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

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

Commission file number 1-15240

JAMES HARDIE INDUSTRIES SE

(Exact name of Registrant as specified in its charter)

Republic of Ireland
(Jurisdiction of incorporation or organization)

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		New York Stock Exchange
of CHESS Units of Foreign Securities

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 434,524,879 shares of common stock at March 31, 2010.

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  o Yes  o No

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

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			28
Item 4A. Unresolved Staff Comments			53
Item 5. Operating and Financial Review and Prospects			53
Item 6. Directors, Senior Management and Employees			76
Item 7. Major Shareholders and Related Party Transactions			112
Item 8. Financial Information			114
Item 9. Listing Details			115
Item 10. Additional Information			117
Item 11. Quantitative and Qualitative Disclosures About Market Risk			134
Item 12A. Debt Securities			136
Item 12B. Warrants and Rights			136
Item 12C. Other Securities			136
Item 12D. American Depository Shares			136
PART II			137
Item 13. Defaults, Dividend Arrearages and Delinquencies			137
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds			137
Item 15. Controls and Procedures			137
Item 16A. Audit Committee Financial Expert			139
Item 16B. Code of Business Conduct and Ethics			139
Item 16C. Principal Accountant Fees and Services			140
Item 16D. Exemptions from the Listing Standards for Audit Committees			140
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			141
Item 16F. Change in Registrant’s Certifying Accountant			141
Item 16G. Corporate Governance			141
Item 17. Financial Statements			141
PART III			141
Item 18. Financial Statements			141
Item 19. Exhibits			141
EX-2.1
EX-2.2
EX-2.3
EX-2.10
EX-2.12
EX-4.30
EX-4.36
EX-4.39
EX-8.1
EX-12.1
EX-12.2
EX-13.1
EX-15.1
EX-15.2
EX-15.3

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

On August 21, 2009, our shareholders approved Stage 1 of a two-stage re-domicile proposal (together, the “Re-domicile”) to move our corporate domicile from The Netherlands to the Republic of Ireland (which we refer to as Ireland). Following this vote, on February 19, 2010, James Hardie Industries SE completed its transformation from a public limited liability corporation registered in The Netherlands (“Naamloze Vennootschap” (N.V.) to a European Company “Societas Europaea” (SE)) registered in The Netherlands (Stage 1). On June 2, 2010, our shareholders approved Stage 2 of the Re-domicile to transform James Hardie Industries SE to an Irish SE by moving our corporate domicile from The Netherlands to Ireland (Stage 2). Following this vote, on June 17, 2010, we moved our corporate domicile to Ireland and are now subject to Irish law in addition to the Council of the European Union’s Regulation on the Statute for a European Company (SE Regulations). We became an Irish tax resident on June 29, 2010.

In this annual report, unless the context otherwise indicates, James Hardie Industries SE, a “Societas Europaea,” or a European company incorporated and existing under the laws of Ireland, is referred to as JHI SE. JHI SE 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 SE and its current direct and indirect wholly owned subsidiaries are collectively referred to as “we,” “us,” “our,” “JHI SE 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, 2010 exchange rate of A$1.0919 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 Ireland, 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, via 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 SE, 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 Mellon. 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 ADSs, 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 SE, consisting of our consolidated balance sheets as of March 31, 2010 and March 31, 2009, and our consolidated statements of operations, changes in shareholders’ equity and cash flows for the years ended March 31, 2010, 2009

and 2008, 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 SE’s financial statements. You should read the selected consolidated financial information in conjunction with JHI SE’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 Year ended March 31,
		2010				2009				2008				2007				2006
		(In millions except sales price per unit and per share data)
Consolidated Statements of Operations Data:
Net Sales
USA and Europe Fiber Cement (1)		$	828.1			$	929.3			$	1,170.5			$	1,291.2			$	1,246.7
Asia Pacific Fiber Cement (2)			296.5				273.3				298.3				251.7				241.8
Total net sales		$	1,124.6			$	1,202.6			$	1,468.8			$	1,542.9			$	1,488.5
Operating (loss) income (3)		$	(21.0	)		$	173.6			$	(36.6	)		$	(86.6	)		$	(434.9	)
Interest expense			(7.7	)			(11.2	)			(11.1	)			(12.0	)			(7.2	)
Interest income			3.7				8.2				12.2				5.5				7.0
Other income (expense) (4)			6.3				(14.8	)			—				—				—
(Loss) income from operations before income taxes			(18.7	)			155.8				(35.5	)			(93.1	)			(435.1	)
Income tax (expense) benefit			(66.2	)			(19.5	)			(36.1	)			243.9				(71.6	)
(Loss) income from operations		$	(84.9	)		$	136.3			$	(71.6	)		$	150.8			$	(506.7	)
Net (loss) income		$	(84.9	)		$	136.3			$	(71.6	)		$	151.7			$	(506.7	)
(Loss) income from operations per common share — basic		$	(0.20	)		$	0.32			$	(0.16	)		$	0.32			$	(1.10	)
Net (loss) income per common share — basic		$	(0.20	)		$	0.32			$	(0.16	)		$	0.33			$	(1.10	)
(Loss) income from operations per common share — diluted		$	(0.20	)		$	0.31			$	(0.16	)		$	0.32			$	(1.10	)
Net (loss) income per common share — diluted		$	(0.20	)		$	0.31			$	(0.16	)		$	0.33			$	(1.10	)
Dividends paid per share		$	—			$	0.08			$	0.27			$	0.09			$	0.10
Weighted average number of common shares outstanding
Basic			433.1				432.3				455.0				464.6				461.7
Diluted			433.1				434.5				455.0				466.4				461.7
Consolidated Cash Flow Information:
Cash flows provided by (used in) operating activities		$	183.1			$	(45.2	)		$	319.3			$	(67.1	)		$	238.4
Cash flows used in investing activities		$	(50.5	)		$	(26.1	)		$	(38.5	)		$	(92.6	)		$	(154.0	)
Cash flows (used in) provided by financing activities		$	(159.0	)		$	25.0			$	(254.4	)		$	(136.4	)		$	118.7
Other Data:
Depreciation and amortization		$	61.7			$	56.4			$	56.5			$	50.7			$	45.3
Adjusted EBITDA (5)		$	40.7			$	230.0			$	19.9			$	(35.9	)		$	(389.6	)
Capital expenditures		$	50.5			$	26.1			$	38.5			$	92.1			$	162.8
Volume (million square feet) (6)
USA and Europe Fiber Cement (1)			1,303.7				1,526.6				1,951.2				2,216.2				2,244.4
Asia Pacific Fiber Cement (2)			389.6				390.6				398.2				390.8				368.3
Average sales price per unit (per thousand square feet)
USA and Europe Fiber Cement (1)		$	635			$	609			$	600			$	583			$	555
Asia Pacific Fiber Cement (2)		A$	894			A$	879			A$	862			A$	842			A$	872

		Fiscal Year ended March 31,
		2010				2009				2008				2007				2006
		(In millions except sales price per unit and per share data)
Consolidated Balance Sheet Data:
Net current assets (7)		$	50.4			$	137.7			$	183.7			$	259.0			$	150.8
Total assets		$	2,178.8			$	1,891.7			$	2,179.9			$	2,128.1			$	1,445.4
Total debt		$	154.0			$	324.0			$	264.5			$	188.0			$	302.7
Common stock		$	221.1			$	219.2			$	219.7			$	251.8			$	253.2
Shareholders’ (deficit) equity		$	(117.9	)		$	(108.7	)		$	(202.6	)		$	258.7			$	94.9

		Fiscal Years Ended March 31,
		2010				2009				2008				2007				2006
		(In millions)
Net cash provided by (used in) operating activities		$	183.1			$	(45.2	)		$	319.3			$	(67.1	)		$	238.4
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities			(312.0	)			(3.5	)			(318.9	)			4.5				(789.1	)
Change in operating assets and liabilities, net			44.0				185.0				(72.0	)			214.3				44.0
Net income (loss)			(84.9	)			136.3				(71.6	)			151.7				(506.7	)
Cumulative effect of change in accounting principle			—				—				—				(0.9	)			—
Income tax expense (benefit)			66.2				19.5				36.1				(243.9	)			71.6
Interest expense			7.7				11.2				11.1				12.0				7.2
Interest income			(3.7	)			(8.2	)			(12.2	)			(5.5	)			(7.0	)
Other (income) expense			(6.3	)			14.8				—				—				—
Depreciation and amortization			61.7				56.4				56.5				50.7				45.3
Adjusted EBITDA		$	40.7			$	230.0			$	19.9			$	(35.9	)		$	(389.6	)

		Adjusted EBITDA is not a measure of financial performance under U.S. GAAP and should not be considered an alternative to, or more meaningful than, income from operations, net income or cash flows as defined by U.S. GAAP or as a measure of our profitability or liquidity. Not all companies calculate Adjusted EBITDA in the same manner as we have and, accordingly, Adjusted EBITDA may not be comparable with other companies. We have included information concerning Adjusted EBITDA because we believe that this data is commonly used by investors to evaluate the ability of a company’s earnings from its core business operations to satisfy its debt, capital expenditure and working capital requirements. To permit evaluation of this data on a consistent basis from period to period, Adjusted EBITDA has been adjusted for noncash charges, as well as non-operating income and expense items.
(6)		Fiber cement volume is measured in 5/16” thick square feet, which are referred to as standard feet.
(7)		Total current assets less total current liabilities.

Risk Factors

Our business, operations and financial condition are subject to various risks and uncertainties. We have described below significant factors that may adversely affect our business, operations, financial performance and condition or industry. You should be aware that the occurrence of any of the events described in the following risk factors, elsewhere in or incorporated by reference into this report, and other events that we have not predicted or assessed, could have a material adverse effect on our results of operations, financial condition and business.

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.

On November 21, 2006, JHI SE (formerly 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 an amended and restated 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, 2010, based on the Amended FFA governing our anticipated future payments to the AICF. The initial funding contribution of A$184.3 million ($145.0 million at the time of payment) was made to the AICF in February 2007. No contribution was required to be made under the Amended FFA in fiscal year 2008. Further contributions were made on a quarterly basis in July and October 2008 and in January and March 2009, inclusive of interest, totaling A$118.0 million ($110.0 million). Under the terms of the Amended FFA, we were not required to make a contribution to the AICF in fiscal year 2010. We expect to make an additional contribution of $63.7 million (an equivalent of A$75.0 million translated at the prevailing exchange rate as of May 31, 2010) to the AICF in fiscal year 2011. Future funding for the AICF continues to be linked under the terms of the Amended FFA to our long-term financial success, especially our ability to generate net operating cash flow.

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,” Item 5, “Operating and Financial Review and Prospects — Liquidity and Capital Resources — Capital Requirements and Resources” and Note 11 to the notes to our consolidated financial statements included in Item 18 for more information.

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, the investments of the AICF could decline in value, as we experienced in fiscal year 2009.

If future proven claims are more numerous, the liabilities arising from them are larger than that currently estimated by the AICF’s actuary (currently KPMG Actuaries Pty Ltd, which we refer to as “KPMG Actuaries”) or if 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.

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,” Item 5, “Operating and Financial Review and Prospects — Critical Accounting Policies” and Note 11 to the notes to our consolidated financial statements included in Item 18 for more information about our asbestos liability. In addition, see Item 5, “Operating and Financial Review and Prospects — Results of Operations” for more information on the Other Expense of $14.8 million recorded in fiscal year 2009 related to losses on investments by AICF.

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 SE or a 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.

Because our revenues are primarily derived from sales in U.S. dollars and payments pursuant to the Amended FFA are made in Australian dollars, we may experience unpredictable volatility in our reported results due to changes in the U.S. dollar (and other currencies from which we derive our sales) compared to the Australian dollar.

Approximately 19%, 16% and 14% of our net sales in fiscal years 2010, 2009 and 2008, 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 dollar denominated annual payments to the AICF.

In addition, because 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.

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. For example, during fiscal years 2010 and 2009, we recorded an unfavorable impact of $220.9 million and a favorable impact of $179.7 million, respectively, due to fluctuations in the U.S. dollar compared to the Australian dollar. 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.”

The Amended FFA imposes certain non-monetary obligations.

Under the Amended FFA, we are also subject to certain non-monetary obligations that could prove onerous or otherwise materially adversely affect our ability to undertake proposed transactions or 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.

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 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 us.

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.

Until the proposed NSW Government loan facility to the AICF is formally in place there remains a risk of a short-term funding shortfall for the AICF.

On November 7, 2009, the NSW Government and the Australian Government advised that the Australian Government would loan up to A$160 million to the NSW Government to contribute towards a standby loan facility of up to A$320 million that the NSW Government intends to make available to the AICF. The proposed standby loan facility is intended to enable the AICF to meet any short-term funding shortfall, and to continue to make payments to claimants in full and without rationing. The NSW parliament has subsequently passed the James Hardie Former Subsidiaries (Winding Up and Administration) Amendment Act 2009 to facilitate the entry into a loan facility and related security documentation by the AICF.

