20-F

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

FORM 20-F

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

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

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

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

Commission file number: 1-11870

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

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

Republic of Chile
(Jurisdiction of incorporation or organization)

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

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

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

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

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

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

Not applicable

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

Not applicable

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

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

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

Yes [ ] No [x]

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

Yes [ ] No [x]

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

Yes [x] No [ ]

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

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

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

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

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

Item 17 [ ] Item 18 [x]

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

Yes [ ] No [x]

TABLE OF CONTENTS

PRESENTATION OF INFORMATION
FORWARD LOOKING STATEMENTS
REQUESTS FOR INFORMATION

PART I

ITEM 1. Identity of Directors, Senior Management and Advisers
ITEM 2. Offer Statistics and Expected Timetable
ITEM 3. Key Information
ITEM 4. Information on the Company
ITEM 5. Operating and Financial Review and Prospects
ITEM 6. Directors, Senior Management and Employees
ITEM 7. Major Shareholders and Related Party Transactions
ITEM 8. Financial Information
ITEM 9. The Offer and Listing
ITEM 10. Additional Information
ITEM 11. Quantitative and Qualitative Disclosures about Market Risk
ITEM 12. Description of Securities Other than Equity Securities

PART II

ITEM 13. Defaults, Dividend Arrearages and Delinquencies
ITEM 14. Material Modifications of the Rights of Security Holders and Use of Proceeds
ITEM 15. Controls and Procedures
ITEM 16. 

PART III

ITEM 17. Financial Statements
ITEM 18. Financial Statements
ITEM 19. Exhibits

PRESENTATION OF INFORMATION

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

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

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

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

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

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

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

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

FORWARD LOOKING STATEMENTS

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

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

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

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

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

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

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

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

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

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

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

REQUESTS FOR INFORMATION

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

PART I

ITEM 1. Identity of Directors, Senior Management and Advisers

Not applicable

ITEM 2. Offer Statistics and Expected Timetable

Not applicable

ITEM 3. Key Information

Selected Financial Data

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

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

	Year ended December 31,
	2003	2004	2005	2006	2007
	(in millions of constant Ch$ as of December 31, 2007)(1)
Income Statement Data (Chilean GAAP)
Net sales	276,746	368,113	400,777	600,518	639,011
Operating income	8,683	28,601	30,528	55,596	40,115
Non-operating income	2,191	2,746	3,736	2,588	3,178
Non-operating expense	(29,924)	(18,707)	(15,677)	(17,166)	(16,543)
Price-level restatement and currency translation	2,026	(285)	(3,018)	(1,366)	(2,796)
Income tax	(1,854)	(1,752)	(1,608)	(5,590)	(1,076)
Net income (loss)	(19,486)	9,670	13,174	32,439	19,660
Income Statement Data (U.S. GAAP)
Net sales	148,013	173,338	167,979	213,638	184,635
Operating income (loss)	(2,998)	12,242	10,042	16,601	5,841
Non-operating income and expenses	(6,246)	(3,371)	(9,557)	(3,822)	(11,890)
Income taxes	931	(1,233)	915	508	4,274
Income (loss) from continuing operations	(3,792)	5,701	1,051	12,855	(1,123)
Income (loss) from discontinued operations(2)	(18,631)	4,957	14,378	23,705	22,868
Net income (loss) ……………………………….	(22,423)	10,658	15,429	36,560	21,746
Per share (Chilean GAAP)
Number of shares as of December 31 (in thousands)	4,120,088	4,441,193	5,348,390	5,541,193	5,661,193
Number of shares, weighted average (in thousands)	2,857,098	4,221,196	4,537,185	5,471,995	5,558,289
Net income (loss) per share	(4.73)	2.18	2.46	5.85	3.47
Net income (loss) per share, weighted average	(6.82)	2.29	2.90	5.93	3.54
Dividend per share in Ch$	-	-	-	-	-
Dividend per ADS in US$ (3)	-	-	-	-	-
Per share (U.S. GAAP)
Earnings (loss) per share from continuing operations (US GAAP)	(1.33)	1.35	0.23	2.35	(0.20)
Earnings (loss) per share from discontinued operations (US GAAP)	(6.52)	1.17	3.17	4.32	4.11
Net earnings (loss) per share (US GAAP)	(5.44)	2.40	2.88	6.60	3.84
Net earnings (loss) per share (US GAAP), weighted average	(7.85)	2.52	3.40	6.68	3.91
Balance Sheet Data (Chilean GAAP)
Current assets	168,965	171,834	174,267	249,473	284,622
Fixed assets	189,522	170,708	158,851	158,897	166,949
Total assets	411,831	389,556	377,585	447,624	487,097
Current liabilities	91,430	72,267	76,201	86,181	131,474
Long-term liabilities	187,810	151,951	94,266	111,368	120,191
Total liabilities	228,424	197,744	141,182	165,137	200,650
Interest bearing debt	136,993	125,477	64,981	78,956	69,176
Minority interest	11,573	11,738	11,192	12,316	22,554
Total Shareholders’ equity	171,834	180,075	225,210	270,170	263,894
Balance Sheet Data (U.S. GAAP)
Current assets ……………………………	86,410	74,780	72,656	253,800	263,777
Property, plant and equipment, net ………	79,299	76,814	73,963	85,688	82,866
Other long-term assets …	173,903	154,138	164,319	20,259	14,815
Total assets ...	339,612	305,732	310,938	359,747	361,458
Current liabilities …………………………	58,122	29,653	40,941	33,243	54,930
Long-term liabiliies ………………………	119,270	102,936	49,243	55,646	38,774
Total liabilities …………………………...	177,392	132,589	90,184	88,889	93,704
Interest-bearing …………………….	153,290	109,802	63,010	66,484	67,872
Minority interest	9,883	9,648	9,491	10,588	11,607
Total Shareholders’ equity …	152,337	163,495	211,263	260,270	256,147

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

Exchange Rate Information

Exchange Rates

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

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

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

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

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

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

Daily Observed Exchange Rate (Ch$ per US$)
Period	Low (1)	High (1)	Average (2)	Period – end(1)
2003	593.10	758.21	691.04	593.80
2004	557.40	649.45	609.41	557.40
2005	509.70	592.75	559.68	512.50
2006	511.44	549.63	530.34	532.39
2007	493.14	548.67	522.55	496.89
December 2007	495.49	506.79	498.83	496.89
January 2008	463.58	498.05	479.46	465.34
February 2008	453.95	476.44	466.67	453.95
March 2008	431.22	454.94	442.13	437.71
April 2008	433.98	461.49	447.51	461.49
May 2008	464.83	479.66	471.00	479.54

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

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

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

	Brazilian Real		Argentine Pesos		Peruvian Sol		Colombian Peso
	In Ch$ (1)	In US$	In Ch$ (1)	In US$	In Ch$ (1)	In US$	In Ch$ (1)	In US$
Low (2)	289.12	0.5772	176.16	0.3273	166.81	0.3366	0.28	0.00053
High (2)	252.04	0.4639	157.44	0.3145	166.90	0.3123	0.24	0.00044
Average (3)	268.21	0.5133	167.72	0.3210	166.93	0.3195	0.25	0.00048
Year-End(2)	280.52	0.5646	157.69	0.3174	166.05	0.3342	0.25	0.00050

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

Capitalization and Indebtedness

Not applicable

Reason for the Offer and Use of Proceeds

Not applicable

Risk Factors

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ITEM 4. Information on the Company

History and Development of the Company

General

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

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

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

• Wire & Cable;

• Brass Mills;

• Flexible Packaging; and

• Aluminum Profiles.

Madeco’s principal products include:

• in the Wire & Cable business: copper and aluminum power cables (thermo-plastic, thermo-stable and bare wire), mining cables, building wire, magnetic wires, optical fiber telecommunication cables, copper telecom cables and copper rods;

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

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

• in the Aluminum Profiles business: extruded profiles used mainly in residential and non- residential construction (windows and patio doors, curtain walls), and diverse industrial applications. In 2008, the Company began the production and commercialization of PVC profiles.

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

History

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

During the third quarter of 2003, the Company publicly offered on the Chilean Stock Exchange a portion of the unsubscribed shares of the April 2003 capitalization process, of which 1,421,603,602 shares, approximately Ch$40,083 million (historic value, approximately US$76.3 million) were sold.

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

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

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

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

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

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

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

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

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

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

On November 8, 2007, Mr. Tiberio Dall'Olio and Julio Córdoba exercised their individual stock options right and purchased 100,000,000 and 20,000,000 shares, respectively. As the five year term, which was established at the Extraordinary Shareholders' Meeting held in 2002, within which to exercise any stock options granted pursuant to compensation plans has expired, there are no such stock options outstanding. For further information about the compensation plans, see "Item 6. Directors, Senior Management and Employees - Senior Management - Compensation".

On November 15, 2007, Madeco and the French cable manufacturing company, Nexans, entered into a framework agreement whereby Madeco would transfer all the assets of its Wire & Cable unit located in Colombia, Peru, Brazil, Argentina and Chile, to Nexans, in exchange for a cash payment of Ch$227,024 million (historic value) or US$448 million, and 2.5 million shares of Nexans' stock (approximately an 8.9% shareholding in Nexans). If completed, this transaction would not only make the Company a major shareholder of Nexans but also affords it an opportunity to elect a representative of Madeco as a member of the Nexans' board of directors.

Nexans is the worldwide leader in the Cable industry, with sales over Ch$5,366 billion or US$10.8 billion in 2007, with a presence in five continents and a broad mix of products, including specialized and high-tech cables such as submarines and umbilicals. On the day this transaction was announced, the net profit from the transaction was estimated at approximately Ch$143,410 million (historic value) or approximately US$283 million and the enterprise value of the Wire & Cable unit at Ch$417,055 million (historic value) or approximately US$823 million. The transaction is expected to be completed before September 30, 2008, following the approval of both Madeco and Nexans shareholders and the pertinent legal authorizations are obtained.

By the end of November 2007, the Board, in order to facilitate the reorganization of the Company, agreed to the creation of three new subsidiaries (closely-held corporations) to be held 100% directly and indirectly by the Company. The first was created to be related to the Wire & Cable business, the second was created to be related to the Brass Mills business and the last one was created as an investment subsidiary. Each of these companies was formed with 100 shares of no par value and initial capital of Ch$1,000,000. This capital will be increased once the business units’ investments and/or assets are contributed, as determined by the Board accordance with current legislation.

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

Nexans

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Capital Expenditures and Divestitures

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

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

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

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

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

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

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

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

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

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

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

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

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

Business Overview

Strategy

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

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

• consolidate the activities of the Wire and Cable unit;

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

• make the Flexible Packaging unit profitable;

• maintain leadership in the Aluminum Profiles unit;

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

• implement a strategic management policy in human resources; and

• consolidate the Company’s financial position.

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

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

Wire & Cable

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

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

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

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

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

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

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

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

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

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

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

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

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

Wire & Cable - Summary of Sales

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

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

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

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

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

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

Wire & Cable Unit – Revenues by Destination (in Ch$ million)
Year	Chile	Brazil	Peru	Argentina (1)	Colombia	Exports	Wire & Cable Unit
2005	42,484	103,809	44,808	7,370	0	34,066	232,537
2006	47,322	192,966	66,983	14,573	0	65,036	386,880
2007	52,122	174,413	70,606	23,005	22,190	69,511	411,847

Wire & Cable Unit – Sales Volumes of Metallic Cable by Destination (in tons)
Year	Chile	Brazil	Peru	Argentina	Colombia	Exports	Wire & Cable Unit
2005	10,718	31,032	11,574	2,256	0	13,132	68,712
2006	8,105	41,092	11,211	3,945	0	15,015	79,368
2007	8,634	37,785	12,196	7,529	4,031	17,749	87,924

Wire & Cable Unit – Sales Volumes of Optical Fiber Cable by Destination (in kms) (2)
Year	Argentina	Exports	Optical Fiber Division
2005	72,700	9,516	82,216
2006	43,521	17,151	60,672
2007	111,583	20,393	131,976

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

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

Wire & Cable Unit – Revenues (in Ch$ million)
Year	Madeco Chile (metallic cable)	Ficap (metallic cable)	Indeco (metallic cable)	Decker-Indelqui (metallic cable)(1)	Cedsa (2) (metallic cable)	Optel (optical fiber)	Inter-company	Wire & Cable Unit
2005	85,349	98,961	69,449	6,313	0	1,894	(29,429)	232,537
2006	141,529	152,985	127,880	14,435	0	1,532	(51,481)	386,880
2007	154,158	162,659	124,075	24,624	22,190	2,350	(78,209)	411,847

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

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

Cable - Production

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The following diagram depicts the production process for magnetic wires:

Copper rod → drawing → enameling → cutting → packing

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

The following diagram depicts the production process for building wire:

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

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

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

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

Cables - Raw Materials

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

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

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

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

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

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

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

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

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

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

Cables — The Company’s Sales and Distribution

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Cable - Market Demand and Industry Size Estimates

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

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

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

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

Industry Size (in metallic tons(1))
Year	Chile	Brazil	Peru	Argentina	Colombia	Total Region (2)
2005	28,100	211,200	16,200	40,100	39,000	334,600
2006	26,500	213,400	17,275	45,500	43,200	345,875
2007	28,700	286,550	19,300	62,600	45,250	442,400

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Wire & Cable - Market Share and Description of Competition

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Optical Fiber Cable

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

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

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

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

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

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

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

Brass Mills

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

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

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

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

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

(1) PBS = Pipes, Bars and Sheets

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

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

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

PBS - Summary of Sales

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

Brass Mills Unit – Revenues (in Ch$ million)
Year	PBS- Revenues	Coins- Revenues	Total Revenues	% Consolidated Revenues
2005	80,717	6,907	87,624	21.9%
2006	117,751	10,466	128,217	21.4%
2007	93,275	9,757	103,032	16.1%

Brass Mills Unit – Sales Volumes (in tons)
Year	PBS- Sales Volumes	Coins- Sales Volumes	Total Sales Volumes	% Consolidated Volume(1)
2005	27,947	1,566	29,513	23.5%
2006	26,400	1,611	28,011	20.5%
2007	20,511	1,321	21,832	13.5%

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

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

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

Brass Mills Unit – Revenues (in Ch$ million)
Year	Madeco Chile	Decker-Indelqui	Armat	Inter-company	Brass Mills Unit
2005	84,637	7,892	7,533	(12,438)	87,624
2006	117,640	10,582	12,619	(12,624)	128,217
2007	98,309	9,593	10,102	(14,972)	103,032

Brass Mills - Production

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

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

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

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

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

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

The following diagram depicts the production process for pipe products:

Billets

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

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

The following diagram depicts the production process for sheets:

Cakes

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

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

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

Billets

Metals → Smelting → extruding → drawing → cutting → packing

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

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

The following diagram depicts the production process for coins:

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

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

Brass Mills - Raw Materials

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

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

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

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

PBS – Sales by Destination

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

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

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

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

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

PBS – The Company’s Sales and Distribution

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

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

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

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

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

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

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

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

PBS – Market Demand and Industry Size Estimates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PBS – Market Share Estimates and Description of Competition

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Coins – Sales by Destination

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

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

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

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

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

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

Coins – The Company’s Sales and Distribution

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

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

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

Flexible Packaging

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

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

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

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

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

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

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

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

Flexible Packaging - Summary of Sales

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

Flexible Packaging Unit
Year	Revenues (in Ch$ million)	% Consolidated Revenues	Sales Volume (in tons)	% Consolidated Volume (1)
2005	48,422	12.1%	14,527	11.6%
2006	49,616	8.3%	15,649	11.5%
2007	89,000	13.9%	38,259	23.7%

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

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

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

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

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

Flexible Packaging Unit - Revenues by Destination (in Ch$ million)
Year	Chile	Argentina	Peru	Exports (1)	Flexible Packaging Unit
2005	30,373	11,233	0	6,816	48,422
2006	29,012	12,335	0	8,270	49,617
2007	30,596	9,497	34,548	14,359	89,000

Flexible Packaging Unit – Sales Volumes by Destination (in tons)
Year	Chile	Argentina	Peru	Exports (1)	Flexible Packaging Unit
2005	8,581	3,828	0	2,118	14,527
2006	8,838	4,137	0	2,674	15,649
2007	9,621	3,586	18,893	6,159	38,259

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

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

Flexible Packaging Unit – Revenues by Subsidiary (in Ch$ million)
Year	Alusa	Aluflex	Peruplast	Inter-company	Flexible Packaging Unit
2005	34,606	13,816	0	0	48,422
2006	33,476	16,866	0	(725)	49,617
2007	35,362	14,797	42,529	(3,688)	89,000

Flexible Packaging - Production

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

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

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

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

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

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

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

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

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

Flexible Packaging - Raw Materials

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

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

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

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

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

Flexible Packaging - The Company’s Sales and Distribution

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Flexible Packaging - Market Demand and Industry Size Estimates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Flexible Packaging - Market Share and Description of Competition

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Aluminum Profiles

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

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

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

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

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

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

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

Aluminum Profiles Unit
Year	Revenues (in Ch$ million)	% Consolidated Revenues	Total Volume (in tons)	% Consolidated Volume
2005	32,193	8.0%	10,819	8.6%
2006	35,804	6.0%	12,262	9.0%
2007	35,131	5.5%	10,354	6.4%

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

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

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

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

Aluminum Unit - Revenues by Destination (in Ch$ million)
Year	Chile	Exports (1)	Aluminum Unit
2005	30,429	1,764	32,193
2006	34,810	994	35,804
2007	34,216	915	35,131

Aluminum Unit - Sales Volume by Destination (in tons)
Year	Chile	Exports (1)	Aluminum Unit
2005	10,345	474	10,819
2006	11,778	484	12,262
2007	9,965	389	10,354

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

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

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

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

Aluminum Profiles - Production

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

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

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

Billet → preheating → extruding → cutting → packing

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

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

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

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

PVC Profiles - Production

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

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

The following diagram shows the production process:

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

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

The following diagram depicts the production process for foiled profiles:

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

Aluminum - Raw Materials

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

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

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

Aluminum Profiles – Summary of Sales

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

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

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

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

Aluminum Profiles – Marketing, Sales and Distribution

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

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

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

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

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

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

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

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

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

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

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

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

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

Aluminum Profiles – Market Demand and Industry Size Estimates

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

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

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

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

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

Aluminum Profiles – Market Share and Description of Competition

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

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

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

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

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

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

Government Regulations

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

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

Organizational Structure

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

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

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

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

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

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

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

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

Property, Plant and Equipment

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

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

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

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

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

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

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

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

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

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

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

ITEM 5. Operating and Financial Review and Prospects

Introduction

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

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

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

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

Economic Overview

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

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

 Brazil: A floating exchange rate, an inflation-targeting regime, and a tight fiscal policy are the three main components of the Brazilian economic program. From 2003 to 2007, Brazil ran record trade surpluses and recorded its first current account surpluses since 1992. According to estimates, in 2007 Brazil's economy grew by 5.3% (3.7% in 2006) as a result of the favorable performance of economic variables such as the annual inflation rate, which ranked below the target of 4.5%; exports of goods, whose expansion was reflected in positive trade surplus and higher international reserves (which rose by nearly US$80,000 million). From a fiscal point of view, primary surplus remained in line with its target (3.8% of GDP), which was positively influenced by a record level of tax revenues and improved working conditions, including a decrease in the unemployment rate (from an average of 10% to 9.4% in 2007) and an increase in real income (an average of 3.4%). Market projections indicate that for 2008, t he growth rate will be slightly lower.

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

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

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

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

Fluctuations in LME Metal Prices and Exchange Rates between Currencies

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

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

The Company’s Summary of Operations

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

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

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

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

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

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

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

2007 versus 2006

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

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

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

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

Analysis of Operating Segment Performance: 2007 versus 2006

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

Wire & Cable
 

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

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

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

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

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

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

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

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

Brass Mills
 

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

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

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

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

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

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

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

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

Flexible Packaging
 

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

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

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

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

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

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

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

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

Aluminum Profiles
 

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

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

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

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

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

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

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

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

The Company’s Non-Operating Results

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

• Non-Operating Income: In 2007, the Company’s non-operating income increased by Ch$534 million to Ch$3,122 million as compared to Ch$2,588 million in 2006. The higher non-operating income is mainly due to gains obtained on assets sales and higher gains in financial income as a result of increased interest rates on time deposits, export financing interest and the contributions of Peruplast and Cedsa.
• Non-Operating Expenses: In 2007, the Company’s non-operating expenses decreased by Ch$679 million as compared to the previous year due to less obsolescence and write-offs of long-term assets, reduced devaluation of idle assets and reduced adjustment to realization value of idle fixed assets, despite an increase in financial expenses and a reduction of income in related companies. Financial expenses increased by Ch$582 million in 2007, reflecting borrowings related to acquired companies (Cedsa added Ch$1,106 and Peruplast added Ch$689 million), offset by lower Company’s consolidated financial debt of Ch$691 million.
• Price-Level Restatement: In 2007, price level restatement, which is made up of inflationary adjustments and foreign exchange differences, increased by Ch$1,430 million as compared to the previous year. The price level restatement balance in 2007 reflected a net loss position of Ch$2,796 million compared to a net loss position of Ch$1,366 million in 2006. The higher expenses were due to a higher inflation rate (Chilean CPI), offset by higher profits from foreign exchange differences as a consequence of a revaluation of the Brazilian real, Colombian Peso and Peruvian sol.
• Income Taxes: In 2007, the Company reported a reduction in income tax expense of Ch$4,514 million as compared to Ch$5,590 million the year before, as a result of reduced taxable income (Madeco Chile, Ficap and Indeco), reversal of the valuation of deferred taxes and the use of tax losses by Madeco Chile. These reduced charges are partly offset by the inclusion of taxes of Cedsa (Ch$688 million) and Peruplast (Ch$1,176 million).
• Minority Interest: The Company’s minority interest reflects the portion of profits or losses that correspond to the holdings of the minority shareholders in the subsidiaries Alusa, Indeco, Indalum and Cedsa. The minority interest in 2007 amounted to Ch$3,308 million, an increase of Ch$1,656 million over 2006, mainly due to Company’s new acquisitions.

2006 versus 2005

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

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

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

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

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

Analysis of Operating Segment Performance: 2006 versus 2005

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

Wire & Cable
 

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

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

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

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

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

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

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

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

Brass Mills
 

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

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

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

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

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

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

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

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

Flexible Packaging
 

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

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

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

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

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

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

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

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

Aluminum Profiles
 

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

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

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

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

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

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

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

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

The Company’s Non-Operating Results

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

• Non-Operating Income: The Company’s non-operating income decreased by Ch$1,147 million to Ch$2,588 million in 2006 from Ch$3,735 million in 2005. The decrease in non-operating income is mostly due to the consolidation of Madeco’s fiber optic subsidiary, Optel, in 2005 which produced reversals of provisions. The unfavorable arbitration decision in 2003, in which Madeco lost control of its interest in Optel in a lawsuit against Dow Corning International, was resolved in Madeco’s favor in March 2005. See “Item 4. Information on the Company – History and Development of the Company – History”. This decreased income was compensated in part by increased financial income of Ch$841 million and higher net income from the related companies totalling Ch$431 million.
• Non-Operating Expenses: The Company’s non-operating expenses in 2006 increased by Ch$1,489 million compared to the previous year due to an increase in financial expenses and other non-operating expenses. Financial expenses increased by Ch$1,991 million in 2006. This increase reflects greater borrowings made by Madeco’s group of companies to finance their growing working capital needs which resulted from higher prices for raw materials and increased sales volumes.
• Price-Level Restatement: Price level restatement, which is made up of inflationary adjustments and foreign exchange differences, decreased by Ch$1,652 million in 2006 compared to the previous year. The price level restatement balance in 2006 reflected a net loss position of Ch$1,366 million compared to a net loss position of Ch$3,018 million in 2005. The improvement in results was due to a lower inflation rate and better results from foreign exchange differences as a consequence of a revaluation of the Brazilian real and Peruvian sol.
• Income Taxes: The Company reported an increase in income tax expense of 247.5% in 2006 compared to the previous year, as a result of a higher level of income before taxes. Income taxes in 2006 and 2005 amounted to Ch$5,590 million and Ch$1,609 million, respectively.
• Minority Interest: Minority interest reflects the portion of profit or loss of the shares held by minority shareholders in the Alusa, Indeco and Indalum subsidiaries. Minority shareholder interest in 2006 was Ch$1,652 million, up 104.5% compared to Ch$808 million in the previous year. This was due to the higher net income generated by Madeco’s subsidiaries, Alusa and Indeco.

Acquisitions and dispositions

1. Discontinued operations

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

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

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

2. Unconsolidated Peruplast

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

3. Acquisitions

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

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

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

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

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

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

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

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

Impact of Inflation and Price Level Restatement

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

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

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

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

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

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

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

Working Capital in Foreign Currencies

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

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

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

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

Critical Accounting Policies and Estimates

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

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

Allowance for doubtful accounts

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

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

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

Allowance for inventory obsolescence

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

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

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

Property, Plant and Equipment

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

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

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

Investments

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

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

Goodwill

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

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

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

Deferred Income Tax Valuation Allowance

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

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

Derivative Instruments

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

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

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

Net Realizable Values of Inventories

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

U.S. GAAP Reconciliation

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

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

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

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

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

Liquidity and Capital Resources

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

Short Term Financing

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

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

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

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

Bonds

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

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

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

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

Medium-Term and Long-Term Bank Loans

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

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

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

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

The Company’s Compliance with Financial Covenants

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

Changes in the Company’s Risk Classification

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

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

Financial Instruments Used for Hedging Purposes

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

Contractual Obligations and Commercial Commitments

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

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

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

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

Liquidity

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

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

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

Cash Flow

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

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

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

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

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

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

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

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

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

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

⁽¹⁾ WAIR = Weighted Average Interest Rate

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

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

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

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

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

Capital Expenditures

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

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

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

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

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

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

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

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

As discussed above, in the case that the transaction with Nexans is completed, the Company will sold its Wire & Cable unit, so no further capital expenditures will be required by Madeco to this unit. However,  upon the completion of the transaction, the Company will receive from Nexans 2.5 million shares and US$448 million that after charges (i.e. minority interest, bond prepayment, Wire & Cable financial debt, income tax and extraordinary dividend payment), as was estimated on February 21, 2008, will amount to approximately US$98 million. The Company believes that it could invest approximately US$38 millions in debt prepayment and US$60 million in its Flexible Packaging unit in order to expand its regional presence and to increase its installed capacity; nevertheless, the Company may decided to invest in one of its other business units.

The Company modifies its capital investment program on an ongoing basis due to changes in market conditions for the Company’s products, changes in general economic conditions in Chile, Argentina, Brazil, Peru, Colombia or elsewhere, changes in the prices of raw materials, interest rate changes, inflation and foreign exchange rate changes, competitive conditions and other factors. Accordingly, there can be no assurance that the Company will make any of the above-mentioned expenditures, and the actual amount of such future capital expenditures could be significantly more or less than planned.

If necessary, Madeco intends to provide or actively participate in obtaining financing (whether equity, debt or a combination thereof) to support the planned future capital expenditures and expansion of its principal businesses. The amounts and terms of any such debt or equity financing for Madeco will depend, among other things, on the terms and conditions of financing available to its businesses from third parties and international capital markets, as well as Madeco’s ability to substantially and timely complete its refinancing plan.

Research and Development, Patents and Licenses

The Company’s research and development efforts do not involve material expenditures as the Company relies primarily on technology and equipment purchased or licensed from foreign companies.

Trends

The 2003 - 2005 Business Plan developed in late 2002 was successfully completed last year. It focused on: 1) increasing sales, 2) improving production efficiency at plants, 3) reducing selling and administrative expenses, and 4) increasing the profitability of Company’s assets. As a result of this Business Plan, in 2004 the Company was able to reverse the losses of the previous five years, and increase profit by 34% in 2005.

In late 2005, Madeco did an evaluation of the 2003 - 2005 Business Plan, which it used as a basis for defining the 2006 - 2008 Business Plan to efficiently align efforts to make the Company grow profitably. The main objectives of the new Business Plan follow: 1) to consolidate the activities of the Wire and Cable unit, 2) to diversify and search for growth and profit opportunities for the Brass Mills unit, 3) to make the Flexible Packaging unit profitable, 4) to maintain leadership in the Aluminum Profiles unit, 5) to achieve operational excellence by searching for homologous process options and best practices in the different business units, 6) to implement a strategic management policy in human resources, 7) to consolidate the Company’s financial position.

Progress is being made on the strategic plan for 2006-2008 including consolidation of the performance of the Wire and Cable and Flexible Packaging units and maintenance of the market leadership of the Aluminum Profiles unit. Simultaneously, the Company’s financial position has improved and the Company has begun to use SAP in order to implement best practices throughout the Company. In addition, the Company implemented the Skills Management Program in order to improve strategic management in the human resources area.

Development of the Business Plan is expected to continue to have a positive impact on profitability at the operating level. Notwithstanding the successful implementation of the Business Plan, the Company is facing a permanent increase in the cost of its main raw material, copper. Even though the Company has been able to transfer this cost increase to its customers, there can be no assurance that the Company will be able to continue to pass along increases in the cost of copper and/or aluminum to its customers in the future. Furthermore, as long as copper prices keep increasing, the Company will have to continue meeting greater working capital requirements.

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

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

Wire & Cable

In Chile, the Company expects that growth in the wire and cables industry will be driven by increasing demand from the construction industry as well as the energy distribution sector. The target is to continue its leadership in cables for power transmission lines, lines for energy distribution and telecom lines. In Brazil, the challenge is to continue to invest in the Company in order to support market growth, particularly in aluminum cables used for energy transmission lines and energy distribution lines. In Peru, the Company expects to maintain its leadership position and take the necessary steps to meet the requirements of the mining, energy, telecom, and construction industries. In Argentina, the Company expects to increase its production due to consolidation of demand. Growth is expected in sales of aluminum cables used for energy transmission lines and energy distribution lines. In Colombia, the Company pla ns to increase the production capacity of Cedsa by introducing more value-added products in order to take advantage of existing opportunities afforded by the recent expansion of the Colombian economy.

Brass Mills

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

Flexible Packaging

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

Aluminum Profiles

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

Off-Balance Sheet Arrangements

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

ITEM 6. Directors, Senior Management and Employees

Directors

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

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

Board Member	Position	Born	First Elected	Other Directorships
Guillermo Luksic Craig (1) (4)	Chairman	1956	1984	Chairman, Quiñenco S.A. Chairman, Compañía Cervecerías Unidas S.A. Chairman, Ficap S.A. (Brasil) Chairman, Inversiones y Rentas S.A. Chairman, Embotelladoras Chilenas Unidas S.A. Chairman, Compañía Cervecerías Unidas Argentina S.A. Chairman, Compañía Telefónica del Sur S.A. Chairman, Compañía de Teléfonos de Coyhaique S.A. Chairman, LQ Inversiones Financieras S.A. Chairman, Viña San Pedro S.A. Director, Compañía Pisquera de Chile S.A. Director, Viña Altair S.A. Director, Banco de Chile Director, SM Chile S.A. Director, Antofagasta Minerals S.A. Director, Antofagasta plc
Jean-Paul Luksic Fontbona (1) (4)	Vice-Chairman	1964	1985	Chairman, Minera El Tesoro Chairman, Minera Los Pelambres Chairman, Minera Michilla S.A. Chairman, Antofagasta Minerals S.A. Chairman, Antofagasta PLC Chairman, Antofagasta Railway Company PLC Chairman, Minera Esperanza Director, Quiñenco S.A.
Andrónico Luksic Craig (1)	Director	1954	1980	Vice-Chairman, Quiñenco S.A. Vice-Chairman, Banco de Chile Director, Compañia Cervecerias Unidas S.A. Director, Industria Nacional de Alimentos S.A. Director, Sociedad de Fomento Fabril (SOFOFA) Director, Bolsa de Comercio de Santiago
Hernán Büchi Buc	Director	1949	1994	Director, Quiñenco S.A. Director, Soquimich S.A. Director, Falabella S.A. Director, Pilmaiquén S.A.
Francisco Pérez Mackenna (2) (3)	Director	1958	2007	Director, Banco de Chile Director, SM Chile S.A. Director, Compañía Cervecerías Unidas S.A. Director, Viña San Pedro S.A. Director, Inversiones y Rentas S.A. Director, Embotelladoras Chilenas Unidas S.A. Director, Compañía Cervecerías Unidas Argentina S.A. Director, Compañía Telefónica del Sur S.A. Director, Compañía de Teléfonos de Coyhaique S.A. Director, LQ Inversiones Financieras S.A. Director, Banchile Corredores de Bolsa S.A. Director, Compañía Pisquera de Chile S.A. Director, Calaf S.A.
Alejandro Ferreiro Yazigi (3) (4)	Director	1966	2008	Director, compañía de seguros de vida Corpvida. S.A. Consejero del Sistema de Empresas Públicas, SEP.
Augusto Iglesias Palau (3) (4)	Director	1956	2008	Director, Compañía Chilena de Fósforos S.A. Director, PrimAmérica Consultores Director, Colegios Padre Hurtado y Juanita de los Andes Director, SCAN Director, Top Partners
Oscar Ruiz-Tagle Humeres (4)	Honorary Chairman	1920	1970

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

Senior Management

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Compensation

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

On October 27, 2004, Madeco's Board of Directors approved the renewal of the employment agreements of the Company's Chief Executive Officer, Tiberio Dall'Olio, and the Director of Operations of Madeco Chile, Julio Cordoba, for an additional two-year period. The two executives, originally hired for a two-year period in October 2002, were given renewed contracts that expire on September 30, 2008. The contract of Tiberio Dall’Olio was renewed in September 2006, and will terminate on September 30, 2008.

These executives were granted new stock options on May 20, 2005 to subscribe for shares of Madeco pursuant to the compensation plans established in the Special Shareholders Meeting held on November 14, 2002 and approved by the Board on January 25, 2005. The subscription price for these new shares was Ch$60 per share, as determined in the Extraordinary Shareholders Meeting on December 22, 2004.

The Board of Directors agreed to offer subscription options at Ch$60 per share to the executives as follows: i) Chief Executive Officer, Tiberio Dall’Olio, 100,000,000 shares, with the provision that the option be exercised between September 30 and November 30, 2006; ii) Director of Operations in Chile, Julio Córdoba, 20,000,000 shares, with the provision that the option be exercised between September 30 and November 30, 2006; iii) Corporate Director of Operations, Giampiero Genesini, 10,000,000 shares, with the provision that the option be exercised between September 30 and November 30, 2005.

On August 31, 2005, the contracts on stock options signed on May 20, 2005 were declared null and void by mutual accord between Madeco S.A. and the above mentioned executives.

At its meeting on November 29, 2005, the Company’s Board of Directors agreed to set a new strike price for the stock options included in the compensation plan mentioned above at Ch$48.52 per share in order to equal this price to the issue price of the shares destined to be subscribed by the shareholders and corresponding to the same capital increase, agreed to in the Extraordinary Shareholders’ Meeting of September 2, 2005. In the same Board of Directors meeting, a new compensation plan was devised for the placement of the remaining shares destined for this purpose.

In its meeting on May 30, 2006, the Board granted new stock options at Ch$48.52 per share to Mr. Tiberio Dall’Olio, for 100,000,000 shares and to Mr. Julio Cordoba, for 20,000,000 shares. Both options can be exercised between October 1^st and November 12 of 2007. The contracts for these stock options were signed on July 14, 2006, between these executives and the Company.

There is an annual performance-based bonus program for executive officers.

Each year, the Board of Directors submits a proposal regarding compensation of its members to the shareholders, who approve the Board’s proposal at the annual ordinary Shareholders’ Meeting. The following table sets forth the total compensation paid by the Company and its subsidiaries to each Company’s director of the Board for services rendered in 2007 in thousands of Chilean pesos:
 

Director	2007 (In ThCh$)
Guillermo Luksic Craig (1)	1,340
Andrónico Luksic Craig (1)	373
Jean-Paul Luksic Fontbona (1)	1,896
Hernan Büchi Buc	2,067
Alessandro Bizzarri Carvallo (2)	1,837
Francisco Pérez Mackenna (2)	3,271
Felipe Joannon Vergara	19,084
Eugenio Valck Varas	5,941
Oscar Ruiz-Tagle Humeres (3)	54,226
Total	90,035

1. Guillermo Luksic Craig, Andronico Luksic Craig and Jean Paul Luksic Fontbona are brothers.
2. On June 26, 2007, Alessandro Bizarri Carvallo resigned from the Board of Directors and the Company’s Directors’ Committee. Francisco Pérez Mackenna was elected by the Board to replace him until the reelection of the Board on March 25, 2008.
3. Mr. Oscar Ruiz-Tagle Humeres resigned on July 24, 2001 and on that same day was nominated as an Honorary Chairman of the Board.

Board Practices

Directors’ Service Contracts

As approved at the Ordinary Shareholders’ Meeting, held on March 25, 2008, the current term of office for each director expires in 2011. There are no service contracts among any of the directors and Madeco S.A. providing for benefits upon termination of employment.

Directors’ Committee

According to Chilean Corporations Law, the Boards of Directors of corporations whose market capitalization reaches or exceeds UF1.5 million (as of May 31, 2008, approximately US$62.8 million) shall designate a Directors’ Committee (the “Directors’ Committee”). If the market capitalization falls below this threshold, there is no obligation to designate a Directors’ Committee. However, corporations which do not reach the threshold may voluntarily assume Directors’ Committee obligations, in which case they shall strictly follow the provisions of the Law.

However, the Directors’ Committee, as defined and mandated under the Chilean Corporations Act, does not satisfy the Directors’ Committee requirements of Rule 10A-3 under the Exchange Act and certain additional requirements under NYSE Rule 303A, with which the Company was required to comply since July 31, 2005.

The Directors’ Committee shall have the following powers and duties:

1. to examine the independent accountants’ reports, the balance sheets, and other financial statements submitted by the corporation’s managers or liquidators to the shareholders, and issue an opinion about them prior to their submission for shareholder approval;
2. to propose to the Board of Directors, the independent accountants and the risk rating agencies, which the Board must then propose to the shareholders. If the Board disagree with the Directors’ Committee’s proposal, the Board shall be entitled to make its own proposal, submitting both proposals to the shareholders for their consideration;
3. to examine the documentation concerning (i) contracts or agreements in which directors have an interest and (ii) transactions between related or affiliated companies, and to produce a written report on such documentation. A copy of the report shall be delivered to the Chairman of the Board, who shall read it at the Board meeting in which the relevant transaction is presented for approval or rejection;
4. to examine the managers’ and chief executives’ remuneration policies and compensation plans; and
5. all other matters contemplated in the Company’s bylaws or entrusted to the Directors’ Committee by a Shareholders’ Meeting or the Board of Directors.

For purposes of the related party transactions mentioned above, the following entities and/or persons are considered by the Securities Market Law and the Chilean Corporations Law to be related to a company:

1. any entities within the financial conglomerate to which the company belongs;
2. corporate entities that have, with respect to the company, the character of parent company, affiliated company, subsidiary or related company. Parent companies are those that control directly or indirectly more than 50% of the subsidiary’s voting stock (or participations, in the case of business organizations other than stock companies), or that may otherwise elect or appoint, or cause the election or appointment, of the majority of the directors or officers. Limited partnerships (sociedades en comandita) may likewise be affiliates of a corporation, whenever the latter has the power to direct or guide the administration of the general partner (gestor) thereof. Related companies are those that, without actually controlling the affiliate, own directly or indirectly 10% or more of the affiliate’s voting stock (or participations, in the case of business organizations other than stock companies), or that may otherwise elect or appoint, or cause the election or appointment of at leas t one board member or manager;
3. persons who are directors, managers, administrators or liquidators of the company, and their spouses or their close relatives (i.e., parents, father/mother in law, sisters, brothers, sisters/brothers in law); and
4. any person who, whether acting alone or in agreement with others, may appoint at least one member of the management of the Company or controls 10% or more of the capital of the Company.

In addition, the Chilean Superintendencia de Valores y Seguros (Superintendency of Securities and Insurance, or “SVS”) 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:

1. whether acting alone or in agreement with others, has sufficient voting power to influence the company’s management;
2. creates conflicts of interest in doing business with the company;
3. in the case of a corporate entity, is influenced in its management by the company; or
4. holds an employment or position which affords the person access to non-public information about the company and its business, which renders the person capable of influencing the value of the company’s securities.

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 Directors’ Committee’s discussions, agreements, and organization are regulated, in every applicable matter, by the Chilean Corporation's Law provisions related to Board of Directors’ meetings. The Directors’ Committee shall inform the Board of Directors about the manner it will request information and of its resolutions.

The Directors’ Committee shall be composed of three members, the majority of which shall be independent. Independent directors are those that would have been elected even if the votes cast in the director’s favor by the controlling shareholder and its related persons had not been counted. However, a majority of directors related to the controlling shareholder is permissible if there are an insufficient number of independent directors. Should there be more than three directors entitled to participate in the Directors’ Committee, the Board of Directors shall elect the members of the Directors’ Committee by unanimous vote. Should the Board fail to reach an agreement, the matter shall be decided by drawing. The Company’s Directors’ Committee was composed, until June 26, 2007, of Mr. Felipe Joannon, Alessandro Bizzarri and Eugenio Valck. Mr. Felipe Joannon and Mr. Alessandro Bizzarri were appointed by the controlling shareholder while Mr. Eugenio Valck is an independent director. On June 26, 2007, the Board of Directors accepted the resignation of Mr. Alessandro Bizzarri and designated Mr. Francisco Pérez Mackenna to replace him until the next Annual Shareholder´s Meeting.

At the Annual Shareholders’ Meeting held on March 25, 2008, the Board of Directors was renewed. Eugenio Valck Varas and Felipe Joannon Vergara were replaced by Augusto Iglesias Palau and Alejandro Ferreiro Yazigi, both independent Directors, as explained above. The Board of Directors then elected Augusto Iglesias Palau, Alejandro Ferreiro Yazigi and Francisco Pérez Mackenna to form the Company’s Directors’ Committee for a period of three years.

In addition to the general liabilities imputable to any director, the directors that compose the Directors’ Committee shall, in the exercise of their duties, be jointly and severally liable for any damage caused to the corporation or the shareholders.

The members of the Director’s Committee shall be remunerated. The amount of such remuneration shall be established annually by the shareholders, taking into consideration the duties that the Director’s Committee members shall perform. The remuneration of the members of the Company’s Director’s Committee is UF 50 (as of May 31, 2008, approximately US$2,092) per Director’s Committee meeting.

The shareholders shall determine the budget of the Directors’ Committee and those of its advisors, and the Director’s Committee shall be allowed to request the recruitment of professionals to fulfill its duties, within the limits imposed by the budget. The activities of the Directors’ Committee and its expenses, including its advisors’, shall be included in the annual report and conveyed to the shareholders. The budget of the Company’s Directors’ Committee and its advisors is UF 2,000 per year (as of May 31, 2008, approximately US$83,668).

Audit Committee

Pursuant to NYSE Rule 303A.06, in 2008, Madeco designated an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act and the additional requirements under NYSE Rule 303A. The Audit Committee is currently composed by Messrs. Augusto Iglesias Palau and Alejandro Ferreiro Yazigi.

General summary of significant differences with regard to corporate government standards.

The following paragraphs provide a brief, general summary of significant differences between corporate governance practices followed by Madeco pursuant to its home-country rules and those applicable to U.S. domestic issuers under New York Stock Exchange (“NYSE”) listing standards.

Composition of the Board of Directors; independence. The NYSE listing standards provide that listed companies must have a majority of independent directors and that certain board committees must consist solely of independent directors. Under NYSE rule 303A.02, a director qualifies as independent only if the board affirmatively determines that such director has no material relationship with the company, either directly or indirectly. In addition, the NYSE listing standards enumerate a number of relationships that preclude independence.

Under Chilean law there is no legal obligation to have independent directors. However, Chilean law establishes a number of principles of general applicability designed to avoid conflicts of interests and to establish standards for related party transactions. Specifically, directors elected by a group or class of shareholders have the same duties to the company and to the other shareholders as the rest of the directors, and thus may not fail to perform such duties under the pretense of defending the interests of the shareholder who elected them. Furthermore, all transactions with the company in which a director has an interest, either personally (which includes the director’s spouse and certain relatives) or as a representative of a third party, require prior approval by the board of directors and must be entered into on market terms and conditions. Furthermore, such transactions must be reviewed by the Directors’ Committee (as defined below) and disclosed at the next meeting o f shareholders. Pursuant to NYSE rule 303A.00, Madeco may follow Chilean practices and is not required to have a majority of independent directors. The directors of a company are jointly and severally liable for any damages they cause to the company and its shareholders.

Committees. The NYSE listing standards require that listed companies have 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 Directors’ Committee, composed of three members, such a committee having a direct responsibility to (a) review the company’s financial statements and the independent auditors’ report and issue an opinion on such financial statements and report prior to their submission for shareholders’ approval, (b) make recommendations to the Board of Directors with respect to the appointment of independent auditors and risk rating agencies, (c) review transactions in which directors have an interest and transactions between affiliated companies, and issue a report on such transactions, (d) review the managers and principal executive officers compensation policies and plans and (e) perform other duties as defined by the company’s charter, by the annual shareholders’ meeting or by the board. Of the three members of the Committee, two have to be independent from the controlling shareholder. A director wh o is a member of the Directors’ Committee is “independent” if, subtracting the votes of the controlling shareholder and its affiliates from the total number of votes given in favor of such director, he or she would have been nevertheless elected. Directors elected with the votes of the controlling shareholder and its affiliates may constitute the majority of the Directors’ Committee if there are not enough independent directors on the board. The members of the Committee are jointly and severally liable for any damages they cause to the company and its shareholders.

Shareholder approval of equity-compensation plans. Under NYSE listing standards, shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereof, with limited exemptions. An “equity-compensation plan” is a plan or other arrangement that provides for the delivery of equity securities of the listed company to any employee, director or other service provider as compensation for services.

Under Chilean law, if previously approved by shareholders at an extraordinary shareholders’ meeting, up to ten percent of a capital increase in a publicly traded company may be set aside to fund equity-compensation plans for the company’s employees and/or for the employees of the company’s subsidiaries. Pursuant to NYSE rule 303A.00, as a foreign issuer, Madeco may follow Chilean practices and is not required to comply with the NYSE listing standards with respect to shareholder approval of equity-compensation plans.

Corporate Governance Guidelines. The NYSE listing standards provide that listed companies must adopt and disclose corporate governance guidelines with regard to (a) director qualifications standards; (b) director responsibilities; (c) director access to management and independent advisors; (d) director compensation; (e) director orientation and continuing education; (f) management succession; and (g) annual performance evaluation of the board.

Chilean law does not require that such corporate governance guidelines be adopted. Director responsibilities and access to management and independent advisors are directly provided for by applicable law. Director compensation is approved by the annual meeting of shareholders pursuant to applicable law. As a foreign issuer, Madeco may follow Chilean practices and is not required to adopt and disclose corporate governance guidelines.

Code of Business Conduct and Ethics. The NYSE listing standards require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.

Madeco has adopted a code of business conduct and ethics that applies generally to all of its executive officers and employees. A copy of the code of ethics is filed as an exhibit to this annual report.

Executive Sessions. To empower non-management directors to serve as a more effective check on management, NYSE listing standards provide that non-management directors of each company must meet at regularly scheduled executive sessions without management.

Under Chilean law, the office of director is not legally compatible with that of a company officer in publicly traded companies. The board of directors exercises its functions as a collective body and may partially delegate its powers to executive officers, attorneys, a director or a board commission of the company, and for specific purposes to other persons. As a foreign issuer, Madeco may follow Chilean practices and is not required to comply with the NYSE listing standard for executive sessions.

Certification Requirements. Under the NYSE listing standards, Section 303A.12(a) requires that each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards. Section 303A.12(b) requires that each listed company CEO must promptly notify the NYSE in writing after any executive officer of the listed company becomes aware of any material non-compliance with any applicable provisions of Section 303A. Section 303 A.12 (c) requires that each listed company must submit an executed written affirmation regarding certain board and committee practices annually and each time a change occurs to the board or certain of its committees.

As a foreign private issuer, Madeco is required to comply with Section 303A.12(b) and (c), but is not required to comply with the certifications requirements set forth in Section 303A.12(a).

Employees

The following table breaks down the Company’s total number of employees by country as of December 31, 2005, 2006 and 2007 as well as of March 31, 2008:
 

Total Number of Employees (1)
Country	Dec 31, 2005	Dec 31, 2006	Dec 31, 2007	March 31, 2008
Chile	1,634	1,555	1,554	1,636
Brazil	618	731	895	915
Peru (2) Peru	308	315	1,194	1,227
Argentina	298	390	433	444
Colombia (3)	-	-	181	201
Total	2,858	2,991	4,257	4,423

1. The Table includes Optel´s workforce in Madeco´s consolidation, 5 employees as of December 31, 2005, 18 employees as of December 31, 2006, 23 employees as of December 31, 2007, and 21 employees as of March 31, 2008.
2. Since March 31, 2007, Alusa’s Peruvian subsidiaries, Peruplast S.A. and Tech Pak S.A., consolidated their accounting records with those of the Company.
3. Since March 31, 2007, Madeco’s Colombian subsidiary, Cedsa S.A., has consolidated its accounting records with those of Madeco.

As of December 31, 2007, a total of 1,335 employees, or 31.4% of the Company’s total workforce, were represented by 15 labor unions, which represent their members in collective bargaining negotiations with the Company. Additionally, the Company had a total of 198 temporary employees who were hired for specific time periods to satisfy short-term needs. Management’s relationship with the labor unions representing the employees is generally good.

During the 1999 - 2003 period, the Company implemented a series of restructuring measures in response to the continued unfavorable economic conditions within the region. As a consequence of Argentina’s deep economic recession, in December 2001, the Company closed the production operations of its Argentine subsidiary Decker-Indelqui. Since December 31, 2004, the Wire & Cable business unit located in Argentina has been, on a non-continuous basis, partially reopened. The Brass Mills business unit facilities also located in Argentina have been operating at limited capacity since 2003.

The Company does not maintain any pension fund or retirement program for its employees and has no liability for the performance of governmental pension plans or any governmental pension payments to employees.

The following tables and discussion provide further information regarding the Company’s total human resources by business unit as of December 31, 2005, 2006 and 2007, as well as of March 31, 2008:

	Executives	Professionals	Employees	Total
December 31, 2005
Wire & Cable and Brass Mills	35	475	1,512	2,022
Flexible Packaging	7	147	400	554
Aluminum Profiles	7	84	191	282
Madeco Consolidated	49	706	2,103	2,858
December 31, 2006
Wire & Cable and Brass Mills	36	511	1,563	2,110
Flexible Packaging	5	158	438	601
Aluminum Profiles	7	89	184	280
Madeco Consolidated	48	758	2,185	2,991
December 31, 2007 (1)
Wire & Cable and Brass Mills	47	633	1,902	2,582
Flexible Packaging	25	407	978	1,410
Aluminum Profiles	10	105	150	265
Madeco Consolidated	82	1,145	3,030	4,257
March 31, 2008 (1)
Wire & Cable and Brass Mills	49	665	2,003	2,717
Flexible Packaging	26	432	979	1,437
Aluminum Profiles	10	106	153	269
Madeco Consolidated	85	1,203	3,135	4,423

(1) Figures for the Wire & Cable and Flexible Packaging business units include employees from the Colombian facility, which was acquired in February 2007, and from the Peruvian subsidiaries which started consolidating in March 2007.

