg Finance Corporation
Establishment, a company related to the Luksic Group, Quinenco's controlling
shareholder, at a fixed price of US$1.11 per share. The Luksic Group's
beneficial ownership in Quinenco of 82.4% did not change as a result of the
transfer.

      On September 4, 2003, in an ordinary board meeting, Quinenco's Board of
Directors approved to transfer the rights associated with the registrations
rights agreement with Antofagasta to Andsberg.

      For information concerning the portion of the Company's common stock held
in the United States, see "Item 9. The Offer and Listing".

B. Related Party Transactions

      Article 89 of the Chilean Corporations Law, Law No.18.046, requires that
the Company's transactions with related parties be on terms similar to those of
an arm's length transaction. Directors and executive officers of companies that
violate Article 89 are liable for losses resulting from such violations. In
addition, Articles 44 and 50 of the Chilean Corporations Law provide that any
related party transaction, including any transaction in which a director has a
personal interest or is acting on behalf of a third party may be executed only
when such transaction is disclosed to the Audit Committee and previously
approved by the Board of Directors, and the terms of such transaction are
similar to those of an arm's length transaction. If the conflicting interest
transaction involves a "material amount," the Board of Directors is required to
produce a statement declaring in advance that the conflicting interest
transaction is similar in its terms to an arm's length transaction. A
conflicting interest transaction is deemed to involve a "material amount" if the
amount involved is both greater than UF2,000 (as of March 31, 2004,
approximately US$55 thousand) and exceeds 1% of the assets of the corporation,
or if the amount exceeds UF20,000 (as of March 31, 2004, approximately US$546
thousand) regardless of the size of the corporation.

      If the Board of Directors believes that it is not possible to ascertain
whether the conflicting interest transaction is similar to an arm's length
transaction, it may approve or reject the conflicting interest transaction, or
appoint independent advisors to make such a determination. In each case,
interested directors are excluded from the decision of the Board related to the
conflicting interest transaction. If the Board appoints independent advisors,
the report prepared by the advisors will be made available to the shareholders
and the Board of Directors for 20 business days from the date the last report
was received from the independent advisors. The shareholders will be notified in
writing of the receipt of the report. After this period the Board may approve or
reject the conflicting interest transaction, but the Board is not required to
follow the independent advisors' conclusion. The Board may treat the conflicting
interest transaction and the report as confidential information. In each
circumstance, the interested director would be excluded from the decision-making
process at the Board level.

      Within a twenty day period, shareholders representing at least a 5% of the
voting shares of the Company may request the Board to call a shareholders'
meeting in order to approve or reject the conflicting interest transaction by a
two-thirds majority of the outstanding voting shares. All decisions adopted by
the Board in respect of the conflicting interest transaction must be reported at
the next shareholders' meeting.

      The controller of the corporation or the related party which intends to
enter into the conflicting interest transaction shall make available to the
Board of Directors, at the time the transaction is being considered by the
Board, all information relating to the transaction filed with any non-Chilean
regulatory entities or stock exchanges. A violation of Article 44 may result in
administrative or criminal sanctions against the interested director. The
Company, the shareholders or interested third parties who suffer


                                      124
<PAGE>

losses as a result of such violation have the right to receive compensation from
such director in certain situations.

      In the ordinary course of its business, the Company engages in a variety
of transactions with affiliates of the Luksic Group. Financial information
concerning these transactions during the last three years is set forth in Note
21 to the Consolidated Financial Statements. The Company believes that it has
complied with the requirements of Chilean law in all transactions with related
parties.

      Although the Company generally does not provide or receive long-term debt
financing to or from other entities within the Luksic Group (except in
connection with bank loans on arm's length terms in the ordinary course of
business from the Company's subsidiary, Banco de Chile), the Company has
occasionally in the past and may in the future advance funds and receive
advances of funds from other companies under the common control of the Luksic
Group when required to meet liquidity requirements. These loans have
historically been made on an unsecured basis at market rates of interest and, in
the case of loans made by the Company to affiliated companies, require the prior
approval of the Audit Committee and Quinenco's Board of Directors pursuant to
the requirements of the Chilean Corporations Laws relating to open companies
such as Quinenco. The outstanding amounts of such loans made by the Company to
affiliated companies during the years ended December 31, 2001, 2002 and 2003
were not material to Quinenco, individually or in the aggregate. In addition,
the Company has from time to time in the past made loans and advances to
affiliated companies in the Luksic Group and to strategic investors and their
affiliates to provide financing resources in connection with acquisitions of
assets and other transactions. Such loans and advances have generally been made
on a secured basis at market rates of interest. See Note 21 to the Consolidated
Financial Statements.

      The Company also provides goods and services in commercial transactions in
the ordinary course of business to affiliated companies in the Luksic Group. In
connection with such transactions, the Company from time to time extends
unsecured credit on terms substantially similar to those available to other
customers purchasing goods and services in similar quantities.

      Except for the transactions described below, none of the transactions
carried out during 2003 between the Company and related parties were deemed to
have been material to the related party:

      1.    On April 10, 2003, Quinenco's wholly-owned subsidiary,
            Hidroindustriales Overseas Company, obtained a US$19 million loan
            (historic value) from Andsberg Finance Corporation, a company based
            in Bermuda owned by Mr. Andronico Luksic. The transaction, which was
            carried out on terms similar to those of an arms' length
            transaction, bears an interest rate of LIBOR plus 1.83% per annum.
            The loan matures in April of 2006. Proceeds were used to finance
            working capital needs.

      2.    Under its executive incentive plan established in 2000, Quinenco has
            made non-interest bearing loans to qualified executives in the
            amount of Ch$3,149 million as of December 31, 2003. For a
            description of the incentive plan, see "Item 6B. Executive
            Compensation".

Item 8.  Financial Information

A. Consolidated Statements and Other Financial Information

See "Item 18.  Financial Statements".

Legal Proceedings

      Neither Quinenco nor any of its subsidiaries or affiliates in which
Quinenco holds significant non-consolidated equity investments is party to any
legal proceedings which are material to the Company, except as described below.

      Madeco


                                      125
<PAGE>

      On June 27, 2002, Madeco announced that it had been notified by Corning,
its joint venture partner in Optel, a producer of optical fiber cable in Brazil
and Argentina, of its desire to liquidate the joint venture. Madeco believed
that Corning was attempting to unjustifiably terminate the agreements with
Madeco and filed an arbitration suit against its partner to resolve this
dispute.

      Corning filed a counterclaim against Madeco in which it requested, among
other things, that Corning be permitted to terminate its joint venture
agreements with Madeco, alleging that Optel is effectively bankrupt.

      On November 11, 2003, Madeco was notified that the arbitrators had
resolved the dispute in favor of Corning. The arbitral decision provided for the
termination of the investment agreement governing the joint venture, and as a
result, Madeco lost certain rights over the appointment of Optel's management
and its rights to exercise a put option to sell its Optel shares to Corning for
US$18 million between January 2004 and December 2005 (consequently, the
subsidiary was not consolidated with Madeco in its December 31, 2003 financial
statements). In addition, the decision obliges the company to agree to the
liquidation of Optel at Corning's request. As a consequence of this unfavorable
ruling, Madeco recognized provisions of Ch$4,917 million in the fourth quarter
of 2003 in order to reflect the value of its 50% equity share in Optel and costs
associated with the ruling.

      In Brazil, two legal disputes against the previous owner of Madeco's
subsidiary, Ficap, have been pending since prior to Madeco's acquisition of the
subsidiary in 1997. It is estimated that the total potential liability arising
from the lawsuits is approximately US$10 million. The previous owner of Ficap
has personally agreed to indemnify Madeco if Ficap is affected by these actions.

      Telsur

      Telsur is involved in seven lawsuits related to its normal course of
business involving claims worth Ch$2,684 million. Telsur has not made provisions
to cover anticipated losses because it believes that the lawsuits will not
result in significant losses.


                                      126
<PAGE>

      Lucchetti

      In March 2000, allegations were made by certain governmental authorities
and private parties in Peru that Lucchetti representatives acted improperly to
obtain a judgment in their favor with respect to legal proceedings in 1998
arising out of a dispute between Lucchetti Peru and the Municipality of Lima, as
discussed below under "Lucchetti Peru". Lucchetti Peru had commenced these
proceedings following actions by Lima to suspend construction and operation of
the Lucchetti plant. The allegations were based in part on publicly-released
portions of videotapes of meetings between Lucchetti representatives and
Vladimiro Montesinos, a senior official of the government of then President
Alberto Fujimori who has since been implicated in a widespread corruption
scandal. The videotapes have been portrayed as an attempt by Lucchetti
representatives to use Mr. Montesino's influence to intervene on behalf of
Lucchetti Peru in order to obtain a favorable judgment. Lucchetti has denied
that it acted improperly in the matter.

      In May 2001, criminal charges were filed before the Second Anti-Corruption
Court of Lima against certain Lucchetti representatives and Peruvian government
officials, alleging influence peddling in connection with the matter described
above. These charges have been denied by the individuals involved, and are still
being investigated by the court in order to determine whether or not there is
cause to warrant a trial. Subsequent efforts by the prosecution to broaden the
charges to include corruption were dismissed and may not be brought again.

      Although Lucchetti expects its representatives to prevail in the pending
legal proceedings, no assurances can be given as to the outcome of these or any
related proceeding or other actions which may be brought against Lucchetti, its
Peruvian subsidiary or their respective representatives relating to this matter.

      Lucchetti Peru

      On August 16, 2001, the Metropolitan Council of the Municipality of Lima
adopted a resolution to revoke Lucchetti's operating license that had been
previously granted by the Municipality of Chorrillos, and to require Lucchetti
to close its plant operations within twelve months and dismantle and remove the
plant facilities. The Municipal Council of the Municipality of Lima alleged that
the operation of the plant interfered with the special characteristics of an
adjacent wetlands area. The resolution was published in the Official Gazette of
Peru on August 21, 2001.

      On October 3, 2001, Lucchetti notified the Republic of Peru that it was
invoking the dispute resolution procedures of a bilateral investment treaty
between Chile and Peru, which requires a six-month period of consultations prior
to the formal initiation of any legal proceedings. The consultation period ended
on April 3, 2002 without a settlement. On August 16, 2002, Lucchetti requested
an extension of the term dictated by the Municipal resolution. This request was
rejected by the Metropolitan Council of the Municipality of Lima on December 16,
2002.

      On December 23, 2002, Lucchetti presented its request for arbitration to
the International Centre for Settlement of Investment Disputes ("ICSID") in
Washington D.C.

      On January 6, 2003, Lucchetti received an order by an official of the
Municipality of Chorrillos to immediately close the plant. Lucchetti proceeded
to close the plant and is currently in the process of liquidating its Peruvian
assets.

      On March 26, 2003, Lucchetti was notified by ICSID that its request for
the constitution of an arbitration tribunal had been accepted. Lucchetti is
seeking damages in connection with the loss of its investment in Peru, arguing
that there was a lack of technical and legal justification for the Municipality
to have adopted the resolution to close the plant. Although Lucchetti believes
that it will prevail in the pending arbitration tribunal, the final outcome of
this matter cannot be determined at this time.


                                      127
<PAGE>

      Habitaria

      The Company's 50%-owned affiliate, Habitaria is involved in five lawsuits
for alleged construction defects and/or false advertising. Habitaria believes
that it develops and markets high quality housing units, and that it will be
able to make repairs and construction upgrades in conjunction with the
construction company responsible for building its projects on an extra-judicial
basis. Habitaria considers the amounts involved are not significant to its
operations and has not made a provision in its financial statements.

      Dividend Policy

      A declaration of dividends is made to shareholders at a general ordinary
meeting. A dividend declaration is based upon a proposal made by the Board of
Directors. However, shareholders are not obligated to approve the board's
recommendation. The dividend policy of the Company is to distribute at least 30%
of annual net earnings as dividends. On April 30, 2004, a general ordinary
meeting was held. At that time, it was proposed and accepted that a dividend
payment of Ch$17.4555 pesos corresponding to the distribution of 50% of 2003 net
income be paid. The definitive dividend was paid on May 11, 2004.

B. Significant Changes

      See "Item 4. Information on the Company - Developments During 2004" for
certain developments in 2004.

Item 9. The Offer and Listing

A. and C. Offer and Listing Details and Markets

      The Company's common stock is traded on the Santiago Stock Exchange, the
Chilean Electronic Stock Exchange and the Valparaiso Stock Exchange, and since
June 1997 has been quoted on the New York Stock Exchange (the "NYSE") in the
form of American Depositary Shares. The Company conducted a preemptive rights
offering and United States offering of American Depositary Shares ("ADSs") in
June 1997 (the "Offerings"). Since the conclusion of the Offerings, the ADSs
(each ADS representing 10 shares) have been traded in the United States on the
NYSE under the symbol LQ. The ADSs are evidenced by American Depositary Receipts
("ADRs"). The ADRs are outstanding under an amended and restated Deposit
Agreement, dated as of August 19, 2003 (the "Deposit Agreement"), among the
Company, Bank of New York, as depositary (the "Depositary"), and the holders
from time to time of ADRs issued thereunder. Only persons in whose names ADRs
are registered on the books of the Depositary are treated by the Depositary as
owners of ADRs.

      Until August 19, 2003, the ADRs were outstanding under a Deposit
Agreement, dated as of June 24, 1997, among the Company, Citibank N.A., as
depositary, and the holders from time to time of ADRs issued thereunder.


                                      128
<PAGE>

      The table below shows, for the period indicated, the high and low closing
prices in Chilean pesos of the Company's common stock on the Santiago Stock
Exchange and the high and low closing prices of the ADS in U.S. dollars on the
NYSE:

<TABLE>
<CAPTION>
                                     Santiago Stock Exchange(1)                    NYSE
                                     -----------------------                       ----
                                            Ch$ per Share                      US$ per ADS
  Annual                            High                     Low        High                  Low
                                    ----                     ---        ----                  ---
<S>                                 <C>                      <C>        <C>                   <C>
  1999                              621                      310        12.00                 6.00
  2000                              795                      390        14.63                 6.75
  2001                              545                      347         8.00                 5.48
  2002                              490                      245         7.40                 3.30
  2003                              600                      325         9.50                 4.51

  2002
  1st Quarter................       490                      370         7.40                 5.43
  2nd  Quarter...............       405                      324         6.30                 4.75
  3rd Quarter................       320                      245         4.70                 3.30
  4th  Quarter...............       350                      262         4.85                 3.60

  2003
  1st Quarter................       391                      325         5.40                 4.53
  2nd  Quarter...............       458                      325         6.46                 4.51
  3rd Quarter................       495                      405         7.05                 5.92
  4th  Quarter...............       600                      465         9.50                 7.05

  2004
  1st Quarter................       592                      500         9.98                 8.40
  January....................       535                      500         9.61                 8.55
  February...................       585                      520         9.76                 8.80
  March                             592                      520         9.98                 8.40
  April                             560                      530         9.40                 8.10
  May   .....................       530                      495         8.41                 7.40
  June (through June 10) ....       516                      495         8.00                 7.75
</TABLE>

--------------------
(1)   Pesos per Share and U.S. dollar per share reflected nominal price at trade
      date.

(2)   Shares began to trade on the Santiago Stock Exchange and the NYSE on June
      25, 1997.

      At December 31, 2003, ADRs evidencing 7,833,162 ADSs were outstanding
(equivalent to 78,331,620 shares, or 7.25% of the total number of issued shares.
It is not practicable for the Company to determine the proportion of ADRs
beneficially owned by U.S. persons. At December 31, 2003, the Luksic Group did
not own ADRs of Quinenco.

      Madeco's shares are traded on the Chilean Stock Exchanges, and since 1993
have traded on the NYSE in the form of American Depositary Shares. CCU's shares
are traded on the Chilean Stock Exchanges and between 1992 and March 1999 were
quoted on the NASDAQ National Market in the form of American Depositary Shares.
In March 1999, trading in CCU's American Depositary Shares moved to the NYSE.
Until December 31, 2001, Banco Edwards's shares were traded on the Chilean Stock
Exchanges, and starting in November 1995 were traded on the NYSE in the form of
American Depositary Shares. On January 1, 2002, as a result of its merger with
Banco de Chile, Banco Edwards shares were converted to Banco de Chile "F shares"
and on March 21, 2002, following the distribution of Banco Edwards' 2001 net
income, the "F shares were converted to Banco de Chile common shares. Banco de
Chile's shares have been traded on the Chilean Stock Exchanges since November
1996 and on the NYSE since January 2002. Since the last quarter of 2002, Banco
de Chile's shares have also been traded on the London Stock Exchange in the form
of American Depositary Shares and on the Madrid Latibex Stock Exchange as
ordinary shares. The shares of Lucchetti, Hoteles Carrera, Entel, and Telsur are
traded on the Chilean Stock Exchanges. The shares of Habitaria are not publicly
traded.


                                      129
<PAGE>

      Markets

      The Chilean Stock Market

      General

      The Chilean stock market, which is regulated by the Superintendencia de
Valores y Seguros (SVS) under Chile's 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. This policy of 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. Certain elements of the
market, including pension fund administrators, are highly regulated with respect
to investment and remuneration criteria, but the general market is less
regulated than the U.S. market with respect to disclosure requirements and
information usage. While the expectation is that stock market regulations and
practices will evolve, the Chilean stock market is still developing.

      History and Description

      The Santiago Stock Exchange was established in 1893. As of December 31,
2003, 239 companies had shares listed on the Santiago Stock Exchange. The
Santiago Stock Exchange is Chile's principal exchange, with transactions in 2003
which amounted to Ch$4,481,261 million. In Chile, shares may also be traded on
the Valparaiso Stock Exchange and the Chilean Electronic Stock Exchange.

      There are two share price indices for the Santiago Stock Exchange: The
General Share Price Index (the "IGPA") and the Selective Shares Price Index
("IPSA"). The IGPA index is calculated using the prices of companies traded on
the exchange, divided 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.

      The table below summarizes recent value and performance indicators for the
Santiago Stock Exchange.

<TABLE>
<CAPTION>
                                                    Annual                                     Percent            Percent
                                  Market           Trading      IGPA          IPSA            Change in          Change in
At or for the Year Ended      Capitalization       Volume     Index (1)    Index (1)       IGPA Index (2)     IPSA Index (2)
------------------------      --------------       -------    ------       ------          -----------        -----------
<S>                               <C>                <C>           <C>          <C>              <C>              <C>
                                    (in US$ millions)
December 31, 1999.......          68,193             6,601         206.76       402.78            40.51%            39.82%
December 31, 2000.......          60,426             5,778         186.37       371.36           (9.86)%           (7.80)%
December 31, 2001.......          56,857             4,111         201.30       394.72             8.01%             6.29%
December 31, 2002.......          47,693             3,370         182.06       324.46           (9.56)%          (17.80)%
December 31, 2003.......          86,344             7,547         236.28       476.66            44.61%            46.91%
</TABLE>

----------------------------
Source:  Santiago Stock Exchange

(1)   Index base = 100 on December 31, 1980

(2)   In nominal peso terms.

      Volatility and Suspension of Trading

      The IPSA has increased at an average compounded annual rate of 6.9% for
the period 2000 to 2003. During 2003, the IPSA increased by 46.91% in nominal
peso terms. As the table above shows, swings in market performance are often
significant and reflect the high level of volatility characteristic of the
Chilean stock market.

      According to Article 14 of the Securities Market Law, the SVS may suspend
the offer, quotation or trading of shares of any company listed on one or more
Chilean stock exchanges for up to 30 days if in


                                      130
<PAGE>

its opinion such suspension is necessary to protect investors or is justified
for reasons of public interest. Such suspension may be extended to 120 days. If,
at the expiration of the extension, the circumstances giving rise to the
original suspension have not changed, the SVS may then cancel the relevant
listing in the Registry of Securities.

      Liquidity

      The aggregate market value of equity securities listed on the Santiago
Stock Exchange as of December 31, 2003 was US$86.3 billion. The ten largest
companies in terms of market capitalization as of December 31, 2003 represented
approximately 58% of that exchange's aggregate market capitalization and
accounted for approximately 49% of total volume traded during 2003. Average
monthly trading volume for 2003 was US$629 million. (Comparatively, the NYSE had
an aggregate global market capitalization of approximately US$17.3 trillion at
December 31, 2003, and average daily reported share volume of approximately 1.4
billion).

      Foreign Ownership

      Foreign investment in Chile is governed by Decree Law No. 600 of 1974, as
amended ("Decree Law No. 600"), by the Central Bank Foreign Exchange Regulations
and by the Central Bank Act, law No. 18,840, which is an organic constitutional
law requiring a "special majority" vote of the Chilean Congress to be modified
(hereinafter referred to as the "Central Bank Act"). See "Item 10 D. Exchange
Controls". Foreign investment into Chile under Decree Law No. 600 may not be
remitted outside Chile earlier than one year after the initial investment.
According to new regulations issued by the Central Bank in May 2000 and April
2001, if governed by Chapter XIV of the Central Bank Foreign Exchange
Regulations, the capital may be remitted outside Chile at any time. Earnings may
be remitted at any time, whether under Decree Law No. 600 or Chapter XIV.
Capital and earnings must be remitted through the Formal Exchange Market.

      Notwithstanding the foregoing, an investment in Chilean shares by
foreigners through an ADR program is also governed by the Central Bank Act and
by Chapter XIV of the Central Bank Foreign Exchange Regulations, which do not
require a holding period before remitting capital or earnings abroad. See "Item
10 D. Exchange Controls".

      Foreign capital investment funds ("FCIFs") are governed by Law No. 18,657
and are permitted to receive preferential tax treatment. Law No.18,657 also
regulates foreign venture capital investment funds, which have different
investment limits than the ones set forth for the FCIFs. FCIFs are required to
obtain a favorable report issued by the SVS in order to conduct business in
Chile. FCIFs may not remit capital for five years following the investment of
such capital as from the date the capital entered into Chile, although earnings
may be remitted at any time. An FCIF may hold a maximum of 5% of a given
company's shares, although this can be increased to a maximum of 10% if the
excess over 5% corresponds to newly issued shares of such company that are
subscribed and paid by the FCIF. Furthermore, no more than 10% of an FCIF's
assets may be invested in a given company's stock, unless the security is issued
or guaranteed by the Republic of Chile or the Central Bank, and no more than 25%
of the outstanding shares of any stock corporation may be owned by FCIFs, taken
together. In addition, a FCIF may not invest more than 40% of its assets in
securities issued or authorized by the same group. For a description of Chilean
taxation, see "Item 10. Additional Information - E. Taxation". The minimum
amount of capital that may be invested in Chile by a given FCIF is US$1,000,000.

Item 10. Additional Information

B. Memorandum and Articles of Association

      Pursuant to the requirements of the Chilean Corporations Law, and in
accordance with Law Number 18,046, the Company's articles of incorporation and
by-laws or estatutos have been registered with the Securities Register (Registro
de Valores), under entry number 0594. As set forth in the Third Article of
Quinenco's bylaws, its purposes include the acquisition, disposition and
management of all manner of assets and investments in, among other things,
industrial and financial activities.


                                      131
<PAGE>

      Directors

      Under the Ley de Sociedades Anonimas (Chilean Corporations Law), a
corporation may not enter into a contract or agreement in which a director has a
direct or indirect interest (i.e., a conflicting interest transaction) without
prior approval by the Board of Directors, and only if the terms of the
conflicting interest transaction are similar to those of an arm's length
transaction.

      If the conflicting interest transaction involves a "material amount," the
Board of Directors is required to produce a statement declaring in advance that
the conflicting interest transaction is similar in its terms to an arm's length
transaction. A conflicting interest transaction is deemed to involve a "material
amount" if the amount involved is both greater than UF2,000 (as of May 31, 2004,
approximately US$53,256) and exceeds 1% of the assets of the corporation, or if
the amount exceeds UF20,000 (as of May 31, 2004, approximately US$532,562)
regardless of the size of the corporation.

      If the Board of Directors believes that it is not possible to ascertain
whether the conflicting interest transaction is similar to an arm's length
transaction, it may approve or reject the conflicting interest transaction, or
appoint two independent advisors to make such a determination, in all these
cases, with the exclusion of the interested directors. If the Board appoints
independent advisors, the reports prepared by the advisors will be made
available to the shareholders and the Board of Directors for 20 business days
from the date the last report was received from the independent advisors. The
shareholders will be notified in writing of the receipt of the reports. After
this period, and with the exclusion of the interested director, the Board may
approve or reject the conflicting interest transaction, but the Board is not
required to follow the independent advisors' conclusion. The Board may treat the
conflicting interest transaction and the reports as confidential information.
Shareholders representing at least a 5% of the voting shares of the Company may
request the Board to call a shareholders' meeting in order to approve or reject
the conflicting interest transaction by a two-thirds majority of the outstanding
voting shares.

      All decisions adopted by the Board in respect of the conflicting interest
transaction must be reported to the next following shareholders' meeting. The
controller of the corporation or the related party which intends to enter into
the conflicting interest transaction shall make available to the Board of
Directors, at the time the transaction is being considered by the Board, all
information relating to the transaction filed with any non-Chilean regulatory
entities or stock exchanges.

      If a suit for damages arises from such a transaction, the defendant (i.e.,
one or more directors, the controller, a related party, or all of them) bears
the burden of proof that the transaction was equally as or more beneficial to
the corporation than an arm's length transaction, unless the conflicting
interest transaction was previously approved by the shareholders.

      The amount of any director's remuneration is established each year at the
annual shareholders' meeting. Directors are prohibited from borrowing or
otherwise making use of corporate money or assets for their own benefit, unless
previously authorized by the Board of Directors. Directors are also prohibited
from borrowing or otherwise making use of corporate money or assets for the
benefit of certain relatives or of companies in which such directors are either
directors or owners of a 10% interest or more, unless previously authorized by
the Board of Directors. However, the shareholders' authorization is not
required. These rules can only be modified by law.

      It is not necessary to hold shares of Quinenco to be elected a director,
and there is no age limit established for the retirement of directors.


                                      132
<PAGE>

      For a description of the Company's share capital, including rights,
preferences and restrictions thereto, See "Description of Share Capital" in the
Registration Statement, Form F-1, filled with the Securities and Exchange
Commission on June 6, 1997.

C. Material Contracts

      Not applicable.

D. Exchange Controls

      The Central Bank is responsible for, among other things, monetary policies
and exchange controls in Chile. See "Item 3. Key Information - Exchange Rates".
Foreign investments can be registered with the Foreign Investment Committee
under Decree Law No. 600 - registration which grants the investor access to the
Formal Exchange Market - or with the Central Bank under Chapter XIV of the
Central Bank Foreign Exchange Regulations.

      Effective April 19, 2001, the Central Bank abrogated the then existing
Chapter XXVI of the Central Bank Foreign Exchange Regulations ("Chapter XXVI"),
which addressed issuances of ADSs by a Chilean company, and issued an entirely
new set of Foreign Exchange Regulations (the "2001 Foreign Exchange
Regulations"), virtually eliminating all the restrictions and limitations that
had been in force up to that date. The 2001 Foreign Exchange Regulations were
based upon the general principle that foreign exchange transactions can be done
freely in Chile by any person, notwithstanding the power conferred by law to the
Central Bank of imposing certain restrictions and limitations on such
transactions.

      With the issuance of the 2001 Foreign Exchange Regulations, the approval
by the Central Bank required for access to the Formal Exchange Market was
replaced with the requirement of disclosure of the relevant transactions to the
Central Bank. However, some foreign exchange transactions, notably foreign
loans, capital investment or deposits, continued to be subject to the
requirement of being effected through the Formal Exchange Market.

      The 2001 Foreign Exchange Regulations, among other things, eliminated the
following restrictions:

      (1)   prior authorization by the Central Bank for the entry of capital in
            connection with foreign loans, investment, capital contribution,
            bonds and ADRs;

      (2)   prior authorization by the Central Bank for the remittance of
            capital in connection with repatriation of capital, dividends and
            other benefits related to capital contributions and investment, and
            prepayment of foreign loans;

      (3)   minimum risk classification restrictions and terms for the issuance
            of bonds;

      (4)   restrictions to the issuance of ADSs. Therefore, the rules
            established under Chapter XXVI of the previous Foreign Exchange
            Regulations were abrogated; and

      (5)   mandatory reserve deposits for foreign capital.

      The abrogation of Chapter XXVI by the 2001 Foreign Exchange Regulations
implied that the issuance of ADSs by a Chilean company remained subject to the
rules contained in Chapter XIV of such regulations, according to which credits,
deposits, investments and capital contributions coming from abroad must be
effected through the Formal Exchange Market.

      According to the 2001 Foreign Exchange Regulations, the foreign exchange
transactions performed before April 19, 2001, remained subject to the
regulations in effect at the time of the


                                      133
<PAGE>

transactions, unless the interested parties elected the applicability of the
2001 Foreign Exchange Regulations, thereby expressly waiving the applicability
of the regulations in force at the time of the execution of the respective
transaction.

      Effective March 1, 2002, the Central Bank abrogated the then existing
Central Bank Foreign Exchange Regulations, i.e. the 2001 Foreign Exchange
Regulations, and issued an entirely new set of Foreign Exchange Regulations (the
"New Regulations"), thereby continuing the liberalization of the foreign
exchange regulations. As the 2001 Foreign Exchange Regulations, the New
Regulations are also based upon the general principle that foreign exchange
transactions can be done freely in Chile by any person, notwithstanding the
power conferred by law to the Central Bank of imposing certain restrictions and
limitations on such transactions.

      The New Regulations also require the disclosure of the relevant
transaction to the Central Bank and that some foreign exchange transactions,
notably foreign loans, capital investments or deposits, be effected through the
Formal Exchange Market.

      The issuance of ADSs by a Chilean company remains subject to the rules
contained in Chapter XIV. These rules were partly amended in the New
Regulations, which allow the use of proceeds from a foreign credit, deposit,
investment or capital contribution directly abroad, i.e., without delivering the
currency into Chile. The direct use abroad of the proceeds of a foreign credit,
deposit, investment or capital contribution remain subject to the obligation of
informing the Central Bank of the transaction.

      The New Regulations have also simplified the forms required to provide the
information to the Central Bank, so as to reduce the time needed to effect
foreign exchange transactions by foreign investors in Chile.

      The New Regulations contain a transitory norm establishing that foreign
exchange transactions performed before April 19, 2001, remain subject to the
regulations in effect at the time of the transactions, unless the interested
parties elect the applicability of the New Regulation, thereby expressly waiving
the applicability of the regulations in force at the time of the execution of
the relevant transaction.

      A Foreign Investment Contract was entered into among the Central Bank, the
Company and the Depositary pursuant to Article 47 of the Central Bank Act and
Chapter XXVI. According to Chilean law, a contract is ruled by the law in effect
at the time of the execution of the contract. Therefore, the Foreign Investment
Contract entered into among the Central Bank of Chile, the Company and the
Depositary is ruled by the foreign exchange regulations in force before April
19, 2001, among which is Chapter XXVI.

      Absent the Foreign Investment Contract, under Chilean exchange controls in
force until April 19, 2001, investors would not have been granted access to the
Formal Exchange Market for the purpose of converting Chilean pesos to U.S.
dollars and repatriating from Chile amounts received in respect of deposited
shares or shares withdrawn from deposit on surrender of ADRs (including amounts
received as cash dividends and proceeds from the sale in Chile of the underlying
shares and any rights with respect thereto). In December 1999, amendments were
introduced in Chapter XXVI whereby, among other things, the Central Bank was
authorized to reject applications under such regulations without expression of
cause. In resolving on such applications, the Central Bank was required to take
into account the situation of the balance of payments and the stability of the
capitals account. However, the Central Bank was authorized to require certain
conditions to the applicants prior to resolving on the applications. In April
2000, Chapter XXVI was again amended in order to incorporate, in addition to
shares issued by Chilean corporations, quotes of investment funds as eligible to
be converted into ADSs. Chapter XXVI did not require delivery of a new
application in case of the entry of U.S. dollars intended for the acquisition of
shares not subscribed by the shareholders or by the transferees of the options
to subscribe the shares.


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<PAGE>

      Under Chapter XXVI and the Foreign Investment Contract, the Central Bank
agreed to grant to the Depositary, on behalf of ADR holders, and to any
non-Chilean resident investor who withdrew Shares upon surrender of ADRs (such
Shares being referred to herein as "Withdrawn Shares") access to the Formal
Exchange Market to convert Chilean pesos to U.S. dollars (and to remit such
dollars outside of Chile) in respect of Shares represented by ADSs or Withdrawn
Shares, including amounts received as (a) cash dividends, (b) proceeds from the
sale in Chile of Withdrawn Shares (subject to receipt by the Central Bank of a
certificate from the holder of the Withdrawn Shares (or from an institution
authorized by the Central Bank) that such holder's residence and domicile were
outside Chile and a certificate from a Chilean stock exchange (or from a
brokerage or securities firm established in Chile) that such Withdrawn Shares
had been sold on a Chilean exchange), (c) proceeds from the sale in Chile of
pre-emptive rights to subscribe for and purchase additional Shares, (d) proceeds
from the liquidation, merger or consolidation of the Company and (e) other
distributions, including, without limitation, those resulting from any
recapitalization, as a result of holding Shares represented by ADSs or Withdrawn
Shares. Access to the Formal Exchange Market in the case of (a), (b), (c) and
(d) above would be available for only five working days following the sale of
the shares on the stock exchange. Transferees of Withdrawn Shares would not be
entitled to any of the foregoing rights under Chapter XXVI unless the Withdrawn
Shares were redeposited with the Custodian. Investors receiving Withdrawn Shares
in exchange for ADRs would have the right to redeposit such Shares in exchange
for ADRs, provided that certain conditions to redeposit were satisfied. For a
description of the Formal Exchange Market, see "3A Exchange Rates".
Alternatively, according to the amendments introduced to Chapter XXVI in
December 1999, in case of Withdrawn Shares and their subsequent sale in a stock
exchange, the Chilean peso proceeds obtained thereby could be converted into
U.S. dollars in a market different from the Formal Exchange Market within five
business days from the date of the sale.

      Chapter XXVI provided that access to the Formal Exchange Market in
connection with the sale of Withdrawn Shares or distributions thereon would be
conditioned upon receipt by the Central Bank of a certification by the
Depositary or the Custodian, as the case might have been, that such Shares had
been withdrawn in exchange for delivery of the pertinent ADRs and receipt of a
waiver of the benefits of the Foreign Investment Contract with respect thereto
(except in connection with the proposed sale of the Shares) until such Withdrawn
Shares were redeposited. Chapter XXVI also provided that access to the Formal
Exchange Market in connection with dividend payments was conditioned on
certification by the Company to the Central Bank that a dividend payment had
been made. The provision contained in Chapter XXVI that established that access
to the Formal Exchange Market in connection with dividend payments was
conditioned on certification by the Company to the Central Bank that any
applicable tax had been withheld was eliminated on November 23, 2000.

      Chapter XXVI and the Foreign Investment Contract provided that a person
who brought foreign currency into Chile, including U.S. dollars, to purchase
Shares entitled to the benefit of the Foreign Investment Contract was required
to convert such foreign currency into Chilean pesos on the same date and had
five banking business days within which to invest in Shares in order to receive
the benefit of the Foreign Investment Contract. If such person decided within
such period not to acquire Shares, such person could access the Formal Exchange
Market to reacquire foreign currency, provided that the applicable request was
presented to the Central Bank within seven banking days of the initial
conversion into pesos. Shares acquired as described above could be deposited in
exchange for ADRs and receive the benefit of the Foreign Investment Contract,
subject to receipt by the Central Bank of a certificate from the Depositary that
such deposit had been effected and that the related ADRs had been issued and
receipt by the Custodian of a declaration from the person making such deposit
waiving the benefit of the Foreign Investment Contract with respect to the
deposited Shares.

      Chapter XXVI required foreign investors acquiring shares or securities in
Chile to maintain a mandatory reserve (the "Mandatory Reserve") for one year in
the form of a non-interest bearing U.S. dollar deposit with the Central Bank, or
to pay to the Central Bank a non-refundable fee (the "Fee"). Such reserve
requirement was imposed with respect to investments made by foreign investors to
acquire shares or securities in the secondary market, but did not apply to
capital contributions made for purposes


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<PAGE>

of paying-in capital for a newly created company or increasing the capital of an
existing company. As of June 1, 1999, the Mandatory Reserve was not applied to
foreign investments made for purposes of acquiring shares of a stock
corporation, provided that the investor was entitled to the benefit of Chapter
XXVI, and that such acquisition was consummated in accordance with the
provisions of Chapter XXVI. On September 17, 1998, the Central Bank reduced the
Mandatory Reserve to 0%.

      Access to the Formal Exchange Market under any of the circumstances
described above was not automatic. Pursuant to Chapter XXVI, such access
required approval of the Central Bank of Chile based on a request presented
through a banking institution established in Chile within five business days
from the occurrence of any of the events described in letters (a), (b), (c) and
(d) above. Pursuant to the Foreign Investment Contract, if the Central Bank had
not acted on such request within seven banking days, the request would be deemed
approved.

      Under current Chilean law, the Foreign Investment Contract cannot be
changed unilaterally by the Central Bank. No assurance can be given, however,
that new restrictions applicable to the holders of ADRs, the disposition of
underlying Shares or the repatriation of the proceeds from such disposition will
not be reinstated in the future by the Central Bank, nor can there be any
assessment of the possible duration or impact of such restrictions.

E. Taxation

Chilean Tax Considerations

      The following discussion relates to Chilean income tax laws presently in
force, including Ruling No. 324 of January 29, 1990 of the Chilean Internal
Revenue Service and other applicable regulations and rulings in effect on the
date of this Annual Report, all of which are subject to change. The discussion
summarizes the principal Chilean income tax consequences of an investment in the
ADSs or Shares by a person who is neither domiciled in nor a resident of Chile
or by a legal entity that is not organized under the laws of Chile and does not
have a permanent establishment located in Chile (any such individual or entity,
a "Foreign Holder"). For purposes of Chilean tax law, an individual holder is a
resident of Chile if he has resided in Chile for more than six consecutive
months in one calendar year or for a total of six months, whether consecutive or
not, in two consecutive tax years. The discussion is not intended as tax advice
to any particular investor, which can be rendered only in light of that
investor's particular tax situation.

      Under Chilean law, provisions contained in statutes such as tax rates
applicable to foreign investors, the computation of taxable income for Chilean
purposes and the manner in which Chilean taxes are imposed and collected may
only be amended by another statute. In addition, the Chilean tax authorities
enact rulings and regulations of either general or specific application and
interpret the provisions of Chilean tax law. Chilean tax may not be assessed
retroactively against taxpayers who act in good faith relying on such rulings,
regulations and interpretations, but Chilean tax authorities may change these
rulings, regulations and interpretations prospectively. There is no income tax
treaty in force between Chile and the United States.

Cash Dividends and Other Distributions

      Cash dividends paid by Quinenco with respect to the ADSs or Shares held by
a Foreign Holder will be subject to a 35% Chilean withholding tax, which is
withheld and paid over to the Chilean tax authorities by Quinenco (the
"Withholding Tax"). If the dividends, however, are paid to a Chilean Bank under
whose name the Shares are registered by power of attorney, such bank will be
liable for withholding and paying the Withholding Tax once the cash dividends
are remitted to the bank's principal. A credit against the Withholding Tax is
available based on the level of corporate income tax actually paid by Quinenco
on the income to be distributed (the "First Category Tax"); however, this credit
does not reduce the Withholding Tax on a one-for-one basis because it also
increases the base on which the Withholding Tax is imposed. In addition, if
Quinenco distributes less than all of its distributable income, the credit for
First-Category Tax paid by Quinenco is proportionally reduced.


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<PAGE>

Presently, the First Category Tax rate is 17%. The example below illustrates the
effective Chilean Withholding Tax burden on a cash dividend received by a
foreign holder, assuming a Withholding Tax rate of 35%, an effective
First-Category Tax rate of 17% and a distribution of 30% of the consolidated net
income of Quinenco distributable after payment of the First-Category Tax:

Quinenco taxable income ..............................................     100
First Category Tax (17% of Ch$100) ...................................     (17)
                                                                         -----
Net distributable income .............................................      83
                                                                         -----
Dividend distributed (30% of net distributable income) ...............    24.9
Withholding Tax (35% of the sum of Ch$24.9 dividend plus Ch$5.1 First-
            Category Tax paid) .......................................   (10.5)
Credit for 30% of First-Category Tax .................................     5.1
                                                                         -----
Net additional tax withheld ..........................................    (5.4)
                                                                         -----
Net dividend received ................................................    19.5
                                                                         -----
Effective dividend withholding rate ..................................   21.69%
                                                                         -----

      In general, the effective dividend Withholding Tax rate, after giving
effect to the credit for the First-Category Tax, can be calculated using the
following formula:

<TABLE>
<S>                                                  <C>
                                                     (Withholding Tax Rate) - (First Category Tax Rate)
                                                     --------------------------------------------------
   Effective dividend Withholding Tax rate =                    1 - (First Category  Tax Rate)
</TABLE>

      Under Chilean income tax law, dividends generally are assumed to have been
paid out of the Company's oldest retained profits for purposes of determining
the level of First-Category Tax that was paid by the Company. For information as
to the retained earnings of the Company for tax purposes and the tax credit
available on the distribution of such retained earnings, see Note 24 to the
Consolidated Financial Statements. The effective rate of Withholding Tax to be
imposed on dividends paid by Quinenco will vary depending upon the amount of
First Category Tax paid by the Company on the earnings to which the dividends
are attributed. The effective rate for dividends attributed to earnings from
1991 until 2001, for which the First Category Tax was 15%, generally was 23.5%.
For 2002, the First Category Tax rate was 16%, which resulted in an effective
rate of Withholding Tax of 22.6%, and for 2003, the First Category Tax rate was
16.5%, resulting in an effective rate of Withholding Tax of 22.16% for the year.
From 2004 onwards, the First Category Tax rate will be 17%, which will result in
an effective rate of withholding tax of 21.69%.

      For dividends attributable to the Company's profits during years when the
First-Category Tax was 10% (before 1991), the effective dividend Withholding Tax
rate will be 27.8%. However, whether the First-Category Tax is 10%, 15%, 16%,
16.5% or 17%, the effective overall combined tax rate imposed on the Company's
distributed profits will be 35%.

      Dividend distributions made in property would be subject to the same
Chilean tax rules as cash dividends based on the fair market value of such
property. Stock dividends and the distribution of preemptive rights are not
subject to Chilean taxation.

Capital Gains

      Under current tax law, gain from the sale or other disposition by a
Foreign Holder of ADSs (or ADRs evidencing ADSs) outside Chile will not be
subject to Chilean taxation. The deposit and withdrawal of Shares in exchange
for ADRs will not be subject to any Chilean taxes.

      Gain recognized on a sale or exchange of Shares (as distinguished from
sales or exchanges of ADRs evidencing ADSs representing such Shares) may be
subject to both the First-Category Tax and the Withholding Tax (the former being
creditable against the latter) if either, (i) the Foreign Holder has held the
Shares for less than one year since exchanging ADSs for the Shares, (ii) the
Foreign Holder acquired and disposed of the Shares in the ordinary course of its
business or as a habitual trader of shares, or


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<PAGE>

(iii) the Foreign Holder and the purchaser of the Shares are "related parties"
within the meaning of Article 17, Number 8, of Decree Law N(0) 824 of 1974, the
Chilean Income Tax Law. In all other cases, gain on the disposition of Shares
will be subject only to a capital gains tax which is assessed at the same rate
as the First Category Tax (currently imposed at a rate of 17%).

      Gain recognized in the transfer of Shares that have a high presence in the
stock exchange, however, is not subject to capital gains tax in Chile, provided
that the Shares are transferred in a local stock exchange, in other authorized
stock exchanges (up to this date, the New York Stock Exchange, the London Stock
Exchange and the Madrid Stock Exchange have been authorized for these purposes),
or within the process of a public tender of shares governed by the Chilean
Securities Market Act. The Shares must also have been acquired either in a stock
exchange, within the referred process of a public tender of shares governed by
the Chilean Securities Market Act, in an initial public offer of shares
resulting from the formation of a corporation or a capital increase of the same,
or in an exchange of convertible bonds. Shares are considered to have a high
presence in the stock exchange when they (i) are registered in the Securities
Registry, (ii) are registered in a Chilean Stock exchange, and (iii) have an
adjusted presence equal to or above 25%. To calculate the adjusted presence of a
particular Share, the aforementioned regulation states that, the number of days
in which the operations regarding the stock exceeded, in Chilean pesos, the
equivalent of UF200 (approximately US$5,700) within the previous 180 business
days of the stock market. That number must then be divided by 180, multiplied by
100, and expressed in a percentage value. The referred tax regime does not apply
in case the transaction involves an amount of Shares that would allow the
acquirer to take control of the publicly traded corporation, in which case the
ordinary tax regime referred in the previous paragraph will apply, unless the
sale complies with one of the following conditions: (i) the transfer is part of
a tender offer governed by the Chilean Securities Market Act; or (ii) the
transfer is done in a Chilean stock exchange, without substantially exceeding
the market price.

      Capital gains obtained in the sale of shares that are publicly traded and
have a high presence in a stock exchange are also exempt from capital gains tax
in Chile when the sale is made by "foreign institutional investors", such as
mutual funds and pension funds, provided that the sale is made in a stock
exchange or in accordance with the provisions of the Securities Market Law, or
in any other form authorized by the Superintendencia de Valores y Seguros ( the
SVS is equivalent to the Securities and Exchange Commission in the U.S.). To
qualify as a foreign institutional investor, the referred entities must be
formed outside of Chile, not have a domicile in Chile, and they must be at least
one of the following:

      (a)   An investment fund that offers its shares or quotas publicly in a
            country with an investment grade for its public debt, according to a
            classification performed by an international risk classification
            entity registered with the SVS;

      (b)   An investment fund registered with a regulatory agency or authority
            from a country with an investment grade for its public debt,
            according to a classification performed by an international risk
            classification entity registered with the SVS, provided that its
            investments in Chile constitute less than 30% of the share value of
            the fund, including deeds issued abroad representing Chilean
            securities, such as ADRs of Chilean companies;

      (c)   An investment fund whose investments in Chile represent less than
            30% of the share value of the fund, including deeds issued abroad
            representing Chilean securities, such as ADRs of Chilean companies,
            provided that not more than 10% of the share value of the fund is
            directly or indirectly owned by Chilean residents;

      (d)   A pension fund, i.e., those formed exclusively by natural persons
            that receive pensions out of an accumulated capital in the fund;

      (e)   A Foreign Capital Investment Fund, as defined in Law No18.657; or


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<PAGE>

      (f)   Any other foreign institutional investor that complies with the
            requirements set forth through general regulations for each category
            of investor, prior information from the SVS and the Chilean tax
            authority or Servicio de Impuestos Internos ("SII").

      The foreign institutional investor must not directly or indirectly
participate in the control of the corporations issuing the shares it invests in
nor possess or participate in 10% or more of the capital or the profits of the
same corporations.

      Other requirements for the exemption to apply are that the referred
foreign institutional investors must execute a written contract with a bank or a
stock broker, both incorporated in Chile. In this contract, the bank or stock
broker undertake to perform the purchase and sale orders, as well as to verify
the applicability of the tax exemption and inform the SII of the investors it
operates with and the transactions it performs. Finally, the foreign
institutional investor must register with the SII by means of a sworn statement
issued by the entities referred above (bank or stock broker).

      The tax basis of Shares received in exchange for ADRs will be the
acquisition value of the Shares on the date of exchange. The valuation procedure
set forth in the Deposit Agreement, which values Shares which are being
exchanged at the highest price at which they trade on the Santiago Stock
Exchange on the date of the exchange, will determine the acquisition value for
this purpose. Consequently, the surrender of ADRs for Shares and the immediate
sale of the Shares for the value established under the Deposit Agreement will
not generate a capital gain subject to taxation in Chile.

      The exercise of preemptive rights relating to the Shares will not be
subject to Chilean taxation. Any gain on the sale of preemptive rights relating
to the Shares will be subject to both the First-Category Tax and the Withholding
Tax (the former being creditable against the latter).

Other Chilean Taxes

      There are no Chilean inheritance, gift or succession taxes applicable to
the ownership, transfer or disposition of ADSs by a Foreign Holder, but such
taxes generally will apply to the transfer at death or by gift of the Shares by
a Foreign Holder. There are no Chilean stamp, issue, registration or similar
taxes or duties payable by Foreign Holders of ADSs or Shares.

Withholding Tax Certificates

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

United States Tax Considerations

      The following is a summary of certain United States federal income tax
consequences of the ownership of Shares or ADSs by an investor that is a U.S.
Holder (as defined below) that holds the Shares or ADSs as capital assets. This
summary does not purport to address all material tax consequences of the
ownership of Shares or ADSs, and does not take into account the specific
circumstances of any particular investors (such as tax-exempt entities, certain
insurance companies, broker-dealers, traders in securities that elect to mark to
market, investors liable for alternative minimum tax, investors that actually or
constructively own 10% or more of the voting stock of the Company, investors
that hold Shares or ADSs as part of a straddle or a hedging or conversion
transaction or U.S. Holders (as defined below) whose functional currency is not
the U.S. dollar), some of which may be subject to special rules. This summary is
based on the tax laws of the United States (including the Internal Revenue Code
of 1986, as amended, its legislative history, existing and proposed regulations
there under, published rulings and court decisions) as in effect on the date
hereof, all of which are subject to change (or changes in interpretation),
possibly with retroactive effect.

      For purposes of this discussion, a "U.S. Holder" is any beneficial owner
of Shares or ADSs that is (i) a citizen or resident of the United States, (ii) a
corporation or partnership organized under the laws


                                      139
<PAGE>

of the United States or any State, (iii) an estate whose income is subject to
United States federal income tax regardless of its source or (iv) a trust if a
United States court can exercise primary supervision over the trust's
administration and one or more United States persons are authorized to control
all substantial decisions of the trust. The discussion does not address any
aspects of United States taxation other than federal income taxation. Investors
are urged to consult their tax advisors regarding the United States federal,
state and local and other tax consequences of owning and disposing of Shares and
ADSs.

