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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

OR

OR

Commission file number 1-15240

JAMES HARDIE INDUSTRIES N.V.

N/A
(Translation of Registrant’s name into English)

The Netherlands
(Jurisdiction of incorporation or organization)

4^th Level, Atrium, unit 04-07
Strawinskylaan 3077
1077 ZX Amsterdam, The Netherlands
(Address of principal executive offices)

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

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

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

     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: 457,514,598 shares of common stock at March 31, 2003

     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. [X] Yes   [  ] No

     Indicate by check mark which financial statement item the registrant has elected to follow. [  ] Item 17   [X] Item 18

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PART I

Item 1 Identity of Directors, Senior Management and Advisers

Not Required

Item 2 Offer Statistics and Expected Timetable

Not Applicable

Item 3 Key Information

     In this annual report, unless the context otherwise indicates, James Hardie Industries N.V., a “naamloze vennootschap,” or a Dutch public limited liability company incorporated under the laws of The Netherlands, is referred to as “JHI NV.” James Hardie Industries N.V. and its subsidiaries are collectively referred to as “we,” “us,” “our,” “JHI NV and its subsidiaries,” the “Company” or “company,” “James Hardie” or the “James Hardie Group.”

     The term “fiscal year” refers to our fiscal year ended March 31 of such year, the term “dollars” or “$” refers to U.S. dollars, the term “A$” refers to Australian dollars, the term “NZ$” refers to New Zealand dollars, the term “PHP” refers to Philippine pesos and the term “CLP” refers to Chilean pesos. The term “msf” refers to thousands of square feet and the term “mmsf” refers to millions of square feet.

     As a company incorporated under the laws of The Netherlands, JHI NV has listed its securities for trading on the Australia Stock Exchange (“ASX”) through the use of the Clearing House Electronic Subregister System (“CHESS”) Units of Foreign Securities (“CUFS”). CUFS are a form of depositary security that represents a beneficial ownership interest in the securities of a non-Australian corporation. Each of our CUFS represents the beneficial ownership of one share of common stock of JHI NV, the legal ownership of which is held by CHESS Depositary Nominees Pty Ltd. The CUFS are listed and traded on the ASX under the symbol “JHX.”

     The Company has also listed its securities for trading on the New York Stock Exchange (“NYSE”). The Company sponsors a program, whereby beneficial ownership of five CUFS is represented by one American Depositary Share (“ADS”), which is issued by the Bank of New York. These ADSs trade on the NYSE in the form of American Depositary Receipts (“ADRs”) under the symbol “JHX.” Unless the context indicates otherwise, when we refer to ADRs, we are referring to ADRs or ADSs depending on the context and when we refer to our “common stock” we are referring to the shares of our common stock that are represented by CUFS.

     In April 2002, we completed the sale of our Gypsum operations. We had entered into an agreement to sell our Gypsum operations in March 2002, and accordingly, beginning with the quarter ended March 31, 2002, the results of our Gypsum operations have been reported as discontinued operations and our consolidated financial statements and operating results contained in this annual report reflect our Gypsum operations as discontinued operations. All comparative periods presented have been restated accordingly.

Selected Financial Data

     We have included in Item 18 of this annual report the audited consolidated financial statements of JHI NV, consisting of our consolidated balance sheets and consolidated statements of changes in shareholders’ equity as of March 31, 2003 and March 31, 2002, and our consolidated statements of income and cash flows for the years ended March 31, 2003, 2002 and 2001, together with the related notes. For periods prior to October 19, 2001, the effective date of our corporate restructuring (see Item 4 “Information on the Company – History and Development of the Company – Corporate Restructuring”), the consolidated financial statements represent the financial position, results of operations and cash flows of James Hardie Industries Limited (“JHIL”) and its wholly owned subsidiaries. For periods after October 19, 2001, our consolidated financial statements represent the financial position, results of operations and cash flows of JHI NV and its wholly owned subsidiaries.

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     The consolidated financial statements included in this annual report have been prepared in accordance with accounting principles generally accepted in the United States, or “U.S. GAAP.”

     The selected consolidated financial information set forth below has been derived in part from JHI NV’s financial statements. You should read the selected financial information in conjunction with JHI NV’s financial statements and related notes contained in Item 18 and under the section entitled “Operating and Financial Review and Prospects” contained in Item 5. Such historic financial data is not necessarily indicative of our future results and you should not unduly rely upon it.

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(6)

Represents income from continuing operations before interest income, interest expense, income taxes, other nonoperating expenses, net, depreciation and amortization charges, and certain other property, goodwill and equipment impairment charges as follows:

		Adjusted EBITDA is not a measure of financial performance under U.S. GAAP and should not be considered an alternative to, or more meaningful than, income from operations, net income or cash flows as defined by U.S. GAAP or as a measure of our profitability or liquidity. Not all companies calculate Adjusted EBITDA in the same manner and, accordingly, Adjusted EBITDA may not be comparable with other companies. We have included information concerning Adjusted EBITDA because we believe that this data is commonly used by investors to evaluate the ability of a company’s earnings from its core business operations to satisfy its debt, capital expenditure and working capital requirements. To permit evaluation of this data on a consistent basis from period to period, Adjusted EBITDA has been adjusted for noncash charges such as goodwill and asset impairment charges, as well as nonoperating income and expense items. See our consolidated financial statements and “Operating and Financial Review and Prospects” for further information to assist in identifying and evaluating trends in Adjusted EBITDA.
(7)		Information for capital expenditures includes both cash and credit purchases, and is for continuing businesses only.
(8)		Fiber cement volume is measured in 5/16” thick square feet, which are referred to as standard feet.

Risk Factors

Substantial and increasing competition in the building products industry could adversely affect our business.

     Competition in the building products industry is based largely on price and, to a lesser extent, quality, performance and service. Our fiber cement products compete with products manufactured from natural and engineered wood, vinyl, stucco, masonry, gypsum and other materials as well as fiber cement products from other manufacturers. Some of our competitors may have greater financial and other resources than we do and, among other factors, may be less affected by reductions in margins resulting from price competition.

     Some of our competitors have lowered prices of their products to compete for sales. In addition, we expect our competitors to continue to expand their manufacturing capacities, to improve the design and performance of their products and to introduce new products with competitive price and performance characteristics. Increased competition by existing or future competitors could adversely impact fiber cement prices, as well as require us to increase our investment in product development, productivity improvements and customer service and support to compete in our markets.

     Fiber cement prices in the United States, Australia and New Zealand have fluctuated for a number of years due to the entry into the market of new producers and competition from alternative products, among other reasons, and these prices could continue to fluctuate in the future. Because of the maturity of the Australian and New Zealand markets, we believe that prices in those markets may decline and that sales volumes may not increase significantly or may decline in the future. Historically, increased sales volumes of our U.S. fiber cement products, the addition of

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proprietary products to our product mix and improved operating efficiencies have more than offset the decrease in pricing for such products in the United States. However, there may be future price decreases and we may not be able to offset such decreases with increased volume, new products or improved operating efficiencies. For instance, unanticipated technical problems could impair our efforts to commission new equipment aimed at improving operating efficiencies. Any of these factors could have a material adverse effect on our business, results of operations and financial condition.

Our business is dependent on the residential and commercial construction markets.

     Demand for our products depends in large part on residential construction markets and, to a lesser extent, on commercial construction markets. The level of activity in residential construction markets depends on new housing starts and residential remodeling projects, which are a function of many factors not within our control, including general economic conditions, mortgage and other interest rates, inflation, unemployment, demographic trends, gross domestic product growth and consumer confidence in each of the countries and regions in which we operate. Historically, in periods of economic decline, both new housing starts and residential remodeling also decline. The level of activity in the commercial construction market depends largely on vacancy rates and general economic conditions. Because residential and commercial construction markets are sensitive to cyclical changes in the economy, downturns in the economy or a lack of substantial improvement in the economy of any of our geographic markets could negatively affect operating results. Because of these and other factors, our operating results may be subject to substantial fluctuations and the results for any prior period may not be indicative of results for any future period.

We may acquire or divest businesses from time to time, and this may adversely affect our operating results and financial condition as well as significantly change the nature of the company in which you have invested.

     In the past we have divested business segments and, from time to time in the future, we may acquire other businesses or sell some or all of our assets or business segments. Any such significant acquisition or sale may adversely affect our operating results and financial condition and could change the overall profile of our business. As a result, the value of our shares may decrease in response to any such acquisition or sale and, upon any such acquisition or sale, our shares may represent an investment in a company with significantly different assets and prospects from the company when you made your initial investment in us.

If our research and development efforts fail to generate new, innovative products, our overall profit margins may decrease and demand for our products may fall, which would have an adverse effect on our results of operations and financial condition.

     We have invested significantly in research and development because we believe that such efforts are key to sustaining and growing our existing market leadership position in fiber cement. Because profit margins for fiber cement products and building products generally erode the longer a product has been on the market, innovation is particularly important. We rely on our research and development efforts to generate new products to increase demand and to protect profit margins. If our research and development efforts fail to generate new, innovative products, our overall profit margins may decrease and demand for our products may fall, which would have an adverse effect on our results of operations and financial condition.

Because demand for our products in our major markets is seasonal, our quarterly results of operations may vary throughout the year.

     In the U.S., a large proportion of our fiber cement products is sold in three regions: the Southeast, the Southcentral and the Pacific Northwest. Demand for building products in these regions is seasonal because construction activity diminishes during the winter season. In Australia, New Zealand and the Philippines, demand for building products is also seasonal because, in Australia and New Zealand, construction activity diminishes during the summer period of December to February, and in the Philippines, construction activity diminishes during the wet season from June to September. We commenced production of fiber cement products in Chile in early 2001, where markets also experience decreased seasonal construction activity from May through September.

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We may experience adverse fluctuations in the supply and cost of raw materials necessary to our business and a significant reduction or cessation of shipments from an important supplier could adversely affect our business if we are unable to secure alternative supplies within a short time on reasonable terms.