Wire & Cable and Brass Mills. The following table sets forth the Company’s human resources as of December 31, 2007 for the Wire & Cable and Brass Mills business units. The employees are broken down by employee category and country:
 

Wire & Cable and Brass Mills Units: Employees as of December 31, 2007
	Executives	Professionals	Employees	Total
Chile	14	147	689	850
Brazil	17	88	790	895
Peru	4	334	80	418
Argentina	2	39	197	238
Colombia	10	25	146	181
Total	47	633	1,902	2,582

In Chile as of December 2007, the Company had 850 permanent employees and 25 temporary employees. A total of 664 employees were represented by 7 labor unions and one non-unionized labor union (590 and 74 employees, respectively). On December 16, 2004, Madeco Chile reached an agreement with Unions Nº1 and Nº2 prior to the expiration of the collective bargaining agreement. The Company also reached an agreement with Union Nº3 and the non-unionized workers. Consequently, the Company and the Unions signed new contracts with a three year term, expiring on January 1, 2010. The last work stoppage in Madeco-Chile was in February 1993 and lasted 10 days. At Armat, new collective bargaining agreements were signed with Unions Nº1 and Nº2, which involved 42 and 26 workers respectively with a 2 year term. Armat’s last work stoppage was in 1991 and lasted 12 days. By the end of 2006, Cotelsa signed a collective bargaining agreemen t with its two labor unions which represented 101 employees.

In October 2005 and January 2007, the Company reduced its workforce by 120 and 54 employees, respectively, in the Brass Mills business unit’s facilities located in Chile.

In Brazil, as of December 2007, the Company had 895 permanent employees and 11 temporary employees. A total of 318 employees were represented by 2 labor unions, Metalurgicos do Rio de Janeiro and Metalurgicos de Campinas. Collective bargaining in Brazil is done on a statewide basis rather than on an industry-wide basis or on a company-by-company basis. Each year, the unions negotiate with their respective municipal governments to reach an agreement. The Company’s last work stoppage in Brazil was in October 1997, lasting four days and involving 54 employees; currently, the Company considers its relations with all its employees to be good.

In Peru, as of December 2007, the Company had 418 permanent employees and 12 temporary employees, none of which were members of labor unions, in 2007. The Company has experienced no strikes in Peru since 1993.

In Argentina, as of December 2007, the Company had 238 permanent employees and 1 temporary employee. A total of 142 employees were represented by 2 labor unions. Collective bargaining in Argentina is done on a statewide basis, rather than on an industry-wide basis or on a company-by-company basis. Although, there have been several work stoppages in Argentina since the Company’s acquisition of Indelqui in 1990 these were due to strikes called by nation wide labor federations and were unrelated to conditions at the Company’s operations. The last work stoppage was in 1999 and involved 301 employees.

In Colombia, as of December 2007, the Company had 181 permanent employees and 35 temporary employees, none of which were members of a labor union during 2007. The Company has experienced no strikes in Colombia.

Flexible Packaging. The following table sets forth the Company’s human resources as of December 31, 2007, for the Flexible Packaging unit. The personnel are broken down by employment category and country of origin.
 

Flexible Packaging Unit: Employees as of December 31, 2007
	Executives	Professionals	Employees	Total
Chile	4	107	328	439
Argentina	3	40	152	195
Peru	18	260	498	776
Total	25	407	978	1,410

In Chile as of December 2007, the Company had 439 permanent employees and 9 temporary employees. A total of 270 and 163 employees were represented by four bargaining commissions (three labor unions and one non-unionized personnel commission, respectively). In 2006, the Company entered into a three-year collective bargaining agreement with bargaining commissions. The last work stoppage, which occurred on August 1998, lasted 20 days and included 130 employees.

In Argentina as of December 2007, the Company had 195 permanent employees and 50 temporary employees. A total of 52 employees were represented by one labor union in 2007. On June 2006, Aluflex signed a collective bargaining agreement with a union that represented 166 company employees.

In Peru as of December 2007, the Company had 776 permanent employees and 2 temporary employees, none of which were members of labor unions, in 2007. The Company has experienced no strikes in Peru since 1996.

Aluminum Profiles. The following table sets forth the Company’s personnel at December 31, 2007 for the Aluminum Profiles unit. Personnel are broken down by employment category.
 

Aluminum Unit: Employees as of December 31, 2007
	Executives	Professionals	Employees	Total
Total	10	105	150	265

The Aluminum Profiles division in Chile had 265 permanent and 53 temporary employees. A total of 53 employees were represented by two unions. In December 2006, Indalum completed its collective bargaining process and entered into an employee labor agreement for the next 3 years with Unions No.1 and No.2, and with the Bargaining Commission for non unionized personnel (both groups represented a total of 226 employees).

Indemnities

All employees who are terminated in Chile, Brazil, Peru, Argentina and Colombia for reasons not imputable to the workers are entitled by law to receive a severance payment.

In Chile, if the employee has been working continuously for a period of 12 months or more and the employer ended his contract due to necessities of the company, the employer will have to pay the employee, an indemnification for each year and fraction thereof (up to six months) that the employee worked for the company, equivalent to thirty days of salary for the last worked month. This indemnification has a maximum amount equivalent to three hundred and thirty days of remuneration (11 years) and a limit of 90 U.F. per year (as of May 31, 2008, approximately US$41,416). If the employer chooses to terminate an employee under these circumstances, it will have to inform the worker within thirty days of the anticipated termination. Nevertheless, it will not be required to give the employee this much notification, if the Employer chooses to pay the indemnification (in money equivalent) of the last yielded remuneration.

In Chile, the employees of the Company who are subject to collective bargaining agreements receive an indemnification for each year worked (exclusive of the remuneration discussed above), equivalent to 30 days of salary for each full year, and fraction thereof that is worked. This payment will become effective if the Company has the need to terminate the employee’s contract, or if the worker voluntary resigns (unless the worker violates sections N°1 and N°6 of article N° 160 of the labor code). The collective bargaining agreement does not contain any limitation regarding the total amount that may be paid to the employee (in terms of years or remunerations), but establishes a maximum number of employees per year that may voluntarily terminate their contracts and claim severance benefit. However, the above referenced indemnification must not be inferior to the amount established by law.

In Brazil, permanent employees are entitled to a percentage of their salary based on the number of months worked, as well as a payment of 1.33 times the employee’s salary in case of any pending vacations and a payment of 40% of the amount the employee has contributed to the Fondo Guarantia Por Tiempo Servicio (Guaranteed Funds for Service Time, or “FGTS”).

In Peru, permanent employees are entitled to compensation payments related to Compensación por Tiempo de Servicios (Employee Severance Indemnities, or CTS). The compensation amount is payable in two installments (May and November) and is equivalent to one month’s salary for each year of service. These CTS payments act as the employee’s unemployment insurance. Additionally, permanent employees are also entitled to, in certain circumstances, severance payments upon termination equivalent to one and a half month’s salary for each year of service with a maximum limit of 12 month’s salary.

In Argentina, permanent employees are entitled to one month’s salary for each year of service with a limit established by the Ministry of Labor.

In Colombia, permanent employees are entitled to one month’s salary for each year of service, under the Colombian law (“Cesantias”). The employees who are terminated in Colombia for reasons not imputable to them are entitled by law to receive a severance payment (“Indemnizaciones”). The payment is as follows:

• If an employee earns less than 10 minimum Legal Salaries: For a year of service, the employee will earn 30 days of work; for more than a year of service, 30 days the first year plus 20 days for each additional year worked.

• If an employee earns more than 10 actual minimum Legal Salaries: For a year of service, the employee will earn 20 days of work; for more than a year, 20 days the first year and 15 additional days for each year worked.

Pension Plans

Workers in Chile are subject to a national pension fund law which establishes a system of independent pension plans, administered by Administradoras de Fondos de Pensiones (Pension Fund Administrators, or “AFPs”). The Company has no liability for the performance of the pension plans or any pension payments to be made to the employees.

Retired employees in Brazil receive government payments from both the FGTS and the Instituto Nacional de Seguridad Social (National Institute of Social Security). The Company has no liability for the performance of the pension plans or any pension payments to be made to the employees.

Workers in Peru are subject to a national pension fund law, which establishes a system of independent pension plans administered by AFPs. The Company has no liability for the performance of the pension plans or any pension payments to be made to the employees.

Workers in Argentina are subject to a national pension fund law that establishes a system of independent pension plans administered by Administradoras de Fondos de Jubilaciones y Pensiones (Pension and Retirement Fund Administrators, or “AFJPs”). The Company has no liability for the performance of the pension plans or any pension payments to be made to the employees.

Retired employees in Colombia are subject to a national pension fund law, which establishes a system of independent pension plans administered by private pension funds. The Company has no liability for the performance of the pension plans or any pension payments to be made to the employees.

Share Ownership

With respect to directors and senior management, information concerning their share ownership in the Company is addressed in “Item 7. Major Shareholders and Related Party Transactions”.

The only compensation program is the one detailed above in “Item 6. Directors, Senior Management and Employees – Senior Managment – Compensation ”. The Company does not have any other stock option or other programs involving employees in the share capital of the Company.

ITEM 7. Major Shareholders and Related Party Transactions

Major Shareholders

Madeco’s only outstanding voting securities are its shares of common stock. The following table sets forth information concerning ownership of Madeco’s common stock as of May 31, 2008 with respect to each shareholder owning more than 5% of the outstanding shares of common stock and with respect to the percentage of Madeco’s common stock owned by all directors and executive officers of Madeco as a group:
 

Shareholder	Number of shares owned	% Ownership
Quiñenco S.A. and subsidiaries (1) (2)	2,557,255,382	45.17%
The Bank of New York	427,161,930	7.55%
AFP Provida S.A.	377,214,179	6.66%
AFP Habitat S.A.	322,983,162	5.71%
AFP Cuprum S.A.	306,875,815	5.42%
AFP Capital S.A.	298,009,551	5.26%
Directors, Executive Officers and related parties as a group (3)	138,889,305	2.45%

(1) The controlling shareholder of Madeco S.A. is Quiñenco S.A., an open stock corporation.
(2) Quiñenco S.A. directly controls 40.10% of Madeco S.A. (2,269,895,546 shares) and indirectly controls through its subsidiary, Inversiones Río Grande S.A., 5.08% (287,359,836 shares).
(3) Includes shares owned by Executives, Luksic family members and its related companies, excluding Quiñenco S.A. and Inversiones Río Grande S.A.

Quiñenco S.A. is controlled by the Luksic Group, whose principal members are The Luksburg Foundation, Andrónico Luksic Craig, Guillermo Luksic Craig and Jean-Paul Luksic Fontbona. Until his death in August 2005, the Luksic Group also included Andrónico Luksic Abaroa, the father of Andrónico Luksic Craig, Guillermo Luksic Craig and Jean-Paul Luksic Fontbona. As of the date of this Annual Report, certain members of the Luksic Group beneficially own 83.1% of the outstanding shares of common stock of Quiñenco. Jean-Paul Luksic Fontbona does not directly or indirectly owns any shares of Quiñenco but exercises control through memberships on boards of directors and managing councils of Luksic Group companies.

Control by the Luksic Group is exercised through the Luksic Group’s control of Andsberg Inversiones Ltda., Ruana Copper A.G. Agencia Chile, Inversiones Orengo S.A., Inversiones Consolidadas S.A., Inversiones Salta S.A., Inmobiliaria e Inversiones Río Claro S.A. and Inversiones Río Claro Ltda., which are the Luksic Group companies that hold shares of Quiñenco. The Luksburg Foundation beneficially owns approximately 94.6% of the total equity interest in Andsberg Inversiones Limitada, 100% of the outstanding shares of common stock of Ruana Copper A.G. Agencia Chile and 97.3% of the common shares of Inversiones Orengo S.A., entities which jointly hold approximately 56.8% of the outstanding shares of common stock of Quiñenco.

Although there are no formal agreements as to the voting or disposition of shares known to Quiñenco, Quiñenco believes that the members of the Luksic Group generally consult with each other regarding actions to be taken by shareholders of Quiñenco. Consequently, the Luksic Group has the power to elect a majority of Quiñenco’s directors and to determine the outcome of substantially all matters to be decided by a vote of shareholders.

Quiñenco’s only outstanding voting securities are its shares of common stock. There was no significant change in the share ownership of Quiñenco in 2005, 2006 or 2007. The following table sets forth information concerning ownership of the shares with respect to the Luksic Group’s companies as of December 31, 2007:
 

Title of Class	Identity of Person or Group	Amount Owned	Percent of Class
Common Stock	Andsberg Inversiones Ltda.  Ruana Copper A.G. Agencia Chile  Inmobiliaria e Inversiones Río Claro S.A.  Inversiones Consolidadas S.A. Inversiones Salta S.A. Inversiones Río Claro Ltda. Inversiones Orengo S.A.	391,308,877 255,946,677 143,427,860 129,988,779 19,121,268 8,934,508 2,619,260	34.2% 22.4% 12.5% 11.4% 1.7% 0.8% 0.2%

In addition, the Fundación Andrónico Luksic A., a charity foundation, owned 1,432,232 shares of Quiñenco equivalent to a 0.1% interest, and Inversiones Carahue S.A., a company owned by Paola Luksic Fontbona, owned 8,211 shares as of December 31, 2007. Davor and Andrónico Luksic Lederer, sons of Andrónico Luksic Craig, each own 128 shares of Quiñenco.

The Company’s shareholders have identical voting rights. To the knowledge of the Company, there are no arrangements or operations that may result in a change in control of the Company.

Madeco’s majority shareholder is Quiñenco S.A., which, through its direct and indirect interests in the Company, beneficially owns as of May 31, 2008 an aggregate of 45.17% of the outstanding shares (2,557,255,382 shares) of Common Stock. Between April 26, 2005 and March 25, 2008, six members of the Company’s Board of Directors were representatives of the Quiñenco Group, including the Chairman of the Board. The entire Board of Directors was reelected at the Annual Shareholders’ Meeting held on March 25, 2008, for a three-year period pursuant to the Company’s bylaws. After the Annual Shareholders’ Meeting, the Quiñenco Group reduced its representatives in the Company’s Board of Directors to five members, including the Chairman of the Board.

The following table shows the total number of shares authorized and paid as of December 31, 2005, 2006 and 2007:
 

	2005	2006	2007
Common Stock (number of shares authorized and paid)	5,348,390,129	5,541,192,887	5,661,192,887

The following table includes each of the Company’s shareholders with an ownership interest exceeding 1.0% at December 31, for the years 2005, 2006 and 2007, demonstrating the significant changes in ownership percentages during the past three years:
 

Shareholder	December 31, 2005		December 31, 2006		December 31, 2007
Quiñenco S.A. and related parties (1)	2,557,141,629	47.81%	2,557,255,382	46.15%	2,557,255,382	45.17%
AFP Provida S.A.	88,927,032	1.66%	150,227,032	2.71%	387,214,179	6.84%
AFP Habitat S.A.	82,908,314	1.55%	313,895,523	5.66%	334,545,142	5.91%
The Bank of New York	210,112,530	3.93%	318,509,330	5.75%	216,157,030	3.82%
AFP Bansander S.A.	25,537,117	0.48%	258,140,595	4.66%	206,966,302	3.66%
AFP Cuprum S.A.	21,389,584	0.40%	145,647,038	2.63%	183,066,962	3.23%
Citibank Chile Cta.de Terceros	46,017,234	0.86%	113,360,357	2.05%	174,654,001	3.09%
Dall’Olio Lenzini, Tiberio	61,056,097	1.14%	61,056,097	1.10%	161,056,097	2.84%
AFP Santa Maria S.A.	29,828,899	0.56%	104,559,989	1.89%	124,208,710	2.19%
Banchile Corredores de Bolsa S.A.	254,852,902	4.77%	163,733,746	2.95%	118,248,424	2.09%
Celfin Capital S.A. Corredores de Bolsa	142,689,620	2.67%	103,510,306	1.87%	104,170,529	1.84%
Axxion S.A.	0	0.00%	0	0.00%	87,985,096	1.55%
Bolsa de Comercio de Santiago	283,819,492	5.31%	68,221,617	1.23%	86,053,526	1.52%
Bolsa Electronica de Chile	151,685,754	2.84%	49,135,641	0.89%	60,400,432	1.07%
Fondo mutuo Legg Mason	0	0.00%	71,305,359	1.29%	58,280,547	1.03%
Others	1,392,423,925	26.03%	1,062,634,875	19.18%	800,930,528	14.15%

(1) Quiñenco S.A. directly controls 40.10% of Madeco S.A. (2,269,895,546 shares) and indirectly controls through its subsidiary, Inversiones Río Grande S.A., 5.08% of Madeco S.A. (287,359,836 shares).

As of May 31, 2008, The Bank of New York, as depositary for Madeco’s ADS facility, was the record owner of 427,161,930 shares of Common Stock in the form of 4,271,619 ADSs. These ADSs represented 7.55% of the total number of issued and outstanding shares at such date. The ADSs are issued pursuant to a deposit agreement dated June 7, 1993, as amended (the “Depositary Agreement”), among the Company, the Bank of New York as depositary (the “Depositary”) and the holders from time to time of the American Depositary Receipts (“ADSs”) evidencing the ADSs issued pursuant to the Depositary Agreement. It is not practicable for Madeco to determine the portion of its common stock or ADSs beneficially owned by U.S. persons.

Related Party Transactions

Under the Chilean Corporations Law, a corporation may not enter into a contract or agreement in which a director has a direct or indirect interest without prior approval by the Board of Directors, and only if the terms of the conflicting interest transaction are similar to those of an arm’s length transaction.

The Directors’ Committee is required by Chilean law to examine all documentation concerning (i) contracts or agreements in which directors have an interest and (ii) transactions between related or affiliated companies, and report their findings at the Board of Director meetings. For further discussion regarding Chilean law as it pertains to the Committee’s responsibilities and regulations regarding related party transactions, see “Item 6. Directors, Senior Management and Employees — Board Practices — Directors’ Committee”.

If the conflicting interest transaction involves a “material amount,” the Board of Directors is required to produce a statement declaring in advance that the conflicting interest transaction is similar in its terms to an arm’s length transaction. A conflicting interest transaction is deemed to involve a “material amount” if the amount involved is both greater than UF2,000 (as of May 31, 2008, approximately US$83,668) and exceeds 1% of the consolidated assets of the corporation, or if the amount exceeds UF20,000 (as of May 31, 2008, approximately US$836,678) regardless of the size of the corporation.

If the Board of Directors believes that it is not possible to ascertain whether the conflicting interest transaction is similar to an arm’s length transaction, it may approve or reject the conflicting interest transaction, or appoint independent advisors to make such a determination, in all these cases, with the exclusion of the interested directors. If the Board appoints independent advisors, the report prepared by the advisors must be made available to the shareholders and the Board of Directors within 20 business days from the date the report was received from the independent advisors. The shareholders must be notified in writing of the receipt of the report. After this period the Board may approve or reject the conflicting interest transaction, but the Board is not required to follow the independent advisors’ conclusion. The Board may treat the conflicting interest transaction and the report as confidential information, with the exclusion of the interested directors. Shareh olders representing at least a 5% of the voting shares of the Company may request the Board call an Extraordinary Shareholders’ meeting in order to approve or reject the conflicting interest transaction by a two-thirds majority of the outstanding voting shares.

All decisions adopted by the Board in respect of the conflicting interest transaction must be reported at the following Shareholders’ Meeting. The controller of the corporation or the related party which intends to enter into the conflicting interest transaction shall make available to the Board of Directors, at the time the transaction is being considered by the Board, all information relating to the transaction filed with any non-Chilean regulatory entities or stock exchanges.

If a suit for damages arises from such a transaction, the defendant (i.e., one or more directors, the controller, a related party, or all of them) bears the burden of proof that the transaction was equally as or more beneficial to the corporation than an arm’s length transaction, unless the conflicting interest transaction was previously approved by the shareholders.

In the ordinary course of its business, the Company engages in a variety of transactions with affiliates of Madeco. Financial information concerning these transactions during the last three years is set forth in Note 24 to the Consolidated Financial Statements. The Company believes that it has complied with the requirements of Article 89 and Article 44 in all transactions with related parties.

Although the Company generally does not provide or receive long-term debt financing to or from other entities within Madeco (except in connection with bank loans on arm’s length terms in the ordinary course of business from the Company’s former banks), the Company has occasionally in the past and expects in the future to advance funds and receive advances of funds from other companies under the common control of the Quiñenco Group where required to meet short-term liquidity requirements. These loans have been on a short-term unsecured basis at market rates of interest and, in the case of loans made by the Company to affiliated companies, have required the prior approval of Madeco’s Board of Directors pursuant to the requirements of the Chilean Corporations Law relating to open stock corporations such as Madeco. The outstanding amounts of such loans made by the Company to affiliated companies during the years ended December 31, 2005, 2006 and 2007 were not material to Madeco, individually or in the aggregate. In addition, the Company has from time to time in the past made loans and advances to affiliated companies and to strategic investors and their affiliates to provide financing resources in connection with acquisitions of assets and other transactions. Such loans and advances have generally been made on a secured basis at market rates of interest. See Note 24 to the Consolidated Financial Statements.

The Company also provides goods and services in commercial transactions in the ordinary course of business to affiliated companies. In connection with such transactions, the Company from time to time extends unsecured credit on terms substantially similar to those available to other customers purchasing goods and services in similar quantities.

Except for the transaction described below, none of the transactions carried out during 2005, 2006 and 2007 between the Company and related parties were deemed to have been material to the Company and/or to the related party.

Interests of Experts and Counsel

Not applicable

ITEM 8. Financial Information

Consolidated Statements and Other Financial Information

Identification of Financial Statements and Other Financial Information

See “Item 18. Financial Statements”

Export Sales

The tables below show export sales from each of the Company’s business units and their division components, in tons and in revenues. In each case, sales are also shown as a percentage of the total for the corresponding division or business unit:
 

Export (1) Sales Volume
	2005		2006		2007
	Volume	% total	Volume	% total	Volume	% total
Metallic Cable (in tons)	13,132	19.1%	15,015	18.9%	17,749	20.2%
Optical Fiber Cable (in km)	9,516	11.6%	17,151	28.3%	20,393	15.5%
Wire & Cable (in equivalent tons)(2)	13,348	18.9%	15,405	19.1%	18,212	20.0%
Pipes Bars and Sheets (in tons)	16,044	57.4%	17,031	64.5%	11,188	54.5%
Coins (in tons)	1,557	99.4%	1,572	97.6%	1,255	95.0%
Brass Mills (in tons)	17,601	59.6%	18,603	66.4%	12,443	57.0%
Flexible Packaging (in tons)	2,118	14.6%	2,674	17.1%	6,159	16.1%
Aluminum Profiles (in tons)	474	4.4%	484	3.9%	389	3.8%
Total (in equivalent tons)	33,541	26.7%	37,166	27.2%	37,203	23.1%

Export (1) Revenues
	2005		2006		2007
	Ch$ million	% total	Ch$ million	% total	Ch$ million	% total
Metallic Cable	33,710	14.6%	65,011	16.9%	69,495	17.0%
Optical Fiber Cable	354	18.7%	25	1.6%	18	0.8%
Total Wire & Cable	34,064	14.6%	65,036	16.8%	69,513	16.9%
Pipes Bars and Sheets	43,592	54.0%	73,862	62.7%	50,411	54.0%
Coins	5,777	83.6%	7,505	71.7%	8,161	83.7%
Brass Mills	49,369	56.3%	81,367	63.5%	58,572	56.9%
Flexible Packaging	6,816	14.1%	8,270	16.7%	14,359	16.1%
Aluminum Profiles	1,764	5.5%	994	2.8%	915	2.6%
Total	92,013	23.0%	155,667	25.9%	143,359	22.4%

(1) Exports of Metallic cables consist of all sales to customers in any country other than Chile, Brazil, Peru, Argentina and Colombia (figures for 2005 and 2006 include Colombia due to the Company acquisition of Cedsa S.A. in 2007). Exports of Optical Fiber cables consist of all sales to customers in any country other than Argentina. Exports of the PBS division of the Brass Mills unit consist of all sales to customers in any country other than Chile or Argentina. Exports of the Coins division of the Brass Mills unit consist of all sales to customers in any country other than Chile. Exports of the Flexible Packaging unit consist of all sales to customers in any country other than Chile, Argentina and Peru (figures for 2005 and 2006 include Peru due to the consolidation by the Company of Peruplast S.A.in 2007). Exports for the Aluminum unit consist of all sales to customers in any country other than Chile

(2) Total sales volume of the Wire & Cable unit includes sales of both metallic and optical fiber cable products. Optical fiber sales volumes have been converted to tons, using the conversion rate: 1 ton = 44 km.

Wire & Cable. In 2007, the Wire & Cable business unit generated export sales, which amounted to 18,212 tons or 20.0% of the total business unit’s sales volume. In terms of revenues, exports amounted to Ch$69,513 million, an increase of 6.9% compared to 2006, and represented 16.9% of the total business unit’s revenues. The copper wire rod is the primary product exported to South American countries (73.6% of Wire & Cable exports) where the Company does not have a subsidiary.

PBS. In 2007, the PBS division of the Brass Mills business unit generated export sales, which amounted to 11,188 tons or 54.5% of the total division’s sales volume. Export revenues as a percentage of the PBS division’s revenues amounted to 54.0% or Ch$50,411 million. With regard to exports, a total of 48.9% and 23.8% of products were sold in North America and Europe, respectively.

Coins. In 2007, export sales volume amounted to 1,255 tons or 95.0% of the coins division’s total sales volume. The business unit’s primary customers are central banks and coin mints around the world, with special emphasis on customers located in Central America and Europe, which represent 60.3% and 36.2% of total export revenues, respectively.

Flexible Packaging. In 2007, export sales volume amounted to 6,159 tons or 16.1% of the Flexible Packaging business unit's total sales volume. Export sales as a percentage of total in revenues represent 16.1% or Ch$14,359 million in 2007 an increase of 73.6% compared to 2006, due to the acquisition of Peruplast. Principal export customers for the Flexible Packaging unit are located in other Latin American countries. In 2007, exports to South and Central America represented 71.9 % of total export sales volumes for the unit.

Aluminum Profiles. Export sales for the Aluminum Business unit include sales made to customers in countries other than Chile. In 2007, export sales volume amounted to 389 tons or 3.8% of the Aluminum Profiles business unit’s total sales volume, or Ch$915 million represented 2.6% of the unit’s revenues.

Legal Proceedings

There are two lawsuits pending in Brazil brought by the State Secretary of Finance (Rio de Janeiro) against the previous owner of Ficap S.A., dating from before the time that Madeco S.A. bought the company in 1997. The total damages amount to approximately 6,950 thousand Brazilian reales as of December 31, 2005. Madeco S.A. has personal guarantees from the previous owner of Ficap S.A. to indemnify Madeco S.A. should the Brazilian subsidiary be affected by such legal actions.

In addition, the Company has other minor legal proceedings, the outcome of its outstanding litigation will not have a material adverse effect on the Company’s financial condition or results of operations. See Note 22 to the Company’s Consolidated Financial Statements.

Dividend Policy

The Company's dividend policy is established by the Board of Directors. The Company’s current dividend policy was modified in 2007. The change in dividend policy was reported by the Board of Directors on March 28, 2007, and the Board informed shareholders at the shareholders’ meeting held on April 24, 2007. The dividend policy authorizes distribution of cash dividends in an amount equal to at least 30% of the Company’s annual net income under Chilean GAAP for the previous year. The Company’s dividend policy is subject to amendment by reason of changes in Chilean law, capital requirements, economic results and/or other factors. See “Item 3. Key Information — Risk Factors.” The Board of Directors may declare interim dividends out of profits earned during such interim period; these interim dividends must be imputed to the period dividends under the Dividend Policy. However, each year the Board of Directors must submit for shareholder a pproval the final declared dividend with respect to the preceding year.

On April 23, 2008, the Board of Directors of the Company agreed to ask shareholders at the next Annual Shareholders' Meeting, which is scheduled to be held no later than April 30, 2009, to approve the distribution of an extraordinary dividend of up to US$ 165 million (approximately Ch$73,504 million), or 76% of the net profit that is expected from the transaction between Madeco and Nexans (as estimated on February 21, 2008), which dividend payment would be dependent on the completion of this transaction. 

With respect to the distribution of dividends, Chilean Corporate law provides that the company must distribute cash dividends equal to at least 30% of its annual net income calculated in accordance with Chilean GAAP, unless otherwise decided by a unanimous vote of the holders of all issued shares and unless and except to the extent it has accumulated losses.

Dividends are paid to all of the shareholders of record on the fifth business day (including Saturday) before the date set for payment of the dividend. Holders of record of ADSs are entitled to dividends declared for each applicable period. The dividend amounts and the aggregate amount of such dividends per share of Common Stock and per ADR for the period between 2003 and 2007 are shown in “Item 3. Key Information — Selected Financial Data.”

On December 19, 2007, the Board of Directors agreed to distribute an interim dividend of $2.65 per share, chargeable to the profits of the 2007 business year, which was paid on January 18, 2008. In spite of this dividend, due to the existence of accumulated losses, the Company has not paid any other dividends, since May 1999.

Generally, shareholders who are not Chilean residents must register as foreign investors under one of the foreign investment regimes provided for by Chilean law in order to be entitled to the payment outside Chile, through the Formal Exchange Market of dividends, sale proceeds and other amounts with respect to their shares. Under the Foreign Investment Contract, the Depositary, on behalf of the ADS holders, has granted access to the Formal Exchange Market to convert cash dividends from Chilean pesos to U.S. dollars and to pay such dollars to ADS holders outside Chile. Dividends paid in respect of shares of Common Stock, including to holders of ADSs who are not Chilean residents, are subject to Chilean withholding tax. See “Item 10. Additional Information —Taxation”.

Significant Changes

See “Item 4. Information on the Company – History and Development of the Company – History”.

ITEM 9. The Offer and Listing

Offer and Listing Details

The shares of the Company’s Common Stock are currently traded on the Santiago Stock Exchange, the Bolsa de Valores de Valparaiso and the Bolsa Electronica de Chile, an electronic over-the-counter trading system.

Shares of Madeco’s Common Stock also trade in the United States on the New York Stock Exchange Inc. (NYSE) since May 28, 1993 in the form of American Depositary Shares (“ADSs”) under the symbol “MAD”. Since May 12, 2003, each ADS represents 100 shares of Common Stock of the Company.

For the periods indicated, the table below sets forth the low and high closing sales prices of Madeco’s Common Stock in Chilean pesos on the Santiago Stock Exchange. The table also includes for the same periods the low and high closing sales prices of the ADSs in U.S. dollars on the NYSE.
 

	Santiago Stock Exchange		NYSE
	Low	High	Low	High
Years	(Ch$ per Share) (1)		(US$ per ADS)
2003	17.0	57.5	0.25	0.89
2004	35.0	64.0	0.57	1.10
2005	40.0	62.5	7.83	11.10
2006	40.5	60.0	7.67	11.29
2007	56.8	82.9	10.91	15.90
Quarters
2006
First Quarter	40.5	47.7	7.67	9.21
Second Quarter	42.5	52.0	7.79	10.51
Third Quarter	47.3	54.0	8.65	9.90
Fourth Quarter	52.5	60.0	9.80	11.55
2007
First Quarter	57.1	69.5	10.82	13.01
Second Quarter	61.3	75.5	11.01	14.90
Third Quarter	58.5	82.9	9.90	12.00
Fourth Quarter	56.8	80.0	10.99	14.30
2008
First Quarter	39.4	57.5	7.75	12.00
Second Quarter through May 31	49.2	56.5	10.90	13.49
Months
December 2007	56.8	66.0	11.00	13.45
January 2008	39.4	57.5	7.75	11.97
February 2008	42.0	53.5	8.95	11.98
March 2008	46.5	51.0	10.01	12.00
April 2008	49.2	56.5	11.05	13.49
May 2008	55.6	50.2	10.90	12.10

(1) Chilean pesos per share of Common Stock reflect the price at the trade date and have not been restated to constant real pesos.

On June 25, 2002, the Company was notified of its non-compliance with NYSE requirements for continued listing as a consequence of the price of Madeco’s shares, which was below US$1.00 over a consecutive 30-trading-day period.

On December 31, 2002, NYSE informed the Company that it was also not in compliance with NYSE’s continued listing standard requiring an average market capitalization of not less than US$15 million (approximately Ch$10,779 million, historic value) over a 30-trading-day period.

On January 10, 2003, NYSE informed the Company that NYSE’s Listing and Compliance Committee had approved Madeco’s proposed course of action to resolve its non-compliance with NYSE’s listing criteria. Madeco successfully completed its capital increase and indebtedness restructuring in the first quarter 2003. As a result of its capital increase and restructuring, Madeco’s market capitalization is above NYSE’s minimum market capitalization requirement.

On May 2003, the Company implemented a share to ADS ratio change which became effective on May 12, 2003. The ratio of shares to ADS changed from 1 ADS = 10 shares of common stock to 1 ADS = 100 share of common stock. This ratio change, together with the capital increase discussed above was implemented by Madeco to attempt to comply with the NYSE’s continuing listing requirements.

On May 21, 2003 NYSE informed the Company that as a result of actions taken to meet the minimum security price and minimum market capitalization continued listing requirements, the Company regained compliance with both requirements. There can be no assurance that the Company will meet the NYSE continued listing requirements in the future.

ITEM 10. Additional Information

Memorandum and Articles of Association

Provided below is a summary of certain material information found in the Company’s bylaws and provisions of current Chilean law. This summary is not complete. For more information relating to the items discussed in this summary, you are encouraged to read the bylaws which we have filed as an exhibit to the Annual Report on Form 20-F for the year 2002.

Registration and Corporate Purposes

Madeco S.A. is an open stock corporation (sociedad anonima abierta) organized by means of a public deed (escritura publica) dated April 3, 1944, the abstract of which was recorded on Folio 1,099, No. 946 of Santiago’s Registry of Commerce in 1944 and published in Chile’s Official Gazette on May 4, 1944. Its existence was approved by a Decree No. 1740 of the Ministry of Finance, dated April 26, 1944, recorded on Folio 1,105, No. 947 of Santiago’s Registry of Commerce in 1944, published in the Official Gazette as of May 4, 1944 and recorded at the Securities Registry of the Chilean Superintendencia de Valores y Seguros (Superintendency of Securities and Insurance, or “SVS”) under No. 251 on July 20, 1984.

As set forth in Article 4 of Madeco’s bylaws, its purpose is to manufacture processed products from metal and metal alloys, to engage in other businesses relating to such production, and the exploration and development of ore deposits and mining rights, among other businesses.

Directors

Under the Ley de Sociedades Anónimas (Chilean Corporations Law), a corporation may not enter into a contract or agreement in which a director has a direct or indirect interest (i.e., a conflicting interest transaction) without prior approval by the Board of Directors, and only if the terms of the conflicting interest transaction are similar to those of an arm’s length transaction.

If the conflicting interest transaction involves a “material amount,” the Board of Directors is required to produce a statement declaring in advance that the conflicting interest transaction is similar in its terms to an arm’s length transaction. A conflicting interest transaction is deemed to involve a “material amount” if the amount involved is both greater than UF2,000 (as of May 31, 2008, approximately US$83,668) and exceeds 1% of the assets of the corporation, or if the amount exceeds UF20,000 (as of May 31, 2008, approximately US$836,678) regardless of the size of the corporation.

If the Board of Directors believes that it is not possible to ascertain whether the conflicting interest transaction is similar to an arm’s length transaction, it may approve or reject the conflicting interest transaction, or appoint independent advisors to make such a determination, in all these cases, with the exclusion of the interested directors. If the Board appoints independent advisors, the report prepared by the advisors will be made available to the shareholders and the Board of Directors for 20 business days from the date the report was received from the independent advisors. The shareholders will be notified in writing of the receipt of the report. After this period the Board may approve or reject the conflicting interest transaction, but the Board is not required to follow the independent advisors’ conclusion. The Board may treat the conflicting interest transaction and the report as confidential information. Shareholders representing at least a 5% of the voting sha res of the Company may request the Board to call a shareholders’ meeting in order to approve or reject the conflicting interest transaction by a two-thirds majority of the outstanding voting shares.

All decisions adopted by the Board in respect of the conflicting interest transaction must be reported to the next following shareholders’ meeting. The controller of the corporation or the related party which intends to enter into the conflicting interest transaction shall make available to the Board of Directors, at the time the transaction is being considered by the Board, all information relating to the transaction filed with any non-Chilean regulatory entities or stock exchanges.

If a suit for damages arises from such a transaction, the defendant (i.e., one or more directors, the controller, a related party, or all of them) bears the burden of proof that the transaction was equally as or more beneficial to the corporation than an arm’s length transaction, unless the conflicting interest transaction was previously approved by the shareholders.

The amount of any director’s remuneration is established each year at the annual Shareholders’ Meeting. Directors are prohibited from borrowing or otherwise making use of corporate money or assets for their own benefit, unless previously authorized by the Board of Directors. Directors are also prohibited from borrowing or otherwise making use of corporate money or assets for the benefit of companies in which such directors are either directors or owners of a 10% interest or more, unless previously authorized by the Board of Directors. However, the shareholders’ authorization is not required. These rules can only be modified by law.

It is not necessary to hold shares of the company to be elected a director, and there is no age limit established for the retirement of directors.

Rights, Preferences and Restrictions Regarding Shares

At least thirty percent of the company’s net profits for each fiscal year is required to be distributed in cash to the shareholders, unless the shareholders unanimously decide otherwise and except in the case the Company has unabsorbed prior year losses. Any remaining profits may be used to establish a reserve fund (that may be capitalized at any time, amending the corporate bylaws by the vote of a majority of the voting stock issued) or to pay future dividends.

Compulsory minimum dividends (i.e., at least 30% of the company’s net profits for each fiscal year) become due thirty days after the date on which the shareholders’ meeting has approved the distribution of profits in the fiscal year. Any additional dividends approved by the shareholders become due on the date set by the shareholders or the Board of Directors if previously empowered by the Shareholders at the Annual Shareholders’ Meeting.

Accrued dividends that corporations fail to pay or make available to their shareholders within certain periods are to be adjusted by the variation of the UF from the date on which those dividends became due and to the date of the actual payment. Overdue dividends will accrue annual interest established for adjustable operations over the same period.

Dividends and other cash benefits unclaimed by shareholders after five years from the date on which they became due will become the property of the Chilean Fire Department.

Madeco has only one class of shares and there are therefore no preferences or limitations on the voting rights of shareholders. Each shareholder is entitled to one vote per share. In shareholders’ meetings, determinations are generally made by a simple majority of stockholders entitled to vote. However, the Chilean Corporations Law provides that certain determinations require the vote of a two-thirds majority of the voting stock issued.

The company’s directors are elected every three years and their terms are not staggered. Chilean law does not permit cumulative voting. However, shareholders may accumulate their votes in favor of just one person or distribute their votes to more than one person. In addition, by unanimous agreement of the shareholders present and entitled to vote, the vote may be omitted and the election made by acclamation.

In the event of liquidation, the Chilean Corporations Law provides that corporations may carry out distributions to shareholders on account of a reimbursement of capital only after the payment of corporate indebtedness.

There are no redemption or sinking fund provisions applicable to the Company, nor are there any liabilities to shareholders relating to future capital calls by the corporation.

Under Chilean law, certain provisions affect any existing or prospective holder of securities as a result of the shareholder owning a substantial number of shares. The Securities Market Law establishes that (a)any person who, directly or indirectly, (i)owns 10% or more of the subscribed capital of a corporation (the “majority shareholders”) whose shares are registered in the Securities Registry of the SVS, or (ii)owns any such percentage because of the purchase of shares; and (b)all liquidators, directors, the chief executive officer and the other principal officers of any corporation whose shares are registered with the Securities Registry of the SVS, regardless of the number of shares they own, must report any purchase or sale of shares made by such persons or entities within two business days of such transactions to the SVS and to each of the stock exchanges in Chile where such corporation has securities registered. In addition, majority shareholders mus t inform the SVS and the stock exchanges with respect to whether the purchase is aimed at acquiring control of the corporation or just as a financial investment.

The Securities Market Law also provides that when one or more persons intend to takeover a corporation subject to oversight by the SVS, they must give prior public notice. This notice must include the price to be offered per share and the conditions of the proposed transaction, including the expected manner of acquiring the shares. Chapter XXV of the Securities Market Law considers that controlling shareholders share with minority shareholders the benefits of a change of control, by requiring that certain share acquisitions be made pursuant to a tender offer.

The Chilean Corporations Law provides shareholders with preemptive rights. The Act requires that options to purchase representing stock capital increases in corporations and debentures duly convertible into stock of the issuing corporation, or any other securities extending future rights over such stock, must be offered preferably, at least once, to existing shareholders, proportionally to the number of shares owned by them. A corporation must distribute any bonus stock in the same manner.

The Chilean Corporations Law also provides shareholders with a right to withdraw from a corporation in certain situations. Unless there is an ongoing bankruptcy proceeding, if a Shareholders’ Meeting approves any of the following matters, dissenting shareholders will be automatically entitled to withdraw from the corporation upon payment by the corporation of the market value of their shares:

• conversion of the corporation into a different type of legal entity;
• merger of the corporation;
• disposition of 50% or more of the assets of the corporation, whether or not including the disposition of liabilities;
• guarantee of a third party’s liabilities with collateral exceeding 50% of the corporation’s assets;
• establishment of preferences in connection with a series of shares, or any other modification of existing preferences, in which case only dissenting shareholders in the affected series will have the right to withdraw; and
• curing certain errors or defects, affecting the corporate charter or amending the bylaws in respect of one or more of the matters listed above.

In addition, shareholders may withdraw if a person becomes the owner of two-thirds of the outstanding shares of the corporation as a consequence of a share acquisition and such person does not make a tender offer for the remaining shares within 30 days.

The Company’s bylaws do not provide for additional circumstances under which shareholders may withdraw.

Action Necessary to Change the Rights of Holders of Stock

Rights of stockholders are established by law and pursuant to the bylaws of a corporation. Any change to the rights of stockholders must be adopted by an absolute majority of stockholders or, in some cases, by a two-thirds majority vote, as discussed above. However, the amendment of certain rights requires a unanimous vote of the shareholders, including the right of shareholders to receive at least 30% of the net profits for each fiscal year. Notwithstanding the preceding, no decision of the shareholders’ meeting can deprive a shareholder from property over the stock.

The Company’s bylaws do not contemplate additional conditions in connection with matters described in this subsection.

Shareholders’ Meetings

Annual shareholders’ meetings are to be held during the months of February, March or April of each year. During the meetings, determinations are made relating to particular matters, matters that may or may not be specifically indicated in the notice of such meeting.

The quorum for a shareholders’ meeting is established by the presence, in person or by proxy, of shareholders representing at least an absolute majority of the issued voting stock of Madeco; if a quorum is not present at the first meeting, the meeting can be reconvened and upon the meeting being reconvened, shareholders present at the reconvened meeting are deemed to constitute a quorum regardless of the percentage of the voting stock represented. In that case, decisions will be made by the absolute majority of stock with voting rights present or otherwise represented. The following matters are specifically reserved for annual meetings:

1. review of the state of the corporation and of the reports of internal and independent auditors, and the approval or rejection of the annual report, balance sheet, financial statements and records submitted by the officers or liquidators of the corporation;
2. distribution of profits, including the distribution of dividends;
3. election or revocation of regular and alternate Board members, liquidators and management supervisors; and
4. determination of the remuneration of the Board members, designation of a newspaper to publish the notice of meetings and, in general, any other matter to be dealt with by the annual meeting being of corporate interest and not specifically reserved to extraordinary shareholders’ meetings.

Extraordinary shareholders’ meetings may be held at any time, when required by corporate necessity. During extraordinary meetings, determinations are made relating to any matter which the law or the company’s bylaws reserve for consideration by such extraordinary meetings, which matters shall be expressly set forth in the relevant notice. Whenever in an extraordinary shareholders’ meeting determinations must be made relating to matters specifically reserved to annual meetings, the operation and decisions of such extraordinary meeting will follow the requirements applicable to annual meetings. The following matters are specifically reserved for extraordinary meetings:

1. dissolution of the corporation;
2. transformation, merger or spin off of the corporation and amendments to its bylaws;
3. issuance of bonds or debentures convertible into stock;
4. transfer of corporate fixed assets and liabilities; and
5. guarantees of third parties’ obligations, except when these third parties are affiliated companies (in which case approval of the Board of Directors is sufficient).

In addition to the above, annual and extraordinary shareholders’ meetings must be called by the Board of Directors in the following circumstances:

1. when requested by shareholders representing at least 10% of issued stock; and
2. when required by the SVS.

Only holders of stock registered in the Record of Shareholders at least five days before the date of the pertinent meeting may participate with the right to be heard and vote in shareholders’ meetings. Directors and officers other than shareholders may participate in shareholders’ meetings with the right to be heard. Other individuals, regardless of whether or not those persons are shareholders themselves may represent shareholders at meetings. Representation must be conferred before the meeting, in writing, and for the total number of shares held by the shareholder.

Limitations on the Right to Own Securities

The right to own any kind of property is guaranteed by the Chilean Constitution, and the Chilean Corporations Law does not contain any general limitation regarding the right to own securities. There are, however, certain limitations on the right of foreigners to own securities of Chilean corporations, but only for certain special types of companies. Madeco is not affected by these limitations, and Madeco’s bylaws do not contain limitations or restrictions in this regard.

Takeover Defenses

Madeco’s bylaws do not contain any provisions that would have the effect of delaying, deferring or preventing a change in control of Madeco and that would operate only with respect to a merger, acquisition or corporate restructuring involving Madeco (or any of its subsidiaries).

Ownership Threshold

Madeco’s bylaws do not contain any ownership threshold above which shareholder ownership must be disclosed. For a description of the ownership thresholds mandated by Chilean law, see “Item 10. Additional Information — Rights, Preferences and Restrictions Regarding Shares”.

Changes in Capital

Madeco’s bylaws do not impose any conditions that are more stringent than those required by law for effecting changes in the capital of the Company.

Material Contracts

In December 2004, the Company entered into a 7-year local Series D bond contract for a total amount of UF1.8 million, with a fixed 5.0% annual interest rate.

Madeco had prepaid all local Series D bonds as of June 10, 2008, for a remaining value of UF1,130,299 equivalent to Ch$22,710 million (or equivalent to US$46.97 million at the Ch$483.55 to US$1.00 at the observed exchange rate on June 10, 2008). To pay these bonds, Madeco used a short-term bridge loan with Banco ITAU that includes an option for Madeco to refinance with a long-term loan with a structure similar to that of the Series D bond.

In September 2005, Madeco prepaid all the Credit Rescheduling Agreements subscribed by the Company with its creditor banks on December 18, 2002, freeing it from the restrictions pertaining to the agreements mentioned above.

On June 5, 2006, the Company refinanced a total of US$50 million or Ch$26,680 million (historic value) of its financial debt by means of a 5-year term club deal loan, (US$ 28.6 million or Ch$15,261 million (historic value) was lent by local banks and the remaining US$ 21.4 million or Ch$11,419 million (historic value) was lent by off-shore banks). Approximately US$12 million or Ch$6,403 million (historic value) of this credit was used to prepay liabilities of the Company with Quiñenco, another US$13 million or Ch$6,937 million (historic value) was used to repay a short-term bridge loan that Banco BBVA had granted pending a capital increase, and the remaining US$25 million or Ch$13,340 million (historic value) was utilized for financing working capital requirements. During 2006, US$12.2 million or Ch$6,510 million (historic value) was paid of the local part of this credit and in March 2007, the remainder was prepaid for an amount of US$16.4 million or Ch$8,751 million (historic value). The off-shore part of the credit will be paid according to the contract, starting in June 2008. As of April 30, 2008, the syndicated banks had authorized the Nexans Transaction.

As described in Item 4, on November 15, 2007, the Company enterd into a framework agreement with Nexans whereby Madeco would sell to Nexans its Wire & Cable unit's assets, setting the purchase price at US$448 million in cash plus 2.5 million shares in Nexans (representing a an interest in Nexans of approximately 8.9%). On February 21, 2008, a purchase agreement formalizing this transaction was signed by both companies. The transaction is expected to completed before September 30, 2008, subject to regulatory approvals and certain conditions. For further details regarding this purchase agreement, a copy is included as part of this annual report as exhibit 4.3. 

Exchange Controls

The Central Bank is responsible for, among other things, monetary policies and exchange controls in Chile. See “Item 3. Key Information - Exchange Rates”. Foreign investments can be registered with the Foreign Investment Committee under Decree Law No. 600 - registration which grants the investor access to the Formal Exchange Market - or with the Central Bank under Chapter XIV of the Central Bank Foreign Exchange Regulations.

Effective April 19, 2001, the Central Bank abrogated the then existing Chapter XXVI of the Central Bank Foreign Exchange Regulations (“Chapter XXVI”), which addressed issuances of ADSs by a Chilean company, and issued an entirely new set of Foreign Exchange Regulations (the “2001 Foreign Exchange Regulations”), virtually eliminating all the restrictions and limitations that had been in force up to that date. The 2001 Foreign Exchange Regulations were based upon the general principle that foreign exchange transactions can be done freely in Chile by any person, notwithstanding the power conferred by law to the Central Bank of imposing certain restrictions and limitations on such transactions.

With the issuance of the 2001 Foreign Exchange Regulations, the approval by the Central Bank required for access to the Formal Exchange Market was replaced with the requirement of disclosure of the relevant transactions to the Central Bank. However, some foreign exchange transactions, notably foreign loans, capital investment or deposits, continued to be subject to the requirement of being effected through the Formal Exchange Market.

The 2001 Foreign Exchange Regulations, among other things, eliminated the following restrictions:

1) prior authorization by the Central Bank for the entry of capital in connection with foreign loans, investment, capital contribution, bonds and ADRs;
2) prior authorization by the Central Bank for the remittance of capital in connection with repatriation of capital, dividends and other benefits related to capital contributions and investment, and prepayment of foreign loans;
3) minimum risk classification restrictions and terms for the issuance of bonds;
4) restrictions to the issuance of ADSs. Therefore, the rules established under Chapter XXVI of the previous Foreign Exchange Regulations were abrogated; and
5) mandatory reserve deposits for foreign capital.

The abrogation of Chapter XXVI by the 2001 Foreign Exchange Regulations implied that the issuance of ADSs by a Chilean company remained subject to the rules contained in Chapter XIV of such regulations, according to which credits, deposits, investments and capital contributions coming from abroad must be effected through the Formal Exchange Market.

According to the 2001 Foreign Exchange Regulations, the foreign exchange transactions performed before April 19, 2001, remained subject to the regulations in effect at the time of the transactions, unless the interested parties elected the applicability of the 2001 Foreign Exchange Regulations, thereby expressly waiving the applicability of the regulations in force at the time of the execution of the respective transaction.

Effective March 1, 2002, the Central Bank abrogated the then existing Central Bank Foreign Exchange Regulations, i.e. the 2001 Foreign Exchange Regulations, and issued an entirely new set of Foreign Exchange Regulations (the “New Regulations”), thereby continuing the liberalization of the foreign exchange regulations. As the 2001 Foreign Exchange Regulations, the New Regulations are also based upon the general principle that foreign exchange transactions can be done freely in Chile by any person, notwithstanding the power conferred by law to the Central Bank of imposing certain restrictions and limitations on such transactions.

The New Regulations also require the disclosure of the relevant transaction to the Central Bank and that some foreign exchange transactions, notably foreign loans, capital investments or deposits, be effected through the Formal Exchange Market.

The issuance of ADSs by a Chilean company remains subject to the rules contained in Chapter XIV. These rules were partly amended in the New Regulations, which allow the use of proceeds from a foreign credit, deposit, investment or capital contribution directly abroad, i.e., without delivering the currency into Chile. The direct use abroad of the proceeds of a foreign credit, deposit, investment or capital contribution remain subject to the obligation of informing the Central Bank of the transaction.

The New Regulations have also simplified the forms required to provide the information to the Central Bank, so as to reduce the time needed to effect foreign exchange transactions by foreign investors in Chile.

The New Regulations contain a transitory norm establishing that foreign exchange transactions performed before April 19, 2001, remain subject to the regulations in effect at the time of the transactions, unless the interested parties elect the applicability of the New Regulation, thereby expressly waiving the applicability of the regulations in force at the time of the execution of the relevant transaction.