      In general, assuming that the representations of the Depositary are true
and that each obligation in the Deposit Agreement and any related agreement will
be performed in accordance with its terms, for United States federal income tax
purposes, holders of ADRs evidencing ADSs will be treated as the owners of the
Shares represented by those ADSs, and exchanges of Shares for ADSs, and ADSs for
Shares, will not be subject to United States federal income tax.

      Cash Dividends and Other Distributions

      Under the United States federal income tax laws, and subject to the
passive foreign investment company ("PFIC") rules discussed below, U.S. Holders
will include in gross income the gross amount of any dividend paid (after
reduction for any Chilean First-Category Tax that is credited against Chilean
Withholding Tax, but before reduction for the net amount of Chilean Withholding
Tax) by the Company out of its current or accumulated earnings and profits (as
determined for United States federal income tax purposes) as ordinary income
when the dividend is actually or constructively received by the U.S. Holder, in
the case of Shares, or by the Depositary, in the case of ADSs. The dividend will
not be eligible for the dividends-received deduction. Dividends paid to a U.S.
Holder that is a corporation are not eligible for the dividends received
deduction available to corporations. Current law provides for a reduced tax rate
(currently 15%) on the dividend income of an individual U.S. Holder with respect
to dividends paid by a domestic corporation or "qualified foreign corporation."
A qualified foreign corporation generally includes a foreign corporation if (i)
its shares (or its ADSs) are readily tradable on an established securities
market in the United States or (ii) it is eligible for benefits under a
comprehensive United States income tax treaty. The ADSs are traded on the New
York Stock Exchange. As a result, the Company may be treated as a qualified
foreign corporation. However, if the Company is treated as a PFIC, as discussed
below, it will not be a qualified foreign corporation. If the Company is a
qualified foreign corporation, dividends paid to an individual U.S. Holder with
respect to Shares or ADSs should, subject to generally applicable limitations,
be taxed at a maximum rate of 15%. The maximum 15% tax rate is effective with
respect to dividends included in income during the period beginning on or after
January 1, 2003, and ending December 31, 2008. Each U.S. Holder should consult
its own tax adviser regarding the treatment of dividends. The amount of the
dividend distribution includible in income of a U.S. Holder will be the U.S.
dollar value of the Chilean peso payments made, determined at the spot Chilean
peso/U.S. dollar rate on the date such dividend distribution is includible in
the income of the U.S. Holder, regardless of whether the payment is in fact
converted into U.S. dollars. Generally, any gain or loss resulting from currency
exchange fluctuations during the period from the date the dividend payment is
includible in income to the date such payment is converted into U.S. dollars
will be treated as ordinary income or loss. Such gain or loss will generally be
from sources within the United States for foreign tax credit limitation
purposes.

      Subject to certain generally applicable limitations, the net amount of
Chilean Withholding Tax (after reduction for the credit for Chilean
First-Category Tax) paid over to Chile will be creditable against the U.S.
Holder's United States federal income tax liability. For foreign tax credit
limitation purposes, the dividend will be income from sources without the United
States. In the case of U.S. individuals, if the reduced rate of tax on dividends
applies to such holder, such limitations and restrictions will appropriately
take into account the rate differential under rules similar to section
904(b)(2)(B) of the Internal Revenue Code. The rules governing foreign tax
credits are complex and U.S. Holders should consult their tax advisors regarding
their application to the particular circumstances of such holder.


                                      140
<PAGE>

      Pro rata distributions of Shares or preemptive rights generally are not
subject to United States federal income tax. The basis of the new Shares or
preemptive rights (if such rights are exercised or sold) generally will be
determined by allocating the U.S. Holder's adjusted basis in the old shares
between the old Shares and the new Shares or preemptive rights received, based
on their relative fair market values on the date of distribution (except that
the basis of the preemptive rights will be zero if the fair market value of the
rights is less than 15% of the fair market value of the old Shares at the time
of distribution, unless the U.S. Holder irrevocably elects to allocate basis
between the old Shares and the preemptive rights). The holding period of a U.S.
Holder for the new Shares or preemptive rights will include the U.S. Holders
holding period for the old Shares with respect to which the new Shares or
preemptive rights were issued.

      Capital Gains

      U.S. Holders will not recognize gain or loss on deposits or withdrawals of
Shares in exchange for ADSs or on the exercise of preemptive rights. U.S.
Holders will recognize capital gain or loss on the sale or other disposition of
ADSs or Shares (or preemptive rights with respect to such Shares) held by the
U.S. Holder or by the Depositary equal to the difference between the amount
realized and the U.S. Holder's tax basis in the ADSs or Shares. Any gain
recognized by a U.S. Holder generally will be treated as United States source
income. Consequently, in the case of a disposition of Shares or preemptive
rights (which, unlike a disposition of ADRs, will be taxable in Chile), the U.S.
Holder may not be able to claim the foreign tax credit for Chilean tax imposed
on the gain unless it appropriately can apply the credit against tax due on
other income from foreign sources. Loss generally would be treated as United
States source loss. The long-term capital gain tax rate for an individual U.S.
Holder is currently15%. For sales occurring before May 6, 2003, or after
December 31, 2008, under current law the long-term capital gain rate for an
individual U.S. Holder is 20%.

      PFIC Rules

      Quinenco believes that it should not be treated as a PFIC for United
States federal income tax purposes, although this conclusion is subject to some
uncertainty. In particular, this conclusion depends on the valuation of its
ownership interests in certain related companies and interpretations of the
special rules for companies engaged in an active banking business (relevant to
certain of Quinenco's subsidiaries) and the rules characterizing certain of its
intangible assets, which assumptions Quinenco believes are reasonable but are
not free from doubt due to the absence of authority directly addressing
situations closely comparable to those of Quinenco. In addition, Quinenco
maintains its financial books and records and presents its financial statements
in accordance with Chilean GAAP rather than based on U.S. federal income tax
principles. Quinenco has assumed in determining its PFIC status that a
determination regarding its assets and income based on federal income tax
principles would not differ materially from Chilean GAAP principles.

      In general, the Company will be a PFIC with respect to a U.S. Holder if,
for any taxable year in which the U.S. Holder held the Company's ADSs or Shares,
either (i) at least 75% of the gross income of the Company for the taxable year
is passive income or (ii) at least 50% of the value (determined on the basis of
a quarterly average) of the Company's assets is attributable to assets that
produce or are held for the production of passive income. For this purpose,
passive income generally includes dividends, interest, royalties, rents (other
than certain rents and royalties derived in the active conduct of a trade or
business), annuities and gains from assets that produce passive income. If a
foreign corporation owns at least 25% by value of the stock of another
corporation, the foreign corporation is treated for purposes of the PFIC tests
as owning its proportional share of the assets of the other corporation, and as
receiving directly its proportional share of the other corporation's income. If
the Company is treated as a PFIC, a U.S. Holder would be subject to special
rules with respect to (a) any gain realized on the sale or other disposition of
Shares or ADSs and (b) any "excess distribution" by the Company to the U.S.
Holder (generally, any distributions to the U.S. Holder in respect of the Shares
or ADSs during a single taxable year that are greater than 125% of the average
annual distributions received by the U.S. Holder in respect


                                      141
<PAGE>

of the Shares or ADSs during the three preceding taxable years or, if shorter,
the U.S. Holder's holding period for the Shares or ADSs). Under these rules, (i)
the gain or excess distribution would be allocated ratably over the U.S.
Holder's holding period for the Shares or ADSs, (ii) the amount allocated to the
taxable year in which the gain or excess distribution was realized would be
taxable as ordinary income, (iii) the amount allocated to each prior year, with
certain exceptions, would be subject to tax at the highest tax rate in effect
for that year and (iv) the interest charge generally applicable to underpayments
of tax would be imposed in respect of the tax attributable to each such year.

      Special rules apply with respect to the calculation of the amount of the
foreign tax credit with respect to excess distributions by a PFIC.

      If the Company is treated as a PFIC, a U.S. Holder may be able to make a
mark-to-market election if the Company's stock is treated as regularly traded on
a registered national securities exchange or other exchange to the extent
permitted by the IRS. If the election is made, the PFIC rules described above
will not apply. Instead, in general, the electing U.S. Holder will be required
to include as ordinary income each year the excess, if any, of the fair market
value of the Shares or ADSs at the end of the taxable year over the U.S.
Holder's adjusted tax basis in the Shares or ADSs. The electing U.S. Holder will
also be allowed to take an ordinary loss in respect of the excess, if any, of
the adjusted tax basis in the Shares or ADSs over their fair market value at the
end of the taxable year (but only to the extent of the net amount of income
previously included as a result of the mark-to-market election). An electing
U.S. Holder's tax basis in the Shares or ADSs will be adjusted to reflect any
such income or loss amounts.

      Alternatively, a U.S. holder of shares or ADSs in a PFIC can sometimes
avoid the rules described above by electing to treat the company as a "qualified
electing fund" under section 1295 of the Internal Revenue Code. This option will
not be available to U.S. Holders because the Company does not intend to comply
with the requirements necessary to permit a U.S. Holder to make this election.
U.S. Holders should consult their own tax advisors concerning the U.S. federal
income tax consequences of holding Shares or ADSs if the Company is considered a
passive foreign investment company in any taxable year.

      Information Reporting and Backup Withholding

      Dividends in respect of the Shares or ADSs and proceeds from the sale,
exchange, or redemption of the Shares or ADSs may be subject to information
reporting to the United States Internal Revenue Service and a backup withholding
tax of 28% may apply unless the holder furnishes a correct taxpayer
identification number or certificate of foreign status or is otherwise exempt
from backup withholding. Generally, a U.S. Holder will provide such
certification on Form W-9 and a non-U.S. Holder will provide such certification
on Form W-8BEN.

H. Documents on Display

      All Company documents referred to in this Annual Report may be inspected
at the Company's offices, located at Enrique Foster 20, 14th Floor, Las Condes,
Santiago, Chile.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

      The following discussion about the Company's risk management activities
includes "forward-looking statements" that involve risk and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements.

      The Company faces material market risk exposures in four categories:
interest rate risk, exchange rate risk, equity price risk and commodity price
risk. None of the instruments, equity securities or commodities discussed below
were entered into, acquired or held by the Company for trading purposes.


                                      142
<PAGE>

      Interest Rate Risk

      Of the Company's long-term interest bearing debt at December 31, 2003,
Ch$209,353 million was fixed rate and Ch$362,340 million was variable rate;
98.6% of the Company's long-term interest bearing debt with fixed rate was
indexed to the UF and 1.4% was indexed to foreign currencies. The Company's
long-term interest bearing debt with variable rates was 74.5% indexed to the UF,
25.5% was dollar-denominated and tied to the LIBOR.

      The following table summarizes the debt obligations held by the Company at
December 31, 2003. The table presents principal payments obligations in
thousands of Chilean pesos categorized by maturity date and the related
weighted-average interest rates. U.S. dollar-denominated liabilities and
notional amounts have been converted to Chilean pesos based on the observed
exchange rate of December 31, 2003, which was US$1.00 = Ch$593.80.

<TABLE>
<CAPTION>
                                                                        Expected Maturity Date
                                       -----------------------------------------------------------------------------------
On Balance Sheet Financial                                                                                      2009 and
       Instruments                        2004           2005          2006          2007          2008        thereafter
       -----------                        ----           ----          ----          ----          ----        ----------
                                                                             (in thousands)
<S>                                <C>               <C>            <C>           <C>           <C>           <C>
LONG-TERM DEBT

Fixed rate

US$-denominated                  Ch$      682,544        257,502        89,867        51,067        51,067             --

Weighted average interest rate               3.15%          5.83%         8.57%           --            --             --

UF-denominated                   Ch$   50,894,642     26,347,542    24,573,705    24,758,393    16,647,283     63,178,885

Weighted average interest rate               6.51%          6.22%         6.26%         6.27%         6.31%          6.26%

Ch$-denominated                  Ch$           --         46,752        35,220            --            --             --

Weighted average interest rate                 --             --            --            --            --             --

Other-denominated                Ch$      158,323      1,580,467            --            --            --             --

Weighted average interest rate              17.00%            --            --            --            --             --

Sub-total                        Ch$   51,735,509     28,232,263    24,698,792    24,809,460    16,698,350     63,178,885

Variable rate

US$-denominated                  Ch$    5,680,954     56,212,006    16,817,398     2,519,676     2,519,676      8,599,901

Weighted average interest rate               3.00%          3.14%         3.03%         3.73%         3.73%          3.73%

UF-denominated                   Ch$   24,097,954     64,016,959    49,064,138    45,075,112    50,715,001     37,020,993

Weighted average interest rate               4.54%          4.24%         4.02%         4.11%         4.06%          4.65%

Sub-total                        Ch$   29,778,908    120,228,965    65,881,536    47,594,788    53,234,677     45,620,894
                                       ----------    -----------    ----------    ----------    ----------    -----------

Total                            Ch$   81,514,417    148,461,228    90,580,328    72,404,248    69,933,027    108,799,779
                                       ==========    ===========    ==========    ==========    ==========    ===========

<CAPTION>

 On Balance Sheet Financial                         Fair
        Instruments                 Total          Value
        -----------                 -----          -----
<S>                              <C>            <C>
LONG-TERM DEBT

Fixed rate

US$-denominated                    1,132,047      1,120,027

Weighted average interest rate          3.90%

UF-denominated                   206,400,450    216,988,175

Weighted average interest rate          6.32%

Ch$-denominated                       81,972         81,296

Weighted average interest rate            --

Other-denominated                  1,738,790      1,702,954

Weighted average interest rate         1,55%

Sub-total                        209,353,259    219,892,452

Variable rate

US$-denominated                   92,349,611     91,858,985

Weighted average interest rate          3.20%

UF-denominated                   269,990,157    249,947,917

Weighted average interest rate          4.23%

Sub-total                        362,339,768    341,806,902
                                 -----------    -----------

Total                            571,693,027    561,699,354
                                 ===========    ===========
</TABLE>

      Foreign Currency Exchange Rate Risk

      At December 31, 2003, approximately 16.8% of the Company's short- and
long-term interest bearing debt of Ch$590,405 million was exposed to risk from
exchange rate fluctuations between the Chilean peso and the U.S. dollar. As of
December 31, 2003, the Company had entered into 90 day forward contracts for
Ch$57,104 million (equivalent to US$96.2 million) to limit the exposure to
fluctuations between the Chilean peso and the U.S. dollar. As of the same date,
the Company had entered


                                      143
<PAGE>

into swap contracts with maturities of 90 days and 270 days for Ch$4,545 million
(equivalent to US$7.6 million) to limit the exposure between the U.S. dollar and
the Brazilian real. In addition, certain liabilities are considered hedge
instruments of investments abroad, in accordance with Technical Bulletin 64.

      The following table summarizes the debt obligations sensitive to foreign
currency exchange rates held by the Company at December 31, 2003 by maturity
date. The table presents principal payment obligations in thousands of Chilean
pesos by maturity date. The U.S. dollar-denominated debt, which have been
converted to Chilean pesos based on the observed exchange rate of December 31,
2003, was US$1.00 = Ch$593.80.

<TABLE>
<CAPTION>
                                                                 Expected Maturity Date
                                         --------------------------------------------------------------------------

   On Balance Sheet Financial                                                                             2009 and
          Instruments                      2004         2005          2006         2007        2008      thereafter     Total
          -----------                      ----         ----          ----         ----        ----      ----------     -----
                                                                      (in thousands)
<S>                              <C>     <C>          <C>           <C>          <C>         <C>         <C>           <C>
US$-denominated                  Ch$     12,049,442   56,469,508    16,907,265   2,570,743   2,570,743   8,599,901     99,167,602

Other currencies                 Ch$      5,788,136    1,580,467            --          --          --          --      7,368,603

Total                            Ch$     17,837,578   58,049,975    16,907,265   2,570,743   2,570,743   8,599,901    106,536,205
</TABLE>

      Equity Price Risk

      At December 31, 2003 the Company's carrying value of investments under the
cost method was Ch$90 million. The market risk associated with these equity
securities is the potential loss in fair value that would result from a decrease
in their market price. As of December 31, 2003 a 10% decrease in the fair market
value of these investments would not have a material impact on the results of
operations of the Company.

      Commodity Price Risk

      As of December 31, 2003, exposure to commodity price risk relates
primarily to Madeco's inventories of copper and aluminum. Madeco uses
significant amounts of copper and aluminum to manufacture its products. These
metal inventories are subject to price-level restatements of its carrying amount
with reference to trading prices at the London Metal Exchange. The differences
arising from consecutive restatements appear as accounting gains or losses in
Madeco's income statement's price-level restatements line. Market prices for
copper and aluminum fluctuate widely and are affected by numerous factors beyond
Madeco's control.

      To reduce the effects of metal price fluctuations on operating income,
Madeco seeks to sell its copper and aluminum products on a "cost plus" basis,
with reference to current market prices. Accordingly, Madeco's operating income
has generally been determined by the value added to the final product since the
price of copper and aluminum are components of the product's price and passed
through directly to the final price of the product. However, operating margin
(calculated as the percentage of operating income over net sales) is affected by
changes in the prices of copper and aluminum since the product's price reflects
the changes in metal prices.

      In addition, purchases of copper and aluminum are carried out at fair
values and therefore Madeco hedges naturally through its operations the metal
inventories that are periodically purchased as raw material and sold as a
component of final products. During 2003, Madeco sold 75,492 metric tons of
copper and 17,120 metric tons of aluminum in the form of finished goods.


                                      144
<PAGE>

      As of December 31, 2003 Madeco held inventories of copper and aluminum of
16,611 metric tons and 4,821 metric tons, respectively. A 10% adverse change
during 2004 in metal prices with respect to 2003 year-end balances would result
in a pre-tax accounting loss of approximately Ch$2,673 million.

Item 12. Description of Securities Other than Equity Securities

      Not applicable.

                                     PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

      Not applicable.

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

      Not applicable.

Item 15. Controls and Procedures

      The Company's Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO") have evaluated the effectiveness of the Company's "disclosure controls
and procedures" (as defined in Exchange Act rules 13a-14(c) and 15d-14(c)).
These controls and procedures were designed to ensure that material information
relating to the Company and its subsidiaries are communicated to the CEO and the
CFO. Based on such evaluation, Quinenco's CEO and CFO concluded that, as of
December 31, 2003, the Company's disclosure controls and procedures were
effective in timely alerting them to material information required to be
included in periodic SEC reports. There have been no significant changes in the
Company's internal controls and procedures or in other factors that could
significantly affect these controls and procedures subsequent to the date of
this evaluation.

Item 16. (Reserved)

A. Audit Committee Financial Expert

      Quinenco is not required to have, and does not have, an audit committee
financial expert (within the meaning of the regulations adopted under the
Sarbanes-Oxley Act of 2002) serving on its audit committee. However, pursuant to
NYSE Rule 303A.06, Quinenco must have an audit committee that satisfies the
requirements of Rule 10A-3 under the Exchange Act and certain additional
requirements under NYSE Rule 303A, by July 31, 2005.

B. Code of Ethics

      Quinenco has adopted a code of ethics that applies to all of its executive
officers and employees and has filed its code of ethics as an exhibit to this
annual report. Quinenco's code of ethics has not beer amended and no waivers,
either explicit or implicit, of provisions of the code of ethics have been
granted to the Chief Executive Officer, Chief Financial Officer or Chief
Accounting Officer.


                                      145
<PAGE>

C. Principal Accountant Fees and Services

      The aggregate fees billed by Ernst & Young Limitada, the Company's
independent auditor, for professional services related to Quinenco and its
intermediate holding companies in 2003 and 2002 were as follows:

                                         2002               2003
                                         ----               ----
                                      (in millions of historic Ch$)
      Audit Fees (1)                      532                666
      Audit-Related Fees (2)               20                 32
      Tax Fees (3)                         19                 20
      All Other Fees (4)                   63                126
                                          ---                ---
      Total Fees                          634                844

(1)   Provides aggregate fees billed for professional services rendered by Ernst
      & Young and Deloitte and Touche, for the audit of Quinenco and its
      subsidiaries' separate annual financial statement filings required by each
      country's regulatory authorities and annual financial statement filings
      required by the United States Securities adn Exchange Commision.

(2)   Provides aggregate fees billed in each of the last two fiscal years for
      assurance and related services by Ernst & Young and Deloitte and Touche,
      for the performance of of the audit or review of Quinenco's financial
      statements and are not reported under (1) above and that are related to
      financial structure activities and other auditing related activities.

(3)   Provides aggregate fees billed in each of the last two fiscal years for
      professional services rendered by external auditors for tax compliance,
      tax advice and tax planning.

(4)   Provides aggregate fees billed in each of the last two fiscal years for
      products and services provided, other than the services reported in (1),
      (2) and (3) above and which were approved by the Company's Board of
      Directors.

      Pre-approval by Audit Committee

      Since May 2003, foreign private issuers have been subjected to
"pre-approval" requirements under which all audit and non-audit services
provided by the independent auditor must be pre-approved by an audit committee.
Our Directors Committee approves all audit, audit-related, tax and other
services provided by Ernst & Young.

      Any services provided by Ernst & Young that are not specifically included
within the scope of the audit must be pre-approved by the Directors Committee
prior to any engagement.

D. Exemptions from the Listing Standards for Audit Committees

      Not applicable.

E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

      Not applicable.

                                    PART III

Item 17. Financial Statements

      Not applicable.

Item 18. Financial Statements

      Reference is made to pages F-1 through F-120.

Item 19.  Exhibits

Index to Consolidated Financial Statements


                                      146
<PAGE>

<TABLE>
<S>                                                                                <C>
   Independent Auditors' Reports:

    Report of Ernst & Young.....................................................   F-2
    Report of Deloitte & Touche.................................................   F-4
    Report of PricewaterhouseCoopers.............................................  F-6

Consolidated Financial Statements:
    Consolidated Balance Sheets at December 31, 2002 and 2003....................  F-8
    Consolidated Statements of Income for each of the three years in the
       Period ended December 31, 2003............................................  F-9
    Consolidated Statements of Cash Flows for each of the three years in the
       Period ended December 31, 2003............................................  F-10
    Notes to the Consolidated Financial Statements...............................  F-12
    Schedule 1 ..................................................................  F-117
</TABLE>


                                      147
<PAGE>

Index to Exhibits

   Exhibit No.                                 Exhibit

       1.1         By-Laws of Quinenco S.A. (incorporated by reference from
                   Quinenco S.A. Annual Report on Form 20-F for the year ended
                   December 31, 2000, filed on June 29, 2001).

       9.1         List of Subsidiaries

      11.1         Code of Ethics

      12.1         Certification of Chief Executive Officer of Quinenco S.A.
                   pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

      12.2         Certification of Chief Financial Officer of Quinenco S.A.
                   pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

      13.1         Certification of Chief Executive Officer of Quinenco S.A.
                   pursuant to Section 906 of the
                   Sarbanes-Oxley Act of 2002.

      13.2         Certification of Chief Financial Officer of Quinenco S.A.
                   pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

      14.1         Banco de Chile's Financial Statements at December 31, 2002
                   and 2003 and for the years ended December 31, 2001, 2002 and
                   2003 (incorporated by reference from Item 18 of the Banco de
                   Chile 2003 Annual Report on Form 20-F, filed on June 25,
                   2004).

      14.2         Banco de Chile's Guide 3 Data (incorporated by reference from
                   Item 4 "Information on the Company - Selected Statistical
                   Information" of the Banco de Chile 2003 Annual Report on Form
                   20-F, filed on June 25, 2004).

      14.3         Banco Edwards' Financial Statements at December 31, 2001 and
                   for the years ended December 31, 2001 (incorporated by
                   reference from Item 18 of the Banco Edwards 2001 Annual
                   Report on Form 20-F, filed on June 28, 2002).

      14.4         Banco Edwards' Guide 3 Data (incorporated by reference from
                   Item 4 "Information on the Company - Selected Statistical
                   Information" of the Banco Edwards 2001 Annual Report on Form
                   20-F, filed on June 28, 2002).

      14.5         CCU's Financial Statements at December 31, 2002 and 2003 and
                   for the years ended December 31, 2001, 2002 and 2003
                   (incorporated by reference from Item 18 of the CCU 2003
                   Annual Report on Form 20-F, filed on June 25, 2004).


                                      148
<PAGE>

                                    SIGNATURE

      The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

                                            QUINENCO S.A.

                                            By: /s/ Luis Fernando Antunez
                                               ----------------------------

                                            Name: Luis Fernando Antunez
                                            Title: Authorized Representative

Dated: June 29, 2004

<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Item 18. Financial Statements

<TABLE>
<CAPTION>
                                                                                               Page
                                                                                               ----
<S>                                                                                             <C>
Report of Independent Accountants:
      Report of Ernst & Young Limitada....................................................      F-2
      Report of PricewaterhouseCoopers ...................................................      F-4
      Report of Deloitte & Touche.........................................................      F-6

Consolidated Financial Statements:
      Consolidated Balance Sheets as of December 31, 2002 and 2003........................      F-8
      Consolidated Statements of Income for each of the three years in the
          period ended December 31, 2003..................................................      F-9
      Consolidated Statements of Cash Flows for each of the three years in the
          period ended December 31, 2003..................................................      F-10
      Notes to the Consolidated Financial Statements......................................      F-12

Schedule 1
      Condensed Financial Information of Quinenco S.A.....................................      F-117
</TABLE>

      Ch$   - Chilean pesos

      ThCh$ - Thousands of Chilean pesos

      MCh$  - Millions of Chilean pesos

      US$   - United States dollars

      ThUS$ - Thousands of United States dollars

      UF    - The UF is a Chilean inflation-indexed, peso-denominated monetary
              unit that is set daily in advance based on the previous month's
              inflation rate (Note 2b)


                                      F - 1
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of
Quinenco S.A. and subsidiaries:

We have audited the accompanying consolidated balance sheets of Quinenco S.A.
and subsidiaries (the "Company") as of December 31, 2002 and 2003 and the
related consolidated statements of income and cash flows for each of the three
years in the period ended December 31, 2003. Our audits also included the
financial statement Schedule 1 - Condensed financial information. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule, based on our audits. We did not audit the consolidated
financial statements of the subsidiary Madeco S.A. and subsidiaries, which
statements reflect total assets of ThCh$ 381,933,599 and ThCh$ 353,675,790 as of
December 31, 2002 and 2003, and total revenues of ThCh$ 344,856,439, ThCh$
258,845,421 and ThCh$ 237,666,031 for the years then ended December 31, 2001,
2002 and 2003, respectively. In addition, we did not audit the consolidated
financial statements of Compania Cervecerias Unidas S.A., an equity method
investment which represented ThCh$ 134,870,306 and ThCh$ 85,875,591 of total
assets as of December 31, 2002 and 2003, respectively, and accounted for ThCh$
12,298,557, ThCh$ 6,865,059 and ThCh$ 16,661,847 of net income for the years
then ended December 31, 2001, 2002 and 2003, respectively. Those statements were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for these companies, is
based solely on the reports of the other auditors.

We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (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 and the reports of other auditors provide a reasonable basis for our
opinion.


                                     F - 2
<PAGE>

In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Quinenco S.A. and
subsidiaries as of December 31, 2002 and 2003 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2003, in conformity with generally accepted accounting
principles in Chile, which differ in certain respects from generally accepted
accounting principles in the United States of America (see note 26, as restated,
to the consolidated financial statements). Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects, the
information set forth therein.


ERNST & YOUNG LTDA.
Santiago, Chile March 15, 2004
(except for Notes 25 and 26 for which the date is June 25, 2004)


                                     F - 3
<PAGE>

REPORT OF INDEPENDENT AUDITORS

      Santiago, January 29, 2004

      To the Board of Directors and Shareholders
      Compania Cervecerias Unidas S.A.

1        We have audited the accompanying consolidated balance sheets of
         Compania Cervecerias Unidas S.A. and its subsidiaries as of December
         31, 2003 and 2002, and the related consolidated statements of income
         and of cash flows for each of the three years in the period ended
         December 31, 2003, expressed in constant Chilean pesos. These financial
         statements are the responsibility of the Company's management. Our
         responsibility is to express an opinion on these financial statements
         based on our audits.

2        We conducted our audits of these statements in accordance with
         generally accepted auditing standards in both Chile and the standards
         of the Public Company Accounting Oversight Board (United States). Those
         standards require that we plan and perform the audit to obtain
         reasonable assurance about whether the financial statements are free of
         material misstatement. An audit includes examining, on a test basis,
         evidence supporting the amounts and disclosures in the financial
         statements. An audit also includes assessing the accounting principles
         used and significant estimates made by management, as well as
         evaluating the overall financial statement presentation. We believe
         that our audits provide a reasonable basis for our opinion.

3        As described in Note 1, the accompanying consolidated financial
         statements have been restated to reflect the effects of changes in the
         purchasing power of the Chilean peso on the Company's financial
         position and results of operations. Furthermore, the financial
         statements as of December 31, 2001 and 2002 and for the years then
         ended have been restated in terms of constant Chilean pesos of December
         31, 2003 purchasing power.

4        In our opinion, the consolidated financial statements referred to above
         present fairly, in all material respects, the financial position of
         Compania Cervecerias Unidas S.A. and its subsidiaries at December 31,
         2003 and 2002, 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.


                                     F - 4
<PAGE>

5        As discussed in Note 2 to the consolidated financial statements, the
         Company changed its method of valuing inventory as of January 1, 2002.

6        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 24 to the consolidated
         financial statements.


PRICEWATERHOUSECOOPERS
Santiago, Chile
January 29, 2004


                                     F - 5
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of
   Madeco S.A.:

We have audited the consolidated balance sheets of Madeco S.A. and subsidiaries
(the "Company") as of December 31, 2003 and 2002, and the related consolidated
statements of income and of cash flows for each of the three years in the period
ended December 31, 2003 all expressed in thousands of constant Chilean pesos.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (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 the Company's management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Madeco S.A. and its subsidiaries as
of December 31, 2003 and 2002, and the results of their operations and cash
flows for each of the three years in the period ended December 31, 2003, in
conformity with accounting principles generally accepted in Chile.

Accounting principles generally accepted in Chile vary in certain significant
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 36 to the consolidated financial statements.


                                     F - 6
<PAGE>

As explained in note 2.b., the Board of Directors of the overseas subsidiary
Metal Overseas S.A. decided to reserve the full amount of its interest in Optel
Limitada.

As explained in note 12.b., during the last quarter of 2003, the indirect
subsidiary Decker-Indelqui S.A. restarted production of copper pipes and metal
casting at the Barracas and Llavallol plants, respectively.


DELOITTE & TOUCHE

Santiago, Chile
February 24, 2004, except for Note 36 as
   to which the date is June 24, 2004


                                     F - 7
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

             Restated for general price-level changes and expressed
     in constant December 31, 2003 Chilean pesos (Ch$) and US dollars (US$)

<TABLE>
<CAPTION>
                                                                                               As of December 31,
                                                                                -------------------------------------------------
                                                                                     2002              2003              2003
                                                                                -------------     -------------     -------------
                                                                      Note                                            (Note 2v)
Assets                                                                             ThCh$               ThCh$            ThUS$
<S>                                                                             <C>               <C>                   <C>
Current assets
Cash ..........................................................                     5,087,910         6,365,082            10,719
Time deposits .................................................         4           6,797,366        42,342,928            71,308
Marketable securities .........................................         5           2,244,161         6,152,290            10,361
Accounts receivable, net ......................................         6          72,317,323        77,709,811           130,869
Notes and accounts receivable from related companies ..........        21           1,020,766         2,717,768             4,577
Inventories, net ..............................................         7          64,051,603        61,974,433           104,369
Other current assets, net .....................................         8         109,657,759        51,794,546            87,226
                                                                                -------------     -------------     -------------
        Total current assets ..................................                   261,176,888       249,056,858           419,429
                                                                                -------------     -------------     -------------

Property, plant and equipment , net ...........................         9         396,391,324       325,777,170           548,631
                                                                                -------------     -------------     -------------

Other assets
Long-term notes and accounts receivable from related
companies .....................................................        21           4,653,879         1,902,189             3,204
Investments in related and other companies ....................        10         498,093,052       468,877,733           789,622
Goodwill, net .................................................        11         344,969,807       313,926,862           528,674
Other non-current assets ......................................        12          33,185,462        31,819,543            53,586
                                                                                -------------     -------------     -------------
        Total other assets ....................................                   880,902,200       816,526,327         1,375,086
                                                                                -------------     -------------     -------------

        Total assets ..........................................                 1,538,470,412     1,391,360,355         2,343,146
                                                                                =============     =============     =============

Liabilities and Shareholders' Equity:
Current liabilities
Short-term bank loans .........................................        13         108,402,361        18,711,921            31,512
Current portion of long-term liabilities ......................        15         137,287,243        81,514,417           137,276
Accounts payable and supplier notes payable ...................                    37,250,082        26,236,034            44,183
Notes and accounts payable to related companies ...............        21             324,847           483,086               814
Accrued and other liabilities .................................        14          23,595,436        34,965,901            58,885
                                                                                -------------     -------------     -------------
        Total current liabilities .............................                   306,859,969       161,911,359           272,670
                                                                                -------------     -------------     -------------

Long-term liabilities
Long-term debt ................................................        15         305,514,572       342,122,043           576,157
Bonds payable .................................................        15         201,732,965       148,056,567           249,337
Notes and accounts payable to related companies ...............        21                  --            24,829                42
Accrued expenses ..............................................        14           7,436,201         8,864,349            14,928
                                                                                -------------     -------------     -------------
        Total long-term liabilities ...........................                   514,683,738       499,067,788           840,464
                                                                                -------------     -------------     -------------

Minority interest .............................................        22          80,106,745        96,359,027           162,275
                                                                                -------------     -------------     -------------

Commitments and contingencies .................................        19

Shareholders' Equity
Common stock 1,079,740,079 shares authorized, issued and
outstanding with no par value) ................................        17         459,291,711       459,291,711           773,479
Reserves ......................................................        17          41,832,090        13,760,250            23,173
Retained earnings .............................................        17         135,696,159       160,970,220           271,085
                                                                                -------------     -------------     -------------
        Total Shareholders' Equity ............................                   636,819,960       634,022,181         1,067,737
                                                                                -------------     -------------     -------------

        Total Liabilities and Shareholders' Equity ............                 1,538,470,412     1,391,360,355         2,343,146
                                                                                =============     =============     =============
</TABLE>

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


                                     F - 8
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

             Restated for general price-level changes and expressed
     in constant December 31, 2003 Chilean pesos (Ch$) and US dollars (US$)

<TABLE>
<CAPTION>
                                                                                    Years ended December 31,
                                                                   ----------------------------------------------------------
                                                                       2001            2002           2003            2003
                                                                   ------------    ------------   ------------   ------------
                                                       Note                                                        (Note 2v)
                                                                       ThCh$           ThCh$          ThCh$          ThUS$
<S>                                                                <C>             <C>            <C>                <C>
Operating Results:
Net sales ..........................................                493,141,082     400,261,681    357,379,426        601,852
Cost of sales ......................................               (391,781,342)   (319,100,849)  (285,027,378)      (480,006)
                                                                   ------------    ------------   ------------   ------------

   Gross margin ....................................                101,359,740      81,160,832     72,352,048        121,846
Administrative and selling expenses ................                (83,138,388)    (70,781,178)   (59,605,083)      (100,379)
                                                                   ------------    ------------   ------------   ------------

   Operating income ................................                 18,221,352      10,379,654     12,746,965         21,467
                                                                   ------------    ------------   ------------   ------------

Non-Operating Results:
Interest income ....................................                  8,259,179       5,401,212      2,928,419          4,932
Non-operating income ...............................     20         107,084,380      33,877,831    119,526,995        201,292
Interest expense ...................................                (61,387,338)    (51,234,423)   (35,192,376)       (59,267)
Non-operating expense ..............................     20         (72,596,926)    (86,544,758)   (66,438,808)      (111,888)
Price-level restatement (loss) gain, net ...........      3         (11,060,304)     (8,984,896)     2,876,318          4,844
                                                                   ------------    ------------   ------------   ------------

   Non-operating results ...........................                (29,701,009)   (107,485,034)    23,700,548         39,913
                                                                   ------------    ------------   ------------   ------------

(Loss) income before taxes .........................                (11,479,657)    (97,105,380)    36,447,513         61,380
   Income taxes ....................................     16           4,941,465         142,850     (2,568,762)        (4,326)
                                                                   ------------    ------------   ------------   ------------

   (Loss) income before minority interest ..........                 (6,538,192)    (96,962,530)    33,878,751         57,054
   Minority interest ...............................     22          22,672,603      20,727,517      3,816,095          6,427
                                                                   ------------    ------------   ------------   ------------

   Net income (loss) ...............................                 16,134,411     (76,235,013)    37,694,846         63,481
                                                                   ============    ============   ============   ============
</TABLE>

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


                                     F - 9
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

             Restated for general price-level changes and expressed
     in constant December 31, 2003 Chilean pesos (Ch$) and US dollars (US$)

<TABLE>
<CAPTION>
                                                                                            Years ended December 31,
                                                                           --------------------------------------------------------
                                                                               2001            2002            2003          2003
                                                                           ------------    ------------    ------------    --------
                                                                                                                           (Note 2v)
                                                                               ThCh$           ThCh$           ThCh$         ThUS$
<S>                                                                        <C>             <C>             <C>             <C>
Cash Flow From Operating Activities:
Collection of accounts receivable ......................................    573,193,835     474,374,280     408,073,968     687,225
Financial income receivable ............................................     13,645,380      14,217,987       2,806,478       4,726
Dividends and other distributions received .............................     20,529,307      29,559,542      74,552,562     125,552
Other income received ..................................................      3,552,534       2,721,648       1,853,531       3,121
Payments to suppliers and personnel ....................................   (512,387,975)   (417,043,968)   (369,924,710)   (622,979)
Interest paid ..........................................................    (58,356,002)    (43,994,845)    (31,015,020)    (52,231)
Income taxes paid ......................................................     (3,967,358)     (2,012,059)     (1,500,556)     (2,527)
Other expenses .........................................................     (3,827,710)     (4,401,527)     (5,755,019)     (9,692)
Value added taxes (VAT) and other similar items paid ...................    (18,113,015)    (23,114,002)    (14,249,325)    (23,997)
                                                                           ------------    ------------    ------------    --------
     Net cash flow provided by operating activities ....................     14,268,996      30,307,056      64,841,909     109,198
                                                                           ------------    ------------    ------------    --------

Cash Flow From Investing Activities:
Proceeds from sales of permanent investments ...........................    147,509,859         605,447          72,749         123
Proceeds from other investments ........................................     17,315,002           1,597      20,330,061      34,237
Proceeds from sales of property, plant and equipment ...................      1,588,354       2,799,266      15,758,449      26,538
Additions to property, plant and equipment .............................    (31,747,374)    (22,800,364)    (12,075,492)    (20,336)
Interest capitalized paid ..............................................       (658,782)       (313,182)        (77,363)       (130)
Investments in other companies .........................................   (163,857,307)       (611,060)       (191,179)       (322)
Investments in financial instruments ...................................     (3,390,926)       (301,617)    (48,832,995)    (82,238)
Collection of loans from related companies .............................             --          37,710              --          --
Loans granted to related companies .....................................     (3,104,375)             --        (752,838)     (1,268)
Amount received from settlement payment ................................             --              --      36,035,025      60,685
Other investing activities (net) .......................................     (1,659,902)     21,468,426       1,694,348       2,854
                                                                           ------------    ------------    ------------    --------
     Net cash flow provided by (used in) investing activities ..........    (38,005,451)        886,223      11,960,765      20,143
                                                                           ------------    ------------    ------------    --------

Cash Flow From Financing Activities:
Borrowings from banks and others .......................................    256,797,530     141,993,747      42,733,118      71,966
Dividends paid .........................................................     (1,763,253)     (7,989,770)     (1,263,041)     (2,127)
Payments of loans ......................................................   (450,300,905)   (162,052,577)   (167,254,649)   (281,668)
Increase in bonds payable ..............................................    150,064,022              --              --          --
Decrease in bonds payable ..............................................     (8,092,237)    (17,443,404)    (32,346,147)    (54,473)
Capital increase in subsidiaries contributed by minority shareholders ..        752,971       1,100,598      44,811,975      75,466
Capital decrease .......................................................             --              --        (549,040)       (925)
Borrowings from related companies ......................................             --      47,853,010      14,134,221      23,803
Repayment of borrowings from related companies .........................     (1,097,816)     (1,930,216)       (338,327)       (570)
Other financing activities (net) .......................................     (7,506,207)      3,650,070         378,248         637
                                                                           ------------    ------------    ------------    --------
     Net cash flow (used in) provided by financing activities ..........    (61,145,895)      5,181,458     (99,693,642)   (167,891)
                                                                           ------------    ------------    ------------    --------
Net (decrease) increase in cash and cash equivalents ...................    (84,882,350)     36,374,737     (22,890,968)    (38,550)
                                                                           ------------    ------------    ------------    --------
Price-level restatement of cash and cash equivalents ...................       (965,228)      2,597,706     (14,818,431)    (24,955)
                                                                           ------------    ------------    ------------    --------
            Cash and cash equivalents at beginning of  year ............    140,893,179      55,045,601      94,018,044     158,333
                                                                           ------------    ------------    ------------    --------
            Cash and cash equivalents at end of year ...................     55,045,601      94,018,044      56,308,645      94,828
                                                                           ============    ============    ============    ========

Supplemental cash flow information:
Interest paid, net of amounts capitalized ..............................    (58,356,002)    (43,994,845)    (31,015,020)    (52,231)
Income taxes paid ......................................................     (3,967,358)     (2,012,059)     (1,500,556)     (2,527)
</TABLE>

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


                                     F - 10
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

             Restated for general price-level changes and expressed
     in constant December 31, 2003 Chilean pesos (Ch$) and US dollars (US$)

<TABLE>
<CAPTION>
                                                                                             Years ended December 31,
                                                                              -----------------------------------------------------
                                                                                  2001           2002          2003          2003
                                                                              -----------    -----------    -----------    --------
                                                                                                                           (Note 2v)
                                                                                  ThCh$          ThCh$         ThCh$         ThUS$
<S>                                                                           <C>             <C>           <C>             <C>
Reconciliation of net income (loss) for the year to net cash
   provides by operating activities
Net income (loss) .........................................................    16,134,411    (76,235,013)    37,694,846      63,481
Adjustments to reconcile net income to net cash provided by operating
   activities that do not represent cash flows:
Depreciation ..............................................................    32,008,327     32,475,333     30,468,607      51,311
Amortization of goodwill, net .............................................    19,233,602     18,829,253     (3,428,475)     (5,774)
Minority interest .........................................................   (22,672,603)   (20,727,517)    (3,816,095)     (6,427)
Price-level restatement, net ..............................................    11,060,304      8,984,896     (2,876,318)     (4,844)
(Gains) losses on sales of property, plant and equipment ..................       (33,557)        17,088      2,927,230       4,930
Participation in earnings of investments under equity method ..............   (37,713,384)   (25,435,185)   (57,396,368)    (96,659)
Dividends received from equity investees ..................................    20,529,307     29,559,542     74,552,562     125,552
(Gains) losses on sales of investments and marketable securities ..........   (38,077,210)      (405,737)        68,446         115
Write-offs and provisions .................................................    10,086,130     12,870,040      8,878,070      14,951
Other .....................................................................    14,931,424     47,013,766     31,765,715      53,496
Decrease (increase)  in accounts and notes receivable .....................    20,813,844      4,102,443    (19,389,775)    (32,654)
Decrease in inventories ...................................................    10,888,657      7,860,425      1,604,573       2,702
(Increase) decrease in other assets .......................................   (35,042,724)    15,186,571    (55,437,550)    (93,361)
(Decrease) increase in accounts and notes payable .........................    (8,556,292)   (40,994,245)    14,223,499      23,953
Increase in other current liabilities .....................................       678,760     17,205,396      5,002,942       8,426
                                                                              -----------    -----------    -----------    --------
     Net cash flow provided by operating activities .......................    14,268,996     30,307,056     64,841,909     109,198
                                                                              -----------    -----------    -----------    --------
</TABLE>

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


                                     F - 11
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 1 - THE COMPANY

The Company is a diversified company engaged in the industrial and financial
services sectors primarily in the Southern Cone countries of South America. The
Company provides banking and other financial services, through its
unconsolidated investment in Banco de Chile formed by the merger between Banco
de Chile and Banco de A. Edwards ("Banco Edwards"); is involved in the
production of bottles and distributes beer, wine, soft drinks and other
beverages through an equity method investment in Compania Cervecerias Unidas
S.A. ("CCU"); processes and distributes food through Empresas Lucchetti S.A.
("Lucchetti"); provides telecommunications services through its subsidiary
Compania Nacional de Telefonos, Telefonica del Sur S.A. ("Telsur"); manufactures
copper and aluminum products and consumer packaging products through its
subsidiary Madeco S.A. ("Madeco"); is engaged in hotel services through its
subsidiary Hoteles Carrera S.A. ("Hoteles Carrera"); and is involved in the
development of residential real estate in Chile through its equity method
investment in Habitaria S.A. ("Habitaria"). References herein to "Quinenco" or
"The Parent Company" are to Quinenco S.A. and references herein to the "Company"
are to Quinenco together with its consolidated subsidiaries and the companies in
which Quinenco holds significant equity interests. Further details of the
industries in which the Company operates are as a follows:

Financial Services. Banco de Chile, which provides financial services in Chile
is an equity method investment of LQ Inversiones Financieras S.A. ("LQIF"), a
consolidated subsidiary.

Between September 2, 1999 and October 26, 1999, Quinenco acquired a 51.17%
controlling interest in Banco Edwards through a Purchase and Sale Agreement
negotiated with Banco Edwards' controlling shareholder group, subsequent
purchases on the open market, and a private transaction. On December 9, 1999,
Quinenco subscribed to a capital increase of 814,635,802 shares, to maintain its
51.17% ownership interest. During 2000 and 2001, Quinenco held a 51.17% interest
in Banco Edwards.

Quinenco acquired shares of Sociedad Matriz del Banco de Chile S.A. ("SM Chile")
and Banco de Chile between October 18, 1999 and March 27, 2001 and as of
December 31, 2001, 2002 and 2003 held voting interests of 52.66%, 52.16% and
52.16% in Banco de Chile, respectively. Hereafter, interest will refer to the
voting interest held, unless otherwise specified. Banco de Chile, a Chilean
private bank with branches in New York and Miami provides a range of services
through its nationwide service network in Chile. SM Chile is the holding company
that, before the merger of Banco de Chile and Banco Edwards on January 1, 2002,
owned a direct interest of 28% in Banco de Chile and indirectly held an
additional 63.64% through its wholly-owned subsidiary Sociedad Administradora de
la Obligacion Subordinada SAOS S.A. ("SAOS").

In shareholders' meetings held on December 6, 2001 and December 18, 2001, in
Banco de Chile and Banco Edwards respectively, it was agreed to merge the two
banks. Pursuant to authorizations from the Chilean Superintendency of Banks
("SBIF") and a majority of the shareholders from both banks, Banco de Chile and
Banco Edwards, merged operations effective January 1, 2002. As a consequence of
the merger, Banco de Chile, the surviving entity and legal successor, absorbed
Banco Edwards. Under the terms of exchange, Banco Edwards constituted 34% and
Banco de Chile, 66% of the assets, liabilities and equity of the surviving
entity.

As a result of the merger, the Company held a 51.35% interest in SM Chile and a
further 20.22% interest in Banco de Chile.


                                     F - 12
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

SM Chile, after the merger of Banco de Chile and Banco Edwards on January 1,
2002, owned a direct interest of 18.48% in Banco de Chile and indirectly held an
additional 42% through its wholly-owned subsidiary SAOS.

As of December 31, 2002 and 2003, the Company, through its interests in Banco de
Chile and SM Chile owns 52.16% of the voting rights and is entitled to 29.15% of
the dividend rights in the merged bank.

Food and Beverage. CCU, an equity method investee, has beer production
facilities in Chile and Argentina for the domestic markets in those countries,
and it bottles and distributes its proprietary brands, PepsiCo and Cadbury
Schweppes brand soft drinks and mineral water in Chile. CCU markets and
distributes brand beer through both domestic and international licensing
agreements. Additionally, CCU produces Budweiser in Argentina and distributes it
within Argentina and to other countries in the Southern Cone. CCU also owns a
majority interest in Vina San Pedro, Chile's third largest winery. Quinenco owns
its interest in CCU through a 50% interest in Inversiones y Rentas S.A.
("IRSA"). IRSA is a joint venture formed in 1986 between Quinenco and the
Schorghuber Group, German brewers of the Paulaner beer brand. On April 17, 2003,
the Schorghuber Group announced that it had sold its interest in IRSA to
Heineken NV ("Heineken"), the Dutch brewer. As a result Heineken has effectively
become a 50% partner in IRSA, the entity that holds a 61.61% controlling
interest in CCU.

Lucchetti, a consolidated subsidiary, produces pasta, edible oil and packaged
soups for the Chilean market. In 2001, 2002 and 2003, Lucchetti carried out
capital increases giving Quinenco an ownership interest in Lucchetti of 93.25%,
93.69% and 95.91% as of those dates, respectively.

Lucchetti had a presence in Peru since 1995 but in recent times had been faced
with a political campaign against it due to the plant being located in an
environmentally sensitive area in Chorrillos, Lima. This initially led to lower
sales and then to the enforced closure of the plant by an order of the
Municipality of Chorrillos in January 2003, for which Lucchetti is seeking
damages under an existing treaty between Chile and Peru. See Note 19 Commitments
and Contingencies.

Since that date, Lucchetti has been in the process of liquidating its assets in
order to pay off its bank loans and amounts due to suppliers and personnel. In
accordance with accounting principles generally accepted in Chile, the Company
made a provision against the entire investment and for part of the accounts
receivable of Lucchetti Peru S.A. ("Lucchetti Peru"), amounting to a total of
ThCh$30,678,486 (historic pesos) as of December 31, 2002.

