UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

 

(Mark One)

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

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

For the fiscal year ended March 31, 2008

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

o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

JAMES HARDIE INDUSTRIES N.V.

Title of each class:		Name of each exchange on which registered:
Common stock, represented by CHESS Units of Foreign Securities		New York Stock Exchange*
CHESS Units of Foreign Securities		New York Stock Exchange*
American Depositary Shares, each representing five units of CHESS Units of Foreign Securities		New York Stock Exchange

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

Securities registered or to be registered pursuant to Section 12(g) of the Act.
None.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None.

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report 432,214,668 shares of common stock at March 31, 2008.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes o No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. o Yes þ No

Note — Checking the box will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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. þ Yes o No

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

Large accelerated filer þ                Accelerated filer o                Non-accelerated filer o

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

U.S. GAAP þ		International Financial Reporting Standards as issued by the International Accounting Standards Board o		Other o

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

o Item 17 o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes þ No

 

 

TABLE OF CONTENTS

		Page
PART I			2
Item 1. Identity of Directors, Senior Management and Advisers			2
Item 2. Offer Statistics and Expected Timetable			2
Item 3. Key Information			2
Item 4. Information on the Company			24
Item 4A. Unresolved Staff Comments			49
Item 5. Operating and Financial Review and Prospects			49
Item 6. Directors, Senior Management and Employees			70
Item 7. Major Shareholders and Related Party Transactions			106
Item 8. Financial Information			108
Item 9. Listing Details			108
Item 10. Additional Information			110
Item 11. Quantitative and Qualitative Disclosures About Market Risk			122
Item 12. Description of Securities Other Than Equity Securities			124
PART II			124
Item 13. Defaults, Dividend Arrearages and Delinquencies			124
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds			124
Item 15. Controls and Procedures			124
Item 16A. Audit Committee Financial Expert			125
Item 16B. Code of Business Conduct and Ethics			125
Item 16C. Principal Accountant Fees and Services			126
Item 16D. Exemptions from the Listing Standards for Audit Committees			126
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			127
Item 17. Financial Statements			127
PART III			128
Item 18. Financial Statements			128
Item 19. Exhibits			128
EXHIBIT 1.1
EXHIBIT 2.3
EXHIBIT 2.6
EXHIBIT 2.7
EXHBIIT 2.9
EXHIBIT 2.10
EXHIBIT 2.11
EXHIBIT 4.9
EXHIBIT 4.10
EXHIBIT 4.22
EXHIBIT 4.23
EXHIBIT 4.24
EXHIBIT 4.25
EXHIBIT 4.27
EXHIBIT 8.1
EXHIBIT 12.1
EXHIBIT 12.2
EXHIBIT 13.1
EXHIBIT 15.1
EXHBIIT 15.2
EXHIBIT 99.1

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 and existing under the laws of The Netherlands, is referred to as JHI NV. JHI NV together with its direct and indirect wholly owned subsidiaries as of the time relevant to the applicable reference, are collectively referred to as the James Hardie Group. JHI NV and its current direct and indirect wholly owned subsidiaries are collectively referred to as “we,” “us,” “our,” “JHI NV and its wholly owned subsidiaries” or the “Company.”

The term “fiscal year” refers to our fiscal year ended March 31 of such year; the term “dollars,” “US$” or “$” refers to U.S. dollars; the term “A$” refers to Australian dollars; and the term “NZ$” refers to New Zealand dollars. Unless otherwise stated, all amounts in A$ have been converted into US$ at the March 31, 2008 exchange rate of A$1.0903 to $1.0000. The term “msf” or “thousand square feet” refers to thousands of square feet, where a square foot is defined as a standard square foot of 5/16” thickness and the term “mmsf” or “million square feet” refers to millions of square feet, where a square foot is defined as a standard square foot of 5/16” thickness.

As a company incorporated under the laws of The Netherlands, we have listed our securities for trading on the Australian Securities Exchange, or ASX, through the use of the Clearing House Electronic Subregister System, or CHESS, Units of Foreign Securities, or 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.”

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

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 as of March 31, 2008 and March 31, 2007, our consolidated statements of changes in shareholders’ equity as of March 31, 2008, March 31, 2007 and March 31, 2006 and our consolidated statements of operations and cash flows for the years ended March 31, 2008, 2007 and 2006, together with the related notes thereto. The consolidated financial statements included in this annual report have been prepared in accordance with accounting principles generally accepted in the United States of America, or “U.S. GAAP.”

The selected consolidated financial information summarized below for the five most recent fiscal years has been derived in part from JHI NV’s financial statements. You should read the selected consolidated financial information in conjunction with JHI NV’s financial statements and related notes contained in Item 18 and with the information provided in the section of this report entitled “Operating and Financial Review and Prospects” contained in Item 5. Historic financial data is not necessarily indicative of our future results and you should not unduly rely on it.

		Fiscal Years Ended March 31,
		2008				2007				2006				2005				2004
		(In millions, except sales price per unit and per share data)
Consolidated Statements of Operations Data:
Net Sales
USA Fiber Cement		$	1,144.8			$	1,262.3			$	1,218.4			$	939.2			$	738.6
Asia Pacific Fiber Cement (1)			298.3				251.7				241.8				236.1				219.8
Other (2)			25.7				28.9				28.3				35.1				23.5
Total net sales		$	1,468.8			$	1,542.9			$	1,488.5			$	1,210.4			$	981.9
Operating (loss) income (3)		$	(36.6	)		$	(86.6	)		$	(434.9	)		$	196.2			$	172.2
Interest expense			(11.1	)			(12.0	)			(7.2	)			(7.3	)			(11.2	)
Interest income			12.2				5.5				7.0				2.2				1.2
Other (expense) income (4)			—				—				—				(1.3	)			3.5
(Loss) income from continuing operations before income taxes			(35.5	)			(93.1	)			(435.1	)			189.8				165.7
Income tax (expense) benefit			(36.1	)			243.9				(71.6	)			(61.9	)			(40.4	)
(Loss) income from continuing operations		$	(71.6	)		$	150.8			$	(506.7	)		$	127.9			$	125.3
Net (loss) income		$	(71.6	)		$	151.7			$	(506.7	)		$	126.9			$	129.6
(Loss) Income from continuing operations per common share — basic		$	(0.16	)		$	0.32			$	(1.10	)		$	0.28			$	0.27
Net (Loss) income per common share — basic		$	(0.16	)		$	0.33			$	(1.10	)		$	0.28			$	0.28
(Loss) income from continuing operations per common share — diluted		$	(0.16	)		$	0.32			$	(1.10	)		$	0.28			$	0.27
Net (Loss) income per common share — diluted		$	(0.16	)		$	0.33			$	(1.10	)		$	0.28			$	0.28
Dividends paid per share		$	0.27			$	0.09			$	0.10			$	0.03			$	0.05
Return of capital per share		$	—			$	—			$	—			$	—			$	0.15
Weighted average number of common shares outstanding
Basic			455.0				464.6				461.7				458.9				458.1
Diluted			455.0				466.4				461.7				461.0				461.4
Consolidated Cash Flow Information:
Cash flows provided by (used in) operating activities		$	319.3			$	(67.1	)		$	238.4			$	219.4			$	162.2
Cash flows used in investing activities		$	(38.5	)		$	(92.6	)		$	(154.0	)		$	(149.8	)		$	(58.9	)
Cash flows (used in) provided by financing activities		$	(254.4	)		$	(136.4	)		$	118.7			$	(27.2	)		$	(86.6	)
Other Data:
Depreciation and amortization (5)		$	56.5			$	50.7			$	45.3			$	36.3			$	36.4
EBITDA (6)		$	19.9			$	(35.9	)		$	(389.6	)		$	232.5			$	208.6
Capital expenditures (7)		$	38.5			$	92.1			$	162.8			$	153.0			$	74.1
Volume (million square feet) (8)
USA Fiber Cement			1,916.6				2,148.0				2,182.8				1,855.1				1,519.9
Asia Pacific Fiber Cement (1)			398.2				390.8				368.3				376.9				362.1
Average sales price per unit (per thousand square feet)
USA Fiber Cement		$	597			$	588			$	558			$	506			$	486
Asia Pacific Fiber Cement (1)		A$	862			A$	842			A$	872			A$	846			A$	862
Consolidated Balance Sheet Data:
Net current assets (9)		$	183.7			$	259.0			$	150.8			$	180.2			$	195.9
Total assets		$	2,179.9			$	2,128.1			$	1,445.4			$	1,088.9			$	971.2
Total debt		$	264.5			$	188.0			$	302.7			$	159.3			$	175.8
Common stock		$	219.7			$	251.8			$	253.2			$	245.8			$	245.2
Shareholders’ (deficit) equity		$	(202.6	)		$	258.7			$	94.9			$	624.7			$	504.7

		Fiscal Years Ended March 31,
		2008				2007				2006				2005				2004
		(In millions)
Net cash provided by (used in) operating activities		$	319.3			$	(67.1	)		$	238.4			$	219.4			$	162.2
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities			(318.9	)			4.5				(789.1	)			(60.8	)			(50.7	)
Change in operating assets and liabilities, net			(72.0	)			214.3				44.0				(31.7	)			18.1
Net (loss) income			(71.6	)			151.7				(506.7	)			126.9				129.6
(Income) loss from discontinued operations			—				—				—				1.0				(4.3	)
Cumulative effect of change in accounting principle			—				(0.9	)			—				—				—
Income tax expense (benefit)			36.1				(243.9	)			71.6				61.9				40.4
Interest expense			11.1				12.0				7.2				7.3				11.2
Interest income			(12.2	)			(5.5	)			(7.0	)			(2.2	)			(1.2	)
Other expense (income)			—				—				—				1.3				(3.5	)
Depreciation and amortization			56.5				50.7				45.3				36.3				36.4
EBITDA		$	19.9			$	(35.9	)		$	(389.6	)		$	232.5			$	208.6

Risk Factors

Our wholly owned Australian subsidiary, James Hardie 117 Pty Ltd (which we refer to as the Performing Subsidiary), is required to make payments to a special purpose fund that provides compensation for Australian asbestos-related personal injury and death claims for which certain former companies of the James Hardie Group are found liable. Such payments have reduced, and future payments will reduce, our funds available for capital expenditures on existing and new business opportunities, repayments of debt, payments of dividends or other distributions and may restrict our ability to access equity or debt capital markets. Such payments have also materially adversely affected, and will materially adversely affect, our business.

On November 21, 2006, JHI NV, the AICF, the Government of the State of New South Wales, Australia (which we refer to as the NSW Government) and the Performing Subsidiary entered into a restated and amended Final Funding Agreement (which we refer to as the Amended FFA) to provide long-term funding to the AICF, a special purpose fund that provides compensation for Australian asbestos-related personal injury and death claims for which certain former companies of the James Hardie Group, including ABN 60 Pty Limited (which we refer to as ABN 60), Amaca Pty Ltd (which we refer to as Amaca) and Amaba Pty Ltd (which we refer to as Amaba) (collectively, the Former James Hardie Companies) are found liable. We have recorded an asbestos liability of $1.6 billion in our consolidated financial statements as of March 31, 2008, relating to our anticipated future payments to the AICF pursuant to the Amended FFA. Through March 31, 2008 we have made funding payments totaling A$184.3 million ($169.0 million) to the AICF, and we expect to pay an additional A$114.7 million ($109.2 million — converted at the June 24, 2008 exchange rate as prescribed in the Amended FFA) in funding payments to the AICF in fiscal year 2009. In addition, interest compensation of A$3.3 million will also be paid to the AICF in fiscal year 2009.

As a result of our obligation to make payments under the Amended FFA, our funds available for capital expenditures (either with respect to our existing business or new business opportunities), repayments of debt, payments of dividends or other distributions have been, and will be, reduced by the funding paid to the AICF, and consequently, our financial position, liquidity, results of operations and cash flows have been, and will be, reduced or materially adversely affected. Our obligation to make these payments could also affect or restrict our ability to access equity or debt capital markets.

See Item 4, “Information on the Company — Commitment to Provide Funding on a Long-Term Basis in Respect of Asbestos-Related Liabilities of Former Subsidiaries,” for additional information concerning the Amended FFA.

Even though the Amended FFA has been implemented, we may be subject to potential additional liabilities (including claims for compensation or property remediation outside the arrangements reflected in the Amended FFA) because certain current and former companies of the James Hardie Group previously manufactured products that contained asbestos.

Up to 1987, two former subsidiaries of ABN 60, Amaca and Amaba, which are now owned and controlled by the AICF, manufactured products in Australia that contained asbestos. In addition, prior to 1937, ABN 60, which is also now owned and controlled by the AICF, manufactured products in Australia that contained asbestos. ABN 60 also held shares in companies that manufactured asbestos-containing products in Indonesia and Malaysia, and held minority shareholdings in companies that conducted asbestos-mining operations based in Canada and Southern Africa. Former ABN 60 subsidiaries also exported asbestos-containing products to various countries. The AICF is designed to provide compensation only for certain claims and to meet certain related expenses and liabilities, and the legislation introduced in New South Wales in connection with the Amended FFA seeks to defer all other claims against the Former James Hardie Companies. The funds contributed to the AICF will not be available to meet any asbestos-related claims made outside Australia, or claims made arising from exposure to asbestos occurring outside Australia, or any claim for pure property loss or pure economic loss or remediation of property. In these circumstances, it is possible that persons with such excluded claims may seek to pursue those claims directly against us. Defending any such litigation could be costly and time consuming, and consequently, our financial position, liquidity, results of operations and cash flows could be materially adversely affected.

Prior to 1988, a New Zealand subsidiary in the James Hardie Group manufactured products in New Zealand that contained asbestos. In New Zealand, asbestos-related disease compensation claims are managed by the state-run Accident Compensation Corporation (which we refer to as the ACC). Our New Zealand subsidiary that manufactured products that contained asbestos contributed financially to the ACC fund as required by law via payment of an annual levy while it carried on business. All decisions relating to the amount and allocation of payments to claimants in New Zealand are made by the ACC in accordance with New Zealand law. The Injury

Prevention, Rehabilitation and Compensation Act 2001 (NZ) bars compensatory damages for claims that are covered by the legislation which may be made against the ACC fund. However, we may be subject to potential liability if any of these claims are found not to be covered by the legislation and are later brought against us, and consequently, our financial position, liquidity, results of operations and cash flows could be materially adversely affected.

Apart from the funding obligations arising out of the Amended FFA, it is possible that we could become subject to suits for damages for personal injury or death in connection with the former manufacture or sale of asbestos products that have been or may be filed against the Former James Hardie Companies. Although the ability of any claimants to initiate or pursue such suits is restricted by the legislation enacted by the NSW Government under the terms of the Amended FFA (see Item 4, “Information on the Company — Commitment to Provide Funding on a Long-Term Basis in Respect of Asbestos-Related Liabilities of Former Subsidiaries”), we cannot predict with any certainty the outcome of 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 a court of competent jurisdiction relying on applicable law at the time were to find JHI NV or another James Hardie Group subsidiary liable for damages connected with existing or former subsidiaries for their past manufacture of asbestos-containing products, we may incur material 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. Any such additional liabilities could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

Indemnification claims arising under certain indemnification agreements we have granted to third parties could have a material adverse effect on our business.

When we sold our former United States gypsum wallboard manufacturing facilities in April 2002, we agreed to indemnify the buyer from certain future liabilities, including, for a period of 30 years, liabilities arising from asbestos-related injuries to persons or property arising from our former gypsum business that exceed $5 million in the aggregate, subject to a $250 million in the aggregate limit. In addition, in connection with the separation of Amaca, Amaba and ABN 60 from the James Hardie Group, we agreed to indemnify ABN 60 Foundation Pty Ltd (which we refer to as ABN 60 Foundation) in perpetuity for any non asbestos-related legal claims made against ABN 60. We have not recorded any liabilities, or pledged any assets as collateral, for either of these indemnities. If we are required to pay out any indemnification claims under either of these indemnification agreements it could materially adversely affect our financial position, liquidity, results of operations and cash flows.

The Amended FFA imposes certain non-monetary obligations which could materially adversely affect our business.

Under the Amended FFA, we are also subject to certain non-monetary obligations that could prove to be onerous or to otherwise materially adversely affect our ability to undertake proposed transactions or to pay dividends. For example, the Amended FFA contains certain restrictions that generally prohibit us from undertaking transactions that would materially adversely affect the relative priority of the AICF as a creditor, or that would materially impair our legal or financial capacity and that of the Performing Subsidiary, in each case such that we and the Performing Subsidiary would cease to be likely to be able to meet the funding obligations that would have arisen under the Amended FFA had the relevant transaction not occurred. Those restrictions apply to dividends and other distributions, reorganizations of, or dealings in, share capital which create or vest rights in such capital in third parties, or non-arm’s length transactions. While the Amended FFA contains certain exemptions from such restrictions (including, for example, exemptions for arm’s length dealings; transactions in the ordinary course of business; certain issuances of equity securities or bonds; and certain transactions provided certain financial ratios are met and certain amounts of dividends), implementing such restrictions could materially adversely affect our ability to enter into transactions that might otherwise be favorable to us and could materially adversely affect our financial position, liquidity, results of operations and cash flows.

The Amended FFA does not eliminate the risk of adverse action being taken against us.

There is a possibility that, despite certain covenants agreed to by the NSW Government in the Amended FFA, adverse action could be directed against us by one or more of the NSW Government, the government of the Commonwealth of Australia (which we refer to as the Australian Commonwealth Government), governments of the states or territories of Australia or any other governments, unions or union representative groups, or asbestos disease groups with respect to the asbestos liabilities of Amaba, Amaca and ABN 60. Any such adverse action could materially adversely affect our financial position, liquidity, results of operations and cash flows.

If the Amended FFA is terminated, the NSW Government may pass legislation that would seek to impose liability on us for asbestos claims.

If the Amended FFA is terminated for any reason, the NSW Government has indicated that it may pass or attempt to pass legislation to impose liability on us for certain asbestos claims of the Former James Hardie Companies. The Australian Commonwealth Government and governments of other states and territories in Australia could also seek to introduce legislation seeking to have a similar effect. However, the Company has no detailed information as to the content of any such legislation. Any such legislation could materially adversely affect our financial position, liquidity, results of operations and cash flows.

In addition, if the Amended FFA is terminated without a suitable alternative having been reached, our financial position, liquidity, results of operations and cash flows could be materially adversely affected due to uncertainties surrounding our potential exposure to the asbestos-related liabilities of the Former James Hardie Companies, and any related liability which may arise by legislation which may be introduced by one or more of the Australian Commonwealth Governments, the NSW Government and other state and territory governments.

Since our revenues are primarily derived from sales in U.S. dollars and payments pursuant to the Amended FFA are made in Australian dollars, unfavorable fluctuations in the U.S. dollar (and other currencies from which we derive our sales) compared to the Australian dollar, will require us to pay more of our revenues to discharge our obligations under the Amended FFA. In addition, since our results of operations are reported in U.S. dollars, unfavorable fluctuations in the U.S. dollar compared to the Australian dollar will require us to expense the difference in the reported period in order to increase the amount of our asbestos liability on our balance sheet.

Approximately 14% and 11% of our net sales in fiscal years 2008 and 2007, respectively, were derived from sales in Australia. Payments pursuant to the Amended FFA are required to be made to the AICF in Australian dollars. In addition, annual payments to the AICF are calculated based on various estimates that are denominated in Australian dollars. To the extent that our future obligations exceed our Australian dollar cash flows, and we do not hedge this foreign exchange exposure, we will need to convert U.S. dollars or other foreign currency into Australian dollars in order to meet our obligations pursuant to the Amended FFA. As a result, any unfavorable fluctuations in the U.S. dollar (the majority of our revenues is derived from sales in U.S. dollars) and other currencies from which we derive our sales compared to the Australian dollar will require us to convert more U.S. dollars and other currencies from which we derive our sales to pay the same amount of Australian denominated annual payments to the AICF.