While the form of loan facility and related security documentation with the NSW Government has been drafted, it has yet to be finalized and executed. Until the loan facility and related security documentation is finalized and

executed by the parties to it there can be no certainty that the loan will be made available to the AICF or as to the terms of the loan and there remains a risk of a short-term funding shortfall for the AICF.

A short-term funding shortfall for the AICF could subject us to negative publicity. Such negative publicity could materially adversely affect our financial position, liquidity, results of operations and cash flows, employee morale and the market prices of our publicly traded securities.

There is no certainty that the proposed NSW Government loan facility to the AICF will remain in place for the entire term of the facility.

Once the proposed NSW Government loan facility is in place, drawings under it will be subject to satisfaction of certain specified conditions precedent and the NSW Government (as lender) will have the right to cancel the loan facility, require repayment of money advanced and enforce security granted to support the loan in the various circumstances prescribed in the loan facility agreement and related security documentation. There will also be certain positive covenants given by, and restrictions on the activities of, the AICF, Amaca, Amaba and ABN 60 which apply during the term of the loan. A breach of any of these covenants or restrictions may also lead to cancellation of the facility, early repayment of the loan and/or enforcement of the security. As such, there can be no certainty that the loan facility will remain in place for its intended term.

If the loan facility does not remain in place for its intended term, the AICF may experience a short-term funding shortfall. A short-term funding shortfall for the AICF could subject us to negative publicity. Such negative publicity could materially adversely affect our financial position, liquidity, results of operations and cash flows, employee morale and the market prices of our publicly traded securities.

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.

Certain Amended FFA tax conditions may not 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 are not 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 are not 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 are not 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 is not satisfied.

Regulatory action and continued scrutiny may have an adverse effect on our business.

We are subject to oversight by various governmental agencies throughout the world because of our numerous locations, large number of employees, various tax jurisdictions and the trading of our securities on the ASX and NYSE.

We have in the past been subject to regulatory action, which has resulted in significant costs to operate our business, including our ongoing compliance with the provisions of the Amended FFA, costs relating to the ASIC proceedings and appeals, as well as assessments by various governmental tax revenue authorities.

Our compliance with laws and regulations can be subject to future government review and interpretation. If we fail to comply with applicable laws and regulations, we could be subject to fines, penalties, or other legal liability. Also, should these laws and regulations be amended or expanded, or should new laws and regulations be enacted, we could incur additional compliance costs or restrictions on our ability to manufacture our products and operate our business. Furthermore, our failure to comply with such laws and regulations could result in additional costs, fees or reporting requirements as well as significant regulatory action including fines, penalties and legal defense costs, and could subject us to negative publicity. Such actions could have a material adverse effect on our financial position, results of operations and cash flows.

See Item 4, “Information on the Company — Legal Proceedings,” for more information.

We may be liable for defense costs and liabilities incurred in the ASIC proceedings and appeals by current or former directors, officers or employees of the James Hardie Group to the extent that those costs and liabilities 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. To date, claims have been received from certain former directors and officers in relation to the ASIC investigation, the examination of these persons by ASIC delegates and in respect of the ASIC proceedings and appeals. It is our policy to expense such costs as incurred. In fiscal years 2010, 2009 and 2008, we had incurred $3.4 million, $14.0 million and $5.5 million, respectively, of net expenses related to the ASIC proceedings and appeals. Our net costs in relation to the ASIC proceedings and appeals from February 2007 to March 31, 2010 totaled $23.1 million.

As a result of the ASIC proceedings and appeals, we have and may continue to incur further costs under these indemnities which may be material. In this respect, as with the first instance proceedings, we have obligations, or have agreed, to advance funds in respect of the appeals and such advances have been and may continue to be made. In addition, there is a possibility that we could become responsible for other amounts in addition to these costs, such as a proportion of ASIC’s costs of the ASIC proceeding and/or the appeals. These costs could materially adversely affect our financial position, liquidity, results of operations and cash flows.

Currently, a portion of the appeal costs of the former directors are being advanced by third parties, with the Company paying the balance. Based on the information currently available, we expect this arrangement to continue.

See Item 4, “Information on the Company — Legal Proceedings” for more information on the ASIC proceedings and appeals. Losses and expenses arising from the ASIC proceedings and appeals could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

In connection with transforming the company to an Irish SE, we and certain of our subsidiaries were required to negotiate the terms of future employee involvement in JHI SE and certain of its subsidiaries with employees from the European Economic Area (which we refer to as the EEA) member states in which we operate. These negotiations resulted in an agreement that requires us, among other things, to provide information to employees annually and upon certain other events and for us to consult with employees on these matters. There is a risk that our entry into the employee involvement agreement may result in a material change to our governance or adversely affect our decision making process.

Under the SE Regulation and other relevant legislation, formation of an SE through merger requires the companies involved in the merger to enter into negotiations with a special negotiating body (which we refer to as the SNB), made up of employee representatives in EEA member states to come to an arrangement on future employee involvement in the SE. As a result of the SNB process, we and certain of our subsidiaries have entered into an agreement on the involvement of employees governing the provision of information to and consultation with our European employees. The agreement generally provides that the management of JHI SE and certain of our subsidiaries will provide information to our European employees regarding certain matters both annually and as such matters may arise. The agreement also provides that we will, subject to certain conditions, provide additional information and engage in a dialogue and exchange of views with those European employees who express an interest in these communications in a manner and with a content that allows those employees to express an opinion

so that their opinion may be taken into account in our decision-making process. We also have agreed that we will convene a meeting with non-EEA member state employees to discuss information related to certain matters.

As contemplated by the agreement, we provided notice to and consulted with our European employees regarding the migration of our corporate domicile from The Netherlands to Ireland.

While we do not expect that the entry into the employee involvement agreement will result in a material change to our governance or the way James Hardie runs its business, we have not operated under this type of agreement before and there can be no assurance that it will not affect our governance or decision making process. In addition, an adverse change in our governance or decision making process as a result of the employee involvement agreement could for a period of time affect our results of operations or the market price of our publicly traded securities.

The actual benefits that we realize as an Irish SE could be materially different from our current expectations.

The Re-domicile was designed to enable us to reorganize the Company in a manner that would, among other things, allow key senior managers with global responsibilities to be free to spend more time with management at our local operations and in our markets and provide more certainty to JHI SE regarding its future tax obligations. In addition, the transformation was partly driven by the desire to increase our future flexibility by becoming subject to Irish law. However, there can be no assurance that the ability of our key senior managers with global responsibilities to spend more time with local operations and in our markets will result in an improvement to our results of operations, that the tax laws applicable to our operations will not adversely change in the future, that Irish law will not become more restrictive or otherwise disadvantageous or that changes to our governance structure and board composition will not adversely affect us. A variety of other factors that are partially or entirely beyond our control could cause the actual benefits that we realize as an Irish SE to be materially different from what we currently expect.

Our business may be adversely affected as a result of adverse action against us and negative publicity resulting from our transformation to an Irish SE, including the reduction of amounts available for contributions under the Amended FFA resulting from the costs associated with the Re-domicile and the possibility of the AICF later not having sufficient funding to meet future obligations.

There is a possibility that, despite certain covenants agreed to by the NSW Government in the Amended FFA and the standby loan arrangements, adverse action could be directed against us by one or more of the NSW Government, the Australian Commonwealth Government, governments of the other states or territories of Australia or any other governments, unions or union representative groups, or asbestos disease groups in relation to the asbestos liabilities in respect of which the AICF has been established. Such action might arise as a result of the costs of the Re-domicile reducing the amounts available for contribution under the Amended FFA in the financial year following the Re-domicile, particularly if the AICF does not have sufficient funding in future years to meet obligations to claimants or requires additional loans to meet obligations to claimants. This risk is compounded by other factors adversely affecting our net operating cash flow, such as the difficult trading conditions we currently face in our key markets and the payments we have made, and may make in the future, to taxation authorities in respect to prior taxation years.

Our transformation to an Irish SE also could result in increased negative publicity related to the Company. There continues to be negative publicity regarding, and criticism of, companies that conduct substantial business in the U.S. but are domiciled in foreign countries. We cannot assure you that we will not be subject to similar criticism based on the Re-domicile. We previously have been the subject of significant negative publicity in connection with the events that were considered by the SCI and the ASIC proceedings in Australia, which we believe has in the past contributed to declines in the price of our publicly traded securities.

We believe that any such adverse action or negative publicity could materially adversely affect our financial position, liquidity, results of operations and cash flows, employee morale and the market prices of our publicly traded securities.

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. The primary drivers of our effective tax rate are the tax rates of the jurisdictions in which we operate, the level and geographic mix of pre-tax earnings, intra-group royalties, interest rates and the level of debt which give rise to interest expense on external debt and intra-group debt, the benefits derived from the Financial Risk Reserve (which we refer to as the FRR) regime in The Netherlands (our participation in the FRR regime in The Netherlands was terminated on October 16, 2009 upon the transfer of our treasury and finance operations to Ireland), extraordinary and non-core items, and the value of adjustments for timing differences and permanent differences, including the non-deductibility of certain expenses, all of which are subject to change and which could result in a material increase in our effective tax rate. Such changes to our effective tax rate 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. In spite of a favorable settlement with the Appeals Division of the Internal Revenue Service (which we refer to as the IRS) for calendar years 2006 and 2007 (as discussed below), our eligibility for continuing benefits under the U.S.-Netherlands Tax Treaty is still undetermined for 2008 and subsequent years.

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 limitation on benefits (which we refer to as 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 SE 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.

On June 23, 2008, the IRS issued a Notice of Proposed Adjustment to us (which we refer to as NOPA) that concluded that we did not qualify for the LOB provision of the New U.S.-NL Treaty applying from early 2006. However, on April 15, 2009, we announced that the Appeals Division of the IRS had entered into a settlement agreement with our subsidiaries in which the IRS agreed to concede the government’s position in full with regard to its assertion that we did not qualify for benefits under the New U.S.-NL Treaty for calendar years 2006 and 2007. The IRS has concluded that, for those years, we are entitled to reduced withholding tax rates under the LOB provision of the New U.S.-NL Treaty for certain payments from our U. S. subsidiaries to our Netherlands subsidiaries.

In spite of this favorable settlement with the Appeals Division of the IRS for calendar years 2006 and 2007, our eligibility for continuing benefits under the New U.S.-NL Treaty is still undetermined for 2008 and subsequent years because such eligibility is determined on an annual basis and we could be audited by the IRS for this same issue in the future. If during a subsequent tax audit or related process, the IRS determines that we are not eligible for continuing benefits under the New U.S.- NL Treaty, we may not qualify for treaty benefits. As a result, our effective tax rate could significantly increase beginning in the fiscal year that such determination is made and we could be liable for taxes owed for calendar year 2008 and subsequent periods, which could materially adversely affect our financial position, liquidity, results of operations and cash flows.

Tax benefits are available under the U.S.-Ireland Income Tax Treaty for certain intercompany payments made by our U.S. subsidiaries to our Irish subsidiaries. Interest and royalty payments paid by our U.S. subsidiaries to our Irish subsidiaries may not qualify for treaty benefits under the “derivative benefits” clause.

On October 9, 2009 we transferred our intellectual property to James Hardie Technology Ltd, an Irish tax resident incorporated in Bermuda. On October 16, 2009, we transferred our treasury and finance operations to James Hardie International Finance Ltd, which is incorporated in and a tax resident of Ireland. We believe that interest and royalties paid by our U.S. subsidiaries to these companies qualify for treaty benefits in the form of reduced withholding tax under the U.S.-Ireland Income Tax Treaty (which we refer to as the U.S.-Ireland Treaty). For the period between the incorporation of these companies until the date that we became a tax resident in Ireland, under provisions of the U.S.-Ireland Treaty, our Irish subsidiaries qualified for treaty benefits under the “derivative benefits” clause so long as we were also eligible for treaty benefits under the amended U.S.-NL Income Tax Treaty.

Revenue rulings received from Irish and Dutch Revenue authorities are based upon facts that may not be met in the future, in which case there is a risk that the conclusions reached in the rulings will not apply to us, including that JHI SE will not be treated as an Irish tax resident for purposes of the U.S.-Ireland Treaty and The Netherlands-Ireland Treaty.

On August 21, 2009, shareholders approved Stage 1 of the Re-domicile to move our corporate domicile to Ireland. Following this vote, on February 19, 2010, we completed our transformation from a N.V. to a SE registered in The Netherlands. Subsequently, on June 2, 2010, shareholders approved Stage 2 of the Re-domicile; and on June 17, 2010, we became subject to Irish law in addition to the SE Regulation.

As part of this process, we requested and received certain rulings from the Irish and Dutch Revenue authorities. One of the rulings received from the Irish Revenue authorities confirms, among other things, that so long as we are centrally managed and controlled in Ireland, we will be a tax resident of Ireland. The ruling received from the Dutch Revenue authorities confirms, among other things, that we will no longer be subject to Dutch corporate income tax (except on Dutch source income) nor Dutch dividend withholding tax as long as we remain an Irish tax resident for purposes of The Netherlands-Ireland Treaty.