A Foreign Investment Contract was entered into among the Central Bank, Madeco and the Depositary pursuant to Article 47 of the Central Bank Act and Chapter XXVI. According to Chilean law, a contract is ruled by the law in effect at the time of the execution of the contract. Therefore, the Foreign Investment Contract entered into among the Central Bank of Chile, Madeco and the Depositary is ruled by the foreign exchange regulations in force before April 19, 2001, among which is Chapter XXVI.

Absent of the Foreign Investment Contract, under Chilean exchange controls in force until April 19, 2001, investors would not have been granted access to the Formal Exchange Market for the purpose of converting Chilean pesos to U.S. dollars and repatriating from Chile amounts received in respect of deposited shares or shares withdrawn from deposit on surrender of ADRs (including amounts received as cash dividends and proceeds from the sale in Chile of the underlying shares and any rights with respect thereto). In December 1999, amendments were introduced in Chapter XXVI whereby, among other things, the Central Bank was authorized to reject applications under such regulations without expression of cause. In resolving such applications, the Central Bank was required to take into account the situation of the balance of payments and the stability of the capital accounts. However, the Central Bank was authorized to require certain conditions of the applicants prior to resolving on the appl ications. In April 2000, Chapter XXVI was again amended in order to incorporate, in addition to shares issued by Chilean corporations, quotes of investment funds as eligible to be converted into ADSs. Chapter XXVI did not require delivery of a new application in case of the entry of U.S. dollars intended for the acquisition of shares not subscribed by the shareholders or by the transferees of the options to subscribe the shares.

Under Chapter XXVI and the Foreign Investment Contract, the Central Bank agreed to grant to the Depositary, on behalf of ADR holders, and to any non-Chilean resident investor who withdrew Shares upon surrender of ADRs (such Shares being referred to herein as “Withdrawn Shares”) access to the Formal Exchange Market to convert Chilean pesos to U.S. dollars (and to remit such dollars outside of Chile) in respect of Shares represented by ADSs or Withdrawn Shares, including amounts received as (a) cash dividends, (b) proceeds from the sale in Chile of Withdrawn Shares (subject to receipt by the Central Bank of a certificate from the holder of the Withdrawn Shares (or from an institution authorized by the Central Bank) that such holder’s residence and domicile were outside Chile and a certificate from a Chilean stock exchange (or from a brokerage or securities firm established in Chile) that such Withdrawn Shares had been sold on a Chilean exchange), (c) proceeds from the sale in Chile of pre-emptive rights to subscribe for and purchase additional Shares, (d) proceeds from the liquidation, merger or consolidation of the company and (e) other distributions, including, without limitation, those resulting from any recapitalization, as a result of holding Shares represented by ADSs or Withdrawn Shares. Access to the Formal Exchange Market in the case of (a), (b), (c) and (d) above would be available for only five working days following the sale of the shares on the stock exchange. Transferees of Withdrawn Shares would not be entitled to any of the foregoing rights under Chapter XXVI unless the Withdrawn Shares were redeposited with the Custodian. Investors receiving Withdrawn Shares in exchange for ADRs would have the right to redeposit such Shares in exchange for ADRs, provided that certain conditions to redeposit were satisfied. For a description of the Formal Exchange Market, see “3A Exchange Rates”. Alternatively, according to the amendments introduced to Chapter XXVI in December 1999, in case of Withdrawn Shares and their subsequent sale in a stock exchange, the Chilean peso proceeds obtained thereby could be converted into U.S. dollars in a market different from the Formal Exchange Market within five business days from the date of the sale.

Chapter XXVI provided that access to the Formal Exchange Market in connection with the sale of Withdrawn Shares or distributions thereon would be conditioned upon receipt by the Central Bank of a certification by the Depositary or the Custodian, as the case might have been, that such Shares had been withdrawn in exchange for delivery of the pertinent ADRs and receipt of a waiver of the benefits of the Foreign Investment Contract with respect thereto (except in connection with the proposed sale of the Shares) until such Withdrawn Shares were redeposited. Chapter XXVI also provided that access to the Formal Exchange Market in connection with dividend payments was conditioned on certification by Madeco to the Central Bank that a dividend payment had been made. The provision contained in Chapter XXVI that established that access to the Formal Exchange Market in connection with dividend payments was conditioned on certification by Madeco to the Central Bank that any applicable tax had been with held was eliminated on November 23, 2000.

Chapter XXVI and the Foreign Investment Contract provided that a person who brought foreign currency into Chile, including U.S. dollars, to purchase Shares entitled to the benefit of the Foreign Investment Contract was required to convert such foreign currency into Chilean pesos on the same date and had five banking business days within which to invest in Shares in order to receive the benefit of the Foreign Investment Contract. If such person decided within such period not to acquire Shares, such person could access the Formal Exchange Market to reacquire foreign currency, provided that the applicable request was presented to the Central Bank within seven banking days of the initial conversion into pesos. Shares acquired as described above could be deposited in exchange for ADRs and receive the benefit of the Foreign Investment Contract, subject to receipt by the Central Bank of a certificate from the Depositary that such deposit had been effected and that the related ADRs had been issued and receipt by the Custodian of a declaration from the person making such deposit waiving the benefit of the Foreign Investment Contract with respect to the deposited Shares.

Chapter XXVI required foreign investors acquiring shares or securities in Chile to maintain a mandatory reserve (the “Mandatory Reserve”) for one year in the form of a non-interest bearing U.S. dollar deposit with the Central Bank, or to pay to the Central Bank a non-refundable fee (the “Fee”). Such reserve requirement was imposed with respect to investments made by foreign investors to acquire shares or securities in the secondary market, but did not apply to capital contributions made for purposes of paying-in capital for a newly created company or increasing the capital of an existing company. As of June 1, 1999, the Mandatory Reserve was not applied to foreign investments made for purposes of acquiring shares of a stock corporation, provided that the investor was entitled to the benefit of Chapter XXVI, and that such acquisition was consummated in accordance with the provisions of Chapter XXVI. On September 17, 1998, the Central Bank reduced the Man datory Reserve to 0%. 

Access to the Formal Exchange Market under any of the circumstances described above was not automatic. Pursuant to Chapter XXVI, such access required approval of the Central Bank of Chile based on a request presented through a banking institution established in Chile within five business days from the occurrence of any of the events described in letters (a), (b), (c) and (d) above. Pursuant to the Foreign Investment Contract, if the Central Bank had not acted on such request within seven banking days, the request would be deemed approved.

Under current Chilean law, the Foreign Investment Contract cannot be changed unilaterally by the Central Bank. No assurance can be given, however, that new restrictions applicable to the holders of ADRs, the disposition of underlying Shares or the repatriation of the proceeds from such disposition will not be reinstated in the future by the Central Bank, nor can there be any assessment of the possible duration or impact of such restrictions.

On January 1, 2004, a Free Trade Agreement (FTA) between Chile and the U.S. became effective. This state-of-the-art agreement, eliminates bilateral tariffs, lowers trade barriers, promotes economic integration and expands opportunities for both countries. As a result of this agreement, both countries are negotiating a bilateral tax treaty.

Taxation

Chilean Tax Considerations

The following discussion relates to Chilean income tax laws presently in force, including Ruling No. 324 of January 29, 1990 of the Chilean Internal Revenue Service and other applicable regulations and rulings in effect on the date of this Annual Report, all of which are subject to change. The discussion summarizes the principal Chilean income tax consequences of an investment in the ADSs or Shares by a person who is neither domiciled in nor a resident of Chile or by a legal entity that is not organized under the laws of Chile and does not have a permanent establishment located in Chile (any such individual or entity, a “Foreign Holder”). For purposes of Chilean tax law, an individual holder is a resident of Chile if he has resided in Chile for more than six consecutive months in one calendar year or for a total of six months, whether consecutive or not, in two consecutive tax years. The discussion is not intended as tax advice to any particular investor, which can be rend ered only in light of that investor’s particular tax situation.

Under Chilean law, provisions contained in statutes such as tax rates applicable to foreign investors, the computation of taxable income for Chilean purposes and the manner in which Chilean taxes are imposed and collected may only be amended by another statute. In addition, the Chilean tax authorities enact rulings and regulations of either general or specific application and interpret the provisions of Chilean tax law. Chilean tax may not be assessed retroactively against taxpayers who act in good faith relying on such rulings, regulations and interpretations, but Chilean tax authorities may change these rulings, regulations and interpretations prospectively. Currently Chile and U.S. are negotiating a bilateral tax treaty.

Cash Dividends and Other Distributions

Cash dividends paid by Madeco with respect to the ADSs or Shares held by a Foreign Holder will be subject to a 35% Chilean withholding tax, which is withheld and paid over to the Chilean tax authorities by Madeco (the “Withholding Tax”). A credit against the Withholding Tax is available based on the level of corporate income tax actually paid by Madeco on the income to be distributed (the “First-Category Tax”); however, this credit does not reduce the Withholding Tax on a one-for-one basis because it also increases the base on which the Withholding Tax is imposed. In addition, if Madeco distributes less than all of its distributable income, the credit for First-Category Tax paid by Madeco is proportionately reduced. Presently, the First-Category Tax rate is 17%. The example below illustrates the effective Chilean Withholding Tax burden on a cash dividend received by a foreign holder, assuming a Withholding Tax rate of 35%, an effective First-Category Tax rate of 17 % and a distribution of 30% of the consolidated net income of Madeco distributable after payment of the First-Category Tax:
 

Madeco taxable income	100
First-Category Tax (17% of Ch$100)	(17)
Net distributable income	83
Dividend distributed (30% of net distributable income)	24.9
Withholding Tax (35% of the sum of Ch$24.9 dividend plus Ch$5.1 First-Category Tax paid)	(10.5)
Credit for 30% of First-Category Tax	5.1
Net additional tax withheld	(5.4)
Net dividend received	19.5
Effective dividend withholding rate	21.69%

In general, the effective dividend Withholding Tax rate, after giving effect to the credit for the First-Category Tax, can be calculated using the following formula:

                                                                                                     (Withholding Tax Rate) - (First Category Tax Rate)
Effective Dividend Withholding Tax Rate =                           1 – (First Category Tax Rate)

Under Chilean income tax law, dividends generally are assumed to have been paid out of the company’s oldest retained profits for purposes of determining the level of First-Category Tax that was paid by the company. For information as to the retained earnings of the Company for tax purposes and the tax credit available on the distribution of such retained earnings, see Note 18 to the Consolidated Financial Statements. The effective rate of Withholding Tax to be imposed on dividends paid by Madeco will vary depending upon the amount of First Category Tax paid by the Company on the earnings to which the dividends are attributed. The effective rate for dividends attributed to earnings from 1991 until 2001, for which the First Category Tax was 15%, generally was 23.5%. For 2002, the First Category Tax rate was 16%, which resulted in an effective rate of Withholding Tax of 22.6%, and for 2003, the First Category Tax rate was 16.5%, resulting in an effective rate of withholding tax of 22.16 % for the year. From 2004 onwards, the First Category Tax rate will be 17%, which will result in an effective rate of withholding tax of 21.69%.

For dividends attributable to the Company’s profits during years when the First Category Tax was 10% (before 1991), the effective dividend Withholding Tax rate will be 27.8%. However, whether the First Category Tax is 10%, 15%, 16%, 16.5% or 17%, the effective overall combined tax rate imposed on the Company’s distributed profits will be 35%.

Dividend distributions made in property would be subject to the same Chilean tax rules as cash dividends based on the fair market value of such property. Stock dividends and the distribution of preemptive rights are not subject to Chilean taxation.

Capital Gains

Under current tax law, the gain from the sale or other disposition by a Foreign Holder of ADSs (or ADRs evidencing ADSs) outside Chile will not be subject to Chilean taxation. The deposit and withdrawal of Shares in exchange for ADRs will not be subject to any Chilean taxes.

Gain recognized on a sale or exchange of shares (as distinguished from sales or exchanges of ADRs evidencing ADSs representing such Shares) may be subject to both the First-Category Tax and the Withholding Tax (the former being creditable against the latter) if either, (i) the Foreign Holder has held the Shares for less than one year since exchanging ADSs for the Shares, (ii) the Foreign Holder acquired and disposed of the Shares in the ordinary course of its business or as a habitual trader of shares, or (iii) the Foreign Holder and the purchaser of the Shares are “related parties” within the meaning of Article 17, Number 8, of Decree Law Nº 824 of 1974, the Chilean Income Tax Law. In all other cases, gain on the disposition of Shares will be subject only to a capital gains tax which is assessed at the same rate as the First Category Tax (currently imposed at a rate of 17%).

Gain recognized in the transfer of shares that have a high presence in the stock exchange, however, is not subject to capital gains tax in Chile, provided that the Shares are transferred in a local stock exchange, in other authorized stock exchanges (up to this date, the New York Stock Exchange, the London Stock Exchange and the Madrid Stock Exchange have been authorized for these purposes), or within the process of a public tender of shares governed by the Chilean Securities Market Act. The shares must also have been acquired either in a stock exchange, within the referred process of a public tender of shares governed by the Chilean Securities Market Act, in an initial public offer of shares resulting from the formation of a corporation or a capital increase of the same, or in an exchange of convertible bonds. Shares are considered to have a high presence in the stock exchange when they (i) are registered in the Securities Registry, (ii) are registered in a Chilean Stock exchange, and (ii i) have an adjusted presence equal to or above 25%. To calculate the adjusted presence of a particular Share, the aforementioned regulation states that, the number of days in which the operations regarding the stock exceeded, in Chilean pesos, the equivalent of UF200 (as of May 31, 2008, approximately US$8,367) within the previous 180 business days of the stock market, must be divided by 180, multiplied by 100, and expressed in a percentage value. The referred tax regime does not apply in case the transaction involves an amount of Shares that would allow the acquirer to take control of the publicly traded corporation, in which case the ordinary tax regime referred in the previous paragraph will apply, unless the sale complies with one of the following conditions: (i) the transfer is part of a tender offer governed by the Chilean Securities Market Act; or(ii) the transfer is done in a Chilean stock exchange, without substantially exceeding the market price.

Capital gains obtained in the sale of shares that are publicly traded and have a high presence in a stock exchange are also exempt from capital gains tax in Chile when the sale is made by “foreign institutional investors”, such as mutual funds and pension funds, provided that the sale is made in a stock exchange or in accordance with the provisions of the Securities Market Law, or in any other form authorized by the Superintendencia de Valores y Seguros ( the SVS is equivalent to the Securities and Exchange Commission in the U.S.). To qualify as a foreign institutional investor, the referred entities must be formed outside of Chile, not have a domicile in Chile, and they must be at least one of the following:

a) An investment fund that offers its shares or quotas publicly in a country with an investment grade for its public debt, according to a classification performed by an international risk classification entity registered with the SVS;

b)  An investment fund registered with a regulatory agency or authority from a country with an investment grade for its public debt, according to a classification performed by an international risk classification entity registered with the SVS, provided that its investments in Chile constitute less than 30% of the share value of the fund, including deeds issued abroad representing Chilean securities, such as ADRs of Chilean companies;

c) An investment fund whose investments in Chile represent less than 30% of the share value of the fund, including deeds issued abroad representing Chilean securities, such as ADRs of Chilean companies, provided that not more than 10% of the share value of the fund is directly or indirectly owned by Chilean residents;

d) A pension fund, i.e., those formed exclusively by natural persons that receive pensions out of an accumulated capital in the fund;

e) A Foreign Capital Investment Fund, as defined in Law No18.657; or

f) Any other foreign institutional investor that complies with the requirements set forth through general regulations for each category of investor, prior information from the SVS and the Chilean tax authority or Servicio de Impuestos Internos (“SII”).

The foreign institutional investor must not directly or indirectly participate in the control of the corporations issuing the shares it invests in nor possess or participate in 10% or more of the capital or the profits of the same corporations.

Other requirements for the exemption to apply are that the referred foreign institutional investors must execute a written contract with a bank or a stock broker, both incorporated in Chile. In this contract, the bank or stock broker undertake to perform the purchase and sale orders, as well as to verify the applicability of the tax exemption and inform the SII of the investors it operates with and the transactions it performs. Finally, the foreign institutional investor must register with the SII by means of a sworn statement issued by the entities referred above (bank or stock broker).

The tax basis of Shares received in exchange for ADRs will be the acquisition value of the Shares on the date of exchange. The valuation procedure set forth in the Deposit Agreement, which values Shares which are being exchanged at the highest price at which they trade on the Santiago Stock Exchange on the date of the exchange, will determine the acquisition value for this purpose. Consequently, the surrender of ADRs for Shares and the immediate sale of the Shares for the value established under the Deposit Agreement will not generate a capital gain subject to taxation in Chile.

The exercise of preemptive rights relating to the Shares will not be subject to Chilean taxation. Any gain on the sale of preemptive rights relating to the Shares will be subject to both the First-Category Tax and the Withholding Tax (the former being creditable against the latter).

Other Chilean Taxes

There are no Chilean inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of ADSs by a Foreign Holder, but such taxes generally will apply to the transfer at death or by gift of the Shares by a Foreign Holder. There are no Chilean stamp, issue, registration or similar taxes or duties payable by Foreign Holders of ADSs or Shares.

Withholding Tax Certificates

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

United States Tax Considerations

The following is a summary of certain United States federal income tax consequences of the ownership of Shares or ADSs by an investor that is a U.S. Holder (as defined below) that holds the Shares or ADSs as capital assets. This summary does not purport to address all material tax consequences of the ownership of Shares or ADSs, and does not take into account the specific circumstances of any particular investors (such as tax-exempt entities, certain insurance companies, broker-dealers, traders in securities that elect to mark-to-market, investors liable for alternative minimum tax, investors that actually or constructively own 10% or more of the voting stock of the company, investors that hold Shares or ADSs as part of a straddle or a hedging or conversion transaction or U.S. Holders (as defined below) whose functional currency is not the U.S. dollar), some of which may be subject to special rules. This summary is based on the tax laws of the United States (including the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions) as in effect on the date hereof, all of which are subject to change (or changes in interpretation), possibly with retroactive effect.

For purposes of this discussion, a “U.S. Holder” is any beneficial owner of Shares or ADSs that is (i) a citizen or resident of the United States, (ii) a corporation or partnership organized under the laws of the United States or any State, (iii) an estate whose income is subject to United States federal income tax regardless of its source or (iv) a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust. The discussion does not address any aspects of United States taxation other than federal income taxation. Investors are urged to consult their tax advisors regarding the United States federal, state and local and other tax consequences of owning and disposing of Shares and ADSs.

In general, assuming that the representations of the Depositary are true and that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms, for United States federal income tax purposes, holders of ADSs evidencing ADSs will be treated as the owners of the Shares represented by those ADSs, and exchanges of Shares for ADSs, and ADSs for Shares, will not be subject to United States federal income tax.

Cash Dividends and Other Distributions

Under the United States federal income tax laws, and subject to the passive foreign investment company (“PFIC”) rules discussed below, U.S. Holders will include in gross income the gross amount of any dividend paid (after reduction for any Chilean First-Category Tax that is credited against Chilean Withholding Tax, but before reduction for the net amount of Chilean Withholding Tax) by the company out of its current or accumulated earnings and profits (as determined for United States federal income tax purposes) as ordinary income when the dividend is actually or constructively received by the U.S. Holder, in the case of Shares, or by the Depositary, in the case of ADSs. The dividend will not be eligible for the dividends-received deduction. Dividends paid to a U.S. Holder that is a corporation are not eligible for the dividends received deduction available to corporations. Current law provides for a reduced tax rate (currently 15%) on the dividend income of an individual U.S. H older with respect to dividends paid by a domestic corporation or "qualified foreign corporation". A qualified foreign corporation generally includes a foreign corporation if (i) its shares (or ADSs) are readily tradable on an established securities market in the United States or (ii) it is eligible for benefits under a comprehensive United States income tax treaty. The ADSs are traded on the New York Stock Exchange. As a result, the company may be treated as a qualified foreign corporation. However, if the company is treated as a PFIC, as discussed below, it will not be a qualified foreign corporation. If the company is a qualified foreign corporation, dividends paid to an individual U.S. Holder with respect to Shares or ADSs should, subject to generally applicable limitations, be taxed at a maximum rate of 15%. The maximum 15% tax rate is effective with respect to dividends included in income during the period beginning on or after January 1, 2003, and ending December 31, 2008. Each U.S. Holder should c onsult its own tax advisor regarding the treatment of dividends. The amount of the dividend distribution includible in income of a U.S. Holder will be the U.S. dollar value of the Chilean peso payments made, determined at the spot Chilean peso/U.S. dollar rate on the date such dividend distribution is includible in the income of the U.S. Holder, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in income to the date such payment is converted into U.S. dollars will be treated as ordinary income or loss. Such gain or loss will generally be from sources within the United States for foreign tax credit limitation purposes.

Subject to certain generally applicable limitations, the net amount of Chilean Withholding Tax (after reduction for the credit for Chilean First-Category Tax) paid over to Chile will be creditable against the U.S. Holder’s United States federal income tax liability. For foreign tax credit limitation purposes, the dividend will be income from sources without the United States. In the case of U.S. individuals, if the reduced rate of tax on dividends applies to such holder, such limitations and restrictions will appropriately take into account the rate differential under rules similar to section 904(b)(2)(B) of the Internal Revenue Code. The rules governing foreign tax credits are complex and U.S. Holders should consult their tax advisors regarding their application to the particular circumstances of such holder.

Pro rata distributions of Shares or preemptive rights generally are not subject to United States federal income tax. The basis of the new Shares or preemptive rights (if such rights are exercised or sold) generally will be determined by allocating the U.S. Holder’s adjusted basis in the old shares between the old Shares and the new Shares or preemptive rights received, based on their relative fair market values on the date of distribution (except that the basis of the preemptive rights will be zero if the fair market value of the rights is less than 15% of the fair market value of the old Shares at the time of distribution, unless the U.S. Holder irrevocably elects to allocate basis between the old Shares and the preemptive rights). The holding period of a U.S. Holder for the new Shares or preemptive rights will include the U.S. Holder’s holding period for the old Shares with respect to which the new Shares or preemptive rights were issued.

Capital Gains

U.S. Holders will not recognize gain or loss on deposits or withdrawals of Shares in exchange for ADSs or on the exercise of preemptive rights. U.S. Holders will recognize capital gain or loss on the sale or other disposition of ADSs or Shares (or preemptive rights with respect to such Shares) held by the U.S. Holder or by the Depositary equal to the difference between the amount realized and the U.S. Holder’s tax basis in the ADSs or Shares. Any gain recognized by a U.S. Holder generally will be treated as United States source income. Consequently, in the case of a disposition of Shares or preemptive rights (which, unlike a disposition of ADSs, will be taxable in Chile), the U.S. Holder may not be able to claim the foreign tax credit for Chilean tax imposed on the gain unless it appropriately can apply the credit against tax due on other income from foreign sources. Loss generally would be treated as United States source loss.

The long-term capital gain tax rate for an individual U.S. Holder is currently 15% for sales occurring on or before December 31, 2010.

PFIC Rules

The Company believes that it was not a passive foreign investment company (a "PFIC") for United States federal income tax purposes for taxable years before to 2008, although this conclusion is subject to some uncertainty. However, this is a factual determination made annually and thus is subject to change. Even if it was not previously a PFIC, the Company may become a PFIC for 2008 and subsequent taxable years if it consummates the sale of its Wire & Cables business unit to Nexans as disclosed elsewhere in this annual report.

In general, the Company will be a PFIC with respect to a U.S. Holder if, for any taxable year in which the U.S. Holder held the Company's ADSs or Shares, either (i) at least 75% of the gross income of the Company for the taxable year is passive income or (ii) at least 50% of the value (determined on the basis of a quarterly average) of the Company's assets is attributable to assets that produce or are held for the production of passive income.  For this purpose, passive income generally includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. If the Company owns at least 25% by value of the stock of another corporation, the Company is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation's income. However, if the Company owns le ss than 25% by value of the other corporation (as in the case of Nexans shares to be received upon sale of the Wire & Cables business unit), the shares would be a passive asset and produce passive income.  Cash and investment securities generally are passive assets without regard to the purpose for which the Company holds the cash or securities

If the Company is treated as a PFIC, a U.S. Holder would be subject to special rules with respect to (i) any gain realized on the sale or other disposition of Shares or ADSs and (ii) any "excess distribution" by the Company to the U.S. Holder (generally, any distributions to the U.S. Holder in respect of the Shares or ADSs during a single taxable year that are greater than 125% of the average annual distributions received by the U.S. Holder in respect of the Shares or ADSs during the three preceding taxable years or, if shorter, the U.S. Holder's holding period for the Shares or ADSs). Under these rules, (i) the gain or excess distribution would be allocated ratably over the U.S. Holder's holding period for the Shares or ADSs, (ii) the amount allocated to the taxable year in which the gain or excess distribution was realized would be taxable as ordinary income, (iii) the amount allocated to each prior year, with certain exceptions (in particular for amounts allocated to certain years in which the Company was not a PFIC), would be subject to tax at the highest tax rate in effect for that year and (iv) the interest charge generally applicable to underpayments of tax would be imposed in respect of the tax attributable to each such year. If the Company is determined to be a PFIC for 2008, a U.S. Holder may be subject to these rules even if it sells Shares or ADSs prior to the event during 2008 that results in the Company becoming a PFIC for such year.  Even if such a U.S. Holder is not subject to an interest charge under these rules, gains may be treated as ordinary rather than as capital gains eligible for reduced rates on long term capital gains.

Special rules apply with respect to the calculation of the amount of the foreign tax credit with respect to excess distributions by a PFIC.

If the Company is treated as a PFIC, a U.S. Holder may be able to make a mark-to-market election if the Company's stock is treated as regularly traded on a registered national securities exchange or other exchange to the extent permitted by the Internal Revenue Service, or "IRS". If the election is made, the PFIC rules described above will not apply.  Instead, in general, the electing U.S. Holder will be required to include as ordinary income each year the excess, if any, of the fair market value of the Shares or ADSs at the end of the taxable year over the U.S. Holder's adjusted tax basis in the Shares or ADSs. The electing U.S. Holder will also be allowed to take an ordinary loss in respect to the excess, if any, of the adjusted tax basis in the Shares or ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). An electing U.S. Holder's tax basis in the Shares or ADSs will be adjusted to reflect any such income or loss amounts.

A U.S. holder of shares or ADSs in a PFIC can sometimes avoid the rules described above by electing to treat the company as a "qualified electing fund" under section 1295 of the Internal Revenue Code. The Company does not intend to comply with the requirements necessary to permit a U.S. Holder to make this election. U.S. Holders should consult their own tax advisors concerning the U.S. federal income tax consequences of holding Shares or ADSs if the Company is considered a passive foreign investment company in any taxable year.

Information Reporting and Backup Withholding

Dividends in respect of the Shares or ADSs and proceeds from the sale, exchange, or redemption of the Shares or ADSs may be subject to information reporting to the United States Internal Revenue Service and a backup withholding tax of 28% may apply unless the holder furnishes a correct taxpayer identification number or certificate of foreign status or is otherwise exempt from backup withholding. Generally, a U.S. Holder will provide such certification on Form W-9 and a non-U.S. Holder will provide such certification on Form W-8BEN.

Documents on Display

The constituent documents of the Company, exhibits to this and previous Annual Reports and other documents referred to herein may be inspected at the Company’s main corporate office at Ureta Cox 930, San Miguel, Santiago, Chile.

ITEM 11. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risk from interest rate changes, foreign currency fluctuations and changes in the market values of its investments.

Policies and Procedures

In the normal course of its business, the Company applies established policies and procedures to manage its exposure to changes in interest rates, foreign currencies and the fair market value of certain of its investments using a variety of financial instruments.

It is the Company’s policy to enter into foreign currency and interest rate transactions and other financial instruments only to the extent considered necessary to meet its objectives as stated above. The Company does not enter into these transactions for speculative purposes.

The following discussion about the Company’s risk management includes “forward-looking statements” that involve risks and uncertainties. Actual results could differ from those projected in the forward-looking statements. See section “Forward Looking Statements”. In addition to the inherent risks related to the operations in each of its segments and countries in which it does business, the Company faces material market risk exposures in three categories: foreign currency exchange rate risk, interest rate risk and commodity price risk. The following discussion provides additional information regarding the Company’s exposure to each of these risks as of December 31, 2007.

Foreign Currency Exchange Rate Risk

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

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

With respect to the Company’s foreign investment exposure, gains and losses from exchange rate variations are registered directly to the cumulative adjustment from foreign currency translation account included in other reserves in shareholders’ equity, without impacting the Company’s income statement. Assuming a 10% increase during 2008 of the Chilean peso/U.S. dollar exchange rate with respect to 2007 year-end balances, the impact on equity would be an increase in the Company’s cumulative translation adjustment account of approximately Ch$11,868 million.

The Company’s net exposure in Chile to U.S. dollar exchange rate risk in Chilean pesos as of December 31, 2007 was Ch$36,100 million (equivalent to US$72.7 million). Assuming a 10% increase during 2008 of the Chilean peso/U.S. dollar exchange rate with respect to 2007 year-end balances, the result would be a pre-tax accounting profit of approximately Ch$3,610 million. In addition to the Company’s net exposure in foreign investments, there are other assets and liabilities subject to foreign exchange fluctuations whose results impact the income statement. In particular, the Company maintains local currency exposures in Brazil, Argentina, Peru and Colombia, all of which could affect the income statement. Based on the year-end balances, a simultaneous increase of 10% in the exchange rate in Argentina, Brazil, Peru and Colombia of their respective local currencies in relation to the U.S. dollar during 2007 would result in a net loss of Ch$ 7,114 million.

Interest Rate Risk

Exposure to interest rate risk reflects the Company’s exposure to floating interest debt as well as debt renewals or rollovers which could be reset at higher than existing interest rates. As of December 31, 2007, approximately 33.8% of the Company’s total debt was represented by floating rate debt. The Company’s net exposure to interest rate risk as of December 31, 2007 was Ch$40,664 million. Assuming a 100 basis point, or “b.p.”, increase during 2007 in the weighted average interest rate with respect to 2007 year-end balances, the result would be an increase in net annual interest expenses of approximately Ch$281 million.

The Company has contracted debt in different currencies to take in account the possibility that a 100 b.p. increase in interest rates is more likely in certain countries than in others. In addition, a significant amount of debt is indexed to Chilean inflation (UF indexed debt), and as such, an increase in Chilean inflation will affect the total interest the Company pays on such debt.

Commodity Price Risk

The Company uses significant amounts of copper and aluminum to manufacture its products. Exposure to commodity price risk relates primarily to the Company’s metal inventories of copper and aluminum. The Company fixes product prices taking into consideration the market value of the principal raw materials it purchases in such a way that prices should normally follow trends in raw material costs (with a short time lag), thereby reducing commodity price risks. Depending on the competitive price environment and general economic conditions, the Company from time to time is unable to pass along raw material cost increases to its customers.

To hedge part of its risk of exposure to copper price fluctuations, the Company entered into derivatives contracts of this underlying asset. As of December 31, 2007, the Company had 2,500 tons of copper hedged and as of March 31, 2008, the Company had 4,500 tons of copper hedged by derivatives contracts.

During 2007, the Company sold on a consolidated basis 86,392 tons of copper and 33,771 tons of aluminum. As of December 31, 2006, the Company held inventories of copper and aluminum of 15,189 and 12,939 tons, respectively.

The following table presents the commodity inventories held by the Company for non-trading purposes as of December 31, 2007.
 

	As of December 31, 2007
	Carrying Amount	Fair Value
Copper
Tons	15,189
Value (in Ch$ million)	56,519	56,519
Aluminum
Tons	12,939
Value (in Ch$ million)	19,815	19,815

ITEM 12. Description of Securities Other than Equity Securities

 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

Evaluation of Disclosure Controls and Procedures

For the year ended December 31, 2007, the Company carried out, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Rules 13a−15(e) and 15d−15(e) under the Exchange Act). Based on their evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of December 31, 2007, the Company’s disclosure controls and procedures were effective.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a−15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, including the possibility of human error, and the circumvention of overriding of the controls and procedures, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even effective disclosure controls and procedures can only provi de reasonable assurance of achieving their control objectives.

With the participation of the Chief Executive Officer and Chief Financial Officer, the Company’s management conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 31, 2007, based on the framework and criteria established in Internal Control − Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.

As permitted by the Securities and Exchange Commission, the Company has elected to exclude an assessment of the internal controls of entities over which control was obtained during the year 2007. These entities, which are listed in Note 10 of Notes to Consolidated Financial Statements, constituted 3.9% of the Company´s total assets, as of December 31, 2007, and 3.7% and 7.1% of revenues and net income, respectively, for the year then ended.

Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this assessment, management has concluded and hereby reports that as of December 31, 2007, the Company’s internal control over financial reporting is effective in providing reasonable assurance that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is gathered and communicated to the Company’s Management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Ernst & Young Ltda., the independent registered public accounting firm that has audited our Consolidated Financial Statements, has issued an attestation report on the company’s internal control over financial reporting as of December 31, 2007.

Attestation report of the registered public accounting firm

This attestation report appears on page F-2

Changes in Internal Control Over Financial Reporting

During the period covered by this annual report there have been made the following changes which materially affected the internal control over financial reporting of our subsidiary Ficap:

• The satisfactory implementation of the remediation strategy, which was approved by the audit committee, whose main plan of action included the reassignment of certain personnel to strengthen core functions and implement programmed and access on information system SAP.

ITEM 16.

Reserved

Item 16A. Audit Committee Financial Expert

Pursuant to NYSE Rule 303A.06, Madeco has an Audit Committee that satisfies the requirements of Rule 10A-3 under the Exchange Act and certain additional requirements under NYSE Rule 303A. Messrs. Augusto Iglesias Palau and Alejandro Ferreiro Yazigi serve as Madeco’s audit committee financial experts.

Item 16B. Code Of Ethics

Madeco has adopted a code of ethics that applies to all of its employees, including the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer of Madeco S.A. It has filed the code of ethics as an exhibit to this annual report. Madeco’s code of ethics was not amended during 2007, and no waivers, either explicit or implicit, of provisions of the code of ethics were granted to its Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer in 2007.

Item 16C. Principal Accountant Fees and Services

In 2005, 2006 and 2007, the Company hired Ernst & Young as independent auditors. The table below sets forth the total amount billed by Ernst & Young for services performed in the years 2007 and 2006, respectively:
 

	(in thousands of Ch$)
	2006	2007
Audit Fees	265,312	491,296
Audit-Related Fees	189,688	113,211
Tax Fees	29,742	77,291
All Other Fees	159	143,469
Total Fees	484,901	825,267

Audit Fees

Audit fees are fees billed for the audit of the Company’s annual consolidated financial statements.

Audit-Related Fees

Audit-related fees in 2006 and 2007 include fees associated with SOX consulting, due diligence and translations.

Tax Fees

Tax fees in 2006 and 2007 were related to services for tax compliance, tax planning and tax advice.

Pre-Approval Policies and Procedures

The Audit Committee approves all audit, audit-related services, tax services and other services provided by Ernst & Young. Any service provided by Ernst & Young that is not specifically included within the scope of the audit is pre-approved by the Audit Committee prior to any engagement. The Audit Committee is permitted to approve certain fees for audit related services, tax services and other services pursuant to a de minimus exception before the completion of the engagement. In 2007, none of the fees paid to Ernst & Young were approved pursuant to the de minimus exception.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

For the year ended December 31, 2007, neither the Company nor any person acting on the Company’s behalf made any purchase of the Company’s common shares.

PART III

ITEM 17. Financial Statements

Not applicable

ITEM 18. Financial Statements

Reference is made to pages F-1 through F-118

ITEM 19. Exhibits

Exhibit  Description

1.1 Articles of Incorporation and Bylaws

4.1* Amended and Restated Loan Agreement, dated as of December 18, 2002, among Madeco S.A. as Borrower, and Bank of America, N.A. and Bankboston N.A., Nassau Branch as Lenders.

4.2* Amended and Restated Loan Agreement, dated as of December 18, 2002, among Madeco S.A. as Borrower, and Citibank, N.A., Agencia en Chile, Scotiabank Sud Americano, Banco de Chile, Dresdner Bank Lateinamerika, Banco del Estado de Chile, Banco de Credito e Inversiones, Corpbanca, Banco Bice, Banco Santander-Chile, Bankboston, N.A., Sucursal en Chile, Banco Security and Banco del Desarrollo, as Lenders.

4.3 Purchase Agreement dated as of February 21, 2008, between Madeco S.A. and Nexans

8.1 List of Subsidiaries of Madeco S.A.

11.1 Code of Ethics

12.1 Section 302 Certification of the Chief Executive Officer

12.2 Section 302 Certification of the Chief Financial Officer

13.1 Section 906 Certification of the Chief Executive Officer

13.2 Section 906 Certification of the Chief Financial Officer

* Incorporated by reference to the annual report in Form 20-F for the fiscal year ended December 31, 2002.

Signatures

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Madeco S.A.

/s/Tiberio Dall’Olio

Chief Executive Officer

Date: June 30, 2008

Audited Consolidated Financial Statements as of
December 31, 2006 and 2007 and for each of the three years in the period ended December 31, 2007
together with the Reports of Independent Registered Public Accounting Firms

Madeco S.A. and Subsidiaries

Index to the Audited Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firms:

Consolidated Financial Statements:

ThCh$ - Thousands of Chilean pesos
US$ - United States dollars
ThUS$ - Thousands of United States dollars
UF - “Unidad de Fomento”. The UF is a Chilean inflation-indexed, peso-denominated monetary
unit that is set daily based on changes in the Chilean Consumer Price Index.

Application of Constant Chilean Pesos 

The December 31, 2005 and 2006 consolidated financial statements have been restated for general price-level changes and expressed in constant Chilean pesos of December 31, 2007 purchasing power.

Report of Independent Registered Public Accounting Firm

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

We have audited the accompanying consolidated balance sheets of Madeco S.A. and its subsidiaries (the “Company”) as of December 31, 2006 and 2007, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Madeco S.A. and subsidiaries at December 31, 2006 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in Chile, which differ in certain respects from accounting principles generally accepted in the United States of America (see Note 32 to the consolidated financial statements).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 4, 2008, except for internal control over financial reporting related to Notes 28 and 32 of the 2007 consolidated financial statements for which the date is June 20, 2008, expressed an unqualified opinion thereon.

ERNST & YOUNG LTDA.

Santiago, Chile
February 4, 2008
(Except for Notes 28 and 32 for which the date is June 20, 2008)

Report of Independent Registered Public Accounting Firm

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

We have audited Madeco S.A. and Subsidiaries’ internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). Madeco S.A.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of una uthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in Management’s Report on Internal Control over Financial Reporting included in item 15 of this annual report, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Cedsa S.A., which is included in the 2007 consolidated financial statements of Madeco S.A. and constituted 3.9% of total assets as of December 31, 2007 and 3.7% and 7.1% of revenues and net income, respectively, for the year then ended. Our audit of internal control over financial reporting of Madeco S.A. also did not include an evaluation of the internal control over financial reporting of Cedsa S.A.

In our opinion, Madeco S.A. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Madeco S.A. as of December 31, 2006 and 2007, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007 and our report dated February 4, 2008, except for Notes 28 and 32 for which the date is June 20, 2008, expressed an unqualified opinion thereon.

ERNST & YOUNG LTDA.  

Santiago, Chile
February 4, 2008
(except for Notes 28 and 32 for which the date is June 20, 2008)
 

Consolidated Balance Sheets

Go to ACFS index

		As of December 31,
		2006	2007	2007
ASSETS	Notes	ThCh$	ThCh$	ThUS$
				(Note 2 (c))
Current assets:
Cash		5,083,958	10,410,066	20,950
Time deposits	5	280,907	7,883	16
Marketable securities	6	328,664	780,804	1,571
Accounts receivable, net	7	101,438,255	107,255,059	215,853
Notes and accounts receivable from related companies	24	1,661,627	1,781,850	3,586
Inventories, net	8	104,823,552	134,879,735	271,448
Recoverable taxes, net	19	10,087,083	13,259,735	26,685
Prepaid expenses		519,545	1,009,367	2,031
Deferred income taxes, net	19	5,987,127	10,832,815	21,801
Other current assets	9	19,262,049	4,404,190	8,864
Total current assets		249,472,767	284,621,504	572,805
Property, Plant and Equipment, net	10	158,896,582	166,949,097	335,988
Other assets:
Investments in related companies	11	9,649,466	2,188,207	4,404
Investments in other companies		3,828,139	4,404,704	8,865
Goodwill, net	12	18,758,542	15,844,783	31,888
Negative goodwill, net	12	(518,479)	(1,782,733)	(3,588)
Long-term notes and accounts receivable		474,534	246,375	496
Intangible assets, net		335,539	1,204,488	2,424
Other	13	6,726,587	13,420,905	27,010
Total other assets		39,254,328	35,526,729	71,499
Total assets		447,623,677	487,097,330	980,292

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

		As of December 31,
		2006	2007	2007
LIABILITIES AND SHAREHOLDERS’ EQUITY	Notes	ThCh$	ThCh$	ThUS$
				(Note 2 (c))
Current liabilities:
Short-term bank loans	14	16,636,807	35,077,092	70,593
Current portion of long-term debt	14	17,442,658	17,651,927	35,525
Current portion of bonds payable	17	4,872,734	5,081,276	10,226
Long-term obligations, current portion		524,503	2,312,427	4,654
Dividends payable		89,015	15,050,872	30,290
Accounts and notes payable		26,019,177	34,102,408	68,632
Notes and accounts payable to related companies	24	479,654	615,093	1,238
Accrued liabilities and provisions	15	8,710,735	12,114,765	24,381
Withholdings		1,669,117	3,636,679	7,319
Unearned revenues		8,429,225	4,529,223	9,115
Other current liabilities		1,307,823	1,302,090	2,622
Total current liabilities		86,181,448	131,473,852	264,595
Long-term liabilities:
Long-term debt	17	44,539,651	36,291,524	73,037
Bonds payable	17	21,722,840	16,623,066	33,454
Miscellaneous payables	18	5,628,953	7,154,165	14,398
Accrued liabilities and provisions	15	5,909,109	4,489,108	9,034
Deferred income taxes	19	526,320	3,767,112	7,581
Other long-term liabilities		628,744	850,922	1,712
Total long-term liabilities		78,955,617	69,175,897	139,216
Minority interest	25	12,316,348	22,553,910	45,390
Contingencies and commitments	22	- -	-	-
Shareholders’ equity:	20
Paid-in capital, no par value		283,613,711	234,329,190	471,592
Reserves		41,710,054	24,906,578	50,125
Accumulated deficit		(87,592,569)	-	-
Net income for the year		32,439,068	19,660,064	39,566
Provisional dividends		-	(15,002,161)	(30,192)
Total Shareholders’ equity		270,170,264	263,893,671	531,091
Total liabilities and Shareholders’ equity		447,623,677	487,097,330	980,292

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

Consolidated Statements of Income

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		For the year ended December 31,
	Note	2005	2006	2007	2007
		ThCh$	ThCh$	ThCh$	ThUS$
					(Note 2 (c))
Operating income:
Net sales		400,776,781	600,517,944	639,011,008	1,286,021
Cost of sales		(343,821,957)	(514,413,129)	(564,099,291)	(1,135,260)
Gross profit		56,954,824	86,104,815	74,911,717	150,761
Administrative and selling expenses		(26,426,325)	(30,508,415)	(34,797,188)	(70,030)
Operating income		30,528,499	55,596,400	40,114,529	80,731
Non-operating income and expense:
Interest income		882,853	1,723,658	2,360,736	4,751
Other non-operating income	23	2,544,642	125,284	817,414	1,645
Equity participation in income of related companies	11	308,213	739,206	-	-
Interest expense		(10,263,191)	(12,254,807)	(12,837,007)	(25,835)
Equity participation in losses of related companies	11	-	-	(56,150)	(113)
Amortization of goodwill	12	(1,820,232)	(1,848,606)	(1,673,690)	(3,368)
Other non-operating expenses	23	(3,593,855)	(3,062,600)	(1,976,126)	(3,977)
Price-level restatement, net	3	(2,192,920)	(1,725,622)	(6,729,819)	(13,544)
Foreign exchange (loss) gain, net	4	(824,691)	359,400	3,934,247	7,918
Non-operating loss		(14,959,181)	(15,944,087)	(16,160,395)	(32,523)
Income before income taxes, minority interest and amortization of negative goodwill		15,569,318	39,652,313	23,954,134	48,208
Income taxes	19	(1,608,403)	(5,589,678)	(1,075,507)	(2,164)
Income before minority interest and amortization of negative goodwill		13,960,915	34,062,635	22,878,627	46,044
Minority interest	25	(807,501)	(1,651,976)	(3,307,751)	(6,657)
Income before amortization of negative goodwill		13,153,414	32,410,659	19,570,876	39,387
Amortization of negative goodwill	12	20,940	28,409	89,188	179
Net income		13,174,354	32,439,068	19,660,064	39,566

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

Consolidated Statements of Cash Flows

	For the years ended December 31,
	2005	2006	2007	2007
	ThCh$	ThCh$	ThCh$	ThUS$
				(Note 2 (c))
Cash flow from operating activities:
Collection of accounts receivable	469,897,452	687,146,193	773,154,716	1,555,988
Financial income received	2,422,329	1,094,546	4,482,038	9,020
Dividends and other distributions received	-	55,765	-	-
Other income received	408,023	8,339,512	10,195,515	20,519
Payments to suppliers and personnel	(439,220,634)	(670,210,190)	(746,001,797)	(1,501,342)
Interest paid	(14,766,220)	(10,024,475)	(11,551,540)	(23,248)
Income taxes paid	(2,500,710)	(5,339,940)	(6,598,487)	(13,280)
Other expenses	(651,915)	(308,053)	(5,496,278)	(11,061)
Value added taxes and other similar items paid	(4,209,801)	(4,402,469)	(3,044,599)	(6,127)
Net cash provided by operating activities	11,378,524	6,350,889	15,139,568	30,469
Cash flow from investing activities:
Proceeds from sales of investments	233,995	-	106	-
Proceeds from sales of property, plant and equipment	335,024	2,665,407	934,669	1,881
Additions to property, plant and equipment	(11,401,912)	(15,394,293)	(18,726,889)	(37,688)
Investments in Cedsa S.A. and Peruplast S.A.	-	-	(9,828,177)	(19,779)
Additions to cash from acquired companies	-	-	4,119,327	8,290
Investments in other companies	(201,533)	(4,574)	-	-
Decrease in accounts receivable from related companies	56,691	90,663	-	-
Other investing activities (net)	1,193,123	1,441,921	-	-
Other disbursements for investment	(2,870,977)	-	(27,038)	(54)
Net used in provided by investing activities	(12,655,589)	(11,200,876)	(23,528,002)	(47,350)
Cash flow from financing activities:
Borrowings from banks and others	124,632,545	150,557,190	224,125,913	451,057
Proportion of dividends paid to minority shareholders	(41,692)	(652,132)	(677,765)	(1,364)
Payments of loans	(171,489,299)	(137,183,716)	(219,047,628)	(440,837)
Payment of loans from related parties	-	(1,667,612)	-	-
Capital distributions	-	-	(5,079,808)	(10,223)
Decrease in bonds payable	(4,893,335)	(4,571,397)	(4,844,185)	(9,749)
Capital increase in subsidiaries contributed by minority shareholders	47,321,149	10,163,418	6,465,247	13,011
Other financing disbursements	-	(1,129,240)	-	-
Net cash (used in) provided by financing activities	(4,470,632)	15,516,511	941,774	1,895
Net (decrease) increase in cash and cash equivalents	(5,747,697)	10,666,524	(7,446,660)	(14,986)
Effect of price-level restatement on cash and cash equivalents	(331,512)	(366,135)	(198,258)	(399)
Net (decrease) increase of cash and cash equivalents	(6,079,209)	10,300,389	(7,644,918)	(15,385)
Cash and cash equivalents at the beginning of year	14,622,491	8,543,282	18,843,671	37,923
Cash and cash equivalents at the end of year	8,543,282	18,843,671	11,198,753	22,538

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

	For the years ended December 31,
	2005	2006	2007	2007
	ThCh$	ThCh$	ThCh$	ThUS$
				(Note 2 (c))
Reconciliation of net income for the year to net cash from operating activities:
Net income for the year	13,174,354	32,439,068	19,660,064	39,566
Items that do not represent cash flows:
Depreciation	12,328,826	14,382,150	15,785,052	31,768
Amortization of goodwill	1,820,232	1,848,606	1,673,690	3,368
Amortization of negative goodwill	(20,940)	(28,409)	(89,188)	(179)
Minority interest	807,501	1,651,976	3,307,751	6,657
Price-level restatement, net	2,192,920	1,725,622	6,729,819	13,544
Foreign exchange loss (gain), net	824,691	(359,400)	(3,934,247)	(7,918)
Gain on sales of property, plant and equipment	(211,684)	(17,878)	(440,291)	(886)
Loss on sale of investments	-	-	33,418	67
Equity participation in net losses (income) of investments under equity method, net	(308,213)	(739,206)	-	-
Accrued equity participation in loss of related companies	-	-	56,150	113
Gains on sales of investments	-	(33,967)	10,352	21
Write-offs and provisions	916,596	6,690,246	1,029,140	2,071
Other charges to income which do not represent cash flows (1)	5,088,618	7,896,625	9,001,191	18,115
Net changes in operating assets and liabilities:
Increase in accounts and notes receivable	(8,385,138)	(27,792,799)	(1,897,682)	(3,819)
Increase in inventories	(2,905,933)	(27,367,735)	(16,606,150)	(33,420)
Increase in other assets	(8,396,716)	(1,707,466)	(9,257,367)	(18,631)
(Decrease) increase in accounts and notes payable	(6,135,658)	4,931,285	(7,292,867)	(14,677)
Increase (decrease) in other current liabilities	589,068	(7,167,829)	(2,629,267)	(5,291)
Net cash flow (used in) provided by operating activities	11,378,524	6,350,889	15,139,568	30,469
	For the years ended December 31,
	2005	2006	2007	2007
	ThCh$	ThCh$	ThCh$	ThUS$
				(Note 2 (c))
Supplemental Cash Flow Information:
Assets acquired under capital leases	417,904	456,949	409,686	825

(1) Other charges to income, which do not represent cash flows, include additional depreciation charges, which were reflected in other non-operating expenses, as detailed in Note 10.

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

Notes to the Consolidated Financial Statements

Note 1 – The Company

Madeco S.A. and subsidiaries (“the Company”) is a sociedad anónima abierta (open stock corporation) that is organized under the laws of the Republic of Chile (“Chile”) whose shares and American Depositary Receipts are quoted on the Chilean and New York Stock Exchanges, respectively. Furthermore, the Company files financial statements with the Chilean Superintendencia de Valores y Seguros (Superintendency of Securities and Insurance, or “SVS”) and the United States Securities and Exchange Commission (“SEC”). Unless otherwise specified, all references to “Madeco” or the “Company” are to Madeco S.A. together with its consolidated subsidiaries and references to “Madeco Chile” include only Madeco S.A.

The Company operates in four main segments. The principal operating segment and the Company’s largest business unit is its Wire & Cable business, with production facilities in Chile, Brazil, Peru and Argentina. The Wire & Cable business unit’s main clients are in the telecom, energy, mining, construction and industrial sectors. The Company’s second operating segment is Brass Mills unit, which manufactures pipes, bars and sheets from copper, brass, aluminum and related alloys. Additionally, the Brass Mills unit manufactures coin blanks and minted coins from alloys comprising copper, nickel, aluminum and zinc. The Company’s Brass Mills facilities are located in Chile and Argentina. The Company’s third operating segment, Flexible Packaging manufactures printed flexible packaging for use in the packaging of mass consumer products. The Company has flexible packaging facilities in Chile and Argentina, and in addition it exerts significant infl uence over its equity investment in Peru that operates in the same business. The fourth operating segment of the Company is Aluminum Profiles. The aluminum profiles produced by the Company in Chile are used in the residential and the non-residential construction sector as well as in the production of industrial durable goods.