On March 31, 2004, Lucchetti disposed of its Chilean based operations to Corpora
Tresmontes for ThCh$56,074,000 less financial debt generating a gain on sale of
ThCh$1,276,000. The sale represented approximately 85% of Lucchetti's
consolidated net assets. The sale did not include Lucchetti Peru, Lucchetti's
50% participation in the chocolate and cookie maker Calaf, two properties in
Chile, deferred tax credits or settlement rights in Lucchetti's arbitration
proceedings against the Peruvian Government.

Telecommunications. Telsur, a consolidated subsidiary held through VTR S.A.
("VTR") provides local telephone service in Regions VIII, IX, X and XI in the
south of Chile.

Manufacturing Madeco, a consolidated subsidiary, is a Chilean-based manufacturer
of copper and aluminum based cable and wire products and other copper and
aluminum products used in the telecommunications, construction, mining, energy
and general industrial products sectors. Madeco is also a manufacturer of
packaging for consumer products. Until recently, Madeco has been engaged in the
production of copper and aluminum wire and cable products and brass mills
products in Argentina. As a


                                     F - 13
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

result of the economic and political crisis in Argentina, in December 2001
Madeco decided to temporarily close its Argentine subsidiary Decker-Indelqui. In
Peru, Madeco owns Indeco, a wire and cable manufacturer.

In January 1997, Madeco expanded into Brazil by acquiring Ficap S.A. ("Ficap"),
which is a manufacturer of copper and aluminum wire and cable products.

As of December 31, 2001, Quinenco held a 56.11% interest in Madeco. During 2002,
Quinenco did not subscribe to a capital increase carried-out by Madeco,
decreasing its ownership interest to 53.41%.

In 1999, Madeco's four business units were impacted by the deceleration of the
Latin American economies and the Brazilian currency devaluation but thereafter
it initiated a slow but continuous recovery, until the end of 2001 when there
was a decline in telecom cable demand and there was a collapse in the Argentine
economy.

Madeco's Board of Directors considered it necessary to initiate a long-term
management plan oriented towards the industrial restructuring of Madeco. The
main goal of the plan was to improve the use of resources and working capital as
well as optimize the operating performance in the four units, in order to allow
Madeco to compete under better terms in the new market conditions.

During 2002, Madeco focused its efforts on financial restructuring. On December
18, 2002, an amended contract was signed between Madeco and fourteen lenders.
Madeco's bank loans of approximately US$120 million were restructured with an
up-front payment of 30% of the total debt before the capital increase was due to
take place and the remaining 70% of the debt was rescheduled to be paid over
seven years, with a grace period of three years.

During 2003, Madeco completed a capital increase in several stages. Quinenco
subscribed directly and indirectly to shares worth a total of ThCh$ 49,616,293
in March 2003, the minority shareholders did not participate at this point
thereby Quinenco increased its ownership interest to 84.30% as of March 31,
2003. In June and August 2003, additional shares were issued and sold by Madeco
in a public auction. Quinenco did not participate in either of these auctions
and as a result decreased its ownership percentage to 55.22% as of December 31,
2003.

Real Estate and Hotel Administration. Hoteles Carrera operates four hotels in
Chile. These are the Hotel El Araucano in Concepcion (135 guest rooms), which
Hoteles Carrera owns and operates, the La Serena Club Resort in La Serena (95
guest rooms), the Carrera Club Hotel in Iquique (76 guest rooms) and the Carrera
Club Hotel in Antofagasta (137 guest rooms), which Hoteles Carrera leases and
operates.

On November 20, 2003, Hoteles Carrera sold its Santiago hotel and grounds for
UF832,000 (Ch$14,125 million) to the Chilean Ministry of Foreign Affairs.
Carrera recognized a loss on the sale of Ch$4,713 million.

As of December 31, 2001, 2002 and 2003, Quinenco held an 89.95%, 89.95% and
89.96% interest in Hoteles Carrera, respectively.

Quinenco owns a 50% equity method interest in Habitaria, a developer of
residential real estate for Chilean families in the middle-income and
upper-middle income segments. Habitaria is a joint venture between the Company
and Ferrovial Inmobiliaria Chile Ltda., a subsidiary of the Spanish company
Ferrovial S.A..


                                     F - 14
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)    Basis of consolidation

The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in Chile, and specific guidelines
issued by the Superintendency of Securities and Insurance ("SVS"), (collectively
referred to as "Chilean GAAP")

The consolidated financial statements of Quinenco and its subsidiaries as at
December 31, 2002 and 2003 include the accounts of companies in which the Parent
Company holds a direct or indirect ownership of more than 50%. However, they do
not include the financial statements of Banco de Chile, SM Chile, and Banchile
Seguros de Vida S.A. ("Banchile"), because banking and insurance operations are
generally not consolidated with non-financial businesses in Chile, primarily due
to the dissimilarity of both the nature of the operations and the related
accounting policies. The SVS has authorized the Company not to consolidate the
financial statements of Banco de Chile, SM Chile and Banchile.

SM Chile's wholly-owned subsidiary, SAOS has significant liabilities (the
"subordinated debt obligation") with the Chilean Central Bank to the amount of
UF54,598,617.53 (approximately ThCh$923,808,609) as of December 31, 2003. Under
Chilean GAAP, as permitted by law, such liabilities are not included in SM
Chile's financial statements. See note 11.

Lucchetti has not consolidated the subsidiary Lucchetti Peru as of December 31,
2003 and 2002 as a result of action taken by Peruvian government as detailed in
Note 19 d). This action resulted in the closure of the plant and the initiation
of a process to liquidate its assets. This decision is based on the provisions
of Technical Bulletin No.64 of the Chilean Association of Accountants ("BT64")
and SVS Resolution No.01642 dated March 11, 2003, which authorized the
non-consolidation of Lucchetti Peru.

The consolidated financial statements as of and for the years ended December 31,
2001, 2002 and 2003 include the following subsidiaries:

<TABLE>
<CAPTION>
                                                               At December 31,
                                                          -------------------------
                                                          2001      2002       2003
                                                          -----     -----     -----
                                                           %         %          %
<S>                                                       <C>       <C>       <C>
Percentage of Direct and Indirect Ownership:
Lucchetti and subsidiaries .......................        93.25     93.69     95.91
Telsur and subsidiaries ..........................        73.56     73.56     73.56
Madeco and subsidiaries ..........................        56.11     53.41     55.22
Hoteles Carrera ..................................        89.95     89.95     89.96
</TABLE>

All significant intercompany balances and transactions have been eliminated in
consolidation, as well as any unrealized gains or losses arising from such
transactions. The participation of non-controlling shareholders in subsidiaries
has been given effect in the consolidated financial statements under the caption
Minority Interest.

The preparation of financial statements in conformity with Chilean GAAP, along
with the reconciliation to generally accepted accounting principles in the
United States of America ("US GAAP"), requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities as of the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those


                                     F - 15
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

estimates. In addition, certain reclassifications have been made in the 2001 and
2002 amounts to conform to the 2003 presentation.

b)    Price-level restatement

The consolidated financial statements, which are expressed in Chilean pesos,
have been restated to reflect the effects of variations in the purchasing power
of the local currency during each year. For this purpose, and in conformity with
current Chilean regulations, non-monetary assets and liabilities, shareholders'
equity accounts and income and expense accounts have been restated each year in
terms of year-end constant pesos. The resulting net charge or credit to income
arises as a result of the gain or loss in purchasing power from the holding of
monetary assets and liabilities exposed to the effects of inflation. In
accordance with Chilean tax regulations and accounting practices, the
restatements were calculated based on the official Consumer Price Index ("CPI")
of the National Association of Statistics, which was 3.1%, 3.0% and 1.0% for the
years ended November 30, 2001, 2002 and 2003, respectively. The index is based
on the "prior month rule"; pursuant to which the inflation adjustments are based
on the Consumer Price Index at the close of the month preceding the close of the
respective period or of the transaction.

This index is considered by the business community, the accounting profession
and the Chilean government to be the index which most closely complies with the
technical requirement to reflect the variation in the general level of prices in
the country and, consequently, is widely used for financial reporting purposes
in Chile. For comparative purposes, the consolidated financial statements for
the years ended December 31, 2001 and 2002 and the amounts disclosed in the
related footnotes have also been restated using the same index in terms of
Chilean pesos of December 31, 2003 purchasing power.

The above-mentioned price-level restatements do not purport to present appraisal
or replacement values and are only intended to restate all non-monetary
financial statement components in terms of local currency of a single purchasing
power, and to include in net income 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.

Certain assets and liabilities are denominated in Unidades de Fomento ("UF").
The UF is a Chilean inflation-indexed, peso-denominated monetary unit that is
set daily in advance based on changes in the CPI. The adjustments to the closing
value of UF-denominated assets and liabilities are included in the Price-level
restatement account in the Consolidated Statement of Income. Each UF was
equivalent to Ch$16,262.66 as of December 31, 2001, Ch$16,744.12 as of December
31, 2002, and Ch$16,920.00 as of December 31, 2003.

c)    Assets and liabilities in foreign currency

Balances in foreign currency included in the Consolidated Balance Sheets and
detailed in Note 19 have been translated into Chilean pesos at the Observed
Exchange Rates determined by the Central Bank of Chile in effect at each year
end. The most relevant foreign currencies are US$ (historical rates of Ch$654.79
per US$1 as of December 31, 2001, Ch$718.61 per US$1 as of December 31, 2002 and
Ch$593.80 per US$1 as of December 31, 2003), and Brazilian Reals ("BR$"),
(historical rates of Ch$282.24 per BR$1 as of December 31, 2001, Ch$203.00 per
BR$1 as of December 31, 2002 and Ch$205.47 per BR$1 as of December 31, 2003).
The net adjustment of assets and liabilities denominated in foreign currency is
also detailed in Note 3.


                                     F - 16
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

d)    Cash and cash equivalents

The Company considers all short-term, highly liquid investment securities with
remaining maturities of three months or less to be cash equivalents for the
purposes of the Consolidated Statements of Cash Flows:

<TABLE>
<CAPTION>
                                                                                          As of December 31,
                                                                              -----------------------------------------
                                                                                 2001            2002           2003
                                                                              ----------      ----------     ----------
                                                                                 ThCh$           ThCh$          ThCh$
<S>                                                                           <C>              <C>           <C>
Cash .............................................................             4,367,125       5,087,910      6,365,082
Time deposits that are cash equivalents ..........................            18,010,089       6,797,366     23,619,801
Money market funds (Note 5) ......................................               954,136       1,971,302      5,918,525
Securities purchased under agreements to resell
   (Note 8) ......................................................            31,714,251      80,161,466     20,405,237
         -                                                                    ----------      ----------     ----------
        Total ....................................................            55,045,601      94,018,044     56,308,645
                                                                              ==========      ==========     ==========
</TABLE>

e)    Time deposits and marketable securities

Time deposits are stated at cost plus interest and price-level restatement
(indexation) accrued at each year-end.

Marketable securities are valued as follows:

Shares: At the lower of restated cost plus price-level restatement or market
value of the portfolio at each year-end. Shares include the quoted shares of
companies in which both the Company's shareholding is less than 10% of the
investee's capital and the Company does not exert significant influence over the
investee.

Money market funds: At the quoted redemption value of the respective share at
each balance sheet date.

f)    Accounts receivable

Accounts receivables are shown net of the allowance for doubtful accounts.
Allowances are recorded at the end of each period based on specific
identification and those balances considered to be of doubtful recovery due to
the age of the receivable.

g)    Inventories

Raw materials are valued at the lower of their restated cost or current
replacement cost. Work-in-process and finished goods are shown at restated cost,
which includes related direct and indirect manufacturing expenses. Supplies,
spare parts and other inventories are shown at their restated cost. Inventory
values do not exceed net realizable values and are reflected in income on the
basis of average cost. A provision has been made related to discontinued
products and products with low turnover.

h)    Other current assets

Other current assets correspond principally to recoverable income taxes,
deferred income taxes, prepaid expenses, disposable assets held for sale, the
fair value effect of derivative financial instruments and securities purchased
under agreements to resell. These securities represent investments in promissory
notes issued by the Central Bank of Chile and Treasury Bills, which were
purchased at a discount under agreements to resell at a fixed price. They are
valued at their present value calculated on the basis of the interest yield used
to determine the price of each instrument on the date of acquisition.


                                     F - 17
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

i)    Property, plant and equipment

Property, plant and equipment are stated at cost plus price-level restatement
and include construction and financing costs incurred until the assets are in a
condition to be used, applying the average cost of financing. Such costs exclude
foreign exchange gains and losses that are included in the Consolidated
Statements of Income.

In substantially all cases, depreciation is determined by the straight-line
method based on the estimated useful lives of the assets and where applicable as
a function of the production units for certain plants (see Note 9).

In accordance with instructions issued by the SVS, property, plant and equipment
include the revaluation increment arising from the technical appraisals of
certain assets, which were carried out in 1979 and 1986.

Property, plant and equipment are shown net of allowances for obsolescence.

Assets acquired under capital lease contracts are recorded at their present
value, calculated using the contracted monthly installments plus the purchase
option and using the interest rate implicit in the respective contract. The
corresponding liability is shown net of deferred interest. Assets obtained under
financial contracts are not the legal property of the Company until it exercises
the related purchase option. Therefore, the Company cannot freely dispose of
them.

The estimated useful lives of the principal categories of property, plant and
equipment are as follows:

                                                                          Years
                                                                        --------

Buildings and installations .............................                  60
Machinery and equipment .................................               10 to 20
Telephone plant and equipment ...........................               10 to 30
Other fixed assets ......................................               10 to 20

The revaluation from technical appraisals is being amortized over the remaining
lives of the respective assets.

j)    Investments in related companies

Investments in related companies over which the Company has significant
influence, are included under the caption Other assets and are recorded using
the equity method. Accordingly, the Company's proportional share in the net
income (or loss) of each investee is recognized in the non-operating income and
expense classification in the Consolidated Statements of Income on an accrual
basis, after eliminating any unrealized profits from transactions with the
related companies.

Investments in majority-owned companies in the development stage are also
recorded using the equity method on the balance sheet, but the Company's share
of the investee's results of operations during the development stage are taken
to a reserve which forms part of Shareholders' equity.

Equity movements that do not affect the income of the related companies are
shown proportionally as a charge or credit to the account Other reserves in
Shareholders' equity.


                                     F - 18
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

k)    Other investments

Other investments in which the Company has less than 10% of the voting stock of
the investee, which are considered to be permanent are valued at the lower of
cost plus price-level restatement or market value. They are shown under the
caption Other assets. Dividends from such investments are recognized as income
when received.

l)    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 exceeds the purchase price of companies acquired. Goodwill and
negative goodwill also arise from the purchase of investments accounted for by
the equity method. Both goodwill and negative goodwill are normally amortized
over the maximum period of twenty years considering the expected period of
return of the investments. Chilean GAAP also provides that goodwill and negative
goodwill amortization may be accelerated if the proportional net income or net
loss of the Investee Company exceeds the respective straight-line amortization
amount. Beginning January 1, 2004, the Company will apply Technical Bulletin 72
of the Chilean Association of Accountants ("BT 72") that changes the basis for
accounting for goodwill and negative goodwill. The Company has not applied the
voluntary provision to adopt BT 72 as from January 1, 2003.

m)    Bonds payable

Bonds payable are included in liabilities at their par value plus accrued
price-level restatement and interest. The discount that arises from the
difference between par value and the proceeds less issuance costs actually
received is included in Other assets and is amortized using the straight-line
method.

n)    Employee severance indemnities

Certain subsidiaries with agreements to pay severance indemnities calculate the
respective liability based on a present value method (accrued cost of the
benefit method), assuming real annual discount rates of between 6% and 7% and an
estimated remaining service period of each employee until retirement.

o)    Employee vacations

The cost of employee vacations is recognized in the financial statements on an
accrual basis as employees earn the vacations.

p)    Deferred income tax

Beginning January 1, 2000, the Company records deferred income taxes in
accordance with Technical Bulletin Nos.60 and its related amendments issued by
the Chilean Association of Accountants, and with Circular No.1466 issued on
January 27, 2000 by the SVS, recognizing the deferred tax effects of temporary
differences between the financial and tax values of assets and liabilities,
using the liability method.

Previously, deferred income taxes attributable to those temporary differences
related to items that were treated differently for tax and accounting purposes
were not recorded as they were considered to be


                                     F - 19
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

offsetting and temporary in nature and thus were not required to be recorded
pursuant to Technical Bulletin No.41 of the Chilean Association of Accountants.

As a transitional provision, a contra asset or liability was recorded offsetting
the effects of the deferred tax assets and liabilities not recorded prior to
January 1, 2000. The contra asset or liabilities, defined as "complementary
accounts", are being amortized to income over the estimated average reversal
periods corresponding to the underlying temporary differences to which the
deferred tax asset or liability relates.

q)    Revenue recognition

The Company recognizes revenues when goods are shipped or services are provided.
Revenues from telephone line installation contracts (Madeco) are recognized by
the percentage of completion method based on the relationship of actual costs
incurred to total costs estimated to be incurred over the duration of the
contract. Provisions for anticipated contract losses are recognized at the time
they become known.

In addition to services invoiced, Hoteles Carrera recognizes as operating
revenues an estimate of services provided and not invoiced through year-end.
This estimate has been valued using actual rates corresponding to the period in
which the services were provided. Accordingly, the cost related to this service
has been included in cost of sales in the income statement.

r)    National and international long-distance traffic

The subsidiaries in the telecommunications sector maintain a policy of
recognizing revenues when the services are provided. Accordingly, revenues for
each year include both services billed and services provided but unbilled at the
end of the year. The unbilled services are accrued based on a calculation of the
unbilled time for domestic and international telephone and data transmission
services and the average telephone rates in effect during the corresponding year
in which the services are rendered. The related cost of such services is
included in Operating costs in the Consolidated Statement of Income. The
estimated amounts recorded for unbilled services and related costs do not differ
materially from the actual amounts of services normally billed within the
following two months and the actual costs incurred and paid in the subsequent
period.

s)    Translation of foreign currency financial statements

In accordance with BT64, the financial statements of foreign subsidiaries whose
activities do not constitute an extension of the Chilean operation and which
operate in countries that are exposed to significant risks, restrictions or
inflation/exchange fluctuations are remeasured using the U.S. dollar as the
functional currency and then translated into Chilean pesos at the year end
exchange rate. Accordingly, the financial statements of the Company's
subsidiaries in South America (principally Argentina, Brazil Peru) are prepared
in accordance with Chilean GAAP, with the exception of price-level restatement,
and are then remeasured into U.S. dollar as follows:

o     Monetary assets and liabilities are translated at year-end rates of
      exchange between the U.S. dollar and the local currency.

o     All non-monetary assets and liabilities and shareholders' equity are
      translated at historical rates of exchange between the U.S. dollar and the
      local currency.

o     Income and expense accounts are translated at average rates of exchange
      between the U.S. dollar and the local currency.

o     Any exchange differences are included in the results of operations for the
      period.


                                     F - 20
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Banco de Chile's branches in the United States of America use the U.S. dollar as
the measurement currency as they are not considered an extension of their parent
company and function in a country with a stable currency.

On the Parent Company's books, price-level restatements based on Chilean
inflation are applied to the beginning balance of the investment account and
then the participation in the net income of the subsidiary (determined as
described above) is recorded. The Parent Company then compares this value to its
participation in the equity of the investee as remeasured into U.S. dollars, or
in the case of Banco de Chile's branches which were already in U.S. dollars and
translated into Chilean pesos at the prevailing rate as of the balance sheet
date. The difference is recorded as an adjustment to the investment account with
a corresponding adjustment to the cumulative translation account in
Shareholders' equity.

In addition, as permitted by BT64, the Company records the effect of foreign
exchange adjustments arising from financial instruments that hedge the exposure
of foreign investments, Accordingly, the excess of exchange losses over related
price-level restatements is also charged to the Cumulative translation account.

t)    Changes of interest when investee sells stock

When an investee increases capital through sales of additional shares, the
Company's percentage ownership interest in the investee may increase or decrease
depending on whether all shareholders subscribe their proportional amount. As a
result, the Company's proportional carrying amount per share may vary; any
differences that arise are reflected as non-operating gains or losses in the
Consolidated Statements of Income in the period the change of interest
transaction occurs.

u)    Accumulated deficit during development period

In accordance with Circular No.981 of the SVS, disbursements made during the
organization and start-up stage that are not assignable to tangible or
intangible assets are included in Shareholders' equity in the Balance Sheets
under the caption Accumulated Deficit During Development Period (see also Note 2
j)).

v)    Basis of translation to U.S. dollars

The Company maintains its accounting records and prepares its financial
statements in Chilean pesos. The United States dollar amounts disclosed in the
accompanying Consolidated Financial Statements (except the footnotes) as of and
for the year ended December 31, 2003 are presented solely for the convenience of
the reader at the December 31, 2003 exchange rate of Ch$593.80 per US$1. This
translation should not be construed as representing that the Chilean peso
amounts actually represent or have been, or could be, converted into United
States dollars at such rate or any other rate. All other U.S. dollar amounts
included in the footnotes represent the actual dollars at the date of the
transaction.

w)    Financial derivative instruments

The Company maintains forward foreign exchange contracts and foreign exchange
swap contracts to cover the risks of fluctuation in exchange rates between the
Chilean peso, U.S. dollar and Brazilian real. The Company enters into forward
foreign exchange contracts to mitigate the risk that cash flows will be
adversely affected by changes in exchange rates resulting from the collection of
receivables from international customers and the purchase of supplies and raw
materials and also to cover U.S. dollar


                                     F - 21
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

denominated debt. The Company also utilizes interest rate swap agreements to
manage interest rate risk on its floating rate debt portfolio.

These derivative instruments are recorded in the balance sheet at fair value as
other assets or liabilities, with a credit or charge to income, respectively.

NOTE 3 - PRICE-LEVEL RESTATEMENT

The application of price-level restatement as described in Note 2 b) resulted in
net (charges)/credits to income, the effect of which is summarized as follows:

<TABLE>
<CAPTION>
                                                                                     Credit (charge) Year ended December 31,
                                                                              -------------------------------------------------
                                                                                  2001               2002              2003
                                                                              ------------       ------------      ------------
                                                                                  ThCh$              ThCh$             ThCh$
<S>                                                                            <C>                <C>                <C>
Property, plant and equipment, net ..................................            8,716,302          8,098,023         2,677,055
Inventories .........................................................           (2,862,369)         2,154,807         2,316,612
Other current assets ................................................            1,099,357            445,991           182,095
Other assets ........................................................           31,174,542         30,043,249         9,806,818
Other non-monetary liabilities ......................................           (6,266,154)        (3,136,451)       (1,203,860)
Shareholders' Equity, net ...........................................          (20,543,320)       (20,349,191)       (6,305,149)
Income and expense accounts in terms of period-end
  constant Chilean pesos ............................................              (98,575)           847,046          (537,092)
Net adjustment of assets and liabilities indexed in UFs .............          (15,154,666)       (13,030,136)       (5,044,544)
                                                                              ------------       ------------      ------------
     Subtotal .......................................................           (3,934,883)         5,073,338         1,891,935
Net adjustment of assets and liabilities denominated in
  foreign currency ..................................................           (7,125,421)       (14,058,234)          984,383
                                                                              ============       ============      ============
     Price-level restatement, net ...................................          (11,060,304)        (8,984,896)        2,876,318
                                                                              ============       ============      ============
</TABLE>

NOTE 4 - TIME DEPOSITS

Time deposits are summarized as follows:

<TABLE>
<CAPTION>
                                                                                                        At December 31,
                                                                                                 ----------------------------
                                                                                                     2002             2003
                                                                                                 -----------      -----------
                                                                                                     ThCh$            ThCh$
<S>                                                                                                <C>             <C>
Time deposits in UF .................................................                              2,427,590       22,444,102
Time deposits in Chilean pesos ......................................                                134,730        6,709,780
Time deposits in U.S. dollars .......................................                              2,399,510       13,130,684
Time deposits in other foreign currencies ...........................                              1,835,536           58,362
                                                                                                 -----------      -----------
        Total .......................................................                              6,797,366       42,342,928
                                                                                                 ===========      ===========
</TABLE>


                                     F - 22
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 5 - MARKETABLE SECURITIES

Marketable securities are summarized as follows:

<TABLE>
<CAPTION>
                                                                                       At December 31,
                                                                              --------------------------------
                                                                                 2002                  2003
                                                                              -----------          -----------
                                                                                 ThCh$                 ThCh$
<S>                                                                             <C>                  <C>
Marketable equity securities .......................................              256,769              232,340
Money market funds .................................................            1,971,302            5,918,525
Other ..............................................................               16,090                1,425
                                                                              -----------          -----------
        Total marketable securities ................................            2,244,161            6,152,290
                                                                              ===========          ===========
</TABLE>

NOTE 6 - ACCOUNTS RECEIVABLE

a)    Accounts receivable are summarized as follows:

<TABLE>
<CAPTION>
                                                                                       At December 31,
                                                                              --------------------------------
                                                                                 2002                  2003
                                                                              -----------          -----------
                                                                                 ThCh$                 ThCh$
<S>                                                                           <C>                  <C>
Trade accounts receivable ..........................................           69,575,190           75,887,446
Notes receivable ...................................................           12,795,834           11,276,001
Other accounts receivable ..........................................            4,428,563            5,084,832
Allowance for doubtful accounts ....................................          (14,482,264)         (14,538,468)
                                                                              -----------          -----------
        Total ......................................................           72,317,323           77,709,811
                                                                              ===========          ===========
</TABLE>

b)    Changes in the allowance for doubtful accounts for the years ended
      December 31, 2001, 2002 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                                                            At December 31,
                                                                             ----------------------------------------------
                                                                                2001               2002             2003
                                                                             -----------       -----------      -----------
                                                                                ThCh$              ThCh$            ThCh$
<S>                                                                           <C>               <C>              <C>
Balance at beginning of year .......................................          16,018,278        14,886,170       14,482,264
Price-level restatements ...........................................            (461,192)         (399,809)        (143,388)
Effect of devaluation of foreign currencies ........................                  --        (3,028,390)        (216,708)
Effect of non-consolidation of the subsidiary Lucchetti Peru .......                  --        (1,159,412)              --
Charged to expenses ................................................           5,975,661         7,401,360        2,931,499
Write-offs .........................................................          (6,646,577)       (3,217,655)      (2,515,199)
                                                                             -----------       -----------      -----------
       Balance at end of year ......................................          14,886,170        14,482,264       14,538,468
                                                                             ===========       ===========      ===========
</TABLE>


                                     F - 23
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 7 - INVENTORIES

a)    Inventories are summarized as follows:

<TABLE>
<CAPTION>
                                                                                            At December 31,
                                                                                  ----------------------------------
                                                                                      2002                  2003
                                                                                  ------------          ------------
                                                                                      ThCh$                 ThCh$
<S>                                                                                 <C>                   <C>
Raw materials ..........................................................            18,926,749            19,754,557
Finished goods .........................................................            19,680,808            18,541,898
Work-in-process ........................................................             9,870,410            10,736,309
Supplies ...............................................................             7,905,897             6,831,786
Other ..................................................................             7,667,739             6,109,883
                                                                                  ------------          ------------
        Inventories, net ...............................................            64,051,603            61,974,433
                                                                                  ============          ============
</TABLE>

Inventories are presented net of the allowance for obsolescence (ThCh$3,172,701,
ThCh$4,613,333 and ThCh$4,158,291 in 2001, 2002 and 2003, respectively).

b)    Changes in the allowance for obsolescence for the year ended December 31,
      2001, 2002 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                                                             At December 31,
                                                                              -----------------------------------------------
                                                                                 2001               2002              2003
                                                                              -----------       -----------       -----------
                                                                                 ThCh$              ThCh$             ThCh$
<S>                                                                             <C>               <C>              <C>
Balance at beginning of year ...........................................        2,990,281         3,172,701         4,613,333
Price level restatements ...............................................          (87,034)          (89,403)          (45,678)
Foreign exchange rate differences ......................................           48,085          (433,576)          (82,538)
Effect of de-consolidation of the subsidiary Lucchetti Peru ............               --          (103,202)               --
Reversal of allowance Madeco-Decker ....................................               --                --        (1,026,745)
Transfer to long term other assets .....................................          229,088          (148,759)               --
Transfer from long term other assets ...................................               --                --           402,958
Charged to expenses ....................................................          688,384         2,507,412           787,153
Write-offs .............................................................         (696,103)         (291,840)         (490,192)
                                                                              -----------       -----------       -----------
       Balance at end of year ..........................................        3,172,701         4,613,333         4,158,291
                                                                              ===========       ===========       ===========
</TABLE>

NOTE 8 - OTHER CURRENT ASSETS

Other current assets are summarized as follows:

<TABLE>
<CAPTION>
                                                                                            At December 31,
                                                                                  ----------------------------------
                                                                                      2002                  2003
                                                                                  ------------          ------------
                                                                                      ThCh$                 ThCh$
<S>                                                                                <C>                    <C>
Securities purchased under agreements to resell ........................            80,161,466            29,508,600
Recoverable income taxes, net (see Note 16 a)) .........................             6,671,584             5,413,868
Prepaid expenses .......................................................             2,529,527             2,577,899
Deferred income taxes, net (see Note 16 b)) ............................             2,425,144             2,238,596
Property, plant and equipment held for sale, net .......................            10,617,572             6,768,020
Derivative financial instruments .......................................             2,567,513                 6,256
Dividends receivable ...................................................             2,172,481             3,196,235
Other ..................................................................             2,512,472             2,085,072
                                                                                  ------------          ------------
        Total ..........................................................           109,657,759            51,794,546
                                                                                  ============          ============
</TABLE>

Property, plant and equipment held for sale are shown net of allowances to
reflect those assets at their net realizable values. Such allowances amounted to
ThCh$9,409,229 in 2002 and ThCh$6,885,402 in 2003.


                                     F - 24
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 9 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                                                                  At December 31,
                                                                                        ----------------------------------
                                                                                            2002                  2003
                                                                                        ------------          ------------
                                                                                            ThCh$                 ThCh$
<S>                                                                                     <C>                   <C>
Land ...............................................................                      23,824,848            21,919,385
                                                                                        ------------          ------------

Buildings and infrastructure .......................................                     190,726,229           175,753,474
Accumulated depreciation ...........................................                     (55,364,068)          (58,272,691)
                                                                                        ------------          ------------
        Subtotal buildings and infrastructure, net .................                     135,362,161           117,480,783
                                                                                        ------------          ------------

Machinery and equipment ............................................                     407,439,349           362,762,179
Accumulated depreciation ...........................................                    (226,590,077)         (215,487,020)
                                                                                        ------------          ------------
        Subtotal machinery and equipment, net ......................                     180,849,272           147,275,159
                                                                                        ------------          ------------

Other property, plant and equipment:
Leased assets ......................................................                      15,325,207            18,098,244
Construction in progress ...........................................                       8,352,378             3,039,893
Furniture and fixtures .............................................                       9,794,684             8,950,975
Office equipment ...................................................                       4,369,608             3,800,998
Tools and others ...................................................                       2,629,017             2,237,074
Computer software ..................................................                       5,269,403             6,727,036
Computers ..........................................................                       1,113,143             1,126,456
Materials and replacement parts ....................................                       1,501,136             1,797,865
Other property, plant and equipment ................................                       7,333,877             5,160,845
Accumulated depreciation ...........................................                     (20,654,433)          (21,377,538)
                                                                                        ------------          ------------
        Subtotal other property, plant and equipment, net ..........                      35,034,020            29,561,848
                                                                                        ------------          ------------

Revaluation from technical appraisals:
Land ...............................................................                       6,086,488             4,499,135
Buildings and infrastructure .......................................                      18,061,506             8,478,064
Machinery and equipment ............................................                       2,089,249             2,080,490
Accumulated depreciation ...........................................                      (4,916,220)           (5,517,694)
                                                                                        ------------          ------------
        Subtotal revaluation from technical appraisals, net ........                      21,321,023             9,539,995
                                                                                        ------------          ------------
               Total property, plant and equipment, net ............                     396,391,324           325,777,170
                                                                                        ============          ============
</TABLE>

Depreciation expense for the years ended December 31 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                            Years ended December 31,
                                                                                   ----------------------------------------
                                                                                      2001           2002           2003
                                                                                   ----------     ----------     ----------
                                                                                      ThCh$          ThCh$          ThCh$
<S>                                                                                <C>            <C>            <C>
Operating expenses .................................................               28,685,131     26,003,517     24,993,984
Administration and sales expenses ..................................                3,323,196      3,446,653      3,673,932
Non-operating expenses .............................................                       --      3,025,163      1,800,691
                                                                                   ----------     ----------     ----------
Total ..............................................................               32,008,327     32,475,333     30,468,607
                                                                                   ==========     ==========     ==========
</TABLE>

Depreciation expense included depreciation of the revaluation from technical
appraisals of ThCh$469,825, ThCh$492,336 and ThCh$504,500 in 2001, 2002, and
2003, respectively.


                                     F - 25
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

During the month of January 2002, the production activities of the Quilmes,
Barracas, San Luis and Llavallol properties of Madeco's subsidiary Decker
Indelqui S.A. were suspended. Property, plant and equipment involved in the
temporary shutdown had a net carrying value of approximately ThCh$25,935,400
(historic pesos).

In light of the economic situation in Argentina, Madeco wrote-down fixed assets
and certain other long-term assets in the amount of ThCh$12,834,224 (historic
pesos) and ThCh$4,694,239 (historic pesos) in 2001 and 2002, respectively. The
charge was included in Other non-operating expenses (see Note 20).

During the last quarter of 2003, as a consequence of the good performance of
copper pipe exports from Chile and the increase in Argentinean demand for such
products, Madeco's indirect subsidiary Decker-Indelqui S.A. restarted its
industrial activities with the production of copper pipes and metal casting at
the plants of Barracas and Llavallol, respectively. This reopening resulted in
an increase in personnel of approximately 50 persons, which include workers and
administrators, aimed at production once normal operation level has been
reached.

The revaluation from technical appraisals is being amortized over the remaining
lives of the respective assets.

Financing costs capitalized during construction periods amounted to ThCh$658,782
and ThCh$313,182 during 2001 and 2002, respectively. No financing costs were
capitalized during 2003.

NOTE 10 - INVESTMENTS

The carrying value of investments in related companies and other investments are
a follows:

<TABLE>
<CAPTION>
                                                                         Percentage owned              At December 31,
                                                                      ---------------------------------------------------------
                                                                         2002         2003           2002              2003
                                                                      ----------   --------------------------      ------------
                                                                          %            %             ThCh$             ThCh$
<S>                                                                                               <C>               <C>
Related Companies
IRSA (1) ...................................................             50.00        50.00       134,854,254        86,057,019
Banco de Chile (2) .........................................             20.22        20.22       126,233,586       140,688,448
SM Chile series "A","B","D" and "E" (2) ....................             51.35        51.35       182,486,499       187,404,176
Entel S.A. ("Entel") (3) ...................................              5.69         5.69        31,316,100        33,221,487
Habitaria (4) ..............................................             50.00        50.00         8,782,482         8,446,266
Lucchetti Peru (5) .........................................            100.00       100.00                --                --
Other ......................................................           Various      Various        14,198,019        12,969,881
                                                                                                 ------------      ------------
        Subtotal ...........................................                                      497,870,940       468,787,277
Other investments ..........................................                                          222,112            90,456
                                                                                                 ------------      ------------
        Total ..............................................                                      498,093,052       468,877,733
                                                                                                 ============      ============
</TABLE>


                                     F - 26
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Proportional share of net income (losses) of equity method investment are as
follows:

<TABLE>
<CAPTION>
                                                                                    Year ended December 31,
                                                                        --------------------------------------------
Company                                                                    2001             2002             2003
-------                                                                 -----------     -----------      -----------
                                                                           ThCh$            ThCh$            ThCh$
<S>                                                                      <C>             <C>              <C>
Proportional share of net income
   IRSA (1) ................................................             12,240,173       6,819,413       15,992,425
   Banco Edwards (2) .......................................              5,378,652              --               --
   Banco de Chile (2) ......................................              3,859,618      10,746,963       26,397,287
   SM Chile series "A","B","D" and "E" (2) .................             12,293,061       4,831,011       11,649,426
   Entel (3) ...............................................              3,205,475       2,360,868        3,413,981
   Habitaria (4) ...........................................                217,063         453,370               --
   Other ...................................................                660,565         721,743          541,688
                                                                        -----------     -----------      -----------
        Subtotal ...........................................             37,854,607      25,933,368       57,994,807
                                                                        -----------     -----------      -----------
Proportional share of net loss
   Habitaria (4) ...........................................                     --              --         (336,216)
   Other ...................................................               (141,223)       (498,183)        (262,223)
                                                                        -----------     -----------      -----------
        Subtotal ...........................................               (141,223)       (498,183)        (598,439)
                                                                        -----------     -----------      -----------
               Total .......................................             37,713,384      25,435,185       57,396,368
                                                                        ===========     ===========      ===========
</TABLE>

(1)   IRSA is a joint venture holding company through which the Company's
      ownership interests in CCU is held.

(2)   Financial Services investment

SM Chile and Banco de Chile

As indicated in Note 1, between October 18, 1999 and December 30, 1999, Quinenco
acquired an 8.47% voting interest in Banco de Chile through the purchase of
shares of Banco de Chile and its holding company SM Chile. Until December 31,
2001, prior to the merger of Banco de Chile and Banco Edwards on January 1,
2002, SM Chile directly owned 28% of Banco de Chile and indirectly held an
additional 63.64% through its wholly owned subsidiary, SAOS.

(2)   Financial Services investment (continued)

Through a public tender offer which was completed on March 6, 2001, the Company
acquired 28.4 million; 550.0 million; 21.5 million and 29.2 million series A, B,
D and E shares of SM Chile, respectively, for a total price of ThCh$36,212,201
(historical). This investment was further increased by Quinenco on March 27,
2001 through the acquisitions from Empresas Penta and other companies of 1,466.8
million shares of Banco de Chile and 79.5 million, 4,144.1 million, 90.7 million
and 18.6 million series A, B, D and E shares of SM Chile respectively for a
total price of ThCh$304,127,162 (historical). The purchases during 2001
generated goodwill of ThCh$220,679,155 (historical). As of December 31, 2001,
the Company held a 51.35% interest in SM Chile and a further 4.27% interest in
Banco de Chile. As a result, Quinenco exercises control over Banco de Chile.

The voting rights of 41,179 million shares of Banco de Chile belonging to SM
Chile and to SAOS are exercised by the shareholders of SM Chile who attend the
bank's shareholders' meetings. The rights corresponding to the shares owned by
SM Chile are exercised by all of the series' shareholders, (i.e. Series A, B, D,
and E). Those rights corresponding to the shares owned by SAOS are exercised by
Series A, B and D shareholders. As a consequence of the above, the Company held
52.66% of the total voting rights of Banco de Chile as of December 31, 2001.


                                     F - 27
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Banco Edwards

Between September 2, 1999 and October 26, 1999, Quinenco acquired a 51.17%
controlling interest in Banco Edwards through a Purchase and Sale Agreement
negotiated with Banco Edwards' controlling shareholder group, subsequent
purchases on the open market, and a private transaction. These purchases
totaling ThCh$167,859,780 (historic pesos) generated goodwill of ThCh$86,478,915
(historical).

On December 9, 1999, Banco Edwards issued 1,591,836,735 new shares, through a
rights offering. As a result of the offering, the Company acquired 814,635,802
shares for a total of ThCh$40,758,537 (historic pesos), thus maintaining its
holding of 51.17%. In addition, the Company subscribed for an additional
414,018,557 shares and transferred them to J. Ergas Inversiones y Rentas Ltda.
for a price of UF1,238,290 pursuant to a three-year interest bearing note.

Merger of Banco de Chile and Banco Edwards

In shareholders' meetings held on December 6, 2001 and December 18, 2001, in
Banco de Chile and Banco Edwards respectively, it was agreed to merge the two
banks. Pursuant to authorizations from the SBIF and a majority of the
shareholders from both banks, Banco de Chile, a 52.66%-owned subsidiary of the
Company and Banco Edwards, a 51.17%-owned subsidiary of the Company, merged
operations effective January 1, 2002. As a consequence of the merger, Banco de
Chile, the surviving entity and legal successor, absorbed Banco Edwards. Under
the terms of exchange, Banco Edwards constituted 34% and Banco de Chile, 66% of
the assets, liabilities and equity of the surviving entity. Each Banco Edwards
share was exchanged for 3.135826295 shares of Banco de Chile common stock.
Following the merger, Banco de Chile had 68,079,783,605 shares outstanding of
common stock, all of the same series. As a result of the merger, the Company
held a 51.35% interest in SM Chile and a further 20.22% interest in Banco de
Chile.

SM Chile, after the merger of Banco de Chile and Banco Edwards on January 1,
2002, owned a direct interest of 18.48% in Banco de Chile and indirectly held an
additional 42.0% through its wholly-owned subsidiary SAOS.

(2)   Financial Services investment (continued)

As of December 31, 2002 and 2003, the Company owns 52.16% of the voting rights
and is entitled to 29.15% of the dividend rights in the merged bank.

The voting rights and the economic interest in Banco de Chile held by Quinenco,
directly and indirectly are summarized as follows:

                                         2001         2002 (1)        2003 (1)
                                          %               %               %

Voting Rights                           52.66           52.16           52.16
Economic Interest (2)                   17.80           29.16           29.16

(1)   The interests held in 2003 and 2002 are of the merged bank

(2)   Economic interest is the Company's share in the earnings or losses of the
      subsidiary through dividends, which is not always equal to the Company's
      voting interest.


                                     F - 28
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Central Bank Subordinated Debt and dividend rights

During the 1982-1983 economic crisis, the Chilean banking system experienced
significant instability due to, among other things, a recession in most of the
world's major economies accompanied by high international interest rates, an
overvalued peso, a lack of stringent banking regulation and ineffective credit
policies at most Chilean banking organizations. Because of the financial crisis,
the Central Bank and the Chilean government had to provide assistance to most
Chilean private-sector banks.

Subsequent to the 1982-1983 economic crisis, most major Chilean banks sold
certain of their nonperforming loans to the Central Bank at face value on terms
that included a repurchase obligation by the banks. This repurchase obligation
was later exchanged for subordinated debt of the banks issued in favor of the
Central Bank. Pursuant to Law 18,818 of 1989, the banks were permitted to
repurchase the portfolio of non-performing loans previously sold to the Central
Bank for a price equal to the economic value of such loans, provided that the
bank assumed a subordinated obligation equal to the difference between the face
value of the loans and the economic value paid.

The modification of the subordinated debt set forth in Law No.18,818 on November
10, 1989, suspended the dividend rights of the Series A shares of SM Chile (SM
Chile is the predecessor entity of Banco de Chile, and was formerly known as
Banco de Chile at the time of the banking crisis) for the period of time during
which the subordinated debt with the Chilean Central Bank has not been
extinguished.

In accordance with the above, the surpluses generated by SM Chile after
provision of the annual installment of the subordinated debt, can only be
distributed as dividends to shareholders of Series B, D and E Shares of SM
Chile. Series A shares have no right to receive dividends while the subordinated
debt obligation is outstanding. As a result, the equity value of these shares is
calculated based on the shareholders' equity of SM Chile, excluding income.

(2) Financial Services investment (continued)

Dividends received

The dividends received in 2002, relate to income earned during 2001 and are
therefore based on the individual net income of each bank before the merger,
although the dividends have been paid by the merged bank. The participation of
the Company in Banco de Chile's total dividend distribution was equal to 17.8%
of Banco de Chile's net income, before the merger and 51.17% of Banco Edwards'
net income before the merger.

The dividends received in 2003, relate to income earned during 2002 and are
therefore based on the participation of the Company in Banco de Chile's total
dividends equal to 29,15%.

(3) Entel

During 1999, Quinenco acquired a 14.31% interest in Entel through an agreement
with Samsung Chile Holding Ltda. and open market purchases. During 2000 and
2001, Quinenco sold 2,000,000 and 18,920,948 shares of Entel (equivalent to a
0.63% interest and 7.99%), respectively, generating non-operating income of
ThCh$7,912,017 in 2000 and ThCh$51,566,629 in 2001, (see Note 20). The Company
accounts for this investment under the equity method as it exerts significant
influence through Board of Director representation.


                                     F - 29
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(4) Habitaria

On April 26, 2001, the Company participated in the proportional capital increase
of the related company Habitaria, purchasing 2,090,300 shares in the amount of
ThCh$950,648 (historical), maintaining its participation of 50% of Habitaria's
capital.

(5) Lucchetti Peru

Lucchetti has not consolidated the subsidiary Lucchetti Peru as of December 31,
2003 and 2002 as a result of action taken by Peruvian government as detailed in
Note 19 d). This action resulted in the closure of the plant and the start of a
process to liquidate its assets. This decision is based on the provisions of
BT64 and Resolution No.01642 of the SVS dated March 11, 2003, which authorized
the non-consolidation of Lucchetti Peru. The Company has therefore used the
equity method to account for this investment and based on the analysis that the
Company has carried out, has recorded a provision for the full amount of the
investment, leaving a balance of Ch$1. The Company's participation in the net
loss incurred during the year-ended December 31, 2003 and 2002 and the charge
for impairment are included in non-operating expenses.

NOTE 11 - GOODWILL

Goodwill and negative goodwill are summarized as follows:

<TABLE>
<CAPTION>
                                                                               At December 31,
                                                                    ----------------------------------
                                                                        2002                  2003
                                                                    -------------        -------------
                                                                        ThCh$                 ThCh$
<S>                                                                   <C>                  <C>
Goodwill ............................................                 353,856,947          327,283,651
Negative goodwill ...................................                  (8,887,140)         (13,356,789)
                                                                    -------------        -------------
        Total .......................................                 344,969,807          313,926,862
                                                                    =============        =============
</TABLE>

Goodwill (net) at December 31 of each year arose from the purchase of the
following investments:

<TABLE>
<CAPTION>
                                                                               At December 31,
                                                                    ----------------------------------
Company                                                                 2002                  2003
                                                                    -------------        -------------
                                                                        ThCh$                 ThCh$
<S>                                                                   <C>                  <C>
Banco de Chile and SM Chile Series B, D and E .......                 242,366,428          228,956,022
Banco Edwards .......................................                  72,789,959           68,422,561
Madeco and subsidiaries .............................                  38,159,828           28,963,708
Entel ...............................................                      31,738               30,089
Others ..............................................                     508,994              911,271
                                                                    -------------        -------------
        Total .......................................                 353,856,947          327,283,651
                                                                    =============        =============
</TABLE>

The amortization of goodwill is included in non-operating expense each year
(ThCh$28,512,937 in 2001, ThCh$20,737,172 in 2002 and ThCh$20,094,838 in 2003).


                                     F - 30
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Negative goodwill (net) at December 31 of each year arose from the purchase of
the following investments:

<TABLE>
<CAPTION>
                                                                                 At December 31,
                                                                        -------------------------------
Company                                                                     2002               2003
                                                                        ------------       ------------
                                                                            ThCh$              ThCh$
<S>                                                                        <C>               <C>
Banco de Chile y SM Chile Series A ...............................           462,449            441,626
VTR and subsidiaries .............................................         4,396,518          3,622,871
Madeco and subsidiaries ..........................................            55,969          5,525,470
Entel ............................................................         2,455,843          2,349,664
Agricola El Penon S.A ............................................           986,497            916,697
Other ............................................................           529,864            500,461
                                                                        ------------       ------------
        Total ....................................................         8,887,140         13,356,789
                                                                        ============       ============
</TABLE>

The amortization of negative goodwill is included in non-operating income in
each year (ThCh$9,279,335 in 2001, ThCh$1,907,919 in 2002 and ThCh$23,523,313 in
2003).