In addition, since our results of operations are reported in U.S. dollars and the asbestos liability is based on estimated payments denominated in Australian dollars, unfavorable fluctuations in the U.S. dollar compared to the Australian dollar may materially affect our reported results of operations since we will be required to expense any such fluctuations in the reported period in order to increase the reported value of the asbestos liability on our balance sheet. For example, due to the strengthening of the Australian dollar compared to the U.S. dollar, we recorded an $87.2 million expense during fiscal year 2008 related to the impact of foreign exchange rate movements.

At March 31, 2008, there were no material forward exchange contracts outstanding to mitigate this risk. Accordingly, due to the size of the asbestos liability recorded on our balance sheet, fluctuations in the exchange rate will cause unpredictable volatility in our reported results for the foreseeable future and any unfavorable fluctuation in U.S. dollar and the other currencies from which we derive our sales compared to the Australian dollar could have a material adverse effect on our financial position, liquidity, results of operations and cash flows. See Item 11, “Quantitative and Qualitative Disclosures About Market Risk.”

Regulatory action and continued scrutiny resulting from ongoing investigations may have an adverse effect on our business.

Statutory notices previously issued by the Australian Securities and Investments Commission (which we refer to as ASIC) indicate that ASIC is conducting an investigation into suspected contraventions of certain provisions of Australian corporations and crimes legislation concerning the affairs of ABN 60, Amaca, Amaba and the Company during the period July 1, 1994 to October 31, 2004.

On February 14, 2007, ASIC commenced civil proceedings in the Supreme Court of New South Wales (which we refer to as the Supreme Court) against the Company, ABN 60 and ten then-present or former officers and directors of the James Hardie Group. While the subject matter of the allegations varies between individual defendants, the allegations against the Company are confined to alleged contraventions of provisions of the Australian Corporations Act 2001 (which we refer to as the Corporations Act) relating to continuous disclosure, a director’s duty of care and diligence, and engaging in misleading or deceptive conduct in respect of a security.

In the proceedings, ASIC seeks:

	•		declarations regarding the alleged contraventions;
	•		orders for pecuniary penalties in such amount as the Supreme Court thinks fit up to the limits specified in the Corporations Act. The Corporations Act presently limits such penalties to A$200,000 ($183,436) per contravention;
	•		orders that former James Hardie Group directors or officers, including Mr. Michael Brown, Mr. Michael Gillfillan, Ms. Meredith Hellicar, Mr. Martin Koffel, Mr. Peter Macdonald, Mr. Philip Morley, Mr. Geoffrey O’Brien, Mr. Peter Shafron, Mr. Gregory Terry and Mr. Peter Willcox, be prohibited from managing an Australian corporation for such period as the Supreme Court thinks fit;
	•		an order that the Company execute a deed of indemnity in favor of ABN 60 providing that the Company indemnify ABN 60 for an amount up to a maximum of A$1.9 billion ($1.7 billion), for such amount as ABN 60, or its directors, consider, after giving careful consideration, is necessary to ensure that ABN 60 is able to pay its debts, as and when they fall due, and for such amount as ABN 60, or its directors, reasonably believe is necessary to ensure that ABN 60 remains solvent; and
	•		its costs of the proceedings.

ASIC stated in February 2007 that it would not pursue the claim for a deed of indemnity in favor of ABN 60 if the conditions precedent to the original Final Funding Agreement as announced on December 1, 2005 (which we refer to as the Original FFA) were satisfied. The Company and the other parties to the agreement provided certification to ASIC in March 2007 that the conditions precedent to the Amended FFA dated November 21, 2006 have been satisfied. Despite this, ASIC has not agreed to withdraw the indemnity claim.

There remains considerable uncertainty surrounding the likely outcome of the ASIC proceedings in the longer term and there is a possibility that we could become responsible for other amounts in addition to our own defense costs. However, at this stage, we believe that, although it is reasonably possible that such amounts will be incurred in the ASIC proceedings, the actual amount or range of amounts is not estimable and accordingly, as of March 31, 2008, we have not recorded any related reserves. See Item 4, “Information on the Company —Legal Proceedings,” for additional information on the ASIC proceedings. Losses and expenses arising from the ASIC proceedings could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

We may be liable for costs, penalties, fees and expenses incurred by current or former directors, officers or employees of the James Hardie Group to the extent that those costs are covered by indemnity arrangements granted by the James Hardie Group to those persons.

We have entered into deeds of indemnity with certain of our directors and officers, as is common practice for publicly listed companies. Our Articles of Association also contain an indemnity for directors and officers and we have granted indemnities to certain of our former related corporate bodies which may require us to indemnify those entities against indemnities they have granted their directors and officers. To date, claims for payments of expenses incurred have been received from certain former directors and officers in relation to the ASIC investigation, and in relation to the examination of these persons by ASIC delegates. It is our policy to expense legal costs as incurred and as of March 31, 2008, we had incurred $5.5 million of net expenses related to ASIC defense costs.

Now that proceedings have been brought against former directors and officers of the James Hardie Group, we have and will continue to incur further costs under these indemnities which may be material. Initially, we have obligations, or have offered, to advance funds in respect of defense costs and such advances have been and will continue to be made. Currently, a portion of the defense costs of the former directors are being advanced by third parties, with us paying the balance. Based on the information currently available, we expect this to continue absent any finding of dishonesty against any former director or officer. If such costs are not insured or substantially exceed the amount of the insurance that we maintain, our financial position, liquidity, results of operations and cash flows could be materially adversely affected, subject to any entitlement we might have to recover such costs from third parties.

Negative publicity may continue to adversely affect our business.

As a result of the events that were considered by the Special Commission of Inquiry (which we refer to as the SCI) and the ASIC proceedings, we have been the subject of negative publicity, both in Australia and elsewhere in the world which we believe has contributed to declines in the price of our publicly traded securities in recent years. While such negative publicity has been significantly less frequent following our entry into the Original FFA, the potential for such negative publicity to increase in the future, for example, during the ASIC proceedings’ trial, cannot be eliminated. Any uncertainty created by future negative publicity or by the events underlying such negative publicity could have a material adverse effect on our results of operations, staff morale and the market price of our publicly traded securities and create difficulties in attracting or retaining high caliber staff.

We may have insufficient Australian taxable income to utilize tax deductions.

We may not have sufficient Australian taxable income in future years to utilize the tax deductions resulting from the funding payments under the Amended FFA to the AICF. Further, if as a result of making such funding payments we incur tax losses, we may not be able to fully utilize such tax losses in future years of income. Any inability to utilize such deductions or losses could materially adversely affect our financial position, liquidity, results of operations and cash flows.

Potential escalation in proven claims made against, and associated costs of, the AICF could increase our annual funding payments required to be made under the Amended FFA, which may cause us to have to increase our asbestos liability in the future.

The amount of our asbestos liability is based, in part, on actuarially determined, anticipated (estimated), future annual funding payments to be made to the AICF on an undiscounted and uninflated basis. Future annual payments to the AICF are based on updated actuarial assessments that are to be performed as of March 31 of each year to determine expected asbestos-related personal injury and death claims to be funded under the Amended FFA for the financial year in which the payment is made and the next two financial years. Estimates of actuarial liabilities are based on many assumptions, which may not prove to be correct, and which are subject to considerable uncertainty, since the ultimate number and cost of claims are subject to the outcome of events that have not yet occurred, including social, legal and medical developments as well as future economic conditions. For instance, it is possible that the categories of payable claims could be extended to include claims that are not presently compensable or legally recognized. Further, estimating the future extent and pattern of asbestos-related diseases that will arise from past exposure to asbestos and the proportion of those claims that will be successful is inherently difficult and therefore could materially differ from actual results. In addition, particularly during times of credit market downturns, it is possible that the investments of the AICF could decline in value. If future proven claims are more numerous, the liabilities arising from them are larger than that currently estimated by KPMG Actuaries Pty Ltd (which we refer to as KPMG Actuaries) or the AICF investments decline in value, it is possible that pursuant to the terms of the Amended FFA, we will be required to pay higher annual funding payments to the AICF than currently anticipated and on which our asbestos liability is based. If this occurs, we may be required to increase our asbestos liability which would be reflected as a charge in our consolidated statements of operations at that date. Any such changes to actuarial estimates which require us to increase our asbestos liability could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

We have experienced product bans and boycotts and have been subject to other measures taken in response to the events investigated by the SCI and could continue to experience product bans and boycotts in the future.

Following the release of the SCI report, the Australian Council of Trade Unions (which we refer to as the ACTU), UnionsNSW (formerly known as the Labour Council of New South Wales) and a representative of the asbestos claimants (which we collectively refer to as the Representatives) and others indicated that they would encourage or continue to encourage consumers and union members in Australia and elsewhere to ban or boycott the Company’s products, to demonstrate or otherwise create negative publicity toward the Company in order to influence the Company’s approach to the discussions with the NSW Government or to encourage governmental action if the discussions are unsuccessful. As previously disclosed, our financial position, liquidity, results of operations and cash flows were affected by such bans and boycotts.

Pursuant to the Heads of Agreement signed on December 21, 2004 and the Original FFA signed on December 1, 2005 the Representatives agreed to use their best endeavors to achieve forthwith the lifting of all bans or boycotts on any products manufactured, produced or sold by the Company, and the Company and the Representatives signed a deed of release in December 2005 under which the Company agreed to release the Representatives and the members of the ACTU and UnionsNSW from civil liability arising in relation to bans or boycotts instituted as a result of the events described above. All bans and boycotts have now been lifted. However, if the Amended FFA is terminated, new bans or boycotts could be implemented against the Company’s products. Any such measures, and the influences resulting from them, could have a material adverse impact on the Company’s financial position, liquidity, results of operations and cash flows.

The complexity and long-term nature of the Amended FFA and related legislation and agreements may result in litigation as to their interpretation or one or more of the parties to the agreements may seek to renegotiate their terms.

Certain legislation, the Amended FFA and related agreements, which govern the implementation and performance of the Amended FFA are complex and have been negotiated over the course of extended negotiation periods between various parties. There is a risk that, over the term of the Amended FFA, some or all parties may become involved in disputes as to the interpretation of such legislation, the Amended FFA or related agreements. We cannot guarantee that no party will commence litigation seeking remedies with respect to such a dispute, nor can we guarantee that a court will not order other remedies which may materially adversely affect the Company.

Due to the long-term nature of the Amended FFA, unforeseen events may result in one or more of the parties to the Amended FFA (including the Company) wishing to renegotiate the terms and conditions of the Amended FFA or any of the related agreements. Any amendments to the Amended FFA or related agreements in the future would require the consent of the Company, the Performing Subsidiary, the NSW Government and the AICF, and therefore may not be achieved.

Risk of certain Amended FFA tax conditions ceasing to be satisfied.

Despite the Australian Taxation Office (which we refer to as the ATO) rulings for the expected life of the Amended FFA, it is possible that new (and adverse) tax legislation could be enacted in the future. It is also possible that the facts and circumstances relevant to operation of the ATO rulings could change over the life of the Amended FFA. We may elect to terminate the Amended FFA if certain tax conditions cease to be satisfied for more than 12 months. However, we do not have a right to terminate the Amended FFA if, among other things, the tax conditions cease to be satisfied as a result of the actions of a member of the James Hardie Group.

Under certain circumstances, we may still have an obligation to make annual funding payments on an adjusted basis if the tax conditions remain unsatisfied for more than 12 months. If the tax conditions cease to be satisfied in a manner which does not permit us to terminate the Amended FFA, our financial position, liquidity, results of operations and cash flows may be materially adversely affected. The extent of this adverse effect will be determined by the nature of the tax condition which has ceased to be satisfied.

Our effective income tax rate could increase and materially adversely affect our business.

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. Such changes to our effective tax rate could materially adversely affect our financial position, liquidity, results of operations and cash flows.

Exposure to additional income tax liabilities due to audits could materially adversely affect our business.

Due to our size and the nature of our business, we are subject to ongoing reviews by taxing jurisdictions on various tax matters, including challenges to various positions we assert on our income tax and withholding tax returns. We accrue for tax contingencies based upon our best estimate of the taxes ultimately expected to be paid, which we update over time as more information becomes available. Such amounts are included in taxes payable or other non-current liabilities, as appropriate. We record additional tax expense in the period in which we determine that the recorded tax liability is less than the ultimate assessment we expect.

We are currently subject to audit and review in a number of jurisdictions in which we operate and have been advised that further audits may commence in the next 12 months. For example, the Internal Revenue Service (which we refer to as the IRS) is currently conducting an audit to determine whether we are in compliance with the limitation on benefits (which we refer to as the LOB) provision in the amended U.S. Netherlands Income Tax Treaty. If we are not in compliance, we will not be entitled to beneficial withholding tax rates on payments from our U.S. subsidiaries to certain of our Dutch companies. In addition, the ATO is auditing our Australian income tax return for the years ended March 31, 2002 and March 31, 2004 through March 31, 2006. These and other audits are discussed in greater detail in the three risk factors immediately below.

Of the audits currently being conducted, none has progressed sufficiently to predict its ultimate outcome. We accrue income tax liabilities for these audits and reviews based on our knowledge of all relevant facts and circumstances, taking into account existing tax laws, our experience with previous audits and settlements, the status of current tax examinations and how the tax authorities view certain issues. It is reasonably possible that the amount of our unrecognized tax benefits could significantly increase or decrease within the next 12 months. These changes could result from the settlement of ongoing litigation, the completion of ongoing examinations, the expiration of the statute of limitations or other circumstances. At this time, we cannot make an estimate of the range of the reasonably possible change.

The amounts ultimately paid upon resolution of these examinations could be materially different from the amounts included in taxes payable or other non-current liabilities and result in additional tax expense which could materially adversely affect our financial position, liquidity, results of operations and cash flows.

Tax benefits are available under the U.S.-Netherlands income tax treaty to U.S. and Dutch taxpayers that qualify for those benefits. The IRS is auditing us in connection with our eligibility for those benefits on and after February 1, 2006 and has issued a notice of proposed adjustment asserting that we are not eligible.

On December 28, 2004, the United States and The Netherlands amended the U.S.-Netherlands Income Tax Treaty (prior to amendment, the “Original U.S.-NL Treaty”; post amendment, the “New U.S.-NL Treaty”). We believe that, based on the transitional rules set forth in the New U.S.-NL Treaty, the Original U.S.-NL Treaty applied to us and to our Dutch and U.S. subsidiaries until January 31, 2006. We believe that, under the LOB provision of the Original U.S.-NL Treaty, a 5% U.S. withholding tax applied to dividends, and no U.S. withholding tax applied to interest or royalties that our U.S. subsidiaries paid to JHI NV or our Dutch finance subsidiary. The LOB provision of the Original U.S.-NL Treaty had various conditions of eligibility for reduced U.S. withholding tax rates and other treaty benefits, all of which we satisfied. If, however, we do not qualify for benefits under the New U.S.-NL Treaty, those dividend, interest and royalty payments would be subject to a 30% U.S. withholding tax.

Companies eligible for benefits under the New U.S.-NL Treaty qualify for a zero percent U.S. withholding tax rate not only on interest and royalties but also, in certain circumstances, on dividends. However, the LOB provision of the New U.S.-NL Treaty has a number of new, more restrictive eligibility requirements for eliminating or reducing U.S. withholding taxes and for other treaty benefits. We changed our organizational and operational structure as of

January 1, 2006 to satisfy the requirements of the LOB provision of the New U.S.-NL Treaty and believe we are eligible for the benefits of the New U.S.-NL Treaty commencing February 1, 2006.

The IRS is currently conducting an audit to determine whether we satisfy those requirements and thus are entitled to beneficial withholding tax rates on payments from our United States subsidiaries to our Netherlands companies. As part of this audit process, on June 23, 2008, we announced that the IRS issued us a Notice of Proposed Adjustment (which we refer to as NOPA) that concludes we do not satisfy the LOB provision of the New U.S.-N.L. Treaty and that accordingly we are not entitled to beneficial withholding tax rates on payments from our United States subsidiaries to our Netherlands companies. We do not agree with the conclusions reached by the IRS, and we intend to contest the IRS’ findings through the continuing audit process and, if necessary, through subsequent administrative appeals and possibly litigation.

If the IRS position ultimately were to prevail, we would be liable for a 30% withholding tax on dividend, interest and royalty payments made any time on or after February 1, 2006 by our U.S. subsidiaries to JHI NV or our Dutch finance subsidiary. In that event, we estimate we would owe approximately $37.0 million in additional tax for calendar years 2006 and 2007 plus, as of June 30, 2008, $3.0 million in interest and $7.0 million in penalties related to that tax. Interest will continue to accrue and compound daily at the published monthly Federal short term rate plus 3% until the issue is resolved or a deposit of the full amount of the tax, interest and penalties is made with the IRS or a bond for such amounts is posted. Penalties for calendar years 2006 and 2007 will continue to accrue at the rate of one-half percent per month up to a maximum of 25%. The $7.0 million accrued penalty through June 30, 2008 could continue to accrue to a maximum total of $13.0 million. Additional tax, interest and penalties would be payable for later calendar years and such amounts could be significantly more per year in later years than the amounts indicated in the NOPA for calendar years 2006 and 2007. As a result, our effective income tax rate will increase significantly for both past and future periods, which will materially adversely affect our financial position, liquidity, results of operations and cash flows.

In finalizing its audit of our fiscal year ended March 31, 2002 the ATO may issue amended assessments which may require substantial cash deposits to be made and substantial expenses to be incurred in appealing any assessment. In addition, if an assessment is ultimately upheld this also would materially and adversely affect our business.

On June 18, 2008 the ATO commenced proceedings in the Federal Court of Australia (which we refer to as the Federal Court) seeking the reinstatement of our former wholly-owned subsidiary James Hardie Australia Finance Pty Limited (which we refer to as JHAF). The Federal Court will further consider the reinstatement of JHAF on July 18, 2008.

JHAF was deregistered on August 23, 2005 following a subsidiary’s voluntary winding up. We understand that the reinstatement of JHAF is a necessary pre-requisite to the ATO issuing an amended assessment in respect of one of the issues that has been the focus of the ATO’s inquiries during the tax audit of fiscal year 2002.

We understand that it is the view of the ATO that an amended assessment issued to JHAF would comprise primary tax of A$101.5 million ($93.1 million), estimated penalties of A$50.8 million ($46.6 million) and as of June 30, 2008 estimated general interest charges (which we refer to as GIC) of A$88.0 million ($80.7 million). GIC will continue to accrue until the issue is resolved or a bond is posted.

Any reinstatement of JHAF would be likely to involve the appointment of a new liquidator, who would need to determine, among other things, whether and to what extent JHAF was able to put itself in a position to meet any ultimate tax liability assessed in respect of it.

We are considering our position with respect to the ATO proceedings, the merits of the potential amended assessment and any obligations of JHAF to the ATO given its prior winding up.

If the ATO were successful in reinstating JHAF and if we are found to have, or otherwise accept, any liability for tax assessed solely against JHAF or if we are required to make payments on account of that tax while in dispute our financial position, liquidity, results of operations and cash flows could be materially adversely affected.

Our wholly-owned subsidiary, RCI Pty Ltd (which we refer to as RCI), has been required to post a substantial cash deposit and may incur substantial expenses in order to pursue an appeal of an assessment by the ATO. In addition, if the assessment is ultimately upheld this also would materially and adversely affect our business.

In March 2006, RCI received an amended assessment from the ATO. The amended assessment is based on the ATO’s calculation of RCI’s net capital gains arising as a result of an internal corporate restructuring carried out in 1998. The amended assessment originally was for A$412.0 million ($377.9 million). However, after two subsequent remissions of general interest charges (which we refer to as GIC), by the ATO, the total assessment was changed to A$368.0 million ($337.5 million), which includes: A$172.0 million ($157.8 million) as the primary tax after allowable credits; A$43.0 million ($39.4 million) in penalties (representing 25% of the primary tax); and A$153.0 million ($140.3 million) in GIC.

During fiscal year 2007, we agreed with the ATO that in accordance with the ATO Receivables Policy, we would pay 50% of the total amended assessment being A$184.0 million ($168.8 million) and provide a guarantee from JHI NV in favor of the ATO for the remaining unpaid 50% of the amended assessment, pending the outcome of the appeal of the amended assessment. We also agreed to pay GIC accruing on the unpaid balance of the amended assessment in arrears on a quarterly basis. Up to March 31, 2008, we have paid A$95.2 million ($87.3 million) of GIC to the ATO. This amount includes GIC of A$76.7 million ($70.3 million) paid as part of the payment of A$184.0 million ($168.8 million) towards the amended assessment in fiscal year 2007. On April 15, 2008, we paid an additional A$3.3 million ($3.0 million) in GIC in respect of the quarter ended March 31, 2008.