     Our fiber cement business periodically experiences fluctuations in supply and costs of raw materials. Cellulose fiber, silica, cement and water are the principal raw materials utilized in the production of fiber cement. Cellulose fiber has been subject to significant price fluctuations. Although we have not experienced any shortages of raw materials that have materially affected our operations in the past, price fluctuations or material delays may occur in the future due to lack of raw materials or suppliers. The loss or deterioration of our relationship with a major supplier, an increase in demand by third parties for a particular supplier’s products or materials or delays in obtaining materials could have a material adverse effect on our business, results of operations and financial condition.

Demand for our products is subject to changes in consumer preference.

     The continued development of builder and consumer preference for our fiber cement products over competitive products is critical to sustaining and expanding demand for our products. Therefore, the failure to maintain and increase builder and consumer acceptance of our fiber cement products would have a material adverse effect on our growth strategy as well as our business, results of operations and financial condition.

We rely on only a few distributors to distribute our fiber cement products and the loss of any distributor could adversely affect our business.

     Our top three U.S. distributors accounted for approximately 70% of our total U.S. fiber cement sales in fiscal year 2003. Our top two distributors in Australia and our top four distributors in New Zealand accounted for approximately 27% and 78% of our total sales of fiber cement in Australia and New Zealand, respectively, in fiscal year 2003. Our top distributor in the Philippines accounted for approximately 14% of our total sales of fiber cement in the Philippines in fiscal year 2003. We generally do not have long-term contracts with our large distributors. Accordingly, if we were to lose one or more of these distributors because our competitors were able to offer distributors more favorable pricing terms or otherwise, we may not be able to replace such distributors on reasonable terms and in a timely manner. The loss of one or more distributors could have a material adverse effect on our business, results of operations and financial condition.

If one or more of our fiber cement products fail to perform as expected or contain a design defect, this failure or defect and any resulting negative publicity could result in lower sales and may subject us to claims from purchasers or users of our fiber cement products.

     Because our fiber cement products have been used only since the early 1980s, we cannot assure you that these products will perform in accordance with our expectations over an extended period of time or that there are no serious design defects in such products. If our fiber cement technology fails to perform as expected or a product is discovered to have design defects, such failure or defects and any resulting negative publicity could result in lower sales of these products and may subject us to claims from purchasers or users of these products, either of which could have a material adverse effect on our business, results of operations and financial condition.

Warranty claims resulting from unforeseen defects in our products and exceeding our warranty reserves could have a material adverse effect on our business, results of operations and financial condition.

     We have offered, and continue to offer, various warranties on our products, including a 50-year limited warranty on certain of our fiber cement siding products in the United States. Although we maintain reserves for warranty-related claims and legal proceedings that we believe to be adequate, we cannot assure you that warranty expense levels or the results of any warranty-related legal proceedings will not exceed our reserves.

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If damages resulting from product defects exceed our insurance coverage, paying these damages could result in a material adverse effect on our business, results of operations and financial condition.

     The actual or alleged existence of defects in any of our products could subject us to significant product liability claims. Although we do not have replacement insurance coverage for damages to, or defects in, our products, we do have product liability insurance coverage for consequential damages that may arise from our products. Although we believe this coverage to be adequate and currently intend to maintain this coverage in the future, we cannot assure you that this coverage will be sufficient to cover all future product liability claims or that this coverage will be available at reasonable rates in the future. The successful assertion of one or more claims against us that exceed our insurance coverage could require us to incur significant expenses to pay these damages. These additional expenses could have a material adverse effect on our business, results of operations and financial condition.

We are dependent on our senior management.

     Our success is dependent upon the management and the leadership skills of members of our senior management. The loss of any of these individuals or an inability to attract and retain additional qualified personnel could adversely affect us. We cannot assure you that we will be able to retain our existing senior management personnel or attract additional qualified personnel.

We rely on a continuous power supply and availability of utilities to conduct our operations, and any shortages and interruptions could disrupt our operations and increase our expenses.

     In the manufacture of our products we rely on a continuous and uninterrupted supply of electric power, water and natural gas as well as the availability of water, waste and emissions discharge facilities. Any future shortages or discharge curtailments could significantly disrupt our operations and increase our expenses. We currently do not have backup generators to maintain power and do not have alternate sources of power in the event of a blackout. In addition, our current insurance does not provide coverage for any damages that we or our customers may suffer as a result of any interruption in our power supply. If blackouts interrupt our power supply, we would be temporarily unable to continue operations at the affected facilities. Any future interruption in our ability to continue operations at our facilities could damage our reputation, harm our ability to retain existing customers and to obtain new customers and could result in lost revenue, any of which could have a material adverse effect on our business, results of operations and financial condition.

We may incur significant costs in the future to comply with applicable environmental and health and safety laws and regulations, and if we fail to comply with these laws and regulations, or these laws or regulations change, we may be subject to significant damages or penalties.

     We are subject to U.S. federal, state and local and foreign environmental and health and safety laws and regulations governing, among other matters, our operations and the use, handling, disposal and remediation of hazardous substances currently or formerly used by us or any of our affiliates. Under these laws and regulations we may be held jointly and severally responsible for the remediation of any hazardous substance contamination at our or our predecessors’ past or present facilities and at third-party waste disposal sites and may also be held liable for any consequences arising out of human exposure to such substances or other environmental damage. We will continue to be liable for any environmental problems that occurred while we owned or operated any of the three gypsum facilities that we sold in April 2002. See “Information on the Company – Capital Expenditures and Divestitures – Divestitures.”

     Many James Hardie products contain chrystalline silica, which can be released in a respirable form by inappropriate cutting practices and inhaled if proper protective equipment is not used. Repeated and prolonged overexposures to dust containing crystalline silica have been reported to cause silicosis (scarring of the lung), lung cancer and other adverse human health effects. James Hardie companies may face future costs of engineering and compliance to meet new standards relating to chrystalline silica if standards are made more stringent. In addition, there is a risk that claims for silica related disease could arise. At this time, James Hardie entities have no silica related claims, prosecutions or litigation.

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     The costs of complying with environmental and health and safety laws relating to our operations, or the liabilities arising from past or future releases of, or exposure to, hazardous substances or from product liability matters may result in us making future expenditures that could have a material adverse effect on our business, results of operations or financial condition. In addition, we cannot make any assurances that the laws currently in place will not change. Also, if applicable laws or judicial interpretations related to successor liability or piercing the corporate veil were to change, it could have a material adverse effect on our business, results of operations and financial condition. See “Information on the Company — Legal Proceedings” in Item 4.

Changes in, or failure to comply with, the laws, regulations, policies or conditions of any jurisdiction in which we conduct our business could result in, among other consequences, the loss of our assets in such jurisdiction, the elimination of certain rights that are critical to the operation of our business in such jurisdiction, the imposition of additional taxes or other costs or a decrease in revenues.

     Because we manufacture and sell our products internationally, our activities are subject to political, economic, legal and other uncertainties, including:

	•		changing political and economic conditions;
	•		changing laws and policies affecting trade, investment and taxation;
	•		the general hazards associated with the assertion of sovereign rights over certain areas in which we conduct our business; and
	•		laws limiting or conditioning the right and ability of subsidiaries and joint ventures to pay dividends or remit earnings to affiliated companies.

     Although we seek to take applicable laws, regulations and conditions into account in structuring our business on a global basis, changes in, or our failure to comply with, the laws, regulations, policies or conditions of any jurisdiction in which we conduct our business could result in, among other consequences, the loss of our assets in such jurisdiction, the elimination of certain rights that are critical to the operation of our business in such jurisdiction, the imposition of additional taxes or other costs or a decrease in revenues. Therefore, any change in laws, regulations, policies or conditions of a jurisdiction could have a material adverse effect on our business, results of operations and financial condition.

Our reliance on intellectual property and other proprietary information subjects us to the risk that competitors could copy these key ingredients of our business.

     Our success depends, in part, on the proprietary nature of our technology, including non-patentable intellectual property such as our process technology. Despite safeguards, to the extent that a competitor is able to reproduce or otherwise capitalize on our technology, it may be difficult, expensive or impossible for us to obtain necessary legal protection. Also, the laws of some foreign countries may not protect our intellectual property to the same extent as do the laws of the United States. In addition to patent protection of intellectual property rights, we consider elements of our product designs and processes to be proprietary and confidential. We rely on employee, consultant and vendor non-disclosure agreements and contractual provisions and a system of internal safeguards to protect our proprietary information. However, any of our registered or unregistered intellectual property rights may be challenged or exploited by others in the industry, which could harm our operating results and competitive position.

Because we have significant operations outside of the United States and report our earnings in U.S. dollars, unfavorable fluctuations in currency values and exchange rates could have a significant negative impact on our earnings.

     Because our reporting currency is the U.S. dollar, our non-U.S. operations face the additional risk of fluctuating currency values and exchange rates. Such operations may also face hard currency shortages and controls on currency exchange. Approximately 25% and 26% of our net sales in fiscal years 2003 and 2002, respectively, were derived from sales outside the United States. Consequently, changes in the value of foreign currencies (principally Australian dollars, New Zealand dollars, Philippine pesos and Chilean pesos) could significantly affect our business,

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results of operations and financial condition. We generally attempt to mitigate foreign exchange risk by (1) entering, where possible, into contracts providing for payment in U.S. dollars instead of the local currency and (2) having non-U.S. operations borrow in local currencies, with the exception of the Philippines and Chile. Although we did not have any existing interest rate swaps or forward exchange contracts as of March 31, 2003, we may enter into such financial instruments from time to time to manage our market risks. There can be no assurance that we will be successful in these mitigation strategies, or that fluctuations in foreign currencies and other foreign exchange risks will not have a material adverse effect on our business, results of operations and financial condition.

Our Articles of Association and Dutch law contain provisions that could delay or prevent a change of control that may be beneficial to you.