NOTE 12 - OTHER NON-CURRENT ASSETS

Other non-current assets are summarized as follows:

<TABLE>
<CAPTION>
                                                                               At December 31,
                                                                        -------------------------------
                                                                            2002               2003
                                                                        ------------       ------------
                                                                            ThCh$              ThCh$
<S>                                                                       <C>                <C>
Long-term notes and account receivable ...........................         2,418,290          2,165,710
Recoverable tax incentives in Argentina ..........................         1,400,534          1,030,239
Recoverable VAT in Lucchetti Peru and VTR ........................           273,170            273,136
Intangibles, net .................................................           922,063            927,058
Bond issuance costs ..............................................         8,311,039          6,875,948
Legal deposits in guarantee ......................................           342,693            284,171
Fixed assets held-for-sale .......................................         3,168,252          5,980,106
Recoverable VAT in Argentina .....................................           263,730            181,901
Deferred income taxes, net (see Note 16 b)) ......................        14,500,604         13,646,144
Slow moving inventories, net .....................................           299,198            142,520
Other ............................................................         1,285,889            312,610
                                                                        ------------       ------------
        Total other non-current assets ...........................        33,185,462         31,819,543
                                                                        ============       ============
</TABLE>


                                     F - 31
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 13 - SHORT-TERM BANK LOANS

Short-term bank loans are summarized as follows:

<TABLE>
<CAPTION>
                                                                                     At December 31,
                                                                              -----------------------------
                                                                                  2002             2003
                                                                              ------------     ------------
                                                                                  ThCh$            ThCh$
<S>                                                                            <C>               <C>
Payable In:
United States dollars .................................................         64,668,793        5,685,944
Other foreign currencies ..............................................          1,947,159        5,629,813
Inflation-linked units (UFs) ..........................................          8,366,227          129,193
Chilean pesos (not indexed) ...........................................         33,420,182        7,266,971
                                                                              ------------     ------------
        Total short-term bank loans ...................................        108,402,361       18,711,921
                                                                              ============     ============
</TABLE>

<TABLE>
<CAPTION>
                                                                                     At December 31,
                                                                              -----------------------------
                                                                                  2002             2003
                                                                              ------------     ------------
                                                                                   %                 %
<S>                                                                                  <C>              <C>
Year-end weighted average interest rates:
Loans in United States dollars ........................................               4.95             4.59
Loans in Euros ........................................................               4.20               --
Other foreign currencies ..............................................              32.82            22.50
Loans in inflation-linked units (UFs) .................................               5.86             2.40
Loans in Chilean pesos (not inflation indexed) ........................               5.73             5.73
</TABLE>

NOTE 14 - ACCRUED AND OTHER LIABILITIES

Accrued and other liabilities are summarized as follows:

a)    Current liabilities

<TABLE>
<CAPTION>
                                                                                     At December 31,
                                                                              -----------------------------
                                                                                  2002             2003
                                                                              ------------     ------------
                                                                                  ThCh$            ThCh$
<S>                                                                             <C>              <C>
Withholdings ..........................................................          3,552,357        2,697,989
Accrued employee vacation expenses ....................................          2,634,706        2,666,334
Purchase price accruals ...............................................          1,864,597               --
Unearned revenues .....................................................            863,948        1,673,852
Restructuring expenses ................................................          1,120,159        1,013,561
Provision for anticipated losses on construction contracts ............            259,010          200,135
Staff severance indemnities (1) .......................................          1,199,368        1,809,495
Remuneration and consulting services ..................................          3,063,592        2,334,274
Project expenses and suppliers ........................................          2,378,143        2,465,619
Dividends payable .....................................................            574,545       12,447,400
Advertising, promotions and corporate image ...........................            138,390          172,312
Employee benefits .....................................................            348,189          582,163
Property, municipal and other taxes ...................................            918,095          158,214
Import and export costs ...............................................             71,501          153,261
Telephone access charges ..............................................          1,048,285          580,895
Effect of carrying derivative financial instruments at fair value .....             23,916        1,604,310
Provisions for pending lawsuits .......................................            452,352          412,849
Bank fees payable .....................................................            368,650               --
Liquidation of Optel Ltda. (Brazil) (2) ...............................                 --        1,882,564
Other .................................................................          2,715,633        2,110,674
                                                                              ------------     ------------
        Total accrued expenses and other liabilities ..................         23,595,436       34,965,901
                                                                              ============     ============
</TABLE>


                                     F - 32
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

b)    Long-term liabilities

<TABLE>
<CAPTION>
                                                                                             At December 31,
                                                                                   -----------------------------------
                                                                                       2002                  2003
                                                                                   -------------         -------------
                                                                                       ThCh$                 ThCh$
<S>                                                                                    <C>                   <C>
Provisions for contingencies (Note 19) ......................................          1,908,133             4,128,635
Employee severance indemnities (1) ..........................................          2,177,984             1,415,194
Provisions for pending lawsuits .............................................          2,983,378             2,678,224
Effect of carrying derivative financial instruments at fair value ...........            265,848                    --
Other .......................................................................            100,858               642,296
                                                                                   -------------         -------------
        Total accrued expenses ..............................................          7,436,201             8,864,349
                                                                                   =============         =============
</TABLE>

(1)   Hoteles Carrera, Madeco and Lucchetti have entered into collective
      bargaining agreements with their employees, under which each employee is
      entitled to approximately one month's remuneration for each year of
      service, payable upon termination of employment. These subsidiaries
      account for their obligation to pay these vested indemnities using a
      present value method applying real discount rates between 6% and 7% in
      2002 and 2003, except for Hoteles Carrera which has accounted for its
      obligation using the current value method in accordance with Technical
      Bulletin No.8 of the Chilean Association of Accountants.

(2)   At December 31, 2003 the subsidiary Madeco made a provision against its
      50% participation in Optel Ltda. and accrued for certain other legal
      expenses for a total of ThCh$4,9l7,485 as a result of the unfavorable
      decision in the arbitration proceedings against Corning International
      Corporation, owner of the other 50% (See Note 19 f)).

NOTE 15 - LONG-TERM DEBT AND BONDS PAYABLE

a)    Long-term debt

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
                                                                                             At December 31,
                                                                                   -----------------------------------
                                                                                       2002                  2003
                                                                                   -------------         -------------
                                                                                       ThCh$                 ThCh$
<S>                                                                                 <C>                    <C>
Long-term bank loans ........................................................        414,526,289           365,068,555
Long-term accounts payable ..................................................          8,476,651             9,201,481
Other long-term liabilities .................................................            164,536               784,927
                                                                                   -------------         -------------
        Total ...............................................................        423,167,476           375,054,963
Less: Current portion (1) ...................................................       (117,652,904)          (32,932,920)
                                                                                   -------------         -------------
        Long-term debt ......................................................        305,514,572           342,122,043
                                                                                   =============         =============
</TABLE>

(1)   The current portion of long-term debt is reflected on the balance sheet
      together with the short-term portion of bonds payable totaling
      ThCh$19,634,339 and ThCh$48,581,497 at December 31, 2002 and 2003,
      respectively.

<TABLE>
<S>                                                                                        <C>                    <C>
Year-end weighted average interest rates:
Long-term bank loans in United States dollars and others currencies .........               3.41%                 3.38%
Long-term bank loans in UF ..................................................               3.87%                 4.09%
Long-term accounts payable ..................................................              12.19%                 4.46%
Other long-term liabilities .................................................                 --                    --
</TABLE>


                                     F - 33
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

b)    Bonds payable

Bonds have been issued by the following subsidiaries:

<TABLE>
<CAPTION>
                                                                            Original
                                                                         issuance in UFs                At December 31,
                                                                         ---------------       ------------------------------
Subsidiary:                                                                                        2002              2003
                                                                                               ------------      ------------
                                                                                                   ThCh$             ThCh$
<S>                                                                         <C>                  <C>               <C>
Compania de Telefonos de Coyhaique S.A. ("Telcoy") (1) ......                 130,000               666,528           343,590
Telsur (2) ..................................................                 450,000             3,581,724         2,761,043
Telsur (3) ..................................................                 300,000             4,153,214         3,931,137
Telsur (4) ..................................................                 500,000             6,673,732         5,803,046
Telsur (5) ..................................................                 500,000             8,486,944         8,139,714
Telsur (6) ..................................................                 400,000             6,796,565         4,532,009
Telsur (7) ..................................................                 600,000            10,195,266        10,197,018
Madeco (8) ..................................................                 693,000             1,665,582                --
Madeco (9) ..................................................               2,500,000            42,404,385        33,969,576
Madeco (10) .................................................               1,500,000            25,625,529        23,535,975
Quinenco (11) ...............................................               2,000,000            34,190,102        34,190,068
Quinenco (12) ...............................................               4,500,000            76,927,733        69,234,888
                                                                                               ------------      ------------
        Total ...............................................                                   221,367,304       196,638,064
Less: Current portion .......................................                                   (19,634,339)      (48,581,497)
                                                                                               ------------      ------------
        Long-term portion ...................................                                   201,732,965       148,056,567
                                                                                               ============      ============
</TABLE>

(1)   In September 1994, Telcoy, a subsidiary of Telsur, issued bonds under the
      following terms:

Amount issued             :      UF130,000 composed of 260 Series A bonds of
                                 UF500 each.

Term                      :      Ten years (two years of grace and eight years
                                 of principal repayment)

Principal amortization    :      Sixteen equal semi-annual installments from
                                 March 1, 1997. As of December 31, 2003,
                                 fourteen principal installments amounting to
                                 UF110,102 had been paid.

Interest rate             :      6.25% real annual rate, calculated and paid
                                 semi-annually on the outstanding UF-denominated
                                 principal.

(2)   In March 1995, Telsur issued bonds under the following terms:

Amount issued             :      UF450,000 composed of 450 Series C bonds of
                                 UF1,000 each.

Term                      :      Twelve years (two years of grace and ten years
                                 of principal repayment),

Principal amortization    :      Twenty equal semi-annual installments from June
                                 1, 1997. As of December 31, 2003, fourteen
                                 principal installments amounting to UF287,515
                                 had been paid.

Interest rate             :      5.8% real annual rate, calculated and paid
                                 semi-annually on the outstanding UF-denominated
                                 principal.

Advance redemption        :      Telsur has the right to redeem the entire bond
                                 issue on any coupon payment date after June 1,
                                 1997.


                                     F - 34
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(3)   In March 1995, Telsur issued bonds under the following terms:

Amount issued             :      UF300,000 composed of 300 Series D bonds of
                                 UF1,000 each.

Term                      :      Twenty-one years (three years of grace and
                                 eighteen years of principal repayment).

Principal amortization    :      Thirty-six equal semi-annual installments from
                                 June 1, 1998, As of December 31, 2003, twelve
                                 principal installments amounting to UF68,656
                                 had been paid.

Interest rate             :      5.8% real annual rate, calculated and paid
                                 semi-annually on the outstanding UF-denominated
                                 principal.

Advance redemption        :      Telsur has the right to redeem the entire bond
                                 issue on any coupon payment date after June 1,
                                 2000.

(4)   In May 1997, Telsur issued bonds under the following terms:

Amount issued             :      UF500,000 composed of 500 Series E bonds of
                                 UF1,000 each,

Term                      :      Twelve years (three years of grace and nine
                                 years of principal repayment).

Principal amortization    :      Eighteen equal semi-annual installments from
                                 August 1, 2000, As of December 31, 2003, seven
                                 principal installments amounting to UF 165,012
                                 had been paid.

Interest rate             :      5.8% real annual rate, calculated and paid
                                 semi-annually on the outstanding UF-denominated
                                 principal.

Advance redemption        :      Telsur has the right to redeem the entire bond
                                 issue on any coupon payment date after August
                                 1, 2000.

(5)   In May 1997, Telsur issued bonds under the following terms:

Amount issued             :      UF500,000 composed of 500 Series F bonds of
                                 UF1,000 each.

Term                      :      Twenty-one years (five years of grace and
                                 sixteen years of principal repayment).

Principal amortization    :      Thirty-two equal semi-annual installments from
                                 August 1, 2002. As of December 31, 2003 three
                                 principal installments amounting to UF30,125
                                 had been paid.

Interest rate             :      5.8% real annual rate, calculated and paid
                                 semi-annually on the outstanding UF-denominated
                                 principal.

Advance redemption        :      Telsur has the right to redeem the entire bond
                                 issue on any coupon payment date after August
                                 1, 2002.

(6)   In April 2001, Telsur issued bonds under the following terms:

Amount issued             :      UF400,000 composed of 200 Series G1 bonds of UF
                                 500 each and 60 Series G2 bonds of UF5,000
                                 each.

Term                      :      Five years (two years of grace and three years
                                 of principal repayment).

Principal amortization    :      Six equal semi-annual payments from June 1,
                                 2003. As of December 31, 2003 one principal
                                 installment amounting to UF66,667 had been
                                 paid.

Interest rate             :      6.00% real annual rate calculated and paid
                                 semi-annually on the outstanding UF-denominated
                                 principal.


                                     F - 35
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(7)   In April 2001, Telsur issued bonds under the following terms:

Amount issued             :      UF600,000 composed of 300 Series H1 bonds of
                                 UF1,000 each and 60 Series H2 bonds of UF 5,000
                                 each.

Term                      :      Twenty-one years (six years of grace and
                                 fifteen years of principal repayment).

Principal amortization    :      Thirty equal semi-annual payments from June 1,
                                 2007.

Interest rate             :      6.00% real annual rate calculated and paid
                                 semi-annually on the outstanding UF-denominated
                                 principal.

(8)   In September 1991, Madeco issued bonds under the following terms:

Amount issued             :      UF 693,000 composed of 693 Series B bonds of UF
                                 1,000 each.

Terms                     :      Thirteen years (six years of grace and seven
                                 years of principal repayment).

Principal amortization    :      Fourteen equal semi-annual payments from
                                 February 1, 1997. As of December 31, 2003 the
                                 entirety of this obligation has been paid.

Interest rate             :      6.00% real annual rate calculated and paid
                                 semi-annually on the outstanding UF-denominated
                                 principal.

(9)   In April 2000, Madeco issued bonds under the following terms:

Amount issued             :      UF2,500,000 composed of 1,000 Series A1 bonds
                                 of UF 1,000 each and 300 Series A2 bonds of
                                 UF5,000 each.

Term                      :      Fifteen years (three years of grace and twelve
                                 years of principal repayment).

Principal amortization    :      Twelve equal semi-annual installments from
                                 September 15, 2003.

Interest rate             :      7.25% real annual rate, calculated and paid
                                 semi-annually on the outstanding UF-denominated
                                 principal.

Advance redemption        :      Madeco has the right to redeem the entire bond
                                 issue on any coupon payment date after
                                 September 15, 2003.

(10)  In August, 2001, Madeco issued bonds under the following terms:

Amount issued             :      UF1,500,000 composed of 500 Series C1 bonds of
                                 UF1,000 each and 100 Series C2 bonds of UF
                                 10,000 each.

Term                      :      Three years (five semi-annual installments of
                                 principal repayment).

Principal amortization    :      Six semi-annual installments from November 1,
                                 2001.

Interest rate             :      6.20% real annual rate calculated and paid
                                 semi-annually on the outstanding UF-denominated
                                 principal.

(11)  In April 2001, Quinenco issued bonds under the following terms:

Amount issued             :      UF2,000,000 composed of 180 Series A1 bonds of
                                 UF10,000 each and 200 Series A2 bonds of
                                 UF1,000 each.

Terms                     :      Twenty-one years (five years of grace and
                                 sixteen years of principal repayment).

Principal amortization    :      Thirty-two equal semi-annual payments from
                                 October 30, 2005

Interest rate             :      6.20% real annual rate calculated and paid
                                 semi-annually on the outstanding UF-denominated
                                 principal.


                                     F - 36
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(12)  In April 2001, Quinenco issued bonds under the following terms:

Amount issued             :      UF4,500,000 composed of 400 Series B1 bonds of
                                 UF10,000 each and 500 Series B2 bonds of
                                 UF1,000 each.

Terms                     :      Eight years (three years of grace and five
                                 years of principal repayment).

Principal amortization    :      Ten equal semi-annual payments from October 30,
                                 2003. As of December 31, 2003 one principal
                                 installment amounting to UF 450,000 had been
                                 paid.

Interest rate             :      6.20% real annual rate calculated and paid
                                 semi-annually on the outstanding UF-denominated
                                 principal.

c)    The scheduled principal payments on long-term debt and bonds payable at
      December 31, 2003 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                  At December 31, 2003
                                                                                  --------------------
                                                                                          ThCh$
<S>                                                                                    <C>
Principal payments during the fiscal years ending December 31,
2005 ........................................................................          148,777,715
2006 ........................................................................           90,150,815
2007 ........................................................................           72,410,483
2008 ........................................................................           85,018,290
2009 and thereafter .........................................................           93,821,307
                                                                                       -----------
        Total ...............................................................          490,178,610
                                                                                       ===========
</TABLE>

Long-term debt and bonds payable, including the current portion, are payable in
the following currencies:

<TABLE>
<CAPTION>
                                                                                        At December 31,
                                                                                  --------------------------
                                                                                     2002           2003
                                                                                  -----------    -----------
                                                                                     ThCh$           ThCh$
<S>                                                                               <C>             <C>
United States dollars .......................................................     185,289,796     93,430,590
Inflation linked-units (UFs) ................................................     457,196,146    448,546,943
Chilean pesos (not indexed) .................................................       1,157,981     27,976,704
Other currencies (1) ........................................................         890,857      1,738,790
                                                                                  -----------    -----------
        Total ...............................................................     644,534,780    571,693,027
                                                                                  ===========    ===========
</TABLE>

(1)   Other currencies include Peruvian Sols, Argentine Pesos, Brazilian Reals
      and Euros.

d)    Financial covenants

Quinenco and its group companies were in compliance with their financial
covenants related to current bond issuances and bank loan agreements as of
December 31, 2003.

d-1)  Quinenco and certain group companies are subject to certain financial
      covenants, which as of December 31, 2003 are as follows:

      o     Maintain a ratio of unencumbered assets at book value to unsecured
            debt of at least 1.3:1.

      o     Unconsolidated interest-bearing debt to total capitalization ratio
            no greater than 0.45:1.

      o     Consolidated interest-bearing debt to total capitalization ratio no
            greater than 0.6:1.

      o     Minimum Shareholders' equity of UF 33 million.

      o     Luksic Group to maintain control of Quinenco.

      o     Quinenco to maintain control of Banco de Chile (through its
            investment in LQIF).


                                     F - 37
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

d-2)  Telsur is subject to certain financial covenants and restrictions related
      to its bond issuances and bank loan agreements. The main financial
      covenants are as follows:

      Telsur

      o     Maintain a liquidity ratio of at least 0.50:1 on both an
            unconsolidated and consolidated basis.

      o     Leverage (liabilities/net worth) no greater than 1.5:1 on both an
            unconsolidated and consolidated basis.

      o     Minimum net worth of UF2,000,000.

      o     Investments in subsidiaries that are not eligible for investment by
            local pension funds or in shares that are not subject to approval by
            the Commission on Risk Classification may not exceed 20% of the
            company's consolidated net worth.

      o     Maintain a ratio of unencumbered assets to unsecured debt of at
            least 1.3:1.

      Telcoy

      o     Maintain a liquidity ratio of at least 1:1.

      o     Leverage (liabilities/net worth) no greater than 1.5:1.

      o     Investments in subsidiaries that are not eligible for investment by
            local pension funds or in shares that are not subject to approval by
            the Commission on Risk Classification may not exceed 20% of the
            company's net worth.

      o     Maintain a ratio of unencumbered assets to unsecured debt of at
            least 1.3:1.

d-3)  Lucchetti syndicated loan agreement stipulates that the following
      financial covenants must be met:

      Covenants based on the consolidated financial statements of Lucchetti
      Chile S.A. ("Lucchetti Chile"):

<TABLE>
<CAPTION>
      ------------------------------------------------------------------------------------------------------------
                                                                                     Annual            Semi-annual
      ------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>                   <C>
      Liquidity ratio of at least                                                         1                      1
      Debt to equity ratio no more than                                                   1                    1.2
      ------------------------------------------------------------------------------------------------------------

<CAPTION>
      Covenants based on the consolidated financial statements of Lucchetti:
      ------------------------------------------------------------------------------------------------------------
                                                                                     Annual            Semi-annual
      ------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                    <C>
      Liquidity ratio of at least                                                       1.3                    1.3
      Debt to equity ratio no more than                                                 1.5                    1.6
      ------------------------------------------------------------------------------------------------------------
</TABLE>

      With respect to interest coverage, Lucchetti agreed to a ratio of at least
      1.8 times for 2002 and at least 2.0 times for successive years. This ratio
      is calculated as the sum of the consolidated operating income (excluding
      depreciation) of Lucchetti Chile (excluding Lucchetti Peru) plus the
      unconsolidated operating income (excluding depreciation) of Lucchetti,
      divided by the sum of the consolidated interest expense of Lucchetti Chile
      (excluding Lucchetti Peru ) and the unconsolidated interest expense of
      Lucchetti.

      As a result of the provision of ThCh$30,678,486 (historic pesos) for the
      closure of the plant of its subsidiary Lucchetti Peru made in the
      financial statements for the year ended December 31, 2002, Lucchetti
      negotiated and obtained an amendment to the syndicated loan that stated
      that, for the calculation of the consolidated debt ratio, the effect on
      equity of the provisions related to the closure of Lucchetti Peru shall be
      ignored. Should any of the member banks choose to, the amended agreement
      stipulates that this ratio may reach a maximum of 3.2 times equity at
      December 31, 2003. This ratio will reduce gradually over the term of the
      loan.


                                     F - 38
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

      Lucchetti Chile is joint and several guarantor in favor of Banco de
      Credito del Peru for all of Lucchetti Peru's obligations with the bank
      under a leaseback agreement between that bank and the Peruvian subsidiary
      over plant and equipment in Lima.

d-4)  LQIF is subject to certain financial covenants and restrictions related to
      its bank loan agreements, including the following:

      o     Maximum debt to capitalization ratio of 40%

      o     Minimum shareholders' equity of UF9,500,000.

      o     Minimum share coverage of 1.5:1 with topping up and closing out
            clauses.

      o     Quinenco to maintain control of LQIF.

      o     LQIF must maintain control of Banco de Chile.

d-5)  Madeco is subject to certain financial covenants and restrictions as of
      December 31, 2003, the most restrictive of which are:

      Bonds

      o     Maintain a liquidity ratio of at least 0.7:1 (Series C bonds) and
            1:1 (Series A bonds).

      o     Shareholders' equity to be at least UF 7,000,000 (Series A and C
            bonds).

      o     Debt to equity ratio (third-party liabilities/Shareholder's equity
            plus Minority interest) may not exceed 1.8:1 (Series A and C bonds).

      o     Unencumbered assets to be 1.2 times the total amount of bonds
            outstanding (Series A and C bonds).

      o     Short and long-term liabilities to net Shareholders' equity may not
            exceed 2.0:1 starting March 31, 2003; and current assets must exceed
            current liabilities (Series B bonds).

      o     Bank loans or reschedulings obtained as a result of the financial
            restructuring of Madeco to start repayments no earlier than January
            1, 2005. The maximum repayment of the company's unconsolidated bank
            loans to be the amount received in cash from the capital increase
            approved by the extraordinary shareholders' meeting of November 14,
            2002.

      o     Quinenco to remain as the controller of Madeco, with a direct or
            indirect shareholding of at least 40%, in accordance with clause 97
            of the Capital Markets Law, notwithstanding that Quinenco must at
            all times have a shareholding of at least 35%.

      o     Maintain throughout the term of the Series B bonds (contract dated
            August 1, 2003) all of its assets unencumbered except for collateral
            over assets for financing purchases.

      o     Madeco may not sell or permit to be sold, assign or hold a charge
            against and/or in any other way dispose of essential assets that
            represent over 40% of total consolidated assets (Series A and C
            bonds) or those assets of a subsidiary that are essential for the
            efficient operation of the company's business (Series B bonds).

      o     Madeco must use the proceeds obtained from its businesses, new
            borrowings or the sale of its assets to make voluntary prepayments
            on its financial debts with third parties, thereby optimizing its
            cost of debt and maintaining a reasonable balance between different
            kinds of creditors. Prepayments would be made after deducting the
            funds necessary for making payments in the ordinary course of its
            business and to meet its long-term financial commitments.


                                     F - 39
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

      Bank loans:

      Madeco is obliged to meet the following conditions with respect to the
      loan amendment and rescheduling agreements signed between it and its
      creditor banks while any sum covered by those agreements and the
      rescheduled promissory notes remains pending payment until the loans are
      fully paid.

      i)    Madeco must prepay all the rescheduled banks loans should the Luksic
            group cease to own, directly or indirectly, at least 50.1% of the
            shares with voting rights or to control Madeco (control is defined
            as the power to elect the majority of directors or the power to
            determine the result of voting on all matters requiring the absolute
            majority of voting right shares of Madeco or the power to directly
            or indirectly exercise influence over the management or policies of
            Madeco).

      ii)   Preserve and maintain the corporate existence and legal structure of
            all of its Principal Subsidiaries (Alusa S.A., Indalum S.A., Ficap
            and Indeco S.A.), and all their rights, properties, licenses,
            trademarks, permits, franchises, concessions and patents.

      iii)  Use the proceeds obtained from its businesses, new borrowings or the
            sale of its assets to make voluntary prepayments of its financial
            debts with third parties unrelated to the debtor except for Banco de
            Chile, and thereby try to optimize the cost of debt and maintain a
            reasonable balance between different kinds of creditors. The above
            should be performed after deducting the funds necessary for making
            the payments that Madeco should make to meet its operating,
            financial and investment commitments in the ordinary course of
            business and to meet its long-term financial commitments.

      iv)   Maintain the following financial indicators based on both the
            consolidated and unconsolidated balance sheets:

      o     Net financial debt to adjusted equity, as defined in the covenant
            and which relates to certain FECU codes, must not exceed 1.8:1 at
            the quarterly consolidated and unconsolidated measurement dates.
            Adjusted equity, as defined in the covenant contract, excludes
            losses and the negative effects resulting from the disposal of fixed
            assets and disposable assets of Madeco and its subsidiaries, the
            disposal of subsidiaries, provisions for the valuation of disposable
            property, plant and equipment and assets of Madeco and/or its
            subsidiaries, and provisions for the valuation of foreign
            investments.

      o     Minimum adjusted equity of UF7,000,000 as of December 31 each year.
            However, starting September 30, 2005, a minimum adjusted equity of
            UF7,000,000 must be maintained on a quarterly basis.

      o     Current ratio must be greater than 1:1 on the last day of each
            quarter based on both the consolidated and unconsolidated financial
            statements.

      o     Consolidated EBITDA (1) to consolidated financial expenses must be
            at least 1.5:1 between December 31, 2005 and September 30, 2006.

      o     Consolidated EBITDA to consolidated financial expenses must be at
            least 1.75:1 between December 31, 2006 and September 30, 2007.

      o     Consolidated EBITDA to consolidated financial expenses must be at
            least 2.0:1 between December 31, 2007 and September 30, 2009.

      o     Consolidated Net Financial Debt to consolidated EBITDA must be no
            higher than 8.0:1 between December 31, 2005 and September 30, 2006.


                                     F - 40
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

      o     Consolidated Net Financial Debt to consolidated EBITDA must be no
            higher than 7.0:1 between December 31, 2006 and September 30, 2007.

      o     Consolidated Net Financial Debt to consolidated EBITDA must be no
            higher than 6.0:1 between December 31, 2007 and September 30, 2009.

      Distribute dividends only to the degree that the following conditions are
            met:

      o     At least four years have passed since compliance with the
            conditions.

      o     There has been no cause of default or any non-compliance.

      o     The ratio of consolidated Net Financial Debt to consolidated EBITDA
            is no higher than 4.0:1 The above notwithstanding the provisions of
            clause 79 of the Corporations Law.

            (1)   EBITDA as defined in the covenant agreements

      v)    Negative covenants

            The company may not make any encumbrances over its real estate or
            assets and those of its subsidiaries, nor over their intellectual
            property or any other tangible or intangible assets existing at the
            time of the loan rescheduling or which they acquire in the future,
            with certain exceptions such as (i) previously existing
            encumbrances, (ii) encumbrances relating to the normal course of
            business, (iii) financing relating to asset acquisitions, (iv)
            leasing, and (v) others.

            The company shall not sign any act or contract for the merger,
            consolidation or division of its Principal Subsidiaries except
            insofar as (i) the managing agent is notified of the necessary
            adoption or agreements for such merger, consolidation or division,
            (ii) no default arises or is maintained as a result of the
            operation, (iii) the new entity has the same business, operation,
            essential assets, rights and credit rating as Madeco or the
            respective Principal Subsidiary, (iv) the new company assumes all
            the obligations assumed by Madeco or the respective Principal
            Subsidiary in the loan agreement, and (v) in the case of liquidation
            of a Principal Subsidiary, Madeco has determined that this is in its
            best interest and does not substantially affect creditors' rights.

            The company shall not permit essential assets representing more than
            20% of the total consolidated assets described in the consolidated
            accounts Code 5.10.00.00 as of September 30, 2002 to be sold,
            ownership assigned or used or in any way disposed of, whether by one
            operation or a series of operations, to a party that is not a
            subsidiary of Madeco

            The company shall not sign acts or contracts with related parties
            except in the ordinary course of business and under terms and
            conditions that are no more disadvantageous to those obtained in
            market negotiations between unrelated parties. It shall also ensure
            that its subsidiaries do not sign any such contracts. Madeco may not
            grant financial loans to subsidiaries that together or individually
            exceed US$3.5 million. The disposal of subsidiaries to related
            companies must be made on at prevailing market conditions according
            to an independent appraisal.

            The company shall not substantially change the nature of its
            principal line of business or those of its Principal Subsidiaries
            (Alusa S.A., Indalum S.A., Ficap and Indeco S.A.).


                                     F - 41
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

            The company may not and shall ensure that its subsidiaries do not
            (i) make or permit the modification of the conditions of any debt
            that carries no preference over the other debts of Madeco, including
            the modification of any bond issuance contract, loan agreement or
            the granting of guarantees relating to such debts, except that these
            debts reflect new terms and conditions prevailing in the market, and
            (ii) modify or permit the modification of their bylaws that would
            mean a change in the rights of the creditors under the loan
            agreement.

            The company shall not grant and shall ensure that the subsidiaries
            do not grant guarantees to cover the obligations of third parties,
            with certain exceptions.

            The company shall not acquire and shall ensure that its subsidiaries
            do not acquire majority holdings in other companies, or minority
            holdings, whose cost, individually or altogether, exceeds
            US$1,000,000 with certain exceptions.

      vi)   Repayment acceleration

            Any of the creditors is authorized to demand the payment of overdue
            installments or of the whole of the debt in the event of failure or
            delay in the payment of all or part of any amount due under the bank
            loan rescheduling agreements.

      vii)  The Majority Banks are authorized to declare the principal, interest
            and any other amount as due and immediately payable if any of the
            following cases or events occur:

            If Madeco does not pay any debt or obligation with respect to
            principal, interest, premiums or other concepts which individually
            or jointly exceed US$1 million.

            If the subsidiaries Alusa S.A. or Indalum S.A. do not pay any debt
            or obligation (after three years from the effective date of the
            rescheduling) with respect to principal, interest, premiums or other
            amounts, which individually or jointly exceed US$3.5 million.

            If the subsidiaries Ficap or Indeco S.A. do not pay any debt or
            obligation with respect to principal, interest, premiums or other
            concepts which individually or jointly exceed US$3.5 million, and
            provided that a request from the creditors has been made in writing,
            Ficap and Indeco S.A. will be liable to pay the whole of its debt
            immediately.

            If any judicial sentence rules against Madeco or any of its
            Principal Subsidiaries demanding the payment of US$3 million or more
            and such amounts remain unpaid.

            If any judicial sentence rules against Madeco or any of its
            subsidiaries whereby the result does not involve a monetary award
            but could still have an adverse effect on the company.

            If Madeco does not meet its covenants or negative covenants.

            Should for any reason Madeco cease to be included in the Securities
            Register of the SVS.

            Should Madeco cease to hold directly or indirectly at least 51% of
            the common shares with voting rights in any of the subsidiaries
            Indalum S.A., Indeco S.A. and Ficap.


                                     F - 42
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

      viii) Alusa S.A., a subsidiary of Madeco, has a syndicated loan with Banco
            de Chile and Banco Estado for UF 300,000 as of December 31, 2003 for
            which it has to comply with the following commitments:

            Maintain the following financial indicators based on its
            consolidated and unconsolidated financial statements: leverage (debt
            to equity) not to exceed 0.75:1 (equity for these purposes being net
            of intangible assets and technical appraisals of assets).

            Minimum shareholders' equity of UF1,765,000.

            In the event of the disposal of the real estate properties located
            at Avenida. Vicuna Mackenna 2935 and 2585, Alusa S.A. should use at
            least 35% of the proceeds to prepay pro rata the participating banks
            in the syndicated loan.

            Alusa S.A. may not encumber its assets or give guarantees to
            creditors other than the participant banks, without their prior
            written consent, unless such security is also given in favor of the
            participant banks on the same conditions and with equal degree of
            preference as the other creditors. Excluded from this prohibition is
            the collateral given by Alusa S.A. over assets it acquires in the
            future in order to cover the financing obtained for their
            acquisition.

            Not to have accounts receivable from its Argentine subsidiary
            Aluflex S.A. relating to non-business operations, except with the
            prior written consent of the participant banks. Business-related
            accounts receivable with Aluflex S.A., may not exceed US$600,000
            except with the prior written consent of the participant banks.

      Indalum S.A., a subsidiary of Madeco, is required to meet the following
      conditions with respect to negotiations completed on December 29, 2003
      with Banco de Chile, Banco de Credito e Inversiones, Banco Estado and
      Banco Security, to cover the period from that date to December 26, 2008:

      To maintain the following financial ratios as of June 30 and December 31
      of each year, based on the consolidated financial statements:

      o     Debt ratio or leverage not to exceed 1.2:1.

      o     Minimum capital of the equivalent of UF1,630,000.

      o     Maintain its ownership of the property, plant and equipment
            necessary for the normal development of its operations and business
            and maintain its ownership of the subsidiary Alumco S.A.

      o     May not pledge, mortgage or grant any charge or right over any
            property, plant and equipment of Indalum S.A. or its subsidiaries
            except for those over assets it acquires in the future and which are
            granted for financing their acquisition.

      o     May not grant guarantees to cover the compliance of any obligation,
            debt, liability or commitment contracted by a person other than
            Indalum S.A. or its subsidiaries, without the prior written consent
            of the creditors.

      o     May not pay and distribute dividends that exceed 30% of the net
            income for each year, without the prior written consent of the
            creditors.

      o     May not grant direct financing to third parties outside of the
            business. This shall not include the trade accounts receivable of
            Indalum S.A. with its customers nor loans to the executives and
            personnel of Indalum S.A. or its subsidiaries.


                                     F - 43
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

      o     In the event of the disposal of the real estate located at Aysen
            244, Macul, Vitacura 2726, Office 301, Vitacura, and Santa Marta
            1313, Maipu, the sales proceeds should be used to prepay the
            rescheduled obligations pro rata. For this calculation, the
            principal amount of financial loans due to Madeco at that time shall
            be added to the rescheduled obligations. For this purpose, financial
            debt shall be defined as the sum of all loans made by Madeco and
            which amounted to ThCh$4,329,888 at December 31, 2003.

      o     Pay the financial loan currently owing to its parent company Madeco
            only if Indalum S.A. has paid all of the amounts due to the banks
            and has fully complied with the covenants and negative covenants
            assumed under the agreement or that the proceeds come from the sale
            of the properties mentioned above.

      o     Madeco should directly and indirectly have control of Indalum S.A.
            during the term of the agreement or have a shareholding of at least
            50.1% in the company.

NOTE 16 - INCOME TAXES AND OTHER TAXES

a)    Income taxes payable and receivable

Income taxes payable are summarized as follows:

<TABLE>
<CAPTION>
                                                                       At December 31,
                                                               -----------------------------
                                                                   2002             2003
                                                               ------------     ------------
                                                                   ThCh$            ThCh$
<S>                                                              <C>               <C>
Income tax payable .....................................         (1,819,258)       (2,075,704)
Monthly income tax installments ........................          1,429,558         1,422,796
Other credits against taxes ............................          4,431,330         4,568,557
Others tax recoverable .................................          2,629,954         1,498,219
                                                               ------------      ------------
        Recoverable income taxes, net  (Note 8) ........          6,671,584         5,413,868
                                                               ============      ============
</TABLE>


                                     F - 44
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The income tax liability has been determined for each legal entity included in
the consolidated financial statements based on enacted tax laws in each country
in which the Company operates. The net credit (charge) to the results of
operations for each year is summarized as follows:

<TABLE>
<CAPTION>
                                                                                               At December 31,
                                                                             ------------------------------------------------
                                                                                 2001              2002              2003
                                                                             ------------      ------------      ------------
                                                                                 ThCh$             ThCh$              ThCh$
<S>                                                                            <C>               <C>               <C>
Current year provision for income tax ...............................          (3,080,058)       (1,819,257)       (2,075,507)
Deferred income tax .................................................          (1,103,821)        2,836,207         2,101,559
Change in Chilean statutory income tax rate .........................          (1,265,649)               --                --
Amortization of complementary accounts ..............................             758,602         5,004,955           215,733
Valuation allowance on deferred tax assets ..........................          (3,635,871)       (4,544,790)       (8,095,135)
Tax benefit from (use of) tax loss carry forwards ...................          13,296,418        (1,257,753)        5,195,362
Other ...............................................................             (28,156)          (76,512)           89,226
                                                                             ------------      ------------      ------------
        Net income tax benefit (expense) ............................           4,941,465           142,850        (2,568,762)
                                                                             ============      ============      ============
</TABLE>

b)    Deferred income taxes

<TABLE>
<CAPTION>
                                                                    Current portion                         Long-term portion
                                                            -------------------------------         -------------------------------
Timing differences                                              2002               2003                2002                 2003
                                                            -----------         -----------         -----------         -----------
                                                                ThCh$              ThCh$               ThCh$                ThCh$
<S>                                                            <C>                <C>               <C>                 <C>
Assets
Accrued vacation expense ...........................            306,390             354,111               8,929                  --
Amortization of intangible assets ..................                 --               4,989                  --              15,178
Allowance for doubtful accounts ....................          1,431,824           1,359,980              92,965             183,598
Allowance for obsolescence of inventories ..........            576,956             571,901             131,097              97,564
Unearned income ....................................             36,306                  --                  --                  --
Fixed assets held for sale .........................            430,911                  --             113,735                  --
Fixed assets under leasing .........................             41,529             158,370             209,833             277,711
Accelerated depreciation of fixed assets ...........              2,276                  --               5,350               4,126
Employee severance indemnities .....................              7,620               1,197                  --                  --
Tax loss carry forwards ............................            164,704             223,317          37,651,205          35,265,240
Other provisions ...................................            771,862           1,022,506           6,678,621           8,772,785

Liabilities
Fixed assets under leasing .........................            (64,815)            (89,735)         (2,573,879)         (2,381,980)
Production costs (inventories) .....................           (496,168)           (515,016)                 --                  --
Accelerated depreciation of fixed assets ...........           (442,988)           (469,401)        (17,178,274)        (16,916,128)
Employee severance indemnities .....................             (2,947)                 --            (510,139)           (642,555)
Bonds issuance .....................................                 --                  --            (407,126)           (255,785)
Other provisions ...................................           (279,040)           (342,825)           (576,440)           (292,985)
                                                            -----------         -----------         -----------         -----------
       Subtotal ....................................          2,484,420           2,279,394          23,645,877          24,126,769
Complementary accounts, net of amortization ........            (59,276)            (30,244)           (766,996)          2,211,714
Valuation allowance ................................                 --             (10,554)         (8,378,277)        (12,692,339)
                                                            -----------         -----------         -----------         -----------
       Total deferred income taxes, net ............          2,425,144           2,238,596          14,500,604          13,646,144
                                                            ===========         ===========         ===========         ===========
</TABLE>


                                     F - 45
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 17 - SHAREHOLDERS' EQUITY

a)    The changes in Shareholders' equity during the years 2001, 2002 and 2003
      in historical amounts are summarized as follows:

<TABLE>
<CAPTION>
                                                                                  --------------------------------------------
                                                                                                   Reserves
                                                                                  --------------------------------------------

                                                                                                   Cumulative       Executive
                                                     Number of        Paid in         Other       translation       incentive
                                                      shares          capital       reserves       adjustment          plan
                                                   -------------   -------------  ------------   -------------   -------------
<S>                                                <C>               <C>            <C>              <C>            <C>
Balances at January 1, 2001 .................      1,079,740,079     428,224,335    12,875,333       8,550,488      (4,659,565)
Allocation of 2000 net income ...............                 --              --            --              --              --
Deficit from development period .............                 --              --            --              --              --
Price-level restatement of equity accounts ..                 --      13,274,954       399,135         265,065        (144,446)
Proportional share of variations in equity of
   subsidiaries and investees ...............                 --              --      (957,119)             --              --
Cumulative translation adjustments, net .....                 --              --            --       8,257,545              --
Executive incentive plan ....................                                 --            --              --          32,069
Net income for the year .....................                 --              --            --              --              --
                                                   -------------   -------------  ------------   -------------   -------------
   Balances at December 31, 2001 ............      1,079,740,079     441,499,289    12,317,349      17,073,098      (4,771,942)
                                                   =============   =============  ============   =============   =============
   Restatement of December 31, 2001
     balances to December 31, 2003
     constant pesos .........................                 --     459,291,711    12,813,738      17,761,144      (4,964,251)
                                                   =============   =============  ============   =============   =============
Balances at January 1, 2002 .................      1,079,740,079     441,499,289    12,317,349      17,073,098      (4,771,942)
Allocation of 2001 net income ...............                 --              --            --              --              --
Payment of final dividend on 2001 net income                  --              --            --              --              --
Deficit from development period .............                                 --            --              --              --
Price-level restatement of equity accounts ..                 --      13,244,979       369,521         512,192        (143,158)
Proportional share of variations in equity of
   subsidiaries and investees ...............                 --              --     4,882,510              --              --
Cumulative translation adjustments, net .....                 --              --            --      10,993,119              --
Executive incentive plan ....................                 --              --            --              --         185,222
Net loss for the year .......................                 --              --            --              --              --
                                                   -------------   -------------  ------------   -------------   -------------
Balances at December 31, 2002 ...............      1,079,740,079     454,744,268    17,569,380      28,578,409      (4,729,878)
                                                   =============   =============  ============   =============   =============
Restatement of December 31, 2002 balances
   to December 31, 2003 constant pesos ......                 --     459,291,711    17,745,074      28,864,193      (4,777,177)
                                                   =============   =============  ============   =============   =============
Balances at January 1, 2003 .................      1,079,740,079     454,744,268    17,569,380      28,578,409      (4,729,878)
Allocation of 2002 net income ...............                 --              --            --              --              --
Deficit from development period .............                 --              --            --              --              --
Price-level restatement of equity accounts ..                 --       4,547,443       175,694         285,784         (47,299)
Proportional share of variations in equity of
  subsidiaries and investees ................                 --              --    (1,592,645)             --              --
Cumulative translation adjustments, net .....                 --              --            --     (28,107,388)             --
Executive incentive plan ....................                 --              --            --              --       1,628,193
Payment of interim dividend on 2003 net
  income ....................................                 --              --            --              --              --
Net income for the year .....................                 --              --            --              --              --
                                                   -------------   -------------  ------------   -------------   -------------
Balances at December 31, 2003 ...............      1,079,740,079     459,291,711    16,152,429         756,805      (3,148,984)
                                                   =============   =============  ============   =============   =============

<CAPTION>
                                                  ----------------------------------------------------------------
                                                                           Retained earnings
                                                  ----------------------------------------------------------------
                                                   Accumulated
                                                  deficit during                                      Net Income
                                                   development        Interim          Retained     (loss) for the
                                                      period         dividends         earnings          year            Total
                                                  -------------     -----------     -------------   --------------    -------------
<S>                                                    <C>                            <C>               <C>             <C>
Balances at January 1, 2001 .................          (948,892)             --       198,622,412       (5,648,096)     637,016,015
Allocation of 2000 net income ...............                --              --        (5,648,096)       5,648,096               --
Deficit from development period .............        (2,153,073)             --                --               --       (2,153,073)
Price-level restatement of equity accounts ..           (29,416)             --         5,982,204               --       19,747,496
Proportional share of variations in equity of
   subsidiaries and investees ...............                --              --                --               --         (957,119)
Cumulative translation adjustments, net .....                --              --           (71,691)              --        8,185,854
Executive incentive plan ....................                --              --                --               --           32,069
Net income for the year .....................                --              --                --       15,509,382       15,509,382
                                                  -------------     -----------     -------------    -------------    -------------
   Balances at December 31, 2001 ............        (3,131,381)             --       198,884,829       15,509,382      677,380,624
                                                  =============     ===========     =============    =============    =============
   Restatement of December 31, 2001
     balances to December 31, 2003
     constant pesos .........................        (3,257,576)             --       206,899,888       16,134,411      704,679,064
                                                  =============     ===========     =============    =============    =============
Balances at January 1, 2002 .................        (3,131,381)             --       198,884,829       15,509,382      677,380,624
Allocation of 2001 net income ...............         3,131,381              --        12,378,001      (15,509,382)              --
Payment of final dividend on 2001 net income                 --              --        (6,203,753)              --       (6,203,753)
Deficit from development period .............        (1,382,458)             --                --               --       (1,382,458)
Price-level restatement of equity accounts ..                --              --         6,164,180               --       20,147,714
Proportional share of variations in equity of
   subsidiaries and investees ...............                --              --            (7,955)              --        4,874,555
Cumulative translation adjustments, net .....                --              --                --               --       10,993,119
Executive incentive plan ....................                --              --                --               --          185,222
Net loss for the year .......................                --              --                --      (75,480,211)     (75,480,211)
                                                  -------------     -----------     -------------    -------------    -------------
Balances at December 31, 2002 ...............        (1,382,458)             --       211,215,302      (75,480,211)     630,514,812
                                                  =============     ===========     =============    =============    =============
Restatement of December 31, 2002 balances
   to December 31, 2003 constant pesos ......        (1,396,283)             --       213,327,455      (76,235,013)     636,819,960
                                                  =============     ===========     =============    =============    =============
Balances at January 1, 2003 .................        (1,382,458)             --       211,215,302      (75,480,211)     630,514,812
Allocation of 2002 net income ...............         1,382,458              --       (76,862,669)      75,480,211               --
Deficit from development period .............          (276,463)             --                --               --         (276,463)
Price-level restatement of equity accounts ..                --              --         1,343,527               --        6,305,149
Proportional share of variations in equity of
  subsidiaries and investees ................                --              --                --               --       (1,592,645)
Cumulative translation adjustments, net .....                --              --                --               --      (28,107,388)
Executive incentive plan ....................                --              --                --               --        1,628,193
Payment of interim dividend on 2003 net
  income ....................................                --     (12,144,323)               --               --      (12,144,323)
Net income for the year .....................                --                                --       37,694,846       37,694,846
                                                  -------------     -----------     -------------    -------------    -------------
Balances at December 31, 2003 ...............          (276,463)    (12,144,323)      135,696,160       37,694,846      634,022,181
                                                  =============     ===========     =============    =============    =============
</TABLE>


                                     F - 46
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

b)    The Accumulated deficit during the development period for the years ended
      December 31, 2001, 2002 and 2003 includes the recognition of the
      proportional share of the results of operations of certain companies in
      the development stage, losses from which are charged directly against
      shareholders' equity and are not included in the statement of income.

c)    As required by Chilean Law, unless otherwise decided by the unanimous vote
      of the holders of all of the issued and subscribed shares, open stock
      corporations must distribute a cash dividend in an amount equal to at
      least 30% of their net income for each year, excluding amortization of
      negative goodwill in the Parent Company as determined in accordance with
      Chilean GAAP, unless and except to the extent that the Company has
      accumulated losses.

d)    As required by Chilean Law, paid-in capital has been modified to reflect
      the proportional capitalization of the price-level restatement of equity
      accounts.

e)    During March 2000, Quinenco established an executive incentive plan in
      which an aggregate loan of ThCh$4,659,565 (historical) was granted to
      eligible employees to acquire Quinenco's stock and the stock of some of
      its subsidiaries at fair market value. The loan denominated in UFs is
      payable in annual installments and the acquired shares are pledged to
      guarantee payment of the loan.

f)    There are no additional restrictions on the payment of dividends under the
      terms of the various loan agreements with banks and other financial
      institutions.

g)    The Shareholders at the Ordinary Shareholders' Meeting of April 30, 2002
      approved the payment of a final dividend on net income for the year 2001
      amounting to ThCh$6,203,753 (historical).

h)    On December 22, 2003, the Directors approved the payment of an interim
      dividend on net income for the year 2003 amounting to ThCh$12,144,323.

i)    Certain U.S. dollar-denominated obligations are designated as economic
      hedges covering the exposure of foreign investments as permitted by BT64.
      The exchange differences that arise from such obligations are charged
      directly against Shareholders' equity to the Cumulative translation
      account within Shareholders' equity. The cumulative foreign exchange
      adjustments charged to this account were as follows:

<TABLE>
<CAPTION>
                                                                                                 At December 31,
                                                                              ---------------------------------------------------
                                                                                 2001                 2002                2003
                                                                              ----------           ----------         -----------
                                                                                 ThCh$                ThCh$               ThCh$
<S>                                                                           <C>                  <C>                <C>
Foreign exchange adjustments arising from liabilities
designated as hedges of foreign investments .......................           (5,617,046)          10,561,850         (30,379,930)
</TABLE>


                                     F - 47
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 18 - FOREIGN CURRENCY, UF-INDEXED AND CPI RESTATED ASSETS AND LIABILITIES

Balances denominated or measured in foreign currency (principally U.S. dollars)
at December 31, 2002 and 2003 are included in these financial statements in
thousands of Chilean peso equivalents as follows:

<TABLE>
<CAPTION>
                                                                                          At December 31,
                                                                                   ----------------------------
                                                                                       2002            2003
                                                                                   ------------    ------------
                                                                                       ThCh$           ThCh$
<S>                                                                                 <C>             <C>
Current assets:
   Cash and time deposits ...................................................         7,845,651      17,459,064
   Accounts receivable, net .................................................        25,088,501      27,145,659
   Inventories, net .........................................................        33,842,991      35,046,713
   Other current assets .....................................................        60,405,353      13,256,236
Long-term assets:
   Property, plant and equipment and other non-monetary assets ..............       172,027,262     125,506,528
   Other monetary assets ....................................................           617,706         302,045
                                                                                   ------------    ------------
        Total assets ........................................................       299,827,464     218,716,245
                                                                                   ------------    ------------
Current liabilities:
   Short-term bank loans and current portion of long-term liabilities .......       142,972,598      17,837,578
   Accounts payable and supplier notes payable ..............................        16,904,863      12,450,854
   Other ....................................................................         5,730,090       7,113,283
Long-term liabilities
   Long-term debt ...........................................................       109,551,230      88,647,559
   Other ....................................................................           788,537         819,818
                                                                                   ------------    ------------
        Total liabilities ...................................................       275,947,318     126,869,092
                                                                                   ------------    ------------
               Net asset position in U.S. dollars ...........................        23,880,146      91,847,153
                                                                                   ============    ============
</TABLE>

Certain of the U.S. dollar-denominated obligations included in the above table
are designated as economic hedges covering the exposure of foreign investments
as permitted by BT64. As a result, portions of the exchange losses that arise
from such obligations are charged directly against Shareholders' equity to the
Cumulative translation account within Shareholders' equity (see Note 17 i)).

The inventories and fixed assets and other non-monetary assets included above
relate to assets of foreign investments for which the financial statements are
translated to U.S. dollars in accordance with BT64, described in Note 2 s).
Accordingly, there is exposure to variations in the exchange rate between the
U.S. dollar and the Chilean peso, from an accounting perspective.