On May 30, 2007, the ATO disallowed our objection to RCI’s notice of amended assessment for RCI for the year ended March 31, 1999. On July 11, 2007, we filed an application appealing the Objection Decision with the Federal Court of Australia. The hearing date for RCI’s appeal is presently scheduled to commence on December 8, 2008. We will continue to pursue all avenues of appeal to contest the ATO’s position in this matter. RCI may incur substantial legal and other expenses in pursuing this appeal.

As of March 31, 2008, we had not recorded any liability for the amended assessment as we believe that the requirements under Financial Accounting Standards Board (which we refer to as FASB) Interpretation No. 48 (which we refer to as FIN 48) for recording a liability have not been met. We have accounted for all payments made to the ATO as a deposit, see the line item “Deposit with Australian Taxation Office” in our consolidated balance sheets in Item 18. In addition, it is our intention to treat any payments to be made at a later date as a deposit. Even if RCI is successful in appealing the amended assessment and the amount paid to the ATO is ultimately refunded to RCI, the requirement to initially pay 50% of the amended assessment and ongoing payments of accruing general interest charges pending the outcome of the appeal could materially and adversely affect our financial position and liquidity, as the cash required to make these payments is not available during the appeals process for ordinary corporate purposes. If RCI is unsuccessful in appealing the amended assessment, RCI will be required to pay the remaining 50% of the unpaid amended assessment, reverse the “Deposit with Australian Taxation Office” amount and recognize an expense amount for the total amended assessment and general interest charge payments. In which case, our financial position, liquidity, results of operations and cash flows will be materially and adversely affected. See Item 4, “Information on the Company — Legal Proceedings” and Note 15 to the notes to our consolidated financial statements included in Item 18 for more information.

Under Dutch tax law, we derive tax benefits from the group finance operations of our Netherlands-based finance subsidiary, and changes in the laws applicable to the finance subsidiary could increase our effective tax rate and, as a result, could materially adversely affect our business.

We have concentrated our finance and treasury activities in our Dutch finance subsidiary located in The Netherlands. In addition to providing financing to our various subsidiaries, the finance subsidiary owns and develops intellectual property that it licenses to our operating subsidiaries. Under The Netherlands International Group Finance Company rules, we have obtained a ruling from the Dutch Revenue authority that allows the finance subsidiary to set aside, in a Financial Risk Reserve (which we refer to as FRR), a portion of its taxable profits from financing and from licensing its intellectual property. The amounts set aside in the FRR are free of current Dutch income tax. Consequently, the finance subsidiary will generally incur a tax rate of approximately 13% to 15% on its qualifying financing and licensing income and a 25.5% statutory rate on all other income (25.5% is the Dutch statutory rate for calendar year 2007 and subsequent years), including any amounts involuntarily released from the FRR to cover any risks (including currency, bad debt and foreign branch losses) for which the FRR was established. The tax rate on qualifying income may be reduced to as low as approximately 5% to 7% depending on the extent to which amounts from the FRR pay for certain qualifying operating costs and expenditures and result in a tax exempt

release from the FRR. However, the effective tax rate may also be higher than 13% to 15% if (1) the risks for which the FRR was formed materialize or (2) if there are insufficient opportunities to obtain tax exempt releases from the FRR. The Dutch revenue ruling became effective on July 1, 2001 and, when issued, was to apply for 10 years so long as we satisfy the requirements of The Netherlands International Group Finance Company provisions under Dutch tax law. As discussed below, the Dutch revenue ruling is set to expire on December 31, 2010.

The European Commission (which we refer to as the Commission), the executive arm of the European Union (which we refer to as the EU), also reviewed the tax regimes of its member countries to identify tax concessions that the Commission considered to be 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.

We may reorganize our corporate structure by changing our place of incorporation and/or tax residency (which we refer to collectively as Domicile) and this may materially affect our financial position.

Our current Domicile is in The Netherlands.  As outlined above, we believe our Domicile provides certain tax benefits based on the New U.S.-NL Treaty and Dutch tax law. However, these benefits depend on our successful resolution of the IRS audit concerning our eligibility for the New U.S.-NL Treaty benefits and continued compliance with the New U.S.-N.L. Treaty LOB provisions and the FRR rules (see the risk factors above entitled “Tax benefits are available under the U.S.-Netherlands income tax treaty to U.S. and Dutch taxpayers that qualify for those benefits. The IRS is auditing us in connection with our eligibility for those benefits on and after February 1, 2006 and has issued a notice of proposed adjustment asserting that we are not eligible” and “Under Dutch tax law, we derive tax benefits from the group finance operations of our Netherlands-based finance subsidiary, and changes in the laws applicable to the finance subsidiary could increase our effective tax rate and, as a result, could materially adversely affect our business”). In addition, our Domicile in The Netherlands may make it more difficult to recruit qualified successors to our executives who would be required to be based in The Netherlands.

In response, we are evaluating whether or not we can or should change our Domicile. Although no decision to change our Domicile has been made, if we are able and choose to change our Domicile, it may have a material adverse effect on our financial position, liquidity, results of operations and cash flows. Any change in Domicile will require us to incur significant costs including tax payments, advisor-related fees, administrative costs and other costs of which we are not yet aware. Although the amount of these costs cannot be reasonably determined at this time, if we change our Domicile such costs would be material.   

If we change our Domicile, we will be subject to the laws and regulations of the country of our new Domicile which may result in potential additional liabilities and restrictions under the new tax, corporate, and securities regimes, and may affect the rights you have currently as a security holder of a company whose Domicile is in The Netherlands.

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

Our shareholders that are United States persons could incur adverse U.S. federal income tax consequences if, for federal income tax purposes, we are classified as a “controlled foreign corporation” (which we refer to as a CFC) or a “passive foreign investment company” (which we refer to as a PFIC). 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.

Our board of directors and senior management continue to devote significant attention to the Amended FFA, ASIC proceedings, tax audits and tax litigation.

Our board of directors, senior management and others within our organization continue to devote a significant amount of time and resources related to the Amended FFA, ASIC proceedings, tax audits and tax litigation, which are described in the risk factors above and elsewhere in this annual report on Form 20-F. To the extent we are required to devote time and resources to dealing with such issues rather than solely focusing on conducting our business, this could have a material adverse effect on our results of operations.

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

Competition in the building products industry is based largely on price, 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 offered by other manufacturers. Some of our competitors may have greater product diversity and 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 and could require us to increase our investment in product development, productivity improvements and customer service and support to compete in our markets.

Fiber cement product 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, prices in those markets could decline and sales volumes may not increase significantly or may decline in the future.

Historically, in addition to the manufacturing costs associated with our products, the overall costs of our products have been affected by changes in our product mix, the addition of proprietary products to our product mix and the operating efficiencies of our manufacturing facilities. For instance, unanticipated technical problems could impair our efforts to commission new equipment aimed at improving operating efficiencies. Additionally, the current state of the U.S. housing industry increases the possibility of further price pressures. Increased competition into any of the markets in which we compete, would likely cause pricing pressures in those markets. Any of these factors could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

If damages resulting from product defects exceed our insurance coverage, paying these damages could result in a material adverse effect on our business.

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 damage to, or defects in, our products, we do have product liability insurance coverage for consequential damages that may arise from the use of our products. Although we believe this coverage is 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 financial position, liquidity, results of operations and cash flows.

If one or more of our fiber cement products fail to perform as expected or contain a design defect, such 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 our products and may subject us to claims from purchasers or users of defective products, either of which could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

Warranty claims resulting from unforeseen defects in our products and exceeding our warranty reserves could have a material adverse effect on our business.

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. As of March 31, 2008, we have accrued $17.7 million for such warranties. See the line items “Accrued product warranties” in our consolidated balance sheets and Note 11 to our consolidated financial statements in Item 18. Although we maintain reserves for warranty-related claims and legal proceedings that we believe are adequate, we cannot assure you that warranty expense levels or the results of any warranty-related legal proceedings will not exceed our reserves. If our warranty reserves are significantly exceeded, the costs associated with such warranties could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

We may incur significant costs in the future in complying with applicable environmental and health and safety laws and regulations. A failure to comply with or a change in these laws and regulations could subject us to significant liabilities, including, but not limited to, damages and penalties and could have a material adverse effect on our business.

In all the jurisdictions in which we operate, we are subject to environmental, health and safety laws and regulations governing, among other matters, our operations, including the air and water quality of our plants, 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. We may also be held liable for any claims arising out of human exposure to hazardous substances or other environmental damage and our failure to comply with air, water, waste, and other environmental regulations. In addition, we will continue to be liable for any environmental claims that arose while we owned or operated any of the three gypsum facilities that we sold in April 2002. Pursuant to the terms of our agreement to sell our gypsum business, we retained responsibility for any losses incurred by the buyer 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. Our indemnification obligations in this regard 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. See Item 10, “Additional Information — Material Contracts.”

In addition, many of our products contain crystalline silica, which can be released in a respirable form in connection with manufacturing practices and handling or use. The inhalation of respirable crystalline silica at certain exposure levels is known or suspected to be associated with silicosis, potentially causing lung cancer and other adverse human health effects. We may face future costs of engineering and compliance to meet new standards relating to crystalline silica if standards are heightened. In addition, there is a risk that claims for silica-related health effects could be made against us. We cannot assure you that we will have adequate resources, including adequate insurance coverage, to satisfy any future silica-related health effect claims. In addition, our sales could decrease if silica-related health effect claims are made against us and as a result potential users of our products decide not to use our products. Any such claims may have a material adverse effect on our financial position, liquidity, results of operations and cash flows. See also Risk Factor above captioned “If damages resulting from product defects exceed our insurance coverage, paying these damages could result in a material adverse effect on our business.”

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 product liability matters, or our failure to comply with air, water, waste, and other than existing environmental regulations may result in us making future expenditures that could have a material adverse effect on our financial position, liquidity, results of operations

and cash flows. 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 financial position, liquidity, results of operations and cash flows. See Item 4, “Information on the Company — Legal Proceedings.”

Our business is dependent on the residential and commercial construction markets and we expect a slow down in housing construction in the markets we serve, including the U.S., Australia and New Zealand, over the short to medium term.

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, the availability of financing, 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. According to the U.S. Census Bureau, the United States housing starts continued to deteriorate in each quarter of calendar year 2007 in comparison to the same period in the prior year. New housing starts in calendar year 2007 were down 25% compared to calendar year 2006 and 35% from their peak in calendar year 2005. The National Association of Home Builders (which we refer to as the NAHB), and other analysts expect the new construction single-family residential segment to slow further in calendar year 2008. Based on the Housing Industry Association of Australia and InfoMetrics New Zealand, the short-term outlook is for residential construction activity to be flat in Australia and weaker in New Zealand. Any slow down in the markets we serve could result in decreased demand for our products and cause us to experience decreased sales and operating income. In addition, the level of activity in construction markets also depends on our ability to grow primary demand for fiber cement and convert sales of alternative materials to sales of fiber cement. 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 materially adversely affect our financial position, liquidity, results of operations and cash flows. In addition, during periods of economic decline, we may have difficulty retaining our workforce which may, in turn, lead to additional costs such as the costs of deferred bonus programs and the training of new workers. Because of these and other factors, our results of operations may be subject to substantial fluctuations and the results for any prior period may not be indicative of results for any future period.

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

In the United States, a large proportion of our fiber cement products are sold in the Southeastern, South Central and Pacific Northwest regions of the country. 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 and the last half of December due to the slowdown in business activity over the holiday period. Because of these and other factors, our quarterly results of operations may vary throughout the year and the results for any quarterly period may not be indicative of results for any future period.

We may experience adverse fluctuations in the supply and cost of raw materials necessary to our business. A significant reduction or cessation of shipments from an important supplier could have a material adverse effect on our business.

Cellulose fiber, silica, cement and water are the principal raw materials used in the production of fiber cement. Our fiber cement business periodically experiences fluctuations in the supply and costs of raw materials, and some of our supply markets are concentrated. For example, during both fiscal years 2008 and 2007 in the United States, pulp and cement prices rose. Market pulp prices rose by 11% and 16% in fiscal years 2008 and 2007, respectively, and the price we pay for cement increased by 3% and 7% in fiscal years 2008 and 2007, respectively. Pulp selling prices have increased primarily because of tight global supply and low inventory levels. As pulp is globally traded in U.S. dollars, the weakening of the U.S. dollar has also eroded profitability for producers outside of the United States. This has resulted in declining viability for less efficient softwood pulp producers, particularly in Canada, and this in

turn has impacted global supply. Strengthening of currencies relative to the U.S. dollar (particularly in Asia and Europe) has also enabled pulp producers to push through higher U.S. pricing. In fiscal year 2008, strong increases in energy related costs including coal, diesel and electricity also adversely impacted materials which have a high energy cost component, including cement and quarrying products such as silica. 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 financial position, liquidity, results of operations and cash flows.

If our research and development efforts fail to generate new, innovative products or processes, our overall profit margins may decrease and demand for our products may fall, which would have a material adverse effect on our business. In addition we may incur substantial expenses related to unsuccessful research and development efforts.

For fiscal years 2008, 2007 and 2006, our expenses for research and development were $27.3 million, $25.9 million and $28.7 million, respectively. We believe that investing in research and development is 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 and processes to increase demand and to protect profit margins. If our research and development efforts fail to generate new, innovative products or processes, our overall profit margins may decrease and demand for our products may fall, which would have a material adverse effect on our financial position, liquidity, results of operations and cash flows. In addition, we may incur substantial expenses related to unsuccessful research and development efforts.

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 could have a material adverse effect on our growth strategy, as well as our financial position, liquidity, results of operations and cash flows.

In addition, our 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, slow-moving or obsolete. The estimated value of excess, slow-moving and obsolete 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. If our estimate for the future demand for inventory is greater than actual demand and we fail to reduce manufacturing output accordingly, we could be required to record additional inventory reserves, which could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

Our ability to sell our products into certain markets is influenced by building codes and ordinances in effect in the related localities and states and may limit our ability to compete effectively in certain markets and our ability to increase or maintain our current market share for our products.

Most states and localities in the markets in which we sell our products maintain building codes and ordinances that determine the requisite qualities of materials that may be used to construct homes and buildings for which our products are intended. Our products may not qualify under building codes and ordinances in certain markets, prohibiting our customers from using our products in those markets. This may limit our ability to sell our products into certain markets. In addition, ordinances and codes may change over time which may, from the time they are implemented, prospectively limit or prevent the use of our products in those markets, causing us to lose market share for our products. Although we keep up-to-date on the current and proposed building codes and ordinances of the markets in which we sell or plan to sell our products, and when appropriate, become involved in the ordinance and code setting process, our efforts may be ineffective, which would have a material adverse effect on our financial condition, liquidity, results of operations and cash flows.

We rely on only a few customers to buy our fiber cement products and the loss of any customer could materially adversely affect our business.

Our top three customers in the United States represented approximately 59% of our total USA Fiber Cement gross sales in fiscal year 2008. Our top four customers in Australia and our top three customers in New Zealand accounted for approximately 47% and 78% of our total gross sales of fiber cement in Australia and New Zealand, respectively, in fiscal year 2008. We generally do not have long-term contracts with our large customers. Accordingly, if we were to lose one or more of these customers because our competitors were able to offer customers more favorable pricing terms or for any other reasons, we may not be able to replace customers in a timely manner or on reasonable terms. The loss of one or more customers could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

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, a decrease in revenues or the imposition of additional taxes or other costs.

Because we own assets, 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;
	•		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, a decrease in revenues or the imposition of additional taxes. Therefore, any change in laws, regulations, policies or conditions of a jurisdiction could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

Our ability to pay you dividends is dependent on Dutch law and may be limited in the future if we are not able to maintain sufficient levels of Freely Distributable Reserves (which we refer to as FDRs).

Under Dutch corporate law, a Dutch company is able to pay dividends up to the amount of its FDRs which are determined under applicable accounting principles generally accepted in The Netherlands (which we refer to as Dutch GAAP). We believe that our current corporate structure has allowed us to maintain sufficient levels of FDRs to continue paying dividends in accordance with our publicly disclosed dividend policy, which is updated from time to time. However, transactions or events could cause a reduction in our FDRs, resulting in our inability to pay dividends over our securities, which could have a material adverse impact on the market value of the securities that you have invested in.

Because our intellectual property and other proprietary information may be or may become publicly available, we are subject to the risk that competitors could copy our products or processes.

Our success depends, in part, on the proprietary nature of our technology, including non-patentable intellectual property such as our process technology. 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 adequate legal or equitable relief. 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 and/or trade secrets. To safeguard our confidential

information, we rely on employee, consultant and vendor non-disclosure agreements and contractual provisions and a system of internal and technical 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 materially adversely affect our financial position, liquidity, results of operations, cash flows and competitive position.

Natural disasters could have an adverse effect on our overall business.

Our plants and other facilities are located in places that could be affected by natural disasters, such as hurricanes, typhoons, cyclones, earthquakes, floods, tornados and other natural disasters. Natural disasters that directly impact our plants or other facilities could materially adversely affect our manufacturing or other operations and, thereby, harm our overall financial position, liquidity, results of operations and cash flows.

We rely on a continuous power supply and availability of utilities to conduct our operations, and any shortages or 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, in some cases, natural gas, as well as the availability of water, waste and emissions discharge facilities. Any future shortages or discharge curtailments, of a material nature, could significantly disrupt our operations and increase our expenses. We currently do not have backup generators on our sites with the capability of maintaining all of a site’s full operational power needs and we do not have alternate sources of power in the event of a sustained blackout. While our insurance includes coverage for certain “business interruption” losses (i.e., lost profits) and for certain “service interruption” losses, such as an accident at our supplier’s facility, any losses in excess of the insurance policy’s coverage limits or any losses not covered by the terms of the insurance policy could have a material adverse effect on our financial condition. If blackouts interrupt our power supply, we would be temporarily unable to continue operations at the affected facilities. Any future material and sustained interruptions in our ability to continue operations at our facilities could damage our reputation, harm our ability to retain existing customers or obtain new customers and could result in lost revenue, any of which could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

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 material adverse effect on our business.

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 22% and 17% of our net sales in fiscal years 2008 and 2007, 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, Euros, U.K. pounds and Canadian dollars) could materially affect our business, results of operations and financial condition. We generally attempt to mitigate foreign exchange risk by entering into contracts that require payment in local currency, hedging transactional risk, where appropriate, and having non-U.S. operations borrow in local currencies. Although we may enter into such financial instruments from time to time in order to attempt to manage our market risks, we did not have any material interest rate swaps or forward exchange contracts outstanding as of March 31, 2008. 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 and interest rate risks will not have a material adverse effect on our financial position, liquidity, results of operations and cash flows. See also Risk Factor above captioned “Since our revenues are primarily derived from sales in U.S. dollars and payments pursuant to the Amended FFA are made in Australian dollars, unfavorable fluctuations in the U.S. dollar (and other currencies from which we derive our sales) compared to the Australian dollar, will require us to pay more of our revenues to discharge our obligations under the Amended FFA. In addition, since our results of operations are reported in U.S. dollars, unfavorable fluctuations in the U.S. dollar compared to the Australian dollar will require us to expense the difference in the reported period in order to increase the amount of our asbestos liability on our balance sheet.” Any of these factors could materially affect our financial position, liquidity, results of operations and cash flows.

Our Articles of Association and Dutch law contain provisions that could delay or prevent a change of control that may otherwise 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. Our Articles of Association generally 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, the number of shares in which a person holds relevant interests 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 may otherwise be beneficial to you. See Item 10, “Additional Information — Key Provisions of our Articles of Association — Limitations on Right to Hold Common Stock.”