     Our Articles of Association contain several provisions that could have the effect of delaying or preventing a change of control of our ownership. Broadly, our Articles of Association prohibit the holding of shares of our common stock if, because of an acquisition of a relevant interest (including interests held in the form of shares of our common stock, CUFS or ADRs) in such shares, a party’s relevant interest in our common stock or voting rights in us increases from 20% or below to over 20% or from a starting point that is above 20% and below 90%. However, this prohibition is subject to exceptions, including acquisitions that result from acceptance under a takeover bid as described in our Articles of Association. Although these provisions in our Articles of Association may help to ensure that no person acquires voting control of us without making an offer to all shareholders, these provisions may also have the effect of delaying or preventing a change of control that might otherwise be in your best interest. See “Additional Information — Key Provisions of our Articles of Association — Limitations on Right to Hold Common Stock” under Item 10.

Because we are incorporated under Dutch laws, you may not be able to effectively seek legal recourse against us or our management in the United States and may have further difficulty enforcing any U.S. judgments or rulings in a foreign jurisdiction.

     We are incorporated under the laws of The Netherlands. In addition, certain of our directors and executive officers and certain experts named herein are residents of jurisdictions outside the United States and a substantial portion of our assets are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon such persons, or to enforce outside the United States judgments obtained against such persons in U.S. courts, or to enforce in U.S. courts any judgments obtained against such persons in courts located in jurisdictions outside the United States, including actions predicated upon the civil liability provisions of the U.S. securities laws. In addition, it may be difficult for you to enforce, in original actions brought in courts located in jurisdictions outside the United States, rights predicated upon the U.S. securities laws.

     The rights of shareholders and the responsibilities of directors under the laws of The Netherlands may not be as clearly established as under statutes or judicial precedent in existence in certain U.S. jurisdictions. Therefore, our shareholders may have more difficulty in challenging the actions by our directors than they would otherwise as shareholders of a corporation incorporated in the United States.

The issuance of additional shares or the grant of additional options could dilute the value of your shares and adversely affect the price of our common stock.

     Because the authority to issue shares (and to grant rights to subscribe for shares, such as options) up to the amount of our authorized share capital has been delegated to our Supervisory Board, the issuance of such shares or rights could dilute the value of your shares and adversely affect the price of our common stock.

     In addition, if our Supervisory Board or our shareholders authorize the issuance of a large number of our equity securities, and such securities are sold in the open market, the trading price of our equity securities could decrease. We may pursue acquisitions of businesses and may issue equity securities in connection with these acquisitions, although we do not currently have specific acquisitions planned. We cannot predict the effect, if any, the future sales or issuances of our equity securities or the availability of such securities for future sale will have on our securities market price from time to time.

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If we experience labor disputes or interruptions, as we have from time to time in the past, our operations may be disrupted and our business, financial condition and results of operations may be adversely affected.

     Approximately 59% of our employees in Australia and 38% of our employees in New Zealand are currently represented by labor unions. Our unionized employees are covered by a range of federal and state-based agreements in Australia and New Zealand. Our Australian and New Zealand agreements expire at various times beginning mid-2003. We cannot assure you that the agreements will be renewed on reasonable terms, or at all. We have, in the past three years, experienced occasional strikes and work interruptions lasting up to one day in Australia. In the event we experience a prolonged labor dispute at any of our facilities, any strikes or work interruptions associated with such dispute could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to potential liability because our former subsidiaries formerly manufactured products containing asbestos.

     A New Zealand subsidiary of JHI NV manufactured products containing asbestos in New Zealand prior to 1987. Statutory provisions in New Zealand bar claims for compensatory damages arising from work related asbestos exposure. In addition, prior to 1987, two former subsidiaries of ABN 60 Pty Ltd, “ABN 60” (formerly JHIL), Amaca Pty Limited and Amaba Pty Limited, that are now owned and controlled by the Medical Research and Compensation Foundation (the “Foundation”), manufactured products containing asbestos in Australia. In addition, prior to 1937, JHIL, now owned by the ABN 60 Foundation Pty Ltd (“ABN 60 Foundation”), manufactured products containing asbestos in Australia. We cannot predict with any certainty any future claims or allegations that may be made, how the laws of various jurisdictions may be applied to the facts or how the laws may change in the future. If, however, a court of competent jurisdiction relying on applicable law were to find JHI NV or our New Zealand subsidiary liable for damages connected with existing or former subsidiaries or their manufacture of asbestos-containing products, we may incur liabilities in connection with any damages that may be awarded in the legal proceedings, in addition to the costs associated with defending against such claims. In addition, absent a finding of liability, the Company or its subsidiaries may be subject to claims or allegations involving present or future asbestos related liability, or relating to the establishment or adequacy of funding of the Foundation either at its inception or in the future or relating to the corporate restructuring mentioned below or associated intercompany transactions. While the Company does not believe that any such claims or allegations do or could have merit, we cannot guarantee that there would not be an adverse impact on the Company’s stock price in response to associated publicity concerning such claims or the potential consequences of such claims. See Item 4 “Information on the Company — Legal Proceedings.”

     Under the U.S.-Netherlands income tax treaty and Netherlands law, we derive substantial tax benefits from the group finance operations of our Netherlands-based finance subsidiary, and changes in either the treaty or laws applicable to the finance subsidiary could increase our effective tax rate and, as a result, reduce our profits.

     We believe the U.S.-Netherlands Income Tax Treaty (the “U.S.-NL Treaty”) applies to us and our Dutch and U.S. subsidiaries and that, accordingly, we are eligible for its benefits. Under the U.S.-NL Treaty, a reduced 5% withholding tax applies to dividends, and no withholding tax applies to interest, that our U.S. subsidiaries pay to JHI NV or our Dutch finance subsidiary. The U.S.-NL Treaty has various conditions of eligibility for reduced tax withholding rates (and other treaty benefits), all of which we expect to satisfy. If, however, the U.S.-NL Treaty were not to apply, such dividend and interest payments would be subject to a 30% U.S. withholding tax.

     We have concentrated our finance and treasury activities in our Dutch finance subsidiary located in The Netherlands. Under the Netherlands International Group Finance Company rules, we have obtained a ruling from the Dutch revenue authority that allows the subsidiary to set aside a portion of taxable profits from its finance activities in a Financial Risk Reserve (“FRR”). The amounts set aside in the FRR are free of current Dutch income tax. Consequently, if the risks (including currency, bad debt and foreign branch losses) for which the FRR was established do not arise, the finance subsidiary will generally incur a 15% effective tax rate on its qualifying finance income, a rate that the subsidiary can reduce to as low as 7%, depending upon the extent to which amounts from the FRR pay for capital expenditures of our operating companies. Issued in December 2000, the ruling became effective July 1, 2001, and applies for 10 years (although it will end earlier, on December 31, 2010, because of developments described below), so long as we satisfy the requirements of the International Group Finance Company provisions under Netherlands law.

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     Under the European Union Code of Conduct on Direct Business Taxation, member states of the European Union have agreed to eliminate harmful tax competition within the European Union. Accordingly, the EU Council of Economic and Finance Ministers, a working group of EU member countries, reviewed the tax regimes of all its member countries and identified certain tax concessions the Council considered as harmfully competitive and therefore in violation of the Code of Conduct. Among the identified tax concessions is the Netherlands International Group Finance Company regime. In December 2002, the Netherlands agreed to end its International Group Finance Company regime for new entrants.

     In a separate but related development, the European Commission, the executive arm of the European Union, similarly has reviewed the tax regimes of its member countries to identify tax concessions that the Commission considers a form of “prohibited state aid” and therefore contrary to the provisions of the European Community Treaty. In February 2003, the Commission concluded that the existence of special tax concessions in certain countries, including the Netherlands International Group Finance Company regime, cannot be reconciled with EU rules regarding state aid. Accordingly, the Commission banned certain concessionary tax regimes, including the Netherlands International Group Finance Company regime, but allowed companies then operating under that regime, including our Dutch finance subsidiary, to continue to operate under the regime until December 31, 2010. Some uncertainty exists whether, during this extended period of the International Group Finance Company regime, qualifying companies can: (1) continue to set aside profits in their FRR and (2) defer any taxable recovery of profits from their FRR until the expiration date. Until December 31, 2010, we intend to maintain and continue to add to the FRR of our Dutch finance subsidiary all allowable profits the subsidiary earns, and to fund capital expenditures of our operating companies with amounts from the FRR.

     Despite the express permission allowing our Dutch finance company to derive benefits from operating under the Netherlands International Group Finance Company rules until December 31, 2010, we can not guarantee that either the EU again, or another relevant authority or legislative body, would attempt to repeal that law earlier, or that a court of competent jurisdiction would not invalidate it, possibly with retrospective effect.

Our effective income tax rate could increase and adversely affect our operating results.

     We operate in multiple jurisdictions and pay tax on our income according to the tax laws of these jurisdictions. Various factors, some of which are beyond our control, determine our effective tax rate, including changes in or interpretations of tax laws in any given jurisdiction; our ability to use net operating losses and tax credit carry forwards and other tax attributes; changes in geographical allocation of income and expense; and our judgment about the realizability of deferred tax assets.

     In addition, because we derive a majority of our income in the U.S., certain proposed changes in U.S. tax laws, if enacted, could increase our effective tax rate. In particular, recent legislative and regulatory proposals would reduce or eliminate certain of our tax advantages as a foreign-based company with U.S. operations. Specifically, such proposals recommend measures that include (1) amending the earnings stripping rules (to restrict further the ability to reduce U.S. taxable income through interest payments to related foreign parties); (2) preventing the shifting of income through related-party transactions with more stringent enforcement of the arm’s length standards, including pre-approval of certain related party, cross-border transactions; (3) amending the rules governing cross-border reorganizations; and (4) denying treaty benefits for certain deductible payments to a foreign entity. If any of these proposals were enacted, our U.S. income tax liability could increase and thus reduce our earnings. We cannot predict whether one or more of such proposals will be enacted and the extent to which any enacted proposal would apply to us.

If we are classified as a “controlled foreign corporation,” a “passive foreign investment company” or a “foreign personal holding company,” shareholders could be subject to increased tax liability as a consequence of their investment in our securities.

     Our U.S. citizen and resident shareholders could incur adverse U.S. federal income tax consequences if we are classified as a “controlled foreign corporation,” a “passive foreign investment company” or a “foreign personal holding company” for U.S. federal income tax purposes. For information regarding these consequences, see Item 10 – “Additional Information – Taxation – United States Taxation.” In addition, shareholders could be adversely affected by changes in the current tax laws, regulations and interpretations thereof in the United States and The Netherlands, including changes that could have retroactive effect.