Note 2 – Summary of significant accounting policies

1. Basis of preparation, presentation and consolidation of the consolidated financial statements

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in Chile and the regulations established by the SVS, (collectively referred to as “Chilean GAAP”). Certain accounting practices applied by the Company that conform with accounting principles generally accepted in Chile do not conform with accounting principles generally accepted in the United States of America (“US GAAP”). A reconciliation of Chilean GAAP to US GAAP is provided in Note 32.

Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year’s presentation.

The preparation of financial statements in conformity with Chilean GAAP, along with the reconciliation to US GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The accompanying financial statements reflect the consolidated results of operations of Madeco S.A. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation, as well as any unrealized gains or losses arising from such transactions. The Company consolidates the financial statements of companies in which it controls over 50% of the voting shares. The participation of minority shareholders in subsidiaries has been given effect in the consolidated financial statements under the caption Minority interest.

The consolidated financial statements as of December 31, 2006 and 2007 and for the years ended December 31, 2005, 2006 and 2007 include the following subsidiaries:
 

		As of December 31,
		2005	2006	2007
		%	%	%
Percentage of Direct and Indirect Ownership
Alusa S.A. and Subsidiaries	(1) (8)	75.96	75.96	75.96
Indalum S.A. and Subsidiaries	(2)	99.16	99.16	99.16
Armat S.A.		100	100	100
Comercial Madeco S.A. and Subsidiaries (Argentina)	(3)	100	100	100
Indeco S.A. (Peru)		93.97	93.97	93.97
Madeco Overseas S.A. (Cayman Islands)		100	100	100
Soinmad S.A. and Subsidiaries	(4)	100	100	100
Metal Overseas S.A. and Subsidiaries (Cayman Islands)	(5)	100	100	100
Indelqui S.A. and Subsidiary (Argentina)	(6)	-	-	100
Madeco Brass Mills S.A.	(7)	-	-	100
Invercables S.A.	(7)	-	-	100
Madeco Cables S.A.	(7)	-	-	100
Cedsa S.A.	(8)	-	-	80

1. The financial statements of Alusa S.A. and subsidiaries include the consolidation of the following direct and indirect subsidiaries: Aluflex S.A. (Argentina), Alufoil S.A., Inversiones Alusa S.A. and Alusa Overseas S.A. (Cayman Islands) and Peruplast S.A. (Peru). The control over Peruplast S.A. is based on a shareholder’s agreement, which assigns the operative management decisions to Alusa S.A. in addition to a participation in share capital of 50%.

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

3. Comercial Madeco S.A. and subsidiaries include the consolidation of Metalúrgica Industrial S.A. and its subsidiary Decker-Indelqui S.A. including its subsidiaries Metacab S.A. and H. B. San Luis S.A. (Argentina). Metalúrgica Industrial S.A. was presented as a direct subsidiary until June 2006, when Comercial Madeco S.A. acquired 106,393,873 shares of that subsidiary in a group transaction, increasing its participation from 24.25% to 61.33%. The Company’s total participation in Metalúrgica Industrial S.A. remained unchanged.

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

5. The financial statements of Metal Overseas S.A. and subsidiaries include the consolidation of the direct subsidiaries Ficap S.A. (Brazil) and Madeco Brasil Ltda. and subsidiaries. On March 31, 2005, Madeco S.A. through its indirect subsidiary Madeco Brasil Ltda., entered into an agreement with Corning International Corporation, by virtue of which it acquired, at a par value of one Brazilian Real, 50% of the participation that Corning Inc. had in Optel Ltda. In this manner, the parties resolved the effects of the arbitrage settlement provided for a lawsuit followed by both companies in New York before the American Arbitration Association. As a result, beginning December 2005, the financial statements of this subsidiary have been included in the consolidated financial statements of Madeco S.A. Until May 2007, this subsidiary also consolidated Optel Argentina S.A., which was first sold to Decker-Indelqui S.A. and subsequently to Indelqui S.A.

6. In December 2007, the Company established the subsidiary Indelqui S.A. in consideration of the restructuring process to separate the cable unit, which is expected be sold in 2008. Indelqui S.A. and subsidiaries include the consolidation of Optel Argentina S.A., which was acquired from Decker-Indelqui S.A. together with certain fixed assets and inventories related to the cable unit.

7. During 2007, the Company established the subsidiaries Madeco Brass Mills S.A., Invercables S.A. and Madeco Cables S.A. in consideration of the restructuring process to separate the Cable and Wire unit, which is expected be sold in 2008.

8. The 2007 acquisitions of Cedsa S.A. (Colombia) and Peruplast S.A. (Peru) were accounted for in accordance with Technical Bulletin No. 72 and are detailed in Note 26 of the financial statements.

All group transactions were executed at book values and did not generate any effects in income.

2. Price-level restatement

The cumulative inflation rate in Chile as measured by the Chilean Consumer Price Index (“CPI”) for the three-year period ended December 31, 2007 was approximately 14.7%.

Chilean GAAP requires that the financial statements be restated to reflect the full effects of changes in the purchasing power of the Chilean peso on the financial position and results of operations of reporting entities. The method described below is based on a model that enables calculation of net inflation gains or losses caused by monetary assets and liabilities exposed to changes in the purchasing power of local currency. The model prescribes that the historical cost of all non-monetary accounts be restated for general price-level changes between the date of origin of each item and the year-end.

The financial statements of the Company have been price-level restated in order to reflect the effects of the changes in the purchasing power of the Chilean currency during each year. All non-monetary assets and liabilities, all equity accounts and income statement accounts have been restated to reflect the changes in the CPI from the date they were acquired or incurred to year-end.

The resulting gain or loss included in net income reflects the effects of Chilean inflation on the monetary assets and liabilities held by the Company (Note 3).

The restatements were calculated using the official consumer price index of the National Institute of Statistics and based on the “prior-month rule,” in which the inflation adjustments are based on the CPI at the close of the month preceding the close of the respective period or transaction. This index is considered by the business community, the accounting profession and the Chilean government to be the index that most closely complies with the technical requirement to reflect the variation in the general level of prices in Chile, and consequently it is widely used for financial reporting purposes.

The values of the Chilean consumer price indices used to reflect the effects of the changes in the purchasing power of the Chilean peso (“price-level restatement”) are as follows:

	Index	Change over Previous November 30,
November 30, 2005 …………………	100.00	3.6%
November 30, 2006 …………………	102.10	2.1%
November 30, 2007 …………………	109.67	7.4%

By way of comparison, the actual values of the Chilean consumer price indices as of the balance sheet dates are as follows:

	Index	Change over Previous December 31,
December 31, 2005 …………………	100.00	3.7%
December 31, 2006 …………………	103.67	2.6%
December 31, 2007 …………………	111.76	7.8%

The above-mentioned price-level restatements do not purport to represent appraisal or replacement values and are only intended to restate all non-monetary financial statement components in terms of local currency of a single purchasing power and to include in net income or loss for each year the gain or loss in purchasing power arising from the holding of monetary assets and liabilities exposed to the effects of inflation.

Index-linked assets and liabilities

Assets and liabilities that are denominated in index-linked units of account are stated at the year-end values of the respective units of account. The principal index-linked unit used in Chile is the Unidad de Fomento (“UF”), which is adjusted daily to reflect the changes in Chile’s CPI. Certain of the Company’s investments are linked to the UF. As the Company’s indexed liabilities exceed its indexed assets, the increase in the index results in a net loss. Values for the UF are as follows (historical Chilean pesos per UF):

	Ch$
December 31, 2005 …………	17,974.81
December 31, 2006 …………	18,336.38
December 31, 2007 …………	19,622.66

Comparative financial statements

For comparative purposes, the historical December 31, 2005 and 2006 consolidated financial statements and their accompanying notes have been presented in constant Chilean pesos as of December 31, 2007. Amounts previously presented in constant Chilean pesos as of each balance sheet date have been adjusted by the percentage changes in the CPI to December 31, 2007 as follows:

Year	Change in Index
2006……………………	9.7% (1)
2007……………………	7.4% (2)

(1) Equivalent to the change in the CPI for 2006 multiplied with the change in the CPI for 2007.(2) Equivalent to the change in the CPI for 2007.

This updating does not change the prior years’ statements or information in any way except to update the amounts to constant Chilean pesos of similar purchasing power.

c)  Currency translation

Balances denominated in foreign currencies included in the consolidated balance sheets and detailed in Note 21 have been translated into Chilean pesos at the observed exchange rates determined by the Central Bank of Chile in effect at each year end.

As of December 31 2005, 2006 and 2007 the foreign exchange rates of most relevant foreign currencies were as follows:

	As of December 31,
	2005	2006	2007
Currency
United States dollar (US$)	512.50	532.39	496.89
Argentine peso (AR$)	169.42	173.93	157.79
Brazilian real (BR$)	219.35	248.78	280.32
Peruvian sol (S$)	149.77	166.89	167.40

The net effect of foreign exchange translation in income is detailed in Note 4.

Convenience translation to US dollars

The financial statements are stated in Chilean pesos. The translations of Chilean pesos into US dollars are included solely for the convenience of the reader, using the observed exchange rate reported by the Chilean Central Bank as of December 31, 2007 of Ch$ 496.89 for US$ 1.00. The convenience translations should not be construed as representations that the Chilean peso amounts have been, could have been, or could in the future be, converted into US dollars at this or any other exchange rate.

d)  Cash and cash equivalents

The Company considers all short-term, highly liquid investment securities with remaining maturities of three months or less to be cash equivalents for purposes of the consolidated statements of cash flows:

	As of December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Cash and Cash Equivalents
Cash	4,695,431	5,083,958	10,410,066
Time deposits (Note 5)	103,217	280,907	7,883
Mutual funds (Note 6)	164,483	328,664	780,804
Securities purchased under resell agreements (Note 9)	3,580,151	13,150,142	-
Total	8,543,282	18,843,671	11,198,753

e) Time deposits and marketable securities

Time deposits denominated in UF are stated at cost plus interest and indexation accrued at each year-end.

Marketable securities consist in Mutual Funds and are valued at the quoted redemption value of the respective share at each balance sheet date.

f)  Accounts receivable and allowance for accounts receivable

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

g) Inventories

Inventories of finished products, work in progress and by-products are valued at production cost including indirect manufacturing costs plus price-level restatement. Inventories of raw materials, materials in warehouse and materials in transit are valued at price-level restated cost. Inventory values do not exceed their estimated net realizable value. Reductions in inventory are valued using the weighted average method. The related obsolescence allowances have been presented as a deduction from inventories.

Inventories with a turnover exceeding one year are classified as Other long-term assets and are presented net of respective obsolescence allowances.

h) Property, plant and equipment

Property, plant and equipment are stated at cost plus price-level restatement. In accordance with instructions issued by the SVS, property, plant and equipment include also effects of the revaluation increment arising from the technical appraisals of certain assets which were carried out in 1979 and 1986.

Assets acquired under capital lease contracts are recorded at their present value, calculated using the contracted monthly installments plus the purchase option and using the interest rate implicit in the respective contract. The corresponding liability is shown net of deferred interest. Assets obtained under financial contracts are not the legal property of the Company until it exercises the related purchase option. Therefore, the Company cannot freely dispose of them. Included as part of accumulated depreciation is accumulated amortization related to capital lease fixed assets.

Property, plant and equipment are presented net of accumulated depreciation and impairment write-downs.

Depreciation of property, plant and equipment is determined using straight-line method based on the estimated useful lives of the assets. In accordance with Circular No. 1529 issued by the SVS depreciation amounts include respective portion of the technical appraisal revaluation.

The estimated useful lives of the principal categories of property, plant and equipment are as follows:

	Estimated years of useful lives
Assets group
Buildings and Infrastructure	20 to 70
Installations	5 to 33
Machinery and equipment	5 to 40
Engine and Equipment	7
Other fixed assets	2 to 10

Depreciation of temporarily inactive property, plant and equipment is classified under other non-operating expenses in the Consolidated Statement of Income.

The Company periodically evaluates the carrying amount of its property, plant and equipment in relation to the operating performance and future undiscounted cash flows of the underlying assets. An impairment loss is recognized in the event that the carrying amount of an asset may not be fully recoverable, when compared to the estimated future undiscounted cash flows expected from its use and its eventual disposition. The Company has temporarily inactive or underutilized production facilities which are tested for impairment when the Company's management believes such underutilization constitutes a triggering event for the impairment test.

i)  Investments in related companies

Investments in related companies over which the Company has significant influence, are included under the caption Other assets and are recorded using the equity method. Accordingly, the Company’s proportional share in the net income (loss) of each investee is recognized in the non-operating income or expense on an accrual basis, after eliminating any unrealized gains and losses from transactions with the related companies.

Equity movements that do not affect the income of the related companies are shown proportionally as a charge or credit to the account other reserves in Shareholders’ equity.

j)  Other investments

Investments in equity instruments of entities, in which the Company has not more than 20% of the voting stock and which are considered to be permanent, are recorded at the lower of cost plus price-level restatement or market value. They are shown under the caption other assets. Dividends from such investments are recognized as income when received.

k)  Securities purchased under resell agreements

Securities purchased under resell agreements are valued at placement value plus accrued interest and indexation at year-end. These investments are presented in other current assets.

l)  Goodwill and negative goodwill

Prior to January 1, 2004, goodwill was recognized as the excess of the purchase price of companies acquired over their net book value; negative goodwill arose when net book value exceeded the purchase price of companies acquired. Chilean GAAP also provided at that time that goodwill and negative goodwill amortization may be accelerated if the proportional net income or net loss of the investee exceeds the respective straight-line amortization amount.

Beginning January 1, 2004, the Company adopted Technical Bulletin No. 72 of the Chilean Association of Accountants, which prospectively changed the basis for determining amounts of goodwill and negative goodwill generated in transactions after January 1, 2005. This new standard requires allocation of the purchase price based on the fair value of the identifiable assets acquired and identifiable liabilities assumed. Both goodwill and negative goodwill are amortized over the expected period of return of the investment that corresponds to a useful life of 5 to 20 years. Negative goodwill is amortized over the estimated useful life of the underlying non-monetary assets acquired.

Goodwill and negative goodwill may also be recorded in the purchase of investments accounted for by the equity method.

m)  Intangibles

Trademarks are recorded at historical cost plus price-level restatement, and are amortized on a straight-line basis over the period in which they are expected to benefit the Company; however no longer than 40 years in accordance with Technical Bulletin No. 55 of the Chilean Association of Accountants.

n)  Bonds payable

Bonds payable are included in liabilities at their par value plus accrued indexation and interest. The discount and deferred debt issuance costs that arises from the difference between par value and the proceeds received is included in other assets and is amortized using the straight-line method over the term of the bond. The amount of the interest recognized does not differ materially from amounts that would have been recognized under the effective rate method.

o)  Staff severance indemnities

The Company has obligations for staff severance indemnities which are recognized using an accrued cost of the benefit method, i.e. calculating present value of the estimated future payments of the benefits and assuming real annual discount rates using the accrued cost of the benefit method.

p)  Accrued vacation expense

The cost of employee vacations is recognized in the financial statements on an accrual basis.

q)  Current and deferred income taxes

Current income tax provisions are recognized by the group companies on the basis of respective tax regulations in each jurisdiction where the Company operates.

The Company records income taxes in accordance with Technical Bulletin No. 60 (“BT 60”) and complementary technical bulletins thereto issued by the Chilean Association of Accountants, and with SVS Circulars No. 1466 and No. 1560, recognizing, using the liability method, the deferred tax effects of temporary differences between the financial and tax values of assets and liabilities. As a transitional provision on January 1, 2000, the date of adoption of BT 60, a contra asset or liability has been recorded offsetting the effects of the deferred tax assets and liabilities not recorded prior to January 1, 2000. Such contra assets or liabilities must be amortized to income over the estimated average reversal periods corresponding to the underlying temporary differences to which the deferred tax asset or liability related were calculated using the tax rates that were expected to be in effect at the time of reversal.

To the extent necessary, deferred tax assets are further reduced by a valuation allowance, if based on the weight of available evidence; it is more likely than not that some portion of the deferred tax assets will not be realized.

r)  Revenue recognition

Revenue is recognized when goods are delivered to customers or the services are rendered. Unearned revenues related to sales that the Company has invoiced and collected in advance is not recognized until the related goods are delivered.

s)  Translation of foreign currency financial statements

In accordance with Technical Bulletin No. 64 issued by the Chilean Association of Accountants, the financial statements of foreign subsidiaries whose activities do not constitute an extension of the Chilean operations, or which operate in countries that are exposed to significant risks, restrictions or inflation/exchange fluctuations are remeasured using the US dollar as the functional currency and then translated into Chilean pesos at the year end exchange rate.

Accordingly, the financial statements of the Company’s subsidiaries in Argentina, Brazil and Peru are remeasured into US dollars as follows:

- Monetary assets and liabilities are translated at year-end rates of exchange between the US dollar and the local currency.
- - All non-monetary assets and liabilities and shareholders’ equity are translated at historical rates of exchange between the US dollar and the local currency.
- - Income and expense accounts, except for such accounts that are calculated using historical rates (e.g. depreciation and amortization) are translated at average rates of exchange between the US dollar and the local currency.
- - Any exchange differences are included in the results of operations for the period.

Investments in foreign subsidiaries and equity method investees are price-level restated, the effects of which are reflected in income, while the effects of the foreign exchange gains or losses between the Chilean peso and the US dollar on the foreign investment measured in US dollars, are reflected in equity in Cumulative translation adjustment.

In addition as permitted by the Technical Bulletin No. 64, the Company designated certain debt instruments as hedges of net foreign investments. Exchange gains and losses resulting from translation of hedging instruments are recorded directly in Shareholders’ equity in the Cumulative translation adjustment.

t)  Derivative instruments

The Company enters into foreign currency forward contracts, interest rate swap contracts and option contracts to hedge against the risk of fluctuations in exchange rates between the Chilean peso, US dollar and Brazilian Real, changes in interest rates and changes in market prices of commodities. These
instruments are recorded in accordance with Technical Bulletin No. 57.

Derivative contracts that are designated as hedges of existing assets or liabilities are valued at their respective fair values. No adjustment to the hedged item’s carrying amount is recorded. If the net variation in the value of the derivative instrument and the hedged item results in a loss, the difference is recorded in the operating income. If the net variation in the value of the derivative instrument and the hedge item results in a gain, the net difference is deferred and recorded as an unrealized gain in the balance sheet.

Derivative contracts that are designated as hedges of future cash flows or transactions are valued at their
respective fair values. Variation in the fair value are deferred and recorded as unrealized gains or losses
in the income statement until the underlying transaction is realized.

u)  Share issuance costs

The costs of stock issuance and placement related to capital increases have been recorded in Shareholders’ equity under the caption Contributed surplus.

v)  Stock based compensation plans

The company accounts for stock-based compensation plans in accordance with the International Financial Reporting Standard No. 2 Share-based payment, showing the effect of recording the fair value of the options granted as administrative and selling expenses on a straight-line basis over the period between the date of granting of these options to the date that these become vested.

Note 3 - Price-level restatement

The application of price-level restatement as described in note 2 b) resulted in net (charges) credits to income, the effect of which is summarized as follow:

	Credit (charge) as of December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Property, plant and equipment, net	3,131,490	1,796,252	6,042,439
Inventories, net	553,251	176,986	115,104
Other current assets	343,980	168,421	652,566
Other assets	4,569,677	2,346,970	9,090,383
Other liabilities and minority interest	(444,084)	(194,797)	(923,181)
Shareholders’ equity, net	(6,162,598)	(4,706,719)	(18,661,661)
Income and expense accounts	(322,664)	(321,156)	(583,788)
Net adjustment of assets and liabilities indexed to UF	(3,861,972)	(991,579)	(2,461,681)
Price-level restatement, net	(2,192,920)	(1,725,622)	(6,729,819)

Note 4 - Foreign exchange differences

Foreign exchange differences are summarized as follows:

	Credit (charge) as of December 31,
	2005	2006	2007
	ThCh$	ThCh	ThCh$
Cash and short-term investments	(59,321)	342,274	(5,659)
Accounts receivable	(1,077,472)	591,271	(1,615,742)
Other assets	(298,082)	261,085	(257,055)
Bank loans	504,713	(564,581)	609,304
Other liabilities	922,729	(412,538)	963,908
Loss on hedging transactions	(2,005,024)	(2,357,775)	(1,093,377)
Translation adjustments in foreign subsidiaries, net	1,187,766	2,499,664	5,332,868
	(824,691)	359,400	3,934,247

Note 5 – Time deposits

Time deposits are summarized as follows:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Time deposits in other foreign currencies	280,907	7,883
Total time deposits	280,907	7,883

Note 6 – Marketable securities

Marketable securities are summarized as follows:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Mutual funds	328,664	780,804
Total marketable securities	328,664	780,804

Note 7 - Accounts receivable

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

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Trade accounts receivable	94,154,288	93,594,643
Allowance for doubtful trade accounts receivable	(4,284,132)	(3,579,120)
Notes receivable	6,513,522	12,328,743
Allowance for doubtful notes receivables	(954,920)	(1,590,553)
Other accounts receivable	9,740,755	8,754,117
Allowance for doubtful other accounts	(3,731,258)	(2,252,771)
Total accounts receivable, net	101,438,255	107,255,059

b) Changes in short-term allowance for doubtful accounts receivable for the years ended December 31, 2005, 2006 and 2007 are as follows:

	As of December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Balance at the beginning of the year	6,692,602	9,001,652	8,970,310
Price-level restatement	(170,402)	(155,525)	(319,902)
Effect of devaluation of foreign currencies	(712,483)	57,797	193,196
Reclassification from long-term (1)	3,492,484	-	-
Allowance established, net	155,247	363,026	318,092
Write-offs	(455,796)	(296,640)	(1,739,252)
Balance at the end of the year	9,001,652	8,970,310	7,422,444

(1)  Amount was reclassified from the long-term allowance consistent with the corresponding balance of account receivable that was reclassified from long-term.

3. Changes in long-term allowance for doubtful accounts receivable for the years ended December 31, 2005, 2006 and 2007 are as follows:

	As of December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Balance at the beginning of year	3,618,214	-	-
Price-level restatement	(125,730)	-	-
Reclassification to short term (1)	(3,492,484)	-	-
Balance at the end of year	-	-	-

(1)  Amount was reclassified to the short-term allowance for doubtful accounts consistent with the corresponding balance of account receivable that was reclassified to short-term.

Note 8 - Inventories

a) Inventories are summarized as follows:
 

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Raw materials	28,274,878	34,451,200
Finished goods	40,662,641	44,977,146
Work-in-progress	24,443,883	24,252,396
Consumable materials	7,632,118	8,853,254
Supplies in transit	4,108,336	18,083,428
Supplies	3,686,153	6,786,340
Sub-total	107,833,809	137,403,764
Allowance for obsolescence	(3,010,257)	(2,524,029)
Inventories, net	104,823,552	134,879,735

b) Changes in the allowance for obsolescence for the years ended December 31, 2005, 2006 and 2007 are as follows:

	As of December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Balance at beginning of year	3,316,166	3,042,582	3,010,256
Price-level restatement	(115,234)	(62,580)	(207,410)
Effect of devaluation of foreign currencies	(49,366)	115,024	(29,076)
Allowance established	315,951	559,125	300,723
Allowance released (1)	(279,946)	(643,895)	(287,032)
Write-offs	(144,989)	-	(263,432)
Balance at end of year	3,042,582	3,010,256	2,524,029

1. Corresponds to the reversal of the allowance for obsolescence previously recorded for slow moving inventories that have been sold during the period. Such reversal is recognized as an adjustment to the cost basis of the item sold.

The Company’s inventory primarily consists of copper as a raw material and copper-based products. The costs and sales prices of respective products are directly linked to the commodity price, and fluctuations significantly affect the Company’s results.

The Company generally records inventory at net realizable value in accordance with to the accounting policy described in Note 2 g). The inventory covered by hedging agreements (detailed in Note 27) is recorded at fair value with the recognition of offsetting effects in income.

Note 9 – Other current assets

Other current assets are summarized as follows:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Securities purchased under resell agreements (1)	13,150,142	-
Deposit in guarantee	726,791	1,362
Property, plant and equipment to be disposed of, net (2) and (3)	4,026,047	2,355,767
Discount on bond issuance	168,993	168,387
Copper hedging agreement at fair value (4)	1,117,676	1,728,667
Other	72,400	150,007
Total	19,262,049	4,404,190

1. Details provided in the table below.
2. Shown net of adjustment to realization value of ThCh$ 275,462 (ThCh$ 318,399 as of December 31, 2006).
3. During 2007, the subsidiary Optel Brasil Ltda. reclassified assets in the amount of ThCh$ 1,070,314 related to the sale of the Aratú plant to other long-term assets.
4. Relates to the fair value of existing purchase hedging agreements (Asian options and Swap), which are detailed in Note 27 “Derivative Contracts”.

The detail of securities purchased under resell agreements to resell as of December 31, 2006 is as follows:

			Original	Transaction	Interest	Final		Market
Purchase Date	Maturity Date	Counterpart	currency	Amount	rate	value	Description of Instrument	Value
				ThCh$	%	ThCh$		ThCh$
December 28, 2006	January 8, 2007	BBVA Corredores de Bolsa BHIF S.A.	Ch$	28,339	6.00	28,391	Non-indexed promissory note	28,353
December 28, 2006	January 8, 2007	BBVA Corredores de Bolsa BHIF S.A.	Ch$	197,005	6.00	197,366	Non-indexed promissory note	197,104
December 28, 2006	January 8, 2007	BBVA Corredores de Bolsa BHIF S.A.	Ch$	224,663	6.00	225,074	Non-indexed promissory note	224,774
December 28, 2006	January 2, 2007	BBVA Corredores de Bolsa BHIF S.A.	Ch$	43,469	6.00	43,520	Non-indexed promissory note	43,505
December 28, 2006	January 2, 2007	BBVA Corredores de Bolsa BHIF S.A.	Ch$	3,480	6.00	3,484	Non-indexed promissory note	3,483
December 28, 2006	January 2, 2007	BBVA Corredores de Bolsa BHIF S.A.	Ch$	2,333,667	6.00	2,336,389	Non-indexed promissory note	2,335,612
December 28, 2006	January 2, 2007	BBVA Corredores de Bolsa BHIF S.A.	Ch$	2,156,950	6.00	2,159,466	Non-indexed promissory note	2,158,748
December 28, 2006	January 2, 2007	BBVA Corredores de Bolsa BHIF S.A.	Ch$	939,835	6.00	940,931	Non-indexed promissory note	940,618
December 28, 2006	January 8, 2007	BCI corredores de Bolsa S.A.	Ch$	974,091	6.24	975,779	Non-indexed promissory note	974,428
December 28, 2006	January 8, 2007	BCI corredores de Bolsa S.A.	Ch$	3,249	6.24	3,254	Non-indexed promissory note	3,250
December 28, 2006	January 2, 2007	Banco Estado USD	US$	3,246,137	5.34	3,252,878	Non-indexed promissory note	3,252,692
December 28, 2006	January 2, 2007	Banco Estado USD	US$	13,048	5.34	13,076	Non-indexed promissory note	13,072
December 28, 2006	January 8, 2007	Banco Estado USD	US$	2,171,173	5.45	2,174,788	Non-indexed promissory note	2,172,159
December 28, 2006	January 8, 2007	Banco Estado USD	US$	1,617	5.45	1,621	Non-indexed promissory note	1,619
December 28, 2006	January 8, 2007	Banco Estado USD	US$	1,699	5.10	1,702	Non-indexed promissory note	1,700
December 28, 2006	January 8, 2007	Banco Estado USD	US$	798,803	5.10	799,933	Non-indexed promissory note	799,025
							Total	13,150,142

There are no securities purchased under resell agreements as of December 31, 2007.

Note 10 – Property, plant and equipment

Property, plant and equipment are presented net of write-downs of ThCh$ 2,395,193 and ThCh$ 2,301,648 as of December 31, 2006 and 2007, respectively, and are summarized as follows:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Land	12,575,994	14,964,573
Buildings and Infrastructure
Buildings and infrastructure	57,878,851	62,031,258
Accumulated depreciation	(20,159,507)	(20,974,956)
Subtotal buildings and infrastructure, net	37,719,344	41,056,302
Machinery and Equipment
Machinery and equipment	230,935,810	243,153,800
Accumulated depreciation	(151,479,163)	(161,495,251)
Subtotal machinery and equipment, net	79,456,647	81,658,549
Other Property, Plant and Equipment
Leased assets	15,594,852	20,677,629
Furniture and fixtures	3,814,496	3,849,055
Office equipment	7,223,552	7,031,656
Tools and others	1,712,532	1,657,119
Other property, plant and equipment	6,741,173	7,047,131
Accumulated depreciation (1)	(14,287,360)	(18,250,197)
Subtotal other property, plant and equipment, net	20,799,245	22,012,393
Revaluation from technical appraisals
Land	3,319,549	3,109,992
Buildings and infrastructure	8,871,219	7,980,352
Machinery and equipment	1,846,393	1,819,857
Accumulated depreciation	(5,691,809)	(5,652,921)
Subtotal revaluation from technical appraisals, net	8,345,352	7,257,280
Total property, plant and equipment, net	158,896,582	166,949,097

(1) The total accumulated depreciation includes accumulated depreciation of leased assets of ThCh$ 1,769,709 and ThCh$ 3,065,113 as of December 31, 2006 and 2007, respectively.

Depreciation expense is summarized as follows:

	For the year ended December 31,
	2005	2006	2007
Included within the following income statement caption:	ThCh$	ThCh$	ThCh$
Cost of sales	11,630,565	12,848,563	14,438,869
Administrative and selling expenses	698,261	1,533,587	1,346,183
Sub total	12,328,826	14,382,150	15,785,052
Non-operating expense	1,464,358	973,654	539,132
Total	13,793,184	15,355,804	16,324,184

No financing costs were capitalized to property, plant and equipment during 2005, 2006 and 2007. The Company recorded impairment losses related to its property, plant and equipment amounting to ThCh$ 264,208, ThCh$ 1,001,621 and ThCh$ 163,842 during 2005, 2006 and 2007, respectively.

a) Assets to be disposed of

Property, plant and equipment to be disposed of consist mainly of land and buildings which are not in Madeco’s core business. The Company is in the process of disposing those assets normally by sale taking decision about selling based on the real estate market conditions.

As of December 31, 2006 and 2007, the detail of property, plant and equipment held for sale, after adjustments to net realizable value was as follows:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Building Vitacura (Chile)	1,100,836	1,096,889
Land in Via Matoim 902 (Aratú plant) (Brazil) (1)	1,231,644	-
Machinery and equipment Optel Ltda. (Brazil)	1,098,750	954,829
Other	594,817	304,049
Subtotal current assets (Note 9)	4,026,047	2,355,767
Land at Vicuña Mackenna 4665 (Chile)	1,056,935	1,056,935
Land and building at Lomas de Zamora (Argentina)	1,281,994	1,070,032
San Luis plant (Argentina)	235,353	204,524
Land in Via Matoim 902 (Aratú plant) (Brazil) (1)	-	1,070,314
Machinery and equipment Laton (Chile)	550,559	338,273
Other	526,742	441,600
Subtotal non-current assets (Note 13)	3,651,583	4,181,678
Total property, plant and equipment to be disposed of, net	7,677,630	6,537,445

Property, plant and equipment held for sale are recorded at their net realizable values and include allowances of ThCh$ 318,399 and ThCh$ 275,462 related to current assets, and of ThCh$ 5,536,351 and ThCh$ 4,760,063 related to non-current assets as of December 31, 2006 and 2007, respectively.

For the years ended December 31, 2005, 2006 and 2007, the Company recognized impairment charges (net realizable value) related to its Property, plant and equipment held for sale of ThCh$ 265,767, ThCh$ 315,422 and for ThCh$ 0, respectively.

(1) During 2007, the amount of ThCh$ 1,070,314, related to assets for sale of the subsidiary Ficap S.A., was reclassified to Other assets.

2. Leaseback transactions

In connection with the restructuring of its liabilities, on March 30, 2001, the subsidiary Alusa S.A., entered into a sale and leaseback contract for certain assets located in Quilicura (Santiago, Chile) with Corpbanca. The main features of the contract are as follows:

Seller     :                                                                      Alusa S.A.
Purchaser    :                                                                Corpbanca
Assets involved    :              Buildings and plant located in Quilicura
Purchase price    :                                                      UF 414,597
Final value of contract   :                                            UF 641,265
Number of installments   :                                            180 months
Contract period    :                March 30, 2001 to March 30, 2016
Interest rate    :                                  6.53% semiannual (variable)

This transaction generated no effect on income.

On May 5, 2006, the related agreement was amended in respect to installments and interest rates. The new characteristics of this agreement are as follows:

Seller     :                                                                            Alusa S.A.
Purchaser    :                                                                     Corpbanca
Assets involved    :                      Building and plant located in Quilicura
Principal amount   :                                                         U.F. 306,983
Nominal value of agreement  :                                         U.F. 390,131
No. of installments   :                                               20 (semi-annually)
Period     :                                          May 16, 2006 to May 16, 2016
Fixed interest rate   :                                                                  4.80%

Note 11 – Investments in related companies

The participation owned and carrying values of investments in related companies as of December 31, 2006 and 2007 are as follows:

	Percentage owned		As of December 31,
	2006	2007	2006	2007
	%	%	ThCh$	ThCh$
Related company
Peruplast S.A. (1)	25.00%	-	4,343,197	-
Tech Pak S.A. (1)	25.61%	-	2,968,464	-
Colada Continua Chilena S.A.	41.00%	41.00%	1,624,387	1,573,553
Cobrecon Peru S.A.	33.33%	33.33%	713,418	614,654
Total			9,649,466	2,188,207

(1) As of December 31, 2007, these companies are included in the consolidation as described in Note 2a).

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

	For the years ended December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Related company
Peruplast S.A.	218,255	407,870	-
Tech Pak S.A.	61,540	321,489	-
Colada Continua Chilena S.A.	886	507	(50,835)
Cobrecon Peru S.A.	27,532	9,340	(5,315)
Total	308,213	739,206	(56,150)

Note 12 – Goodwill and Negative goodwill

Goodwill as of December 31, 2006 and 2007 and related amortization charges in the years ended December 31, 2005, 2006 and 2007 are as follows:

	Amortization for the year ended December 31,			Net Balance as of December 31,
Company	2005	2006	2007	2006	2007
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Alumco S.A.	93,966	93,966	93,966	762,878	668,910
Alupack S.A. (1)	11,461	11,461	11,461	34,384	22,923
Ficap S.A.	1,450,225	1,475,522	1,282,248	15,738,908	12,395,061
Cedsa S.A. (2)	-	-	44,176	-	1,016,049
Indeco S.A.	149,048	151,641	131,780	1,697,451	1,343,325
Peruplast S.A. (2)	18,489	18,811	-	174,005	-
Tech Pak S.A. (2)	9,327	9,488	22,342	87,766	223,081
Vigaflex S.A. (1)	87,717	87,717	87,717	263,150	175,434
Total	1,820,233	1,848,606	1,673,690	18,758,542	15,844,783

Negative goodwill as of December 31, 2006 and 2007 and related amortization in the years ended December 31, 2005, 2006 and 2007 are as follows:

	Amortization for the year ended December 31,			Net Balance as of December 31,
Company	2005	2006	2007	2006	2007
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Peruplast S.A. (2)	-	-	64,500	-	1,356,858
Optel Brasil Ltda.	20,940	28,409	24,688	518,479	425,875
Total	20,940	28,409	89,188	518,479	1,782,733

1. Effective January 1, 2005, the amortization period of goodwill was changed from 10 to 5 years. The change resulted in an additional charge to income of ThCh$ 48,150 for the year ended December 31, 2005. All other amortization periods remained unchanged and amount to 20 years.

2. During the first quarter of 2007, Madeco S.A. acquired Cedsa S.A. (Colombia). In addition, the subsidiary Alusa S.A. increased its participations in Peruplast S.A. and Tech Pak S.A. (Peru), as described in Note 2a), which generated additional goodwill and negative goodwill.

Note 13 – Other non-current assets

Other non-current assets are summarized as follows:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Recoverable tax incentives in Argentina (1)	440,533	631,486
Bond discount	666,583	505,160
Property, plant and equipment to be disposed of (held-for-sale), net (2)	3,651,583	4,181,678
Lawsuit deposits	1,073,478	7,407,045
Bond issuance cost	-	155,788
Recoverable minimum tax in Argentina	455,597	169,281
Inventories, net (3)	330,251	304,968
Other	108,562	65,499
Total other non-current assets	6,726,587	13,420,905

1. These amounts are presented net of an allowance for doubtful accounts of ThCh$ 107,550 as of December 31, 2007 (ThCh$ 2,128,600 as of December 31, 2006).
2. These amounts are presented net of adjustments to realizable value of ThCh$ 5,536,351 and ThCh$ 4,760,063 as of December 31, 2006 and 2007, respectively.
3. These inventories have a rotation of more than one year and are presented at net realizable values.

Note 14 – Short-term bank loans

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

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Payable in:
Chilean pesos	1,263,631	3,943,396
United States dollars	12,126,643	25,536,723
Loans in Euros	53,411	-
Inflation-indexed units (UF)	-	1,177,760
Other foreign currencies	3,193,122	4,419,213
Total short-term bank loans	16,636,807	35,077,092
Total outstanding principal	16,346,235	34,559,177

	As of December 31,
	2006	2007
	%	%
Year-end weighted average interest rates:
Loans in Chilean pesos	6.11	7.43
Loans in United States dollars	5.93	6.63
Loans in UF	-	4.08
Loans in Euros	6.45	-
Loans in other foreign currencies	7.66	13.77

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

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Payable in:
Inflation-indexed units (UF)	3,306,812	1,662,449
United States dollars	9,311,295	5,413,914
Other foreign currencies	4,824,551	10,575,564
Total current portion of long-term bank loans	17,442,658	17,651,927
Total outstanding principal	16,971,123	17,486,151
Average annual interest rate %	7.98	8.89

Note 15 – Accrued liabilities and provisions

a) Current accrued liabilities and provisions are as follows:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Accrued employee vacation expenses	2,165,789	2,750,932
Remuneration and consulting services	3,001,240	3,428,769
Staff severance indemnities, short-term	945,328	1,015,322
Project expenses, suppliers and other	833,864	997,546
Municipal taxes and others	692,584	670,023
Freight	313,390	357,853
Electricity consumed and other basic services	334,102	458,359
Import and export costs	78,306	252,521
Lawsuits pending (Argentina)	245,439	1,468,144
Directors’ benefits	-	491,502
Others	100,693	223,794
Total current accrued liabilities and provisions	8,710,735	12,114,765

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

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Staff severance indemnities, long-term	1,204,647	1,034,832
Provisions for pending lawsuits (1)	2,304,830	2,669,132
Municipal taxes and others	1,242,108	766,613
Customs obligations	1,133,605	-
Other	23,919	18,531
Total long-term accrued liabilities and provisions	5,909,109	4,489,108

1. This item includes mainly provision for pending lawsuits and unpaid settlements with current employees, which will be paid at their retirement. The liability is stated at present value applying an annual discount rate of 7% and considering the years remaining to estimated retirement dates.

Note 16 – Staff severance indemnities

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

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Balance at the beginning of period	1,960,098	2,001,839
Price-level restatement	7,201	57,050
Provisions established	1,854,366	2,317,450
Payments during the period	(1,671,690)	(2,326,185)
Balance at the period-end	2,149,975	2,050,154
Presented in balance sheet in:
Current liabilities - accrued liabilities and provisions	945,328	1,015,322
Long-term liabilities - accrued liabilities and provisions	1,204,647	1,034,832
Total	2,149,975	2,050,154

Note 17 – Long-term debt and bonds payable

a) Long-term liabilities with banks and financial institutions as of December 31, 2006 and 2007 are as follows:

		Average					Total	Total
Bank	Currency or	annual	More than 1	More than 2	More than 3	More than	as of December	as of December
or financial institution	indexation	interest rate	up to 2 years	up to 3 years	up to 5 years	5 years	31, 2007	31, 2006
		%	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Banks in Chile
Banco Estado de Chile	Indexed Chilean Pesos	5.08	486,082	486,080	102,030	-	1,074,192	2,156,764
Banco Estado de Chile	US dollars	-	-	-	-	-	-	285,895
BBVA	US dollars	-	-	-	-	-	-	1,184,416
Banco de Crédito e Inversiones	Indexed Chilean Pesos	5.49	252,602	252,601	-	-	505,203	760,534
Bank Boston	US dollars	-	-	-	-	-	-	759,501
Banco de Chile	Indexed Chilean Pesos	5.49	368,798	368,796	-	-	737,594	1,701,170
Banco del Desarrollo	Indexed Chilean Pesos	6.37	596,268	795,024	-	-	1,391,292	2,287,147
Scotiabank	US dollars	-	-	-	-	-	-	2,450,514
Banco Security	Indexed Chilean Pesos	4.86	666,015	666,013	-	-	1,332,028	3,500,936
Banks in Brazil:
Banco Itaú	Other currency	-	-	-	-	-	-	8,312,287
Itaú Finame	Other currency	11.95	4,698,571	-	-	-	4,698,571	-
Bndes	Other currency	8.85	1,105,087	-	1,425,333	-	2,530,420	205,218
Citibank	US dollars	5.12	1,480,700	-	-	-	1,480,700	-
Unibanco	US dollars	6.87	2,682,135	-	-	-	2,682,135	1,293,833
Banks in other countries:
Banco Estado New York	US dollars	5.4	1,526,162	1,526,162	763,080	-	3,815,404	6,146,710
Itaú Finame	US dollars	5.4	759,670	759,670	379,835	-	1,899,175	-
Scotiabank - Peru	US dollars	6.1	795,024	795,024	1,590,048	-	3,180,096	-
Crédito Peru	US dollars	7.04	2,948,216	2,948,216	3,204,942	-	9,101,374	7,433,229
BBVA - Cayman Islands	US dollars	5.4	745,336	745,336	372,668	-	1,863,340	3,001,879
Bank Of America - Cayman Islands	US dollars	-	-	-	-	-	-	3,059,618
Total			19,110,666	9,342,922	7,837,936	-	36,291,524	44,539,651

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

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Company
Madeco	26,595,574	21,704,342
Total	26,595,574	21,704,342
Less: Current portion	(4,872,734)	(5,081,276)
Long-term portion	21,722,840	16,623,066

Madeco S.A. issued the bonds in December 2004 under the following terms:

Amount issued :                                                               UF 1,800,000 composed of 360 Series D bonds of UF 5,000 each.
Term :                                                                                                                                                                 Seven years.
Principal amortization :                                                                           Fourteen semi-annual installments from June 10, 2005.
Interest rate :                 5.00% real annual rate calculated and paid semi-annually on the outstanding UF-denominated principal.

The scheduled principal payments on long-term debt, bonds payable, capital lease obligations and other long-term liabilities at December 31, 2007 are summarized as follows:
 

	As of December 31,
	2007
	ThCh$
Principal payments during the fiscal years ending December 31,
2008	25,045,630
2009	28,683,340
2010	14,347,034
2011	11,853,126
2012 and thereafter	6,036,177
Total	85,965,307

Note 18 – Miscellaneous payables

Miscellaneous long-term payables as of December 31, 2006 and 2007 are summarized as follows:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Capital lease obligations	5,628,953	7,154,165
Total	5,628,953	7,154,165

Note 19 – Income taxes and other taxes

a) Net recoverable taxes are summarized as follows:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Income taxes payable	(7,727,250)	(6,463,676)
Monthly income tax payments	7,746,531	7,747,167
Other credits against income taxes (1)	9,904,815	11,172,802
Other recoverable taxes (2)	162,987	803,442
Recoverable income taxes, net	10,087,083	13,259,735

1. The balance of other recoverable taxes is shown net of an allowance for unrecoverable taxes in Uruguay and Argentina of ThCh$ 1,555,651 as of December 31, 2007 (ThCh$ 560,096 as of December 31, 2006).

2. During 2007, minimal income taxes in Argentina of ThCh$ 1,555,651were reclassified from other long-term assets; these taxes are fully provided for.

b) The net income tax charge to the consolidated statement of income for each year is summarized as follows:
 

	For the year ended December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Current year provision for income tax	(3,325,480)	(7,727,250)	(6,463,676)
Income tax from previous year	1,671,773	(24,308)	183,003
Deferred income tax	(2,012,101)	290,874	(406,636)
Tax benefit from (use of) tax loss carry forwards	2,828,259	(2,528,416)	(2,417,450)
Amortization of complementary accounts	1,046,451	(427,748)	(569,933)
Valuation allowance on deferred tax assets	(2,117,372)	4,602,506	8,389,106
Other	300,067	224,664	210,079
Net income tax expense	(1,608,403)	(5,589,678)	(1,075,507)

The income tax provision has been determined based on current tax laws in each country in which the Company operates.

c) Deferred income taxes

	As of December 31,
	Current portion		Long-term portion
Timing differences	2006	2007	2006	2007
	ThCh$	ThCh$	ThCh$	ThCh$
Accrued vacation expense	158,556	297,396	-	-
Unearned revenues	26,435	106,362	-	-
Allowance for doubtful accounts	1,421,487	1,248,585	30,004	3,095
Allowance for obsolescence of inventories	1,328,890	656,206	102,547	18,918
Property, plant and equipment held for sale	32,273	19,510	23,995	23,482
Write-downs of property, plant and equipment		491,419	219,280	466,211
Impairment of investment in Brazil	1,565,742	1,907,846	5,349,618	3,703,466
Allowances for other current and long-term receivables	630,189	353,941	-	-
Adjustment to realization value of property, plant and equipment	12,580	30,599	-	-
Deferred foreign currency exchange differences		72,416	491,634	352,337
Other provisions	1,595,804	1,794,303	961,008	242,567
Property, plant and equipment in leasing	-	102,217	(3,569,756)	(4,698,383)
Accelerated depreciation of property, plant and equipment	-	(48,579)	(3,507,747)	(5,157,552)
Staff severance indemnities	-	-	(589,939)	(564,661)
Production costs	(476,285)	(498,354)	-	-
Negotiation of bonds	(33,037)	(79,600)	-	(26,484)
Bond issuance costs	-	-	(142,048)	(114,503)
Other	(5,890)	(756)	(142,513)	(301,935)
Subtotal	6,256,744	6,249,086	(774,007)	(6,053,442)
Complementary accounts, net of amortization	-	-	4,039,512	3,496,030
Valuation allowance	(3,342,743)	(2,846,184)	(26,572,735)	(17,701,339)
Tax loss carry forwards	3,073,126	7,429,913	22,780,910	16,491,639
Total deferred income taxes, net	5,987,127	10,832,815	(526,320)	(3,767,112)

Note 20 – Shareholders’ equity

a) The changes in Shareholders' equity during each of the years 2005, 2006 and 2007 in historical Chilean pesos are summarized as follows:
 

			Reserves
	Number of shares	Paid in capital	Contributed Surplus	Other Reserves	Cumulative Translation Adjustment	Accumulated Deficit	Dividends	Net (loss) Income for the year	Total
Balances as of January 1, 2005	4,441,192,887	198,492,593	38,458,668	9,494,028	1,022,532	(97,467,650)	-	8,512,367	158,512,538
Allocation of 2004 net loss	-	-	-	-	-	8,512,367	-	(8,512,367)	-
Capital increase	907,197,242	44,017,210	-	-	-	-	-	-	44,017,210
Share issuance expenses	-	-	(774,759)	-	-	-	-	-	(774,759)
Stock options issued	-	-	-	263,500	-	-	-	-	263,500
Reclassification of capital increase year	-	(195,111)	195,111	-	-	-	-	-	-
Price-level restatement of equity accounts	-	7,057,699	1,386,063	341,785	36,810	(3,202,389)	-	-	5,619,968
Cumulative translation adjustments, net	-	-	-	-	(14,272,719)	-	-	-	(14,272,719)
Net income for the year	-	-	-	-	-	-	-	12,014,323	12,014,323
Balances as of December 31, 2005	5,348,390,129	249,372,391	39,265,083	10,099,313	(13,213,377)	(92,157,672)	-	12,014,323	205,380,061
Restatement of December 31, 2005 balances to December 31, 2007 constant pesos	-	267,825,948	42,170,699	10,846,662	(14,191,167)	(98,977,340)	-	12,903,383	220,578,185
Balances as of January 1, 2006	5,348,390,129	249,372,391	39,265,083	10,099,313	(13,213,377)	(92,157,672)	-	12,014,323	205,380,061
Allocation of 2005 net income	-	-	-	-	-	12,014,323	-	(12,014,323)	-
Capital increase	192,802,758	9,350,934	-	-	-	-	-	-	9,350,934
Stock options issued	-	-	-	275,040	-	-	-	-	275,040
Reclassification of stock options	-	-	-	(263,500)	-	263,500	-	-	-
Price-level restatement of equity accounts	-	5,349,032	824,566	206,553	(320,254)	(1,677,478)	-	-	4,382,419
Cumulative translation adjustments, net	-	-	-	-	1,962,753	-	-	-	1,962,753
Net income for the year	-	-	-	-	-	-	-	30,203,974	30,203,974
Balances as of December 31, 2006	5,541,192,887	264,072,357	40,089,649	10,317,406	(11,570,878)	(81,557,327)	-	30,203,974	251,555,181
Restatement of December 31, 2006 balances to December 31, 2007 constant pesos	-	283,613,711	43,056,283	11,080,894	(12,427,123)	(87,592,569)	-	32,439,068	270,170,264
Balances as of January 1, 2007	5,541,192,887	264,072,357	40,089,649	10,317,406	(11,570,878)	(81,557,327)	-	30,203,974	251,555,181
Allocation of 2006 net income	-	-	-	-	-	30,203,974	-	(30,203,974)	-
Capital increase	120,000,000	5,822,400	-	-	-	-	-	-	5,822,400
Absorption of accumulated deficit	-	(51,353,352)	-	-	-	51,353,352	-	-	-
Interim dividend	-	-	-	-	-	-	(15,002,161)	-	(15,002,161)
Stock options issued	-	-	-	412,560	-	-	-	-	412,560
Price-level restatement of equity accounts	-	15,787,785	2,966,634	763,487	(856,245)	-	-	-	18,661,661
Cumulative translation adjustments, net	-	-	-	-	(17,216,035)	-	-	-	(17,216,035)
Net income for the year	-	-	-	-	-	-	-	19,660,064	19,660,064
Balances as of December 31, 2007	5,661,192,887	234,329,190	43,056,283	11,493,453	(29,643,158)	-	(15,002,161)	19,660,064	263,893,671

b) Dividends

As required by the Chilean Law, unless otherwise decided by the unanimous vote of the holders of all of the issued and subscribed shares, open stock corporations must distribute a cash dividend in an amount equal to at least 30% of their net income for each year, as determined in accordance with Chilean GAAP, unless and except to the extent that the Company has accumulated losses.

The accumulated losses were absorbed as described in point d) below. On December 18, 2007, the Company declared to distribute an interim dividend of Ch$ 2.65 per share as a charge to net income for 2007, which was paid on January 18, 2008.

There are no additional restrictions on the payments of dividends under the terms of the various loan agreements with banks and other financial institutions.

c) Cumulative translation adjustment

Certain US dollar-denominated obligations are designated as economic hedges covering the exposure of foreign investments as permitted by Technical Bulletin No. 64. The exchange differences that relate to such obligations are charged directly against Shareholders’ equity to the Cumulative translation adjustment account. The detail of the cumulative translation adjustment for foreign currency gains and losses on liabilities and net investments measured in currencies other than the Chilean peso as of December 31, of each year are as follows:

	(Charges) / credits for the year ended December 31,			Balance as of December 31,
Item	2005	2006	2007	2006	2007
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Alusa S.A.	(1,881,203)	206,951	(1,836,265)	(2,745,190)	(4,581,455)
Comercial Madeco S.A. (Argentina)	(144,892)	143,294	702,552	(170,749)	531,803
Indeco S.A. (Peru).	(2,387,461)	286,580	(2,774,271)	(1,565,528)	(4,339,799)
Metalúrgica e Industrial S.A. (Argentina)	(449,420)	60,073	439,404	11,280,493	11,719,897
Metal Overseas S.A. (Cayman Islands)	(9,360,746)	1,238,469	(8,556,677)	908,528	(7,648,149)
Cedsa Colombia	-	-	(620,642)	-	(620,642)
Indalum S.A.	(180,360)	-	-	2,108	2,108
Decker-Indelqui S.A. (Argentina)	(1,160,708)	140,928	(1,062,170)	(720,917)	(1,783,087)
Indelqui S.A. Argentina	-	-	(3,285,622)	-	(3,285,622)
Indeco S.A. (Peru)	(249,276)	31,702	(222,344)	(67,391)	(289,735)
Exchange gain (loss) on debt	163,259	-	-	(19,348,477)	(19,348,477)
Total	(15,650,807)	2,107,997	(17,216,035)	(12,427,123)	(29,643,158)

4. Capital increases and decreases

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

In May 2006, the Company subscribed and paid 192,802,758 shares for a total of ThCh$ 9,350,934 at a value of Ch$ 48.50 per share (historical). This capital increase did not affect the contributed surplus.