The issue as to whether a company is centrally managed and controlled in Ireland is a question of fact directed at the highest level of control of a company’s business, as distinct from day-to-day control to carry out normal business operations. We intend to establish that we are centrally managed and controlled in Ireland by, among other things, holding a majority of our board meetings in Ireland with participation of a majority of our directors in Ireland; the board deciding on corporate strategy, including decisions relating to significant transactions and investments, capital expenditures, equity and debt raising and dividend payments in Ireland; and maintaining our head office function in Ireland. One of the rulings from the Irish Revenue authorities confirms that if we operate in this manner, we will be considered a tax resident of Ireland.

On June 29, 2010, we conducted our first board meeting in Ireland. In addition, we have expressed an intent to become an Irish tax resident and intend to hold the majority of our subsequent board meetings, at which key decisions affecting us are made, in Ireland. On this basis, with effect from June 29, 2010 and forward, we believe that we should be considered to be an Irish tax resident and should no longer be considered to be a Dutch tax resident.

If we fail to satisfy the requirement that we are centrally managed and controlled in Ireland because we fail to operate in the manner set out in the ruling from the Irish Revenue authorities or otherwise, we may not qualify as an Irish tax resident for the purposes of the U.S.-Ireland Treaty and The Netherlands-Ireland Treaty. In such a circumstance, we could be subject to taxation in another jurisdiction, including The Netherlands. We may also in the future fail to operate in a manner consistent with other facts upon which the rulings of the Irish and Dutch revenue authorities are based. In such an event, the conclusions reached in the revenue rulings would no longer apply and we may not receive some or all of the anticipated benefits of the US-Ireland Treaty.

In addition, we requested and received rulings from the Irish Revenue authorities in relation to the residence position of both James Hardie Technology Ltd and James Hardie International Finance Ltd. These rulings confirmed that so long as both companies are centrally managed and controlled in Ireland, they will be tax residents of Ireland. We

believe that James Hardie Technology Ltd and James Hardie International Finance Ltd should be considered to be Irish tax residents as of October 9, 2009 and October 16, 2009, respectively, because they have held their board meetings, and have been centrally managed and controlled in Ireland. If the companies fail to satisfy the requirement that they be centrally managed and controlled in Ireland, or they fail to operate in a manner consistent with other facts upon which our rulings are based, they may not qualify as Irish tax residents for the purposes of the U.S.-Ireland Treaty. As a result, our effective tax rate could significantly increase beginning in the fiscal year that such determination is made and we could be liable for taxes owed for calendar year 2009 and subsequent periods, which could materially adversely affect our financial position, liquidity, results of operations and cash flows.

Tax benefits are available under the U.S.-Ireland Income Tax Treaty to U.S. and Irish taxpayers that qualify for those benefits. Our eligibility for benefits under the U.S.-Ireland Tax Treaty is determined on an annual basis and we could be audited by the IRS for this issue. If during a subsequent tax audit or related process, the IRS determines that we are not eligible for benefits under the U.S.-Ireland Treaty, we may not qualify for treaty benefits. As a result, our effective tax rate could significantly increase and we could be subject to a 30% U.S. withholding tax rate.

We believe that, under the limitation on benefits (which we refer to as the LOB) provision of the U.S.-Ireland Treaty, no U.S. withholding tax applies to interest or royalties that our U.S. subsidiaries paid to James Hardie Technology Ltd (our Irish intellectual property management subsidiary) and James Hardie International Finance Ltd (our Irish treasury and finance subsidiary). The LOB provision has various conditions of eligibility for reduced U.S. withholding tax rates and other treaty benefits, all of which we believe are satisfied. If, however, we do not qualify for benefits under the U.S.-Ireland Treaty, those interest and royalty payments would be subject to a 30% U.S. withholding tax.

Our eligibility for benefits under the U.S.-Ireland Tax Treaty is determined on an annual basis and we could be audited by the IRS for this issue. If during a subsequent tax audit or related process, the IRS determines that we are not eligible for benefits under the U.S.-Ireland Treaty, we may not qualify for treaty benefits. As a result, our effective tax rate could significantly increase beginning in the fiscal year that such determination is made and we could be liable for taxes owing for calendar year 2010 and subsequent periods, which could materially adversely affect our financial position, liquidity, results of operations and cash flows.

Finally, with effect from June 29, 2010 forward (i.e., the date upon which we became an Irish tax resident), we believe that, under the U.S.-Ireland Treaty, a 5% U.S. withholding tax applies to dividends paid to us by our U.S. subsidiaries. The LOB provision of the U.S.-Ireland Treaty has various conditions of eligibility for reduced U.S. withholding tax rates and other treaty benefits, all of which we believe we have satisfied. If, however, we do not qualify for benefits under the U.S.-Ireland Treaty, dividend payments would be subject to a 30% U.S. withholding rate.

See Item 4, “Information on the Company — Legal Proceedings” for more information.

Under Dutch tax law, from April 1, 2009 through October 15, 2009, we derived tax benefits from the group finance operations of our Netherlands-based finance subsidiary, and changes in the laws applicable to the finance subsidiary could have increased our effective tax rate and, as a result, could materially adversely affect our business. As of October 16, 2009, our group treasury and finance operations were transferred to Ireland.

Prior to October 16, 2009 we conducted 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 owned and developed intellectual property that it licensed to our operating subsidiaries. Under the Dutch International Group Finance Company rules, we obtained a ruling from the Dutch Revenue authority that allowed the finance subsidiary to set aside, in a FRR, a portion of its taxable profits from its financing activity and from licensing its intellectual property. The amounts set aside in the FRR were free of current Dutch income tax. Consequently, the finance subsidiary generally incurred an effective tax rate of approximately 13% to 15% on its qualifying financing and licensing income and was taxable at the 25.5% statutory rate on all other income received (25.5% is the Dutch statutory rate for calendar year 2007 and subsequent years). Such other income includes any amounts involuntarily released from the FRR to cover any risks (such as currency losses, bad debt losses and foreign branch losses) for which the FRR was established. The effective 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 paid for qualifying capital

contributions that were used to finance capital and other certain qualifying expenditures and resulted 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 materialized or (2) if there were 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 satisfied the requirements of the Dutch International Group Finance Company provisions under Dutch tax law. As discussed below, the Dutch revenue ruling was set to expire on December 31, 2010. However, our participation in the FRR Regime in The Netherlands terminated on October 16, 2009 upon the transfer of our treasury and finance operations to Ireland.

The European Commission (which we refer to as the Commission), the executive arm of the European Union (which we refer to as the EU), 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 Dutch International Group Finance Company regime, cannot be reconciled with EU rules regarding state aid. Accordingly, the Commission banned certain concessionary tax regimes, including the Dutch 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.

Under Irish tax law, our Irish subsidiaries are subject to tax at the trading rate of 12.5%. Failure to meet the conditions required to qualify for this rate could increase our effective tax rate and, as a result, could materially adversely affect our business.

We transferred our intellectual property to James Hardie Technology Ltd on October 9, 2009, and terminated our participation in the FRR by transferring our treasury and finance operations to James Hardie International Finance Ltd on October 16, 2009.

We have secured rulings from the Irish Revenue authorities which confirm, subject to certain conditions (which we believe we satisfy), that James Hardie International Finance Ltd should be regarded as carrying on a “trade of treasury operations” in Ireland and James Hardie Technology Ltd should be regarded as carrying on a “trade of intellectual property management”, such that the profits arising to both companies should be subject to tax in Ireland at the trading rate of 12.5%.

If, however, we do not qualify for the trading rate of tax on our finance income and our royalty income, we will be subject to tax in Ireland at the passive rate of 25% on this income with the additional risk of limited deductions for our expenses. As a result, our effective tax rate could significantly increase beginning in the fiscal year that such determination is made and we could be liable for taxes owing for fiscal year 2010 and subsequent periods, which could materially adversely affect our financial position, liquidity, results of operations and cash flows.

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 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. 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 ($148.4 million — converted at the March 31, 2007 spot rate) and provide a guarantee from JHI SE 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 general interest charges (which we refer to as GIC) accruing on the unpaid balance of the amended assessment in arrears on a quarterly basis.

We believe 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, we believe that the requirement to recognize a liability for an uncertain tax position relating to the ATO amended assessment has not been met. Accordingly, we have not recorded any liability at March 31, 2010 for the amended assessment.

We have accounted for all payments made to the ATO and related accrued interest receivable 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. As of March 31, 2010, this deposit totaled A$269.9 million ($247.2 million).

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 make 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. As a result, our financial position, liquidity, results of operations and cash flows would be materially and adversely affected. See Item 4, “Information on the Company — Legal Proceedings”, Item 5, “Operating and Financial Review and Prospects — Liquidity and Capital Resources” and Note 14 to the notes to our consolidated financial statements included in Item 18 for more information.

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 authorities in 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. The amounts ultimately paid on resolution of reviews by taxing jurisdictions 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.

If we are classified by the United States tax authorities 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, The Netherlands and Ireland including changes that could have retroactive effect.

Irish law contains provisions that could delay or prevent a change of control that may otherwise be beneficial to shareholders.

Irish law contains several provisions that could have the effect of delaying or preventing a change of control of our ownership. The Irish Takeover Rules generally prohibit the acquisition 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 ADSs) in such shares, the voting rights of the shares in which a person (or persons acting in concert) holds relevant interests increases (i) from 30% or below to over 30% or (ii) from a starting point that is above 30% and below 50%. However, this prohibition is subject to exceptions, including acquisitions that result from acceptances under a mandatory takeover bid made in compliance with the Irish Takeover Rules. Although the Irish Takeover Rules may help to ensure that no person acquires voting control of us without making an offer to all shareholders, they 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 Irish law, shareholders 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 Ireland. 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 Ireland 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 Ireland 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 the Board, although this right is limited by the applicable listing rule of the ASX or the New York Stock Exchange (which we refer to as the NYSE). Accordingly, our 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.

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

From time to time we have entered into indemnification agreements with third parties. If claims are made under these indemnification agreements, our obligations could be significant and could materially adversely affect our financial position, liquidity, results of operations and cash flows.

For instance, we entered into an indemnity agreement in connection with the sale of our former United States gypsum wallboard manufacturing facilities in April 2002, under which 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.

See Item 4, “Information on the Company — Legal Proceedings” for more information.

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 28%, 24% and 22% of our net sales in fiscal years 2010, 2009 and 2008, 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 to manage our foreign exchange risks, we did not have any material forward exchange contracts outstanding as of March 31, 2010. There can be no assurance that we will be successful in these mitigation strategies, or that fluctuations in foreign currencies and other foreign exchange risks will not have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

See also the 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, we may experience unpredictable volatility in our reported results due to changes in the U.S. dollar (and other currencies from which we derive our sales) compared to the Australian dollar.” Any of these factors could materially affect our financial position, liquidity, results of operations and cash flows.

Our business is dependent on the residential and commercial construction markets and we expect a slow recovery 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 the 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 outside our control, including general economic conditions, the availability of financing, mortgage and other interest rates, inflation, unemployment, the inventory of unsold homes, the level of foreclosures, home resale rates, housing affordability, demographic trends, gross domestic product growth and consumer confidence in each of the countries and regions in which we operate.

For example, in fiscal year 2010, our results continued to be affected by the on-going economic downturn of our major market, the U.S. housing market, where housing starts in the United States reached a seasonally-adjusted annual rate of 531,000 units in March 2010. This reflects a 77% decline from the January 2006 peak of 2.265 million starts. We believe that analysts remain confident that the U.S. housing market will continue to improve in fiscal year 2011; however, uncertainty remains as to the extent and sustainability of an anticipated recovery in the U.S. housing market.

In Australia, the residential housing market is expected to modestly improve during calendar year 2010, supported by increases in housing approvals, robust employment numbers and high levels of immigration. However, such improvements cannot be assured. In New Zealand, new housing construction and renovation activity are anticipated to soften over the short-to-medium term. Softness in renovation and commercial markets is likely to partially offset stronger residential housing growth.

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.

We do not know how long current market conditions will persist, or when or how successful any future recovery of the housing market may be. Further deterioration or continued weaknesses in general economic conditions, such as

higher interest rates, continued high levels of unemployment, continued restrictive lending practices and increased number of foreclosures could have a material adverse effect on our business, financial condition and operating results.

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.

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. In April 2009, we replaced our 50-year limited pro-rated warranty with a 30-year limited non-prorated warranty for certain of our fiber cement siding products in the United States. As of March 31, 2010, we have accrued $24.9 million for such warranties. See the line items “Accrued product warranties” in our consolidated balance sheets and Note 10 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, soil, and water quality of our plants, and the use, handling, storage, 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, including damage to natural resources, 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, subject to certain limitations, 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, although non-contractual environmental obligations could exceed this amount. 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 high and prolonged exposure levels is known or suspected to be associated with silicosis and has been the subject of extensive tort litigation. 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 may 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, greenhouse gases, 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. Such regulations and laws may increase the cost of energy or other products necessary to our operation, thereby increasing our operating costs. In addition, we cannot make any assurances that the laws currently in place that directly or indirectly relate to environmental liability will not change. If, for example, 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.”

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. An increasing proportion of our fiber cement products are sold in the Northeast and Midwest regions of the United States. Demand for building products in all 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 and energy supply necessary to our business. A significant reduction, disruption or cessation of shipments from an important supplier of raw materials or a significant increase in fuel and energy costs could have a material adverse effect on our business.

