Exhibit 99.4

James Hardie Industries N.V. and Subsidiaries
Condensed Consolidated Financial Statements
as of and for the Three Months Ended 30 June 2008

James Hardie Industries N.V. and Subsidiaries
Index

		Page
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of 30 June 2008 and 31 March 2008			F-3
Condensed Consolidated Statements of Operations for the Three Months Ended 30 June 2008 and 2007			F-4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended 30 June 2008 and 2007			F-6
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended 30 June 2008			F-8
Notes to Condensed Consolidated Financial Statements			F-9
Item 2. Quantitative and Qualitative Disclosures About Market Risk			F-31

Item 1. Financial Statements

James Hardie Industries N.V. and Subsidiaries Condensed
Consolidated Balance Sheets
(Unaudited)

		(Millions of								(Millions of
		US dollars)								Australian dollars)
		30 June				31 March				30 June				31 March
		2008				2008				2008				2008
Assets
Current assets:
Cash and cash equivalents		$	171.3			$	35.4			A$	178.1			A$	38.6
Restricted cash and cash equivalents			5.2				5.0				5.4				5.5
Restricted cash and cash equivalents — Asbestos			16.5				37.4				17.2				40.8
Restricted short-term investments — Asbestos			82.3				77.7				85.6				84.7
Accounts and notes receivable, net of allowance for doubtful accounts of $1.7 million (A$1.9 million) and $2.0 million (A$2.2 million) as of 30 June 2008 and 31 March 2008, respectively			140.6				131.4				146.2				143.3
Inventories			159.0				179.7				165.3				195.9
Prepaid expenses and other current assets			17.7				28.0				18.4				30.5
Insurance receivable — Asbestos			14.7				14.1				15.3				15.4
Workers’ compensation — Asbestos			7.2				6.9				7.5				7.5
Deferred income taxes			18.5				8.2				19.2				8.9
Deferred income taxes — Asbestos			9.1				9.1				9.5				9.9
Total current assets			642.1				532.9				667.7				581.0
Property, plant and equipment, net			748.2				756.4				777.8				824.7
Insurance receivable — Asbestos			198.7				194.3				206.5				211.8
Workers’ compensation — Asbestos			82.4				78.5				85.7				85.6
Deferred income taxes			47.6				13.2				49.5				14.4
Deferred income taxes — Asbestos			414.3				397.1				430.7				433.0
Deposit with Australian Taxation Office			222.8				205.8				231.6				224.4
Other assets			1.2				1.7				1.2				1.9
Total assets		$	2,357.3			$	2,179.9			A$	2,450.7			A$	2,376.8
Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable and accrued liabilities		$	92.4			$	107.6			A$	96.0			A$	117.3
Short-term debt			101.7				90.0				105.7				98.1
Dividends payable			34.6				—				36.0				—
Accrued payroll and employee benefits			21.0				37.0				21.8				40.3
Accrued product warranties			7.8				6.9				8.1				7.5
Income taxes payable			11.8				13.0				12.3				14.2
Asbestos liability			82.5				78.7				85.8				85.8
Workers’ compensation — Asbestos			7.2				6.9				7.5				7.5
Other liabilities			36.8				9.1				38.3				9.9
Total current liabilities			395.8				349.2				411.5				380.6
Long-term debt			222.8				174.5				231.6				190.3
Deferred income taxes			126.0				84.2				131.0				91.8
Accrued product warranties			11.3				10.8				11.7				11.8
Asbestos liability			1,542.8				1,497.8				1,603.7				1,633.1
Workers’ compensation — Asbestos			82.4				78.5				85.7				85.6
Other liabilities			213.8				187.5				222.2				204.4
Total liabilities			2,594.9				2,382.5			A$	2,697.4			A$	2,597.6
Commitments and contingencies (Note 7)
Shareholders’ deficit:
Common stock, Euro 0.59 par value, 2.0 billion shares authorised; 432,239,668 shares issued at 30 June 2008 and 432,214,668 shares issued at 31 March 2008			219.7				219.7
Additional paid-in capital			21.4				19.3
Accumulated deficit			(487.7	)			(454.5	)
Common stock in treasury, at cost, 708,695 shares at 30 June 2008 and 31 March 2008			(4.0	)			(4.0	)
Accumulated other comprehensive income			13.0				16.9
Total shareholders’ deficit			(237.6	)			(202.6	)
Total liabilities and shareholders’ deficit		$	2,357.3			$	2,179.9

The accompanying notes are an integral part of these consolidated financial statements.

James Hardie Industries N.V. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

		Three Months
		Ended 30 June
(Millions of US dollars, except per share data)		2008				2007
Net sales		$	365.0			$	424.4
Cost of goods sold			(241.0	)			(257.5	)
Gross profit			124.0				166.9
Selling, general and administrative expenses			(53.3	)			(55.5	)
Research and development expenses			(7.3	)			(6.3	)
Asbestos adjustments			(40.5	)			(30.1	)
Operating income			22.9				75.0
Interest expense			(2.6	)			(1.3	)
Interest income			1.5				1.8
Income before income taxes			21.8				75.5
Income tax expense			(20.4	)			(36.4	)
Net income		$	1.4			$	39.1
Net income per share — basic		$	0.00			$	0.08
Net income per share — diluted		$	0.00			$	0.08
Weighted average common shares outstanding (Millions):
Basic			432.2				467.4
Diluted			432.2				469.4

The accompanying notes are an integral part of these consolidated financial statements.

James Hardie Industries N.V. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

		Three Months
		Ended 30 June
(Millions of Australian dollars, except per share data)		2008				2007
Net sales		A$	386.9			A$	510.3
Cost of goods sold			(255.5	)			(309.6	)
Gross profit			131.4				200.7
Selling, general and administrative expenses			(56.5	)			(66.7	)
Research and development expenses			(7.7	)			(7.6	)
Asbestos adjustments			(42.9	)			(36.2	)
Operating income			24.3				90.2
Interest expense			(2.8	)			(1.6	)
Interest income			1.6				2.2
Income before income taxes			23.1				90.8
Income tax expense			(21.6	)			(43.8	)
Net income		A$	1.5			A$	47.0
Net income per share — basic		A$	0.00			A$	0.10
Net income per share — diluted		A$	0.00			A$	0.10
Weighted average common shares outstanding (Millions):
Basic			432.2				467.4
Diluted			432.2				469.4

The accompanying notes are an integral part of these consolidated financial statements.