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

We are incorporated under the laws of The Netherlands. In addition, many of our directors and executive officers 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 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, and such rights under the laws of The Netherlands may differ substantially from what those rights would be under the laws of various jurisdictions in the United States. 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 shares of common stock or the grant of options to acquire shares of common stock could dilute the value of your shares and materially adversely affect the price of our common stock.

The authority to issue shares and to grant rights (e.g. options) to subscribe for shares, up to the amount of authorized share capital has been delegated to our Supervisory Board subject to the approval of the Joint Board. Accordingly, our Supervisory Board could decide to issue shares or grant rights to subscribe for shares, such as options, up to the amount of our authorized share capital, without shareholder approval, which could dilute the value of your shares and materially adversely affect the price of our common stock.

In addition, if we issue a large number of our equity securities, 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 may also issue equity securities to satisfy other liabilities of the Company. We cannot predict the effect, if any, that 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.

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 may be materially adversely affected.

As of May 31, 2008, approximately 28%, or 155, of our employees in Australia¹ and approximately 52%, or 105, of our employees in New Zealand were represented by labor unions. Our unionized employees are covered by a range

of federal and state-based agreements in Australia and other agreements in New Zealand. Two Australian labor agreements applying to our NSW operation expired in June 2006, one of which was subsequently renewed for two years (until September 2008) and the other is still in negotiation. In addition, we renegotiated one labor agreement for our Queensland (Meeandah) plant which now expires in October 2008. Our New Zealand labor agreement expires in September 2009. We cannot assure you that any of these agreements will be renewed on reasonable terms, or at all. During the past three years, we experienced occasional strikes and work interruptions lasting up to 5 days in Australia. In each case the strike action was confined to a small group of employees and had minimal impact on the operation. If we were to 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 financial position, liquidity, results of operations and cash flows.

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

In the past, we have divested business segments. In the future, we may acquire other businesses or sell some or all of our assets or business segments. Any significant acquisition or sale may materially adversely affect our results of operations 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.

We are dependent upon our key management personnel for our future success.

Our success depends to a significant extent on the continued contributions of our Amsterdam-based executives for the management of our business and development and implementation of our business strategy. Our ability in the future to recruit qualified successors for our Amsterdam-based executives may be more difficult than it may be for U.S. based companies in our industry due to the location of our corporate offices in The Netherlands. The loss of senior management, coupled with our failure to recruit qualified successors, could have a material adverse effect on our business and the trading price of our common stock.

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 or furnished to the United States Securities and Exchange Commission (which we refer to as the SEC), on Forms 20-F and 6-K, in our annual reports to shareholders, in offering circulars, invitation memoranda and prospectuses, in media releases and other written materials and in oral statements made by our officers, directors or employees to analysts, institutional investors, lenders and potential lenders, representatives of the media and others. Examples of forward-looking statements include:

	•		expectations about the timing and amount of payments to the AICF, a special purpose fund for the compensation of proven Australian asbestos-related personal injury and death claims;
	•		statements regarding tax liabilities and related audits and proceedings;
	•		statements as to the possible consequences of proceedings brought against us and certain of our former directors and officers by the ASIC;
	•		expectations concerning indemnification obligations;
	•		expectations concerning the costs associated with the suspension of operations at our Blandon, Pennsylvania and Plant City, Florida plants;
	•		expectations that our credit facilities will be extended or renewed;
	•		expectations concerning dividend payments;
	•		projections of our results of operations or financial condition;

	•		statements regarding our plans, objectives or goals, including those relating to competition, acquisitions, dispositions and our products;
	•		statements about our future performance; 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 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 “Key Information — Risk Factors” beginning on page 6, include, but are not limited to: all matters relating to or arising out of the prior manufacture of products that contained asbestos by current and former James Hardie Group subsidiaries; required contributions to the AICF and the effect of foreign exchange rates on the amount recorded in our financial statements as an asbestos liability; compliance with and changes in tax laws and treatments; competition and product pricing in the markets in which we operate; the consequences of product failures or defects; exposure to environmental, asbestos or other legal proceedings; general economic and market conditions; the supply and cost of raw materials; the success of our research and development efforts; our reliance on a small number of customers; risks of conducting business internationally; compliance with and changes in environmental and health and safety laws; risks of conducting business internationally; compliance with and changes in laws and regulations; foreign exchange risks; and the effect of natural disasters and changes in our key management personnel. We caution 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” (a “B.V.”), or private limited liability company, to a “naamloze vennootschap” (a “N.V.”), or a 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 Atrium, 8^th floor, Strawinskylaan 3077, 1077 ZX Amsterdam. The telephone number there is +31 20 301 2980. Our agent in the United States is CT Corporation. Their office is located at 3 Winners Circle, 3^rd Floor, Albany, New York 12205.

Corporate Restructuring

On July 2, 1998, James Hardie Industries Limited (which we refer to as JHIL or ABN 60), now called ABN 60 Pty Limited, which was then a public company organized under the laws of Australia and listed on the ASX, announced a plan of reorganization and capital restructuring (which we refer to as the 1998 Reorganization).

James Hardie N.V. (which we refer to as JHNV) was incorporated in August 1998 as an intermediary holding company, with all of its common stock owned by indirect subsidiaries of ABN 60. On October 16, 1998, the shareholders of ABN 60 approved the 1998 Reorganization. We began our restructuring in November 1998, primarily to address the structural imbalance and resulting operational, financial and commercial issues associated with the increasing significance and growth opportunities of our U.S. operations and the location of corporate management and our shareholder base in Australia. At that time, we successfully completed:

	•		the formation of JHNV;
	•		the transfer to subsidiaries of JHNV of all of our fiber cement businesses, our U.S. gypsum wallboard business, our Australian and New Zealand building systems business and our Australian windows business, all of which, except for fiber cement, were subsequently sold;

	•		a debt financing, consisting of an issuance of notes to U.S. purchasers, and the arrangement of an Australian credit facility; and
	•		the relocation of most of our senior executives and managers to our operational headquarters in the United States.

In February 2001, ABN 60, or JHIL, established the Medical Research and Compensation Foundation (which we refer to as the Foundation) by gifting A$3.0 million ($1.7 million based on the March 31, 2001 exchange rate of A$1.7989 to US$1.0000) in cash and transferring ownership of Amaca and Amaba to the Foundation.

On July 24, 2001, ABN 60 announced a further plan of reorganization and capital restructuring (which we refer to as the 2001 Reorganization). On October 19, 2001, we completed our 2001 Reorganization. This restructuring was done to provide us with a more efficient financial structure in light of potential global expansion, to allow us to use our stock for acquisitions if necessary and to increase overall returns to our shareholders. The 2001 Reorganization consisted of the following:

	•		the issuance of shares of JHI NV common stock represented by CUFS to substantially all ABN 60 shareholders in exchange for their shares of ABN 60 common stock pursuant to an approved Australian scheme of arrangement;
	•		the transfer by ABN 60 of all of the outstanding shares of JHNV (which directly or indirectly held substantially all of the assets of the James Hardie Group at that time) to JHI NV;
	•		a capital reduction and payment of a dividend by ABN 60 to its then sole shareholder, JHI NV;
	•		the issuance by ABN 60 of 100,000 partly-paid ordinary shares to JHI NV for a total issue price approximately equal to the market value of the James Hardie Group immediately prior to the scheme’s implementation (which equaled approximately A$1.9 billion). There was an initial subscription price paid of A$50 per partly-paid ordinary share (that is, for a total subscription price for such shares of A$5 million), and the remainder was left uncalled. A partly-paid share is a share that is issued with only part of its value paid by the owner of the share. The partly-paid shares were issued by ABN 60 to enable it to call on JHI NV for funds in the future if ABN 60 needed such funds to maintain its solvency;
	•		the listing of the shares of JHI NV represented by CUFS on the ASX and the listing of ADRs, representing CUFS, which in turn represent shares of JHI NV, on the NYSE; and
	•		the establishment of a Dutch financing subsidiary, James Hardie International Finance B.V. (which we refer to as JHIF BV).

As a result of the share exchange, ABN 60 shareholders ceased to hold any direct interest in ABN 60 and instead became the holders of interests in JHI NV common shares, receiving substantially their same proportional ownership interests in the Company as they had in ABN 60 before exchanging their shares.

In addition, as a result of the exchange, ABN 60 and JHNV became direct subsidiaries of JHI NV.

The 2001 Reorganization is generally depicted in the following simplified diagrams:

Following the 2001 Reorganization, JHI NV controlled the same assets and liabilities as ABN 60 controlled immediately prior to the 2001 Reorganization.

During fiscal year 2003:

	•		JHI NV and ABN 60 cancelled the partly-paid shares. The decision to cancel the partly-paid shares was taken by the directors of ABN 60 who did so based on a determination that the reduction in capital would not materially prejudice ABN 60’s ability to pay its creditors, including Amaba and Amaca, which, under the terms of the Deed of Covenant and Indemnity, were creditors of ABN 60 only to the extent of the limited financial obligations under that Deed. The directors of ABN 60, after due consideration of ABN 60’s financial position, determined that the reduction in capital would not materially prejudice ABN 60’s ability to pay its creditors;
	•		ABN 60 transferred control of all of its non-operating subsidiaries to RCI Holdings Pty Ltd, a wholly owned subsidiary of JHI NV, to distinguish between the operating group of companies and non-operating subsidiaries; and
	•		Following the consolidation of the operating assets of the James Hardie Group under JHI NV and JHNV in fiscal year 2003, the principal activity of ABN 60 was paying amounts in accordance with the Deed of Covenant and Indemnity. At that time, the cash position of the Company had improved significantly as a result of the sale of the Company’s gypsum business in the United States and the impending sale of a gypsum mine in Nevada. On March 31, 2003, following a review of all available options to address this issue and after a thorough review had been conducted to determine that the funds available to ABN 60 would be sufficient to meet the claims of all creditors, the shares in ABN 60 were transferred to the ABN 60 Foundation. ABN 60 Foundation was established to be the sole shareholder of ABN 60. ABN 60 was managed by independent directors and operated entirely independently of the Company. During fiscal year 2006, we completed a further restructuring which we believe will enable us to continue paying

dividends and continue realizing benefits available under the Dutch Financial Risk Reserve regime. See Item 3, “Key Information — Risk Factors.”

The 2006 reorganization consisted of the following: The subsidiary that owns our United States operations issued a second series of shares to a new subsidiary of JHIF BV. Our United States operations are now partly owned by JHI NV and the new subsidiary of JHIF BV. We expect that dividends paid to the new subsidiary of JHIF BV will be used to fund our ongoing obligations pursuant to the Amended FFA, to the AICF, through the Performing Subsidiary, while dividends paid to JHI NV will be available for other corporate purposes.

The following is a simplified diagram of our current corporate structure:

Consolidation of the AICF

In February 2007, the Amended FFA was approved by our shareholders to provide long-term funding to the AICF, a special purpose fund that provides compensation for Australian asbestos-related personal injury and death claims for which the Former James Hardie Companies are found liable. After the Amended FFA was approved, shares in Amaca and Amaba were transferred from the Foundation to the AICF. In addition, shares in ABN 60 were transferred from the ABN 60 Foundation to the AICF.

Although we have no legal ownership in the AICF, we have contractual and pecuniary interests in the AICF as a result of funding arrangements outlined in the Amended FFA. The Amended FFA results in the Performing Subsidiary having a contractual liability to pay the initial funding and ongoing annual payments to the AICF, subject to the terms and conditions of the Amended FFA, including application of the cash flow cap. These payments to the AICF will result in us having a pecuniary interest in the AICF. The interest is considered variable because the potential impact on us will vary based upon the annual actuarial assessments obtained by the AICF with respect to Australian asbestos-related personal injury and death claims for which the Former James Hardie Companies are found liable.

Due to our variable interest in the AICF we consolidate the AICF in accordance with FIN 46R, “Consolidation of Variable Interest Entities.” See Note 2 to our consolidated financial statements in Item 18.

Recent Developments (events occurring after April 1, 2008)

On April 2, 2008, we announced our Supervisory Board’s approval of the engagement of Ernst & Young LLP as our external auditor for the year ending March 31, 2009. We will be seeking shareholder ratification of the selection of Ernst & Young LLP as our external auditor at our Annual General Meeting (which we refer to as AGM) in August 2008.

On May 22, 2008, we announced plans to cease production at our Plant City, Florida Hardie Pipe manufacturing facility in the United States. As a result, we recorded an asset impairment of $25.4 million in fiscal year 2008. See Item 5, “Operating and Financial Review and Prospects” and Note 7 to our consolidated financial statements in Item 18.

On June 18, 2008, the ATO commenced proceedings in the Federal Court of Australia seeking the reinstatement of our former wholly-owned subsidiary JHAF. We are considering our position with respect to the ATO proceedings, the merits of the potential amended assessment and any obligations of JHAF to the ATO given its prior winding up. See Item 3, “Key Information — Risk Factors”, Item 4, “Information on the Company — Legal Proceedings” and Note 14 to the notes to our consolidated financial statements included in Item 18 for more information.

On June 23, 2008, we announced that the IRS issued us a NOPA that concludes that we do not satisfy the LOB provision of the New U.S.-N.L. Treaty and that accordingly we are not entitled to beneficial withholding tax rates on payments from our United States subsidiaries to our Netherlands companies. We do not agree with the conclusions reached by the IRS, and we intend to contest the IRS’ findings through the continuing audit process and, if necessary, through subsequent administrative appeals and possibly litigation. See Item 3, “Key Information — Risk Factors”, Item 4, “Information on the Company — Legal Proceedings” and Note 14 to the notes to our consolidated financial statements included in Item 18 for more information.

Board and Management Changes

Effective May 7, 2008, Mr. Robert Cox was appointed as our Company Secretary and as a member of our Managing Board.

Effective May 19, 2008, Mr. David Harrison was appointed as a non-executive director of our Joint and Supervisory Boards.

Effective May 23, 2008, Mr. Steve Ashe, Vice President — Investor Relations, separated from the Company.

Mr. Donald DeFosset will be resigning from our Joint and Supervisory Boards effective August 31, 2008.

Mr. James Loudon will resign from our Joint and Supervisory Boards immediately after the AGM in August 2008.

General Overview of Our Business

Based on net sales, we believe 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. Fiber cement has been one of the fastest growing segments (in terms of market growth) of the U.S. residential exteriors industry for the past three years according to NAHB’s Builder Practices Reports – Siding Usage/Exterior Wall Finish In New Construction and Consumer Practices Reports – Siding Usage/Exterior Wall Finish In Repair & Remodel (which we refer to as the NAHB’s Builder Practices Reports). Based on our knowledge, experience and third-party data regarding our industry, we estimate that the total U.S. industry shipments of fiber cement siding was between 1.4 and 1.5 billion square feet during fiscal year 2008, a decrease of approximately 7 to 13% from fiscal year 2007. Based on our knowledge, experience and third-party data, we estimate that we have 35 to 45% of the U.S. backerboard market. We market our fiber cement products and systems under various Hardie brand names and other brand names such as Artisan^® Lap and Artisan^TM Accent Trim by James Hardie and Cemplank^® siding (we also formerly marketed siding under the brand name Sentry^® siding). 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 that use solid wood, engineered wood, vinyl, brick, stucco or gypsum wallboard.

The sale of fiber cement products in the United States accounted for 78%, 82% and 82% of our total net sales from continuing operations in fiscal years 2008, 2007 and 2006, respectively.

Our fiber cement products are used in a number of 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 and soffit lining, 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. Based on our knowledge, experience and third-party data regarding our industry, we estimate that, in fiscal year 2008, we sold approximately 12%² of the estimated total 9.6 to 9.8 billion square foot² U.S. exterior siding market (all types of siding; excludes fascia, trim and soffit).

The breakdown of our net sales by operating segment for each of our last three fiscal years is as follows:

		Fiscal Year Ended March 31,
		2008				2007				2006
						(In millions)
USA Fiber Cement		$	1,144.8			$	1,262.3			$	1,218.4
Asia Pacific Fiber Cement			298.3				251.7				241.8
Other			25.7				28.9				28.3
Total		$	1,468.8			$	1,542.9			$	1,488.5

Industry Overview

U.S. Housing Industry and Fiber Cement Industry

In the United States, fiber cement is principally used in the residential building industry. Such usage 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 and the availability of finance to homeowners to purchase a new home or make improvements to their existing homes, 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 decreased from approximately 1.80 million in calendar year 2006 to approximately 1.35 million in calendar year 2007 and residential remodeling and repair expenditures decreased from approximately $228.2 billion in calendar year 2006 to approximately $226.4 billion in calendar year 2007, as preliminarily reported in the U.S. Census Bureau on May 1, 2008. However, other indicators of residential repair and remodeling activity reflect a steeper decline, such as year-over-year sales at The Home Depot and Lowe’s which both sell building materials estimated to be predominantly to the repair & remodeling market segment.

Based on our knowledge, experience and third-party data regarding our industry, we estimate that total U.S. industry shipments of fiber cement siding was between 1.4 and 1.5 billion square feet during fiscal year 2008, a decrease of approximately 7 to 13% from fiscal year 2007. The future growth of fiber cement products will depend on overall demand for building products and on 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. See Item 3, “Key Information — Risk Factors.”

In the United States, the largest application for fiber cement products is in the external siding industry. Based on the NAHB’s Builder Practices Reports, for the past three years, fiber cement has been one of the fastest growing segments (in terms of market growth) of the siding industry. Siding is a component of every building and it usually occupies more square footage than any other building component, 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 vinyl, stucco, fiber cement, solid wood, and brick. Vinyl has the largest share of the siding market. In recent years, based on the NAHB’s Builder Practices Reports, fiber cement has been gaining market share against vinyl and wood, and this is believed to be due to a number of reasons, including aesthetics, durability concerns and lower maintenance requirements compared to wood.

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. We believe the level of activity in this industry is generally a function of interest rates, inflation, unemployment levels, demographic trends, gross domestic product growth and consumer confidence. Demand for fiber cement building products is also affected by the level of new housing starts and renovation activity. According to the Australian Bureau of Statistics (which we refer to as the ABS) total dwelling commencements in Australia declined from 165,336 in calendar year 2004 to 148,880 in calendar year 2007. Renovation activity, as measured in local currency expenditures by the ABS has increased from calendar year 2004 to calendar year 2007 for a total increase over this period of approximately 9%. According to Statistics New Zealand, new dwellings authorized in New Zealand declined from approximately 31,423 in calendar year 2004 to 25,544 in calendar year 2007. Residential renovation activity in New Zealand has increased from calendar year 2004 to calendar year 2007 for a total increase over this period of approximately 19%. The Housing Industry Association of Australia and InfoMetrics New Zealand believe new housing construction and renovation activity are expected to soften over the short to medium term in Australia and New Zealand, respectively.

Fiber cement products have, across a range of product applications, gained broader acceptance in Australia and New Zealand than in the United States, primarily due to earlier introduction in Australia and New Zealand. Former subsidiaries of ABN 60 developed fiber cement in Australia as a replacement for asbestos cement in the early 1980s. Asbestos sheet production ceased in the early 1980s and asbestos pipe production ceased in early 1987. Competition has intensified over the past decade 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 growing. Competition continues to intensify in New Zealand as fiber cement imports have become more cost competitive with the strengthening New Zealand dollar, resulting in increasingly competitive market pricing. See Item 3, “Key Information — Risk Factors.”

In the Philippines and other Asian and Middle East (Israel, Kuwait, Qatar and the United Arab Emirates) markets, fiber cement building products are used in both the residential and commercial building industries with applications in external siding, external facades, internal walls, ceilings, floors, and soffits. The residential building industry represents the principal market for fiber cement products. In general, fiber cement products have, across a range of product applications, gained broader acceptance in these regions over the last 10 years. However, in some of the developing markets, gypsum usage has increased and penetrated into fiber cement applications. Fiber cement and asbestos cement facilities are located throughout Asia and exporting between countries is common practice. Management believes that fiber cement has good long-term growth potential because of the benefits of framed construction over traditional masonry construction. In addition, we believe the opportunity to replace wood-based products, such as plywood, with more durable fiber cement will be attractive to some consumers in some of these markets.