Cellulose fiber (wood-based pulp), silica, cement and water are the principal raw materials used in the production of fiber cement, and the availability and cost of such raw materials are critical to our operations. Our fiber cement business periodically experiences fluctuations in the supply and costs of raw materials, and some of our supply markets are concentrated. Pulp prices declined by 11% in fiscal year 2010 as the continued weakness of the global economy further loosened global demand. However, late in the fourth quarter of fiscal year 2010, the market price for pulp in North America increased in response to the February 2010 earthquake in Chile, from which approximately 8% of the world supply of pulp is sourced.

Energy costs also are affected by various market factors, including the availability of particular forms of energy, energy prices and local and national regulatory decisions. We cannot estimate whether there will be substantial increases in energy prices, or a decline in the availability of energy in the future. Significant increases in the cost of fuel can also result in material increases in the cost of transportation.

Price fluctuations or material delays may occur in the future due to lack of raw materials, suppliers, or supply chain disruptions. 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, delays in obtaining materials, or significant increases in fuel and energy costs could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

See Item 11, “Information on the Company — Quantitative and Qualitative Disclosures About Market Risk” for more information.

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 2010, 2009 and 2008, our expenses for research and development were $27.1 million, $23.8 million and $27.3 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.

To determine the net realizable value of our inventory, 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 our products, and is therefore at risk to change from period to period. If our estimate for the future demand of our products 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, seek to 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 major customer could materially adversely affect our business.

Our top five customers in the U.S. represented approximately 63% of our total USA and Europe Fiber Cement gross sales in fiscal year 2010. Our top five customers in Australia accounted for approximately 27% of our total gross sales in Asia Pacific Fiber Cement in fiscal year 2010. 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.

Our financial performance could be impacted by a customer’s inability to pay amounts owed.

Our financial performance is dependent on our customers within the building products industry. Our customers’ businesses have been impacted by the current economic environment, disruptions to the capital and credit markets and decreased demand for their products and services. If any of our largest customers or a substantial number of smaller customers are adversely affected by these conditions, if we become aware of information related to the credit worthiness of a major customer, or if future actual default rates on receivables in general differ from those currently anticipated, we may have to adjust the reserves for uncollectible receivables, which could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

Our reliance on third party distribution channels could impact our business.

We offer our products directly and through a variety of third party distributors and dealers. Changes in the financial or business condition of these distributors and dealers could subject the company to losses and affect its ability to

bring our products to market and could have a material adverse effect on our business, 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.

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 or disruptions in power supply 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.

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.

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, 2010, approximately 51%, or 244, of our employees in Australia¹, approximately 66%, or 91, of our employees in New Zealand and 19%, or 29 of our employees in the Philippines 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 of our labor agreements in Australia will expire in fiscal year 2011 and one labor agreement will expire in June 2014. Our labor agreement for our Meeandah (Queensland, Australia) plant expires in December 2011. Our New Zealand labor agreement expires in October 2012. 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 operations. 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.

In the future, we may be unable to renew our credit facilities on their current terms or terms that are customary for other companies in our industry or who have similar credit ratings, or be able to obtain any alternative or additional financing arrangements.

In the future, we may not be able to renew credit facilities on substantially similar terms, or at all; we may have to pay additional fees and expenses that we might not have to pay under current circumstances; and we may have to agree to terms that could increase the cost of our debt facilities. If we are unable to renew our credit facilities on terms which are not materially less favorable than the terms currently available to us or obtain alternative or additional financing arrangements, we may experience liquidity issues and will have to reduce our levels of planned capital expenditures, continue to suspend dividend payments or take other measures to conserve cash in order to meet our future cash flow requirements. See Item 5, “Operating and Financial Review and Prospects — Liquidity and Capital Resources.”

Our ability to pay dividends is dependent on Irish 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 Irish corporate law, an Irish company is able to pay dividends up to the amount of its FDRs which are determined under applicable accounting practices generally accepted in Ireland (which we refer to as Irish 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 on our securities, which could have a material adverse impact on the market value of the securities that you have invested in.

Ineffective internal controls over financial reporting could impact our business and operating results.

Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation

of financial statements. If we fail to maintain the adequacy of internal controls, our business and operating results could be harmed and we could fail to meet our financial reporting obligations.

Our use of accounting estimates involves judgment and could impact our financial results.

Our most critical accounting estimates are described in the Note 2 to our consolidated financial statements in Item 18. In addition, as discussed in Note 10, “Product Warranties” and Note 13, “Contingencies and Commitments” to our consolidated financial statements in Item 18, we make certain estimates including decisions related to legal proceedings and warranty reserves. Because by definition these estimates and assumptions involve the use of judgment, actual financial results may differ.

Changes in our board structure and the composition of our board of directors may lead to a loss of continuity of directors and adversely affect our decision-making and governance.

In connection with our Re-domicile on June 17, 2010, our Supervisory and Managing Boards were replaced with a single board which, over time, is expected to consist of eight non-executive directors and one executive director. All of the seven directors that served on the Supervisory Board continued as non-executive directors, with one new director to be added to the board over time. Our Board includes one director who was appointed following shareholder approval of Stage 1 of the Re-domicile.

Only one of the existing seven directors on our Supervisory Board who continued as a director on our single board has served more than four years on our board. The balance of the board, other than our CEO, is made up of directors with less than four years experience with the Company. The changes to our board structure and composition as a result of the Re-domicile could for a period of time impact the effectiveness of our directors and of board-level decision-making.

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 is greatly influenced by our ability to attract and retain qualified executives with experience in our market and industry. Our ability to retain executive officers and key management personnel is important to the implementation of our strategy. We could potentially lose the services of any of our senior management personnel due to a variety of factors that could include, without limitation, death, incapacity, personal issues, retirement, resignation, or competing employers. We may fail to attract and retain qualified key management personnel required to continue to operate our business successfully. The unexpected 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 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, existing and potential lenders, representatives of the media and others. Statements that are not historical facts are forward-looking statements and such forward-looking statements are statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

Examples of forward-looking statements include:

	•		statements about our future performance;
	•		projections of our results of operations or financial condition;
	•		statements regarding our plans, objectives or goals, including those relating to strategies, initiatives, competition, acquisitions, dispositions and/or our products;
	•		expectations concerning the costs associated with the suspension or closure of operations at any of our plants and future plans with respect to any such plants;
	•		expectations that our credit facilities will be extended or renewed;
	•		expectations concerning dividend payments;
	•		statements concerning our corporate and tax domiciles and potential changes to them, including potential tax charges;
	•		statements regarding tax liabilities and related audits, reviews 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 about the timing and amount of contributions to the AICF, a special purpose fund for the compensation of proven Australian asbestos-related personal injury and death claims;
	•		expectations concerning indemnification obligations;
	•		statements about product or environmental liabilities; and
	•		statements about economic conditions, such as the levels of new home construction, unemployment levels, the availability of mortgages and other financing, mortgage and other interest rates, housing affordability and supply, the levels of foreclosures and home resales, currency exchange rates and consumer confidence.

Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “aim,” “will,” “should,” “likely,” “continue” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Readers are cautioned not to place undue reliance on these forward-looking statements and all such forward-looking statements are qualified in their entirety by reference to the following cautionary statements.

Forward-looking statements are based on our current expectations, estimates and assumptions and because forward-looking statements address future results, events and conditions, they, by their very nature, involve inherent risks

and uncertainties, many of which are unforeseeable and beyond our control. Such known and unknown risks, uncertainties and other factors may cause our actual results, performance or other achievements to differ materially from the anticipated results, performance or achievements expressed, projected or implied by these 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 subsidiaries; required contributions to the AICF, any shortfall in the AICF and the effect of currency exchange rate movements on the amount recorded in our financial statements as an asbestos liability; proposed governmental loan facility to the AICF; compliance with and changes in tax laws and treatments; competition and product pricing in the markets in which we operate; seasonal fluctuations in the demand for our products; 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 research and development efforts; the potential that competitors could copy our products; reliance on a small number of customers; a customer’s inability to pay; compliance with and changes in environmental and health and safety laws; risks of conducting business internationally; compliance with and changes in laws and regulations; the effect of the transfer of our corporate domicile from The Netherlands to Ireland to become an Irish SE including employee relations, changes in corporate governance, potential tax benefits and the effect of any negative publicity; currency exchange risks; the concentration of our customer base on large format retail customers, distributors and dealers; the effect of natural disasters; changes in our key management personnel; inherent limitations on internal controls; use of accounting estimates; and all other risks identified in our reports filed with Australian, Irish and U.S. securities agencies and exchanges (as appropriate). We caution you that the foregoing list of factors is not exhaustive 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 and are statements of our current expectations concerning future results, events and conditions.

Item 4. Information on the Company

History and Development of the Company

Our initial date of incorporation was October 26, 1998. 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” (which we refer to as a B.V.), or 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. In February 2010, our legal name was changed to James Hardie Industries SE when our legal form was converted from a N.V. to a Dutch SE in connection with implementing Stage 1 of the Re-domicile to move our corporate domicile from The Netherlands to Ireland. On June 17, 2010, we implemented Stage 2 of the Re-domicile and moved our corporate domicile to Ireland.

We conduct our operations under legislation in various jurisdictions. As an Irish SE, we are subject to Irish law in addition to the SE Regulation, European Union Council Regulations and relevant European Union Directives.

Our corporate domicile is located in Ireland. The address of our registered office in Ireland is Europa House, Second Floor, Harcourt Centre, Harcourt Street, Dublin 2, Ireland. The telephone number there is +353 1411 6924. Our agent in the United States is CT Corporation. Its office is located at 3 Winners Circle, 3^rd Floor, Albany, New York 12205.

Corporate Restructuring

On July 2, 1998, JHIL, now called ABN 60, 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 ADSs, 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:

Before

After

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

In August 2008, following proceedings commenced by the Commissioner of Taxation, the Federal Court of Australia made orders providing for the reinstatement of James Hardie Australia Finance Pty Ltd (which we refer to as JHAF), and the appointment of a liquidator. JHAF is a subsidiary of JHIF BV that was deregistered in August 2005 following a member’s voluntary winding up. In December 2008, following our settlement with the ATO, the Federal Court of Australia made orders terminating the liquidation of JHAF. Accordingly, the liquidator was removed and JHAF came under our full control as a wholly owned subsidiary of JHIF BV. For additional information on the ATO settlement see Note 14 to our consolidated financial statements in Item 18.

In August 2009, JHI NV shareholders approved Stage 1 of the Re-domicile to move our corporate domicile from The Netherlands to Ireland. Following this vote, in February 2010, the Company transformed from a N.V. to a SE corporation registered in The Netherlands. The legal name of the Company was changed to James Hardie Industries SE. JHI SE controls the same assets and liabilities as JHI NV controlled immediately prior to the transformation. On June 2, 2010, our shareholders approved Stage 2 of the Re-domicile. Following this vote, on June 17, 2010, we moved our corporate domicile to Ireland and are now subject to Irish law in addition to the SE Regulations, European Union Council Regulations and relevant European Union Directives.

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

Current

Consolidation of the AICF

In February 2007, our shareholders approved a proposal pursuant to which we provide long-term funding to the AICF. JHI SE owns 100% of James Hardie 117 Pty Ltd (the “Performing Subsidiary”) that funds the AICF subject to the provisions of the Amended FFA. We appoint three of the AICF directors and the NSW Government appoints two of the AICF directors.

Under the terms of the Amended FFA, the Performing Subsidiary has an obligation to make payments to the AICF on an annual basis, depending on our net operating cash flow. The amounts of these annual payments are dependent on several factors, including our free cash flow (as defined in the Amended FFA), actuarial estimations, actual claims paid, operating expenses of the AICF and the annual cash flow cap. JHI SE guarantees the Performing Subsidiary’s obligation. As a result, we consider us to be the primary beneficiary of the AICF.

Our interest in the AICF is considered variable because the potential impact on us will vary based upon the annual actuarial assessments obtained by the AICF with respect to asbestos-related personal injury claims against the Former James Hardie Companies.

Although we have no legal ownership in the AICF, we consolidate the AICF due to our pecuniary and contractual interests in the AICF as a result of the funding arrangements outlined in the Amended FFA. Our consolidation of the AICF resulted in a separate recognition of the asbestos liability and certain other items including the related Australian income tax benefit. Among other items, we recorded a deferred tax asset for the anticipated tax benefit related to asbestos liabilities and a corresponding increase in the asbestos liability. The Performing Subsidiary is able to claim a tax deduction for contributions to the asbestos fund. Since fiscal year 2007, we have classified the expense related to the increase of the asbestos liability as asbestos adjustments and we have classified the benefit related to the recording of the related deferred tax asset as an income tax benefit (expense) on our consolidated statements of operations. See Note 2 to our consolidated financial statements in Item 18.

Recent Developments (events occurring after April 1, 2010)

ASIC Proceedings

In February 2007, ASIC commenced civil proceedings in the Supreme Court of New South Wales against us, ABN 60, and ten then-present or former officers and directors of the James Hardie Group.