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Forward-Looking Statements

     This annual report contains forward-looking statements. We may from time to time make forward-looking statements in our periodic reports filed with the Securities and Exchange Commission on Forms 20-F and 6-K, in our annual reports to shareholders, in offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to analysts, institutional investors, representatives of the media and others. Examples of such forward-looking statements include:

	•		projections of our operating results or financial condition;
	•		statements of our plans, objectives or goals, including those relating to competition, acquisitions, dispositions and our products;
	•		statements about our future economic performance or that of the United States, Australia or other countries in which we operate; and
	•		statements about product or environmental liabilities.

     Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should,” “aim” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

     Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors, some of which are discussed under “Risk Factors” beginning on page 5, include but are not limited to: competition and product pricing in the markets in which we operate; general economic and market conditions; compliance with, and possible changes in laws; dependence on senior management; the success of our research and development efforts; the supply and cost of raw materials; our reliance on a small number of product distributors; the consequences of product failures or defects; exposure to environmental or other legal proceedings; risks of conducting business internationally; changes in tax laws and treatments; and foreign exchange risks. We caution you that the foregoing list of factors is not exclusive and that other risks and uncertainties may cause actual results to differ materially from those in forward-looking statements. Forward-looking statements speak only as of the date they are made.

Item 4 Information on the Company

History and Development of the Company

     Our legal name was changed to James Hardie Industries N.V. from RCI Netherlands Holdings B.V. in July 2001 when our legal form was converted from a “besloten vennootschap met beperkte aansprakelijkheid” (“B.V.”), or private limited liability company, to a “naamloze vennootschap” (“N.V.”), or public limited liability company whose stock, unlike a private limited liability company, may be transferred without executing a notarial deed if such company is listed on a recognized stock exchange. We operate under Dutch law. Our corporate seat is located in Amsterdam, The Netherlands. The address of our registered office in The Netherlands is 4^th Level Atrium, unit 04-07, Strawinskylaan 3077, 1077 ZX Amsterdam. The telephone number there is 31 20 301 2984. Our agent in the United States is Peter Shafron, Esq., who is our Senior Vice President – Finance and Legal and Company Secretary. His office is located at 26300 La Alameda, Suite 100, Mission Viejo, California 92691.

Corporate Restructuring

     On July 2, 1998, ABN 60 Pty Ltd (“ABN 60”, formerly known as JHIL), which was then a public company organized under the laws of Australia and listed on the Australia Stock Exchange, announced a plan of reorganization and capital restructuring (the “1998 Reorganization”).

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     James Hardie N.V. (“JHNV”) was incorporated in August 1998, as an intermediary holding company, with all of its common stock owned by indirect subsidiaries of JHIL. On October 16, 1998, JHIL’s shareholders approved the 1998 Reorganization. Effective as of November 1, 1998, JHIL and its subsidiaries contributed certain business assets to JHIL’s subsidiary, JHNV and JHNV’s subsidiaries. In connection with the 1998 Reorganization, JHIL and its non-transferring subsidiaries retained certain unrelated assets and liabilities.

     On July 24, 2001, JHIL announced a further plan of reorganization and capital restructuring (the “2001 Reorganization”). On October 19, 2001, we completed our 2001 Reorganization. In connection with the 2001 Reorganization, JHI NV issued common shares represented by CUFS on a one for one basis to existing JHIL shareholders in exchange for their shares in JHIL and became the ultimate holding company for JHIL and JHNV.

     JHNV continues to hold our operations. Following the 2001 Reorganization, JHI NV controlled the same assets and liabilities as JHIL controlled immediately prior to the 2001 Reorganization.

     During fiscal year 2003, ABN 60 transferred control of all of its non-operating subsidiaries to RCI Holdings Pty Ltd. On March 31, 2003, we transferred control of ABN 60 to a newly established company named the ABN 60 Foundation. See “Information on the Company – Capital Expenditures and Divestitures – Divestitures.”

Recent Developments

Sale of Las Vegas Gypsum Mine

     On March 21, 2003 we completed the sale of our gypsum mine in Las Vegas and realized a $49.2 million pre-tax gain on the sale, which represents the excess of net proceeds from the sale of $48.4 million less the cost of assets sold of $0.7 million and the assumption of $1.5 million in liabilities to the buyer. The sale resulted in an income tax expense of $19.2 million. See “– Capital Expenditures and Divestitures – Divestitures.”

Sale of Gypsum

     On March 12, 2002, we signed an agreement to sell our Gypsum business, including all of our Gypsum manufacturing facilities, to BPB U.S. Holdings, Inc. for $345.0 million in cash. We completed the transaction on April 25, 2002 and realized an $81.4 million pre-tax gain on the sale with $26.1 million in income tax expense. Our consolidated financial statements and operating results contained in this annual report reflect our Gypsum business as discontinued operations. See “– Capital Expenditures and Divestitures – Divestitures.”

     Our Gypsum business, which was based in the United States, produced a wide range of gypsum wallboard products used as interior wall linings in residential, commercial and specialized (moisture and fire resistant) applications. The majority of these products were sold under the Hardirock^TM, Hardikote^TM and Hardiwall^TM brand names. In addition, we made a wide range of gypsum plaster products for construction and industrial applications together with specialty ground gypsum for agricultural markets. Our products were also used in dental and pharmaceutical applications.

General Overview of Our Business

     We are the largest manufacturer of fiber cement products and systems for internal and external building construction applications in the United States, Australia, New Zealand and the Philippines. We are the second largest manufacturer of flat sheet fiber cement products and systems for internal and external building construction applications in Chile. Fiber cement is currently one of the fastest growing segments of the U.S. siding industry. Based on our knowledge, experience, and third-party data regarding our industry, we estimate that total U.S. industry shipments of fiber cement were approximately 1.4 billion square feet during fiscal year 2003, an increase of approximately 17% from fiscal year 2002. We market our fiber cement products and systems under various Hardi™ brand names and other brand names such as Cemplank, Sentry and Artisan. We believe that, in certain applications, our fiber cement products and systems provide a combination of distinctive performance, design and cost advantages when compared to other fiber cement products and alternative products and systems using solid wood, engineered wood, vinyl, brick, stucco or gypsum wallboard.

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     The sale of fiber cement products in the United States accounted for 75%, 73% and 69% of our total net sales from continuing operations in fiscal years 2003, 2002 and 2001, respectively.

     Our fiber cement products are used in various markets including new residential construction (single and multi-family housing), manufactured housing (mobile and pre-fabricated homes), repair and remodeling and a variety of commercial and industrial applications (stores, warehouses, offices, hotels, motels, schools, libraries, museums, dormitories, hospitals, detention facilities, religious buildings and gymnasiums). We manufacture numerous types of fiber cement products with a variety of patterned profiles and surface finishes for a range of applications including external siding, roofing, internal linings, facades, fencing, pipes and floor and tile underlayments. In contrast to some other building materials, fiber cement provides durability attributes such as strong resistance to moisture, fire, impact and termites, requires relatively little maintenance and can be used as a substrate to create a wide variety of architectural effects with textured and colored finishes. During fiscal year 2003, management believes, based on its analysis of competitors’ sales, that we sold approximately 92% of all fiber cement products sold in the United States, 64% of all fiber cement products sold in Australia and 87% of all fiber cement products sold in New Zealand. We estimate that we had approximately 12% of the U.S. external siding market in fiscal year 2003.

     The breakdown of our revenue by product category and geographic area for each of our last three fiscal years is as follows:

Industry Overview

U.S. Housing Industry and Fiber Cement

     In the United States, fiber cement is principally used in the residential building industry, which fluctuates based on the level of new home construction and the repair and remodeling of existing homes. The level of activity is generally a function of interest rates, inflation, unemployment levels, demographic trends, gross domestic product growth and consumer confidence. Demand for building products is also affected by residential housing starts and existing home sales, the age and size of the housing stock and overall home improvement expenditures. According to the U.S. Census Bureau, annual domestic housing starts increased from approximately 1.64 million in 1999 to a seasonally adjusted annual rate of approximately 1.73 million in May 2003 and residential remodeling expenditures increased from approximately $100.5 billion in 1999 to a seasonally adjusted annual rate of approximately $175.7 billion as of the fourth quarter of calendar year 2002.

     Fiber cement is one of the fastest growing segments of the siding industry. Based on our knowledge, experience and third-party data regarding our industry, we estimate that total U.S. industry shipments of fiber cement were approximately 1.4 billion square feet during fiscal year 2003, up approximately 17% from fiscal year 2002. The future growth of fiber cement products will not only depend on overall demand for building products but also the rate of penetration of fiber cement products against competing materials such as wood, engineered wood (hardboard and oriented strand board), vinyl, masonry and stucco.

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     In the United States, the largest application for fiber cement products is in the external siding industry. Continued strength in residential construction combined with gains in the repair and remodel market have resulted in strong demand for external siding products. Based on our knowledge, experience and third-party data regarding our industry, we estimate that the external siding market (including siding, fascia, trim and soffit) was approximately 10.2 billion square feet in fiscal year 2003. Siding is a component of every building and it usually occupies more square footage than other building components, such as windows and doors. Selection of siding material is based on installed cost, durability, aesthetic appeal, strength, weather resistance, maintenance requirements and cost, insulating properties and other features. Different regions of the United States show a decided preference among siding materials according to economic conditions, weather, materials availability and local taste. The principal siding materials are solid wood, engineered wood, fiber cement, vinyl, masonry and stucco. Vinyl has the largest share of the siding market. In recent years, fiber cement has been gaining market share at the expense of wood and engineered wood products due to durability concerns and higher maintenance requirements.

     In the U.S. civil construction market, large diameter pipes are used for major public infrastructure projects such as storm water, sewerage, water distribution and other non-pressurized drainage applications. According to the 2002 Freedonia Report on Large Diameter Pipes, the U.S. market for large diameter pipe is estimated at 177 million linear feet annually. Of this, approximately 45% is used for storm water and sewer applications and approximately 20% is used in drainage and irrigation applications. The market is expected to grow approximately 2.4% annually. In March 2001, we commenced production at our newly constructed fiber reinforced concrete pipe plant in Plant City, Florida.