James Hardie Industries N.V. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

		Three Months
		Ended 30 June
(Millions of US dollars)		2008				2007
Cash Flows From Operating Activities
Net income		$	1.4			$	39.1
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation			14.0				14.2
Deferred income taxes			(6.9	)			11.7
Prepaid pension cost			—				0.4
Stock-based compensation			2.0				1.5
Asbestos adjustments			40.5				30.1
Other			—				(0.8	)
Changes in operating assets and liabilities:
Restricted cash and cash equivalents			22.1				10.7
Accounts and notes receivable			(9.4	)			(2.5	)
Inventories			21.2				16.0
Prepaid expenses and other current assets			10.6				(15.6	)
Insurance receivable — Asbestos			5.1				6.2
Accounts payable and accrued liabilities			(15.2	)			21.2
Asbestos liability			(27.7	)			(17.2	)
Deposit with Australian Taxation Office			(3.1	)			(1.0	)
Other accrued liabilities and other liabilities			40.2				17.5
Net cash provided by operating activities			94.8				131.5
Cash Flows From Investing Activities
Purchases of property, plant and equipment			(3.8	)			(16.5	)
Net cash used in investing activities			(3.8	)			(16.5	)
Cash Flows From Financing Activities
Proceeds from short-term borrowings			11.7				—
Repayments of short-term borrowings			—				(23.0	)
Proceeds from long-term borrowings			48.3				—
Repayments of long-term borrowings			—				(40.0	)
Proceeds from issuance of shares			0.1				2.2
Tax benefit from stock options exercised			—				0.2
Net cash provided by (used in) financing activities			60.1				(60.6	)
Effects of exchange rate changes on cash			(15.2	)			(7.9	)
Net increase in cash and cash equivalents			135.9				46.5
Cash and cash equivalents at beginning of period			35.4				34.1
Cash and cash equivalents at end of period		$	171.3			$	80.6
Components of Cash and Cash Equivalents
Cash at bank and on hand		$	136.3			$	32.7
Short-term deposits			35.0				47.9
Cash and cash equivalents at end of period		$	171.3			$	80.6

The accompanying notes are an integral part of these consolidated financial statements.

James Hardie Industries N.V. and Subsidiaries
Condensed Consolidated Statements of Cash flows
(Unaudited)

		Three Months
		Ended 30 June
(Millions of Australian dollars)		2008				2007
Cash Flows From Operating Activities
Net income		A$	1.5			A$	47.0
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation			14.8				17.1
Deferred income taxes			(7.3	)			14.1
Prepaid pension cost			—				0.5
Stock-based compensation			2.1				1.8
Asbestos adjustments			42.9				36.2
Other			—				(1.0	)
Changes in operating assets and liabilities:
Restricted cash and cash equivalents			23.4				12.9
Accounts and notes receivable			(10.0	)			(2.9	)
Inventories			22.5				19.2
Prepaid expenses and other current assets			11.2				(18.8	)
Insurance receivable — Asbestos			5.4				7.5
Accounts payable and accrued liabilities			(16.1	)			25.5
Asbestos liability			(29.4	)			(20.7	)
Deposit with Australian Taxation Office			(3.3	)			(1.2	)
Other accrued liabilities and other liabilities			42.6				21.0
Net cash provided by operating activities			100.3				158.2
Cash Flows From Investing Activities
Purchases of property, plant and equipment			(4.0	)			(19.8	)
Net cash used in investing activities			(4.0	)			(19.8	)
Cash Flows From Financing Activities
Proceeds from short-term borrowings			12.4				—
Repayments of short-term borrowings			—				(27.7	)
Proceeds from long-term borrowings			51.2				—
Repayments of long-term borrowings			—				(48.1	)
Proceeds from issuance of shares			0.1				2.6
Tax benefit from stock options exercised			—				0.2
Net cash provided by (used in) financing activities			63.7				(73.0	)
Effects of exchange rate changes on cash			(20.5	)			(12.7	)
Net increase in cash and cash equivalents			139.5				52.7
Cash and cash equivalents at beginning of period			38.6				42.3
Cash and cash equivalents at end of period		A$	178.1			A$	95.0
Components of Cash and Cash Equivalents
Cash at bank and on hand		A$	141.7			A$	38.5
Short-term deposits			36.4				56.5
Cash and cash equivalents at end of period		A$	178.1			A$	95.0

The accompanying notes are an integral part of these consolidated financial statements.

James Hardie Industries N.V. and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)

																		Accumulated
						Additional												Other
		Common				Paid-in				Accumulated				Treasury				Comprehensive
		Stock				Capital				Deficit				Stock				Income				Total
Balances as of 31 March 2008		$	219.7			$	19.3			$	(454.5	)		$	(4.0	)		$	16.9			$	(202.6	)
Comprehensive loss
Net income			—				—				1.4				—				—				1.4
Unrealised gain on investments			—				—				—				—				0.8				0.8
Foreign currency translation gain			—				—				—				—				(4.7	)			(4.7	)
Other comprehensive loss			—				—				—				—				(3.9	)			(3.9	)
Total comprehensive loss																							(2.5	)
Stock-based compensation			—				2.0				—				—				—				2.0
Stock options exercised			—				0.1				—				—				—				0.1
Dividends payable			—				—				(34.6	)			—				—				(34.6	)
Balances as of 30 June 2008		$	219.7			$	21.4			$	(487.7	)		$	(4.0	)		$	13.0			$	(237.6	)

The accompanying notes are an integral part of these consolidated financial statements.

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Background and Basis of Presentation

Nature of Operations

The Company manufactures and sells fibre cement building products for interior and exterior building construction applications primarily in the United States, Australia, New Zealand, Philippines and Europe.