In Europe, fiber cement building products are used in both residential and commercial building industries with applications in external siding, internal walls, floors, soffits and roofing. We compete in most segments except roofing and promote the use of fiber cement products against traditional masonry, gypsum based products and wood based products. Since we commenced selling our products in Europe in fiscal year 2004, we have continued to work to grow demand for our products by building awareness among distributors, builders and contractors. Management believes that the growth outlook for fiber cement in Europe is favorable in light of stricter insulation requirements driving demand for advanced cladding systems and better building practices increasing the use of fiber cement in interior applications.

Products

We manufacture fiber cement products in the United States, Australia, New Zealand and the Philippines. In July 2005, we sold our Chilean fiber cement business. In fiscal year 2004, we commenced our European fiber cement business by distributing our fiber cement products in the United Kingdom and France. Our total product offering is aimed at the 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 and tile underlayments. Outside the United States, we also manufacture fiber cement products for use in other applications such as building facades, lattice, fencing, decorative columns, flooring, soffit lining and ceiling applications.

We have developed a proprietary technology platform that enables us to produce 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 Hardietrim™ plank. Hardietrim^™ plank 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. Hardietrim^™ plank was launched in fiscal year 1999, with the introduction of Hardietrim HLD^® plank, from our Cleburne, Texas plant and demand has been strong since that time. A new production process for manufacturing Hardietrim^™ plank was completed at the Cleburne plant and production commenced in fiscal year 2002. Additional trim capacity was added in the Peru plant in fiscal years 2004 and 2005.

We believe 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, which has enabled us to gain a competitive advantage over 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, fiber cement is lightweight, physically flexible and can be cut using readily available tools. This makes fiber cement suitable for lightweight construction across a range of architectural styles. Fiber cement is well suited to both timber and steel-framed construction.

In our interior product range, our ceramic tile underlayment 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 than traditional gypsum wet area wallboard and other competing products.

We also manufacture fiber cement pipes in Australia.

During fiscal year 2004, we introduced pre-finished trim accessories to further expand our ColorPlus^® collection line.

During fiscal years 2005 and 2006, after considerable market research, we re-launched the ColorPlus^â collection of products with additional colors, board profiles, and pallet sizes. In addition, we expanded our manufacturing capacity and capabilities to meet increasing demand for our siding, trim and soffit products with ColorPlus^â Technology.

During fiscal year 2006, we added Moldblock™ Protection to our EZGrid^â underlay and Hardiebacker™ sheets. During fiscal year 2008, we introduced Artisan^â Lap siding, Artisan™ Trim and HardieWrap™ weather barrier. Additionally, in the past five years, we launched many 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 five years include EziGrid^â tile underlay, Eclipsa™ eaves lining, Linea™ weatherboard, ExoTec^â facade panel, Axon^â cladding, Matrix™ cladding, Scyon^â trim and Scyon^â Wet Area Flooring (in Australia only) and Monotek^â facade panel, ShingleSide panel and CLD Cavity Battens (in New Zealand only).

In the Philippines, new products released over the past five years include Hardisenepa™ Fascia Board, Hardiplank^â Siding, Hardifloor™ Boards and Hardipattern™ Boards.

Seasonality

Our earnings are seasonal and typically follow activity levels in the building and construction industry. In the United States, the calendar quarters ending in December and March generally reflect reduced levels of building activity depending on weather conditions. In Australia and New Zealand, the calendar quarter ending in March is usually affected by a slowdown due to summer holidays. In the Philippines, construction activity diminishes during the wet season from June through September and during the last half of December due to the slowdown in business activity over the holiday period. Also, general industry patterns can be affected by weather, economic conditions, industrial disputes and other factors. See Item 3, “Key Information — Risk Factors.”

Raw Materials

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, Canada, and South America (Chile) and is processed to our specifications. It is 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. Moreover, we have obtained patents in the United States and in certain other countries abroad covering certain unique aspects of our pulping formulas and processes that we believe cannot adequately be protected through confidentiality agreements. However, we cannot assure you that our intellectual property and other proprietary information will be protected in all cases. See Item 3, “Key Information — Risk Factors.” During both fiscal years 2008 and 2007 we experienced cost increases related to increases in the price of pulp. We have entered into contracts that discount pulp prices in relation to various pulp indices over a longer-term and purchase our pulp from several qualified suppliers in an attempt to mitigate price increases and supply interruptions.

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.

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. During fiscal years 2008 and 2007 we experienced cost increases related to increases in the price of cement. In fiscal year 2008, strong increases in energy related costs including coal, diesel and electricity also adversely impacted materials

which have a high energy cost component, including cement and quarrying products such as silica. We continue to evaluate options on agreements with suppliers for the purchase of cement that could fix our cement prices over longer periods of time.

Water. We use local water supplies and seek to 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, Canada, and increasingly in parts of Europe, including the United Kingdom and France. In addition, we sell fiber cement products in many other countries, including Belgium, China, Denmark, Germany, Hong Kong, India, Indonesia, Ireland, Malta, the Middle East (Israel, Kuwait, Qatar and the United Arab Emirates), The Netherlands, Norway, various Pacific Islands, South Africa, South Korea, Spain, Sri Lanka, Switzerland, Taiwan, Turkey and Vietnam. Our 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, Europe and Canada. The customer service infrastructure includes inbound customer service support coordinated nationally in each country (customer service support for Canada is based out of the United States), 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 supplemented with direct sales to dealers as a means of accelerating product penetration and sales. Repair and remodel products in the United States are typically sold through the large home center retailers and specialist distributors. Our top three U.S. customers accounted for approximately 59% of our total USA Fiber Cement gross sales in fiscal year 2008. See Item 3, “Key Information — Risk Factors.” In Australia and New Zealand, both new construction and repair and remodel products are generally sold directly to distributor/hardware stores and lumber yards rather than through the two-step distribution process, which is generally used in the United States. In the Philippines, a network of thousands of small to medium size dealer outlets sells our fiber cement products to consumers, builders and real estate developers. Physical distribution of product in each country is primarily by road or sea transport, except for in the United States where transportation is primarily by road and a small use of rail.

We maintain dedicated regional sales management teams in our major sales territories. As of May 31, 2008, the sales teams (including telemarketing staff) consisted of approximately 368 people in the United States and Canada, 72 people in Australia, 21 people in New Zealand, 36 people in the Philippines, and 28 people in Europe. We also employ one person based in Taiwan who functions as a regional export salesperson, and who covers markets such as South Korea, Hong Kong, Macau, China and the Middle East (Israel, Kuwait, Qatar and the United Arab Emirates). 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 some cases, sales forces manage specific product categories. For example, in the United States, there are individuals who may specialize in siding products or interior products, although recent reorganizations have integrated many of these individuals into collaborative teams. Some interior products sales representatives provide 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 and dealers are generally 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 James Hardie^® 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. See Item 3, “Key Information — Risk Factors.”

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. 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 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, Scandinavia, 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 construction solutions and for those solutions to be accepted by the markets.

Because fiber cement products were relatively new to the Philippines, the launch of our fiber cement products in the Philippines in fiscal year 1999 was accompanied by strategies to address the particular needs of local customers and the building trade. For example, we established a carpenter training and accreditation program whereby Filipino carpenters who are unfamiliar with our products are taught installation techniques. We have also put greater emphasis on building our relationships with new home developers and builders in order to educate the market on the benefits of our products in this particular sector.

Fiber cement products manufactured in Australia, New Zealand and the Philippines are exported to a number of markets in Asia, the Pacific, and the Middle East (Israel, Kuwait, Qatar and the United Arab Emirates) by sea transport. A regional sales management team managed out of the Philippines is responsible for coordinating export sales into Asia and the Middle East (Israel, United Arab Emirates, Kuwait, and Qatar). A regional sales coordinator based in New Zealand is responsible for export sales to the Pacific and Papua New Guinea.

Research and Development

We pioneered the successful development of cellulose reinforced fiber cement and, since the 1980s, have 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 activities. In fiscal year 2008, we spent $27.4 million or approximately 1.9% of total net sales, in research and development activities. This amount included $0.1 million of amounts classified as selling, general and administrative expenses for U.S. GAAP purposes. In fiscal year 2007, we spent $30.0 million or approximately 1.9% of total net sales, in research and development activities. This amount included $4.1 million of amounts classified as selling, general and administrative expenses for U.S. GAAP purposes. In fiscal year 2006, we spent $32.1 million, or approximately 2.2% of total net sales, in research and development activities. This amount included $3.4 million of amounts classified as selling, general and administrative expenses for U.S. GAAP purposes. See Item 3, “Key Information — Risk Factors.”

Dependence on Trade Secrets and Research and Development

Our current patent portfolio is based mainly on fiber cement compositions, associated manufacturing processes and the resulting products. Our non-patent technical intellectual property consists primarily of our operating and manufacturing know-how, which is maintained as trade secret information. We have increased our abilities to effectively create, manage and utilize our intellectual property and have implemented a strategy that increasingly uses patenting, licensing, trade secret protection and joint development to protect and increase our market share. However, we cannot assure you that our intellectual property and other proprietary information will be protected in all cases. In addition, if our research and development efforts fail to generate new, innovative products or processes, our overall profit margins may decrease and demand for our products may fall. We do not materially rely on intellectual property licensed from any outside third parties. See Item 3, “Key Information — Risk Factors.”

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, but are not limited to:

	•		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, regional and local regulations. Other countries also have statutory schemes relating to the protection of the environment.

Some environmental laws provide that 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 or other impacted properties. 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, property damage and/or for clean-up associated with releases of hazardous or toxic substances pursuant to applicable environmental laws and common law tort theories, including strict liability.

Environmental compliance costs in the future will depend, in part, on continued oversight of operations, expansion of operations and manufacturing activities, regulatory developments and future requirements that cannot presently be predicted. See Item 3, “Key Information — Risk Factors.” Also see “Legal Proceedings” below.

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, 2008.

Name of Company		Jurisdiction of Establishment
James Hardie 117 Pty Ltd.		Australia
James Hardie Aust Holdings Pty Ltd.		Australia
James Hardie Austgroup Pty Ltd.		Australia
James Hardie Australia Management Pty Ltd.		Australia
James Hardie Australia Pty Ltd.		Australia
James Hardie Building Products Inc.		United States
James Hardie Europe B.V.		Netherlands
James Hardie International Finance B.V.		Netherlands
James Hardie International Finance Holdings Sub I B.V.		Netherlands
James Hardie International Finance Holdings Sub II B.V.		Netherlands
James Hardie International Holdings B.V.		Netherlands
James Hardie N.V.		Netherlands
James Hardie New Zealand Limited.		New Zealand
James Hardie Philippines Inc.		Philippines
James Hardie Research (Holdings) Pty Ltd.		Australia
James Hardie Research Pty Ltd.		Australia
James Hardie U.S. Investments Sierra Inc.		United States
N.V. Technology Holdings A Limited Partnership		Australia
RCI Pty Ltd.		Australia

Capital Expenditures and Divestitures

The following table sets forth our capital expenditures, calculated on an accrual basis, for each year in the three-year period ended March 31, 2008.

		Fiscal Years Ended March 31,
		2008				2007				2006
						(In millions)
USA Fiber Cement		$	31.3			$	80.3			$	154.5
Asia Pacific Fiber Cement			5.6				10.5				6.6
Chile, U.S. Pipes, U.S. Roofing and Europe (1)			1.6				1.3				1.7
Total Capital Expenditures		$	38.5			$	92.1			$	162.8

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

•

construction of a new fiber cement manufacturing plant in Pulaski, Virginia which began in March 2005. The plant includes two manufacturing lines, each with an annual design capacity of 300 million square feet. At the end of fiscal year 2006, we completed construction on the first manufacturing line and, in April 2006, we commenced commercial production on this line. In May 2006, we completed construction on the second manufacturing line. However, we have not yet commissioned or commenced commercial production on this second manufacturing line. The plant produces external siding and interior backerboard products for new residential construction, repair and remodel and manufactured housing markets. As of March 31, 2008, we have incurred $105.7 million related to the construction of our Pulaski, Virginia plant;

	•		the continued implementation of our ColorPlus® strategy. This strategy includes constructing additional ColorPlus® coating capacity inside our existing plants. In fiscal year 2006, we completed construction of, and commenced production on, a new ColorPlus® line at our Blandon, Pennsylvania plant. In fiscal year 2007, we completed construction of, and commenced production on, new ColorPlus® lines at our Reno, Nevada and Pulaski, Virginia plants. In fiscal year 2008, we suspended production at our Blandon, Pennsylvania plant. As of March 31, 2008, we have incurred $52.1 million related to our ColorPlus® strategy;
	•		commencement of a new finishing capability on a new product line in fiscal year 2007. As of March 31, 2008 we have incurred $18.8 million related to this project;
	•		the addition of a new fiber cement plant in Reno, Nevada at a cost of $58.0 million, which occurred during fiscal years 2006, 2005 and 2004; and
	•		the addition of a new trim line at our Peru, Illinois plant. As of March 31, 2005, we were in pre-production and in fiscal year 2006 we commenced the ramp-up of this new trim line. As of March 31, 2007, this project was completed and we had incurred a total cost of $59.0 million related to the construction of this new trim line. These expenditures primarily occurred during fiscal years 2006, 2005 and 2004.

In addition, in fiscal year 2006 we commenced our implementation of a new ERP software system. As of March 31, 2008, we have incurred $14.7 million related to this project.

In fiscal year 2006, we spent $3.5 million to upgrade our fiber cement manufacturing plant at Rosehill in Sydney. The purpose of the upgrade was to improve production line efficiencies in order to increase productivity and cost savings.

We currently expect to spend approximately $40 million to $60 million in fiscal year 2009 for capital expenditures, including facility upgrades and the implementation of new fiber cement technologies. We expect to fund our capital expenditures through a combination of internal cash and funds from our credit facilities.

Competitive pressures and market developments could require further increases in capital expenditures. Our financing for these capital expenditures is expected to come from our cash from our future operations and from external debt to the extent that cash from operations does not cover our capital expenditures. However, if we are unable to extend our credit facilities, or are unable to renew our credit facilities on terms that are substantially similar to the ones we presently have, we may experience liquidity issues and may have to reduce our levels of planned capital expenditures to conserve cash for future cash flow requirements. See Item 3, “Key Information — Risk Factors.”

Property, Plant and Equipment

We estimate that our manufacturing plants are among the largest and lowest cost fiber cement manufacturing plants in the United States. We believe that the location of our plants positions us near growth markets in the United States while minimizing our transportation costs for product distribution and raw material sourcing.

Our manufacturing plants use significant amounts of water which, after internal recycling and reuse, are eventually discharged to publicly owned treatment works (with the exception of our Blandon, Pennsylvania and Summerville, South Carolina facilities, which maintain a closed loop system). The discharge of process water is monitored by us, as well as by regulators. In addition, we are subject to regulations that govern the air quality and emissions from our plants. In the past, from time to time, we have received notices of discharges in excess of our water and air permit limits. In each case, we have addressed the concerns raised in those notices, including the payment of any associated minor fines. See Item 3, “Key Information — Risk Factors.”

Plants and Process

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

		Existing Annual
Location		Design Capacity (1)
Fiber Cement (in million square feet)
United States
Fontana, California			180
Plant City, Florida			300
Cleburne, Texas			500
Tacoma, Washington			200
Peru, Illinois			560
Waxahachie, Texas			360
Blandon, Pennsylvania (2)			200
Summerville, South Carolina			190
Reno, Nevada			300
Pulaski, Virginia (3)			600
Total United States			3,390
Australia
Sydney, New South Wales (4)			180
Brisbane, Queensland (Carole Park) (4) (6)			120
Total Australia			300
New Zealand
Auckland (5)			75
The Philippines
Manila			145
Total Fiber Cement Flat Sheet			3,910
Fiber Reinforced Concrete Pipes (in tons) (7)
Plant City, Florida (pipes) (8)			—
Brisbane, Queensland (Meeandah) (4) (6)			50,000
Total Fiber Reinforced Concrete Pipes			50,000

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. Many 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 increasing production capacity utilization, enhancing the economies of scale or adding additional lines to existing facilities, or 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. In 1998, we entered into lease agreements with a former subsidiary, now owned by the AICF, for all of our fiber cement sites located in Australia. In March 2004, various subsidiaries of Multiplex Property Trust (which we collectively refer to as Multiplex) acquired the land and buildings related to the three fiber cement manufacturing facilities from the former subsidiary. Prior to that acquisition, we renegotiated the three leases with Multiplex. Upon completion of the acquisition and subsequent transfer of title to Multiplex, Multiplex assumed the responsibility of landlord under each of the amended leases. One of the leases for our Australian sites expires on March 22, 2016 with an option to renew the lease for two further terms of 10 years expiring in March 2036. The other two leases for our Australian sites expire on March 22, 2019 and contain options to renew for two further terms of 10 years expiring in March 2039. There is no purchase option available under our leases related to our Australian sites. In addition, in March 2004, we entered into a lease agreement with Multiplex for our fiber cement site located in New Zealand. On June 30, 2005, an unrelated third party, the Location Group Limited, acquired the land and buildings related to the fiber cement manufacturing facilities in New Zealand from Multiplex and we now make lease payments related to this site to the Penrose Land Limited, a company within the Location Group Limited, as landlord under the lease. The leases for our New Zealand facilities expire on March 22, 2016, at which time we have an option to renew the lease for two further terms of 10 years expiring in March 2036. There is no purchase option available under our leases related to our New Zealand facilities. We own our pipe plant in the United States. In addition, we own 40% of the land on which our Philippines fiber cement plant is located, and 100% of the Philippines plant itself.

For fiscal year 2008, average capacity utilization for our fiber cement plants by country was approximately as follows:

		Capacity
Country		Utilization (1)
United States			59	%
Australia			76	%
New Zealand			72	%
Philippines			77	%

Mines

We lease silica quartz mine sites in Tacoma, Washington; Reno, Nevada; and Victorville, California. Our lease for our quartz mine in Tacoma, Washington expires in February 2010 (with options to renew). The lease for our silica quartz mine site in Reno, Nevada expires in May 2011 (with options to renew or purchase). The lease for our silica quartz mine site in Victorville, California expires in July 2015.

Commitment to Provide Funding on a Long-Term Basis in Respect of Asbestos-Related Liabilities of Former Subsidiaries

The Amended FFA to provide long-term funding to the AICF was approved by shareholders in February 2007. The accounting policies utilized by the Company to account for the Amended FFA are described in Note 2 to our consolidated financial statements in Item 18.

Asbestos Adjustments

The asbestos adjustments included in the consolidated statements of operations comprise the following:

		Fiscal Years Ended March 31,
(In millions)		2008				2007				2006
Change in estimates
Change in actuarial estimate – asbestos liability		$	(175.0	)		$	50.3			$	—
Change in actuarial estimate – insurance receivable			27.4				(22.6	)			—
Change in estimate – AICF claims-handling costs			(6.5	)			0.8				—
Change in estimate – Other			1.2				—				—
Subtotal – Change in estimates			(152.9	)			28.5				—
Effect of foreign exchange			(87.2	)			(94.5	)			—
Tax impact related to the implementation of the Amended FFA			—				(335.0	)			—
Initial recording of provision at March 31, 2006			—				—				(715.6	)
Other adjustments			—				(4.5	)			—
Total Asbestos Adjustments		$	(240.1	)		$	(405.5	)		$	(715.6	)

Asbestos-Related Assets and Liabilities

Under the terms of the Amended FFA, the Company has included on its consolidated balance sheets certain asbestos-related assets and liabilities. These amounts are detailed in the table below, and the net total of these asbestos-related assets and liabilities is commonly referred to by the Company as the “Net Amended FFA Liability.”