International Fiber Cement Industry

     In Australia and New Zealand, fiber cement building products are used in both the residential and commercial building industries with applications in external siding, internal walls, ceilings, floors, soffits and fences. The residential building industry represents the principal market for fiber cement products, with the level of activity in this industry a function of interest rates, inflation, unemployment levels, demographic trends, gross domestic product growth and consumer confidence. Demand for fiber cement building products in Australia is also affected by the level of new housing starts and renovation activity. According to the Australian Bureau of Statistics, new housing starts in Australia grew from approximately 149,900 in fiscal year 1999 to a forecasted amount of approximately 172,900 in fiscal year 2003. Renovation activity, as measured in local currency expenditures by the Australian Bureau of Statistics, has increased steadily each year from calendar year ended December 1999 to calendar year ended December 2002 for a total increase over this period of approximately 44%.

     Fiber cement products have gained broader acceptance across a range of product applications in Australia and New Zealand than in the United States primarily due to their earlier introduction. Our former JHIL subsidiaries developed fiber cement in Australia as a replacement for asbestos cement in the early 1980s, with all of their asbestos product manufacturing ceasing in early 1987. Asbestos sheet production ceased in the early 1980s and production of pipe-based products that utilized asbestos ceased in early 1987. Competition has intensified over the past five years in Australia. In addition to competition from solid wood, engineered wood, wallboard, masonry and brick, two Australian competitors have established fiber cement manufacturing facilities in Australia and fiber cement imports are also available. Competition has also intensified in New Zealand as fiber cement imports have increased, resulting in increased competitive market pricing.

     Management believes that fiber cement has strong growth potential in Asian and South American markets in the long-term as the benefits of framed construction over traditional masonry construction are understood and accepted. In addition, we believe the opportunity to replace wood-based products such as plywood with the more durable fiber cement will be attractive to consumers in these markets.

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Products

     We manufacture fiber cement products in the United States, Australia, New Zealand, the Philippines and Chile. Our total product offering is aimed at building and construction markets, including new residential construction, manufactured housing, repair and remodeling and a variety of commercial and industrial building applications.

     We offer a wide range of fiber cement products for both exterior and interior applications, some of which have not yet been introduced into the United States. In the United States and elsewhere, our products are typically sold as planks or flat sheets with a variety of patterned profiles and finishes. Planks are used for external siding while flat sheets are used for internal and external wall linings and floor underlay. In fiscal year 2002, we also commenced production at our new fiber reinforced concrete pipe plant facility in Plant City, Florida, where pipes are being manufactured for use as large diameter storm water and non-pressurized drainage applications. Outside the United States, we also manufacture fiber cement products for use in other applications such as building facades, lattice, fencing and decorative columns.

     We have developed a proprietary technology platform enabling the production of thicker yet lighter-weight fiber cement products that are generally lighter and easier to handle than traditional building products. The first application of this technology has been our Harditrim™ product. Harditrim^TM is a fiber cement trim product that is used on the exterior of residential and commercial construction to replace traditional wood and engineered wood trim. Harditrim^TM was launched in fiscal year 1999 from our Cleburne plant and demand has been strong since that time. A completely new production process for manufacturing Harditrim^TM was commissioned at the Cleburne plant and production commenced in fiscal year 2002.

     Management believes that our products provide certain performance, design and cost advantages. The principal fiber cement attribute in exterior applications is durability, particularly when compared to competing wood and wood-based products, while offering comparable aesthetics. Our fiber cement products exhibit superior resistance to the damaging effects of moisture, fire, impact and termites compared to wood and wood-based products. This has enabled us to capitalize on the performance problems associated with certain competing products. Vinyl siding products generally have better durability characteristics than wood-based products, but typically cannot duplicate the superior aesthetics of fiber cement and lack the characteristics necessary for effectively accepting paint applications.

     Our fiber cement products provide strength and the ability to imprint simulated patterns that closely resemble patterns and profiles of traditional materials such as wood and stucco. The surface properties provide a superior paint-holding finish to wood and engineered wood products such that the periods between necessary maintenance and repainting are longer. Compared to masonry construction, the product is lightweight, physically flexible and can be cut using readily available tools. This makes the product suitable for lightweight construction across a range of architectural styles. The product is especially well suited to timber or steel framed construction.

     In ceramic tile underlayment applications, our products provide superior handling and installation characteristics compared to fiberglass mesh cement boards. Compared to wood and wood-based products, our products provide the same general advantages that apply to external applications. In addition, our fiber cement products exhibit less movement in response to exposure to moisture than many alternative competing products, providing a more consistent and durable substrate on which to install tiles. In internal lining applications where exposure to moisture and impact damage are significant concerns, our products provide superior moisture resistance and impact resistance to traditional gypsum wet area wallboard and other competing products.

     We believe our fiber reinforced concrete pipes are superior to the competing steel reinforced concrete pipes and vinyl in several respects. As compared to standard steel reinforced concrete pipes, our pipes are: lighter, with one-third to one-half the weight of steel reinforced concrete pipes of the same length; longer, with our standard length being 16 feet, which is twice as long as standard steel reinforced concrete pipes; and stronger, compared to steel reinforced concrete pipes of the same size.

     We seek to emphasize the performance attributes of our products and continue to develop new products that, due to the materials used and the process technology employed in their manufacture, may be difficult for competitors to emulate. While no assurances can be given, we believe that the proprietary nature of these products, our ability to competitively source raw materials for these products and the economies of scale that are derived from their

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manufacture should assist our efforts to maintain our leadership and low cost competitive position. See “Research and Development.”

     In fiscal year 2000, we launched Hardibacker^TM 500, a new ½ inch thick tile backer board in the United States. This enabled us to increase sales of products to home center retailers which access the building trade and home repair markets, and the introduction of Harditrim^TM, a new generation of low density fiber cement trim products for residential construction, further extended our product range and enhanced our reputation as a leader in fiber cement innovation. The addition of Harditrim^TM enabled us to offer a fiber cement system for residential construction that allowed builders to completely replace wood and engineered wood products with fiber cement in most exterior applications. We introduced ColorPlus^TM, a new finished product available in specific lap siding, shingles, trim, fascia and soffit products, during fiscal year 2002. In fiscal year 2003, we expanded our new line of pre-finished exterior products, ColorPlus^TM, with the addition of several new colors, and successfully launched a new all-weather low density trim product utilizing our new proprietary XLD^TM low density fiber cement technology. We also launched our new improved proprietary grid ¼” backer product. Additionally, in the past five years, we launched nine new textures, styles and coatings in fiber cement siding products in the United States to capitalize on demand for a variety of styles among homebuilders and homeowners. In Australia and New Zealand, new products released over the past three years include Hardifloor™, Monotek^®, HardiGroove^TM, HardiGlaze^TM, EziGrid^TM Tilebacker, Hardirock^TM, Linea^® and new column profiles and accessories. In fiscal year 2003, we launched Hardiplank^TM Select Cedarmill in the Philippines and South Korea.

Seasonality

     Our business is seasonal and follows activity levels in the building and construction industry. In the United States, the quarters ending in December and March generally reflect reduced levels of building activity depending on weather conditions. In Australia, the quarter ending in March is usually affected by a slowdown due to summer vacations. In the Philippines, sales are generally lower during the period from June through September as this is typhoon season. In Chile, sales are generally lower from May through September due to weather conditions. In addition, general industry patterns can be affected by weather, economic conditions, industrial disputes and other factors.

Raw Materials

     All of the raw materials required in the manufacture of our fiber cement products are available from a number of sources and we have not experienced any shortages that have materially affected our operations. The principal raw materials used in the manufacture of fiber cement are cellulose fiber (wood-based pulp), silica (sand), portland cement and water.

     Cellulose Fiber. Reliable access to specialized, consistent quality, low cost pulp is critical to the production of fiber cement building materials. Cellulose fiber is sourced from New Zealand, the United States and Canada, and is processed to our specifications. It is subsequently further processed using our proprietary technology to provide the reinforcing material in the cement matrix of fiber cement. We have developed a high level of internal expertise in the production and use of wood-based pulps. This expertise is shared with pulp producers, which have access to appropriate raw wood stocks, in order to formulate superior reinforcing pulps. The resulting pulp formulas are typically proprietary and are the subject of confidentiality agreements between the pulp producers and us. There are a variety of supply alternatives for the sourcing of pulp. Although we have entered into contracts to hedge pulp prices in the past, we currently have none in effect and do not anticipate engaging in such transactions in the near future.

     Silica. High purity silica is sourced locally by the various production plants. In the majority of locations, we use silica sand as a silica source. In certain other locations, however, we process quartz rock and beneficiate silica sand to ensure the quality and consistency of this key raw material. In our Fontana, California and Tacoma, Washington plants, where cost-effective sources of sand are not available, we operate quartz mines and process the rock to obtain silica.

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     Cement. Cement is acquired in bulk from local suppliers and is supplied on a just-in-time basis to our manufacturing facilities. The silos at each fiber cement plant hold between one and three days of our cement requirements.

     Water. We use local water supplies and process all wastewater to comply with environmental requirements.

Sales, Marketing and Distribution

     The principal markets for our fiber cement products are the United States, Australia, New Zealand, the Philippines and Chile. In addition, we sell fiber cement products in Canada, Taiwan, Thailand, Singapore, Japan, China, Vietnam, Malaysia, Hong Kong, the Middle East, South Korea, Indonesia, Argentina, Spain and more recently, other parts of the European market. Our Hardi™ brand name, customer education in comparative product advantages, differentiated product range and customer service, including technical advice and assistance, provide the basis for our marketing strategy. We offer our customers support through a specialized fiber cement sales force and customer service infrastructure in the United States, Australia, New Zealand, the Philippines, Canada and Chile. The customer service infrastructure includes inbound customer service support coordinated nationally in each country, and is complemented by outbound telemarketing capability. Within each regional market, we provide sales and marketing support to building products dealers and lumber yards and also provide support directly to the customers of these distribution channels, principally homebuilders and building contractors.