The consolidated financial statements represent the financial position, results of operations and cash flows of JHI NV and its current wholly owned subsidiaries and special purpose entities, collectively referred to as either the “Company” or “James Hardie” and JHI NV together with its subsidiaries as of the time relevant to the applicable reference, the “James Hardie Group,” unless the context indicates otherwise. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto, included in the Company’s Annual Report on Form 20-F for the fiscal year ended 31 March 2008.

The condensed consolidated financial statements included herein are unaudited; however, they contain all normal recurring adjustments which, in the opinion of the Company’s management, are necessary to state fairly the consolidated financial position of the Company at 30 June 2008, and the consolidated results of operations and consolidated cash flows for the three months ended 30 June 2008 and 2007. The results of operations for the three months ended 30 June 2008 are not necessarily indicative of the results to be expected for the full year. The balance sheet at 31 March 2008 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The assets, liabilities, statements of operations and statements of cash flows of the Company have been presented with accompanying Australian dollar (A$) convenience translations as the majority of the Company’s shareholder base is Australian. These A$ convenience translations are not prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and have not been audited. The exchange rates used to calculate the convenience translations are as follows:

		31 March				30 June
(US$1 = A$)		2008				2008				2007
Assets and liabilities			1.0903				1.0395				n/a
Statements of operations			n/a				1.0601				1.2024
Cash flows — beginning cash			n/a				1.0903				1.2395
Cash flows — ending cash			n/a				1.0395				1.1782
Cash flows — current period movements			n/a				1.0601				1.2024

2. Summary of Significant Accounting Policies

Certain prior year balances have been reclassified to conform with the current year presentation. The reclassifications do not impact shareholder’s equity.

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The Company is required to disclose basic and diluted earnings per share (“EPS”). Basic EPS is calculated using net income divided by the weighted average number of common shares outstanding during the period. Diluted EPS is similar to basic EPS except that the weighted average number of common shares outstanding is increased to include the number of additional common shares calculated using the treasury method that would have been outstanding if the dilutive potential common shares, such as options, had been issued. Accordingly, basic and dilutive common shares outstanding used in determining net income per share are as follows:

		Three Months
		Ended 30 June
(Millions of shares)		2008				2007
Basic common shares outstanding			432.2				467.4
Dilutive effect of stock options			—				2.0
Diluted common shares outstanding			432.2				469.4

(US dollars)		2008				2007
Net income per share — basic		$	0.00			$	0.08
Net income per share — diluted		$	0.00			$	0.08

Potential common shares of 19.6 million and nil for the three months ended 30 June 2008 and 2007, respectively, have been excluded from the calculation of diluted common shares outstanding because the effect of their inclusion would be anti-dilutive.

The Company expenses the production costs of advertising the first time the advertising takes place. Advertising expense was US$3.5 million and US$4.0 million during the three months ended 30 June 2008 and 2007, respectively.

At 31 March 2006, the Company recorded an asbestos provision based on the estimated economic impact of the Original Final Funding Agreement (“Original FFA”) entered into on 1 December 2005. The amount of the asbestos provision of US$715.6 million was based on the terms of the Original FFA, which included an actuarial estimate prepared by KPMG Actuaries as of 31 March 2006 of the projected future cash outflows, undiscounted and uninflated, and the anticipated tax deduction arising from Australian legislation which came into force on 6 April 2006. The amount represented the net economic impact that the Company was prepared to assume as a result of its voluntary funding of the asbestos liability which was under negotiation with various parties.

In February 2007, the shareholders approved the Amended FFA entered into on 21 November 2006 to provide long-term funding to the Asbestos Injury Compensation Fund (“AICF”), a special purpose fund that provides compensation for Australian-related personal injuries for which certain former subsidiary companies of James Hardie in Australia (being Amaca Pty Ltd (“Amaca”), Amaba Pty Ltd (“Amaba”) and ABN 60 Pty Limited (“ABN 60”) (collectively, the “Liable Entities”)) are found liable.

Upon shareholder approval of the Amended FFA, in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, the Company consolidated the AICF with the Company resulting in a separate recognition of the asbestos liability and certain other items including the related Australian income tax benefit. Among other items, the Company recorded a deferred tax asset for the anticipated tax

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

benefit related to asbestos liabilities and a corresponding increase in the asbestos liability. As stated in “Deferred Income Taxes” below, the Company’s Performing Subsidiary will be able to claim a taxable deduction for contributions to the asbestos fund. For the year ended 31 March 2007, the Company classified the expense related to the increase of the asbestos liability as asbestos adjustments and the Company classified the benefit related to the recording of the related deferred tax asset as an income tax benefit (expense) on its consolidated statements of operations.

Amaca and Amaba separated from the James Hardie Group in February 2001. ABN 60 separated from the James Hardie Group in March 2003. Upon shareholder approval of the Amended FFA in February 2007, shares in the Liable Entities were transferred to the AICF. The Company appoints three of the AICF directors and the NSW state government appoints two of the AICF directors. The AICF manages Australian asbestos-related personal injury claims made against the Liable Entities, and makes compensation payments in respect of those proven claims.

AICF

Under the terms of the Amended FFA, James Hardie 117 Pty Ltd (the “Performing Subsidiary”) has a contractual liability to make payments to the AICF. This funding to the AICF results in the Company having a pecuniary interest in the AICF. The interest is considered variable because the potential impact on the Company will vary based upon the annual actuarial assessments obtained by the AICF with respect to asbestos-related personal injury claims against the Liable Entities. Due to the Company’s variable interest in the AICF, it consolidates the AICF in accordance with FASB, Interpretation No. 46R, “Consolidation of Variable Interest Entities”.

The AICF has operating costs that are claims related and non-claims related. Claims related costs incurred by the AICF are treated as reductions to the accrued asbestos liability balances previously reflected in the consolidated balance sheets. Non-claims related operating costs incurred by the AICF are expensed as incurred in the line item Selling, general and administrative expenses in the consolidated statements of operations. The AICF earns interest on its cash and cash equivalents and on its short-term investments; these amounts are included in the line item Interest income in the consolidated statements of operations.