On April 24, 2007, an extraordinary shareholders meeting agreed to reduce the capital by the absorption of the Company’s accumulated losses of ThCh$ 51,353,352.

e) Contributed surplus

The detail of contributed surplus in historic values is as follows:

	For years ended December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Issuance of shares in 2005	209,549	-	-
Share issuance costs (Note 2 u))	(832,092)	-	-
Total	(622,543)	-	-

f) Stock options for the compensation plans

At the Extraordinary Shareholders’ Meeting of Madeco S.A., held on November 14, 2002, a stock-based compensation plan was agreed upon for the Company’s executives and, accordingly, 493,334,000 shares were allocated to a capital increase for that purpose.

On January 25, 2005, the Board of Directors granted a group of executives the option to subscribe for a total of 130,000,000 shares of the total shares authorized at a price of Ch$ 60 per share. This was formalized on May 20, 2005 through the signing of share subscription contracts with the following terms:

• The first share subscription to be exercised between September 30 and November 30, 2005.
• The second share subscription to be exercised between September 30 and November 30, 2006.
• The beneficiary to be an employee of Madeco on the respective exercise date.
• The option to be transferable only between September 30 and November 30, 2005 and 2006 (the periods for exercising the respective options).
• Should the controlling entity sell a third of its control of Madeco, the beneficiaries have the right to exercise the option within 60 days of the sale date.
• In the event of death of the beneficiary prior to September 30, 2005, the right to subscribe to extinguish. In the event of death after October 1, 2005, the relatives to have the right to subscribe and pay for the respective shares within 6 months from the date of death.
• The option to be exercised for all or part of the shares and to be paid for in cash.
• While the shares remain un-subscribed, they grant no economic or voting rights in the company and are not considered for quorum purposes at shareholders' meetings.

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

On August 31, 2005, the share subscription contracts signed on May 20, 2005 between Madeco S.A. and its executives were cancelled. The unamortized amount of the stock options was fully charged to income for the year.

During June 2006, the Company reclassified the respective amount of ThCh$ 263,500 from Other Reserves to Retained Earnings, in accordance with Excerpt No. 5908 issued by the Chilean Superintendency of Securities and Insurance dated June 5, 2006.

On May 30, 2006, the Board of Directors agreed to issue to a group of executives stock options for a total of 120,000,000 shares out of the shares issued for this purpose in 2002. The Share Subscription Agreement dated July 14, 2006 sets the exercise price at Ch$ 48.52 per share. Additional terms and conditions are as follows:

• The exercise period is from October 1, 2007 to November 12, 2007.
• The beneficiary must be working for Madeco on the day the exercise period begins, October 1, 2007.
• The option can not be transferred before the exercise period begins.
• Should the controlling entity sell to a third party the control over Madeco, the beneficiaries will have the right to exercise this option within a term of 60 days from the date of the sale
• In the event of the death of a beneficiary on a date prior to October 1, 2006, the subscription right extinguishes. In the event of death on a date subsequent to October 1, 2006, the relatives obtain the right of subscribing and paying the respective shares within a term of 6 months from the date of death.
• The beneficiary has the right to exercise all stock options or a portion; payment must be made in cash
• As long as the stock options are not exercised, they do not bear shareholders’ interest, i.e. economic benefits or voting rights.

As described in Note 2v), the Company determined the fair value of ThCh$ 687,600 for these options at the grant date using the "Black-Scholes-Merton" method and considering the following variables:

Share price at date in which the option is granted    Ch$ 48.52
Liquidity effect                                                             3.48%
Price for the year                                                    Ch$ 48.52
Annual expected volatility                                           23.88%
Option life (in years)                                                       1.25
Expected dividends                                                           0%
Free-of-risk rate                                       5.73 for 15 months

Volatility has been estimated based on historical information in the absence of a market for these options. The fair value determined is recorded with a charge to Compensation cost and a credit to Other Reserves on a straight-line basis over the period between the grant date of the options and the date that these become vested. The charges to income for the year 2006 and 2007 were ThCh$ 295,393 and ThCh$ 412,560, respectively.

Note 21 – Foreign currency, UF indexed and CPI restated assets and liabilities

Balances denominated or measured in foreign currencies (principally US dollars) at December 31, 2006 and 2007 are included in these financial statements in thousands of Chilean pesos equivalents as follows:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Assets
Cash and time deposits	5,104,333	9,013,404
Accounts receivable, net	73,450,112	78,838,523
Notes and account receivable from related companies	6,808	8,198
Inventories, net	54,933,180	89,191,013
Other current assets	17,739,538	14,989,115
Property, plant and equipment and other non-monetary assets	110,125,731	116,917,492
Other monetary assets	177,415	4,714
Total assets	261,537,117	308,962,459
Liabilities
Short-term bank loans and current portion of long-term liabilities	29,510,901	47,708,426
Accounts and notes payable	20,428,738	27,031,176
Notes and account payable to related companies	59,320	31,124
Other current liabilities	15,751,454	16,075,388
Long-term debt	34,133,100	32,642,508
Other long-term liabilities	5,325,849	9,538,396
Total liabilities	105,209,362	133,027,018
Net asset position	156,327,755	175,935,441

The inventories, property, plant and equipment and other non-monetary asset balances presented above relate to assets of foreign investments for which the financial statements are translated to US dollars in accordance with Technical Bulletin No. 64 as described in Note 2 s). Accordingly, from an accounting perspective only, there is an exposure to changes in the exchange rate between the US dollar and the Chilean peso.

Balances denominated in UFs or indexed based on variations in Chilean CPI are included in the financial statements as follows:
 

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Assets
Time deposits and marketable securities	589,196	2,185,349
Accounts receivable, net	27,988,143	28,416,536
Notes and account receivable from related companies	1,654,819	1,773,652
Inventories, net	49,890,372	45,688,722
Other current assets	18,116,266	14,516,992
Property, plant and equipment and other non-monetary assets	87,550,645	85,311,959
Other assets	297,119	241,661
Total assets	186,086,560	178,134,871
Liabilities
Short-term bank loans and current portion of long-term liabilities	5,093,067	7,333,020
Bonds payable	26,595,574	21,704,342
Accounts and notes payable	5,679,454	22,122,104
Notes and account payable to related companies	420,334	583,969
Other current liabilities	4,365,446	5,507,369
Long-term debt	10,406,551	3,649,016
Other long-term liabilities	7,367,277	6,722,911
Total liabilities	59,927,703	67,622,731
Net asset position in UF or indexed to Chilean CPI	126,158,857	110,512,140

Note 22 – Commitments and contingencies

The Company and its subsidiaries are party to various lawsuits arising in the ordinary course of its business. Management and its legal advisers consider it unlikely that any losses associated with the pending lawsuits described below will significantly affect the Company or it subsidiaries' results of operations, financial position and cash flows, although no assurance can be given to such effect.

Madeco S.A.

1) Covenants on the Company’s Management Activities or Limits to Financial Indicators:

1.1) Series D Bonds

a) The Company will have to maintain the current ratio above 1.0.
b) The Company will have to maintain equity equal to or greater than UF 7,000,000.
c) The Company’s debt to capital ratio (Debt with third parties / Equity plus minority interest) will have to be maintained in at least 1.8 times.
d) The Company’s assets free of liens must not be lower than 1.2 times the issuance unpaid amount.
e) That the Company’s controller, Quiñenco S.A., maintains this status, with direct or indirect participation of at least 40% in accordance with article No. 97 of the Security Market Law, with no prejudice that Quiñenco S.A. has to maintain, at all times, participation of at least 35%.

1.2) Bank Loans

As of December 31, 2007, the Company maintains syndicated loans with financial institutions, and during the entire life of the agreements up to the date in which all and each payment obligations contained in agreements have been complied with in full, the Company is obliged to the following:

a) The Company will have to prepay the total amount of bank loans in the event that the Luksic Group does not maintain in a direct or indirect manner at least 40% of voting right shares of Madeco S.A. and the direct or indirect control of Madeco S.A. (per definition contained in Article No. 97 of Law No.18,045 of the Securities Market.

b) Compliance with financial ratios

1. Net Financial Debt less Variation in Working Capital to EBITDA (for the last four quarters) not to exceed 3.2 times.
2. Net Financial Debt less Variation in Working Capital to Adjusted Equity to be lower than 0.75 times.
3. EBITDA to Financial Expenses (for the last four quarters) to be equal or greater than 2.5 times.
4. Adjusted Equity must be at least equal to UF 7,000,000.

c) Main obligations for the Company:

1. The Debtor and its significant subsidiaries (Alusa S.A., Indalum S.A., Ficap S.A., Indeco S.A.) have to comply with all requirements to maintain its legal existence, rights, franchises and licenses.
2. The Debtor and its significant subsidiaries have to maintain and preserve their Essential Assets; “Essential Assets” for these purposes are equipment, machinery and all essential elements the Debtor needs to conduct its businesses and those of the Essential Subsidiaries.
3. Designate the funds indicated in this instrument only and exclusively to finance exports and investments in assets related directly and solely to the export of its products, and the refinancing of existing financing debt.
4. The Debtor and its significant subsidiaries have to substantially meet all laws with respect to pollution or material waste, environmental matters, which do not have any adverse material effect.

d) Main limitations for the Company:

1. The Debtor and its significant subsidiaries should not constitute any lien without the Creditors' prior and written consent.
2. The Debtor and/or its significant subsidiaries, without the prior and written authorization by the Creditors, will not be able to agree any mergers, absorption or incorporation and nor can they be liquidated, terminate their business activities or dissolve.
3. Not disposing of one or any or its Essential Assets in leaseback operations.
4. The Debtor and/or its Essential Subsidiaries will not be able to make any significant changes in the nature of their primary line of business without the Creditors’ prior and written consent.

3) As of December 31, 2007, the Company meets all covenants required in subordinated loan agreements.

4) Agreement with Nexans

On November 15, 2007, in Paris, France, Madeco and Nexans entered into a Framework Agreement by virtue of which both parties agreed the transfer to Nexans of all the assets of the Wire and Cable unit of Madeco in Chile, Argentina, Peru Brazil and Colombia for US$ 448 million plus 2.5 million shares of Nexans, which is equivalent to approximately US$ 823 million (historical).

The Board of Directors of Madeco believes this operation to be beneficial for its shareholders in consideration of its terms and conditions as a result of which Madeco becomes the biggest shareholder of Nexans with approximately 8.9 % of its share capital. Nexans is the main manufacturer of wire worldwide with presence in Europe, North America, Asia, Africa and Brazil in South America.

With the signing of the Framework Agreement with Nexans, the Companies initiated a due diligence process, and if both parties are satisfied, at the end of which the final agreement will be executed, which currently is estimated to take place in June 2008.

For these purposes, Madeco S.A. will separate the wire segment in Chile and Argentina through the incorporation of subsidiaries to which this activity will be transferred.

As this operation includes the transfer of approximately 60% of the Company’s assets, an extraordinary shareholders’ meeting will be held to approve this transaction.

5) Tax Contingencies

Until December 31, 2007, Madeco S.A. has received reimbursements from the Chilean Internal Revenue Service for tax years 2001, 2002, 2003 and 2004 related to corporate income tax differences, and income tax reimbursements from 21^st article of the Income Tax Law for a total of ThCh$ 4,774,410 (tax amount). Company’s management, in accordance with terms established in the Tax Code has filed through its legal advisors the administrative procedures required to claim reimbursements in the first instance before the Tax Court; it believes that these are not applicable.

Additionally, for tax year 2004, the Company is requesting the reimbursement of ThCh$ 642,494, related to the remaining balance withheld by the Chilean Internal Revenue Service of ThCh$ 3,038,789 originally requested for the concept of tax loss absorption

Metal Overseas and Subsidiaries

1) In Brazil, two legal proceedings are pending which have been filed by the State Finance Secretary’s Office (Rio de Janeiro) against the prior owner of Ficap S.A., from a date prior to the acquisition of this subsidiary by Madeco S.A. in 1997. As of December 31, 2007, the total sum for claims amounts to approximately ThR$ 6,950. Madeco S.A. has a personal guarantee from the previous owner of Ficap S.A. related to providing compensation to the Company, should the Brazilian subsidiary be affected by these legal proceedings

2) On July 19, 2006, the Company’s subsidiary Ficap S.A. has received a procedure related to a infraction filed by the State Finance Secretary’s Office (Rio de Janeiro) for tax years 2001, 2002, 2003, 2004 and 2005, related to income tax differences for a total of ThR$18,550, which, according to the Company’s legal advisors, present no risk of significant losses.

Armat S.A.

As of December 31, 2007, there are pending lawsuits filed against this company in the normal course of business, which, in the opinion of the company’s legal advisors, present no risk of significant losses.

Indalum S.A. and subsidiaries

1) There are no lawsuits or other legal proceedings filed against the Company and its subsidiaries.

2) In conformity with the negotiation performed by the Company as of December 29, 2003, with Banco de Chile, Banco de Crédito Inversiones, BancoEstado and Banco Security the following covenants were established, which will apply for the period between the aforementioned date and December 26, 2010.

2.1) Maintain in June and December of each year, based on the consolidated financial statements, in accordance with the respective statutory FECU format:

a) Indebtedness or leverage ratio not greater than 1.2 times.
b) Restated minimum capital for the amount equivalent to UF 1,630,000.

2.2) Maintain the ownership of property, plant and equipment required for its business, maintain the normal course of operations, and maintain the ownership of the subsidiary Alumco S.A.

2.3) Not pledging or mortgaging or constitute any guarantee or actual right on any property, plant and equipment item owned by Indalum S.A. or by its subsidiaries except for those guarantees on assets that are acquired in the future and which are granted as guarantee for the financing of the acquisition of these assets.

2.4) Not providing any personal guarantee or collateral to ensure compliance with any obligation, debt, liability or commitment assumed by any person or entity other than Indalum S.A. or its subsidiaries without the Creditors’ prior and written consent.

2.5) Not paying or distributing dividends which exceed 30% of net income for each year except with the prior and written consent by the creditors.

2.6) Not granting direct financing to third parties other than those related to the normal course of operations. This concept of direct financing does not include accounts receivable of Indalum S.A. with its customers or loans to executives and employees of Indalum S.A. or its subsidiaries.

2.7) Should the Company dispose the properties located at Avda. Vitacura No. 2736, Office 301, in the commune of Vitacura, and at Santa Marta No. 1313 in the commune of Maipú, the debtor will have to designate the total sum of the sales proceeds for these properties to pro-rata prepayment of the balance of restructured obligations. In August 2006, the Company disposed of the property located at Santa Marta No. 1313, and the banks agreed to release the Company from before mentioned restrictions related to this property.

2.8) Indalum S.A. can pay the loan currently owed to its parent company Madeco S.A. only if it has complied with all covenants it assumes by virtue of the agreement or that resources are provided by the sale of the properties indicated above. The loan with Madeco S.A. was completely paid in 2006.

2.9) Madeco S.A. must have the direct or indirect control of the ownership of Indalum S.A. or have at least 50.1% ownership during the life of the agreement.

As of December 31, 2007, the Company has complied with all these covenants.

3) In November 2007, a complaint was filed against the Company before the National Economic Treasurer’s Office by a former distributor, seeking payment of open positions with the Company. In the legal advisors’ opinion, this complaint should not prosper.

4) Tax Contingencies

As of December 31, 2007, Indalum S.A. has received reimbursements for a sum of ThCh$ 327,810 (tax amount) from the Chilean Internal Revenue Service for tax years 1999 to 2003 related to corporate income tax differences. Company’s management, in accordance with terms established in the Tax Code, has began through its legal advisors the administrative proceedings required to claim in the first instance before the Tax Court the reimbursements, as it deems they are not applicable.

As of December 31, 2007, with respect to the subsidiary Ingewall S.A., the Chilean IRS is in the process of reviewing the value added tax assessment for the periods from July to December 1999, February and August 2001, that originally amounted to ThCh$ 276,549.

As of December 31, 2007, Ingewall S.A. has received a resolution from the Chilean IRS for tax years 2001 and 2002 related to the modification of tax loss carryforwards. Additionally, liquidations have been received from the Chilean Internal Revenue Service for tax years 2004 to 2006 related to the first category unique tax for ThCh$185,333 (tax amount.) Company’s management, according to the complaint terms established in the Tax Code has filed through its legal advisors administrative procedures required to file a complaint in the first instance before a Tax Court against this resolution as it believes these liquidations are not applicable.

Alusa S.A. and subsidiaries

2) Loan agreements

As of December 31, 2007, the Company has the following obligations with financial institutions:

• Syndicated loan with Banco de Chile and Banco Estado of UF 300,000 (historic amount). (*)
• Loan with Banco Security of UF 163,000 (historic amount).
• Loan with Banco Estado of UF 52,000 (historic amount).

Alusa S.A. has the following covenants related to these loans:

• Madeco S.A. must be the direct or indirect owner of, at least 50.1% of voting right capital of Alusa S.A., during the duration of these loans.

On December 26, 2006, Alusa S.A. became the guarantor and collateral of Aluflex S.A. for a loan granted by Banco del Desarrollo to this company of US$ 4,000,000. The principal is payable in January 2010.

(*) Further restrictions with respect to this loan agreement, reported in the previous financial statements were eliminated in amendment dated March 8, 2007

On November 6, 2007, the subsidiary Peruplast S.A. assumed the following commitments as a result of two long-term bank loans with Scotiabank and Banco de Credito del Perú for US$ 8,000,000 each:

With Scotiabank, Peruplast S.A. agreed to maintain at the end of each quarter the following indicators:

• Maintain indebtedness ratio (total liabilities less deferred income taxes between net shareholders’ equity less intangible assets and non-trading accounts receivable from Peruplast’s affiliates) no greater than 1.50 times until September 2009 and no greater than 1.25 times thereafter.
• Maintain debt coverage ratio (financial debt between EBITDA) no greater than 2.0 times from December 2007 to September 2009 and no greater than 1.75 times from December 2009 and thereafter.
• Maintain debt service coverage (EBITDA between the sum of the current portion of long-term debt plus financial expenses) no lower than 1.50 times

With Banco de Credito del Perú, Peruplast S.A. agreed to maintain the following indicators:

• Maintain total liabilities less taxes and deferred participation divided by equity lower than 1.50 times. (The measurement of this ratio will consider as the Company’s liabilities all collaterals and contingent guarantees granted by it in favor of third parties.)
• Maintain operating income plus depreciation and amortization less income taxes and participation less distributions to shareholders less loans to affiliates less capital investments net of financing plus opening cash on debt servicing greater than 1.25 times.

As of December 31, 2007, Peruplast S.A. meets all requirements for the loans described above.

2) Tax Contingencies

As of December 31, 2007, Alusa S.A. has received liquidations from the Chilean Internal Revenue Service for tax years 2001, 2002 and 2003, related to first category income tax differences and income reimbursements for a total sum of ThCh$ 281,263 (tax amount). Company’s management, according to the terms established in the Tax Code has filed through its legal advisors administrative procedures required to file a complaint in the first instance before a Tax Court against this liquidations as it believes these liquidations are not applicable.

Comercial Madeco S.A. and subsidiaries

Metacab S.A. (a subsidiary of Decker Indelqui S.A.) has received claims generated in the Ownership Participation Program according to the purchase agreement signed with the former ECA Company, a company owned by the State of Argentina. The by-laws of Metacab S.A. provided that the owners of 6% of share capital must be organized under a Participation Ownership Program, to which the Company’s employees could adhere, provided that they met certain requirements. This plan was never implemented.

Former employees filed a complaint alleging inadequate management by the Company, causing losses and damaging beneficiaries of the aforementioned program. Among other restrictions, attachments were placed on the Lomas de Zamora plant and certain pieces of machinery. To date, the Company’s legal advisors believe it is not possible to estimate the outcome of this complaint or possible obligations.

Direct Guarantees

			Balance pending payment		Release of guarantee
	Company	Transaction	2006	2007	2008	2009	2010
CASA MONEDA DE CHILE	Madeco S.A.	Compliance with sales order	4,016	-	-	-	-
CÍA.TELECOMUNICACIONES DE CHILE SA.	Madeco S.A.	Compliance with sales order	-	1,794	1,794	-	-
COMERCIAL Y LOGÍSTICA GENERAL SA.	Madeco S.A.	Compliance with sales order	-	42,922	42,922	-	-
S.Q. M. INDUSTRIAL S.A.	Madeco S.A.	Compliance with sales order	3,791	3,53	3,530	-	-
SQM SALAR S.A.	Madeco S.A.	Compliance with sales order	2,892	1,298	1,298	-	-
TECHINT CHILE SA.	Madeco S.A.	Compliance with sales order	25,023	854	-	854	-
CORPORACIÓN NACIONAL DEL COBRE	Madeco S.A.	Compliance with sales order	537	83,985	-	-	83,985
ATACAMA MINERALS CHILE SCM	Madeco S.A.	Compliance with sales order	-	654	654	-	-
CASA MONEDA DE CHILE SA.	Madeco S.A.	Compliance with sales order	-	94,676	94,676	-	-
CÍA. AMERICANA DE MULTISERVICIOS	Madeco S.A.	Compliance with sales order	223,970	-	-	-	-
CÍA. DE TELECOMUNICACIONES DE CHILE S.A.	Madeco S.A.	Compliance with sales order	-	34,873	34,873	-	-
CORPORACIÓN NACIONAL DEL COBRE	Madeco S.A.	Compliance with sales order	-	10,823	10,823	-	-
FAM AMERICA LATINA	Madeco S.A.	Compliance with sales order	72,272	31,982	31,982	-	-
METSO PAPER	Madeco S.A.	Compliance with sales order	30,702	26,681	26,681	-	-
MINERA ESCONDIDA LTDA.	Madeco S.A.	Compliance with sales order	-	57,612	57,612	-	-
MINERA ESPENCE S.A.	Madeco S.A.	Compliance with sales order	3,503	-	-	-	-
MINERA LOS PELAMBRES	Madeco S.A.	Compliance with sales order	72,281	91,777	62,814	28,963	-
MINERA SAN CRISTOBAL	Madeco S.A.	Compliance with sales order	182,836	158,886	158,886	-	-
MITSUBISHI CORP. SUCURSAL CHILE CONST. Y PROYECTOS	Madeco S.A.	Compliance with sales order	73,932	64,248	64,248	-	-
COSTANERA CENTER SA.	Madeco S.A.	Compliance with sales order	-	4,969	4,969	-	-
CÍA. MINERA RIOCHILEX S.A.	Madeco S.A.	Compliance with sales order	12,078	-	-	-	-
CORPORACIÓN NACIONAL DEL COBRE	Madeco S.A.	Compliance with sales order	251,380	-	-	-	-
CÍA. AMERICANA DE MULTISERVICIOS	Madeco S.A.	Compliance with sales order	8,292	-	-	-	-

Indirect Guarantees

			Balance pending payment		Release of guarantee
	Company	Transaction	2006	2007	2008	2009	2010
BANCO CENTRAL DE LA REPUBLICA ARGENTINA	ARMAT S.A.	ORDER COMPLIANCE	-	844,713	844,713	-	-
BANCO CENTRAL DE LA REPUBLICA DOMINICANA	ARMAT S.A.	ORDER COMPLIANCE	-	174,240	174,240	-	-
BANCO DE GUATEMALA	ARMAT S.A.	ORDER COMPLIANCE	343,072	359,719	359,719	-	-
CASA DE MONEDA DE CHILE	ARMAT S.A.	ORDER COMPLIANCE	-	470,306	470,306	-	-
CASA DE MONEDA DE CHILE	ARMAT S.A.	ORDER COMPLIANCE	725,462	464,393	6,541	-	457,852
CODELCO	ARMAT S.A.	ORDER COMPLIANCE	-	3,833	479	3,354	-
BANCO CENTRAL DE CHILE	ARMAT S.A.	ORDER COMPLIANCE	228,715	-	-	-	-
MINISTERIO DE HACIENDA	FICAP S.A.	PP&E (COMPLAINT)	-	124,603	-	-	124,603
MINISTERIO DE HACIENDA	FICAP S.A.	PP&E (TAX)	-	5,081,862	-	-	5,081,862
PORTO PRIMAVERA TRANSM. ENERGIA	FICAP S.A.	ORDER COMPLIANCE	12,382	12,987	12,987	-	-
PROMON ENG LTDA	FICAP S.A.	ORDER COMPLIANCE	15,382	16,135	-	16,135	-
ENERG POWER LTDA	FICAP S.A.	ORDER COMPLIANCE	17,782	18,653	18,653	-	-
CONSÉORCIO PRA 1	FICAP S.A.	ORDER COMPLIANCE	7,416	7,779	7,779	-	-
ALSTOM BRASIL LTDA	FICAP S.A.	ORDER COMPLIANCE	76,774	80,530	80,530	-	-
ANDE	FICAP S.A.	ORDER COMPLIANCE	35,387	-	-	-	-
OUTOTEC TEC. BRASIL	FICAP S.A.	ORDER COMPLIANCE	-	120,076	-	120,076	-
MARINHA DO BRASIL	FICAP S.A.	GUARANTEE FOR COMPLIANCE	-	8,136	8,136	-	-
POYRY EMPREEND. IND.	FICAP S.A.	GUARANTEE FOR COMPLIANCE	-	95,223	95,223	-	-
ITUMBIARA TRANSMS. DE ENERGIA	FICAP S.A.	ORDER COMPLIANCE	-	32,904	32,904	-	-
ATE III TRANSM.	FICAP S.A.	ORDER COMPLIANCE	66,278	57,558	-	57,558	-
COVERTEAM BRASIL LTDA	FICAP S.A.	ORDER COMPLIANCE	-	294,946	294,946	-	-
SERRA DA MESA TRANSM. ENERGIA	FICAP S.A.	ORDER COMPLIANCE	802,789	230,120	-	230,120	-
FURNAS CENTRAIS ELETRICAS	FICAP S.A.	ORDER COMPLIANCE	-	9,187	9,187	-	-
IEMG	FICAP S.A.	ORDER COMPLIANCE	-	1,326,891	1,326,891	-	-
SERRA DA MESA TRANSM. ENERGIA	FICAP S.A.	ORDER COMPLIANCE	-	41,336	41,336	-	-

Indirect Guarantees

			Balance pending payment		Release of guarantee
	Company	Transaction	2006	2007	2008	2009	2010
11ª VARA DE FAZENDA RJ	FICAP S.A.	INF PROCESS GUARANTEE	-	329,468	-	-	329,468
11ª VARA DE FAZENDA RJ	FICAP S.A.	INF PROCESS GUARANTEE	-	727,577	-	-	727,577
11ª VARA DE FAZENDA RJ	FICAP S.A.	INF PROCESS GUARANTEE	-	713,129	-	-	713,129
11ª VARA DE FAZENDA RJ	FICAP S.A.	INF PROCESS GUARANTEE	-	515,326	-	-	515,326
11ª VARA DE FAZENDA RJ	FICAP S.A.	INF PROCESS GUARANTEE	-	144,924	-	-	144,924
POÇOS DE CALDAS TRANSM. ENERGIA	FICAP S.A.	BANK GUARANTEE	-	242,363	242,363	-	-
POÇOS DE CALDAS TRANSM. ENERGIA	FICAP S.A.	ORDER COMPLIANCE	-	486,420	486,420	-	-
OBRAS Y DESAROLLO S/A	FICAP S.A.	ORDER COMPLIANCE	28,167	12,686	12,686	-	-
UTE	FICAP S.A.	ORDER COMPLIANCE	-	5,311	5,311	-	-
CIA. AMERICANA DE MULTICSERVICIOS	FICAP S.A.	ORDER COMPLIANCE	-	19,379	-	19,379	-
ATE II TRANS. DE ENERGIA S/A	FICAP S.A.	ORDER COMPLIANCE	-	32,516	32,516	-	-
ELECNOR S/A	FICAP S.A.	ORDER COMPLIANCE	505,605	46,949	-	46,949	-
ALUNORTE ALUMINA DO BRASIL	FICAP S.A.	GUARANTEE	314,536	-	-	-	-
CONSORCIO LUMMUS	FICAP S.A.	GUARANTEE	114,152	-	-	-	-
CPEL COMERCIALIZACIÓN BRASIL	FICAP S.A.	GUARANTEE	70,915	-	-	-	-
ELECTRO NORTE	FICAP S.A.	ORDER COMPLIANCE	22,732	-	-	-	-
ENERBRASIL ENERG RENT DO BRASIL	FICAP S.A.	ORDER COMPLIANCE	97,352	-	-	-	-
FICAP S.A. (MATRIZ)	FICAP S.A.	GUARANTEE	534,880	-	-	-	-
KVAERNER DO BRASIL LTDA.	FICAP S.A.	GUARANTEE	218,022	-	-	-	-
MICHELIN PARTIC. IND. COMERCIO	FICAP S.A.	GUARANTEE	575,514	-	-	-	-
SAFRA	FICAP S.A.	LEGAL GUARANTEE	1,121,801	-	-	-	-
VILA DO CONDE TRANSM. ENERG	FICAP S.A.	ORDER COMPLIANCE	5,625	-	-	-	-
DIRECCION DE VIALIDAD	INDALUM S.A.	CERTICATE OF DEPOSIT	862	853	853	-	-
SERVIU REGION METROPOLITANA	INDALUM S.A.	CERTICATE OF DEPOSIT	-	94	-	-	94
HUEMURA REPRESENTACIONES S.R.L. / BCP	INDECO S.A.	GUARANTEE	-	4,969	4,969	-	-
CONDUMAX S.A / BBVA	INDECO S.A.	GUARANTEE	-	2,484	2,484	-	-
V Y F TECNOLOGIA COMERCIAL S.A.C / SCOTIABANK	INDECO S.A.	GUARANTEE	-	24,845	24,845	-	-
INGENIERIA SOCIEDAD ANONIMA NORTE / BCP	INDECO S.A.	GUARANTEE	-	4,969	4,969	-	-
DISTRIBUIDORA ROMERO S.R.L. / BBVA	INDECO S.A.	GUARANTEE	-	24,845	24,845	-	-
HUEMURA REPRESENTACIONES S.R.L. / BCP	INDECO S.A.	GUARANTEE	-	9,938	9,938	-	-
DISTRIBUIDORA ROMERO S.R.L. / BCP	INDECO S.A.	GUARANTEE	-	4,969	4,969	-	-

Indirect Guarantees

			Balance pending payment		Release of guarantee
	Company	Transaction	2006	2007	2008	2009	2010
IND COMERCIAL SANTA ADELAIDA S.A. / BCP	INDECO S.A.	GUARANTEE	-	12,422	12,422	-	-
CONDUMAX S.A. / BBVA	INDECO S.A.	GUARANTEE	-	29,813	29,813	-	-
DISTRIBUIDORA ROMERO S.R.L. / BBVA	INDECO S.A.	GUARANTEE	-	9,938	9,938	-	-
DIMEX S.A.C / BBVA	INDECO S.A.	GUARANTEE	-	11,606	11,606	-	-
DISTRIBUIDORA INCORESA S.A. / BCP	INDECO S.A.	GUARANTEE	-	17,391	17,391	-	-
COMERCIAL IQUITOS S.A. / BBVA	INDECO S.A.	GUARANTEE	-	9,938	9,938	-	-
KOLLER S.R.L. / BBVA	INDECO S.A.	GUARANTEE	-	49,689	49,689	-	-
DISTRIBUIDORA INCORESA S.A. / BCP	INDECO S.A.	GUARANTEE	-	9,938	9,938	-	-
HUEMURA REPRESENTACIONES S.R.L. / SCOTIABANK	INDECO S.A.	GUARANTEE	-	9,938	9,938	-	-
JORVEX S.A. / BANCO CONTINENTAL	INDECO S.A.	GUARANTEE	-	149,067	149,067	-	-
DISTRIBUIDORA ROMERO S.R.L. / BCP	INDECO S.A.	GUARANTEE	-	9,938	9,938	-	-
DISTRIBUIDORA INCORESA S.A. / BCP	INDECO S.A.	GUARANTEE	-	7,453	7,453	-	-
DISTRIBUIDORA ROMERO S.R.L. / BCP	INDECO S.A.	GUARANTEE	-	4,969	4,969	-	-
JORVEX S.A. / SCOTIABANK	INDECO S.A.	GUARANTEE	-	49,689	49,689	-	-
CONDUTEK S.A. Y/O CONDUMAX S.A. / BBVA	INDECO S.A.	GUARANTEE	-	49,689	49,689	-	-
CANALA COM. ELECTRICA CIA LTDA. / AMERICAN EXPRES	INDECO S.A.	GUARANTEE	-	55,155	55,155	-	-
JORVEX S.A. / BCP	INDECO S.A.	GUARANTEE	-	149,067	149,067	-	-
RENSA VENTAS Y SERVICIOS S.R.L. / BCP	INDECO S.A.	GUARANTEE	-	1,491	1,491	-	-
DISTRIBUIDORA ROMERO S.R.L. / BCP	INDECO S.A.	GUARANTEE	-	4,969	4,969	-	-
DISTRIBUIDORA ROMERO S.R.L / BCP	INDECO S.A.	GUARANTEE	-	4,969	4,969	-	-
CAM PERU S.R.L.	INDECO S.A.	GUARANTEE	115,831	-	-	-	-
EDELNOR S.A.	INDECO S.A.	GUARANTEE	667,843	-	-	-	-
ELECTRO ORIENTE S.A.	INDECO S.A.	GUARANTEE	2,202	-	-	-	-
ELECTRO PUNO S.A.	INDECO S.A.	GUARANTEE	2,252	-	-	-	-
ELECTRO SUR ESTE S.A.	INDECO S.A.	GUARANTEE	4,257	-	-	-	-
ELECTROCENTRO S.A.	INDECO S.A.	GUARANTEE	6,112	-	-	-	-
ELECTRONOROESTE S.A.	INDECO S.A.	GUARANTEE	9,327	-	-	-	-
ELECTRONORTE S.A.	INDECO S.A.	GUARANTEE	8,503	-	-	-	-
GAS NATURAL DE LIMA Y CALLAO	INDECO S.A.	GUARANTEE	3,202	-	-	-	-
HIDRANDINA S.A.	INDECO S.A.	GUARANTEE	15,584	-	-	-	-
LIMA AIRPORT PARTNERS S.R.L.	INDECO S.A.	GUARANTEE	17,318	-	-	-	-
LUZ DEL SUR S.A.	INDECO S.A.	GUARANTEE	1,976	-	-	-	-
RED DE ENERGIA DEL PERU S.A.	INDECO S.A.	GUARANTEE	4,950	-	-	-	-
SOCIEDAD ELECTRICA DEL SUR OESTE S.A.	INDECO S.A.	GUARANTEE	629	-	-	-	-
SUNAT	INDECO S.A.	GUARANTEE	1,926,432	-	-	-	-
TURBOGENERADORES DEL PERU SAC	INDECO S.A.	GUARANTEE	29,662	-	-	-	-

Note 23 – Other non-operating income and expenses

Other non-operating income and expenses for each year are summarized as follows:

	For the years ended December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Other non-operating income
Asset rental	-	-	140,586
Gain on sale of property, plant and equipment	211,684	17,878	440,291
Net gain from sale of disposable assets	-	33,967	8,489
Reversal of allowance for receivables due from Optel Ltda.	381,351	-	-
Recovery of tax benefits in foreign subsidiaries	550,700	-	28,333
Reversal of allowance for investment in Optel Ltda.	558,454	-	-
Release of provision for expenses related to Optel Ltda.	724,826	-	-
Indemnities received	-	-	45,542
Others	117,627	73,439	154,173
Total	2,544,642	125,284	817,414
Other non-operating expenses
Staff severance indemnity payments related to restructuring	298,945	-	459,702
Obsolescence and write-offs of other long-term assets	264,208	1,001,621	163,842
Adjustment to realizable value of assets held for sale (Note 10)	265,767	315,422	-
Provision for closure and valuation on assets Ingewall and Uruguay	42,749	-	-
Provision for lawsuit s	107,895	18,609	65,186
Appraisal of assets to be disposed of	-	-	119,796
Net loss on sale of investments	-	-	33,418
Directors’ benefits	-	-	442,352
Depreciation of inactive assets – Argentina (1)	1,484,141	1,010,056	627,132
Government fines, taxes and interest from foreign subsidiaries	996,144	698,682	41,151
Other	134,006	18,210	23,547
Total	3,593,855	3,062,600	1,976,126

(1) Corresponds to depreciation of property, plant and equipment (Note 10) and inactive assets (Note 13).

Note 24 – Balances and transactions with related parties

Balances with related companies at December 31 of each year are as follows:

a) Current assets

			As of December 31,
			2006	2007
Company	Nature of relationship	Nature of transaction	ThCh$	ThCh$
Cobrecon S.A.	Equity method investment	Loan	4,104	8,198
Embotelladoras Chilenas Unidas S.A.	Member of Controlling Group	Sales	216,560	138,163
Sodimac S.A.	Member of Controlling Group	Sales	1,061,101	1,290,056
Calaf S.A.	Member of Controlling Group	Sales	31,310	41,352
Minera Michilla S.A.	Member of Controlling Group	Sales	58,901	2,478
Minera Los Pelambre S.A.	Member of Controlling Group	Sales	203,607	257,827
Alte S.A.	Controlled by Minority Interest Holder	Sales	58,554	34,358
Other related Companies	Various	Various	27,490	9,418
Total			1,661,627	1,781,850

b)  Current liabilities

			As of December 31,
			2006	2007
Company	Nature of relationship	Nature of transaction	ThCh$	ThCh$
Colada Continua Chilena S.A.	Equity method investment	Commercial	232,968	413,343
Minera Michilla S.A.	Shareholder	Commercial	117,415	101,996
Cobrecon S.A.	Equity method investment	Loan	59,318	31,124
Sodimac S.A.	Member of Controlling Group	Loan	53,508	58,102
Other related Companies	Various	Various	16,445	10,528
Total			479,654	615,093

In accordance with Article 89 of the Chilean Companies Act, the Company’s transactions with related parties must be carried out under market conditions. Short-term receivables and payables relate to current accounts and do not accrue interest.

Additionally, cash, long-term debt and its current portion, as well as fixed assets under capital leases and related miscellaneous payables, include the balances of transactions with Banco de Chile and its related companies, and with Banco Latinoamericano de Exportaciones S.A. (Brazil). These financial institutions are related companies under common control, however, respective balances have been classified according to the nature of the underlying transaction to present fairly the character of these relations.

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

			Revenue (Expenses) for the years ended December 31,
Company	Nature of relationship	Transaction	2005	2006	2007
			ThCh$	ThCh$	ThCh$
Alte S.A.	Member of Group of Minority Shareholder	Services	(21)	(17,553)	(8,064)
		Sales of products and services	137,694	173,035	166,777
Almacenes Paris Comercial	Member of Controlling Group	Products purchase	(220)	-	-
Artikos Chile S.A. .	Member of Controlling Group	Services	(1,453)	(1,237)	(1,122)
Banchile Corredores de Bolsa.	Member of Controlling Group	Interest	23,580	29,347	32,417
Banco de Chile	Member of Controlling Group	Interest from investments	(365,108)	(269,183)	(153,109)
Banco Latinoamericano - Bladex	Member of Controlling Group	Interest from investments	-	(159,024)	(136,473)
Interbank	Shareholder	Interest from investments	-	-	(108,697)
Nessus Peru S.A.	Shareholder	Services	-	-	(38,159)
Calaf S.A.	Member of Controlling Group	Sales of products and services	60,438	57,342	131,964
CNT Telefónica del Sur S.A.	Member of Controlling Group	Sales of products and services	149,009	117,235	90,676
Cobrecon	Equity method investment	Sales	-	30,687	35,626
Colada Continua Chilena S.A.	Equity method investment	Sales of products and services	(92,418)	192,032	148,242
Embotelladoras Chilenas Unidas S.A.	Member of Controlling Group	Sales of products and services	710,149	868,289	788,203
		Services	(8,748)	(6,702)	(4,151)
Entel S.A.	Member of Controlling Group	Services	(55,704)	(15,608)	(53,295)
Falabella S.A.C.I.	Member of Controlling Group	Services	(1,861)	(441)	(1,144)
Gianfranco Zechetto	Member of Controlling Group	Sales	30	-	-
Sodimac S.A.	Member of Controlling Group	Sales of products and services	4,518,428	6,117,030	5,686,402
Minera El Tesoro	Member of Controlling Group	Sales of products and services	54,280	49,458	125,198
Minera Los Pelambres S.A.	Member of Controlling Group	Sales of products and services	200,602	1,320,622	383,660
Minera Michilla S.A.	Shareholder	Sales of products and services	67,644	72,957	46,136
Quiñenco S.A.	Parent Company	Loan indexation	(317,842)	(64,948)	-
		Interest and expenses	(313,748)	(162,852)	-
Transportes CCU Ltda.	Member of Controlling Group	Sales of products and services	-	194,124	-
Vending y Servicios CC	Member of Controlling Group	Services	-	(2,166)	(4,718)
Viña San Pedro S.A.	Member of Controlling Group	Sales of products and services	134,034	2,885	-
		Products purchase	(2,117)	(3,672)	(692)
Inmobiliaria Norte Verde S.A.	Member of Controlling Group	Services	(23,547)	(12,032)	(15,084)
Peruplast S.A.	Equity method investment	Sales	-	3,814	-
Others	Member of Group of Minority Shareholder	Various	56,586	5,429	7,825

In accordance with Article 89 of the Chilean Companies Act, the Company’s transactions with related parties must be carried out on an “arm’s length” or market basis.

Note 25 – Minority Interest

Minority shareholders’ investment participation in the shareholders’ equity of the Company’s subsidiaries as of each year-end is as follows:
 

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Balance Sheet
Alusa S.A.	10,505,546	10,538,567
Indalum S.A.	263,473	270,421
Indeco S.A.	1,547,329	1,612,743
Cedsa S.A. (1)	-	1,234,060
Peruplast S.A. (1)	-	8,898,119
Total	12,316,348	22,553,910

The equity participation of minority shareholders’ in the net results from operations of the Company’s subsidiaries for each year is as follows:
 

	As of December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Income Statement
Alusa S.A.	(560,699)	(1,097,733)	(941,311)
Distribuidora Boliviana Indalum S.A. (2)	336	739	-
Indalum S.A.	(18,801)	(12,172)	(6,948)
Indeco S.A.	(228,337)	(542,810)	(417,180)
Cedsa S.A. (1)	-	-	(279,541)
Peruplast S.A. (1)	-	-	(1,662,771)
Minority interest participation in net loss	(807,501)	(1,651,976)	(3,307,751)

1. The 2007 acquisitions are detailed in Note 26.
2. In May 2007, the subsidiary Indalum S.A. sold its participation in this company.

Note 26 – Companies acquired in 2007

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

1. On February 12, 2007, Madeco S.A. entered into a share purchase agreement acquiring 80% of Cedsa S.A. for US$ 3.7 million in cash. Together with the acquisition of these shares, the shareholders assumed the commitment of making a capital increase of US$ 6 million in two equal installments in March and September 2007.

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

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

At the General Shareholder’s Meeting of Peruplast S.A. and Tech Pack S.A. held on July 18, 2007, the shareholders approved the merger and absorption of Tech Pack S.A. by Peruplast S.A., which was executed on October 1, 2007.

Additionally, the subsidiary Alusa S.A. has entered into a shareholders’ agreement assigning to the company the management of both companies. As a consequence, Alusa S.A. included in its consolidation the financial statements of Peruplast S.A. (including Tech Pak S.A.).