     In the United States, we sell fiber cement products for new residential construction predominantly to distributors, which then sell these products to dealers or lumber yards. This two-step distribution process is increasingly being supplemented with direct sales to customers as a means of accelerating product penetration and sales. Our top three U.S. distributors accounted for approximately 70% of our total U.S. fiber cement sales in fiscal year 2003. Repair and remodel sales in the United States are typically sold through the large home center retailers and specialist distributors. In Australia and New Zealand, both new construction and repair and remodel products are generally sold directly to hardware stores and lumberyards rather than through the two-step distribution process used in the United States. In the Philippines, a network of thousands of small to medium size dealers sells our fiber cement products to consumers, builders and real estate developers. In Chile, we sell directly to builders, contractors and distributors. Physical distribution is primarily by road or sea transport in each country with significant use of rail only in the United States.

     We maintain dedicated regional sales management teams in the major sales territories. The sales teams (including telemarketing staff) consist of approximately 206 people in the United States and Canada, 121 people in Australia, 16 people in New Zealand, 29 people in the Philippines, 1 person in Papua New Guinea, 22 people in Chile and 13 people in Europe. Our national sales managers and national account managers together with the regional sales managers and sales representatives maintain relationships with national and other major accounts. Our sales force includes skilled trades people who provide on-site technical advice and assistance. In certain cases, sales forces manage specific product categories. For example, in the United States there are separate sales forces for siding products, interior products and pipes, and we will be adding a separate sales force for roofing products. The interior products sales force provides in-store merchandising support for home center retailers.

     We also use trade and consumer advertising and public relations campaigns to generate demand for our products. These campaigns usually explain the differentiating attributes of our fiber cement products and the suitability of our fiber cement products and systems for specific applications.

     Despite the fact that distributors are our direct customers, we also aim to increase primary demand for our products by marketing our products directly to homeowners, architects and builders. We encourage them to specify and install our products because of the quality and craftsmanship of our products. This “pull through” strategy, in turn, assists us in expanding sales for our distribution network as distributors benefit from the increasing demand for our products.

     Geographic expansion of our fiber cement business has occurred in markets where framed construction is prevalent for residential applications or where there are opportunities to change building practices from masonry to framed construction as in parts of Asia and South America. Expansion is also possible where there are direct substitution opportunities irrespective of the methods of construction. Our entry into the Philippines is an example of

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the ability to substitute fiber cement for an alternative product (in this case plywood). With the exception of our current major markets, as well as Japan and certain rural areas in Asia and Eastern Europe, most markets in the world principally utilize masonry construction for external walls in residential construction. Accordingly, further geographic expansion depends on our ability to provide alternative solutions.

     The launch of fiber cement products in the Philippines has been accompanied by strategies to address the particular needs of local customers and the building trade as fiber cement products are relatively new to this market and until recently were not widely used. For example, we have established a carpenter training and accreditation program whereby Filipino carpenters unfamiliar with our products are taught installation techniques. Additionally, we sponsor the “Bridging the Campus Career Gap” one-day seminar for graduating architects at each of the top 10 universities in the Philippines on preparing resumes and preparing for interviews.

     Fiber cement products manufactured in Australia, New Zealand and the Philippines are exported to a number of markets in Asia and the Middle East by ship. A regional sales management team based in the Philippines is responsible for coordinating export sales into Asia and the Middle East.

Research and Development

     We pioneered the successful development of cellulose reinforced fiber cement and during the 1980s progressively introduced products resulting from our proprietary product formulation and process technology. We have capitalized on our strong market positions to maintain leadership in product research and development and process technology enhancements. Our product differentiation strategy, and our quest to maintain our position as one of the low cost manufacturers of fiber cement, is supported by our significant investment in research and development. In fiscal year 2003, we invested $20.8 million related to fiber cement or approximately 2.6% of total net sales in research and development expenditures, which includes $2.7 million of amounts classified as selling, general and administrative expenses for US GAAP purposes. For fiscal years 2002 and 2001, we invested $16.0 million and $15.9 million, respectively, in research and development expenditures, which includes $1.9 million and $1.4 million of amounts classified as selling, general and administrative expenses, or 2.6% and 2.9% of total net sales, respectively. We believe that we now have one of the largest and most advanced fiber cement research and development capabilities in the world.

     Globally, we employ approximately 107 scientists, engineers and technicians in Core Research and in Product & Process Development. Core Research, based at our Global Research & Development Center in Sydney, Australia, develops technologies that have the potential to create new generations of products and production processes. Product & Process Development units in Sydney and in Fontana, California, transform these technologies into new and more efficient ways of manufacturing our products, and into new products that meet specific market needs.

     By investing in process technology, we aim to keep reducing our capital and operating costs, and at the same time find new ways to make existing and new products.

     In addition, our goals are to:

	•		continue to lower the capital cost of each unit of production at new plants by learning from past projects and through continuing innovation in engineering; and
	•		reduce operating costs at all plants by improving manufacturing processes, raw materials yields and machine productivity.

Dependence on Trade Secrets and Research and Development

     Our current patent portfolio is based mainly on manufacturing and use of fiber cement products. Our additional technical intellectual property consists primarily of our operating and manufacturing know-how, which is treated as a trade secret. We are in the process of elevating our abilities to effectively create, manage and utilize our intellectual property and have developed a strategy that increasingly uses patenting, licensing, trade secret protection and joint development. If our research and development efforts fail to generate new, innovative products, our overall profit margins may decrease and demand for our products may fall.

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Governmental Regulation

Environmental Regulation

     Our operations and properties are subject to extensive federal, state and local and foreign environmental protection and health and safety laws, regulations and ordinances. These environmental laws, among other matters, govern activities and operations that may have adverse environmental effects, such as discharges to air, soil and water, and establish standards for the handling of hazardous and toxic substances and the handling and disposal of solid and hazardous wastes. In the United States, these environmental laws include:

	•		the Resource Conservation and Recovery Act;
	•		the Comprehensive Environmental Response, Compensation and Liability Act;
	•		the Clean Air Act;
	•		the Occupational Safety and Health Act;
	•		the Emergency Planning and Community Right to Know Act;
	•		the Clean Water Act;
	•		the Safe Drinking Water Act;
	•		the Surface Mining Control and Reclamation Act;
	•		the Toxic Substances Control Act;
	•		the National Environmental Policy Act; and
	•		the Endangered Species Act,

as well as analogous state statutes and regulations. Other countries also have statutory schemes relating to the protection of the environment. Pursuant to certain environmental laws, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of environmental contamination on, under or in that property. In addition, persons who arrange, or are deemed to have arranged, for the disposal or treatment of hazardous substances may also be liable for the costs of removal or remediation of environmental contamination at the disposal or treatment site, regardless of whether the affected site is owned or operated by such person. Environmental laws often impose liability whether or not the owner, operator or arranger knew of, or was responsible for, the presence of such environmental contamination. Also, third parties may make claims against owners or operators of properties for personal injuries and property damage associated with releases of hazardous or toxic substances pursuant to applicable environmental laws as well as common law tort theories, including strict liability. Environmental compliance costs in the future will depend, in part, on regulatory developments and future requirements that cannot be predicted. While we do not currently anticipate any material expenditures or modifications will be required, there can be no assurance that such expenditures or modifications will not have a material adverse effect on our business, financial condition or results of operations.

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Organizational Structure

     JHI NV is incorporated in The Netherlands, with its corporate seat in Amsterdam.

     The table below sets forth our significant subsidiaries, all of which are 100% owned by JHI NV, either directly or indirectly, as of May 31, 2003.

Capital Expenditures and Divestitures

Capital Expenditures

     The following table sets forth our capital expenditures, calculated on an accrual basis, for each year in the three-year period ended March 31, 2003.

     The significant capital expenditure projects over the past three fiscal years in our USA Fiber Cement business include:

	•		the construction of our plant in Peru, Illinois and completion of its first line at a cost of $45.2 million, which occurred during fiscal years 2000 and 2001;
	•		the addition of a second trim line at our Cleburne, Texas plant at a cost of $22.7 million which occurred during fiscal years 2000, 2001 and 2002;
	•		upgrades to the first line and plant infrastructure at our Waxahachie, Texas plant at a cost of $9.1 million, which was completed in fiscal year 2001;
	•		the addition of a line at our Waxahachie, Texas plant at a cost of $12.6 million, which occurred during fiscal year 2002;

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	•		the addition of a second line at our Peru, Illinois plant at a cost of $24.7 million, which occurred during fiscal years 2001, 2002 and 2003;
	•		the addition of a second line at our Waxahachie, Texas plant at a cost of $21.6 million, which began during fiscal year 2003 and is scheduled for completion in fiscal year 2004;
	•		the construction of a new pilot plant in California to begin manufacturing trials of a new generation of fiber cement roofing products at a cost of $9.9 million, which began during fiscal year 2003 and is scheduled for completion in fiscal year 2004;
	•		upgrades to our Blandon, Pennsylvania plant at a cost of $4.1 million, which began during fiscal year 2003 and is scheduled for completion in fiscal year 2004; and
	•		the purchase of property in Summerville, South Carolina and Blandon, Pennsylvania, at a cost of $10.0 million and $7.6 million, respectively, in fiscal year 2003.

     The significant capital expenditure project in our Chile and U.S. Pipes businesses over the past three fiscal years was for the construction of our pipe plant in Plant City, Florida at a cost of $32.3 million, which occurred during fiscal years 2001 and 2002. In addition, $1.4 million was spent in fiscal year 2000.

     We currently expect the level of our capital expenditures to continue to be substantial. Competitive pressures or market developments could require increased capital expenditures. Our financing for these capital expenditures is expected to come from our internal cash flows from our future operations.