Asbestos-Related Assets and Liabilities

The Company has recorded on its consolidated balance sheets certain assets and liabilities under the terms of the Amended FFA. These items are Australian dollar-denominated and are subject to translation into US dollars at each reporting date. These assets and liabilities are commonly referred to by the Company as Asbestos-Related Assets and Liabilities and include:

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 projected future cash flows prepared by KPMG Actuaries. Based on KPMG Actuaries’ assumptions, KPMG Actuaries arrived at a range of possible total cash flows and proposed a central estimate which is intended to reflect an expected outcome. The Company views the central estimate as the basis for recording the asbestos liability in the Company’s financial statements, which under US GAAP, it considers the best estimate under SFAS No. 5. The asbestos liability includes these cash flows as undiscounted and uninflated on the basis that it is inappropriate to discount or inflate future cash flows when the timing and amounts of such cash flows is not fixed or readily determinable.

Adjustments in the asbestos liability due to changes in the actuarial estimate of projected future cash flows and changes in the estimate of future operating costs of the AICF are reflected in the consolidated statements of operations during the period in which they occur. Claims paid by the AICF and claims-handling costs incurred by the AICF are treated as reductions in the accrued balances previously reflected in the consolidated balance sheets.

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Insurance Receivable

There are various insurance policies and insurance companies with exposure to the asbestos claims. The insurance receivable determined by KPMG Actuaries reflects the recoveries expected from all such policies based on the expected pattern of claims against such policies less an allowance for credit risk based on credit agency ratings. The insurance receivable generally 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 are not fixed or readily determinable. The Company only records insurance receivables that it deems to be probable.

Included in insurance receivable is US$14.6 million recorded on a discounted basis because the timing of the recoveries has been agreed with the insurer.

Adjustments in insurance receivable due to changes in the actuarial estimate, or changes in the Company’s assessment of recoverability are reflected in the consolidated statements of operations during the period in which they occur. Insurance recoveries are treated as a reduction in the insurance receivable balance.

Workers’ Compensation

Workers’ compensation claims are claims made by former employees of the Liable Entities. Such past, current and future reported claims were insured with various insurance companies and the various Australian State-based workers’ compensation schemes (collectively “workers’ compensation schemes or policies”). An estimate of the liability related to workers’ compensation claims is prepared by KPMG Actuaries as part of the annual actuarial assessment. This estimate contains two components, amounts that will be met by a workers’ compensation scheme or policy, and amounts that will be met by the Liable Entities.

The portion of the KPMG Actuaries estimate that is expected to be met by the Liable Entities is included as part of the Asbestos Liability. Adjustments to this estimate are reflected in the consolidated statements of operations during the period in which they occur.

The portion of the KPMG Actuaries estimate that is expected to be met by the workers’ compensation schemes or policies of the Liable Entities is recorded by the Company as a workers’ compensation liability. Since these amounts are expected to be paid by the workers’ compensation schemes or policies, the Company records an equivalent workers’ compensation receivable.

Adjustments to the workers’ compensation liability result in an equal adjustment in the workers’ compensation receivable recorded by the Company and have no effect on the consolidated statements of operations.

Asbestos-Related Research and Education Contributions

The Company agreed to fund asbestos-related research and education initiatives for a period of 10 years, beginning in fiscal year 2007. The liabilities related to these agreements are included in “Other Liabilities” on the consolidated balance sheets.

Restricted Cash and Cash Equivalents

Cash and cash equivalents of the AICF are reflected as restricted assets, as the use of these assets is restricted to the settlement of asbestos claims and payment of the operating costs of the AICF.

Restricted Short-Term Investments

Short-term investments consist of highly liquid investments held in the custody of major financial institutions. All short-term investments are classified as available for sale and are recorded at market value using the specific identification method. Unrealised gains and losses on the market value of these investments are included as a separate component of accumulated other comprehensive income.

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

AICF – Other Assets and Liabilities

Other assets and liabilities of the AICF, including fixed assets, trade receivables and payables are included on the consolidated balance sheets under the appropriate captions and their use is restricted to the operations of the AICF.

Deferred Income Taxes

The Performing Subsidiary is able to claim a taxation deduction for its contributions to the AICF over a five-year period from the date of contribution. Consequently, a deferred tax asset has been recognised equivalent to the anticipated tax benefit over the life of the Amended FFA.

Adjustments are made to the deferred income tax asset as adjustments to the asbestos-related assets and liabilities are recorded.

Foreign Currency Translation

The asbestos-related assets and liabilities are denominated in Australian dollars and thus the reported values of these asbestos-related assets and liabilities in the Company’s consolidated balance sheets in US dollars are subject to adjustment depending on the closing exchange rate between the two currencies at the balance sheet date. The effect of foreign exchange rate movements between these currencies is included in Asbestos Adjustments in the consolidated statements of operations.

Recent Accounting Pronouncements

Fair Value Measurements

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”) and expands disclosures about fair value measurements. The expanded disclosures in this statement about the use of fair value to measure assets and liabilities should provide users of financial statements with better information about the extent to which fair value is used to measure recognised assets and liabilities, the inputs used to develop the measurements, and the effect of certain measurements on earnings (or changes in net assets) for the period. Certain provisions of SFAS No. 157 became effective for the Company from 1 April 2008; our adoption did not impact our consolidated financial position or results of operations. The additional disclosures required by SFAS No. 157 are included in Note 3, Fair Value Measurements.

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”), which allows for voluntary measurement of financial assets and liabilities as well as certain other items at fair value. Unrealised gains and losses on financial instruments for which the fair value option has been elected are reported in earnings. The provisions of SFAS No. 159 are effective for the Company from 1 April 2008; the adoption of SFAS No. 159 did not have a material impact on its financial statements.

Business Combinations

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations (“SFAS No. 141R”)”, which replaces SFAS No. 141. The statement establishes principles and requirements for how the acquirer in a business combination recognises and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest; recognises and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The provisions of SFAS No. 141R are effective for the Company for business combinations for which the acquisition date is on or after 1 April 2009. The Company is currently evaluating the impact that adopting SFAS No. 141 will have on its financial statements.