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

c.1) Summarized balances of incorporated companies as of December 31, 2007:
	Cedsa S.A.	Peruplast S.A.
	ThCh$	ThCh$
Assets
Current assets	14,574,975	22,879,092
Property, plant and equipment	3,406,309	15,902,295
Other assets	38,770	(1,016,461)
Total Assets	18,020,054	37,764,926
Liabilities
Current liabilities	12,250,195	10,726,558
Long-term liabilities	215,782	11,352,374
Shareholders’ equity	5,554,077	15,685,994
Total Liabilities and Shareholders equity	18,020,054	37,764,926
c.2) Summarized statement of income of incorporated companies as of December 31, 2007:
	Cedsa S.A.	Peruplast S.A.
	ThCh$	ThCh$
Sales	22,190,004	42,528,795
Gross margin	3,736,192	6,654,949
Operating income, net	2,675,149	4,482,943
Non-operating loss, net	(438,382)	(37,670)
Income taxes	(687,965)	(1,176,029)
Net income	1,548,802	3,269,244
At carrying value recognized by the acquired company:
	Cedsa S.A.
	ThCh$
Property, plant and equipment at fair value	3,406,309
Property, plant and equipment at fair value recorded by the acquired company	3,747,672
Net difference of assets and liabilities at fair value vs. carrying value	(341,363)
Less: difference which does not affect minority interest	68,273
Fair value difference affecting the investor as of December 31, 2007	(273,090)

Note 27 – Derivative Contracts

As of December 31, 2006 and 2007 the details of derivative contracts, recorded in conformity with Note 2 t), are as follows:

						As of December 31, 2006
Type	Nominal amount	Period of maturity	Item	Sales / Purchase	Hedged item	Amount	Effect in Income	Effect in Income
	ThCh$					ThCh$	ThCh$	ThCh$
Swap	6,406,137	1st Quarter 07	Exchange rate	Purchase	Loans	6,406,138	(388,465)	-
Forward	382,240	1st Quarter 07	Exchange rate	Purchase	Cash flow	382,240	-	180,227
Asian option	423,351	1st Quarter 07	Copper	Purchase	Inventory	423,350	-	(41,886)
Swap	5,078,461	1st Quarter 07	Copper	Purchase	Inventory	4,495,673	629,394	-
Swap	3,040,461	2nd Quarter 07	Exchange rate	Purchase	Loans	2,697,404	352,597	-
Forward	1,944,990	2nd Quarter 07	Exchange rate	Purchase	Loans	1,944,990	(211,679)	-
Swap	2,821,465	2nd Quarter 07	Exchange rate	Purchase	Loans	2,821,465	(465,697)	-
Forward	533,728	2nd Quarter 07	LME CU	Purchase	Cash flow	533,728	(48,217)	-
Forward	272,742	2nd Quarter 07	LME AL	Purchase	Cash flow	272,742	-	(930)
Swap	2,345,184	2nd Quarter 07	Copper	Purchase	Inventory	2,345,183	-	180,471
Swap	2,810,579	3rd Quarter 07	Exchange rate	Purchase	Loans	2,697,404	119,121	-
Forward	1,505,332	3rd Quarter 07	LME CU	Purchase	Cash flow	1,505,332	(92,613)	-
Forward	272,742	3rd Quarter 07	LME AL	Purchase	Cash flow	272,742	(2)	(810)
Swap	2,382,607	3rd Quarter 07	Copper	Purchase	Inventory	2,382,607	-	142,909
Swap	2,743,019	4th Quarter 07	Interest rate	Purchase	Loans	2,697,405	16,563	-
Swap	1,685,691	4th Quarter 07	Exchange rate	Purchase	Loans	1,685,691	(22,138)	-
Forward	328,816	4th Quarter 07	LME CU	Purchase	Cash flow	328,816	(24,258)	-
Forward	272,742	4th Quarter 07	LME AL	Purchase	Cash flow	272,742	-	(2,188)
Swap	595,373	1st Quarter 08	Exchange rate	Purchase	Loans	595,373	-	39,922
Swap	9,244,784	2nd Quarter 08	Exchange rate	Purchase	Loans	9,360,651	172	-
Swap	1,274,650	2nd Quarter 08	Exchange rate	Purchase	Loans	1,274,650	(129,196)	-
Swap	11,823,426	2nd Quarter 11	Interest rate	Purchase	Loans in USD	12,208,207	(15,373)	-
						Total	(279,791)	497,715

						As of December 31, 2007
Type	Nominal amount	Period of maturity	Item	Sales / Purchase	Hedged item	Amount	Effect in Income	Effect in Income
	ThCh$					ThCh$	ThCh$	ThCh$
Swap	1,107,687	2nd Quarter 08	Exchange rate	Purchase	debt	1,107,687	(547,590)	-
Swap	312,601	1st Quarter 08	Exchange rate	Purchase	debt	312,601	(87,696)	-
Swap	2,610,402	3rd Quarter 09	Exchange rate	Purchase	debt	2,610,402	(246,881)	-
Swap	805,995	4th Quarter 08	Exchange rate	Purchase	debt	805,995	(84,274)	-
Swap	699,264	1st Quarter 09	Exchange rate	Purchase	debt	699,264	(73,114)	-
Swap	658,444	4th Quarter 09	Exchange rate	Purchase	debt	658,444	(68,846)	-
Swap	2,484,450	4th Quarter 08	Exchange rate	Purchase	debt	2,484,450	(36,327)	-
Swap	1,473,050	1st Quarter 08	Exchange rate	Purchase	debt	1,473,050	3,734	-
Swap	1,535,544	1st Quarter 08	Exchange rate	Purchase	debt	1,535,544	3,892	-
Swap	511,741	1st Quarter 09	Exchange rate	Purchase	debt	511,741	(43,227)	-
Forward	153,787	2nd Quarter 08	Exchange rate	Purchase	Supplier purchase	153,787	-	(7,870)
Forward	181,365	2nd Quarter 08	Exchange rate	Purchase	Supplier purchase	181,365	-	(9,304)
Forward	130,185	2nd Quarter 08	Exchange rate	Purchase	Supplier purchase	130,185	-	(6,705)
Forward	444,220	1st Quarter 08	Exchange rate	Purchase	Supplier purchase	444,220	-	6,436
Forward	54,161	1st Quarter 08	Exchange rate	Purchase	Supplier purchase	54,161	-	407
Forward	216,147	2nd Quarter 08	Exchange rate	Purchase	Supplier purchase	216,147	-	2,350
Forward	49,803	2nd Quarter 08	Exchange rate	Purchase	Supplier purchase	49,803	-	(2,153)
Forward	83,117	2nd Quarter 08	Exchange rate	Purchase	Supplier purchase	83,117	-	(3,677)
Forward	83,701	2nd Quarter 08	Exchange rate	Purchase	Supplier purchase	83,701	-	(3,762)
Forward	50,221	3rd Quarter 08	Exchange rate	Purchase	Supplier purchase	50,221	-	(2,285)
Forward	66,782	3rd Quarter 08	Exchange rate	Purchase	Supplier purchase	66,782	-	(3,102)
Forward	133,663	2nd Quarter 08	Exchange rate	Purchase	Supplier purchase	133,663	-	(2,173)
Forward	33,789	1st Quarter 08	Exchange rate	Purchase	Supplier purchase	33,789	-	(496)
Forward	111,303	2nd Quarter 08	Exchange rate	Purchase	Supplier purchase	111,303	-	(1,769)
Forward	3,229,785	1st Quarter 08	Exchange rate	Purchase	Supplier purchase	3,229,785	(35,685)	-
Forward	5,217,345	1st Quarter 08	Exchange rate	Purchase	Supplier purchase	5,217,345	(92,519)	-
Forward	2,732,895	1st Quarter 08	Exchange rate	Purchase	Supplier purchase	2,732,895	(46,513)	-
Forward	1,490,670	1st Quarter 08	Exchange rate	Purchase	Supplier purchase	1,490,670	(7,171)	-

						As of December 31, 2007
Type	Nominal amount	Period of maturity	Item	Sales / Purchase	Hedged item	Amount	Effect in Income	Effect in Income
	ThCh$					ThCh$	ThCh$	ThCh$
Forward	954,078	2nd Quarter 08	LME AL	Purchase	Cash flow	954,078	-	(118,420)
Forward	920,004	2nd Quarter 08	LME AL	Purchase	Cash flow	920,004	-	(108,539)
Forward	545,188	1st Quarter 08	LME AL	Purchase	Cash flow	545,188	-	(74,462)
Forward	408,891	1st Quarter 08	LME AL	Purchase	Cash flow	408,891	-	(53,138)
Forward	533,014	1st Quarter 08	LME AL	Purchase	Cash flow	533,014	-	(32,868)
Forward	501,660	1st Quarter 08	LME AL	Purchase	Cash flow	501,660	-	(27,323)
Forward	501,660	2nd Quarter 08	LME AL	Purchase	Cash flow	501,660	-	(24,141)
Forward	501,660	2nd Quarter 08	LME AL	Purchase	Cash flow	501,660	-	(20,792)
Forward	501,660	3rd Quarter 08	LME AL	Purchase	Cash flow	501,660	-	(17,455)
Forward	501,660	3rd Quarter 08	LME AL	Purchase	Cash flow	501,660	-	(14,237)
Forward	652,168	1st Quarter 08	LME AL	Purchase	Cash flow	652,168	-	(34,341)
Forward	652,168	1st Quarter 08	LME AL	Purchase	Cash flow	652,168	-	(29,601)
Forward	652,168	2nd Quarter 08	LME AL	Purchase	Cash flow	652,168	-	(25,424)
Forward	652,168	2nd Quarter 08	LME AL	Purchase	Cash flow	652,168	-	(21,029)
Forward	671,284	2nd Quarter 08	LME AL	Purchase	Cash flow	671,284	-	(17,363)
Forward	30,683	1st Quarter 08	LME AL	Purchase	Cash flow	30,683	(1,058)	-
Forward	209,911	1st Quarter 08	LME AL	Purchase	Cash flow	209,911	(8,469)	-
Forward	31,549	1st Quarter 08	LME AL	Purchase	Cash flow	31,549	-	(426)
Forward	71,657	1st Quarter 08	LME AL	Purchase	Cash flow	71,657	(4,148)	-
Forward	62,282	1st Quarter 08	LME AL	Purchase	Cash flow	62,282	(4,527)	-
Forward	87,723	1st Quarter 08	LME AL	Purchase	Cash flow	87,723	(8,306)	-
Forward	73,441	1st Quarter 08	LME AL	Purchase	Cash flow	73,441	(5,877)	-
Forward	41,580	1st Quarter 08	LME AL	Purchase	Cash flow	41,580	(3,626)	-
Forward	47,261	1st Quarter 08	LME AL	Purchase	Cash flow	47,261	-	(2,283)
Forward	32,233	2nd Quarter 08	LME AL	Purchase	Cash flow	32,233	(1,408)	-
Forward	34,574	1st Quarter 08	LME AL	Purchase	Cash flow	34,574	-	(1,099)
Forward	74,325	1st Quarter 08	LME AL	Purchase	Cash flow	74,325	-	(2,603)
Forward	65,917	1st Quarter 08	LME AL	Purchase	Cash flow	65,917	-	(352)

						As of December 31, 2007
Type	Nominal amount	Period of maturity	Item	Sales / Purchase	Hedged item	Amount	Effect in Income	Effect in Income
	ThCh$					ThCh$	ThCh$	ThCh$
Forward	89,801	1st Quarter 08	LME AL	Purchase	Cash flow	89,801	-	(1,540)
Forward	60,074	1st Quarter 08	LME AL	Purchase	Cash flow	60,074	-	(782)
Forward	555,483	1st Quarter 08	LME CU	Purchase	Cash flow	555,483	(73,811)	-
Forward	181,370	2nd Quarter 08	LME CU	Purchase	Cash flow	181,370	-	(32,038)
Forward	130,113	2nd Quarter 08	LME CU	Purchase	Cash flow	130,113	-	(23,132)
Forward	153,770	2nd Quarter 08	LME CU	Purchase	Cash flow	153,770	-	(26,914)
Forward	96,521	1st Quarter 08	LME CU	Purchase	Cash flow	96,521	(14,644)	-
Forward	437,869	1st Quarter 08	LME CU	Purchase	Cash flow	437,869	-	(58,669)
Forward	113,460	1st Quarter 08	LME CU	Purchase	Cash flow	113,460	(21,796)	-
Forward	100,682	1st Quarter 08	LME CU	Purchase	Cash flow	100,682	-	(17,884)
Forward	95,853	1st Quarter 08	LME CU	Purchase	Cash flow	95,853	-	840
Forward	147,353	1st Quarter 08	LME CU	Purchase	Cash flow	147,353	(443)	-
Forward	149,142	1st Quarter 08	LME CU	Purchase	Cash flow	149,142	-	(1,805)
Forward	150,036	1st Quarter 08	LME CU	Purchase	Cash flow	150,036	(2,608)	-
Forward	69,599	1st Quarter 08	LME CU	Purchase	Cash flow	69,599	(817)	-
Forward	106,963	1st Quarter 08	LME CU	Purchase	Cash flow	106,963	(5,332)	-
Forward	83,005	2nd Quarter 08	LME CU	Purchase	Cash flow	83,005	-	1,322
Forward	83,117	2nd Quarter 08	LME CU	Purchase	Cash flow	83,117	-	1,366
Forward	83,701	3rd Quarter 08	LME CU	Purchase	Cash flow	83,701	-	1,323
Forward	83,701	3rd Quarter 08	LME CU	Purchase	Cash flow	83,701	-	1,371
Forward	83,478	4th Quarter 08	LME CU	Purchase	Cash flow	83,478	-	1,457
Forward	92,956	1st Quarter 08	LME CU	Purchase	Cash flow	92,956	(6,369)	-
Forward	134,250	1st Quarter 08	LME CU	Purchase	Cash flow	134,250	(16,358)	-
Forward	87,950	1st Quarter 08	LME CU	Purchase	Cash flow	87,950	(6,076)	-
Forward	70,290	1st Quarter 08	LME CU	Purchase	Cash flow	70,290	(4,792)	-
Forward	352,394	1st Quarter 08	LME CU	Purchase	Cash flow	352,394	-	(19,092)
Forward	353,736	1st Quarter 08	LME CU	Purchase	Cash flow	353,736	-	(19,180)
Forward	88,198	2nd Quarter 08	LME CU	Purchase	Cash flow	88,198	(6,206)	-

						As of December 31, 2007
Type	Nominal amount	Period of maturity	Item	Sales / Purchase	Hedged item	Amount	Effect in Income	Effect in Income
	ThCh$					ThCh$	ThCh$	ThCh$
Forward	89,962	1st Quarter 08	LME CU	Purchase	Cash flow	89,962	-	(7,338)
Forward	555,051	2nd Quarter 08	LME CU	Purchase	Cash flow	555,051	-	(57,727)
Forward	449,872	2nd Quarter 08	LME CU	Purchase	Cash flow	449,872	-	(34,691)
Forward	84,037	1st Quarter 08	LME CU	Purchase	Cash flow	84,037	(1,928)	-
Forward	83,701	1st Quarter 08	LME CU	Purchase	Cash flow	83,701	-	379
Forward	106,374	1st Quarter 08	LME CU	Purchase	Cash flow	106,374	-	1,523
Forward	82,608	1st Quarter 08	LME CU	Purchase	Cash flow	82,608	-	1,583
Forward	130,483	1st Quarter 08	LME CU	Purchase	Cash flow	130,483	-	4,191
Forward	115,110	1st Quarter 08	LME CU	Purchase	Cash flow	115,110	-	5,228
Forward	126,791	1st Quarter 08	LME CU	Purchase	Cash flow	126,791	-	1,507
Forward	84,198	1st Quarter 08	LME CU	Purchase	Cash flow	84,198	-	(108)
Forward	257,811	1st Quarter 08	LME CU	Purchase	Cash flow	257,811	-	(7,419)
Forward	82,919	1st Quarter 08	LME CU	Purchase	Cash flow	82,919	-	(204)
Forward	82,996	2nd Quarter 08	LME CU	Purchase	Cash flow	82,996	-	(179)
Forward	83,057	2nd Quarter 08	LME CU	Purchase	Cash flow	83,057	-	(77)
Forward	166,263	3rd Quarter 08	LME CU	Purchase	Cash flow	166,263	-	(218)
Forward	161,489	1st Quarter 08	LME CU	Purchase	Cash flow	161,489	-	3,759
Forward	81,300	1st Quarter 08	LME CU	Purchase	Cash flow	81,300	-	1,325
Forward	161,489	1st Quarter 08	LME CU	Purchase	Cash flow	161,489	-	4,097
Forward	161,489	2nd Quarter 08	LME CU	Purchase	Cash flow	161,489	-	4,285
Forward	161,489	2nd Quarter 08	LME CU	Purchase	Cash flow	161,489	-	4,454
Forward	161,489	2nd Quarter 08	LME CU	Purchase	Cash flow	161,489	-	4,583
Forward	161,489	3rd Quarter 08	LME CU	Purchase	Cash flow	161,489	-	4,688
Forward	161,489	3rd Quarter 08	LME CU	Purchase	Cash flow	161,489	-	4,741
Forward	161,489	3rd Quarter 08	LME CU	Purchase	Cash flow	161,489	-	4,740
Forward	161,489	4th Quarter 08	LME CU	Purchase	Cash flow	161,489	-	4,691
Forward	161,489	4th Quarter 08	LME CU	Purchase	Cash flow	161,489	-	4,609
Forward	161,489	4th Quarter 08	LME CU	Purchase	Cash flow	161,489	-	4,513
Forward	161,489	1st Quarter 09	LME CU	Purchase	Cash flow	161,489	-	4,335
Swap	11,008,776	2nd Quarter 11	Interest rate	Purchase	Loans in USD	10,609,086	(4,214)	-
Swap	1,030,468	1st Quarter 08	Copper	Purchase	Inventory	829,372	(23,623)	-
Swap	1,020,043	1st Quarter 08	Copper	Purchase	Inventory	829,372	(2,381)	-
Swap	1,026,701	1st Quarter 08	Copper	Purchase	Inventory	829,372	(5,114)	-
Swap	1,019,765	1st Quarter 08	Copper	Purchase	Inventory	829,372	(335)	-
Swap	1,025,359	1st Quarter 08	Copper	Purchase	Inventory	829,372	(4,011)	-
Swap	1,024,780	1st Quarter 08	Copper	Purchase	Inventory	829,372	(2,895)	-
Swap	1,018,323	1st Quarter 08	Copper	Purchase	Inventory	829,372	(17,810)	-
Swap	1,022,460	2nd Quarter 08	Copper	Purchase	Inventory	829,372	(4,707)	-
Swap	1,032,076	1st Quarter 08	Copper	Purchase	Inventory	829,372	(10,854)	-
							(1,636,760)	(892,086)

Note 28 – Subsequent events

There have been no significant events between January 1, 2007 and the date of the financial statements.

Note 29 – Guarantees received from third parties

As of December 31, 2006 and 2007, the Company holds the following guarantees from third parties:
 

		Type of	Balances
Guarantee received	Relationship	guarantee	2006	2007
			ThCh$	ThCh$
Angel Aravena	Customer	Pledge	32,435	21,230
Angel Aravena	Customer	2 vehicles	-	10,510
Arriaza Romo Luis	Customer	Credit limit guarantee	10,740	10,000
Aseguradora de Cauciones S.A.	Customer	Advance guarantee	5,033,507	-
Cam Perú S.R.L. - Banco de Crédito.	Supplier	Guarantee letter	-	31,737
Cam Perú S.R.L. - Interbank	Supplier	Guarantee letter	-	62,394
Cammesa S.A.	Customer	Compliance with PO	-	16,230
Centelha equipamientos eléctricos Ltda.	Customer	Bank guarantee	267,440	280,523
Chubb Argentina de seguros S.A.	Customer	Contract compliance	1,104,817	-
Comité de Administración del fondo fiduciario para el transporte electrico federal (CAF)	Customer	Offer maintenance	-	604,063
Consorcio Alfa Tarapoto - Interbank	Supplier	Guarantee letter	-	54,380
Construcciones Termicas SA	Customer	Advance guarantee	-	69,941
Coop. Pop. de Electr., Obras y Serv. Pub. de Santa Rosa LTDA	Customer	Offer maintenance	-	174
Coop. Pop. de Electr., Obras y Serv. Pub. de Santa Rosa LTDA	Customer	Compliance with PO	-	1,309
Cristales y Aluminios S.A.	Customer	Promissory note	189,055	188,378
Daniel Valverde	Customer	Industrial pledge	125,238	121,967
Project Executive Director's Office of the Ministry	Supplier	Guarantee letter	-	5,529
Project Executive Director's Office of the Ministry	Supplier	Guarantee letter	-	11,861
Executive Director’s Office of Mine Energy Project	Supplier	Guarantee letter	-	4,821
Edelnor S.A.A. - Banco de Crédito	Supplier	Guarantee letter	-	679
Edelnor S.A.A. – Interbank	Supplier	Guarantee letter	-	641,774
Edesur S.A.	Customer	Acquisition of wires and conductors	-	131,559
Edesur S.A.	Customer	Compliance with PO	-	2,556
Edesur S.A.	Customer	Offer maintenance	-	5,112
Electro Oriente – Interbank	Supplier	Guarantee letter	-	8,584
Electro Oriente – Interbank	Supplier	Guarantee letter	-	9,674
Electro Puno S.A. – Interbank	Supplier	Guarantee letter	-	8,911
Electro Sur Este S.A. – Interbank	Supplier	Guarantee letter	-	24,907
Electro Sur S.A. – Interbank	Supplier	Guarantee letter	-	8,966
Electrocentro S.A. – Interbank	Supplier	Guarantee letter	-	12,474
Electromecanica Industrial	Customer	Rent guarantee	7,877	7,849
Electronoroeste - Interbank	Supplier	Guarantee letter	-	740
Electronoroeste S.A. - Interbank	Supplier	Guarantee letter	-	21,045
Electronorte S.A. - Interbank	Supplier	Guarantee letter	-	35,969
Electroucayali S.A.	Supplier	Guarantee letter	-	7,964
Elfle Comercial Ltda.	Customer	Credit limit guarantee	75,180	70,000
Empresa Brasil central de Eng. Ltda.	Customer	Bank guarantee	-	645,202
Empresa Provincial de Energía de Córdoba	Customer	Offer maintenance	-	2,597
Empresa Provincial de Energía de Córdoba	Customer	Contract performance guarantee	-	823
Empresa Provincial de Energía de Sta. Fe.	Customer	Offer maintenance	-	1,873
Empresa Provincial de Energía de Sta. Fe.	Customer	Compliance with PO	-	325
Emprocil Emp. Projetos cosnt. Inst. elet.	Customer	Bank guarantee	267,440	-

		Type of	Balances
Guarantees received	Relationship	Guarantee	2006	2007
			ThCh$	ThCh$
Ernesto Retamal	Customer	Mortgage guarantee	2,938	2,876
Etc Comercio e representaciones Ltda.	Customer	Bank guarantee	267,440	-
Ferbras S.A.	Customer	Checks	128,880	120,000
Fianza y Crédito S.A.	Customer	Contract compliance	147,143	-
Gas Natural de Lima y Callao - Interbank	Supplier	Guarantee letter	-	10,485
Gobierno Regional de Arequipa	Supplier	Guarantee letter	-	977
Gtía.de Business Recovery Ltda	Customer	Rent guarantee	8,055	7,500
Heat Transfer	Customer	Letters of credit	-	5,017
Hidrandina S.A - Interbank	Supplier	Guarantee letter	-	73,469
Incosyp Ingen. y construcciones Ltda.	Customer	Certificate of deposit	174,553	23,048
Ind. Nac. De Piezas Y Partes	Customer	Credit limit guarantee	40,904	38,086
Ind. Radiadores Gallardo Ltda.	Customer	Credit limit guarantee	32,220	30,000
Interbank	Supplier	Guarantee letter	-	30,297
Ivan Maturana	Customer	Vehicle	2,148	2,102
Juan C. Inostroza Carrasco	Customer	Checks	6,444	6,000
Kitchen Pack Ltda.	Customer	Credit limit guarantee	87,212	81,203
Lima Airport Partners - Interbank	Supplier	Guarantee letter	-	20,681
Lima Airport Partners S.R.L.	Supplier	Guarantee letter	-	5,017
Lima Airport Partners S.R.L. - Banco de Credito	Supplier	Guarantee letter	-	10,033
Lineas Mesopotamicas SA	Customer	Repair fund substitution guarantee	-	335,983
Lineas Mesopotamicas SA	Customer	Advance guarantee	-	4,374,692
Lineas Mesopotamicas SA	Customer	Financial advance	-	271,491
Lineas Mesopotamicas SA	Customer	Guarantee encumbrance	-	662,359
Luigi Lotito y Cia. Ltda.	Customer	Credit limit pledge	40,091	34,840
Luz del Sur S.A.A. - Interbank	Supplier	Guarantee letter	-	858
Luz del Sur S.A.A. - Interbank	Supplier	Guarantee letter	-	19,712
Municipalidad Distrital de Coronel Gregorio - Inte	Supplier	Guarantee letter	-	8,713
Municipalidad Distrital Santa Rita de Siguas-Inter	Supplier	Guarantee letter	-	2,583
Pedro Gajardo	Customer	Mortgage guarantee	2,890	2,828
Progos	Customer	Certificate of deposit	-	2,922
Puerto L SA	Customer	Compliance with PO	-	178,931
Red de Energía del Perú S.A. - Interbank	Supplier	Guarantee letter	-	1,745
Renovación Cam Peru - Interbank	Supplier	Guarantee letter	-	5,327
Ruben Riojas	Customer	Pledge	1,074	1,051
Servicios Energéticos del Chaco-Empresa Estado Provincial	Customer	Compliance with PO	-	5,080
Sialum	Customer	Mortgage	2,577	2,521
Soc. Ing. Y const. Inducon.	Customer	Mortgage	39,344	38,501
Sociedad Electrica del Sur Oeste - Interbank	Supplier	Guarantee letter	-	63,043
Sunat- Banco Interamericano de Finanzas	Supplier	Guarantee letter	-	862,138
Techint - Panedile - U.T.E.	Customer	Repair fund substitution guarantee	-	21,467
Tito Alvarado	Supplier	Letters of credit	100,436	100,076
Transportel Minera 2 SA	Customer	Compliance with PO	-	86,602
Turbogeneradores del Peru S.A.C - Banco de Crédito	Supplier	Guarantee letter	-	10,248
Turbogeneradores del Peru S.A.C - Interbank	Supplier	Guarantee letter	-	35,217
Unidad ejecutora del programa de la interconexión NEA-NOA	Customer	Offer maintenance	-	1,479,321
Vidrios y aluminios Alucenter	Customer	Mortgage guarantee	17,184	16,816
Wood-Es Ing. Plásticos Ltda.	Customer	Credit limit guarantee	21,480	20,000
Total			8,236,742	12,256,487

Note 30 – Local and foreign currency

As of December 31, 2006 and 2007, foreign currency denominated assets and liabilities are as follows:
 

		As of December31,
	Currency of Measurement	2006	2007
		ThCh$	ThCh$
CASH	Ch$	260,532	1,652,484
	US dollars	1,910,864	5,693,895
	Argentine pesos	836,752	1,282,789
	REAL	1,326,878	867,262
	SOLES	277,434	291,387
	EUROS	458,084	173,498
	Colombian $	-	448,751
	OTHER CURRENCIES	13,414	-
TIME DEPOSITS	REAL	280,907	7,883
MARKETABLE SECURITIES, NET	Ch$	328,664	532,865
	Colombian $	-	247,939
TRADE ACCOUNTS RECEIVABLE, NET	Ch$	23,162,466	23,941,612
	US dollars	42,606,991	34,430,333
	Argentine pesos	1,235,205	4,057,593
	REAL	21,917,574	22,225,102
	SOLES	143,030	777,933
	EUROS	793,410	1,409,281
	Colombian $	-	3,173,669
	OTHER CURRENCIES	11,480	-
NOTES RECEIVABLE, NET	Ch$	3,436,782	3,743,500
	Adjustable Ch$	11,539	-
	US dollars	457,716	5,267,492
	Argentine pesos	1,619,728	1,716,844
	SOLES	-	10,354
	OTHER CURRENCIES	32,837	-
MISCELLANEOUS RECEIVABLES, NET	Ch$	1,088,286	726,401
	Adjustable Ch$	289,070	5,023
	US dollars	742,329	3,573,688
	Argentine pesos	2,850,529	778,677
	REAL	574,326	476,393
	SOLES	464,957	461,657
	EUROS	-	47,947
	Colombian $	-	431,560
NOTES AND ACCOUNTS RECEIVABLE FROM RELATED COMPANIES	Ch$	1,654,819	1,773,652
	US dollars	6,808	8,198

		As of December31,
	Currency of Measurement	2006	2007
		ThCh$	ThCh$
INVENTORY, NET	Ch$	49,890,372	45,688,722
	US dollars	1,752,068	6,614,386
	Argentine pesos	9,602,824	9,497,287
	REAL	28,998,860	33,386,810
	SOLES	14,579,428	30,212,730
	Colombian $	-	9,479,800
INCOME TAXES RECOVERABLE	Ch$	5,284,085	4,518,734
	REAL	3,909,092	3,509,317
	SOLES	888,932	4,842,907
	Colombian $	-	388,777
	OTHER CURRENCIES	4,974	-
PREPAID EXPENSES	Ch$	151,125	594,549
	Adjustable Ch$	126,141	16,299
	US dollars	-	42,262
	Argentine pesos	72,538	64,677
	REAL	127,812	119,003
	SOLES	41,929	58,479
	Colombian $	-	114,098
DEFERRED INCOME TAXES	Ch$	2,664,382	7,806,880
	Argentine pesos	961,132	561,525
	REAL	2,209,053	2,363,976
	SOLES	152,560	92,295
	Colombian $	-	8,139
OTHER CURRENT ASSETS	Ch$	9,527,719	1,219,017
	Adjustable Ch$	362,814	361,513
	US dollars	8,636,139	2,683,496
	Argentine pesos	3,125	17,042
	REAL	732,252	123,122
Total current assets		249,472,767	284,621,504

		As of December31,
	Currency of Measurement	2006	2007
		ThCh$	ThCh$
LAND	Ch$	5,024,584	5,025,171
	US dollars	7,551,410	9,939,402
BUILDINGS AND INFRASTRUCTURE	Ch$	24,435,711	24,777,068
	US dollars	33,443,140	37,254,190
MACHINERY AND EQUIPMENT	Ch$	102,412,450	106,371,183
	US dollars	128,523,360	136,782,617
OTHER PROPERTY, PLANT AND EQUIPMENT	Ch$	23,636,246	23,541,748
	US dollars	11,450,358	16,720,842
REVALUATION FROM PP&E TECHNICAL APPRAISAL	Ch$	5,636,165	5,609,629
	US dollars	8,400,997	7,300,572
DEPRECIATION	Ch$	(79,355,141)	(86,052,713)
	US dollars	(112,262,698)	(120,320,612)
Total property, plant and equipment		158,896,582	166,949,097

		As of December31,
	Currency of Measurement	2006	2007
		ThCh$	ThCh$
INVESTMENTS IN RELATED COMPANIES	Ch$	1,624,387	1,573,553
	US dollars	8,025,079	614,654
INVESTMENTS IN OTHER COMPANIES	Ch$	16,693	16,693
	REAL	3,798,652	4,371,930
	SOLES	12,794	16,081
GOODWILL	Ch$	1,060,413	867,268
	US dollars	17,698,129	14,977,515
NEGATIVE GOODWILL	US dollars	(518,479)	(1,782,733)
LONG-TERM ACCOUNTS RECEIVABLE	Ch$	297,119	241,661
	Argentine pesos	9,748	4,714
	REAL	167,667	-
INTANGIBLE ASSETS	Ch$	326,511	897,443
	US dollars	7,011	6,093
	Argentine pesos	-	45,974
	REAL	62,228	65,272
	SOLES	203,504	531,691
AMORTIZATION	Ch$	(180,486)	(176,336)
	US dollars	(5,035)	(4,990)
	SOLES	(78,194)	(160,659)
OTHER	Ch$	2,246,529	2,200,304
	Adjustable Ch$	666,583	660,948
	US dollars	1,774,652	2,344,869
	Argentine pesos	465,016	176,252
	REAL	1,572,948	8,038,532
	OTHER CURRENCIES	859	-
Total other assets		39,254,328	35,526,729
Total assets		447,623,677	487,097,330

	Currency	90 days				90 days to 1 years
		12/31/2007		12/31/2006		12/31/2007		12/31/2006
		Amount	Rate	Amount	Rate	Amount	Rate	Amount	Rate
SHORT-TERM OBLIGATIONS WITH BANKS	Ch$	3,320,326	7.43	1,263,630	6.11	623,068	7.43	-	-
SHORT-TERM OBLIGATIONS WITH BANKS	Adjustable Ch$	-	-	-	-	1,177,760	4.08	-	-
SHORT-TERM OBLIGATIONS WITH BANKS	US$	16,811,576	6.63	6,442,383	5.93	8,725,150	6.63	5,684,259	5.93
SHORT-TERM OBLIGATIONS WITH BANKS	Argentine $	-	-	749	8.80	-	-	-	-
SHORT-TERM OBLIGATIONS WITH BANKS	REAL	-	-	908,355	14.30	-	-	-	-
SHORT-TERM OBLIGATIONS WITH BANKS	SOLES	-	-	1,284,316	5.27	-	-	999,704	5.70
SHORT-TERM OBLIGATIONS WITH BANKS	EUROS	-	-	53,411	6.46	-	-	-	-
SHORT-TERM OBLIGATIONS WITH BANKS	Colombian $	4,419,212	13.04	-	-	-	-	-	-
CURRENT PORTION OF LONG-TERM OBLIGATIONS WITH BANKS	Adjustable Ch$	293,345	5.22	748,680	5.65	1,369,103	5.22	2,558,132	5.65

	Currency	90 days				90 days to 1 years
		12/31/2007		12/31/2006		12/31/2007		12/31/2006
		Amount	Rate	Amount	Rate	Amount	Rate	Amount	Rate
CURRENT PORTION OF LONG-TERM OBLIGATIONS WITH BANKS	US$	357,035	5.04	1,289,975	5.22	5,056,879	5.04	8,021,320	5.22
CURRENT PORTION OF LONG-TERM OBLIGATIONS WITH BANKS	REAL	841,952	12.10	-	-	9,733,613	11.30	4,286,376	3.64
CURRENT PORTION OF LONG-TERM OBLIGATIONS WITH BANKS	OTHER CURRENCIES	-	-	-	-	-	-	538,175	2.52
BONDS PAYABLE	Adjustable Ch$	-	-	-	-	5,081,276	5.00	4,872,734	5.00
LONG-TERM OBLIGATIONS MATURING WITHIN ONE YEAR	Adjustable Ch$	-	-	1,262	4.81	549,418	4.81	521,363	4.81
LONG-TERM OBLIGATIONS MATURING WITHIN ONE YEAR	US$	882,928	7.58	560	8.00	713,024	-	1,318	8.00
LONG-TERM OBLIGATIONS MATURING WITHIN ONE YEAR	Colombian $	167,057	-	-	-	-	-	-	-
DIVIDENDS PAYABLE	Ch$	15,002,161	-	-	-	-	-	-	-
DIVIDENDS PAYABLE	SOLES	48,711	-	89,015	-	-	-	-	-

	Currency	90 days				90 days to 1 years
		12/31/2007		12/31/2006		12/31/2007		12/31/2006
		Amount	Rate	Amount	Rate	Amount	Rate	Amount	Rate
ACCOUNTS PAYABLE	Ch$	6,389,194	-	5,487,522	-	-	-	-	-
ACCOUNTS PAYABLE	Adjustable Ch$	559,650	-	34,887	-	-	-	-	-
ACCOUNTS PAYABLE	US$	18,330,213	-	11,239,729	-	-	-	-	-
ACCOUNTS PAYABLE	Argentine $	295,912	-	1,248,952	-	-	-	-	-
ACCOUNTS PAYABLE	REAL	4,025,534	-	4,964,105	-	-	-	-	-
ACCOUNTS PAYABLE	SOLES	573,469	-	246,388	-	-	-	-	-
ACCOUNTS PAYABLE	EUROS	154,346	-	141,397	-	-	-	-	-
ACCOUNTS PAYABLE	YENS	-	-	370,252	-	-	-	-	-
ACCOUNTS PAYABLE	Colombian $	226,978	-	-	-	-	-	-	-
ACCOUNTS PAYABLE	OTHER CURRENCIES	1,477	-	155,738	-	-	-	-	-
NOTES PAYABLE	Ch$	4,559	-	-	-	-	-	-	-
NOTES PAYABLE	US$	2,908,006	-	1,085,992	-	-	-	2,455	12.25
NOTES PAYABLE	Argentine $	342,954	-	279,480	-	-	-	-	-

	Currency	90 days				90 days to 1 years
		12/31/2007		12/31/2006		12/31/2007		12/31/2006
		Amount	Rate	Amount	Rate	Amount	Rate	Amount	Rate
MISCELLANEOUS EXPENSES	Ch$	156,048	-	151,779	-	-	-	-	-
MISCELLANEOUS EXPENSES	Adjustable Ch$	10,492	-	5,266	-	-	-	-	-
MISCELLANEOUS EXPENSES	US$	18,647	3.49	564,460	4.98	-	-	-	-
MISCELLANEOUS EXPENSES	Argentine $	22,303	-	1,384	-	-	-	-	-
MISCELLANEOUS EXPENSES	REAL	65,052	-	39,391	-	-	-	-	-
MISCELLANEOUS EXPENSES	SOLES	17,574	-	-	-	-	-	-	-
NOTES AND ACCOUNTS PAYABLE TO RELATED COMPANIES	Ch$	583,969	-	420,334	8.85	-	-	-	-
NOTES AND ACCOUNTS PAYABLE TO RELATED COMPANIES	US$	31,124	-	59,320	-	-	-	-	-
ACCRUED EXPENSES	Ch$	3,593,456	-	2,736,422	-	630,492	-	696,299	-
ACCRUED EXPENSES	Adjustable Ch$	107,047	-	115,047	-	-	-	-	-
ACCRUED EXPENSES	US$	241,763	-	155,108	-	-	-	-	-
ACCRUED EXPENSES	Argentine $	952,858	-	725,067	-	1,065,264	-	-	-
ACCRUED EXPENSES	REAL	3,210,359	-	2,689,746	-	-	-	-	-
ACCRUED EXPENSES	SOLES	2,052,812	-	1,593,046	-	-	-	-	-
ACCRUED EXPENSES	Colombian $	260,714	-	-	-	-	-	-	-

	Currency	90 days				90 days to 1 years
		12/31/2007		12/31/2006		12/31/2007		12/31/2006
		Amount	Rate	Amount	Rate	Amount	Rate	Amount	Rate
WITHHOLDINGS	Ch$	959,883	-	812,072	-	-	-	-	-
WITHHOLDINGS	Argentine $	1,771,404	-	393,237	-	-	-	-	-
WITHHOLDINGS	REAL	470,756	-	329,499	-	-	-	-	-
WITHHOLDINGS	SOLES	333,954	-	134,309	-	-	-	-	-
WITHHOLDINGS	Colombian $	100,682	-	-	-	-	-	-	-
UNEARNED INCOME	Ch$	94,471	-	566	-	-	-	-	-
UNEARNED INCOME	US$	1,404,942	-	1,029,951	-	-	-	-	-
UNEARNED INCOME	Argentine $	1,217,360	-	3,456,791	-	-	-	-	-
UNEARNED INCOME	REAL	1,322,998	-	3,776,201	-	-	-	-	-
UNEARNED INCOME	SOLES	67,356	-	165,716	-	-	-	-	-
UNEARNED INCOME	Colombian $	422,096	-	-	-	-	-	-	-
OTHER CURRENT LIABILITIES	Ch$	122,020	-	5,040	-	-	-	-	-
OTHER CURRENT LIABILITIES	US$	4,214	-	1,232,060	-	-	-	-	-
OTHER CURRENT LIABILITIES	REAL	1,175,856	-	70,723	-	-	-	-	-
Total Current Liabilities		96,748,805		57,999,313		34,725,047		28,182,135

Long term liabilities as of December 31, 2007
 

	Currency	1 to 3 years		3 to 5 years		5 to 10 years		More than 10 years
		Amount	Rate	Amount	Rate	Amount	Rate	Amount	Rate
OBLIGATIONS WITH BANKS AND FIN. INST.	Adjustable Ch$	3,546,987	5.16	102,029	4.63	-	-	-	-
OBLIGATIONS WITH BANKS AND FIN. INST.	US$	19,102,941	6.25	6,310,572	6.30	-	-	-	-
OBLIGATIONS WITH BANKS AND FIN. INST.	REAL	5,803,663	11.39	1,425,332	8.73	-	-	-	-
BONDS PAYABLE	Adjustable Ch$	10,809,607	5.00	5,813,459	5.00	-	-	-	-
MISCELLANEOUS PAYABLES	Adjustable Ch$	1,111,992	4.80	1,222,648	4.80	2,439,635	4.80	-	-
MISCELLANEOUS PAYABLES	US$	1,628,187	1.08	419,045	-	156,583	-	-	-
MISCELLANEOUS PAYABLES	Colombian $	176,075	12.21	-	-	-	-	-	-
ACCRUED EXPENSES	Ch$	161,651	2.01	41,355	7.00	72,371	7.00	874,583	2.85
ACCRUED EXPENSES	Adjustable Ch$	78,240	5.59	55,495	7.00	97,116	7.00	478,642	7.00
ACCRUED EXPENSES	Argentine $	120,363	-	-	-	-	-	-	-
ACCRUED EXPENSES	REAL	2,509,292	-	-	-	-	-	-	-
DEFERRED INCOME TAXES	Ch$	-	-	-	-	-	-	89,183	-
DEFERRED INCOME TAXES	US$	724,134	-	-	-	-	-	-	-
DEFERRED INCOME TAXES	Argentine $	44,781	-	-	-	-	-	-	-
DEFERRED INCOME TAXES	SOLES	399,812	-	198,460	-	2,271,035	-	-	-
DEFERRED INCOME TAXES	Colombian $	39,707	-	-	-	-	-	-	-
OTHER LIABILITIES	Argentine $	187,687	-	-	-	-	-	-	-
OTHER LIABILITIES	REAL	432,069	-	-	-	-	-	-	-
OTHER LIABILITIES	SOLES	231,166	-	-	-	-	-	-	-
Total Long-Term Liabilities		47,108,354		15,588,395		5,036,740		1,442,408

Long term liabilities as of December 31, 2006
 

	Currency	1 to 3 years		3 to 5 years		5 to 10 years		More than 10 years
		Amount	Rate	Amount	Rate	Amount	Rate	Amount	Rate
		ThCh$	%	ThCh$	%	ThCh$	%	ThCh$	%
Bank Loans	Indexed Chilean pesos	7,003,765	5.94	3,402,786	6.34	-	-	-	-
Bank Loans	US$	15,175,443	5.64	10,440,152	3.41	-	-	-	-
Bank Loans	Reales	8,312,287	14.15	205,218	11.50	-	-	-	-
Bonds payable	Indexed Chilean pesos	10,331,909	5.00	11,390,931	5.00	-	-	-	-
Miscellaneous payable	Indexed Chilean pesos	1,064,293	4.80	1,170,204	4.80	3,076,486	4.80	-	-
Miscellaneous payable	US$	317,970	7.44	-	-	-	-	-	-
Accrued expenses	Ch$	185,184	2.28	57,213	7.00	101,461	7.00	985,594	3.46
Accrued expenses	Indexed Chilean pesos	77,610	5.47	57,455	7.00	101,889	7.00	489,888	7.00
Accrued expenses	Argentine $	1,357,295	-	-	-	-	-	-	-
Accrued expenses	Brazilian Real	2,495,520	-	-	-	-	-	-	-
Deferred income taxes	Argentine $	56,215	-	-	-	-	-	-	-
Deferred income taxes	Peruvian Soles	470,105	-	-	-	-	-	-	-
Other liabilities	US$	129,196	-	-	-	-	-	-	-
Other liabilities	Argentine $	328,173	-	-	-	-	-	-	-
Other liabilities	Brazilian Real	171,375	-	-	-	-	-	-	-
Total long-term liabilities		47,476,340		26,723,959		3,279,836		1,475,482

Note 31 - Sanctions

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

Note 32 – Differences between Chilean and United States Generally Accepted Accounting Principles

Chilean GAAP varies in certain important respects from US GAAP. Such differences involve certain methods for measuring the amounts shown in the financial statements.

1. Differences in measurement methods

The principal differences between Chilean GAAP and US GAAP are described below together with an explanation, where appropriate, of the method used in the determination of the adjustments that affect net income (loss) and total shareholders’ equity. References below to “SFAS” are to Statements of Financial Accounting Standards issued by the Financial Accounting Standards Board in the United States of America.

a)  Inflation accounting

Pursuant to Chilean GAAP, the Company’s financial statements recognize certain effects of inflation (see Note 2 b). In addition, the Company translates the accounting records of its subsidiaries abroad to Chilean pesos from US dollars in accordance with Technical Bulletin No. 64, Accounting for Foreign Permanent Investments (see Note 2 s)). In the opinion of the Company, this foreign currency translation methodology forms part of the comprehensive basis of preparation of price-level adjusted financial statements required by Chilean GAAP. Inclusion of inflation and the effects of translation in the accompanying consolidated financial statements under the Chilean accounting standards in the financial statements is considered appropriate under the inflationary conditions that have historically affected the Chilean economy even though the cumulative inflation rate for the last three years does not exceed 100%. Accordingly, and as allowed pursuant to Form 20-F, these effects have not been eliminated in the reconciliation to US GAAP included under paragraph (1.p) below.

b)  Revaluation of property, plant and equipment

In accordance with standards issued by the SVS, certain property, plant and equipment are recorded in the financial statements at amounts determined in accordance with a technical appraisal. The difference between the carrying value and the revalued amount is included as part of Property, plant and equipment in Other Reserves within Shareholders’ equity, and is subject to adjustments for price-level restatement and depreciation. Revaluation of property, plant and equipment is not allowed under US GAAP, therefore, the effects of the reversal of this revaluation, as well as of the related accumulated depreciation and depreciation expense is included in paragraph (1.p) below. Certain revaluations presented in the financial statements were recorded as part of purchase accounting adjustments under Chilean GAAP and therefore were not eliminated.
 

c)  Deferred income taxes

Under Chilean GAAP, until December 31, 1999, deferred income taxes were recorded based on non-recurring timing differences between the recognition of income and expense items for financial statement and tax purposes. Accordingly, there was an orientation toward the income statement focusing on differences in the timing of recognition of revenues and expenses in pre-tax accounting income and taxable income. At the time, Chilean GAAP also permitted not providing for deferred income taxes where a deferred tax asset or liability was either offsetting or not expected to be realized.

Beginning January 1, 2000, the Company recorded income taxes in accordance with Technical Bulletin No. 60 and its related amendments issued by the Chilean Association of Accountants, recognizing, using the liability method, the deferred tax effects of temporary differences between the financial and tax values of assets and liabilities. As a transitional provision, a contra (referred to as “complementary”) asset or liability has been recorded offsetting the effects of the deferred tax assets and liabilities not recorded prior to January 1, 2000. Such complementary assets or liabilities are being amortized to income over the estimated average reversal periods corresponding to the underlying temporary differences to which the deferred tax assets and liabilities relate.

Under US GAAP, companies must account for deferred taxes in accordance with SFAS No. 109 Accounting for Income Taxes (“SFAS 109”), which requires an asset and liability approach for financial accounting and reporting of income taxes, under the following basic principles:

1. A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and tax loss carry-forwards.
2. The measurement of deferred tax liabilities and assets is based on the provisions of the enacted tax law. The effects of future changes in tax laws or rates are not anticipated.
3. The balance of deferred tax assets is reduced by a valuation allowance, if based on the weight of available evidence, it is more-likely-than-not that some portion of the deferred tax assets will not be realized.

Temporary differences are defined as any difference between the financial reporting basis and the tax basis of an asset and liability that at some future date will reverse, thereby resulting in taxable income or expense. Temporary differences ordinarily become taxable or deductible when the related asset is recovered or the related liability is settled. A deferred tax liability or asset represents the amount of taxes payable or refundable in future years as a result of temporary differences at the end of the current year.

The principal differences between US GAAP and Chilean GAAP relate to:

1. The reversal of the complementary assets and liabilities recorded as a transitional provision for unrecorded deferred taxes as of January 1, 2000 and their corresponding amortization into income,
2. Accounting for deferred tax effects related to US GAAP adjustments.

The effect of these differences on the net income and shareholders’ equity of the Company is included in paragraph (1.p) below. Additional disclosures required under SFAS 109 are further described in paragraph (2.b) below.

During 2007, the Company adopted FASB Interpretation No. 48: “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards No. 109: “Accounting for Income Taxes” (“FAS 109”). The Interpretation prescribes a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken within an income tax return. For each tax position, the enterprise must determine whether it is more likely than not that the position will be sustained upon examination by taxing authorities, based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is then measured to determine the amount of benefit to be recognized within the financial statements. No benefits may be recognized for tax positions that do not meet the more likely than not threshold. For tax positions that meet the more likely than not threshold, the benefit to be recognized is the largest amount that is greater than 50% likely of being realized upon ultimate settlement.

As a result of implementing FIN 48, no material adjustment in the provision for uncertainties in tax positions was recognized. The Company and its subsidiaries recognize interest and penalties related to unrecognized tax benefits in financial expense and other operating expense, respectively.

The Company is potentially subject to income tax audits in numerous jurisdictions in Chile and internationally until the applicable statute of limitations expires. Tax audits by their nature are often complex and can require several years to complete. The following is a summary of tax years, potentially subject to examination, in the significant tax and business jurisdictions in which the Company operates.

Tax jurisdiction	Tax Years Subject to Examination
Chile	2005-2007
Argentina	2006-2007
Brazil	2001-2007
Colombia	2007
Peru	2002-2007

d)  Goodwill

Under Chilean GAAP, prior to the implementation of Technical Bulletin No. 72, (“BT 72”) which is mandatory for periods beginning after December 31, 2005, the excess of cost over the net book value of a purchased company was recorded as goodwill and amortized to income over a maximum period of twenty years. Amortization of goodwill may be accelerated if the acquired company generates sufficient income to absorb the additional amortization in any given year. The adoption of BT 72 did not change the amortization period for goodwill, but instead requires measurement of acquired assets and liabilities in their fair values for all acquisitions after January 1, 2004.

Under US GAAP, in a business combination accounted for under the purchase method of accounting, the acquired company’s identifiable assets and liabilities are recorded at fair values to give effect to the purchase price paid by the acquiring company. If, after the assets and liabilities of the acquired company have been adjusted to their fair value at the acquisition date, the purchase price exceeds the amount of such fair value, the excess is recorded as goodwill. The Company adopted SFAS No. 142 Goodwill and other Intangible Assets (“SFAS 142”) as of January 1, 2002. SFAS 142 applies to all goodwill and identified intangible assets acquired in a business combination. Under this standard, beginning January 1, 2002, all goodwill, including amounts acquired before initial application of SFAS No. 142, and indefinite-lived intangible assets are not amortized, but must be tested for impairment at least annually.

For the years ended December 31, 2006 and 2007, the Company performed the annual impairment test of goodwill required by the standard and determined that no impairment existed under either Chilean GAAP or US GAAP.

The following effects are included in the net income (loss) and Shareholders’ equity reconciliation to US GAAP under paragraph (1.p) below:

(i)  Differences in the amount of the impairment under US GAAP related to basis differences in the original determination and subsequent amortization methodology between Chilean GAAP and US GAAP;
(ii)  The reversal of goodwill amortization recorded under Chilean GAAP.

A summary of the changes in the Company's goodwill under US GAAP during the years ended December 31, 2005, 2006 and 2007, by segment of operation is as follows:

	January 1, 2005	Currency translation adjustment	December 31, 2005	Currency translation adjustment	December 31, 2006	Acquisitions	Discontinued Operation	Currency translation adjustment	December 31, 2007
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Wire and Cable	22,536,419	(2,471,798)	20,064,621	342,218	20,406,839	1,252,431	(18,866,391)	(2,792,879)	-
Flexible Packaging	1,096,811	(52,036)	1,044,775	5,078	1,049,853	175,342	-	(285,373)	939,822
Aluminum Profiles	1,257,173	-	1,257,173	-	1,257,173	-	-	-	1,257,173
Total	24,890,403	(2,523,834)	22,366,569	347,296	22,713,865	1,427,773	(18,866,391)	(3,078,252)	2,196,995

e)  Acquisition of 50% participation in Optel Ltda.

As described in Note 11, Madeco held a 50% participation in the fiber-optic company Optel Ltda. (“Optel”) joint venture with Corning International Corporation. In November 2005 based on arbitration ruling the joint venture agreement was declared lawfully terminated. As a result, Madeco lost the ability to appoint Optel’s management and was required to initiate the liquidation of Optel. The Company deconsolidated this entity and recorded a write-down of its investment in Optel in December 2005 and provided for expected costs related to the litigation with Corning and the forced liquidation of Optel.

On March 31, 2005, Madeco S.A., through its indirect subsidiary Madeco Brasil Ltda., signed an agreement with Corning whereby it acquired, for the nominal price of 1 Brazilian real, Corning’s 50% interest in Optel and also renegotiated and repaid indebtedness owed by Optel to its creditors. Under Chilean GAAP, as a result of that step acquisition the Company once again gained control over Optel and reversed through 2007 net income the impairment previously recorded in 2003. Under Technical Bulletin No. 72 the excess of the net assets acquired over the cost of acquisition referred to as “negative goodwill” was recorded in the step acquisition of an additional 50% interest in Optel in 2005. This negative goodwill is being amortized on a straight-line basis over a period of 20 years.

Under US GAAP the impairment write-offs on investments are not be reversed for improvements in the situation affecting the underlying investment, also the negative goodwill determined on the step acquisition of an additional 50% interest in Optel in 2005 would have been allocated as a reduction of the non-current assets (property, plant and equipment) in accordance with SFAS 141 Business Combinations..

In addition under Chilean GAAP certain payables due to Madeco Group companies were considered identifiable liabilities assumed during the additional 50% step acquisition in Optel. Those payables resulted principally from reimbursements payable for expenses incurred by other entities controlled by Madeco on behalf of Optel during the period when this investment was not controlled by the Company. In addition, as a result of regaining control and renegotiating Optel’s indebtedness the Company released into income the allowances against receivables due from Optel that were recorded in the moment of losing control over it in 2003. For US GAAP purposes the above mentioned payables represented no additional benefit or incremental liability to the acquirer and therefore no portion of the purchase price would be allocated to such amounts. Consequently the amount of the net assets acquired under US GAAP is different than under Chilean GAAP. This difference also affected the dete rmination of the amount of excess of the net assets acquired over the cost of acquisition that reduced the amount of property, plant and equipment.

The differences between Chilean GAAP and US GAAP related to the accounting for the acquisition of 50% participation in Optel are included in paragraph (1.p) below and are as follows:

1. The reversal of negative goodwill and its amortization recorded under Chilean GAAP;
2. The reversal of the impairment write-up recognized under Chilean GAAP;
3. The effects of reducing depreciation expense, due to the proportionate allocation of the excess of acquisition cost (including effect of elimination of intercompany balances and its effect in income) to property, plant and equipment.

f)  Minimum dividend

As required by the Chilean Companies Act, unless otherwise decided by the unanimous vote of the holders of issued and subscribed shares, the Company must distribute a cash dividend in an amount equal to at least 30% of its net income before amortization of negative goodwill for each year as determined in accordance with Chilean GAAP, unless and except to the extent the Company has unabsorbed prior year losses. Net income related to the amortization of negative goodwill can only be distributed as an additional dividend by the approval of the shareholders, and accordingly, is not included in the calculation of the minimum dividend to be distributed. Under Chilean GAAP dividend amounts are only recorded in the period in which the dividend is declared, whereas under US GAAP, absent shareholder approval to the contrary, the amount of the minimum dividend required to be distributed represents a liability.

Until 2006, the Company had unabsorbed losses from prior years and did not record a minimum dividend liability. These losses were absorbed during 2007, and the Company declared and recorded a dividend obligation satisfying the minimum dividend criteria. As a consequence, no adjustment has been recorded in the reconciliation in paragraph (1.q.) in any period.

g)  Staff severance indemnities

The Company and certain subsidiaries record a provision for staff severance indemnities when rights to such benefits have been formally guaranteed to employee groups. These severance indemnity plans are unfunded. Under Chilean GAAP these obligations are recorded using the present value of the liability determined at the end of each year based on the current salary and the estimated remaining number of years of service of each employee, as described in Note 2 o) using an interest rate of 7%. Under US GAAP based on EITF 88-1 such severance indemnities may be recorded based on the vested benefits to which the employees are entitled if their employment terminated immediately (settlement basis). The effect of this difference in accounting for staff severance benefits between Chilean GAAP and US GAAP is included in the reconciliation to US GAAP under paragraph (1.p) below.

h)  Derivative instruments and hedging activities

The Company is exposed to the impact of fluctuations foreign currency exchange rates, changes in interest rates and changes in the market prices of commodities. In the normal course of business, the Company enters into a variety of derivate contracts designated to hedge its exposure to these risks.

Under Chilean GAAP, foreign forward exchange contracts and swaps have been recorded in accordance with Technical Bulletin No. 57 issued by the Chilean Association of Accountants, as follows:

(i) Derivative contracts not qualifying for hedge accounting are recorded at the closing spot rate and gains and losses are included in earnings as Other non-operating income and expenses.

i)  Derivative instruments and hedging activities

(i)  Derivatives that are designated and are effective as hedges of existing assets or liabilities are valued, together with the item being hedged, based on the closing spot rate. If the net change in values of the derivative instrument and the hedged item results in a loss, the net difference is recorded in operating income. If the net variation in the value of the derivative instrument and the hedge item results in a gain, the net difference is recorded as unrealized gains and is deferred in the balance sheet.

(ii) Derivative contracts that are designated as hedges of future cash flows or forecasted transactions must be marked-to-market based on the closing spot rate, with any variation in the fair value recorded as unrealized gains or losses in the income statement

Under US GAAP, in accordance with SFAS 133 Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), derivatives are always carried at fair value on the balance sheet. Hedge accounting can only be applied if the instruments meet certain requirements, among others a formal documentation of the hedging relationship and a periodic assessment of its effectiveness. If the derivative instrument does not qualify as a hedging instrument, changes in the fair value are reported directly in income. If the derivative instrument qualifies as a hedge, the accounting treatment varies based on the type of instrument being hedged.

The Company’s derivative instruments do not meet the formal documentation requirement of SFAS 133, therefore all effects should be reported in the same accounting period under US GAAP. As of December 31, 2005, the differences between Chilean GAAP and US GAAP were not material to the Company’s financial position and results of its operation. As of December 31, 2006, the Company is reporting a loss related to fair value hedges under Chilean GAAP, which results in a valuation consistent with US GAAP. Additionally in 2006, the Company entered into cash flow hedges and deferred an unrealized gain related to these derivatives. The effect of recognizing this gain for the year 2006 is included in the reconciliation to US GAAP under paragraph (1.p) below.