		March 31,
(In millions)		2008				2007
Asbestos liability – current		$	(78.7	)		$	(63.5	)
Asbestos liability – non-current			(1,497.8	)			(1,225.8	)
Asbestos liability – Total			(1,576.5	)			(1,289.3	)
Insurance receivable – current			14.1				9.4
Insurance receivable – non-current			194.3				165.1
Insurance receivable – Total			208.4				174.5
Workers’ compensation asset – current			6.9				2.7
Workers’ compensation asset – non-current			78.5				76.5
Workers’ compensation liability – current			(6.9	)			(2.7	)
Workers’ compensation liability – non-current			(78.5	)			(76.5	)
Workers’ compensation – Total			—				—
Deferred income taxes – current			9.1				7.8
Deferred income taxes – non-current			397.1				318.2
Deferred income taxes – Total			406.2				326.0
Income tax payable (reduction in income tax payable)			20.4				9.0
Other net liabilities			(3.4	)			(6.3	)
Net Amended FFA liability			(944.9	)			(786.1	)
Restricted cash and cash equivalents and restricted short-term investment assets of the AICF			115.1				146.9
Unfunded Net Amended FFA liability		$	(829.8	)		$	(639.2	)

Asbestos Liability

The amount of the asbestos liability has been calculated by reference to (but is not exclusively based upon) the most recent actuarial estimate of the projected future asbestos-related cash flows prepared by KPMG Actuaries and is in accordance with the terms of the Amended FFA. The asbestos liability also includes an allowance for the future claims-handling costs of the AICF. The Company will receive an updated actuarial estimate as of March 31 each year. The last actuarial assessment was performed as of March 31, 2008.

The changes in the asbestos liability for the year ended March 31, 2008 are detailed in the table below:

		A$				A$ to				US$
		Millions				US$ rate				Millions
Asbestos liability – March 31, 2007		A$	(1,598.1	)			1.2395			$	(1,289.3	)
Asbestos claims paid (1)			74.3				1.1503				64.6
AICF claims-handling costs incurred (1)			2.8				1.1503				2.4
Change in actuarial estimate (2)			(190.8	)			1.0903				(175.0	)
Change in estimate of AICF claims-handling costs (2)			(7.1	)			1.0903				(6.5	)
Effect of foreign exchange											(172.7	)
Asbestos liability – March 31, 2008		A$	(1,718.9	)			1.0903			$	(1,576.5	)

Insurance Receivable – Asbestos

The changes in the insurance receivable for the year ended March 31, 2008 are detailed in the table below:

		A$				A$ to				US$
		Millions				US$ rate				Millions
Insurance receivable – March 31, 2007		A$	216.3				1.2395			$	174.5
Insurance recoveries (1)			(19.2	)			1.1503				(16.7	)
Change in estimate (3)			0.2				1.1782				0.2
Change in actuarial estimate (2)			29.9				1.0903				27.4
Effect of foreign exchange											23.0
Insurance receivable – March 31, 2008		A$	227.2				1.0903			$	208.4

Deferred Income Taxes – Asbestos

The changes in the deferred income taxes — asbestos for the year ended March 31, 2008 are detailed in the table below:

		A$				A$ to US$				US$
		Millions				rate				Millions
Deferred tax assets – March 31, 2007		A$	404.1				1.2395			$	326.0
Amounts offset against income tax payable (1)			(11.1	)			1.1503				(9.6	)
Impact of change in actuarial estimates (2)			50.4				1.0903				46.2
Impact of other asbestos adjustments (1)			(0.5	)			1.1503				(0.4	)
Effect of foreign exchange											44.0
Deferred tax asset – March 31, 2008		A$	442.9				1.0903			$	406.2

Income Tax Payable

A portion of the deferred income tax asset is applied against the Company’s income tax payable. At March 31, 2008 and 2007, this amount was $20.4 million and $9.0 million, respectively. During the year ended March 31, 2008, there was a $1.7 million favorable effect of foreign exchange.

Other Net Liabilities

Other net liabilities include a provision for asbestos-related education and medical research contributions of $3.3 million and $4.6 million at March 31, 2008 and 2007, respectively. Also included in other net liabilities are the other assets and liabilities of the AICF including trade receivables, prepayments, fixed assets, trade payables and accruals. These other assets and liabilities of the AICF were a net liability of $0.1 million and $1.7 million at March 31, 2008 and 2007, respectively. During the year ended March 31, 2008, there was a $1.0 million favorable adjustment related to changes in estimates of the other net liabilities and a $0.5 million unfavorable effect of foreign exchange.

Restricted Cash and Short-term Investment Assets of the AICF

Cash and cash equivalents and short-term investments of the AICF are reflected as restricted assets as these assets are restricted for use in the settlement of asbestos claims and payment of the operating costs of the AICF. During the year ended March 31, 2008, no short-term investments were purchased or sold.

The changes in the restricted cash and cash equivalents and restricted short-term investment assets of the AICF for the year ended March 31, 2008 are detailed in the table below:

		A$				A$ to US$				US$
		Millions				rate				Millions
Restricted cash and cash equivalents and restricted short-term investment assets – March 31, 2007		A$	182.1				1.2395			$	146.9
Asbestos claims paid (1)			(74.3	)			1.1503				(64.6	)
AICF operating costs paid – claims handling (1)			(2.8	)			1.1503				(2.4	)
AICF operating costs paid – non-claims handling (1)			(4.6	)			1.1503				(4.0	)
Insurance recoveries (1)			19.2				1.1503				16.7
Interest and investment income (1)			10.8				1.1503				9.4
Unrealized loss on investments (1)			(5.1	)			1.1503				(4.4	)
Other (1)			0.2				1.1503				0.2
Effect of foreign exchange											17.3
Restricted cash and cash equivalents and restricted short-term investment assets – March 31, 2008		A$	125.5				1.0903			$	115.1

Actuarial Study; Claims Estimate

The AICF commissioned an updated actuarial study of potential asbestos-related liabilities as of March 31, 2008. Based on KPMG Actuaries’ assumptions, KPMG Actuaries arrived at a range of possible total cash flows and proposed a central estimate which is intended to reflect an expected outcome. The Company views the central estimate as the basis for recording the asbestos liability in the Company’s financial statements, which under U.S. GAAP, it considers the best estimate under SFAS No. 5. Based on the results of these studies, it is estimated that the discounted (but inflated) value of the central estimate for claims against the Former James Hardie Companies was approximately A$1.4 billion ($1.3 billion). The undiscounted (but inflated) value of the central estimate of the asbestos-related liabilities of Amaca and Amaba as determined by KPMG Actuaries was approximately A$3.0 billion ($2.8 billion). Actual liabilities of those companies for such claims could vary, perhaps materially, from the central estimate described above. The asbestos liability includes projected future cash flows as undiscounted and uninflated on the basis that it is inappropriate to discount or inflate future cash flows when the timing and amounts of such cash flows is not fixed or readily determinable.

The asbestos liability has been revised to reflect the most recent actuarial estimate prepared by KPMG Actuaries as of March 31, 2008 and to adjust for payments made to claimants during the year then ended.

In estimating the potential financial exposure, KPMG Actuaries made assumptions related to the total number of claims which were reasonably estimated to be asserted through 2071, the typical cost of settlement (which is sensitive to, among other factors, the industry in which a plaintiff claims exposure, the alleged disease type and the jurisdiction in which the action is brought), the legal costs incurred in the litigation of such claims, the rate of receipt of claims, the settlement strategy in dealing with outstanding claims and the timing of settlements.

Further, KPMG Actuaries relied on the data and information provided by the AICF and assumed that it is accurate and complete in all material respects. The actuaries tested the data for reasonableness and consistency, but have not verified the information independently nor established the accuracy or completeness of the data and information provided or used for the preparation of the report.

Due to inherent uncertainties in the legal and medical environment, the number and timing of future claim notifications and settlements, the recoverability of claims against insurance contracts, and estimates of future trends in average claim awards, as well as the extent to which the above named entities will contribute to the overall settlements, the actual amount of liability could differ materially from that which is currently projected.

A sensitivity analysis has been performed to determine how the actuarial estimates would change if certain assumptions (i.e., the rate of inflation and superimposed inflation, the average costs of claims and legal fees, and the projected numbers of claims) were different from the assumptions used to determine the central estimates. This analysis shows that the discounted (but inflated) central estimates could be in a range of A$1.0 billion ($0.9 billion) to A$2.1 billion ($1.9 billion) (undiscounted, but inflated, estimates of A$1.9 billion ($1.7 billion) to A$5.4 billion ($5.0 billion)), as of March 31, 2008. It should be noted that the actual cost of the liabilities could be outside of that range depending on the results of actual experience relative to the assumptions made.

The potential range of costs as estimated by KPMG Actuaries is affected by a number of variables such as nil settlement rates (where no settlement is payable by the Former James Hardie Companies because the claim settlement is borne by other asbestos defendants (other than the Former James Hardie Companies) which are held liable), peak year of claims, past history of claims numbers, average settlement rates, past history of Australian asbestos-related medical injuries, current number of claims, average defense and plaintiff legal costs, base wage inflation and superimposed inflation. The potential range of losses disclosed includes both asserted and unasserted claims. While no assurances can be provided, the Company believes that it is likely to be able to partially recover losses from various insurance carriers. As of March 31, 2008, KPMG Actuaries’ undiscounted central estimate of asbestos-related liabilities was A$3.0 billion ($2.8 billion). This undiscounted (but inflated) central estimate is net of expected insurance recoveries of A$497.8 million ($456.6 million) after making a general credit risk allowance for bad debt insurance carriers and an allowance for A$72.7 million ($66.7 million) of “by claim” or subrogation recoveries from other third parties. In accordance with FIN 39, the Company has not netted the insurance receivable against the asbestos liability on its consolidated balance sheets.

Claims Data

The AICF provides compensation payments for Australian asbestos-related personal injury claims against the Former James Hardie Companies. The claims data in this section are only reflective of these Australian asbestos-related personal injury claims against the Former James Hardie Companies.

For the years ended March 31, 2008, 2007 and 2006, the following table, provided by KPMG Actuaries, shows the claims filed, the number of claims dismissed, settled or otherwise resolved for each period and the average settlement amount per claim:

		Years Ended March 31,
		2008				2007				2006(1)
Number of claims filed			552				463				346
Number of claims dismissed			74				121				97
Number of claims settled or otherwise resolved			445				416				405
Average settlement amount per claim		A$	147,349			A$	166,164			A$	151,883
Average settlement amount per claim		$	128,096			$	127,165			$	114,322

The following table, provided by KPMG Actuaries, shows the activity related to the numbers of open claims, new claims and closed claims during each of the past five years and the average settlement per settled claim and case closed:

		As of March 31,
		2008				2007				2006(1)				2005				2004
Number of open claims at beginning of period			490				564				712				687				743
Number of new claims			552				463				346				489				379
Number of closed claims			519				537				502				464				435
Number of open claims at end of period			523				490				556				712				687
Average settlement amount per settled claim		A$	147,349			A$	166,164			A$	151,883			A$	157,594			A$	167,450
Average settlement amount per settled claim		$	128,096			$	127,163			$	114,318			$	116,572			$	116,123
Average settlement amount per case closed		A$	126,340			A$	128,723			A$	122,535			A$	136,536			A$	121,642
Average settlement amount per case closed		$	109,832			$	98,510			$	92,229			$	100,996			$	84,356

Under the terms of the Amended FFA, the Company has obtained rights of access to actuarial information produced for the AICF by the actuary appointed by the AICF (which we refer to as the Approved Actuary). The Company’s future disclosures with respect to claims statistics are subject to it obtaining such information from the Approved Actuary. The Company has had no general right (and has not obtained any right under the Amended FFA) to audit or otherwise require independent verification of such information or the methodologies to be adopted by the Approved Actuary. As such, the Company will need to rely on the accuracy and completeness of the information and analysis of the Approved Actuary when making future disclosures with respect to claims statistics.

See Item 3, “Key Information — Risk Factors” for additional information concerning the Amended FFA.

Legal Proceedings

Our operations, like those of other companies engaged in similar businesses, are subject to a number of federal, state and local laws and regulations on air and water quality, waste handling and disposal. Our policy is to accrue for environmental costs when it is determined that it is probable that an obligation exists and the amount can be reasonably estimated. In the opinion of management, based on information presently known, except as set forth below, the ultimate liability for such matters should not have a material adverse effect on either our consolidated financial position, results of operations or cash flows.

We are involved from time to time in various legal proceedings and administrative actions incidental or related to the normal conduct of business. Although it is impossible to predict the outcome of any pending legal proceeding, our management believes that such proceedings and actions should not, except as described below, individually or in the aggregate, have a material adverse effect on either our consolidated financial position, results of operations or cash flows. See also Item 3, “Key Information — Risk Factors.”

ASIC Proceedings

In February 2007, ASIC commenced civil proceedings against the Company, ABN 60 and ten then-present or former officers and directors of the James Hardie Group. While the subject matter of the allegations varies between individual defendants, the allegations against the Company are confined to alleged contraventions of provisions of the Corporations Act relating to continuous disclosure, a director’s duty of care and diligence, and engaging in misleading or deceptive conduct in respect of a security.

In the proceedings, ASIC seeks:

	•		declarations regarding the alleged contraventions;
	•		orders for pecuniary penalties in such amount as the Supreme Court thinks fit up to the limits specified in the Corporations Act;
	•		orders that Former James Hardie Group directors or officers Michael Brown, Michael Gillfillan, Meredith Hellicar, Martin Koffel, Peter Macdonald, Philip Morley, Geoffrey O’Brien, Peter Shafron, Gregory Terry and Peter Willcox be prohibited from managing an Australian corporation for such period as the Supreme Court thinks fit;
	•		an order that the Company execute a deed of indemnity in favor of ABN 60 providing that the Company indemnify ABN 60 for an amount up to a maximum of A$1.9 billion ($1.7 billion), for such amount as ABN 60, or its directors, consider, after giving careful consideration, is necessary to ensure that ABN 60 is able to pay its debts, as and when they fall due, and for such amount as ABN 60, or its directors, reasonably believe is necessary to ensure that ABN 60 remains solvent; and
	•		its costs of the proceedings.

The Company is defending each of the allegations made by ASIC and the orders sought against it in the proceedings, as are the other former directors and officers.

ASIC has indicated that its investigations into other related matters continue and may result in further actions, both civil and criminal. However, it has not indicated the possible defendants to any such actions.

The Company has entered into deeds of indemnity with certain of its directors and officers, as is common practice for publicly listed companies. The Company’s articles of association also contain an indemnity for directors and officers and the Company has granted indemnities to certain of its former related corporate bodies which may require the Company to indemnify those entities against indemnities they have granted their directors and officers. To date, claims for payments of expenses incurred have been received from certain former directors and officers in relation to the ASIC investigation, and in relation to the examination of these persons by ASIC delegates. Now that proceedings have been brought against former directors and officers of the James Hardie Group, the Company has and will continue to incur further costs under these indemnities which may be significant. Initially, the Company has obligations, or has offered, to advance funds in respect of defense costs and such advances have been and will continue to be made. Currently, a portion of the defense costs of former directors are being advanced by third parties, with the Company paying the balance. Based upon the information available to it presently, the Company expects this to continue absent any finding of dishonesty against any former director or officer. The Company notes that other recoveries may be available, depending upon the outcome of the ASIC proceedings, including either as a result of a costs order being made against ASIC or, if ASIC is successful in securing civil penalty declarations, as a result of repayments by former directors and officers in accordance with the terms of their indemnities. It is the Company’s policy to expense legal costs as incurred.

There remains considerable uncertainty surrounding the likely outcome of the ASIC proceedings in the longer term and there is a possibility that the Company could become responsible for other amounts in addition to the defense costs. However, at this stage, the Company believes that although such amounts are reasonably possible, the amount or range of such amounts are not estimable.

Tax Contingencies

Due to the size of the Company and the nature of its business, the Company is subject to ongoing reviews by taxing jurisdictions on various tax matters, including challenges to various positions the Company asserts on its income tax returns. The Company accrues for tax contingencies based upon its best estimate of the taxes ultimately expected to be paid, which it updates over time as more information becomes available. Such amounts are included in taxes payable or other non-current liabilities, as appropriate. If the Company ultimately determines that payment of these amounts is unnecessary, the Company reverses the liability and recognizes a tax benefit during the period in which the Company determines that the liability is no longer necessary. The Company records additional tax expense in the period in which it determines that the recorded tax liability is less than the ultimate assessment it expects.

In fiscal years 2008, 2007 and 2006, the Company recorded income tax benefit of nil, $10.4 million and $20.7 million, respectively, as a result of the finalization of certain tax audits (whereby certain matters were settled), the

expiration of the statute related to certain tax positions and adjustments to income tax balances based on the filing of amended income tax returns, which give rise to the benefit recorded by the Company.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions including Australia and The Netherlands. The Company is no longer subject to U.S. federal examinations by the IRS for tax years prior to and including tax year 2004. The Company is no longer subject to examinations by The Netherlands tax authority, for tax years prior to tax year 2002. With certain limited exceptions, the Company is no longer subject to examinations by the ATO for tax years prior to tax year 2000. The Company is currently subject to audit and review in a number of jurisdictions in which it operates and has been advised that further audits will commence in the next 12 months. In particular, the IRS is currently conducting an audit to determine whether the Company is in compliance with the revised U.S. – Netherlands Tax Treaty Limitations on Benefits provision that entitles it to beneficial withholding tax rates on payments from the U.S. to The Netherlands.

On June 23, 2008, we announced that the IRS issued us a NOPA that concludes that we do not satisfy the LOB provision of the New U.S.-N.L. Treaty and that accordingly we are not entitled to beneficial withholding tax rates on payments from our United States subsidiaries to our Netherlands companies. We do not agree with the conclusions reached by the IRS, and we intend to contest the IRS’ findings through the continuing audit process and, if necessary, through subsequent administrative appeals and possibly litigation. If the IRS position ultimately were to prevail, we would be liable for a 30% withholding tax on dividend, interest and royalty payments made any time on or after February 1, 2006 by our U.S. subsidiaries to JHI NV or our Dutch finance subsidiary. In that event, we estimate we would owe approximately $37.0 million in additional tax for calendar years 2006 and 2007 plus, as of June 30, 2008, $3.0 million in interest and $7.0 million in penalties related to that tax. Interest will continue to accrue and compound daily at the published monthly Federal short term rate plus 3% until the issue is resolved or a deposit of the full amount of the tax, interest and penalties is made with the IRS or a bond for such amounts is posted. Penalties for calendar years 2006 and 2007 will continue to accrue at the rate of one-half percent per month up to a maximum of 25%. The $7.0 million accrued penalty through June 30, 2008 could continue to accrue to a maximum total of $13.0 million. Additional tax, interest and penalties would be payable for later calendar years and such amounts could be significantly more per year in later years than the amounts indicated in the NOPA for calendar years 2006 and 2007. See Item 3, “Key Information — Risk Factors.”

In addition, the ATO is auditing the Company’s Australian income tax returns for the years ended March 31, 2002 and March 31, 2004 through March 31, 2006. On June 18, 2008, the ATO commenced proceedings in the Federal Court seeking the reinstatement of our former wholly-owned subsidiary JHAF. The Federal Court will further consider the reinstatement of JHAF on July 18, 2008. JHAF was deregistered on August 23, 2005 following a subsidiary’s voluntary winding up. We understand that the reinstatement of JHAF is a necessary pre-requisite to the ATO issuing an amended assessment in respect of one of the issues that has been the focus of the ATO’s inquiries during the tax audit of fiscal year 2002. We understand that it is the view of the ATO that an amended assessment issued to JHAF would comprise primary tax of A$101.5 million ($93.1 million), estimated penalties of A$50.8 million ($46.6 million) and as of June 30, 2008 estimated GIC charges of A$88.0 million ($80.7 million). GIC will continue to accrue until the issue is resolved or a bond is posted. Any reinstatement of JHAF would be likely to involve the appointment of a new liquidator, who would need to determine, among other things, whether and to what extent JHAF was able to put itself in a position to meet any ultimate tax liability assessed in respect of it. We are considering our position with respect to the ATO proceedings, the merits of the potential amended assessment and any obligations of JHAF to the ATO given its prior winding up. See Item 3, “Key Information — Risk Factors.”

It is anticipated that the audits and reviews currently being conducted will be completed within the next 24 months. Of the audits currently being conducted, none have progressed sufficiently to predict their ultimate outcome. The Company accrues income tax liabilities for these audits based upon knowledge of all relevant facts and circumstances, taking into account existing tax laws, its experience with previous audits and settlements, the status of current tax examinations and how the tax authorities view certain issues.

For further information, see Note 14 to our consolidated financial statements in Item 18 and Item 3, “Key Information — Risk Factors.”