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Noncontrolling Interests in Consolidated Financial Statements – an amendment to ARB No. 51

In December 2007, the FASB approved the issuance of SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements – an amendment to ARB No. 51” (“SFAS No. 160”). SFAS No. 160 establishes accounting and reporting standards that require the ownership interest in subsidiaries held by parties other than the entity be clearly identified and presented in the Consolidated Balance Sheets within equity, but separate from the entity’s equity; the amount of consolidated net income attributable to the entity and the noncontrolling interest be clearly identified and presented on the face of the Consolidated Statement of Earnings; and changes in the entity’s ownership interest while the entity retains its controlling financial interest in its subsidiary be accounted for consistently. The provisions of SFAS No. 160 are effective for the Company on 1 April 2009. The Company is currently evaluating the impact that adopting SFAS No. 160 will have on its financial statements.

Disclosures about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”). SFAS No. 161 is intended to improve financial reporting of derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for the Company April 1, 2009. The Company is currently evaluating the impact that adopting SFAS No. 161 will have on its financial statements.

Hierarchy of Generally Accepted Accounting Principles

In May 2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S. GAAP. This statement shall be effective 60 days following the Securities Exchange and Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The adoption of SFAS No. 162 is not expected to have a material impact on the Company’s financial statements.

3. Fair Value Measurements

As discussed in Note 2, we adopted SFAS No. 157 effective 1 April 2008. This standard defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. SFAS No. 157 defines fair value as the prices that would need to be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy prescribed by SFAS No. 157 contains three levels as follows:

Level 1 – Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.

Level 2 – Other observable inputs available at the measurement date, other than the quoted prices included in Level 1, either directly or indirectly, including:

	§		quoted prices for similar assets or liabilities in active markets;
	§		quoted prices for identical or similar assets in non-active markets;
	§		inputs other than quoted prices that are observable for the asset or liability; and
	§		inputs that are derived principally from or corroborated by other observable market data.

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Level 3 – Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilise management’s estimates of market participant assumptions.

The following table sets forth by level within the fair value hierarchy, the Company’s financial assets that were accounted for at the fair value on a recurring basis at 30 June 2008 according to the valuation techniques it used to determine their fair values.

						Fair Value Measurements
		Fair Value at				Using Inputs Considered as
		30 June 2008				Level 1				Level 2				Level 3
Assets
Cash and cash equivalents		$	171.3			$	171.3				—				—
Restricted cash and cash equivalents			21.7				21.7				—				—
Restricted short-term investments			82.3				82.3				—				—
Total		$	275.3			$	275.3				—				—

4. Inventories

Inventories consist of the following components:

		30 June				31 March
(Millions of US dollars)		2008				2008
Finished goods		$	105.9			$	127.4
Work-in-process			7.6				8.4
Raw materials and supplies			53.0				51.0
Provision for obsolete finished goods and raw materials			(7.5	)			(7.1	)
Total inventories		$	159.0			$	179.7

5. Operating Segment Information and Concentrations of Risk

The Company has reported its operating segment information in the format that the operating segment information is available to and evaluated by the Managing Board of Directors. USA and European Fibre Cement manufactures fibre cement interior linings, exterior siding and related accessories products in the United States; these products are sold in the United States, Canada and Europe. Asia Pacific Fibre Cement includes all fibre cement manufactured in Australia, New Zealand and the Philippines and sold in Australia, New Zealand and Asia. Research and Development represents the cost incurred by the research and development centres. On 1 April 2008, the Company realigned its operating segments by combining the previously reported segments of USA Fibre Cement and Other, into one operating segment, USA and European Fibre Cement. On 22 May 2008, the Company ceased the operation of its pipe business in the United States. The Company’s operating segments are strategic operating units that are managed separately due to their different products and/or geographical location.

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Operating Segments

The following are the Company’s operating segments and geographical information:

		Net Sales to Customers1
		Three Months
		Ended 30 June
(Millions of US dollars)		2008				2007
USA & Europe Fibre Cement		$	281.7			$	353.2
Asia Pacific Fibre Cement			83.3				71.2
Worldwide total		$	365.0			$	424.4

		Income Before Income Taxes
		Three Months
		Ended 30 June
(Millions of US dollars)		2008				2007
USA & Europe Fibre Cement		$	65.6			$	113.1
Asia Pacific Fibre Cement			15.8				12.4
Research and Development			(5.0	)			(4.1	)
Segments total			76.4				121.4
General Corporate2			(53.5	)			(46.4	)
Total operating income			22.9				75.0
Net interest (expense) income 3			(1.1	)			0.5
Worldwide total		$	21.8			$	75.5

		Total Identifiable Assets
		30 June				31 March
(Millions of US dollars)		2008				2008
USA & Europe Fibre Cement		$	819.6			$	846.4
Asia Pacific Fibre Cement			232.5				218.3
Research and Development			14.1				13.9
Segments total			1,066.2				1,078.6
General Corporate4			1,291.1				1,101.3
Worldwide total		$	2,357.3			$	2,179.9

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Geographic Areas		Net Sales to Customers
		Three Months
		Ended 30 June
(Millions of US dollars)		2008				2007
USA		$	277.1			$	349.1
Australia			58.5				46.8
New Zealand			17.2				17.3
Other Countries			12.2				11.2
Worldwide total		$	365.0			$	424.4

		Total Identifiable Assets
		30 June				31 March
(Millions of US dollars)		2008				2008
USA		$	818.5			$	846.6
Australia			149.0				139.0
New Zealand			34.5				26.1
Other Countries			64.2				66.9
Segments total			1,066.2				1,078.6
General Corporate4			1,291.1				1,101.3
Worldwide total		$	2,357.3			$	2,179.9

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

6. Accumulated Other Comprehensive Income

Accumulated other comprehensive income consists of the following components:

		30 June				31 March
(Millions of US dollars)		2008				2008
Pension and post-retirement benefit adjustments (net of US$1.0 million and US$1.0 million tax benefit, respectively)		$	(2.1	)		$	(2.1	)
Unrealised loss on restricted short-term investments			(3.6	)			(4.4	)
Foreign currency translation adjustments			18.7				23.4
Total accumulated other comprehensive income		$	13.0			$	16.9

7. Asbestos

The Amended FFA to provide long-term funding to the AICF was approved by shareholders in February 2007. The accounting policies utilised by the Company to account for the Amended FFA are described in Note 2, Summary of Significant Accounting Policies.