Current Chilean accounting rules do not consider the existence of derivative instruments embedded in other contracts and therefore they are not reflected in the financial statements. For US GAAP purposes in accordance with SFAS 133, certain implicit or explicit terms included in host contracts that affect some or all of the cash flows or the value of other exchanges required by the contract in a manner similar to a derivative instrument, must be separated from the host contract and accounted for at fair value. The Company separately measures embedded derivatives as freestanding derivative instruments at their estimated fair values recognizing changes in earnings when they occur. Currently the only host contracts and instruments that the Company has, which have implicit or explicit terms that must be separately accounted for at fair value, are raw materials sale and purchase contracts. The effect of accounting for embedded derivatives is not material to the Company’s fi nancial position and results of its operations and therefore was not included in the reconciliation to US GAAP under paragraph (1.p) below.
 

j)  Reversal of impairment loss

Under Chilean GAAP, during 2001 the Company recorded an impairment loss on property, plant and equipment related to its plants in Argentina. During the year ended December 31, 2002, the Company reassessed this impairment provision based on an improvement in the economic situation in Argentina and reversed, as permitted by Chilean GAAP, the amount of ThCh$ 7,870,470 related to previously recognized impairment losses. For US GAAP purposes, SFAS 144 does not allow the reversal of impairment losses. Therefore, the provision amount reversed for Chilean GAAP purposes is treated as a reconciling item in the US GAAP reconciliation under paragraph (1.p) below.

k)  Stock option plan

At the Extraordinary Meeting of Shareholders held on November 14, 2002, the shareholders approved a stock option plan, which was adopted by the Company’s Board of Directors on January 28, 2005. This incentive plan authorized the issuance of up to 493,334,000 shares of the Company’s common stock upon the exercises of stock options.

On April 24, 2003, the Company granted stock options to certain employees in the total amount of 182,147,724 shares.

• The options exercise period was from September 30, 2004 to November 30, 2004, assuming the employee continued service to that date, with an exercise price of Ch$ 24 per share. On October 29, 2004, the executives exercised the portion of the stock options and subscribed 182,147,724 shares at the price of Ch$ 24 per share, which was paid with their own resources on that same date. In accordance with the accounting criteria described in Note 2 v) the corresponding capital increase of ThCh$ 4,371,545 (historic value) was recognized in the financial statement.

• At an Extraordinary Shareholders’ Meeting held on December 22, 2004, it was agreed to modify the placement value of remaining 311,186,276 authorized shares destined to such compensation plan, setting a price of Ch$ 60 per share.

On January 25, 2005 the Board of Directors agreed to a separate stock option plan of 130,000,000 shares for certain executives. The exercise price was set at Ch$ 60 per share. This plan commenced on May 20, 2007 when the stock option contracts were issued. Under Chilean GAAP the stock options were recognized in accordance with accounting criteria described in the Note 2 v) at the fair value of ThCh$ 263,500 determined using the “Black-Scholes-Merton” model as of the grant date (January 25, 2005).

On August 31, 2005, the above mentioned contracts signed on May 20, 2005 were nullified and the Company recorded in income the unamortized amount of the fair value of the options.

On May 30, 2006, the Board of Directors agreed to issue to a group of executives stock options for a total of 120,000,000 shares out of the shares issued for this purpose in 2002. The Share Subscription Agreement dated July 14, 2006 sets the exercise price at Ch$ 48.52 per share.

The Company determined the fair value of ThCh$ 687,600 for these options at the grant date using the "Black-Scholes-Merton" method, which is recorded with a charge to compensation cost and a credit to other reserves on a straight-line basis over the period between the grant date of the options and the date that these become vested. The charge to income for the year 2006 was ThCh$ 275,040 and ThCh$ 412,560 in 2007.

A summary of stock option activity for the plan is as follows:

	For the years ended December 31,
	Authorized Options			Granted Options (thereof)
	2005	2006	2007	2005	2006	2007
	Number	Number	Number	Number	Number	Number
Balance as of January 1,	311,186,276	311,186,276	311,186,276	-	-	120,000,000
Granted during the period	-	-	-	130,000,000	120,000,000	-
Cancelled during the period	-	-	(191,186,276)	(130,000,000)	-	-
Exercised during the period	-	-	(120,000,000)	-	-	(120,000,000)
Balance as of December 31,	311,186,276	311,186,276	-	-	120,000,000	-

Under US GAAP, the Company applied until December 31, 2005 the Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees when accounting for stock options. Until then no compensation cost was recognized for grants made to employees when the grant price is greater than or equal to the market price of a common share on the grant date. For the year 2005, the amount recorded in income under Chilean GAAP was reversed in the US GAAP reconciliation under paragraph (1.p) below.

As of January 1, 2006, the Company adopted SFAS No. 123(R) Accounting for Stock-Based Compensation. This standard requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values estimated at the date of the grant. As of the date of the transition, there were no stock options outstanding; the Company is applying SFAS 123(R) using the modified-prospective-transition method. There is no difference in the treatment under Chilean GAAP, which is in accordance with International Financial Reporting Standard No. 2 Share-based payments, and SFAS 123(R), accordingly there is no adjustment included in the reconciliation under paragraph (1.p) for the year 2006.

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

l) Capitalized Interest

Under Chilean GAAP, all interest on debt directly associated with construction projects is capitalized, including interest, price-level restatement and, with respect to foreign currency borrowings, foreign currency translation gains and losses. The capitalization of interest costs associated with projects under construction is optional when incurred on debt that is not directly related to such projects. During 2005, 2006 and 2007, the Company’s debt was not considered directly associated with construction projects, and the Company did not capitalize interest.

Under US GAAP, capitalization of interest is required for the interest, which could be avoided should expenditures for the associated assets have not been made. As a consequence of increasing construction activities, starting 2006 the Company was implementing an adjustment for the capitalization of interest and the corresponding effect on depreciation that is included under paragraph (1.p) below.

	For the years ended December 31,
	2006	2007
	ThCh$	ThCh$
Interest cost incurred	(12,254,807)	(12,837,007)
Interest capitalized under US GAAP	308,922	133,377

m)  Minority interest

The effects on the minority interest of the US GAAP adjustments in subsidiaries that are not wholly-owned by the Company have been reflected in Minority interest and are included in paragraph (1.p) below.

n)  Elimination of discontinued operations

(i) Alufoil S.A.

Under Chilean GAAP the Company records divestitures of investments or assets in the year in which they occur and no restatement to the financial statement information presented in previous years is required after a divestiture has occurred. Under US GAAP, in accordance with SFAS 144 Accounting for the Impairment or Disposal of Long-Lived Assets, the discontinued operations of a component must be retroactively separated from the continuing operations of an entity, when the operations and cash flows of the component will be eliminated from the ongoing operations of an entity as a result of a disposal or a sale transaction, and the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.

During 2004 and 2005 the Company disposed substantially all of its assets of subsidiary Alufoil S.A. that produced in Chile mass consumer flexible packaging products such as aluminum foil, trash bags and plastic wrap and did not maintain any continuing involvement in the operations of this component after the disposal transaction.

As a result of the disposal, the results of operations of that component have been eliminated from the ongoing operations of the Company. The effect of restating discontinued operations is included in the reconciliation of net income to US GAAP and is presented net of tax (benefit) expenses of ThCh$ 248,435 and ThCh$ 42, and net of minority interest of ThCh$ 162,539 and ThCh$ (266) for the years ended December 31, 2004 and 2005, respectively under paragraph (1.p) below.

(ii) Wire and Cable Unit

As of November 15, 2007 the Company signed a framework agreement with the Nexans Group about the intention to transfer the Company’s Wire and Cable Unit, which was formalized on February 21, 2008 setting the purchase price at US$ 448 million in cash plus 2.5 million shares in Nexans (participation of approximately 8.9%). The transaction is expected to close by September 30, 2009, subject to regulatory approvals and customary closing conditions. The estimated purchase price is higher than the carrying value of the disposal group, therefore, the Company did not recognize any gain or loss on this transaction at December 31, 2007.

Pursuant to SFAS 144 “Accounting for the Impairment or Disposal of Long Lived Assets”, the Wire and Cable segment was considered as "discontinued" as of December 31, 2007. The results of operations of the unit have been eliminated from the continuing operations of the Company. The effect of restating discontinued operations is included in the reconciliation of net income to US GAAP under paragraph (1.p) below.

o)  Investment in related company

Under Chilean GAAP the Company, as of December 31, 2007, consolidated its 50% owned investee Peruplast S.A., since pursuant to a shareholders’ agreement, the Company through its representatives in the board of directors can appoint the chief executive officer of the investee. Consequently, the Company is able to establish finance and operation policies and strategies, which under Chilean GAAP is sufficient to presume control and thus consolidate the investee.

With its 50% ownership in Peruplast S.A., the Company does not exercise control over the investee pursuant to US GAAP. Consequently, the investment is accounted for in accordance with Accounting Principles Board Opinion No. 18 “The Equity Method for accounting for Investments in Common Stock”, recognizing the investor’s share of the earnings and losses determined under US GAAP. The principal US GAAP adjustment affecting the Company’s equity investee is the capitalization of interest and corresponding effects to deferred taxes and minority interest, which is included in the US GAAP reconciliation under paragraph (1.p) below.

p)  Effects of conforming to US GAAP

The adjustments to the reported consolidated net income (loss) required to conform to US GAAP are as follows:

	For the years ended December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Net (loss) income in accordance with Chilean GAAP	13,174,354	32,439,068	19,660,064
Reversal of depreciation on revaluation increment of fixed assets (par. 1b)	121,342	54,052	54,549
Deferred income taxes (par. 1c)
c.i Reversal of amortization of complementary accounts	290,267	285,582	288,314
c.ii Deferred tax effects of US GAAP adjustments	2,232,806	5,811,893	3,899,248
Amortization of goodwill (par. 1d)	220,958	221,442	215,486
Staff severance indemnities (par. 1g) .	166,865	(11,719)	125,041
Reversal of impairment loss (par. 1j)	244,382	212,508	264,421
Stock option plan (par. 1k)	172,367	-	-
Capitalized interests (par. 1l)
l.i Capitalized interest	-	125,177	37,459
l.ii Accumulated depreciation	-	(5,505)	(6,377)
Minority interest (par. 1m)	178,955	491,303	643,299
Elimination of discontinued operations (par. 1n)	(15,750,801)	(26,768,566)	(26,322,590)
Investment in related company (par. 1o)	-	-	18,575
Net income (loss) from continuing operations in accordance with US GAAP	1,051,495	12,855,235	(1,122,511)
Income from discontinued operations, net of taxes and minority interest (par. 1n)	14,377,800	23,704,784	22,868,497
Net income in accordance with US GAAP	15,429,295	36,560,019	21,745,986
Other comprehensive income:
Foreign currency translation adjustment, net of taxes	667,415	(75,016)	45,464
Loss on hedge of the foreign currency exposure of net investment in foreign operations	(15,814,066)	2,107,997	(17,216,035)
Gain on hedge of the foreign currency exposure of net investment in foreign operations	163,259	-	-
Comprehensive income in accordance with US GAAP	445,903	38,593,000	4,575,415

The following is a reconciliation of consolidated Shareholder’s Equity differences under Chilean GAAP to the corresponding amounts under US GAAP:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Shareholder’s Equity in accordance with Chilean GAAP	270,170,264	263,893,671
Reversal of revaluation of property, plant and equipment (par. 1b)
b.i Property, plant and equipment	(5,647,670)	(5,609,629)
b.ii Accumulated depreciation	2,933,007	3,003,417
Deferred income taxes (par. 1c)
c.i Reversal of complementary accounts	(5,199,966)	(4,656,482)
c.ii Deferred tax effects of US GAAP adjustments	1,055,109	1,510,650
Amortization of goodwill (par. 1d)	9,673,192	10,187,505
Acquisition of Optel (par. 1e)
e.i Reversal of negative goodwill amortization	(49,717)	(67,893)
e.i Reversal of negative goodwill	568,195	493,769
e.ii-iii New basis of property, plant and equipment	(1,769,991)	(1,538,176)
e.iii Accumulated depreciation of property, plant and equipment	190,684	280,383
Staff severance indemnities (par. 1g)	(3,943,807)	(3,721,521)
Derivative instruments (par. 1i)	497,714	(892,084)
Reversal of impairment loss (par. 1j)	(3,110,219)	(2,443,638)
Impairment of goodwill Ficap (par. 1d)	(5,717,871)	(4,968,902)
Capitalized interests (par 1l)
l.i Capitalized interest	308,922	402,613
l.ii Accumulated depreciation	(15,085)	(30,714)
Minority interest (par. 1m)	326,856	285,029
Investment in related company (par. 1o)	-	18,575
Shareholder’s Equity in accordance with US GAAP	260,269,617	256,146,573

The following summarizes the changes in shareholders’ equity under US GAAP during the years ended December 31, 2005, 2006 and 2007:

	As of December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Beginning balance	163,494,996	211,263,749	260,269,617
Capital increase	48,267,248	10,042,903	5,822,400
Issuance of stock options	-	295,393	412,560
Cumulative translation adjustment	(14,983,392)	2,032,981	(17,170,571)
Interim dividend	-	-	(15,002,161)
Price-level restatement	(944,398)	74,572	68,742
Net income for the year	15,429,295	36,560,019	21,745,986
Ending balance	211,263,749	260,269,617	256,146,573

2. Additional disclosure requirements

1. Earnings (loss) per share

	For the years ended December 31,
	2005	2006	2007
	Ch$	Ch$	Ch$
Earnings (loss) per share from continuing operations (US GAAP)	0.23	2.35	(0.20)
Earnings per share from discontinued operations (US GAAP)	3.17	4.32	4.11
Net earnings (loss) per share (US GAAP)	3.40	6.68	3.91
Net earnings (loss) per share (Chilean GAAP)	2.90	5.93	3.54
Weighted average number of common stock
outstanding (in thousands)	4,537,185	5,471,995	5,558,289

The earnings per share figures disclosed above for both US GAAP and Chilean GAAP purposes have been calculated by dividing the respective earnings determined in accordance with US GAAP and Chilean GAAP, respectively, by the weighted average number of common shares outstanding during the year. The outstanding employee stock options do not have a dilutive effect on the above calculation under application of the treasury stock method.

2. Income taxes

The provision for income taxes charged to the results of operations determined in accordance with US GAAP is as follows:

 

	For the year ended December 31, 2005
	Chile	Argentina	Peru	Brazil	Total
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Income (loss) before income taxes and minority interest under Chilean GAAP	3,712,638	(413,274)	6,754,163	5,536,731	15,590,258
Current income taxes as determined under Chilean GAAP	(240,440)	-	(2,676,524)	(408,516)	(3,325,480)
Deferred income taxes as determined under Chilean GAAP	2,229,933	(683,531)	(265,578)	436,252	1,717,076
Subtotal	1,989,493	(683,531)	(2,942,102)	27,736	(1,608,404)
US GAAP adjustments:
Deferred tax effects of applying SFAS No. 109	440,930	-	83,154	-	524,084
Deferred tax effects of US GAAP adjustments	(48,028)	-	-	231,336	183,308
Reclassification of income of discontinued operations	(897,741)	113,547	2,858,948	(259,072)	1,815,682
Expense (benefit) for the year under US GAAP	1,484,654	(569,984)	-	-	914,670

	For the year ended December 31, 2006
	Chile	Argentina	Peru	Brazil		Total
	ThCh$	ThCh$	ThCh$	ThCh$		ThCh$
Income before income taxes and minority interest under Chilean GAAP	16,975,808	1,322,483	12,848,317	8,534,115		39,680,723
Current income taxes as determined under Chilean GAAP	(804,660)	(725,717)	(3,736,072)	(2,460,800)		(7,727,249)
Deferred income taxes as determined under Chilean GAAP	2,535,123	98,055	(111,375)	(384,232)		2,137,571
Subtotal	1,730,463	(627,662)	(3,847,447)	(2,845,032)		(5,589,678)
US GAAP adjustments:
Deferred tax effects of applying SFAS No. 109	411,450	-	78,410	-		489,860
Deferred tax effects of US GAAP adjustments	(26,878)	88,272	(941)	79,150		139,603
Reclassification of income of discontinued operations	(1,293,068)	225,220	3,769,978	2,765,882		5,468,012
Expense (benefit) for the year under US GAAP	821,967	(314,170)	-	-		507,797
	For the year ended December 31, 2007
	Chile	Argentina	Peru	Brazil	Colombia	Total
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Income before income taxes and minority interest under Chilean GAAP	4,271,301	(33,170)	9,993,635	9,722,368	1,406,733	25,360,867
Current income taxes as determined under Chilean GAAP	(415,701)	(137,920)	(3,969,203)	(760,150)	(687,965)	5,970,939
Deferred income taxes as determined under Chilean GAAP	5,483,369	(351,980)	(282,817)	46,860	-	4,895,432
Subtotal	5,067,668	(489,900)	(4,252,020)	(713,290)	(687,965)	(1,075,507)
US GAAP adjustments:
Deferred tax effects of applying SFAS No. 109	397,413	-	98,142	-	-	495,555
Deferred tax effects of US GAAP adjustments	(58,743)	235,750	(6,487)	315,562	-	486,082
Reclassification of income of discontinued operations	(736,108)	(142,358)	2,984,336	397,728	687,965	3,191,563
Deconsolidation Peruplast	-	-	1,176,029	-	-	1,176,029
Expense (benefit) for the year under US GAAP	4,670,230	(396,508)	-	-	-	4,273,722

Deferred tax assets (liabilities) as of December 31, 2006 are as follows:     

	Short-term			Long-term
	Deferred tax under Chilean GAAP	SFAS No. 109 applied to US GAAP adjustments	Deferred tax under US GAAP	Deferred tax under Chilean GAAP	SFAS No. 109 applied to US GAAP adjustments	Deferred tax under US GAAP
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Deferred tax assets
Allowance for doubtful accounts	1,421,487	-	1,421,487	30,004	-	30,004
Tax loss carry forwards	3,073,126	-	3,073,126	21,620,458	-	21,620,458
Valuation allowance	(3,342,743)	-	(3,342,743)	(26,572,735)	(990 ,606)	(27,563,341)
Accrued vacation expense	158,556	-	158,556	-	-	-
Property, plant and equipment held for sale	32,273	-	32,273	23,995	-	23,995
Impairment of investment in Decker	-	-	-	-	1,088,577	1,088,577
Impairment of investment in Brazil	1,565,742	-	1,565,742	5,349,618	-	5,349,618
Adjustment to realizable value for property, plant and equipment	12,580	-	12,580	-	-	-
Allowance for obsolescence of inventories	1,328,890	-	1,328,890	102,457	-	102,457
Allowances for other current and long-term receivables	630,189	-	630,189	-	-	-
Write-downs of property, plant and equipment	-	-	-	219,280	-	219,280
Provision for unused property, plant and equipment	-	-	-	491,634	33,851	525,485
Other	1,622,238	-	1,622,238	862,090	65,061	927,151
Gross deferred tax assets	6,502,338	-	6,502,338	2,126,801	196,883	2,323,684
Deferred tax liabilities
Property, plant and equipment in leasing and accelerated depreciation	-	-	-	1,925,638	4,695,951	6,621,589
Manufacturing expenses	476,285	-	476,285	-	-	-
Staff Severance Indemnities	-	-	-	442,925	(442,925)	-
Negotiation of bonds	33,038	-	33,038	-	-	-
Bond issuance costs	-	-	-	142,047	-	142,047
Other	5,890	-	5,890	142,513	(80,508)	62,005
Gross deferred tax liabilities	515,213	-	515,213	2,653,123	4,172,518	6,825,641
Net assets (liabilities) deferred taxes	5,987,125	-	5,987,125	(526,322)	(3,975,635)	(4,501,957)

Deferred tax assets (liabilities) as of December 31, 2007 are as follows:    

	Short-term			Long-term
	Deferred tax under Chilean GAAP	SFAS No. 109 applied to US GAAP adjustments	Deferred tax under US GAAP	Deferred tax under Chilean GAAP	SFAS No. 109 applied to US GAAP adjustments	Deferred tax under US GAAP
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Deferred tax assets
Allowance for doubtful accounts	1,248,585	-	1,248,585	3,095	-	3,095
Tax loss carry forwards	7,429,913	-	7,429,913	15,331,187	-	15,331,187
Valuation allowance	(2,846,184)	-	(2,846,184)	(17,701,339)	(526,613)	(18,227,952)
Accrued vacation expense	297,396	-	297,396	-	-	-
Property, plant and equipment held for sale	19,510	-	19,510	23,482	-	23,482
Impairment of investment in Decker	-	-	-	-	855,274	855,274
Impairment of investment in Brazil	1,907,846	-	1,907,846	3,703,466	-	3,703,466
Adjustment to realizable value for property, plant and equipment	30,599	-	30,599	-	-	-
Allowance for obsolescence of inventories	656,206	-	656,206	18,918	-	18,918
Allowances for other current and long-term receivables	353,941	-	353,941	-	-	-
Write-downs of property, plant and equipment	491,419	-	491,419	466,211	-	466,211
Provision assets long-term	72,416	-	72,416	352,337	30,410	382,747
Other	1,900,665	-	1,900,665	152,516	59,641	212,157
Gross deferred tax assets	11,562,372	-	11,562,372	2,349,873	418,712	2,768,585
Deferred tax liabilities
Property, plant and equipment in leasing and accelerated depreciation	150,787	-	150,787	5,238,039	4,252,390	9,490,429
Manufacturing expenses	498,354	-	498,354	-	-	-
Staff Severance Indemnities	-	-	-	436,024	(400,730)	35,294
Negotiation of bonds	79,600	-	79,600	26,484	-	26,484
Bond issuance costs	-	-	-	114,503	-	114,503
Other	756	-	756	301,935	(272,754)	29,181
Gross deferred tax liabilities	729,497	-	729,497	6,116,985	3,578,906	9,695,891
Net assets (liabilities) deferred taxes	10,832,815	-	10,832,815	(3,767,112)	(3,160,194)	(6,927,306)

A reconciliation of the Chilean Statutory income tax rate to the Company’s effective tax rate on net income calculated in accordance with US GAAP is as follows:

	For the years ended December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Pretax (loss) income in accordance with US GAAP	485,577	12,778,752	(6,048,906)
Statutory tax rate	17.0%	17.0%	17.0%
Statutory tax rate applied to pretax (loss) income	(82,548)	(2,172,388)	1,028,313
Effect on tax and financial equity restatement (1)	758,805	32,773	814,435
Non-taxable income	596,918	753,718	4,230,244
Non-deductible expenses	611,386	(606,426)	(2,459,747)
Adjustments for application of BT 64	2,556,691	(590,552)	(7,126,326)
Other local taxes	-	(27,147)	(15,962)
Foreign taxes in excess of domestic rate	117,729	968,518	401,246
Valuation allowance changes affecting the provision for income taxes	(3,639,012)	2,509,296	7,386,324
Other	(5,299)	(359,995)	15,196
At effective tax rate	914,670	507,797	4,273,722

(1) This item corresponds to the difference in the basis used for the price-level restatement calculation of shareholder’s equity for financial and tax purposes.

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

Expiration dates of the tax loss carry-forwards as of December 31, 2007 are as follows:

Country	2008	2009	2010	2011	2012	Total
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Argentina (1)	8,005,310	72,972	550,617	102,008	63,552	8,794,459
Brazil (2)	-	-	-	-	-	8,917,791
Chile (3)	-	-	-	-	-	75,051,274
Total	8,005,310	72,972	550,617	102,008	63,552	92,763,524

(1) Tax-loss carry-forwards in Argentina expire in 5 years under current tax legislation.
(2) Tax-loss carry-forwards in Brazil under current tax legislation do not expire but the deduction from taxable income is limited to 30% of the taxable income.
(3) Tax loss carry-forwards do not expire in Chile under current tax legislation.

3. Concentration of credit risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash investments and trade accounts receivable.

The Company maintains cash and cash equivalents, marketable securities, and certain other financial instruments with various financial institutions. These financial institutions are located in Chile and other parts of the world, and the Company’s policy is designed to limit exposure to any institution. The Company performs periodic evaluations of the relative credit standing of these financial institutions as part of its investment strategy.

Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities comprising the Company’s customer base located in Chile, Argentina, Brazil and Peru. The Company’s credit risk customer base sales in this region amounted to approximately 75.56% and 78.47% as of December 31, 2006 and 2007 respectively. As of these dates, no customer has outstanding receivables of more than 10%. Furthermore, the Company does not require collateral or security for its accounts receivable.

4. Collective bargaining agreements

As of December 31, 2007, approximately 58.28% of the Company’s employees are covered by collective bargaining agreements. Of the employees covered by collective bargaining agreements, 41.76% of the agreements will expire within one year.

5. Lease commitments

The Company leases certain property under long-term non-cancelable leases, which are accounted for as capital leases. The related future minimum lease payments as of December 31, 2007 were as follows:

	As of December 31, 2007
	ThCh$
2008	1,512,595
2009	1,392,779
2010	1,109,097
2011	961,325
2012	763,147
Due after 5 years	2,439,635
Total	8,178,578

The present value of net long-term minimum lease payments totaled ThCh$ 7,038,163 as of December 31, 2007. The imputed interest totals ThCh$ 1,140,415.

Operating lease and related future minimum payments as of December 31, 2007 are presented as follows:

	As of December 31, 2007
	ThCh$
Due within 1 year	461,730
Due after 1 year but within 2 years	414,545
Due after 2 years but within 3 years	272,851
Due after 3 years but within 4 years	224,572
Due after 4 years but within 5 years	209,821
Due after 5 years	209,821
Total	1,793,340

Cash paid for operating leases for the years ended December 31, 2005, 2006 and 2007 was ThCh$ 342,750, ThCh$ 392,036 and ThCh$ 617,114. respectively. The Company did not incur contingent rental expenses and did not receive sublease rentals.

6. Advertising Costs

The Company expenses advertising costs when the related advertising has been published or aired. Advertising expenses amounted to ThCh$ 429,442, ThCh$ 1,272,006 and ThCh$ 901,248 for the years ended December 31, 2005, 2006 and 2007, respectively.

7. Fair value of financial instruments

The accompanying tables provide disclosure of the estimated fair value of financial instruments owned by the Company. Carrying values are based on amounts reported in accordance with Chilean GAAP. The following methods and assumptions were used to estimate the fair value of each class of financial instruments at December 31, 2006 and 2007, for which it is practicable:

Cash and Cash Equivalents - Cash and Cash Equivalent are stated at the carrying amounts, which approximate fair values.

Marketable securities - The fair value of marketable securities is based on quoted market prices.

Long-term accounts receivable - As substantially all of the Company’s long-term accounts receivable bear interest rates at variable rates, and these interest rates are stated at current market rates, the carrying value of the long-term accounts balance approximates fair value.

Short-term and long-term debt - The fair value of short-term and long-term debt is based on rates currently available to the Company for debt with similar terms and remaining maturities.

Other current liabilities - This category consists of current liabilities whose carrying value approximates their fair value. The derivative contracts’ fair value is based on market-prices at December 31, 2006, and 2007 respectively.

Other current assets - The fair value of these derivative contracts is based on market price.

The following represent the company’s required disclosures regarding the fair value of financial instruments under US GAAP as of December 31, 2006 and 2007,

	As of December 31,
	2006		2007
	Carrying	Fair	Carrying	Fair
	Amount	value	Amount	Value
	ThCh$	ThCh$	ThCh$	ThCh$
Assets:
Cash	5,083,958	5,083,958	10,410,066	10,410,066
Time deposits and marketable securities	609,571	609,571	788,687	788,687
Other current assets	13,150,142	13,150,142	-	-
Derivative financial instruments	1,221,241	1,221,241	1,635,672	-
Financial assets:
Long-term accounts receivable	474,534	474,534	246,375	246,375
Derivative financial instruments	-	-	4,335	-
Short-term debt:
Short-term bank borrowings (includes current portion of long-term liability)	34,079,465	34,028,585	52,729,019	52,884,954
Current portion of bonds payable	4,872,734	4,900,812	5,081,276	5,144,480
Current portion of long-term liabilities	524,503	524,503	2,312,427	2,312,427
Other current liabilities	53,624	53,624	-	-
Derivative financial instruments	1,254,199	1,254,199	1,302,090	-
Long-term debt:
Bonds payable	21,722,840	22,224,439	16,623,066	22,436,525
Long-term bank liabilities	44,539,651	44,547,361	36,291,524	36,590,989
Derivative financial instruments	129,196	129,196	432,070	-

h) Restrictions on net assets

As stated in Note 22 the Company has subsidiaries that must abide by certain financial ratios and covenants that require minimum equity levels or that contain other characteristics that restrict the transfer of assets to the parent company. The amounts of Madeco’s proportional share in restricted net assets in consolidated subsidiaries as of December 31, 2007 are as follows:

	Proportionate share of restricted net assets
Legal Entity	as of December 31, 2007
	ThCh$
Alusa S.A.	26,307,983
Indalum S.A.	31,716,262

The consolidated retained earnings which represent undistributed earnings of investees accounted for using the equity method as of December 31, 2007 amounts to ThCh$ 19,152.

i)  Comprehensive income (loss)

The Company presents comprehensive income and its components with the objective to report a measure of all changes in shareholders’ equity that result from transactions and other economic events of the period other than transactions with owners (“comprehensive income”). Comprehensive income is the total net income and other non-owner equity transactions that result in changes in net equity.

The following represents accumulated other comprehensive income balance, for the years ended December 31, 2005, 2006 and 2007:

	For the year ended December 31, 2005
		Chilean GAAP cumulative translation adjustment	Effect of US GAAP adjustments on cumulative translation adjustment	Accumulated Other Comprehensive Income (Loss)
Beginning balance		1,161,624	1,659,177	2,820,801
Credit (charge) for the period		(15,650,807)	667,415	(14,983,392)
Ending balance		(14,489,183)	2,326,592	(12,162,591)

	For the year ended December 31, 2006
		Chilean GAAP cumulative translation adjustment	Effect of US GAAP adjustments on cumulative translation adjustment	Accumulated Other Comprehensive Income (Loss)
Beginning balance		(14,489,183)	2,326,592	(12,162,591)
Credit (charge) for the period		2,107,997	(75,016)	2,032,981
Price-level restatement		(45,397)	-	(45,397)
Ending balance		(12,427,123)	2,251,576	(10,175,547)

	For the year ended December 31, 2007
		Chilean GAAP cumulative translation adjustment	Effect of US GAAP adjustments on cumulative translation adjustment	Accumulated Other Comprehensive Income (Loss)
Beginning balance		(12,427,123)	2,251,576	(10,175,547)
Credit (charge) for the period		(17,216,035)	45,464	(17,170,571)
Ending balance		(29,643,158)	2,297,040	(27,346,118)

1. Reclassifications for US GAAP purposes

Under Chilean GAAP, the following income and expenses are classified as non-operating expenses whereas under US GAAP they would be classified as operating income and expenses:

	Charge/(credit)
	For the years ended December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Gain on sale of property, plant and equipment	(191,343)	(320,683)	-
Recovery of tax benefits in foreign subsidiaries	-	-	(13,329)
Asset rental	-	-	(133,083)
Indemnities received	-	-	(1,251)
Other non-operating income	(51,834)	(29,414)	(4,483)
Amortization of negative goodwill	-	-	(64,500)
Amortization of goodwill	220,958	221,443	215,486
Staff severance indemnity payments related to restructuring	178,321	-	-
Obsolescence and write-offs of other long-term assets	169,120	584,140	-
Provision for lawsuits settlements	64,360	1,462	-
Adjustment to realizable value of assets held for sale	146,995	315,422	-
Depreciation of inactive assets (Argentina)	757,440	505,028	313,566
Government fines, taxes and interest from foreign subsidiaries	-	392,729	10,352
Indemnity Cost	-	-	287,946
Directors’ profit sharing	-	-	438,750
Disposable asset appraisal cost	-	-	119,796
Allowance for closure and valuation of assets in foreign subsidiaries (Ingewall and Uruguay)	42,749	-	-
Discontinued operations	3,044,197	3,115,984	1,913,872
Deconsolidation Peruplast	-	-	(367,035)
Other non-operating expense	132,171	5,369	2,198
Total	4,513,134	4,791,480	2,718,285

The condensed consolidated statements of income for the years ended December 31 under US GAAP are presented as follows:

	For the years ended December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Sales	167,979,452	213,638,331	184,635,475
Cost of sales	(145,416,829)	(183,722,704)	(164,972,448
Gross Margin	22,562,623	29,915,627	19,663,027
Administrative and selling expenses	(12,520,527)	(13,314,509)	(13,822,017)
Operating (loss) income…  ……	10,042,096	16,601,118	5,841,010
Non-operating income and expenses, net	(9,556,519)	(3,822,366)	(11,889,916)
Income (loss) before income taxes and minority interest  interest	485,577	12,778,752	(6,048,906)
Income taxes	914,670	507,797	4,273,722
Equity in participation on (loss) income of related companies, net	279,795	729,360	1,661,502
Income (loss) before minority interest	1,680,042	14,015,909	(113,682)
Minority interest	(628,547)	(1,160,674)	(1,008,829)
Income (loss) from continuing operations	1,051,495	12,855,235	(1,122,511)
Income (loss) from discontinued operations	14,377,800	23,704,784	22,868,497
Net (loss) income	15,429,295	36,560,019	21,745,986
Other comprehensive income (loss):
Loss on hedge of the foreign currency exposure of net investment in foreign operations	(15,650,807)	2,107,997	(17,216,035)
Cumulative translation adjustment	667,415	(75,016)	45,464
Comprehensive net (loss) income	445,903	38,593,000	4,575,415

Certain reclassifications would be made to the Chilean GAAP balance sheet in order to present Chilean GAAP amounts in accordance with presentation requirements under US GAAP.

The following are summarized balance sheets of the Company using a US GAAP presentation and amounts determined in accordance with US GAAP:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Current assets	245,277,729	94,690,298
Assets of disposal group	-	263,948,515
Property, plant, and equipment	343,405,683	185,011,040
Accumulated depreciation of property, plant and equipment	(191,619,452)	(102,145,508)
Property, plant, and equipment, net	151,786,231	82,865,532
Goodwill, net	22,713,863	2,196,995
Other assets	24,373,728	12,617,875
Total assets	444,151,551	456,319,215
Current liabilities	85,514,741	54,930,290
Liabilities of disposal group	-	94,860,869
Long-term liabilities	86,377,700	38,774,061
Minority interest	11,989,493	11,607,422
Shareholders’ equity	260,269,617	256,146,573
Total Liabilities and Shareholders’ equity	444,151,551	456,319,215

k)  Cash flow information

The statement of cash flow under Chilean GAAP differs in certain aspects from the presentation of the same statement under US GAAP, as follows:

	For the years ended December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Cash provided by operating activities under Chilean GAAP	11,378,524	6,350,889	15,139,568
Cash provided by operating activities under US GAAP	11,378,524	6,350,889	15,139,568
Cash provided by (used in) financing activities under Chilean GAAP	(4,470,632)	15,516,511	941,774
Cash provided by (used in) financing activities under US GAAP	(4,470,632)	15,516,511	941,774
Cash used in investing activities under Chilean GAAP	(12,655,587)	(11,200,876)	(23,528,002)
Purchase of time deposits and marketable securities	(267,700)	(609,571)	(780,804)
Sale of time deposits and marketable securities	-	267,700	601,688
Cash used in investing activities under US GAAP	(12,387,887)	(10,859,005)	(23,348,886)

Under US GAAP, cash and cash equivalents includes all highly liquid debt instruments purchased with a maturity of three months or less. The detail is a follows:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Cash in banks	5,083,958	10,410,066
Securities purchased under agreements to resell	13,150,142	-
Total	18,234,100	10,410,066

l) Segment reporting

The Company provides disclosures in accordance with Statement of Financial Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”) which establishes standards for reporting information about operating segments in annual financial statements as well as related disclosures about products and services and geographic areas. Operating segments are defined as components of an enterprise about which separate financial statement information is available and is evaluated regularly by the chief operating decision maker in making decisions about allocating resources and assessing performance. The Company operates in four business segments including Wire and Cable, Brass Mills, Flexible Packaging and Aluminum Profiles.

The accounting policies of each segment are as described in the Company’s summary of significant accounting policies (See Note 2). The following is a description of the four segments:

Wire and Cable

The Company produces and sells in Chile, Argentina, Peru and Brazil various wire and cable products designed to meet client needs in the telecommunications, energy, mining, construction and manufacturing industries. Wire and Cable products have certain generalized differentiating characteristics, such as single or multiple strand (wire), twisted strands (cable), bare or insulated, type of material used for insulation and magnetic or non-magnetic. This segment is expected to be sold during 2008 and presented as discontinued operations in accordance with SFAS 144 as detailed in Note 32, section 2.m below.

Brass Mills

The Company’s Brass Mills segment manufactures a variety of products used by other industrial companies and the construction sector. These products include pipes, bars, busbars and sheets made of copper, copper alloy, brass, aluminum and aluminum alloy. The Company also manufactures coin blanks and minted coins, which are produced principally from alloys comprised of copper, nickel, aluminum and zinc. While the Company’s Brass Mills facilities are located in Chile and Argentina, a significant portion of revenues are generated from export sales. Exports for the pipes, bars and sheets, or “PBS” division of the Brass Mills may include sales to customers in countries other than Chile or Argentina. Exports for the Coins division of the Brass Mills unit may include sales to customers in any country other than Chile.

Flexible Packaging

The Company’s Flexible Packaging segment manufactures flexible packaging for use in the packaging of large scale consumer products, as well as aluminum foil and plastic wrap, for both commercial and home use. The Company has flexible packaging operations in Chile and Argentina. In Peru, the subsidiary Alusa also has a 50% interest in two Peruvian operations, Peruplast S.A. and Tech Pak S.A. that operate in that business. Financial information of these investees is not considered as part of segment data reviewed by the chief operating decision maker and consequently these investees are not included in the segment information presented below.

Aluminum Profiles

The Company’s aluminum segment manufactures aluminum siding used principally in the construction sector for window frames, door frames, external and internal hardware fixtures and customized goods for the production of industrial durable goods.

The Company presents segment information in accordance with Chilean GAAP. Disclosure of segment data and a reconciliation of the total amounts reported by reportable segments to the consolidated amounts in the financial statements are as follows:

	For the year ended December 31, 2005
	Wire and Cable	Brass Mills	Flexible Packaging	Aluminum	Unallocated	Elimination	Consolidated
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Sales to external customers	232,536,782	87,624,095	48,422,686	32,193,218	-	-	400,776,781
Intersegment sales	29,429,902	12,437,251	-	-	-	(41,867,152)	-
Total revenues	261,966,684	100,061,346	48,422,686	32,193,218	-	(41,867,152)	400,776,781
Interest income	336,129	415,797	23,995	106,932	-	-	882,853
Interest expense	(5,667,218)	(3,292,827)	(435,683)	(867,463)	-	-	(10,263,191)
Income taxes	(2,261,132)	1,811,765	(349,701)	(809,335)	-	-	(1,608,403)
Equity participation in net income of related companies	28,418	-	279,795	-	-	-	308,213
Depreciation expense	6,102,310	2,745,883	2,434,012	1,046,622	-	-	12,328,827
Operating income	21,262,792	2,218,644	3,756,686	3,290,377	-	-	30,528,499
Investments in related companies	2,315,890	-	6,523,243	-	-	-	8,839,133
Identifiable assets at December 31, 2005	202,740,708	69,636,682	62,112,157	40,532,538	2,562,777	-	377,584,862
Capital expenditures	2,756,019	889,465	5,791,938	1,964,489	-	-	11,401,911

	For the year ended December 31, 2006
	Wire and Cable	Brass Mills	Flexible Packaging	Aluminum	Unallocated	Elimination	Consolidated
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Sales to external customers	386,879,612	128,217,340	49,617,306	35,803,686	-	-	600,517,944
Intersegment sales	51,483,582	12,621,496	19,282	-	-	(64,124,359)	-
Total revenues	438,363,194	140,838,836	49,636,588	35,803,686	-	(64,124,359)	600,517,944
Interest income	1,041,323	546,917	60,557	71,958	2,903	-	1,723,658
Interest expense	(7,991,346)	(2,587,790)	(1,103,608)	(567,340)	(4,723)	-	(12,254,807)
Income taxes	(5,773,866)	1,271,837	(587,588)	(393,876)	(106,185)	-	(5,589,678)
Equity participation in net income of related companies	9,846	-	729,360	-	-	-	739,206
Depreciation expense	7,994,587	2,542,616	2,705,901	1,139,046	-	-	14,382,150
Operating income	36,839,999	10,518,127	5,154,239	3,084,035	-	-	55,596,400
Investments in related companies	2,284,106	-	7,311,660	-	-	-	9,595,766
Identifiable assets at December 31, 2006	239,298,977	84,114,535	69,886,028	41,926,895	12,397,242	-	447,623,677
Capital expenditures	4,612,358	552,607	7,100,440	3,128,888	-	-	15,394,293

	For the year ended December 31, 2007
	Wire and Cable	Brass Mills	Flexible Packaging	Aluminum	Unallocated	Elimination	Consolidated
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Sales to external customers	411,846,738	103,032,211	89,000,333	35,131,726	-	-	639,011,008
Intersegment sales	78,209,907	14,971,335	50,875	-	-	(93,232,117)	-
Total revenues	490,056,645	118,003,546	89,051,208	35,131,726	-	(93,232,117)	639,011,008
Interest income	613,512	426,407	207,612	84,856	1,028,349	-	2,360,736
Interest expense	(8,582,920)	(814,817)	(1,969,990)	(600,359)	(868,921)	-	(12,837,007)
Income taxes	(3,991,495)	489,083	(1,433,269)	(184,615)	4,044,789	-	(1,075,507)
Equity participation in net income of related companies	(56,150)	-	-	-	-	-	(56,150)
Depreciation expense	7,245,513	2,490,301	4,756,225	1,293,013	-	-	15,785,052
Operating income	30,539,473	(1,360,723)	8,783,690	2,152,089	-	-	40,114,529
Investments in related companies	2,188,207	-	-	-	-	-	2,188,207
Identifiable assets at December 31, 2007	262,263,399	66,932,311	98,431,943	40,438,993	19,030,684	-	487,097,330
Capital expenditures	9,612,545	949,931	4,178,122	3,986,291	-	-	18,726,889

The following represents sales data for the years ended December 31, 2005, 2006 and 2007 and property, plant and equipment information by geographic area as of December 31, 2006 and 2007:

	Sales			Property, plant and equipment
	2005	2006	2007	2006	2007
	ThCh$	ThCh$	ThCh$	ThCh$	ThCh$
Chile	183,997,259	281,773,634	250,270,144	81,790,016	80,234,507
Brazil	96,105,833	150,193,084	158,952,347	39,494,158	35,072,755
Argentina	57,689,624	42,208,466	47,655,051	25,440,704	21,178,199
Peru	62,984,065	126,342,760	159,943,462	12,171,704	27,184,806
Colombia	-	-	22,190,004	-	3,278,830
Total	400,776,781	600,517,944	639,011,008	158,896,582	166,949,097

m) Discontinued Operations

As described in Note 32 par. q) during 2005 the Company disposed substantially all of its assets of subsidiary Alufoil S.A. and during 2007 was signed a compromise agreement to sell the business unit to the wire and cable company Nexans SA that was accounted for as discontinued operations in accordance with SFAS 144, accordingly, amounts in the reconciliation of net income to US GAAP and the additional disclosure notes required under US GAAP for all periods shown, reflect discontinued accounting.

The following major classes of discontinued combined assets and combined liabilities included in the Madeco S.A. consolidated balance sheet under US GAAP:

	As of December 31,
	2006	2007
	ThCh$	ThCh$
Current assets	130,065,118	164,527,960
Property, plant, and equipment	157,749,312	147,904,145
Accumulated depreciation of property, plant and equipment	(91,650,693)	(83,550,412)
Property, plant, and equipment, net	66,098,619	64,353,733
Goodwill, net	20,406,839	18,866,391
Other assets	6,421,934	16,200,431
Total assets	222,992,510	263,948,515
Current liabilities	52,271,915	66,540,700
Long-term liabilities	30,732,006	25,501,707
Minority interest	1,401,223	2,818,462
Shareholders’ equity	138,587,366	169,087,646
Total liabilities and shareholders’ equity	222,992,510	263,948,515

The following major classes of revenues and expenses are included in the Madeco S.A. consolidated income statement under US GAAP, presented net of taxes as discontinued operations:

	For the years ended December 31,
	2005	2006	2007
	ThCh$	ThCh$	ThCh$
Sales	232,797,332	386,879,613	411,846,738
Costs of sales	(199,783,200)	(332,384,583)	(363,446,316)
Gross Margin	33,014,132	54,495,030	48,400,422
Administrative and selling expenses	(14,177,120)	(17,819,149)	(19,332,589)
Operating income…  ……	18,837,012	36,675,881	29,067,833
Non-operating income and expenses, net	(2,438,896)	(6,965,296)	(2,246,861)
Net income before income taxes and minority  interest	16,398,116	29,710,585	26,820,972
Income taxes	(1,815,682)	(5,468,012)	(3,191,563)
Equity in participation on income of related companies...	28,418	9,846	(56,150)
Income before minority interest	14,610,852	24,252,419	23,573,259
Minority interest	(233,052)	(547,635)	(704,762)
Net income from discontinued operations	14,377,800	23,704,784	22,868,497

n)  Recent accounting pronouncements

(i) In September 2006, the FASB issued Statement of Financial Accounting Standards No, 157, "Fair Value Measurements". This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact that will result from the adoption of SFAS 157.

(ii) In February 2007, the FASB issued Statement of Financial Accounting Standards No, 159, "The Fair Value Option for Financial Assets and Financial Liabilities". SFAS No. 159 permits measurement of recognized financial assets and liabilities at fair value with some exceptions, Changes in the fair value of items for which the fair value option is elected should be recognized in income or loss, The election to measure eligible items at fair value is irrevocable and can only be made at defined election dates or events, generally on an instrument by instrument basis. Items for which the fair value option is elected should be separately presented or be parenthetically disclosed in the statement of financial position. SFAS No, 159 also requires significant new disclosures that apply for interim and annual financial statements. SFAS No. 159 will be effective for fiscal years beginning after November 15, 2007 with earlier adoption permitted, if certain con ditions are met. The Company does not expect the result of adopting SFAS No. 159 to be material to the consolidated financial statements.

(iii)  In December 2007, the FASB issued SFAS No. 141 (revised 2007) “Business Combinations”. SFAS 141 (R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008. Earlier adoption is prohibited. SFAS 141 (R) will be applied to future business combinations, if any, consummated by the Company.

(iv) In December 2007, the FASB issued SFAS No. 160 “Noncontrolling interests in Consolidated Financial Statements – an amendment of ARB No. 51”. SFAS No. 160 establishes accounting and reporting standards that require that the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent's equity; the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income; and changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company is in the process of eval uating the financial impact of adopting SFAS 160.

(v) In March 2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities”. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is in the process of evaluating the financial impact of adopting SFAS 161.

(vi) On August 28, 2007, the SVS issued an official announcement with respect to the adoption of International Financial Reporting Standards (IFRS) in Chile. According to this announcement, the Company will have to adopt IFRS as of January 1, 2009 or 2010. The Company is in the process of defining a convergence plan, and is currently evaluating the impacts that the application of IFRS will have on the financial statements.

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EX-13

 
Exhibit 13.1
 

SECTION 906 - Certification of Chief Executive Officer

I, Tiberio Dall'Olio, the Chief Executive Officer of Madeco S.A. (the "Company"), hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

1. the Company's annual report on Form 20-F for the year ended December 31, 2007, to which this statement is filed as an exhibit (the "Report"), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 30, 2008

/s/ Tiberio Dall'Olio
Tiberio Dall'Olio
Chief Executive Officer

EX-13

 
Exhibit 13.2
 

SECTION 906 - Certification of Chief Financial Officer

I, Cristian Montes Layahe, the Chief Financial Officer of Madeco S.A. (the "Company"), hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

1. the Company's annual report on Form 20-F for the year ended December 31, 2007, to which this statement is filed as an exhibit (the "Report"), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 30, 2008

/s/ Cristian Montes Lahaye
Cristian Montes Lahaye
Chief Financial Officer

EX-1

Exhibit 1.1
 

MADECO S.A. BYLAWS

Madeco S.A. is an open stock corporation constituted by a Public Document dated April 3, 1944, granted by Santiago Notary, Mr. Jorge Gaete Rojas, a copy of which is recorded in Folio 1,099 No. 946 of the Santiago Registry of Commerce of 1944, and published in the Official Daily on May 4, 1944. Its existence is authorized by Ministry of Finance Decree No. 1740 of April 26, 1944, recorded in Folio 1,105 No. 947 of the Santiago Registry of Commerce of 1944, and published in the Official Daily on May 4, 1944, and recorded in the Superintendencia de Valores y Seguros (Superintendency of Securities and Insurance, or "SVS") at No. 251 on May 18, 2007. The most recent amendment to the Bylaws, which is included in this revised text, evidences the public document dated November 15, 2002, granted by Santiago Notary, Mr. Sergio Henríquez Silva, a copy of which is recorded in Folio 20,969 No. 15,333 of the Santiago Registry of Commerce of 2007, with a note at the margin of the original corporate entry, and published in the Official Daily on May 28, 2007.

TITLE ONE

NAME, DOMICILE, TERM AND PURPOSE OF THE CORPORATION

ARTICLE ONE: An open stock corporation is hereby constituted under the name "MADECO S.A.", which shall be governed according to the provisions of these bylaws, and where silent herein, by the rules of Law No. 18,046, of October 22, 1981, and further applicable legal or regulatory provisions and any future rulings.

ARTICLE TWO: The domicile of the Corporation is the city of Santiago, although agencies, branches, offices, etc., may be established in other cities of the Republic or abroad by an agreement of the Board of Directors.

ARTICLE THREE: The term of the Corporation shall be indefinite.

ARTICLE FOUR: The purpose of the Corporation shall be to transform copper and other metals and alloys into sheets, plates, bands, pipes, bars, structural shapes, cables and other manufactured products; the manufacture, marketing, import and export, for itself or on behalf of others, of these products and any supplemental or accessory products; to conduct any type of activity related to telecommunications in any form; to perform services related to the products and activities referred to above and to act as a representative. Likewise, its purpose shall be the exploration and exploitation of mineral and ore deposits of any nature; to file, grant and establish claims and mining rights to all kinds of mineral substances; to develop mineral and ore deposits and beds, to process any products extracted therefrom and carry out any acts with respect to such claims and mining rights. Its purpose shall also be to cultivate agricultural fields and industrialize and commercialize any typ e of product evolving from the agriculture and farming industry. In addition, its purpose shall be to manufacture and market all types of containers and packaging and provide services in this area.

TITLE TWO

CORPORATE CAPITAL AND STOCK

ARTICLE FIVE: The capital of the Corporation is $218,510,860,904.- (Chilean Pesos) divided into 5,661,192,887 registered shares with no par value. Notwithstanding the above, in accordance Article 10 of Law No. 18,046, the capital and the value of the shares are understood to carry full rights subject to approval of the balance sheet for each fiscal year.

ARTICLE SIX: The shares shall be paid in cash or other assets and as to subscription, payment, rights and obligations they shall be governed by the rules of Law No. 18,046. A shareholder in default may be subject to legal action either by ordinary proceedings or executory action, as the case may be.

ARTICLE SEVEN: The share certificates shall be registered, and the form, issuance, delivery, replacement, exchange, transfer, transmittal and cancellation of the certificates shall be subject to the rules of Law No. 18,046, the Chilean Corporations Act and its amendments. Shareholders have the right to withdraw from the Corporation following payment for the value of their shares in the cases and pursuant to the rules established in Articles 69 and numerically subsequent provisions of Law No. 18,046.

TITLE THREE

ADMINISTRATION OF THE CORPORATION

ARTICLE EIGHT: The Corporation shall be administered by a Board of Directors, without prejudice to the powers held by the Annual Shareholders' Meeting.

ARTICLE NINE: The Board of Directors shall be composed of seven members elected by the Annual Shareholders' Meeting.

ARTICLE TEN: The Directors shall hold office for three years and may be reelected indefinitely, on each such occasion totally reelecting the Board of Directors. The Directors shall continue to hold office following expiration of their terms if the Annual Shareholders' Meeting called to replace or reelect them fails to meet, in which case the Board of Directors shall convene a shareholders' meeting within a period of 30 days to make such appointments.