Amended Australian Taxation Office Assessment

In March 2006, RCI, a wholly owned subsidiary of the Company, received an amended assessment from the ATO in respect of RCI’s income tax return for the year ended March 31, 1999. The amended assessment relates to the amount of net capital gains arising as a result of an internal corporate restructure carried out in 1998 and has been issued pursuant to the discretion granted to the Commissioner of Taxation under Part IVA of the Australian Income Tax Assessment Act 1936. The original amended assessment issued to RCI was for a total of A$412.0 million. However, after two remissions of GIC made by the ATO during fiscal year 2007, the total was revised to A$368.0 million and is comprised of the following as of March 31, 2008:

(In millions)		$(1)				A$
Primary tax after allowable credits		$	157.8			A$	172.0
Penalties (2)			39.4				43.0
General interest charges			140.3				153.0
Total amended assessment		$	337.5			A$	368.0

During fiscal year 2007, the Company agreed with the ATO that in accordance with the ATO Receivables Policy, the Company would pay 50% of the total amended assessment being A$184.0 million ($168.8 million), and provide a guarantee from James Hardie Industries N.V. in favor of the ATO for the remaining unpaid 50% of the amended assessment, pending outcome of the appeal of the amended assessment. The Company also agreed to pay GIC accruing on the unpaid balance of the amended assessment in arrears on a quarterly basis. Up to March 31, 2008, GIC totaling A$95.2 million has been paid to the ATO. On April 15, 2008, the Company paid A$3.3 million in GIC in respect of the quarter ended March 31, 2008.

On May 30, 2007, the ATO issued a Notice of Decision disallowing the Company’s objection to the amended assessment. On July 11, 2007, the Company filed an application appealing the Objection Decision with the Federal Court of Australia. The hearing date for RCI’s trial is presently scheduled for December 8, 2008.

RCI strongly disputes the amended assessment and is pursuing all avenues of appeal to contest the ATO’s position in this matter. The ATO has confirmed that RCI has a reasonably arguable position that the amount of net capital gains arising as a result of the corporate restructure carried out in 1998 has been reported correctly in the fiscal year 1999 tax return and that Part IVA does not apply. As a result, the ATO reduced the amount of penalty from an automatic 50% of primary tax that would otherwise apply in these circumstances, to 25% of primary tax. In Australia, a reasonably arguable position means that the tax position is about as likely to be correct as it is not correct. The Company and RCI received legal and tax advice at the time of the transaction, during the ATO inquiries and following receipt of the amended assessment. The Company believes that it is more likely than not that the tax position reported in RCI’s tax return for the 1999 fiscal year will be upheld on appeal. Therefore, the Company believes that the requirements under FIN 48 for recording a liability have not been met and therefore it has not recorded any liability at March 31, 2008 for the amended assessment.

The Company expects that amounts paid in respect of the amended assessment will be recovered by RCI (with interest) at the time RCI is successful in its appeal against the amended assessment. As a result, the Company has treated all payments in respect of the amended assessment that have been made up to March 31, 2008 as a deposit and it is the Company’s intention to treat any payments to be made at a later date as a deposit.

For further information on the amended ATO assessment, see Item 3, “Key Information — Risk Factors.”

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

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 intend this discussion to provide information that will assist in understanding our March 31, 2008 consolidated financial statements, the changes in significant items in those consolidated financial statements from year to year, and the primary reasons for those changes and the factors and trends which are anticipated to have a material effect on our financial condition and results of operations in future periods. This discussion includes information about our critical accounting policies and how these policies affect our consolidated financial statements, and information about the consolidated financial results of each business segment to provide a better understanding of how each segment and its results affect our financial condition and results of operations as a whole.

Our pre-tax results for fiscal years 2008 and 2007 were substantially and adversely affected by asbestos adjustments of $240.1 million and $405.5 million, respectively; impairment charges of $71.0 million and nil, respectively; and AICF SG&A expenses of $4.0 million and nil, respectively. The asbestos provision was originally recorded in fiscal year 2006 for $715.6 million for estimated future asbestos-related compensation payments. We also incurred $13.6 million and $17.4 million related to the SCI and other related matters during fiscal years 2007 and 2006, respectively. Information regarding our asbestos-related matters and the SCI and other related matters can be found in this discussion, Item 3, “Key Information — Risk Factors,” Item 4, “Information on the Company — Commitment to Provide Funding on a Long-Term Basis in Respect of Asbestos-Related Liabilities of Former Subsidiaries” and Note 12 to our consolidated financial statements in Item 18.

The Company and the Building Product Markets

Based on net sales, we believe 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. Our current primary geographic markets include the United States, Australia, New Zealand, the Philippines, Europe and Canada. Through significant research and development expenditure, we develop key product and production process technologies that we patent or hold as trade secrets. We believe that these technologies give us a competitive advantage.

Our fiber cement products are used in a number of 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 and soffit lining, internal linings, facades, fencing, pipes and floor and tile underlayments. We believe that in certain construction applications, our fiber cement products and systems provide a combination of distinctive performance, design and cost advantages over competing building products and systems.

Our products are primarily sold in the residential housing markets. Residential construction levels fluctuate based on new home construction activity and the repair and renovation of existing homes. These levels of activity are affected by many factors, including home mortgage interest rates, the availability of financing to homeowners to purchase a new home or make improvements to their existing homes, inflation rates, unemployment levels, existing home sales, the average age and the size of housing inventory, consumer home repair and renovation spending, gross domestic product growth and consumer confidence levels. A number of these factors were generally unfavorable during fiscal year 2008, resulting in weaker residential construction activity.

Fiscal Year 2008 Key Results

Total net sales decreased 5% to $1,468.8 million in fiscal year 2008. However, the asbestos adjustments resulted in an operating loss of $36.6 million compared to an operating loss of $86.6 million in fiscal year 2007. We reported a loss from continuing operations of $71.6 million in fiscal year 2008.

Our largest market is North America. Based on the NAHB’s Builder Practices Reports, for the past three years, fiber cement has been one of the fastest growing segments (in terms of market growth) of the U.S. residential exteriors industry. During fiscal year 2008, USA Fiber Cement net sales contributed approximately 78% of total net sales, and its operating income was the primary contributor to the total Company results. Net sales for our USA Fiber Cement business decreased due to a reduction in sales volume, partially offset by a higher average net sales price.

Operating income for our USA Fiber Cement segment decreased from fiscal year 2007 primarily due to decreased sales volume and higher freight costs, which were partially offset by lower selling, general and administrative expenses.

During fiscal year 2008, Asia Pacific net sales contributed approximately 20% of total net sales, and its operating income was the second largest contributor to the total Company results. Net sales increased in fiscal year 2008 in our Asia Pacific businesses due to favorable currency exchange rates of the Asia Pacific business’ currencies compared to the U.S. dollar, increased volume and a higher average Australian dollar net sales price.

Our emerging business of Europe Fiber Cement continued to make good progress. Sales in our Europe Fiber Cement business in fiscal year 2008 continued to grow steadily, albeit from a low base.

In fiscal year 2008, we recorded asset impairment charges of $45.6 million in our USA Fiber Cement segment related to the suspension of production at our Blandon, Pennsylvania plant and buildings and machinery utilized to produce materials for our products; and $25.4 million in our Other segment related to the closure of our Plant City, Florida Hardie Pipe plant.

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

Critical Accounting Policies

The 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. 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 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 consolidated financial statements and the uncertainties that could impact our results of operations, financial condition and cash flows.

Accounting for Contingencies

We account for loss contingencies in accordance with SFAS No. 5 under which we accrue amounts for losses arising from contingent obligations when the obligations are probable and the amounts are reasonably estimable. As facts concerning contingencies become known, we reassess our situation and make appropriate adjustments to the consolidated financial statements. For additional information regarding asbestos-related matters, ASIC Proceedings and the ATO assessment, see Item 3, “Key Information — Risk Factors,” Item 4, “Information on the Company — Commitment to Provide Funding on a Long-Term Basis in Respect of Asbestos-Related Liabilities of Former Subsidiaries,” Item 4, “Information on the Company — Legal Proceedings” and Notes 12, 13 and 14 to our consolidated financial statements in Item 18.

Accounting for the Amended FFA

Prior to March 31, 2007, our consolidated financial statements included an asbestos provision relating to our anticipated future payments to the AICF based on the terms of the Original FFA.

In February 2007, the Amended FFA was approved to provide long-term funding to the AICF, a special purpose fund that provides compensation for Australian asbestos-related personal injury and death claims for which the Former James Hardie Companies are found liable.

The amount of the asbestos liability reflects the terms of the Amended FFA, which has been calculated by reference to (but is not exclusively based upon) the most recent actuarial estimate of projected future cash flows prepared by KPMG Actuaries. Based on the their assumptions, the KPMG Actuaries arrived at a range of possible total cash flows and proposed a central estimate which is intended to reflect an expected outcome. The Company views the central estimate as the basis for recording the asbestos liability in the Company’s financial statements, which under U.S. GAAP, it considers the best estimate under SFAS No. 5. The asbestos liability includes these cash flows as undiscounted and uninflated on the basis that it is inappropriate to discount or inflate future cash flows when the timing and amounts of such cash flows is not fixed or readily determinable.

The asbestos liability also includes an allowance for the future operating costs of the AICF.

In estimating the potential financial exposure, KPMG Actuaries has made a number of assumptions. These include an estimate of the total number of claims by disease type which are reasonably estimated to be asserted through 2071, the typical average cost of a claim settlement (which is sensitive to, among other factors, the industry in which the plaintiff claims exposure, the alleged disease type and the jurisdiction in which the action is being brought), the legal costs incurred in the litigation of such claims, the proportion of claims for which liability is repudiated, the rate of receipt of claims, the settlement strategy in dealing with outstanding claims, the timing of settlements of future claims and the long-term rate of inflation of claim awards and legal costs.

Further, KPMG Actuaries has relied on the data and information provided by the AICF and assumed that it is accurate and complete in all material respects. The actuaries tested the data for reasonableness and consistency, but have not verified the information independently nor established the accuracy or completeness of the data and information provided or used for the preparation of the report.

Due to inherent uncertainties in the legal and medical environment, the number and timing of future claim notifications and settlements, the recoverability of claims against insurance contracts, and estimates of future trends in average claim awards, as well as the extent to which the above-named entities will contribute to the overall settlements, the actual amount of liability could differ materially from that which is currently projected and could result in significant debits or credits to the consolidated balance sheet and statement of operations.

An updated actuarial assessment will be performed as of March 31 each year. Any changes in the estimate will be reflected as a charge or credit to the consolidated statements of operations for the year then ended. Material adverse changes to the actuarial estimate would have an adverse effect on our business, results of operations and financial condition.

For additional information regarding our asbestos liability, see Item 3, “Key Information — Risk Factors,” Item 4, “Information on the Company — Commitment to Provide Funding on a Long-Term Basis in Respect of Asbestos-Related Liabilities of Former Subsidiaries” and Note 12 to our consolidated financial statements in Item 18.

Sales Rebates and Discounts

We record estimated reductions to sales for customer rebates and discounts including volume, promotional, cash and other rebates and 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 collectability of accounts receivable on an ongoing basis based on historical bad debts, customer credit-worthiness, current economic trends and changes in our customer payment activity. An allowance for doubtful accounts is provided for known and estimated bad debts. Although 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. Because 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 which would decrease our net sales. For additional information regarding our customer concentration, see Item 3, “Key Information — Risk Factors” and Note 19 to our consolidated financial statements in Item 18.

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, slow-moving or obsolete. The estimated value of excess, slow-moving and obsolete 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. If our estimate for the future demand for inventory is greater than actual demand and we fail to reduce manufacturing output accordingly, we could be required to record additional inventory reserves, which would have a negative impact on our gross profit. For additional information regarding our inventories, see Item 3, “Key Information — Risk Factors.”

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 in North America since the early 1990s, there is a risk that these products will not perform in accordance with our expectations over an extended period of time. A typical warranty program requires that we replace defective products within a specified time period from the date of sale. We record an estimate for future warranty-related costs based on an analysis of actual historical warranty costs as they relate to sales. Based on this analysis and other factors, we adjust the amount of our warranty provisions as necessary. Although our warranty costs have historically been within calculated estimates, if our experience is significantly different from our estimates, it could result in the need for additional reserves. For additional information regarding warranties, see Item 3, “Key Information — Risk Factors.”

Accounting for Income Tax

We account for income taxes according to FASB’s Statement No. 109, “Accounting for Income Taxes,” under which we compute our deferred tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes. We must assess whether, and to what extent, we can recover our deferred tax assets. If full or partial recovery is unlikely, we must increase our income tax expense by recording a valuation allowance against the portion of deferred tax assets that we cannot recover. We believe that we will recover all of the deferred tax assets recorded (net of valuation allowance) on our consolidated balance sheet at March 31, 2008. However, if facts later indicate that we will be unable to recover all or a portion of our net deferred tax assets, our income tax expense would increase in the period in which we determine that recovery is unlikely.

We account for uncertain income tax positions according to FIN 48, “Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No.109.” Due to our size and the nature of our business, we are subject to ongoing reviews by taxing jurisdictions on various tax matters, including challenges to various positions we assert on our income tax returns. Positions taken by an entity in its income tax returns must satisfy a more-likely-than-not recognition threshold, assuming that the positions will be examined by taxing authorities with full knowledge of all relevant information, in order for the positions to be recognized in the consolidated financial statements. Each quarter we evaluate the income tax positions taken, or expected to be taken, to determine whether these positions meet the more-likely-than-not threshold prescribed by FIN 48. We are required to make subjective judgments and assumptions regarding our income tax exposures and must consider a variety of factors, including the current tax statutes and the current status of audits performed by tax authorities in each tax jurisdiction. To the extent an uncertain tax position is resolved for an amount that varies from the recorded estimated liability, our income tax expense in a given financial statement period could be materially affected.

For additional information, see Item 3, “Key Information — Risk Factors” and Note 14 to our consolidated financial statements in Item 18.

Results of Operations

The following table shows our selected financial and operating data for continuing operations, expressed in millions of U.S. dollars and as a percentage of total net sales:

		Fiscal Years Ended March 31,
		2008								2007								2006
Net sales:
USA Fiber Cement		$	1,144.8				77.9	%		$	1,262.3				81.8	%		$	1,218.4				81.9	%
Asia Pacific Fiber Cement			298.3				20.3				251.7				16.3				241.8				16.2
Other (1)			25.7				1.8				28.9				1.9				28.3				1.9
Total net sales			1,468.8				100.0				1,542.9				100.0				1,488.5				100.0
Cost of goods sold			(938.8	)			(63.9	)			(969.9	)			(62.9	)			(937.7	)			(63.0	)
Gross profit			530.0				36.1				573.0				37.1				550.8				37.0
Selling, general and administrative expenses			(228.2	)			(15.5	)			(214.6	)			(13.9	)			(209.8	)			(14.1	)
Research and development expenses			(27.3	)			(1.9	)			(25.9	)			(1.7	)			(28.7	)			(1.9	)
Impairment charges			(71.0	)			(4.8	)			—				—				(13.4	)			(0.9	)
SCI and other related expenses			—				—				(13.6	)			(0.8	)			(17.4	)			(1.2	)
Asbestos adjustments			(240.1	)			(16.4	)			(405.5	)			(26.3	)			(715.6	)			(48.1	)
Other operating expense			—				—				—				—				(0.8	)			—
Operating loss			(36.6	)			(2.5	)			(86.6	)			(5.6	)			(434.9	)			(29.2	)
Interest expense			(11.1	)			(0.7	)			(12.0	)			(0.8	)			(7.2	)			(0.5	)
Interest income			12.2				0.8				5.5				0.4				7.0				0.5
Loss from continuing operations before income taxes			(35.5	)			(2.4	)			(93.1	)			(6.0	)			(435.1	)			(29.2	)
Income tax (expense) benefit			(36.1	)			(2.5	)			243.9				15.8				(71.6	)			(4.8	)
(Loss) income from continuing operations		$	(71.6	)			(4.9	)%		$	150.8				9.8	%		$	(506.7	)			(34.0	)%

The following table provides a breakdown of our operating loss:

		Fiscal Years Ended March 31,
(In millions)		2008				2007				2006
USA Fiber Cement (1)		$	268.0			$	362.4			$	342.6
Asia Pacific Fiber Cement			50.3				39.4				41.7
Research and Development			(18.1	)			(17.1	)			(15.7	)
Other (2)			(32.8	)			(9.3	)			(26.5	)
Total segment operating income			267.4				375.4				342.1
General Corporate (3)			(63.9	)			(56.5	)			(61.4	)
Asbestos adjustments			(240.1	)			(405.5	)			(715.6	)
Total operating loss		$	(36.6	)		$	(86.6	)		$	(434.9	)

Year Ended March 31, 2008 Compared to Year Ended March 31, 2007

Total Net Sales. Total net sales decreased 5% from $1,542.9 million in fiscal year 2007 to $1,468.8 million in fiscal year 2008. Net sales from USA Fiber Cement decreased 9% from $1,262.3 million in fiscal year 2007 to $1,144.8 million in fiscal year 2008 due to reduced sales volume, partially offset by a higher average net sales price. Net sales from Asia Pacific Fiber Cement increased 19% from $251.7 million in fiscal year 2007 to $298.3 million in fiscal year 2008 due to favorable currency exchange rates, increased sales volumes and a higher average net sales price. Other net sales decreased by 11% from $28.9 million in fiscal year 2007 to $25.7 million in fiscal year 2008 due to reduced sales performance in the USA Hardie Pipe business, partially offset by improved sales performance in the Europe Fiber Cement business.

USA Fiber Cement Net Sales. Net sales decreased 9% from $1,262.3 million in fiscal year 2007 to $1,144.8 million in fiscal year 2008 due to decreased sales volume, partially offset by a higher average net sales price. Sales volume decreased 11% from 2,148.0 mmsf in fiscal year 2007 to 1,916.6 mmsf in fiscal year 2008, as the decline in housing construction activity and deteriorating economic conditions led to weaker demand for our products. The average net sales price increased 2% from $588 per msf in fiscal year 2007 to $597 per msf in fiscal year 2008 due to price increases and a shift in the product mix.

Despite improved housing affordability as a result of further interest rate cuts, the housing market continued to deteriorate during fiscal year 2008 as weaker consumer confidence, tighter lending standards and falling housing prices weighed heavily on demand for new homes. Housing construction starts for fiscal year 2008 were at near record lows as builders again attempted to reduce high inventory levels of new homes for sale, and as increased foreclosures placed more existing homes on the market.

Artisan^® Lap, the business’ new premium exterior product launched in Atlanta last September, is continuing to be well received by architects, developers and builders who work in the custom home segment of the market. Artisan^® Lap has now been launched in regions of the Western and Southern Divisions.

Repair and remodelling activity has not been affected to the same extent as the new construction segment of the housing market, however some weakness in repair and remodelling activity has led to sales of our interior products being slightly lower in fiscal year 2008 compared to fiscal year 2007.

The overall rate of market penetration slowed during fiscal year 2008 and the business did not buffer the impact of the downturn in housing construction activity to the extent expected. The usual seasonal pickup in demand that was expected during the latter part of the fourth quarter of fiscal year 2008 did not occur and this led to inventory levels for the business at the end of the fiscal year 2008 being higher than expected.

Although the business is continuing to perform well at the operating income line relative to other participants in the housing sector, the business has shifted its focus for the next fiscal year to increase margins. We believe that this shift in focus will not result in funding cuts for key growth initiatives.

For fiscal year 2008, market penetration in the interior and exterior product categories and an increase in the average net sales price helped to partly offset the unfavorable impact of significantly weaker housing construction activity.

Asia Pacific Fiber Cement Net Sales. Net sales increased 19% from $251.7 million in fiscal year 2007 to $298.3 million in fiscal year 2008 due to a 17% increase in the average net sales price and 2% increase in sales volumes from 390.8 mmsf to 398.2 mmsf. Favorable currency exchange rates of the Asia Pacific business’ currencies compared to the U.S. dollar accounted for 15% of the increase in net sales in U.S. dollars. In Australian dollars, net sales increased 4% due to a 2% increase in sales volume and a 2% increase in the average Australian dollar net sales price.