Asbestos Adjustments

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

		Three Months
		Ended 30 June
(Millions of US dollars)		2008				2007
Effect of foreign exchange			(40.5	)			(33.2	)
Other adjustments			—				3.1
Total Asbestos Adjustments		$	(40.5	)		$	(30.1	)

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Asbestos-Related Assets and Liabilities

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

		30 June				31 March
(Millions of US dollars)		2008				2008
Asbestos liability — current		$	(82.5	)		$	(78.7	)
Asbestos liability — non-current			(1,542.8	)			(1,497.8	)
Asbestos liability — Total			(1,625.3	)			(1,576.5	)
Insurance receivable — current			14.7				14.1
Insurance receivable — non-current			198.7				194.3
Insurance receivable — Total			213.4				208.4
Workers’ compensation asset — current			7.2				6.9
Workers’ compensation asset — non-current			82.4				78.5
Workers’ compensation liability — current			(7.2	)			(6.9	)
Workers’ compensation liability — non-current			(82.4	)			(78.5	)
Workers’ compensation — Total			—				—
Deferred income taxes — current			9.1				9.1
Deferred income taxes — non-current			414.3				397.1
Deferred income taxes — Total			423.4				406.2
Income tax payable (reduction in income tax payable)			24.1				20.4
Other net liabilities			(3.6	)			(3.4	)
Net Amended FFA liability			(968.0	)			(944.9	)
Restricted cash and cash equivalents and restricted short-term investment assets of the AICF			98.8				115.1
Unfunded Net Amended FFA liability		$	(869.2	)		$	(829.8	)

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

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. The Company will receive an updated actuarial estimate as of 31 March each year. The last actuarial assessment was performed as of 31 March 2008.

The changes in the asbestos liability for the three months ended 30 June 2008 are detailed in the table below:

		A$				A$ to US$
		Millions				rate				US$ Millions
Asbestos liability — 31 March 2008		A$	(1,718.9	)			1.0903			$	(1,576.5	)
Asbestos claims paid1			28.5				1.0601				26.9
AICF claims-handling costs incurred1			0.9				1.0601				0.8
Effect of foreign exchange											(76.5	)
Asbestos liability — 30 June 2008		A$	(1,689.5	)			1.0395			$	(1,625.3	)

Insurance Receivable — Asbestos

The changes in the insurance receivable for the three months ended 30 June 2008 are detailed in the table below:

		A$				A$ to US$
		Millions				rate				US$ Millions
Insurance receivable — 31 March 2008		A$	227.2				1.0903			$	208.4
Insurance recoveries1			(5.4	)			1.0601				(5.1	)
Effect of foreign exchange											10.1
Insurance receivable — 30 June 2008		A$	221.8				1.0395			$	213.4

Deferred Income Taxes — Asbestos

The changes in the deferred income taxes — asbestos for the three months ended 30 June 2008 are detailed in the table below:

		A$				A$ to US$
		Millions				rate				US$ Millions
Deferred tax assets — 31 March 2008		A$	442.9				1.0903			$	406.2
Amounts offset against income tax payable1			(2.8	)			1.0601				(2.6	)
Effect of foreign exchange											19.8
Deferred tax assets — 30 June 2008		A$	440.1				1.0395			$	423.4

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Income Tax Payable

A portion of the deferred income tax asset is applied against the Company’s income tax payable. At 30 June 2008 and 31 March 2008, this amount was US$24.1 million and US$20.4 million, respectively. During the three months ended 30 June 2008, there was a US$1.1 million favourable effect of foreign exchange.

Other Net Liabilities

Other net liabilities include a provision for asbestos-related education and medical research contributions of US$3.5 million at 30 June 2008. Also included in other net liabilities are the other assets and liabilities of the AICF including trade receivables, prepayments, fixed assets, trade payables and accruals. These other assets and liabilities of the AICF were a net liability of US$0.1 million at 30 June 2008. During the three months ended 30 June 2008, there was a US$0.2 million unfavourable effect of foreign 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 three months ended 30 June 2008, no short-term investments were purchased or sold.

The changes in the restricted cash and short-term investments of the AICF for the three months ended 30 June 2008 are detailed in the table below:

		A$				A$ to US$
		Millions				rate				US$ Millions
Restricted cash and cash equivalents and restricted short-term investments – 31 March 2008		A$	125.5				1.0903			$	115.1
Asbestos claims paid1			(28.5	)			1.0601				(26.9	)
AICF operating costs paid — claims-handling1			(0.9	)			1.0601				(0.8	)
AICF operating costs paid — non claims-handling1			(0.6	)			1.0601				(0.6	)
Insurance recoveries1			5.4				1.0601				5.1
Interest and investment income1			1.0				1.0601				0.9
Unrealised gain on investments1			0.8				1.0601				0.8
Effect of foreign exchange											5.2
Restricted cash and cash equivalents and restricted short-term investments – 30 June 2008		A$	102.7				1.0395			$	98.8

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Claims Data

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

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:

		Three Months
		Ended				For the Year Ended 31 March
		30 June 2008				2008				2007				20061				2005
Number of open claims at beginning of period			523				490				564				712				687
Number of new claims			151				552				463				346				489
Number of closed claims			176				519				537				502				464
Number of open claims at end of period			498				523				490				556				712
Average settlement amount per settled claim		A$	184,556			A$	147,349			A$	166,164			A$	151,883			A$	157,594
Average settlement amount per case closed		A$	164,632			A$	126,340			A$	128,723			A$	122,535			A$	136,536
Average settlement amount per settled claim		US$	174,093			US$	128,096			US$	127,163			US$	114,318			US$	116,572
Average settlement amount per case closed		US$	155,299			US$	109,832			US$	98,510			US$	92,229			US$	100,996

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

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

8. Commitment and Contingencies

ASIC Proceedings

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

In the proceedings, ASIC seeks:

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

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

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

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

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

There remains considerable uncertainty surrounding the likely outcome of the ASIC proceedings in the longer term and there is a possibility that the Company could become responsible for other amounts in addition to the defence costs. However, at this stage, the Company believes that, although it is reasonably possible that such amounts will be incurred in the ASIC proceedings, the actual amount or range of amounts is not estimable and accordingly, as of 30 June 2008, has not recorded any related reserves.