                                     F - 48
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 19 - COMMITMENTS AND CONTINGENCIES

a)    Pledges of shares

The Company has pledged shares of subsidiaries and equity investees to cover
obligations as of December 31, 2003 as follows:

<TABLE>
<CAPTION>
                                                      Balance of                                     Company/Series
       Beneficiary                 Currency          secured loan          Number of Shares             of Shares
       -----------                 --------          ------------          ----------------             ---------
                                                         ThCh$
<S>                                   <C>              <C>                   <C>                     <C>
Banco Santiago                         UF              18,321,737              890,293,606           SM Chile Series B
Banco del Estado de Chile              UF              83,889,602            7,146,413,174           Banco de Chile
Banco del Estado de Chile              UF              14,062,545               69,036,963           Telsur
BBVA Banco BHIF                        UF              27,748,800            1,530,475,093           Banco de Chile
Credit Lyonnais                       US$               8,907,000              232,022,016           SM Chile Series B
Deutsche Bank                         US$              11,400,960              723,736,876           Banco de Chile
</TABLE>

b)    Mortgages and pledges

Lucchetti Chile maintains guarantees in favor of a group of banks under the
terms of a syndicated loan agreement signed on December 10, 2001 amounting to
UF2,369,359. The guarantees include pledges and mortgages over machinery,
equipment, land and buildings of its plants in Santiago and Talca. As part of
the same syndicated loan agreement, Lucchetti has also pledged its 50.1%
shareholding in Lucchetti Chile and the rights to the trademarks Lucchetti,
Talliani, Miraflores, Oro Vegetal and Naturezza. Lucchetti Chile has been sold
during 2004 as discussed in Note 2 above.

Hoteles Carrera, by public deed dated November 20, 2003 sold the Hotel Carrera
building in Santiago, located at Teatinos 180 to Banco Santander-Santiago, in
order for it to be used by the Ministry of Foreign Affairs. The sales contract
provides for the partial transfer of the building (i.e. the complete termination
of the hotel and restaurant business and the complete evacuation of the property
except for the premises rented to Citibank N.A. and Banco Santander - Chile) by
March 6, 2004.

c)    Guarantees to third parties

Hoteles Carrera has rental and administration contracts with Santander
Administradora de Fondos de Inversion for the La Serena Club Resort; Hoteles
Carrera Club Hotel Antofagasta and Carrera Club Hotel Iquique has similar rental
and administration contracts with Hotelera Norte Sur S.A., for which it provided
a renewable insurance policy as a guarantee for the equivalent of six months'
rent (ThCh$152,280) and a renewable time deposit of ThCh$126,529.

d)    Lucchetti Peru and related extraordinary provision

On August 22, 2001, the Metropolitan Council of the Municipality of Lima
published in the Diario El Peruano (the Official Gazette) two council
resolutions (Nos. 258 and 259) declaring the public need to preserve the
ecological area adjoining the production plant of Lucchetti Peru It authorized
the mayor to prepare legislation for the expropriation of the land where the
plant is built, to revoke the operating license


                                     F - 49
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

granted by the Municipality of Chorrillos to Lucchetti Peru for its industrial
facilities, and to order the final closure of the plant and its complete
eradication within twelve months.

Consequently, on October 3, 2001, Lucchetti started proceedings to protect its
rights and interests as a foreign investor under the Reciprocal Investment
Promotion and Protection Treaty signed between Chile and Peru (hereinafter "the
Treaty"). On the same day, Lucchetti delivered a letter addressed to the
President of Peru requesting that the process of cordial negotiations begin, as
set out in the Treaty, which was to last for a period of six months. After that
period, if no agreement was reached, Lucchetti would be in a position to begin
arbitration proceedings to resolve the dispute before an arbitration tribunal
reporting to the International Center for the Settlement of Investment Disputes
("ICSID").

In order to reach a resolution, as provided for in the Treaty, Lucchetti wrote
four further letters to the President of Peru, none of which were answered. On
August 16, 2002, at the request of the then mayor of the Metropolitan
Municipality of Lima, Mr. Alberto Andrade, Lucchetti Peru S.A., asked for an
extension of the term granted by Municipal Resolution 259, expressly reserving
its rights to approach the ICSID. The Metropolitan Council of Lima rejected this
request on December 16, 2002.

On December 23, 2002, Lucchetti, together with Lucchetti Peru, then presented
its request for arbitration to the General Secretary of ICSID to resolve the
dispute arising between the investor and the Peruvian state as a result of
Municipal Resolutions 258 and 259. Among other reasons, the presentation was
mainly based on the argument that there was a total lack of technical and legal
reasons for having adopted these resolutions.

On January 6, 2003, Lucchetti Peru was notified by an official of the
Municipality of Chorrillos of the revocation of its license to operate its
industrial plant for alleged environmental violations and as a consequence
Lucchetti was forced to abandon its operations in Peru. Consequently, the Board
of Directors of Lucchetti agreed to comply with the order as quickly as possible
in order to protect its subsidiary's employees and installations, and to begin
the orderly liquidation of the assets of the Peruvian subsidiary.

As a result of these events, Lucchetti decided to make a provision in the
financial statements for the year ended December 31, 2002 against the entire
investment and for part of the accounts receivable of its subsidiary Lucchetti
Peru, amounting to ThCh$30,678,486 (historic pesos).

The management of Lucchetti, backed by legal reports and analyses, considered
that the actions carried out by the Peruvian authorities constituted an indirect
expropriation of the investment made by Lucchetti in Peru, and as a consequence,
believed that there was a reasonable legal basis under international law to
obtain a favorable settlement for damages. Likewise, the legal advisers to
Lucchetti, believed that the arbitration request qualified for registration with
the ICSID and had a high likelihood of success and that the amount of
compensation should be based on the amounts invested in Peru. Despite these
opinions, and in accordance with current accounting regulations, including the
provisions of Technical Bulletin No.6 of the Chilean Association of Accountants,
Lucchetti did not to record the potential settlement gain that might result from
the international arbitration process for the year ended December 31, 2002.

On March 25, 2003, the ICSID general secretary registered the arbitration
request presented by Lucchetti.


                                     F - 50
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

On August 1, 2003, the ICSID arbitration tribunal was constituted to assess the
lawsuit.

The first meeting of the arbitration tribunal was held on September 15, 2003 at
which time the tribunal formally rejected the request of the Republic of Peru to
suspend the arbitration. The tribunal also set forth the procedures to be
followed for the lawsuit brought by Lucchetti against the Republic of Peru. On
December 15, 2003 the Republic of Peru requested the tribunal to declare that it
had no jurisdiction over the case. Lucchetti is in the process of preparing its
counter argument to the Peruvian request.

e)    Civil liability

Lucchetti is also involved in legal proceedings brought in Peru against certain
of its executives and shareholders.

In the opinion of the management of Lucchetti and its legal advisers, they
expect that the judgment should be in favor of Lucchetti and that in any case if
the judgment is unfavorable to the interests of the Lucchetti, the resultant
liability would not be significant with respect to the financial statements as a
whole.

f)    Lawsuits

As of December 31, 2003, the Quinenco and its Subsidiaries have lawsuits pending
against them with respect to their ordinary course of business which, according
to the company's legal advisers, do not represent risks of significant losses
and for which the Company has not made any provisions in the financial
statements.

During 2001, Madeco and its subsidiary Madeco Brasil Ltda., filed an arbitration
claim before the American Arbitration Association against Corning Inc.
("Corning"), based on the fact that Corning Inc. had attempted to unjustifiably
terminate the agreements entered into with Madeco regarding Optel, a Brazilian
company in which Corning Inc. and Madeco Brasil Ltda. are owners in equal
shares.

Corning filed a counterclaim against the Company in which it requested, among
other things, that Corning be permitted to terminate its joint venture
agreements with the Company, alleging that Optel, a joint venture between Madeco
and Corning, was effectively bankrupt.

Madeco was notified of the ruling passed by the arbitration proceeding during
2003. This ruling effectively terminated the Investment Agreement of June 1999
signed between Madeco Brasil Ltda. and Corning Inc., and the amendments thereof.

Madeco's ability to exercise its put option to sell its Optel shares to Corning
for US$18 million, subject to certain adjustments, between January 2004 and
December 2005, has therefore been compromised. This had no accounting effect.

The termination of the Investment Agreement also means that Madeco Brasil Ltda.
has lost management control over Optel, therefore this indirect subsidiary has
not been consolidated by Madeco as of December


                                     F - 51
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

31, 2003 and has been treated as an equity method investment. Optel is currently
in the process of liquidation.

There are legal proceedings in Brazil against the previous owner of Ficap, a
subsidiary of Madeco, dating from the time prior to Madeco's ownership starting
in 1997. It is believed that total damages would be about US$10 million. Madeco
has personal guarantees from the previous owner of Ficap to indemnify Madeco
should the Brazilian subsidiary be affected by these legal actions.

As of December 31, 2003, Madeco has other lawsuits pending against it with
respect to its ordinary course of business which, according to the company's
legal advisers, do not represent risks of significant losses and for which the
Company has not made any provisions in the financial statements.

VTR has an appeal pending since 1999 against the rejection by the Chilean
Internal Revenue Service of a claim for tax repayments from a contract between
VTR and Citibank N.A. in which there were losses relating to resale agreements
in foreign currencies. Management does not believe that any further payments
could become due relating to this matter.

g) Other contingencies

The indirect guarantees of the Parent Company, include joint and several
guarantees for the debts of the following subsidiaries: Agricola El Penon S.A.,
VTR, Inversiones y Bosques S.A., Inversiones Ranquil S.A., Inversiones Punta
Brava S.A., Inmobiliaria e Inversiones Hidroindustriales S.A. and LQIF. The
relative loan agreements include clauses regarding the use of the funds and
financial covenants that are normal for this type of agreement.

Quinenco has signed option contracts with the above companies, except LQIF,
which are exercisable between February 28, 2003 and February 28, 2006, which
state:

1.    Quinenco may require that the above companies sell their shares in LQIF at
      a price to be determined based on the purchase price of these shares and
      borrowing costs, plus a further 2.0% calculated on the total of these
      items.

2.    The above companies may require Quinenco to purchase shares of LQIF at a
      price to be determined based on the purchase price of these shares and
      borrowing costs, plus a further 0.5% calculated on such amounts.

Telsur and Telcoy, are in compliance with all the regulations applicable to them
as telecommunications companies.

Certain obligations were reciprocally agreed to between the parties to a share
purchase agreement between VTR and SBC International Inc. dated June 16, 1999,
which could result in adjustments to the sale price.

On August 14, 2001, Armat S.A., a subsidiary of Madeco, signed a loan agreement
with Scotiabank to restructure its working capital. The agreement means that
Armat S.A. must comply, inter alia, with certain


                                     F - 52
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

obligations principally regarding the delivery of semi-annual information,
annual audited financial statements, certain financial ratios and obligations
regarding the ownership of Armat S.A.

At December 31, 2003, there is an obligation for deferred customs duties arising
from the import of capital goods meeting the provisions of Law 1,226 of 1985 and
Law 18,634 of 1987. The maturities of these obligations fall between April 2002
and October 2005.


                                     F - 53
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 20 - NON-OPERATING INCOME AND EXPENSES

Non-operating income and expenses for each year are summarized as follows:

<TABLE>
<CAPTION>
                                                                                                  Year ended December 31,
                                                                                       ---------------------------------------------
                                                                                          2001             2002              2003
                                                                                       -----------      -----------      -----------
                                                                                          ThCh$            ThCh$             ThCh$
<S>                                                                                    <C>               <C>             <C>
Non-operating income:
Proportional share of net income of equity method investments (Note 10) .........       37,854,607       25,933,368       57,994,807
Gain on sale of Entel shares ....................................................       51,566,629               --               --
Gain on sale of Plava d.d .......................................................        1,331,703               --               --
Gain on sale of other investments ...............................................        4,938,728          435,361           17,810
Amortization of negative goodwill ...............................................        9,279,335        1,907,919       23,523,313
Amortization of unrealized gains ................................................          161,718          587,019               --
Tax refunds .....................................................................          149,115          393,341          486,894
Release of purchase price accruals ..............................................               --        3,296,718               --
Amount received from settlement payment (1) .....................................               --               --       36,035,025
Recovery of previous investments ................................................               --               --          518,824
Other ...........................................................................        1,802,545        1,324,105          950,322
                                                                                       -----------      -----------      -----------
        Total ...................................................................      107,084,380       33,877,831      119,526,995
                                                                                       ===========      ===========      ===========
Non-operating expenses:
Proportional share of net loss of equity method investments (Note 10) ...........          141,223          498,183          598,439
Amortization of goodwill ........................................................       28,512,937       20,737,172       20,094,838
Restructuring costs and severance indemnities ...................................        5,619,122        6,867,285          221,430
Losses on sales of investments, fixed assets and other ..........................        1,000,557        2,065,661        1,680,636
Financial, legal and other consulting services ..................................        4,543,407          739,573               --
Adjustment to market value of shares ............................................          105,098           34,340            6,751
Directors' compensation .........................................................          446,030          364,887        4,167,745
Adjustment of property, plant and equipment to net realizable value .............        2,735,516          848,680          489,166
Provision for losses on loans and recoverable taxes of foreign subsidiaries .....        3,402,582        2,678,109          483,135
Losses on construction contracts ................................................          906,366               --               --
Allowance for uncollectible debts ...............................................          686,145        1,166,629               --
Amortization of non-recurring expenses ..........................................        1,366,482          770,663               --
Financial consulting and other expenses for sale of Argentine subsidiary ........          545,261               --               --
Labor lawsuits ..................................................................        3,963,348          326,330          381,953
Legal expenses for defense of Lucchetti Peru ....................................        2,410,220        2,246,733        1,395,937
Valuation allowance for fixed and other assets, Argentina .......................       12,962,566        6,201,865          821,194
Impairment of equity investment in and account receivable with Lucchetti Peru ...               --       30,110,178               --
Depreciation of property, plant and equipment involved in temporary shutdown ....               --        3,284,965        1,984,140
Loss originated in non participation in capital increase of subsidiary(2) .......               --        2,762,883       21,130,016
Purchase price accruals .........................................................               --        1,250,433               --
Valuation allowance for accounts receivable to Lucchetti Peru ...................               --          875,093        1,187,600
Provision for liquidation of subsidiary Optel Ltda. (Brazil) ....................               --               --        4,917,485
Loss on sale of Hotel Carrera building ..........................................               --               --        4,713,021
Other ...........................................................................        3,250,066        2,715,096        2,165,322
                                                                                       -----------      -----------      -----------
        Total ...................................................................       72,596,926       86,544,758       66,438,808
                                                                                       ===========      ===========      ===========
</TABLE>

1)    Relates to the US $50 million payment made to Quinenco by FHI Finance
      Holding International during 2003, as part of the Settlement and Release
      Agreement signed on January 13, 2002 between Quinenco and the companies
      Schorghuber Stiftung & Co. Holding K.G., Bayerische BrauHolding A.G. and
      FHI Finance Holding International B.V. to settle arbitration proceedings
      concerning the joint investment in the equity method investment CCU.

2)    Quinenco participated in the capital increase carried out by Madeco in
      March 2003, whereas the minority shareholders did not. This resulted in
      the recognition of negative goodwill. An extraordinary amortization of
      negative goodwill for ThCh$21,130,016 was recognized at the same time as
      this loss, the net effect on income being zero.


                                     F - 54
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 21 - BALANCES AND TRANSACTIONS WITH RELATED PARTIES

Balances with related companies at December 31 of each year are as follows:

a)    Current assets

Notes and accounts receivable from related companies:

<TABLE>
<CAPTION>
                                                                                                             At December 31,
                                                                                                      ---------------------------
                                                                                                         2002             2003
                                                                                                      ----------       ----------
           Company                         Nature of relationship           Nature of transaction        ThCh$            ThCh$
<S>                                     <C>                               <C>                         <C>              <C>
Cobrecon S.A.                           Equity method Investment          Services                       248,457          172,055
Transportes y Servicios Aereos S.A.     Equity method Investment          Services                            --        1,680,726
Blue Two Chile S.A.                     Subsidiary in development stage   Services                            --          289,995
Others related Companies                Various                           Various                        772,309          574,992
                                                                                                      ----------       ----------
        Total..................                                                                        1,020,766        2,717,768
                                                                                                      ==========       ==========
</TABLE>

b)    Long-Term assets

Notes and accounts receivable from related companies:

<TABLE>
<CAPTION>
                                                                                                             At December 31,
                                                                                                      ---------------------------
                                                                                                         2002             2003
                                                                                                      ----------       ----------
           Company                         Nature of relationship           Nature of transaction        ThCh$            ThCh$
<S>                                     <C>                               <C>                         <C>              <C>
Electromecanica Industrial S.A.         Related Company                   Services                       107,459          246,413
Promosol S.A.                           Equity method Investment          Services                        40,825           42,775
Lucchetti Peru                          Equity method Investment          Current account in US$       2,853,916        1,401,217
Transportes y Servicios Aereos S.A.     Equity method Investment          Services                     1,651,679               --
Inversiones Ontario S.A.                Affiliate                         Long-term loan                      --          211,784
                                                                                                      ----------       ----------
        Total                                                                                          4,653,879        1,902,189
                                                                                                      ==========       ==========
</TABLE>

c)    Current Liabilities

Notes and accounts payable to related companies:

<TABLE>
<CAPTION>
                                                                                                             At December 31,
                                                                                                      ---------------------------
                                                                                                         2002             2003
                                                                                                      ----------       ----------
           Company                         Nature of relationship          Nature of transaction        ThCh$            ThCh$
<S>                                     <C>                               <C>                         <C>              <C>
Colada Continua Chilena S.A.            Equity method Investment          Sales of products and
                                                                            services                     185,266          276,948
Other related companies...........      Various                           Various                        139,581          206,138
                                                                                                      ----------       ----------
        Total.....................                                                                       324,847          483,086
                                                                                                      ==========       ==========
</TABLE>

The December 31, 2002 and 2003 balances maintained with Banco de Chile are
included in bank loans for an amount of ThCh$29,615,944 and of ThCh$25,864,443
respectively and time deposits for an amount of ThCh$16,175,119 and of
ThCh$7,006,413 respectively at the end of each year.

The December 31, 2002 and 2003 balance maintained with Andsberg Finance Corp.
LI, company member of Luksic Group, is included in bank loans for an amount of
ThCh$50,959,181 and of ThCh$53,000,082 respectively.


                                     F - 55
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

d)    Long-Term liabilities

<TABLE>
<CAPTION>
                                                                                                                 At December 31,
                                                                                                          -------------------------
                                                                                                             2002            2003
                                                                                                          --------        ---------
           Company                         Nature of relationship          Nature of transaction            ThCh$           ThCh$
<S>                                     <C>                               <C>                               <C>              <C>
Compania de Telecomunicaciones de       Equity method Investment
   Llanquihue S.A.................                                        Sales of products and services        --           24,829
                                                                                                          --------        ---------
        Total.....................                                                                              --           24,829
                                                                                                          ========        =========
</TABLE>

Significant transactions with related parties are summarized as follows:

<TABLE>
<CAPTION>
                                                                                  Revenue (Expenses) for the year-ended December 31,
                                                                                  -------------------------------------------------
Company                                         Transaction                           2001                2002              2003
-------                                         -----------                       -----------          ----------        ----------
                                                                                      ThCh$               ThCh$             ThCh$
<S>                                             <C>                                <C>                  <C>              <C>
Minera Los Pelambres S.A. ................      Services                              144,437             324,679          324,679
Telefonica del Sur Net S.A. ..............      Sales of products and services     (1,218,421)                 --               --
Promosol S.A. ............................      Sales of products and services     (1,748,945)                 --               --
Andsberg Finance Corp. Ltd. ..............      Financing and interest                     --          (4,601,191)       7,712,386
Banco de Chile ...........................      Investment income                     580,697           1,371,332          322,473
Alte S.A. ................................      Sales of products and services        142,336                  --               --
Compania de Telecomunicaciones de
  Llanquihue S.A. ........................      Services                              152,381            (202,586)        (179,023)
Embotelladoras Chilenas Unidas S.A. ......      Sales of products and services             --             686,952          761,700
</TABLE>

On August 20, 2001, Quinenco announced that it had sold its 39.4% interest in
Plava Laguna to Sutivan Investments, a Luksic Group company, for ThUS$29,624
(historical). The pre-tax gain on the sale of its interest was Ch$1,280 million
(historical) (ThUS$1,955). Under the terms of the sales agreement, Quinenco has
an option to purchase 50% of Sutivan Investments in 2004.

In accordance with Article 89 of the Chilean Companies Act, the Company's
transactions with related parties have been carried out on an "arm's length" or
market basis.

NOTE 22 - MINORITY INTEREST

Minority interest is summarized as follows:
<TABLE>
<CAPTION>
                                                                                                  At December 31,
                                                                                           ---------------------------
                                                                                              2002             2003
                                                                                           ----------       ----------
                                                                                              ThCh$            ThCh$
<S>                                                                                        <C>              <C>
Balance Sheet:
Madeco and subsidiaries ..............................................                     60,208,531       76,020,177
Telsur and subsidiaries ..............................................                     16,093,329       16,897,117
Lucchetti and subsidiaries ...........................................                      1,031,060        1,139,413
Hoteles Carrera ......................................................                        953,031          554,861
Other ................................................................                      1,820,794        1,747,459
                                                                                           ----------       ----------
        Total ........................................................                     80,106,745       96,359,027
                                                                                           ==========       ==========
</TABLE>


                                     F - 56
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

<TABLE>
<CAPTION>
                                                                                        For the Year ended December 31,
                                                                           --------------------------------------------------------
                                                                               2001                  2002                  2003
                                                                           ------------          ------------          ------------
                                                                               ThCh$                 ThCh$                 ThCh$
<S>                                                                          <C>                   <C>                   <C>
Income Statement:
Madeco and subsidiaries ..........................................           24,205,788            20,043,348             5,439,424
Telsur and subsidiaries ..........................................           (2,500,109)           (1,745,058)           (2,115,865)
Lucchetti and subsidiaries .......................................              699,351             2,370,624               104,396
Hoteles Carrera ..................................................              102,159                65,396               345,390
Other ............................................................              165,414                (6,793)               42,750
                                                                           ------------          ------------          ------------
        Minority interest participation in net loss ..............           22,672,603            20,727,517             3,816,095
                                                                           ============          ============          ============
</TABLE>

NOTE 23 - CONDENSED FINANCIAL STATEMENTS

Set forth below are condensed financial statements for the significant
investment in CCU held through Quinenco's 50% owned company IRSA.

CCU Condensed Consolidated Balance Sheet

The condensed consolidated financial statements of CCU at December 31, 2002 and
2003 and for the years ended December 31, 2001, 2002 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                                                               At December 31,
                                                                                       ------------------------------
                                                                                           2002              2003
                                                                                       ------------      ------------
                                                                                           ThCh$             ThCh$
<S>                                                                                     <C>               <C>
Assets
Current assets ...............................................................          220,346,843       199,541,116
Property, plant and equipment, net ...........................................          334,053,444       313,804,536
Other assets .................................................................          104,246,463        63,252,595
                                                                                       ------------      ------------
Total Assets .................................................................          658,646,750       576,598,247
                                                                                       ============      ============

Liabilities and Shareholders' Equity
Current liabilities ..........................................................          123,489,890       120,602,961
Long-term liabilities ........................................................           55,435,986       138,947,849
Minority interest ............................................................           41,901,344        38,275,838
Shareholders' equity .........................................................          437,819,530       278,771,599
                                                                                       ------------      ------------
Total Liabilities and Shareholders' Equity ...................................          658,646,750       576,598,247
                                                                                       ============      ============
</TABLE>

CCU Condensed Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                                           Year ended December 31,
                                                                           --------------------------------------------------------
                                                                               2001                  2002                  2003
                                                                           ------------          ------------          ------------
                                                                               ThCh$                 ThCh$                 ThCh$
<S>                                                                        <C>                   <C>                   <C>
Net sales ........................................................          374,088,147           349,349,505           384,064,231
Cost of sales ....................................................         (176,934,187)         (172,156,846)         (189,203,934)
Administrative and selling expenses ..............................         (151,742,626)         (139,051,067)         (148,997,512)
Non-operating income and expenses, net ...........................            3,858,077            (7,080,785)           13,641,860
Minority interest ................................................           (1,911,669)           (1,264,473)             (439,494)
Income tax .......................................................           (7,433,842)           (7,510,799)           (4,977,027)
                                                                           ------------          ------------          ------------
Net income .......................................................           39,923,900            22,285,535            54,088,124
                                                                           ============          ============          ============
</TABLE>


                                     F - 57
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

CCU Condensed Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                           Year ended December 31,
                                                                             -----------------------------------------------------
                                                                                 2001                2002                 2003
                                                                             -------------       -------------       -------------
                                                                                 ThCh$               ThCh$                ThCh$
<S>                                                                            <C>                 <C>                 <C>
Cash Flows From Operating Activities
Net income .............................................................        39,923,900          22,285,535          54,088,124
Income from sales of assets ............................................       (17,786,124)           (682,872)         (1,364,639)
Charges to income that do not represent cash flows .....................        53,875,724          53,024,061          23,034,406
Changes in assets ......................................................       (10,838,666)        (12,924,951)        (19,102,393)
Changes in liabilities .................................................         3,435,984           2,442,535           6,239,499
Minority interest ......................................................         1,911,669           1,264,473             439,494
                                                                             -------------       -------------       -------------
Cash flows from operating activities ...................................        70,522,487          65,408,781          63,334,491
Cash flows from investing activities ...................................       (63,651,352)        (26,169,091)          9,125,569
Cash flows from financing activities ...................................         5,398,270         (12,728,147)        (97,760,899)
Price-level restatement of cash and cash equivalents ...................         1,946,483           1,643,905          (1,442,456)
                                                                             -------------       -------------       -------------
Net increase in cash and cash equivalents ..............................        14,215,888          28,155,448         (26,743,295)
Cash and cash equivalents at beginning of year .........................        50,727,781          64,943,669          93,099,117
                                                                             -------------       -------------       -------------
Cash and cash equivalents at end of year ...............................        64,943,669          93,099,117          66,355,822
                                                                             =============       =============       =============

The reconciliation between the equity holding in IRSA and the net assets and income of CCU is as
follows:

<CAPTION>
                                                                                     At or for the  Year ended December 31,
                                                                             -----------------------------------------------------
                                                                                 2001                2002                 2003
                                                                             -------------       -------------       -------------
                                                                                 ThCh$               ThCh$                ThCh$
<S>                                                                           <C>                 <C>                 <C>
Balance sheet data:
Net worth of CCU .......................................................       428,161,252         437,819,530         278,771,599
Minority interest in CCU (1) ...........................................      (164,494,322)       (168,204,914)       (107,033,103)
Minority interest in IRSA (2) ..........................................      (131,906,304)       (134,854,254)        (86,057,019)
Other movements of balance sheet of IRSA ...............................           145,678              93,892             375,542
                                                                             -------------       -------------       -------------
Investment in IRSA under equity method (Note 10) .......................       131,906,304         134,854,254          86,057,019
                                                                             =============       =============       =============

Income statement data:
Net income of CCU ......................................................        39,923,900          22,285,535          54,088,124
Minority interest in CCU (3) ...........................................       (15,338,275)         (8,561,830)        (20,775,006)
Minority interest in IRSA (4) ..........................................       (12,240,174)         (6,818,403)        (15,992,426)
Other income and expenses of IRSA ......................................          (105,277)            (85,889)         (1,328,267)
                                                                             -------------       -------------       -------------
Equity in net earnings of IRSA (Note 10) ...............................        12,240,174           6,819,413          15,992,425
                                                                             =============       =============       =============

IRSA's investment in CCU ...............................................             61.58%              61.58%              61.61%
Quinenco's investment in IRSA ..........................................             50.00%              50.00%              50.00%
</TABLE>

(1)   Corresponds to differences between the shareholders' equity of CCU and the
      amount recognized via the equity method in IRSA.

(2)   Corresponds to the difference between the shareholders' equity of IRSA and
      the amount recognized via the equity method in Quinenco.

(3)   Corresponds to difference between of the net income of CCU and the net
      income recognized in IRSA.

(4)   Corresponds to proportion of the net income of IRSA recognized in minority
      shareholders'.


                                     F - 58
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 24 - SEGMENT REPORTING:

Quinenco provides disclosures in accordance with Statement of Financial
Accounting Standards 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131") which establishes standards for reporting
information about operating segments in annual financial statements as well as
related disclosures about products and services and geographic areas. Operating
segments are defined as components of an enterprise about which separate
financial statement information available is evaluated regularly by the chief
operating decision maker in making decisions about allocating resources and
assessing performance. In accordance with SFAS 131, Quinenco manages its
business in five segments: Financial Services (Banco de Chile), Food and
Beverage (CCU-Lucchetti), Telecommunications (Telsur), Manufacturing (Madeco),
and Other. Other includes real estate and hotel administration as well as
Quinenco and intermediate holding companies.

The accounting policies of each segment are the same as those as described in
the "Summary of Significant Accounting Policies"(Note 2).

In addition, for Financial Services, interest revenue and expense are recognized
on the accrual basis using the effective interest method. The carrying amounts
of loans, investments and liabilities include accrued interest and the
indexation adjustment applicable to balances that are denominated in UFs or
other indexes. The effect of changes in the UF index on interest-bearing assets
and liabilities are reflected in the income statement as an increase or decrease
in interest revenue or expense

The Bank generally suspends the accrual of interest and indexation adjustment of
principal on loans beginning on the first day that such loans are overdue and on
amounts not yet due for loans on which any installments of principal or interest
are 90 days overdue. Previously accrued interest remains on the Bank's books and
is considered to be a part of the loan balance when determining the Allowance
for loan losses. Payments received on overdue loans are recognized as income,
after reducing the recorded balance of accrued interest receivable, if
applicable, to the extent of interest earned but not recorded

Fees and expenses related to loans, as well as fees for services rendered, are
deferred and recognized in income over the term of the loans to which they
relate, and to the period that the services are performed.

CCU recognizes revenues relating to domestic sales of beer, soda, mineral water,
juice products and wine upon delivery and physical acceptance of the product, at
which time title passes to the customer. Vina San Pedro S.A. generally
recognizes revenues relating to export sales of wine when the wine is shipped,
which in accordance with established sales terms is when title passes to the
customer.

In CCU, advertising and sales promotion costs are expensed as incurred.
Inventory is stated at replacement cost, which does not exceed estimated net
realizable value. Bottles and containers are reported at restated cost, net of
write-offs due to breakage and allowances. Deposits received on bottles and
containers in circulation are classified as long-term liabilities. The amount of
these deposits is determined based on an annual inventory of the bottles and
cases in the possession of customers.

Consistent with US GAAP reporting requirements of financial information reviewed
by the chief operating decision maker, the following segment information
presented has been determined in


                                     F - 59
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

accordance with Chilean GAAP. In accordance with Chilean GAAP, and as described
in Note 10, Investments, Lucchetti Peru was consolidated through December 31,
2002 but the balance sheet as of and subsequent to that date was not
consolidated.

Segment information is presented below:


                                     F - 60
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

<TABLE>
<CAPTION>
                                                                                Year ended December 31, 2001
                                                         --------------------------------------------------------------------------



                                                         Financial Services             Food and beverage        Telecommunications

                                                           Banco de Chile-           CCU             Lucchetti           Telsur
                                                          Banco Edwards (1)
                                                                ThCh$               ThCh$              ThCh$             ThCh$
                                                         --------------------------------------------------------------------------
<S>                                                         <C>                  <C>               <C>               <C>
Statement of Income Data:
Sales to unaffiliated customers .......................                --        374,021,734        89,731,180        47,166,412
Intersegment sales ....................................                --             66,413                --             1,564
                                                         --------------------------------------------------------------------------
       Total revenues .................................                --        374,088,147        89,731,180        47,167,976
                                                         --------------------------------------------------------------------------

Operating  income before general corporate expenses ...                --        197,153,960        26,816,633        28,052,160
General corporate expenses ............................                --       (151,742,625)      (24,063,397)      (14,069,022)
                                                         --------------------------------------------------------------------------
Operating income (loss) ...............................                --         45,411,335         2,753,236        13,983,138
Interest income .......................................                --          3,566,173           335,093           375,638
Non-operating income ..................................                --         20,657,882           913,912           606,563
Interest expense ......................................                --         (6,457,498)       (9,624,972)       (3,064,296)
Non-operating expense .................................                --        (11,412,964)       (5,754,712)         (660,444)

 Financial Services
Net interest revenue and expenses .....................       349,020,650                 --                --                --
Provision for loan losses .............................       (94,197,084)                --                --                --
Income from services, net .............................        80,063,569                 --                --                --
Other operating income, net ...........................        11,495,315                 --                --                --
Other income and expenses, net ........................        20,872,579                 --                --                --
Operating expenses ....................................      (255,548,655)                --                --                --

Price-level restatement, net ..........................       (10,350,985)        (2,495,517)        1,814,399          (387,011)
Income tax ............................................          (372,427)        (7,433,842)        2,897,828        (1,862,699)
Minority interest .....................................                --         (1,911,669)               22          (167,355)
                                                         --------------------------------------------------------------------------
       Net income (loss) ..............................       100,982,962         39,923,900        (6,665,194)        8,823,534
                                                         ==========================================================================

Balance Sheet Data (at December 31):
Identifiable assets ...................................     8,791,332,910        534,398,749       121,195,027       130,135,732
Cash and cash equivalents .............................       549,225,345         59,264,394         2,422,350           803,694
Accounts receivable from related companies ............                --            902,356            92,404         5,557,264
Investments in related and other companies and goodwill         5,415,802         60,202,688           325,289           543,236
                                                         --------------------------------------------------------------------------
       Total assets ...................................     9,345,974,057        654,768,187       124,035,070       137,039,926
                                                         ==========================================================================

<CAPTION>
                                                                                Year ended December 31, 2001
                                                         --------------------------------------------------------------------------
                                                                           Elimination of
                                                                            Companies not
                                                                            Consolidated
                                                          Manufacturing                        Other     Eliminations  Consolidated

                                                             Madeco              (2)         (3) (4)

                                                              ThCh$             ThCh$          ThCh$         ThCh$         ThCh$
                                                         --------------------------------------------------------------------------
<S>                                                        <C>           <C>               <C>           <C>          <C>
Statement of Income Data:
Sales to unaffiliated customers .......................    344,508,866      (374,021,734)   11,734,624            --    493,141,082
Intersegment sales ....................................        779,058           (66,413)      492,978    (1,273,600)            --
                                                         --------------------------------------------------------------------------
       Total revenues .................................    345,287,924      (374,088,147)   12,227,602    (1,273,600)   493,141,082
                                                         --------------------------------------------------------------------------

Operating  income before general corporate expenses ...     46,838,557      (197,153,960)     (347,610)           --    101,359,740
General corporate expenses ............................    (35,742,686)      151,742,625    (9,572,286)      309,003    (83,138,388)
                                                         --------------------------------------------------------------------------
Operating income (loss) ...............................     11,095,871       (45,411,335)   (9,919,896)      309,003     18,221,352
Interest income .......................................      1,999,116        (3,566,173)   22,939,017   (17,389,685)     8,259,179
Non-operating income ..................................      4,161,130       (20,657,882)  101,402,775            --    107,084,380
Interest expense ......................................    (22,126,690)        6,457,498   (43,961,065)   17,389,685    (61,387,338)
Non-operating expense .................................    (34,396,738)       11,412,964   (31,785,032)           --    (72,596,926)

 Financial Services
Net interest revenue and expenses .....................             --      (349,020,650)           --            --             --
Provision for loan losses .............................             --        94,197,084            --            --             --
Income from services, net .............................             --       (80,063,569)           --            --             --
Other operating income, net ...........................             --       (11,495,315)           --            --             --
Other income and expenses, net ........................             --       (20,872,579)           --            --             --
Operating expenses ....................................             --       255,548,655            --            --             --

Price-level restatement, net ..........................    (13,746,900)       12,846,502     1,259,208            --    (11,060,304)
Income tax ............................................       (435,218)        7,806,269     4,341,554            --      4,941,465
Minority interest .....................................      1,334,472         1,911,669    21,505,464            --     22,672,603
                                                         --------------------------------------------------------------------------
       Net income (loss) ..............................    (52,114,957)     (140,906,862)   65,782,025       309,003     16,134,411
                                                         ==========================================================================

Balance Sheet Data (at December 31):
Identifiable assets ...................................    371,374,081    (9,325,731,659)   81,947,111            --    704,651,951
Cash and cash equivalents .............................      4,625,266      (608,489,739)   47,194,290            --     55,045,600
Accounts receivable from related companies ............        538,008          (902,356)    3,365,447            --      9,553,123
Investments in related and other companies and goodwill     44,471,381       (65,618,490)  809,570,694            --    854,910,600
                                                         --------------------------------------------------------------------------
       Total assets ...................................    421,008,736   (10,000,742,244)  942,077,542            --  1,624,161,274
                                                         ==========================================================================
</TABLE>

(1)   Banco de Chile and Banco Edwards are an equity method investment under
      Chilean GAAP and is presented here as a separate segment. In order to
      reconcile to the consolidated financial statements, it is removed in the
      column, "elimination of companies not consolidated and the equity
      participation is added in one line in the column "other".

(2)   This column includes the elimination of CCU, Banco de Chile and Banco
      Edwards

(3)   This column includes real estate and hotel administration as well as
      Quinenco and intermediate holding companies.

(4)   The net equity investments in CCU, Banco de Chile and Banco Edwards are
      included in the column entitled "Other" in the caption "Non-Operating
      income".


                                     F - 61
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

<TABLE>
<CAPTION>
                                                                       Year ended December 31, 2002
                                           -----------------------------------------------------------------------------------------



                                           Financial Services          Food and beverage          Telecommunications   Manufacturing

                                           Banco de Chile (1)       CCU              Lucchetti          Telsur            Madeco
                                                 ThCh$              ThCh$              ThCh$             ThCh$             ThCh$
                                           -----------------------------------------------------------------------------------------
<S>                                         <C>                  <C>                 <C>              <C>               <C>
Statement of Income Data:
Sales to unaffiliated customers .......                --        349,349,505         84,636,517        47,112,075       258,462,506
Intersegment sales ....................                --                 --                 --                --           382,915
                                           -----------------------------------------------------------------------------------------
     Total revenues ...................                --        349,349,505         84,636,517        47,112,075       258,845,421
                                           -----------------------------------------------------------------------------------------

Operating income before general
  corporate expenses ..................                --        177,021,259         22,638,874        27,627,184        32,012,500
General corporate expenses ............                --       (139,051,067)       (19,933,907)      (14,347,577)      (27,969,011)
                                           -----------------------------------------------------------------------------------------
Operating income ......................                --         37,970,192          2,704,967        13,279,607         4,043,489
Interest income .......................                --          1,651,716            140,489           360,012         1,585,938
Non-operating income ..................                --          4,698,899            209,759           704,950           715,160
Interest expense ......................                --         (3,871,422)        (4,948,204)       (3,287,938)      (19,282,582)
Non-operating expense .................                --         (5,849,240)       (35,033,590)       (2,620,658)      (22,537,041)

Financial Services
Net interest revenue and expenses .....       371,271,960                 --                 --                --                --
Provision for loan losses .............      (101,650,440)                --                 --                --                --
Income from services, net .............        87,552,860                 --                 --                --                --
Other operating income, net ...........       (30,325,250)                --                 --                --                --
Other income and expenses, net ........        (5,348,960)                --                 --                --                --
Operating expenses ....................      (259,811,390)                --                 --                --                --

Price-level restatement, net ..........        (9,691,960)        (3,710,738)          (487,154)         (414,803)       (8,526,775)
Income tax ............................         1,164,530         (7,510,799)          (181,354)       (1,797,841)        1,416,371
Minority interest .....................                --         (1,264,473)               158          (135,588)        2,017,913
                                           -----------------------------------------------------------------------------------------
     Net income (loss) ................        53,161,350         22,114,135        (37,594,929)        6,087,741       (40,567,527)
                                           =========================================================================================

Balance Sheet Data (as of December 31):
Identifiable assets ...................     7,993,979,310        488,767,503         73,931,325       136,509,162       328,707,965
Cash and cash equivalents .............       683,187,230         93,099,117             89,441         1,962,591         7,836,288
Accounts receivable from related
  companies ...........................                --          2,628,155          2,905,605            94,299           876,147
Investments in related and other
  companies and goodwill ..............         4,824,770         74,993,524            181,642           341,694        44,513,198
                                           -----------------------------------------------------------------------------------------
     Total assets .....................     8,681,991,310        659,488,299         77,108,013       138,907,746       381,933,598
                                           =========================================================================================

<CAPTION>
                                                                Year ended December 31, 2002
                                           -----------------------------------------------------------------------

                                            Elimination of
                                            Companies not
                                             Consolidated           Other           Eliminations      Consolidated

                                                 (2)               (3) (4)
                                                 ThCh$              ThCh$               ThCh$             ThCh$
                                           -----------------------------------------------------------------------
<S>                                           <C>                <C>                 <C>               <C>
Statement of Income Data:
Sales to unaffiliated customers .......      (349,349,505)        10,050,583                 --        400,261,681
Intersegment sales ....................                --            293,808           (676,723)                --
                                           -----------------------------------------------------------------------
     Total revenues ...................      (349,349,505)        10,344,391           (676,723)       400,261,681
                                           -----------------------------------------------------------------------

Operating income before general
  corporate expenses ..................      (177,021,259)        (1,117,726)                --         81,160,832
General corporate expenses ............       139,051,067         (9,207,406)           676,723        (70,781,178)
                                           -----------------------------------------------------------------------
Operating income ......................       (37,970,192)       (10,325,132)           676,723         10,379,654
Interest income .......................        (1,651,716)        20,122,354        (16,807,581)         5,401,212
Non-operating income ..................        (4,698,899)        32,247,962                            33,877,831
Interest expense ......................         3,871,422        (40,523,280)        16,807,581        (51,234,423)
Non-operating expense .................         5,849,240        (26,353,469)                          (86,544,758)

Financial Services
Net interest revenue and expenses .....      (371,271,960)                --                 --                 --
Provision for loan losses .............       101,650,440                 --                 --                 --
Income from services, net .............       (87,552,860)                --                 --                 --
Other operating income, net ...........        30,325,250                 --                 --                 --
Other income and expenses, net ........         5,348,960                 --                 --                 --
Operating expenses ....................       259,811,390                 --                 --                 --

Price-level restatement, net ..........        13,402,698            443,835                 --         (8,984,897)
Income tax ............................         6,346,269            705,674                 --            142,850
Minority interest .....................         1,264,473         18,845,034                 --         20,727,517
                                           -----------------------------------------------------------------------
     Net income (loss) ................       (75,275,485)        (4,837,021)           676,723        (76,235,013)
                                           =======================================================================

Balance Sheet Data (as of December 31):
Identifiable assets ...................    (8,482,746,813)        54,393,929                 --        593,542,381
Cash and cash equivalents .............      (776,286,347)        84,129,725                 --         94,018,045
Accounts receivable from related
  companies ...........................        (2,628,155)         3,971,076                 --          7,847,127
Investments in related and other
  companies and goodwill ..............       (79,818,294)       798,026,325                 --        843,062,859
                                           -----------------------------------------------------------------------
     Total assets .....................    (9,341,479,609)       940,521,055                 --      1,538,470,412
                                           =======================================================================
</TABLE>

(1)   Banco de Chile is an equity method investment under Chilean GAAP and is
      presented here as a separate segment. In order to reconcile to the
      consolidated financial statements, it is removed in the column,
      "elimination of companies not consolidated and the equity participation is
      added in one line in the column "other".

(2)   This column includes the elimination of CCU and Banco de Chile

(3)   This column includes real estate and hotel administration as well as
      Quinenco and intermediate holding companies.

(4)   The net equity investments in CCU and Banco de Chile are included in the
      column entitled "Other" in the caption "Non-Operating income".


                                     F - 62
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

<TABLE>
<CAPTION>
                                                                         Year ended December 31, 2003
                                            ----------------------------------------------------------------------------------------



                                            Financial Services           Food and beverage       Telecommunications    Manufacturing

                                            Banco de Chile (1)        CCU           Lucchetti           Telsur             Madeco
                                                  ThCh$              ThCh$            ThCh$             ThCh$              ThCh$
                                            ----------------------------------------------------------------------------------------
<S>                                           <C>                 <C>               <C>              <C>                <C>
Statement of Income Data:
Sales to unaffiliated customers .......                  --       384,064,231       59,115,255        51,468,755        236,294,285
Intersegment sales ....................                  --                --              992            12,351          1,371,746
                                            ----------------------------------------------------------------------------------------
     Total revenues ...................                  --       384,064,231       59,116,247        51,481,106        237,666,031
                                            ----------------------------------------------------------------------------------------

Operating  income before general
  corporate expenses ..................                  --       194,860,297       18,310,591        26,204,413         29,228,646
General corporate expenses ............                  --      (148,997,512)     (15,416,430)      (13,887,621)       (21,771,874)
                                            ----------------------------------------------------------------------------------------
Operating income (loss) ...............                  --        45,862,785        2,894,161        12,316,792          7,456,772
Interest income .......................                  --         2,529,007           31,080            70,752          1,114,271
Non-operating income ..................                  --        21,960,954          134,815           886,728            823,694
Interest expense ......................                  --        (5,661,161)      (2,889,478)       (3,027,495)       (12,461,680)
Non-operating expense .................                  --        (6,448,576)      (4,120,522)         (481,421)       (13,236,468)

 Financial Services
Net interest revenue and expenses .....         224,470,000                --               --                --                 --
Provision for loan losses .............         (60,069,000)               --               --                --                 --
Income from services, net .............         103,389,000                --               --                --                 --
Other operating income, net ...........          96,391,000                --               --                --                 --
Other income and expenses, net ........           8,746,002                --               --                --                 --
Operating expenses ....................        (224,436,000)               --               --                --                 --

Price-level restatement, net ..........          (4,036,000)        1,261,636          111,164          (141,167)         1,739,726
Income tax ............................         (13,902,000)       (4,977,027)       1,703,287        (2,040,530)        (1,592,412)
Minority interest .....................                  (2)         (439,494)             (66)         (153,843)          (578,227)
                                            ----------------------------------------------------------------------------------------
     Net income (loss) ................         130,553,000        54,088,124       (2,135,559)        7,429,816        (16,734,324)
                                            ========================================================================================

Balance Sheet Data (as of December 31):
Identifiable assets ...................       8,387,772,000       475,531,561       69,770,866       129,032,723        313,514,853
Cash and cash equivalents .............         856,834,000        66,355,822        8,057,256         1,896,695          5,421,093
Accounts receivable from related
  companies ...........................                   0           676,390        1,454,748           289,995          1,029,079
Investments in related and other
  companies and goodwill ..............           5,296,000        34,034,474          174,392           576,532         33,710,765
                                            ----------------------------------------------------------------------------------------
     Total assets .....................       9,249,902,000       576,598,247       79,457,262       131,795,945        353,675,790
                                            ========================================================================================

<CAPTION>
                                                                  Year ended December 31, 2003
                                            -----------------------------------------------------------------------
                                              Elimination of
                                              Companies not
                                               Consolidated          Other          Eliminations       Consolidated

                                                   (2)              (3) (4)
                                                  ThCh$              ThCh$             ThCh$              ThCh$
                                            -----------------------------------------------------------------------
<S>                                            <C>                <C>                 <C>               <C>
Statement of Income Data:
Sales to unaffiliated customers .......       (384,064,231)        10,501,131                 --        357,379,426
Intersegment sales ....................            (22,648)          (657,056)          (705,385)                 0
                                            -----------------------------------------------------------------------
     Total revenues ...................       (384,086,879)         9,844,075           (705,385)       357,379,426
                                            -----------------------------------------------------------------------

Operating  income before general
  corporate expenses ..................       (194,860,297)        (1,391,602)                --         72,352,048
General corporate expenses ............        148,997,512         (9,234,543)           705,385        (59,605,083)
                                            -----------------------------------------------------------------------
Operating income (loss) ...............        (45,862,785)       (10,626,145)           705,385         12,746,965
Interest income .......................         (2,529,007)        13,398,673        (11,686,357)         2,928,419
Non-operating income ..................        (21,960,954)       117,681,758                 --        119,526,995
Interest expense ......................          5,661,161        (28,500,080)        11,686,357        (35,192,376)
Non-operating expense .................          6,448,576        (48,600,397)                --        (66,438,808)

 Financial Services
Net interest revenue and expenses .....       (224,470,000)                --                 --                 --
Provision for loan losses .............         60,069,000                 --                 --                 --
Income from services, net .............       (103,389,000)                --                 --                 --
Other operating income, net ...........        (96,391,000)                --                 --                 --
Other income and expenses, net ........         (8,746,002)                --                 --                 --
Operating expenses ....................        224,436,000                 --                 --                 --

Price-level restatement, net ..........          2,774,364          1,166,595                 --          2,876,318
Income tax ............................         18,879,027           (639,107)                --         (2,568,762)
Minority interest .....................            439,496          4,548,231                 --          3,816,095
                                            -----------------------------------------------------------------------
     Net income (loss) ................       (184,641,124)        48,429,528            705,385         37,694,846
                                            =======================================================================

Balance Sheet Data (as of December 31):
Identifiable assets ...................     (8,863,303,561)        35,308,716                 --        547,627,158
Cash and cash equivalents .............       (923,189,822)        40,933,601                 --         56,308,645
Accounts receivable from related
  companies ...........................           (676,390)         1,846,135                 --          4,619,957
Investments in related and other
  companies and goodwill ..............        (39,330,474)       748,342,906                 --        782,804,595
                                            -----------------------------------------------------------------------
     Total assets .....................     (9,826,500,247)       826,431,358                 --      1,391,360,355
                                            =======================================================================
</TABLE>

(1)   Banco de Chile is an equity method investment under Chilean GAAP and is
      presented here as a separate segment. In order to reconcile to the
      consolidated financial statements, it is removed in the column,
      "elimination of companies not consolidated and the equity participation is
      added in one line in the column "other".

(2)   This column includes the elimination of CCU and Banco de Chile

(3)   This column includes real estate and hotel administration as well as
      Quinenco and intermediate holding companies.

(4)   The net equity investments in CCU and Banco de Chile are included in the
      column entitled "Other" in the caption "Non-Operating income".