In fiscal year 2008 there was a stronger primary demand for fiber cement in Australia and New Zealand mainly due to growth in sales of the Scyon™ product range in Australia and Linea™ weatherboards in New Zealand, a higher average net sales price and favorable foreign currency movements. In Australia, sales of Scyon™ branded differentiated products continued to grow and increased as a proportion of the sales mix. Sales of Scyon™ branded products for fiscal year 2008 increased 150% compared to fiscal year 2007. Non-differentiated products remain subject to strong price competition. In New Zealand, differentiated products, including Linea™ weatherboards also continued to grow as a proportion of the sales mix. The increase in the average net sales price in fiscal year 2008 was due to the shift in the Australia and New Zealand sales mix.

Other Sales. Other sales include sales of Hardie^â pipe in the United States and fiber cement operations in Europe.

In our U.S. pipes business, net sales decreased in fiscal year 2008 as compared to fiscal year 2007 due to materially lower sales volume resulting from weaker residential and non-residential construction activity in Florida. On May 22, 2008, we announced plans to cease production in our U.S. pipes business.

In our Europe Fiber Cement business, net sales continued to grow steadily in fiscal year 2008.

Gross Profit. Gross profit decreased 8% from $573.0 million in fiscal year 2007 to $530.0 million in fiscal year 2008. The gross profit margin decreased 1.0 percentage point from 37.1% in fiscal year 2007 to 36.1% in fiscal year 2008.

USA Fiber Cement gross profit decreased 12% compared to fiscal year 2007 due to lower sales volumes, higher freight costs and higher average unit costs, partially offset by a higher average net sales price. The gross profit margin decreased 1.3 percentage points in fiscal year 2008.

Asia Pacific Fiber Cement gross profit increased 24% compared to fiscal year 2007. Favorable currency exchange rates of the Asia Pacific business’ currencies compared to the U.S. dollar accounted for 14% of this increase while the underlying Australian dollar business results accounted for the remaining 10% increase. In Australian dollars, gross profit increased 10% in fiscal year 2008 due to increased sales volumes, a higher average net sales price and an insurance claim recovery which accounted for 2% of the increase. The gross profit margin increased 1.4 percentage points in fiscal year 2008.

Selling, General and Administrative (SG&A) Expenses. SG&A expenses increased 6% from $214.6 million in fiscal year 2007 to $228.2 million in fiscal year 2008, primarily due to higher warranty provisions relating to non-U.S. activities, costs associated with the ASIC proceedings, non-claims handling related operating expenses of the AICF and the impact of the unfavorable currency exchange rates of the Asia Pacific business’ currencies compared to the

U.S. dollar. These increases were partially offset by improved SG&A performance of the USA Fiber Cement and Other segments. As a percentage of sales, SG&A expense increased 1.6 percentage points to 15.5% in fiscal year 2008. SG&A expenses in fiscal year 2008 include non-claims handling related operating expenses of the AICF of $4.0 million.

ASIC Proceedings

In February 2007, the ASIC commenced civil proceedings against JHI NV, a former subsidiary and ten then-present or former officers and directors of the James Hardie Group. The civil proceedings concern alleged contraventions of certain provisions of the Corporations Law and/or the Corporations Act connected with the affairs of the Company and certain subsidiaries during the period February 2001 to June 2003.

There remains considerable uncertainty surrounding the likely outcome of the ASIC proceedings in the longer term and there is a possibility that we could become responsible for other amounts in addition to the defense costs. However, at this stage, we believe that, while incurring such amounts is reasonably possible, the actual amount or range of amounts is not estimable.

See Note 13 to our consolidated financial statements in Item 18 and Item 3, “Key Information — Risk Factors.”

Research and Development Expenses. Research and development expenses include costs associated with “core” research projects that are designed to benefit all business units. These costs are recorded in the Research and Development segment rather than being attributed to individual business units. These costs were 38% higher at $18.0 million in fiscal year 2008. Other research and development costs associated with commercialization projects in business units are included in the business unit segment results. In total, these costs were 28% lower at $9.3 million in fiscal year 2008.

Impairment Charges. The downturn in U.S. construction activity has prompted us to review the carrying value of certain long-lived assets. As a result of these reviews, impairments charges of $71.0 million have been taken in fiscal year 2008.

On October 31, 2007, we announced plans to suspend production at our Blandon, Pennsylvania plant in the United States. We recorded an asset impairment of $32.4 million in fiscal year 2008 in our USA Fiber Cement segment. The impaired assets include buildings and machinery, which were reduced to their estimated fair value based on valuation methods including quoted market prices and discounted future cash flows. These assets are being held for use by us. Since the date of the announcement through March 31, 2008, we have incurred $1.4 million of closure costs. These closure costs are not included in the impairment charge of $32.4 million and have been included in cost of goods sold and selling, general and administrative expenses in the period in which they were incurred.

On May 22, 2008, we announced plans to cease production at our Plant City, Florida Hardie Pipe manufacturing facility in the United States. As a result, we recorded an asset impairment of $25.4 million in fiscal year 2008 in our Other segment. The impaired assets include buildings and machinery, which were reduced to their estimated fair value based on valuation methods including quoted market prices and discounted future cash flows.

We recorded an asset impairment of $13.2 million in fiscal year 2008 related to buildings and machinery utilized to produce materials for our products. This impairment charge was recorded in our USA Fiber Cement segment. The impaired assets were reduced to their estimated fair value based on valuation methods including quoted market prices and discounted future cash flows.

SCI and Other Related Expenses. During fiscal year 2008, SCI and other related expenses were nil compared to $13.6 million in fiscal year 2007. Now that the Amended FFA has been implemented, we anticipate no significant SCI and other related expenses going forward.

Asbestos Adjustments. The asbestos adjustments are derived from an estimate of future Australian asbestos-related liabilities in accordance with the Amended FFA that was signed with the NSW Government on November 21, 2006 and approved by our security holders on February 7, 2007.

The asbestos-related assets and liabilities are denominated in Australian dollars. Therefore the reported value of these asbestos-related assets and liabilities in our consolidated balance sheets in U.S. dollars is subject to adjustment, with a corresponding effect on our consolidated statement of operations, depending on the closing exchange rate between the two currencies at the balance sheet date.

The asbestos adjustments for the fiscal years ended March 31, 2008 and 2007 are as follows:

		Fiscal Years Ended March 31,
(In millions)		2008				2007
Change in estimates		$	(152.9	)		$	28.5
Effect of foreign exchange			(87.2	)			(94.5	)
Impact of tax-effecting the net Amended FFA liability			—				(335.0	)
Other adjustments			—				(4.5	)
Asbestos adjustments		$	(240.1	)		$	(405.5	)

Operating Loss. Operating loss decreased from $86.6 million in fiscal year 2007 to $36.6 million in fiscal year 2008. Operating loss in fiscal year 2008 includes net unfavorable asbestos adjustments of $240.1 million, AICF SG&A expenses of $4.0 million and asset impairments of $71.0 million. In fiscal year 2007, operating loss includes net unfavorable asbestos adjustments of $405.5 million.

USA Fiber Cement operating income decreased 26% from $362.4 million in fiscal year 2007 to $268.0 million in fiscal year 2008, primarily due to impairment charges, lower volume and higher freight costs, partially offset by lower SG&A spending. The operating income margin in fiscal year 2008 was lower by 5.3 percentage points at 23.4%.

Asia Pacific Fiber Cement operating income for fiscal year 2008 increased 28% from $39.4 million in fiscal year 2007 to $50.3 million. Favorable currency exchange rates of the Asia Pacific business’ currencies compared to the U.S. dollar accounted for 16% of this increase while the underlying Australian dollar business results accounted for the remaining 12% increase. In Australian dollars, Asia Pacific Fiber Cement operating income for fiscal year 2008 increased 12% due to an improved gross margin performance partially offset by increased SG&A expenses. The operating income margin was 1.2 percentage points higher at 16.9% for fiscal year 2008.

The USA Hardie Pipe business recorded a significantly greater operating loss for fiscal year 2008 compared to a small operating income in fiscal year 2007.

The Europe Fiber cement business incurred significantly reduced operating loss in fiscal year 2008 as it continued to build sales and improve operating margins.

General Corporate Costs. General corporate costs increased by $7.4 million from $56.5 million in fiscal year 2007 to $63.9 million in fiscal year 2008. The increase was primarily due to AICF SG&A costs of $4.0 million, higher warranty provisions relating to non-U.S. activities and costs associated with the ASIC proceedings, partially offset by the decrease in SCI costs.

Net Interest Income (Expense). Net interest income (expense) increased from an expense of $6.5 million in fiscal year 2007 to income of $1.1 million. The increase was primarily due to interest income of $9.4 million earned on investments and cash balances held by the AICF and the lack of a make-whole payment in fiscal year 2008 compared to the $6.0 million make-whole payment made in fiscal year 2007. These increases were partially offset by reduced capitalized interest and reduced interest income due to lower cash balances.

Income Tax (Expense) Benefit. Income tax decreased from an income tax benefit of $243.9 million in fiscal year 2007 to an income tax expense of $36.1 million in fiscal year 2008. Income tax expense in fiscal year 2008 includes a tax benefit related to asbestos adjustments of $45.8 million; a tax benefit related to asset impairments of $27.6 million; and unfavorable tax adjustments of $5.8 million related to FIN 48 adjustments. Income tax expense in fiscal year 2007 includes a tax benefit related to asbestos adjustments of $335.0 million and a favorable tax adjustment of $10.4 million related to tax provision write-backs.

With effect from April 1, 2007, we were required to adopt the provisions of FIN 48, “Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes.” The adoption of FIN 48 resulted in the reduction of our consolidated beginning retained earnings of $78.0 million.

See Note 14 to our consolidated financial statements in Item 18 for further information on the adoption of FIN 48.

Net (Loss) Income. Net income decreased from a net income of $151.7 million in fiscal year 2007 to a net loss of $71.6 million in fiscal year 2008. Net loss in fiscal year 2008 includes asbestos adjustments of $240.1 million; a tax benefit related to asbestos adjustments of $45.8 million; impairment charges of $71.0 million ($44.6 million, after tax); and unfavorable tax adjustments of $5.8 million related to FIN 48 adjustments. Net income in fiscal year 2007 includes asbestos adjustments of $405.5 million and a tax benefit related to the implementation of the Amended FFA of $335.0 million. Also included in net income for fiscal year 2007 are SCI and other related expenses of $13.6 million ($12.6 million, after tax), the make-whole payment on the prepayment on notes of $6.0 million ($5.6 million after tax) and a tax provision write back of $10.4 million.

Year Ended March 31, 2007 Compared to Year Ended March 31, 2006

Total Net Sales. Total net sales increased 4% from $1,488.5 million in fiscal year 2006 to $1,542.9 million in fiscal year 2007. Net sales from USA Fiber Cement increased 4% from $1,218.4 million in fiscal year 2006 to $1,262.3 million in fiscal year 2007 due to a higher average net sales price, partially offset by decreased sales volume. Net sales from Asia Pacific Fiber Cement increased 4% from $241.8 million in fiscal year 2006 to $251.7 million in fiscal year 2007 due to increased sales volumes and favorable currency exchange rate differences, partially offset by a decreased average net sales price. Other net sales increased by 2% from $28.3 million in fiscal year 2006 to $28.9 million in fiscal year 2007 due to improved sales performance in the USA Hardie Pipe business and the Europe Fiber Cement business partially offset by decreased sales resulting from the sale of the Chile Fiber Cement business in July 2005.

USA Fiber Cement Net Sales. Net sales increased 4% from $1,218.4 million in fiscal year 2006 to $1,262.3 million in fiscal year 2007 due to a higher average net sales price partially offset by decreased sales volume. Sales volume decreased 2% from 2,182.8 mmsf in fiscal year 2006 to 2,148.0 mmsf in fiscal year 2007, due mainly to a decrease in base demand in our products during the second half of fiscal year 2007 as a result of weaker residential housing construction activity, partially offset by growth in primary demand during the first half of fiscal year 2007. The average net sales price increased 5% from $558 per msf in fiscal year 2006 to $588 per msf in fiscal year 2007 primarily due to price increases for certain products that were implemented during fiscal year 2007 and an increased proportion of higher-priced, differentiated products in the sales mix.

The new housing construction market continued to weaken, with the U.S. Census Bureau reporting that new housing starts were down 25% and 30%, respectively, for the three months ended December 31, 2006 and March 31, 2007, compared to the same periods last year. Despite interest rates remaining relatively low, deepening problems in the sub-prime mortgage market kept builder and consumer confidence at weak levels.

According to Brian Catalde, President of the NAHB, “Builders, overall, have been systematically cutting back on new building activity for more than a year now. This slowdown is enabling them to reduce their inventory and better position themselves for the balance of the year, especially when faced with uncertainties over the impacts of the sub-prime-related tightening of mortgage lending standards on home sales.” Despite this, supply of new residential housing remains greater than demand and industry inventory levels at the end of the quarter continued to be above optimal levels at around 7 to 8 months supply, as reported by the NAHB.

Demand in our exterior products category for fiscal year 2007 was affected significantly by weaker housing construction activity. The decrease in net sales was due mainly to softer demand in our exterior products category, which spanned all regions except the mid-Atlantic region. Net sales were lower for all products in the exteriors category other than the higher-priced, differentiated products, XLD^® trim and the ColorPlus^® collection.

Repair and remodeling activity was relatively steady during fiscal year 2007 and sales in our interior products category were flat compared to fiscal year 2006. Continued acceptance of Hardibacker ¹/2” board as a wet area wall solution helped grow sales for that product during the quarter, almost off-setting weaker sales of our ¹/4” Hardibacker^{TM 1}/4” product in a number of our larger markets.

The net sales growth for the fiscal year 2007 largely reflects further market penetration against alternative materials, mainly wood and vinyl, across the Northern, Southern and Western Divisions and in the exterior and interior product categories, and an increase in the average net sales price.

Asia Pacific Fiber Cement Net Sales. Net sales increased 4% from $241.8 million in fiscal year 2006 to $251.7 million in fiscal year 2007 due to a 6% increase in sales volume from 368.3 mmsf to 390.8 mmsf, partly offset by a 2% decrease in the average net sales price. Net sales in Australian dollars increased 2% due to a 6% increase in sales volume, partly offset by a 3% decrease in the average Australian dollar net sales price.

In our Australia and New Zealand Fiber Cement business, net sales increased 2% from $218.1 million in fiscal year 2006 to $223.4 million in fiscal year 2007 due to a 5% increase in sales volumes, partially offset by a 3% decrease in the average net sales price compared to fiscal year 2006. In Australian dollars, net sales increased 1% due to a 5% increase in sales volumes, partially offset by a 4% decrease in the average Australian dollar net sales price compared to fiscal year 2006. In the Australia and New Zealand business, both the new housing and renovation markets weakened during fiscal year 2007, but sales volumes increased compared to fiscal year 2006 due to market initiatives designed to grow primary demand for fiber cement and increase sales of value-added, differentiated products. There was strong sales growth in the recently-launched Scyon™ range of premium products and in Linea™ weatherboards. Selling prices for non-differentiated products continue to be subject to strong competitive pressures, leading to a lower average net sales price.

In the Philippines, net sales increased in fiscal year 2007 due to increased sales volumes, partially offset by a slight decrease in the average Philippine peso net sales price. The increase in sales volume in fiscal year 2007 was due to stronger domestic building and construction activity and increased export demand.

Other Sales. Other sales include sales of Hardie™ pipe in the United States and fiber cement operations in Europe.

In our U.S. pipes business, net sales increased in fiscal year 2007 as compared to fiscal year 2006 due to an increase in sales volume and a higher average net sales price.

In our Europe Fiber Cement business, net sales continued to grow steadily, albeit from a low base.

Gross Profit. Gross profit increased 4% from $550.8 million in fiscal year 2006 to $573.0 million in fiscal year 2006. The gross profit margin increased 0.1 percentage points to 37.1% in fiscal year 2007.

USA Fiber Cement gross profit increased 5% compared to fiscal year 2006 due mainly to increases in net sales and, to a lesser extent, lower freight costs. The gross profit margin increased 0.5 percentage points in fiscal year 2007.

Asia Pacific Fiber Cement gross profit decreased 3% primarily due to reduced profitability in the Australian Fiber Cement business. The decrease was due mainly to a lower average net sales price, increased freight and raw material costs in Australia, costs associated with the start-up of the manufacture of new products, and inefficiencies associated with the rebuild of inventory at the Rosehill, New South Wales plant associated with the plant’s temporary closure in December 2006 for asbestos-related reasons. In Australian dollars, gross profit decreased 5% in fiscal year 2007. The gross profit margin decreased 2.2 percentage points in fiscal year 2007.

Selling, General and Administrative (SG&A) Expenses. SG&A expenses increased 2% from $209.8 million in fiscal year 2006 to $214.6 million in fiscal year 2007, mainly due to an increase in spending in the USA Fiber Cement business reflecting expenditures on business initiatives including build-up of organizational infrastructure to drive growth strategies. As a percentage of sales, SG&A expense decreased 0.2 of a percentage point to 13.9% in fiscal year 2007.

Research and Development Expenses. Research and development expenses include costs associated with “core” research projects that are designed to benefit all business units. These costs are recorded in the Research and Development segment rather than being attributed to individual business units. These costs were 10% lower at $25.9 million in fiscal year 2007. Other research and development costs associated with commercialization projects in business units are included in the business unit segment results. In total, these costs decreased 21% to $12.9 million for fiscal year 2007.

SCI and Other Related Expenses. Costs incurred associated with the SCI and other related expenses totaled $13.6 million in fiscal year 2007 compared to $17.4 million in fiscal year 2006. Further information on the SCI and other related matters can be found in Item 3, “Key Information — Risk Factors.”

Asbestos Adjustments. The asbestos adjustments are derived from an estimate of future Australian asbestos-related liabilities in accordance with the Amended FFA that was signed with the NSW Government on November 21, 2006 and approved by our security holders on February 7, 2007. The adjustments include the full implementation of the Amended FFA.

The asbestos adjustments are comprised of the following components for the fiscal years ended March 31:

(In millions)		2007				2006
Adjustments to the net Amended FFA liability at September 30, 2006		$	(41.8	)		$	—
Adjustments to the net Amended FFA liability at March 31, 2007			70.3				—
Tax impact related to the implementation of the Amended FFA			(335.0	)			—
Effect of foreign exchange			(94.5	)			—
Contributions to asbestos research and education			(4.5	)			—
Initial recording of provision at March 31, 2006			—				(715.6	)
Asbestos adjustments		$	(405.5	)		$	(715.6	)

Adjustments to the Net Amended FFA liability

The discounted central estimate as calculated by KPMG Actuaries is the main component of the net Amended FFA liability. In addition to the discounted central estimates, there are U.S. GAAP adjustments that are required to be made as the standards of U.S. GAAP differ from actuarial standards. KPMG Actuaries issued two additional reports during fiscal year 2007 (at September 30, 2006 and at March 31, 2007) adjusting the discounted central estimate and other amounts related to the net Amended FFA liability. The following table illustrates the impact on the net Amended FFA liability of the updated KPMG Actuaries’ valuations:

September 2006 Valuation:

		September 30,								Increase/
		2006				March 31, 2006				(decrease)
		(In millions, except exchange rate data)
Discounted Central Estimate		A$	1,554.8			A$	1,517.0			A$	37.8
U.S. GAAP Adjustments
Discounting and inflation allowance			(112.6	)			(113.2	)			0.6
Uninflated and undiscounted central estimate			1,442.2				1,403.8				38.4
Provision for claims handling costs of AICF			67.7				67.7				—
Other U.S. GAAP adjustments			31.5				28.7				2.8
Net (assets) liabilities of AICF excluding funding payments			(33.0	)			(71.6	)			38.6
Total net Amended FFA liability pre-tax			1,508.4				1,428.6				79.8
Total net Amended FFA liability post-tax		A$	1,055.9			A$	1,000.0			A$	55.9
Exchange rate — A$ to $- September 30, 2006											1.3365
Increase in the net Amended FFA liability										$	41.8