The operations of the Company, 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. The Company’s 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 above, the ultimate liability for such matters should not have a material adverse effect on either the Company’s consolidated financial position, results of operations or cash flows.

The Company is involved from time to time in various legal proceedings and administrative actions incidental or related to the normal conduct of its business. Although it is impossible to predict the outcome of any pending legal proceeding, management believes that such proceedings and actions should not, except as it relates to asbestos, ASIC proceedings and income taxes as described in these financial statements, individually or in the aggregate, have a material adverse effect on its consolidated financial position, results of operations or cash flows.

9. Short and Long-Term Debt

Debt consists of the following components:

		30 June				31 March
(Millions of US dollars)		2008				2008
Short-term debt		$	101.7			$	90.0
Long-term debt			222.8				174.5
Total debt1		$	324.5			$	264.5

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

At 30 June 2008, the Company’s credit facilities consisted of :

		At 30 June 2008
		Effective				Total				Principal
Description		Interest Rate				Facility				Drawn
(US$ millions)
364-day facilities, can be drawn in US$, variable interest rates based on LIBOR plus margin, can be repaid and redrawn until December 2008			3.31	%		$	55.0			$	50.0
364-day facilities, can be drawn in US$, variable interest rates based on LIBOR plus margin, can be repaid and redrawn until June 2009			3.38	%			55.0				51.7
Term facilities, can be drawn in US$, variable interest rates based on LIBOR plus margin, can be repaid and redrawn until June 2010			3.46	%			245.0				212.8
Term facilities, can be drawn in US$, variable interest rates based on LIBOR plus margin, can be repaid and redrawn until February 2011			3.58	%			45.0				10.0
Term facilities, can be drawn in US$, variable interest rates based on LIBOR plus margin, can be repaid and redrawn until February 2013			—				90.0				—
Total						$	490.0			$	324.5

The Company’s credit facilities as of 30 June 2008 consist of 364-day facilities in the amount of US$55.0 million, which as of 30 June, mature in December 2008. The Company has requested extensions of the maturity date of such credit facilities to June 2009.

For all facilities, the interest rate is calculated two business days prior to the commencement of each draw-down period based on the US$ London Interbank Offered Rate (“LIBOR”) plus the margins of individual lenders and is payable at the end of each drawn-down period. The Company paid commitment fees in the amount of US$0.2 million and US$0.1 million, respectively for the three months ended 30 June 2008 and 2007. At 30 June 2008, there was US$324.5 million drawn under the combined facilities and US$165.5 million was available.

Short-term debt at 30 June 2008 and 31 March 2008 comprised US$101.7 million and US$90.0 million, respectively, drawn under the 364-day facilities. Long-term debt at 30 June 2008 and 31 March 2008 comprised US$222.8 million and US$174.5 million, respectively, drawn under the term facilities.

At 30 June 2008, management believes that the Company was in compliance with all restrictive covenants contained in its credit facility agreements. Under the most restrictive of these covenants, the Company (i) is required to maintain certain ratios of indebtedness to equity which do not exceed certain maximums, excluding assets, liabilities and other balance sheet items of the AICF, Amaba Pty Limited, Amaca Pty Limited, ABN 60 Pty Limited and Marlew Mining Pty Limited, (ii) must maintain a minimum level of net worth, excluding assets, liabilities and other balance sheet items of the AICF, (iii) must meet or exceed a minimum ratio of earnings before interest and taxes to net interest charges, excluding all

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

income, expense and other profit and loss statement impacts of the AICF, Amaba Pty Limited, Amaca Pty Limited, ABN 60 Pty Limited and Marlew Mining Pty Limited and (iv) has limits on how much it can spend on an annual basis in relation to asbestos payments to the AICF. Such limits are consistent with the contractual liabilities of the Performing Subsidiary and the Company under the Amended FFA.

The Company anticipates being able to meet its future payment obligations for the next 12 months from existing cash, unutilised committed facilities, anticipated future net operating cash flows and proposed new facilities.

10. Non-Current Liabilities

Non-current other liabilities consist of the following components:

		30 June				31 March
(Millions of US dollars)		2008				2008
Employee entitlements		$	7.2			$	6.4
Uncertain tax positions			132.9				123.7
Other			73.7				57.4
Total non-current other liabilities		$	213.8			$	187.5

11. Income Taxes

FASB Interpretation No. 48

The Company adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes” on April 1, 2007. The adoption of FIN 48 resulted in the reduction of the Company’s consolidated beginning retained earnings of US$78.0 million. As of the adoption date, the Company had US$39.0 million of gross unrecognised tax benefits that, if recognised, would affect the effective tax rate. As of the adoption date, the Company’s opening accrual for interest and penalties was US$39.7 million.

A reconciliation of the beginning and ending amount of unrecognised tax benefits and interest and penalties are as follows:

		Unrecognized				Interest and
(US$ millions)		tax benefits				Penalties
Balance at 1 April 2007		$	39.0			$	39.7
Additions for tax positions of the current year			1.3				—
Additions for tax positions of prior year			16.0				1.8
Foreign translation adjustment			5.6				5.5
Balance at 31 March 2008		$	61.9			$	47.0
Additions for tax positions of the current year			0.4				0.2
Additions for tax positions of prior year			9.4				0.5
Settlements paid during the current period			(3.1	)			(0.3	)
Foreign translation adjustment			2.5				2.2
Balance at 30 June 2008		$	71.1			$	49.6

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

As of 30 June 2008 the total amount of unrecognised tax benefits and the total amount of interest and penalties accrued related to unrecognised tax benefits that, if recognised, would affect the effective tax rate is US$71.1 million and US$49.6 million, respectively.

The Company recognises penalties and interest accrued related to unrecognised tax benefits in income tax expense. During the three months ended 30 June 2008, the total amount of interest and penalties recognised in tax expense was US$2.6 million.