                                     F - 63
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Depreciation for each of the segments was as follows:

<TABLE>
<CAPTION>
                                                                                              Years ended December 31,
                                                                                 --------------------------------------------------
                                                                                     2001               2002               2003
                                                                                 ------------       ------------       ------------
                                                                                     ThCh$              ThCh$              ThCh$
<S>                                                                               <C>                <C>                <C>
Segment
Financial Services
   Banco de Chile .........................................................         8,152,831         16,395,891         13,763,224
   Banco Edwards ..........................................................         7,716,729                 --                 --
Food and Beverage
   CCU ....................................................................        41,817,651         43,447,971         40,161,075
   Lucchetti ..............................................................         4,678,983          3,823,533          2,936,391
Telecommunications
   Telsur .................................................................         9,835,738         10,682,631         12,696,750
Manufacturing
   Madeco .................................................................        15,367,656         12,913,549         11,072,480
Other (1) .................................................................         2,125,950          2,030,457          1,962,295
Elimination of non-consolidated companies (2) .............................       (57,687,211)       (59,843,862)       (53,924,299)
                                                                                 ------------       ------------       ------------
        Total depreciation ................................................        32,008,327         29,450,170         28,667,916
                                                                                 ============       ============       ============
</TABLE>

(1)   Includes real estate and hotel administration as well as Quinenco and
      intermediate holding companies.

(2)   Includes the elimination of non-consolidated companies CCU, Banco de Chile
      and Banco Edwards.

Capital expenditures, comprised of additions to property plant and equipment,
for each of the segments were as follows:

<TABLE>
<CAPTION>
                                                                                             Years ended December 31,
                                                                                 --------------------------------------------------
                                                                                     2001               2002               2003
                                                                                 ------------       ------------       ------------
                                                                                     ThCh$              ThCh$              ThCh$
<S>                                                                                <C>                <C>                <C>
Segment:
Financial Services
   Banco de Chile .........................................................        10,415,810         12,116,900          6,805,300
   Banco Edwards ..........................................................         6,770,452                 --                 --
Food and Beverage
   CCU ....................................................................        35,123,627         20,476,274         24,772,968
   Lucchetti ..............................................................           695,889          1,818,693            325,030
Telecommunications
   Telsur .................................................................        21,008,933         14,477,975          7,241,195
Manufacturing
   Madeco .................................................................         8,918,274          6,464,838          3,478,819
Other (1) .................................................................         2,424,765             38,858          1,030,448
Elimination of non-consolidated companies (2) .............................       (52,309,889)       (32,593,174)       (31,578,268)
                                                                                 ------------       ------------       ------------
     Total capital expenditures ...........................................        33,047,861         22,800,364         12,075,492
                                                                                 ============       ============       ============
</TABLE>

(1)   Includes real estate and hotel administration as well as Quinenco and
      intermediate holding companies.

(2)   Includes the elimination of non-consolidated companies CCU, Banco de Chile
      and Banco Edwards.


                                     F - 64
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Property, plant and equipment for each of the segments were as follows:

<TABLE>
<CAPTION>
                                                                                            Years ended December 31,
                                                                              -----------------------------------------------------
                                                                                  2001                2002                 2003
                                                                              -------------       -------------       -------------
                                                                                  ThCh$               ThCh$                ThCh$
<S>                                                                            <C>                 <C>                 <C>
Segment:
Financial Services
   Banco de Chile ......................................................         88,535,980         127,754,900         140,736,900
   Banco Edwards .......................................................         61,826,277                  --                  --
Food and Beverage
   CCU .................................................................        356,356,353         334,053,444         313,804,536
   Lucchetti ...........................................................         75,314,562          38,965,621          36,472,439
Telecommunications
   Telsur ..............................................................        107,769,210         112,527,301         104,764,935
Manufacturing
   Madeco ..............................................................        208,035,745         203,244,824         162,759,476
Other (1) ..............................................................         43,501,624          41,653,578          21,780,320
Elimination of non-consolidated companies (2) ..........................       (506,718,610)       (461,808,344)       (454,541,436)
                                                                              -------------       -------------       -------------
     Total Property, plant and equipment ...............................        434,621,141         396,391,324         325,777,170
                                                                              =============       =============       =============
</TABLE>

(1)   Includes the real estate and hotel administration as well as Quinenco and
      intermediate holding companies.

(2)   Includes the elimination of CCU, Banco de Chile and Banco Edwards.

Sales, which relate to non-Financial Service companies, detailed by major
geographic areas were as follows:

<TABLE>
<CAPTION>
Sales (1)                                                                                   Years ended December 31,
                                                                              -----------------------------------------------------
                                                                                  2001                2002                 2003
                                                                                  ThCh$               ThCh$                ThCh$
<S>                                                                            <C>                 <C>                 <C>
Chile ..................................................................        455,487,018         617,174,608         610,297,631
Argentina ..............................................................        104,298,502          40,546,672          55,603,644
Peru ...................................................................         30,121,867          44,835,427          24,797,469
Brazil .................................................................        110,963,049          71,793,121          51,040,913
Sub-total ..............................................................        700,870,436         774,349,828         741,739,657
Elimination of non-consolidated companies (2) ..........................       (355,582,511)       (374,088,147)       (384,360,231)
                                                                              -------------       -------------       -------------
     Total .............................................................        345,287,925         400,261,681         357,379,426
                                                                              =============       =============       =============
</TABLE>

(1)   The table above does not include Banco de Chile and Banco Edwards.

(2)   Includes the elimination of CCU.

NOTE 25 - SUBSEQUENT EVENT

On March 31, 2004, Lucchetti disposed of its Chilean based operations to Corpora
Tresmontes for ThCh$56,074,430 less financial debt, generating a gain on sale of
ThCh$1,276,001. The sale represented approximately 85% of Lucchetti's
consolidated net assets. The sale did not include Lucchetti Peru, Lucchetti's
50% participation in the chocolate and cookie maker Calaf, two properties in
Chile, deferred tax credits or settlement rights in Lucchetti's arbitration
proceedings against the Peruvian Government.


                                     F - 65
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

NOTE 26 - DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES

Accounting principles generally accepted in Chile (Chilean GAAP) vary in certain
important respects from accounting principles generally accepted in the United
States of America (US GAAP). Such differences involve certain methods for
measuring the amounts shown in the financial statements, as well as additional
disclosures required by US GAAP.

The principal differences between Chilean GAAP and US GAAP are described below
together with explanations, where appropriate, of the method used in the
determination of the adjustments that affect net income and total shareholders'
equity. Under Chilean GAAP, banking operations are not generally consolidated
with non-financial businesses primarily due to the dissimilarity of both the
nature of the businesses and the related accounting policies. However, under US
GAAP consolidation of the Company's banking operations would be required under
Statement of Financial Accounting Standards 94 ("SFAS 94"), which deals with the
consolidation of all majority-owned subsidiaries. As a result, where
appropriate, adjustments to US GAAP of the Company's banking operations are
disclosed on a gross basis with a separate adjustment for taxes, providing
separate disclosure for items that would impact several balance sheet accounts
under US GAAP separated between the Company's banking operations and
non-financial businesses. Additional disclosure required under US GAAP of the
consolidation of majority owned subsidiaries is provided in part II of this
note. This information has been presented on a Chilean GAAP basis. References
below to "the Bank" are to the merged Banco de Chile and Banco Edwards.
References below to "SFAS" are to United States Statements of Financial
Accounting Standards and references to "FASB" are to the Financial Accounting
Standards Board.

I.    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) Inflation accounting

Chilean accounting principles require that financial statements be restated to
reflect the full effects of the loss in the purchasing power of the Chilean peso
on the financial position and results of operations of reporting entities. The
method, described in Note 2b), is based on a model which permits the calculation
of net inflation gains or losses caused by the holding of 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.

Although the cumulative inflation rate in Chile as measured by the Consumer
Price Index for the three-year period ended December 31, 2003 was approximately
7.25%, the inclusion of price-level adjustments in the accompanying financial
statements is considered appropriate under the prolonged inflationary conditions
that have affected the Chilean economy in the past. Accordingly, the effect of
price-level changes is not eliminated in the reconciliation to US GAAP.


                                     F - 66
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(b) Deferred income taxes

Under Chilean GAAP, until December 31, 1999, deferred income taxes were recorded
based on non-recurring timing differences between the recognition of income and
expense items for financial statement and tax purposes. Accordingly, there was
an orientation toward the income statement focusing on differences in the timing
of recognition of revenues and expenses in pre-tax accounting income and taxable
income. At the time, Chilean GAAP also permitted not providing for deferred
income taxes where a deferred tax asset or liability was either offsetting or
not expected to be realized.

Beginning January 1, 2000, the Company recorded income taxes in accordance with
Technical Bulletin No. 60 and its related amendments issued by the Chilean
Association of Accountants, recognizing, using the liability method, the
deferred tax effects of temporary differences between the financial and tax
values of assets and liabilities. As a transitional provision, a contra
(referred to as "complementary") asset or liability has been recorded offsetting
the effects of the deferred tax assets and liabilities not recorded prior to
January 1, 2000. Such complementary assets or liabilities are being amortized to
income over the estimated average reversal periods corresponding to the
underlying temporary differences to which the deferred tax asset or liability
relates.

Under US GAAP, companies must account for deferred taxes in accordance with
Statement of Financial Accounting Standards 109 Accounting for Income taxes
("SFAS 109"), which requires an asset and liability approach for financial
accounting and reporting of income taxes, under the following basic principles:

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

            o     The measurement of deferred tax liabilities and assets is
                  based on the provisions of the enacted tax law. The effects of
                  future changes in tax laws or rates are not anticipated.

            o     The measurement of deferred 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 of the
                  deferred tax assets will not be realized.

Temporary differences are defined as any difference between the financial
reporting basis and the tax basis of an asset and liability that at some future
date will reverse, thereby resulting in taxable income or expense. Temporary
differences ordinarily become taxable or deductible when the related asset is
recovered or the related liability is settled. A deferred tax liability or asset
represents the amount of taxes payable or refundable in future years as a result
of temporary differences at the end of the current year.

For the years ended December 31, 2001, 2002 and 2003 the principal difference
between Chilean GAAP and US GAAP relates to the amortization of the contra asset
and liability recorded as a transitional provision for unrecorded deferred taxes
as of January 1, 2000.

To the extent that the US GAAP adjustments generate temporary differences (i.e.
that they will reverse in the future) between the tax basis and the US GAAP
basis of assets and liabilities then an adjusting entry to record the
appropriate deferred tax impact must be made. For the years ended December 31,
2001, 2002 and 2003, the purchase accounting adjustments, staff severance
indemnities, derivatives, the impairment of property, plant and equipment,
investment securities and certain adjustments relating to the restructuring
provisions generated temporary differences and therefore the deferred income tax
effect of such adjustments has been recorded.


                                     F - 67
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The effect of differences in accounting for deferred taxes on net income and
shareholders' equity is included in paragraph I (ff) below and certain
disclosures required under FAS 109 are set forth under paragraph II c) below.

(c) Minimum dividend

As required by the Chilean Companies Act, unless otherwise decided by the
unanimous vote of the issued and subscribed shares, an open stock corporation
must distribute a cash dividend in an amount equal to at least 30% of the
company's net income less negative goodwill amortization in the parent company
for each year as determined in accordance with Chilean GAAP. Since the payment
of the 30% dividend out of each year's income is a legal requirement in Chile,
provision has been made in the accompanying US GAAP reconciliation in I (ff)
below to recognize this effect. In addition no provision was made for the year
ended December 31, 2002 as the Company had a net loss, no provision was made for
the year ended December 31, 2003 as the Company has already paid an interim
dividend greater than 30% of income as of the year end. The effects of the
accounting for the minimum dividend are shown in the paragraph I (ff) below.

(d) Reversal of the revaluation of property, plant and equipment

As mentioned in Note 2 i), certain property, plant and equipment 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, as well as of the related accumulated
depreciation and depreciation expense for each year is shown in paragraph I (ff)
below as follows:

      (d-1) Reversal of the revaluation of property, plant and equipment.

      (d-2) Reversal of the accumulated depreciation of the revalued property,
            plant and equipment.

(e)Investment securities

e-1) Non-Financial Services

Under Chilean GAAP, investments in other companies reported in the financial
statements are valued at the lower of restated cost or market value. Unrealized
losses on such investments are reflected in the statements of income.

Under US GAAP, SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS No. 115"), requires that debt and equity securities be
classified in accordance with the Company's intent and ability to hold the
security, as follows:

o     Debt securities that the Company has the positive intent and ability to
      hold to maturity are classified as held-to-maturity securities and are
      reported at amortized cost.

o     Debt and equity securities that are bought and held by the Company,
      principally for the purpose of selling them in the near term, are
      classified as trading securities and reported at fair value, with
      unrealized gains and losses included in earnings.

o     Debt and equity securities not classified as either held-to-maturity
      securities or trading securities are classified as available-for-sale
      securities and reported at fair value, with unrealized gains and losses
      excluded from earnings and reported in a separate component of
      shareholders' equity net of the deferred income tax effects.


                                     F - 68
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The Company held a 5.69% ownership interest in Entel at December 31, 2001, 2002
and 2003, respectively. Under Chilean GAAP, the Company has recorded its equity
participation in the net income of Entel under the equity method and has
recorded goodwill and negative goodwill arising from the various acquisitions of
shares. Under US GAAP, these investments would be classified as
available-for-sale marketable securities and held at fair value. Additionally,
due to the sale of 7.99% of its investment in 2001 and the distinct methods used
to account for the investments, there is also an adjustment between Chilean GAAP
and US GAAP relating to the gain on the sale, which under US GAAP was calculated
based on the average cost of the securities purchased. The effect of the
differences in the accounting method and the gain in the sale are included in
paragraph I (ff) below as follows:

      (e-1-1) The effects of recording the investments in other companies
              classified as available-for-sale under US GAAP at their fair value

      (e-1-2) The reversal of the equity method participation in the net income
              of Entel.

      (e-1-3) The reversal of goodwill and accumulated amortization recorded on
              certain acquisitions of Entel shares.

      (e-1-4) The reversal of negative goodwill and accumulated amortization
              recorded on certain acquisitions of Entel shares.

e-2) Financial Services

Under Chilean GAAP, the Company's banking operations classify investments as
either trading securities or permanent securities. Trading securities are
reported at fair value, with unrealized gains and losses included in earnings.
Permanent securities are stated at fair market value with unrealized gains and
losses included in a separate component of shareholders' equity, with realized
gains and losses included in other operating results. Investments with a
secondary market are carried at market value, and all other financial
investments are carried at acquisition cost plus accrued interest and UF
indexation adjustments.

Under US GAAP, based upon the criteria above, the Company's banking operations
have determined that under US GAAP, their investments should be classified as
"trading", "available-for-sale" and "held-to-maturity". Consequently,
investments classified as permanent are considered to be "available-for-sale"
and all other investments are considered to be "trading", with the exception of
certain Central Bank securities and other investments, maintained by banking
branches in the United States of America, some of which are classified as
"held-to-maturity". The effect of eliminating the market value adjustment for
the held to maturity securities is included in the reconciliation of
consolidated net income and shareholders' equity in paragraph I (ff) above.

(f) Employee severance indemnities

For Chilean GAAP purposes, the Company accrues for severance indemnities when
rights to such benefits have been formally guaranteed to employee groups. Those
obligations are based on the present value of the liability determined at the
end of each year based on the current salary and number of years of service to
date of each employee. The Company uses a real discount rate and a projected
employee service life based on probable tenure for vested employees. The real
annual discount rate does not include a projection of inflation and accordingly,
future salary increases are also excluded from the calculation of the
obligation, because all such future increases are expected to approximate the
increase in inflation over a long-term period.


                                     F - 69
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

For US GAAP purposes, the severance indemnities described above are determined
based on the vested benefits to which the employees are entitled if they
separate immediately (settlement basis) in accordance with EITF 88-1
"Determination of Vested Benefit Obligation for a Defined Benefit Pension Plan"
("EITF 88-1"). The effect of differences in the accounting for employee
severance indemnities is included in paragraph I (ff) below as follows:

      (f-1) The effect of recognizing the short-term portion of the additional
            liability.

      (f-2) The effect of recognizing the long-term portion of the additional
            liability.

(g) Deficit during development stage

For Chilean GAAP purposes, investments in majority-owned subsidiaries in the
development stage are recorded by the equity method and the investor's
proportional share of the subsidiary's results of operations are taken to a
reserve which forms part of the investor's shareholders' equity. For US GAAP
purposes, majority-owned subsidiaries in the development stage are consolidated
and the results of their operations charged directly to income. The effect of
differences in accounting methods is included in paragraph I (ff) below. No
disclosure of the effect of consolidation of such subsidiaries has been made
considering that the effects are not material. During 2004 a new technical
bulletin is expected to change the accounting rules for such subsidiaries and
Chilean GAAP treatment will become consistent with US GAAP.

(h) Advertising costs

During 1998, Lucchetti capitalized corporate image advertising costs incurred in
connection with obtaining a municipal license for the construction of its plant
in Lima, Peru. During 1999, Lucchetti started amortizing the capitalized
advertising costs. For US GAAP purposes, those costs cannot be capitalized and
were charged to income. During the year ended December 31, 2001, the effect of
reversing the amortization that is included in the income statement in Chilean
GAAP is included in discontinued operations in paragraph I (ff) below. In the
year ended December 31, 2002, under Chilean GAAP, all such costs were
written-off as part of the provision for the closure of the plant in Peru and
subsequently, there is no longer a difference in shareholders' equity between
Chilean GAAP and US GAAP as of December 31, 2002 and 2003. The adjustment to
reverse the write-down of previously capitalized costs taken in the year ended
December 31, 2002 under Chilean GAAP has been included within discontinued
operations, included in paragraph I (ff) below.

(i) Restructuring costs

During 1999, Madeco began restructuring a portion of its operations. As part of
this process, certain operating plants were either closed or transferred and
merged with other plants. At December 31, 1999, some steps related to this
process were not complete and accordingly, the Company recorded provisions for
the estimated costs to completion. The estimated costs related to employee
benefits, such as staff severance indemnities and termination benefits, and
costs associated with the relocation of plant facilities. During 2000 and 2001,
other subsidiaries of the Company also implemented restructuring plans.

The recognition of liabilities related to a restructuring process under US GAAP
is prescribed by SFAS 146 "Accounting for Costs Associated with Exit or Disposal
Activities", effective for disposal activities after December 31, 2002, and
Emerging Issue Task Force 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)" ("EITF 94-3"), applicable prior to the
application of SFAS 146. In order to recognize a


                                     F - 70
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

liability for employee termination benefits and other restructuring costs under
both EITF 94-3 and SFAS 146, prior to the date of the financial statements,
certain specific conditions must be met or exist.

At December 31, 2001, 2002 and 2003, some of the required conditions had not
been met or did not exist with respect to the restructuring process of the
Company and its subsidiaries, therefore, an adjustment to reverse a portion of
the restructuring provisions was included in the reconciliation to US GAAP in
each of those years. The adjustment to reverse the restructuring provisions in
each of the three years ended December 31, 2003 is included in paragraph I (ff)
below.

(j) Goodwill

Under Chilean GAAP, prior to the implementation of Technical Bulletin 72, ("BT
72") which is mandatory for periods beginning after December 31, 2003, the
excess of cost over the net book value of a purchased company was recorded as
goodwill and amortized to income over a maximum period of twenty years.
Amortization of goodwill may be accelerated if the acquiring company generates
sufficient income to absorb the additional amortization in any given year.

Under US GAAP, assets acquired and liabilities assumed are recorded at their
estimated fair values, and the excess of the purchase price over the estimated
fair value of the net identifiable assets and liabilities acquired are recorded
as goodwill. Prior to July 1, 2001 under US GAAP, the Company amortized goodwill
on a straight-line basis over the estimated useful lives of the assets, ranging
from 20 to 40 years. For US GAAP purposes, the Company adopted SFAS 142, as of
January 1, 2002. SFAS 142 applies to all goodwill and identified intangible
assets acquired in a business combination. Under this standard, all goodwill and
indefinite-lived intangible assets, including that acquired before initial
application of the standard, are not amortized, but must be tested for
impairment on a segmental basis at least annually.

Under Chilean GAAP, goodwill is amortized over the estimated period of return of
the investment made. Impairment tests are only performed if there is evidence of
impairment.

In December 2003, the Company performed its annual impairment test under SFAS
No.142. As a result of that test, the Company booked an amount of
ThCh$5,938,000, related to goodwill impairment in its subsidiary Madeco,
specifically related to its Ficap plant in Brazil.

The effect of differences in accounting methods for goodwill is included in
paragraph I (ff) below.

(k) Negative goodwill

Under Chilean GAAP, prior to the implementation of BT 72, negative goodwill was
calculated as the excess of the net book value over the purchase price of
companies acquired. Negative goodwill is capitalized as a credit to the balance
sheet and amortized over a period not exceeding 20 years.

Under US GAAP, prior to the adoption of SFAS 142, negative goodwill was
considered as a reduction of the long-term non-monetary assets (excluding
long-term investments in marketable securities) of the acquired company, and if
a credit remained after reducing those assets to zero, negative goodwill was
recorded on the balance sheet and amortized over the period of expected benefit.
However, in the period of adoption, SFAS 142 requires that unamortized negative
goodwill be written off and the resulting gain be recognized as an effect of a
change in accounting principle. Quinenco adopted SFAS 142 in 2002. The effect of
writing-off negative goodwill not allocated to non-monetary assets as recorded
under US GAAP


                                     F - 71
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

in 2002 and the subsequent reversal of negative goodwill amortization recorded
under Chilean GAAP in 2003 is set-forth in paragraph I (ff) below. Additionally,
during 2003 Madeco completed a capital increase in several stages as part of its
financial restructuring. Quinenco subscribed to the first stage of the capital
increase in March, however did not subscribe to the second and third share
issues in June and August. Under Chilean GAAP Quinenco treated the capital
increase as three separate transactions as described below:

      o     In March 2003, Quinenco recognized negative goodwill arising from
            the increase in its participation in Madeco from 53.41% to 84.30%.

      o     In June and August 2003, Quinenco recognized non-operating losses
            corresponding to the dilution in its participation in Madeco from
            84.30% to 55.22% and at the same time accelerated the amortization
            of negative goodwill in an equal proportion to the loss, thus in
            overall terms, there was no net effect on income.

      o     The remaining negative goodwill balance was amortized on a
            straightline basis over 20 years.

Under US GAAP, Quinenco has treated the succession of transactions as a single
pre-planned event resulting in the acquisition of an additional 1.8% of Madeco.
Under US GAAP the share purchase has been accounted for as a step acquisition in
accordance with SFAS 141 recording assets acquired and liabilities assumed at
their estimated fair values, and the excess of the allocated purchase price over
the estimated fair value of the net identifiable assets and liabilities acquired
recorded as goodwill. To the extent that the fair values of the net assets
acquired is higher than the purchase price, the resulting amount is referred to
as negative goodwill, which would be considered as a reduction of the long-term
non-monetary assets acquired.

This different accounting treatment under US GAAP resulted in the determination
of negative goodwill which has been allocated to long-term non-monetary assets.
This allocation results in lower carrying values of property, plant and
equipment under US GAAP and therefore a lower subsequent depreciation and the
reversal of the effects of negative goodwill amortization recorded under Chilean
GAAP.

The effects of the US GAAP adjustments related to negative goodwill are included
in paragraph I (ff) below as follows:

      (k-1) The write-off of negative goodwill as a cumulative change in
            accounting principle.

      (k-2) The reversal of negative goodwill amortization on negative goodwill
            already written off under US GAAP.

      (k-3) The allocation of negative goodwill to the property, plant and
            equipment in Madeco

      (k-4) The depreciation of long-term non-monetary assets in Madeco.

(l) Revenue recognition

Under Chilean GAAP revenue is recognized at the time that goods are shipped.
Revenue, which the Company has billed and collected in advance, is deferred
until the related goods are shipped. Under US GAAP and in accordance with SEC
Staff Accounting Bulletin No. 101 ("SAB 101"), revenue is realized or realizable
and earned when persuasive evidence of an arrangement exists, the seller's price
is fixed or determinable, collectibility is reasonably assured and delivery has
occurred. Delivery is considered to have occurred when the customer has taken
title and the customer assumes risks and rewards of ownership of the products.
The Company's subsidiary, Madeco, recorded revenue on certain export sales,
whose terms are CIF, for which delivery had not occurred under US GAAP, in 2001
and 2002. Following the issuance of Technical Bulletin No.71 this US GAAP
difference reversed in 2003 and the US GAAP adjustment to


                                     F - 72
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

shareholders' equity as of December 31, 2003 is zero. The effect of the
differences in the accounting method is included in paragraph I (ff) below.

(m) Executive incentive plan

During 2000, Quinenco established an executive incentive plan for eligible
employees. Under the plan, Quinenco granted a loan to employees to acquire
shares of the Company's stock and the stock of some of its subsidiaries at fair
market value. Under both Chilean and US GAAP, the aggregate loan was deducted
from equity. However, under US GAAP, the dividends paid to employees under the
plan should be treated as compensation cost and the monetary correction should
be credited to paid-in capital. The effect of the differences in accounting for
executive incentive plans is included in paragraph I (ff) below.

(n) Investment in Plava Laguna

During 2000, Quinenco purchased an aggregate interest of 39.42% in Plava Laguna,
a Croatian hotel chain. For Chilean GAAP, the purchase was accounted for at its
book value and the investment was recorded under the equity method. For US GAAP
purposes the investment is also accounted for under the equity method. However,
as required under US GAAP, a purchase price allocation was performed and
ThCh$12,667,397 of negative goodwill was calculated and allocated to the
property, plant and equipment and was being amortized against depreciation
expense over the useful lives of the assets.

On August 17, 2001, the Company sold its 39.42% interest in the public Croatian
company Plava Laguna to Sutivan Investments, a related party, and as a result
the income effect on the sale has been adjusted for the difference in the basis
of the assets sold under US GAAP. The effect of the differences in accounting
methods is included in paragraph I (ff) below.

(o) Purchase of companies with tax loss carryforwards

During 2000, the Company purchased a company with tax operating loss
carryforwards. Under Chilean GAAP, the acquisition was treated as a purchase of
a company in which goodwill totaling ThCh$3,202,549 was recorded on the
purchase. For US GAAP purposes, the transaction was not considered a business
combination. A gross deferred tax asset should be recorded for the expected tax
benefit and the difference between this amount and the purchase price paid for
the company represents a deferred credit which should be amortized to income tax
expense in proportion to the amount of the tax benefit realized each year. The
effects of conforming to US GAAP are included in paragraph I (ff) below.

(p) Involuntary employee termination

Under Chilean GAAP, the Company recorded an impairment charge in 2002 related to
the closure of Lucchetti's plant in Peru. The impairment charge was calculated
after assessing the future cash flows likely to be generated by the plant.
Included in the charge was an accrual of involuntary employee termination
expenses. Under US GAAP, there must have been a detailed announcement of the
program prior to the balance sheet date in order to recognize a liability at the
balance sheet date. As of December 31, 2002 this requirement had not been met
and therefore this accrued liability was eliminated. As of December 31, 2003,
the plant has been officially closed and therefore this elimination has been
reversed. The effect of eliminating the accrued liability is presented in
paragraph I (ff) below.


                                     F - 73
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(q) Effects of US GAAP adjustments in equity investees

Under Chilean GAAP, when an investment accounted for by the equity method is
acquired, the proportionate net book value of the investee company is recorded
as an investment and the difference between the cost of the investment and the
proportionate net book value of the investee is recorded as goodwill. The
goodwill is then amortized to income over a maximum period of twenty years. The
investment account is adjusted to recognize the investor's share of the earnings
or losses of the investee determined under Chilean GAAP subsequent to the date
of the purchase.

Under US GAAP, in accordance with Accounting Principles Board Opinion No. 18,
"the Equity Method for accounting for Investments in Common Stock" ("APB No.
18"), the carrying amount of an investment accounted for under the equity method
is initially recorded at cost and shown as a single amount in the balance sheet
of the investor. It is adjusted to recognize the investor's share of the
earnings or losses of the investee determined under US GAAP subsequent to the
date of investment. The investment reflects adjustments similar to those made in
preparing consolidated financial statements, including adjustments to eliminate
intercompany gains and losses and to account for the differences, if any,
between the investor's cost and the underlying equity in net assets of the
investee at the date of investment. The investment is also adjusted to reflect
the investor's share of changes in the investee capital accounts.

The differences between recognizing the investor's share of the earnings of
investees under Chilean GAAP and under US GAAP for the Company's investments in
CCU, in which the Company had a 30.79% economic interest at December 31, 2003 is
included in paragraph I (ff) below. The significant differences between Chilean
and US GAAP relate to the following:

         (q-1)  Revaluations of property, plant and equipment

         (q-2)  Inventory valuation

         (q-3)  Fixed assets held for sale

         (q-4)  Deferred income taxes

         (q-5)  Investment securities

         (q-6)  Goodwill

         (q-7)  Minimum dividend

         (q-8)  Trademarks

         (q-9)  Staff severance indemnities

         (q-10) Capitalization of interest

         (q-11) Comprehensive income

         (q-12) Investment in Backus & Johnston (Peru)

         (q-13) Accounting for join venture in Vina Totihue S.A.

         (q-14) Derivative financial instruments

(r) Impairment of fixed assets in Madeco

For the year ended December 31, 2001, Madeco recorded a provision for impairment
related to property, plant and equipment to be held and used in Argentina. Under
Chilean GAAP during the year ended December 31, 2002, Madeco reassessed this
impairment provision based on an improvement in the economic situation in
Argentina and reversed ThCh$6,693,764 related to this provision. Under US GAAP,
SFAS 144 does not allow the reversal of impairment losses for such assets.
Therefore, the income relating to the release of the provision has been included
in the reconciliation to US GAAP for the year ended December 31, 2002 in
paragraph I (ff) below. In the year ended December 31, 2003, the Company has
reversed the depreciation of the incremental value of these fixed assets as they
are recorded under Chilean GAAP.


                                     F - 74
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(s) Derivatives

(s-1) Accounting under SFAS 133

The Company engages in derivative activity for hedging purposes. These
derivatives are considered accounting hedges under Chilean GAAP. Under Chilean
GAAP the accounting treatment of hedging activity is similar to the accounting
treatment of fair value hedges and cash flow hedges under SFAS 133 "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133"). The
documentation and hedge effectiveness requirements under Chilean GAAP though are
not as burdensome as under SFAS 133. Under SFAS 133 to qualify for hedge
accounting strict requirements need to be met, including hedge documentation and
effectiveness tests. The Company does not have the documentation and hedge
effectiveness requirements to qualify for hedge accounting. Therefore, all
derivative instruments have been accounted at fair value with changes in fair
value recognized in earnings for US GAAP purposes.

The Company has designated under Chilean GAAP certain non-derivative financial
instruments as hedges of the foreign currency exposure of net investments in
foreign operations. The gain or loss on the non-derivative financial instrument
that is designated as a hedge is reported as a translation adjustment to the
extent it is effective as a hedge, any ineffectiveness is recorded in earnings.
This accounting treatment is consistent with SFAS 133.

SFAS 133 also requires that certain embedded derivatives be separated and
reported on the balance sheet at fair value and be subject to the same rules as
other derivative instruments. Current Chilean accounting rules do not consider
the existence of derivative instruments embedded in other contracts and
therefore they are not reflected in the financial statements under Chilean GAAP.

The effect of adopting SFAS 133 as of January 1, 2001, resulted in a cumulative
effect on net income which is presented net of deferred taxes of ThCh$ 364 and
minority interest under the caption "Cumulative effect of changes in accounting
principles". The effects of the adjustment with respect to derivatives for the
years ended December 31, 2001, 2002 and 2003 is included in the net income and
shareholders' equity reconciliation to US GAAP under paragraph I (ff) below.

(s-2) Non-Financial Services

In its non-financial services operations, the Company maintains forward foreign
exchange contracts and foreign exchange swap contracts to cover the risks of
fluctuation in foreign exchange between the US dollar and the Chilean peso and
the US dollar and the Brazilian real.

Under Chilean GAAP, these foreign forward exchange contracts and swaps exchange
rate contracts have been recorded on the balance sheet using an estimate of
forward exchange rates as of the balance sheet date, with gains and losses
included in earnings as "Other non-operating income and expense". The initial
discount or premium is amortized over the life of the contract as interest
expense.

Under US GAAP, contracts that are designated by the management as hedges of
future cash flow or forecasted transactions in Chilean GAAP do not meet the
conditions to be considered as true accounting hedges. For the years ended
December 31, 2001, 2002 and 2003 such contracts were valued in accordance with
SFAS 133 as described above.


                                     F - 75
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(s-3) Financial Services

In terms of the Company's banking operations, the use of derivatives in Chile is
regulated by the Chilean Central Bank, which requires that all foreign exchange
forward contracts be made only in US dollars and other major foreign currencies.
Currently, Chilean banks are permitted to use foreign exchange forward contracts
(covering either foreign currencies against the US dollar, the UF against the
Chilean peso or the UF and the Chilean peso against the US dollar), forward rate
agreements and interest rate swaps.

The Company's banking operations enter into derivative transactions for their
own account and to meet customers' risk management needs. Generally the
Company's banking operations enter into forward contracts in US dollars against
the Chilean peso or the UF, however, occasionally, forward contracts are also
made in other currencies, but only when the Company's banking operations act as
intermediary. During the years ended December 31, 2001 and 2002, the Company's
banking operations entered into interest rate and foreign currency swap
agreements as a means of hedging their short-term deposits against long-term
loans.

Under Chilean GAAP, the accounting for derivative transactions in the Company's
banking operations is established by the SBIF. The Company's banking operations
account for forward contracts between foreign currencies and US dollars at fair
value with realized and unrealized gains and losses on these instruments
recognized in other income. Forward contracts between the US dollar and the
Chilean peso for the U.F. are valued at the closing spot exchange rate of each
balance sheet date, with the initial discount or premium being amortized over
the life of the contract in accordance with Chilean hedge accounting criteria.
Under Chilean GAAP the Company's banking operations generally record differences
between interest income and interest expense on interest rate swap transactions
in net income in the period that such differences originate. Such contracts were
recorded in accordance with SFAS 133 as described above.

While the Company's banking operations use derivatives for the purpose of
mitigating their global interest and foreign currency risks, these operations do
not meet the requirements to qualify for hedge accounting under US GAAP.
Therefore changes in the respective fair values of all derivative instruments
are reported in earnings when they occur.

The effects of the adjustments with respect to foreign exchange and interest
rate swap transaction contracts on the income and net equity of the Company are
included in paragraph I (ff) below.

(t) Investment in SM Chile and Banco de Chile

As of December 31, 2001 and 2002, the Company held voting interests of 51.35% in
SM Chile and voting interests of 4.27% and 20.22% in Banco de Chile,
respectively, through a series of step acquisitions occurring during the
three-year period ended December 31, 2001. Under Chilean GAAP, during the three
years ended December 31, 2003 these investments were accounted for using the
equity method.

Under US GAAP, in accordance with APB No. 18, these investments are also
accounted for using the equity method for the period from January 1, 2001 to
March 27, 2001, the date at which the Company acquired a controlling interest in
them. The effect of recording the Company's equity participation in the results
of operations of SM Chile and Banco de Chile prior to March 27, 2001 as
calculated under US GAAP are included in paragraph I (ff) below. The principal
US GAAP adjustments in SM Chile and Banco de Chile relate to the following
items:


                                     F - 76
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

            o     Fair value adjustments relating to business combinations

            o     Loan origination fees and costs

            o     Investments in other companies

            o     Assets received in lieu of payment

            o     Mortgage finance bonds

            o     Allowance for loan losses

            o     Deferred income taxes

            o     Investment securities

            o     Derivatives

            o     Staff severance indemnities

Had the acquisition of Banco de Chile taken place on January 1, 2001, the impact
on Quinenco's consolidated revenues, net income and net income per share under
Chilean GAAP, for the year ended December 31, on an unaudited pro forma basis
would have been as follows:

                                                                2001 (unaudited)
                                                                ----------------
                                                                     ThCh$
       Net sales                                                    488,258,497
       Net income                                                    49,961,519
       Net income per share (in single pesos)                              46.3
       Based on weighted average shares outstanding               1,079,740,079

Under Chilean GAAP, Quinenco uses the equity method to account for Banco de
Chile and does not consolidate its banking operations for the reasons described
in the introduction to Note 26. Therefore, consolidated revenues are not
impacted by the purchase but the effect can be seen in the net income line.

(u) Fair value of Financial Service assets and liabilities acquired in business
combinations

Under Chilean GAAP, prior to the implementation of BT 72, assets acquired and
liabilities assumed in a business combination are recorded at their carrying
value, and the excess of the purchased price over the carrying value are
recorded as goodwill. Under US GAAP, in a business combination accounted for
under the purchase method of accounting, the acquired company's identifiable
assets and liabilities are adjusted to give effect to the purchase price paid by
the acquiring company. If, after the assets and liabilities of the acquired
company have been adjusted to their fair value at the acquisition date, the
purchase price exceeds the amount of such fair value, the excess is recorded as
goodwill.

Two significant business combinations have taken place during the period covered
by these financial statements; on March 27, 2001 Quinenco purchased a
controlling stake in Banco de Chile and on January 1, 2002, Banco de Chile
merged with Banco Edwards. Under the accounting treatment that is applicable
under US GAAP for the merger of the two banks, to the extent that Banco de Chile
shares or cash (in the case of fractional shares) were exchanged for Banco
Edwards shares held by parties other than LQIF a wholly owned subsidiary of
Quinenco, purchase accounting has been used to record the transaction. As a
result and due to the fact that Quinenco consolidates with Banco de Chile, the
adjustment to fair value of the assets and liabilities of Banco Edwards of that
portion not held by LQIF, at the time of the merger has been included in the
reconciliation to US GAAP, net of amortization and depreciation where
applicable.

The fair value increments of the assets and liabilities of Banco de Chile and
Banco Edwards at the time of the business combinations have been calculated
based on appropriate market values and using estimates and modeling techniques
where the asset or liability makes reference to future cash flows. In a business


                                     F - 77
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

combination accounted for by the purchase method involving the acquisition of a
banking or thrift institution, intangible assets acquired that can be separately
identified are assigned a portion of the total cost of the acquired enterprise
if the fair values of those assets can be reliably determined. The identified
intangible assets shall be amortized over the estimated lives of those existing
relationships. The adjustments to fair value arising from the acquisitions of
Banco de Chile and Banco Edwards and their subsequent merger relate to the
following assets and liabilities:

(u-1) Core deposits, brand and other intangibles

In determining the fair value of the assets and liabilities of Banco de Chile
and Banco Edwards, the Company has considered the value of its long-term
customer relationships (core deposit intangibles) in estimating the fair value
of its deposits. In addition, independent valuations were carried out to assess
the value of the brand names and other intangible assets. The effect of
recording such assets at their fair value and their subsequent amortization is
recorded in paragraph I (ff) below as follows:

      (u-1-1) The effect of recording the initial fair value of core deposits,
              brand and other intangibles.

      (u-1-2) The effect of recording their subsequent amortization.

(u-2) Fair value of bank premises and equipment

In determining the fair value of the assets and liabilities of Banco de Chile
and Banco Edwards, the Company has considered the fair value of the Banks'
tangible assets such as the Head Office and other owned branches. The effect of
recording such assets at their fair value and their subsequent amortization is
recorded in paragraph I (ff) below as follows:

      (u-2-1) The effect of recording the initial fair value of bank premises
              and equipment.

      (u-2-2) The effect of recording their subsequent amortization.

(u-3) Fair value of loans

In determining the fair value of the assets and liabilities of Banco de Chile
and Banco Edwards, the Company has considered the fair value of the Company's
banking operations' loan portfolios based on future cash flows and using market
based discount rates. The effect of recording the loan portfolio at fair value
and their subsequent amortization is recorded in paragraph I (ff) below.

(u-4) Fair value of subordinated debt obligation

In determining the fair value of the assets and liabilities of Banco de Chile
the Company has considered the fair value of the subordinated debt arising from
the economic crisis in 1982-1983. At that time Banco de Chile sold certain of
its non-performing loans to the Chilean Central Bank at face value on terms that
included a repurchase obligation. The repurchase obligation was later exchanged
for subordinated debt of each participating bank issued in favor of the Central
Bank. In 1996, a reorganization took place by which Banco de Chile was converted
to a holding company named SM Chile that in turn organized a new wholly-owned
banking subsidiary named Banco de Chile to which it contributed all of its
assets and liabilities other than the Central Bank subordinated debt. SM Chile
then created a second wholly owned subsidiary, SAOS, that, pursuant to a prior
agreement with the Central Bank, assumed a new repayment obligation in favor of
the Central Bank which replaced the Central Bank subordinated debt in its
entirety.


                                     F - 78
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Under Chilean GAAP, as explained in Note 2a), the Company is not required to
record Banco de Chile's subordinated debt obligation on its books and as a
result it was not considered in the determination of goodwill under Chilean
GAAP. Under US GAAP, the Company records the subordinated debt obligation at
fair value in connection with the purchase accounting for the acquisition of the
bank. As described in paragraph (cc), interest repayments are recorded using an
effective rate of 5.53%. The effect of recording the subordinated debt at fair
value is recorded in paragraph I (ff) below.

(u-5) Fair value of other financial assets and liabilities

In determining the fair value of the assets and liabilities of Banco de Chile
and Banco Edwards, the Company has considered the value of its other financial
assets and liabilities such as financial investments, mortgage finance bonds and
deposits. The effect of recording such assets and liabilities and their
subsequent adjustment to interest yield is recorded in paragraph I (ff) below as
follows:

      (u-5-1) The effect of recording other interest bearing liabilities at fair
              value.

      (u-5-2) The effect of recording other liabilities at fair value.

      (u-5-3) The effect of recording other assets at fair value.

      (u-5-4) The effect of recording deposits at fair value.

(v) Loan origination fees and costs

Under Chilean GAAP, in accordance with regulations issued by the SBIF, beginning
January 1, 2001, the Company's banking operations began to defer and amortize
certain loan fee income and loan origination costs, over the term of loans to
which they relate, and the period that the services are performed. In prior
years, the Company's banking operations recognized origination fees on credit
card loans, lines of credit and letters of credit when collected and recorded
the related direct costs when incurred.

Under SFAS No 91, "Accounting for Nonrefundable Fees and Costs Associated with
Origination of Acquiring Loans and Initial Direct Costs of Leases", loan
origination fees and certain direct loan origination costs should be recognized
over the term of the related loan as an adjustment to yield. As of December 31,
2002, the accounting treatment applied under Chilean GAAP is considered similar
to US GAAP and therefore this difference has reversed. The effect of accounting
for net loan origination fees in accordance with US GAAP is included in the
reconciliation of consolidated net income and shareholders' equity in paragraph
I (ff) below.

(w) Investments in other companies

Banco de Chile and Banco Edwards participate in shared service companies with
other banks in the Chilean financial system, through equity investments each of
which represents an ownership interest of less than 20% in a particular company.
Under Chilean GAAP, these investments have been accounted for under the equity
method. As these investments are long-term in nature and are not traded, under
US GAAP these investments would generally be accounted for at cost less any
non-temporary impairment in value. The effect of recording these assets in
accordance with US GAAP is included in the reconciliation of consolidated net
income and shareholders' equity in paragraph I (ff) below.

(x) Assets received in lieu of payment

Under Chilean GAAP, assets received in lieu of payment by the Company's banking
operations are carried at cost and have been restated for price-level changes,
less a global valuation allowance if the total


                                     F - 79
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

of the market value of those assets is lower than the carrying amount. Market
value is determined based on appraiser valuations, as required by the SBIF. If
the asset is not sold within one year, then recorded asset amounts must be
written-off on at least a straight-line basis over the following 18-month
period.

Under US GAAP, assets received in lieu of payment are initially recorded at fair
value less any estimated costs to sell at the date of foreclosure, on an
individual asset basis. The effect of recording these assets in accordance with
US GAAP is included in the reconciliation of consolidated net income and
shareholders' equity in paragraph I (ff) below.

(y) Mortgage finance bonds

Under Chilean GAAP, other financial investments include mortgage finance bonds
issued by the Company's banking operations and held for future sale. Effective
October 31, 2002 the Company's banking operations modified their accounting
treatment of financial investments in mortgage finance bonds issued by the
Company's banking operations in accordance with the instructions of the SBIF,
reducing from assets the amount recorded for mortgage finance bonds issued by
the Company's banking operations, including a market value adjustment, and from
liabilities, the respective mortgage finance bond obligation. Under US GAAP,
this accounting treatment has always been applied.

In addition, as under US GAAP mortgage finance bonds are offset against the
corresponding liability for periods before 2002, the market value adjustment
applied under Chilean GAAP before the accounting change would not have been made
under US GAAP.

The effects of this difference between Chilean and US GAAP have been included in
the reconciliation to US GAAP in paragraph I (ff) below.

(z) Allowance for loan losses

The following note relates to the Company's banking operations and amounts
stated are rounded to millions of Chilean pesos.

      1) Allowance for loan losses

Under Chilean GAAP, the allowance for loan losses is calculated according to
specific guidelines set out by the rules of the SBIF. Under US GAAP allowances
for loan losses should be in amounts adequate to cover inherent losses in the
loan portfolio at the respective balance sheet dates. Under US GAAP, the
Company's banking operations have estimated their required reserve using
historical loan data, in order to estimate the inherent losses in their loan
portfolio, using patterns and trends based upon historical loan movements
("migration analysis").

In addition, specific additional provisions were determined for loans considered
impaired under SFAS No. 114, "Accounting by Creditors for Impairment of a Loan"
("SFAS No. 114"). Under this analysis, each of the Company's banking operations
commercial loans and leasing operations were valued at the present value of the
expected future cash flows discounted at the loan's effective contractual
interest rate, or at market rates in the case of those loans were considered to
be collateral dependent, while the related loan loss provisions for mortgage and
consumer loans were determined based on historical loan charge-offs, after
considering the recoverability of the underlying collateral.


                                     F - 80
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Based on the preceding estimation process the Company's banking operations
computed their allowance for loan losses under U.S. GAAP, and compared this
estimate with the reported allowance for the combined banks determined in
accordance with the guidelines established by the SBIF. The voluntary loan loss
allowance for the combined banks, permitted under Chilean GAAP, was then
deducted from the reserve requirements determined in accordance with U.S. GAAP
to arrive at a cumulative U.S. GAAP adjustment to Shareholders' equity, as
follows:

<TABLE>
<CAPTION>
                                                                                  As of December 31,
                                                                              --------------------------
                                                                                 2002             2003
                                                                              ---------        ---------
                                                                                 MCh$             MCh$
<S>                                                                            <C>              <C>
U.S. GAAP loan loss reserve ..............................................      196,490          150,419
Less: Chilean GAAP loan loss allowance as required by the SBIF ...........     (197,390)        (158,834)
      Chilean GAAP voluntary loan loss allowance (1) .....................      (20,763)         (20,557)
                                                                              ---------        ---------
U.S. GAAP adjustment .....................................................      (21,663)         (28,972)
                                                                              =========        =========
</TABLE>

----------
(1)   A reclassification of MCh$(49) was made to the 2002 Chilean GAAP amounts
      in order to conform with the 2003 presentation. The restated balance of
      the Chilean voluntary loan loss allowance for 2002 amounts to
      MCh$(21,712).

The effects of this difference between Chilean and US GAAP have been included in
the reconciliation to US GAAP in paragraph I (ff) below.

      2) Recognition of income

As of December 31, 2001, 2002 and 2003 the recorded investment in loans for
which impairment had been recognized in accordance with SFAS No.114 totaled
MCh$403,023, MCh$416,147 and MCh$323,012, respectively, with a corresponding
valuation allowance of MCh$138,057 MCh$161,595 and MCh$172,372, respectively.
For the years ended December 31, 2001, 2002 and 2003 the average recorded
investment in impaired loans was MCh$360,225, MCh$397,780 and MCh$341,974
respectively. For the years ended December 31, 2002 and 2003, the Company's
banking operations recognized interest on impaired loans of MCh$60,401 and
MCh$122,936 respectively. Comparative information for the year ended December
31, 2001 is not available. The Company's banking operations recognize interest
on impaired loans on an accrual basis, except for past due loans for which the
Company's banking operations recognize interest on a cash basis, as described in
paragraph (1) above. As of December 31, 2002 and 2003, the Company's banking
operations had made provisions against all loans which they considered to be
impaired.

      3) Loan loss recoveries

Under U.S. GAAP recoveries of loans previously charged-off are added to the
allowance when received; under Chilean GAAP such recoveries are recognized as
other income.

The following presents an analysis under U.S. GAAP of the changes in the
allowance for loan losses during the periods presented. As described above,
under U.S. GAAP all information presented as described in paragraph (u) above,
as of and for the periods prior to March 27, 2001 reflects the banking
operations of Banco Edwards prior to the acquisition of Banco de Chile and the
subsequent merger of the banking operations which were under common control.


                                     F - 81
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

<TABLE>
<CAPTION>
                                                                                                 As of December 31,
                                                                                     ---------------------------------------
                                                                                       2001           2002            2003
                                                                                     --------       --------        --------
                                                                                       MCh$           MCh$            MCh$
<S>                                                                                   <C>            <C>             <C>
Allowance for loan losses in accordance with U.S. GAAP, as of
  January 1, ..............................................................            85,581        195,371         196,539
Price-level restatement (1) ...............................................            (5,188)        (6,498)         (2,748)
Incorporation of Banco de Chile, as of March 27, 2001 .....................           100,217             --              --
Charge-offs ...............................................................           (52,871)      (112,075)        (96,132)
Loan loss recoveries ......................................................            13,737         12,033          25,391
Allowances for loan losses established ....................................            62,292        132,436          28,824
Allowances for loan losses released .......................................            (8,397)       (24,728)         (1,455)
                                                                                     --------       --------        --------
     Balances as of December 31, ..........................................           195,371        196,539         150,419
                                                                                     ========       ========        ========
</TABLE>

----------
(1)   Reflects the effect of inflation and exchange rate changes of branches
      abroad on the allowance for loan losses under Chilean GAAP at the
      beginning of each period, adjusted to constant pesos of December 31, 2003.