ARTICLE ELEVEN: It is not necessary to be a shareholder in order to be elected a Director.

ARTICLE TWELVE: Each time an election of the Board of Directors occurs at an Annual Shareholders' Meeting, a President shall be elected from among its members. Likewise, a Director shall be designated to act for the President in his absence or inability, and shall hold the title of Vice President.

ARTICLE THIRTEEN: Each Director shall receive as remuneration for his services the amount fixed annually by the Annual Shareholders' Meeting. Any remuneration which the Directors receive, in whatever capacity it is received, shall be reported to the Annual Shareholders' Meeting, and shall appear in the Annual Report in a detailed, separate form.

ARTICLE FOURTEEN: Meetings of the Board of Directors shall be ordinary or extraordinary. Ordinary meetings shall be held on dates predetermined by the Board of Directors. Extraordinary meetings shall be held when expressly called by the President himself or at the request of one or more Directors, subject to approval of the need for such meeting by the President, except in cases when requested by a majority of the Directors in office. Pursuant to law, the Board of Directors shall also meet when required by resolution of the SVS. Ordinary meetings of the Board of Directors shall be held at least once a month. The notice to the Directors, whether for ordinary or extraordinary meetings, shall be made by letter sent to the address on file with the Corporation.

ARTICLE FIFTEEN: Meetings of the Board of Directors shall be convened when attended by a majority of the members in office, as a minimum, and resolutions shall be passed by majority vote of the Directors present. In the event of a tie, the President or the person acting in his place shall cast the deciding vote.

ARTICLE SIXTEEN: The Board of Directors shall have the fullest possible powers to act in name and on behalf of the Corporation and to carry out transactions related to the purposes for which the Corporation was constituted, to represent the Corporation judicially and extra-judicially, and with respect to matters regarding the performance of the corporate purpose which do not require accreditation of third parties, it is vested with all the powers of administration and disposition which the law or these Bylaws do not delegate exclusively to the Annual Shareholders' Meeting, including those acts or contracts with respect to which the law requires special powers. The Board of Directors may delegate part of its powers to senior managers, managers or attorneys of the Corporation, to one director or a committee of directors, and for purposes that are specifically designated for other persons. The Board of Directors shall likewise: (a) give the shareholders and the general p ublic sufficient, reliable and timely information related to essential facts of the Corporation and its business at the time such occur or come to their knowledge, and likewise, report the legal, economic and financial condition of the Corporation; (b) appoint, remove and fix the remuneration and the powers of the Chief Executive Officer, senior managers and managers and other employees or persons whose services are required by the Corporation. The Board of Directors may grant the Chief Executive Officer and other employees of the Corporation any share or commissions it deems advisable in the net profits, sales, production, etc.; (c) designate a person to perform the office of Secretary of the Board of Directors and the Annual Shareholders' Meeting and fix remuneration for these services. This designation may become the responsibility of the Chief Executive Officer of the Corporation. (d) acquire for the Corporation shares of its own issuing, pursuant to the provisions of Article 27 and any other rele vant provisions of Law No. 18,046; (e) decide to convene the Annual Shareholders' Meeting in the cases provided under Article 58 of Law No. 18,046; (f) present the Annual Shareholder' Meeting each year with the Annual Report and the Balance Sheet of the corporate activities and an inventory of stock, and propose the distribution of profits. Notwithstanding, the Board of Directors may decide to distribute provisional dividends during the fiscal year which shall be drawn from the profits for that year, provided that there are no aggregate losses and that the respective Directors who concur with this arrangement assume personal responsibility for such action.

ARTICLE SEVENTEEN: Without limiting the powers conferred upon the Chief Executive Officer, the President of the Board of Directors of the Corporation or the person designated to act for him/her will be authorized to sign in representation of the Corporation all public and private legal instruments which are necessary to perfect any contractual agreement approved by the Board of Directors, whether or not formalized. The above shall not restrict the power of the Board of Directors to appoint in special cases another person for these purposes or to assemble the Directors who have attended the respective meeting to grant such powers. In the instrument that is granted, there shall be inserted the relevant part of the minutes of the meeting of the Board of Directors at which the agreement to enter into such contract that requires their approval was adopted, as provided in these Bylaws, by law or by the Chilean Corporations Act.

ARTICLE EIGHTEEN: The Directors shall cease to hold office for any incompatibility referred to in Articles 35 and 36 of Law No. 18,046 and other relevant legal provisions, for not attending three consecutive meetings for causes not deemed sufficient by the Board of Directors, for leaving the country for more than three months, death, unexpected legal incapacity, disability or resignation. Notwithstanding, Directors whose absence results from a specific mission entrusted to them by the Corporation shall continue to hold office. In the event of a vacancy by a Director, the Corporation shall proceed with a total reelection of the Board of Directors at the next Annual Shareholders' Meeting, and a substitute Director shall be designated in the interim.

ARTICLE NINETEEN: The form of recording the deliberations and resolutions of the Board of Directors shall be subject to the rules contained in Article 48 of Law No. 18,046 and any other applicable provisions.

ARTICLE TWENTY: The Directors shall be subject to the obligations, responsibilities and restrictions, and shall enjoy the rights of all applicable legal provisions established in Law No. 18,046, and shall be personally responsible for all acts they exercise in the performance of office. A Director who wishes to avoid responsibility for an act or agreement of the Board of Directors shall evidence his opposition in the minutes of the meeting and such act shall be brought to the attention of the Annual Shareholders' Meeting, at its next meeting, by the President of the Corporation.

TITLE FOUR

THE PRESIDENT

ARTICLE TWENTY-ONE: The President of the Corporation shall have, in addition to the special powers conferred by these Bylaws, the following powers and obligations: (a) to preside at meetings of the Board of Directors and the Annual Shareholders' Meeting; (b) to ensure that the Bylaws, the Chilean Corporations Act and resolutions of the Board of Directors are strictly complied with; (c) to call meetings of the Board of Directors; (d) to propose to the Board of Directors any measures needed to develop the business of the Corporation and office rules in the various service branches; (e) to reprimand employees who fail to comply with their duties and in extreme cases recommend dismissal to the Board of Directors; and (f) to sign the Annual Report and the notes and resolutions passed by the Annual Shareholders' Meeting and the Board of Directors.

ARTICLE TWENTY-TWO: In the event of absence or inability by the President of the Corporation, the Vice President shall assume the duties of President, and in the Vice President's absence such duties shall be performed by a Director designated for this purpose by the Board of Directors.

TITLE FIVE

THE CHIEF EXECUTIVE OFFICER

ARTICLE TWENTY-THREE: The Corporation shall have a Chief Executive Officer whose duties shall not be compatible with those of a Director. The Chief Executive Officer shall be an employee of the Corporation duly appointed by the Board of Directors and shall act with the power and authority given to him by special mandate. The Board of Directors may also appoint marketing and technical managers at the Corporation's principal place of business, its branches and agencies.

ARTICLE TWENTY-FOUR: The Chief Executive Officer shall be responsible for: (a) organizing the services and offices of the Corporation, including its accounting practices, and enforcement of the Bylaws and the Chilean Corporations Act; (b) executing the resolutions of the Board of Directors and performing the office of Secretary of the Board of Directors and the Annual Shareholders' Meeting in any period during which the Board of Directors has not appointed another person for this duty; (c) being the legal representation of the Corporation under the authority granted in both sections of Article 7 of the Code of Civil Procedure; and (d) maintaining the custody of the books and corporate registers and assuring that these are maintained with the regularity required by the applicable regulations. He shall likewise be responsible for compliance with the provisions established in Article 7 of Law No. 18,046.

ARTICLE TWENTY-FIVE: The Chief Executive Officer shall have the right to speak at meetings of the Board of Directors and shall respond along with members of the Board of Directors to charges of illegal or prejudicial acts when he has not clearly evidenced his opinion to the contrary in the minutes. The Chief Executive Officer shall be held responsible by the Corporation for faithful compliance with the tax, pension and labor laws and other legal provisions and regulations applicable to corporations. Any fines or sanctions incurred by the Corporation for violation of such laws and regulations shall be attributed to the Chief Executive Officer unless it is determined that he is not at fault. The senior managers and persons acting on their behalf shall be subject to the obligations, responsibilities and restrictions which Law No. 18,046 imposes upon Directors with respect to performance of their responsibilities.

TITLE SIX

SHAREHOLDERS' MEETING

ARTICLE TWENTY-SIX: The Shareholders' Meetings shall be either Annual or Extraordinary. Annual meetings shall be convened once a year during the months of February, March or April to resolve the following matters: ONE: Analysis of the financial condition of the Corporation and reports of the Independent External Auditors and Accounts Examiners, and approval or rejection of the Annual Report, the balance sheet and the financial statements presented by the administrators of the Corporation; TWO: Distribution of earnings for the fiscal year and, in particular, distribution of dividends; THREE: Election or reelection of the members of the Board of Directors and administrative auditors; FOUR: Fixing remuneration for the Board of Directors, selecting a newspaper to publish calls for meetings and, in general, resolving any other matters which it is empowered to resolve under these Bylaws or the laws of Annual Shareholders' Meetings, and any matters of corporate interest which are n ot specifically delegated to Extraordinary Shareholders' Meetings. Extraordinary Shareholders' Meetings shall be convened at any time deemed necessary in the Corporation's interest and in particular when resolving the following special matters: ONE: Dissolution of the Corporation; TWO: Reorganization, merger or restructuring of the Corporation and amendment of its Bylaws; THREE: Issuance of notes and debentures convertible into shares; FOUR: Transfer or disposal of fixed assets and debts of the Corporation or its total assets; FIVE: Granting collateral or personal guarantees in pledge of obligations of third parties, except with respect to corporate affiliates, in which case approval by the Board of Directors shall suffice; SIX: Any other matters which by law or under these Bylaws are within the authority or competency of Extraordinary Shareholders' Meetings.

ARTICLE TWENTY-SEVEN: Matters involving dissolution, reorganization, merger or restructuring of the Corporation, amendment of Bylaws, issuance of notes or debentures convertible into shares and transfer of fixed assets, debt or total assets of the Corporation may only be resolved at Extraordinary Shareholders' Meetings in the presence of a Notary.

ARTICLE TWENTY-EIGHT: The call for a shareholders' meeting shall be made by a conspicuous public notice published at least three times on different days in the newspaper of the Corporation's principal place of business as determined by the shareholders' meeting or, in the absence of such determination or in the event of suspension of circulation or closing of the designated newspaper, published in the Diario Oficial in accordance with the time, form and conditions established by the Chilean Corporations Act. Further, the call shall be sent by mail to each shareholder at least fifteen days in advance of the date of the meeting, and shall contain a reference to the agenda of the meeting.

ARTICLE TWENTY-NINE: A quorum at a shareholders' meeting on first call will consist of the absolute majority of issued stock entitled to vote, i.e. at least 50% plus one of the issued stock entitled to vote, unless a higher percentage is required by law or these Bylaws to be present. If the meeting is adjourned for lack of quorum, the subsequent meeting will be deemed to have a quorum regardless of the number of shares entitled to vote that attend. The second call for meeting shall be convened within 45 days following the date set for the meeting which was not held. Holders of share certificates recorded in the Share Registry five days prior to the date of the respective meeting to be convened shall have the right to speak and vote at such meeting.

ARTICLE THIRTY: Resolutions of the shareholders' meetings shall be adopted by absolute majority vote of the shares present or represented having voting rights. Resolutions related to the following matters may be constituted and approved by affirmative vote of two-thirds of the shares issued with voting rights: ONE: Reorganization or restructuring of the Corporation or merger with another corporation; TWO: Amendment of the duration of the Corporation; THREE: Early dissolution of the Corporation; FOUR: Changing the location of the corporate headquarters; FIVE: Reduction in capital stock; SIX: Approval of equity contributions and appraisal of non-monetary assets; SEVEN: Amendment of the powers reserved for the shareholders' meetings or of the limitations of the authority of the Board of Directors; EIGHT: Reduction in the number of members of the Board of Directors; NINE: Transfer or disposal of fixed assets, debt or total assets of the Corporation; TEN: Form of distribut ion of corporate earnings.

ARTICLE THIRTY-ONE: At all elections held by the shareholders' meetings, the voting procedure shall be one vote per share held or represented, and votes may be consolidated in favor of one person or distributed in any manner deemed advisable; the person who receives the highest number of votes in a single voting shall be declared elected and so forth until completion of the number of persons to be elected. The above shall not prevent the shareholders present with voting rights to unanimously agree to omit the ballot voting procedure and proceed with a voice vote of yeas or nays.

ARTICLE THIRTY-TWO: The deliberations and resolutions of the shareholder's meeting shall be recorded in a special book of minutes maintained by the titular Secretary or by the Chief Executive Officer, as the case may be, in compliance with the provisions of the law and the Chilean Corporations Act.

TITLE SEVEN

ADMINISTRATIVE AUDITORS

ARTICLE THIRTY-THREE: Each year the Annual Shareholders' Meeting shall designate independent external auditors to review the Corporation's accounting procedures, inventory, balance sheets and other financial statements, and the auditors shall send a written report containing the results of their audit to the next Annual Shareholders' Meeting. The auditors shall have the right to speak at meetings and shall have the duties and powers established in the Chilean Corporations Act.

ARTICLE THIRTY-FOUR: The Annual Shareholders' Meeting shall also appoint two persons who are shareholders to perform the duties of accounts examiners, overseeing the corporation's business transactions and operations and reviewing and inspecting the performance of the administrators.

ARTICLE THIRTY-FIVE: The Accounts Examiners may be compensated for their duties, and the Annual Shareholders' Meeting shall determine such amounts, if any.

TITLE EIGHT

ANNUAL REPORT, BALANCE SHEET AND DISTRIBUTION OF PROFITS

ARTICLE THIRTY-SIX: Each year on the 31st day of December, a General Balance Sheet shall be prepared which the Board of Directors shall present for consideration at the Annual Shareholders' Meeting along with the Annual Report, which together shall set forth the financial condition of the Corporation for the fiscal year, accompanied by a Profit and Loss Statement and the report of the independent external auditors. In the event that shareholders representing ten percent or more of the issued shares formulate comments and/or proposals related to the course of the corporation's business and, provided they so request, a faithful summary of their comments and proposals shall be included as an annex to the Annual Report. The General Balance Sheet and a duly audited Profit and Loss Statement shall be published in a daily newspaper of major circulation in the Corporation's principal place of business not less than ten nor more than twenty days after the date of the Annual Sharehold ers' Meeting.

ARTICLE THIRTY-SEVEN: The net profits reflected on each balance sheet shall be distributed in accordance with the following procedure: (a) except as otherwise agreed and unanimously adopted by the issued shares, an amount equal to not less than 30 percent of the net profits to be distributed as a dividend to shareholders in cash and pro rata according to the number of shares held; (b) the amount of the net profits after the payment of dividends may be used to form reserve funds which may at any time be capitalized following amendment of the Corporate Bylaws, or used to pay dividends in future fiscal years. The minimum obligatory dividend shall be paid by the Corporation in accordance with the provisions of the first section of Article 81 of Law No. 18,046. Additional dividends which the Annual Shareholders' Meeting agrees to pay shall be distributed within the fiscal year and on the date fixed by the Annual Shareholders' Meeting or the Board of Directors, if authorized to su ch effect. The Annual Shareholders' Meeting or the Board of Directors, as the case may be, shall set the date on which the agreed dividends shall be paid, and shareholders qualifying under the final part of Article 81 of Law No. 18,046 shall be entitled to such dividends.

TITLE NINE

DISSOLUTION AND LIQUIDATION

ARTICLE THIRTY-EIGHT: The Corporation shall necessarily be dissolved and liquidated for the legal reasons indicated in Article 103 of Law No. 18,046 insofar as they are applicable.

ARTICLE THIRTY-NINE: The liquidation shall be carried out by three persons selected by the shareholders' meeting. The liquidators shall perform their duties for a term of three years, and may be reelected only once. The Liquidation Commission shall appoint a President from among its members who shall represent it judicially and extra-judicially.

ARTICLE FORTY: The liquidators shall act on any given matter when at least two members are in agreement. The Liquidation Commission shall be vested with the powers granted by the shareholders' meeting, but in all cases, unless the shareholders' meeting shall limit such powers, they shall be understood to represent the Corporation judicially and extra-judicially, and shall be invested with such full powers of administration and disposition which the law or the Bylaws do not establish as belonging exclusively to the shareholders' meeting, and the Liquidation Commission may delegate part of its powers to one or more liquidators or to other persons for certain reasons.

ARTICLE FORTY-ONE: During the liquidation, the Annual Shareholders' Meeting shall continue to meet and the liquidators shall provide information related to the progress of the liquidation at such meetings; the Annual Shareholders' Meeting and the liquidators shall agree upon measures needed to conclude the liquidation.

ARTICLE FORTY-TWO: The duties of the liquidators shall be remunerated, and the Annual Shareholders' Meeting shall determine such remuneration.

ARTICLE FORTY-THREE: A liquidator who dies, resigns, is incapacitated for legal reasons or is declared bankrupt shall automatically cease his duties. The shareholders' meeting shall fill the vacancy thereby produced, and may likewise revoke at any time the mandate of the liquidators it has appointed.

ARTICLE FORTY-FOUR: If all shares are held by one person, it shall not be necessary to appoint liquidators. In such case, the Board of Directors shall solicit the approval of the SVS to permit the transfer or conveyance which shall determine the dissolution of the Corporation and conduct any further publicity procedures required by law.

TITLE TEN

ARBITRATION

ARTICLE FORTY-FIVE: The differences which arise among shareholders in their capacity as such, or between shareholders and the Corporation or its administrators, either during the term of the Corporation or during its liquidation, shall be resolved by an arbitrator appointed by the Higher Civil Court of First Instance of Santiago who shall be on duty at the time of the appointment. The decision of the arbitrator shall not be subject to appeal. Notwithstanding, the recourse of cassation or reversal of a sentence may be applied in the form and for causes applicable to this type of arbitration which are provided by law. Notwithstanding the preceding, in case of conflict, the plaintiff may refuse to recognize the arbitrator's competency and submit the matter for decision by the Ordinary Legal Courts.

TITLE ELEVEN

TEMPORARY PROVISIONS

TRANSITORY ARTICLE ONE: With respect to permanent Article Thirteen of the Bylaws and unless agreed otherwise, remuneration for the Board of Directors shall be as follows: each Director shall receive as remuneration for his services an allowance of five Unidades Tributarias monthly for each meeting of the Board of Directors he attends. In addition, the Board of Directors shall receive five percent of the net profits reflected in the Annual Balance Sheet which shall be distributed in equal parts or shares among the Directors in office. With respect to the applicability of this Article, the Annual Shareholders' Meeting shall make an annual declaration of the remuneration fixed for each period.

TRANSITORY ARTICLE TWO: The capital stock increase of TWO BILLION ONE HUNDRED NINETY-NINE MILLION SIX HUNDRED EIGHTY THOUSAND CHILEAN PESOS ($2,199,680,000 Chilean Pesos) to THREE BILLION EIGHT HUNDRED FIFTEEN MILLION FIVE HUNDRED SIXTY THOUSAND CHILEAN PESOS ($3,815,560,000 Chilean Pesos), approved by the Extraordinary Shareholders' Meeting on June 11, 1986, shall be subscribed and fully paid in the following manner: (a) As provided in Article 10 of Law No. 18,046, after approval of the balance sheet for fiscal year 1984 by the Annual Shareholders' Meeting, the capital stock was legally increased in the amount of $488,320,000 Chilean Pesos as a result of the proportional capitalizing of the equity capital revaluation. In this way, the capital stock remained at $2,688,000,000 Chilean Pesos divided into 28,000,000 shares, par value $96 Chilean Pesos per share, fully subscribed and paid. Applying Article 6 of the Chilean Corporations Act of 1982, by carrying the par value of t he shares to two decimals, there remained an excess of $8,960 Chilean pesos. (b) In accordance with the same legal provision, when the Annual Shareholders' Meeting approved the Balance Sheet for fiscal year 1985, the capital stock was legally increased in the amount of $712,320,000 Chilean Pesos, including the excess referred to in subsection (a) above, due to the distribution of equity capital revaluation. Consequently, the capital stock remained at $3,400,320,000 Chilean Pesos divided into 28,000,000 shares with a par value of $121.44 Chilean Pesos each, fully subscribed and paid. By rounding the par value of the shares to two decimals, there remains an excess of $11,334 Chilean Pesos which will increase the revaluation of the capital for the coming fiscal year, pursuant to the provisions of Section Two of Article 6 of the Chilean Corporations Act of 1982. (c) To complete the amount of the capital increase to $3,815,560,000 Chilean Pesos, it was agreed to transfer to capital the following amounts from the indicated funds as reflected in the Balance Sheet at December 31, 1985: (One) The amount of $87,861 Chilean Pesos derived from the Reserve Fund for Future Capital Increases. (Two) The total amount of the Reserve Fund for Future Capitalizations, in effect, the amount of $415,152,139 Chilean Pesos. (d) Consequently, based on the preceding capitalizations, the capital stock now remains at $3,815,560,000 Chilean Pesos divided by 28,000,000 shares, par value $136.27 Chilean Pesos per share, fully subscribed and paid. (e) The capital increase, as indicated, shall be passed on to the shareholders through an increase in the par value of the 28,000,000 issued and outstanding shares of $78.56 Chilean Pesos to $136.27 Chilean Pesos per share, as provided in the Bylaws. (f) The Board of Directors of the Corporation is authorized to carry out the agreed capital increase by effecting the capitalizations referred to above, which shall be fully implemented within a period of three years from the date of this agreement. The Board of Directors shall also be authorized to consider and resolve any matters not provided under this Article which are necessary to make the capital increase effective.

TRANSITORY ARTICLE THREE: ONE: By agreement of the Extraordinary Shareholders' Meeting on June 11, 1986, the capital stock was increased to $3,815,560,000 Chilean Pesos, divided into 28,000,000 shares with a par value of $136.27 Chilean Pesos per share, fully subscribed and paid in the manner described in Transitory Article Two of these Bylaws. By application of Article 10 of Law No. 18.046, following approval by the Annual Shareholders' Meeting with respect to the Balance Sheets of the Corporation for the years 1986, 1987 and 1988, as a result of the proportional capitalizing of the revaluation of its equity capital ordered by such legal provision, the capital stock of the Corporation was legally increased in the amount of $1,611,400,000 Chilean Pesos, remaining fixed currently at the amount of $5,426,960,000 Chilean Pesos divided into 28,000,000 shares with a par value of $193.82 Chilean Pesos per share. TWO: In order to effect the agreements adopted by the Extraordinary S hareholders' Meeting held on April 25, 1989, the number of shares in which to divide the capital stock was increased from 28,000,000 shares to 280,000,000 shares in a single series and the par value of the shares was canceled, enabling the increase to be passed on to the shareholders through an exchange of the certificates of the current issuance, which shall have no value, for new certificates representing shares without par value at the rate of 10 new shares for each share of the previous issuance held by the shareholder. The Board of Directors shall be authorized to proceed to exchange the shares and its certificates within a period of 90 days from the date of this meeting. For such purpose, a press release shall be published in the same daily newspaper which publishes calls for shareholders' meetings announcing the specific date from which the certificate exchange shall occur. Shareholders who are registered in the Shareholder Registry five business days prior to the date set by the Board of Directors to effect the exchange shall have the right to participate in the exchange to the extent of the number of shares held at that time. Likewise, the Board of Directors shall be authorized to approve and resolve any matters not provided under this Article which are necessary or conducive to effecting this amendment to the Bylaws.

TRANSITORY ARTICLE FOUR: The increase in capital stock of the Corporation agreed upon by the Extraordinary Shareholders' Meeting on March 2, 1993, shall be effected, subscribed and paid in the following manner:

ONE: It is hereby established, in order to update the Corporate Bylaws, that in accordance with the provisions of Article 10 of Law No. 18,046, following approval by the respective Annual Shareholders' Meeting of the Balance Sheets of the Corporation for the fiscal years 1989, 1990 and 1991, that the capital stock established in the form described in Transitory Article Three above was legally increased by the amount of $4,591,136,803 Chilean Pesos as a result of the proportional capitalization of the equity capital revaluation provided under the above regulations. Accordingly, on the date of convening this Extraordinary Shareholders' Meeting the capital stock shall be fixed by operation of law at the amount of $10,018,096,803 Chilean Pesos, divided into 280,000,000 registered shares without par value, fully subscribed and paid.

TWO: To increase the capital stock from the figure appearing in Paragraph One above to the amount of $38,893,096,803 Chilean Pesos, the Extraordinary Shareholders' Meeting resolved to issue 57,750,000 new shares payable without par value, with a price or placement value of $500 Chilean Pesos per share, and the Board of Directors shall be authorized to issue such shares in one or various stages, at such value or at a higher value. Payment of these shares shall be made in cash.

Such shares shall be offered on a preferred basis to the Shareholders pro rata in accordance with the number of shares recorded in their names in the Shareholder Registry on the fifth business day prior to the date of publication of the subscription option.

Shares which were not subscribed within the deadline by the Shareholders having rights thereto, shares which were products of fractions produced pro rata by the Shareholders and shares corresponding to waived options by the Shareholders having subscription rights, may be offered to third parties by the Board of Directors in the form and conditions established by law and the Chilean Corporations Act. It was resolved to evidence on record that it is the intention of the Board of Directors to place an offering to third parties on the international market, in the form of American Depositary Receipts (ADRs), of that portion of the capital increase which was not subscribed by the Shareholders, as indicated above.

In no event shall a placement offering to third parties be made on conditions or prices more favorable than the preferred offer to the Shareholders having rights to such shares.

The Board of Directors of the Corporation is fully authorized to determine the time, manner, conditions and other terms of this issuance of shares within the framework of the prior agreements and in compliance with all legal rules and regulations governing this matter which may be pertinent and applicable to this capital increase and/or not provided under this Transitory Article Four.

The total capital increase referred to in this temporary provision shall be fully subscribed and paid within a period of one year from the date of this agreement, which date is March 2, 1993.

TRANSITORY ARTICLE FIVE: The capital increase of the Corporation resolved by the Extraordinary Shareholders' Meeting on April 29, 1997, shall be effected, announced and paid in the following manner:

ONE: It is hereby established, in order to update the Corporate Bylaws, that in accordance with the provisions of Article 10 of Law No. 18,046, following approval by the respective Annual Shareholders' Meeting of the Balance Sheets of the Corporation for the fiscal years 1992, 1993, 1994, 1995 and 1996, that the capital stock established in the form described in Transitory Article Four above was legally increased by the amount of $17,581,236,644 Chilean Pesos as a result of the capitalization in proportion to the equity capital revaluation provided under the above regulation. Accordingly, on the date of convening this Extraordinary Shareholders' Meeting the capital stock shall be fixed by operation of law at the amount of $56,474,333,447 Chilean Pesos, divided into 337,750,000 registered shares without par value, fully subscribed and paid.

TWO: To increase the capital stock from the figure appearing in Paragraph One above to the amount of $104,724,333,447 Chilean Pesos, the Extraordinary Shareholders' Meeting resolved to issue 48,250,000 new shares payable without par value, with a price or placement value of $1,000 Chilean Pesos per share, and the Board of Directors shall be authorized to issue such shares in one or various stages, at such value or at a higher value. Payment of these shares shall be made in cash.

Such shares shall be offered on a preferred basis to the Shareholders pro rata in accordance with the number of shares recorded in their names in the Shareholder Registry on the fifth business day prior to the date of publication of the subscription option.

Shares which were not subscribed within the deadline by the Shareholders having rights thereto, shares which were products of fractions produced pro rata by the Shareholders and shares corresponding to waived options by the Shareholders having subscription rights, may be offered to third parties by the Board of Directors in the form and conditions established by law and the Chilean Corporations Act.

In no event shall a placement offering to third parties be made on conditions or prices more favorable than the preferred offer to the Shareholders having rights to such shares.

The Board of Directors of the Corporation is fully authorized to determine the time, manner, conditions and other terms of this issuance of shares within the framework of the prior agreements and in compliance with all legal rules and regulations governing this matter which may be pertinent and applicable to this capital increase and/or not provided under this Transitory Article Five.

The total capital increase referred to in this temporary provision shall be fully subscribed and paid within a period of three years from the date of this agreement, which date is April 29, 1997.

TRANSITORY ARTICLE SIX: The increase in the number of Directors of the Corporation, from six to seven, resolved by the Extraordinary Shareholders' Meeting on April 24, 2001, shall become effective as of the same date in order for the Annual Shareholders' Meeting, which shall be convened immediately following this meeting, to proceed to elect a Board of Directors composed of seven members. The above shall be effected without prejudice to the subsequent complete legalization of this amendment to the Bylaws in the manner and within the time period established by applicable law.

TRANSITORY ARTICLE SEVEN: The capital increase of the Corporation resolved by the Extraordinary Shareholders' Meeting on July 10, the 2002, was increased from $96,127,400,217 Chilean Pesos, divided into 386,000,000 shares without pare value to $178,574,735,146 Chilean Pesos, divided into 2,906,000,000 shares without pare value, shall be effected, subscribed and paid in the following manner:

ONE: In first place, it is hereby established that in the Extraordinary Shareholders Meeting held on April 29, 1997, agreed to increase the Corporation's capital to $104,724,333,447 Chilean Pesos, divided into 386,000,000 shares without pare value. As of the date of the Shareholders Meeting, the Corporation capital was fixed in accordance of Article 10 of Law No. 18,046 at the amount of $56,474,333,447 shares, divided into 337,750,000 shares without pare value, fully subscribed and paid. Accordingly, on the date of convening this Extraordinary Shareholders' Meeting the capital stock increased to $48,250,000,000 Chilean Pesos, through the issuance of 48,250,000 shares without pare value. During the preemptive rights offering period, the Company's shareholders subscribed and paid 33,167,661 shares with a price or placement value of $1,000 Chilean Pesos per share. Subsequently, expired the term of the rights offering period and by the agreement of an Extraordinary Shareh olders Meeting held on April 28, 1998, the period to subscribe and paid was extended from one to three years the aforementioned capital increase, the remaining 15,082,339 shares was offered and sold through the exchange, in accordance of established in the final incise of Article 29 of Open Corporation Regulation. In the sale executed though the Santiago Stock Exchange in April 2000, the Company obtained $6,485,405,770 Chilean Pesos, equivalent to a price of $430 per share, these price was lower that the placement price of the rights offering ($1,000 per share and that would let a capital of $104,724,333,447 Chilean Pesos. Consequently, there was a lower value of $8,596,933,230 Chilean Pesos in the placement of the remaining shares, therefore the capital was $96,127,400,217, divided into 386,000,000 shares without pare value and no as was agreed in the Extraordinary Shareholders Meeting held on April 29, 1997 of $104,724,333,447 Chilean Pesos.

TWO: It is hereby established, that in accordance with the provisions of Article 10 of Law No. 18,046, following approval by the respective Annual Shareholders' Meeting of the Balance Sheets of the Corporation for the fiscal years 1997, 1998, 1999, 2000 and 2001, that the capital stock was legally increased by the amount of $19,447,334,929 Chilean Pesos as a result of the capitalization in proportion to the equity capital revaluation provided under the above regulation. Accordingly, on the date of convening this Extraordinary Shareholders' Meeting the capital stock shall be fixed by operation of law at the amount of $115,574,735,146 Chilean Pesos, divided into 386,000,000 registered shares without par value, fully subscribed and paid.

THREE: To increase the capital stock from the figure appearing in Paragraph TWO above to the amount of $178,574,735,146 Chilean Pesos, the Extraordinary Shareholders' Meeting resolved to issue 2,520,000,000 new shares payable without par value, the Board of Directors shall be authorized to issue such shares in one or various stages and to fix the price of placement. In virtue of these delegation of faculties, the Board of Directors would, in consequence, fix the price of each share within the next 120 days after the Extraordinary Shareholders Meeting. The Board of Directors of the Corporation is authorized to carry out the agreed capital increase, which shall be fully implemented within a period of three years from the date of this agreement.

Payment of these shares shall be includes the alternatives to subscribe shares either through payment in cash and/or the capitalization of existing debt, the Company's Board of Directors was granted the authority to make certain decisions regarding the specific via of pay the shares of these capital increase. In the case that the Board of Director agreed the payment in cash and/or the capitalization of existing debt, the payments or contributions in goods other than cash, will be estimated by a financial expert and such credits and estimations would be approved on an Extraordinary Shareholders Meeting, according to Article 15 of Law 18,046. Such shares shall be offered on a preferred basis to the Shareholders pro rata in accordance with the number of shares recorded in their names in the Shareholder Registry on the fifth business day prior to the date of publication of the subscription option. Shares which were not subscribed within the deadline by the Shareholders having ri ghts thereto, shares which were products of fractions produced pro rata by the Shareholders and shares corresponding to waived options by the Shareholders having subscription rights, may be offered to third parties by the Board of Directors in the form and conditions established by law and the Article 29 of the Chilean Corporations Act. In no event shall a placement offering to third parties be made on conditions or prices more favorable than the preferred offer to the Shareholders having rights to such shares, considering the Article 29 of the Chilean Corporations Act.

The shares will be offered and sold in a transaction outside the United States and will be offered and sold only to Non-U.S. Persons.

The Board of Directors of the Corporation is fully authorized to determine the time, manner, conditions and other terms of this issuance of shares within the framework of the prior agreements and in compliance with all legal rules and regulations governing this matter which may be pertinent and applicable to this capital increase and/or not provided under this Transitory Article Six.

It was agreed to leaf evidence that the capital increase is a part of the Company's financial restructuring, that includes also, the refinancing of the credits, no including the Bonds issued by Madeco, both the capital increase and the refinancing of the credits looks the same purpose, the improvement of the Company's financial structure. Well now, due to the fact that is not yet signed the contract between Madeco and its debt-holders, even though exists a pre-agreement, the Board in order to protect the interest of the Company's shareholders, agreed to implement a mechanism of subscription and payment of shares that allows shareholders to subscribe its respective portion of new shares, only in the event that the refinancing contract is signed.

For such purpose, the Company is evaluating hired a bank or an financial entity, in order to acting as the mandatory of shareholders that preferred to used of the aforementioned mechanism, acting for them subscribe and pay the correspondent shares only in the event that the financial restructuring contract includes the following general conditions:

1. The contract includes at least 95% of the financial debt as of the date of subscription, not including the Bonds issued by the Company;
2. The maximum interest rate included in the refinance are LIBOR + 2.2% annual or TAB + 1.75% annual; and,
3. The remaining portion of the debt has to be reschedule to seven years, with 3 years of grace period.

In addition, in order that the mandatory agency subscribe and pay the shares, the capital increase have to reach at least $47,000,000,000 Chilean Pesos, in cash or/and capitalization of existing debt. In the event that during the preemptive rights offering period was not subscribed the aforementioned agreement between the Company and its debt-holders in the terms mentioned above and have not reach the minimum amount of the capital increase, the mandatory agency will no subscribe the shares and will restitute the funds for those effects to Shareholders. The Board is granted the authority to regulate the establishment of the aforementioned mechanism, including the operation, additional conditions that must be fulfilled in order to the agency subscribe the shares and the manner in which the shareholders will have access to the mechanism to subscribe and pay shares thought the agency.

The cost of the subscription mechanism will be paid by the Company, because is a matter of general interest of shareholders, to whom the mechanism will be free of charges.

The total capital increase referred to in this temporary provision shall be fully subscribed and paid within a period of three years from the date of this agreement, which date is July 10, 2002.

TRANSITORY ARTICLE EIGHT: The capital increase of the Corporation resolved by the Extraordinary Shareholders' Meeting on November 14, 2002, shall be effected, announced and paid in the following manner:

ONE: It is established that this Shareholders Meeting agreed to leave without effect, in the portion no subscribed, the capital increase approved at the Extraordinary Shareholders Meeting held on July 10, 2002, therefore the capital stock amount to $116,062,510,846 Chilean Pesos, divided into 405,511,028 shares without pare value, fully subscribed and paid. To effect, was modified Article Five of the Company's bylaws, setting up on that article the capital stock and the number of shares previously indicated, as was mentioned in the Act of the Extraordinary Shareholders Meeting held on November 14, 2002, the text is not included in the transitory article nine in order to avoid unnecessary repetitions.

TWO: To increase the capital stock from the figure appearing in Paragraph One above to the amount of $217,442,506,846 Chilean Pesos, the Extraordinary Shareholders Meeting resolved to issue 5,632,222,.000 new shares payable without par value, in the following manner:

a) 493,334,000 of the new shares, equivalent to 8.76% will be intended for compensation plans that the Board will develop, authorized for such purpose. In respect of these portion of the capital increase, shareholders will no have preemptive rights, according to Article 24 of Law No. 18,046. The period to subscribe and paid these shares will be five years from the date of this Meeting.

The Board was granted the authorization to issued the shares in one or several stages, according too the compensation plans develop for such purpose.

b) The residuary 5,138,888,000 shares agreed to issued by the Shareholders Meeting, shall be offered on a preferred basis to the Shareholders pro rata in accordance with the number of shares recorded in their names in the Shareholder Registry on the fifth business day prior to the date of publication of the subscription option.

The Board was granted the authorization to issue the share in one or several stages, shall be fully subscribed and paid within a period of three years from the date of this agreement. The Board of Directors of the Corporation is fully authorized to determine the price or placement value of shares to the pertinent capital increase. By virtue of the authorization the Board shall fix the price of each share within the following 120 days from the date of this Extraordinary Meeting.

The shares payment that the Extraordinary Meeting agreed to issue will be in cash and shall be made in cash or capitalization of existing debt or any other via permitted by law, the Board was granted to determine: a) the specific manner of share payment of these capital increase and, b) the portion, percentage or share number of the aforementioned capital increase that can be paid though cash or other goods different of cash, being able to agreed that all of them or a portion of them will be pay in either ways.

In the case that the Board agreed that the share payment will be made in cash and other goods, such agreement will be subject to the condition that the payments in cash and other goods different than cash, have to take place though the credits and/or bonds approved at the Shareholders Meeting with the correspondent estimation of the financial expert, as subject to be given or capitalized, total or partially, in accordance of Article 15 of Law No. 18,046.

The portion of the shares that shareholders will have preemptive rights, will be subscribed and paid in accordance of the Mechanism of Subscription and Payment of Shares approved at the Shareholders Meeting and the Regulation that the Board develop for such purpose, in accordance of the faculties granted for such purpose. The shares that are part of the Compensation Plan, will be paid directly the Corporation from those involve in the aforementioned plan.

Shares which were not subscribed within the deadline by the Shareholders having rights thereto, shares which were products of fractions produced pro rata by the Shareholders and shares corresponding to waived options by the Shareholders having subscription rights, may be offered to third parties by the Board of Directors in the form and conditions established by law and the Chilean Corporations Act of incise 4, Article 24 of the Law No.18,046. The Board was authorized to determine whether the remaining shares will be intended for compensation plans, and in that case the portion or percentage intended for such purpose. The portion of shares intended for the compensation plan shall be fully subscribed and paid within five years from the date of this Shareholders Meeting. For all purpose, the Board shall fulfill the norms of Article 24 of Law No. 18,046 and 29 of the Chilean Corporation Act.

In no event shall a placement offering to third parties be made on conditions or prices more favorable than the preferred offer to the Shareholders having rights to such shares, besides the norm included in Article 29 of the Chilean Corporation Act.

The shares will be offered and sold in a transaction outside the United States and will be offered and sold only to Non-U.S. Persons. However, the holders of ADRs will have the same duties of the Company's shareholders, those duties can be excerpted though the Depositary, in accordance with Article 219 of Law No. 18,045.

The Board of Directors of the Corporation is fully authorized to determine the time, manner, conditions and other terms of this issuance of shares within the framework of the prior agreements and in compliance with all legal rules and regulations governing this matter which may be pertinent and applicable to this capital increase and/or not provided under this Transitory Article Eight.

The total capital increase referred to in this temporary provision shall be fully subscribed and paid within a period of three years from the date of this agreement, which date is November 14, 2002. Notwithstanding the portion of the shares that are part of the compensation plan, of which can be subscribed and paid within the following 5 years, from November 14, 2002, according to Article 24 of Law No. 18,046".

NINTH PROVISIONAL ARTICLE:

The capital of the Company, of $284,035,204,849 divided into 7,137,733,028 registered shares, with no par value, is made up as follows:

ONE: As is on record in the Eighth Provisional Article of the Company Bylaws, the Extraordinary Shareholders’ Meeting of the Company, held on 14 November 2002, agreed to increase the Company’s capital from $116,062,510,846 divided into 405,511,028 registered shares, with no par value, to $217,442,506,846 divided into 6,037,733,028 registered shares, with no par value, through the issuing of 5,632,222,000 cash shares, in the following manner:

a. With 492,334,000 cash shares that it was agreed to be destined to Compensation Plans, as established in Article 24 of Law N° 18,046. The time limit to subscribe and pay for these shares was fixed at five years counted from 14 November 2002; and

b. With 5,138,888,000 cash shares that it was agreed to be offered preferably to the Shareholders. The time limit to subscribe and pay these shares was fixed at three years counted from 14 November 2002.

The situation of the issuance of these shares on the date of the Extraordinary Shareholders’ Meeting held on 02 September, 2005, is the following:

(i) Of the 493,334,000 cash shares to be destined to Compensation Plans: 182,147,724 shares have been subscribed and paid by the beneficiaries of the first Compensation Plan approved by the Board of Directors; 10,000,000 shares have a time limit pending fulfillment to exercise the option of subscription; and 301,186,276 shares are currently available to be destined to the new Compensation Plan or Plans that the Board of Directors may draw up in accordance with the powers granted to it by the Shareholders’ Meeting that agreed to the issuing of these shares; and

(ii) Of the remainder of 5,138,888,000 cash shares that it was agreed would be issued to be offered preferably to the Shareholders: 3,853,534,135 shares were issued and have been subscribed and paid entirely; and 1,285,353,865 shares have not been physically issued and consequently, to date, they have not been registered with the Securities Register of the Superintendence of Securities and Insurance. With regard to these shares, the time limit established for their subscription and payment, which expires on 14 November 2005, will be allowed to elapse so that upon its expiry effect foreseen in Article 24 of Law N° 18,046 will take place as a matter of course, and the General Manager, at the appropriate time, must put this on record in the manner foreseen in Article 33 of the Regulation for Corporations.

TWO: As a consequence of what is expressed in number ONE above, up to the date on which the Extraordinary Shareholders’ Meeting was held, 2 September 2005, the Company had a registered capital of $217,442,506,846 divided into 6,037,733,028 registered shares with no par value, in which the amount of 188,704,784,308 divided into 4,441,192,887 registered shares with no par value is subscribed and paid, and therefore, is still pending the subscription and payment of a remainder of $28,737,722,538 divided into 1,596,540,141 registered shares, with no par value. Finally, to this registered capital must be added the accumulated amount of $9,592,698,003 corresponding to the capitalization of the proportional appreciation of the equity capital revaluation, applied to the capital subscribed and paid, produced by operation of law when the respective Annual Shareholders’ Meeting approved the balance sheets corresponding to the accounting periods of the years 2002, 200 3 and 2004 pursuant to the provisions in Article 10 of Law N° 18,046; therefore, on the date of this Shareholders’ Meeting the updated registered capital of the Company is $227,035,204,849 divided into the above-mentioned number of shares.

THREE: To increase the registered capital from the updated registered amount indicated in point two above to the amount of $284,035,204,849, the Extraordinary Shareholders’ Meeting held on 2 September 2005 agreed to issue 1,100,000,000 new cash shares with no par value, which will be offered preferably to the Shareholders in proportion to the shares that they own registered by their name in the Shareholders’ Register on the 5th working day prior to the date of publication of the subscription option, at an offering price or value that is the same as the average weighted price of the Company’s share transactions that were recorded in the Santiago Stock Exchange between the 15th and the 5th stock market working days prior to the date of publication of the notice of the beginning of the preferential option period, and the Board of Directors is fully authorized to proceed with the fixing of the final price for placing the shares, applying for this the abo ve-mentioned price fixing mechanism, when it deems it convenient, within the legal time limits, and the Board of Directors is also fully authorized to fix the starting date of the preferential option period, to issue these shares in one or various stages and to adopt all the agreements that may be necessary to execute this placement.

The payment of these shares will paid in cash. It may also be made by check or sight draft.

During the preferential option period, the Shareholders may transfer all or part of their option rights to subscribe the shares to which they have a right, which they must do in accordance with what is established in the Regulation of the Corporation Law and agreements that the Board of Directors may adopt to this effect. The Board of Directors was authorized to establish the procedure that will be applied for this purpose. In any case, the transferee of a preferential option right must subscribe the shares to which it has a right under the terms of the transfer, within the same deadline for the subscription that the respective transferor of the option right had. If he does not exercise his right within the mentioned time period, it will be understood that he has waived this right.

The new cash shares that were not subscribed in a timely manner by the Shareholders that have a right to them, those that were the result of fractions produced in the apportionment between the Shareholders and the shares with regard to which Shareholders to whom they belong have waived their rights, may be offered and sold to a third party or to Shareholders that are interested in subscribing shares of the remainder, in addition to those they have a right to.

The placing of the remainder with a third party cannot be made under conditions and prices more favorable than those of the preferential offer to the Shareholders having a right to them, without damage to the application, in due course, of the norm contained in the final paragraph of Article 29 of the Regulation for Corporations. For this purpose, the norms contained in Articles 24 and 25 of Law N° 18,046 and in Article 29 of the Regulation for Corporations must be observed, as applicable and when in order.

It was also agreed that this issue will be registered and the preferential option will only be given within the country. Therefore, for all purposes of the holders of ADRs, it is hereby put on record that the shares of Madeco S.A. that are issued as a result of the capital increase that was approved at the Extraordinary Shareholders’ Meeting held on 2 September 2005 will be offered and placed via transactions that will take place outside the territory of the United States of America, pursuant to the provisions of Regulation S of the U.S. Securities Act of 1933. Therefore, no offer or placement of the shares of Madeco S.A. that are issued in connection with this capital increase may be made to persons in the United States of America.

The Company’s Board of Directors was given broad authority to determine the timing, form, conditions and other stipulations and terms of the share issue, all of which it can carry out in one or several acts, adjusting to the framework of preceding agreements and complying with legal norms and regulations on this subject, in all matters that are pertinent and applicable to this capital increase and/or that are not foreseen in this Ninth Provisional Article.

The totality of the capital increase informed in this transitory provision must be fully subscribed and paid within the time limit of 3 years counted from the date of this agreement, that is, as of 2 September 2005.

TENTH PROVISIONAL ARTICLE: By agreement of the Extraordinary Shareholders’ Meeting held on April twenty-fourth of the year two thousand and seven, the Company’s capital was reduced from $273,305,565,617 divided into 5,852,379,163 registered shares with no par value, to $221,952,213,872 divided into the same number of shares, by the absorption of the Company’s accumulated loss amounting to $51,353,351,745, which figure resulted after the approval of the Balance Sheet at December thirty-first of 2006 and after the profits of that accounting period had been distributed by the Shareholders’ Meeting held on that same date. With regard to this reduction in capital, it was agreed that the following would be put on record:

FIRST: By agreement of the Extraordinary Shareholders’ Meeting held on September second of the 2005, the registered capital was fixed at $284,305,204,849 divided into 7,137,733,028 registered shares with no par value.

SECOND: By application of Article twenty-four of the Corporation Law, on the 14th of November of the year 2005, a legal reduction of the capital took place in the amount of $23,136,369,570 corresponding to the value of the remainder of 1,285,353,865 shares of the capital increase agreed by the Extraordinary Shareholders’ Meeting held on the 14th of November of the 2002, considering that the referential value of this issue was $18 per share. This remainder of shares was not issued and therefore, not subscribed and paid within the time period of three years fixed by the Shareholders’ Meeting for that purpose; therefore upon its expiry, that is, on November 14th of the year 2005, the registered capital was legally reduced to the amount of $260,898,835,279 divided into 5,852,379.163 registered share with no par value. Of these shares, on this date, April 24th, 2007, 5,541,192,887 shares have been subscribed and paid. The remaining 311,186,279 shares correspon d to the remainder of those destined to Compensation Plans by the Extraordinary Shareholders’ Meeting held on November fourteenth two thousand and two and whose time period for subscription and payment expires on November 14th 2007.

THIRD: It is hereby put on record that as provided in Article 10 of Law number 18.046 on Corporations, when the respective Annual Shareholders’ Meeting approves the Company’s Balance Sheets corresponding to the accounting periods 2005 and 2006, the subscribed and paid up capital of the Company was legally increased in the accumulated amount of both accounting periods that ascends to $12,406,730,338 as a result of the proportional capitalization of the equity capital revaluation provided for by the said legal norm. Consequently, on the date when this Extraordinary Shareholders’ Meeting was held, the registered capital was fixed at the amount of $273,305,565,617 divided into 5,852,379,163 registered shares with no par value.

FOURTH: It is hereby also put on record that the Annual Shareholders’ Meeting held on this same date, April 24^th 2007, in fulfillment of the provisions of Article 78 paragraph two of the Corporation Law, agreed to destine the profit of the 2006 accounting period, of $30,203,974,751 to the partial absorption of the Company’s accumulated losses, amounting to $81,557,326,496, both figures according to the General Balance Sheet of December 31th of 2006, approved by that Annual Shareholders’ Meeting. Thus, the accumulated loss of the 2006 accounting period was reduced to $51,353,351,745 which latter figure this Extraordinary Shareholders’ Meeting agreed to absorb by the reduction of the registered capital in the same amount.

EX-8

 
Exhibit 8.1

 

List of Subsidiaries of Madeco S.A.

   

Name	Jurisdiction of Incorporation
Soinmad S.A.	Chile
Cotelsa S.A.	Chile
Colada Continua Chilena S.A.	Chile
Ficap S.A.	Brazil
Optel Ltda.	Brazil
Madeco Brasil Ltda.	Brazil
Indeco S.A.	Peru
Cobrecon S.A.	Peru
Cedsa S.A.	Colombia
Metalurgica e Industrial S.A.	Argentina
Metacab S.A.	Argentina
H.B. San Luis S.A.	Argentina
Comercial Madeco S.A.	Argentina
Optel Argentina S.A.	Argentina
Indelqui S.A.	Argentina
Madeco Overseas S.A.	Cayman Islands
Invercable S.A.	Chile
Madeco Cables S.A.	Chile
Metal Overseas S.A.	Cayman Islands
Madeco S.A. Agencia Islas Caiman	Cayman Islands
Armat S.A.	Chile
Decker Indelqui S.A.	Argentina
Madeco Brass Mills S.A.	Chile
Alusa S.A.	Chile
Alufoil S.A.	Chile
Inversiones Alusa S.A.	Chile
Peruplast S.A.	Peru
Aluflex S.A.	Argentina
Alusa Overseas	Cayman Islands
Indalum S.A.	Chile
Alumco S.A.	Chile
Inversiones Alumco S.A.	Chile
Ingewall S.A.	Chile
PVTEC S.A.	Chile

EX-11

 
Exhibit 11.1
 

MADECO S.A.

CODE OF ETHICS

EX-12

 
Exhibit 12.1


 

Section 302 - Certification of the Chief Executive Officer

I, Tiberio Dall'Olio, certify that:

1. I have reviewed this annual report on Form 20-F of Madeco;

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

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

4. The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and

5. The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of company's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date: June 30, 2008

/s/ Tiberio Dall'Olio
Tiberio Dall'Olio
Chief Executive Officer

EX-12

 
Exhibit 12.2

 

Section 302 - Certification of the Chief Financial Officer

I, Cristian Montes Lahaye, certify that:

1. I have reviewed this annual report on Form 20-F of Madeco;

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

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

4. The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and

5. The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of company's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date: June 30, 2008

/s/ Cristian Montes Lahaye
Cristian Montes Lahaye
Chief Financial Officer

EX-4

PURCHASE AGREEMENT