On April 23, 2009, Justice Gzell issued judgment against us, ABN 60 and the ten former officers and directors of the James Hardie Group. All defendants other than two lodged appeals against Justice Gzell’s judgments, and ASIC responded by lodging cross-appeals against the appellants. The appeals lodged by the former directors and officers were heard in April 2010 and the appeal lodged by us was heard in May 2010. Judgment in respect of all appeals is still pending.

See Item 3, “Key Information — Risk Factors”, “Legal Proceedings” below and Note 13 to our consolidated financial statements in Item 18 for additional information on the ASIC proceedings.

Re-domicile

As noted above, on June 2, 2010, shareholders approved Stage 2 of the Re-domicile; and with effect from June 17, 2010, the Company became subject to Irish law in addition to the SE Regulation.

Debt Facilities

On June 16, 2010, $161.7 million of our term facilities matured, which included $95.0 million of term facilities that were outstanding at March 31, 2010. We did not refinance these facilities. Accordingly, amounts outstanding under these facilities were repaid in June 2010 by using longer term facilities. See Item 5, “Operating and Financial Review and Prospects — Liquidity and Capital Resources” for more information.

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 0.87 and 0.93 billion square feet during fiscal year 2010, a decrease of approximately 19 to 23% from fiscal year 2009. Based on our knowledge, experience and third-party data, we estimate that we have 30 to 40% of the U.S. backerboard category. 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^TM 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 72%, 77% and 78% of our total net sales in fiscal years 2010, 2009 and 2008, 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 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 2010, we sold approximately 12%¹ of the estimated total of 6.0 to 6.5 billion square foot 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,
		2010				2009				2008
		(In millions)
USA and Europe Fiber Cement		$	828.1			$	929.3			$	1,170.5
Asia Pacific Fiber Cement			296.5				273.3				298.3
Total		$	1,124.6			$	1,202.6			$	1,468.8

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 1.35 million in calendar year 2007 to approximately 554 thousand in calendar year 2009. 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 0.87 and 0.93 billion square feet during fiscal year 2010, a decrease of approximately 19 to 23% from fiscal year 2009. 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 this is believed to be due to a number of reasons, including aesthetics, and durability concerns.

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 148,880 in calendar year 2007 to 137,695 in calendar year 2009. Renovation activity, as measured in local currency expenditures by the ABS has increased from calendar year 2007 to calendar year 2009 for a total increase over this period of approximately 1.2%. According to Statistics New Zealand, new dwellings authorized in New Zealand declined from approximately 25,544 in calendar year 2007 to 14,425 in calendar year 2009. Residential renovation activity in New Zealand has decreased from calendar year 2007 to calendar year 2009 for a total decrease over this period of approximately 6.8%. The Housing Industry Association of Australia expects new housing construction and renovation activity to maintain a steady recovery while InfoMetrics New Zealand believes new housing construction and renovation activity are expected to soften over the short-to-medium term in New Zealand.

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 and overseas manufacturers struggling with the global recession look for additional markets to their existing ones. 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 decade. 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. We believe that fiber cement has good long-term growth potential because of the benefits of light-weight and 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. We also manufacture fiber cement pipes in Australia and previously manufactured fiber cement pipes in the United States. In May 2008, we ceased operation of our pipe business in the United States. 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. 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, some of which have not yet been introduced into the United States.

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^® board. Hardietrim board 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 board was launched in fiscal year 1999, with the introduction of Hardietrim ^® board, from our Cleburne, Texas plant and demand has been strong since that time. A new production process for manufacturing Hardietrim board 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.

In the United States, the following new products were released over the last five years:

	•		During fiscal years 2005 and 2006, after considerable market research, we re-launched the ColorPlusâ 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 ColorPlusâ Technology.
	•		During fiscal year 2006, we added Moldblock™ Technology to our EZGridâ underlay and Hardiebackerâ sheets.
	•		During fiscal year 2008, we introduced Artisanâ Lap siding, Artisan™ Accent Trim, 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.

	•		During fiscal year 2009, we introduced two new siding profiles, Beaded Porch Panel and Shingle Plank.
	•		During fiscal year 2010, we introduced HardieZone™ System siding products.

In Australia and New Zealand, new products released over the past five years include Eclipsa^â eaves lining, Linea^â weatherboard and Axon^â cladding; in Australia only, new products include: Matrix™ cladding, Stria™ cladding, Axent™ trim, Secura™ Interior Flooring, Secura™ Exterior Flooring and EasyLap™ Panel; in New Zealand only, new products include: ShingleSide panel and CLD Cavity Battens, Horizon Lining and Rigid Air Barrier.

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. Pulp has historically demonstrated more price sensitivity than other raw materials that we use in our manufacturing process. For example, in fiscal year 2010, the average Northern Bleached Softwood Kraft (which we refer to as NBSK) pulp price was 7% lower compared to fiscal year 2009. However, during the fourth quarter of fiscal year 2010, the average pulp price was 24% higher than in the fourth quarter of fiscal year 2009 and 9% higher than in the third quarter of fiscal year 2010 as a result of continued strong demand and the effects on supply of the Chilean earthquake in February 2010. In addition, cement prices rose in fiscal year 2008, but declined in fiscal year 2009 and 2010. We expect that pulp prices will continue to increase and cement prices to remain relatively flat in fiscal year 2011.

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 fiscal year 2008 and the first half of fiscal year 2009, we experienced cost increases related to increases in the price of pulp. In the second half of fiscal year 2009 and during fiscal 2010, lower pulp prices had a favorable impact on our overall cost. Pulp prices increased in the fourth quarter of fiscal year 2010 and are expected to continue to increase in fiscal year 2011. 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. 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 five U.S. customers accounted for approximately 63% of our total USA Fiber Cement gross sales in fiscal year 2010. 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 in the United States where transportation is primarily by road and, to a lesser extent, by rail.

We maintain dedicated regional sales management teams in our major sales territories. As of May 31, 2010, the sales teams (including telemarketing staff) consisted of approximately 255 people in the United States and Canada, 67 people in Australia, 20 people in New Zealand, 30 people in the Philippines, and 23 people in Europe. We also employ one person based in Hong Kong 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 believe 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. See Item 3, “Key Information — Risk Factors.” The following table sets forth our research and development expenditures for the three preceding fiscal years:

		Fiscal Years Ended March 31,
(In millions)		2010				2009				2008
Research and Development Expenditures (1)		$	30.4			$	28.3			$	27.4
Research and Development Expenditures as a percentage of total net sales			2.7	%			2.4	%			1.9	%

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.

In addition, the Company has a variety of patents and licenses; industrial, commercial and financial contracts; and manufacturing processes. While the Company is dependent on the competitive advantage that these items provide as a whole, the Company is not dependent on any one of them individually and does not consider any one of them

individually to be material. We do not materially rely on intellectual property licensed from any outside third parties. See Item 3, “Key Information — Risk Factors.”

Governmental Regulation

As noted above, on June 17, 2010 we moved our corporate domicile to Ireland and are now subject to Irish law in addition to the SE Regulations. See Item 10, “Additional Information — Key Provisions of our Articles of Association” for information regarding Irish company law and regulations to which we are subject.

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 Mine 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 SE is incorporated and domiciled in Ireland.

The table below sets forth our significant subsidiaries, all of which are wholly-owned by JHI SE, either directly or indirectly, as of June 10, 2010.

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 Holdings Limited		Ireland
James Hardie International Finance Limited		Ireland
James Hardie International Holdings SE		Ireland
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 Technology Limited		Bermuda
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 for each year in the three-year period ended March 31, 2010.

		Fiscal Years Ended March 31,
		2010				2009				2008
		(In millions)
USA and Europe Fiber Cement (1)		$	40.6			$	20.0			$	31.3
Asia Pacific Fiber Cement			6.7				4.9				5.6
Research and Development and Corporate			3.2				1.2				1.6
Total Capital Expenditures		$	50.5			$	26.1			$	38.5

For further information See Note 7 to our consolidated financial statements in Item 18.

The Company did not have any material divestitures in the fiscal years ended March 31, 2010, 2009 and 2008.

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

	•		commencement of a new finishing capability on an existing product line in fiscal year 2009. As of March 31, 2010, we have incurred $18.9 million related to this project; and
	•		the implementation of our ColorPlus® strategy in fiscal year 2005. This strategy included constructing additional ColorPlus® coating capacity inside our existing plants. Over the last three fiscal years, we have incurred $14.1 million of capital expenditures related to our ColorPlus® strategy.

In addition, in fiscal year 2006 we commenced our implementation of a new ERP software system. This project was completed in fiscal year 2008. Over the last three fiscal years, we incurred $4.4 million related to our ERP software system.

We currently expect to spend approximately $70 million to $80 million in fiscal year 2011 for capital expenditures, including facility upgrades, equipment to enhance environmental compliance, and the implementation of new fiber cement technologies. The expected amount of spending in fiscal year 2011 includes additional capital expenditures expected to be made on projects that were in progress during fiscal year 2010, including the completion of a new finishing capability on an existing product line. 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 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 attractive 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 closed loop systems, at which production was suspended at November 2007 and November 2008, respectively). 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 and capital expenditures associated with preventing future discharges in excess of permitted levels. 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
		Design Capacity
Location		(1)
Fiber Cement (in million square feet)
United States
Fontana, California (2)			180
Plant City, Florida			300
Cleburne, Texas			500
Tacoma, Washington			200
Peru, Illinois			560
Waxahachie, Texas			360
Blandon, Pennsylvania (3)			200
Summerville, South Carolina (2)			190
Reno, Nevada			300
Pulaski, Virginia			600
Total United States			3,390
Australia
Sydney, New South Wales			180
Brisbane, Queensland (Carole Park) (4)			120
Total Australia			300
New Zealand
Auckland			75
The Philippines
Manila			145
Total Fiber Cement Flat Sheet			3,910
Fiber Reinforced Concrete Pipes (in tons) (5)
Plant City, Florida (pipes) (6)			—
Brisbane, Queensland (Meeandah) (4)			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 facility, we own all of our fiber cement sites and facilities located in the United States. The lease for the Waxahachie, Texas facility expires on March 31, 2020, at which time we have an option to purchase the facility.

Our three Australian fiber cement manufacturing facilities are not owned by us. Prior to March 2004, the land and buildings on which these facilities are located were leased on a long-term basis from Amaca. In March 2004, various subsidiaries of Multiplex Property Trust (now Brookfield Asset Management Inc., which we collectively refer to as Brookfield Multiplex), an unrelated third party, acquired the land and buildings related to these three fiber cement manufacturing facilities from Amaca. The land and buildings on which these facilities are located are leased on a long-term basis from Brookfield Multiplex. One of the leases expires on March 23, 2016, with an option to renew the lease for two further terms of 10 years expiring in March 2036. The other two leases expire on March 23, 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.

Our one New Zealand fiber cement manufacturing facility is not owned by us. Prior to March 2004, the land and buildings on which this facility is located were leased on a long-term basis from Studorp Limited or Studorp. In March 2004, Multiplex Property Trust (now Brookfield Multiplex) acquired the relevant land and buildings from Studorp. On June 30, 2005, an unrelated third party, the Location Group Limited, acquired the relevant land and buildings from Multiplex Property Trust. Penrose Land Limited, a company within the Location Group Limited, took over as landlord in respect of the lease of the land and buildings to James Hardie New Zealand Limited. The lease for our New Zealand facility expires 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 lease related to our New Zealand facility.

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 2010, average capacity utilization for our fiber cement plants by region was approximately as follows:

		Capacity
Region		Utilization (1)
United States			40	%
Asia Pacific (2)			69	%

Mines

We lease silica quartz mine sites in Tacoma, Washington; and Reno, Nevada. The lease for our quartz mine in Tacoma, Washington expires in February 2014 (with options to renew). The lease for our silica quartz mine site in Reno, Nevada expires in January 2014 (with options to purchase).

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 us 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)		2010				2009				2008
Change in estimates:
Change in actuarial estimate — asbestos liability		$	(3.8	)		$	(180.9	)		$	(175.0	)
Change in actuarial estimate — insurance receivable			1.9				19.8				27.4
Change in estimate — AICF claims-handling costs			(1.4	)			(1.2	)			(6.5	)
Change in estimate — other			—				—				1.2
Subtotal — Change in estimates			(3.3	)			(162.3	)			(152.9	)
(Loss) gain on foreign currency exchange			(220.9	)			179.7				(87.2	)
Total Asbestos Adjustments		$	(224.2	)		$	17.4			$	(240.1	)

Asbestos-Related Assets and Liabilities

Under the terms of the Amended FFA, we have included on our 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 us as the “Net Amended FFA Liability.”