      4) Charge-offs

Under Chilean GAAP the Company's banking operations charge-off loans when
collection efforts have been exhausted. Under the rules and regulations
established by the SBIF, charge-offs must be made within the following maximum
prescribed limits:

      - 24 months after a loan is past due (3 months after past due for consumer
        loans) for loans without collateral;

      - 36 months after a loan is past due for loans with collateral.

Under U.S. GAAP, loans should be written-off in the period that they are deemed
uncollectible. Management of the Company's banking operations believe that the
charge-off policies they apply in accordance with Chilean GAAP are substantially
the same as those required under U.S. GAAP, and therefore that differences are
not significant to the presentation of its financial statements.

(aa) Gain from exchange of shares in merger

Banco de Chile and Banco Edwards merged effective January 1, 2002 by way of a
share exchange. As a result of this transaction, the Company's participation in
the carrying values of the banks changed. To the extent that there was a
dilution of the Company's participation in the banks, as a result of the
issuance of shares by Banco de Chile, a gain was recorded under US GAAP
equivalent to the proportionate share of the banks' equity immediately before
and immediately after the transaction. No such gain was recorded under Chilean
GAAP. The effect of recording the gain has been included in paragraph I (ff)
below.

(bb) Minority interest

The effects on the minority interest of the US GAAP adjustments in subsidiaries
that are not wholly-owned by the Company have been reflected in Minority
interest and are included in paragraph I (ff) below.

(cc) Interest on Subordinated Debt

Through acquisitions the Company has assumed a portion of the subordinated debt
obligation owed to the Chilean Central Bank by the predecessor company of Banco
de Chile relating to the economic crisis in Chile during 1982 - 1983. The
Company's indirect subsidiary Sociedad Administradora de la Obligacion


                                     F - 82
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Subordinada S.A., or SAOS, is solely responsible for this Central Bank
indebtedness and there is no recourse to either the Company's banking operations
or its immediate parent company SM Chile. The Central Bank indebtedness has a
term of 40 years providing for equal annual installments and a pledge of certain
Banco de Chile shares as collateral for such debt. The Central Bank indebtedness
bears interest at a rate of 5.0% per year and is denominated in UF.

In exchange for originally assuming the Central Bank indebtedness, SAOS received
shares of Banco de Chile, which serve as collateral for the Central Bank
indebtedness. Dividends received from Banco de Chile are the sole source of
SAOS's revenue, which it must apply to repay the Central Bank indebtedness.
However, under SAOS's agreement with the Central Bank regarding SAOS's Central
Bank indebtedness, Banco de Chile has no obligation to distribute dividends to
shareholders. To the extent dividend revenues are not sufficient to pay the
amount due on any installment, SAOS is permitted to maintain a cumulative
deficit balance with the Central Bank that SAOS commits to pay with future
dividends. In the event the cumulative deficit balance exceeds an amount equal
to 20% of the total capital of Banco de Chile, SAOS would be required by the
Central Bank to sell a sufficient number of shares of the stock owned by SAOS to
pay the entire deficit amount accumulated.

Under Chilean GAAP, the charge made against income is limited to the amount of
dividends that will be paid by Banco de Chile the following April without
consideration as to whether such amount represents sufficient to cover the
installment due, capital repayments or interest repayments. Instead dividends
and consequently the subordinated debt provision are recorded based on the net
income of the banking operations of Banco de Chile.

Under US GAAP, long-term liabilities meeting the definition described in
Concepts Statement 6, including the subordinated debt obligation, must be
recorded on the balance sheet and accrue interest. To the extent that the
subordinated debt obligation was assumed as part of the consideration paid for
the acquisition of the Bank based on fair values, the resulting discount on the
liability should be reported in the balance sheet as a direct deduction from the
face amount of the obligation. Under US GAAP any repayments of principal serve
to reduce the liability and are not be included in net income for the period,
while interest repayments are recorded using an effective interest rate of
5.53%. The effects of the interest on the subordinated debt for the years ended
December 31, 2001 and 2002 have been restated as described below in paragraph
(gg).

The effects of accounting for interest expense on the subordinated debt
obligation under US GAAP is shown in paragraph I (ff) below.

(dd) Elimination of discontinued operations

As of December 31, 2003 the Company was in negotiations with a third party to
sell its subsidiary in the foods and beverage operating segment, Lucchetti Chile
S.A. As of that date, the group of assets to be disposed of was considered as
discontinued, as the following conditions had been met in accordance with SFAS
144 Accounting for the Impairment or Disposal of Long Lived Assets ("SFAS 144").

      o     Management had the authority to approve the disposal and was
            committed to the plan to carry out the disposal of its Chilean
            operations;

      o     The operations were available for immediate sale in their present
            condition subject only to terms that are usual and customary for
            such sales;

      o     A buyer had been identified and other actions required to complete
            the plan to sell the operations had been initiated;


                                     F - 83
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

      o     The sale of the operations has subsequently been completed;

      o     The sale of the operations was at a price that is reasonable in
            relation to its fair value;

Accordingly, Luchetti Chile has been considered as "discontinued" and an
assessment was made of the difference between the purchase price and the book
value of the subsidiary. Under Chilean GAAP, as the purchase price was higher
than the carrying value, no provision has been created, as of December 31, 2003,
for the difference between the final purchase price and the book value at the
date of the sale. Under US GAAP, no adjustment has been made to reduce the
subsidiary to its fair value less selling costs.

As of December 31, 2003 the Company had been forced to abandon the operations of
its overseas subsidiary Lucchetti Peru S.A. due to the government action
described in Note 19 (d). Accordingly, Lucchetti Peru has been considered as
"discontinued". As of December 31, 2002 Empresas Lucchetti had not taken a
decision to abandon these operations and therefore they were not considered as
discontinued as of this date.

The relevant disclosures relating to such operations for both current and prior
periods have been included in paragraph II (j) below. The effect of restating
discontinued operations is included in the net income reconciliation to U.S.
GAAP under paragraph I (ff) below.

(ee) Recoverable taxes in Madeco

Under Chilean GAAP as of December 31, 2003, Madeco provided against 100% of the
recoverable tax asset it had recorded arising from an income tax refund
application made to the Chilean Internal Revenue Service ("IRS"). The tax refund
was under review by the IRS and as of the date of issue of the Chilean GAAP
financial statements, its recoverability was uncertain.

In June 2004, the IRS authorized the partial payment of the tax refund and
accordingly this portion of the provision has been reversed.


                                     F - 84
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(ff) Effects of conforming to US GAAP

The adjustments to reported net income required to conform with US GAAP are as
follows (parenthetical references are to Note 26 part I):

<TABLE>
<CAPTION>
                                                                                                  Year ended December 31,
                                                                                        -------------------------------------------
                                                                                           2001            2002             2003
                                                                                        -----------     -----------     -----------
                                                                                           ThCh$           ThCh$            ThCh$
                                                                                          Restated       Restated
<S>                                                                                      <C>            <C>              <C>
Net income (loss) as shown in the Chilean GAAP financial statements ................     16,134,410     (76,235,013)     37,694,846
NON-FINANCIAL SERVICES
  Deferred income taxes (paragraph b) ..............................................     (2,641,192)     (3,117,841)      1,498,534
  Reversal of depreciation of the revaluation of property, plant and
    equipment (paragraph d) ........................................................        211,931         201,045       8,980,362
  Reversal of effects for investment in Entel (paragraph e-1-2) ....................      1,345,628         160,146      (3,495,845)
  Employee severance indemnities (paragraph f) .....................................        428,499       2,230,077      (1,356,287)
  Deficit during development stage (paragraph g) ...................................     (2,239,842)     (1,396,283)       (276,463)
  Advertising costs (paragraph h) ..................................................        262,181         524,362              --
  Restructuring costs (paragraph i) ................................................      1,775,473      (2,392,650)       (106,598)
  Goodwill (paragraph j)
     Impairment of goodwill ........................................................             --              --      (5,938,000)
     Reversal of goodwill amortization .............................................        (88,819)      2,767,233       2,185,146
  Negative goodwill (paragraph k) ..................................................             --              --      (2,202,695)
  Reversal of revenue recognition (paragraph l) ....................................        (17,539)       (649,936)        729,993
  Executive incentive plan (paragraph m) ...........................................             --         (33,509)        (41,556)
  Investment in Plava Laguna (paragraph n) .........................................       (211,395)             --              --
  Purchase of companies with tax loss carryforwards (paragraph o) ..................        (54,891)             --              --
  Involuntary employee termination (paragraph p) ...................................             --              --              --
  Net effects of US GAAP adjustments in equity investees (paragraph q) .............     (1,238,624)       (847,380)        345,189
  Impairment of fixed assets in Madeco (paragraph r) ...............................             --      (6,760,702)        738,583
  Derivatives (paragraph s-1, s-2) .................................................       (575,765)        416,168         159,596
  Elimination of discontinued operations (paragraph dd) ............................      6,215,293      35,222,690       2,048,215
  Allowance for recoverable taxes in Madeco (paragraph ee) .........................             --              --       1,519,394

FINANCIAL SERVICES
  Deferred income taxes (paragraph b) ..............................................     (5,136,775)      7,907,615      (2,076,305)
  Investment securities (paragraph e-2) ............................................     (5,188,536)     (7,375,020)         10,000
  Employee severance indemnities (paragraph f) .....................................        430,837       4,496,520         122,000
  Goodwill (paragraph j) ...........................................................      7,494,141      17,867,248      17,756,981
  Derivatives (paragraph s-1, s-3) .................................................     (6,868,509)      8,649,640       3,429,671
  Investment in SM Chile and Banco de Chile (paragraph t) ..........................     (5,847,806)             --              --
  Core deposits, brand and other intangibles (paragraph u-1) .......................    (13,600,065)    (20,796,595)    (17,545,875)
  Fair value of bank premises and equipment (paragraph u-2) ........................       (168,102)       (231,795)       (230,973)
  Fair value of loans (paragraph u-3) ..............................................        892,247      10,128,473        (139,813)
  Fair value of other financial assets and liabilities (paragraph u-5) .............       (195,173)    (15,149,212)      4,222,206
  Loan origination fees and costs (paragraph v) ....................................        317,292      (1,026,160)       (466,671)
  Investments in other companies (paragraph w) .....................................         27,048        (321,180)         98,000
  Assets received in lieu of payment (paragraph x) .................................        515,989      (1,739,220)        381,000
  Mortgage finance bonds (paragraph y) .............................................         43,693      (1,788,710)      1,916,667
  Allowance for loan losses (paragraph z) ..........................................     13,053,683     (18,039,610)      7,309,000
  Gain from exchange of shares in merger (paragraph aa) ............................             --          96,082              --
  Interest on Subordinated Debt (paragraph cc) .....................................     20,043,232     (13,337,943)     19,180,067
Net effects of US GAAP adjustments on minority interest (paragraph bb) .............     (6,387,841)     26,375,651     (14,888,083)
                                                                                        -----------     -----------     -----------
Income (loss) from continuing operations in accordance with US GAAP before
cumulative effect of change in accounting principle and discontinued operations ....     18,730,703     (54,195,809)     61,560,286
                                                                                        ===========     ===========     ===========
</TABLE>


                                     F - 85
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(ff) Effects of conforming to US GAAP, continued

<TABLE>
<CAPTION>
                                                                                       2001               2002              2003
                                                                                    -----------       -----------       -----------
                                                                                       ThCh$              ThCh$             ThCh$
                                                                                      Restated          Restated
<S>                                                                                 <C>               <C>                <C>
Net income (loss) from continuing operations under US GAAP before
cumulative effect of change in accounting principle and discontinued
operations ...................................................................       18,730,703       (54,195,809)       61,560,286
Cumulative effect of change in accounting principle, net of taxes
(paragraphs s and l) .........................................................            2,081         5,968,848                --
                                                                                    -----------       -----------       -----------
Net income (loss) from continuing operations under US GAAP ...................       18,732,784       (48,226,961)       61,560,286
Loss from discontinued operations, net of taxes and minority
interest(paragraph dd) .......................................................       (6,118,316)      (34,862,602)       (2,543,602)
                                                                                    -----------       -----------       -----------
Net income (loss) under US GAAP ..............................................       12,614,468       (83,089,563)       59,016,684
Other comprehensive income, net of tax:
Foreign currency translation adjustment ......................................        7,735,927        10,972,386       (26,556,480)
Net unrealized (losses) gains on securities, net of tax (paragraph e) ........      (64,386,296)       (5,267,077)        3,215,544
                                                                                    -----------       -----------       -----------
Other comprehensive income ...................................................      (56,650,369)        5,705,309       (23,340,936)
                                                                                    -----------       -----------       -----------
Comprehensive (loss) income under US GAAP ....................................      (44,035,901)      (77,384,254)       35,675,748
                                                                                    ===========       ===========       ===========
</TABLE>


                                     F - 86
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The adjustments required to conform net equity amounts to US GAAP are as
follows:

<TABLE>
<CAPTION>
                                                                                                            At December 31,
                                                                                                  ---------------------------------
                                                                                                      2002                 2003
                                                                                                  ------------         ------------
                                                                                                    Restated
                                                                                                      ThCh$                 ThCh$
<S>                                                                                               <C>                  <C>
Net equity as shown in the Chilean GAAP financial statements .............................         636,819,960          634,022,181
NON-FINANCIAL SERVICES
  Deferred income taxes (paragraph b) ....................................................         (11,757,668)         (11,354,708)
  Reversal of the revaluation of property, plant and equipment
    Property, plant and Equipment (d-1) ..................................................         (15,034,435)          (2,628,865)
    Accumulated depreciation (d-2) .......................................................           3,502,164               76,956
  Available-for-sale securities, net of deferred income taxes (paragraph e-1-1) ..........          43,064,129           48,905,609
  Reversal of effects for investment in Entel (paragraph e-1)
     Reversal of equity method participation in net income of Entel (e-1-2) ..............         (31,316,099)         (33,186,595)
     Reversal of goodwill, net (e-1-3) ...................................................             (31,738)                  --
     Reversal of negative goodwill, net (e-1-4) ..........................................           2,455,843            2,349,664
  Employee severance indemnities (paragraph f)
     Short-term (f-1) ....................................................................            (832,835)          (2,078,294)
     Long-term (f-2) .....................................................................          (1,512,518)          (1,625,670)
  Restructuring costs (paragraph i) ......................................................           1,120,159            1,013,561
  Goodwill (paragraph j)
     Goodwill ............................................................................                  --           (5,938,000)
     Accumulated amortization ............................................................           3,238,346            5,423,492
  Negative goodwill (paragraph k)
     Negative goodwill (k-1) .............................................................           5,968,849            5,968,849
     Negative goodwill amortization (k-2) ................................................                  --             (928,821)
     Property, plant and equipment  (k-3) ................................................                  --           (1,336,038)
     Accumulated depreciation (k-4) ......................................................                  --               62,164
  Reversal of revenue recognition (paragraph l) ..........................................            (729,993)                  --
  Involuntary employee termination (paragraph p) .........................................             518,219                   --
  Net effects of US GAAP adjustments in equity investees (paragraph q) ...................            (829,800)            (415,297)
  Impairment of fixed assets in Madeco (paragraph r)
      Property, plant and equipment (paragraph r) ........................................          (6,760,702)          (6,022,119)
  Derivatives (paragraph s-1, s-2) .......................................................            (159,596)                  --
  Allowance for recoverable taxes in Madeco (paragraph ee) ...............................                  --            1,519,394
FINANCIAL SERVICES
  Deferred income taxes (paragraph b) ....................................................          16,351,041           14,275,736
  Investment securities (paragraph e-2) ..................................................             (10,104)              (4,104)
  Employee severance indemnities (paragraph f) ...........................................          (3,884,526)          (3,762,526)
  Goodwill (paragraph j) .................................................................         237,395,635          255,152,616
  Derivatives (paragraph s-1, s-3) .......................................................           3,671,805            7,101,476
  Core deposits, brand and other intangibles (paragraph u-1)
    Fair value of intangibles (u-1-1) ....................................................         204,652,988          204,652,988
    Amortization of intangibles (u-1-2) ..................................................         (34,398,132)         (51,944,007)
  Fair value of bank premises and equipment (paragraph u-2)
    Fair value of premises and equipment (u-2-1) .........................................          11,161,454           11,161,454
    Amortization of fair value of premises and equipment (u-2-2) .........................            (401,589)            (632,562)
  Fair value of loans (paragraph u-3) ....................................................          (2,029,549)          (2,169,362)
  Fair value of subordinated debt obligation (paragraph u-4)
    Fair value of subordinated debt obligation (u-4-1) ...................................        (249,958,854)        (249,958,854)
  Fair value of other financial assets and liabilities (paragraph u-5)
    Fair value of other interest bearing liabilities (u-5-1) .............................         (42,319,000)         (37,960,000)
    Fair value of other liabilities (u-5-2) ..............................................          (1,324,562)          (1,152,487)
    Fair value of other assets (u-5-3) ...................................................             697,638              625,769
    Fair value of deposits (u-5-4) .......................................................             261,590               24,590
  Loan origination fees and costs (paragraph v) ..........................................             466,671                   --
  Investments in other companies (paragraph w) ...........................................             404,949              502,949
  Assets received in lieu of payment (paragraph x) .......................................             613,939              994,939
  Mortgage finance bonds issued by the Bank (paragraph y) ................................          (1,916,667)                  --
  Allowance for loan losses (paragraph z) ................................................          21,663,440           28,972,440
Interest on Subordinated Debt (paragraph cc) .............................................           6,705,287           25,885,354

Net effects of US GAAP adjustments on minority interest (paragraph bb) ...................        (172,761,890)        (187,628,847)
                                                                                                  ------------         ------------
Net equity in accordance with US GAAP ....................................................         622,763,849          647,965,025
                                                                                                  ============         ============
</TABLE>


                                     F - 87
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The changes in net shareholders' equity accounts determined under US GAAP are
summarized as follows:

<TABLE>
<CAPTION>
                                                                                                                           ThCh$
<S>                                                                                                                     <C>
Balance at January 1, 2001 .................................................................................            750,371,291
   Accrued minimum dividend at December 31, 2000 ...........................................................             (4,840,320)
   Executive incentive plan ................................................................................                 33,361
   Other comprehensive income, net of tax:
     Net change in unrealized gains and losses on available-for-sale-securities, net of
     deferred income taxes .................................................................................            (64,386,296)
     Cumulative translation adjustment .....................................................................              7,735,927
   Net income for the year .................................................................................             12,614,468
                                                                                                                       ------------
Balance at December 31, 2001 ...............................................................................            701,528,431
                                                                                                                       ------------
   Reversal of accrued minimum dividend at December 31, 2001 ...............................................              4,840,320
   Dividends paid ..........................................................................................             (6,407,722)
   Executive incentive plan ................................................................................                187,074
   Other comprehensive income, net of tax:
     Net change in unrealized gains and losses on available-for-sale-securities, net of
     deferred income taxes .................................................................................             (5,267,077)
     Cumulative translation adjustment .....................................................................             10,972,386
   Net loss for the year ...................................................................................            (83,089,563)
                                                                                                                       ------------
Balance at December 31, 2002 ...............................................................................            622,763,849
                                                                                                                       ------------
   Interim dividends paid ..................................................................................            (12,102,765)
   Executive incentive plan ................................................................................              1,628,193
   Other comprehensive income, net of tax:
     Net change in unrealized gains and losses on available-for-sale-securities, net of
     deferred income taxes .................................................................................              3,215,544
     Cumulative translation adjustment .....................................................................            (26,556,480)
   Net income for the year .................................................................................             59,016,684
                                                                                                                       ------------
Balance at December 31, 2003 ...............................................................................            647,965,025
                                                                                                                       ============
</TABLE>


                                     F - 88
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(gg) Restatement of Reconciliaton to US GAAP

The Company has restated the results in US GAAP for the years ended December 31,
2001 and 2002 to correct the calculation of interest on the Company's
subordinated debt obligation. The adjustment to record interest related to the
subordinated debt is described in paragraph I (cc) of this Note. The effect of
this restatement and its corresponding effect on deferred income taxes and
minority interest is as follows:

<TABLE>
<CAPTION>
                                                                                              Year ended December 31,
                                                                                            2001                  2002
                                                                                        ---------------------------------
                                                                                            ThCh$                 ThCh$
<S>                                                                                       <C>                 <C>
US GAAP net income (loss) as previously reported                                          11,355,554          (74,314,373)

Difference due to:
Interest expense of subordinated debt                                                     12,805,059          (17,072,106)
Effect of restatement on deferred income taxes                                            (3,441,144)           2,902,259
Effect of restatement on minority interest (net of taxes)                                 (8,105,001)           5,394,657
                                                                                        ------------         ------------
US GAAP net income (loss) as restated                                                     12,614,468          (83,089,563)
                                                                                        ============         ============

Basic and diluted earnings (loss) per share from continuing operations before
cumulative effect of changes in accounting principles and discontinued
operations under US GAAP as previously reported                                                16.18               (42.07)
Effect of accounting change on earnings per share as previously reported                        0.00                 5.53
Basic and diluted earnings (loss) per share from discontinued operations as
previously reported                                                                            (5.67)              (32.28)
Basic and diluted earnings (loss) per share under US GAAP as previously
reported                                                                                       10.51               (68.82)
                                                                                        ---------------------------------

Basic and diluted earnings (loss) per share from continuing operations before
cumulative effect of changes in accounting principles and discontinued
operations under US GAAP as restated                                                           17.35               (50.19)
Effect of accounting change on earnings per share as restated                                   0.00                 5.53
Basic and diluted earnings (loss) per share from discontinued operations as
restated                                                                                       (5.67)              (32.28)
Basic and diluted earnings (loss) per share under US GAAP as restated                          11.68               (76.95)

US GAAP shareholders' equity as previously reported                                      700,269,517          630,280,129

Differences due to:
Interest expense of subordinated debt                                                     12,805,059           (5,737,821)
Effect of restatement on deferred income taxes                                            (3,441,144)             931,885
Effect of restatement on minority interest (net of taxes)                                 (8,105,001)          (2,710,344)
                                                                                        ------------         ------------
US GAAP shareholders' equity as restated                                                 701,528,431          622,763,849
                                                                                        ============         ============
</TABLE>


                                     F - 89
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

II. Additional US GAAP Disclosures

a) Consolidation of subsidiaries

As indicated in Note 2a) banking and insurance operations are not generally
consolidated with non-financial businesses in Chile primarily due to the
dissimilarity of both the nature of the businesses and the related accounting
policies. The information presented below, which is presented using a US GAAP
presentation and amounts determined in accordance with US GAAP, shows the
consolidation of those subsidiaries which under SFAS 94, "Consolidation of All
Majority-Owned Subsidiaries," the Company is required to consolidate.

The condensed consolidated balance sheet, income statement and reconciliation of
cash flows set forth below consolidate those entities consolidated for Chilean
GAAP purposes (see Note 2) plus the following:

For the year ended December 31, 2001, income statement and reconciliation of
cash flows:

      o     Banco Edwards - a 51.17% owned banking subsidiary

      o     Banedwards - a 66.30% owned insurance company

      o     SM Chile - a 51.35% owned banking subsidiary, through which the
            Company owns 48.39% of Banco de Chile. Also included is the 4.27%
            direct interest the Company has in Banco de Chile.

As of and for the years ended December 31, 2002 and 2003:

      o     SM Chile - a 51.35% owned banking subsidiary, through which the
            Company owns 31.94% of Banco de Chile subsequent to the merger with
            Banco Edwards. Also included is the 20.22% direct interest that the
            Company owns in Banco de Chile subsequent to the merger with Banco
            Edwards.

      o     Banchile - a 66.30% owned insurance company

      o     Lucchetti Peru- a 93.69% owned food manufacturing company. Under
            Chilean GAAP and in accordance with discussions held with the SVS,
            Lucchetti Peru's balance sheet was not consolidated as of December
            31, 2002 and 2003, due to the closure of its plant in Lima and the
            ending of its operations in Peru. Under US GAAP the operations are
            considered as discontinued therefore the assets and liabilities have
            been consolidated for the years ended December 31, 2002 and 2003 and
            then re-classified as short-term in accordance with SFAS 144.


                                     F - 90
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The following are balance sheets of the Company using amounts determined in
accordance with US GAAP:

<TABLE>
<CAPTION>
                                                                       At December, 31
                                                             -----------------------------------
                                                                  2002                2003
                                                             ---------------     ---------------
                                                                  ThCh$               ThCh$
<S>                                                            <C>                <C>
Assets:
Non-Financial Services:
Current assets
Cash and time deposits ..............................              9,305,627          43,778,373
Marketable securities ...............................             45,308,290          55,081,630
Accounts and notes receivable, net ..................             75,553,916          79,419,713
Inventories .........................................             67,391,868          62,203,817
Other current assets ................................            168,915,452         112,915,812
                                                             ---------------     ---------------
       Total current assets .........................            366,475,153         353,399,345
                                                             ---------------     ---------------

Net property, plant and equipment ...................            339,132,730         296,806,893
                                                             ---------------     ---------------

Other assets:
Investments in and advances to related companies ....            159,090,269         100,700,094
Goodwill, net .......................................             41,938,906          29,390,560
Other non-current assets ............................             38,280,555          32,936,275
                                                             ---------------     ---------------
       Total other assets ...........................            239,309,730         163,026,929
                                                             ---------------     ---------------

Total non-financial services assets .................            944,917,613         813,233,167
                                                             ---------------     ---------------

Financial Services:
Cash and due from banks .............................            392,601,383         476,534,055
Investments .........................................          1,521,999,292       1,855,589,020
Loans, net ..........................................          5,642,800,493       5,711,556,557
Premises and equipment ..............................            175,464,648         163,615,034
Goodwill, net .......................................            552,552,022         552,552,022
Other assets ........................................            423,653,571         491,671,535
                                                             ---------------     ---------------
       Total financial services assets ..............          8,709,071,409       9,251,518,223
                                                             ---------------     ---------------

       Total assets .................................          9,653,989,022      10,064,751,390
                                                             ===============     ===============
</TABLE>


                                     F - 91
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The following are balance sheets of the Company using amounts determined in
accordance with US GAAP:

<TABLE>
<CAPTION>
                                                                                     At December, 31
                                                                            ----------------------------------
                                                                                 2002                2003
                                                                            --------------      --------------
                                                                                 ThCh$               ThCh$
<S>                                                                          <C>                <C>
Liabilities and Shareholders' Equity:
Non-Financial Services:
Current liabilities
Debt payable within one year .................................                 284,290,156         134,529,175
Accounts and notes payable ...................................                  37,776,343          25,421,643
Accrued and other liabilities ................................                  37,189,852          46,806,263
                                                                            --------------      --------------
       Total current liabilities .............................                 359,256,351         206,757,081
                                                                            --------------      --------------

Long-term liabilities:
Long term debt ...............................................                 450,739,808         426,620,189
       Other liabilities .....................................                  33,435,808          36,748,676
                                                                            --------------      --------------
Total long-term liabilities ..................................                 484,175,616         463,368,865
                                                                            --------------      --------------

       Total non-financial services liabilities ..............                 843,431,967         670,125,946
                                                                            --------------      --------------

Financial Services:
Deposits .....................................................               4,793,976,608       4,854,816,951
Short-term borrowings ........................................                 262,443,004         391,548,004
Investments sold under agreements to repurchase ..............                 279,441,996         426,740,996
Other liabilities ............................................                 254,621,067         441,664,554
Long-term debt ...............................................               2,465,451,497       2,429,186,430
                                                                            --------------      --------------
         Total financial services liabilities ................               8,055,934,172       8,543,956,935
                                                                            --------------      --------------

Minority interest ............................................                 131,859,034         202,703,484

Shareholders' equity .........................................                 622,763,849         647,965,025
                                                                            --------------      --------------

       Total Liabilities and Shareholders' equity ............               9,653,989,022      10,064,751,390
                                                                            ==============      ==============
</TABLE>


                                     F - 92
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The condensed consolidated statements of income for the years ended December 31
under US GAAP and classified in accordance with US GAAP are presented as
follows:

<TABLE>
<CAPTION>
                                                                                                 At December, 31
                                                                                   ------------------------------------------------
                                                                                      2001               2002              2003
                                                                                   ------------      ------------      ------------
                                                                                      ThCh$              ThCh$             ThCh$
<S>                                                                                <C>               <C>               <C>
Non-Financial Services
Operating results:
Net sales ....................................................................      403,392,364       314,975,228       298,994,164
Cost of sales ................................................................     (345,353,503)     (245,078,763)     (239,416,741)
Administrative and selling expenses ..........................................     (100,542,735)      (94,401,478)      (63,995,757)
                                                                                   ------------      ------------      ------------
     Operating income ........................................................      (42,503,874)      (24,505,013)       (4,418,334)
                                                                                   ------------      ------------      ------------

Non-Operating results:
Interest income ..............................................................        7,309,050         3,568,971         2,897,339
Non-operating income .........................................................       75,316,479        13,112,831        53,852,596
Interest expense .............................................................      (51,762,366)      (46,286,219)      (32,302,898)
Non-operating expense ........................................................               --        (2,697,504)       (3,567,475)
Price-level restatement loss, net ............................................      (12,874,703)       (8,497,899)        2,765,154
                                                                                   ------------      ------------      ------------
Non-operating results ........................................................       17,988,460       (40,799,820)       23,644,716
                                                                                   ------------      ------------      ------------
     (Loss) from non-financial services before income taxes and
     minority interest .......................................................      (24,515,414)      (65,304,833)       19,226,382
                                                                                   ------------      ------------      ------------

Financial Services
Total interest income ........................................................      711,262,105       716,948,246       458,768,304
Total interest expense .......................................................     (414,761,234)     (346,487,000)     (204,149,785)
    Net interest income ......................................................      296,500,871       370,461,246       254,618,519
Provision for loan losses ....................................................      (53,896,132)     (107,656,711)      (27,369,364)
    Net interest income after provision for loan losses ......................      242,604,739       262,804,535       227,249,155
Other income .................................................................      103,266,956        41,043,201       190,868,340
Other expenses ...............................................................     (291,508,881)     (328,652,838)     (310,622,509)
                                                                                   ------------      ------------      ------------
     Income (loss) from financial services before Income
     taxes and minority interest .............................................       54,362,814       (24,805,102)      107,494,986
                                                                                   ------------      ------------      ------------

Income (loss) before income taxes ............................................       29,847,400       (90,109,935)      126,721,368
Income taxes .................................................................       (6,126,759)        6,165,507       (17,431,603)
                                                                                   ------------      ------------      ------------
Income (loss) before minority interest .......................................       23,720,641       (83,944,428)      109,289,765
Minority interest ............................................................       (4,989,938)       29,748,619       (47,729,479)
                                                                                   ------------      ------------      ------------
     Income (loss) from continuing operations before cumulative change in
     accounting principle ....................................................       18,730,703       (54,195,809)       61,560,286
Cumulative change in accounting principles, net of taxes .....................            2,081         5,968,848                --
                                                                                   ------------      ------------      ------------
     Income (loss) from continuing operations ................................       18,732,784       (48,226,961)       61,560,286
     Loss from discontinued operations, net of taxes and
     minority interest .......................................................       (6,118,316)      (34,862,602)       (2,543,602)
                                                                                   ------------      ------------      ------------
     Net (loss) income .......................................................       12,614,468       (83,089,563)       59,016,684
                                                                                   ============      ============      ============
</TABLE>


                                     F - 93
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The effect of consolidating the banking and insurance operations as required
under US GAAP, but using amounts calculated in accordance with Chilean GAAP for
the years ended December 31, 2001, 2002 and 2003 is as follows:

<TABLE>
<CAPTION>
                                                                                                   At December, 31
                                                                                     ----------------------------------------------
                                                                                          2001             2002             2003
                                                                                          ThCh$            ThCh$            ThCh$
<S>                                                                                   <C>             <C>              <C>
Cash provided by (used in) operating activities reported under Chilean GAAP            14,268,995       30,307,056       64,841,909
Effect of combination of banking and insurance operations                              38,902,170      422,301,240     (114,229,000)
                                                                                     ------------     ------------     ------------
Cash provided by (used in) operating activities reported under US GAAP                 53,171,165      452,608,296      (49,387,091)

Cash provided by (used in) investing activities reported under Chilean GAAP           (38,005,451)         886,223       11,960,765
Effect of combination of banking and insurance operations                             365,426,312     (253,035,910)    (166,362,000)
                                                                                     ------------     ------------     ------------
Cash provided by (used in) investing activities reported under US GAAP                327,420,861     (252,149,687)    (154,401,235)

Cash provided by (used in) financing activities reported under Chilean GAAP           (61,145,895)       5,181,458      (99,693,642)
Effect of combination of banking and insurance operations                             212,263,620     (262,893,920)     461,822,000
                                                                                     ------------     ------------     ------------
Cash provided by (used in) financing activities reported under US GAAP                151,117,725     (257,712,462)     362,128,358

Effect of inflation on cash and cash equivalents under Chilean GAAP                      (965,228)       2,597,707      (14,818,431)
Effect of combination of banking and insurance operations                             (21,483,130)     (26,102,440)       7,584,000
                                                                                     ------------     ------------     ------------
Effect of inflation on cash and cash equivalents under US GAAP                        (22,448,358)     (23,504,733)      (7,234,431)

Net change in cash and cash equivalents under Chilean GAAP                            (85,847,579)      38,972,444      (37,709,399)
Effect of combination of banking and insurance operations                             595,108,972     (119,731,030)     188,815,000
                                                                                     ------------     ------------     ------------
Net change in cash and cash equivalents under US GAAP                                 509,261,393      (80,758,586)     151,105,601

Cash and cash equivalents at beginning of year under Chilean GAAP                     140,893,179       55,045,600       94,018,044
Effect of combination of banking and insurance operations                             207,809,288      802,918,260      683,187,230
                                                                                     ------------     ------------     ------------
Cash and cash equivalents at beginning of year under US GAAP                          348,702,467     857, 963,860      777,205,274

Cash and cash equivalents at end of year under Chilean GAAP                            55,045,600       94,018,044       56,308,645
Effect of combination of banking and insurance operations                             802,918,260      683,187,230      872,002,230
                                                                                     ------------     ------------     ------------
Cash and cash equivalents at end of year under US GAAP                                857,963,860      777,205,274      928,310,875
                                                                                     ============     ============     ============
</TABLE>

Cash and cash equivalents are measured both for Chilean GAAP purposes and US
GAAP purposes as the portion of original maturity outstanding as of the balance
sheet date.


                                     F - 94
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

II. Additional disclosure requirements

b) Earnings per share

The following disclosure of earnings per share information is not generally
required for presentation in financial statements under Chilean accounting
principles but is required under US GAAP:

<TABLE>
<CAPTION>
                                                                                               Year ended December 31,
                                                                                          (Expressed in single Chilean pesos)
                                                                               ----------------------------------------------------
                                                                                   2001              2002                  2003
                                                                               -------------     -------------        -------------
                                                                                    Ch$               Ch$                  Ch$
<S>                                                                            <C>               <C>                  <C>
Basic and diluted earnings (loss) per share under Chilean GAAP .........               14.94            (70.61)               34.91
Basic and diluted earnings (loss) per share under US GAAP
Basic and diluted earnings (loss) per share from continuing
  operations before cumulative effect of changes in accounting
  principles and discontinued operations ...............................               17.35            (50.19)               57.01
Effect of accounting change on earnings per share ......................                0.00              5.53                   --
Basic and diluted earnings (loss) per share from discontinued operations               (5.67)           (32.28)               (2.36)
Basic and diluted earnings (loss) per share under US GAAP ..............               11.68            (76.95)               54.65
Dividends paid per share ...............................................                  --              5.81                11.21

Weighted average number of shares of common stock outstanding ..........       1,079,740,079     1,079,740,079        1,079,740,079
</TABLE>

The earnings (loss) per share data shown above is determined by dividing net
income for both Chilean GAAP and US GAAP purposes by the weighted average number
of shares of common stock outstanding during each year. For the years presented
the Company did not have convertible securities outstanding. Dividends paid per
share represents dividends paid on prior years' income, calculated in accordance
with Chilean GAAP.

c) Income tax

The provision for income taxes charged to the results of operations under US
GAAP was as follows:

<TABLE>
<CAPTION>
                                                                                           Year ended December 31,
                                                                            -------------------------------------------------------
                                                                               2001                  2002                   2003
                                                                            -----------           -----------           -----------
                                                                               ThCh$                 ThCh$                  ThCh$
<S>                                                                          <C>                  <C>                   <C>
Current tax expense ..............................................           (7,109,728)          (10,305,158)          (19,229,684)
Deferred income tax benefit (expense) ............................           (1,288,994)           13,881,567             3,997,559
Reassessment of previous year's tax ..............................              980,315            (3,267,350)                   --
Net change in tax loss carryforwards .............................           12,030,769            (1,325,423)            5,759,362
Changes in valuation allowance ...................................           (3,635,871)           (7,652,257)           (3,458,282)
Deferred tax effect of US GAAP adjustments .......................           (3,983,207)           15,044,249            (3,724,860)
Current tax effect of US GAAP adjustments ........................                   --                    --             1,519,394
Other ............................................................             (216,451)             (508,792)             (587,774)
                                                                            -----------           -----------           -----------
        Total benefit (provision) under US GAAP ..................           (3,223,167)            5,866,836           (15,724,285)
                                                                            ===========           ===========           ===========
</TABLE>

Substantially all of the income tax provision in each year arises from Chilean
sources. The total benefit (provision) includes income taxes related to the
discontinued operation Lucchetti.


                                     F - 95
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Deferred tax assets (liabilities) are summarized as follows:

<TABLE>
<CAPTION>
                                                                                                      Year ended December 31,
                                                                                              -------------------------------------
                                                                                                  2002                     2003
                                                                                              ------------             ------------
                                                                                                  ThCh$                    ThCh$
<S>                                                                                            <C>                      <C>
Accounts receivable ..............................................................               1,524,790                1,543,578
Inventories ......................................................................                 708,053                  669,465
Tax loss carryforwards ...........................................................              56,730,754               51,996,402
Vacation provision ...............................................................               1,649,529                1,700,111
Leasing equipment ................................................................               5,249,980                8,517,000
Provision fixed assets held for sale .............................................               1,652,617                1,828,480
Derivatives ......................................................................                  26,334                       --
Obligation with repurchase agreements ............................................              25,646,930               42,075,520
Allowance for loan losses ........................................................              21,693,790               18,111,215
Charge-offs from financial investment ............................................               2,335,120                  330,785
Accrued interests and readjustments from risky loan portfolio ....................               1,610,950                1,936,100
Accruals interest and readjustments from past due loans ..........................               1,070,600                  806,900
Personnel provisions .............................................................                 917,080                1,504,000
Staff severance indemnities ......................................................               1,315,209                1,308,316
Fair value adjustments ...........................................................              18,244,791               19,606,167
Other ............................................................................              20,202,431               22,557,304
                                                                                              ------------             ------------
Gross deferred tax assets ........................................................             160,578,958              174,491,343

Depreciation .....................................................................             (23,184,100)             (22,687,403)
Inventories ......................................................................                (496,168)                (515,016)
Fixed assets under leasing contract ..............................................              (2,387,332)              (2,035,634)
Investments ......................................................................              (3,557,707)              (4,657,312)
Investment with repurchase agreements ............................................             (24,793,480)             (41,563,000)
Transitory assets ................................................................              (1,359,460)              (1,112,000)
Other ............................................................................              (5,251,758)              (3,859,309)
                                                                                              ------------             ------------
Gross deferred tax liabilities ...................................................             (61,030,005)             (76,429,674)
Deferred tax assets valuation allowance ..........................................             (37,581,352)             (35,970,177)
                                                                                              ------------             ------------
        Net deferred tax assets ..................................................              61,967,601               62,091,492
                                                                                              ============             ============
</TABLE>


                                     F - 96
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The provision for income taxes differs from the amount of income tax determined
by applying the applicable Chilean statutory income tax rate of 16.5% for 2003
to pretax accounting income on a US GAAP basis as a result of the following
differences:

<TABLE>
<CAPTION>
                                                                                              Year ended December 31,
                                                                                 --------------------------------------------------
                                                                                     2001               2002                2003
                                                                                 ------------       ------------       ------------
                                                                                     ThCh$              ThCh$               ThCh$
<S>                                                                               <C>                <C>                <C>
At statutory Chilean tax rate .............................................        (1,865,884)        11,415,967         (9,497,499)
Increase (decrease) in rates resulting from:
Price-level restatement not accepted for tax purposes .....................         1,315,998          4,965,309          1,104,826
Nontaxable income .........................................................        18,324,048         12,034,437         10,708,061
Nondeductible expenses ....................................................       (17,275,611)       (17,357,734)       (20,848,224)
Change in valuation allowances ............................................        (3,635,871)        (7,652,257)         2,028,048
Local taxes ...............................................................           308,816           (558,268)           373,170
Foreign taxes .............................................................        (1,891,850)           744,673           (251,782)
Change in Chilean statutory tax rate ......................................         1,265,649          2,090,700            552,000
Other .....................................................................           231,538            184,009            107,115
                                                                                 ------------       ------------       ------------
        At effective tax rates ............................................        (3,223,167)         5,866,836        (15,724,285)
                                                                                 ============       ============       ============
</TABLE>

In accordance with Chilean law, the Company and each of its subsidiaries compute
and pay tax on a separate return basis and not on a consolidated basis. The
Chilean income tax rate will be 17% in 2004 and for years thereafter.

The Argentine income tax rate was 35% for 2001, 2002 and 2003, in accordance
with currently enacted tax legislation. The Peruvian tax rate was 27.0% in 2001,
2002 and 2003.

Quinenco and its subsidiaries possess tax loss carryforwards which resulted in
deferred tax assets of ThCh$37,815,909 and ThCh$35,488,557 as of December 31
2002 and 2003, respectively. The tax losses relating to the Chilean and
Uruguayan subsidiaries have no expiration date. The tax losses in Peru expire
five years from the point that the subsidiary starts to record taxable income
and in Argentina tax losses may be applied against taxable income for a period
of five years.

d) Fair value of financial instruments

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments at December 31, 2002 and 2003 where an
estimation of fair value is practicable.

Cash and cash equivalents: Cash and time deposits and marketable securities that
are considered to be cash equivalents are stated at their carrying amount, which
is equivalent to fair value.

Other marketable securities: The fair value of other marketable securities is
based on the quoted market prices of the common stock or other securities held.

Other current assets: The fair value of deposits in guarantee included within
other current assets was estimated using the interest rate currently available
for deposits of similar duration. Other current assets are stated at carrying
amount, which is equivalent to fair value.


                                     F - 97
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Investments in other companies: The fair value of common stocks in other
companies is based on quoted market prices.

Other assets: The fair value of long-term accounts receivable included within
other assets was estimated using the interest rate the Company would pay for
similar credit.

Short and long-term debt and bonds payable: The fair value of short and
long-term debt and bonds payable was based on rates currently available to the
Company for debt with similar terms and similar remaining maturities.

Loans in the Company's financial services sector: For performing loans with an
original maturity of greater than one year, the fair values were calculated by
discounting contractual cash flows, using the Bank's current origination rates
for loans with similar terms and similar risk characteristics. For loans where
the Bank's management believes that the amounts outstanding will not be paid in
accordance with contractual terms, the estimated cash flows arising from the
liquidation of collateralized assets and other expected flows have been
discounted at an estimated discount rate commensurate with the risk in the
collection of these amounts.

Interest bearing liabilities in the Company's financial services sector: For
interest-bearing liabilities with an original contractual maturity, of greater
than one year, the fair values are calculated by discounting contractual cash
flows at current market origination rates with similar terms.

Derivative Instruments: The estimated fair value of foreign exchange forward
contracts was determined using quoted market prices of financial instruments
with similar characteristics. The fair value of interest rate swaps represents
the estimated amount the Company would expect to receive or pay to terminate the
contracts or agreements, taking into account current interest rates. As no
quoted market prices are available for the interest rate swap and forward
exchange rate instruments held by the Company, such estimates have been
estimated using modeling and other valuation techniques.


                                     F - 98
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The estimated fair values of the Company's financial instruments are as follows:

<TABLE>
<CAPTION>
                                                                                          As of December 31
                                                               --------------------------------------------------------------------
                                                                            2002                                   2003
                                                               --------------------------------       -----------------------------
                                                                    US GAAP                             US GAAP
                                                                  Book value        Fair value        Book value         Fair value
                                                                     ThCh$             ThCh$             ThCh$              ThCh$
                                                               --------------------------------------------------------------------
                                                                                       Non-Financial Services
                                                               --------------------------------------------------------------------
<S>                                                              <C>               <C>                <C>               <C>
Cash                                                                6,582,244         6,582,244         6,365,082         6,365,082
Time deposits                                                       2,723,383         2,723,383        37,413,291        37,413,291
Marketable securities                                              45,308,290        45,308,290        55,081,630        55,081,630
Accounts and notes receivable, net                                 75,553,916        75,553,916        79,419,713        79,419,713
Securities purchased under agreements to resell                    80,161,466        80,161,466        29,508,600        29,508,600
Long term receivables                                               2,418,290         2,418,290         2,165,710         2,165,710
Derivatives                                                         2,407,917         2,407,917                --                --
Accounts payable and suppliers notes payables                     (37,451,496)      (37,451,496)      (24,938,557)      (24,938,557)
Notes and accounts payables to related companies                     (324,847)         (324,847)         (483,086)         (483,086)
Short-term bank borrowings                                       (151,284,026)     (151,284,026)      (85,228,790)      (86,368,750)
Derivatives                                                                --                --        (1,604,310)       (1,604,310)
Bonds payable                                                    (221,367,304)     (230,775,966)     (197,356,952)     (199,301,235)
Long-term bank borrowings                                        (353,737,447)     (339,563,334)     (278,563,622)     (258,044,809)
Other long-term debt                                               (8,641,187)       (8,641,187)       (9,986,408)       (9,986,408)

                                                               --------------------------------------------------------------------
                                                                                       Financial Services
                                                               --------------------------------------------------------------------
Cash and due from banks                                           392,601,383       392,601,383       476,534,055       476,534,055
Interest bearing deposits in other banks                           33,602,000        33,602,000       183,707,000       183,707,000
Accounts receivable under spot foreign exchange transactions       30,249,000        30,249,000        39,148,000        39,148,000
Financial investments                                           1,485,148,292     1,485,158,320     1,632,734,020     1,632,734,240
Loans, net                                                      5,642,800,493     5,768,670,958     5,711,556,557     5,906,713,799
Deposits                                                       (4,793,976,608)   (4,795,641,489)   (4,854,816,951)   (4,918,649,690)
Accounts payable under spot foreign exchange transactions         (28,482,000)      (28,482,000)      (47,030,000)      (47,030,000)
Investments under agreements to repurchase                       (279,441,996)     (279,441,996)     (426,740,996)     (426,740,996)
Short-term and long-term borrowings                            (2,307,563,750)   (2,391,505,596)   (2,425,336,826)   (2,500,347,243)
Derivative instruments                                             (4,894,460)       (4,894,460)       (2,205,000)       (2,205,000)
</TABLE>


                                     F - 99
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

e) Investment securities

The following are required disclosures for investments classified as
available-for-sale securities, using amounts determined in accordance with US
GAAP.

e-1) Non-financial services

Realized gains and losses are determined using the proceeds from sales less the
cost of the investment identified to be sold. Gross gains and losses realized on
the sale of available-for-sale securities for the years ended December 31, 2001,
2002 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                                                                            Gross
                                                                                                         Unrealized          Fair
                                                                                          Cost              Gains            Value
                                                                                       ----------        ----------       ----------
                                                                                          ThCh$             ThCh$            ThCh$
<S>                                                                                    <C>               <C>              <C>
Securities available-for-sale at December 31, 2001 .............................       21,448,330        31,719,839       53,168,169
Securities available-for-sale at December 31, 2002 .............................       21,772,583        21,554,474       43,327,057
Securities available-for-sale at December 31, 2003 .............................       21,741,995        27,395,954       49,137,949
</TABLE>

Information on sales of available-for-sale securities during the three years in
the period ended December 31, 2003 is as follows:

<TABLE>
<CAPTION>
                                                                                          2001              2002             2003
                                                                                       ----------        ----------       ----------
                                                                                          ThCh$             ThCh$            ThCh$
<S>                                                                                    <C>                     <C>             <C>
Proceeds from sales ............................................................       92,336,464              --              --
Gross realized gains ...........................................................       51,609,630              --              --
Gross realized losses ..........................................................          (10,039)             --              --
</TABLE>

The Company has no securities that are considered to be trading securities or
debt securities to be held to maturity. The cost of available-for-sale
securities is determined using the average cost method.

e-2) Financial services

<TABLE>
<CAPTION>
                                                                                                  Years ended December 31,
                                                                                       ---------------------------------------------
                                                                                          2001              2002             2003
                                                                                       ----------        ----------       ----------
                                                                                           ThCh$            ThCh$            ThCh$
<S>                                                                                    <C>               <C>               <C>
Proceeds on sales ..............................................................       21,955,380        12,864,370        7,695,000
Gross realized gains ...........................................................        1,528,130         1,503,890        5,442,000
Gross realized  losses .........................................................          204,020         2,020,000          146,000
</TABLE>


                                    F - 100
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

      (1)   The cost and estimated market value of securities available for sale
            as of December 31, 2002 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                                                       Year ended December 31, 2003
                                                                    ----------------------------------------------------------------
                                                                                         Gross            Gross
                                                                                      Unrealized        Unrealized    Estimated Fair
Available-for-sale Instruments:                                         Cost             Gains           (Losses)          Value
                                                                    ------------     ------------     ------------    --------------
                                                                        ThCh$            ThCh$             ThCh$           ThCh$
<S>                                                                   <C>                 <C>                   <C>      <C>
Foreign private sector debt securities ........................               --               --               --               --
Foreign financial institutions debt securities ................               --               --               --               --
Government securities .........................................       11,952,000            4,000               --       11,956,000
Credit linked investments .....................................               --               --               --               --
Chilean private sector debt securities ........................        8,636,000          320,000               --        8,956,000
                                                                    ------------     ------------     ------------     ------------
      Total ...................................................       20,588,000          324,000               --       20,912,000
                                                                    ============     ============     ============     ============

<CAPTION>
                                                                                       Year ended December 31, 2002
                                                                    ----------------------------------------------------------------
                                                                                         Gross            Gross
                                                                                      Unrealized        Unrealized    Estimated Fair
Available-for-sale Instruments:                                         Cost             Gains           (Losses)          Value
                                                                    ------------     ------------     ------------    --------------
                                                                        ThCh$            ThCh$             ThCh$           ThCh$
<S>                                                                  <C>                <C>               <C>           <C>
Foreign private sector debt securities ........................       40,112,150        3,287,550         (634,280)      42,765,420
Foreign financial institutions debt securities ................        1,298,860          816,080               --        2,114,940
Credit linked investments .....................................       69,618,290               --               --       69,618,290
                                                                    ------------     ------------     ------------     ------------
      Total ...................................................      111,029,300        4,103,630         (634,280)     114,498,650
                                                                    ============     ============     ============     ============
</TABLE>

The contractual maturities of available-for-sale securities held by financial
service companies, are as follows:

<TABLE>
<CAPTION>
                                                                                 As of December 31, 2003
                                                ------------------------------------------------------------------------------------
                                                                   After one year    After five years
                                                                   but within five     but within 10
                                                Within one year        years              years          After 10 years     Total
                                                ------------------------------------------------------------------------------------
                                                      ThCh$            ThCh$             ThCh$                ThCh$          ThCh$
<S>                                               <C>                <C>                     <C>              <C>         <C>
Available-for-sale Instruments:
U.S. Government debt securities .............      11,956,000               --               --                --         11,956,000
Chilean private sector debt securities ......              --        8,956,000               --                --          8,956,000
                                                 -----------------------------------------------------------------------------------
        Estimated fair value ................      11,956,000        8,956,000                --                --        20,912,000
                                                 ===================================================================================
</TABLE>


                                    F - 101
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(2)   The following disclosures, in addition to those required under Chilean
      GAAP, are required disclosures for investments classified as
      held-to-maturity in accordance with SFAS No. 115:

<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                          ------------------------------------------------------
                                                                                 2003
                                                          ------------------------------------------------------
                                                                            Gross Unrealized     Estimated Fair
                                                          Amortized Cost      Gains (Losses)          Value
                                                          ------------------------------------------------------
                                                               ThCh$              ThCh$                ThCh$
<S>                                                          <C>                      <C>            <C>
Held-to-maturity Instruments:
U.S. government debt securities ...................          21,017,000               4,000          21,021,000
Chilean Central Bank securities ...................                  --                  --                  --
Government Securities .............................                  --                  --                  --
                                                           ------------        ------------        ------------
      Total .......................................          21,017,000               4,000          21,021,000
                                                           ============        ============        ============

<CAPTION>
                                                                         Year ended December 31,
                                                          ------------------------------------------------------
                                                                                  2002
                                                          ------------------------------------------------------
                                                                            Gross Unrealized     Estimated Fair
                                                          Amortized Cost      Gains (Losses)          Value
                                                          ------------------------------------------------------
                                                               ThCh$              ThCh$                ThCh$
<S>                                                         <C>                      <C>            <C>
Held-to-maturity Instruments:
U.S. government debt securities ...................          39,450,600               5,050          39,455,650
Chilean Central Bank securities ...................         277,206,620               5,050         277,211,670
Government Securities .............................             297,950                  --             297,950
                                                           ----------------------------------------------------
      Total .......................................         316,955,170              10,100         316,965,270
                                                           ====================================================
</TABLE>

The contractual maturities of securities classified by the Company's banking
operations as held-to-maturity are as follows:

<TABLE>
<CAPTION>
                                                                                    December 31, 2003
                                                         ---------------------------------------------------------------------
                                                                            After one year
                                                         Within one         but within five      After five
                                                            year                 years             years              Total
                                                         ---------------------------------------------------------------------
                                                            ThCh$               ThCh$               ThCh$             ThCh$
<S>                                                      <C>                       <C>               <C>            <C>
Held-to-maturity Instruments:
U.S. government debt securities ............             21,021,000                --                --             21,021,000
                                                         ---------------------------------------------------------------------
        Estimated fair value ...............             21,021,000                --                --             21,021,000
                                                         =====================================================================
</TABLE>

(3)   Under US GAAP, the Company's banking operations are required to disclose
      the amounts of unrealized holding gains and losses included in income on
      securities classified as trading. For the years ended December 31, 2001,
      2002 and 2003, the Company's banking operations recognized in income
      unrealized holding gains (losses) of ThCh$ 3,090,000, ThCh$110,852,000 and
      ThCh$(10,227,000) respectively, on these securities.