The liabilities associated with FIN 48 are included in other non current liabilities on the Company’s consolidated balance sheet.

A number of years may lapse before an uncertain tax position is audited and ultimately settled. It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably possible that the amount of unrecognised tax benefits could significantly increase or decrease within the next twelve months. These changes could result from the settlement of ongoing litigation, the completion of ongoing examinations, the expiration of the statute of limitations, or other circumstances. At this time, an estimate of the range of the reasonably possible change cannot be made.

The Company or one of its subsidiaries files income tax returns in the US federal jurisdiction, and various states and foreign jurisdictions including Australia and The Netherlands. The Company is no longer subject to US federal examinations by US Internal Revenue Service (“IRS”) for tax years prior to and including tax year 2004. The Company is no longer subject to examinations by The Netherlands tax authority, for tax years prior to tax year 2002. With certain limited exceptions, the Company is no longer subject to Australian federal examinations by the Australian Taxation Office (“ATO”) for tax years prior to tax year 2000. The Company is currently subject to audit and review in a number of jurisdictions in which it operates and has been advised that further audits will commence in the next 12 months. It is anticipated that the audits and reviews currently being conducted will be completed within the next 24 months. Of the audits currently being conducted, none have progressed sufficiently to predict their ultimate outcome. The Company accrues income tax liabilities for these audits based upon knowledge of all relevant facts and circumstances, taking into account existing tax laws, its experience with previous audits and settlements, the status of current tax examinations and how the tax authorities view certain issues.

Internal Revenue Service (IRS) — Notice of Proposed Adjustment (NOPA)

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

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

On 16 July 2008 the Company issued a rebuttal response to the IRS NOPA. On 18 July 2008 the IRS issued a 30 Day Letter that concludes that the Company is not in compliance with the LOB provision for the calendar years 2006 and 2007 and that it is not entitled to reduced withholding tax rates on payments from the United States to the Netherlands. The 30 Day Letter is a formal IRS examination report that requires the Company to either agree in full and pay the tax or file a formal, written protest within 30 days of the 30 Day Letter to request consideration of the issues with the Appeals Division of the IRS.

The Company filed a formal protest on 18 August 2008 to exercise its rights to an impartial hearing before the Appeals Division of the IRS.

ATO – 2002 Tax Audit

The ATO is auditing the Company’s Australian income tax returns for the years ended 31 March 2002 and 31 March 2004 through 31 March 2006. On 8 August 2008, the Federal Court of Australia (“ Federal Court”) made orders providing for the reinstatement of the Company’s former wholly-owned subsidiary James Hardie Australia Finance Pty Limited (“JHAF”) to the register of companies and appointing Max Donnelly of Ferrier Hodgson as the new liquidator of JHAF. JHAF was deregistered on 23 August 2005 following a voluntary winding up. The Company understands that the reinstatement of JHAF is a necessary pre-requisite to the ATO issuing an amended assessment in respect of one of the issues that has been the focus of the ATO’s inquiries during the tax audit of fiscal year 2002. The Company understands that it is the view of the ATO that an amended assessment issued to JHAF would comprise primary tax of A$101.5 million (US$97.6 million), estimated penalties of A$50.8 million (US$48.9 million) and as of 30 June 2008 estimated general interest charges (“GIC”) charges of A$88.0 million (US$84.7 million). GIC would continue to accrue until the issue is resolved or full payment of any amended assessment is made. The new liquidator would need to determine, among other things, whether and to what extent JHAF is able to put itself in a position to meet any ultimate tax liability assessed in respect of it. The Company is considering its position with respect to the merits of the potential amended assessment and any obligations of JHAF to the ATO given its prior winding up.

ATO – 1999 Disputed Amended Assessment

In March 2006, RCI Pty Ltd (“RCI”), a wholly owned subsidiary of the Company, received an amended assessment from the ATO in respect of RCI’s income tax return for the year ended 31 March 1999.

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

The Company believes that it is more likely than not that the tax position reported in RCI’s tax return for the 1999 fiscal year will be upheld on appeal. Therefore, the Company believes that the requirements under FIN 48 for recording a liability have not been met and therefore it has not recorded any liability at 30 June 2008 for the amended assessment.

The Company expects that amounts paid in respect of the amended assessment will be recovered by RCI (with interest) at the time RCI is successful in its appeal against the amended assessment. As a result, the Company has treated all payments in respect of the amended assessment that have been made up to 30 June 2008 as a deposit and it is the Company’s intention to treat any payments to be made at a later date as a deposit.

James Hardie Industries N.V. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

12. Stock-Based Compensation

At 30 June 2008, the Company had the following equity award plans: the Executive Share Purchase Plan; the Managing Board Transitional Stock Option Plan; the JHI NV 2001 Equity Incentive Plan; the Supervisory Board Share Plan 2006 and the Long-Term Incentive Plan.

Compensation expense arising from equity award grants as estimated using option-pricing models was US$2.0 million and US$1.5 million for the three months ended 30 June 2008 and 30 June 2007, respectively. As of 30 June 2008, the unrecorded deferred stock-based compensation balance related to equity awards was US$9.9 million after estimated forfeitures and will be recognised over an estimated weighted average amortisation period of 1.6 years.

Stock Options

The following table summarises all of the Company’s stock options available for grant and the movement in all of the Company’s outstanding options:

Outstanding Options

Weighted

Shares

Average

Available for

Exercise

Grant

Number

Price

Balance at 1 April 2008

15,564,294

22,190,237

A$7.29

Exercised

—

(25,000

)

A$5.99

Forfeited

2,136,680

(2,136,680

)

A$7.44

Balance at 30 June 2008

17,700,974

20,028,557

A$7.27

The Company accounts for stock options in accordance with the fair value provisions of SFAS No. 123R, which requires the Company to estimate the value of stock options issued and recognise this estimated value as compensation expense over the periods in which the stock options vest.

The Company estimates the fair value of each option grant on the date of grant using either the Black-Scholes option-pricing model or a lattice model that incorporates a Monte Carlo Simulation (the “Monte Carlo method”).

There were no stock options granted during the three months ended 30 June 2008 and 30 June 2007.