		March 31,
(In millions)		2010				2009
Asbestos liability — current		$	(106.7	)		$	(78.2	)
Asbestos liability — non-current			(1,512.5	)			(1,206.3	)
Asbestos liability — Total			(1,619.2	)			(1,284.5	)
Insurance receivable — current			16.7				12.6
Insurance receivable — non-current			185.1				149.0
Insurance receivable — Total			201.8				161.6
Workers’ compensation asset — current			0.1				0.6
Workers’ compensation asset — non-current			98.8				73.8
Workers’ compensation liability — current			(0.1	)			(0.6	)
Workers’ compensation liability — non-current			(98.8	)			(73.8	)
Workers’ compensation — Total			—				—
Deferred income taxes — current			16.4				12.3
Deferred income taxes — non-current			420.0				333.2
Deferred income taxes — Total			436.4				345.5
Income tax payable			16.5				22.8
Other net liabilities			(1.7	)			(2.0	)
Net Amended FFA liability			(966.2	)			(756.6	)
Restricted cash and cash equivalents and restricted short-term investment assets of the AICF			57.8				98.3
Unfunded Net Amended FFA liability		$	(908.4	)		$	(658.3	)

Asbestos Liability

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 the projected future asbestos-related cash flows prepared by KPMG Actuaries. The asbestos liability also includes an allowance for the future claims-handling costs of the AICF. We receive an updated actuarial estimate as of March 31 each year. The last actuarial assessment was performed as of March 31, 2010.

The changes in the asbestos liability for the year ended March 31, 2010 are detailed in the table below:

		A$				A$ to				US$
		Millions				US$ rate				Millions
Asbestos liability — March 31, 2009			(1,869.2	)			1.4552				(1,284.5	)
Asbestos claims paid (1)			103.2				1.1749				87.8
AICF claims-handling costs incurred (1)			3.6				1.1749				3.1
Change in actuarial estimate (2)			(4.1	)			1.0919				(3.8	)
Change in estimate of AICF claims-handling costs (2)			(1.5	)			1.0919				(1.4	)
Loss on foreign currency exchange											(420.4	)
Asbestos liability — March 31, 2010			(1,768.0	)			1.0919				(1,619.2	)

Insurance Receivable — Asbestos

The changes in the insurance receivable for the year ended March 31, 2010 are detailed in the table below:

		A$				A$ to				US$
		Millions				US$ rate				Millions
Insurance receivable — March 31, 2009			235.2				1.4552				161.6
Insurance recoveries (1)			(16.9	)			1.1749				(14.4	)
Change in actuarial estimate (2)			2.0				1.0919				1.8
Gain on foreign currency exchange											52.8
Insurance receivable — March 31, 2010			220.3				1.0919				201.8

Deferred Income Taxes — Asbestos

The changes in the deferred income taxes — asbestos for the year ended March 31, 2010 are detailed in the table below:

		A$				A$ to US$				US$
		Millions				rate				Millions
Deferred tax assets — March 31, 2009			502.7				1.4552				345.5
Amounts offset against income tax payable (1)			(17.9	)			1.1749				(15.3	)
Impact of other asbestos adjustments (1)			(8.3	)			1.1749				(7.0	)
Gain on foreign currency exchange											113.2
Deferred tax assets — March 31, 2010			476.5				1.0919				436.4

Income Tax Payable

A portion of the deferred income tax asset is applied against our income tax payable. At March 31, 2010 and 2009, this amount was $15.3 million and $8.8 million, respectively. During the year ended March 31, 2010, there was a $6.6 million favorable effect of foreign currency exchange.

Other Net Liabilities

Other net liabilities include a provision for asbestos-related education and medical research contributions of $2.6 million and $2.2 million at March 31, 2010 and 2009, 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 asset of $0.9 million and $0.2 million at March 31, 2010 and 2009, respectively. During the year ended March 31, 2010, there was a $0.6 million unfavorable effect of foreign currency exchange on the other net liabilities.

Restricted Cash and Short-term Investments 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, 2010, the AICF sold $61.1 million (A$71.8 million) of its short-term investments. The sales for the year ended March 31, 2010 resulted in a realized gain of $6.7 million (A$7.9 million) which was recorded in the line item Other Income.

At March 31, 2010, we revalued the AICF’s remaining short-term investments available-for-sale resulting in a positive mark-to-market fair value adjustment of $1.2 million (A$1.4 million). This appreciation in the value of the investments was recorded as an unrealized gain in Other Comprehensive Income.

The changes in the restricted cash and short-term investments of the AICF for the year ended March 31, 2010 are detailed in the table below:

		A$				A$ to US$				US$
		Millions				rate				Millions
Restricted cash and cash equivalents and restricted short-term investments — March 31, 2009			143.1				1.4552				98.3
Asbestos claims paid (1)			(103.2	)			1.1749				(87.8	)
AICF operating costs paid — claims handling (1)			(3.6	)			1.1749				(3.1	)
AICF operating costs paid — non-claims handling (1)			(2.5	)			1.1749				(2.1	)
Insurance recoveries (1)			16.9				1.1749				14.4
Interest and investment income (1)			3.9				1.1749				3.3
Unrealized gain on investments (1)			1.4				1.1749				1.2
Gain on investments (1)			7.9				1.1749				6.7
Other (1)			(0.8	)			1.1749				(0.7	)
Gain on foreign currency exchange											27.6
Restricted cash and cash equivalents and restricted short-term investments — March 31, 2010			63.1				1.0919				57.8

Actuarial Study; Claims Estimate

The AICF commissioned an updated actuarial study of potential asbestos-related liabilities as of March 31, 2010. 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. We view the central estimate as the basis for recording the asbestos liability in our financial statements, which under U.S. GAAP, we consider the best estimate. 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$1.5 billion ($1.4 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$2.9 billion ($2.7 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 are 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, 2010 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.

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.

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 subsidiaries) 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, we believe that we are likely to be able to partially recover losses from various insurance carriers. As of March 31, 2010, KPMG Actuaries’ undiscounted central estimate of asbestos-related liabilities was A$2.9 billion ($2.7 billion). This undiscounted (but inflated) central estimate is net of expected insurance recoveries of A$434.9 million ($398.3 million) after making a general credit risk allowance for insurance carriers for A$61.5 million ($56.3 million) and an allowance for A$77.7 million ($71.2 million) of “by claim” or subrogation recoveries from other third parties. We have not netted the insurance receivable against the asbestos liability on our consolidated balance sheets.

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$2.4 billion ($2.2 billion). The undiscounted, but inflated, estimates could be in the range of A$1.8 billion ($1.6 billion) to A$5.1 billion ($4.7 billion)), as of March 31, 2010. The actual cost of the liabilities could be outside of that range depending on the results of actual experience relative to the assumptions made. One of the critical assumptions of the analysis is the estimated peak year of mesothelioma disease claims which is forecasted by KPMG actuaries to be 2010/2011. Potential variation in this estimate has an impact much greater than the other sensitivities. If the peak year occurs five years later, in 2015/2016, the discounted central estimate could increase by approximately 50%.

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.

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:

		Years Ended March 31,
		2010				2009				2008				2007				2006(1)
Number of open claims at beginning of period			534				523				490				564				712
Number of new claims			535				607				552				463				346
Number of closed claims			540				596				519				537				502
Number of open claims at end of period			529				534				523				490				556
Average settlement amount per settled claim		A$	190,627			A$	190,638			A$	147,349			A$	166,164			A$	151,883
Average settlement amount per settled claim		$	162,250			$	151,300			$	128,096			$	127,163			$	114,318
Average settlement amount per case closed		A$	171,917			A$	168,248			A$	126,340			A$	128,723			A$	122,535
Average settlement amount per case closed		$	146,325			$	133,530			$	109,832			$	98,510			$	92,229

Under the terms of the Amended FFA, we have 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). Our future disclosures with respect to claims statistics are subject to us obtaining such information from the Approved Actuary. We have had no general right (and have 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, we 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 in the Supreme Court of New South Wales against us, ABN 60 and ten then-present or former officers and directors of the James Hardie Group. While the subject matter of the allegations varied between individual defendants, the allegations against us were confined to alleged contraventions of provisions of the Australian Corporations Act/Law relating to continuous disclosure and engaging in misleading or deceptive conduct in respect of a security.

We defended each of the allegations made by ASIC and the orders sought against us in the proceedings, as did the other former directors and officers of the Company.

The proceedings commenced on September 29, 2008 before his Honor Justice Gzell. On April 23, 2009, Justice Gzell issued judgment against us, ABN 60 and the ten former officers and directors of the James Hardie Group. All defendants other than two lodged appeals against Justice Gzell’s judgments, and ASIC responded by lodging cross appeals against the appellants. The appeals lodged by the former directors and officers were heard in April 2010 and the appeal lodged by us was heard in May 2010. A final judgment has not been rendered.

Depending upon the outcome of the appeals and cross-appeals, further or different findings may be made as to the liability of each defendant-appellant, any banning orders, fines payable, and as to the costs of the appeal and the first instance proceedings that we may become liable for either in respect of our own appeal or the appeals of other defendants-appellants under indemnities. As with the first instance proceedings, we have agreed to pay a portion of the costs of bringing and defending appeals, with the remaining costs being met by third parties. We note that other recoveries may be available, including as a result of successful appeals or repayments by former directors and officers in accordance with the terms of their indemnities.

It is our policy to expense legal costs as incurred. Losses and expenses arising from the ASIC proceedings and appeals could have a material adverse effect on our financial position, liquidity, results of operations and cash flows.

As a result of the above uncertainties, it is not presently possible for us to estimate the amount or range of amounts, including costs that we might become liable to pay as a consequence of the appeal proceedings. Accordingly, as of March 31, 2010, we have not recorded any related loss reserves.

For further information, see Item 3, “Key Information — Risk Factors” and Note 13, “Commitments and Contingencies” in Item 18.

Chile Litigation

On April 24, 2009, a trial court in Santiago, Chile awarded the then equivalent of $13.4 million in damages against the former James Hardie Chilean entity now known as Compañía Industrial El Volcán S.A. (“El Volcan”) in civil litigation brought by Industria Cementa Limitada (“Cementa”) in 2007.

Cementa, a fiber cement manufacturer in Chile, commenced anti-trust proceedings in 2003 against the former James Hardie Chilean entity alleging that it had engaged in predatory pricing, by selling products below cost when it entered the Chilean market, in breach of the relevant anti-trust laws in Chile. Electrónica Quimel S.A. (“Quimel”) also joined the proceedings.

As these actions existed prior to the sale of our Chilean business in July 2005, we had agreed to indemnify the buyer, El Volcan, subject to certain conditions and limitations, for damages or penalties awarded against FC Volcan in relation to such proceedings.

After the anti-trust proceedings concluded in 2006, Cementa, in 2007, brought a separate civil action against FC Volcan claiming that Cementa had suffered damages, allegedly as a result of predatory pricing.

Quimel also filed a separate civil action against FC Volcan in 2007 claiming that it had suffered damages, allegedly as a result of predatory pricing. On June 23, 2009, the Chilean trial court dismissed the claim filed by Quimel against FC Volcan.

On December 30, 2009, we entered into a settlement agreement with El Volcan resolving all outstanding issues between the parties relating to the sale of the former James Hardie Chilean entity to El Volcan in July 2005. Under the settlement agreement, we have no further obligation to defend or indemnify El Volcan in the antitrust proceedings commenced by Cementa or Quimel. El Volcan is now responsible for its own defense of the antitrust proceedings, including payment of any final judgments rendered on appeal. El Volcan will also be required to defend and indemnify us against any future claims by third parties related to the management or business of the former James Hardie Chilean entity, including any future antitrust allegations.

We denied and continue to deny the allegations of predatory pricing in Chile. The terms and conditions of the settlement remain confidential. All amounts owed by us under the terms of the settlement were paid in full on December 31, 2009. As a result, the amount of our provision in excess of the settlement amount was reversed, resulting in a gain of $7.6 million included in the consolidated statements of operations for the year ended March 31, 2010.

Tax Contingencies

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. 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. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. 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.

In fiscal years 2010, 2009 and 2008, we recorded an income tax expense of $2.2 million, an income tax benefit of $3.0 million and nil, respectively, as a result of the finalization of certain tax audits (whereby certain matters were settled), the expiration of the statute of limitations 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 us.

We or one of our subsidiaries file income tax returns in various jurisdictions, including the United States, Ireland, Australia and The Netherlands. We are no longer subject to U.S. federal examinations by the IRS for tax years prior to tax year 2007. We are no longer subject to examinations by The Netherlands tax authority, for tax years prior to tax year 2005. We are no longer subject to Australian federal examinations by the ATO for tax years prior to tax year 2007.

The Original U.S.-Netherlands treaty was amended during fiscal year 2005 and the New U.S.-NL Treaty became effective for us on February 1, 2006. We derived significant tax benefits under the New US-Netherlands Treaty up until June 29, 2010 when we became an Irish tax resident. The New U.S.-Netherlands treaty provides, among other things, requirements that we must meet for us to continue to qualify for treaty benefits and our effective income tax rate. During fiscal year 2006, we made changes to our organizational and operational structure to satisfy the requirements of the amended treaty and believe that we were in compliance and qualified for treaty benefits until June 29, 2010. However, if during a subsequent tax audit or related process, the IRS determines that these changes do not meet the requirements, we may not qualify for treaty benefits and our effective income tax rate could significantly increase beginning in the fiscal year that such determination is made and we could be liable for taxes owed for calendar year 2008 and subsequent periods.