Divestitures

Gypsum

     On March 12, 2002, we signed an agreement to sell our Gypsum operations to BPB U.S. Holdings, Inc. for cash proceeds of $345.0 million less selling costs of $10.6 million. See “Recent Developments.” The sale was completed on April 25, 2002. We recorded a pre-tax gain of $81.4 million representing the excess of net proceeds from the sale of $334.4 million over the net book value of assets sold of $253.0 million. The sale resulted in income tax expense of $26.1 million. The net assets of our Gypsum business prior to the sale primarily consisted of trade receivables, inventory, accounts payable, mineral reserves, property, plant and equipment, goodwill and deferred taxes.

     Prior to the sale of our Gypsum operations in April 2002, we owned and operated three gypsum wallboard-manufacturing facilities in the United States. For fiscal year 2002, the average capacity utilization for our gypsum wallboard manufacturing facilities was approximately 83%.

     We also owned three gypsum rock mines located in an area covering parts of Northwest Arizona, Utah and Nevada; in Las Vegas, Nevada; and in Nashville, Arkansas. In June 2001, we entered into an agreement to sell our Las Vegas mine to a developer for $50.0 million. On March 21, 2003 we completed the sale of our gypsum mine in Las Vegas and recorded a pre-tax gain of $49.2 million representing the excess of net proceeds from the sale of $48.4 million less the cost of assets sold of $0.7 million and the assumption of $1.5 million in liabilities by the buyer. The sale resulted in an income tax expense of $19.2 million. The proceeds from the sale were comprised of cash of $50.6 million less selling costs of $2.2 million. The other two gypsum rock mines were included with the sale of our Gypsum operations to BPB U.S. Holdings, Inc. in April 2002.

     Under the terms of our agreement to sell our Gypsum business to BPB U.S. Holdings, Inc., we agreed to customary indemnification obligations related to our representations and warranties in the agreement. Our indemnification obligation generally extends for 2 years from the closing date, arises only if claims exceed $5 million in the aggregate and is limited to $100 million in the aggregate. In addition, we agreed to indemnify BPB U.S. Holdings, Inc. for any future liabilities arising from asbestos-related injuries to persons or property arising from our former Gypsum business. Although we are not aware of any asbestos-related claims arising from the Gypsum business nor circumstances that would give rise to such claims, under the sale agreement, our obligation to indemnify the purchaser for liabilities arising from asbestos-related injuries arises only if such claims exceed $5

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million in the aggregate, is limited to $250 million in the aggregate and will continue for 30 years after the closing date of our Gypsum business.

     Pursuant to the terms of our agreement to sell our Gypsum business, we also retained responsibility for any losses incurred by the purchaser resulting from environmental conditions at the Duwamish River in the state of Washington so long as notice of a claim is given within 10 years of closing. Such losses are subject to a $34.5 million limitation. The Seattle gypsum facility had previously been included on the “Confirmed and Suspected Contaminate Sites Report” released in 1987 due to the presence of metals in the groundwater. As we believe the metals found emanated from an offsite source, we do not believe we are liable for, and have not been requested to conduct, any investigation or remediation relating to the metals in the groundwater.

Building Services

     During the year ended March 31, 2003, we recorded a loss of $1.3 million relating to our Building Services business, which was disposed of in November 1996. The loss consisted of expenses of $0.8 million and a $0.5 million write-down of an outstanding receivable that was retained as part of the sale.

James Hardie & Coy Pty Ltd and Jsekarb Pty Ltd

     In fiscal year 2001, we gifted A$3.0 million ($1.7 million) in cash and transferred ownership of Amaca Pty Ltd (formerly James Hardie & Coy Pty Ltd) and Amaba Pty Ltd (formerly Jsekarb Pty Ltd) to the Medical Research and Compensation Foundation. The change in ownership resulted in a gain on disposal of $2.3 million. In addition, ABN 60 (formerly JHIL) agreed to repay its existing loan of A$70.0 million ($34.3 million) due to JH & Coy. Following the placement of ABN 60 shares on August 1, 2001, this A$70.0 million loan was repaid in full on August 8, 2001. ABN 60 also agreed to provide 42 annual payments to the former subsidiaries, totaling A$234.2 million ($141.4 million). Under this agreement, ABN 60 had the option of making the first seven annual payments and then a final payment of A$73.0 million ($44.1 million) when the eighth payment comes due, making a total payment of A$112.0 million ($67.6 million). However, the former subsidiaries’ obligation to indemnify JHIL and its related entities is not limited to the amount ABN 60 is obligated to pay to the Foundation.

     On September 9, 2001, ABN 60 made an early payment of A$1.0 million ($0.5 million) to the Foundation. This payment was in addition to the annual required payment that is made each February. As a result, the required annual payments of A$5.6 million have been reduced to A$5.5 million. On March 31, 2003, we transferred control of ABN 60, and consequently this agreement and related liability, to a newly established company named ABN 60 Foundation. Also see “Legal Proceedings.”

ABN 60

     On March 31, 2003, we transferred control of ABN 60 to a newly established company named ABN 60 Foundation. ABN 60 Foundation was established to be the sole shareholder of ABN 60 and to ensure ABN 60 meets its payment obligations to the Foundation. Following the establishment of the ABN 60 Foundation, JHI NV no longer owns any shares of ABN 60. ABN 60 Foundation is managed by independent directors and operates entirely independently of our company. We do not control the activities of ABN 60 or ABN 60 Foundation in any way. We have no economic interest in ABN 60 or the ABN 60 Foundation, have no right to dividend or capital distributions, nor will we benefit in the event that there is ultimately a surplus of funds in ABN 60 or ABN 60 Foundation. Equally, outside of the express indemnity for non-asbestos matters provided to ABN 60 and more fully described in “Legal Proceedings,” we do not believe we will have any liability should future liabilities of ABN 60 or ABN 60 Foundation exceed the funds available to those entities. As a result of the change in ownership of ABN 60 on March 31, 2003, we recorded a loss on disposal of $0.4 million, representing the liabilities of ABN 60 (to the Foundation) of A$94.6 million ($57.2 million), the A$94.5 million ($57.1 million) in cash held on the balance sheet, and costs associated with the establishment and funding of ABN 60 Foundation. Also see “Legal Proceedings” and Notes 14 and 17 to our consolidated financial statements included in Item 18 in this Form 20-F.

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Windows

     On November 30, 2001, we sold our Windows business. We began the divestiture of our Windows business in August 2000 when we approved a plan to dispose of the business. In fiscal year 2001, we recorded a loss on disposal of $17.4 million, net of an income tax benefit of $0.6 million. This loss on disposal consisted of $17.2 million for a write-down of assets to their expected net realizable value on disposal and transaction costs expected to be incurred with the disposal. In addition, operating losses from August 15, 2000 to the final disposition date were estimated at $0.8 million and included in fiscal year 2001’s loss on disposal. In fiscal year 2002, we recorded a gain on disposal of $2.0 million representing the excess of cash proceeds of $7.8 million over the net book value of the assets sold of $5.8 million, a retirement plan settlement loss of $1.3 million and an income tax benefit of $1.3 million. The cash proceeds were offset by cash divested of $0.5 million.

Property, Plant and Equipment

     Over the past several years, we have built significant production capacity in the United States in an effort to ensure that we will be able to meet expected increases in demand for our products and improve our operating efficiencies. As part of our facilities investment strategy, we have constructed a new plant for flat sheet and trim products in Illinois and upgraded and expanded our plants in Illinois, Texas, California and Pennsylvania, at an aggregate total cost of approximately $203.5 million over five years. In addition, we entered into a long-term lease arrangement in fiscal year 2001 with Temple Inland for our Waxahachie, Texas plant and upgraded the first line, completed the second line and began adding a new line at this fiber cement plant in fiscal years 2001, 2002 and 2003, respectively. In fiscal year 2002, we also acquired the operating assets of Cemplank, Inc., which included a fiber cement plant at Blandon, Pennsylvania and a fiber cement plant at Summerville, South Carolina and in fiscal year 2003, we purchased the property on which these plants are located. Our management estimates that we now have eight of the largest and lowest cost fiber cement manufacturing plants in the United States. Our management also believes that the location of our plants in California, Texas, Florida, Illinois, Washington, Pennsylvania and South Carolina positions us near high growth markets in the United States while minimizing our transportation costs for product distribution and raw material sourcing.

     In Australia, all of our manufacturing plants have been upgraded and modernized in the past five years as part of a A$40 million ($29 million) capital improvement program. This program, which included the automation of product finishing processes at both plants, was aimed at reducing direct costs, increasing production yields and improving product quality. In fiscal year 2002, we closed our fiber cement plant in Western Australia and have been meeting demand from our remaining facilities. In New Zealand, our fiber cement production line was upgraded in fiscal year 2001 at a cost of NZ$1 million ($1 million) to enable it to produce new siding and internal lining fiber cement products. In the Philippines, we have one fiber cement manufacturing plant, which began producing marketable product in fiscal year 1999.

     In December 2000, we purchased and significantly upgraded a plant in Santiago, Chile and the production of our products commenced in March 2001.

     Additionally, in March 2001, our new fiber reinforced concrete pipe plant at Plant City, Florida commenced operations. Built at a total cost of $33.7 million, the plant has commenced production of drainage pipes and has an annual production capacity of 100,000 tons.

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Plants and Process. We manufacture fiber cement products in the United States, Australia, New Zealand, the Philippines and Chile. The location of each of our fiber cement plants and the annual production capacity for such plants are set forth below:

     While the same basic process is used to manufacture fiber cement products at each facility, plants are designed to produce the appropriate mix of products to meet each market’s specific, projected needs. All of our manufacturing facilities have been either newly constructed or substantially modernized and upgraded in the past five years. The facilities were constructed so production can be efficiently adjusted in response to increased consumer demand by either increasing production capacity utilization or enhancing the economies of scale or by adding additional lines to existing facilities, or by making corresponding reductions in production capacity in response to weaker demand. Except for the Waxahachie, Texas plant, we own all of our fiber cement sites and plants located in the United States. The lease for the Waxahachie, Texas site and plant expires on March 31, 2020, at which time we have an option to purchase the plant. Pursuant to the lease, we make quarterly base rental payments of $850,000. We lease all of our

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fiber cement sites located in Australia from former subsidiaries now held by the Foundation. All of these leases expire on October 31, 2008, and contain renewal options and provisions adjusting lease payments based on changes in various market factors as reflected in changes in the consumer price index. Pursuant to these leases, we make rental payments of approximately $2.7 million in the aggregate each year. We own our fiber cement plants located in New Zealand, the Philippines and Chile, and our Pipe plant in the United States.