                                    F - 102
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

f) Reclassification differences between Chilean GAAP and US GAAP

Certain non-operating income and expenses under Chilean GAAP would be considered
operating income and expenses under US GAAP. for the years ended December 31,
2001, 2002 and 2003 as follows:

<TABLE>
<CAPTION>
                                                                                            2001            2002            2003
                                                                                        ------------    ------------    ------------
                                                                                            ThCh$           ThCh$           ThCh$
<S>                                                                                      <C>              <C>            <C>
Non-operating income under Chilean GAAP ............................................     107,084,379      33,877,831     119,526,995
Less:
   Amortization of negative goodwill ...............................................       9,279,335       1,907,919      23,523,313
   Amortization of unrealized gain .................................................         161,718         587,019              --
   Release of purchase price accruals ..............................................              --       3,296,718              --
   Tax refund ......................................................................         149,115         393,341         486,894
                                                                                        ------------    ------------    ------------
Non-operating income as classified under US GAAP, but calculated in
accordance with Chilean GAAP .......................................................      97,494,211      27,692,834      95,516,788
                                                                                        ============    ============    ============

Non-operating expenses under Chilean GAAP ..........................................      72,596,926      86,544,758      66,438,808
Less:
   Amortization of goodwill ........................................................      28,512,937      20,737,172      20,094,838
   Restructuring costs and severance indemnities ...................................       5,619,122       6,867,285         221,430
   Losses on sales of investments, fixed assets and other ..........................       1,000,557       2,065,661       1,680,636
   Consulting services .............................................................       4,543,407         739,573              --
   Adjustment of market value of shares ............................................         105,098          34,340              --
   Provision for losses on loans and recoverable taxes of foreign subsidiaries .....       3,402,582       2,678,110         483,135
   Financial consulting and other expenses for sale of Argentine
      Subsidiary ...................................................................         545,261              --              --
   Directors' compensation .........................................................         446,030         364,887       4,167,745
   Adjustment of property, plant and equipment to net
      realizable value (Note 9) ....................................................       2,735,516         848,680         489,166
   Allowance for uncollectible debts ...............................................         686,145       1,166,629              --
   Labor lawsuits ..................................................................       3,963,348         326,330         381,953
   Legal expenses for defense of Lucchetti Peru ....................................       2,410,219       2,246,733       1,395,937
   Valuation allowance for fixed and other assets Argentina ........................      12,962,566       6,201,865         821,194
   Losses on construction contracts ................................................         906,365              --
   Impairment of equity investment in and account receivable
      with Lucchetti Peru ..........................................................              --      30,985,271       1,187,600
   Depreciation of property, plant and equipment involved in
      temporary shutdown (see Note 9) ..............................................              --       3,284,965       1,984,140
   Adjustment to sales price of a business .........................................              --       1,250,433              --
   Loss originated in non participation in capital increase of subsidiary ..........              --              --      21,130,016
   Loss in sale of building Hotel Carrerra .........................................              --              --       4,713,021
                                                                                        ------------    ------------    ------------
Non-operating expense as classified under US GAAP, but
   calculated in accordance with Chilean GAAP ......................................       4,757,773       6,746,824       7,687,997
                                                                                        ============    ============    ============
</TABLE>


                                    F - 103
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

g) Loan covenants

At December 31, 2001 the Company's subsidiary Madeco was not in compliance with
a covenant relating to the Madeco Bonds series B for UF 693,000 nominal value,
however waivers were obtained before the issuance of the 2001 consolidated
financial statements.

Also, at December 31, 2001, the Company's subsidiary Madeco did not comply with
certain covenants related to a loan with an affiliate of Bank Boston which had
approximately ThCh$7,609,562 outstanding balance at December 31, 2001.
Additionally, for the quarter ended March 31, 2002, the Company's subsidiary
Madeco was also in non-compliance with respect to covenants pursuant to its loan
with Citibank, which had a balance outstanding at that date of ThCh$3,421,516
(ThCh$3,372,169 at December 31, 2001). Since the Company's subsidiary Madeco
obtained waivers for non-compliance before the issuance of the 2001 consolidated
financial statements, for each facility, but only for the particular quarter
period in which the Company was in default, for US GAAP purposes these
facilities would be classified as a short-term liability at December 31, 2001.
Madeco was in compliance with its covenants as of December 31, 2002 and 2003.

h) Goodwill

The following details what the Company's net income and under basic and diluted
earnings (loss) per share under US GAAP would have been for the year ended
December 31, 2001, excluding goodwill amortization expense:

<TABLE>
<CAPTION>
                                                                                                       For the year ended
                                                                                                       December 31, 2001
                                                                                                                   Per Share
                                                                                                      ThCh$           Ch$
                                                                                                    Restated        Restated
<S>                                                                                                <C>                  <C>
      Income from continuing  operations before cumulative effect of changes in
      accounting principles and discontinued operations as reported ..........................     18,730,703           17.35
      Add back: Goodwill amortization ........................................................     12,559,612           11.63
                                                                                                  -----------     -----------
      Net income from continuing operations before cumulative effect of changes in
      accounting principles, discontinued operations and goodwill amortization ...............     31,290,315           28.98
                                                                                                  -----------     -----------
      Cumulative effect of changes in accounting principles, net of taxes and
      minority interest ......................................................................          2,081              --
      Net income before discontinued operations and goodwill amortization,
      net of taxes and minority interest .....................................................     31,292,396           28.98
                                                                                                  -----------     -----------
      Loss from discontinued operations, net of taxes and minority interest ..................     (6,568,217)          (6.08)
                                                                                                  -----------     -----------
      Net income before goodwill amortization ................................................     24,724,179           22.90
                                                                                                  ===========     ===========
</TABLE>


                                    F - 104
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The net US GAAP balance of goodwill as of December 31, 2002 and 2003 was
ThCh$594,490,928 and ThCh$581,942,582 respectively.

The changes in the carrying amount of goodwill on a segment basis for the years
ended December 31, 2002 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                Financial          Foods &
                                                 services          beverage       Manufacturing    Telecommunications
                                                  ThCh$              ThCh$            ThCh$               ThCh$
                                               ------------      ------------     -------------    ------------------
<S>                                             <C>                   <C>            <C>                   <C>
Balance as of January 1, 2002                   552,552,022            88,765        41,370,433            462,755
Impairment losses                                        --                --                --                 --
Goodwill acquired during the year                        --                --            16,953                 --
                                               ------------      ------------      ------------       ------------
Balance as of December 31, 2002                 552,552,022            88,765        41,387,386            462,755
Goodwill acquired during the year                        --           309,091            14,662            131,581
Impairment losses                                        --                --        (7,383,285)                --
Cumulative translation adjustment                        --                --        (5,620,395)                --
                                               ------------      ------------      ------------       ------------
Balance as of December 31, 2003                 552,552,022           397,856        28,398,368            594,336
                                               ============      ============      ============       ============
</TABLE>

i) Insurance Operations

The Company participates in certain insurance brokerage and other operations.
There are no material differences in the accounting for these operations between
Chilean GAAP and US GAAP.

j) Discontinued operations

In October of 2001, the FASB issued SFAS 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets" which is effective for fiscal years beginning
after December 15, 2001. SFAS 144 establishes accounting and reporting standards
for the impairment and disposal of long-lived assets and discontinued
operations. The Company adopted SFAS 144 in 2002. All prior year reporting
periods have been restated to reflect the adoption. The application of this
statement resulted in the classification, and separate financial presentation of
certain entities as discontinued operations, the results of which are not
included in continuing operations.

In 2003 the Company committed to a plan to dispose of the equity participation
it held in the consolidated subsidiary, Lucchetti Chile S.A. In addition,
Empresas Lucchetti's operations in Peru are considered as discontinued as of
December 31, 2003 as they were effectively abandoned due to the court case
discussed in Note 19. There was an impairment of assets related to these
discontinued operations in the year ended December 31, 2002 which resulted in a
loss of ThCh$ 30,985,271.

This subsidiary was reported as part of the Food and Beverage operating segment.
It was accounted for as discontinued operations in accordance with SFAS No. 144
and, accordingly, amounts in the reconciliation of net income to US GAAP and the
additional disclosure notes required under US GAAP for all periods shown,
reflect discontinued accounting.


                                    F - 105
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The major classes of discontinued combined assets and combined liabilities
included in the US GAAP Quinenco S.A. consolidated Balance Sheet are as follows:

<TABLE>
<CAPTION>
                                                                                                 At December, 31
                                                                                          ------------------------------
                                                                                              2002              2003
                                                                                          ------------      ------------
                                                                                              ThCh$              ThCh$
<S>                                                                                         <C>               <C>
            Assets:
            Cash ...................................................................         1,598,718         3,906,300
            Account receivable, net ................................................        17,080,759        16,610,422
            Other current assets ...................................................        15,501,421        16,806,536
            Property, plant and equipment, net .....................................        49,585,556        47,092,375
            Intangibles ............................................................           632,060           596,929
            Other assets ...........................................................         8,650,946        11,808,232

            Total assets of discontinued operations ................................        93,049,460        96,820,794
                                                                                          ============      ============

            Liabilities:
            Current liabilities ....................................................        26,609,935        24,554,283
            Long term liabilities ..................................................        52,578,925        46,340,271
                                                                                          ------------      ------------
            Total liabilities of discontinued operations ...........................        79,188,860        70,894,554
            Minority interest ......................................................           874,604         1,060,383
                                                                                          ------------      ------------
            Quinenco's investment in Lucchetti .....................................        12,985,996        24,865,857
                                                                                          ============      ============
</TABLE>

The major classes of discontinued consolidated revenues and expenses included in
the US GAAP Quinenco S.A. combined Income Statement are as follows:

<TABLE>
<CAPTION>
                                                                                              Year Ended December 31,
                                                                               ----------------------------------------------------
                                                                                   2001                2002                2003
                                                                               ------------        ------------        ------------
                                                                                   ThCh$               ThCh$                ThCh$
<S>                                                                             <C>                 <C>                 <C>
Sales ..................................................................         89,731,179          84,636,517          59,115,255
Costs of sales .........................................................        (62,914,547)        (61,997,643)        (40,804,664)
Gross profit ...........................................................         26,816,632          22,638,874          18,310,591

Administrative and selling expenses ....................................        (23,968,049)        (50,426,416)        (17,124,639)
                                                                               ------------        ------------        ------------
Operating income .......................................................          2,848,583         (27,787,542)          1,185,952
                                                                               ============        ============        ============

Non operating loss .....................................................        (12,313,372)         (9,124,376)         (5,545,341)
                                                                               ------------        ------------        ------------
Loss before taxes and minority interest ................................         (9,464,789)        (36,911,918)         (4,359,389)
                                                                               ============        ============        ============

Income tax .............................................................          2,903,592            (298,672)          1,707,318
Minority interest ......................................................            442,881           2,347,988             108,469
                                                                               ------------        ------------        ------------
Net loss for the year ..................................................         (6,118,316)        (34,862,602)         (2,543,602)
                                                                               ============        ============        ============
</TABLE>

Lucchetti Chile S.A. was sold in March 2004, generating a gain on sale of
ThCh$1,276,001.


                                    F - 106
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

k) Comprehensive income

In accordance with US GAAP, the Company reports a measure of all changes in
shareholders' equity that result from transactions and other economic events of
the period other than transactions with owners ("comprehensive income").
Comprehensive income is the total of net income and other non-owner equity
transactions that result in changes in net shareholders' equity. Comprehensive
income is as follows:

<TABLE>
<CAPTION>
                                                                                Before         Tax (expense)      Net of tax
                                                                              tax amount         or benefit          amount
                                                                             ------------      ------------      ------------
                                                                                 ThCh$              ThCh$             ThCh$
<S>                                                                           <C>                <C>              <C>
Balance as of December 31, 2001 ........................................      (31,358,972)       (4,997,613)      (36,356,585)
Translation adjustment .................................................       10,972,386                --        10,972,386
Unrealized gains and losses on available-for-sale securities ...........       (6,811,553)        1,544,476        (5,267,077)
                                                                             ------------      ------------      ------------
Balance as of December 31, 2002 ........................................      (27,198,139)       (3,453,137)      (30,651,276)
Translation adjustment .................................................      (26,556,480)               --       (26,556,480)
Unrealized gains and losses on available-for-sale securities ...........        4,314,149        (1,098,605)        3,215,544
                                                                             ------------      ------------      ------------
Balance as of December 31, 2003 ........................................      (49,440,470)       (4,551,742)      (53,992,212)
</TABLE>

The gains and losses on debt classified as a net investment hedge covering the
exposure of foreign investments as permitted by SFAS 133 and presented in other
comprehensive income are as follows:

<TABLE>
<CAPTION>
                                                                                   2001                 2002               2003
                                                                                   ThCh$                ThCh$              ThCh$
                                                                                ----------           ----------         -----------
<S>                                                                             <C>                  <C>                <C>
Gain (loss) on debt classified as net investment hedge ...............          (7,702,396)          16,178,896         (40,941,780)
</TABLE>

l) Restrictions which limit the payment of dividends by the registrant

As stated in Note 15, the Company has subsidiaries that must abide by certain
financial ratios and covenants that require minimum equity levels or that
contain other characteristics that restrict the transfer of assets to the parent
company. The amounts of Quinenco's proportionate share of restricted net assets
in consolidated subsidiaries as of December 31, 2003 are as follows:

                                                          Proportionate Share of
                     Subsidiary                           Restricted Net Assets
                                                                   ThCh$
        CNT Telefonica del Sur S.A.                              25,095,744
        Compania de Telefonos de Coyhaique S.A.                     878,449
        Empresas Luchetti S.A.                                   43,457,502
        LQ Inversiones Financieras S.A.                         270,414,766
        Madeco S.A.                                              65,402,568
        Indalum S.A.                                             15,102,589
        Alusa S.A.                                               12,527,864

The amount of consolidated retained earnings which represents undistributed
earnings of investments accounted for under the equity method as of December 31,
2003 is ThCh$89,998,649.


                                    F - 107
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

m) Contingent Liabilities

The following note relates to the Company's banking operations and amounts
stated are rounded to millions of Chilean pesos.

The Company's banking operations have contingent liabilities which consist of
open and unused letters of credit, together with guarantees granted in Chilean
pesos, UF and foreign currencies (principally U.S. dollars). Under U.S. GAAP
these transactions represent off-balance sheet activities. The following is a
summary of instruments that are considered financial guarantees in accordance
with FIN No. 45:

<TABLE>
<CAPTION>
                                                                                       Year ended               As of
                                                                                   December 31, 2003      December 31, 2003
                                                                                          Fees             Contract amount
                                                                                          MCh$                   MCh$
<S>                                                                                       <C>                  <C>
              Standby letters of credits ...............................                    190                 32,074
              Foreign office guarantees ................................                    289                 24,033
              Performance bonds ........................................                  2,775                245,888
                                                                                        -------                -------
              Total ....................................................                  3,254                301,995
</TABLE>

Guarantees in the form of performance bonds are issued in connection with
agreements made by customers to counterparties. If the customer fails to comply
with the agreement, the counterparty may enforce the performance bond as a
remedy. Credit risk arises from the possibility that the customer may not be
able to repay the Bank for performance bonds. To mitigate credit risk, the Bank
generally determines the need for specific covenant, guarantee and collateral
requirements on a case-by-case basis, depending on the nature of the financial
instrument and the customer's creditworthiness.

Guarantees expiration periods are as follows:

<TABLE>
<CAPTION>
                                                                 Due after 1         Due after 1      Due after 1
                                               Due within 1        year but           year but          year but
                                                   year         within 3 years     within 3 years    within 3 years       Total
                                                   MCh$                MCh$              MCh$              MCh$            MCh$
                                               ------------     --------------     --------------    --------------     ---------
<S>                                               <C>                <C>                <C>               <C>             <C>
      Standby letters of credits ..........        19,920             8,989              3,165               --            32,074
      Foreign office guarantees ...........        20,161             3,872                 --               --            24,033
      Performance bonds ...................       176,856            56,798             10,180            2,054           245,888
                                                ---------         ---------          ---------        ---------         ---------
      Total ...............................       216,937            69,659             13,345            2,054           301,995
</TABLE>

n) Other Interest Bearing Liabilities

The following note relates to the Company's banking operations and amounts
stated are rounded to millions of Chilean pesos.

The Company's banking operations long-term and short-term borrowings are
summarized below. In accordance with the guidelines established by the SBIF, the
Company's banking operations do not present a classified balance sheet.
Borrowings are described as short-term when they have original maturities of
less than one year or are due on demand. All other borrowings are described as
long-term, including the amounts due within one year on such borrowings.


                                    F - 108
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

<TABLE>
<CAPTION>
                                                                 As of December 31, 2002               As of December 31, 2003
                                                          --------------------------------------------------------------------------
                                                          Long-term    Short-term    Total       Long-term    Short-term    Total
                                                             MCh$          MCh$       MCh$          MCh$         MCh$        MCh$
<S>                                                       <C>            <C>        <C>          <C>            <C>        <C>
Central Bank Credit lines for renegotiation of loans .        3,801           --        3,801        2,975           --        2,975
Other Central Bank borrowings ........................           --           --           --           --       24,906       24,906
Mortgage finance bonds ...............................    1,137,200           --    1,137,200    1,052,412           --    1,052,412
Bonds ................................................        4,639           --        4,639        3,127           --        3,127
Subordinated bonds ...................................      280,431           --      280,431      271,197           --      271,197
Borrowings from domestic financial institutions ......          127       50,866       50,993          103       49,779       49,882
Foreign borrowings ...................................      335,087      180,360      515,447      450,860      267,109      717,969
Investments under agreements to repurchase ...........           --      279,442      279,442           --      426,741      426,741
Other obligations ....................................       46,320       31,217       77,537        9,846       49,754       59,600
                                                          --------------------------------------------------------------------------
    Total other interest bearing liabilities .........    1,807,605      541,885    2,349,490    1,790,520      818,289    2,608,809
                                                          ==========================================================================
</TABLE>

(1) Central Bank borrowings

Central Bank borrowings include credit lines for the renegotiation of loans and
other Central Bank borrowings. Credit lines were provided by the Central Bank
for the renegotiation of mortgage loans due to the need to refinance debts as a
result of the economic recession and crisis of the Chilean banking system from
1982 to 1985. The lines for the renegotiations of mortgage loans are linked to
the UF index and carry a real annual interest rate of 2.36%. The maturities of
the outstanding amounts are as follows:

<TABLE>
<CAPTION>
                                                                          As of December 31, 2003
                                                                          -----------------------
                                                                                     MCh$
<S>                                                                                 <C>
      Due within 1 year ..............................................              2,975
      Due after 1 year but within 2 years ............................                 --
      Due after 2 years but within 3 years ...........................                 --
      Due after 3 years but within 4 years ...........................                 --
      Due after 4 years but within 5 years ...........................                 --
      Due after 5 years ..............................................                 --
                                                                                   ------
          Total long-term (Credit lines for renegotiation of loans) ..              2,975
          Total short-term (Other Central Bank borrowings) ...........             24,906
                                                                                   ------
          Total Central Bank borrowings ..............................             27,881
                                                                                   ======
</TABLE>

(2) Mortgage finance bonds

These bonds are used to finance the granting of mortgage loans. The outstanding
principal amounts of the bonds are amortized on a quarterly basis. The range of
maturities of these bonds is between five and twenty years. The bonds are linked
to the UF index and carry a weighted average annual rate of interest of 6.2% as
of December 31, 2003.


                                    F - 109
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The maturities of outstanding mortgage bond amounts as of December 31, 2003 are
as follows:

<TABLE>
<CAPTION>
                                                                                    As of December 31,
                                                                                           2003
                                                                                    ------------------
                                                                                           MCh$
<S>                                                                                     <C>
      Due within 1 year ..............................................                     84,397
      Due after 1 year but within 2 years ............................                     87,257
      Due after 2 years but within 3 years ...........................                     88,085
      Due after 3 years but within 4 years ...........................                     86,401
      Due after 4 years but within 5 years ...........................                     83,345
      Due after 5 years ..............................................                    622,927
                                                                                        ---------
          Total mortgage finance bonds ...............................                  1,052,412
                                                                                        =========
</TABLE>

(3) Bonds

The maturities of outstanding bonds amounts as of December 31, 2003 are as
follows:

<TABLE>
<CAPTION>
                                                                                    As of December 31,
                                                                                           2003
                                                                                    ------------------
                                                                                           MCh$
<S>                                                                                         <C>
      Due within 1 year ..............................................                        905
      Due after 1 year but within 2 years ............................                        858
      Due after 2 years but within 3 years ...........................                        858
      Due after 3 years but within 4 years ...........................                        506
      Due after 4 years but within 5 years ...........................                         --
      Due after 5 years ..............................................                         --
                                                                                        ---------
          Total bonds ................................................                      3,127
                                                                                        =========
</TABLE>

Bonds are linked to the UF Index and carried an average real annual interest
rate of 6.9% as of December 31, 2003, with interest and principal payments due
semi-annually. The bonds were originally intended to finance loans that had a
maturity of greater than one year.

(4) Subordinated bonds..

In 2002 the Company's banking operations issued Bonds totaling UF 1,580,000
("known as 6.5% Bonds") at a discount of UF 98,670. The 6.5% Bonds are linked to
the UF index with interest and principal payments due semi-annually. The
discount on the issuance of the "6.5% Bonds" is amortized over the life of the
bond. As of December 31, 2003, the effective real interest rate is 7.0%, taking
into consideration the discount on issuance.


                                    F - 110
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The 6.5% Bonds are intended for the financing of loans having a maturity of
greater than one year. As of December 31, 2003 the outstanding maturities of
these bonds, which are considered long-term, are as follows:

<TABLE>
<CAPTION>
                                                                            As of December 31, 2003
                                                                            -----------------------
                                                                                      MCh$
<S>                                                                                 <C>
      Due within 1 year ......................................                       25,571
      Due after 1 year but within 2 years ....................                       19,307
      Due after 2 years but within 3 years ...................                       19,307
      Due after 3 years but within 4 years ...................                       19,307
      Due after 4 years but within 5 years ...................                       19,307
      Due after 5 years ......................................                      168,398
                                                                                    -------
          Total subordinated bonds ...........................                      271,197
                                                                                    =======
</TABLE>

The value of the subordinated bonds that can be considered in the "effective
equity" should decrease by 20% per year beginning six years prior to maturity.

(5) Borrowings from domestic financial institutions

Borrowings from domestic financial institutions are used to fund the Company's
banking operations' general activities, carry a weighted average annual real
interest rate of 2.3% and have the following outstanding maturities as of
December 31, 2003:

<TABLE>
<CAPTION>
                                                                            As of December 31, 2003
                                                                            -----------------------
                                                                                      MCh$
<S>                                                                                 <C>
      Due within 1 year ......................................                          103
      Due after 1 year but within 2 years ....................                           --
      Due after 2 years but within 3 years ...................                           --
      Due after 3 years but within 4 years ...................                           --
      Due after 4 years but within 5 years ...................                           --
      Due after 5 years ......................................                           --
                                                                                    -------
          Total long-term ....................................                          103
          Total short-term ...................................                       49,779
                                                                                    -------
</TABLE>


                                    F - 111
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

(6) Foreign borrowings

The Company's banking operations have short-term and long-term borrowings from
foreign banks. The outstanding maturities of these borrowings as of December 31,
2003 are as follows:

<TABLE>
<CAPTION>
                                                                                  As of December 31, 2003
                                                                                  -----------------------
                                                                                            MCh$
<S>                                                                                        <C>
      Due within 1 year .......................................                            431,098
      Due after 1 year but within 2 years .....................                             13,015
      Due after 2 years but within 3 years ....................                                127
      Due after 3 years but within 4 years ....................                              6,620
      Due after 4 years but within 5 years ....................                                 --
      Due after 5 years .......................................                                 --
                                                                                         ---------
         Total long-term ......................................                            450,860
         Total short-term .....................................                            267,109
                                                                                         ---------
            Total foreign borrowings ..........................                            717,969
                                                                                         =========
</TABLE>

All of these loans are denominated in U.S. dollars, are principally used to fund
the' foreign trade loans and carry an average, annual nominal interest rate of
3.8% as of December 31, 2003.

(7) Other obligations

<TABLE>
<CAPTION>
                                                                                  As of December 31,
                                                                                ---------------------
                                                                                 2002           2003
                                                                                 MCh$           MCh$
<S>                                                                             <C>            <C>
      Other long-term obligations:
          Payable accounts ....................................                    883             --
          Obligations with Chilean government .................                 45,437          9,846
                                                                                ---------------------
          Total other  long-term obligations ..................                 46,320          9,846
      Other short-term obligations ............................                 31,217         49,754
                                                                                ---------------------
          Total other obligations .............................                 77,537         59,600
                                                                                =====================
</TABLE>

As of December 31, 2003, other obligations had the following maturities:

<TABLE>
<CAPTION>
                                                                                  As of December 31, 2003
                                                                                  -----------------------
                                                                                            MCh$
<S>                                                                                         <C>
      Due within 1 year .......................................                                945
      Due after 1 year but within 2 years .....................                              1,200
      Due after 2 years but within 3 years ....................                              1,418
      Due after 3 years but within 4 years ....................                              1,479
      Due after 4 years but within 5 years ....................                              1,408
      Due after 5 years .......................................                              3,396
                                                                                         ---------
         Total long-term ......................................                              9,846
         Total short-term .....................................                             49,754
                                                                                         ---------
           Total other obligations ............................                             59,600
                                                                                         =========
</TABLE>


                                    F - 112
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

o) Fees and income from services

The following note relates to the Company's banking operations and amounts
stated are rounded to millions of Chilean pesos.

The Company's banking operations' fees and income from services and
non-operating income and expenses for the years ended December 31, 2001, 2002
and 2003 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                       Years ended December 31,
                                                              ---------------------------------------------------------------------
                                                                       2001                    2002                    2003
                                                              ---------------------------------------------------------------------
                                                                 Income    Expenses      Income     Expenses      Income   Expenses
                                                                  MCh$        MCh$         MCh$        MCh$        MCh$       MCh$
<S>                                                              <C>        <C>           <C>        <C>         <C>        <C>
Fees and income from services
Contingent fees ..........................................        4,766          --        3,277          --       3,261         --
Demand deposits and overdrafts ...........................       10,827          --        9,098          --       4,909         --
Sight accounts and ATMs ..................................        9,376      (2,578)      11,982      (2,601)     15,295     (4,696)
Mutual funds .............................................        9,279        (436)      13,287      (1,337)     14,663     (1,394)
Insurance ................................................        7,262        (602)       6,860        (720)     10,490     (1,128)
Stock brokerage ..........................................        3,933        (449)       4,060        (435)      9,912       (612)
Collection of overdue loans ..............................           --          --        6,398          --       8,621         --
Collection and payment of services .......................        3,752          --        5,748          --       7,179         --
Credit lines .............................................        3,451          --        5,033          --       5,521         --
Financial services .......................................        1,749          --        1,929          --       5,350         --
Income and expense from goods received in lieu of
  payment ................................................          604      (2,041)       2,961      (1,730)      4,179     (1,753)
Letters of credit guarantees, collaterals and other
  contingent loans .......................................        3,272      (2,127)       1,743          --       1,737         --
Collection services ......................................        2,962          --        2,610          --       2,874         --
Foreign trade and currency exchange ......................        1,979          --        1,766          --       2,418         --
Prepayment of loans ......................................          676          --        1,208          --       1,969         --
Leasing ..................................................          408        (672)       1,685        (484)      1,637       (514)
Custody and trust services ...............................          639          --          595          --         911         --
Factoring ................................................          290         (51)         298          (4)        735         (3)
Fees from sales force ....................................           --      (4,508)          --      (8,553)         --    (10,864)
Teller services (Servipag) ...............................           --      (2,103)          --      (2,765)         --     (3,179)
Other ....................................................        2,755      (2,552)       2,134      (1,444)      4,177     (2,454)
                                                              ---------------------------------------------------------------------
    Total ................................................       67,980     (18,119)      82,672     (20,073)    105,838    (26,597)
                                                              =====================================================================
</TABLE>

p) Non-operating income and expense

The following note relates to the Company's banking operations and amounts
stated are rounded to millions of Chilean pesos.


                                    F - 113
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

The Company's banking operations' fees and income from services and
non-operating income and expenses for the years ended December 31, 2001, 2002
and 2003 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                         Years ended December 31,
                                                                   ----------------------------------------------------------------
                                                                          2001                  2002                   2003
                                                                   ----------------------------------------------------------------
                                                                    Income     Expenses    Income   Expenses      Income   Expenses
                                                                     MCh$        MCh$       MCh$       MCh$        MCh$       MCh$
<S>                                                                 <C>        <C>          <C>      <C>           <C>      <C>
Non-operating income and expenses
Rental income .................................................      2,448          --      2,699         --       2,554         --
Recoveries of expenses ........................................        626          --        863         --         428         --
Gains on sales of assets received in lieu of payment ..........      4,366          --        964         --       1,095         --
Income from correspondent banks ...............................        838          --        584         --         941         --
Income from sale of fixed assets ..............................        201          --        524         --         453         --
Securities in companies and shares ............................         85          --        298         --          19         --
Miscellaneous gains on exchange ...............................        135          --         --         --          --         --
Overestimated provision .......................................        (12)         --         --         --          --         --
Amortization of intangibles ...................................         --     (14,128)        --    (20,796)         --    (17,547)
Charge-offs and provision of assets received in lieu of payment         --      (4,336)        --     (8,373)         --     (7,357)
Charge-offs and provision related to fixed assets .............         --        (184)        --     (4,409)         --       (124)
Administration and credit card contracts ......................         --      (1,727)        --     (3,072)         --     (5,946)
Charge-offs of transaction in process related to the merger ...         --          --         --     (2,036)         --         --
Asset received in lieu of payment .............................        515          --         --     (1,739)         --       (381)
Charge-offs ...................................................         --        (383)        --     (1,315)         --     (2,257)
Legal contingencies provision .................................         --        (188)        --       (972)         --       (147)
Delivery services of bank products ............................         --        (586)        --       (644)         --       (637)
Indemnity for termination of rental contracts .................         --          --         --       (588)         --         --
Merger expenses ...............................................         --          --         --     (1,245)         --         --
Income (losses) attributable to investments in other companies       1,451         (26)        --     (1,301)         --     (1,122)
Other .........................................................        915      (1,173)       531     (2,131)        647     (4,312)
                                                                   ----------------------------------------------------------------
    Total .....................................................     11,568     (22,731)     6,463    (48,621)      6,137    (39,830)
                                                                   ================================================================
</TABLE>

q) Stock Option Plan

At Madeco's Extraordinary Meeting of Shareholders held on November 14, 2002, the
shareholders of Madeco approved the Madeco Stock Option Plan, which was adopted
by the Board of Directors of Madeco on January 28, 2003. The 2003 incentive plan
authorizes the issuance of up to 493,334,000 shares of Madeco's common stock
upon the exercises of stock options.

On April 24, 2003, Madeco granted stock options to certain employees in the
total amount of 182,147,724 shares. These options were granted at fair market
value on the date of grant. The options vest and they are exercisable on
September 30, 2004, assuming the employee continues service to that date. The
exercise period is September 30, 2004 to November 30, 2004 with an exercise
price of Ch$24 per share.

r) Recent accounting pronouncements

On January 23, 2003, the FASB Emerging Issues Taskforce issued EITF 00-21 Issue
Revenue Arrangements with Multiple Deliverables ("EITF 00-21"). This Issue
addresses certain aspects of the accounting by a vendor for arrangements under
which it will perform multiple revenue-generating activities. Specifically, this
Issue addresses how to determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting. The Issue requires, that
revenue arrangements with multiple deliverables should be divided into separate
units of accounting if the deliverables in the arrangement meet certain
criteria, arrangement consideration should be allocated among the separate units
of accounting based on their relative fair values, and applicable revenue
recognition criteria should be


                                    F - 114
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

considered separately for units of accounting. The guidance in this Issue is
effective for revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. Alternatively, entities may elect to report the change in
accounting as a cumulative-effect adjustment. EITF 00-21 had no material impact
on the Company's results of operations, financial positions or cash flows.

In April 2003, the Financial Accounting Standards Board issued SFAS No.149,
Amendment of SFAS No. 133 on Derivative Instruments and Hedging Activities
("SFAS 149"). This Statement amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No.133. SFAS No.149 is
effective for contracts entered into or modified after June 30, 2003, except for
hedging relationships designated after June 30, 2003. In addition, certain
provisions relating to forward purchases or sales of issued securities or other
securities that do not yet exist should be applied to existing contracts as well
as new contracts entered into after June 30, 2003. The adoption of SFAS No. 149
had no material impact on the Company's results of operations, financial
position or cash flows.

In June 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity.("SFAS 150").
SFAS No. 150 clarifies classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. It requires
classification of financial instruments within its scope as liabilities. Such
financial instruments may include mandatory redeemable shares, financial
instruments which embody an obligation to repurchase shares or require the
issuer to settle the obligation by transferring assets, or financial instruments
that embody an unconditional obligation, or, in certain circumstances, an
unconditional obligation. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The
adoption of SFAS No. 150 had no material impact on the Company's results of
operations, financial position or cash flows.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities-an interpretation of ARB 51 ("FIN 46") to expand upon
and strengthen existing accounting guidance that addresses when a company should
include in its financial statements the assets, liabilities and activities of
another entity. Many variable interest entities have commonly been referred to
as special-purpose entities or off-balance sheet structures, but the guidance
applies to a larger population of entities. In general, a variable interest
entity is a corporation, partnership, trust, or any other legal structure used
for business purposes that either (a) does not have equity investors with voting
rights or (b) has equity investors that do not provide sufficient financial
resources for the entity to support its activities. The Company must apply
Interpretation No. 46 to variable interest entities created after January 31,
2003. The Company did not create any variable interest entities after January
31, 2003 and is in the process of assessing the impact of the Interpretation in
relation to business relationships created before January 31, 2003. The Company
does not expect the implementation of the Interpretation to have a material
impact on the Company's results of operation or financial position.

In May 2003, the EITF reached a consensus in EITF Issue No. 01-08 Determining
Whether an Arrangement Contains a Lease. EITF 01-08 clarifies the requirements
of identifying whether an arrangement should be accounted for as a lease at its
inception. The guidance in the consensus is designed to mandate reporting
revenue as rental or leasing income that otherwise would be reported as part of
product sales or service revenue. EITF Issue No. 01-08 requires both parties to
an arrangement to


                                    F - 115
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

determine whether a service contract or similar arrangement is, or includes, a
lease within the scope of SFAS No. 13, Accounting for Leases. Upon application
of EITF Issue No. 01-08, the accounting requirements under the consensus could
affect the timing of revenue and expense recognition, and revenues reported as
supply, transportation and storage services may be required to be reported as
rental or lease income. The consensus is being applied prospectively to
arrangements agreed to, modified, or acquired in business combinations on or
after January 1, 2004. The Company is currently evaluating the impact of the
adoption of EITF Issue No. 01-08 on its consolidated results of operations, cash
flows or financial position.

In January 2003, the Chilean Association of Accountants issued Technical
Bulletin No. 72, "Business Combinations and Consolidation of Financial
Statements". This standard complements or replaces existing accounting
literature for business combinations under Chilean GAAP, and requires all
acquisitions initiated after January 1, 2004 to be accounted for using the
purchase method based on fair values of assets acquired and liabilities assumed.
In addition, in exceptional cases the pooling-of-interest method may be used in
reorganizations between related parties or for those transactions, where there
is no clear acquirer. Technical Bulletin No. 72 continues to require the
amortization of goodwill, and specifies the requirement for an impairment test.
Notwithstanding any future transactions, the adoption of Technical Bulletin No.
72 is not expected to have a significant effect on the results of operations,
financial position or cash flows of the Company.


                                    F - 116
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          SCHEDULE 1- CONDENSED FINANCIAL INFORMATION OF QUINENCO S.A,
                             ("QUINENCO INDIVIDUAL")
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

Schedule I - Condensed financial information of Quinenco S.A. ("Quinenco
Individual")

1)    Condensed balance sheets of Quinenco Individual under US GAAP as of
      December 31, 2002 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                                                At December, 31
                                                                       ---------------------------------
                                                                             2002               2003
                                                                        -------------      -------------
                                                                             ThCh$              ThCh$
<S>                                                                       <C>                <C>
      Assets:
      Current assets
      Cash and time deposits .....................................             91,110         11,635,740
      Accounts and notes receivable, net .........................         68,808,757         19,733,847
                                                                        -------------      -------------
             Total current assets ................................         68,899,867         31,369,587
                                                                        -------------      -------------

      Net property, plant and equipment ..........................          5,981,329          6,166,136
                                                                        -------------      -------------

      Other assets:
      Investments in and advances to related companies ...........        586,768,089        539,359,395
      Other non-current assets ...................................        133,730,953        203,557,128
                                                                        -------------      -------------
             Total other assets ..................................        720,499,042        742,916,523
                                                                        -------------      -------------

             Total assets ........................................        795,380,238        780,452,246
                                                                        =============      =============

      Liabilities and Shareholders' Equity:

      Current liabilities ........................................         47,759,042         31,518,870
      Long-term liabilities ......................................        124,857,347        100,968,351
      Shareholders' equity
      Common stock ...............................................        459,291,711        459,291,711
      Reserves ...................................................        163,472,138        188,673,314
                                                                        -------------      -------------
                                                                          622,763,849        647,965,025

             Total liabilities and shareholders' equity ..........        795,380,238        780,452,246
                                                                        =============      =============
</TABLE>


                                    F - 117
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          SCHEDULE 1- CONDENSED FINANCIAL INFORMATION OF QUINENCO S.A,
                      ("QUINENCO INDIVIDUAL") - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

2)    Condensed income statements of Quinenco Individual under US GAAP for the
      years ended December 31, 2001, 2002 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                                                             At December, 31
                                                                                  -------------------------------------------
                                                                                     2001            2002             2003
                                                                                  -----------     -----------     -----------
                                                                                     ThCh$           ThCh$            ThCh$
<S>                                                                                <C>             <C>             <C>
      Operating results:
      Net sales ..............................................................             --              --              --
      Cost of sales ..........................................................             --              --              --
      Administrative and selling expenses ....................................     (4,589,124)     (4,438,007)     (5,363,320)
      Other operating results ................................................     (1,690,993)      5,083,793         725,316
                                                                                  -----------     -----------     -----------
           Operating income ..................................................     (6,280,117)        645,786      (4,638,004)

      Non-Operating results:
      Non-operating income and expenses, net .................................      2,533,193         222,161      33,601,451
      Income taxes ...........................................................       (217,531)         66,763        (177,926)
      Equity participation in income of related companies, net ...............     16,578,923     (88,864,596)     30,231,163

           Income (loss) before cumulative change in accounting principle ....     12,614,468     (87,929,886)     59,016,684
      Cumulative change in accounting principle ..............................             --       4,840,323              --
                                                                                  -----------     -----------     -----------
           Net (loss) income .................................................     12,614,468     (83,089,563)     59,016,684
                                                                                  ===========     ===========     ===========
</TABLE>


                                    F - 118
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          SCHEDULE 1- CONDENSED FINANCIAL INFORMATION OF QUINENCO S.A,
                      ("QUINENCO INDIVIDUAL") - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

3)    Condensed statements of cash flows of Quinenco Individual under US GAAP
      for the years ended December 31, 2001, 2002 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                                                                  At December 31,
                                                                                  -------------------------------------------------
                                                                                       2001              2002              2003
                                                                                  -------------     -------------     -------------
                                                                                       ThCh$             ThCh$             ThCh$
<S>                                                                                <C>                 <C>              <C>
      Net cash provided by operating activities ..............................        9,533,628         1,714,165        47,879,991
Cash flows from financing activities:
Proceeds from the issuance of debt ...........................................       59,078,916                --                --
Proceeds from loans obtained from related companies ..........................       12,948,170                --        42,966,608
Proceeds from bond issuances .................................................      108,381,393                --                --
Dividends paid ...............................................................          (48,374)       (6,424,002)          (19,596)
Payment of debt ..............................................................      (65,606,800)         (186,601)      (15,931,782)
Payment of bonds .............................................................               --        (6,821,021)      (10,955,422)
Payment of loans obtained from related companies .............................               --       (35,938,524)               --
Other disbursements for financing ............................................       (6,317,886)          (23,529)          (52,489)
                                                                                  -------------     -------------     -------------
    Net cash provided by (used in) financing activities ......................      108,435,419       (49,393,677)       16,007,319
                                                                                  -------------     -------------     -------------
Cash flows from investing activities:
Proceeds from sales of property, plant and equipment .........................               --                --            46,064
Proceeds from sales of permanent investments .................................          313,589                --        15,655,507
Payments received on loans to related companies ..............................               --       339,866,263                --
Other receipts from investments ..............................................               --        21,350,391        37,408,588
Additions to property, plant and equipment ...................................       (5,297,079)           (7,536)         (557,560)
Long-term investments ........................................................      (28,838,706)     (277,211,982)      (43,376,298)
Other loans granted to related companies .....................................      (82,083,006)               --      (101,744,853)
Other investment disbursements ...............................................               --          (202,283)               --
                                                                                  -------------     -------------     -------------
    Net cash provided used in investing activities ...........................     (115,905,202)       83,794,853       (92,568,552)
                                                                                  -------------     -------------     -------------
Net cash flow for the year ...................................................        2,063,845        36,115,341       (28,681,242)
Effect of price-level restatement on cash and cash equivalents ...............           54,958           246,172        (3,977,755)
    Net (decrease) increase in cash and cash equivalents .....................        2,118,803        36,361,513       (32,658,997)
Cash and cash equivalents beginning of year ..................................       22,098,103        24,216,906        60,578,419
                                                                                  -------------     -------------     -------------
Cash and cash equivalents end of year ........................................       24,216,906        60,578,419        27,919,422
                                                                                  =============     =============     =============
</TABLE>

4)    The following table presents bank debt payable as of December 31, 2002 and
      2003:

<TABLE>
<CAPTION>
                                                                 As of December 31, 2003

                                                  After 2     After 3      After 5
                                 After 1 year      years     years but      years                   Total      Annual       As of
                                  but within    but within   within 5    but within    After 10   long-term   interest    December,
                      Currency      2 years       3 years      years      10 years       years     portion      rate        2002
Financial institution
                                     ThCh$        ThCh$        ThCh$        ThCh$        ThCh$      ThCh$          %        ThCh$
<S>                               <C>                <C>          <C>          <C>          <C>   <C>             <C>           <C>
Banco Credito e
Inversiones             UF        8,171,931           --           --           --           --   8,171,931       3.39          --
                                  ---------       ------       ------       ------       ------   ---------                 ------
Total                             8,171,931           --           --           --           --   8,171,931                     --
                                  =========       ======       ======       ======       ======   =========                 ======
</TABLE>


                                    F - 119
<PAGE>

                         QUINENCO S.A. AND SUBSIDIARIES
          SCHEDULE 1- CONDENSED FINANCIAL INFORMATION OF QUINENCO S.A,
                      ("QUINENCO INDIVIDUAL") - (Continued)
           (expressed in constant Chilean pesos of December 31, 2003,
                            unless otherwise stated)

5)    The following table presents bonds payable as of December 31, 2002 and
      2003:

<TABLE>
<CAPTION>
Series                          Face value     Currency       Interest         Maturity                 Par value as of
                               outstanding                      rate                                      December 31,
                                                                                                 -------------------------------
                                                                                                     2002                2003
                                                                                                 -----------          ----------
                                                                   %                                ThCh$                ThCh$
<S>                                                                                              <C>                  <C>
                A                       --         UF             6.2         30/04/2021             366,980             350,068
                B                  900,000         UF             6.2         30/04/2008           8,435,910          15,936,888
                                                                                                 -----------          ----------
      Total current portion                                                                        8,802,890          16,286,956
                                                                                                 ===========          ==========

                A                2,000,000         UF             6.2         30/04/2021          33,823,122          33,840,122
                B                3,150,000         UF             6.2         30/04/2008          68,491,823          53,298,000
                                                                                                 -----------          ----------
     Total long-term portion                                                                     102,315,945          87,138,122
                                                                                                 ===========          ==========
</TABLE>

6)    The following table presents a schedule of debt maturity in each of the
      next five years and thereafter as of December 31, 2003:

<TABLE>
<CAPTION>
                                                                                        As of December 31,
                                                                                                2003
                                                                                                ThCh$
                                                                                        ------------------
<S>                                                                                         <C>
               2004.....................................................                     22,597,852
               2005.....................................................                     25,162,431
               2006.....................................................                     16,990,500
               2007.....................................................                      4,629,068
               2008.....................................................                      4,578,000
               Thereafter ..............................................                     27,010,500
                                                                                            -----------
               Total  ..................................................                    100,968,351
                                                                                            ===========
</TABLE>

7)    The following table presents the dividends received by Quinenco Individual
      in the years ended December 31, 2001, 2002 and 2003:

<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                    ----------------------------------------------
                                                                       2001              2002              2003
                                                                    ----------         ---------        ----------
                                                                       ThCh$             ThCh$             ThCh$
<S>                                                                 <C>                <C>              <C>
Dividends received ................................                 14,250,725         6,686,796        58,109,118
</TABLE>


                                    F - 120