On June 29, 2010, we conducted our first board meeting in Ireland. In addition, we expressed an intent to become an Irish tax resident and intend to hold the majority of our subsequent board meetings, at which key decisions affecting our company are made, in Ireland. On this basis, with effect from June 29, 2010 forward, we believe we should be considered to be an Irish tax resident and should no longer be considered to be a Dutch tax resident.

IRS NOPA

On June 23, 2008, the IRS issued us with a NOPA that concluded that we did not qualify for the U.S.-Netherlands Treaty LOB provision of the U.S.-Netherlands Treaty applying from early 2006 and that accordingly, we were not entitled to beneficial withholding tax rates on payments from our United States subsidiaries to our Netherlands companies for the calendar years 2006 and 2007. On April 15, 2009, we announced that the Appeals Division of the IRS had entered into a settlement agreement with our subsidiaries in which the IRS conceded its position in full with regard to its assertion in the NOPA. The IRS concluded that, for those years, we are entitled to reduced withholding tax rates under the LOB for certain payments from our United States subsidiaries to our Netherlands companies. This settlement outcome had no impact on our results. This agreement applies only to the 2006 and 2007 calendar years and does not affect or limit the IRS’ ability to challenge our qualification for benefits in later years.

We believe that it is more likely than not that we are eligible for treaty benefits and should continue qualifying for treaty benefits. Therefore, we believe that the requirement for recording a liability has not been met and therefore we have not recorded any liability at March 31, 2010 for the treaty benefits.

For further information, see Item 3, “Key Information — Risk Factors.”

ATO Settlement

As announced on December 12, 2008, we and the ATO reached an agreement that finalized tax audits being conducted by the ATO on our Australian income tax returns for the years ended March 31, 2002 and March 31, 2004 through March 31, 2006 and settled all outstanding issues arising from these tax audits. With the exception of the assessment in respect of RCI (see below) for the 1999 financial year, the settlement concluded ATO audit activities for all years prior to the year ended March 31, 2007. The agreed settlement, made without concessions or admissions of liability by either us or the ATO, required us to pay an amount of $101.6 million (A$153.0 million) in December 2008.

Amended Australian Taxation Office Assessment

In March 2006, RCI received an amended assessment from the ATO 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. 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 ($148.4 million — converted at the March 31, 2007 spot rate) and provide a guarantee from JHI SE 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.

On May 30, 2007, the ATO issued a Notice of Decision disallowing RCI’s objection to the amended assessment (“Objection Decision”). On July 11, 2007, RCI filed an application appealing the Objection Decision and the matter was heard before the Federal Court of Australia in September 2009. Judgment was reserved and a decision is awaited.

We believe 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, we have not recorded any liability at March 31, 2010 for the amended assessment.

We expect 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, we have treated all payments in respect of the amended assessment that have been made up through March 31, 2010 and related accrued interest receivable as a deposit, and it is the Company’s intention to treat any payments to be made at a later date as a deposit. At March 31, 2010 and 2009, this deposit totaled $247.2 million (A$269.9 million) and $173.5 million (A$252.5 million), respectively.

Included in other non-current liabilities are taxes payable in relation to GIC charged of $43.0 million and $27.3 million at March 31, 2010 and 2009, respectively.

For further information, see Item 3, “Key Information — Risk Factors” and Item 5, “Operating and Financial Review and Prospects — Liquidity and Capital Resources” and Note 14 to our consolidated financial statements in Item 18.

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, 2010 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 consolidated financial statements are prepared in accordance with U.S. GAAP. Our discussion in this section includes several non-GAAP measures to provide additional information concerning our performance. We believe that these non-GAAP measures enhance an investor’s overall understanding of our financial performance by being more reflective of our core operational activities and to be more comparable with our financial results over various periods. In addition, we use non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. Non-GAAP financial measures include

	•		Operating income excluding asbestos, ASIC expenses and asset impairments
	•		Effective tax rate excluding asbestos, asset impairments and tax adjustments
	•		Net income excluding asbestos, ASIC expenses, asset impairments and tax adjustments

We have reconciled these non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure for fiscal years 2010 and 2009 on pages 63-64 and 67-70, respectively. These non-GAAP financial measures are not prepared in accordance with U.S. GAAP; therefore, the information is not necessarily comparable to other companies’ financial information and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with U.S. GAAP.

Our pre-tax results for fiscal years 2010 and 2009 were affected by unfavorable asbestos adjustments of $224.2 million and favorable asbestos adjustments of $17.4 million, respectively; AICF SG&A expenses of $2.1 million and $0.7 million, respectively; and ASIC expenses of $3.4 million and $14.0 million, respectively. Information regarding our asbestos-related matters and ASIC 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”, Item 4, “Information on the Company — ASIC Proceedings and Notes 11 and 13 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 and floor and tile underlayments.

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 continued to be generally unfavorable during fiscal year 2010, resulting in weaker residential construction activity.

Fiscal Year 2010 Key Results

Total net sales decreased 6% to $1,124.6 million in fiscal year 2010. We recorded an operating loss of $21.0 million in fiscal year 2010 compared to an operating income of $173.6 million in fiscal year 2009. The operating loss of $21.0 million in fiscal year 2010 was adversely affected by the unfavorable asbestos adjustment of $224.2 million. Operating profit excluding asbestos and ASIC expenses increased 22% to $208.7 million in fiscal year 2010 from $170.9 million in fiscal year 2009.

Net income excluding asbestos, ASIC expenses and tax adjustments increased 32% to $133.0 million in fiscal year 2010 from $100.5 million in fiscal year 2009. Including asbestos, ASIC expenses and tax adjustments, net income moved from $136.3 million to a loss of $84.9 million.

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 2010, USA and Europe Fiber Cement net sales contributed approximately 74% of total net sales, and its operating income was the primary contributor to the total Company results. Net sales for our USA and Europe Fiber Cement business decreased due to a reduction in sales volume, slightly offset by a higher average net sales price.

Operating income for our USA and Europe Fiber Cement segment increased in fiscal year 2010 from fiscal year 2009 primarily due to lower material input costs, higher average net sales price and improved plant performance, partially offset by lower sales volume and a resulting increase in the fixed unit costs of manufacturing as fixed costs were spread over significantly lower production volume.

During fiscal year 2010, Asia Pacific net sales contributed approximately 26% of total net sales. Net sales increased 9% due to favorable currency exchange rates movements in the Asia Pacific business’ currencies compared to the U.S. dollar and a 2% increase in average net sales price.

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 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 Chile litigation, 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 11 and 13 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 based on the Original Final Funding Agreement governing our anticipated future payments to the AICF as announced on December 1, 2005 (which we refer to as 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 best estimate for recording the asbestos liability in the Company’s financial statements. 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.

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 is 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 11 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 17 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 have offered, and continue to offer, various warranties on our products. In April 2009, we replaced our 50-year limited pro-rated warranty with a 30-year limited non-prorated warranty for 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 by us, which includes the historical relationship of warranty costs to installed product. 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 recognize deferred tax assets and deferred tax liabilities for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts using enacted tax rates in effect for the year in which we expect the differences to reverse. We record a valuation allowance to reduce the deferred tax assets to the amount that we are more likely than not to realize. 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, 2010. 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 evaluate our uncertain tax positions in accordance with the guidance for accounting for uncertainty in income taxes. We believe that our reserve for uncertain tax positions, including related interest, is adequate. 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. The amounts ultimately paid upon resolution of these matters could be materially different from the amounts previously included in our income tax expense and therefore could have a material impact on our tax provision, net income and cash flows. 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. 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,
		2010								2009								2008
Net sales:
USA and Europe Fiber Cement (1)		$	828.1				73.6	%		$	929.3				77.3	%		$	1,170.5				79.7	%
Asia Pacific Fiber Cement			296.5				26.4				273.3				22.7				298.3				20.3
Total net sales			1,124.6				100.0				1,202.6				100.0				1,468.8				100.0
Cost of goods sold			(708.5	)			(63.0	)			(813.8	)			(67.7	)			(938.8	)			(63.9	)
Gross profit			416.1				37.0				388.8				32.3				530.0				36.1
Selling, general and administrative expenses			(185.8	)			(16.5	)			(208.8	)			(17.4	)			(228.2	)			(15.5	)
Research and development expenses			(27.1	)			(2.4	)			(23.8	)			(2.0	)			(27.3	)			(1.9	)
Impairment charges			—				—				—				—				(71.0	)			(4.8	)
Asbestos adjustments			(224.2	)			(20.0	)			17.4				1.5				(240.1	)			(16.4	)
Operating (loss) income			(21.0	)			(1.9	)			173.6				14.4				(36.6	)			(2.5	)
Interest expense			(7.7	)			(0.7	)			(11.2	)			(0.9	)			(11.1	)			(0.7	)
Interest income			3.7				0.3				8.2				0.7				12.2				0.8
Other income (expense)			6.3				0.6				(14.8	)			(1.3	)			—				—
(Loss) income from operations before income taxes			(18.7	)			(1.7	)			155.8				12.9				(35.5	)			(2.4	)
Income tax expense			(66.2	)			(5.9	)			(19.5	)			(1.6	)			(36.1	)			(2.5	)
(Loss) income from operations		$	(84.9	)			(7.6	)%		$	136.3				11.3	%		$	(71.6	)			(4.9	)%

The segment also includes fiber cement manufactured and sold in Chile (through July 2005), fiber reinforced concrete pipes manufactured and sold in the United States (through May 2008) and a roofing pilot plant in the United States (through April 2006). Our Plant City, Florida Hardie Pipe Plant was closed and the business ceased operations in May 2008. Our roofing pilot plant was closed and the business ceased operations in April 2006.

Year Ended March 31, 2010 Compared to Year Ended March 31, 2009

Total Net Sales. Total net sales decreased 6% from $1,202.6 million in fiscal year 2009 to $1,124.6 million in fiscal year 2010 reflecting the ongoing decline in U.S. housing activity.

USA and Europe Fiber Cement Net Sales. Net sales decreased 11% from $929.3 million in fiscal year 2009 to $828.1 million in fiscal year 2010 due to lower sales volume, partially offset by a higher average net sales price.

Sales volume decreased 15% from 1,526.6 million square feet in fiscal year 2009 to 1,303.7 million square feet in fiscal year 2010, primarily due to weaker demand for our products in the United States as a result of the downturn in activity in the U.S. housing construction and renovations market amid overall weak economic conditions. Although housing affordability has improved, the reduced availability of mortgage credit for prospective home buyers, the large inventory of homes for sale and relatively low consumer confidence continued to negatively affect demand.

The average net sales price increased 4% from $609 per msf in fiscal year 2009 to $635 per msf in fiscal year 2010 as a result of a price increase early in fiscal year 2010 and a favorable shift in product mix.

According to the U.S. Census Bureau, annualized seasonally-adjusted single family housing starts in March 2010 were 531,000, still significantly below the January 2006 peak of 1.823 million annualized starts.

For the full year ended March 31, 2010, the NBSK pulp price was $761 per ton, 7% down compared to $814 per ton for the prior year; however during the course of the year, key raw material and energy costs increased. The average pulp price in the fourth quarter was 24% higher than in the fourth quarter of fiscal year 2009, and 9% higher than in the third quarter of fiscal year 2010 as a result of continued strong demand, especially from China, and the effects on supply of the Chilean earthquake in February 2010.

Although production capacity has been re-commissioned as the NBSK pulp price index has risen, the price of pulp is expected to remain high in the immediate to medium term. In April 2010, the average NBSK pulp price rose to $939 per ton.

Similarly, freight costs were lower for fiscal year 2010, compared to fiscal year 2009. However, freight costs rose in the fourth quarter of fiscal year 2010, compared to the third quarter of fiscal year 2010 and the fourth quarter of fiscal year 2009, in response to significantly higher diesel prices amid emerging signs of a recovery in the United States economy.

Over the full year, the ColorPlus^® product range continued to increase its penetration rate.

The company’s strategy remains unchanged, with the focus continuing to be on primary demand growth, product mix shift and zero to landfill.

Asia Pacific Fiber Cement Net Sales. Net sales from Asia Pacific Fiber Cement increased 9% from $273.3 million in fiscal year 2009 to $296.5 million in fiscal year 2010. The higher value of the Asia Pacific business’ currencies against the U.S. dollar accounted for 7% of the increase, while the remaining 2% of the increase was due to the underlying Australian dollar business results. In Australian dollars, net sales increased 2% due to an increase in average net sales price.

Australian Bureau of Statistics (ABS) reported a 16% increase in housing approvals in fiscal year 2010 compared to the fiscal year 2009.

Asia Pacific sales volume was stable as increasing volume in Australia and the Philippines was offset by an 11% decrease in New Zealand volume, due to a weaker domestic market in fiscal year 2010, compared to fiscal year 2009.

In Australia, the Scyon™ branded product range continued to build momentum over the course of the fiscal year. In New Zealand, sales of differentiated products also grew in fiscal year 2010. Similarly, in the Philippines, sales of differentiated products, primarily thicker board, increased over the full year.

Appreciating local currencies resulted in a 5% decrease in raw material costs measured in Australian dollar terms for the Asia Pacific business compared to fiscal year 2009. The vast majority of this saving relates to pulp which is traded in U.S. dollars.

Gross Profit. Gross profit increased 7% from $388.8 million in fiscal year 2009 to $416.1 million in fiscal year 2010. The gross profit margin increased 4.7 percentage points from 32.3% in fiscal year 2009 to 37.0% in fiscal year 2010.

USA and Europe Fiber Cement gross profit increased 5% in fiscal year 2010 compared to fiscal year 2009. Gross profit benefited 11% as a result of higher average net sales price and 12% from a reduction of input costs, primarily pulp, energy and freight and lower warranty expenses. The benefits were partially offset by a 19% detriment due to lower sales volume and a resulting increase in the fixed unit cost of manufacturing, as fixed costs were spread over a lower production volume.

The gross profit margin of the USA and Europe Fiber Cement business increased by 5.9 percentage points.

Asia Pacific Fiber Cement gross profit increased 16% in fiscal year 2010 compared to fiscal year 2009. The higher value of Asia Pacific business’ currencies against the U.S. dollar accounted for 8% of the increase.

In Australian dollars, Asia Pacific Fiber Cement gross profit benefited 6% as a result of a favorable price movement, including product mix shift. In addition, gross profit benefited 5% from reduced manufacturing costs and decreased raw material input costs as appreciating local currencies more than offset increasing costs of raw materials that are traded in U.S. dollars. These benefits were offset by higher warranty expenses.

The gross profit margin of the Asia Pacific Fiber Cement business increased by 1.9 percentage points.

Selling, General and Administrative (SG&A) Expenses. SG&A expenses decreased 11% from $208.8 million in fiscal year 2009 to $185.8 million in fiscal year 2010. The decrease was primarily due to a favorable $7.6 million adjustment to a legal provision following settlement of a contractual warranty and lower general corporate costs, partially offset by higher SG&A spending in the USA and Europe Fiber Cement and Asia Pacific Fiber Cement segments. As a percentage of sales, SG&A expenses declined 0.9 of a percentage point to 16.5% in fiscal year 2010. For fiscal year 2010, SG&A expenses included non-claims handling related operating expenses of the AICF of $2.1 million.

ASIC Proceedings

For the year ended March 31, 2010, we incurred legal costs related to the ASIC proceedings and appeals, noted as ASIC expenses, of $3.4 million. These costs were substantially lower compared to fiscal year 2009, when we incurred ASIC expenses of $14.0 million. ASIC expenses are included in SG&A expenses.

Our net costs in relation to the ASIC proceedings from their commencement in February 2007 and the appeals to March 31, 2010 total $23.1 million.

See Item 3, “Key Information — Risk Factors,” Item 4, “Information on the Company — Legal Proceedings” and Note 13 to our consolidated financial statements in Item 18 for more information.

Chile Litigation

On December 31, 2009, we entered into a settlement agreement with El Volcan resolving all outstanding issues between us relating to the sale of FC Volcan to El Volcan in July 2005. Under the settlement agreement, we will have no further obligation to defend or indemnify El Volcan in the antitrust proceedings commenced by Cementa or Quimel.

El Volcan will now be responsible for its own defense of the antitrust proceedings, including payment of any final judgments rendered on appeal. El Volcan will also be required to defend and indemnify us against any future claims by third parties related to the management or business of FC Volcan, including any future antitrust allegations. The terms and conditions of the settlement remain confidential. All amounts we owed under the terms of the settlement were paid in full on December 31, 2009. As a result, the amount of the provision in excess of the settlement amount was reversed, resulting in a gain of $7.6 million included in general corporate costs for the year ended March 31, 2010.

We denied and continue to deny the allegations of predatory pricing in Chile.

See Note 13 to our consolidated financial statements in Item 18 for more information.

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 9% higher for fiscal year 2010 at $15.7 million.

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 24% higher for fiscal year 2010 at $11.4 million compared to fiscal year 2009.

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 in November 2006 and approved by our security holders in February 2007.

The discounted central estimate of the asbestos liability has decreased from A$1.782 billion at March 31, 2009 to A$1.537 billion at March 31, 2010. The reduction in the discounted central estimate of A$245 million is primarily due to increases in yields on Government Bonds, which are used for discounting the future cash flows; and a reduction in the projected future number of claims to be reported for a number of disease types.

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.

For fiscal year 2010, the Australian dollar appreciated against the U.S. dollar by 33%, compared to a 25% depreciation in fiscal year 2009. We receive an updated actuarial estimate as of March 31 each year. The last actuarial assessment was performed as of March 31, 2010. The asbestos adjustments for the fiscal years ended March 31, 2010 and 2009 are as follows:

		Fiscal Years Ended March 31,
(In millions)		2010				2009
Change in estimates		$	(3.3	)		$	(162.3	)
Effect of foreign exchange movements			(220.9	)			179.7
Asbestos adjustments		$	(224.2	)		$	(17.4	)

Claims Data

The number of new claims filed in fiscal year 2010 of 535 is lower than new claims of 607 reported for fiscal year 2009, and also slightly below actuarial expectations for fiscal year 2010.

The number of claims settled of 540 for fiscal year 2010 is lower than claims settled of 596 for fiscal year 2009.

The average claim settlement of A$191,000 for fiscal year 2010 is in line with fiscal year 2009 and slightly below the actuarial expectations for fiscal year 2010.

Asbestos claims paid of A$103.2 million for fiscal year 2010 were lower than the actuarial expectation of A$114.2 million for fiscal year 2010.

As of March 31, 2010, the AICF had cash and investment assets of A$63.1 million ($57.8 million). We will make a contribution of approximately $63.7 million to the AICF on July 1, 2010. This amount represents 35% of the company’s free cash flow for fiscal year 2010, as defined by the Amended FFA.

All figures provided in this claims data section are gross of insurance and other recoveries. See Note 11 to our consolidated financial statements in Item 18 for further information on asbestos adjustments.

Operating Income (Loss). Operating income moved from $173.6 million in fiscal year 2009 to a loss of $21.0 million for fiscal year 2010. The loss for fiscal year 2010 includes net unfavorable asbestos adjustments of $224.2 million (due primarily to the appreciation of the Australian dollar against the U.S. dollar during the period), AICF SG&A expenses of $2.1 million and ASIC expenses of $3.4 million.

In fiscal year 2009, operating income included net favorable asbestos adjustments of $17.4 million (attributable to depreciation of the Australian dollar against the U.S. dollar during the period, partially offset by a change in the actuarial estimate), AICF SG&A expenses of $0.7 million and ASIC expenses of $14.0 million.

Excluding asbestos and ASIC expenses, operating income increased from $170.9 million in fiscal year 2009 to $208.7 million in fiscal year 2010.

USA and Europe Fiber Cement operating income increased by 5% from $199.3 million in fiscal year 2009 to $208.5 million in fiscal year 2010. The improvement was driven by lower material input costs (primarily pulp, energy and freight), higher average net sales price and improved plant performance which contributed to lower average unit manufacturing costs. These benefits were partially offset by lower sales volume and a resulting increase in the fixed unit cost of manufacturing as fixed costs were spread over significantly lower production volume. The USA and Europe Fiber Cement operating income margin was 3.8 percentage points higher at 25.2%.

Asia Pacific Fiber Cement operating income increased 25% from $47.1 million in fiscal year 2009 to $58.7 million in fiscal year 2010. Favorable currency exchange rate movements in the Asia Pacific business’ currencies compared to the U.S. dollar accounted for 11% of this increase. In Australian dollars, Asia Pacific Fiber Cement operating profit for the full year increased 14% due to strong primary demand growth offsetting weakened local markets, an increase in average net sales price, and favorable product mix shift, together with lower raw materials costs and reduced manufacturing costs. These benefits were partially offset by an increase in warranty expenses. The operating profit margin was 2.6 percentage points higher at 19.8%.

General Corporate Costs. General corporate costs decreased $27.7 million from $70.6 million in fiscal year 2009 to $42.9 million in fiscal year 2010. We incurred costs associated with our Re-domicile of $9.1 million in fiscal year 2010, compared to $10.3 million in fiscal year 2009. ASIC expenses decreased from $14.0 million in fiscal year 2009 to $3.4 million in fiscal year 2010.

General corporate costs excluding ASIC expenses and domicile change related costs for fiscal year 2010 decreased from $46.3 million in fiscal year 2009 to $30.4 million in fiscal year 2010. The reduction was due to a $7.6 million reversal of a legal provision and reductions in other general corporate costs.

Net Interest Expense. Net interest expense increased from $3.0 million in fiscal year 2009 to $4.0 million in fiscal year 2010. Net interest expense for fiscal year 2010 included AICF interest income of $3.3 million and a realized loss of $2.5 million on interest rate swap contracts. Net interest expense for the fiscal year 2009 included AICF interest income of $6.4 million and nil related to interest rate swap contracts.

Other Income (Expense). Other income moved from an expense of $14.8 million in fiscal year 2009 to income of $6.3 million in fiscal year 2010. The turnaround resulted from an other-than-temporary impairment charge of $14.8 million recognized at March 31, 2009 on restricted short-term investments held by the AICF. Other income for the full year also benefited from a $6.7 million (A$7.9 million) realized gain arising from the sale of restricted short-term investments held by the AICF, partially offset by an unrealized loss of $0.4 million resulting from movements in the fair value of interest rate swap contracts.

Income Tax. Income tax expense increased from $19.5 million in fiscal year 2009 to $66.2 million in fiscal year 2010. Our effective tax rate on earnings excluding asbestos and tax adjustments was 34.4% in fiscal year 2010, compared to 41.4% for fiscal year 2009. The change in effective tax rate excluding asbestos and tax adjustments is attributable to changes in the geographic mix of earnings and expenses, reductions in non-tax deductible expenses and the reversal of a non-taxable legal provision in operating profit.

We recorded favorable tax adjustments of $2.0 million in fiscal year 2010 compared to unfavorable tax adjustments of $7.2 million in fiscal year 2009. The tax adjustments in fiscal years 2010 and 2009 relate to uncertain tax positions.

Net Income (Loss). Net loss moved from income of $136.3 million in fiscal year 2009 to a loss of $84.9 million in fiscal year 2010. Net income excluding asbestos, ASIC expenses and tax adjustments increased from $100.5 million in fiscal year 2009 to $133.0 million in fiscal year 2010.

Fiscal year 2010 includes a legal provision reversal of $7.6 million. See Note 13 to our consolidated financial statements in Item 18 for further information on the legal provision reversal.

Non-GAAP Financial Information Derived from GAAP Measures for Fiscal Year 2010

The following tables set forth the reconciliation of our non-GAAP financial measures included in our discussion above to the most directly comparable GAAP financial measure. These non-GAAP financial measures are not prepared in accordance with U.S. GAAP; therefore, the information is not necessarily comparable to other companies’ financial information and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with U.S. GAAP.

Operating income (loss) excluding asbestos and ASIC expenses		Fiscal Years Ended March 31,
(In millions)		2010				2009
USA and Europe Fiber Cement		$	208.5			$	199.3
Asia Pacific Fiber Cement			58.7				47.1
Research and Development			(19.0	)			(18.9	)
General Corporate:
General corporate costs			(42.9	)			(70.6	)
Asbestos adjustments			(224.2	)			17.4
AICF SG&A expenses			(2.1	)			(0.7	)
Total operating (loss) income		$	(21.0	)		$	173.6
Excluding:
Asbestos:
Asbestos adjustments			224.2				(17.4	)
AICF SG&A expenses			2.1				0.7
ASIC expenses			3.4				14.0
Operating income excluding asbestos and ASIC expenses		$	208.7			$	170.9

Effective tax rate excluding asbestos and tax adjustments		Fiscal Years Ended March 31,
(In millions)		2010				2009
(Loss) income before income taxes		$	(18.7	)		$	155.8
Excluding:
Asbestos:
Asbestos adjustments			224.2				(17.4	)
AICF SG&A expenses			2.1				0.7
AICF interest income			(3.3	)			(6.4	)
(Gain) impairment on AICF investments			(6.7	)			14.8
Income before income taxes excluding asbestos		$	197.6			$	147.5
Income tax expense			(66.2	)			(19.5	)
Excluding:
Tax benefit (expense) related to asbestos adjustments			1.1				(48.7	)
Tax adjustments			(2.9	)			7.2
Income tax expense excluding asbestos and tax adjustments		$	(68.0	)		$	(61.0	)

		Fiscal Years Ended March 31,
		2010				2009
Effective tax rate			354.0	%			12.5	%
Effective tax rate excluding asbestos and tax adjustments			34.4	%			41.4	%

Net income (loss) excluding asbestos, ASIC expenses and tax adjustments		Fiscal Years Ended March 31,
(In millions)		2010				2009
Net (loss) income		$	(84.9	)		$	136.3
Excluding:
Asbestos adjustments			224.2				(17.4	)
AICF SG&A expenses			2.1				0.7
AICF interest income			(3.3	)			(6.4	)
(Gain) impairment on AICF investments			(6.7	)			14.8
Tax expense (benefit) related to asbestos			1.1				(48.7	)
ASIC expenses			3.4				14.0
Tax adjustments			(2.9	)			7.2
Net income excluding asbestos, ASIC expenses and tax adjustments		$	133.0			$	100.5