     For fiscal year 2003, average capacity utilization for our fiber cement plants by country was approximately as follows:

     The capital cost per unit of production for new plants has significantly declined since we opened our first U.S. plant in Fontana, California in 1989. This improvement is largely attributable to our utilization of proprietary technology. Management believes that this capital cost per unit of capacity is substantially lower than that of many competing plants and is one factor in improving our cost position. In addition, we can now build and commission new manufacturing plants significantly faster than when we built our first production line in the United States. Management believes that the speed and cost at which we can erect new plants relative to our competitors enable us to respond rapidly to emerging regional demand for fiber cement and to gain the advantage accorded to the first local producer in a market.

     Mines. We own a quartz mine in Fontana, California and lease a quartz mine in Tacoma, Washington. Our five-year lease for the mine in Tacoma, Washington expires on February 28, 2006, at which time we have the option to renew our lease for an additional 4 years. We pay production royalties to the owner based on silica tonnage removed from the mine. Because cost effective sources of sand are not available at these locations, we operate these quartz mines and process the rock to obtain silica for our fiber cement products.

Legal Proceedings

     Our subsidiaries are involved from time to time in various legal proceedings and administrative actions incidental to the normal conduct of business. Although it is impossible to accurately predict the outcome of any pending legal proceeding, our management believes that these proceedings and actions should not, individually or in the aggregate, have a material adverse effect on our business, financial condition or results of operations. See the risk factor entitled “We may be subject to potential liability because our former subsidiaries formerly manufactured products containing asbestos” in Item 3.

     Following the establishment of the Foundation, JHI NV no longer owns any shares of Amaca Pty Ltd (formerly James Hardie & Coy Pty Ltd) or Amaba Pty Ltd (formerly Jsekarb Pty Ltd), former Australian subsidiaries of ABN 60 that previously manufactured products containing asbestos in Australia. Following the establishment of the ABN 60 Foundation on March 31, 2003, JHI NV no longer owns any shares of ABN 60, which manufactured products containing asbestos prior to 1937. These former Australian subsidiaries as well as ABN 60 agreed to indemnify JHI NV and its related corporate entities for past and future asbestos-related liabilities as part of the establishment of the respective foundations. The former subsidiaries’ and ABN 60’s obligation to indemnify JHI NV and its related entities includes claims that may arise associated with the manufacturing activities of those companies. JHI NV has agreed to indemnify ABN 60 Foundation for any non asbestos-related legal claims made on ABN 60. See also Note 17 to our consolidated financial statements included in Item 18 of this Form 20-F.

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     While it is difficult to predict accurately the incidence or outcome of future litigation, we believe that it is remote that any personal injury suits for damages, in connection with the former subsidiaries’ manufacture or sale of asbestos-containing products, that have been or may be filed against JHI NV as the ultimate holding company, or against its current subsidiaries, would have a material adverse effect on our business, results of operations or financial condition. Our belief is based in part on the separateness of corporate entities under Australian law, the limited circumstances where “piercing the corporate veil” might occur under Australian and Dutch law, there being no equivalent under Australian law of the U.S. legal doctrine of “successor liability” and because of the Dutch principle to the effect that transferees of assets may be held liable for the transferor’s liabilities when they acquire assets at a price that leaves the transferor with insufficient assets to meet claims is not triggered by the restructuring or previous group transactions. The courts in Australia have confirmed the primacy of separate corporate entities and have generally refused to hold parent entities responsible for the liabilities of their subsidiaries absent any finding of fraud, agency, direct operational responsibility or the like. In New Zealand, where RCI Holdings Pty Ltd holds a subsidiary that formerly manufactured asbestos-containing products, there is legislation entitled the “Accident Insurance Act 1998” which bars claims for compensatory damages arising from work-related asbestos exposure. While claims for non work-related injury might still be alleged, and while it is possible that a claimant for work-related asbestos exposure could still seek non-compensatory damages, we believe that any such claims would not have a material adverse effect on our business, results of operations or financial condition.

     Under U.S. laws, the doctrine of “successor liability” provides that an acquirer of the assets of a business carried on by a corporation can, in certain states and in certain circumstances, be held responsible for liabilities arising from the conduct of that business prior to the acquisition, notwithstanding the absence of any contractual arrangement between the acquirer and the selling corporation pursuant to which the acquirer agreed to assume such liabilities.

     The general principle under Australian law is that, in the absence of a contractual agreement to transfer specified liabilities of a business and where there is no fraudulent conduct, the liabilities remain with the corporation that previously carried on the business and are not passed on to the acquirer of assets. We currently lease certain manufacturing sites from the former subsidiaries now owned and controlled by the Foundation and we purchased certain of our business assets comprising plant and equipment and inventory pursuant to the first phase of our restructuring at fair value from those former subsidiaries now owned and controlled by the Foundation. Each of these transactions concerned only Australian companies, and accordingly, we believe the transactions fall under Australian laws and not the laws of any other jurisdiction. We do not believe these transactions should give rise to the assumption by us or our subsidiaries of any asbestos-related liabilities (tortious or otherwise) under Australian law that may have been incurred during the period prior to the transfer of the assets.

     As an issue related to the restructuring completed on October 19, 2001, under Dutch law, a Dutch transferee of assets of another business may be held responsible for the liabilities of a prior business following a transfer of such business, if the transfer results in the transferor of the business having insufficient assets to meet the claims of its creditors. We believe the transfer by ABN 60 of all of the shares of JHNV to us under the restructuring will not result in us being held responsible as transferee under this principle of Dutch law since, upon the transfer and the implementation of the other aspects of the restructuring, ABN 60 had the same financial resources to meet the claims of its creditors as it had prior to the transfer.

Item 5 Operating and Financial Review and Prospects

     For the periods prior to October 19, 2001, the effective date of the 2001 Reorganization, the consolidated financial statements represent the financial position and results of operations of JHIL and its wholly owned subsidiaries. The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes thereto, included under Item 18.

Overview

     We are the largest manufacturer of fiber cement products and systems for internal and external building applications in the United States, Australia and New Zealand and, based on third-party data, we were the fourth largest manufacturer of gypsum wallboard in the United States before we signed a definitive agreement in fiscal year 2002 to sell our Gypsum business. The sale of our Gypsum operations was completed in April 2002. Our operations are organized into the following three operating segments:

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	•		USA Fiber Cement, which manufactures and sells fiber cement flat sheet products in the United States;
	•		Asia Pacific Fiber Cement, which manufactures fiber cement products in Australia, New Zealand and the Philippines and sells fiber cement products in Australia, New Zealand and Asia; and
	•		Other, which primarily includes the manufacture and sale of fiber cement products in South America and fiber reinforced concrete pipes in the United States, and our fiber cement operations in Europe.

     For further information regarding our business and operations, please see Item 4 “Information on the Company.”

Critical Accounting Policies

     Our accounting policies affecting our financial condition and results of operations are more fully described in Note 2 to our consolidated financial statements included in Item 18 of this Form 20-F. Certain of our accounting policies require the application of judgment by management in selecting appropriate assumptions for calculating financial estimates, which inherently contain some degree of uncertainty. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the reported carrying value of assets and liabilities and the reported amounts of revenues and expenses that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations, financial condition and cash flows.

Sales

     We record estimated reductions to sales for customer rebates and discounts including volume, promotional, cash and other discounts. Rebates and discounts are recorded based on management’s best estimate when products are sold. The estimates are based on historical experience for similar programs and products. Management reviews these rebates and discounts on an ongoing basis and the related accruals are adjusted, if necessary, as additional information becomes available.

Accounts Receivable

     We evaluate the collectibility of accounts receivable, based on historical bad debts, customer credit-worthiness, current economic trends and changes in our customer payment activity, on an ongoing basis and an allowance for doubtful accounts is provided for known and estimated bad debts. Collections and payments from our customers are monitored, and a provision is maintained for estimated losses based on historical experience and any specific customer issues identified. While credit losses have historically been within our expectations, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. Since our accounts receivable are concentrated in a relatively small number of customers, a significant change in the liquidity or financial position of any of these customers could impact their ability to make payments and result in the need for additional allowances. For additional information regarding our customer concentration, see Item 3 “Risk Factors.”

Inventory

     Inventories are recorded at the lower of cost or market. In order to determine market, management regularly reviews inventory quantities on hand and evaluates significant items to determine whether they are excess or slow-moving. The estimated value of excess and slow-moving inventory is recorded as a reduction to inventory and an expense in cost of sales in the period it is identified. This estimate requires management to make judgments about the future demand for inventory, and is therefore at risk to change from period to period.

Accrued Warranty Reserve

     We offer various warranties on our products, including a 50-year limited warranty on certain of our fiber cement siding products in the United States. Because our fiber cement products have only been used since the early 1980’s,

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we cannot assure you that these products will perform in accordance with our expectations over an extended period of time. Our warranty reserve is established based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. While we believe our reserves to be adequate, if our experience is significantly different from our expectations, it could result in the need for additional reserves. For additional information regarding warranties, see Item 3 “Risk Factors.”

Accounting for Income Tax

     We record deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We must then assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance. We have recorded a valuation allowance due to uncertainties related to our ability to utilize some of our deferred tax assets. If our estimates and related assumptions change in the future, we may require additional valuation allowances, which would result in additional income tax expense, or we may reduce our valuation allowance, which would result in a reduction to tax expense.

Results of Operations

     In fiscal years 2001 through 2003, there was a significant increase in our net sales generated from our USA Fiber Cement operations as a result of $195.7 million in capital investments during fiscal years 2001 to 2003 in this segment. In fiscal year 2002, restructuring and other operating expenses adversely affected increased sales from our USA Fiber Cement business.

     The following table shows JHI NV’s selected financial and operating data for continuing operations, expressed in millions of dollars and as a percentage of total net sales: