James Hardie

JAMES HARDIE ANNUAL REPORT 2008 CONTENTS 121 Share/CUFS Information 120 Group Statistics Financial 119 Selected Data Quarterly 118 Remuneration Disclosures Financial NotestoConsolidated 89 Statements ofChangesinShareholders’ Equity Consolidated Statements ofCashFlows 88 Consolidated Statements 86 of Consolidated Statements 84 Operations ConsolidatedBalanceSheets 83 Accounting Firm Registered ReportofIndependent 82 Public Principles Corporate Governance 70 Remuneration Report 46 Directors’ Report 42 and Management’s Discussion 28 Analysis Contents 27 FINANCIAL STATEMENTS Environment 20 Differentiated Products 18 Workplace Safety 16 AsiaPacificFibreCement 14 USAFibreCement 12 Summary of Operations 11 Manufacturing Capacity 10 7 CFO’s Report 5 CEO’s Report 4 Chairman’s ResultsataGlance Report 2 24 Supervisory Supervisory Board Directors 24 SeniorLeadershipTeam 22 in thisreport. the terminologyused and informationabout deﬁ nitions,abbreviations 1077ZX Amsterdam. address atStrawinskylaan 3077, with corporateseatinAmsterdam and Dutch registrationnumber34106455) (ARBN 097829895) The liability of itsmembersislimited. Incorporated intheNetherlands(with James HardieIndustriesNV See pages39–41for + Community + + + + +

We arealsoestablishingapresenceinEurope. States, Australia,NewZealand,andthePhilippines. internal andexternalbuildingapplicationsintheUnited manufacturer offibrecementproductsandsystemsfor Based onournetsales,webelievearethelargest rewarding careersforouremployees. benefits forourcustomersandofferchallenging our shareholders,providedesignandconstruction our differentiatedproducts,weaimtocreatewealthfor programs, ouruniquemanufacturingtechnologyand Through ourextensiveresearchanddevelopment fiscal year2008. We generatednetsalesofoverUS$1.4billionin We employaround2,900people. pipes, bracing,decorativeelementsandfencing. buildings, asexteriorcladdingandinternallinings, Our productsareusedinresidentialandcommercial

1 James Hardie Annual Report 2008 2 James Hardie Annual Report 2008 RESULTS AT A GLANCE 2 1 See Deﬁ nitionsstartingonpage39. Includes discontinued operations. (Millions ofUSdollars) EBIT (Millions ofUSdollars) EBITDA (Millions ofUSdollars) Net OperatingProﬁ t (Millions ofUSdollars) Net Sales 04 05 06 04 05 06 04 05 06 04 05 06 07 08 07 08 07 08 07 08 2 2 1 1,210.4 1,488.5 1,542.9 1,468.8 208.6 232.5 326.0 369.6 264.0 126.9 117.3 981.9 129.6 208.9 222.2 172.2 196.2 280.7 318.9 207.5

3 Capital expenditureincludes (%) Return onCapitalEmployed (Millions ofUSdollars) Capital Expenditure (US cents) Diluted EarningsperShare (%) EBIT Margin 04 05 06 04 05 06 04 05 06 07 08 07 08 04 05 06 07 08 07 08 ﬂ ow. consolidated statements ofcash and thereforediffersfrom the both cashandcreditpurchases 2 3 153.0 162.8 14.1 18.1 25.7 38.5 27.2 27.7 45.2 47.6 17.5 16.2 18.9 20.7 74.1 92.1 23.4 23.6 28.9 26.6 2 Net operating(loss)profit before cumulativeeffectofchangeinaccounting principle Operating profit(loss)fromcontinuing operations Income tax(expense)benefit Operating lossfromcontinuingoperationsbeforeincometaxes Net interestincome(expense) EBIT Asbestos adjustments Impairment charges andotherrelatedexpenses Special CommissionofInquiry Research anddevelopmentexpenses Selling, generalandadministrativeexpenses Gross profit Cost ofgoodssold Total netsales Other Asia PacificFibreCement USA FibreCement Net sales (Millions ofUSdollars) + + + + + + + + + + Asia Pacific FibreCement USA FibreCement Average netsalespriceperunit(per msf) Asia PacificFibreCement USA FibreCement Volume (mmsf)

Dividends ofUS27.0centspershare/CUFSwerepaidduringtheyearto31March2008. weighted averagecostofcapital. of US$5.83,achievingmorethan3%accretioninearningspershareand0.5%reductionthecompany’s In anon-marketsharebuy-back,US$208.0millionspenttopurchase7.6%ofissuedcapitalataverageprice Diluted earningspershareexcludingasbestosdecreasedfromUS47.6centstoUS25.7cents. As apercentageofsales,SG&Aexpensesincreasedby1.6pointsto15.5%. EBIT marginexcludingasbestosdecreasedby6.6percentagepointsto14.1%. the prioryear. EBIT excludingasbestosdecreasedby35%toUS$207.5million,comparedUS$318.9millionfor 47% toUS$117.3million. benefit relatedtoasbestosadjustmentsofUS$45.8million.Netoperatingprofitexcludingdecreased of US$240.1million,AICFSG&AexpensesUS$4.0interestincomeUS$9.4millionandtax operating lossofUS$71.6millioninfiscalyear2008.This2008figureincludesasbestosadjustments Net operating(loss)profitdecreasedfromanetofUS$151.7millioninfiscalyear2007to Gross profitmargindecreased1.0percentagepointto36.1%. Gross profitdecreased8%fromUS$573.0milliontoUS$530.0million. Total netsalesdecreased5%,fromUS$1,542.9milliontoUS$1,468.8million. were down37%fromlastyearand55%theirpeaklevelsof2006: In thefaceofsignificantadverseconditionsinourmajormarketsUS,wherenewhousingstarts S 597 US$ $ 862 A$ $ 1,144.8 $ (71.6) $ (71.6) 1,468.8 1,916.6 (240.1) (228.2) (938.8) 530.0 298.3 398.2 (36.1) (35.5) (36.6) (71.0) (27.3) 2008 25.7 1.1 – (13.6) – 2007 % Change S 8 2 US$ 588 $ 82 2 A$ 842 $ 1,262.3 (9) 1,542.9 (5) (6.5) – 573.0 (8) 28.9 251.7 (11) 19 2,148.0 (11) 390.8 2 $ – 151.7 $ – 150.8 243.9 (93.1) – 62 (86.6) (405.5) 58 – 41 (25.9) – (214.6) (5) (6) (969.9) 3

3 James Hardie Annual Report 2008 4 James Hardie Annual Report 2008 CHAIRMAN’S REPORT (%) Return onShareholdersFunds (US cents) Dividends PaidperShare 04 05 06 04 05 06 07 08 07 08 13.2 27.0 10.0 27.6 22.4 29.1 24.0 5.0 3.0 9.0 the business andimproving ourcompetitive time andattention on thebasicrunningof management canconcentrate 100%oftheir behind usorcontrolled tothepointwhere where thesevarious“legacy”issuesare deal with.GettingJamesHardietoasituation issues thattheBoardandmanagement must as youknow,hasseveralimportant“legacy” situation discussedabove,JamesHardie, In additiontothebasicbusinessissuesand every confidencethatthisinfactwillhappen. the managementteamthatwehave,have stronger marketandfinancialposition.With will enableJamesHardietoemergeinaneven period ofeconomictransition,programsthat organisation, weputinplaceduringthis Hardie bothinthemarketplaceandasan that, giventheinherentstrengthsofJames exceptionally importanttoourshareholders somewhat beyondthat.Webelieveitis somewhere inthe2010timeframeorperhaps forecasts thatIhaveheardwouldputit industry demandlevelswillreturn-the No oneknowsforcertainwhen“normal” issues withmeasurablegoalsandresults. on thecorrectshort,mediumandlong-term Board believeswillhelptofocusmanagement incentive planforfiscalyear2009whichthe shareholder approvalofanoverallmanagement recommended inourNoticeofMeetings be controlledbymanagement.Wehave however, manyareasofresultsthatcan as newhousingstarts–willbe.Thereare, and mediumoverallindustrydemand–such obviously quitedifficulttoforecastwhatshort During suchaperiodofuncertaintyitis or 19%ofnetsales. and assetimpairments)ofUS$281.7million profitability, withEBIT(excludingasbestos was abletomaintainanexcellentlevelof in adepressedmarketplace,JamesHardie in theUS).Inadditiontoclearlygainingshare sales decreasewasonly5%overalland9% outperformed theindustry(JamesHardie’s management teamatJamesHardiesignificantly 37% comparedtotheprioryear) new housingstartsintheUSweredown situation infiscalyear2008(forexample Within anexceptionallydifficulteconomic General observations Board issues. in addition,addresssomespecific you someofmyobservationsand, detail butIwouldliketosharewith Gries willdiscussthisinsome CEO report,whichfollows,Louis market, theUnitedStates.Inhis now especiallyinourprincipal have beeninturmoilforsometime As weallknow,economicevents priority forus. position andresultsisaveryimportant fiscal year. the overallsituationaswegointothisnext issued capital.Wewillcontinuetomonitor US$208.0 millionandpurchasing7.6%ofthe we completedasharebuybackprogramtotalling dividends totallingUS20centspershareand In additioninthispastfiscalyearweannounced corporate levels. international financeexperienceatsenior and MrHarrisonbringstotheBoardsignificant levels ingovernmentandthecorporateworld governmental andlegalexperienceatsenior Andrews comestotheBoardwithsignificant David AndrewsandHarrison.Mr made twoappointmentssincethelastAGM: Replacing MessrsBarrandLoudon,wehave business commitments. because ofthedemandshisotherboardand could notcontinuetoparticipateintheBoard DeFosset, whojoinedtheBoardaboutayearago, contribution tothecompany.Inaddition,Don resignations. Wedeeplythankthemfortheir is withgreatregretthatwehaveacceptedtheir retire afterthisyear’sAGMrespectively,andit have retiredandadvisedtheirintentionto serving directors,JohnBarrandJamesLoudon, process ofBoardrenewal.Twoourlonger In thepastyearwehavecontinuedanormal Other issues Chairman Michael N.Hammes will continuethroughtheupcomingfiscal years. have atthecompanyandweanticipate thatthis of LouisGriesandthemanagementteam thatwe Hardie continuestogrowundertheleadership At thesametimeinherentstrengthofJames of thelegacyissuesthatwemustdealwith. situation weareallfamiliarwithandsome for JamesHardiegiventhegeneraleconomic There isstillsignificantuncertaintyexisting as follows: into justafewwordsIwouldsummariseit Trying toencapsulateacomplexsituation Summary well-placed totakeadvantage ofopportunities market positionduring thisperiodandwillbe also confidentthat we arestrengtheningour holders indifficult market conditions.Weare working hardtooptimisereturnsforshare- outperform buildingmaterialpeers,we are So althoughweexpecttocontinue appropriate. we havereducedcapacityandinSG&A where reduced employeenumbersinplantswhere costs. Tothatend,wehavesignificantly are facinghigherenergy,pulpandfreight market opportunity,atthesametimeaswe become morechallengingduetothereduced bottom lineperformance.Thishasobviously term focussomewhat,withmoreemphasison on thisoutlook,wehaveshiftedourshort- and maycontinueintofiscalyear2010.Based expected tocontinuethroughfiscalyear2009, The declineinUShousingconstructionis broader market. market shareandcontinuetooutperformthe initiatives andweexpecttofurtherincrease remain committedtoinvestinginkeygrowth good returns,eveninthedownmarket.We product leadershipstrategycontinuestodeliver position thathasbeenbuiltthroughour businesses, ourhighlydifferentiatedproduct changed. UnlikemostUSbuildingmaterial Our strategyfortheUSbusinesshasn’t grew year-on-year. sales ofourColorPlus negatively impactedbythehousingdownturn, While ourexteriorproductvolumeswere to takemarketsharefromalternativeproducts. products andpricingwasflat,aswecontinued We increasedmarketpenetrationwithour excluding impairments. down 1.3percentagepointsto27.4%,both at US$313.6millionandtheEBITmargin 9% toUS$1,144.8million,EBIT13%lower market, withnetsalesfortheyeardownjust We continuedtooutperformthebroader USA FibreCement decreased 12%toUS$281.7million. excluding asbestosandassetimpairments was down8%toUS$530.0million,andEBIT by just5%toUS$1,468.8million,grossprofit In theseconditions,ournetsalesdecreased of 2006. year and55%fromtheirpeaklevels new startsweredown37%fromlast housing marketintheUS,where affected byadramaticallydeclining financial resultsweresignificantly very difficultmarketconditions.Our year 2008wasgood,consideringthe James Hardie’sperformanceinfiscal ® collectionofproducts when theUSmarketreboundsinfuture. continued over remain subjecttostrong competition. expect ournon-differentiated productswill products inAustraliaandNewZealand. We market sharesthroughitsrangeofdifferentiated primary demandforfibrecementand increase The businessexpectstocontinuegrow New ZealandandthePhilippines. to beweakeninginAustraliaandweaker outlook isforresidentialconstructionactivity For AsiaPacificFibreCement,theshort-term lending standards. consumer sentiment,andtightermortgage market, weakereconomicconditionsand foreclosures placingmorepropertiesonthe new homesforsale,anincreasedrateof short-term, duetohighinventorylevelsof in newhousingconstructionactivitythe In NorthAmerica,weexpectfurtherweakness Outlook reduced EBITlossfortheyear. small, isstillgrowingandhadasignificantly Our EuropeFibreCementbusiness,although our AustralianFRCPipebusiness. further investment.Wewillcontinuetooperate financial returnswerenotsufficienttowarrant effective 22May2008.Theestimatedfuture Pipe business,ledustoclosethisbusiness in Florida,andtheoutlookforUSAHardie The recentdownturninconstructionactivity Other range ofdifferentiatedproducts. value pricingwearegettingonourgrowing numbers areinAustralia.Ourresultsreflectthe years, butmostofthegainsinAsiaPacific and it’sgottenbetteroverthelastcoupleof Zealand hasalwaysbeenagoodbusiness, results, whichisarealaccomplishment.New several yearsagoisnowshowingupinthe The strategyweputinplaceforthisdivision percentage pointsto16.9%. million andtheEBITmarginrose1.2 million, EBITwas28%higheratUS$50.3 year. Netsalesincreased19%toUS$298.3 Asia PacificFibreCementhadaverystrong Asia PacificFibreCement (Thousands ofUSdollars) EBIT/Employee (Thousands ofUSdollars) Net Sales/Employee 04 05 06 04 05 06 07 08 07 08 509.6 319.5 387.7 450.7 524.1 108.3 72.0 56.0 62.9 85.0

5 James Hardie Annual Report 2008 CEO’S REPORT 6 James Hardie Annual Report 2008 CEO’S REPORT the disputedfiscalyear1999taxreturnof issues wehavewiththeATO,relatingto We aresimilarlycommittedtoresolvingthe available touscontestthisview. will continuetopursueappropriateavenues do notagreewiththeIRSpositionandwe that becameeffective1February2006,we that wecompliedwiththetreatychanges management structureandpracticestoensure The Netherlands.Sincewehadadjustedour rates onpaymentsfromtheUnitedStatesto 2007, whichwouldaffectthewithholdingtax US-Dutch taxtreatyfortheyears2006and that initsviewwedonotcomplywiththe domicile, theUSIRSrecentlyadvisedus On anothermatterrelatedtoTheNetherlands Government endsin2010. financial riskreserveagreementwiththeDutch that couldbeimplementedbeforethecurrent but weareconsideringvariousalternatives challenging. Addressingthisissueiscomplex, focussed businessfromTheNetherlandsis past. ManagingwhathasbecomeamoreUS- domicile tothesameextentaswehavein longer derivethebenefitfromourNetherlands businesses andotherchangesmeanthatweno domiciled. Changestotheincomemixfrom The firstoftheseissuesconcernswhereweare management timeandexpensetothecompany. and theseissuesconsumeconsiderable relating topreviouscompanyrestructures, challenges thatstemfromlegacyissues We alsohavetodealwithsignificant US operatingenvironment. addition tothosepresentedbythedeteriorating report, JamesHardieisfacingchallengesin As ourChairman,MikeHammes,notedinhis Legacy issues Chief ExecutiveOfficer Louis Gries value creatingactivities. allows ustofocusmoremanagementtimeon shareholders, andlookforwardtoafuturethat them intheinterestofcompanyandits shareholders. Wearecommittedtoresolving past events,Iknowthattheyconcernour Although alloftheaboveissuesdealwith Amended FFA. by theNSWGovernmentinsupportof and thatspeciallegislationhasbeenenacted approved byshareholders(February2007), the NSWGovernment(November2006)and the AmendedFFAhasbeenenteredintowith required. Thosebasesincludethefactthat of theAICFTrust,foruptoA$1.9billionif JHI NVtoindemnifyABN60,asubsidiary including itsclaimforacourtorderrequiring contesting ASIC’scaseonanumberofbases, to startthisSeptember.Wewillbeactively Hearings intheASICproceedingsaredue liquidated formersubsidiary. recently advisedactionsrelatingtoanow hearings inDecember2008,andthemore- our subsidiary,RCI,whichwillstartcourt buildings inUSAFibreCement; andaUS$32.4 adjustments tothe value ofmachineryand USA HardiePipe;US$13.2 millioninQ4 million inQ4associated withtheclosureof the yeartotallingUS$71.0million:US$25.4 We hadthreemajorassetimpairments in detail below. Asbestos paymentsarediscussedin more liability andunfavourablecurrencymovements. Actuaries’ (KPMG)estimateoftheasbestos adjustment asaresultofchangeinKPMG We madeaUS$240.1millionasbestos asset impairmentsandtax. affected bynon-cashadjustmentsforasbestos, Our netoperatingprofitwassubstantially Non-cash adjustments year’s resultofUS$211.8million. a US$169.7millionprofit,20%downonlast impairments andtaxadjustments,werecorded 2007. Afteradjustingforasbestos,asset to aprofitofUS$151.7millionforfiscalyear for theyearwasUS$71.6million,compared was US$36.1millionandthenetoperatingloss million, ourincometaxexpensefortheyear After asbestosadjustmentsofUS$240.1 research anddevelopmentexpenses. 6% andwerecordeda5%increaseinour profit down8%;SG&Aexpenseswere improvements intheAsiaPacificregion;gross in theUS,offsetbycurrencygainsandsales down 5%,affectedbythehousingdownturn Our consolidatedresultsshowednetsales Discussion andAnalysisonpages28–38. of thisannualreport,andinManagement’s described inmoredetailonpages11–15 The resultsforourbusinesssegmentsare Consolidated results weighted averagecostofcapital. share anda0.5%reductioninthecompany’s a morethan3%accretioninearningsper The materialbenefitsofthebuy-backare share purchasessince1April2008. of US$5.83pershare.Therehavebeenno 7.6% oftheissuedcapitalatanaverageprice year 2008,spentUS$208.0millionpurchasing back inmid-August2007and,duringfiscal We announceda10%on-marketsharebuy- Capital management of US20centspershare. US8 centstogiveatotaldividend We announcedafinaldividendof viewpoint, thehighlightofyear. This isarecordand,fromfinancial US$319.3 millionforthecompany. have verystrongcashgeneration,at market activity.Wecontinuedto decline inUSresidentialhousing not-withstanding thesignificant we believeareverygoodresults, operating performance,withwhat Fiscal year2008sawasolid continued over US$319.3 millionfor theyear. this year,whenwe hadnetcashgenerationof outflow ofUS$67.1 million.Thatwasreversed to theAICF,resultinginanetoperating cash ATO andaUS$148.7millioninitialpayment included aUS$154.8milliondeposit with the in anegativenetoperatingcashflow. These last yearsomematerialpaymentsresulted levels ofcashinfiscalyears2007and2008, Although ourtradingactivitiesgeneratedgood operating assets. transferred fromconstructioninprogressto US$5.8 million,astheresultofassetsbeing Depreciation andamortisationincreasedby 9% lessthanforfiscalyear2007. asset impairments,wasUS$338.2million, Adjusted EBITDA,excludingasbestosand continue withinthatrange. 35% plusorminus2-3%andweexpectto guidance ofaneffectivetaxrateabout of theUSbusiness.Wehavepreviouslygiven The Netherlandsandachangeinthenature this increase,includingincreasedexpensein last year.Anumberoffactorscontributedto fiscal year2008was37.9%,versus32.5% tax adjustments,oureffectiveratefor Excluding asbestos,assetimpairmentsand debt levelsthatweanticipateholding. interest expensetocontinuewiththehigher share buy-back.Weexpecttheincreasein by theextradebtwehavetakenonwith interest incomewasUS$8.3million,affected Net interestexpenseexcludingAICFnet by theendofyear. the yearforprojectswhichwerecompleted included consultingcostsincurredearlyin of OthercostsUS$39.6million,which Corporate costswere6%higher,asaresult Financial results accounting foruncertaintaxpositions. US GAAPstandardFIN48,whichrelatesto unfavourable taxadjustmentsrelatingtothe In addition,wehadUS$5.8millionin we recordedanEBITlossofUS$36.6million. After thesesignificantnon-cashadjustments, of theBlandon,PennsylvaniaplantinQ3. million impairmentchargewiththeclosure 04 05 06 (Millions ofUSdollars) Depreciation andAmortisation (%) Working CapitaltoNetSales (Times) Net InterestExpenseCover (Millions ofUSdollars) Net InterestExpense 04 05 06 04 05 06 04 05 06 07 08 07 08 07 08 07 08 1,404.0 25.4 56.5 36.4 36.3 45.3 50.7 12.5 17.2 38.5 49.1 10.0 20.0 14.9 10.1 12.5 8.3 5.1 0.2 6.5

7 James Hardie Annual Report 2008 CFO’S REPORT 8 James Hardie Annual Report 2008 CFO’S REPORT 2 1 Excludesasbestos,asset Capital expenditure includes cash ﬂ ow. consolidated statements of and thereforediffersfromthe both cashandcreditpurchases impairments andtaxadjustments. (%) Gearing Ratio (Millions ofUSdollars) Income Tax Expense (%) Effective IncomeTax Rate 04 05 06 04 05 06 04 05 06 07 08 07 08 07 08 17.0 12.8 22.7 81.9 40.4 61.9 71.6 91.1 (1.6) 24.4 32.6 32.9 32.5 37.9 2 6.8 USA FibreCement (Millions ofUSdollars) Gross capital employed Accounts payableand accruals Other Receivables/prepayments Inventories Fixed assets (Millions ofUSdollars) Gross CapitalEmployed NZD AUD Closing Spot NZD AUD Weighted Average Exchange Rates(us$1=) Capital Expenditure Total Borrowings Greater than5years 4–5 years 3–4 years 2–3 years 1–2 years Less thanoneyear (Millions ofUSdollars) Debt MaturityProfile Currency ofBorrowings Continuing Operations Other Asia PacificFibreCement USD Borrowings (Millions ofUSdollars) Net Borrowings Total Deposits Other PHP NZD USD AUD Deposits Total Borrowings Other $229.1

$ 1,162.8 755.8 $ 264.5 $ 3.0 $ $ 31.5 38.5 $ 35.4 $ 90.0 $ $ 264.5 $ 264.5 1.5 5.5 1.2607 1.0903 1.3161 1.1503 (118.4 345.2 179.7 174.5 2008 2008 2008 2008 2008 20.2 Year ended31March 0.5 1.3 9.0 1.9 – – – – – As at31March 2007 ) 0.4 329.5 827.3 $ 147.6 2007 1.4009 1.2395 1.5213 1.3066 – – 105.0 83.0 $ – – 2007 2007 $ 1,200.7 1.3 10.5 $92.1 80.3 2007 $ 188.0 0.6 7.4 $ 1.2 5.7 19.2 – $ $ 34.1 188.0

$ 153.9 $ $ 188.0 (104.1) in fiscalyear2008. operating cashflow ofUS$319.3million represents 35%of James Hardie’snet million toAICFduringfiscalyear2009. This contribution oftheA$equivalentUS$111.75 flow duringfiscalyear2008,wewillmake a As aresultofJamesHardie’sstrongcash short-term investmentsofA$125.5million. restricted cashandequivalents manages asbestosclaimsandfunds,had At theendofMarch2008AICF,which on page99ofthisannualreport. financial statementsinNote12,commencing for asbestosisincludedintheaccompanying year. Furtherinformationontheaccounting dollar againsttheAustralianinpast significant depreciationoftheUnitedStates in KPMGActuaries’reassessmentandthe at 31March2008,asaresultoftheincrease million at31March2007toUS$944.9 recoveries andtax,increasedfromUS$786 The asbestosprovision,netofinsurance,other mesothelioma claims. most materialbeinganestimatedincreasein Many factorscontributedtothisincrease,the million ontheassessmentat31March2007. 2008 wasA$1.426billion,anincreaseofA$71 of KPMGActuaries’assessmentat31March The discounted(butinflated)centralestimate February 2007. (Amended FFA)approvedbyshareholdersin of theAmendedFinalFundingAgreement which JamesHardieassumedwiththesigning a furtherassessmentoftheasbestosliability At 31March2008KPMGActuariesundertook Asbestos payments still low. US$229.1 millionat31March2008,itis While ourlevelofnetdebtincreasedto US$208.0 milliononthesharebuy-back. million onanincreaseddividendand cash generationallowedustospendUS$126.2 The reducedcapitalexpenditureandhigher manufacturing capacity. where wearenowcarryingsubstantialunused prior year,withthelargestdecreaseinUS down significantlyfromUS$92.6millioninthe Our capitalexpenditureofUS$38.5millionwas TheA$amountwilldependontheA$/US$ + + + Ourdebtservicecapacityindicators + + + + + Ourkeyperformanceratiosfortheyear Keyperformanceratios Russell Chenu Iwouldsummarisetheyear asaverysolid Net debtpaybackof0.7years Net interestpaidcoverof16.5times;and Net interestexpensecoverof25.4times; Total dividendsofUS27centspershare A declineinEBITmarginfrom20.7%,to A dilutioninreturnoncapitalemployed, A returnonshareholderfundsof13.2%, A declineindilutedearningspershare, Amended FFA. through theyear,asallowedforin A$ amountinequalquarterlyinstalments exchange rateinlateJune.Wewillpaythe continued tobestrong,with: were paidinthefiscalyear. 14.1%; and from 26.6%to18.1%; shareholders fundsandlowerearnings; down from24.0%,asaresultofbothhigher from US47.6centstoUS25.7cents; US business: reflect thechallengingconditionsforour Chief FinancialOfficer underlying strengthofourcompany. the strongcashgenerationhighlights financial positionremainsstrongand number ofnon-cashadjustments,our earnings wereadverselyaffectedbya conditions. Althoughthenetoperating overall operatingperformancegiventhe 3 . 4 3 Excluding impairments. Excludespaymentsunder (Millions ofUSdollars) EBIT (Millions ofUSdollars) Total Identiﬁ ableAssets (Millions ofUSdollars) Net Sales the AmendedFFA. EBIT forR&DandOtherwasalossof25.4 03 AsiaPacificFibreCement 50.3 313.6 24.5 Other AsiaPacificFibreCement 218.3 835.8 USA Fibre Cement 25.7 Other AsiaPacificFibreCement 298.3 1,144.8 USA Fibre Cement 4 USAFibreCement

9 James Hardie Annual Report 2008 10 James Hardie Annual Report 2008 MANUFACTURING CAPACITY SOUTHAMPTON 1 Plant MANUFACTURING CAPACITY–PIPES (Thousand location MANUFACTURING CAPACITY–BUILDINGPRODUCTS Design tons capacity/year Number of

ln iy lrd 300 PlantCity, Florida Blandon, Waxahachie, Peru, Tacoma, Cleburne, North America Pennsylvania Texas Washington Illinois Texas 360 200 560 500 United States yny e ot ae 180 190 Sydney, NewSouthWales SouthCarolina Summerville, Australia Pulaski, Reno, Virginia Nevada 300 Australia Corporate Research and Development Europe Philippines New Zealand

CORPORATE HEADQUARTERS DISTRIBUTION HUB JAMES HARDIESALESOFFICE JAMES HARDIEMANUFACTURING OPERATIONS Annualdesigncapacityisnotnecessarily is usuallyless thanannualdesigncapacity. availability andproduction speedsand such asproductmix,batch size,plant Actual productionisaffected byfactors which negativelyaffects their outputs. States producearangeofthickerproducts, at eachplant.PlantsoutsidetheUnited reﬂ ectiveofouractualcapacityutilisation oa ot mrc Total NorthAmerica oa utai Total Australia rn oa Grand total 3,910 2,766 Total 46 PARIS rsae uesad 120 Brisbane,Queensland rsae uesad 5 82 50 Brisbane,Queensland LONDON 48 Manila 145 167 Auckland 75 188 PlantCity, Florida AMSTERDAM Fontana, California 180 111 2 On31October2007,thecompany conditions. in responsetoUShousingmarket at theBlandon,Pennsylvaniaplant, announced planstosuspendproduction PERTH Plant location ADELAIDE TAIPEI MANILA MELBOURNE

5 3 2 – 600 200 3

BRISBANE SYDNEY commenced commercial production. capacity of300millionsquare feet,has however, currentlyonlyoneline, witha manufacturing lineshave beencompleted, (300 millionsquarefeetperline).Both design capacityof600millionsquarefeet manufacturing lineswithatotalannual The plantinPulaski,Virginiahastwo

CHRISTCHURCH AUCKLAND xsigdsg aaiy Numberof Existing designcapacity/ MISSION VIEJO year (mmsf) TACOMA RENO 3,390 WAXAHACHIE 300 397 50 116 FONTANA 5 4 TheUSpipebusiness,atPlantCity, 4 1 CLEBURNE

5 Employees

) Employees Florida, ceasedoperationsinMay2008. tons ratherthanmillionsquarefeet. Pipe andcolumncapacityismeasuredin 4 34 CHICAGO DALLAS PERU TAMPA PLANT CITY SUMMERVILLE PULASKI BLANDON 2,882 1,809 + Trading conditions + + + + + + Results USA FIBRE CEMENT + + FormoreinformationaboutUSAFibre Factorssuchashighinventorylevelsof Outlook + + + + Although housingaffordabilityimproved EBIT marginexcludingimpairmentsdecreased EBIT excludingimpairmentsdecreased 13% Gross profitdecreased12%andthegross Average netsalespriceincreased2%from Sales volumedecreased11%from2,148.0 Net salesdecreased9%fromUS$1,262.3 Net salesinAustraliandollarsincreased4% Net salesincreased19%fromUS$251.7 Repair andremodelling activitywasnotaffected Sales wereloweracrossalldivisionsandin Weaker housingactivityresultedinlower Housing constructionwereatnearrecordlows growing. collection ofproducts,whichcontinued ASIA PACIFICFIBRECEMENT heavily ondemandfornewhomes. standards andfallinghousepricesweighed weaker consumerconfidence,tighterlending during eachquarteroffiscalyear2008as housing marketcontinuedtodeteriorate as aresultoffurtherinterestratecuts,the 1.3 percentagepointsto27.4%. from US$362.4milliontoUS$313.6million. profit margindecreased1.3percentagepoints. per thousandsquarefeet. US$588 perthousandsquarefeettoUS$597 square feet. million squarefeetto1,916.6 million toUS$1,144.8million. average Australian dollar netsalesprice. million squarefeet,anda2%increase inthe from 390.8millionsquarefeetto398.2 due toa2%increaseinnetsalesvolumes million toUS$298.3million. Results Cement, seepages12–13. construction activityislikelyintheshort-term. weakness inthelevelofnewhousing lending standards,allsuggestthatfurther consumer sentiment,andtightermortgage market, weakereconomicconditionsand foreclosures placingmorepropertiesonthe new homesforsale,anincreasedrateof our interiorproductsbeingslightlylower. some weaknessinthissegmentledtosalesof to thesameextentasnewconstruction,but each keyregionwiththeexceptionofCanada. our exteriorproductsotherthanColorPlus sales volumesacrosstheentirerangeof foreclosures placedmorehomesforsale. levels ofnewhomesforsale,andasincreased as buildersattemptedtoreducehighinventory ®

+ Trading conditions + + + TheEuropeFibreCementbusinessincurred EuropeFibreCement Asaresultofthisdownturn,andtheoutlook Netsalesdecreasedcomparedtolastyear USAHardiePipe + + + Outlook Theincreaseinnetsaleswasdrivenby + + Residential constructionactivitywasslightly The EBITmarginwas1.2percentagepoints EBIT rose28%fromUS$39.4millionto Gross profitincreased24%duetofavourable Net salesdecreasedby11%,from Traditional productsinparticularare The short-termoutlookisforresidential Traditional productsinparticularremained Foreign currencyexchangerateswere OTHER Fibre Cement,seepages14–15. For moreinformationaboutAsiaPacific weaker inbothAustraliaandNewZealand. higher, at16.9%. US$50.3 million. volumes andahigheraveragenetsalesprice. currency exchangerates,increasedsales operating margins. as itcontinuedtobuildsalesandimprove significantly reducedEBITlossesfortheyear pages 27–38ofthisannualreport. in Management’sAnalysisofResultson fourth quarter.Moreinformationiscontained impairment chargeofUS$25.4millioninthe the businessinMay2008,resultingan for USAHardiePipethecompanyclosed construction activityinFlorida. from weakerresidentialandnon-residential due tomateriallylowersalesvolumeresulting US$28.9 milliontoUS$25.7million. Results competition inAustralia. expected toremainsubjectstrong the Philippines. Australia andweakerinNewZealand construction activitytobeweakeningin and favourableforeigncurrencymovements. New Zealand,ahigheraveragenetsalesprice in AustraliaandLinea™weatherboards growth insalesoftheScyon™productrange in AustraliaandNewZealandmainlydueto stronger primarydemandforfibrecement sales mix. continued togrowasaproportionofthe products, includingLinea™weatherboards, Australia. InNewZealand,differentiated subject tostrongpricecompetitionin favourable.

11 James Hardie Annual Report 2008 SUMMARY OF OPERATIONS 12 James Hardie Annual Report 2008 USA FIBRE CEMENT USA InteriorBackerboardMarket James HardieSalesMix Sales Mix James HardieTotal ProductRegional (Millions ofUSdollars) USA FibreCementEBIT USA FibreCementEBITMargin 04 05 06 Net SalesPrice(USdollars/msf) USA FibreCementAverage 04 05 06 07 08 04 05 06 07 08 07 08 USA Exterior SidingMarket 1 313.6 195.6 241.5 342.6 362.4 27.4 26.5 25.7 28.1 28.7 486 506 558 588 597 Other 55-65% James Hardie 35-45% New Construction 60-65% Repair andRemodel 35-40% Western Divisions Southern and 66% Northern Division 34% 2 Other 88% James Hardie 12% 1 USA FIBRE CEMENT 2008 2007 2006 2005 2004 Net sales US$m 1,144.8 1,262.3 1,218.4 939.2 738.6 EBIT1 US$m 313.6 362.4 342.6 241.5 195.6 Total identifiable assets US$m 835.8 893.0 826.0 670.1 554.9 Volumes (mmsf ) 1,916.6 2,148.0 2,182.8 1,855.1 1,519.9 Average net sales price (per msf ) US$ 597 588 558 506 486 EBIT Margin1 % 27.4 28.7 28.1 25.7 26.5 Number of employees 1,809 1,868 2,174 1,820 1,722

Our business + The repair and remodelling segment Steps taken towards Based on our net sales, we believe we are the accounts for around 35-40% of our sales achieving our strategy largest manufacturer of fibre cement products mix and we have identified significant During the year: and systems for internal and external building opportunity for growth here, and in the + we suspended production at the Blandon, construction applications in the United States. manufactured housing segment. Pennsylvania plant, in response to US Our fibre cement products are principally used + Our Northern Division accounts for housing market conditions, in October 2007; in the residential building industry, including approximately 34% of our sales. We are + we re-set the business in February 2008, in new residential construction (single and targeting growth in this Division through based on housing starts of 1 million per multi-family housing), in manufactured increased consumer awareness; field annum; further market deterioration led to housing (mobile and prefabricated homes) sales representatives; partner programs an additional re-set for housing starts of and in the repair and remodelling of homes. with builders; and sales of value-added, 800,000; When we started our siding business in the differentiated products. + we continued to increase sales of our US over a decade ago, we targeted states + In our Southern and Western Divisions we ColorPlus® collection of products our where the superior durability of our products are targeting growth opportunities in rural Artisan® Lap premium siding and Artisan™ offered considerable performance advantages markets and in the repair and remodelling Accent Trim were launched in Atlanta in over traditional wood and engineered wood segment, as well as targeting increased sales September 2007, and have been well- siding products. These states now form our of value-added, differentiated products. Southern and Western Divisions. In the last received by architects, developers and seven years, we have increased our marketing Interior products builders who work in the custom home segment; efforts in areas where vinyl is the dominant + Based on our knowledge, experience and siding material, because we believe these third-party data, we estimate that we have + we launched Artisan® Lap in regions of areas offer us significant growth opportunities. 35-45% of the US backerboard market. the Western and Southern Divisions; These areas make up our Northern Division. + Our net sales in this segment have achieved + we introduced HardieWrap™ weather We have ten manufacturing plants in the a compound annual growth rate of 17% barrier; and United States: two in Texas and one each for the fiscal years 2003-2008. We have a in California, Florida, Washington, Illinois, + technology advantage for floor applications, we continued to participate in trade and Pennsylvania3, South Carolina, Nevada and hold a leading position in the ¼” consumer events and publications to and Virginia. We also have a Research and backer market. increase primary demand for our products Development Centre at our California plant. by marketing directly to homeowners, + HardieBacker™ ½” backerboard continues architects and builders. Market position and opportunity to drive our market penetration for wall Exterior products applications. + Based on our knowledge, experience and Our strategy third-party data regarding our industry, we Our strategy in the United States continues estimate that, in fiscal year 2008, we sold to be to: approximately 12% of the estimated total 9.6 to 9.8 billion square foot US exterior siding + aggressively grow demand for our products market (all types of siding; excludes fascia, in targeted market segments; trim and soffit). + grow our overall market position while + We initially took market share from wood- defending our share in existing market based siding products, and continue to do segments; so; more recently, we have taken market + share from vinyl, which offers us a significant offer products with superior value to that of 1 growth opportunity. our competitors; and Excluding impairments. 2 + Siding usage reports from + We achieved a compound annual growth rate introduce differentiated products to reduce NAHB for calendar year 2007 of 13% in exterior product net sales for the direct price competition. will not be available until August and November 2008. five fiscal years 2003-2008. With the severe decline in US housing 3 Production at the Blandon, construction activity and the prospect of a + Our early focus on producing planks for new Pennsylvania, plant was further decline in the short-term, we have suspended in October 2007. construction has been expanded to an exterior changed our focus slightly, away from products portfolio that contains a full-wrap Note: All market and market growth initiatives, to those that will increase share fi gures are management exterior bundle (siding, trim and soffits). margins and build our EBIT performance. estimates and cannot be precisely measured. 13 James Hardie Annual Report 2008 14 James Hardie Annual Report 2008 ASIA PACIFIC FIBRE CEMENT (%) Asia Pacifi cEBITMargin (Millions ofUSdollars) Asia Pacifi cEBIT 04 05 06 04 05 06 07 08 07 08 16.9 50.3 37.6 46.8 41.7 39.4 17.1 19.8 17.2 15.7 ASIA PACIFIC FIBRE CEMENT 2008 2007 2006 2005 2004 Net sales US$m 298.3 251.7 241.8 236.1 219.8 EBIT US$m 50.3 39.4 41.7 46.8 37.6 Total identifiable assets US$m 218.3 199.3 170.4 181.4 175.9 Volumes (mmsf )* 398.2 390.8 368.3 376.9 362.1 Average net sales price (per msf )* A$ 862 842 872 846 862 EBIT Margin % 16.9 15.7 17.2 19.8 17.1 Number of employees 834 835 854 892 955

Our business Our strategy We manufacture a wide range of fibre cement Our strategy in Asia Pacific is consistent products in Australia, New Zealand and the with our strategy for the USA Fibre Cement Philippines and sell these throughout the Asia business. We aim to: Pacific region. + grow primary demand for our products; Our products are used in both residential and commercial building construction, as external + leverage our superior technology to offer exterior cladding, interior walls, ceilings, differentiated products and systems with floors, soffits and fences. superior value to those of our competitors; In Australia, we also manufacture fibre cement + promote a smarter way to build composite pipes for civil and commercial use, and fibre construction houses using our products; cement columns for decorative use. and We manufacture our internal and external fibre + vigorously defend our position in existing cement products at two plants in Australia, in market segments. New South Wales and in Queensland, and at Steps taken towards achieving plants in the Philippines and New Zealand. our strategy Our pipes and decorative columns are During the year: manufactured at a plant in Queensland. + in Australia, we increased sales and market We also have a Research and Development share as a result of the success of our Centre at our New South Wales plant. Scyon™ range of products, launched last Market position and opportunity fiscal year; We see growth opportunities in Australia, + sales of Scyon™ branded differentiated New Zealand and the Philippines where our products increased 150% compared to the products are used in framed construction previous fiscal year; that offers benefits over traditional masonry construction. + sales of Scyon™ wet area flooring, Scyon™ Fibre cement has a small share of a large trim, Axon™ cladding, Matrix™ cladding building materials market in Australia and and Scyon™ Linea™ weatherboards New Zealand, and we are implementing increased the proportion of differentiated strategies to increase demand for our products in the sales mix; products. + in New Zealand, continued strong growth We are facing increased competition in the of Linea™ weatherboards and Axon™ panel Philippines’ and Australian building boards drove market share growth; and markets, but are focussed on improving + we focussed on domestic construction our EBIT. and building our market share in new residential and commercial segments to grow sales volumes in the Philippines. 15 James Hardie Annual Report 2008 16 James Hardie Annual Report 2008 WORKPLACE SAFETY 1 2 TheLostWorkday CaseFrequency Assuming thatemployees work40 Frequency per200,000hoursworked Lost Workday CaseFrequencyRate Frequency per200,000hoursworked Recordable CaseFrequencyRate 04 05 06 04 05 06 07 08 07 08 work inayear. the numberofhours100people hours perweek,200,000is hours peryear. employees working200,000 time employeesbasedon 100 in lostworkdays,per100 full- recordable incidentsthat resulted that describesthenumberof Rate (LWDCFR) isacalculation 0.31 0.67 1.02 1.02 0.99 3.6 3.0 2.5 2.7 3.5 1 1 2

+ + + Throughoutfiscalyear2008,ourcorporate Threemanufacturinglines(orfacilities)out Asacompany,weachievedrecordablecase Havingalowincidentandseverityrate, Therecordablelostworkdaycaseseverity Aplant’srecordablecasefrequencyrate Wedefinearecordableincidentasany continuedtoworkwithourdesignengineers putinplaceprogramstoformallycapture implementedabettersystemofmeasuring How wemeasureworkplacesafety How weworkedtoimprovesafety fiscal year2008 Safety performancefor reviews attheearliest stages. or plantmodifications incorporatedEH&S to ensureanyproduction developments by differentplants;and and communicatebestpracticesdeveloped of thesafetyperformance; incidents toprovideamorerelevantmeasure improve oursafetyperformance.We: with thesupporttheyneededtofurther and refinetools,toprovideplantmanagers EH&S teamcontinuedtodeveloppeople, Five facilitiesachievedbothtargets. recordable caseseverityrateoflessthan20. of lessthan2;andtenfacilitiesachieveda facilities achievedarecordableincidentrate less than1andaseverityrateof0;three of 19achievedarecordableincidentrate frequency rateof3.6infiscalyear2008. Processes. overall Environmental,HealthandSafety James Hardiesustainsexcellenceinour responsibility aroundsafetyandassures teamwork, communicationandpersonal shows ouremployeesarepractising resulted indaysawayfromwork. illnesses per100full-timeemployeesthat the numberofrecordableinjuriesand rate foraplantiscalculationthatdescribes per week50weeksyear). employees (100working40hrs of recordableincidentsper100fulltime is acalculationthatdescribesthenumber for theemployeeasaresultoftreatment. may notleadtolostorrestrictedworkdays professional medicaltreatmentwhichmayor incident wheretheemployeereceives Inallofouroperations, EH&Smanagersand Infiscal year2009,ourfacilitiesinboththe + + TheAsiaPacificfacilitieshadanoverall Workplacesafetydeclinedslightlyatour + + + Fortheyear: ThetotalUSfacilities’recordablecase Infiscalyear2008,ourUSplantscontinued twootherfacilitieshadseverityrateswell onefacilityachievedarecordablecase twelvefacilitiesbeatatleastoneof thetarget threefacilitiesachievedthe“(lessthan) 2 onefacilityachievedayearwithnorecordable safety performance Asia PacificFibreCement USA FibreCementsafetyperformance Safety forthefuture and identifylessons thatcanbeapplied. in monthlysafetycalls toreviewsafetydata plant managerswill continuetoparticipate towards achievingour2and20target. US andAsiaPacificwillcontinuetowork below thetargetof20. consecutive year;and case severityratebelow20forthethird frequency ratebelow2andarecordable fiscal year2007.Fortheyear: compared to3.7and16.1respectivelyin a recordablecaseseverityrateof20.6, recordable casefrequencyrateof5.7and rate. frequency rateorrecordablecaseseverity one ormoreoftherecordablecase manufacturing lines(orfacilities)improving Asia Pacificplants,withjustoneofourfive recordable caseseverityrate. metrics ofrecordablecasefrequencyrateor rate, comparedtosevenlastyear;and frequency rateandrecordablecaseseverity and (lessthan)20”targetforrecordablecase managed thisintheprioryear; incidents, comparedtothreefacilitieswhich last year. respective ratesof2.8and57achieved severity rateof57,closelymatchedthe frequency rateof2.8,andrecordablecase or recordablecaseseverityrate. more oftherecordablecasefrequencyrate 14 manufacturingfacilitiesimprovingoneor their safetyimprovements,withnineofthe InAsiaPacificweareworkingtoreinvigorate + + + IntheUnitedStates: + + + + + atplantssubjecttoextremesummer wearefocussedonsafetyleadership,and wehaveimplementedanewsafetymetrics theAustralianfacilitiesareworkingtowards benchmarkingourselvesagainstanexternal formalisingourbenchmarkingpractices so continuingtoimplementanupdated EH&S increasingourfocusonhazardmanagement our safetyprogramby: illness. protective measurestopreventheatrelated employees understandtheissuesand and controlmeasurestoassureour processes, bestpractices,PPErequirements heat stressprogram,includingupdated temperatures, wehaveintroduceda employees intheplant;and safety evaluationsbetweenmanagersand have introducedSafetyTaginteractive our employees; progress inreducinghazardsandrisksto needs tobemadesafer;andmeasureour assess whatplantsystemsandequipment and analysetrendsthatindicateissues; leadership andseverityreduction;identify program toassessknowledge,behaviour, improving. reflect bestpracticesandarecontinuously management systemstoensurethese AS4801 accreditationfortheirEH&S operations; and best practicesthatcouldbeappliedtoour industrial companytoseeifthereareany plants; site andapplytheseacrosstheAsiaPacific we cantakethebestpracticesfromeach management system; and riskreduction;

17 James Hardie Annual Report 2008 18 James Hardie Annual Report 2008 DIFFERENTIATED PRODUCTS 1 Research anddevelopment expenditure and 2004,respectively. ended 31March2008,2007, 2006,2005, million andUS$3.5 fortheyears US$4.1 million,US$3.4 million,US$5.5 US GAAPintheamounts ofUS$0.1million, general andadministrativeexpenseunder expenses andamountsclassiﬁ edasselling, includes USGAAPresearchanddevelopment (Millions ofUSdollars) Expenditure Research andDevelopment 04 05 06 07 08 1 27.4 26.1 27.1 32.1 30.0 + InNorthAmerica,infiscalyear2008: WehaveResearchandDevelopment Infiscalyear2008,wespentUS$27.4 Thisyearweagainincreasedsalesof + WelaunchedArtisan Weincreasedsalesofourhigher-priced, work inthecustomhomesegment. architects, developersandbuilderswho has beenwell-receivedbyhomeowners, like aestheticsanddurablelowdensity respectively. Itscombinationoftimber- weatherboards andLinea™ Zealand whereitissoldasScyon™Linea™ already successfulinAustraliaandNew and WesternDivisions.Thisproductis generation” sidingproductinourSouthern Products than fiveyears. have workedforJamesHardielonger scientists haveadvanceddegreesand45% & ProcessDevelopment.Over50%ofour technicians inCoreResearchandProduct hundred scientists,engineersand California, whereweemployoverone Centres inSydney,AustraliaandFontana, activities. net sales–inresearchanddevelopment million –orapproximatelyin1.9%oftotal development. research andproduct,processmarket result ofoursignificantinvestmentsin processes weusetocreatethem,arethe manufacturing capacityandproprietary of theseproducts,andthecost-efficient core ofourgrowthstrategy.Thesuccess the differentiatedproductsthatareat differentiated ColorPlus of house. and productcombinationsontheirstyle Design Centrewheretheycantestcolour and aninteractiveon-lineJamesHardie offer ourcustomersachoiceof20colours continued substitutionforvinyl.Wenow performance anddurabilitywhichenable the housingmarket,duetosuperior products increased,despitethefallsin ® Lapsiding,a“next ® collectionof + InAsiaPacific,infiscalyear2008: + Thedifferentiatedproductswecreateby + Wesawincreasingenthusiasmin WeintroducedHardieWrap™weather Wealsosawcontinuedsalesgrowth for increased 150%onthepriorfiscalyear. edges andcorners.Scyon™productsales Scyon™ Axent™trim,afinishingtouchfor cladding, withasleekverticaldesign;and architectural design;Scyon™Axon™ cladding, contributingtocontemporary for interiorwetareas;Scyon™Matrix™ area flooring,athick,easy-to-useflooring weatherboards, Scyon™Secura™wet differentiated products-Scyon™Linea™ Australia forourScyon™brandedrangeof the elements. envelope tomaximiseprotectionagainst more advancedweather-resistantbuilding weather barrierprovidesacomplete, cement sidingproducts,theHardieWrap When usedinconjunctionwithourfibre allowing thehometodryoutandbreathe. prevent waterfromenteringthehome,while uses aproprietaryMicroTech™coatingto Carolina. HardieWrapweatherbarrier barrier inGeorgiaandNorthSouth their ownproductsorhomes. allow ourcustomers,inturn,todifferentiate re-investing inproductsandprocesses, Linea™ weatherboardsinNewZealand. Axon™ panelforexternalcladdingand

19 James Hardie Annual Report 2008 20 James Hardie Annual Report 2008 ENVIRONMENT + COMMUNITY Ourcurrentresearchprojectsinclude Werecognisethattheseresourcesarenot Theprimaryrawmaterialsusedinthe Weaimtooperateourfacilitiesinan Infiscalyear2008,wecontinuedto + + + + JamesHardierecognisesthatconserving Minimising environmentalimpacts energy-efficient buildings. make productsthatcanbeusedtocreate materials; and effectively useanyrecoveredorrecycled conserve resources; our operations; minimise theenvironmentalimpactsfrom technology toensurewe: effort andcapitaltoadvancingfibrecement We continuetodevoteconsiderabletime, Conservation ofresources energy moreefficiently. materials, andprocessestousewater greater useofrecycledorby-product and energy. emphasis ontheefficientuseofmaterials inexhaustible, however,andweplacegreat from aworldwidemarket;andwater. timber; sandfromvarioussources;cement wherever possible,fromplantationgrown abundant: cellulosefibrethatissourced, manufacture ofJamesHardie’sproductsare sustainable compliance. and implementthesetoensurefull efforts, weformulatecorrectivemeasures any gapsarenotedinourcompliance spirit ofregulatorystandards.Where that fullycomplieswiththeletterand environmentally-responsible manner regulatory standards. responsible mannerthatcompliedwith operate ourmanufacturingfacilitiesina success andviabilityofourbusiness. natural resourcesisvitaltothelong-term OurAustralianoperationsareregistered Cementisacontributortotheimpactof Finally,ourbuildingproductsareused Solidwastethatcannotbereusedinour JamesHardieispassionateabout Waste minimisation of 2008. outcomes oftheevaluationbyend undertaken toreportpubliclyonthe efficiency opportunitiesandhave working toidentifyandevaluateenergy Opportunities Act2006.Wearenow under theNationalEnergyEfficiency friendly alternatives. formulae tousemoreenvironmentally- technologies, weadaptourprocessesand and, asitadoptscleanerandmoreefficient monitors changesinthecementindustry manufacture. JamesHardieactively the energyefficiencyoftheirproducts’ manufacturers makeimprovementsto but itseffectisbeingreduced,ascement James Hardieproductsontheenvironment, Energy efficientbuildingsystems systems available. environmentally responsiblebuilding are amongthemostenergy-efficientand in lightweightconstructionsystemsthat cement suppliers. in theproductionofcementatpartnering locations, rejectedboardsarerecycled especially desirable.Forexample,atsome in applicationswhereitspropertiesare of inlandfills.Processwasteisalsoused operations canbecertifiedanddisposed process asrawmaterials. – isreintroducedintothemanufacturing scrap, fineparticlesandrejectmaterial possible, solidwaste–suchastrimmings, material use.Atalllocations,asmuch focussed oncontinuouslyimproving company-wide programtocreateaculture operations andwehaveintroduceda minimising wasteinourmanufacturing Ourcurrentproductshavebeenusedfor Whenincorporatedintoawallsystem, Duringfiscalyear2008,theAustralian IndividualJamesHardieplantssupport recycled, ordisposedofinlandfills. demolished, theproductscanbesafely using ourcurrentproductsareeventually cladding materials.Ifbuildingscreated problems ofmanyotherlightweight maintenance requirementanddurability building applicationsanddonotsufferthe many yearsinresidentialandcommercial impact ontheenvironment. to constructastructurethathaslower less energytotransportandcanbeused than otherbuildingproducts,sotheyuse construction systems.Theyarelighter embodied energythanmanyothertypical fibre cementbuildingproductshavelower Community involvement donations dollarfordollar. survey. Thecompanywillmatchall four charitiesselectedthroughanemployee through thepayrollsystemtoagroupof employees tomakeregulardonations workplace givingprogramtoencourage operation introducedtheHardieHelp variety ofcharitablefund-raisingprojects. employee teamsregularlyparticipateina local charitiesandorganisations

21 James Hardie Annual Report 2008 22 James Hardie Annual Report 2008 SENIOR LEADERSHIP TEAM ehrad ntdSae Australia UnitedStates Netherlands Louis Gries Robert Cox Russell Chenu Joel Rood Nigel Rigby Brian Holte Grant Gustafson Mark Fisher Peter WBaker 1 Messrs Chenuand Cox are Australia. Macquarie GraduateSchoolofManagement, University ofMelbourneandanMBAfrom He hasaBachelorofCommercefromthe Australian publicly-listedcompanies. and managementpositionswithanumberof finance executivewhohasheldsenior Mr Chenuisanexperiencedcorporateand at the2005AGM. company’s ManagingBoardbyCUFSholders CFO inFebruary2005.Hewaselectedtothe CFO inOctober2004andwasappointed Russell ChenujoinedJamesHardieasInterim Age 58 Managing Board Chief FinancialOfficer;member, Russell ChenuBCom,MBA (in alphabeticalorder)are: Netherlands-based teammembers (www.ir.jameshardie.com.au). Hardie’s InvestorRelationswebsite information isavailableonJames order) appearbelow.Additional of teammembers(inalphabetical finance andlegal.Briefbiographies human resources,investorrelations, production, manufacturing,sales, fibre cementresearchanddevelopment, Its memberscoverthekeyareasof development, andmanufacturing. global operations,researchand Team co-ordinatesthecompany’s James Hardie’sSeniorLeadership California. a JDfromtheUniversityofCalifornia, Berkeley, International StudiesinWashington,DC,and from theJohnHopkinsSchoolofAdvanced University inConnecticut,aMasterofArts Mr CoxhasaBachelorofArtsfromWesleyan and California. Bingham McCutchenLLP,atofficesinAsia years asapartneroftheinternationallawfirm five years.Hisexperiencealsoincludes10 Assistant SecretarywithPepsiCoInc.for Vice President,DeputyGeneralCounseland Before joiningJamesHardie,MrCoxwas 7 May2008. Director andasCompanySecretaryeffective company’s ManagingBoardasanExecutive Counsel inJanuary2008.Hejoinedthe Robert CoxjoinedJamesHardieasGeneral Age 54 member, ManagingBoard General Counsel&CompanySecretary; Robert CoxBA,MA,JD Managing Board atthe2008AGM. standing forre-election to the 1 1 Louis Gries BSc, MBA Mr Gustafson has a Bachelor of Arts from the Prior to Hilti, Mr Rood worked with MTS Chief Executive Officer; chairman, University of California at Santa Barbara, USA, Systems Corporation, where he developed their Managing Board; member, Joint Board and an MBA from the University of Chicago, successful seismic business in Asia. Age 54 USA. Mr Rood has a Bachelor of Science in Louis Gries joined James Hardie in February Brian Holte BS, MBA Civil Engineering from Princeton University, 1991 and held a number of roles with the Vice President - General Manager summa cum laude, and a Master of Science company leading to his appointment as Western Division in Petroleum Engineering from the University Executive Vice President Operations in Age 41 of Texas in Austin. In addition, he attended January 2003, responsible for operations, Stanford University as a Sloan Fellow, earning Brian Holte joined James Hardie as Vice sales and marketing in James Hardie’s a Master of Science in Management. President - General Manager Western Division businesses in the Americas, Asia Pacific in March 2007. Prior to joining James Hardie, The Australian-based team member is: and Europe. Mr Holte spent 17 years with Rockwell Peter W Baker BSc, MSc, MBA He was appointed Interim CEO in October Automation, a global leader in power, control, Executive Vice President - Asia Pacific 2004 and CEO in February 2005. Mr Gries and information solutions for manufacturing Age 57 was elected to the company’s Managing and infrastructure business sectors. During Board by CUFS holders at the 2005 AGM. his time at Rockwell Automation, Mr Holte Peter Baker joined James Hardie in October gained extensive experience in sales, industry 2004 as General Manager External Affairs, He has a Bachelor of Science in Mathematics marketing, business development, sales was made Executive Vice President Australia from the University of Illinois, USA and an leadership and regional management. in September 2005 and promoted to Executive MBA from California State University in Vice President - Asia Pacific in February 2008. Long Beach, California USA. He has a Bachelor of Science Degree in Mr Baker has been Chairman of the Asbestos Industrial Technology from the University of US-based team members Injuries Compensation Fund Limited (Trustee Wisconsin, Stout, USA and an MBA from the (in alphabetical order) are: of AICF) since January 2006. University of Southern California, USA. Mark Fisher BSc, MBA He was involved in various aspects of the Nigel Rigby Vice President - Research & Development resolution of James Hardie’s asbestos Vice President - General Manager Age 37 compensation matters and in his current Northern Division role oversees James Hardie’s operations in Mark Fisher joined James Hardie in 1993 as Age 41 Australia, New Zealand and the Philippines. a Production Engineer and has held a variety Nigel Rigby joined James Hardie in 1998 of production, sales and management roles Mr Baker is an experienced corporate executive as a Planning Manager for our New Zealand with the company. He was appointed Vice who has held a number of senior positions business and has held a number of sales, President - Specialty Products in November in Australian public and private companies, marketing and product and business 2004, then Vice President Research & including the MIA Group, the Tenix Group development roles with the company. In Development in December 2005. In February and TNT Ltd. November 2004, Mr Rigby was appointed 2008, his role was expanded to cover Vice President - Emerging Markets, and in He has a Bachelor of Science with first class Engineering & Process Development. 2006 he was named Vice President - honours from the University of Leicester, UK; Before joining James Hardie, Mr Fisher General Manager Northern Division. a Master of Science in Operational Research worked in engineering for Chevron with distinction from the London School Before joining James Hardie, Mr Rigby held Corporation. He has a Bachelor of Science of Economics, UK; and an MBA from the various management positions at Fletcher in Mechanical Engineering and an MBA from University of Chicago, USA. Challenge, a New Zealand-based company the University of Southern California, USA. involved in energy, pulp and paper, forestry Grant Gustafson BA, MBA and building materials. Vice President - Interiors and Joel Rood BSCE, MSPE, MSM Business Development Vice President - General Manager Age 45 Southern Division Grant Gustafson joined James Hardie as Age 50 Vice President of Interiors and Business Joel Rood joined James Hardie as Vice Development in April 2006. During fiscal President - General Manager Southern year 2008, his role was expanded to cover Division in February 2007 and in February Marketing, Europe and IT. 2008 his role was expanded to cover HR. Before joining James Hardie, Mr Gustafson He has over 20 years of sales, marketing and held various consulting management and general management experience, the last nine consulting positions with Bain & Company with Hilti Corporation as Sales Vice President and Arthur D Little, and senior management in the US, General Manager of Australia, and positions in the commercial building products finally as Managing Director of the United sector with American Buildings Company and Kingdom and Ireland. Mr Rood is based in Varco-Pruden. He has lived and worked in the Dallas Texas. US, Australia and Asia. 23 James Hardie Annual Report 2008 24 James Hardie Annual Report 2008 SUPERVISORY BOARD DIRECTORS David Harrison Michael Hammes Don DeFosset David RAndrews Brian Anderson Catherine Walter Rudy vanderMeer Donald McGauchie James Loudon Re-election due: States. (since January2006);residentoftheUnited Other: Inc. Committee (since2003)forW.W.Grainger, Director (since1999)andChairoftheAudit Homes Corporation(sinceSeptember2005); Castle &Co.(sinceJuly2005);Pulte and ChairoftheAuditCommitteeA.M. past threeormoreyears: Directorships oflistedcompaniesinthe Officer ofOfficeMax,Inc(2004-2005). Executive VicePresidentandChiefFinancial Officer (1997-2004)and,morerecently,as Senior VicePresidentandChiefFinancial years asCorporateVicePresidentofFinance, at BaxterInternational,Inc,includingseven variety ofseniorpositions,withthirteenyears executive andboardlevels.Hehashelda financial andbusinessexperienceatboth Experience: and ChairmanoftheAuditCommittee. member oftheJointandSupervisoryBoards held inAmsterdamFebruary2007.Heisa elected attheExtraordinaryGeneralMeeting Hardie on14December2006andwasre- independent Non-ExecutiveDirectorofJames Brian Andersonwasappointedasan Age 57 Brian AndersonBS,MBA,CPA website (www.ir.jameshardie.com.au). James Hardie’sInvestorRelations Additional detailiscontainedon Board directorsappearbelow. Brief biographiesoftheSupervisory Hardie’s growth. experience thatassistswithJames also bringsvaluableinternational law andaccounting.Eachdirector in generalmanagement,finance, directors havewidespreadexperience James Hardie’sSupervisoryBoard Mr Andrewsalsoserved astheLegalAdviser law firmMcCutchen, Doyle,Brown&Enersen. lawyer. HewasChairman oftheinternational decades ofexperienceasaprivatepractice the privateandpublicsectors.Hehas three legal andmanagementexperienceacross Experience: Committee. a memberoftheNominatingandGovernance Chairman oftheRemunerationCommitteeand member oftheJointandSupervisoryBoards, with effectfrom1September2007.Heisa an independentNon-ExecutiveDirector David AndrewsjoinedJamesHardieas Age 66 David RAndrewsAB,JD DirectorofTheNemoursFoundation MrAndersonhasextensive MrAndrewshasextensive 2009AGM

Current -Director (General Counsel) to the US Department Michael Hammes BS, MBA years at Pentair, Inc., as Executive Vice of State from 1997-2000. His most recent Age 66 President and Chief Financial Officer. His executive role was as Secretary, General Michael Hammes was appointed as an experience also includes roles as Vice Counsel & Senior Vice President Government independent Non-Executive Director of James President and Chief Financial Officer at Scotts, Affairs, PepsiCo Inc., from 2002-2005. Hardie at the Extraordinary General Meeting Inc. and Coltec Industries, Inc. Directorships of listed companies in the past held in Amsterdam in February 2007. He Directorships of listed companies in the past three or more years: Current - Pacific Gas was appointed Chairman of the Joint and three or more years: Current - Director and and Electric Corporation (since 2000), Union Supervisory Boards in January 2008. Chairman of the Audit Committee for National Bank of California (since 2000), and James Experience: Mr Hammes has extensive Oilwell Varco (since 2003); Director and Campbell Company LLC (since 2007). commercial experience at the senior executive member of the Audit & Finance Committee for Navistar International (since 2007). Other: Mr Andrews is a member of the level. He has held a number of executive Permanent Court of Arbitration in The Hague positions in the medical products, hardware Other: Member of Ohio University MBA and a Member of the Council on Foreign and home improvement, and automobile Advisory Board (since 2003) and of the Iredell Relations; resident of the United States. sectors, including CEO and Chairman of County / Twin Cities / Charlotte Salvation Sunrise Medical, Inc (2000-2007) and Army Advisory Board (since 1995); resident Re-election due: 2008 AGM Chairman and CEO of Guide Corporation of the United States. Don DeFosset BS, MBA (1998-2000). Re-election due: 2008 AGM Age 59 Directorships of listed companies in the past James Loudon BA (Cantab), MBA Don DeFosset was appointed as an three or more years: Current - Director of Age 65 independent Non-Executive Director of James Sunrise Medical (since 1998); Director of Hardie on 14 December 2006 and was re- Navistar International Corporation (since James Loudon was elected as an independent elected at the Extraordinary General Meeting 1996), Chairman of the Navistar Nominating Non-Executive Director of James Hardie held in Amsterdam in February 2007. He was and Governance Committee, and a Member in July 2002 after serving as a consultant Chairman of the Joint and Supervisory Boards of the Navistar Compensation, Finance and to the Board. He is a member of the Joint between April 2007 and January 2008. Executive Committees. and Supervisory Boards and a member of the Audit Committee and Remuneration Experience: Mr DeFosset has broad executive Other: Previous Member of the Board of Committee. experience in the homebuilding and mortgage, Directors of Johns Manville Corporation; resources, automotive components, transport Member of the Board of Visitors, Georgetown Experience: Mr Loudon has held management and logistics and industrial sectors. Previous University’s School of Business; resident of positions in finance and investment roles include Chairman, President and CEO of the United States. banking and senior roles in the transport Walter Industries, Inc (2000-2005), COO and and construction industries. He was Group Re-election due: 2009 AGM Board Member of Dura Automotive Systems, Finance Director of Blue Circle Industries Plc, Inc (1999-2000). David Harrison BA, MBA, CMA one of the world’s largest cement producers, Age 61 from 1987 to 2001. Directorships of listed companies in the past three or more years: Current - Director David Harrison was appointed as an Directorships of listed companies in the of EnPro Industries Inc (since June 2008), independent Non-Executive Director of James past three or more years: Current - Deputy Director and Member of the Audit Committee Hardie effective 19 May 2008. He is a member Chairman of Caledonia Investments Plc and a of Regions Financial Corporation (since of the Joint and Supervisory Boards and the Director since 1995; Former - Non-Executive October 2005), Director, Member of the Remuneration Committee. Director of Lafarge Malayan Cement Bhd Compensation Committee and Chair of the Experience: Mr Harrison is an experienced (1989-2004). Audit Committee of Terex Corporation (since company director and has a distinguished Other: Governor of the University of 1999). finance background, having served with Greenwich and of several charitable Other: resident of the United States. special expertise in corporate finance roles, organisations; resident of the UK. international operations and information Re-election due: Mr DeFosset has resigned Re-election due: It is Mr Loudon’s current technology during 22 years with General from the Supervisory and Joint Boards intention to resign immediately after the Electric Co. effective 31 August 2008. 2008 AGM. He is Managing Partner of the US financial investor, HCI Inc. and previously spent ten continued over 25 James Hardie Annual Report 2008 26 James Hardie Annual Report 2008 SUPERVISORY BOARD DIRECTORS (2006-2008). of theSupervisory Board ofHagemeyerN.V. Norit InternationalB.V.(2005-2007); Member Former: ChairmanoftheSupervisory Boardof Supervisory BoardofImtechN.V.(since 2005); three ormoreyears: Directorships oflistedcompaniesinthe past Executive Board(1993-2005). (1993-2000) andmemberofthefive - Coatings(2000-2005),CEOChemicals number ofseniorpositionsincludingCEO association withAkzoNobelN.V.,hehelda construction sector.Duringhis32year of globalbusinessesandthebuilding executive, withconsiderableknowledge Experience: Governance Committee. Boards andamemberoftheNominating is amemberoftheJointandSupervisory held inAmsterdamFebruary2007.He Hardie attheExtraordinaryGeneralMeeting independent Non-ExecutiveDirectorofJames Rudy vanderMeerwasappointedasan Age 63 Rudy vanderMeerM.Ch.Eng Re-election due: 2003; residentofAustralia. society throughagricultureandbusinessin the CentenaryMedalforservicetoAustralian Finance Corporation(2003-2004);awarded Federation (1994-1998);ChairmanofRural Australia; PresidentoftheNationalFarmers Other: (1999-2002). (2000 -2005);DirectorofGraincorpLimited Director ofNationalFoodsLimited Ridley CorporationLimited(1998-2004); Limited (1999-2002);DeputyChairmanof Former -ChairmanofWoolstockAustralia Director ofNufarmLimited(since2003); Telstra CorporationLimited(since2004); three ormoreyears: Directorships oflistedcompaniesinthepast positions togovernment. previously heldseveralhigh-leveladvisory extensive publicpolicyexperience,having telecommunication sectors.Healsohas processing, commoditytrading,financeand commercial experiencewithinthefood Experience: and amemberoftheRemunerationCommittee. of theNominatingandGovernanceCommittee the JointandSupervisoryBoards,Chairman Chairman inApril2007.Heisamemberof Chairman inFebruary2007,andDeputy August 2003andwasappointedActingDeputy an independentNon-ExecutiveDirectorin Donald McGauchiejoinedJamesHardieas Age 58 Donald McGauchieAO DirectorofTheReserveBank MrvanderMeerisanexperienced Mr McGauchiehaswide 2009AGM

Current Current -Chairmanofthe - Chairmanof Re-election due: 1996); residentofAustralia. Commissioner, CityofMelbourne(1994- 2003), VodafonePacificLimited(1998-2001); Queensland InvestmentCorporation(2000- National AustraliaBank(1995-2004), Council. Former:Non-ExecutiveDirector, Research; Member,FinancialReporting and Walter&ElizaHallInstituteofMedical School, MelbourneInternationalArtsFestival Non-Executive Director,MelbourneBusiness Synchrotron (2007);ChairmanEquipsuper; Board (2007);Chairman,Australian Other: (1996-2006). Director ofAustralianStockExchangeLimited Limited (since1998).Former:Non-Executive Company Limited(since2002)andOrica Director ofAustralianFoundationInvestment Re-election due: der MeerisaresidentofTheNetherlands. Beheer NederlandB.V.(since2006).Mrvan (since 2004);ChairmanoftheBoardEnergie Verzekeringen (Insurance)NederlandN.V. ING BankNederlandN.V.and Other: LL.M, MBA Catherine WalterAM,LL.B.(Hons), JHI NV. appears onpage23,formtheJointBoardof Executive Officer,LouisGries,whosebiography The non-executivedirectorsandourChief JOINT BOARD three ormoreyears: Directorships oflistedcompaniesinthepast government sectors. and inthearts,education,medicallocal financial servicesandinsuranceindustries building supplies,telecommunications, spanning theresources,consumerproducts, more than15yearsforcompaniesandentities has servedasaNon-ExecutiveDirectorfor the MelbourneofficeofClaytonUtz.MrsWalter years includingatermasManagingPartnerof levels. Shepractisedcommerciallawfor20 and businessexperienceatexecutiveboard Experience: Committee. Supervisory BoardsandamemberoftheAudit July 2007.SheisamemberoftheJointand independent Non-ExecutiveDirectoron1 Catherine WalterjoinedJamesHardieasan Age 55

MemberoftheSupervisoryBoard Current: MrsWalterhaswideranginglegal Director,PaymentSystems 2010AGM 2009AGM

Current: Non-Executive 11 hr/US Information Share/CUFS Statistics Group 121 SelectedQuarterlyFinancialData Disclosures 120 Remuneration 119 118 OTHER INFORMATION RelatedPartyTransactions 21 AccumulatedOtherComprehensiveIncome(Loss) 117 20 OperatingSegmentInformationandConcentrationsofRisk 116 19 Instruments Financial 114 18 ShareRepurchaseProgram 113 17 Compensation Stock-Based 113 16 AmendedATO 109 Assessment 15 Taxes Income 109 14 CommitmentsandContingencies 105 13 104 Asbestos 12 99 Product 11 Warranties Non-CurrentOtherLiabilities 98 10 ShortandLong-Term Debt 9 98 AccountsPayableandAccruedLiabilities 8 97 Property, PlantandEquipment 7 97 96 Inventories 6 AccountsandNotesReceivable 5 95 RestrictedCashandEquivalents 4 95 CashandEquivalents 3 95 ofSignificantAccountingPolicies Summary 2 95 BackgroundandBasisofPresentation 1 89 89 NOTES TOCONSOLIDATED FINANCIALSTATEMENTS ConsolidatedStatementsofChangesinShareholders’Equity Consolidated StatementsofCashFlows 88 Consolidated StatementsofOperations 86 Consolidated BalanceSheets 84 83 CONSOLIDATED FINANCIALSTATEMENTS ReportofIndependentRegisteredPublicAccountingFirm CorporateGovernancePrinciples 82 Remuneration 70 Report Directors’ Report Management’s 46 DiscussionandAnalysis 42 28 CONTENTS

27 James Hardie Annual Report 2008 FINANCIAL STATEMENTS FINANCIAL STATEMENTS 28 James Hardie Annual Report 2008 FINANCIAL STATEMENTS over competingbuildingproductsand systems. combination ofdistinctiveperformance, designandcostadvantages applications, itsfibrecementproducts andsystemsprovidea tile underlayments.JamesHardiebelieves thatincertainconstruction and soffitlining,internallinings,facades, fencing,pipesandfloor surface finishesforarangeofapplications,includingexternalsiding types offibrecementproductswithavarietypatternedprofilesand buildings andgymnasiums).Thecompanymanufacturesnumerous libraries, museums,dormitories,hospitals,detentionfacilities,religious applications (stores,warehouses,offices,hotels,motels,schools, repair andremodellingavarietyofcommercialindustrial housing), manufacturedhousing(mobileandpre-fabricatedhomes), including newresidentialconstruction(singleandmulti-family James Hardie’s fibrecementproductsareusedinanumberofmarkets, Hardie believesthatthesetechnologiesgiveitacompetitiveadvantage. process technologiesthatitpatentsorholdsastradesecrets.James expenditure, JamesHardiedevelopskeyproductandproduction Europe andCanada.Throughsignificantresearchdevelopment include theUnitedStates,Australia,NewZealand,Philippines, and thePhilippines.Thecompany’s geographicmarkets currentprimary construction applicationsintheUnitedStates,Australia,NewZealand, of fibrecementproductsandsystemsforinternalexternalbuilding Based onnetsales,JamesHardiebelievesitisthelargestmanufacturer The CompanyandtheBuildingProductMarkets annual report. 12 oftheconsolidatedfinancialstatementsstartingonpage99this and otherrelatedmatterscanbefoundinthisdiscussionNote respectively. Informationregardingasbestos-relatedmattersandtheSCI to theSCIandotherrelatedmattersduringfiscalyears20072006, company alsoincurredUS$13.6millionandUS$17.4 million related for estimatedfutureasbestos-relatedcompensationpayments.The was originallyrecordedinfiscalyear2006forUS$715.6 million expenses ofUS$4.0millionandnil,respectively. Theasbestosprovision charges ofUS$71.0millionandnil,respectively;AICFSG&A US$240.1 millionandUS$405.5million,respectively;impairment substantially andadverselyaffectedbyasbestosadjustmentsof James Hardie’s pre-taxresultsforfiscalyears2008and2007were whole. as a and its results affectthefinancialconditionandofoperations segment toprovideabetterunderstandingofhoweach information abouttheconsolidatedfinancialresultsofeachbusiness how thesepoliciesaffectitsconsolidatedfinancialstatements,and information aboutJamesHardie’s criticalaccountingpoliciesand condition andresultsofoperationsinfutureperiods.Itincludes are anticipatedtohaveamaterialeffectonthecompany’s financial reasonsforthosechangesandthefactorstrendswhich primary in thoseconsolidatedfinancialstatementsfromyeartoyear, andthe consolidated financialstatements,thechangesinsignificantitems in understandingJamesHardie’s (thecompany’s) 31March2008 This discussionisintendedtoprovideinformationthatwillassist OVERVIEW James HardieIndustriesNVandSubsidiaries AND ANALYSIS DISCUSSION MANAGEMENT’S Hardie Pipeplant. in theOthersegmentrelatedtoclosureofitsPlantCity, Florida, utilised toproducematerialsforitsproducts;andUS$25.4million at itsBlandon,Pennsylvania,plantandbuildingsmachinery the USAFibreCementsegmentrelatedtosuspensionofproduction The companyrecordedassetimpairmentchargesofUS$45.6millionin continued togrowsteadily, albeitfromalowbase. to makegoodprogress.SalesintheEuropeFibreCementbusiness The company’s emergingbusinessofEuropeFibreCementcontinued average Australiandollarnetsalesprice. currencies comparedtotheUSdollar, increasedvolumeandahigher due tofavourablecurrencyexchangeratesoftheAsiaPacificbusiness’ results. Netsalesincreasedinthecompany’s AsiaPacificbusinesses and itsEBITwasthesecondlargestcontributortototalcompany Asia Pacificnetsalescontributedapproximately20%oftotalsales, administrative expenses. costs, whichwerepartiallyoffsetbylowerselling,generaland 2007 primarilyduetodecreasedsalesvolumeandhigherfreight EBIT fortheUSAFibreCementsegmentdecreasedfromfiscalyear volume, partiallyoffsetbyahigheraveragenetsalesprice. the USAFibreCementbusinessdecreasedduetoareductioninsales contributortothetotalcompanyresults.Netsalesfor was theprimary net salescontributedapproximately78%oftotalsales,anditsEBIT the USresidentialexteriorsindustry. Duringtheyear, USAFibreCement been oneofthefastestgrowingsegments(intermsmarketgrowth) Builder PracticesReports,forthepastthreeyears,fibrecementhas The company’s largestmarketisNorthAmerica.BasedontheNAHB’s continuing operationsdecreasedtoUS$71.6million. compared toanEBITlossofUS$86.6million.Operatingfrom asbestos adjustmentsresultedinanEBITlossofUS$36.6million Total netsalesdecreased5%toUS$1,468.8million.However, the Fiscal Year2008KeyResults construction activity. unfavourable duringfiscalyear2008,resultinginweakerresidential consumer confidencelevels.Anumberofthesefactorsweregenerally repair andrenovationspending,grossdomesticproductgrowth the averageageandsizeofhousinginventory, consumerhome homes, inflationrates,unemploymentlevels,existinghomesales, to purchaseanewhomeormakeimprovementstheirexisting mortgage interestrates,theavailabilityoffinancingtohomeowners These levelsofactivityareaffectedbymanyfactors,includinghome construction activityandtherepairrenovationofexistinghomes. markets. Residentialconstructionlevelsfluctuatebasedonnewhome The company’s productsareprimarilysoldintheresidentialhousing Europe FibreCementbusiness. Pipe business,partiallyoffsetbyimprovedsalesperformanceinthe US$25.7 million duetoreducedsalesperformanceintheUSAHardie Other netsalesdecreasedby11%fromUS$28.9millionto sales price. exchange rates,increasedsalesvolumesandahigheraveragenet US$251.7 milliontoUS$298.3duefavourablecurrency Net salesfromAsiaPacificFibreCementincreased19% volume, partiallyoffsetbyahigheraveragenetsalesprice. US$1,262.3 million toUS$1,144.8duereduced sales Net salesfromUSAFibreCementdecreased9% US$1,468.8 million. Total netsalesdecreased5%fromUS$1,542.9millionto TOTAL NETSALES Net operating(loss)profit before cumulativeeffectofchangeinaccountingprinciple Operating (loss)profitfromcontinuingoperations Income tax(expense)benefit Operating lossfromcontinuingoperationsbeforeincometaxes Net interestincome(expense) EBIT Asbestos adjustments Impairment charges andotherrelatedexpenses Special CommissionofInquiry Research anddevelopmentexpenses Selling, generalandadministrativeexpenses Gross profit Cost ofgoodssold Total netsales Other Asia PacificFibreCement USA FibreCement Net sales (Millions ofUSdollars) All results are for continuing operations unless otherwise stated.SeeDefinitionsstartingonpage39ofthisannualreport. All resultsareforcontinuingoperationsunlessotherwise Asia PacificFibreCement USA FibreCement Average netsales priceperunit(permsf) Asia PacificFibreCement USA FibreCement Volume (mmsf) S 597 US$ on the market. on the for sale,andasincreasedforeclosuresplacedmoreexistinghomes levelsofnewhomes builders againattemptedtoreducehighinventory Housing constructionstartsfortheyearwereatnearrecordlowsas and fallinghousingpricesweighedheavilyondemandfornewhomes. the yearasweakerconsumerconfidence,tighterlendingstandards interest rate cuts, thehousingmarket continuedtodeteriorateduring Despite improvedhousingaffordabilityasaresultoffurther in theproductmix. US$588 permsftoUS$597duepriceincreasesandashift the company’s products.Theaveragenetsalespriceincreased2%from activity anddeterioratingeconomicconditionsledtoweakerdemandfor 2,148.0 mmsfto1,916.6mmsf,asthedeclineinhousingconstruction a higheraveragenetsalesprice.Salesvolumedecreased11%from US$1,144.8 million duetodecreasedsalesvolume,partially offsetby Net salesdecreased9%fromUS$1,262.3millionto USA FIBRECEMENT $ 862 A$ $ 1,144.8 $ (71.6) $ (71.6) 1,468.8 1,916.6 (240.1) (228.2) (938.8) 530.0 298.3 398.2 (36.1) (35.5) (36.6) (71.0) (27.3) 2008 25.7 1.1 – (13.6) – 2007 % Change 1,542.9 (5) $ 1,262.3 (9) (6.5) – 573.0 (8) 28.9 251.7 (11) 19 S 8 2 US$ 588 $ 82 2 A$ 842 2,148.0 (11) 390.8 2 $ – 151.7 108 – 150.8 $ 243.9 (93.1) – (86.6) 62 (405.5) – 58 41 (25.9) – (214.6) (5) (6) (969.9) 3

29 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 30 James Hardie Annual Report 2008 FINANCIAL STATEMENTS was duetotheshiftinAustraliaandNewZealandsalesmix. proportion ofthesalesmix.Theincreaseinaveragenetprice products, includingLinea™weatherboardsalsocontinuedtogrowasa subject tostrongpricecompetition.InNewZealand,differentiated branded productsincreased150%.Non-differentiatedremain grow andincreasedasaproportionofthesalesmix.SalesScyon™ Australia, salesofScyon™brandeddifferentiatedproductscontinuedto average netsalespriceandfavourableforeigncurrencymovements.In range inAustraliaandLinea™weatherboardsNewZealand,ahigher New ZealandmainlyduetogrowthinsalesoftheScyon™product demandforfibrecementinAustraliaand There wasastrongerprimary sales price. sales volumeanda2%increaseintheaverageAustraliandollarnet In Australiandollars,netsalesincreased4%duetoa2%increasein US dollaraccountedfor15%oftheincreaseinnetsalesdollars. exchange ratesoftheAsiaPacificbusiness’currenciescomparedto in salesvolumesfrom390.8mmsfto398.2mmsf.Favourablecurrency due toa17%increaseintheaveragenetsalespriceand2% Net salesincreased19%fromUS$251.7milliontoUS$298.3 ASIA PACIFIC FIBRECEMENT Artisan James HardieIndustriesNVandSubsidiaries AND ANALYSIS DISCUSSION MANAGEMENT’S construction activity. partly offsettheunfavourableimpactofsignificantlyweakerhousing categories andanincreaseintheaveragenetsalespricehelpedto For theyear, marketpenetrationintheinteriorandexteriorproduct for keygrowthinitiatives. company believesthatthisshiftinfocuswillnotresultfundingcuts business hasshifteditsfocusfornextyeartoincreasemargins.The income linerelativetootherparticipantsinthehousingsector, the Although thebusinessiscontinuingtoperformwellatoperating of theyearbeinghigherthanexpected. levelsforthebusinessatend did notoccurandthisledtoinventory in demandthatwasexpectedduringthelatterpartoffourthquarter construction activitytotheextentexpected.Theusualseasonalpick-up the businessdidnotbufferimpactofdownturninhousing The overallrateofmarketpenetrationslowedduringtheyearand company’s interiorproductsbeingslightlylower. weakness inrepairandremodellingactivityhasledtosalesofthe as thenewconstructionsegmentofhousingmarket,howeversome Repair andremodellingactivityhasnotbeenaffectedtothesameextent and SouthernDivisions. market. Artisan developers andbuilderswhoworkinthecustomhomesegmentof Atlanta lastSeptember, iscontinuingtobewell-receivedbyarchitects, ® Lap,thebusiness’newpremiumexteriorproductlaunchedin ® LaphasnowbeenlaunchedinregionsoftheWestern increase. Thegrossprofitmarginincreased1.4percentagepoints. whichaccountedfor2%ofthe price andaninsuranceclaimrecovery 10% duetoincreasedsalesvolumes,ahigheraveragenet remaining 10%increase.InAustraliandollars,grossprofitincreased the underlyingAustraliandollarbusinessresultsaccountedfor compared totheUSdollaraccountedfor14%ofthisincreasewhile currency exchangeratesoftheAsiaPacificbusiness’currencies Asia PacificFibreCementgrossprofitincreased24%.Favourable decreased 1.3percentagepoints. offset byahigheraveragenetsalesprice.Thegrossprofitmargin volumes, higherfreightcostsandaverageunitcosts,partially USA FibreCementgrossprofitdecreased12%duetolowersales 37.1% to36.1%. The gross profitmargindecreased1.0percentagepointfrom Gross profitdecreased8%fromUS$573.0toUS$530.0million. GROSS PROFIT Net salescontinuedtogrowsteadily. Europe FibreCement the USpipesbusiness. On 22May2008,thecompanyannouncedplanstoceaseproductionin weaker residentialandnon-residentialconstructionactivityinFlorida. Net salesdecreasedduetomateriallylowervolumeresultingfrom USA HardiePipe cement operationsinEurope. Other salesincludeofHardie OTHER of US$4.0million. include non-claimshandlingrelatedoperatingexpensesoftheAICF expense increased1.6percentagepointsto15.5%.SG&Aexpenses Fibre CementandOthersegments.Asapercentageofsales,SG&A were partiallyoffsetbyimprovedSG&AperformanceoftheUSA business’ currenciescomparedtotheUSdollar. These increases impact oftheunfavourablecurrencyexchangeratesAsiaPacific non-claims handlingrelatedoperatingexpensesoftheAICFand to non-USactivities,costsassociatedwiththeASICproceedings, US$228.2 million, primarilyduetohigherwarrantyprovisions relating SG&A expensesincreased6%fromUS$214.6millionto (SG&A) EXPENSES SELLING, GENERALANDADMINISTRATIVE ® PipeintheUnitedStatesandfibre administrative expensesintheperiodwhichtheywereincurred. and havebeenincludedincostofgoodssoldselling,general costs arenotincludedintheimpairmentchargeofUS$32.4million company hasincurredUS$1.4millionofclosurecosts.These Since thedateofannouncementthrough31March2008, future cashflows.Theseassetsarebeingheldforusebythecompany. on valuationmethodsincludingquotedmarketpricesanddiscounted and machinery, whichwerereducedtotheirestimatedfairvaluebased USA FibreCementsegment.Theimpairedassetsincludebuildings The companyrecordedanassetimpairmentofUS$32.4millioninthe production atitsBlandon,PennsylvaniaplantintheUnitedStates. On 31October2007,thecompanyannouncedplanstosuspend reviews, impairmentchargesofUS$71.0millionhavebeen taken. valueofcertainlong-livedassets.As review thecarrying a result ofthese The downturninUSconstructionactivityhaspromptedthecompany to IMPAIRMENT CHARGES 28% loweratUS$9.3million. included inthebusinessunitsegmentresults.Intotal,thesecostswere costs associatedwithcommercialisationprojectsinbusinessunitsare were 38%higheratUS$18.0million.Otherresearchanddevelopment rather thanbeingattributedtoindividualbusinessunits.Thesecosts These costsarerecordedintheResearchandDevelopmentsegment “core” researchprojectsthataredesignedtobenefitallbusinessunits. Research anddevelopmentexpensesincludecostsassociatedwith RESEARCH ANDDEVELOPMENTEXPENSES statements startingonpage104ofthisannualreport. For moreinformation,seeNote13totheconsolidatedfinancial actual amountorrangeofamountsisnotestimable. believes that,whileincurringsuchamountsisreasonablypossible,the addition tothedefensecosts.However, atthisstage,thecompany that thecompanycouldbecomeresponsibleforotheramountsin of theASICproceedingsinlongertermandthereisapossibility There remainsconsiderableuncertaintysurroundingthelikelyoutcome 2001toJune2003. subsidiaries duringtheperiodFebruary Corporations Actconnectedwiththeaffairsofcompanyandcertain contraventions ofcertainprovisionstheCorporationsLawand/or of theJamesHardieGroup.Thecivilproceedingsconcernalleged andtenthen-presentorformerofficersdirectors former subsidiary 2007,ASICcommencedcivilproceedingsagainstJHI In February NV, a ASIC Proceedings Asbestos adjustments Other adjustments AmendedFFA liability Impact oftax-effectingthenet Effect offoreignexchange Change inestimates going forward. the companyanticipatesnosignificantSCIandotherrelatedexpenses in thepreviousyear. NowthattheAmendedFFA hasbeenimplemented, SCI andotherrelatedexpenseswerenilcomparedtoUS$13.6million SCI ANDOTHERRELATED EXPENSES and discountedfuturecashflows. fair valuebasedonvaluationmethodsincludingquotedmarketprices Cement segment.Theimpairedassetswerereducedtotheirestimated its products.ThisimpairmentchargewasrecordedintheUSAFibre utilisedtoproducematerialsfor related tobuildingsandmachinery The companyrecordedanassetimpairmentofUS$13.2million discounted futurecashflows. value basedonvaluationmethodsincludingquotedmarketpricesand buildings andmachinery, whichwerereducedtotheirestimatedfair of US$25.4millionintheOthersegment.Theimpairedassetsinclude United States.Asaresult,thecompanyrecordedanassetimpairment at thePlantCity, Florida,HardiePipemanufacturingfacilityinthe On 22May2008,thecompanyannouncedplanstoceaseproduction FiscalYears Ended31March (In millions) 2007 areasfollows: The asbestosadjustmentsforthefiscalyearsended31March2008and exchange ratebetweenthetwocurrenciesatbalancesheetdate. the consolidatedstatementofoperations,dependingonclosing US dollarsissubjecttoadjustment,withacorrespondingeffecton related assetsandliabilitiesintheconsolidatedbalancesheets Australian dollars.Thereforethereportedvalueoftheseasbestos- The asbestos-relatedassetsandliabilitiesaredenominatedin and approvedbythecompany’s 2007. securityholderson7February FFA thatwassignedwiththeNSWGovernmenton21November2006 Australian asbestos-relatedliabilitiesinaccordancewiththeAmended The asbestosadjustmentsarederivedfromanestimateoffuture ASBESTOS ADJUSTMENT $ (152.9) $ (240.1) (87.2) 2008 – – $ (405.5) $ 28.5 (335.0) (94.5) 2007 (4.5)

31 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 32 James Hardie Annual Report 2008 FINANCIAL STATEMENTS (Millions ofUSdollars) items decreased1.5percentagepointsto19.2%. As showninthetablebelow, EBITexcludingasbestosandassetimpairmentsdecreased12%toUS$281.7million.marginexclu AICF SG&A expensesofUS$4.0millionandassetimpairmentsUS$71.0million. EBIT lossdecreasedfromUS$86.6milliontoUS$36.6million. loss includesnetunfavourableasbestosadjustmentsofUS$240 EBIT James HardieIndustriesNVandSubsidiaries AND ANALYSIS DISCUSSION MANAGEMENT’S in SCIcosts. associated withtheASICproceedings, partiallyoffsetbythedecrease to higherwarrantyprovisionsrelating tonon-USactivitiesandcosts US$56.5 million to US$59.9million.Theincreasewasprimarilydue General corporatecostsincreasedbyUS$3.4millionfrom EBIT loss asitcontinuedtobuildsalesandimproveoperatingmargins. The EuropeFibrecementbusinessincurredasignificantlyreduced EBIT loss comparedtoasmallEBITprofitinthepreviousyear. The USAHardiePipebusinessrecordedasignificantlygreater The EBIT marginwas1.2percentagepointshigherat16.9%. gross marginperformancepartiallyoffsetbyincreasedSG&Aexpenses. Asia PacificFibreCementEBITincreased12%duetoanimproved results accountedfortheremaining12%increase.InAustraliandollars, 16% ofthisincreasewhiletheunderlyingAustraliandollarbusiness Pacific business’currenciescomparedtotheUSdollaraccountedfor to US$50.3million.FavourablecurrencyexchangeratesoftheAsia Asia PacificFibreCementEBITincreased28%fromUS$39.4million at 27.4%. SG&A spending. The EBIT marginwas1.3percentagepointslower to lowervolumeandhigherfreightcosts,partiallyoffsetby 13% fromUS$362.4milliontoUS$313.6million,primarilydue USA FibreCementEBIT(excludingassetimpairments)decreased EBIT marginexcludingasbestosandassetimpairments Net sales EBIT excludingasbestosandassetimpairments Impairment relatedcosts Impairment charges Asset impairments: AICF SG&Aexpenses Asbestos adjustments Asbestos: Excluding: EBIT AICF SG&Aexpenses Asbestos adjustments Asset Impairments General Corporate Research &Development Other Asia PacificFibreCement USA FibreCement report forfurtherinformation ontheadoptionofFIN48. consolidated financialstatementsstarting onpage105ofthisannual beginning retainedearningsofUS$78.0 million. SeeNote14tothe Taxes”. Theadoption of FIN48resultedinthereductionconsolidated Accounting Standards(“SFAS”) No.109,AccountingforIncome Uncertainty inIncomeTaxes, aninterpretationofStatementFinancial provisions ofFASB InterpretationNo.48(“FIN48”),“Accounting for With effectfrom1April2007,thecompanywasrequiredtoadopt related toFIN 48 adjustments. US$27.6 million; andunfavourabletaxadjustmentsofUS$5.8million of US$45.8 million; ataxbenefitrelatedtoassetimpairmentsof expense includesataxbenefitrelatedtoasbestosadjustments to anincometaxexpenseofUS$36.1million.Income Income taxdecreasedfromanincomebenefitofUS$243.9 million INCOME TAX (EXPENSE)BENEFIT due tolowercash balances. offset byreducedcapitalisedinterestandincome payment madeinthepreviousyear. Theseincreaseswerepartially make-whole paymentcomparedtotheUS$6.0million investments andcashbalancesheldbytheAICFlackofa primarily duetointerestincomeofUS$9.4millionearnedon US$6.5 million toincomeofUS$1.1million.Theincrease was Net interestincome(expense)increasedfromanexpenseof NET INTERESTINCOME(EXPENSE) $ 1,468.8 $ 313.6 $ 281.7 19.2% (240.1) 240.1 (36.6) (71.0) (59.9) (18.1) 2008 71.0 50.3 (4.0) (7.4) 3.2 4.0 389 (12) $ 318.9 324 (13) $ 362.4 ,4. (5) $ 1,542.9 20.7% (405.5) 41 405.5 (41) (86.6) 58 (56.5) (6) (17.1) (6) 2007 % Change 39.4 28 (9.3) 20 – – – – – .1 million, ding these oa $400 $264.5 $490.0 – – PrincipalOutstanding 174.5 90.0 Total Facility 45.0 EffectiveInterestRate 90.0 – $ 245.0 – 3.64% Total 110.0 $ 2013 on LIBORplusmargin,canberepaid andredrawnuntilFebruary Term facilities,canbe drawninUS$,variableinterestratesbased 2011 on LIBORplusmargin,canberepaid andredrawnuntilFebruary 3.61% Term facilities,canbedrawninUS$,variableinterestrates based on LIBORplusmargin,canberepaidandredrawnuntilJune2010 Term facilities,canbedrawninUS$,variableinterestrates based on LIBORplusmargin,canberepaidandredrawnuntilDecember2008 364-day facilities,canbedrawninUS$,variableinterestratesbased Description (Millions ofUSdollars) the following: had creditfacilitiestotallingUS$490.0million,ofwhichUS$264.5million wasdrawn.Thecreditfacilitiesarealluncollater Excluding restrictedcash,thecompanyhadcashandequivalentsof US$35.4 millionasof31March2008.Atthatdate,the signed offannuallybytheCFO. exposure toanyonecounterpartyislimitedspecifiedamountsand departmentandbaseduponthecounterpartycreditrating;total treasury countries inwhichitoperates.Counterpartylimitsaremanagedbythe its businessactivitiesandmeetfuturerequirementsinthe designed toensurethatthecompanyhassufficientliquiditysupport centralised inTheNetherlands.Thispolicyisreviewedannuallyand departmentandis cash managementisadministeredbyitstreasury exchange risksmanagement,interestrateriskmanagementand The company’s policyregardingliquiditymanagement,foreign treasury LIQUIDITY ANDCAPITAL RESOURCES Net operatingprofitexcludingasbestos,assetimpairmentsandtaxadjustments Tax adjustments Impairment relatedcosts(netoftax) Impairment charges(netoftax) Asset impairments: AICFinterestincome AICFSG&Acosts Tax benefitrelatedtoasbestosadjustments Asbestos adjustments Asbestos: Excluding: Net operating(loss)profit (Millions ofUSdollars) shown inthetable below: Net operatingprofitexcludingasbestos,assetimpairmentsandtaxadjustmentsdecreased20%fromUS$211.8milliontoUS$169.7 (US$44.6 million,aftertax);andunfavourabletaxadjustmentsofUS$5.8millionrelatedtoFIN48adjustments. asbestos adjustmentsofUS$240.1million;ataxbenefitrelatedtoUS$45.8impairmentcharges Net operatingprofitdecreasedfromanofUS$151.7millionintolossUS$71.6million.ope NET OPERATING PROFIT(LOSS) operating cashflows. existing cash,unusedcommittedfacilitiesandanticipatedfuturenet cash requirementsarisingfromtheAmendedFFA willbemetfrom cash flowsarisingduringtheyear. Thecompanyanticipatesthatany months basedonitsexistingcashbalancesandanticipatedoperating planned workingcapitalandothercashrequirementsforthenext12 The companyanticipatesthatitwillhavesufficientfundstomeetits significant impactonthecompany’s short-termorlong-termliquidity. Seasonal fluctuationsinworkingcapitalgenerallyhavenothada plant andequipment,proceedsfromtheredemptionofinvestments. facilities andotherborrowings,proceedsfromthesaleofproperty, from operations,proceedsthedivestitureofbusinesses,credit capital expenditure requirementsthroughacombination ofcashflow James Hardiehashistoricallymetitsworkingcapitalneedsand $ 169.7 $ (71.6) At 31March2008 240.1 (45.8) 2008 44.6 (9.4) 5.8 2.0 4.0 1. (20) $ 211.8 – $ 151.7 (335.0) – 405.5 (41) (10.4) – 2007 % Change alised andconsistof – – – – rating lossincludes company also of US$71.0million million as

33 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 34 James Hardie Annual Report 2008 FINANCIAL STATEMENTS starting on page109ofthis annual report. information, seeNote 15totheconsolidatedfinancialstatements under FIN48forrecording aliabilityhavenotbeenmet. Formore liability fortheamended assessmentasitbelievestherequirements assessment. Asof31March2008,the companyhasnotrecordedany RCI isunsuccessfulinitsappeal, willberequiredtopaytheentire successful initsappealagainsttheamended assessment.However, if paid wouldberecovered,withinterest, byRCIatthetimeis prevail inthismatter. Accordingly, itisexpectedthatanyamounts company believesthatRCI’s viewonitstaxpositionwillultimately avenues ofappealtocontesttheATO’s positioninthismatter. The RCI stronglydisputestheamendedassessmentandispursuingall on 8December2008. The hearingdateforRCI’s appealispresentlyscheduledtocommence appealing theObjectionDecisionwithFederalCourtofAustralia. 31 March 1999.On11July2007,thecompanyfiledanapplication RCI’s notice ofamendedassessmentforRCItheyearended On 30May2007,theATO disallowedthecompany’s objectionto respect ofthequarterended31March2008. company paidanadditionalA$3.3million(US$3.0million)inGIC the amendedassessmentinfiscalyear2007.On15April2008, as partofthepaymentA$184.0million(US$168.8million)towards This amountincludesGICofA$76.7million(US$70.3million)paid 2008, ithaspaidA$95.2million(US$87.3million)ofGICtotheATO. amended assessmentinarrearsonaquarterlybasis.Upto31March company alsoagreedtopayGICaccruingontheunpaidbalanceof pending outcomeoftheappealamendedassessment.The the ATO fortheremainingunpaid50%ofamendedassessment, (US$168.8 million)andprovideaguaranteefromJHINVinfavourof pay 50%ofthetotalamendedassessmentbeingA$184.0million accordance withtheATO ReceivablesPolicy, thecompanywould During fiscalyear2007,thecompanyagreedwithATO thatin (US$337.5 million). The assessment wassubsequentlyamendedtoA$368.0 million received anamendedassessmentfromtheATO ofA$412.0million. ofthecompany,In March2006,awholly-ownedsubsidiary RCI, US$225.5 millionwasavailable. US$264.5 million wasdrawnunderthecombinedfacilities and paid US$0.4 million incommitmentfees.Asof 31March2008, the endofeachdrawn-downperiod.Duringyear, thecompany or LIBOR,plusthemarginsofindividuallendersandispayableat draw-down periodbasedontheUS$LondonInterbankOfferedRate, is calculatedtwobusinessdayspriortothecommencementofeach at 31March2008was2.4years.Forallfacilities,theinterestrate average remainingtermofthetotalcreditfacilities,US$490.0 million, 2013,respectively. 2011andFebruary 2010, February Theweighted million, US$45.0millionandUS$90.0whichmatureinJune The companyalsohastermfacilitiesintheamountofUS$245.0 agreement totheseextensionsintheamountofUS$55.0million. date ofsuchcreditfacilitiestoJune2009andhasreceived December 2008.Thecompanyhasrequestedextensionsofthematurity the amountofUS$110.0millionwhich,as31March2008,maturein The company’s creditfacilitiescurrentlyconsistof364-dayin compared withnetdebtofUS$153.9millionat31March2007. At 31March2008thecompanyhadnetdebtofUS$229.1million, James HardieIndustriesNVandSubsidiaries AND ANALYSIS DISCUSSION MANAGEMENT’S approximately US$40million toUS$60million oncapitalexpenditures, working capital.During fiscalyear2009,thecompanyexpects tospend primarily generated fromoperationstofundcapitalexpenditures and cash andfundsfromcreditfacilities. The companyexpectstousecash capital expenditurerequirementsthrough acombinationofinternal During thefiscalyearended31March 2008,thecompanymetits renovation activityvolumesincrease. seasonally duringmonthsoftheyear whenoverallconstructionand andaccountsreceivable payables,fluctuate primarily ofinventory facilities. Thecompany’s workingcapitalrequirements,consisting and maintenanceofitsproductionfacilitiesconstructionnew James Hardie’s capitalrequirementsconsistofexpansion,renovation Capital RequirementsandResources in thepreviousyeartonetborrowingsofUS$76.5million. proceeds fromdebtfacilitiesnetrepaymentsofUS$114.7million US$42.1 milliontoUS$126.2million,partiallyoffsetbyincreased US$208.0 millionintheyearandanincreasedividendspaidfrom stock purchasesof to US$254.4millionprimarilyduetreasury Net cashusedinfinancingactivitiesincreasedfromUS$136.4million US$38.5 ascapitalexpenditureswerereduced. Net cashusedininvestingactivitiesdecreasedfromUS$92.6millionto respectively intheyearended31March2008. respectively, comparedtopaymentsofUS$9.7millionandnil, 31 March2007totallingUS$154.8millionandUS$151.9million, payment andpaymentsmadetofundtheAICFduringyearended to acashinflowofUS$319.3millionprimarilyduetheATO deposit Net operatingcashincreasedfromaoutflowofUS$67.1million CASH FLOW Subsidiary andthecompanyunderAmendedFFA.Subsidiary Such limitsareconsistentwiththecontractualliabilitiesofPerforming spend onanannualbasisinrelationtoasbestospaymentstheAICF. Mining PtyLimitedand(iv)haslimitsonhowmuchthecompanycan Amaba PtyLimited,AmacaABN60LimitedandMarlew income, expenseandotherprofitlossstatementimpactsoftheAICF, earnings beforeinterestandtaxestonetcharges,excludingall sheet itemsoftheAICF, (iii)mustmeetorexceedaminimumratioof minimum levelofnetworth,excludingassets,liabilitiesandotherbalance ABN 60PtyLimitedandMarlewMiningLimited,(ii)mustmaintaina balance sheetitemsoftheAICF, AmabaPtyLimited,Amaca do notexceedcertainmaximums,excludingassets,liabilitiesandother (i) isrequiredtomaintaincertainratiosofindebtednessequitywhich agreements. Underthemostrestrictiveofthesecovenants,company compliance withallrestrictivecovenantscontainedinitscreditfacility At 31March2008,thecompany’s managementbelievesthatitwasin anticipated futurenetoperatingcashflows. next 12monthsfromexistingcash,unusedcommittedfacilitiesand anticipates beingabletomeetitsfuturepaymentobligationsforthe to meetitsfuturecashflowrequirements.Nevertheless,thecompany cashinorder dividend payments,ortakeothermeasurestoconserve to reduceitslevelsofplannedcapitalexpenditures,oreliminate ones itpresentlyhas,mayexperienceliquidityissuesandwillhave renew itscreditfacilitiesontermsthataresubstantiallysimilartothe If thecompanyisunabletoextenditscreditfacilities,or have beencontributors totherenovationandremodelmarkets forits which mayaffectavailable ownerequityandhousehold net worth, housing prices.Thecompanybelieves thathigherhousingprices, because thesefactorsaffecthousingaffordability andthelevelof conditions andinterestratesintheUnited Statesandinothercountries The companybelievesitsbusinessis affectedbygeneraleconomic funding requirements. to 75% ofnetincomebeforeasbestosadjustments,subjectto Currently, thedividendpaymentratiopolicyisbetween50% factors discussedhere. growth plan,isdependentonthecontinuationofthistrendandother ability tomeetitslong-termliquidityneeds,including greater marketpenetrationandincreasedprofitability. Thecompany’s research anddevelopmentactivities,whichitbelieveshasfacilitated from itsoperationstofundadditionalcapitalexpenditures,including The companyhashistoricallyreinvestedaportionofthecashgenerated that generatehighermargins. product mixhaschangedtowardshigher-priced, differentiatedproducts the company’s productshavebeenwell-acceptedbythemarketandits product mixtogeneratecashfunditslong-termgrowth.Historically, of itsproductsandincreasedprofitabilityfromamorefavourable The companyexpectstorelyprimarilyonincreasedmarketpenetration meet anycashshortfallsduringatleastthenext12months. be availabletothecompanyundercreditfacilities,willsufficient US$35.4 million at31March2008,andthecashthatit anticipateswill capital requirements,itbelievesthecashandequivalentsof from operationstofunditsplannedcapitalexpendituresandworking in theshort-term.Ifcompanydoesnotgeneratesufficientcash fund itsplannedcapitalexpenditureandworkingrequirements estimated paymentsundertheAmendedFFA, willbesufficientto The companyanticipatesthatitscashflowsfromoperations,netof compensation totheAICF. to payininstallments,thecompanyisalsorequiredinterest Amended FFA) infourequalinstallments.Asaresultofthiselection converted atthe24June2008exchangerateasprescribedin the annualfundingpaymentofA$114.7million(US$109.2 under theAmendedFFA, haselectedtopay thePerformingSubsidiary expenses oftheAICFandannualcashflowcap.Aspermitted 1 December 2005),actuarialestimations,actualclaimspaid,operating at thedateoforiginalFinalFundingAgreementasannouncedon (defined ascashfromoperationsinaccordancewithGAAPforce payments aredependentonseveralfactors,includingfreecashflow payments willbemadeeachJuly. Theamountsoftheseannual A$184.3 2007andannual million wasmadetotheAICFinFebruary fund theAICFonanannualbasis.Theinitialfundingpaymentof Under thetermsofAmendedFFA, thecompanyisrequiredto 2008, andcashthatitanticipateswillbeavailableundercreditfacilities. cash flowsurpluses,onhandofUS$35.4millionat31March payments madetotheATO undertheamendedassessment,withfuture it mayexperienceduetopaymentsrelatedtheAmendedFFA and technologies. Thecompanyplanstofundanycashflowshortfallsthat including facilityupgradesandcapitaltoimplementnewfibrecement to maintainsufficient capitalresourcesovertheshortand longer-term. cash postpone itsexpansionplansand/ortake othermeasurestoconserve toreduce oreliminatedividendpayments,scaleback it necessary available underthosefacilities.Additionally, thecompanycould determine under itscreditfacilitiesandthatitwill beabletomaintainsufficientcash at leastthenext12monthswithcashthat itanticipateswillbeavailable The companybelievesthatitwillbeabletofundanycashshortfallsfor from operationstomeetitsshortandlonger-term capital requirements. adversely affectthecompany’s abilitytogeneratesufficientcashflows looking statementsonpage125ofthisannualreport,maymaterially noteconcerning forward- including thoseidentifiedinthecautionary The collectiveimpactoftheforegoingfactors,andother to continueincreasewiththeforecastedonfuelcosts. Energy InformationAdministration,thecompanyexpectsfreightcosts surcharges anddecreasedcarrieravailability. Basedondatafromthe Freight costsincreasedinfiscalyear2008duetohigherfuel continue toevaluateopportunitiesincreaseitssupplierbase. negotiate lowerpriceswithitscementsuppliersinsomemarketsand year 2008levels.Thecompanycontinuestolookforopportunities The companyexpectscementpricestoremainrelativelyflatatfiscal mitigate priceincreasesandsupplyinterruptions. and purchaseitspulpfromseveralqualifiedsuppliersinanattemptto discount pulppricesinrelationtovariousindicesoveralonger-term by risingpulpprices,thecompanyhasenteredintocontractsthat to increase.To minimiseadditionalworkingcapitalrequirementscaused it predictstoincreasethroughfiscalyear2009thuscausingpulpprices based oninformationthecompanyreceivesfromRISIandothersources, from aglobalindex,NorthernBleachedSoftwoodKraft,orNBSK,which company’s workingcapitalrequirements.Pulppricesarediscounted formulation, whichhavebeensubjecttopricevolatility, affectingthe ingredientsinJamesHardie’sPulp andcementareprimary fibrecement reduce demandforitsproducts. growth ofUSnewhousingconstructionovertheshort-term,whichmay these economicfactors,alongwithothers,maycauseaslowdownin housing affordabilityindexhasdecreased.Thecompanybelievesthat interest ratesandhousingpricesincreased,butthereaftertheUS its capitalrequirements.Duringcalendaryear2005,UShomemortgage liquidity andabilitytogeneratesufficientcashfromoperationsmeet levels ofrevenueandprofitabilitythereforedecreasethecompany’s sells itsproductswouldnegativelyimpactgrowthandcurrent States orinothercountrieswhichthecompanymanufacturesand that adeeperthanexpecteddeclineinnewhousingstartstheUnited to fundthemajorityofplannedcapitalexpenditures.Itispossible expenditures willresultinitsoperationsgeneratingcashflowsufficient current USforecastsofnewhousingstartsandrenovationremodel over theshort-term.Thecompanyexpectsthatbusinessderivedfrom may causeafurtherdecreaseinnewhousingstartsbeforelevelingoff ofunsoldhomes prime mortgagefalloutandhighcurrentinventory renovation andremodelexpenditures.However, theongoingsub- rates intheUnitedStateshelpedsustainnewhousingstartsand economic conditionsandhistorically-reasonablemortgageinterest products. Overthepastseveralyearsthroughmid-2006,favourable

35 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 36 James Hardie Annual Report 2008 FINANCIAL STATEMENTS long-term debtandoperatingleases,respectively. See Notes9and13totheconsolidatedfinancialstatementsstartingonpages97104ofthisannualreportforfurtherinfo other factors. be affectedbyweather, economicconditions,industrialdisputesand patternscan activity overtheholidayperiod.Also, generalindustry and duringthelasthalfofDecember due totheslowdowninbusiness activity diminishesduringthewetseason fromJunetoSeptember a slowdownduetosummerholidays. InthePhilippines,construction New Zealand,thecalendarquarterendingMarchisusuallyaffectedby of buildingactivitydependingonweatherconditions.InAustraliaand calendar quartersendingDecemberandMarchreflectreducedlevels in thebuildingandconstructionindustry. IntheUnitedStates, James Hardie’s earningsareseasonalandtypicallyfollowactivitylevels SEASONALITY ANDQUARTERLY VARIABILITY 31 March2008. impact ontheresultsofoperationsforfiscalyearended The companydoesnotbelievethatinflationhashadasignificant INFLATION balance sheetarrangements. As of31March2008thecompanydidnothaveanymaterialoff- DuringFiscalYearEnding31March Thereafter OFF-BALANCE SHEETARRANGEMENTS 2012to2013 2010to2011 2009 2 Total 1 Asbestos Liability (Millions ofUSdollars) Payments The followingtablesummarisesthecompany’s contractualobligationsat31March2008: Contractual Obligations capacity fornewfibrecementproducts. the company’s fibrecementproductsandtocreatenewmanufacturing high-volume manufacturingcapacitytomeetincreaseddemandfor capital expenditureswereprimarilyusedtocreateadditionallow-cost, for continuingoperationsfiscalyear2008wasUS$38.5million.The James Hardie’s totalcapitalexpenditure,includingamountsaccrued, Capital Expenditures James HardieIndustriesNVandSubsidiaries AND ANALYSIS DISCUSSION MANAGEMENT’S Due ogTr et 7. — 7. — — 56.7 $56.7 20.6 — $20.6 25.7 $200.2 174.5 $23.8 14.8 — $1,877.8 117.8 174.5 Total Purchase Obligations Operating Leases Long-Term Debt thatareenforceableandlegally-binding onthe Purchase Obligationsaredefinedasagreementstopurchasegoodsorservices The amount oftheasbestosliabilityreflectstermsAmendedFFA, whichhasbeencalculatedbyreferenceto(butis annual report. due eachyearassuchamountsarenotreasonablyestimable.SeeNote12totheconsolidatedfinancialstatementsonpages99–10 liability alsoincludesanallowanceforthefutureclaims-handlingcostsofAICF. Thetableabovedoesnotincludeabreak based upon)themostrecentactuarialestimateofprojectedfutureasbestos-relatedcashflowspreparedbyKPMGActuaries. approximate timingofthetransactions. that specifyallsignificantterms,including:fixedorminimumquantitiestobepurchased;fixed,variablepricepr 1 ,7. $ / $ NA NA $ N/A $ N/A $ N/A $ N/A $1,576.5 2 9.0 9.0 — — — income performance. business hasincreaseditsfocusoninitiatives thatbuildoperating activity andtheprospectofafurtherdecline intheshort-term, However, asaresultoftheseveredeclineinhousingconstruction the expenseofalternativematerialsandoutperformbroadermarket. key growthinitiativesandexpectstofurtherincreasemarketshareat The USAFibreCementbusinessremainscommittedtoinvestingin enable itscostbasetobetterreflectexpectedmarketdemand. afurtherbusinessreset inApril2008to Cement businessunderwent To addresstheprospectoffurthermarketweakness,USA Fibre likely intheshort-term. further weaknessinthelevelofnewhousingconstructionactivityis sentiment, andtightermortgagelendingstandards,allsuggestthat properties onthemarket,weakereconomicconditionsandconsumer for sale,anincreasedrateofforeclosuresplacingmoreexisting levelsofnewhomes In NorthAmerica,factorssuchashighinventory OUTLOOK software system. line and expendituresrelatedtotheimplementationofanewERP expenditures relatedtoanewfinishingcapabilityonproduct Significant capitalexpendituresinfiscalyear2008included rmation regarding notexclusively -down ofpayments ovisions; andthe company and The asbestos 3 ofthis which theFormerJamesHardieCompanies arefoundliable. anddeathclaimsfor for Australianasbestos-relatedpersonal injury funding totheAICF, aspecialpurposefundthatprovidescompensation 2007,theAmendedFFAIn February wasapprovedtoprovidelong-term future paymentstotheAICFbasedontermsofOriginalFFA. statements includedanasbestosprovisionrelatingtoitsanticipated Prior to31March2007,thecompany’s consolidatedfinancial Accounting fortheAmendedFFA of thisannualreport. consolidated financialstatementsstartingonpages99,104and105 Proceedings andtheATO assessment,seeNotes12,13and14tothe For additionalinformationregardingasbestos-relatedmatters,ASIC appropriate adjustmentstotheconsolidatedfinancialstatements. become known,thecompanyreassessesitssituationandmakes amounts arereasonablyestimable.Asfactsconcerningcontingencies contingent obligationswhentheareprobableand SFAS No.5underwhichitaccruesamountsforlossesarisingfrom James Hardieaccountsforlosscontingenciesinaccordancewith Accounting forContingencies impact itsresultsofoperations,financialconditionandcashflows. consolidated financialstatementsandtheuncertaintiesthatcould in understandingthejudgmentsthatareinvolvedpreparingits The companyconsidersthefollowingpoliciestobemostcritical differ fromtheseestimatesunderdifferentassumptionsandconditions. may notbereadilyapparentfromothersources.Actualresults and liabilitiesthereportedamountsofrevenuesexpensesthat valueofassets basis formakingjudgmentsaboutthereportedcarrying be reasonableunderthecircumstances,resultsofwhichform on historicalexperienceandotherassumptionsthatarebelievedto contain somedegreeofuncertainty. Managementbasesitsestimates assumptions forcalculatingfinancialestimates,whichinherently application ofjudgmentbymanagementinselectingappropriate report. Certainofthecompany’s accountingpoliciesrequirethe consolidated financialstatementsstartingonpage89ofthisannual and resultsofoperationsaremorefullydescribedinNote2tothe The accountingpoliciesaffectingJamesHardie’s financialcondition CRITICAL ACCOUNTINGPOLICIES have amaterialimpactontheconsolidatedfinancialstatements. rates orupdatestotheactuarialestimateandothermattersmay Changes totheasbestosliabilityreflectchangesinforeignexchange remain subjecttostrongcompetition. Australia andNewZealand.Non-differentiatedproductsareexpectedto increase marketsharesthroughitsrangeofdifferentiatedproductsin demandforfibrecementand expects tocontinuegrowprimary Australia, andweakerinNewZealandthePhilippines.Thebusiness outlook isforresidentialconstructionactivitytobeweakeningin Association ofAustraliaandInfoMetricsNewZealand,theshort-term In AsiaPacificFibreCement,accordingtotheHousingIndustry annual report. 12 totheconsolidatedfinancialstatements onpages99–103ofthis For additionalinformationregarding the asbestosliability, seeNote financial condition. would haveanadverseeffectonbusiness, resultsofoperationsand then ended.Materialadversechangestotheactuarialestimate or credittotheconsolidatedstatementsofoperationsforyear each year. Anychangesintheestimatewillbereflectedas a charge An updatedactuarialassessmentwillbeperformedasof31March the consolidatedbalancesheetandstatementofoperations. currently projectedandcouldresultinsignificantdebitsorcreditsto the actualamountofliabilitycoulddiffermateriallyfromthatwhichis the above-namedentitieswillcontributetooverallsettlements, future trendsinaverageclaimawards,aswelltheextenttowhich recoverability ofclaimsagainstinsurancecontracts,andestimates number andtimingoffutureclaimnotificationssettlements,the Due toinherentuncertaintiesinthelegalandmedicalenvironment, information providedorusedforthepreparationofreport. nor establishedtheaccuracyorcompletenessofdataand and consistency, buthavenotverifiedtheinformationindependently all materialrespects.Theactuariestestedthedataforreasonableness provided bytheAICFandassumedthatitisaccuratecompletein Further, KPMGActuarieshasreliedonthedataandinformation and legalcosts. of futureclaimsandthelong-termrateinflationclaimawards strategy indealingwithoutstandingclaims,thetimingofsettlements which liabilityisrepudiated,therateofreceiptclaims,settlement incurred inthelitigationofsuchclaims,proportionclaimsfor the jurisdictioninwhichactionisbeingbrought),legalcosts in whichtheplaintiffclaimsexposure,allegeddiseasetypeand settlement (whichissensitiveto,amongotherfactors,theindustry to beassertedthrough2071,thetypicalaveragecostofaclaim number ofclaimsbydiseasetypewhicharereasonablyestimated made anumberofassumptions.Theseincludeanestimatethetotal In estimatingthepotentialfinancialexposure,KPMGActuarieshas operating costsoftheAICF. The asbestosliabilityalsoincludesanallowanceforthefuture is notfixedorreadilydeterminable. future cashflowswhenthetimingandamountsofsuch uninflated onthebasisthatitisinappropriatetodiscountorinflate asbestos liabilityincludesthesecashflowsasundiscountedand US GAAP, itconsidersthebestestimateunderSFAS No.5.The asbestos liabilityinthecompany’s financialstatementswhich,under The companyviewsthecentralestimateasbasisforrecording a centralestimatewhichisintendedtoreflectanexpectedoutcome. Actuaries arrivedatarangeofpossibletotalcashflowsandproposed flows preparedbyKPMGActuaries.Basedonitsassumptions, based upon)themostrecentactuarialestimateofprojectedfuturecash FFA, whichhasbeencalculatedbyreferenceto(butisnotexclusively The amountoftheasbestosliabilityreflectstermsAmended

37 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 38 James Hardie Annual Report 2008 FINANCIAL STATEMENTS for additional reserves. different fromtheestimates, itcouldresultintheneed been withincalculated estimates,ifitsexperienceissignificantly necessary. Althoughthecompany’s warrantycosts havehistorically and otherfactors,itadjuststheamount ofitswarrantyprovisionsas historical warrantycostsastheyrelate tosales.Basedonthisanalysis estimate forfuturewarranty-relatedcosts basedonananalysisofactual a specifiedtimeperiodfromthedate of sale.Thecompanyrecordsan program requiresthatthecompanyreplace defectiveproductswithin expectations overanextendedperiodoftime.Atypicalwarranty that theseproductswillnotperforminaccordancewiththecompany’s only beenusedinNorthAmericasincetheearly1990s,thereisarisk the UnitedStates.Becausecompany’s fibrecementproductshave 50-year limitedwarrantyoncertainfibrecementsidingproductsin James Hardieoffersvariouswarrantiesonitsproducts,includinga Accrued WarrantyReserve its grossprofit. which wouldhaveanegativeimpacton reserves, additional inventory reduce manufacturingoutputaccordingly, itcouldberequiredtorecord isgreaterthanactualdemandandthecompanyfailsto inventory period toperiod.Ifthecompany’s estimateforthefuturedemand future demandforinventory, andisthereforeatrisktochangefrom This estimaterequiresmanagementtomakejudgmentsaboutthe andanexpenseincostofsalestheperioditisidentified. inventory isrecordedasareductionto slow-moving andobsoleteinventory are excess,slow-movingorobsolete.Theestimatedvalueof on handandevaluatessignificantitemstodeterminewhetherthey quantities determine market,managementregularlyreviewsinventory Inventories arerecordedatthelowerofcostormarket.Inorderto Inventory 114 ofthisannualreport. see Note19totheconsolidatedfinancialstatementsstartingonpage additional informationregardingthecompany’s customerconcentration, allowances whichwoulddecreasethecompany’s netsales.For their abilitytomakepaymentsandresultintheneedforadditional liquidity orfinancialpositionofanythesecustomerscouldimpact a relativelysmallnumberofcustomers,significantchangeinthe past. Becausethecompany’s accountsreceivableareconcentratedin will continuetoexperiencethesamecreditlossratesthatithasin been withinthecompany’s expectations,itcannotguaranteethat and estimatedbaddebts.Althoughcreditlosseshavehistorically activity. Anallowancefordoubtfulaccountsisprovidedknown worthiness, currenteconomictrendsandchangesincustomerpayment an ongoingbasisbasedonhistoricalbaddebts,customercredit- James Hardieevaluatesthecollectibilityofaccountsreceivableon Accounts Receivable information becomesavailable. basis andtherelatedaccrualsareadjusted,ifnecessary, asadditional Management reviewstheserebatesanddiscountsonanongoing are basedonhistoricalexperienceforsimilarprogramsandproducts. management’s bestestimatewhenproductsaresold.Theestimates rebates anddiscounts.Rebatesdiscountsarerecordedbasedon rebates anddiscountsincludingvolume,promotional,cashother James Hardierecordsestimatedreductionstosalesforcustomer Sales RebatesandDiscounts James HardieIndustriesNVandSubsidiaries AND ANALYSIS DISCUSSION MANAGEMENT’S statements startingonpage105ofthisannualreport. For additionalinformation,seeNote14totheconsolidatedfinancial financial statementperiodcouldbemateriallyaffected. estimated liability, thecompany’s incometaxexpenseinagiven tax positionisresolvedforanamountthatvariesfromtherecorded by taxauthoritiesineachjurisdiction.To theextentanuncertain the currenttaxstatutesandstatusofauditsperformed income taxexposuresandmustconsideravarietyoffactors,including required tomakesubjectivejudgmentsandassumptionsregardingits more-likely-than-not thresholdprescribedbyFIN48.Thecompanyis expected tobetaken,determinewhetherthesepositionsmeetthe Each quarterthecompanyevaluatesincometaxpositionstaken,or the positionstoberecognisedinconsolidatedfinancialstatements. authorities withfullknowledgeofallrelevantinformation,inorderfor threshold, assumingthatthepositionswillbeexaminedbytaxing in itsincometaxreturnsmustsatisfyamore-likely-than-notrecognition company assertsonitsincometaxreturns.Positionstakenbyanentity on varioustaxmatters,includingchallengestopositionsthe of itsbusiness,itissubjecttoongoingreviewsbytaxingjurisdictions of FASB StatementNo.109.”Duetothecompany’s sizeandthenature FIN 48,“AccountingforUncertaintyinIncomeTaxes aninterpretation The companyaccountsforuncertainincometaxpositionsaccordingto isunlikely.in theperiodwhichitdeterminedthatrecovery deferred taxassets,thecompany’s incometaxexpensewouldincrease later indicatethatitwillbeunabletorecoveralloraportionofitsnet its consolidatedbalancesheetat31March2008.However, iffacts all ofthedeferredtaxassetsrecorded(netvaluationallowance)on assets thatitcannotrecover. Thecompanybelievesthatitwillrecover by recordingavaluationallowanceagainsttheportionofdeferredtax isunlikely,recovery thecompanymustincreaseitsincometaxexpense and towhatextent,itcanrecoveritsdeferredtaxassets.Iffullorpartial and financialstatementpurposes.Thecompanymustassesswhether, differences inthetimingofrecognitionrevenueandexpensefortax computes itsdeferredtaxassetsandliabilities,whicharisefrom No. 109,“AccountingforIncomeTaxes,” underwhichthecompany James HardieaccountsforincometaxesaccordingtoFASB’s Statement Accounting forIncomeTax GAAP measuresforthesamepurposes. condition andresultsofoperations.The companyusesthesenon-US operations andprovidesusefulinformation regardingitsfinancial results inamannerthatisfocussedon theperformanceofitsongoing provide investorswithanalternativemethodforassessingitsoperating EBIT margin.JamesHardiehasincludedthesefinancialmeasuresto and shouldnotbeconsideredtomoremeaningfulthanEBIT impairments arenotmeasuresoffinancialperformanceunderUSGAAP impairments EBIT andmarginexcludingasbestosasset Non-US GAAPFinancialMeasures cash equivalents. Net debt(cash) from operations. Net debtpayback period forinterest,netofamountscapitalised. Net interestpaidcover Net interestexpensecover shareholders’ equity. Gearing Ratio Financial Ratios standard squarefootof5/16”thickness. msf standard squarefootof5/16”thickness. mmsf Sales Volumes net income. Net operatingprofit Operating profit similarly titledmeasuresreportedbyothercompanies. margin, asthecompanyhasdefinedthem,maynotbecomparableto generally acceptedintheUnitedStatesofAmerica.EBITand performance reportedinaccordancewithaccountingprinciples in additionto,butnotasasubstitutefor, othermeasuresoffinancial its Australianinvestors.EBITandmarginshouldbeconsidered measureandterminologyusedby EBIT isbelievedtobeaprimary operations, excludinginterestandincometaxexpenses.Additionally, management tomeasuretheearningsgeneratedbycompany’s profit orlossofitsbusiness.EBITisoneseveralmetricsusedby measuresusedbymanagementtomeasuretheoperating the primary EBIT andmargintoberelevantusefulinformationastheseare is definedasEBITapercentageofnetsales.JamesHardiebelieves equivalent totheUSGAAPmeasureofoperatingincome.EBITmargin EBIT andmargin Financial Measures–USGAAPequivalents DEFINITIONS –thousandsquarefeet,whereafootisdefinedas –millionsquarefeet,whereafootisdefinedas –EBITandmarginexcludingasbestosasset –Netdebt(cash)dividedbynetplus –short-termandlong-termdebtlesscash –isequivalenttotheUSGAAPmeasureofincome. –Netdebt(cash)dividedbycashflow –isequivalenttotheUSGAAPmeasureof –EBIT, asusedinthisdocument,is – EBITdividedbycashpaidduringthe –EBITdividedbynetinterestexpense. asset impairments and taxadjustments Net operatingprofitexcludingasbestos, Tax adjustments Impairmentrelatedcosts(netoftax) Impairmentcharges(netoftax) Asset impairments: Tax benefitrelatedtoasbestosadjustments AICFinterestincome AICFSG&Aexpenses Asbestos adjustments Asbestos: Net operating(loss)profit (Millions ofUSdollars) for thesamepurposes. its ongoingoperations.Thecompanyusesthisnon-USGAAPmeasure its operatingresultsinamannerthatisfocussedontheperformanceof measure toprovideinvestorswithanalternativemethodforassessing meaningful thannetincome.Thecompanyhasincludedthisfinancial performance underUSGAAPandshouldnotbeconsideredtomore asset impairmentsandtaxadjustmentsisnotameasureoffinancial and taxadjustments Net operatingprofitexcludingasbestos,assetimpairments EBIT marginexcludingasbestos Net Sales EBIT excludingasbestos AICF SG&Aexpenses Asbestos adjustments Asbestos: EBIT (US$ Millions) non-US GAAPmeasuresforthesamepurposes. financial conditionandresultsofoperations.Thecompanyusesthese of itsongoingoperationsandprovidesusefulinformationregarding its operatingresultsinamannerthatisfocussedontheperformance measures toprovideinvestorswithanalternativemethodforassessing than EBITandmargin.JamesHardiehasincludedthesefinancial under USGAAPandshouldnotbeconsideredtomoremeaningful margin excludingasbestosarenotmeasuresoffinancialperformance EBIT andmarginexcludingasbestos and assetimpairments EBIT marginexcludingasbestos Net Sales and assetimpairments EBIT excludingasbestos Impairmentrelatedcosts Impairment charges Asset impairments: AICFSG&Aexpenses Asbestos adjustments Asbestos: EBIT (Millions ofUSdollars) –Netoperatingprofitexcludingasbestos, $ 1,468.8 $ (36.6) $ 1,468.8 $ (36.6) $ 169.7 $ (71.6) 14.1% 19.2% 240.1 207.5 240.1 281.7 240.1 –EBITand (45.8) 2008 2008 2008 44.6 71.0 (9.4) 5.8 2.0 4.0 4.0 3.2 4.0 $ 1,542.9 $ (86.6) $ (86.6) $ 1,542.9 $ 151.7 $ 211.8 20.7% 20.7% (335.0) 405.5 318.9 405.5 318.9 405.5 (10.4) 2007 2007 2007 – – – – – – – –

39 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 40 James Hardie Annual Report 2008 FINANCIAL STATEMENTS asbestos(UScents) Diluted earningspershareexcluding outstanding –Diluted(millions) Weighted averagecommonshares Net operatingprofitexcludingasbestos (Millions ofUSdollars) uses thisnon-USGAAPmeasureforthesamepurposes. performance ofitsongoingoperations.Thecompany’s management for assessingitsoperatingresultsinamannerthatisfocussedonthe this financialmeasuretoprovideinvestorswithanalternativemethod meaningful thandilutedearningspershare.Thecompanyhasincluded performance underUSGAAPandshouldnotbeconsideredtomore earnings pershareexcludingasbestosisnotameasureoffinancial Diluted earningspershareexcludingasbestos adjustments (UScents) asbestos, assetimpairmentsandtax Diluted earningspershareexcluding outstanding –Diluted(millions) Weighted averagecommon shares asset impairmentsandtaxadjustments Net operatingprofitexcludingasbestos, (Millions ofUSdollars) same purposes. The company’s managementusesthisnon-USGAAPmeasureforthe manner thatisfocussedontheperformanceofitsongoingoperations. with analternativemethodforassessingitsoperatingresultsina The companyhasincludedthisfinancialmeasuretoprovideinvestors considered tobemoremeaningfulthandilutedearningspershare. measure offinancialperformanceunderUSGAAPandshouldnotbe excluding asbestos,assetimpairmentsandtaxadjustmentsisnota impairments andtaxadjustments Diluted earningspershareexcludingasbestos,asset Net operatingprofitexcludingasbestos Tax benefitrelatedtoasbestosadjustments AICFinterestincome AICFSG&Aexpenses Asbestos adjustments Asbestos: Net operating(loss)profit (Millions ofUSdollars) same purposes. operations. Thecompanyusesthisnon-USGAAPmeasureforthe results inamannerthatisfocussedontheperformanceofitsongoing provide investorswithanalternativemethodforassessingitsoperating net income.Thecompanyhasincludedthisfinancialmeasureto US GAAPandshouldnotbeconsideredtomoremeaningfulthan excluding asbestosisnotameasureoffinancialperformanceunder Net operatingprofitexcludingasbestos James HardieIndustriesNVandSubsidiaries AND ANALYSIS DISCUSSION MANAGEMENT’S –Dilutedearningspershare $ (71.6) $ 117.3 $ 169.7 $ 117.3 –Netoperatingprofit 456.1 456.1 240.1 (45.8) 2008 2008 2008 25.7 37.2 (9.4) 4.0 –Diluted $ 222.2 $ 151.7 $ 222.2 $ 211.8 (335.0) 466.4 466.4 405.5 2007 2007 2007 47.6 45.4 – – asset impairmentsandtaxadjustments Effective taxrateexcludingasbestos, asset impairmentsandtaxadjustments Income taxexpenseexcludingasbestos, Tax adjustments Tax benefitrelatedtoassetimpairments Tax benefitrelatedtoasbestosadjustments Income taxbenefit(expense) excluding asbestosandassetimpairments Operating profitbeforeincometaxes Impairment relatedcosts Impairment charges Asset impairments: AICFinterestincome AICFSG&Aexpenses Asbestos adjustments Asbestos: Operating lossbeforeincometaxes (Millions ofUSdollars) uses thisnon-USGAAPmeasureforthesamepurposes. performance ofitsongoingoperations.Thecompany’s management for assessingitsoperatingresultsinamannerthatisfocussedonthe this financialmeasuretoprovideinvestorswithanalternativemethod more meaningfulthaneffectivetaxrate.Thecompanyhasincluded performance underUSGAAPandshouldnotbeconsideredto asset impairmentsandtaxadjustmentsisnotameasureoffinancial and taxadjustments Effective taxrateexcludingasbestos,assetimpairments EBITDA Depreciation andamortisation EBIT (Millions ofUSdollars) satisfy itsdebt,capitalexpenditureandworkingrequirements. ability ofacompany’s earningsfromitscorebusinessoperationsto believes thatthisdataiscommonlyusedbyinvestorstoevaluatethe The companyhasincludedinformationconcerningEBITDAbecauseit accordingly, EBITDAmaynotbecomparablewithothercompanies. calculate EBITDAinthesamemannerasJamesHardiehasand, US GAAPorasameasureofprofitabilityliquidity. Notallcompanies than, incomefromoperations,netorcashflowsasdefinedby and shouldnotbeconsideredanalternativeto,ormoremeaningful EBITDA –isnotameasureoffinancialperformanceunderUSGAAP –Effectivetaxrateexcludingasbestos, $ 273.4 $ (35.5) $ (36.6) $ 19.9 37.9% (103.7) 240.1 (27.6) (45.8) (36.1) 2008 2008 71.0 56.5 (9.4) 5.8 3.2 4.0 $ 312.4 $ (93.1) $ (86.6) $ (35.9) 32.5% (101.5) (335.0) 405.5 243.9 (10.4) 2007 2007 50.7 – – – – – GIC CUFS CFO CEO ATO ASX ASIC Amended FFA AGM AIM AICF ADR Abbreviations EBITDA excludingasbestos Depreciation andamortisation EBIT excludingasbestos (Millions ofUSdollars) expenditure andworkingcapitalrequirements. earnings fromitscorebusinessoperationstosatisfydebt,capital commonly usedbyinvestorstoevaluatetheabilityofacompany’s information concerningEBITDAbecauseitbelievesthatthisdatais not becomparablewithothercompanies.Thecompanyhasincluded in thesamemannerasJamesHardiehasand,accordingly, EBITDAmay measure ofprofitabilityorliquidity. NotallcompaniescalculateEBITDA operations, netincomeorcashflowsasdefinedbyUSGAAPa considered analternativeto,ormoremeaningfulthan,incomefrom measure offinancialperformanceunderUSGAAPandshouldnotbe EBITDA excludingasbestos EBITDA excludingasbestos Depreciation andamortisation asset impairments EBIT excludingasbestosand (Millions ofUSdollars) expenditure andworkingcapitalrequirements. earnings fromitscorebusinessoperationstosatisfydebt,capital commonly usedbyinvestorstoevaluatetheabilityofacompany’s information concerningEBITDAbecauseitbelievesthatthisdatais not becomparablewithothercompanies.Thecompanyhasincluded same mannerasJamesHardiehasand,accordingly, EBITDAmay profitability orliquidity. NotallcompaniescalculateEBITDAinthe net incomeorcashflowsasdefinedbyUSGAAPameasureof an alternativeto,ormoremeaningfulthan,incomefromoperations, financial performanceunderUSGAAPandshouldnotbeconsidered excluding asbestosandassetimpairmentsisnotameasureof EBITDA excludingasbestosandassetimpairments – GeneralInterestCharge – AnnualInformationMeeting – ChiefFinancialOfficer – ChiefExecutiveOfficer – AustralianTaxation Office – AustralianSecuritiesExchange – American Depository Receipt – AmericanDepository – AsbestosInjuriesCompensationFund – AnnualGeneralMeeting – AustralianSecuritiesandInvestmentsCommission – CHESSUnitsofForeignSecurities – AmendedFinalFundingAgreememt –EBITDAexcludingasbestosisnota $ 264.0 $ 207.5 $ 338.2 $ 281.7 2008 2008 56.5 56.5 –EBITDA $ 369.6 $ 318.9 $ 369.6 $ 318.9 2007 2007 50.7 50.7 2007 respectively. of US$944.9 million andUS$786.1at31March2008 2007. BalancesheetreferencesexcludethenetAmendedFFA liability related toasbestosadjustmentsofUS$335.0millionforfiscalyear 2008 andasbestosadjustmentsofUS$405.5milliontaxbenefit related toasbestosadjustmentsofUS$45.8millionforfiscalyear US$4.0 million,AICFinterestincomeofUS$9.4millionandtaxbenefit asbestos adjustmentsofUS$240.1million,AICFSG&Aexpenses comments refertoresultsfromcontinuingoperationsexcluding stated,graphs andeditorial cement business,unlessotherwise To allowreaderstoassesstheunderlyingperformanceoffibre year versusthepriorfiscalyear. stated,resultsandcomparisonsareofthecurrentfiscal Unless otherwise asbestos andassetimpairments”,“EBITDAexcludingasbestos”). asset impairmentsandtaxadjustments”,“EBITDA”,“EBITDAexcluding income taxesexcludingasbestos”,“Effectivetaxrateasbestos, taxes excludingasbestosandassetimpairments”,“Operatingprofitbefore earnings pershareexcludingasbestos”,“Operatingprofitbeforeincome excluding asbestos,assetimpairmentsandtaxadjustments”,“Diluted “Net operatingprofitexcludingasbestos”,“Dilutedearningspershare profit excludingasbestos,assetimpairmentsandtaxadjustments”, excluding asbestos”,“EBITmargin“Netoperating “EBIT marginexcludingasbestosandassetimpairments”, financial measures(“EBITexcludingasbestosandassetimpairments”, paid cover”,“Netdebtpayback”,debt/cash”);andNon-USGAAP financial ratios(“Gearingratio”,“Netinterestexpensecover”, volumes (“millionsquarefeet(mmsf)”and“thousand(msf)”); The companymayalsopresentothertermsformeasuringitssales and “Netoperatingprofit”. financial measuresinclude“EBIT”,“EBITmargin”,“Operatingprofit” are customarilyusedbyitsAustralianinvestors.Specifically, these on page39.Thecompanypresentsfinancialmeasuresthatitbelieves measures includedintheDefinitionssectionofthisdocumentstarting sales volumeterms,financialratios,andNon-USGAAP In thisannualreport,JamesHardiemaypresentfinancialmeasures, About theterminologyusedinthisannualreport SG&A SEC RCI NYSE NSW NAHB KPMG Actuaries JHAF IRS – RCIPtyLimited – InternalRevenueService – SecuritiesExchangeCommission – NewSouthWales – JamesHardieAustraliaFinancePtyLimited – NewYork StockExchange – NationalAssociationofHomeBuilders – Selling,General&Administrative – KPMGActuariesPtyLimited

41 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 42 James Hardie Annual Report 2008 FINANCIAL STATEMENTS in theDirectors’Profilesonpages24–26ofthisannualreport. office anddirectorshipsofotherpublicly-listedcompaniesaresetout Directors’ qualifications,experience,specialresponsibilities,periodin – Mr DeFossettannouncedhisresignationfromtheJointand – Mr LoudonannouncedhisresignationfromtheJointand – Boards Mr HarrisonwasappointedtotheJointandSupervisory – andManagingBoard Mr CoxwasappointedasCompanySecretary – andJointBoardseffective Mr BarrresignedfromtheSupervisory – andManagingBoard Mr ButterfieldresignedasCompanySecretary – andJointBoards Mr AndrewswasappointedtotheSupervisory – andJointBoards Mrs Walter wasappointedtotheSupervisory 2007 andthedateofthisreportwere: Boardsbetween1April Changes intheManagingandSupervisory BoarddirectorsandMrGries. consists ofallSupervisory TheJointBoard Robert Cox(GeneralCounselandCompanySecretary). Board directorswere:LouisGries(CEO),RussellChenu(CFO)and Loudon, RudyvanderMeerandCathyWalter; andtheManaging Anderson, DavidAndrews,DonaldDeFosset,Harrison,James Hammes (Chairman),DonaldMcGauchie(DeputyChairman),Brian Boarddirectorswere:Michael At thedateofthisreportSupervisory DIRECTORS 2008 (collectivelyreferredtoasthecompany). entities itcontrolledattheendof,orduring,yearended31March entity consistingofJamesHardieIndustriesNV(JHINV)andthe Your JointBoarddirectorspresenttheirreportontheconsolidated James HardieIndustriesNVandSubsidiaries REPORT DIRECTORS’ Supervisory Boards,totakeeffecton31August2008. Supervisory Boards,totakeeffecton22August2008;and Supervisory effective 19May2008; director effective7May2008; 2008; 31 March director effective1October2007; effective 1September2007; 2007; 17 August effective 1July2007andwasre-electedbyshareholderson – the performanceofJHINV’s individualbusinessgroupsand Boarddiscussedregularly: In itsmeetings,theSupervisory throughout fiscalyear2008. BoardanditsCommitteesregularlyhelddeliberations The Supervisory AND ITSCOMMITTEES ACTIVITIES OFTHESUPERVISORY BOARD and itsCommitteesappearsbelow. Board annual report.InformationabouttheactivitiesofSupervisory BoardCommittees,aresetoutonpages70–81ofthis Supervisory including informationabouttheroles,structureandchartersof Details ofJHINV’s corporategovernancepoliciesandprocedures, CORPORATE GOVERNANCE – the civilproceedingslaunchedbyASICagainstJHINVandothers – taxation matters,includingthestatusofongoingauditsand – JHI NV’s domicile inTheNetherlands; – JHINV’s financingandcapitalstructure; – the safetyandenvironmentalperformanceofthebusiness; – capital expenditurerequests; – monthly, quarterly, half-yearlyand yearlyresultsandfinancial – company andbusinessunitbudgets; of theMedicalResearchandCompensationFoundationin2001. Australian corporationslawineventssurroundingtheestablishment in theSupremeCourtofNewSouthWales forallegedbreachesof proceedings; and statements; JHI NVoverall; compliance developments. of thecompany. Thiscommitteealsodiscussedcorporategovernance buy-back; andthedeedsofindemnityprovidedtodirectorsofficers trading, marketcommunicationandtheoperationofon-market continuing developmentprogram;thecompany’s policiesoninsider Board tenure policy;thedirectororientationprogram;Supervisory Boardretirementand Boardevaluation;theSupervisory Supervisory Boarddirector;theprocessfor the independenceofeachSupervisory Boardrenewal;assessing directors. OthertopicsincludedSupervisory BoardandManaging functioning oftheindividualSupervisory BoardCommitteesandtheManaging Boardaswellthe Supervisory Board, BoardthesizeandcompositionofSupervisory Supervisory The planning anddevelopment. grants; executivecontracts;managementstructure;andsuccession Boarddirectorequity director remunerationandcap;Supervisory Board increaseguidelinesforeachbusiness;Supervisory team; salary executives; remunerationandperformanceobjectivesoftheexecutive 46–68 ofthisannualreport.Othertopicsincludedequitygrantsto executives, asdescribedintheRemunerationReportwithinpages and theremunerationofManagingBoarddirectorssenior operation oftheEP/IPPlan,andcompany’s compensationstructure The Young asitsexternalauditorcommencingfiscalyear2009. company’s auditwhichresultedinthecompanyappointingErnst& the AuditCommitteealsooversawatenderandreviewprocessof of internalriskmanagementandcontrolsystems.Infiscalyear2008, ofinternalandexternalauditors.Itdiscussedtheeffect observations internal auditor, includingthecompliancewithrecommendationsand Committee oversawtherelationshipwithexternalauditorand yearly results,financialstatementsandtheannualreport.TheAudit The starting onpage70ofthisannualreport. BoardaresetoutintheCorporateGovernanceReport Supervisory Further detailsofthesematters,andtheprocessesundertakenby Board’sSupervisory relationshipwiththeManagingBoard. Board Committees,Managingandindividualdirectorsthe Board,Supervisory and successionmattersoftheSupervisory Board directorsbeingpresent,theperformance,composition,profile Boarddiscussed,withoutManaging In addition,theSupervisory internal riskmanagementandcontrolsystemstheirdevelopments. risks tothecompanyandreportsbyManagingBoardof for thebusinesses,dividenddistributionsandcapitalmanagement, parameters tobeappliedinrelationthestrategy, thebusinessplans objectives ofJHINV, thestrategytoachievetheseobjectives, Boardalsodiscussedtheoperationalandfinancial The Supervisory Nominating andGovernanceCommittee Remuneration Committee Audit Committee reviewedJHINV’s quarterly, half-yearlyand discussedandreviewedthe discussedwiththe shares/CUFS. date of this report,25,000optionswereexercisedinrespectofordinary the date of thisreport.Betweentheendfiscalyearand No optionsweregrantedbetweentheendoffiscalyearand annual report. year aresetoutintheRemunerationReportonpages61and62ofthis Board directorsandseniorexecutivesofthecompanyduringfiscal starting onpage109ofthisannualreport.OptionsgrantedtoManaging period, aresetoutinNote16totheconsolidatedfinancialstatements including optionsgrantedandexercisedduringthereporting options changesduringtheperiod1April2007to31March2008, Boarddirectorsdonotreceiveoptions.DetailsofJHINV Supervisory OPTIONS ANDSHARERIGHTS Remuneration Reportofthisannualreport. 1 April2007and31March2008aresetoutinonpage68,the Changes indirectors’relevantinterestsJHINVsecuritiesbetween IN JHINVSECURITIES CHANGES INDIRECTORS’INTERESTS Corporate GovernanceReportofthisannualreport. the fiscalyearended31March2008isrecordedonpage72,within BoardCommitteeandManagingmeetingsduring Supervisory Board, Directors’ attendanceatJHINVJointBoard,Supervisory ATTENDANCE AT MEETINGS

43 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 44 James Hardie Annual Report 2008 FINANCIAL STATEMENTS environmental laws thatapplyineachrespectivelocation. company aresubjecttolicenses,permits andagreementsissuedunder activitiesconductedbythe The manufacturingandotherancillary plans andcorrectiveactionaspriorities. performance andsystemswithtraining, regularreview, improvement company. Thesystemisdesignedtocontinuallyimprove thecompany’s includes regularmonitoring,auditingandreportingwithinthe 3,373,875 20,053,224 Our integratedenvironmental,healthandsafetymanagementsystem 3,283,510 more efficientlyandtoreducewasteemissions. (25,000) – business, andwecontinuetoseekmeansofusingmaterialsenergy Protecting theenvironmentiscriticaltowaycompanydoes 886,000 2,135,750 – AND PERFORMANCE (2,112,013) ENVIRONMENTAL REGULATIONS 4,094,440 – and Analysisonpages28–38ofthisannualreport. – (527,225) 22,190,237 results ofthoseoperationsiscontainedinManagement’s Discussion – A reviewofthecompany’s operationsduringthefiscalyearandof (463,830) 2,488,125 3,901,100 REVIEW ANDRESULTS OFOPERATIONS fibre cementproductsinCanada,Asia,EuropeandtheMiddleEast. 3,747,340 (145,000) (15,500) (25,000) Australia, NewZealandandthePhilippines.Thecompanyalsosells the manufactureandmarketingoffibrecementproductsinUSA, (727,958) The principalactivitiesofthecompanyduringfiscalyear2008were 2,280,750 901,500 PRINCIPAL ACTIVITIES (232,500) forequalnumber 4,822,398 Options 22June2008 2,745,625 Numberofoptions and theDeferredBonusProgramaresetoutinRemunerationReportonpages46–68ofthisannualreport. outstandingat 22June2008 ofshares/CUFS report, 698,440RSUswereissuedtoseniorexecutivesofthecompanyunderDeferredBonusProgram.Furtherdetailst No sharerightsintheformofrestrictedstockunits(RSUs)weregrantedduringfiscalyear. Betweenthe end ofthefiscal cancelled 1Aprilto 22June2008 Total $9.5000 40,200 31March2008 Numberofoptions $8.9000 1Aprilto $8.5300 1,320,000 $8.4000 $8.3500 151,400 outstandingat $7.8300 1,016,000 $7.0500 $6.4490 $6.3800 $6.3000 93,000 $5.9900 $5.0586 660,582 – $3.1321 100,435 – $3.0921 409,907 Prices A$ – Range ofexerciseprices – – Options changesbetween31March2008andthedateofthisreportaresetoutbelow: – – – – – James HardieIndustriesNVandSubsidiaries – – REPORT DIRECTORS’ – – – – 1,320,000 Options 40,200 1,016,000 151,400 93,000 660,582 100,435 409,907 exercised annual report. out inManagement’s DiscussionandAnalysis,onpages 28–38ofthis The financialposition,outlookandfutureneedsofthecompanyareset FUTURE NEEDS FINANCIAL POSITION,OUTLOOKAND this annualreport. environmental aimsandperformanceisincludedonpages20–21of expanded recyclingprograms.FurtherinformationaboutJamesHardie’s place toreducewastethatpresentlygoeslandfills;theseinclude Solid wastesareremovedtolicensedlandfills.Programsin by law. improvements insystemsandprocessthatgobeyondthoserequired its obligationsaremet.Theseresourcesalsoemployedtosecure resources andappropriatemanagementsystemsateachsitetoensure by localgovernmentauthorities.Thecompanyemploysdedicated In addition,dustandodouremissionsfromthesitesareregulated maintained belowspecifiedlimits. to water, airandtheseweragesystemnoiseemissionsaretobe Under theapplicablelicensesandtradewasteagreements,discharges yearandthedateofthis erms oftheRSUs in AmsterdamorRegionalOfficeSydney. (www.jameshardie.com), orfromthecompany’s Corporate Headquarters accessed throughtheInvestorRelationsareaofcompany’s website disclosures prescribedbytheSEC.TheForm20-Ffilingcanbe is filedwiththeUSSECannually, andwhichcontainsadditional Readers arereferredtothecompany’s Form20-Fdocumentwhich OTHER DISCLOSURES annual report. Note 13totheconsolidatedfinancialstatementsonpage104ofthis of thepremiums.Furtherdetailsthesearrangementsaresetoutin prohibit disclosureofthenatureinsurancecoverandamount accordance withcommoncommercialpractice,theinsurancepolicies and indemnitiestoitsdirectors,officersseniorexecutives.In Like mostpublicly-listedcompanies,JHINVprovidesinsurances OF DIRECTORSANDOFFICERS INSURANCE ANDINDEMNIFICATION approved, bytheAuditCommittee. has beenmadeinaccordancewithadviceprovided,andaresolution the auditordidnotcompromisetheirindependence.Thisstatement to thecompany, by thattheprovisionofthesenon-auditservices provided andtheauditor’s statementsoftheircontinuedindependence theuniquecircumstancesandnatureoftaxservices audit services, basis ofthecompany’s policiesforreviewandpre-approvalofallnon- Boardissatisfied,onthe company anditsauditors.TheSupervisory appropriate standardsofindependenceforauditorsapplicabletothe bytheauditorduringfiscalyear2008iscompatiblewith services Boardissatisfiedthattheprovisionofthesenon-audit The Supervisory set outinRemunerationDisclosures,onpage118ofthisannualreport. external auditor, PricewaterhouseCoopersLLP, forfiscalyear2008are feespaidtoJHINV’sAudit Committee.Particularsofnon-auditservice receivespriorapprovalbythe fees payableforeachindividualservice, performedbytheexternalauditor,services includingtheamountof The AuditCommitteehasapprovedpoliciestoensurethatallnon-audit NON-AUDIT SERVICES with declarationsoftheirindependence. independent registeredaccountingfirmshaveprovidedthecompany registered publicaccountingfirminthecountriesconcerned.The GAAP andUSGAAP. Eachsetofaccountsisauditedbyanindependent The companypreparesitsannualaccountsinaccordancewithDutch AUDITORS statements startingonpage105ofthisannualreport. More informationiscontainedinNote14totheconsolidatedfinancial through subsequentadministrativeappealsandpossiblylitigation. IRS’ findingsthroughthecontinuingauditprocessand,ifnecessary, with theconclusionsreachedbyIRS,andintendstocontest subsidiaries toitsNetherlandscompanies.Thecompanydoesnotagree beneficial withholdingtaxratesonpaymentsfromitsUnitedStates New US-NetherlandsTreaty andthataccordinglyitisnotentitledto company doesnotsatisfytheLimitationofBenefitsprovision it withaNoticeofProposedAdjustmentthatconcludedthe On 23June2008,thecompanyannouncedthatIRShadissued report. consolidated financialstatementsstartingonpage105ofthisannual its priorwinding-up.MoreinformationiscontainedinNote14tothe amended assessmentandanyobligationsofJHAFtotheATO given with respecttotheATO proceedings,themeritsofpotential JHAF.owned subsidiary Thecompanyisconsideringitsposition Court ofAustraliaseekingthereinstatementaformerwholly- On 18June2008,theATO commencedproceedingsintheFederal of thisannualreport. in Note7totheconsolidatedfinancialstatementsstartingonpage96 of US$25.4millioninfiscalyear2008.Moreinformationiscontained United States.Asaresult,thecompanyrecordedanassetimpairment at itsHardiePipemanufacturingfacilityinPlantCity, Florida,inthe On 22May2008,thecompanyannouncedplanstoceaseproduction external auditorattheAGMinAugust2008. shareholder ratificationoftheselectionErnst&Young LLPasits auditor fortheyearending31March2009.Thecompanywillseek approval oftheengagementErnst&Young LLPasitsexternal Board’sOn 2April2008thecompanyannouncedSupervisory POST FISCALYEAREVENTS fiscal 2007and55%fromtheirpeakin2006. quarters offiscalyear2007.Newhousingstartsweredown37%from of fiscalyear2008,followingonthemarketdeteriorationinlasttwo States. IntheUS,housingmarketdeterioratedinallfourquarters intheUnited economic conditionsfacingtheentirehousingindustry In fiscalyear2008,thecompanywasheavilyaffectedbymacro SIGNIFICANT CHANGESINSTATE OFAFFAIRS US currency. were paidinAustraliancurrency. ADRholdersreceived paymentin CUFS on18December2007totalling US$55.5million.CUFSholders CUFS on10July2007totallingUS$70.7 million,andUS12.0centsper During fiscalyear2008,JHINVpaid dividends ofUS15.0centsper 4 June 2008(AEST).ADRholderswillreceivepaymentin US currency. on 11July2008iftheywereregisteredasatthecloseofbusiness share. CUFSholderswillbepaidthedividendinAustraliancurrency The ManagingBoardhasannouncedafinaldividendofUS8.0centsper DIVIDENDS

45 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 46 James Hardie Annual Report 2008 FINANCIAL STATEMENTS the individual’s competencies,skills andperformance,thespecificrole the guidelinesofremunerationpolicy andincludefactorssuchas company’s seniorexecutives.Theserecommendations arebasedon the remunerationpackagesofManaging Boarddirectorsandthe The CEOmakesrecommendationsto theRemunerationCommitteeon final approval. Boardfor Committee, whichrecommendsittotheSupervisory The CEO’s remunerationpackageisreviewedbytheRemuneration developments inthemarket. the objectivesofremunerationpolicyandarecompetitivewith the company’s seniorexecutivesannuallytoensurethattheymeet and theircomponentsfortheCEO,ManagingBoarddirectors The RemunerationCommitteeconsiderstheremunerationpackages 1.3 Settingremunerationpackages individual. an evaluationofperformanceintwobasicareas:thebusinessand performance policythatdifferentiatescompensationamountsbasedon The company’s executivecompensationprogramisbasedonapay-for- 1.2 Policy success ofthebusiness. attract, motivateandretainhigh-performingexecutivestoensurethe link executiveremunerationwiththeinterestsofshareholdersand performance pay, basedonbothlongandshort-termincentiveswhich benefits positionedaroundthemarketmedian,andvariable“AtRisk” James Hardieaimstoprovideapackageoffixed“NotAtRisk”payand 1.1 Objectives AND SENIOREXECUTIVEREMUNERATION 1. APPROACHTOCEO,MANAGINGBOARD remuneration forfiscalyear2009,describedinthisreport. (in Australia)asitsindependentadvisorsonthechangesto retained Towers Perrin(intheUnitedStates)andGuerdonAssociates its compensationadvisor. Inaddition,theRemunerationCommittee During fiscalyear2008,thecompanyretainedHewittAssociatesas remuneration reporttoitsshareholdersforanon-bindingvote. basis,andwillpresentthis and 9to11ofthisreportonavoluntary Act, thecompanyhaselectedtoprovideinformationinsections2 having regardtotheaimsunderlyingsection300AofCorporations and Recommendations,goodcorporategovernanceinAustralia In accordancewiththeASXCorporateGovernanceCouncilPrinciples andManagingBoarddirectorsseniorexecutives. of Supervisory This reportalsocontainsdetailedinformationabouttheremuneration the DutchCodeonCorporateGovernance. departures, andreasons,fromtheBestPracticeRecommendationsin Managing Boardandsection12ofthisreportdescribesthecompany’s Sections 1-8ofthisreportdescribetheremunerationpolicyfor Committee. Remuneration of the the recommendation Boardon remuneration, andhasbeenadoptedbytheSupervisory This remunerationreportexplainsJamesHardie’s approachto 2008 REMUNERATION REPORT James HardieIndustriesNVandSubsidiaries Remuneration Report REPORT DIRECTORS’ 1 4 3 2 Robert Russell,VicePresident–EngineeringandProcess Development Jamie Chilcoff,VicePresident–InternationalBusiness Former seniorexecutives: Joel Rood,VicePresident–GeneralManagerSouthernDivision Nigel Rigby, VicePresident–GeneralManagerNorthernDivision Brian Holte,VicePresident–GeneralManagerWestern Division Grant Gustafson,VicePresident–InteriorsandBusinessDevelopment Mark Fisher, VicePresident–ResearchandDevelopment Robert Cox,GeneralCounselandCompanySecretary Peter Baker, ExecutiveVicePresident–AsiaPacific Senior executives: year 2008 unless otherwise stated: year 2008unlessotherwise intheserolesthroughoutfiscal report directlytotheCEOandserved remuneration detailsofthefollowingseniorexecutives,allwhom Board. Forthepurposeofthisreport,companywillreport Board levelisconsistentwiththeremunerationpolicyforManaging The remunerationpolicyfortheseniorexecutivesbelowManaging 1.4 Seniorexecutives the company’s seniorexecutives. concerning remunerationfortheCEO,ManagingBoarddirectorsand Boardmakesthefinalcompensationdecisions The Supervisory specific person’s homecountry. executives. Thelistofpeergroupcompaniesmaydifferdependingona for theCEO,ManagingBoarddirectorsandcompany’s senior setting remunerationlevels(basesalary, targetbonus,andequity) of peergroupcompanieswhichitusesforcomparativepurposesin Each yeartheRemunerationCommitteereviewsandapprovesalist based priortoanyrelocation. company operatesandcountriesinwhichtheexecutiveisbasedorwas advisors, andotherpracticesspecifictothemarketsinwhich from theRemunerationCommittee’s externalindependentcompensation and responsibilitiesoftherelevantposition,assessmentsadvice annual report. covered inthisremunerationreportaresetoutonpages22–23of oftheManaging Boarddirectors The names,rolesandlengthofservice Mr Russell separated from the company effective 18 January 2008. MrRussellseparatedfromthecompanyeffective18January 2008. MrChilcoffseparatedfromthecompanyeffective25February 2008. Mr CoxjoinedthecompanyasGeneralCounselon14January 2008 2008.From1April2007toFebruary Effective 1February Remuneration Report. 2008. HewillbereportedasaManagingBoarddirectorinthe2009 this reportashewasnotaManagingBoarddirectorat31March effective 7May2008.MrCoxisreportedasaseniorexecutivein He wasappointedtotheManagingBoardandasCompanySecretary Mr Baker wasExecutiveVicePresident–Australia. 1 2 3 4 usl hn 9311 2 3,5 1 – 3420 2 8,9 38 583,091 71 2,926,943 22 55 344,240 2,267,910 – – – – 16 16 238,851 659,033 62 29 626,925 953,151 1,166,361 Benjamin Butterfield Former ManagingBoarddirector Russell Chenu Louis Gries Managing Boarddirectors US$ % US$ % US$ % US$ % US$ % ee ae 3864 8 798 2 – 717 0 0,1 22 105,115 10 47,157 – – 12 57,958 78 378,684 Robert Cox Peter Baker Senior executives oetRsel 8,7 7 – – 1258 9 9,5 29 36 192,558 220,066 29 36 192,558 8 220,066 7 – – 6 – – – – – – 5 4 71 64 482,575 3 393,809 2 1 Robert Russell Jamie Chilcoff CashIncentive 401(k)etc NotatRiskRemuneration Superannuation, Benefits, Salary, 2.1 Componentsofremunerationpackagesinfiscalyear2008 Short-Termfollowing table,anddescribedbelow: The proportionsofthe“AtRisk”and“NotAtcomponentsJamesHardie’s remunerationpackagesinfiscalyear2008ares 2. STRUCTUREANDOVERVIEWOFREMUNERATION PACKAGES Non-cash Long-Term Equity olRo 3676 3 930 0 – 4,7 3 3685 47 316,875 52 44 411,974 37 335,766 44 53 35 247,575 32 302,877 411,974 275,084 – 247,575 32 35 – – – 220,066 275,084 – – – – 10 69,300 – 17 – 12 53 136,890 88,191 356,706 48 12 18 56 373,235 82,811 136,890 432,636 47 56 363,973 384,859 Former seniorexecutives Joel Rood Nigel Rigby Brian Holte Grant Gustafson Mark Fisher 2008andwasineligibleforashort-termincentiveorequitygrantinfiscalyear200 Mr Coxjoinedthecompanyon14January Amount includesseverancepaymentofUS$335,323. Options arevaluedusingeithertheBlack-Scholesoption-pricingmodelorMonteCarlomethod,dependingon See section3.2.3.TherewerenoBonusBankpaymentsinrespectoffiscalyear2008. See sections3.2.1and3.2.2ofthisreport.Thisamountincludesallincentiveamountsinrespectfiscalyear2008th Seesection3ofthisreport. Seesection4ofthisreport. Not atRiskremunerationincludesaccruedvacationtimeofUS$36,304 andUS$67,726forMessrsChilcoffRussellrespective A$3.14 weightedaveragefairvalueatgrantdate. value usedforgrantsinfiscalyear2008wereasfollows:5.0%dividendyield; 32.1%expectedvolatility;4.2%riskfreeinter A$1.13 weightedaveragefairvalueatgrantdate.FortheMonteCarlomethod, theweightedaverageassumptionsandave in fiscalyear2008wereasfollows:5.0%dividendyield;30.0%expected volatility; 3.4%riskfreeinterestrate;4.4yearsof options wereissuedunder. FortheBlack-Scholesmodel,weightedaverageassumptionsandfairvalue used f the DeferredBonusProgram. a US$83,635 severancepaymentforMrRussell. 7 156,449 100 – – – – – – – 0 8 6 10 – – – – – – – – – – – 100 1 At Risk Remuneration 3 Cash Incentive 4 (stock options) 2 5 Total atRisk expectedlife;and e cashcomponentof est rate;and 8. hown inthe theplan ly and or grants rage fair

47 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 48 James Hardie Annual Report 2008 FINANCIAL STATEMENTS uainPa aeFtr ttsFurtherDetails FutureStatus Long-Term Incentive PlanName Short-Term Incentive Duration for fiscalyear2009aresetoutbelow: exceeded bymeetingorexceedingspecifiedgoals.Thecompany’s “AtRisk”incentiveplansforseniorexecutivesinfiscalyear CEO. “AtRisk”remunerationconsistsofshort-termincentives(STIs)andlong-term(LTIs). AnLTI targetorSTItarg inclusion inaplandoesnotguaranteeparticipationanyfutureyear. Participationofanydivision/businessunitinaplan Senior executiveswithinthecompanyareeligibletoparticipateinoneormoreincentiveplanscontaining“AtRisk”remunerati 3.1 OverviewofAtRiskcomponentsinfiscalyear2008 3. AT RISKREMUNERATION INFISCALYEAR2008 James HardieIndustriesNVandSubsidiaries Remuneration Report(continued) REPORT DIRECTORS’ performance hurdles (LTIP) withrelativeTSRandROCE 2006 LongTerm IncentivePlan (Option Plan) 2001 JHINVEquityIncentivePlan component withtimevesting Deferred BonusProgramequity under EP/IPPlan EP PlanBonusBankpayments cash component Deferred BonusProgram Component Individual Performance(IP) EP/IP Plan Economic Profit(EP)Component EP/IP Plan fiscal year2009. performance hurdlesfor executives withrevised directors. Extendedtosenior Current forManagingBoard for fiscalyear2009. Senior executivesmovedtoLTIP than ManagingBoarddirectors. Sections3.2.2,6and8below Current forseniorexecutivesother One-off forfiscalyear2008. Section3.2.3(a) below Terminated forfiscalyear2009. long-term incentive. Equity componenttreatedas cash andequitycomponents. One-off forfiscalyear2008with terms. on same forfiscalyear2009 preserved year 2009,butIPcomponent EP/IP planterminatedforfiscal Incentive Program. and replacedwithExecutive Terminated forfiscalyear2009 Sections 3.2.3(c)and8below Sections 3.2.3(b)and8below Sections 3.2.2and6below Section 3.2.1(b)below Section 3.2.1(a)below is atthediscretionof et canbeearnedor on. Eligibilityfor 2008 andtheirstatus year. Participantsweregivenaratingbasedonreviewof which oftheirindividualobjectivestheyachievedandhowach The IPcomponentwasbasedontheparticipant’s performanceratingattheendof PlanYear and/orwhen heorshechangedro increased shareholdervalue. The IPcomponentrelatedparticipants’financialrewardstotheirachieving specificindividualobjectivesthatbenefitedthec Senior executiveswhoparticipatedintheEP/IPplanalsoIPcomponent. (b) IndividualPerformancecomponentoftheEP/IPPlan(IPcomponent) – the remaining twothirdswerecreditedtotheBonusBankofexecutiveandsubjectbeingpaidoutequallyinfollo – one thirdwasconsideredearnedandpaidinthatyear; For anyEPBonusamountsrealisedinoneyearexcessoftheSTItarget: Bonus Bank. The EPcomponentoftheEP/IPPlanhadunlimitedupsideanddownsidelimitedtozero,orlossamountsaccumulatedfromprevi calculating theEPSTIbonusforthatyear. exceeded theEPgoalbyapredeterminedannualamount,percentagewhichwastakenintoconsider If thecompanyonlymetpartofitsEPgoal,anequivalentpercentageSTItargetwaspaid.company’s Economi company’s globalexpectedimprovementinEconomicProfitandadjustingforthechangescompany’s weightedaveragecosto At thestartofeachPlanYear BoardconfirmedtheEPgoalrequiredtoattainSTIt (yearending31March),theSupervisory 2007 tofiscalyear2009wassetin2006. company mustexceedtheEPgoaltorealiseincentivesgreaterthanSTItarget.TheforimprovementinEconomicProf company’s EconomicProfitmustincreaseineachofthefollowingthreeyears(theEPgoal)toachieveSTItarget,anda Board threeyears,withtheassistanceofindependentadvisors,RemunerationCommitteerecommendedtoSupervisory Every considered appropriatebecauseittiedtheincentivespaidtoindividualsdirectlyunderlyingoperatingperformanceoft economic valueinthecompany’s businessmustcontinuetobecreatedinsuccessiveyearsforthefullrealisedincentive Economic ProfitwasdefinedasNetOperatingAfterTax (NOPAT) minuscapitalcharge.ThephilosophybehindtheEPcompon section 3.2.3(a)belowrelatingtoBonusBank). their financialrewardtoanincreaseinEconomicProfit.Ithadcomponentsthatwerebothshort-term(describedhere)andlong The EPcomponentoftheEP/IPPlanwasdesignedtoprovideparticipatingseniorexecutiveswithincentivecompensationwhichdi (a) EconomicProfitcomponentoftheEP/IPPlan(EPcomponent) 3.2.1 Short-termincentives 3.2 DetailsofAtRiskcomponentsinfiscalyear2008 provided thattheperformancetargetwasmetandexecutivecontinuedtomeeteligibilitystandardsforadditionalpayme aeslr x Base salary x Base salary STI targetas STI targetas a %ofbase a %ofbase salary salary x x component of component of of STITarget of STITarget participating participating Percentage Percentage EP/IP Plan EP/IP Plan in EP in IP x x Performance determined multiple or multiple or fraction of EP goal fraction Board rating ompany andindirectly IPBonus = EPBonus = he business. wing twoyears, ieved them. arget bytakingthe c Profitperformance mount bywhichthe paid. Thiswas -term (describedin nts. it forfiscalyear les duringthe rectly related ous yearsinthe ent wasthat f capital. theamount ation when

49 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 50 James Hardie Annual Report 2008 FINANCIAL STATEMENTS price setonthatdate. based ontheBlackScholesoptionpricing model,withtheexercise number ofoptionsusingthevalue theoptionsondateofgrant shareholder value.Theawardlevelswere convertedtoaspecific the individual’s responsibility, performanceandpotentialtoenhance the RemunerationCommittee’s reviewoflocalmarketstandardsand Managing Boarddirectors.Award levelsweredeterminedbasedon Incentive Plan(OptionPlan)forallseniorexecutivesotherthanthe incentives intheformofshareoptionsunder2001JHINVEquity shareholders, JamesHardieprovidedequity-basedlong-term To reinforceexecutives’alignmentwiththefinancialinterest of (b) JHINVEquityIncentivePlan(OptionPlan) in fiscalyears2006and2007werereducedtozero. conditions facingtheUShousingmarket,BonusBankamountsaccrued In fiscalyear2008,asaresultofthedifficultmacroeconomic funds weresubtractedfromtheseniorexecutive’s BonusBank(ifany). a threeyearterm.IfthecompanymisseditsEPgoalinanygivenyear, participants focussedonsustainingEconomicProfitperformanceover mechanism whichwastreatedasalong-termincentivetokeep The EPcomponentoftheEP/IPPlanincludedaBonusBanking (a) EPBonusBankingmechanismunderEP/IPPlan 3.2.3 Long–termincentives August 2008. shareholder approval,willreceiveagrantofrestrictedstockunitsin The CEOisalsoaparticipantinthisprogramand,subjectto Section 8belowandintheNoticeofMeetingsfor2008AGM. restricted stockunitsandtheDeferredBonusProgramaresetoutin departure andotherspecifiedcorporateevents.Furtherdetailsofthe period, subjecttoexceptionsbasedonthereasonsforrecipient’s levelofperformanceduringthis executive hasmaintainedasatisfactory convert intosharesonaone-for-one basisintwoyearsifthesenior units grantedinrespectoftheDeferredBonusProgramvestand entitlements forsharestobeissuedinthefuture.Therestrictedstock Restricted stockunitsareunfundedandunsecuredcontractual and 2007. accumulated forthecompany’s goodperformanceinfiscalyears2006 therefore included75%oftheBonusBankseniorexecutivehad Bonus Programwas75%oftheSTItargetinfiscalyear2008,which The totalvalueofcashandrestrictedstockunitsundertheDeferred incentive) inJune2008. vesting restrictedstockunitsequaltotwothirdsofthevalue(long-term third ofthetotalvalue(short-termincentive)andagranttwoyear Payments underthisplancomprisedofacashpaymentequaltoone Bonus Program. component oftheEP/IPPlanandreasonsforone-offDeferred Board’sSections 5and6explaintheSupervisory assessmentoftheEP incentive) 3.2.2 DeferredBonusProgram(bothshortandlong-term James HardieIndustriesNVandSubsidiaries Remuneration Report(continued) REPORT DIRECTORS’ companies intheS&P/ASX100overperformanceperiod. has achievedatleastthe50thpercentilerelativetocomparable companies intheS&P/ASX100.Nooptionswillvestunlesscompany TSR referstothetotalshareholderreturnofapeergroupcomparable TSR performancehurdle comparable companiesovertheperformanceperiod. the companyhasachievedatleast60thpercentilerelativeto performance relativetothepeergroup.Nooptionswillvestunless The numberofoptionsthatvestwilldependonthecompany’s ROCE translation incomeorexpense. anddeathclaims),anyrelatedforeigncurrency personal injury to thecompany’s compensationforprovenasbestos-related voluntary amounts paidorprovidedforbywayofcontributiontotheAICF(relating For thepurposesofthiscalculation,allROCEcomponentsexcludeany management performanceinareasoverwhichthecompanyhascontrol. and earningsprovidesforacomparisonwithpeercompanies’ the efficiencywithwhichcapitalisbeingusedtogeneraterevenue capital employed(iefixedassetsplusnetworkingcapital).Thismeasures ROCE iscalculatedbydividingearningsbeforeinterestandtaxesnet ROCE performancehurdle granted undertheLTIP areidentifiedonpage58ofthisannualreport. The companiesthatcomprisethepeergroupsforbothtypesofoptions interests ofshareholdersastheydrivethecompany’s businessforward. Board directorsandensuretheymakedecisionsthatrepresentthebest The purposeoftheLTIP wastoretainandmotivatetheManaging with ROCEandTSRperformancehurdles. using theMonteCarlooptionpricingmodel,50:50betweenoptions a TSRhurdle).Thetotalvalueoftheoptionsgrantedwasapportioned foroptionswith options withaROCEhurdleandthefifthanniversary for oftheissuedate(thethirdanniversary vest ontheanniversary Capital Employed(ROCE)performancerelativetoapeergroup,and hurdles: thecompany’s Total ShareholderReturn(TSR)andon options grantedundertheLTIP. Theseoptionsarebasedontwo long-term incentivesandtheperformanceofcompanythrough In fiscalyear2008,ManagingBoarddirectorshadalinkbetweentheir (c) ManagingBoardlong-termincentivesunderLTIP annual report. outstanding equitygrants,aresetoutinsection8onpage57ofthis The detailsoftheOptionPlan,andotherlong-termincentiveplanswith USgrantguidelinesandhadnoperformancehurdles. customary considered thatitwasappropriatetheseoptionsfollownormaland date. AsthemajorityofparticipantsareUSemployees,company dateand50%onthe3rdanniversary 25% onthe2ndanniversary ofthegrant, The optionsgenerallyvested25%onthe1stanniversary oetRsel 10 100 100 100 100 – 100 – – 100 100 – – 100 N/A 100 – – 100 60 – N/A 25 – 100 49 100 – 100 40 25 52 – 75 – 51 N/A N/A 32 75 48 N/A 68 100 – 22 – 78 100 2 Short-termcashincentive 1 Robert Russell Jamie Chilcoff Former seniorexecutives Joel Rood Nigel Rigby Brian Holte Grant Gustafson Mark Fisher Robert Cox Peter Baker Senior executives Benjamin Butterfield Former ManagingBoarddirector Russell Chenu Louis Gries Managing Boarddirectors % Awarded ceasing employment.Allamountsshowninthistablerelatingtofiscalyear2008werepaidJune2008. least 12monthsafterthegrantdateanditwouldonlybeforfeitedduringthatfiscalyearinlimitedcircumstancesallofwhi Board directorsandseniorexecutivesaresetoutbelow. Equitylong-termincentiveisnotincludedinthetableasitdoes not Details ofthe“AtRisk”compensationincludingpercentageawardedorforfeitedinfiscalyea 3.3 AtRiskcomponentspaidinfiscalyear2008 % Forfeited % Awarded % Forfeited Awarded =%ofpossiblefiscalyear2008paymentfromBonusBankamountsaccumulatedin2006and2007 cashpaymentunder DeferredBonusProgram Awarded =%offiscalyear2008STItargetactuallypaid.Includesdiscretionary Forfeited =%ofpossiblepaymentlost. Forfeited =%ofSTItargetlost. which, asstatedinsection3.2.2onpage50,isbasedthe2008STItargetandBonusBankamountsfromfiscalyears2006 1 Long-term BonusBankincentive ch involvetheemployee starttovestuntilat r 2008forManaging in June2008 2007. actually paid. 2

51 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 52 James Hardie Annual Report 2008 FINANCIAL STATEMENTS not automatic. Base salariesarereviewedeachyear, althoughincreasestothemare forpositionsofsimilarresponsibilityinpeer groups. median salary positoned aroundthemarketmedianandisgenerallytargetedat capability, experienceandperformance.Basepayforexecutivesis of thepositionandinternalequitiesbetweenroles,individual’s provides aguaranteedlevelofincomethatrecognisesthemarketvalue who arecriticaltothecompany’s long-termsuccess.Thebasesalary James Hardieprovidesbasesalariestoattractandretainexecutives 4.1 Basesalaries defined contributionretirementplanandsuperannuation. “Not atRisk”remunerationcomprisesbasesalary, non-cashbenefits, YEAR 2008 4. NOTAT RISKREMUNERATION INFISCAL Long-termincentive Long-termincentive Bonus senior executivesoverfutureyearsaresetoutbelow. Theminimumamountpayableisnilinallcases. Details oftheminimumandmaximumvalue“AtRisk”compensationforfiscalyear2008thatmaybepaidtoManagingBoard 3.4 AtRiskcomponentspayableinfutureyears James HardieIndustriesNVandSubsidiaries Remuneration Report(continued) REPORT DIRECTORS’ Bank equity-based ie ib – 1531 145 33,095 71,495 33,095 26,476 125,391 5,673 71,495 57,196 – 12,256 125,391 100,313 4 (USdollars) 21,496 – – – 3 47,427 – – 112,852 64,34529,786 2 114,642 – – – – 112,852 64,34529,786 114,642 – 1 – – Jamie Chilcoff Former seniorexecutives Joel (USdollars) – Nigel Rigby – – – Brian Rood – 755,280 312,458 20122013 2010 Grant Gustafson 2009 20102011 2009 Mark Fisher Holte – Robert Peter Baker – – Senior executives – Benjamin Cox Former ManagingBoarddirector Russell Chenu Louis Butterfield Managing Boarddirectors Gries Robert Russell Options grantedinfiscalyear2008expiredon26May2008. The ManagingBoarddirectorsreceivedperformanceoptionsinFY2008(calendaryear2007).Sincetheseareexpensed whetheror Represents annualSG&Aexpensefortheaggregatefiscalyear2008andstockoptionawardfairmarketvalueestimated usingthe vest, theyarerecordedhere. (for theseniorexecutives)orMonteCarloManagingBoard)option-pricingmodeldependingonplanoptionswere Under the terms of his separation agreement, all vested options at the time of his separation will expire on 17 January 2010. Under thetermsofhisseparationagreement,allvestedoptionsattimewillexpireon17January 3 4 – – – – – 87,774 50,046 – 2 retirement savings plans. retirement savings employees access topension,superannuationorindividual inwhichitoperates, thecompanyoffers country In every 4.3 RetirementPlans/Superannuation countries. in multiple prepare theirincometaxreturnsiftheyarerequiredtolodge to leaveand taxservices executive wellnessprograms,longservice medical andlifeinsurancebenefits,carallowances,membershipof James Hardie’s executivesmayreceivenon-cashbenefitssuchas 4.2 Non-cashbenefits 1 Black-Scholes issuedunder. directors and nottheyever (Millions ofUSdollars) Five yearEBIT(exasbestos)growth future performance. Note: Paststockperformanceisnotnecessarilyanindicatorof veracity ofthedata. data. Note:Mercer(Australia)PtyLtdprovidesnoopiniononthe Graph compiledbyMercer(Australia)PtyLtdusingpubliclyavailable JHX TotalReturnIndexvsUShousingstarts two graphsbelow: returns) mappedagainstchangestoUShousingstartsareshowninthe and five-yeartotalshareholderreturn(includingdividendscapital James Hardie’s five-yearEBITinUS$terms(exasbestosadjustments) 5.1 Companyperformance YEAR 2008 AND COMPANY PERFORMANCEINFISCAL 5. LINKBETWEENREMUNERATION POLICY 04 05 06 Index Rebased at 31 March 2003 07 08 100 140 180 220 31 March 60 20 2003 JHX TotalReturnIndex 31 March 2004 172.2 196.2 280.7 318.9 207.5 Financial YearEnd 31 March 2005 31 March 2006 US HousingStarts 31 March 2007 31 March 2008 – payments underthecorporatecomponentofshort-termincentive As aresult: made undertheEPcomponentofEP/IPPlan. growth inEconomicProfitfiscalyear2008andnopaymentswere growth infiscal2008.Therefore,thecompanydidnotachievetarget The targetsettingdidnotanticipatethenegativeUShousingmarket The EPgoalforthecomponentofEP/IPPlanwassetin2006. 5.2 Marketeffectonremunerationinfiscalyear2008 market hasexistedforanumberofyears. of products),drivingstrongerrevenue.Thisout-performancethe – all eligibleemployeesforfeitedtheirentirelong-termincentivecash – all optionsissuedunderthecompany’s long-termincentiveplans – the optionsissuedtoManagingBoarddirectorsendedlastfiscal introducing highermarginproducts(suchastheColorPlus wood andvinyl,drivingstrongervolume,itscontinuedsuccessin market penetrationattheexpenseofalternativematerialssuchas of thecompany’s demandgrowthstrategiestoachievefurther primary These resultswereachievedmainlythroughthesuccessfulexecution profit and78%oftotalcompanysales. USA FibreCementbusinessstillaccountedfor82%oftotalcompany was stillabletoholdpriceanddeliveranEBITmarginof27.4%.The housing marketinfiscalyear2008,theUSAFibreCementbusiness 11%. Atthesametime,inspiteofdramaticdownturnUS year 2008,withrevenuedownonly9%andsalesvolume business continuedtooutperformthebroaderhousingmarketforfiscal In thefaceoftheseconditions,company’s USAFibreCement their peakinfiscalyear2006. housing startsweredown37%fromfiscalyear2007and55% of fiscalyear2008andthelasttwoquarters2007.New States. IntheUS,housingmarketdeterioratedinallfourquarters intheUnited economic conditionsfacingtheentirehousingindustry In fiscalyear2008,thecompanywasheavilyaffectedbymacro the companyandbonusespaidequityawarded. arrangements aimtoensureadirectlinkbetweentheperformanceof executives is“AtRisk”remuneration.Thecompany’s remuneration a significantproportionoftheremunerationforCEOandsenior As showninthetableatsection2.1onpage47ofthisannualreport, plan werenil; payments accumulatedinfiscalyears2006and2007; ended theyearsubstantiallybelowtheirexerciseprice;and US housingmarket. stark contrasttotheperformanceofcompaniesexposed Australian companies,inparticularresourcesstocks,was year lesslikelytovestasthestrongperformanceofcomparative ® collection

53 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 54 James Hardie Annual Report 2008 FINANCIAL STATEMENTS of performanceduringthisperiod. level number ofRSUsinJune2010iftherecipientmaintainssatisfactory with atwoyearvestingperiodresultinginofsharesequaltothe and twothirdswasgrantedasrestrictedstockunits,alsoinJune2008, interests, onlyonethirdofthebonuswaspaidascashinJune2008 To optimiseseniorexecutiveretentionandalignthemwith shareholder bonus wasjustified,andimplementedtheDeferredBonusProgram. was ofsuchastandardthat,in Boardconcluded thatexecutives’performance above, theSupervisory performance intheextrememarketconditionsdescribedsection5.1 After carefullyassessingtheseniorexecutives’responsetoand – the forfeitureoftheBonusBankfrompreviousyearsmeant – the EPcomponentoftheEP/IPPlandidnotrecogniseormeasure – the EPcomponentoftheEP/IPPlanassumedanexternalgrowth In particular: with rewardsreflectingthisperformanceduringfiscalyear2008. of theremunerationpolicyastheydidnotprovideseniorexecutives short andlong-termincentiveplanswerenotdeliveringtheobjectives Boardbelievesthatthecompany’sThe Supervisory formal“AtRisk” the strategiessetandimplementedbymanagement. quarters ofdeteriorationintheUShousingmarketreflectedwellon continued out-performanceofthemarketthroughsixconsecutive In particular, Boardconsideredthatthecompany’s theSupervisory US housingmarket. done asuperiorjobofdeliveringrelativelystrongresultsinthecurrent economic environmentanddeterminedthatthecompanyhadgenerally company’s performanceinrelationtoitsUSpeerslightoftheoverall Boardreviewedthe The RemunerationCommitteeandSupervisory Boardfromtimetotime. recommended totheSupervisory of remunerationand,ifapplicable,thepolicyitself,are objectives oftheremunerationpolicy. Changestothecomposition yeartomakesurethatitcontinuesachievethe Committee every The compositionofremunerationisevaluatedbytheRemuneration 6. REVIEWOFEXECUTIVEREMUNERATION James HardieIndustriesNVandSubsidiaries Remuneration Report(continued) REPORT DIRECTORS’ these employees. timethatitwasmostdesirousofretaining executives atthevery company hadfewretentionmechanismsinplaceforitssenior than thecompany’s actualperformance;and factors) werebiggerdeterminantsinthesizeofincentivepayouts and declinesorgrowthinUShousingstarts(uncontrollableexternal performance thattookaccountofvolatileexternalmarketconditions environment thatwaspredictable; this instance, an exceptional discretionary this instance,anexceptionaldiscretionary – introducing anewshort-termincentiveplanfocussedonseparate remuneration arrangementsforfiscalyear2009by: Boardresolvedtoamendthecompany’sCommittee andSupervisory of executiveremuneration.Followingtheirreviews,theRemuneration the competitiveness,appropriatenessandeffectivenessofallaspects asked Towers PerrinandGuerdonAssociatestoassistthemreview Board arrangements, theRemunerationCommitteeandSupervisory Before finalisingitsfiscalyear2009executiveremuneration section 3.2.2 onpage50ofthisannualreport. Further detailsoftheDeferredBonusProgramaresetoutin more detailinsection7onpage55ofthisannualreport. The changestoremunerationforfiscalyear2009aredescribedin valid beyond2009. remuneration designalternativesthatpromisetoremainrobustand The RemunerationCommitteeisalsoinvestigatingexecutive the UShousingmarket. appropriately tothesubstantialamountofuncertaintyandvolatilityin The RemunerationCommitteebelievesthattheseinitiativesrespond payments underthecorporatecomponentofEP/IPPlan. market deterioratedfurther, managementwasunlikelytoreceiveany the companycontinuedtooutperformmarketbutUShousing EP/IP Planhadremainedinplaceduringfiscalyear2009,evenif Boardnotedthatifthe In makingthesedecisions,theSupervisory – providing along-termincentiveequitygrantofperformancerestricted – temporarily transferringaportionofLTI targettoSTItarget,withthis exposed totheUSbuildingmaterialsmarket. five yearrelativeTSRissuperiortoapeergroupofothercompanies stock unitsthatdeliversagrantofsharesifthecompany’s threeto portion providedinrestrictedstockunitsinsteadofcash;and EBIT goals dependingontheexecutive’s division; 2009 andbeyond. Remuneration Committee,terminated thiscomponentforfiscalyear external marketvolatilityandunpredictability and,ontheadviceof component oftheEP/IPPlanwasnot suitableintimesofexceptional BoardandRemunerationCommitteerecognisedthattheEP Supervisory value inanexternalgrowthenvironment thatwaspredictible.The to rewardprogressiveimprovementinthedriversofshareholder The EPcomponentoftheoldEP/IPPlanwasspecificallydesigned Incentive Long Term uainPa aeFurtherDetails Incentive PlanName Short-Term Duration following “AtRisk”incentiveplanswillbeinplaceforfiscalyear2009: Boardresolvedthatthe Remuneration CommitteeandSupervisory Following itsreviewoftheexistingremunerationplans, 7.2.1 OverviewofAtRiskcomponentsforfiscalyear2009 7.2 AtRiskremunerationforfiscalyear2009 market hasstabilised. revert backtoagreaterfocusonlong-termresultsoncetheUShousing Boardtohavetheseniorexecutivecompensationmix Supervisory intheUnitedStates.Itisintentof the entirehousingindustry target tobeaone-offreponsethemacroeconomicconditionsfacing BoardconsidersthistransferofLTIThe Supervisory targettoSTI building materialsmarket. period againstapeergroupofothercompaniesexposedtotheUS on thecompany’s relativeTSRperformanceoverathreetofiveyear The remaining30%ofeachseniorexecutive’s LTI targetwillbebased June 2011. in restrictedstockunitswithatwoyearvestingperiod the transferof70%LTI targetinfiscalyear2009willberewarded remain alignedwithexecutives,theenlargedSTItargetattributableto However, toensurethatthelongerterminterestsofshareholders in avolatilemarket. responds tothepracticaldifficultyofsettingvalidlonger-term targets Executive IncentiveProgramforfiscalyear2009.Thisdecisionalso executive’s LTI targetwillbetransferredtotheSTIunder Boardhasresolvedthat70%ofeachsenior market, theSupervisory In ordertofocusmanagementondealingwiththevolatilityinUS 7.1 Changestocompensationmixforfiscalyear2009 7. REMUNERATION FORFISCALYEAR2009 TSR performancehurdles directors withrelative and ManagingBoard LTIP forseniorexecutives two years deferred fora further Program withvesting Executive Incentive Plan (IPPlan) Individual Performance Program Executive Incentive Section 7.2.2.2below Section 7.2.2.1(a)below Section 7.1aboveand below Section 7.2.2.1(b) below Section 7.2.2.1(a) for twoyears)andtheRelativeTSRPlan. Incentive Program(withvestingoftherestrictedstockunitsdeferred executives willreceiveequitylong-termincentivesundertheExecutive Program andIPPlan.BothManagingBoarddirectorssenior Instead, thecompanyhasintroducednewExecutiveIncentive – US participantswillhaveanEBITgoalbasedontheof in theirfunctionandlocation: Participating employeeswillhaveoneofthreeEBITgoals,depending Board. Committee beforetheywereapprovedbytheSupervisory reviewed anddiscussedtheEBITgoalswithRemuneration the currentbusinessenvironmentandoutlook.TheAuditCommittee Each EBITgoalforfiscalyear2009wasderivedinternallybasedon performance againstEBITgoalsadoptedatthestartoffiscalyear. The ExecutiveIncentiveProgramwillrewardmanagementbasedon Description paid infullcashwithinthreemonthsoftheendfiscalyear. performing seniorexecutives.TheremainderoftheSTIpaymentwillbe alignment withlongertermshareholderinterestsandretainstrongly units withanadditionaltwo-yearvestingperiod.Thiswillmaintain at theconclusionoffiscalyear2009,bereceivedinrestrictedstock Any STIpaymentbasedonthisamounttransferredtothetargetwill, in itscurrentstate. acknowledging thedifficultyinsettinglong-termtargetswithmarket opportunities associatedwiththeUShousingdownturn,whilealso will enhanceseniorexecutivefocusontheimmediateissuesand increased infiscalyear2009bytransferring70%ofLTI target.This For thereasonsdescribedinSection7.1above,STItargetwillbe Change tocompensationmix (a) ExecutiveIncentiveProgram Incentive Program)and20%towardsindividualgoals(IPPlan). continue tobeallocated80%towardscorporategoals(Executive senior executivesotherthantheCFOandEVP– Asia Pacificwill Program, theSTItargetforManagingBoarddirectorsandother Excluding theone-offallocationofLTI totheExecutiveIncentive 7.2.2.1 Short-termincentives 7.2.2 DetailsofAtRiskcomponentsforfiscalyear2009 – Asia PacificparticipantswillhaveanEBITgoalbasedonthe – Managing Boarddirectorsandcorporatestaff willhaveanEBITgoal under theIPPlan. All otherstrategic,financialandindividual objectiveswillbemeasured calculated andindexedinthesamemannerasforUSparticipants; and based onJHINV’s consolidatedresultsinUS$,withtheUScomponent depending onwhetherUShousingstartsincreaseordecrease; US businessinUS$.TheEBITgoalwillbeindexedupordown performance oftheAsiaPacificregion.

55 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 56 James Hardie Annual Report 2008 FINANCIAL STATEMENTS housing startsarelowerthananticipated. than anticipatedandprovidesappropriateincentiveopportunitiesif the companyagainstwindfallpaymentsifhousingstartsaregreater Boardconsidersthistobeappropriateasitprotects The Supervisory EBIT goal. that fromtheinitialestimateusedtoset US housingstartsvary housing starts.TheEBITgoalwillbeadjustedbasedonthedegree for theManagingBoarddirectorsandcorporateexecutives)toUS goal forUSparticipants(andthebusinesspartofEBIT goal BoardproposedtoindextheEBIT these conditions,theSupervisory level ofuncertaintyandvolatilitywhichmadeforecastingdifficult.Given housing marketwashighlycyclicalandcurrentlyexperiencingahigh punitive orgenerousduetoexternalfactors.ItnotedthattheUS Board hadastrongdesiretodesignplanthatwouldnotbeoverly In implementingtheExecutiveIncentiveProgram,Supervisory Executive IncentiveProgrampayoutschedule based onthepayoutschedulebelow: capping outat200%ofSTItargetif120%theEBITgoalisachieved, if theEBITgoalisreached;andextrarewardsforout-performance, sliding scalepayingnilat70%oftheEBITgoal;100%STItarget target, dependingonperformance.Paymentswillcommencea Participants mayearnbetween0%and200%oftheirenlargedSTI James HardieIndustriesNVandSubsidiaries Remuneration Report(continued) REPORT DIRECTORS’ Payout (% of STI target) 100 150 200 250 50 0 0130 70 80 Performance (%ofEBITgoal) 90 100 110 120 the company’s fiscalyear2009RemunerationReport. Further detailsoftheExecutiveIncentiveProgramwillbecontainedin be capped. EP/IP Plan,totalpayoutsundertheExecutiveIncentiveProgramwill expected, theEBITgoalwillalsoincrease.Inaddition,unlikeprior and theoldEP/IPPlanisthatifhousingstartsimprovesoonerthan The maindifferencebetweenthenewExecutiveIncentiveProgram will becapped. the futurewithoutterminatingbothplans.PaymentsunderIPPlan Committee torespondchangesinthecompany’s environmentin old IPcomponentintoaseparatePlanwillallowtheRemuneration as theoldIPcomponentofEP/IPPlan.Theseparation component ofthatplan.ThenewIPPlanfollowsthesameformat The terminationoftheEP/IPPlanincludedIP (b) IndividualPerformancePlan(IPPlan) 2 1 – 80% xUS$900,000150%=US$1,080,000tobepaidincash receive 150%oftheSTItarget,asfollows: Incentive Program.Basedon110%oftheEBITgoal,CEOwould the STItargetaretestedbasedonperformanceunderExecutive performance at110%ofEBITgoal.70%theLTI targetand80%of of US$900,000(theCEO’s fiscalyear2009LTI andSTItargets) operates assumesanLTI targetofUS$1,800,000andanSTI The followingexampleofhowtheExecutiveIncentiveProgram Worked Example – 315,000 RSUsxUS$8/share=US$2,520,000 – 315,000 RSUsxUS$4/share=US$1,260,000 2011, theycouldbeworth: After anadditionaltwoyearvestingperiod,whentheRSUsvestin – 70% xUS$1,800,000150%=US$1,890,000tobesettledinRSUs Being amountofSTItargetundertheExecutiveIncentiveProgram. Being amountofLTI targettransferredtoSTIunderthe Executive IncentiveProgram. 315,000 RSUs. in MayorJune2009.AtavalueofUS$6/sharethisisequivalentto May orJune2009. STI target LTI target 2009 2009 x x 80% 70% 2 1 x= x on performance Payout based EBIT goal against = 2-year vesting Value tobe Value tobe received as received in RSUs cash xriepro Until November2015. Yes, andbeforethe Fifth onthelastBusinessDay ofeachsixmonthperiodfollowingtheThirdAnniversary andGeneralCounsel). ManagingBoarddirectors(CEO, CFOandCompanySecretary 22November2005to 2008. Exercise period Retesting Performance period ofeach grant. 10thanniversary Offered to Off-cyclegrantsmadetoseniorUSexecutives on19October2001inexchangefortheterminationofshadow Seniorexecutives,notManaging Boarddirectors. Plan (MBTSOP) dateand50%veston ofthegrant;25%veston2ndanniversary 25%ofoptionsvestonthe1stanniversary Transitional 2005 ManagingBoard Expiration date Vesting schedule Offered to Plan (OptionPlan) 2001 JHINVEquityIncentive 8. KEYTERMSOFOUTSTANDING EQUITYGRANTS market. Thepeergroupis: For fiscalyear2009thecompanywillreplaceASX100peergroupwithaofothercompaniesexposedtoUSbuil important componentofalong-termequityincentiveplan. Boardcontinuetobelievethatarelativeperformancemeasureoftotalshareholderr The RemunerationCommitteeandSupervisory Relative TSRRSUs 7.2.2.2 Long-termincentive No significantchangesto“NotatRisk”remunerationareplannedforfiscalyear2009. 7.3 NotAtRiskremunerationforfiscalyear2009 Further detailsoftheRelativeTSRRSUsandPlanaresetoutinSection8below2008NoticeMeeting potential oftheplanfromthreetofiveyears. on asbestos-relatedmattersbyothercompanieswithasbestosexposures,membersofthemediaandothers.Inaddition,itextend This re-testingreflectsthefactthatcompany’s sharepricecanbesubjecttoshort-termfluctuationsrelatingpublicc willbemeasuredoverafiveyearperiod).AnyRSUsthathavenotvestedaftertimelapse. anniversary (witheachre-testextendingthemeasurementperiodbyafurthersixmonths suchthatr untilthefifthanniversary anniversary The performancehurdlewillbetestedafterthreeyearsfromthegrantdateandretestedatendofeachsixmonthperiodfo Each RelativeTSRRSUwillvestuponsatisfactionofperformancehurdlesdescribedbelow: rxUGValmont Industries 33% Slidingscale 0% Watsco, Inc %ofRelativeTSRRSUsvested Texas Industries,Inc QuanexBuildingProductsCorp. USG MuellerWater Products,Inc Headwaters,Inc > Vulcan Materials 51st –74thPercentile MartinMariettaMaterials, Inc SimpsonManufacturingCo. 50th Percentile < 50thPercentile Performance againstpeergroup MDUResourcesGroup,Inc OwensCorning EagleMaterials,Inc Louisiana-PacificCorp. Valspar Corporation Trex Williams Sherwin NCI BuildingSystems,Inc Masco Corporation Lennox International,Inc Acuity Brands,Inc 75thPercentile

Stock Option Grantedon22November 2005. Annualgrantsmade inDecember2001,2002,2003,2004and2005,November20072007.

Anniversary. date. the 3rdanniversary stock awards,previouslygrantedinNovember1999and2000,tonew employeesinMarch 2007. 100% omment anddisclosures llowing thethird e-testing atthefifth s. s themotivational eturn isan ding materials

57 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 58 James Hardie Annual Report 2008 FINANCIAL STATEMENTS xiaindt Onvesting,theRSUs convert intosharesgrantedonaone-for-one basis. ofthe grant 100%vestonthe2ndanniversary SeniorexecutivesandCEO butnototherManagingBoarddirectors. page 109ofthisannualreport. – Nil 100% ofperformancerightsvestif thecompany’s TSRisinatleastthe75thpercentileofpeer group. Details ofequityincentiveplansthat expired duringfiscalyear2008areprovidedinNote16totheconsolidated financialst Expiration date – Between 50thand75thpercentile,vestingisonastraightlinebasiswiththecompany’s rankingagainstthe Vesting schedule –50%ofperformancerightsvestifthe company’s TSRisatthe50thpercentileofpeergroup. Option ExercisePrice –0%ofperformancerightsvestifthe company’s TSRisbelowthe50thpercentileofpeergroup. Offered to (RSUs) – 100% oftheoptionsvestifcompany’s performanceisinatleastthe85thpercentileofpeergroup. (Restricted StockUnits Deferred BonusProgram – Between the60thand85thpercentile,vestingisonastraightlinebasiswithcompany’s rankingagainst –50%oftheoptionsvestifcompany’s ROCEisatthe60thpercentileofpeergroup. –0%oftheoptionsvestifcompany’s ROCEisnotatthe60thpercentileofpeergroup. TSRperformanceagainstapeergroup ofcomparablecompaniesintheS&P/ASX100attimegrantand Vesting criteria ROCEperformanceagainstthefollowing globalpeergroupofbuildingmaterialscompaniesinUSA,Europe Until5yearsfromthegrantdate. Yes, fortheTSRtrancheonly, onthelastBusinessDayofeachsixmonthperiodfollowingThirdAnniversary andGeneralCounsel). ManagingBoarddirectors(CEO,CFOandCompanySecretary 3yearsto5fromthegrantdate. Performance condition – 100% ofperformancerightsvestifthecompany’s TSRisinatleastthe75thpercentileofpeer group. Exercise period – Between 50thand75thpercentile,vestingisonastraightlinebasiswiththecompany’s rankingagainstthe Retesting – 50% ofperformancerightsvestifthecompany’s TSRisatthe50thpercentileofpeergroup. Performance period – 0% ofperformancerightsvestifthecompany’s TSRisbelowthe50thpercentileofpeergroup. Offered to 2006 (LTIP) Long TermIncentivePlan James HardieIndustries TSRperformancehurdlecomparedtoapeergroupofcompaniesintheS&P/ASX200Indexongrantdate Performance condition James HardieIndustriesNVandSubsidiaries Remuneration Report(continued) REPORT DIRECTORS’

Grantedon21November2006andAugust2007. One-offgrantmadeinJune2008. Grant toCEOwillbemadeinAugust2008subjectshareholderapproval atthe2008AGM. For theTSRtranche: For theROCEtranche: and beadjustedtotakeintoaccountadditionsdeletionsS&P/ASX100duringtherelevantperiod. excluding financialinstitutions,insurancecompanies,propertytrusts,oilandgasproducersminingcompanies For theTSRtranche: Materials CoandTheSiamCementPlc. Wienerberger AG,Lousiana-PacificCorporation,FloridaRockIndustriesInc,CRHplc,USGVulcan Fletcher BuildingLimited,MartinMariettaMaterialsInc,SaintGobain,EagleTexas Industries, Group Limited(2006grantonly),Weyerhaeuser, LafargeSA,CSRLimited,CemexSAdeCV, NichihiaCorp, and Australiaspecialisinginbuildingmaterials:BoralLimited,Valspar Corporation,Hansonplc,Rinker For theROCEtranche: and beforetheFifthAnniversary. Vesting criteria excluding thecompanieslistedin200FinancialsandPropertyTrust indices. peer group(+2%foreachpercentileoverthe50thofgroup). the peergroup(+2%foreachpercentileover60thofgroup). peer group(+2%foreachpercentileoverthe50thofgroup). atements, startingon iclya 07 2,9 4656 158 320 0,5 1110 1,181,322 4 – 1,092,877 111,160 – 206,351 3,488,254 3 79,849 13,200 – 2 101,282 61,598 OtherNon- Rightsand 121,498 57,776 466,516 and401(k) 1 755,110 Fiscal Noncash 57,628 year 322,497 Fiscal year2008 2007 $ 14,287 $85,263 $312,507 $ $ 1,062,743 $ Total RemunerationforManagingBoarddirectors – $191,543 1,705,290 $ 5,762,453 2,405,107 200,161 Fiscal year2007 72,317 Fiscal year2008 596,181 Benjamin Butterfield Former ManagingBoarddirector 1,738,430 Fiscal year2007 786,612 Fiscal year2008 Russell Chenu Fiscal year2007 Fiscal year2008 Louis Gries Managing Boarddirectors annuation Name Base Super- Stock Allowances, Appreciation Relocation Expatriate Pay (US dollars) Benefits, Details oftheremunerationeachManagingBoarddirectorJamesHardiearesetoutbelow: Bonuses 9.1 TotalremunerationforManagingBoarddirectorstheyearsended31March2008and2007 9. REMUNERATION TABLES FORMANAGINGBOARDDIRECTORSANDSENIOREXECUTIVES and Mr Butterfieldseparatedfromthecompany effective1October2007.SeveranceamountincludeslumpsumcashpaymentofUS$335, Options arevaluedusingeithertheBlack-Scholesoption-pricingmodelorMonteCarlomethod,dependingon Includes theaggregateamountofallnoncashbenefitsreceivedbyexecutiveinyearindicated.Examplesben Bonuses inrespectofeachfiscalyeararepaidJunethefollowingyear. The amountinfiscalyear2008includes received byourexecutivesincludemedicalandlifeinsurancebenefits,carallowances,membershipinexecutivewellnessprogra consulting agreementisnotterminatedearlierinaccordancewithitsterms. fee equivalenttohiscurrentannualsalary, atthetimeofhisseparation, onamonthlybasisforuptoperiodof24months addition, aspartofhisseverancebenefits,MrButterfieldenteredintoatwo-year consultingagreement,underwhichhewillb terms ofourEP/IPPlanandDeferredBonusProgram,respectively. earned inrespectoffiscalyear2008andthecashcomponentDeferredBonusProgram.Seesection3.2.13.2.2foras Mr GriesincludeStockAppreciationRights.InDecember2007,theremaining StockAppreciationRightsvestedandwereexercised dividend yield;32.1%expectedvolatility;4.2%riskfreeinterestrate;andA$3.14weightedaveragefairvalueatgrantdate. Monte Carlomethod,theweightedaverageassumptionsandfairvalueusedforgrantsinfiscalyear2008werea yield; 30.0%expectedvolatility;3.4%riskfreeinterestrate;4.4yearsoflife;andA$1.13weightedaveragefairva Scholes model,theweightedaverageassumptionsandfairvalueusedforgrantsinfiscalyear2008wereasfol were issuedunder, andthefairvalueofoptionsgrantedareincludedincompensationduringperiodwhich ve Primary Post-employment Equity Other 1840 6,0 – 6,2 6,3 3533 886,953 335,323 61,430 260,028 – $335,323 $87,979 $356,261 $ 5,717,249 $ 2,072,928 $249,211 $ $897,884 61,702 1,717,663 – 168,470 – 1,415,961 133,451 223,959 63,238 44,032 238,851 712,430 – $ $ 3,414,335 $24,741 $161,380 $ 1,588,941 $143,477 $659,033 $ 836,763 4 1 Benefits 2 Benefits Options 3 rcrigSvrne Total recurring Severance lue atgrantdate.Forthe The figuresstatedherefor all incentiveamounts efits thatmaybe provided thatthe st. FortheBlack- ms andtaxservices. e paidaconsulting lows: 5.0%dividend the planoptions s follows:5.0% . ummary ofthe ummary 323. In

59 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 60 James Hardie Annual Report 2008 FINANCIAL STATEMENTS ocs ad41k OtherNon- and401(k) Noncash annuation Name Base Super- Allowances, Expatriate Relocation Benefits, Pay (US dollars) Details oftheremunerationeachseniorexecutiveJamesHardiearesetoutbelow: and 9.2 Totalremunerationforseniorexecutivestheyearsended31March2008and2007 Bonuses James HardieIndustriesNVandSubsidiaries Remuneration Report(continued) REPORT DIRECTORS’ iclya 07 0,3 3925 819 348 9,4 608 1,024,146 – 1,019,129 – 6,058 – 957,134 295,748 $4,570,192 – – $ 13,408 $110,971 277,998 2 $1,206,975 48,159 $51,277 12,842 – $157,908 359,235 1 $1,572,678 44,136 $1,470,383 Fiscal year 2007 301,538 588,196 282,435 Fiscal year2008 373,192 Total remunerationforseniorexecutives 981,587 – – Fiscal year2007 310,961 Fiscal year2008 – Robert Russell Fiscal year2007 104,913 22,673 Fiscal year2008 – 55,046 Jamie Chilcoff 350,488 Former seniorexecutives Fiscal 11,619 301,538 Fiscal year2008 295,748 Joel Rood 18,896 year Fiscal year2007 13,408 Fiscal year2008 142,914 N/A Nigel Rigby N/A N/A 24,044 N/A 2007 Fiscal 254,808 Fiscal year2008 346,849 Brian Holte year Fiscal year2007 301,538 Fiscal year2008 N/A Grant Gustafson N/A N/A N/A 2007 Fiscal year2007 Fiscal year2008 Mark Fisher Fiscal Fiscal year2008 Robert Cox year Fiscal Fiscal year2008 N/A N/A N/A N/A 2007 year N/A N/A N/A N/A 2007 Peter Baker Senior executives Includes theaggregateamountofallnoncash benefitsreceivedbytheexecutiveinyearindicated.Examplesofnoncashben Bonuses inrespectofeachfiscalyearare paidinJuneofthefollowingfiscalyear. Theamountinfiscalyear2008includes terms ofourEP/IPPlanandDeferredBonusProgram,respectively. earned inrespectoffiscalyear2008andthecashcomponentDeferred BonusProgram.Seesection3.2.1and3.2.2foras leave, andtaxservices. received byourexecutivesincludemedicalandlifeinsurancebenefits,car allowances,membershipinexecutivewellnessprogra 5 5 6 5 Primary Post-employment Equity Other 7 8 ,8,5 $ 7,4 $2543 054 ,7,8 $3080 365 $5,671,148 $83,635 $300,890 $1,776,182 $90,514 $265,433 572,040 $ 684,613 – $2,582,454 42,586 50,93513,298 – 286,294 75,77883,635 290,804 768,869 9,611 41,966 258,929 – 299,646 – 616,414 – 3,879 190,408 315,000 69,30037,827 326,510 – 136,890 713,610 315,000 88,19136,387 10,177 192,783 71,072 34,307 – – 156,449 – 299,823 632,621 313,077 82,81129,446 12,681 65,502 164,951 – 29,655 12,418 – 2,077 2,332 809,948 – 326,510 86,538 136,890 $ – $ 25,505 $ $– $ 487,938 30,712 $ 51,296 $ 6,728 $ 341,244 57,958 11,958 299,823 – 800,686 1 Benefits 2 Benefits Options 3 recurring 4 Svrne Total Severance all incentiveamounts efits thatmaybe ms, long service ms, longservice ummary ofthe ummary 1Nv0 .00 1100 2990 – – 1100 2.9700 101,000 2.1400 – 110,000 – – 2.9800 – 66,000 2.1700 – 68,000 – 2.1525 – – 230,000 – 2.9700 – – 60,000 2.1400 – – – 65,000 2.1525 1.1610 – – 90,000 – – – – 2.9800 – – – 437,000 2.1700 – – 445,000 – – – 299,970 – 101,000 – – 235,400 – – 110,000 – – – – 90,000 2.9700 – – 2.1400 381,000 1.1610 – – – 8.4000 – 415,000 – 93,000 4 – 21Nov06 – – 8.4000 – – 178,800 3 – 21Nov06 60,000 – 90,000 130,200 2.1525 2 – – – 60,000 1,000,000 1.0430 – – 495,075 90,000 – 1 325,000 – – 230,000 – – 0.6481 208,980 – 230,000 180,000 325,000 – 8.5300 178,200 – 180,000 7.8300 – 60,000 0.4233 – 22Nov05 – 6.3000 – 29Aug07 139,100 324,347 – 7.8300 60,000 65,000 22Feb05 – – – Butterfield 29Aug07 193,725 8.4000 65,000 – 90,000 – Benjamin – – 21Nov06 1,302,260 8.4000 437,000 90,000 – 965,650 Former ManagingBoarddirector – – 21Nov06 – 0.3847 8.5300 445,000 175,023 – – 22Nov05 – – – – 93,000 7.8300 – – 107,973 29Aug07 381,000 0.3571 1,131,570 93,000 7.8300 – – 888,100 381,000 – 40,174 29Aug07 93,000 415,000 8.4000 – – 415,000 325,000 21Nov06 6.3000 8.4000 338,975 22Feb05 325,000 325,000 Russell Chenu 2,152,500 21Nov06 2.11 1,000,000 1,000,000 8.5300 210,633 325,000 325,000 7.0500 – 22Nov05 324,347 325,000 262,516 5Dec03 137,296 6.4490 437,539 324,347 Grant 168,321 3Dec02 324,347 437,539 5.0586 1.98 175,023 17Dec01 3.0921 160,700 19Oct01 200,874 71,732 1April 200,874 perright 40,174 Grant 3.1321 19Oct01 Louis Gries Managing Boarddirectors Price at Exercise Value Weighted Holding Total 9.3.1 OptionsgrantedtoManagingBoarddirectors at 9.3 EquityHoldingsfortheyearsended31March2008and2007 Value Exercise Lapse at at Fair Value 8 at Holding 7 Average 6 5 4 3 Name Date (A$) 2007 Granted (US$) Vested Exercised (US$) Lapsed (US$) 2008 per right Mr Russell separated from the company effective 18 January 2008.Severanceamountincludes post-employmentconsultingfeesand Mr Russellseparatedfromthecompanyeffective18January 2008.MrChilcoffentered intoatwo-yearconsultingagreement,u Mr Chilcoffseparatedfromthecompanyeffective25February 2008andbecameamemberoftheManagingBoard effective7May2008. Mr Coxjoinedthecompanyon14January Messrs Baker, HolteandRoodwerenotexecutivesforwhomthecompanyreportedremunerationinfiscalyear2007. Other non-recurringincludescashpaidinlieuofvacationaccrued,aspermittedunderthecompany’s USvacationpolicyandCa Options arevaluedusingtheBlack-Scholesmodelandfairvalueofoptionsgrantedincluded incompensationduringthe Weighted Average FairValue perrightisestimatedonthedate ofgrantusingtheBlack-Scholesoption-pricingmodelorMonte Value atLapse/right =FairMarketValue ofasharethecompany’s stockatLapselesstheExercisepriceperright. Value atExercise/right =Value Market Value ofashare ofthecompany’s stockatExerciselessthepriceperright. Total Value atGrant=Weighted Average Fair Value perrightmultiplied bynumberofrightsgranted. and thisisrecordedasOtherNon-Recurringintable. post-employment consultingagreementwiththecompany. MrRussellreceivedcashofUS$67,726aspaymentforhisaccruedvacatio insurance benefitsupto18monthsfollowinghisseparationdate.Theexerciseperiodforvestedoptionswasextendeduntil of 24monthsprovidedthattheconsultingagreementisnotterminatedearlierinaccordancewithitsterms.MrRussellwillals which hewillbepaidaconsultingfeeequivalenttohiscurrentannualsalary, atthetimeofhisseparation,onamonthlybas insurance benefitspaidinfiscalyear2008.Aspartofhisseparationbenefits,MrRussellenteredintoatwo-yearconsulting as paymentforhisaccruedvacationtimeandthisisrecordedOtherNon-Recurringintable. months providedthattheconsultingagreementisnotterminatedearlierinaccordancewithitsterms.MrChilcoffreceivedcash will bepaidaconsultingfeeequivalenttohiscurrentannualsalary, atthetimeofhisseparation,onamonthlybasisforup yield; 30.0%expectedvolatility;3.4%riskfreeinterestrate;4.4yearsoflife;andA$1.13weightedaveragefairva options vest.Theweightedaverageassumptionsandfairvalueusedforgrantsinfiscalyear2008wereasfoll pricing method,depending ontheplanoptionswere issuedunder. 1 per right 2 per right lue atgrantdate. toaperiodof24 3 ows: 5.0%dividend agreement, under is foruptoaperiod 1Mrh Value 31March periodinwhichthe o receivehealth ofUS$36,304 theendofhis Carlo option- lifornia law. nder whichhe health n time 4

61 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 62 James Hardie Annual Report 2008 FINANCIAL STATEMENTS Price at Grant Exercise Value Weighted Holding Total 9.3.2 Optionsgrantedtoseniorexecutives at per Value Exercise James HardieIndustriesNVandSubsidiaries Lapse at at Remuneration Report(continued) right Fair Value REPORT DIRECTORS’ at 1 Holding Average April Grant 1Nv0 840 1850 5,0 2109 965 – 1,7 – 965 1.8364 2.0323 39,625 95,000 – – 1.0182 0.9903 135,000 – 118,875 – 95,000 – – – – – 0.3571 – – 222,222 1.82 1.8364 2.0323 – 39,625 39,625 95,000 95,000 291,069 – 45,000 – 386,137 158,500 – 180,000 158,500 190,000 – 183,276 8.4000 190,000 0.9903 180,000 8.9000 – 21Nov06 250,000 118,875 45,000 95,000 1Dec05 – – 5.9900 – 10 0.9903 – 14Dec04 277,778 2.82 0.3571 –66,000 – 1.0430 – – – 220,066 5 – Dec 40,174 – 222,222 Dec 40,174 – – 03 7.050066,000 – – 39,625 14,346 1.9964 132,000 0.99 137,676 3 07 95,000 66,000 146,500 291,069 132,000 40,174 386,137 158,500 6.3800 1.0182 17 –135,000 – – 6.3800 – 158,500 190,000 – – 10Dec07 8.4000 190,000 19 Dec 0.9903 8.9000 21Nov06 250,000 – 194,444 – 1Dec05 Dec – 3.1321 – 4.15 – Oct 19Oct01 02 Robert Russell 192,558 – 1.96 – 14 40,174 45,000 01 – Dec 6.4490 – – 183,276 5.9900135,000180,000 0.9903 247,575 40,174 04 194,444 – 01 0.9903 277,778 250,000 14,346 5.0586 – 1.8364 – – 222,222 –158,500 111,000 3 1.8364 2.0323 – 3.0921 – 0.9903 –190,000 40,174 275,084 – – 158,500 1.9299 68,283 277,778 17 71,939 – 151,400 – – 1.0182 – 6.3800 –180,000 138,170 19 – 28,904 Dec – – 10Dec07 36,625 111,000 – 53,154 Dec 3.1321 68,283 – 292,473 6.3800 – – – Oct 19Oct01 146,500 02 – 111,000 Jamie Chilcoff 10Dec07 – – 146,500 – 68,283 138,170 –33,000 1.0430 – 8.9000 – 1.46 – Former seniorexecutives – 01 0.99 6.4490 – –27,000 21 0.6481 13Mar07 – – 01 39,625 138,170 Nov 1 291,069 0.6481 8.4000158,500 – – 247,575 5.0586 – 0.4233 95,000 06 Dec – – Joel Rood 386,137 111,000 3.08 8.9000190,000 250,000 05 3.0921 – – 14 – 68,283 Dec – – 183,276 71,939 5.9900180,000 – 0.3847 5 04 – 92,113 – – 28,904 Dec 3 1.8364 0.3571 – –158,500 6.3800 111,000 35,436 34,419 2.0323 03 7.050033,000 – –20,003 –190,000 Dec 275,064 0.4233 – 68,283 10Dec07 220,066 277,778 17,499 02 6.449027,000 37,850 – – 92,113 222,222 – 111,000 1.0182 –180,000 – 68,283 292,187 – 1.0430 – – –132,000 1.61 151,400 291,069 2.0323 – 2.67 92,113 – 151,400 – 158,500 40,000 – – Nigel 4.18 8.3500 6.3800 – 158,500 0.6481 – – 0.4233 6.3800 8.4000 – Rigby 17 27Mar07 10Dec07 – – 0.3847 10Dec07 21Nov06 Dec – – Brian Holte 8,467 20,003 – –74,000 21 0.6481 01 5.058620,003 Gustafson – 39,625 Nov 1 291,069 8.4000158,500 – 2.11 95,000 06 –68,283 Dec –47,619 – Grant 386,137 0.4233 8.9000190,000 0.9903 – 05 14 –92,113 0.3847 40,174 Dec 5 – 183,276 – 5.9900180,000 – – 04 Dec 137,676 7.0500132,000 132,000 40,174 – 03 3 – – 14,346 – Dec –27,500 – 1.8364 – 40,174 17 – – 47,959 02 6.449074,000 – 19 Dec – – 28,904 Oct 01 5.058668,283 68,283 – 20,000 35,436 – 01 3.092192,113 10 81,292 3.1321 47,157 –47,619 Dec – 40,000 21 19Oct01 07 6.3800 40,000 Nov Mark Fisher 6,875 50,501 8.9000 06 8.400027,500 1Dec05 Peter Baker Senior executives Name Date (A$) 2007 Granted (US$) Vested Exercised (US$) Lapsed (US$) 2008 per right 4 3 2 1 Weighted Average FairValue perrightisestimated onthedateofgrantusing Black-Scholesoption-pricingmodel. Value atLapse/right=FairMarketValue ofasharethe company’s stock atLapselesstheExercisepriceper right. Value atExercise/right =Value Market Value ofashare ofthecompany’s stockatExerciselessthepriceperright. Total Value atGrant=Weighted Average Fair Value perrightmultiplied bynumberofrightsgranted. 1 per right 2 per right 3 1Mrh Value 31March 4 1 US$850,000forcurrentyear. 2005.Term Threeyearterm,commencing 10February isautomaticallyextendedon9thdayof eachFebruary Base salary Length ofcontract Components Details Details ofthetermsCEO’s employmentcontractareasfollows: 10.1 CEO’semploymentcontract The main elementsofthesecontractsaresetoutbelow. Remuneration andothertermsofemploymentfortheCEOCFOcertainseniorexecutivesareformalisedin 10. EMPLOYMENTCONTRACTS out below: Changes incurrentandformerManagingBoarddirectors’relevantinterestsJHINVsecuritiesbetween1April200731Mar 9.3.3 ManagingBoarddirectors’relevantinterestsinJHINV c. continuation ofhealthandmedical benefitsatthecompany’s expensefortheremainingtermof b. amount equivalentto1.5timesthe executive’s Average STIactuallypaidinuptothepreviousthreefiscal atthetimeoftermination;and a.amountequivalentto1.5timesthe annualbasesalary The Post-termination Consulting TheCEOmayceaseemployment withthecompanybyprovidingwrittennotice. ThecompanymayterminatetheCEO’s employmentforcauseornotcause. Ifthecompanyterminate Termination byJamesHardie Resignation eie otiuinPa TheCEOmayparticipateintheUS401(k)definedcontributionplanuptoannualIRSlimit.co TheRemunerationCommitteerecommendsthecompany’s andCEO’s performanceobjectives,andthe –20%ofthisincentivetargetisbasedontheCEOmeetingorexceedingpersonalperformanceobjectives. Upontheapprovalofshareholders,stockoptionsorotherequityincentivewillbegrantedeachyear. – 80% ofthisincentivetargetisbased onthecompanymeetingorexceedingpre-determinedperformance Defined ContributionPlan Long-term incentive AnnualSTItargetis100%ofannualbasesalary: Short-term incentive ejmnBtefed––6100180,000 442,000 3,867,544 621,000 134,000 882,000 – 308,000 2,985,544 – 20,000 127,675 15,000 127,675 Managing Boarddirectorsorseniorexecutives. The companydidnotgrantloanstoManagingBoarddirectorsorseniorexecutivesduringfiscalyear2008.Therearenoou 9.4 Loans Benjamin Butterfield Former ManagingBoarddirector Russell Chenu Louis Gries Managing Boarddirectors Actual fiscal year 2008 salary isshown in section9.1onpage 59ofthisannual report. Actualfiscal year2008salary date, thatitdoesnotwantthetermtorenew. for anadditionaloneyearunlesseitherpartynotifiestheother, 90daysinadvanceoftheautomaticrenewal the following: employment, notforcause,ortheCEOterminateshisemployment“forgood reason”thecompanywillpay will matchtheCEO’s contributionsintotheplanuptoannualIRSlimit. of executiveintheUS. The recommended numberofoptionsorotherformequitytobegrantedwillappropriateforthislevel Program andIPPlaninfiscalyear2009. was calculatedundertheEP/IPPlaninfiscalyear2008,andwillbeExecutiveIncentive Boardforapproval.TheCEO’sperformance againsttheseobjectives,totheSupervisory short-termincentive and LTIP, theCEO’s outstandingoptionswill not expireduringanypost-terminationconsulting period. consulting andnon-compete. Underthetermsofequity incentive grantsmadetotheCEOunder theMBTSOP andannualtargetincentive inexchangeforthis agreement, theCEOwillreceiveannual basesalary agreements andexecutesareleaseof claims followingtheeffectivedateoftermination.Underconsulting for aminimumoftwoyears,aslong theCEOmaintainscompany’s non-competeandconfidentiality 1 April2007 objectives; and agreement andtheconsulting referencedbelow. years asCEO;and company willrequesttheCEO,and CEOwillagree,toconsultthecompanyuponterminatio CUFS at 31 March2008 CUFS at 1 Salary reviewed annually in May by the Supervisory Board. reviewedannuallyinMaybytheSupervisory Salary 1 April2007 Options at exercised/forfeited Options granted 29 August 2007 29 August Options Options at31 March tstanding to ch 2008areset contracts. 441,000 n mpany 2008 s the

63 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 64 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 1 TheManagingBoarddirectorsreceiveadditionalbenefitsduetointernationalassignment:housing Other International Assignment Components Details Employment contractsfortheCEOandCFOalsospecifyfollowingbenefits: 10.3 BenefitscontainedincontractsforCEOandCFO totheCFO’s Thecompanywillcontribute9%ofgrosssalary nominatedsuperannuationfund. IfthepositionofCFOisdeterminedtoberedundantorsubjectamaterialdiminutioninst ThecompanyorCFOmaycease theCFO’s employmentwiththecompanybyprovidingthreemonths’notice Redundancy ordiminutionofrole Resignation orTermination Superannuation Upontheapprovalofshareholders,stockoptionsorotherlong-termequitywithperformancehurdles A$816,000forcurrentyear. basedontheCFOmeetingorexceedingpersonal AnnualSTItargetis33%ofannualbasesalary Long-term incentive Fixedperiodofthreeyearsconcluding5October2010. Short-term incentive Base salary Length ofcontract Components Details Details oftheCFO’s employmentcontractareasfollows: 10.2 CFO’semploymentcontract James HardieIndustriesNVandSubsidiaries Remuneration Report(continued) REPORT DIRECTORS’ Actual fiscal year 2008 salary isshowninsection 9.1onpage59ofthisannualreport. Actualfiscalyear2008salary the US. the alternative,theywillbeentitledtoanautomobileequivalentlevel ofvehicletheycouldreceivein Automobile: employment agreements. undertheir business expensestheyincurorpayforinconnectionwiththeperformance oftheirservices Business Expenses: Executive HealthandWellness program. offered toallUSemployeesorsimilarbenefits.Theyarealsoeligibleparticipateinthecompany’s Health, WelfareandVacationBenefits: Tax Advice: in TheNetherlands. Tax Equalisation: allowance,movingandstorage. allowance, expatriateGoodsandServices in writing. that timewillalsolapse. remained employedbythecompanyuntilfirsttestingdate,atwhichpointanyoptionsthatdonotvest granted intherelevanttranche.Theremainingunvested/unexercisedoptionswillcontinueasifCFO the numberofmonthsfromdategrantuntilfirsttestingandCistotaloptions D=Cx(A/B), whereAisthenumberofmonthsfromdateemploymentceasestofirsttestingdate,B the CFO’s unvestedoptionswillexpireonthedateemploymentceases,calculatedbasedformula US$350,000. IftheCFOceasesemploymentwithcompanythenapro-rataamountofeachtranche will begrantedeachyear. Therecommendedvalueofequitytobegrantedwillequivalentatleast Executive IncentiveProgram. fiscal year2009totheextentthatsomeofCFO’s LTI targethasbeentransferredtoSTIunderthe performance objectives.TheCFOdoesnotparticipateintheExecutiveIncentiveProgram,butwill the contract. CFO a severancepaymentequaltothegreaterof12months’ payortheremainingproportionofterm or responsibility, thecompanyorCFOmayterminateCFO’s employment.Thecompanywillpaythe Thecompanywillpaythecostsoffilingincometaxreturnstorequiredcountries. The companywilleitherpurchaseorleaseanautomobileforbusinessand personaluseor, in ThecompanycoverstheextrapersonaltaxburdenforManagingBoarddirectorsbased Entitled to receive reimbursement for all reasonable and necessary travelandother Entitledtoreceivereimbursementforallreasonableandnecessary 1 Salary reviewed annually in May by the Supervisory Board. reviewedannuallyinMaybytheSupervisory Salary Eligibletoreceiveallhealth,welfareandvacationbenefits atus, duties

Base salary Base salary issubjecttoRemunerationCommitteeapprovalandreviewedannuallyinMayforincrease Basesalary AnannualSTItargetissetatapercentageoftheseniorexecutive’s salary. TheSTItargetisbetween65 Indefinite. Short-term incentive Base salary Length ofcontract Components Details Details ofemploymentcontractsforseniorexecutives(otherthanBrianHolte)areasfollows: 10.4 Seniorexecutives’employmentcontracts nentoa sinet Seniorexecutiveswhoareonassignmentincountriesotherthantheirownreceiveadditionalbenefits International Assignment Other USseniorexecutivesmay ceaseemploymentwiththecompanybyproviding30days’written notice. For Thecompanymayterminatetheseniorexecutive’s employmentforcauseornotcause. Thecompanywillmatchtheseniorexecutive’s contributionsintotheplanuptoannualIRSlimit.For Post-termination Consulting Termination byJamesHardie Resignation USseniorexecutivesmayparticipateinthe401(k)definedcontributionplanuptoannualIRS Board,stockoptionshavebeengrantedeachyearundertheJHINV UpontheapprovalofSupervisory Superannuation Defined ContributionPlan/ Long-term incentive effective 1July. automobile leaseallowancenottoexceedUS$750permonth. personal usebytheseniorexecutive,or, inthealternative,seniorexecutivewillbeentitledtoan Automobile: undertheiremployment. services travelandotherbusinessexpensesincurredorpaidinconnectionwiththeperformanceof and necessary Business Expenses: participate inthecompany’s ExecutiveHealthandWellness program. and vacationbenefitsofferedtoallotherUSemployees.Theseniorexecutivesarealsoeligible Health, WelfareandVacationBenefits: executive’s asoftheterminationdateforeachyearconsulting. annualbasesalary form acceptabletothecompany. Inexchangefortheconsultingagreement,companyshallpaysenior them tomaintainnon-competeandconfidentialityobligationsthecompany, and2)areleaseofclaimsin years upontermination,aslongtheysignandcomplywith1)aconsultingagreement,whichwillrequire may requesttheseniorexecutive,andexecutivewillagree,toconsultcompanyfortwo Depending ontheUSseniorexecutive’s individualcontract,andthereasonsfortermination,co Australian seniorexecutives,thisperiodisthreemonths. nominated superannuationfund. totheseniorexecutive’sAustralian seniorexecutives,thecompanywillcontribute9%ofgrosssalary under thenewplansproposedforfiscalyear2009. 2001 EquityIncentivePlan.Itisanticipatedthatinthefutureseniorexecutiveswillreceiveequitygrants this splitis70%–30%. US seniorexecutivemeetingorexceedingpersonalperformanceobjectives.ForAustralianexecutives, company meetingorexceedingcorporateperformanceobjectivesand20%ofthisSTItargetisbasedonthe and 25%dependingontheindividual;forUSseniorexecutives,80%ofthisSTItargetisbased term incentive,DefinedContributionPlanandOtherbenefitsasoutlinedabove. assistance withhousing,movingandstorage. theyareassignedto,andfinancial may includetaxequalisationpaymentandadvice,acarinthecountry Brian Holtedoesnothavesuchawrittenemploymentagreement,butreceives Short-termincentive,Long- ForUSseniorexecutives,thecompanywilleitherleaseanautomobileforbusinessand Theseniorexecutivesareentitledtoreceivereimbursementforallreasonable US seniorexecutivesareeligibletoreceiveallhealth,welfare mpany limit. which %

65 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 66 James Hardie Annual Report 2008 FINANCIAL STATEMENTS Committee Chair Governance Nominating and Remuneration or Audit CommitteeChair Board Member Deputy Chairman performance rights. Boarddirectorhasbeengrantedoptionsor No Supervisory of thecompany. Boarddirectors’remunerationandtheshort-termresults Supervisory and well-beingofJamesHardie,thereisnodirectlinkbetween Board isonthelong-termdirection As thefocusofSupervisory base fee.TheSpecialMatterCommitteemetonceinfiscalyear2008. Committee receivedfeesofUS$1,000permeetinginadditiontotheir proceedings. DirectorswhoattendedmeetingsoftheSpecialMatter formed aSpecialMatterCommitteetodealwithissuesrelatedthe company andsomeofitsformerofficersdirectors,the Following thecommencementofproceedingsbyASICagainst 2 1 Fiscal2009 Fiscal2008 Chairman Role (US dollars) paid infiscal2008,andpayable2009,are: Chairman, DeputyChairmanandBoardCommitteeChairmen.Thefees James HardieBoards.Additionalfeesarepaidtothepositionof onthe Boarddirectorsarepaidabasefeeforservice Supervisory 11.1 Remunerationstructure remuneration providedaspartoftheirnormalemploymentconditions. responsibilities ofboardmembershipareconsideredindeterminingthe Board feesarenotpaidtoManagingdirectorssincethe responsibilities, andworkloadrequirementsofboardmembers. of companieswithsimilarsize,complexityoperationsand taking intoconsiderationtheleveloffeespaidtoboardmembers Boarddirectors’remunerationagainstpeercompanies, Supervisory Independent expertsinAustraliaandtheUnitedStatesbenchmark approved byshareholdersin2006. time totime.ThecurrentaggregatefeepoolofUS$1,500,000was within themaximumtotalamountapprovedbyshareholdersfrom Board,withtheadviceofexternalremunerationadvisors, Supervisory Boarddirectorsaredeterminedbythe Fees paidtoSupervisory SUPERVISORY BOARD 11. REMUNERATION FOR James HardieIndustriesNVandSubsidiaries Remuneration Report(continued) REPORT DIRECTORS’ From 1 February 2008 From1February To 2008 31January $300,000 $215,000 1000$120,000 $175,000 $100,000 $175,000 1,0 $10,000 $20,000 $10,000 $20,000 2 1 $215,000 No other Supervisory Boarddirectorsretainanybenefits underthisplan. No otherSupervisory US$307,658. Theseamountswerepaid infiscalyear2008. to thisplan,respectivelyinthegross amountofUS$833,979and Ms HellicarandMrBrown,wereentitled toreceivepaymentspursuant period priortotheirretirement.Two Boarddirectors, formerSupervisory multiple ofuptofivetimestheiraverage annualfeesforthethreeyear termination foranyreasonotherthanmisconduct,anamountequaltoa Boarddirectorstoreceive,upontheir some formerSupervisory In July2002,thecompanydiscontinuedaretirementplanthatentitled 11.4 DirectorRetirementBenefits this requirement. fees, onapost-taxbasis,oversixyearperiod,towardsatisfying be requiredtoapplymorethan50%ofthecashcomponenttheir Boarddirectorwill positions ofindividualdirectors,noSupervisory impact onthefundsrequiredtobecommittedanddifferenttaxation To recognisethepotentialforsharepricefluctuationstohave an directors’ totalbaseremuneration(excludingBoardCommitteefees). original formulationof1.5times(andtwofortheChairman) in JHINVshares,itwasagreedthatthepolicyshouldreverttoits Board directorelectedtochangetheamountofdirector’s feesreceived eliminate inconsistencyunderthepolicy, forinstanceifoneSupervisory receive 50%oftheirdirector’s feesinJHINVsharesundertheSBSP. To remuneration, althoughthiswaswheneachdirectorhadagreedto Board directorsshouldaccumulatethreetimestheirannualcash The policyhadpreviouslybeendescribedasrequiringthatSupervisory later ofAugust2006ortheirappointment. superannuation orpensionplan)withinthesixyearperiodfrom (either personally, inthenameoftheirspouse,orthroughapersonal base remuneration(excludingBoardCommitteefees)inJHINVshares a minimumof1.5times(andtwofortheChairman)theirtotal Boarddirectorsshouldaccumulate its BoardpolicythatSupervisory Boardreviewedandconfirmed In fiscalyear2008,theSupervisory 11.3 BoardAccumulationPolicy Boarddirectors. fees earnedbytheSupervisory amounts appliedtoacquiresharesundertheSBSParefromannual The SBSPdoesnotincludeaperformanceconditionbecausethe shares areacquiredonmarket,thepriceispurchaseprice. during thefivebusinessdaysprecedingdayofissue.Where the marketclosingpricesatwhichshareswerequotedonASX acquired onmarket.Wheresharesareissued,thepriceisaverageof JHI NVsharesreceivedundertheSBSPcanbeeitherissuedor taxes weredeductedbeforetheJHINVsharespurchased. US$107,500 (50%ofgrossChairman’s fees)inJHINVshares.Dutch Chairman, tookUS$100,000(33 Messrs DeFossetandHammeswho,prorataduringthetimetheywere their grossbasefeesinJHINVsharesundertheSBSP, otherthan BoarddirectorstookUS$50,000of In fiscalyear2008,Supervisory three years. shares. TheSBSPwaslastapprovedatthe2007AGMforaperiodof Board directorscanelecttoreceivesomeoftheirannualfeesinJHINV BoardSharePlan2006(SBSP),Supervisory Under theSupervisory 11.2 SupervisoryBoardSharePlan 1 / 3 % ofgrossChairman’s fees)and Michael Hammes Supervisory Boarddirectors iclya 07 299 000 288 115,817 N/A 17,247 $ 2,888 423,452 9 N/A $17,328 8 90,472 – – 7 6 $9,402 35,847 N/A 2,888 N/A 5 20,000 – $ 20,000 2,888 4 36,573 N/A 3 – $376,722 N/A 92,929 – 2 – 1 108,361 2,888 N/A Fiscal year 2007 19,135 – Fiscal year2008 N/A Total remunerationforSupervisoryBoarddirectors Fiscal year2007 2,888 17,247 – – Fiscal year2008 John Barr 2,888 Former SupervisoryBoarddirectors N/A 87,584 Fiscal year2007 9,402 Fiscal year2008 Catherine Walter 32,959 – – Fiscal year2007 Fiscal year2008 N/A Rudy vanderMeer – Fiscal year2007 Fiscal year2008 James Loudon 33,685 – Fiscal year2007 Fiscal year2008 Don DeFosset 96,071 Fiscal year2007 Fiscal year2008 David Andrews 16,247 Fiscal year2007 Fiscal year2008 Brian Anderson Fiscal year2007 Fiscal year2008 Donald McGauchie Fiscal year2007 Fiscal year2008 Name Fees Directors’ (US dollars) 11.5 TotalremunerationforSupervisoryBoarddirectorstheyearsended31March2008and2007 JHI NV Other Benefitsincludesthecostofnon-executive directors’fiscalcomplianceinTheNetherlands.ForMrDeFossetitalsoinc superannuationcontributionsinthefirstquarteroffiscalyear2008. Mr McGauchieceasedmakingvoluntary BoardmemberwasdeterminedafterdeductingapplicableDutchtaxesfromthisamoun The actualamountspentbyeachSupervisory Amount includesbase,Chairman,Deputy ChairmanandCommitteeSpecialMatterattendancefees. Mr Barrresignedfrom thecompany’s Boards effective31March2008. JointandSupervisory Boardseffective1July2007andwasre-electedforathree-yeartermon Mrs Walter wasappointed totheJointandSupervisory Mr Loudon didnotparticipateintheSBSPfiscalyear2008.However, on14March2008,hebought6,300JHINVshares onmar Mr Andrewswasappointedtothecompany’s Boardseffective1September2007. JointandSupervisory Boardspousaltraveltoaccompanydirectorsuponemeetingpe The companypaysforexpensesrelatedto Supervisory with thecurrentyearpresentation. he wasChairman,officecosts,thepersonaluseofacompanylaptopand PDA phone.Certainprioryearamountshavebeenrestate equivalent tothevalueofJHINVshares hewouldhavereceivedifhadparticipatedintheSBSP. and Barr, respectively. Infiscal year2007,thecompanypaidUS$9,493relatedtospousaltravelforMr McGauchie. year 2008,thecompanypaidUS$15,984,US$16,331,US$21,865andUS$18,163 forspousaltravelMessrsHammes,McGauchie,Ande of participationintheSBSPbymarketpurchaseprice. tax lawdoesnotallowacquisitionofsharesoutpre-taxincome.Thenumber ofJHINVsharesacquiredwasdeterminedbydivi 5, 9 Primary Equity Post-employment 7 6 5 8 5 5 2,3 $4797 – 978 $1,190,788 $49,738 – $ $417,917 $723,133 59,352 – 50,000 3,192 112,544 37,500 – 37,500 $123,411 3,192 78,192 51,000 – – 50,000 3,192 – $ 101,000 3,192 – 101,000 104,192 – 175,863 $ – 91,667 27,394 294,924 30,782 $ – 59,583 29,167 3,192 63,141 71,000 – $60,636 50,000 3,192 136,000 – 124,192 3,192 50,000 189,192 1 Stock 2 Superannuation 3 Other Benefits 4 Total ludes, fortheperiod 17August2007. ding theamount r year. Infiscal d toconform ket, whichwas t asDutch rson

67 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 68 James Hardie Annual Report 2008 FINANCIAL STATEMENTS ae odn ,5 – 6,300 – 6,355 James Loudon ihe ams – 9,000 – 15,500 – Don DeFosset Michael Hammes Supervisory Boarddirectors ubro a aeo Sae/US Numberof Shares/CUFS Shares/CUFSat atDateof SBSP Purchases Onmarket Director becoming atdateof At1April2007 Shares/CUFS Numberof Boarddirectors’relevantinterestsinJHINVsecuritiesbetween1April2007and31March2008areset Changes inSupervisory 11.6 SupervisoryBoarddirectors’relevantinterestsinJHINV James HardieIndustriesNVandSubsidiaries Remuneration Report(continued) REPORT DIRECTORS’ Shares/CUFS Number of uyvndrMe – – ,1 NA 4,410 N/A 4,410 – BoarddirectorsareentitledtoparticipateintheSBSP.Only Supervisory – 6,375 8 7 6 N/A – 5 4 3 2 1 Catherine Walter Rudy vanderMeer oadMGuhe ,6 – 583 / 15,372 6,124 N/A N/A 5,803 3,903 6,124 – – – – – – 9,569 N/A – Donald McGauchie David Andrews Brian Anderson onBr 24,477 John Barr Former SupervisoryBoarddirector Held fortheAndrewsRevocableTrust. 1,651 shareswereacquiredundertheSBSPon26March2007atapriceofA$8.50.21,000heldforJ& MBarrTrust. 6,375 sharesheldfortheWalter SuperFund. 6,000 sharesheldfortheMcGauchieSuperannuationFund. Acquired on14March2008atapriceofA$5.7368inthenameHSBCNomineesandheldbehalfJames RHLoudon. Held asADRs. Held asADRs. All sharespurchasedunderSBSPwereacquiredon14March2008atapriceofA$5.7352. 7 3 7,667 32,144 – – 10,377 N/A 25,877 6 – 5,032 N/A 11,407 4 2 – N/A 12,655 15,859 N/A 6,859 8 1 NA 3,903 N/A 31March2008 resignation out below: 5 himn ChiefExecutiveOfficerand LGries Chairman,ManagingBoard Signed Amsterdam,TheNetherlands, 27June2008 andJointBoards Supervisory Chairman M Hammes This reportismadeinaccordancewitharesolutionofthemembers JointBoard. company’s non-competeandconfidentialityagreements. addition toatwo-yearconsultingcontract,aslonghemaintainsthe and1.5timeshisaverageannualbonusin times hisannualbasesalary of aterminationwithoutcauseorforgoodreason,hewillreceive1.5 Operating Officer, MrGries’currentcontractspecifiesthatintheevent prior employmentagreementwhenheactedasthecompany’s Chief (2001) unlessapprovedbyshareholders.ConsistentwithMrGries’ cannot exceedthelimitssetoutinAustralianCorporationsAct Board director’s specificsituation,providedthataseverancepayment practiceandtheManaging basis, takingintoaccounthomecountry directors, theseverancepaymentsareagreedupononanindividual time theamountoffixedsalary. IncontractswithManagingBoard severance paymenttoaManagingBoarddirectorshallnotexceedone Best PracticeProvisionII.2.7oftheDutchCodeprovidesthata of theemployeeothercircumstancesdescribedinLTIP. employment agreementwithaManagingBoarddirectorupondeparture Hardie maymodifythetermofoptionsasspecifiedinLTIP or or thecompanyinaccordancewithestablishedmarketpractice.James options, exceptaspromptedbystructuralchangesrelatingtoshares to ManagingBoarddirectorsmaybemodifiedduringthetermof the exercisepricenorotherconditionsregardingoptionsgranted Best PracticeProvisionII.2.5oftheDutchCodeprovidesthatneither such informationwillbeprovidedinthisreport. practice provisionsoftheDutchCoderelatingtoremunerationmatters, states thatwherethecompanyhasnotcompletelyappliedbest of theirannualreport.Thecorporategovernancesectionthisreport to explaintheircorporategovernancestructureinaseparatesection Tabaksblat Committee)in2003,listedDutchcompaniesareobliged published bytheDutchCorporateGovernanceCommittee(the Under theDutchCode(theCode)onCorporateGovernance 12. DUTCHCORPORATE GOVERNANCECODE the UnitedStates. to thebenefitofcompanyandiscommonpracticeinAustralia Boarddirector.appointment asaSupervisory We believethispracticeis in shareownershipwithinthesixyearperiodfromdateoftheir accumulate aminimumof1.5timestheirannualbaseboardfees in theStockAccumulationPolicyprovidesguidancethattheyshould not grantedsharesbywayofremuneration,theguidelinecontained Boardare of remuneration.AlthoughourmemberstheSupervisory Boardshallnotbegrantedsharesbyway members oftheSupervisory Best PracticeProvisionIII.7.1oftheDutchCodeprovidesthat financial year2008andhasreceivedatwo-yearconsultingagreement. Company Secretary, waspaidaseverancepaymentofUS$335,323in although MrBButterfield,aformerManagingBoarddirectorand not payanyspecialremunerationtoManagingBoarddirectors, remuneration oraseverancepayment,thisisaccountedfor. We did if aManagingBoarddirectororformerispaidspecial Best PracticeProvisionII.2.12oftheDutchCodeprovidesthat,

69 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 70 James Hardie Annual Report 2008 FINANCIAL STATEMENTS The Netherlands. office atAtrium,8thFloor, Strawinskylaan3077,1077ZXAmsterdam, atthecompany’sa printedcopyfromtheCompanySecretary head Relations areaofourwebsite(www.jameshardie.com) orbyrequesting policies, asupdatedfromtimetotime,areavailabletheInvestor Association, BoardandCommitteecharterskeycompany These CorporateGovernancePrinciples,aswellourArticlesof Boards inMay2008. andManaging recommendation, adoptedbytheJoint,Supervisory approved bytheNominatingandGovernanceCommitteeand,onits our corporategovernanceframework,andweredeveloped of These CorporateGovernancePrinciplescontainanoverview set outinthisreport. shareholder value.Furtherdetailsoftheseprocessesandpoliciesare the operationsandgovernanceofcompanytherebyprotect and ManagingBoards(theBoards)withappropriateassuranceabout processes andpoliciesdesignedtoprovidetheJoint,Supervisory Our corporategovernanceframeworkincorporatesanumberof consider tobethestandardsmostappropriateJamesHardie. acrossthesejurisdictions,wehaveadoptedwhat where thesevary best practicesinTheNetherlands,AustraliaandtheUnitedStatesand, requirementsandcurrent practices. We have consideredtheregulatory Board conductedareviewofourcorporategovernancestructureand year, theNominatingandGovernanceCommitteeSupervisory stakeholders’ interests,changesinlawandcurrentbestpractices.Last updated asappropriatetoreflectwhatwebelieveareourand Hardie’s corporategovernanceframeworkisreviewedregularlyand that meetsorexceedsappropriatecommunityexpectations.James as theletter, ofthelawandweaimtogoverncompanyinaway We believeitisimportant thatourbehaviourreflectsthespirit,aswell NYSE, theUSSECandvariousotherrule-makingbodies. including theDutchAuthorityFinancialMarkets,ASX,ASIC, requirementsofnumerousjurisdictionsandorganisations, regulatory As atrans-nationalorganisation,JamesHardieoperatesunderthe AT JAMESHARDIE 1. CORPORATE GOVERNANCE James HardieIndustriesNVandSubsidiaries GOVERNANCE CORPORATE 2. BOARDSTRUCTURE expense fortheproperperformanceoftheirduties. directors mayallseekindependentprofessionaladviceatthecompany’s Board, BoardCommitteesandindividual auditors. TheSupervisory with directaccesstoseniorexecutivesandoutsideadvisors Boarddirectorsareprovided In dischargingtheirduties,Supervisory our shareholdersattheAGM. Boarddirectorsmaybedismissedby Board.Supervisory Supervisory and ourshareholdershavetherighttonominatecandidatesfor Boardifthereisavacancy. Board the Supervisory TheSupervisory by ourshareholdersattheAnnualGeneralMeeting(AGM),or Boarddirectorsare appointed Board.Supervisory by theSupervisory must haveatleasttwomembers,orahighernumberasdetermined Boardincludesonlynon-executivedirectorsand The Supervisory 2.2 SUPERVISORYBOARD involved inorwithJamesHardie. employees), shareholders,otherstakeholdersandallparties interests ofJamesHardie,itsenterprise(includingthe In dischargingitsduties,eachBoardaimstotakeintoaccountthe advisor andmadenochanges. reviewed thisdivisionofdutieswiththeassistanceanexternal authority tomanagethecompany. DuringthefiscalyearBoards Board determinesrequireitsapproval,theManaginghas Board oroneoftheCommittees,anymattersSupervisory totheJointorSupervisory Apart fromthemattersspecificallyreserved oftheManagingBoard’sproviding appropriatesupervision activities. Boards providingstrategicguidancetotheManagingBoardaswell andJoint Committees. ThisdivisionofdutiesfacilitatestheSupervisory certainmatterstooneormoreBoardsand/orBoard charters reserve formalised incharters.OurArticlesofAssociationandthese The responsibilitiesofourBoardsandBoardCommitteesare States orAustralia. the equivalentofafullboarddirectorscompanyinUnited comprised ofallnon-executivedirectorsandourCEOistherefore BoardandaManagingBoard.TheJointis a Supervisory with Dutchcorporatelaw. ThisstructureconsistsofaJointBoard, James Hardiehasamulti-tieredboardstructure,whichisconsistent 2.1 THREEBOARDS – preparing quarterlyandannualaccounts,managementreports – ensuring theimplementationofcompany’s strategicplan; – preparing astrategicplanandbudgetsettingoutoperational – administering thecompany’s generalaffairs,operationsandfinance; responsible fortheday-to-daymanagementofcompany, including: Joint BoardandtotheAGMforperformanceofitsduties,is Board,the The ManagingBoardisaccountabletotheSupervisory Board. AGM andmaybesuspendedatanytimebytheSupervisory Managing Boarddirectorsmaybedismissedbyourshareholdersatthe appointed ourcurrentCEOtochairtheManagingBoard. Boardhas Chairman andonememberasitsCEO.TheSupervisory BoardappointsoneManagingdirectorasits The Supervisory candidates fortheManagingBoard. Boardandourshareholdersmaynominate Board. TheSupervisory officers totheManagingBoardifthereisavacancyon Boardmayappointinterim shareholders atourAGM.TheSupervisory Board.TheManagingBoarddirectorsareappointedbyour Supervisory at leasttwomembers,orsuchhighernumberasdeterminedbythe The ManagingBoardincludesonlyexecutivedirectorsandmusthave 2.3 MANAGINGBOARD – approving issuesofnewshares. – thegeneralcourseofaffairsJamesHardieand supervising – thepolicyandactionspursuedbyManagingBoard; supervising – approving theannualfinancialaccounts; – approving thestrategicplanandannualbudgetproposedby – approving ManagingBoarddecisionsrelatingtospecifiedmattersor – appointing andremovingtheCEOChairmanof – nominating ManagingBoarddirectorsforelectionbyshareholders; Board, andisresponsiblefor, amongstothermatters: andprovidesadvicetotheManaging Boardsupervises The Supervisory media releases; Boards; Supervisory the companyfornextthreeyears,approvalbyJointand financial objectives,implementationstrategyandparametersfor business enterpriseitoperates;and Managing Board; above agreedthresholds; Managing Board; of itsmeetingsareheldatthecompany’s officesinThe Netherlands. The ManagingBoardgenerallymeetsatleastmonthlyandthemajority Boards mayalsopassresolutionsbywrittenconsent. present foratleastpartofthemeeting.TheJointandSupervisory Boardmeetsinexecutive sessionwithoutmanagement the Supervisory Netherlands, butmaybeheldelsewhere.Ateachphysicalmeeting, Board meetingsaregenerallyheldatthecompany’s officesinThe members haverequestedameeting.JointBoardandSupervisory at leastfivetimesayearorwhenevertheChairmantwomore Boardgenerallymeetconcurrently,The JointBoardandSupervisory 3.1 BOARDMEETINGS 3. OPERATION OFTHEBOARD – monitoring thecompany’s compliancewithallrelevantlegislationand – reporting anddiscussingthecompany’s internalriskmanagement – representing, enteringintoandperformingagreementsonbehalfof – approving anysharebuy-backprogramsandcancellingtheshares – approving declarationofdividends; – thegeneralcourseofaffairsJamesHardie; supervising Board.Itisresponsiblefor: Managing BoardandSupervisory Association, butisprimarilyaforumforcommunicationsbetweenthe The JointBoardisallocatedspecifictasksundertheArticlesof BoarddirectorsaswellourCEO. includes alloftheSupervisory as determinedbyourshareholdersattheAGM.TheJointBoard Board’sdetermined bytheSupervisory Chairman,oragreaternumber The JointBoardconsistsofbetweenthreeandtwelvemembersas 2.4 JOINTBOARD – approving anysignificantchangesintheidentityornatureof – approving issuesofnewshares; the bestinterestsofcompanyanditsstakeholders. course ofaffairsthecompanybyexercisingbusinessjudgmentin The coreresponsibilityoftheJointBoardistooverseegeneral – maintaining effectiveexternaldisclosurepoliciesandprocedures. – monitoring companyperformance;and – approving thestrategysetbyManagingBoard; activities; regulations andmanagingtherisksassociatedwithcompany’s Committee; and BoardandtheAudit and controlsystemswiththeSupervisory the company. bought back; company;

71 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 72 James Hardie Annual Report 2008 FINANCIAL STATEMENTS the desired profile for the Supervisory Board. the desiredprofile for theSupervisory and GovernanceCommittee believedwererequiredtohelp achieve Boardthat the Nominating skills andexperience totheSupervisory arrangements. Thesedirectorswereappointed becausetheybrought since thefinalisationoflong-term asbestoscompensation during recentyears.Anumberofnew directorshavebeenappointed BoardandNominatingGovernanceCommittee Supervisory Boardrenewalhasbeenapriorityforthe Joint andSupervisory and otherseniorexecutives. management successionplans,policiesandproceduresforourCEO Committee, hasdeveloped,andperiodicallyreviseswiththeCEO, Board,togetherwith theNominatingandGovernance The Supervisory 3.3 SUCCESSIONPLANNING Board memberseachyear.commitments ofSupervisory The NominatingandGovernanceCommitteereviewstheother for, andeffectivelyparticipatein,BoardCommittee meetings. Nominating Directors mustbeabletodevoteasufficientamountoftimeprepare in theInvestorRelationsareaofourwebsite(www.jameshardie.com). are summarisedonpages24–26ofthisannualreportandalsoappear relevant expertiseofeachdirector, andhisorhertermofappointment, to createshareholdervalue.Theskills,qualifications,experienceand assist theBoardstofulfiltheirresponsibilities,andcompany Directors haveskills,qualifications,experienceandexpertisewhich 3.2 DIRECTORQUALIFICATIONS BOARD A COMMITTEE and Name Joint Supervisory BOARD Attendance atBoardandCommitteemeetingsduringtheyearended31March2008 Managing The numberofBoardandCommitteemeetingsheld,eachdirector’s attendanceduringtheyear, issetoutbelow: Audit James HardieIndustriesNVandSubsidiaries Remuneration GOVERNANCE Governance CORPORATE 4 3 2 1 Benjamin Former ManagingBoarddirector Russell Butterfield 9 Louis – 9 7 – – – 10 – 10 – – Managing Boarddirectors 24 11 Chenu 11 24 11 – – – – 24 Catherine 10 Gries 24 11 – – 11 – Rudy vanderMeer Donald McGauchie 4 11 7 – 7 7 7 Walter 4 – – 4 – – James Loudon Michael Hammes 5 Don John Barr 11 David Andrews 11 DeFosset 11 11 – – – – – ra nesn 1 10 11 Brian Anderson Director Supervisory andJointBoarddirectors John Barr retired as a Joint and Supervisory Boarddirectoreffective31March2008. JohnBarrretiredasaJointandSupervisory Boards. NonattendancereferstoatelephonicmeetingoftheJointandSupervisory NumberofmeetingsattendedduringtheperioddirectorwasamemberBoardand/orCommittee. NumberofmeetingsheldduringtheperioddirectorwasamemberBoardand/orCommittee. 4 11 10 1 B 3 3 3 3 3 3 3 2 1 9 11 11 10 11 10 11 10 11 10 5 4 11 10 A B B A B B A B 3 3 3 3 3 3 3 – – – 4 – 4 4 4 5 6 – – – – – 7 6 6 – – – 4 – – 4 – – 4 3 6 6 – – 2 1 2 2 – – – 7 – – 7 – – performance ofManaging Boarddirectorsisassessedannually. There isnotenurepolicyforManaging Boarddirectors.However, the formorethan12years. directors hasserved Board longerthanthis period.NoneofourcurrentSupervisory serve that itwouldbeinthebestinterestsof thecompanyfordirectorto Boarddetermines Board directorsto12years,unlessthe Supervisory Governance Code(theDutchCode)limitingtenureofSupervisory The companyhasadoptedtherecommendationofDutchCorporate 3.4 RETIREMENTANDTENUREPOLICY when MrDeFosset’s retirementtakeseffect. Mr D Harrison. Thelastofthesechanges willtakeeffectonAugust31 of MessrsBarr, LoudonandDeFossettheappointment of to sevenmembersfollowingthepreviouslyannouncedretirements Board company andresolvedtoreducethesizeofSupervisory Boardwasmoreappropriate totheoperationsof Supervisory During thelastyear, Boarddeterminedthatasmaller theSupervisory Board’smaximise theSupervisory effectiveness. experience, expertiseandgeographiclocationareappropriateto directors, andtheircurrentnumber, mixofskills,qualifications, Board’s assessmentofitsneedsandwhetherthecurrentBoard discussed regularly. ThemattersconsideredincludetheSupervisory andManagingBoardsis The desiredprofileoftheSupervisory is independent. Boarddirector Boardhas determinedthateachSupervisory Supervisory Governance Council recommendations.Followingthisassessment, the of theDutchCode,NYSEandSEC aswelltheASXCorporate to hisorherindependenceaccording totherulesandregulations their responsestoalengthyquestionnaire containingmattersrelevant Board directorand Governance Committee,assesseseach Supervisory Board,togetherwiththeNominatingand Each yeartheSupervisory body.of ASX,theNYSEoranyotherregulatory number isrequiredtobeindependentundertherulesandregulations Boards tobeindependent,unlessagreater the JointandSupervisory and JointBoardsBoardCommittees,aswelltheChairmanof The companyrequiresthemajorityofdirectorsonSupervisory 3.7 INDEPENDENCE of managementperformance. company believesitisappropriateassupportsthecontinuity departure fromtheBestPracticeProvisionsofDutchCode,but Board directoraslongtheindividualremainsCEO.Thisisa The CEOisnotrequiredtostandforre-electionasaManaging next AGMbeforedecidingwhethertorecommendtheirre-election. the performanceofeachdirectorduetostandforre-electionat Boarddiscussindetail Governance CommitteeandtheSupervisory individual performanceandthecompany’s needs.TheNominatingand of theirthree-yearterm.Nominationforre-electionisbasedon Directors arenotautomaticallynominatedforre-electionattheend at the next AGM. Boards tofillavacancymustsubmithimorherselfforre-election submitting himorherselfforre-election.Apersonappointedtothe following hisorherappointment,whicheverislonger, without period ofmorethanthreeyears,orpasttheendthirdAGM No director(otherthantheCEO)shallholdofficeforacontinuous 3.6 DIRECTORRE-ELECTION review oftheotherManagingBoarddirectors. feedback totheCEO.TheCEOusesthataspartofannual Managing BoardasacorporatebodyandtheChairmanprovidesthat performance oftheCEO,otherManagingBoarddirectorsand Board annuallydiscuss,withoutManagingdirectorspresent,the The NominatingandGovernanceCommitteetheSupervisory for fiscalyear2009. perspective ontheireffectiveness.Thenextsuchreviewisscheduled an externalfacilitatortoassistinthisprocessprovideoutside Boardswillengage twotothreeyears,theJointandSupervisory Every Boards. contribution totheeffectivenessofJointandSupervisory Chairman discussedwiththeChairman,hisorherperformanceand Boarddirector,discussed witheachSupervisory andtheDeputy Board.TheChairman Governance CommitteeandtheSupervisory the resultswerereviewedanddiscussedbyNominating BoardandeachCommittee, operation oftheSupervisory During theyear, wasusedtoassessthe apurpose-designedsurvey Board. Supervisory Board evaluation processandmakesrecommendationstothe the The NominatingandGovernanceCommitteesupervises 3.5 BOARDEVALUATION – Donald McGauchieisChairmanofTelstra, Australia’s leading Boarddirectorwasindependent: to determiningthateachSupervisory Boardconsideredthefollowingspecificmattersprior The Supervisory body.rules andregulationsoftheapplicableexchangeorregulatory considering theaccountingstandards’approachtomaterialityand independence andconsidersallrelationshipsonacase-by-casebasis, Boardhasnotsetmaterialitythresholdsforassessing The Supervisory potential oractualconflictsofinterest. judgment totheBoardsandBoardCommitteesmustdeclareany All directorsareexpectedtobringtheirindependentviewsand – Brian AndersonisadirectorofPulteHomes,homebuilderinthe – BoardofING Rudy van derMeerisaMemberoftheSupervisory continuing development. Boardmeetingfor set asideateachphysicalJointandSupervisory andtimeis The trainingiscoordinatedbytheCompanySecretary environment,includingupdatesontopicaldevelopments. regulatory Board’sSupervisory understandingofthecompany’s operationsand adopted ayearlytimetableforcontinuingdevelopmenttobuildthe framework. TheNominatingandGovernanceCommitteehas The companyoperateswithinacomplexgeographicalandregulatory 3.9 BOARDCONTINUINGDEVELOPMENT including relevantcorporatedocumentsandpolicies. senior management.Newdirectorsareprovidedwithorientationmaterials results andkeyrisksissues;meetingtheCEOmembersof on thecompany’s riskmanagementandcontrolframework,financial knowledge;briefings plant andmarkettourstoimpartrelevantindustry directors’ dutiesinTheNetherlands,theUnitedStatesandAustralia; ofthecompany’sincludes anoverview governancearrangementsand The companyhasanorientationprogramfornewdirectors. 3.8 ORIENTATION any influenceoverthesetransactions. Boarddirector.Supervisory Itisnotconsideredthatthesedirectorshad were inexistenceanddisclosedbeforethepersonquestionbecamea companies listedaboveortoJamesHardie.Eachoftheserelationships and normaltermsconditionswerenotmaterialtoanyofthe Any transactionsmentionedabovewereinaccordancewitharmslength communications services; telecommunications company, fromwhomthecompanypurchases products throughthecompany’s customers;and directly fromJamesHardie,althoughitdoesbuyHardie United States.PulteHomesdoesnotbuyanyJamesHardieproducts becoming a Supervisory Boarddirector.becoming aSupervisory the companyatsameorlowervolumespriortoMrvanderMeer company. to Ineachcasethoseentitieswereprovidingtheseservices N.V. tothe EntitiesintheINGGroupprovidefinancialservices Bank NederlandN.V. andINGVerzekeringen (Insurance)Nederland

73 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 74 James Hardie Annual Report 2008 FINANCIAL STATEMENTS Articles ofAssociationandrelevantlaws. subsidiaries. Theindemnitiesprovided areconsistentwiththe executives whoareofficersordirectorsofthecompanyits of Access,InsuranceandIndemnitytoBoarddirectorssenior The companyandsomeofitssubsidiarieshaveprovidedDeeds indemnification isappropriatenonetheless. A courtinwhichanactionisbroughtmay, however, determinethat with grossnegligenceorwilfulmisconductinperformingtheirduties. generally notbeavailableifthepersonseekingindemnificationacted they reasonablybelievedtobeinourinterest.Thisindemnificationwill outtheirduties andinamanner they actedingoodfaithcarrying tous,provided a resultofanyactioninconnectionwiththeirservice or oneofouremployees,officersagents,whosuffersanylossas who is(orkeepindemnifiedanypersonwas)aBoarddirector Our ArticlesofAssociationprovideforanindemnificationanyperson 3.13 INDEMNIFICATION this annualreport. Remuneration ReportwithintheDirectors’onpages46–68of directors andexecutives,thelinktoperformance,issetoutin A detaileddescriptionofthecompany’s remunerationpoliciesfor 3.12 REMUNERATION is MrMcGauchie. The currentChairmanisMrHammesandtheDeputy exceptional circumstancesand/orforashortperiodoftime. Committee. TheChairmanalsomaynotbetheCEO,otherthanin The ChairmanmaynotbetheofRemunerationorAudit – monitors, evaluatesandassessestheperformanceofcompany’s – Boarddiscussion;and facilitates JointandSupervisory – Boardandshareholdermeetings; chairs JointandSupervisory – Boards; provides leadershiptotheJointandSupervisory The Chairman: responsibilities andactsasthemaincontactwithManagingBoard. Board’sThe Chairmanco-ordinatestheSupervisory dutiesand Chairman appointstheDeputyChairman. The Chairmanmustbeanindependent,non-executivedirector. The and thatpersonalsobecomestheChairmanofJointBoard. BoardappointsoneofitsmembersastheChairman The Supervisory 3.11 CHAIRMAN that role. of hisorherappointmentandtheCompany’s expectationsofthemin receives aletterofappointmentsettingoutthekeytermsandconditions andManagingBoards Each incomingdirectoroftheSupervisory 3.10 LETTEROFAPPOINTMENT James HardieIndustriesNVandSubsidiaries GOVERNANCE CORPORATE Boards andBoardCommittees. brought byASIC. met onceinrelationtothecompany’s responsetotheproceedings time. Overthecourseoflastfiscalyear, aSpecial MatterCommittee Boardmayalsoformad hoccommitteesfromtimeto The Supervisory properly dischargeallofitsresponsibilities. an annualcalendarofmeetinganddiscussiontopicstoassistit Each BoardCommitteemeetsatleastquarterlyandhasscheduled jameshardie.com). available fromtheInvestorRelationsareaofourwebsite(www. reviewed andupdateditscharterduringtheyear. Thechartersare Committee andtheRemunerationCommittee.EachBoard and comprisetheAuditCommittee,NominatingGovernance Board The BoardCommitteesareallcommitteesoftheSupervisory 4. BOARDCOMMITTEES Board Committee. Board Committeemeeting,whetherornottheyaremembersofthe and all minutesforBoardCommitteemeetingsand may attendany receive acopyofallBoardCommitteepapersforphysicalmeetings Boarddirectors from eachBoardCommitteeChairman.Supervisory of eachManagingBoardmeeting,inadditiontoreceivingoralreports of eachBoardCommittee’s deliberationsandfindingstheminutes Boardreceivesandreviewstheminutesofmeetings The Supervisory discharge alloftheirresponsibilities. an annualcalendaroftopicstobecoveredassistthemproperly the company’s strategyandprogress.TheBoardshavealsoscheduled yearwheretheyspendanentiredaydiscussing two sessionsevery Managing Boardonthecompany’s strategyandperformance,including Boardshaveregulardiscussionswiththe The JointandSupervisory Boards. information providedtotheJointandSupervisory Committee periodicallyreviewstheformat,timelinessandcontentof to seniorexecutivesifrequired.TheNominatingandGovernance information toallowthemfulfiltheirduties,includingaccess Boarddirectorsreceivetimelyandnecessary Joint andSupervisory 3.15 INFORMATIONFORTHEBOARD This processwasfollowedduringthefiscalyear. feedback toassistintheannualreviewofSeniorLeadershipTeam. discussion onmanagementsuccessionplanning.TheCEOusesthis discussion isseparatefromandoccursatameetingdifferentthe Senior LeadershipTeam againstagreedperformancemeasures.This Boardreviewtheperformanceofeachmember Supervisory At leastonceayear, theCEO,RemunerationCommitteeand 3.14 EVALUATIONOFMANAGEMENT – reviewing theadequacyandeffectiveness ofthecompany’s internal – having generaloversightoftheappointmentandprovisionall – reviewing andassessingthecompany’s riskmanagementpoliciesand – discussing earningsreleasesaswellinformationand – reviewing withmanagementandtheExternalAuditorcompany’s – overseeing thecompany’s financialreportingprocessandreportson Board infulfillingitsresponsibilitiesand,amongstothermatters: The AuditCommitteeprovidesadviceandassistancetotheSupervisory onourAuditCommittee. not impairhisabilitytoeffectivelyserve does Boardhasdeterminedthatsuchsimultaneousservice Supervisory of threepubliccompaniesinadditiontoourAuditCommittee.The it followsvoluntarily. ontheauditcommittees MrAndersonserves audit committee.Althoughthecompanyisnotboundbythisprovision, onthelistedcompany’sthe abilityofthismembertoeffectivelyserve willnotimpair board mustdeterminethatsuchsimultaneousservice committees ofmorethanthreepubliccompanies,thelistedcompany’s ontheaudit member ofanauditcommitteesimultaneouslyserves Under theNYSElistingstandardsthatapplytoUScompanies,ifa he joinstheAuditCommitteeinAugust2008. will alsobenominatedasan“auditcommitteefinancialexpert”,once are “auditcommitteefinancialexperts”.ItisexpectedthatMrHarrison BoardhavedeterminedthatMessrsAndersonandLoudon Supervisory the sameperson.TheNominatingandGovernanceCommittee BoardinaccordancewiththeSECrules.Thesemaybe Supervisory as determinedbytheNominatingandGovernanceCommittee of theAuditCommitteeshallbean“auditcommitteefinancialexpert” effectively asmembersoftheAuditCommittee.Atleastonemember andfinancialexpertisetoact must havesufficientbusiness,industry All membersoftheAuditCommitteemustbefinanciallyliterateand Audit CommitteeinAugust2008. Boards.ItisexpectedthatMrHarrisonwilljointhe and Supervisory 2008whenhewasappointedChairmanoftheJoint until 31January (Chairman), MrLoudonandMrsWalter. MrHammeswasamember Currently, themembersofAuditCommitteeareMrAnderson a separate executivesessionwiththeExternalandInternalAuditor. set outinthisreport.TheAuditCommitteemeetsatleastquarterly aspects ofthetermsreferencefollowedbyourAuditCommitteeare company’s accountingandfinancialpoliciescontrols.Thekey The AuditCommitteeoverseestheadequacyandeffectivenessof 4.1 AUDITCOMMITTEE compliance andcontrolprocedures; audit function; tothecompanyandcompany’sexternal auditservices internal procedures; guidance providedtoanalysts; annual andquarterlyfinancialstatementsreportstoshareholders; Board; the resultsofitsactivitiestoSupervisory – identifying individualsqualifiedtobecomeManagingBoardor The NominatingandGovernanceCommitteeisresponsiblefor: 4.2 NOMINATINGANDGOVERNANCECOMMITTEE performance oftheinternalauditfunction. the performanceandindependenceofExternalAuditor, orthe requirements,thecompany’sor regulatory riskmanagementsystems, company’s financialstatements,thecompany’s compliancewithlegal general issuesthatarisewithrespecttothequalityorintegrityof Boardofany The AuditCommitteewillinformtheSupervisory Reporting interest issuesastheyarise. Conduct andEthicspolicyotherbusiness-relatedconflictof The AuditCommitteeoverseesthecompany’s CodeofBusiness Conflicts ofinterest – Boardcandidatesforthe recommending totheSupervisory – andManagingBoards overseeing theevaluationofSupervisory – performing aleadershiproleinshapingthecompany’s corporate – operation oftheAIMandAGM; – Boarddirector; assessing theindependenceofeachSupervisory – administers andmakesrecommendationsonthecompany’s incentive the company’s remunerationstructure,policiesandprograms.Italso: management andemployees;approvesanysignificantchangesin company’s remunerationstructureestablishesappropriateincentivesfor remuneration structure,policiesandprograms;assesseswhetherthe The RemunerationCommitteeoverseesthecompany’s overall 4.3 REMUNERATIONCOMMITTEE 2008. 31 March throughout theyear, untilhisresignationasadirector effectiveon Mr BarrwasamemberoftheNominatingandGovernanceCommittee are MrMcGauchie(Chairman),vanderMeerandAndrews. The currentmembersoftheNominatingandGovernanceCommittee – Boardonthecompany’smakes recommendationstotheSupervisory – reviews theremunerationpolicyforManagingBoard directors;and – Boarddirectors; reviews theremunerationofSupervisory – reviewing thecompany’s compliancewithlegalandregulatory – establishing proceduresforcomplaintsregardingaccounting,internal Supervisory Boarddirectors; Supervisory shareholders attheAGM); Board(tobeappointedby Managing Board orSupervisory and seniormanagement; governance policies. compensation andequity-basedremuneration plans; senior management. recruitment, retention andterminationpoliciesprocedures for requirements; and from whistleblowers. accounting controlsandauditingmatters,includinganycomplaints

75 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 76 James Hardie Annual Report 2008 FINANCIAL STATEMENTS senior management. Boardaswell toappropriate Audit Committee and Supervisory to theEthicshotlinewerereporteddirectly totheChairmenof of theEthicshotline.Duringlastyear, anycomplaints made company employeesworldwideareremindedannuallyoftheexistence which allowsemployeestoreportanonymouslyanyconcerns.All telephone EthicsHotlineoperatedbyanindependentexternalprovider or questionsregardingviolationsofthepolicy. JamesHardiehasa with adviceaboutwhomtheyshouldcontactifhaveinformation Our CodeofBusinessConductandEthicspolicyprovidesemployees 5.2 ETHICSHOTLINE of theCodeandrequestedtoconfirmthattheyhavereadit. company employeesworldwideareremindedannuallyoftheexistence with legalandotherresponsibilitiestostakeholders.Alldirectors Ethics coversmanyaspectsofcompanypolicythatgoverncompliance all ofouremployeesanddirectors.TheCodeBusinessConduct which weoperate.OurCodeofBusinessConductandEthicsappliesto governing theconductofJamesHardie’s in activitiesineachcountry requirements with thespiritandletterofalllawsotherstatutory high standardsofethicalbehaviour. We requireouremployeestocomply to ensuringthatJamesHardieconductsitsbusinessinaccordancewith We seektomaintainhigh standardsofintegrityandwearecommitted 5.1 CODEOFBUSINESSCONDUCTANDETHICS of ourwebsite(www.jameshardie.com). Copies ofallthesepoliciesareavailableintheInvestorRelationsarea – Insider Trading. – Continuous DisclosureandMarketCommunication; – Ethics Hotline; – Code ofBusinessConductandEthics; policies cover: that address keyaspectsofourcorporategovernance.Our key As setoutatthestartofthisreport,wehaveanumberpolicies 5. POLICIESANDPROCESSES resignation asadirectoreffective31March2008. member oftheRemunerationCommitteethroughoutyear, untilhis 2008anda Chairman oftheRemunerationCommitteeuntil1February (Chairman), MrLoudon,HarrisonandMcGauchie.Barrwas The currentmembersoftheRemunerationCommitteeareMrAndrews 46–68 ofthisannualreport. in theRemunerationReportwithinDirectors’onpages Further detailsontheroleofRemunerationCommitteearedisclosed purposes ofSection162(m)theUSInternalRevenueCode. Exchange Actof1934,asamended,and“outsidedirectors”forthe employee directors”forthepurposesofRule16b-3underSecurities Members oftheRemunerationCommitteemustqualifyas“non- James HardieIndustriesNVandSubsidiaries GOVERNANCE CORPORATE Communication policyduringthefiscalyear. reviewed andupdatedtheContinuousDisclosureMarket annual resultsreleases.TheNominatingandGovernanceCommittee Statements DisclosureCommitteethatimpactonthequarterlyand Audit CommitteeanyissuesarisingoutofmeetingstheFinancial processes andcontrols.TheManagingBoarddiscusseswiththe which providesassuranceregardingourcompliancewithreporting Board issupportedbytheFinancialStatementsDisclosureCommittee, calendar. Forourquarterlyandannualresultsreleases,theManaging obligations outsideofthecompany’s normalfinancialreporting is responsibleforalldecisionsregardingourmarketdisclosure comprised oftheManagingBoardandVPInvestorRelations with ourcontinuousdisclosureobligations.ADisclosureCommittee The ManagingBoardisresponsibleforensuringthecompanycomplies complies withallofitslegaldisclosureobligations. and thestrengthofitsgrowthprospects,thatcompany assess thequalityofitsmanagementandexaminefinancialposition ensure thatinvestorscaneasilyunderstandJamesHardie’s strategies, Our ContinuousDisclosureandMarketCommunicationPolicyaimsto Netherlands (AFM). Australia (ASXandASIC),theUnitedStates(SECNYSE)The We strivetocomplywith allrelevantdisclosurelawsandlistingrulesin COMMUNICATION 5.3 CONTINUOUSDISCLOSUREANDMARKET integrity concern. any adverseactionagainstanyoneforraisingor helping toresolvean is discussedabove,prohibitsanyemployeefromretaliatingortaking are addressedbyus.OurCodeofBusinessConductandEthics,which addressed byourGeneralCounselinthesamewaythatotherconcerns directors fortheirreview, andwillbesimultaneouslyreviewed Board totheappropriateSupervisory such concernswillbeforwarded Amsterdam, Netherlandsorsubmittedbyphoneat+31 203 012 986.All company’s headofficeatAtrium,8thFloor, Strawinkylaan3077,1077ZX atthe and maybesubmittedinwritingtoourCompanySecretary Committee. Suchcommunicationsmaybeconfidentialoranonymous, directors asagroup,theChairmanofAuditCommitteeorour Board for NYSEpurposes),ourDeputyChairman,Supervisory may communicatedirectlywithourChairman(orPresidingDirector including accounting,internalaccountingcontrolsorauditmatters, Interested partieswhohaveaconcernaboutJamesHardie’s conduct, corporate governanceandcreationof shareholdervalue.Theobjective risk managementandinternalcontrolthatisfundamentaltogood policies, proceduresandcontrolsproducesasystemofriskoversight, The companyconsidersthatasoundframeworkofriskmanagement 6.2 OBJECTIVE the AuditCommittee. and independentofeachotherhasadirectlinereportingto functions. Theinternalandexternalauditfunctionsareseparatefrom Committee (describedindetailbelow)andinternalexternalaudit business risks,aswelltherolesplayedbyRiskManagement put inplacebytheManagingBoardtooverseeandmanagematerial The AuditCommitteeissupportedinitsoversightrolebythepolicies processes andcontrols. Boardonthecompany’sthe Supervisory riskmanagementpolicies, The AuditCommitteeandManagingBoardreportperiodicallyto monitors anddiscussesthesematterswiththeManagingBoard. policies, proceduresandcontrols.TheAuditCommitteereviews, The AuditCommitteehasoversightofthecompany’s riskmanagement 6.1 OVERALLRESPONSIBILITY 6. RISKMANAGEMENT while anyon-marketbuy-backiscurrent. protocols duringtheyeartoreinforceitsexistingdisclosurepolicies The NominatingandGovernanceCommitteeadoptedasetofdisclosure The companyconductedanon-marketbuy-backduringthefiscalyear. 5.5 SHAREBUY-BACK updated theInsiderTrading Policyduringthefiscalyear. transaction. TheNominatingandGovernanceCommitteereviewed notification tothecomplianceofficerinnowayimpliesapprovalofany complies withthespiritandletterofinsidertradinglawsthat of eachJamesHardiedirectorandemployeetoensureheorshe The ManagingBoardrecognisesthatitistheindividualresponsibility the company. employees mayhedgevestedoptionsorshares,providedtheynotify any sharesoroptions.Companyemployeeswhoarenotdesignated a generalprohibitiononhedgingorsellingforshort-swingprofit or pledgingtheirsharesbytakingoutamarginloanoverthem,and prior clearancefromthecompany’s complianceofficerbeforetrading employees anddirectors,includingarequirementthattheyreceive There areadditionalrestrictionsontradingfordesignatedsenior possession ofpricesensitiveinformation. announcement ofquarterlyorfullyearresults,providedtheyarenotin company’s securitieswithinfourweeksbeginningtwodaysafterthe Policy. Companyemployeesanddirectorsmayonlybuyorsellthe All companyemployeesanddirectorsaresubjecttoourInsiderTrading 5.4 SHARETRADING – reporting systems,internalcontrolsandarrangementsformonitoring – effective systemsareinplacetomonitorandmanagerisks; – our principalstrategic,operationalandfinancialrisksareidentified; – our riskmanagementsystemsareeffective; is toensurethat: of thecompany’s riskmanagementpolicies,proceduresandcontrols – an Enterprise RiskManagementprocess,whichinvolves oversight andmanagementofmaterialbusinessrisksare: significant policies,processesorcontrolsadoptedbythecompanyfor ofthemore measures describedelsewhereinthisreport,asummary systems ofinternalcontrolandriskmanagement.Inadditiontothe independent controlstoprovideassuranceastheintegrityofour Management hasputinplaceanumberofkeypolicies,processesand BUSINESS RISKS 6.3 POLICIESFORMANAGEMENTOFMATERIAL – a planning processinvolvingthepreparationofthree-yearstrategic – maintaining policiesandproceduresinrelationtotreasury – maintaining anappropriateinsuranceprogram; – annual budgeting andmonthlyreportingtomonitorperformance; – issuing and revisingstandardsproceduresinrelationto – implementing andmaintainingtrainingprogramsinrelationtolegal – issuing procedures requiringsignificantcapitalandrecurring – documenting detailedaccountingpolicies,proceduresandguidance managing thecompany’s materialbusinessrisks. management’s assessmentoftheeffectivenessthat process in including progressoftheEnterpriseRiskManagementprocessand operation andeffectivenessofthesepolicies,processescontrols, andJointBoards,receiveda numberofreportsonthe Supervisory During thefiscalyear, theAuditCommittee,andthroughit the Investor Relationsareaofourwebsite(www.jameshardie.com). ofthesepolicies,processesandcontrolsisavailable inthe A summary compliance withlawsandregulationsareadequate. plans andbeyond; facing thecompanyanditsassumptionsinthreeyearstrategic identifying and thendevelopingcontingencyplansforthe keyrisks plans andarolling12monthforecast; operations, includingtheuseoffinancialderivatives; environmental andhealthsafetymatters; property protection; issues suchastradepractices/antitrust,secrecy, andintellectual expenditure tobeapprovedattheappropriatelevels;and for thegroupinasinglefinancemanual.

77 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 78 James Hardie Annual Report 2008 FINANCIAL STATEMENTS performance oftheauditforyearending31March2008. Hardie’s externalauditorforover30yearshasbeenresponsiblethe 1 April2008.PricewaterhouseCoopersLLPwhichhadbeenJames & Young wasappointedasexternalauditorfortheyearcommencing BoardandErnst Committee madearecommendationtotheSupervisory Audit Committeeandaspecialcommitteeofmanagement,the capabilities ofundertakingtheCompany’s audit,overseenbythe tender andreviewprocessofmajoraccountingfirmswiththe totheJamesHardiegroup.Followingacomprehensive audit services undertake acompetitivetenderprocessfortheprovisionofexternal BoardinDecember2007to Audit CommitteeandSupervisory The selectionofErnst&Young followsadecisionoftheCompany’s commencing 1April2008. & Young asexternalauditorfortheJamesHardiegroupyear On 2April2008JamesHardieannouncedtheengagementofErnst receivepriorapproval. payable forthoseservices, performedbytheExternalAuditor,services includingtheamountoffees The AuditCommitteehasapprovedpoliciestoensurethatallnon-audit Boarddirectorsarepresent. Committee andSupervisory including anexecutivesessionwhereonlymembersoftheAudit The ExternalAuditorattendseachmeetingoftheAuditCommittee, announcement andauditsthefullyearresults. The ExternalAuditorreviewseachquarterlyandhalf–yearresults 6.6 EXTERNALAUDIT Board inexecutivesessionsonaquarterlybasis. Audit CommitteeandmeetswiththeSupervisory Committee. TheDirectorofInternalAuditreportstotheChairman internal auditdepartment’s workplanisapprovedannuallybytheAudit audit department,itsscopeofwork,responsibilitiesandplan.The an InternalAuditChartersettingouttheindependenceofinternal to headaninternalauditdepartment.TheAuditCommitteeapproved During thelastyear, thecompanyappointedaDirectorofInternalAudit 6.5 INTERNALAUDIT also overseesthecompany’s EnterpriseRiskManagementprocess. financial risksfacingthecompany. TheRiskManagementCommittee managing andreportingontheprincipalstrategic,operational Committee ontheproceduresinplaceforidentifying,monitoring, employees andreportsbothtotheManagingBoardAudit Management Committeecomprisesacross-functionalgroupof Committee intheRiskManagementcharter. TheRisk the companyformallydocumentedroleofRiskManagement assessment andmanagementinthecompany. Duringthelastyear, risks facingthecompany, managementforumforrisk istheprimary The RiskManagementCommittee,whichreviewsandmonitorsthe 6.4 RISKMANAGEMENTCOMMITTEE James HardieIndustriesNVandSubsidiaries GOVERNANCE CORPORATE which appearsonpage82ofthisannualreport. independent registeredpublicaccountingfirm,asstatedintheirreport 31 March2008hasbeenauditedbyPricewaterhouseCoopersLLP, an The effectivenessofourinternalcontroloverfinancialreportingas control overfinancialreportingwaseffectiveasof31March2008. on ourassessmentusingthosecriteria,weconcludedthatinternal Treadway CommissioninInternalControl–IntegratedFramework. Based criteria setforthbytheCommitteeofSponsoringOrganisations reporting asof31March2008.Inmakingthisassessment,weusedthe We assessedtheeffectiveness ofourinternalcontroloverfinancial compliance withthepoliciesorproceduresmaydeteriorate. inadequate becauseofchangesinconditions,orthatthedegree to futureperiodsaresubjecttheriskthatcontrolsmaybecome misstatements. Also,projectionsofanyevaluationeffectiveness internal controloverfinancialreportingmaynotpreventordetectall 13a-15(f) oftheExchangeAct.Becauseitsinherentlimitations, adequate internalcontroloverfinancialreportingasdefinedinRule Our managementisresponsibleforestablishingandmaintaining CONTROL OVERFINANCIALREPORTING 6.9 MANAGEMENT’SANNUALREPORTONINTERNAL failings andweaknesses. controls areinplaceandoperatingeffectively, andevaluateany an internalcontrolcertificatethatseekstoconfirmadequate members ofthecompany’s businessandcorporatefunctions,complete Each fiscalyear, themembersofSeniorLeadershipTeam, andkey 6.8 INTERNALCONTROLSANDSOX404 Leadership Team. the CorporateControllerandannualcertificationsfromSenior Financial Officersofeachbusinessunit,theDirectorTreasury and and annualsub-certificationsfromtheGeneralManagersChief financial reporting.Thisassuranceissupportedbywrittenquarterly disclosure controlsandproceduresinternalover Financial StatementsDisclosureCommitteerelatingtothecompany’s The ManagingBoardinturnreceivesquarterlyassurancefromthe accordance withUSGAAP. Act andareconsideredappropriategiventhatthecompanyreportsin comprehensive anddetailedthanthoserequiredundertheCorporations internal controlsoverfinancialreporting.Thesecertificationsaremore full yearfinancialstatements,disclosurecontrolsandprocedures our CEOandCFOprovidecertaincertificationswithrespectto Under SECrulesandthecompany’s internalcontrolarrangements, 6.7 CEOANDCFOCERTIFICATIONOFFINANCIALREPORTS degree ofcompliancewithpoliciesorprocedures. inadequate becauseofchangesinconditionsordeteriorationthe future periodsaresubjecttorisks.Overtime,controlsmaybecome conditions. Projectionsofanyevaluationcontrols’effectivenessto will succeedinachievingitsstatedgoalsunderallpotentialfuture of futureevents,andtherecanbenoassurancethatanydesign of controlsisbasedinpartoncertainassumptionsaboutthelikelihood or bymanagementoverrideofthecontrols.Thedesignanysystem individual actsofsomepersons,bycollusiontwoormorepeople, of simpleerrorormistake.Controlscanalsobecircumventedbythe decision-making canbefaultyandthatbreakdownsoccurbecause These inherentlimitationsincludetherealitiesthatjudgmentsin have beendetected. that allcontrolissuesandinstancesoffraud,ifany, withinthecompany assurance thatmisstatementsduetoerrororfraudwillnotoccur all controlsystems,noevaluationofcontrolscanprovideabsolute relative totheircosts.Further, becauseoftheinherentlimitationsin resource constraints,andthebenefitsofcontrolsmustbeconsidered The designofacontrolsystemmustreflectthefactthatthereare that thecontrolsystem’s objectiveswillbemet. a controlsystemcanprovideonlyreasonable,notabsolute,assurance all errorandfraud.Nomatterhowwellitisdesignedoperated, our internalriskmanagementandcontrolsystemswillpreventordetect Despite thestepsoutlinedabove,ourmanagementdoesnotexpectthat 6.11 LIMITATIONSOFCONTROLSYSTEMS in theUnitedStatespursuanttoSection404ofSarbanes-OxleyAct. Dutch Codeisdifferentfromthereportthatwearerequiredtoprepare internal riskmanagementandcontrolsystemsforpurposesofthe of Section404theUSSarbanes-OxleyAct.Ouranalysisour This statementisnotainaccordancewiththerequirements – no materialfailingsintheriskmanagementandcontrolsystems – the riskmanagementandcontrolsystemsprovidereasonable believes that: internal riskmanagementandcontrolsystems,theManagingBoard the financialreportinganditsdisclosures.Havingassessedour mattersandtosafeguardreliabilityof compliance withregulatory systems toprovidereasonable(butnotabsolute)assuranceensure James Hardiehasdesigneditsinternalriskmanagementandcontrol 6.10 STATEMENTONRISKMANAGEMENTANDCONTROL were discoveredinourfiscalyear2008. inaccuracies; and assurance thatthisannualreportdoesnotcontainanymaterial – exercise votingrights,subjecttotheprovisionsofourArticles – speak at theAGM;and – attend the AGMeitherinpersonorbyproxy; Each shareholder(otherthanADRholders)hastherightto: The AGMisheldinNetherlandswithinsevendaysoftheAIM. 7.3 AGM answer questions. The ExternalAuditorattendstheAIMbytelephoneandisavailableto on theirbehalfandaskquestions. shareholders willbeabletoappointrepresentativesattendtheAIM so itcanbereplayedlaterifrequired.Beginningforthe2008AIM, jameshardie.com. Thewebcastremainsonthecompany’s website over theinternetinInvestorRelationsareaofwebsiteatwww. For thoseshareholdersunabletoattend,theAIMisbroadcastlive meeting duringtheAIM. Shareholders canalsoaskquestionsrelevanttothebusinessof shareholders canusetosubmitquestionsinadvanceoftheAIM. We distributewiththeNoticeofMeetingsaquestionformwhich and votedonattheAGM. can reviewitemsofbusinessandothermattersthatwillbeconsidered in TheNetherlands,weconductanAIMAustraliasoshareholders Recognising thatmostshareholderswillnotbeabletoattendtheAGM 7.2 ANNUALINFORMATIONMEETING(AIM) trade asCUFSontheASXandADRsNYSE. vennootschap) incorporatedunderDutchlaw. JamesHardiesecurities James Hardieisapubliclimitedliabilitycompany(naamloze 7.1 LISTINGINFORMATION 7. SHAREHOLDERS’PARTICIPATION voting oftheirunderlyingsharesthroughtheADRdepository. While ADRholderscannotvotedirectly, ADRholderscandirectthe Association.

79 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 80 James Hardie Annual Report 2008 FINANCIAL STATEMENTS at theAGM. Board,whichare accountable forthistoshareholders the Supervisory the DutchCodearejointresponsibilityofManagingBoardand James Hardie’s corporategovernancestructureandcompliancewith to JamesHardie. and maywellbejustifiedbecauseofparticularcircumstancesrelevant provision isnotinitselfconsideredobjectionablebytheDutchCode, public limited liabilitycompany. Notapplyingaspecificbestpractice The DutchCodeappliestoJamesHardiebecauseitisa if theydonot,whyandtowhatextentnotapplythem. extent theyapplythebestpracticeprovisionsofDutchCodeand, annual report.ListedDutchcompaniesmustindicateexpresslytowhat their corporategovernancestructureinaseparatesectionof Under theDutchCode,listedcompaniesareobligedtoexplain 8.1 DUTCHCORPORATEGOVERNANCECODE GOVERNANCE REQUIREMENTS 8. COMPLIANCEWITHCORPORATE website arenotincorporatedintothisannualreport. corporate governancestructure.Exceptwherestated,thecontentsof expanded toensureitpresentsthemostup-to-dateinformationonour Information onthissectionofthewebsiteisprogressivelyupdatedand the InvestorRelationsareaofourwebsite(www.jameshardie.com). We haveadedicatedsection oncorporategovernanceaspartof 7.5 INVESTORWEBSITE – equality ofaccessforshareholdersandinvestmentanalyststo – toadviseshareholdersandotherinterested an emailalertservice – site visitsandbriefingsonstrategyforinvestmentanalysts; – a comprehensiveInvestorRelationswebsitethatdisplaysall – audio webcastsofothermanagementbriefingsandthe – making managementbriefingsandpresentationsaccessibleviaalive through aprogramthatincludes: We arecommittedtocommunicatingeffectivelywithourshareholders, 7.4 COMMUNICATION James HardieIndustriesNVandSubsidiaries GOVERNANCE CORPORATE the company, onareasonablebasis. briefings, presentationsandmeetingsequalityofmediaaccessto parties ofannouncementsandotherevents; road showpresentations; cleared bytheASX,aswellallmajormanagementandinvestor company announcements andnoticesassoontheyhavebeen shareholder AIM; annual results; webcast and/orteleconferencefollowingthereleaseofquarterlyand Audit Committee. the NYSEuponoccurrenceofcertain specifiedchangestothe governance listingstandardsandawritteninterimaffirmationto annually totheNYSEaboutitscompliancewithNYSE’s corporate provides thateachlistedcompanymustsubmitawrittenaffirmation any applicableprovisionsofthisSection303A.303A.12(c) listed companybecomesawareofanymaterialnon-compliancewith promptly notifytheNYSEinwritingafteranyexecutiveofficerof Section 303A.12(b)providesthateachlistedcompany’s CEOmust listing standards. practices differfromthosefollowedbyUScompaniesundertheNYSE disclose anysignificantwaysinwhichtheircorporategovernance Section 303A.11providesthatlistedforeignprivateissuersmust Securities ExchangeActof1934,asamended. Committee thatsatisfiestherequirementsofRule10A-3under Section 303A.06requiresthatalllistedcompanieshaveanAudit 303A.12(b) and(c),eachofwhichisdiscussedbelow. required tocomplywithSection303A.06,303A.11and of theListedCompanyManual,exceptthatforeignprivateissuersare provisions ofthecorporategovernancerulescontainedinSection303A practiceinlieuofthe Hardie) arepermittedtofollowhome-country companies thatareforeignprivateissuers(whichincludesJames In accordancewiththeNYSEcorporategovernancestandards,listed 8.3 NYSECORPORATEGOVERNANCERULES Council Recommendations. the waysinwhichwecomplywithASXCorporateGovernance of ourwebsite(www.jameshardie.com) containsmoredetailabout For thebenefitofAustralianholders,InvestorRelationsarea period describedinthisannualreport. the ASXCorporateGovernanceCouncilRecommendationsforentire stated,thecompanyhascompliedwithrevisededitionof otherwise 2008.Exceptwhere for reportingperiodsstartingfrom1January Council RecommendationswaspublishedinAugust2007andapplies Recommendations). AsecondeditionoftheASXCorporateGovernance and Recommendations(ASXCorporateGovernanceCouncil Australian companiesareencouragedtocomplywiththePrinciples published bytheASXCorporateGovernanceCouncil,listed Under theCorporateGovernancePrinciplesandRecommendations 8.2 ASXPRINCIPLESANDRECOMMENDATIONS Report onpages46–68ofthisannualreport. or ManagingBoarddirectorstheyaredescribedintheRemuneration Where theseinstancesrelatetotheremunerationofSupervisory, Joint or bestpracticeprovisionintheDutchCodeandreasonswhy. where JamesHardiedoesnotfullycomplywiththeletterofaprinciple requirements oftheDutchCode,thisdocumentdescribesinstances practice provisionsoftheDutchCode.Inaccordancewith James Hardiecomplieswithalmostalloftheprinciplesandbest – NYSE rulesrequireeachissuertohaveanauditcommittee,a – In theUS,anauditcommitteeofapubliccompanyisrequiredto NYSE listingstandardsshouldbenoted: significantly fromthosefollowedbyUSdomesticcompaniesunder Two waysinwhichourcorporategovernancepracticesdiffer of whichareshownonpage125thisannualreport. (www.jameshardie.com) orfromourcorporateoffices,theaddresses Form 20-FisavailablefromtheInvestorRelationsareaofourwebsite companies undertheNYSElistingstandards.Ourannualreporton our corporategovernancepracticesdifferfromthosefollowedbyUS Form 20-FthatisfiledwiththeSEC,anysignificantwaysinwhich 303A.11, wediscloseinthisreport,andourannualreporton independence requirementsoftheNYSE.InaccordancewithSection example, therequirementthatamajorityofourdirectorsmeet standardsincluding,for standards andmanyofthenon-compulsory NYSElisting James Hardiepresentlycomplieswiththemandatory accordance withtherulesandregulationsofSECNYSE. and GovernanceCommitteepresentlyqualifyasindependentin of ourAuditCommittee,RemunerationCommitteeandNominating Boardhasdeterminedthatallofthecurrentmembers Supervisory higher numberismandatory. Notwithstandingthisdifference,our a majorityofindependentdirectorsonthesecommittees,unless Committees reflectAustralianandDutchpractices,inthatwehave with thisrequirement.Inourcase,thechartersofBoard directors. Asaforeignprivateissuer, wedonothavetocomply and anominatingcommitteecomposedentirelyofindependent compensation committee(equivalenttoaremunerationcommittee) then theManagingBoard;and Boardand in theabsenceofsuchanappointment,bySupervisory registered publicaccountingfirmisappointedbytheshareholdersor, registered publicaccountingfirm.UnderDutchlaw, theindependent be directlyresponsibleforappointingthecompany’s independent – the acquisitionofcontroloverCUFSorsharestakesplaceinan Article 49istoensurethat: companies undertheAustralianCorporationsAct.Thepurposeof change ofcontroltothoseprovidedshareholdersinAustralianlisted provide shareholderswithsimilarprotectionsintheeventofapotential Article 49ofourArticlesAssociationhasbeenincorporatedto to listedcompaniesincorporatedinAustraliaorTheNetherlands. The companyisnotformallysubjecttothetakeoverlawsthatapply THE COMPANY 8.4 ANTI-TAKEOVERPROTECTIONSANDCONTROLOVER – each shareholderandCUFSholdertheManagingBoard,Joint – as far practicable,theshareholdersandCUFSholdersallhave are givenenoughinformationtoassessthemeritsofaproposal iii. are givenreasonabletimetoconsideraproposalacquire ii. know theidentityofanypersonwhoproposestoacquirea i. before obtainingadvicefromaseniorAustralianlegalpractitioner. basisofupto 21days company totakesuchactiononatemporary has occurred.Article49.10oftheArticlesAssociationpermits Australian legalpractitionerthatabreachoftheArticlesAssociation the actionsspecifiedinArticle49.7afterreceivingadvicefromasenior Article 49.9oftheArticlesAssociationpermitscompanytotake distributions arisingfromtheshares. shareholder fromtherighttoreceiveallorpartofdividendsother in breachofArticle49theArticlesAssociation;orsuspendsuch the votingrightsattachedtohisorhersharesifrightvoteisheld Association; todisregardtheexercisebyashareholderofallorpart or partofhishersharesheldinbreachArticle49theArticles Articles ofAssociationincludingorderingtheshareholdertodivestall actions againstanyshareholderwhoisinbreachofArticle49the Article 47.7ofourArticlesAssociationpermitsthecompanytotake efficient, competitiveandinformedmarket; Board and Supervisory Board: Board andSupervisory the company. accruing thoughaproposaltoacquiresubstantialinterestin a reasonableandequalopportunitytoparticipateinanybenefits to acquireasubstantialinterestinthecompany;and substantial interestinthecompany;and substantial interestinthecompany;

81 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 82 James Hardie Annual Report 2008 FINANCIAL STATEMENTS benefit pensionplans. method ofaccountingforstock-basedcompensationanddefined during the year ended31March2007, theCompanychangedits as discussedinNote2totheconsolidatedfinancialstatements, the mannerinwhichitaccountsforuncertaintaxpositions.Also, during theyearended31March2008,Companychanged As discussedinNote14totheconsolidatedfinancialstatements, We believe thatourauditsprovideareasonablebasisforopinions. inthecircumstances. other proceduresasweconsiderednecessary based ontheassessedrisk.Ourauditsalsoincludedperformingsuch and evaluatingthedesignoperatingeffectivenessofinternalcontrol reporting, assessingtheriskthatamaterialweaknessexists,andtesting included obtaininganunderstandingofinternalcontroloverfinancial presentation. Ourauditofinternalcontroloverfinancialreporting made bymanagement,andevaluatingtheoverallfinancialstatement assessing theaccountingprinciplesusedandsignificantestimates supporting theamountsanddisclosuresinfinancialstatements, the financialstatementsincludedexamining,onatestbasis,evidence financial reportingwasmaintainedinallmaterialrespects.Ourauditsof of materialmisstatementandwhethereffectiveinternalcontrolover reasonable assuranceaboutwhetherthefinancialstatementsarefree Those standardsrequirethatweplanandperformtheauditstoobtain of thePublicCompanyAccountingOversightBoard(UnitedStates). and 2007).We conducted ourauditsinaccordancewiththestandards reporting basedonouraudits(whichwereintegratedin2008 statements andontheCompany’s internalcontroloverfinancial page 78.Ourresponsibilityistoexpressopinionsonthesefinancial Report onInternalControloverFinancialReportingappearing internal controloverfinancialreporting,includedinManagement’s over financialreportingandforitsassessmentoftheeffectiveness these financialstatements,formaintainingeffectiveinternalcontrol Commission (COSO).TheCompany’s managementisresponsiblefor issued bytheCommitteeofSponsoringOrganizationsTreadway on criteriaestablishedinInternalControl–IntegratedFramework internal controloverfinancialreportingasof31March2008,based our opinion,theCompanymaintained,inallmaterialrespects,effective principles generallyacceptedintheUnitedStatesofAmerica.Also in theperiodended31March2008conformitywithaccounting of theiroperationsandcashflowsforeachthethreeyears subsidiaries at31March2008and2007,theresults respects, thefinancialpositionofJamesHardieIndustriesNVandits and changesinshareholders’equitypresentfairly, inallmaterial and therelatedconsolidatedstatementsofoperations,cashflows In ouropinion,theaccompanyingconsolidatedbalancesheets JAMES HARDIEINDUSTRIESNV: AND SHAREHOLDERSOF TO THEBOARDOFDIRECTORS James HardieIndustriesNVandSubsidiaries ACCOUNTING FIRM REGISTERED PUBLIC REPORT OFINDEPENDENT 27 June2008 Los Angeles,California PricewaterhouseCoopers LLP procedures maydeteriorate. in conditions,orthatthedegreeofcompliancewithpolicies the riskthatcontrolsmaybecomeinadequatebecauseofchanges of any evaluationofeffectivenesstofutureperiodsaresubject to reporting maynotpreventordetectmisstatements.Also,projections Because ofitsinherentlimitations,internalcontroloverfinancial that couldhaveamaterialeffectonthefinancialstatements. of unauthorisedacquisition,use,ordispositionthecompany’s assets provide reasonableassuranceregardingpreventionortimelydetection authorisations ofmanagementanddirectorsthecompany;(iii) expenditures ofthecompanyarebeingmadeonlyinaccordancewith with generallyacceptedaccountingprinciples,andthatreceipts topermitpreparationoffinancialstatementsinaccordance necessary (ii) providereasonableassurancethattransactionsarerecordedas reflect thetransactionsanddispositionsofassetscompany; maintenance ofrecordsthat,inreasonabledetail,accuratelyandfairly includes thosepoliciesandproceduresthat(i)pertaintothe principles. Acompany’s internalcontroloverfinancialreporting external purposesinaccordancewithgenerallyacceptedaccounting of financialreportingandthepreparationstatementsfor designed toprovidereasonableassuranceregardingthereliability A company’s internalcontroloverfinancialreportingisaprocess ahadcs qiaet 3 Cash andcashequivalents conspybeadacudlaiiis 8 31March Accounts payableandaccruedliabilities Current liabilities: LIABILITIES ANDSHAREHOLDERS’EQUITY 31March Total assets (MillionsofAustraliandollars) (MillionsofUSdollars) Current assets: ASSETS James HardieIndustriesNVandSubsidiaries BALANCE SHEETS CONSOLIDATED oa iblte n hrhles qiy The accompanying notesare anintegralpartof theseconsolidated financialstatements. Total liabilitiesandshareholders’equity Total shareholders’(deficit)equity hr-emdb 9 Short-term debt 4 Restricted cashandequivalents 6,9,9 hrsise t3 ac 07 13 467,295,391sharesissuedat31March2007 432,214,668sharesissuedat31March2008and Common stock,Euro0.59parvalue,2.0billionsharesauthorised; Shareholders’ equity: Commitments andcontingencies Total liabilities Total currentliabilities diinlpi-ncptl Additional paid-incapital cuuae eii 20 Accumulated othercomprehensiveincome at31March2008and2007,respectively Common stockintreasury, at cost,708,695sharesandnil Accumulated deficit etitdcs n aheuvlns–Abso 12 Restricted cashandequivalents–Asbestos cre arl n mlyebnft Accrued payrollandemployeebenefits ogtr et 9 Long-term debt etitdsottr netet sets 12 Restricted short-terminvestments–Asbestos cre rdc arnis 11 Accrued productwarranties eerdicm ae 14 Deferred incometaxes so 1Mrh20 n 1Mrh20,rsetvl 5 asof31March2008and2007,respectively of$2.0million(A$2.2million)and$1.5(A$1.9 Accounts andnotesreceivable,netofallowancefordoubtfulaccounts noetxspybe 14 Income taxespayable cre rdc arnis 11 Accrued productwarranties Inventories 6 setslaiiy 12 Asbestos liability setslaiiy 12 Asbestos liability rpi xessadohrcretast Prepaid expensesandothercurrentassets okr’cmesto sets 12 Workers’ compensation– Asbestos okr’cmesto sets 12 Workers’ compensation–Asbestos nuac eevbe–Abso 12 Insurance receivable–Asbestos Other liabilities te iblte 10 Other liabilities okr’cmesto sets 12 Workers’ compensation–Asbestos eerdicm ae 14 Deferred incometaxes eerdicm ae sets 12 Deferred incometaxes–Asbestos Total currentassets rpry ln n qimn,nt 7 Property, plantandequipment,net nuac eevbe–Abso 12 Insurance receivable–Asbestos okr’cmesto sets 12 Workers’ compensation– Asbestos eerdicm ae 14 Deferred incometaxes eerdicm ae sets 12 Deferred incometaxes–Asbestos eoi ihAsrla aainOfc 15 Deposit withAustralianTaxation Office te ses Other assets Notes

$ 2,179.9 $ 2,179.9 35.4 $ $ 107.6 2,382.5 1,497.8 (202.6) (454.5) 187.5 219.7 349.2 174.5 131.4 179.7 532.9 756.4 194.3 397.1 205.8 2008 16.9 90.0 19.3 37.4 37.0 77.7 84.2 13.0 10.8 78.7 28.0 78.5 14.1 78.5 13.2 (4.0) 9.1 5.0 6.9 6.9 6.9 8.2 9.1 1.7

2007 258.7 $ 100.8 $ 2,128.1 $ 2,128.1 $ 34.1 $ 1,869.4 1,225.8 (178.7) 251.8 317.6 180.2 146.9 105.0 163.4 147.6 576.6 827.7 165.1 318.2 154.8 41.2 83.0 42.0 93.8 10.6 63.5 32.4 76.5 27.3 76.5 5.4 9.3 5.0 5.7 9.5 2.7 9.4 2.7 7.8 6.9 2.3 – – (Unaudited) A$ 2,376.8 A$ 2,597.6 A$ 38.6 A$117.3 1,633.1 204.4 380.6 190.3 143.3 195.9 581.0 824.7 211.8 433.0 224.4 2008 98.1 40.8 40.3 84.7 91.8 14.2 11.8 85.8 30.5 85.6 15.4 85.6 14.4 9.9 5.5 7.5 7.5 7.5 8.9 9.9 1.9 2007 (Unaudited) $ 42.3 A$ A$ 124.9 A$ 2,637.9 A$ 2,317.1 1,519.4 1,025.9 102.9 393.6 182.1 130.1 116.3 202.5 183.0 714.8 204.6 394.4 191.9 11.5 51.1 52.1 13.1 11.8 78.7 40.2 94.8 11.7 33.8 94.8 6.2 7.1 3.3 3.3 9.7 8.6 2.9 –

83 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 84 James Hardie Annual Report 2008 FINANCIAL STATEMENTS Mlin fU olr,ecp e hr aa Notes (Millions ofUSdollars,exceptpersharedata) (US$) James HardieIndustriesNVandSubsidiaries OF OPERATIONS STATEMENTS CONSOLIDATED Dltd 2 2 14 19 The accompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements. Diluted 12 Basic Weighted averagecommon sharesoutstanding(Millions): 7 Net (loss)incomepershare–diluted Net (loss)incomepershare–basic 19 Net (loss)income net ofincometaxexpensenil,$0.4millionandrespectively Cumulative effectofchangeinaccountingprincipleforstock-basedcompensation, (Loss) incomebeforecumulativeeffectofchangeinaccountingprinciple Income tax(expense)benefit Loss beforeincometaxes Interest income Interest expense Operating loss Other operatingexpense Asbestos adjustments SCI andotherrelatedexpenses Impairment charges Research anddevelopmentexpenses Selling, generalandadministrativeexpenses Gross profit Cost ofgoodssold Net sales $ (0.16) $ (0.16) $ (71.6) $ 1,468.8 (240.1) (228.2) (938.8) 455.0 455.0 530.0 (71.6) (36.1) (35.5) (11.1) (36.6) (71.0) (27.3) 2008 12.2 – – – Years Ended31March 117 (506.7) $ 151.7 $ ,4. $1,488.5 $ 1,542.9 03 $ (1.10) $ (1.10) $ 0.33 $ 0.33 $ (405.5) (715.6) (214.6) (209.8) (969.9) (937.7) 466.4 461.7 464.6 461.7 573.0 550.8 150.8 (506.7) 243.9 (71.6) (93.1) (435.1) (12.0) (7.2) (86.6) (434.9) (25.9) (28.7) (13.6) (17.4) 2007 2006 5.5 7.0 0.9 – – (13.4) – (0.8) The accompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements. Diluted Basic Weighted averagecommon sharesoutstanding(Millions): Net (loss)incomepershare–diluted Net (loss)incomepershare–basic Net (loss)income net ofincometaxexpensenil,A$0.5millionandrespectively Cumulative effectofchangeinaccountingprincipleforstock-basedcompensation, (Loss) incomebeforecumulativeeffectofchangeinaccountingprinciple Income tax(expense)benefit Loss beforeincometaxes Interest income Interest expense Operating loss Other operatingexpense Asbestos adjustments SCI andotherrelatedexpenses Impairment charges Research anddevelopmentexpenses Selling, generalandadministrativeexpenses Gross profit Cost ofgoodssold Net sales (Millions ofAustraliandollars,exceptpersharedata) (A$ UNAUDITED) James HardieIndustriesNVandSubsidiaries OF OPERATIONS STATEMENTS CONSOLIDATED A$ (0.18) A$ (0.18) A$ (82.4) A$ 1,689.6 (1,079.9) (276.2) (262.5) 455.0 455.0 609.7 (82.4) (41.5) (40.9) (12.8) (42.1) (81.7) (31.4) 2008 14.0 – – – Years Ended31March $ 9. A$ (722.4) A$ 198.3 $2060 A$1,977.5 A$ 2,016.0 $ .3 A$(1.56) 0.43 A$ A$(1.56) 0.43 A$ (1,267.3) (1,245.7) (121.6) (627.3) (113.1) (627.0) (529.8) (1,000.0) (280.4) (278.7) 466.4 461.7 464.6 461.7 197.1 (722.4) 318.7 (95.1) 748.7 731.8 (17.8) (23.1) (15.7) (9.6) (33.8) (38.1) 2007 2006 1.2 – 7.2 9.3 – (1.1) – (17.8)

85 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 86 James Hardie Annual Report 2008 FINANCIAL STATEMENTS (Millions ofUSdollars,exceptpersharedata) (US$) James HardieIndustriesNVandSubsidiaries OF CASHFLOWS STATEMENTS CONSOLIDATED Net cash(usedin)providedbyfinancingactivities Collections onloansreceivable Net cashprovidedby(usedin)operatingactivities Changes inoperatingassetsandliabilities: Adjustments toreconcilenet(loss)incomecashprovidedby(usedin)operatingactivities: Net (loss)income Cash flowsfromoperatingactivities Cash andcashequivalentsatendofperiod Cash andcashequivalentsatbeginningofperiod Net increase(decrease)incashandequivalents Effects ofexchangeratechangesoncash Net cashusedininvestingactivities Proceeds fromdisposalofsubsidiariesandbusinesses,netcashdivested Purchases ofproperty, plantandequipment Cash flowsfrominvestingactivities Cash andcashequivalentsatend ofperiod Short-term deposits Cash atbankandonhand Components ofcashandequivalents Dividends paid Treasury stockpurchased Tax benefitfromstockoptionsexercised Proceeds fromissuanceofshares Repayments oflong-termborrowings Proceeds fromlong-termborrowings Repayments ofshort-termborrowings Proceeds fromshort-termborrowings Cash flowsfromfinancingactivities The accompanying notesareanintegralpartoftheseconsolidated financialstatements. Cash paidduringtheyearforincome taxes,net Cash paidduringtheyearforinterest, netofamountscapitalised Supplemental disclosureofcash flowactivities Other accruedliabilitiesandother Deposit withAustralianTaxation Office Asbestos liability Accounts payableandaccruedliabilities Insurance receivable–Asbestos Prepaid expensesandothercurrentassets Inventories Accounts andnotesreceivable Restricted cashandequivalents Other Impairment charges Cumulative effectofchangeinaccountingprinciple Asbestos adjustments Stock-based compensation Prepaid pensioncost Deferred incometaxes Depreciation

$ (71.6) $ 35.4 $ 21.6 $ 35.4 $ 70.4 $ 12.8 (254.4) (126.2) (208.0) 240.1 319.3 (67.0) (26.6) (54.0) (25.1) (38.5) (38.5) 2008 66.8 16.7 39.6 44.7 71.0 56.5 34.1 13.8 69.5 (9.7) (3.4) 2.6 4.9 7.7 1.0 1.3 3.3 7.0 – – – – – – Years Ended31March 39 3.5 $ $ 3.9 3 . $ 315.1 $ 34.1 2 . $ 24.9 $ 26.1 3 . $ 315.1 $ 34.1 8 . $ 93.4 $ 80.8 5. $(506.7) $ 151.7 (154.8) – (151.9) – (310.4) 4.3 (281.0) 201.6 (136.4) 118.7 (121.7) (37.6) 405.5 715.6 315.1 113.5 105.0 – (42.1) (45.9) (19.6) 7.0 (18.4) 24.4 (19.5) (26.6) (92.6) (162.0) (67.1) 238.4 (92.6) (154.0) (98.0) – 2007 2006 50.7 45.3 15.1 (1.5) 18.5 18.7 (0.1) (24.8) (4.8) (24.0) (0.4) 2.9 (0.9) – 0.1 0.3 1.3 1.7 4.5 5.9 8.0 290.2 1.8 2.2 – – – 13.4 – 8.0 – – 181.0 Dividends paid Treasury stockpurchased Tax benefitfromstockoptionsexercised Proceeds fromissuanceofshares Repayments oflong-termborrowings Proceeds fromlong-termborrowings Repayments ofshort-termborrowings Proceeds fromshort-termborrowings Cash flowsfromfinancingactivities Net cashusedininvestingactivities Proceeds fromdisposalofsubsidiariesandbusinesses,netcashdivested Purchases ofproperty, plantandequipment Cash flowsfrominvestingactivities Net cashprovidedby(usedin)operatingactivities Changes inoperatingassetsandliabilities: The accompanying notesareanintegralpartoftheseconsolidated financialstatements. Cash paidduringtheyearforincome taxes,net Cash paidduringtheyearforinterest, netofamountscapitalised Supplemental disclosureofcash flowactivities Cash andcashequivalentsatend ofperiod Short-term deposits Cash atbankandonhand Components ofcashandequivalents Cash andcashequivalentsatendofperiod Cash andcashequivalentsatbeginningofperiod Net (decrease)increaseincashandequivalents Effects ofexchangeratechangesoncash Net cash(usedin)providedbyfinancingactivities Collections onloansreceivable Adjustments toreconcilenet(loss)incomecashprovidedby(usedin)operatingactivities: Net (loss)income Cash flowsfromoperatingactivities (Millions ofAustraliandollars,exceptpersharedata) (A$ UNAUDITED) James HardieIndustriesNVandSubsidiaries OF CASHFLOWS STATEMENTS CONSOLIDATED Other accruedliabilitiesandother Deposit withAustralianTaxation Office Asbestos liability Accounts payableandaccruedliabilities Insurance receivable–Asbestos Prepaid expensesandothercurrentassets Inventories Accounts andnotesreceivable Restricted cashandequivalents Other Impairment charges Cumulative effectofchangeinaccountingprinciple Asbestos adjustments Stock-based compensation Prepaid pensioncost Deferred incometaxes Depreciation

A$ 38.6 A$ 38.6 A$ 81.0 A$ 14.7 A$ 23.6 A$ (82.4) (145.2) (239.3) (292.7) 367.3 276.2 (44.3) (44.3) (11.2) (77.1) (30.6) (62.1) (34.0) 2008 79.9 76.8 19.2 45.6 51.4 81.7 65.0 15.0 42.3 (3.9) (3.7) 3.8 8.1 3.0 5.6 8.9 1.2 – – – – – – Years Ended31March $ . A 4.9 A$ A$ 4.8 $ 23 $ 440.4 A$ A$ 42.3 A$ 440.4 A$ 42.3 $ 24 A$ 34.8 A$ 32.4 $102 A$ 130.5 A$ 100.2 $183 A$(722.4) A$ 198.3 (121.0) (204.6) (159.0) (50.0) (128.0) – (121.0) (215.2) (202.3) – (198.5) – (405.6) 5.7 (178.1) 157.5 (398.1) 293.5 137.2 – 529.8 1,000.0 440.4 146.9 (87.7) 316.9 (25.6) 9.3 (24.0) 32.4 (25.5) (35.3) (55.0) (61.0) (11.3) 23.7 2007 2006 24.2 24.8 66.2 60.2 (0.1) (32.9) (6.3) (31.9) (0.5) 3.9 (1.2) – 2.4 2.9 1.7 2.3 5.9 7.8 0.1 0.3 9.9 405.6 – – 10.6 – – – 240.5 – 17.8

87 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 88 James Hardie Annual Report 2008 FINANCIAL STATEMENTS iied ad – 162 – (126.2) – (208.0) 3.3 – 7.7 (78.0) (208.0) 204.0 – (60.1) – – – – – (71.6) – 15.3 – 11.5 – (4.4) (126.2) – – (202.6) – $ – (4.0) – (42.1) – – $ – (78.0) – – 16.9 – 0.6 (171.4) $ 0.1 – 11.5 18.5 15.3 (4.4) – – 2.8 (454.5) $ (32.6) (71.6) – 7.7 4.5 – – – 19.3 – – $ – – 0.5 – – 1.8 219.7 (2.7) $ 188.2 0.6 – – – – 151.7 – (42.1) The accompanyingnotesareanintegralpartoftheseconsolidatedfinancial statements. – – – – 258.7 – – Balances asof31March2008 36.5 $ 36.5 (45.9) – – Treasury stockretired – – – – – Treasury stockpurchased $ – (2.7) – 0.3 – – – Dividends paid – – 18.7 Stock optionsexercised 5.4 $ – – Stock-based compensation – 0.1 15.4 Adoption ofFIN48 5.9 36.5 – – – 36.5 – (178.7) $ Total comprehensive – loss (511.0) 151.7 Other comprehensive income 2.2 180.2 – Foreign currencytranslationgain 4.5 $ 3.1 – – – – Unrealised lossoninvestments – – – – 251.8 (4.3) (45.9) (506.7) Pension andpost-retirementbenefitadjustments $ 1.8 (4.8) – 0.5 Net loss – – Comprehensive income(loss) – 94.9 – – – – – – $ – Balances asof31March2007 – – – – – – Other (4.5) – Dividends paid $ (4.3) – – Stock optionsexercised – (4.8) (28.4) 0.3 – $ 11.3 0.5 Employee loansrepaid Tax benefitfromstockoptionsexercised – (288.3) – $ (506.7) Stock-based compensation 5.9 Adoption ofFAS 158,netoftax 7.4 – – 158.4 – $ Total Total comprehensive – income Other comprehensive 2.2 income 253.2 – Foreign currencytranslationgain $ – – Net Stock – income – Comprehensive income(loss): – – Balances asof31March2006 – (Loss)Income Dividends paid Deficit – – Stock optionsexercised Employee loansrepaid Capital Tax benefitfromstockoptionsexercised Stock-based compensation – Total comprehensive Stock loss Other comprehensive loss Foreigncurrencytranslationloss $ on Accumulated $ derivative instruments – 624.7 $(24.1) Amortisationofunrealisedtransitiongain Net $264.3 loss $138.7 Comprehensive income(loss): $245.8 Balances as of (Millions ofUSdollars) – 31 March Common 2005 James HardieIndustriesNVandSubsidiaries IN SHAREHOLDERS’EQUITY – STATEMENTS OFCHANGES Paid-in CONSOLIDATED Additional (4.5) Accumulated Comprehensive Other Treasury is not material. is not The impact ofthis adjustmentonpriorperiods’financialstatements a chargeofUS$2.7millionrelatingto priorperiodleasecosts. Operating lossforthetwelvemonths ended 31March2008includes the “JamesHardieGroup,”unlesscontextindicatesotherwise. with itssubsidiariesasofthetimerelevanttoapplicablereference, to aseitherthe“Company”or“JamesHardie”andJHINVtogether owned subsidiariesandspecialpurposeentities,collectivelyreferred results ofoperationsandcashflowsJHINVitscurrentwholly The consolidatedfinancialstatementsrepresenttheposition, Basis ofPresentation additional information. consolidated withtheresultsforJHINV. SeeNote 2 andNote12for AICF wasdeemedaspecialpurposeentityand,assuch,it Upon approvaloftheAmendedFFA 2007,the on7February 31 March2007aspartoftheaccountingforasbestosliability. Previously deconsolidatedentitieshavebeenconsolidatedbeginning 2001 Reorganisation. assets and liabilitiesasJHILcontrolledimmediatelyprior tothe Following the2001Reorganisation,JHINVcontrolssame became thenewultimateholdingcompanyforJHILandJHNV. shareholders inexchangefortheirsharesJHILsuchthatJHINV shares representedbyCUFSonaoneforbasistoexistingJHIL NV”), formerlyRCINetherlandsHoldingsB.V., issuedcommon with the2001Reorganisation,JamesHardieIndustriesN.V. (“JHI the 2001Reorganisationoccurredon19October2001.Inconnection and capitalrestructuring(the“2001Reorganisation”).Completionof On 24July2001,JHILannouncedafurtherplanofreorganisation certain unrelatedassetsand liabilities. Reorganisation, JHILanditsnon-transferringsubsidiariesretained Businesses”) toJHNVanditssubsidiaries.Inconnectionwiththe1998 and itsAustralianwindowsbusiness(collectively, the“Transferred business, itsAustralianandNewZealandbuildingsystemsbusinesses JHIL contributeditsfibrecementbusinesses,USgypsumwallboard approved the1998Reorganisation.Effectiveasof1November1998, indirect subsidiariesofJHIL.On16 October 1998,JHIL’s shareholders holdingcompany,intermediary withallofitscommonstockownedby James HardieN.V. (“JHNV”)wasincorporatedinAugust1998,asan reorganisation andcapitalrestructuring(the“1998Reorganisation”). the lawsofAustraliaandlistedonASX,announcedaplan Industries Limited(“JHIL”),thenapubliccompanyorganisedunder On 2July1998,ABN60000009263PtyLtd,formerlyJamesHardie Background the UnitedStates,Australia,NewZealand,PhilippinesandEurope. for interiorandexteriorbuildingconstructionapplicationsprimarilyin The Companymanufacturesandsellsfibrecementbuildingproducts Nature ofOperations OF PRESENTATION 1. BACKGROUNDANDBASIS James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS CONSOLIDATED NOTES TO ACCOUNTING POLICIES 2. SUMMARY OFSIGNIFICANT period movements Cash flows–current Cash flows–endingcash Cash flows–beginningcash Statements ofoperations Assets andliabilities (US$1 =A$) 31 translations areasfollows: been audited.Theexchangeratesusedtocalculatetheconvenience generally acceptedintheUnitedStatesofAmericaandhavenot translations arenotpreparedinaccordancewithaccountingprinciples Company’s shareholderbaseisAustralian.TheseA$convenience Australian dollar(A$)conveniencetranslationsasthemajorityof cash flowsoftheCompanyhavebeenpresentedwithaccompanying The assets,liabilities,statementsofoperationsand March with originalmaturitiesofthreemonths orlesswhenacquired. cash investedtemporarilyinvarioushighly liquidfinancialinstruments Cash andcashequivalentsincludeamounts ondepositinbanksand Cash andEquivalents currency transactionsarerecognisedinincomecurrently. income inshareholders’equity. Gainsandlossesarisingfromforeign translation adjustmentsareincludeddirectlyinothercomprehensive exchange ratesineffectfortheperiod.Theeffectsofforeigncurrency exchange rateswhilerevenuesandexpensesaretranslatedataverage All assetsandliabilitiesaretranslatedintoUSdollarsatcurrent Foreign CurrencyTranslation shareholders’ equity. the currentyearpresentation.Thereclassificationsdonotimpact Certain prioryearbalanceshavebeenreclassifiedtoconformwith Reclassifications from theseestimates. and expensesduringthereportingperiod.Actualresultscoulddiffer date ofthefinancialstatements,andreportedamountsrevenues liabilities andthedisclosureofcontingentassetsat estimates andassumptionsaffectthereportedamountsofassets requires managementtomakeestimatesandassumptions.These The preparationoffinancialstatementsinconformitywithUSGAAP Use ofEstimates significant intercompanytransactionsandbalancesareeliminated. All subsidiariesandspecialpurposeentitiesareconsolidatedall America (“USGAAP”).TheUSdollarisusedasthereportingcurrency. with accountingprinciplesgenerallyacceptedintheUnitedStatesof The consolidatedfinancialstatementsarepreparedinaccordance Accounting Principles 1.1503 1.0903 1.2395 1.1503 1.0903 2008 1.3066 1.3285 1.2395 1.3975 1.3975 1.2946 1.3066 1.3285 1.2395 1.3975 2007 2006

89 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 90 James Hardie Annual Report 2008 FINANCIAL STATEMENTS useful life. the asset’s valueandallocatedtoexpenseovertheasset’s carrying and arelatedlong-livedassetretirementcostiscapitalisedaspartof retirement obligationisbaseduponthepresentvalueofestimatedcost in whichtheliabilityisincurred.Theinitialmeasurementofanasset the Company accruesforallassetretirementobligationsintheperiod (“SFAS”) No.143,“AccountingforAssetRetirementObligations”, In accordancewithStatementofFinancialAccountingStandards 5to10 3to10 reflected intheconsolidatedstatementsofoperations. 20 accumulated depreciationamountswithanyresultinggainorloss sales anddisposalsofassetsarerecordedbyremovingthecost 5to10 and isamortisedovertheasset’s estimatedusefullife.Retirements, Capitalised interestisrecordedaspartoftheassettowhichitrelates capitalised inconnectionwiththeconstructionofmajorfacilities. maintenance andrepaircostsareexpensedasincurred.Interestis The costsofadditionsandimprovementsarecapitalised,while 3to7 Office furnitureandequipment Computer equipment,softwareanddevelopment General equipment Manufacturing machinery Building improvements Buildings 40 Years the followingestimatedusefullives: plant andequipmentiscomputedusingthestraight-linemethodover based onfairvalueatthedateofacquisition.Depreciationproperty, equipment ofbusinessesacquiredarerecordedattheirestimatedcost Property, plantandequipmentarestatedatcost.Property, plantand Property, PlantandEquipment balancesarewrittendown,ifnecessary.evaluations, inventory onhand,saleslevelsandotherinformation.Basedthese inventory balances forexcessquantitiesandobsolescencebyanalysingdemand, overhead. Onaregularbasis,theCompanyevaluatesitsinventory costs. Costincludesthecostsofmaterials,labourandappliedfactory of rawmaterialsandsuppliesisdeterminedusingactualoraverage determined underthefirst-in,first-outmethod,exceptthatcost Inventories arevaluedatthelowerofcostormarket.Costisgenerally Inventories based oninsolvency, disputesorothercollectionissues. specific customeraccountsandassessingtheriskofuncollectability doubtful accountseachperiod.Theallowanceisdeterminedbyanalysing The Companyreviewstradereceivablesandestimatesoftheallowancefor Accounts Receivable insurance companies. Restricted cashandequivalentsincludeamountsondepositwith Restricted CashandEquivalents associated withtheCompany’s distributionnetwork. expenses alsoincludecertaintransportation andlogisticsexpenses other generalcorporatefunctions.Selling, generalandadministrative related toadvertising,marketing,selling, informationtechnologyand Selling, generalandadministrativeexpensesprimarilyincludecosts Selling, GeneralandAdministrative sales priceperunitandisthereforeclassifiedaspartofnetsales. ofthesecostsisincorporatedin theCompany’sincurred. Recovery Shipping andhandlingcostsarechargedtocostofgoodssoldas Shipping andHandling handling costs. costs, warehousinginternaltransfercostsandshipping inbound freightcharges,purchasingandreceivingcosts,inspection and manufacturing.Costofgoodssoldalsoincludesthecost Cost ofgoodssoldisprimarilycomprisedcostmaterials,labour Cost ofGoodsSold if necessary, asadditionalinformationbecomesavailable. discounts onanongoingbasisandtherelatedaccrualsareadjusted, similar programsandproducts.Managementreviewstheserebates products aresold.Theestimatesbasedonhistoricalexperiencefor discounts arerecordedbasedonmanagement’s bestestimatewhen including volume,promotional,cashandotherdiscounts.Rebates estimated reductionstosalesforcustomerrebatesanddiscounts tothecustomer.occurs atthetimeofdelivery TheCompanyrecords ownership havebeentransferredtothecustomer, whichgenerally The Companyrecognisesrevenuewhentherisksandobligationsof Revenue Recognition commitment toaformalplanofaction. accruals coincideswithcompletionofafeasibilitystudyortheCompany’s are notdiscountedtopresentvalue.Generally, thetimingofthese probable andthecostscanbereasonablyestimated.Estimatedliabilities recorded whenenvironmentalassessmentsand/orremedialeffortsare to currentorfuturerevenuegeneration,areexpensed.Liabilities existing conditioncausedbypastoperations,andwhichdonotcontribute are expensedorcapitalised,asappropriate.Expendituresthatrelatetoan Environmental remediationexpendituresthatrelatetocurrentoperations Environmental amountoftheassetexceedsfairvalueassets. carrying flows, animpairmentchargeisrecognisedbytheamountwhich amountoftheassetexceedsitsestimatedfuturecash If thecarrying undiscounted futurecashflowsexpectedtobegeneratedbytheasset. amountofanassettoestimated by acomparisonofthecarrying recoverable. Recoverabilityofassetstobeheldandusedismeasured amountofanassetmaynotbe circumstances indicatethatthecarrying are reviewedforimpairmentwhenevereventsorchangesin plant andequipment,purchasedintangiblessubjecttoamortisation Disposal ofLong-LivedAssets,”long-livedassets,suchasproperty, In accordancewithSFAS No.144,“AccountingfortheImpairmentor Impairment ofLong-LivedAssets income currently. Changesinthefairvalueofderivative instruments recognised. Theineffectiveportionof thesehedgesisrecognisedin are recognisedinincomewhenthetransactions beinghedgedare in othercomprehensiveincome.These deferredgainsorlosses instruments designatedascashflow hedges aredeferredandrecorded as amended.Specifically, changesinthefairvalue ofderivative 133, “AccountingforDerivativeInstrumentsandHedgingActivities,” on suchcontractsareaccountedforinaccordancewithSFAS No. designated as,andareeffectiveahedge,gainslossesarising prices andforeigncurrencyexchangerates.Wheresuchcontractsare exposure resultingfromfluctuationsininterestrates,commodity exchange contractsareusedtomanagemarketrisksandreduce Periodically, interestrateswaps,commodityswapsandforward effect ontheestimatedfairvalueamounts. assumptions and/orestimationmethodologiesmayhaveamaterial could realiseinacurrentmarketexchange.Theuseofdifferent herein arenotnecessarilyindicativeoftheamountsthatCompany develop theestimatesoffairvalue.Accordingly, theestimatespresented considerable judgmentisrequiredininterpretingmarketdatato market informationandappropriatevaluationmethodologies.However, amounts havebeendeterminedbytheCompanyusingavailable value, noadditionaldisclosureismade.Theestimatedfairvalue instruments. Whenthefairvaluereasonablyapproximatescarrying valueofthosefinancial the fairvalueisdifferentthancarrying information inthenotestoconsolidatedfinancialstatementswhen the fairvalueoffinancialinstrumentsandincludesthisadditional About FairValue ofFinancialInstruments”,theCompanycalculates To meetthereportingrequirementsofSFAS No.107,“Disclosures Financial Instruments in incometaxexpense. Interest andpenaltiesrelatedtouncertaintaxpositionsarerecognised not thatallorsomeportionofdeferredtaxassetswillberealised. date. Avaluationallowanceisprovidedwhenitmorelikelythan rates isrecognisedinincometheperiodthatincludesenactment assets andliabilities.Theeffectondeferredtaxesofachangeintax between thetaxbasesandfinancialreportingamountsofexisting ratesapplicabletofutureyearsdifferences applying enactedstatutory method. Underthismethod,deferredincometaxesarerecognisedby The Companyaccountsforincometaxesundertheassetandliability Income Taxes warranty coststosales. an analysisbytheCompany, includingthehistoricalrelationshipof An accrualforestimatedfuturewarrantycostsisrecordedbasedon Accrued ProductWarranties Research anddevelopmentcostsarechargedtoexpensewhenincurred. Research andDevelopment years ended31March2008,2007and2006,respectively. US$11.9 million, US$17.0millionandUS$19.1duringthe first timetheadvertisingtakesplace.Advertisingexpensewas The Companyexpensestheproductioncostsofadvertising Advertising formally declaresthedividend. Dividends arerecordedasaliabilityon thedateBoardofDirectors Dividends difference eitherasaprepaidoraccruedpensioncost. amount ofnetperiodicpensioncost,theCompanyrecognises total contributiontoitspensionplanfortheperiodisnotequal any unrecognisednettransitionasset.IftheamountofCompany’s (e) recognitionofnetactuarialgainsorlosses;and(f)amortisation cost; on planassets;(d)amortisationofunrecognisedpriorservice cost;(b)interest (c)expectedreturn pension expense:(a)service consideration thefollowingcomponentstocalculatenetperiodic defined benefitplancoversalleligibleemployeesandtakesinto in theperiodthatemployees’salariesorwagesareearned.The defined contributionplansarerecognisedasperiodicpensionexpense retirement plansforitsemployees.Employercontributionstothe The Companysponsorsbothdefinedbenefitandcontribution US$2.7 million, at31March2007. of US$3.9 million andareductioninshareholders’equityof resulted inthe recognition ofanincreaseinnon-current liabilities Pension andOtherPostretirementPlans”.Adoptingthisstandard of SFAS No. 158,“Employers’AccountingforDefinedBenefit In fiscalyear2007,theCompanyimplementedprovisions Employee BenefitPlans adjustment wasUS$0.4million. employees wasUS$1.0millionforwhichtherelatedUSAincometax 2007, theamountofcumulativeadjustmentrelatedtoUSA-based tax assetpreviouslyrecorded.Forthetwelvemonthsended31March that relatestoUSA-basedemployeescausedareductioninthedeferred principle (netofincometax).Theportionthecumulativeadjustment statements ofoperationsasacumulativeeffectchangeinaccounting 1 April2006.Theadjustmentispresentedontheconsolidation net ofanincometaxbenefitUS$0.4millionwasrecordedeffective adjustment tostock-basedcompensationexpenseofUS$1.3million forfeiture rateof30.7%.Basedonthisestimatedrate,acumulative which vestingwascomplete,resultinginanestimatedweightedaverage analysed forfeitureratesonallofits2001StockOptionPlangrantsfor Compensation”, atthebeginningoffiscalyear2007,Company Upon adoptionofSFAS No.123R,“AccountingforStock-Based 2007 and2006,respectively. US$5.8 millionandUS$5.9fortheyearsended31March2008, in selling,generalandadministrativeexpense)ofUS$7.7million, The Companyrecognisedstock-basedcompensationexpense(included Stock-based Compensation not use derivativesfortradingpurposes. accounting purposesarerecognisedinincome.TheCompanydoes value ofderivativeinstrumentsthatarenotdesignatedashedgesfor changes inthefairvalueofhedgeditem.Changes designated asfairvaluehedgesarerecognisedinincome,

91 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 92 James Hardie Annual Report 2008 FINANCIAL STATEMENTS Years Ended31March Net (loss)incomepershare–basic (US dollars) Diluted commonsharesoutstanding Dilutive effectofstockoptions Basic commonsharesoutstanding (Millions ofshares) income pershareareasfollows: and dilutivecommonsharesoutstandingusedindeterminingnet(loss) common shares,suchasoptions,hadbeenissued.Accordingly, basic method thatwouldhavebeenoutstandingifthedilutivepotential the numberofadditionalcommonsharescalculatedusingtreasury average numberofcommonsharesoutstandingisincreasedtoinclude period. DilutedEPSissimilartobasicexceptthattheweighted weighted averagenumberofcommonsharesoutstandingduringthe share (“EPS”).BasicEPSiscalculatedusingnetincomedividedbythe The Companyisrequiredtodisclosebasicanddilutedearningsper Earnings PerShare James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS CONSOLIDATED NOTES TO Net (loss)incomepershare–diluted various parties. funding oftheasbestosliabilitywhich wasundernegotiationwith that theCompanywaspreparedtoassume asaresultofitsvoluntary on 6April2006.Theamountrepresented theneteconomicimpact tax deductionarisingfromAustralianlegislationwhichcameintoforce future cashoutflows,undiscountedanduninflated,theanticipated prepared byKPMGActuariesasof31March2006theprojected the termsofOriginalFFA, whichincludedanactuarialestimate amount oftheasbestosprovisionUS$715.6millionwasbasedon Agreement (“OriginalFFA”) enteredintoon1December 2005.The based ontheestimatedeconomicrealityofOriginalFinalFunding At 31March2006,theCompanyrecordedanasbestosprovision Asbestos of shareholders’equity. unrecognised pensioncosts,andispresentedasaseparatecomponent translation gainsandlosses,unrealisedlossesoninvestments Accumulated othercomprehensiveincomeincludesforeigncurrency Accumulated OtherComprehensiveIncome stock andadditionalpaid-incapital,asapplicable. equity. stockisrecordedasareductionofcommon Retirementoftreasury stockasacomponentofshareholders’ method andincludessuchtreasury The Companyaccountsforrepurchasedcommonstockunderthecost Repurchased CommonStock would havebeenanti-dilutive. the assumednetexerciseofstockoptionswasexcluded,aseffect Due tothenetlossforyearsended31March2008and2006, outstanding becausetheeffectoftheirinclusionwouldbeanti-dilutive. have beenexcludedfromthecalculationofdilutedcommonshares for theyearsended31March2008,2007and2006,respectively, Potential commonsharesof10.4million,7.7millionand6.6 $ (0.16) $ (0.16) 455.0 455.0 2008 2008 – .3 $(1.10) $ 0.33 .3 $(1.10) $ 0.33 466.4 461.7 464.6 461.7 2007 2006 2007 2006 1.8 – consolidated statementsofoperations. these amountsareincludedintheline itemInterestincomeinthe its cashandequivalentson itsshort-terminvestments; consolidated statementsofoperations. TheAICFearnsintereston the lineitemSelling,generalandadministrative expensesinthe operating costsincurredbytheAICFareexpensedasin reflected intheconsolidatedbalancesheets.Non-claimsrelated reductions totheaccruedasbestosliabilitybalancespreviously related. ClaimsrelatedcostsincurredbytheAICFaretreatedas The AICFhasoperatingcoststhatareclaimsrelatedandnon-claims of Variable InterestEntities”. AICF inaccordancewithFASB, InterpretationNo.46R,“Consolidation Due to theCompany’s variableinterestintheAICF, itconsolidatesthe claimsagainst theLiableEntities. to asbestos-relatedpersonalinjury the annualactuarialassessmentsobtainedbyAICFwithrespect based upon because thepotentialimpactonCompanywillvary interestintheAICF.a pecuniary Theinterestisconsideredvariable to theAICF. ThisfundingtotheAICFresultsinCompanyhaving hasacontractualliabilitytomakepayments “Performing Subsidiary”) Under thetermsofAmendedFFA, JamesHardie117PtyLtd(the AICF compensation paymentsinrespectofthoseproven claims. claimsmadeagainsttheLiableEntities,andmakes personal injury of theAICFdirectors.ThemanagesAustralianasbestos-related three oftheAICFdirectorsandNSWstategovernmentappointstwo in theLiableEntitiesweretransferredtoAICF. TheCompanyappoints Upon shareholderapprovaloftheAmendedFFA 2007,shares inFebruary 2001. ABN60separatedfromtheJamesHardieGroupinMarch2003. Amaca andAmabaseparatedfromtheJamesHardieGroupinFebruary consolidated statementsofoperations. related deferredtaxassetasanincomebenefit(expense)onits the Companyclassifiedbenefitrelatedtorecordingof the increaseofasbestosliabilityasadjustmentsand 31 March 2007,theCompanyclassifiedexpenserelated to deduction forcontributionstotheasbestosfund.Foryearended the Company’s willbeabletoclaimataxable PerformingSubsidiary in theasbestosliability. Asstatedin“DeferredIncomeTaxes” below, tax benefitrelatedtoasbestosliabilitiesandacorrespondingincrease items, theCompanyrecordedadeferredtaxassetforanticipated items includingtherelatedAustralianincometaxbenefit.Amongother in aseparaterecognitionoftheasbestosliabilityandcertainother 46R, theCompanyconsolidatedAICFwithresulting Financial AccountingStandardsBoard(“FASB”) InterpretationNo. Upon shareholderapprovaloftheAmendedFFA, inaccordancewith the “Liable Entities”))arefoundliable. Pty Ltd(“Amaba”)andABN60Limited(“ABN60”)(collectively, of JamesHardieinAustralia(beingAmacaPtyLtd(“Amaca”),Amaba companies related personalinjuriesforwhichcertainformersubsidiary a special purposefundthatprovidescompensationforAustralian- into on21November2006toprovidelong-termfundingtheAICF, 2007,theshareholdersapprovedAmendedFFAIn February entered the insurancereceivablebalance. in whichtheyoccur. Insurancerecoveriesaretreatedasareductionin reflected intheconsolidatedstatementsofoperationsduringperiod estimate, orchangesintheCompany’s assessmentofrecoverabilityare Adjustments ininsurancereceivableduetochangestheactuarial with theinsurer. discounted basisbecausethetimingofrecoverieshasbeenagreed Included ininsurancereceivableisUS$16.2millionrecordedona only recordsinsurancereceivablesthatitdeemstobeprobable. such cashflowsarenotfixedorreadilydeterminable.TheCompany discount orinflatefuturecashflowswhenthetimingandamountsof undiscounted anduninflatedonthebasisthatitisinappropriateto The insurancereceivablegenerallyincludesthesecashflowsas less anallowanceforcreditriskbasedonagencyratings. policies basedontheexpectedpatternofclaimsagainstsuch by KPMGActuariesreflectstherecoveriesexpectedfromallsuch exposure totheasbestosclaims.Theinsurancereceivabledetermined There arevariousinsurancepoliciesandcompanieswith Insurance Receivable consolidated balancesheets. treated asreductionsintheaccruedbalancespreviouslyreflected paid bytheAICFandclaims-handlingcostsincurredare statements ofoperationsduringtheperiodinwhichtheyoccur. Claims of futureoperatingcoststheAICFarereflectedinconsolidated estimate ofprojectedfuturecashflowsandchangesinthe Adjustments intheasbestosliabilityduetochangesactuarial such cashflowsisnotfixedorreadilydeterminable. discount orinflatefuturecashflowswhenthetimingandamountsof as undiscountedanduninflatedonthebasisthatitisinappropriateto under SFAS No.5.Theasbestosliabilityincludesthesecashflows statements, whichunderUSGAAP, itconsidersthebestestimate basis forrecordingtheasbestosliabilityinCompany’s financial expected outcome.TheCompanyviewsthecentralestimateas flows andproposedacentralestimatewhichisintendedtoreflectan assumptions, KPMGActuariesarrivedatarangeofpossibletotalcash cash flowspreparedbyKPMGActuaries.BasedonActuaries’ based upon)themostrecentactuarialestimateofprojectedfuture FFA, whichhasbeencalculatedbyreferenceto(butisnotexclusively The amountoftheasbestosliabilityreflectstermsAmended Asbestos Liability Liabilities andinclude: commonly referredtobytheCompanyasAsbestos-RelatedAssetsand into USdollarsateachreportingdate.Theseassetsandliabilitiesare items areAustraliandollar-denominated andaresubjecttotranslation assets andliabilitiesunderthetermsofAmendedFFA. These The Companyhasrecordedonitsconsolidatedbalancesheetscertain Asbestos-Related AssetsandLiabilities the operations of the AICF. sheets undertheappropriatecaptionsandtheiruseisrestrictedto receivables andpayablesareincludedontheconsolidatedbalance Other assetsandliabilitiesoftheAICF, includingfixedassets,trade AICF –OtherAssetsandLiabilities component ofaccumulatedothercomprehensiveincome. on themarketvalueoftheseinvestmentsareincludedasaseparate using thespecificidentificationmethod.Unrealisedgainsandlosses are classifiedasavailableforsaleandrecordedatmarketvalue the custodyofmajorfinancialinstitutions.Allshort-terminvestments Short-term investmentsconsistofhighlyliquidheldin Restricted Short-TermInvestments claims andpaymentoftheoperatingcostsAICF. as theuseoftheseassetsisrestrictedtosettlementasbestos Cash andcashequivalentsoftheAICFarereflectedasrestrictedassets, Restricted CashandEquivalents on theconsolidatedbalancesheets. liabilities relatedtotheseagreementsareincludedin“OtherLiabilities” initiatives foraperiodof10years,beginninginfiscalyear2007.The The Companyagreedtofundasbestos-relatedresearchandeducation Asbestos-Related ResearchandEducationContributions statements ofoperations. recorded by the Companyandhavenoeffectonconsolidated an equal adjustment intheworkers’compensationreceivable Adjustments totheworkers’compensationliabilityresultin compensation receivable. schemes orpolicies,theCompanyrecordsanequivalentworkers’ these amountsareexpectedtobepaidbytheworkers’compensation is recordedbytheCompanyasaworkers’compensationliability. Since by theworkers’compensationschemesorpoliciesofLiableEntities The portionoftheKPMGActuariesestimatethatisexpectedtobemet statements ofoperationsduringtheperiodinwhichtheyoccur. Liability be metbytheLiableEntitiesisincludedaspartof The portionoftheKPMGActuariesestimatethatisexpectedto scheme orpolicy, andamountsthatwillbemetbytheLiableEntities. components, amountsthatwillbemetbyaworkers’compensation part oftheannualactuarialassessment.Thisestimatecontainstwo to workers’compensationclaimsispreparedbyKPMGActuariesas compensation schemesorpolicies”).Anestimateoftheliabilityrelated State-based workers’compensationschemes(collectively“workers’ insured withvariousinsurancecompaniesandtheAustralian the LiableEntities.Suchpast,currentandfuturereportedclaimswere Workers’ compensationclaimsaremadebyformeremployeesof Workers’ Compensation . Adjustmentstothisestimatearereflectedintheconsolidated Asbestos

93 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 94 James Hardie Annual Report 2008 FINANCIAL STATEMENTS on or after1April2009. effective forbusiness combinationsforwhichtheacquisition dateis of thebusinesscombination. TheprovisionsofSFAS No.141Rare of thefinancialstatementstoevaluate thenatureandfinancialeffects purchase; anddetermineswhatinformation todiscloseenableusers goodwill acquiredinthebusinesscombination oragainfrombargain assumed, andanycontrollinginterest; recognisesandmeasuresthe in itsfinancialstatementstheidentifiable assetsacquired,theliabilities how theacquirerinabusinesscombinationrecognisesandmeasures No. 141.Thestatementestablishesprinciplesandrequirementsfor “Business Combinations(“SFAS No.141R”)”,whichreplaces SFAS In December2007,theFASB issuedSFAS No.141(revised2007), Business Combinations financial statementsofadoptingSFAS No.159. Company on1April2008anditiscurrentlyevaluatingtheimpactits reported inearnings.TheprovisionsofSFAS No.159 areeffectiveforthe financial instrumentsforwhichthefairvalueoptionhasbeenelectedare as wellcertainotheritemsatfairvalue.Unrealisedgainsandlosseson measurementoffinancialassets andliabilities which allowsforvoluntary Option forFinancialAssetsandLiabilities”(“SFAS No.159”), 2007,theFASBIn February issuedStatementNo.159,“TheFairValue Financial Liabilities Fair ValueOptionforFinancialAssetsand statements ofadoptingSFAS No.157. 1 April2008anditiscurrentlyevaluatingtheimpactonitsfinancial Certain provisionsofSFAS No.157areeffectivefortheCompanyon measurements onearnings(orchangesinnetassets)fortheperiod. the inputsusedtodevelopmeasurements,andeffectofcertain which fairvalueisusedtomeasurerecognisedassetsandliabilities, users offinancialstatementswithbetterinformationabouttheextentto the useoffairvaluetomeasureassetsandliabilitiesshouldprovide value measurements.Theexpandeddisclosuresinthisstatementabout accounting principles(“GAAP”)andexpandsdisclosuresaboutfair establishes aframeworkformeasuringfairvalueingenerallyaccepted Value Measurements” (“SFAS No.157”),whichdefinesfairvalue, In September2006,theFASB issuedStatementNo.157,“Fair Fair ValueMeasurements Recent AccountingPronouncements statements ofoperations. currencies isincludedinAsbestosAdjustmentstheconsolidated date. Theeffectofforeignexchangeratemovementsbetweenthese closing exchangeratebetweenthetwocurrenciesatbalancesheet sheets inUSdollarsaresubjecttoadjustmentdependingonthe related assetsandliabilitiesintheCompany’s consolidatedbalance Australian dollarsandthusthereportedvaluesoftheseasbestos- The asbestos-relatedassetsandliabilitiesaredenominatedin Foreign CurrencyTranslation adjustments totheasbestos-relatedassetsandliabilitiesarerecorded. FFA. Adjustmentsaremadetothedeferredincometaxassetas equivalent totheanticipatedtaxbenefitoverlifeofAmended contribution. Consequently, adeferredtaxassethasbeenrecognised its contributionstotheAICFoverafive-yearperiodfromdateof isabletoclaimataxationdeductionfor The PerformingSubsidiary Deferred IncomeTaxes James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS CONSOLIDATED NOTES TO Hedging Activities Disclosures aboutDerivativeInstrumentsand SFAS No.160. is currentlyevaluatingtheimpactonitsfinancialstatementsofadopting of SFAS No.160areeffectivefortheCompanyon1April2009,andit beaccountedforconsistently.interest initssubsidiary Theprovisions ownership interestwhiletheentityretainsitscontrollingfinancial of theConsolidatedStatementEarnings;andchangesinentity’s noncontrolling interestbeclearlyidentifiedandpresentedontheface the amount ofconsolidatednetincomeattributabletotheentityand Balance Sheetswithinequity, butseparatefromtheentity’s equity; the entitybeclearlyidentifiedandpresentedinConsolidated the ownershipinterestinsubsidiariesheldbypartiesotherthan 160 establishesaccountingandreportingstandardsthatrequire – anamendmenttoARBNo.51”(“SFAS No.160”).SFAS No. 160 “NoncontrollingInterestsinConsolidatedFinancialStatements In December2007,theFASB approvedtheissuanceofSFAS No. Statements –anamendmenttoARBNo.51 Noncontrolling InterestsinConsolidatedFinancial financial statements. adoption willhaveamaterialimpactontheCompany’s consolidated Accepted AccountingPrinciples.”TheCompanydoesnotexpectits 411, “TheMeaningofPresentFairlyinConformityWithGenerally Company AccountingOversightBoardamendmentstoAUSection shall beeffective60daysfollowingtheSEC’s approvalofthePublic entities thatarepresentedinconformitywithUSGAAP. Thisstatement used inthepreparationoffinancialstatementsnon-governmental accounting principlesandtheframeworkforselecting refers toasSFAS No.162).SFAS No.162identifiesthesourcesof Generally AcceptedAccountingPrinciples”(whichtheCompany In May2008,theFASB issuedSFAS No.162“TheHierarchyof Hierarchy ofGenerallyAcceptedAccountingPrinciples the impactonitsfinancialstatementsofadoptingSFAS No.161. is effectivefortheCompany1April2009anditcurrentlyevaluating financial position,performance,andcashflows.SFAS No.161 to enableinvestorsbetterunderstandtheireffectsonanentity’s instruments andhedgingactivitiesbyrequiringenhanceddisclosures SFAS No.161isintendedtoimprovefinancialreportingofderivative Derivative InstrumentsandHedgingActivities”(“SFAS No.161”). In March2008,theFASB issuedSFAS No.161,“Disclosuresabout Total accountsandnotesreceivable Allowance fordoubtfulaccounts Other receivablesandadvances Trade receivables (Millions ofUSdollars) 31 Accounts andnotesreceivableconsistofthefollowingcomponents: 5. ACCOUNTSANDNOTESRECEIVABLE policy asof31March2008and2007. Included inrestrictedcashisUS$5.0millionrelatedtoaninsurance EQUIVALENTS 4. RESTRICTEDCASHAND and 2007,respectively. between 2.14% to2.93%and4.85%5.25%asof31March2008 Short-term depositsareplacedatfloatinginterestratesvarying Total cashandequivalents March Short-term deposits Cash atbankandonhand (Millions ofUSdollars) 31 Cash andcashequivalentsconsistofthefollowingcomponents: with originalmaturitiesofthreemonthsorless. cash investedtemporarilyinvarioushighlyliquidfinancialinstruments Cash andcashequivalentsincludeamountsondepositinbanks 3. CASHANDEQUIVALENTS March $ 131.4 $ 122.7 35.4 $ 21.6 $ 2008 2008 10.7 13.8 (2.0) $ 163.4 $ 152.4 $ 34.1 $ 26.1 2007 2007 12.5 (1.5) 8.0 Total inventories and rawmaterials Provision forobsoletefinishedgoods Raw materialsandsupplies Work-in-process Finished goods (Millions ofUSdollars) 31 Inventories consistofthefollowingcomponents: 6. INVENTORIES Balance atendofperiod Costs anddeductions Charged toexpense Balance atbeginningofperiod (Millions ofUSdollars) 31 The following arechangesintheallowancefordoubtfulaccounts: doubtful accountsisprovidedforknownandestimatedbaddebts. receivables, isreviewedonanongoingbasisandallowancefor The collectabilityofaccountsreceivable,consistingmainlytrade March March $ 179.7 $ 127.4 $ 2.0 $ 1.5 2008 2008 51.0 (7.1) (0.1) 8.4 0.6 $ 1.5 $ 1.3 $ 147.6 $ 101.5 2007 2007 37.8 12.3 (4.0) (0.3) 0.5

95 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 96 James Hardie Annual Report 2008 FINANCIAL STATEMENTS cuuae ercain (20 (4.) (392.6) 5.2 (71.3) – – (34.9) (1.2) 13.7 (340.6) 38.5 $82.4 (15.3) – 5.2 – $499.9 (52.0) (34.9) (21.4) $156.9 (336.1) – 0.6 (1.2) 52.1 $17.2 – 13.7 65.8 0.3 – (0.6) (110.8) – – – – 7.3 10.2 99.1 (296.1) 92.6 – $117.3 – 0.6 Construction inprogressconsistsofplantexpansionsandupgrades. – – 0.3 $515.2 (40.0) Net (110.8) 62.5 book Accumulated depreciation (285.4) value $178.3 (0.6) 228.1 Cost 17.2 – Balance at31March2008: $16.9 – 10.2 131.3 – 1.3 Total changes – 416.1 Foreign currencytranslationadjustments Other movements 1,061.0 $ – 70.8 – Impairment – $228.1 Depreciation – (253.7) 115.8 Retirements andsales $669.8 – Capital expenditures 1.3 $147.5 Changes innetbookvalue: (31.7) – inProgress 15.6 Net $15.6 book 208.9 Accumulated depreciation value Equipment Cost 16.9 – Balance at31March2007: Buildings Total changes (16.7) Foreign currencytranslationadjustments Land (12.0) Other movements Depreciation – Retirements andsales Capital expenditures Changes innetbookvalue: Net bookvalue 840.5 Accumulated depreciation 218.3 Cost Balance at31March2006: (Millions ofUSdollars) (54.3) (44.5) (8.3) Property, plantandequipmentconsistofthefollowingcomponents: 7. PROPERTY, PLANTANDEQUIPMENT 82.4 James HardieIndustriesNVandSubsidiaries 811.3 – – FINANCIAL STATEMENTS (42.4) CONSOLIDATED NOTES TO 1,149.0 (56.5) (71.0) 117.3 – and Machinery (50.7) 1,163.8 Construction $ 756.4 $ 827.7 775.6 Total future cashflows.TheseassetsarebeingheldforusebytheCompany. valuation methodsincludingquotedmarketpricesanddiscounted impaired assetswerereducedtotheirestimatedfairvaluebasedon impairment wasrecordedinitsUSAFibreCementsegment.The utilised toproducematerialsfortheCompany’s products.Thisasset in theyearended31March2008relatedtobuildingsandmachinery The CompanyrecordedanassetimpairmentchargeofUS$13.2million by theCompany. and discountedfuturecashflows.Theseassetsarebeingheldforuse fair valuebasedonvaluationmethodsincludingquotedmarketprices include buildingsandmachinery, whichwerereducedtotheirestimated closure ofitsPlantCity, FloridaHardiePipeplant.Theimpairedassets in theyearended31March2008itsOthersegment,relatedto The CompanyrecordedanassetimpairmentchargeofUS$25.4million in the periodincurred. in costofgoodssoldandselling,generaladministrativeexpenses asset impairmentchargeofUS$32.4millionandhavebeenincluded closure relatedcosts.Thecostsarenotincludedinthe through 31March2008,theCompanyhasincurredUS$1.4millionof held forusebytheCompany. Sincethedateofannouncement market pricesanddiscountedfuturecashflows.Theseassetsarebeing estimated fairvaluebasedonvaluationmethodsincludingquoted assets includebuildingsandmachinery, whichwerereducedtotheir ended 31March2008initsUSAFibreCementsegment.Theimpaired recorded anassetimpairmentchargeofUS$32.4millionintheyear production atitsBlandon,PennsylvaniaplantintheUS.TheCompany On 31October2007,theCompanyannouncedplanstosuspend future cashflows. valuation methodsincludingquotedmarketpricesanddiscounted machinery, whichwerereducedtotheirestimatedfairvaluebasedon Company’s Othersegment.Theimpairedassetsincludebuildingsand roofing plant.Thisassetimpairmentchargewasrecordedinthe for theyearended31March2006relatedtoclosureofitspilot The CompanyrecordedanassetimpairmentchargeofUS$13.4 million Asset Impairments of 31 March2008and2007,respectively. AICF withanetbookvalueofUS$0.6millionandUS$0.4as Included inproperty, plantandequipmentarerestrictedassetsofthe 2007 and 2006,respectively. million andUS$45.3fortheyearsended31March2008, expense forcontinuingoperationswasUS$56.5million,US$50.7 ended 31March2008,2007and2006,respectively. Depreciation was US$0.6million,US$5.3millionandUS$5.7fortheyears included inthecostofassettowhichitrelates.Interestcapitalised Interest relatedtotheconstructionofmajorfacilitiesiscapitalisedand ni eray21 9. – combined facilitiesandUS$225.5million wasavailable. 2007. At31March2008,therewasUS$264.5 milliondrawnunderthe 90.0 US$0.7 million,respectivelyfortheyears ended31March2008and Company paidcommitmentfeesinthe amountofUS$0.4millionand lenders andispayableattheendofeachdrawn-downperiod.The London InterbankOfferedRate(“LIBOR”)plusthemarginsofindividual to thecommencementofeachdraw-downperiodbasedonUS$ For allfacilities,theinterestrateiscalculatedtwobusinessdaysprior Total $ 2013 until February – plus margin,canberepaidandredrawn 90.0 $ variable interestratesbasedonLIBOR Term 110.0 facilities,canbedrawninUS$, $ 45.0 174.5 2011 can berepaidandredrawnuntilFebruary interest ratesbasedonLIBORplusmargin, 245.0 Term facilities,canbedrawninUS$,variable can berepaidandredrawnuntilJune2010 interest ratesbasedonLIBORplusmargin, Term490.0 facilities,canbedrawninUS$,variable December 2008 margin, canberepaidandredrawnuntil variable interestratesbasedonLIBORplus 364-day facilities,canbedrawninUS$, (US$ millions) Description Facility Total At 31March2008,theCompany’s creditfacilitiescurrentlyconsistof: $ Principal 264.5 Drawn 1 Total debt Long-term debt Short-term debt (Millions ofUSdollars) 31 Debt consistsofthefollowingcomponents: 9. SHORT ANDLONG-TERMDEBT Total accountspayableandaccruedliabilities Other creditorsandaccruals Trade creditors (Millions ofUSdollars) 31 following components: Accounts payableandaccruedliabilitiesconsistofthe ACCRUED LIABILITIES 8. ACCOUNTSPAYABLE AND March March Total debtat3.63%and5.91%weightedaveragerates31March 2008 and2007,respectively. 1

$ 264.5 $ 90.0 $ 107.6 $ 73.7 174.5 2008 2008 33.9 $ 83.0 $ 57.7 $ 188.0 $ 100.8 105.0 2007 2007 43.1

97 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 98 James Hardie Annual Report 2008 FINANCIAL STATEMENTS (Millions ofUSdollars) 31 Non-current otherliabilitiesconsistofthefollowingcomponents: 10. NON-CURRENTOTHERLIABILITIES committed facilitiesandanticipatedfuturenetoperatingcashflows. obligations forthenext12monthsfromexistingcash,unutilised The Companyanticipatesbeingabletomeetitsfuturepayment andtheCompanyunderAmendmentFFA.Performing Subsidiary AICF. Suchlimitsareconsistentwiththecontractualliabilitiesof it canspendonanannualbasisinrelationtoasbestospaymentsthe Limited andMarlewMiningPty(iv) has limitsonhowmuch impacts oftheAICF, AmabaPtyLimited,AmacaABN60 excluding allincome,expenseandotherprofitlossstatement March ratio ofearningsbeforeinterestandtaxestonetcharges, balance sheetitemsoftheAICF, (iii)mustmeetorexceedaminimum a minimumlevelofnetworth,excludingassets,liabilitiesandother ABN 60PtyLimitedandMarlewMiningLimited,(ii)mustmaintain balance sheetitemsoftheAICF, AmabaPtyLimited,Amaca do notexceedcertainmaximums,excludingassets,liabilitiesandother (i) isrequiredtomaintaincertainratiosofindebtednessequitywhich agreements. Underthemostrestrictiveofthesecovenants, Company compliance withallrestrictivecovenantscontainedinitscreditfacility At 31March2008,managementbelievesthattheCompanywasin drawn underthetermfacilities. 2007 comprisedUS$174.5millionandUS$105.0million,respectively, 364-day facilities.Long-termdebtat31March2008and US$90.0 millionandUS$83.0million,respectively, drawnunderthe Short-term debtat31March2008and2007comprised James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS CONSOLIDATED NOTES TO could differfromthoseestimates. within itscalculatedestimates,itispossiblethatfuturewarrantycosts necessary. WhiletheCompany’s warrantycostshavehistoricallybeen the adequacyofCompany’s warrantyprovisionsareadjustedas as theyrelatetosales.Basedonthisanalysisandotherfactors, related costsbasedonananalysisofactualhistoricalwarranty date ofsale.TheCompanyrecordsanestimateforfuturewarranty to replacedefectiveproductswithinaspecifiedtimeperiodfromthe in theUnitedStates.AtypicalwarrantyprogramrequiresCompany a 50-yearlimitedwarrantyoncertainofitsfibrecementsidingproducts The Companyoffersvariouswarrantiesonitsproducts,including 11. PRODUCTWARRANTIES Total non-currentotherliabilities Other Uncertain taxpositions Employee entitlements $ 187.5 $ 6.4 123.7 2008 57.4 $ 11.9 $ 41.2 2007 28.6 0.7 years ended31March2008and2007,respectively. Years Ended31March the SettlementAgreementofUS$0.3millionandUS$0.2for made incashorkind”lineitemaboveincludessettlementsrelatedto respectively, relatedtotheSettlementAgreement.The“Settlements of US$2.0millionfortheyearsended31March2008and2007, reduction intheaccrualofUS$0.5millionandanadditional The “Accrualsforproductwarranties”lineitemaboveincludesa Balance atendofperiod Foreign currencytranslationadjustments Settlements madeincashorkind Accruals forproductwarranties Balance atbeginningofperiod (Millions ofUSdollars) The followingarethechangesinproductwarrantyprovision: US$3.5 millionasof31March2008and2007,respectively. provision relatingtotheSettlementAgreementisUS$2.7millionand alleged problems.Thetotalamountincludedintheproductwarranty marketplace between1995and1998inareaswheretherehadbeenany manufactured roofingproducts.Theseproductswereremovedfromthe and propertyrelatedliabilityclaimsassociatedwiththesepreviously Company signedtheSettlementAgreementforallproduct,warranty 2002,the longer manufacturedintheUnitedStates.On14February Agreement”) relatedtoitspreviousroofingproducts,whichareno amounts foraClassActionSettlementAgreement(the“Settlement Additionally, theCompanyincludesinitsaccrualforproductwarranties $ 17.7 $ 15.2 2008 10.2 (7.9) 0.2 $ 15.2 0.2 4.4 $ 15.5 (4.9) 2007 (Millions ofUSdollars) Company asthe“NetAmendedFFA Liability”. These amountsaredetailedinthetablebelow, andthenettotaloftheseasbestos-relatedassetsliabilitiesiscommonlyr Under thetermsofAmendedFFA, theCompanyhasincludedonitsconsolidatedbalancesheetscertainasbestos-relatedassets Asbestos-Related AssetsandLiabilities Total AsbestosAdjustments Other adjustments Initial recordingofprovisionat31March2006 Tax impactrelatedtotheimplementationofAmendedFFA Effect offoreignexchange Subtotal –Changeinestimates Changeinestimate–other Changeinestimate–AICFclaims-handlingcosts Changeinactuarialestimate–insurancereceivable Changeinactuarialestimate–asbestosliability Change inestimates: (Millions ofUSdollars) The asbestosadjustmentsincludedintheconsolidatedstatementsofoperationscomprisefollowing: Asbestos Adjustments the CompanytoaccountforAmendedFFA ofSignificantAccountingPolicies. aredescribedinNote2,Summary The AmendedFFA 2007.Theaccountingpolicies toprovidelong-termfundingtheAICFwasapprovedbyshareholdersinFebruary 12. ASBESTOS Restricted cashandequivalentsrestrictedshort-terminvestment assets oftheAICF Asbestos liability–current Unfunded NetAmendedFFAliability Asbestos liability–non-current Asbestos liability–Total Insurance receivable–current Insurance receivable–non-current Insurance receivable–Total Workers’ compensationasset –current Workers’ compensationasset –non-current Workers’ compensationliability –current Workers’ compensationliability–non-current Workers’ compensation–Total Deferred incometaxes–current Deferred incometaxes–non-current Deferred incometaxes–Total Income taxpayable(reductioninincomepayable) Other netliabilities Net AmendedFFAliability

$ (240.1) $ (175.0) (152.9) (87.2) 2008 27.4 (6.5) 1.2 – – – Years Ended31March $ (829.8) $ (78.7) 455 $(715.6) $ (405.5) 03 $ – $ 50.3 (1,497.8) (1,576.5) (944.9) 115.1 194.3 208.4 397.1 406.2 (335.0) – (78.5) 2008 14.1 78.5 (22.6) – (94.5) – 20.4 2007 2006 (6.9) (3.4) 28.5 – (4.5) – 6.9 9.1 0.8 – eferred tobythe – (715.6) – – 31 March andliabilities. utilisedby $ (63.5) $ (639.2) (1,225.8) (1,289.3) (786.1) 146.9 165.1 174.5 318.2 326.0 (76.5) 2007 76.5 (2.7) (6.3) 9.4 2.7 7.8 9.0 –

99 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 100 James Hardie Annual Report 2008 FINANCIAL STATEMENTS Change inactuarialestimate AICF claims-handlingcostsincurred feto oeg xhne 23.0 326.0 $ 1.2395 404.1 A$ 208.4 $ 1.0903 227.2 A$ Amounts offsetagainstincometaxpayable Deferred taxassets–31March2007 The changesinthedeferredincometaxes–asbestosforyearended31March2008aredetailedtablebelow: Deferred IncomeTaxes–Asbestos Insurance receivable–31March2008 Effect offoreignexchange Change inestimateofAICFclaims-handlingcosts Change inactuarialestimate feto oeg xhne 44.0 406.2 $ 1.0903 442.9 A$ Deferred taxassets–31March2008 Effect offoreignexchange Impact ofchangeinactuarialestimates 3 (172.7) 174.5 2 $ 1.2395 1 216.3 Impact ofotherasbestosadjustments A$ (1,576.5) $ 1.0903 (1,289.3) (1,718.9) $ A$ 1.2395 (1,598.1) A$ Insurance recoveries Insurance receivable–31March2007 The changesintheinsurancereceivableforyearended31March2008aredetailedtablebelow: Insurance Receivable–Asbestos Asbestos liability–31March2008 Effect offoreignexchange Asbestos claimspaid Asbestos liability–31March2007 The changesintheasbestosliabilityforyearended31March2008aredetailedtablebelow: year. Thelastactuarialassessmentwasperformedasof31March2008. includes anallowanceforthefutureclaims-handlingcostsofAICF. TheCompanywillreceiveanupdatedactuarialestimate upon) themostrecentactuarialestimateofprojectedfutureasbestos-relatedcashflowspreparedbyKPMGActuaries.Theas The amountoftheasbestosliabilityreflectstermsAmendedFFA, whichhasbeencalculatedbyreferenceto (butisn Asbestos Liability James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS CONSOLIDATED NOTES TO Change inestimate The spotexchangerateat30June2007isusedtoconverttheAustraliandollar amounttoUSdollarsastheadjustment The spotexchangerateat31March2008isusedtoconverttheAustraliandollar amounttoUSdollarsastheadjustmentth The averageexchangeratefortheperiodisusedtoconvertAustraliandollar amounttoUSdollarsbasedontheassumptio made on thatdate. made on thatdate. transactions occurredevenlythroughouttheperiod. 3 0.2 1.1782 0.2 1 1 (19.2) 1.1503 (16.7) 74.3 1.1503 64.6 2 2 29.9 (190.8) 1.0903 1.0903 27.4 (175.0) 1 1 2.8 1.1503 2.4 (0.5) 1.1503 (0.4) 2 50.4 1.0903 46.2 1 (11.1) 1.1503 (9.6) 2 (7.1) 1.0903 (6.5) Millions rate Millions Millions rate Millions Millions rate Millions $ $t S US$ A$toUS$ A$ $ $t S US$ A$toUS$ A$ US$ A$toUS$ A$ ot exclusivelybased estimatewas as of31Marcheach e estimatewas n thatthese bestos liabilityalso feto oeg xhne 17.3 115.1 $ 1.0903 125.5 A$ investmentassets–31March2008 Restricted cashandequivalentsrestrictedshort-term Effect offoreignexchange Interest andinvestmentincome AICF operatingcostspaid–claims-handling Other Unrealised lossoninvestments netetast 1Mrh20 A 8. 129 $ 146.9 $ 1.2395 182.1 A$ 1 Asbestos claimspaid investment assets–31March2007 Restricted cashandequivalentsrestrictedshort-term are detailedinthetablebelow: The changesintherestrictedcashandequivalentsshort-terminvestmentassetsofAICFforyearen were purchasedorsold. settlement ofasbestosclaimsandpaymenttheoperatingcostsAICF. Duringtheyearended31March2008,noshort-ter Cash andcashequivalentsshort-terminvestmentsoftheAICFarereflectedasrestrictedassetstheserestric Restricted CashandShort-termInvestmentAssetsoftheAICF favourable adjustmentrelatedtochangesinestimatesoftheothernetliabilitiesandaUS$0.5millionunfavourableeffect US$0.1 million andUS$1.7at31March20082007,respectively. Duringtheyearended31March2008,therewasaUS$ receivables, prepayments,fixedassets,tradepayablesandaccruals.TheseotherassetsliabilitiesoftheAICFwereanet at 31March2008and2007,respectively. AlsoincludedinothernetliabilitiesaretheassetsandofAIC Other netliabilitiesincludeaprovisionforasbestos-relatededucationandmedicalresearchcontributionsofUS$3.3million Other NetLiabilities exchange. of foreign was US$20.4 millionandUS$9.0million,respectively. Duringtheyearended31March2008,therewasaUS$1.7millionfavourabl A portionofthedeferredincometaxassetisappliedagainstCompany’s incometaxpayable.At31March2008and2007,this Income TaxPayable AICF operatingcostspaid–nonclaims-handling Insurance recoveries The average exchangeratefortheperiodisusedtoconvertAustraliandollaramountUSdollarsbasedonassumptio transactions occurredevenlythroughouttheperiod. 1

1 1 19.2 1.1503 16.7 (74.3) 1.1503 (64.6) 1 1 10.8 1.1503 9.4 (5.1) 1.1503 (4.4) 1 (2.8) 1.1503 (2.4) 1 (4.6) 1.1503 (4.0) Millions rate Millions . .53 0.2 0.2 1.1503 $ $t S US$ A$toUS$ A$ F includingtrade foreign exchange. liability of nd US$4.6 million ted foruseinthe ded 31March2008 n thatthese m investments amount e effect 1.0 million

101 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 102 James Hardie Annual Report 2008 FINANCIAL STATEMENTS is currently projected. is currently the actualamountofliabilitycoulddiffermateriallyfromthatwhich the abovenamedentitieswillcontributetooverallsettlements, of futuretrendsinaverageclaimawards,aswelltheextenttowhich the recoverabilityofclaimsagainstinsurancecontracts,andestimates the number andtimingoffutureclaimnotificationssettlements, Due toinherentuncertaintiesinthelegalandmedicalenvironment, provided orusedforthepreparationofreport. established theaccuracyorcompletenessofdataandinformation consistency buthavenotverifiedtheinformationindependentlynor material respects.Theactuariestestedthedataforreasonablenessand by theAICFandassumedthatitisaccuratecompleteinall Further, KPMGActuariesreliedonthedataandinformationprovided of settlements. settlement strategyindealingwithoutstandingclaimsandthetiming in thelitigationofsuchclaims,ratereceipt jurisdiction inwhichtheactionisbrought),legalcostsincurred in whichaplaintiffclaimsexposure,theallegeddiseasetypeand settlement (whichissensitiveto,amongotherfactors,theindustry reasonably estimatedtobeassertedthrough2071,thetypicalcostof made assumptionsrelatedtothetotalnumberofclaimswhichwere In estimatingthepotentialfinancialexposure,KPMGActuaries then ended. 2008 andtoadjustforpaymentsmadeclaimantsduringtheyear recent actuarial estimatepreparedbyKPMGActuariesas of31March The asbestosliabilityhasbeenrevisedtoreflectthemost readily determinable. flows whenthetimingandamountsofsuchcashisnotfixedor on thebasisthatitisinappropriatetodiscountorinflatefuturecash includes projectedfuturecashflowsasundiscountedanduninflated from thecentralestimatedescribedabove.Theasbestosliability of thosecompaniesforsuchclaimscouldvary, perhapsmaterially, was approximatelyA$3.0billion(US$2.8billion).Actualliabilities liabilities ofAmacaandAmabaasdeterminedbyKPMGActuaries (but inflated)valueofthecentralestimateasbestos-related was approximatelyA$1.4billion(US$1.3billion).Theundiscounted estimate forclaimsagainsttheFormerJamesHardieCompanies it isestimatedthatthediscounted(butinflated)valueofcentral estimate underSFAS No.5.Basedontheresultsofthesestudies, financial statements,whichunderUSGAAP, itconsidersthebest as thebasisforrecordingasbestosliabilityinCompany’s reflect anexpectedoutcome.TheCompanyviewsthecentralestimate total cashflowsandproposedacentralestimatewhichisintendedto Actuaries’ assumptions,KPMGActuariesarrivedatarangeofpossible asbestos-related liabilitiesasof31March2008.BasedonKPMG The AICFcommissionedanupdatedactuarialstudyofpotential Actuarial Study:ClaimsEstimate James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS CONSOLIDATED NOTES TO the averagesettlementamountperclaim: resolvedforeach periodand of claimsdismissed,settledorotherwise table, providedbyKPMGActuaries,showstheclaimsfiled,number For theyearsended31March2008,2007and2006,following claimsagainsttheLiableEntities. related personalinjury data inthissectionareonlyreflectiveoftheseAustralianasbestos- claimsagainsttheLiableEntities.The related personalinjury The AICFprovidescompensationpaymentsforAustralianasbestos- Claims Data the asbestosliabilityonitsconsolidatedbalancesheets. FIN 39, theCompanyhasnotnettedinsurancereceivable against or subrogationrecoveriesfromotherthirdparties.Inaccordancewith and anallowanceforA$72.7 million (US$66.7million) of“byclaim” making ageneralcreditriskallowanceforbaddebtinsurancecarriers insurance recoveriesofA$497.8million(US$456.6million)after This undiscounted(butinflated)centralestimateisnetofexpected of asbestos-relatedliabilitieswasA$3.0billion(US$2.8billion). As of 31March2008,KPMGActuaries’undiscountedcentral estimate to beablepartiallyrecoverlossesfromvariousinsurancecarriers. no assurancescanbeprovided,theCompanybelievesthatitislikely losses disclosedincludesbothassertedandunassertedclaims.While base wageinflationandsuperimposedinflation.Thepotentialrangeof current numberofclaims,averagedefenceandplaintifflegalcosts, ofAustralianasbestos-relatedmedicalinjuries, rates, pasthistory ofclaimsnumbers,averagesettlement year ofclaims,pasthistory the formerJamesHardiesubsidiaries)whichareheldliable),peak the claimsettlementisbornebyotherasbestosdefendants(otherthan settlement ispayablebytheFormerJamesHardieCompaniesbecause affected byanumberofvariablessuchasnilsettlementrates(whereno The potentialrangeofcostsasestimatedbyKPMGActuariesis assumptions made. range dependingontheresultsofactualexperiencerelativeto be notedthattheactualcostofliabilitiescouldoutside to A$5.4billion(US$5.0billion)),asof31March2008.Itshould (undiscounted, butinflated,estimatesofA$1.9billion(US$1.7billion) range ofA$1.0billion(US$0.9billion)toA$2.1(US$1.9 billion) shows thatthediscounted(butinflated)centralestimatescouldbeina the assumptionsusedtodeterminecentralestimates.Thisanalysis legal fees,andtheprojectednumbersofclaims)weredifferentfrom of inflationandsuperimposedinflation,theaveragecostsclaims actuarial estimateswouldchangeifcertainassumptions(i.e.,therate A sensitivityanalysishasbeenperformedtodeterminehowthe respect toclaimsstatistics. whenmakingfutured will needtorelyontheaccuracyandcompletenessofinformationanalysisApprovedActuary requireindependentverificationofsuchinformationorthemethodologiestobeadoptedbyApprovedActuary.otherwise Ass information fromtheApprovedActuary. TheCompanyhashadnogeneralright(andnotobtainedanyundertheAmendedF TheCompany’sappointed bytheAICF(the“ApprovedActuary”). futuredisclosureswithrespecttoclaimsstatisticsaresubject Under thetermsofAmendedFFA, theCompanyhasobtainedrightsofaccesstoactuarialinformationproducedforAICFby 1 each ofthepastfiveyearsandaveragesettlementpersettledclaimcaseclosed: The followingtable,providedbyKPMGActuaries,showstheactivityrelatedtonumbersofopenclaims,newclaimsandclose Average settlementamountpersettledclaim Average settlementamountpersettledclaim resolved Number ofclaimssettledorotherwise Number ofclaimsdismissed Number ofclaimsfiled Number ofopenclaimsatbeginningperiod Number ofnewclaims Number ofclosedclaims Number ofopenclaimsatendperiod Average settlement amountpersettledclaim Average settlement amountpercaseclosed Average settlement amountpersettledclaim Average settlement amountpercaseclosed 2006.Claimsdataforthe12monthsended31 March2006 Information includesclaimsdataforonly11monthsended28February available atthetimeCompany’s financialstatementswereprepared. US$ 128,096 US$ 109,832 A$ 147,349 A$ 126,340 2008 490 552 519 523 S 2,6 U$1438 S 1,7 US$116,123 US$116,572 US$114,318 US$ 127,163 S 850 S 9,2 U$1096 US$84,356 US$ 100,996 92,229 US$ US$ 98,510 $1614 $1183 $1754 A$167,450 A$157,594 A$151,883 A$ 166,164 $1873 $1255 $1656 A$121,642 A$136,536 A$122,535 A$ 128,723 2007 2006 564 712 687743 463 346 489379 537 502 464435 490 556 712687 US$ 128,096 A$ 147,349 Years Ended31March 2008 445 552 74 1 20 2004 2005 Years Ended31March S 2,6 US$114,322 US$ 127,165 $1614 A$151,883 A$ 166,164 2007 2006 416 405 121 97 463 346 to itobtainingsuch uch, theCompany isclosures with d claimsduring the actuary theactuary FA) toauditor wasnot 1

103 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 104 James Hardie Annual Report 2008 FINANCIAL STATEMENTS any such actions. any such criminal. However, ithasnotindicatedthepossible defendantsto matters continue andmayresultinfurtheractions,both civiland ASIC hasindicatedthatitsinvestigationsintootherrelated directors andofficers. the orderssoughtagainstitinproceedings,asareotherformer The CompanyisdefendingeachoftheallegationsmadebyASICand – its costsoftheproceedings. – an orderthattheCompanyexecuteadeedofindemnityinfavour – orders thatformerJamesHardiegroupdirectorsorofficersMichael – penaltiesinsuchamountastheCourtthinksfit orders forpecuniary – declarations regardingtheallegedcontraventions; In theproceedings,ASICseeks: conduct inrespectofasecurity. duty ofcareanddiligence,engaginginmisleadingordeceptive Corporations Act/Lawrelatingtocontinuousdisclosure,adirector’s are confinedtoallegedcontraventionsofprovisionstheAustralian between individualdefendants,theallegationsagainstCompany James Hardie Group.Whilethesubjectmatterofallegationsvaries ABN 60 andtenthen-presentorformerofficersdirectorsofthe Court ofNewSouthWales (the“Court”)againsttheCompany, 2007,ASICcommencedcivilproceedingsintheSupreme In February ASIC Proceedings 13. COMMITMENTANDCONTINGENCIES James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS CONSOLIDATED NOTES TO believe is necessary toensurethatABN60remainssolvent;and believe isnecessary due, andforsuchamountasABN60,oritsdirectors,reasonably to ensurethatABN60isablepayitsdebts,asandwhentheyfall directors, consider, aftergivingcarefulconsideration,isnecessary up toamaximumofA$1.9billion,forsuchamountasABN60,orits ABN 60providingthattheCompanyindemnifyforanamount corporation forsuchperiodastheCourtthinksfit; Terry andPeterWillcoxbeprohibitedfrommanaginganAustralian Macdonald, PhilipMorley, GeoffreyO’Brien,PeterShafron,Gregory Brown, MichaelGillfillan,MeredithHellicar, MartinKoffel,Peter up tothelimitsspecifiedinCorporationsAct; amount orrangeofsuchamountsarenotestimable. believes thatalthoughsuchamountsarereasonablypossible,the addition tothedefencecosts.However, atthisstage,theCompany that theCompanycouldbecomeresponsibleforotheramountsin of theASICproceedingsinlongertermandthereisapossibility There remainsconsiderableuncertaintysurroundingthelikelyoutcome policy toexpenselegalcostsasincurred. in accordancewiththetermsoftheirindemnities.ItisCompany’s declarations, asaresultofrepaymentsbyformerdirectorsandofficers made againstASICor, ifASICissuccessfulinsecuringcivilpenalty ASIC proceedings,includingeitherasaresultofcostsorderbeing recoveries maybeavailable,dependingupontheoutcomeof against anyformerdirectororofficer. TheCompanynotesthatother Company expectsthistocontinueabsentanyfindingofdishonesty the balance.Baseduponinformationavailabletoitpresently, the directors arebeingadvancedbythirdparties,withtheCompanypaying continue tobemade.Currently, aportionofthedefencecostsformer in respectofdefencecostsandsuchadvanceshavebeenwill Initially, theCompanyhasobligations,oroffered,toadvancefunds to incurfurthercostsundertheseindemnitieswhichmaybesignificant. officers oftheJamesHardieGroup,Companyhasandwillcontinue that proceedingshavebeenbroughtagainstformerdirectorsand relation totheexaminationofthesepersonsbyASICdelegates.Now directors andofficersinrelationtotheASICinvestigation, payments ofexpensesincurredhavebeenreceivedfromcertainformer they havegrantedtheirdirectorsandofficers.To date,claimsfor require theCompanytoindemnifythoseentitiesagainstindemnities indemnities tocertainofitsformerrelatedcorporatebodieswhichmay indemnity fordirectorsandofficerstheCompanyhasgranted companies. TheCompany’s articlesofassociationalsocontainan its directorsandofficers,asiscommonpracticeforpubliclylisted The Companyhasenteredintodeedsofindemnitywithcertain 2006, respectively. and US$12.5 millionfortheyearsended31March2008, 2007and Rental expenseamountedtoUS$10.2million,US$12.1million Total $ Thereafter 56.7 (MillionsofUSdollars) 2013 8.6 2012 12.0 2011 12.4 2010 13.3 2009 $ Years ending31March: term in excessofoneyearat31March2008: payments fornon-cancellableoperatingleaseshavingaremaining and equipmentleases.Thefollowingarefutureminimumlease As thelessee,Companyprincipallyentersintoproperty, building Operating Leases consolidated financialposition,resultsofoperationsorcashflows. 117.8 individually orintheaggregate,haveamaterialadverseeffectonits specifically describedwithintheseconsolidatedfinancialstatements, that suchproceedingsandactionsshouldnot,exceptthoseitems the outcomeofanypendinglegalproceeding,managementbelieves normal conductofitsbusiness.Althoughitisimpossibletopredict proceedings andadministrativeactionsincidentalorrelatedtothe The Companyisinvolvedfromtimetoinvariouslegal of operations orcashflows. effect oneithertheCompany’s consolidatedfinancialposition,results ultimate liabilityforsuchmattersshouldnothaveamaterialadverse based oninformationpresentlyknownexceptassetforthabove,the the amountcanbereasonablyestimated.Inopinionofmanagement, when itisdeterminedthatprobableanobligationexistsand disposal. TheCompany’s policyistoaccrueforenvironmentalcosts local lawsandregulationsonairwaterquality, wastehandlingand in similarbusinesses,aresubjecttoanumberoffederal,stateand The operationsoftheCompany, likethoseofothercompaniesengaged Environmental andLegal 14.8 Years Ended31March Domestic operations beforeincometaxes: (Loss) incomefromcontinuing following components: tax (expense)benefitforcontinuingoperationsconsistsofthe financial statementandtaxbasesofassetsliabilities.Income and those differencesbetweenthe deferred becauseoftemporary Income taxexpenseincludesincometaxescurrentlypayable 14. INCOMETAXES 1 and contingencies. ATO Assessmentforadditionaldisclosuresofcommitments Readers arereferredtoNote12Asbestosand15Amended US$9.0 millionat31March2008. not recognisedasliabilitiesandgenerallypayablewithinoneyear, were purchase obligations,primarilyintheUnitedStates,contractedforbut Commitments fortheacquisitionofplantandequipmentother Capital Commitments benefit forcontinuingoperations Total incometax(expense) Deferred incometaxbenefit Foreign Domestic Deferred: Current incometaxexpense Foreign Domestic Current: Income tax(expense)benefit: operations beforeincometaxes (Loss) incomefromcontinuing Foreign represents TheNetherlands. Since JHINVistheDutchparentholdingcompany, domestic 1 1 1

$ (36.1) $ (7.1) $ (35.5) $ 80.1 (109.2) (102.1) (115.6) 2008 73.1 73.3 (0.2) 0 4 (9.0) $ $ 0.4 $ 243.9 $ (71.6) $ $ 243.9 9.) $ (435.1) $ (93.1) 1. $113.7 $ 110.9 (204.0) (548.8) 307.2 28.9 307.1 29.2 (63.3) (100.5) (63.7) (91.5) 2007 2006 0.1 (0.3)

105 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 106 James Hardie Annual Report 2008 FINANCIAL STATEMENTS (Millions ofUSdollars) ratesasfollows: Income tax(expense)benefitfromcontinuingoperationsisreconciledtotheatstatutory incometaxrateineachjurisdictionmultipliedbythepre-taxattributab conducts business,calculatedasthestatutory ratesrepresentstaxesonincomeapplicabletoalljurisdictions inwhic Income tax(expense)benefitcomputedatthestatutory James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS CONSOLIDATED NOTES TO Net deferredtaxliabilities 2008 duetoforeigncurrencymovements. valuation allowanceincreasedbyUS$5.4 millionduringthefiscalyear The andallofitsAustraliancapitallosscarryforwards. carryforwards allowance pertainingtoallofitsAustralian netoperatingloss asset willnotberealised.TheCompanyhasestablishedavaluation is morelikelythannotthatsomeportionorallofthedeferredtax establishes avaluationallowanceagainstdeferredtaxassetifit Under SFAS No.109,“AccountingforIncomeTaxes”, theCompany Deferred taxassets: (Millions ofUSdollars) Deferred taxbalancesconsistofthefollowingcomponents: Effective taxrate Total incometax(expense)benefit Other items Change intaxlaw Result oftaxaudits Change inreserves Losses notavailableforcarryforward Non-assessable items Expenses notdeductible regime Benefit fromDutchfinancialriskreserve Asbestos –effectofforeignexchange Asbestos provision US stateincometaxes,netofthefederalbenefit taxrates Income taxbenefitcomputedatstatutory Total deferredtaxliabilities Deferred taxliabilities: Total deferredtaxassets,netofvaluationallowance Valuation allowance Total deferredtaxassets Asbestos liability Net operating loss carryforwards Net operatinglosscarryforwards Other provisionsandaccruals Taxes onintellectualpropertytransfer Capital losscarryforwards Prepayments Other Other Foreign currencymovements Property, plantandequipment capital losscarryforwards. the Companyhada100%valuationallowance againsttheAustralian whichwillneverexpire.At31March2008, capital losscarryforwards At 31March2008,theCompanyhad US$133.2millioninAustralian Australian taxlosscarryforwards. 2008, theCompanyhada100%valuationallowanceagainst of approximatelyUS$17.7millionthatwillneverexpire.At31March At 31March2008,theCompanyhadAustraliantaxlosscarryforwards 7.8 $ $ (36.1) (18.5) (27.5) 101.7% 2008 (1.4) (1.4) (3.2) (1.9) 2.7 7.3 – – – Years Ended31March $ 336.0 $ 406.2 1 . $ 121.0 $ $ 16.2 4. $(71.6) $ 243.9 (108.6) 444.6 489.7 (45.1) (15.2) (93.4) (24.1) – 2008 262.0% 16.5% 242.0 (214.7) 27.0 40.0 2007 2006 (2.1) 0.4 (3.2) (2.6) (1.7) (3.4) (6.5) (7.1) 10.4 – 6.3 6.5 2.9 0.8 1.8 1.4 8.1 12.7 3.0 – le tothatjurisdiction. – 20.7 – h theCompany 31 March $ 262.9 $ 326.0 (113.7) (108.4) 376.6 416.3 (39.7) 2007 33.3 35.2 (5.2) (0.1) 7.8 6.5 7.5 – the IRS’findingsthroughcontinuing auditprocessand,ifnecessary, conclusions reachedbytheIRS,and Companyintendstocontest to itsNetherlandscompanies.TheCompany doesnotagreewiththe tax ratesonpaymentsfromtheCompany’s UnitedStatessubsidiaries Treaty andthataccordingly itisnotentitledtobeneficialwithholding the CompanydoesnotsatisfyLOBprovisionofNewUS-NL with aNoticeofProposedAdjustment(“NOPA”) thatconcludes that On 23June2008,theCompanyannouncedthatIRShadissuedit US toTheNetherlands. that entitlesittobeneficialwithholdingtaxratesonpaymentsfromthe Treaty Limitations(NewUS-NLTreaty) onBenefits(“LOB”)provision the CompanyisincompliancewithrevisedUS–NetherlandsTax particular, theIRSiscurrentlyconductinganaudit todeterminewhether advised thatfurtherauditswillcommenceinthenext12months.In review inanumberofjurisdictionswhichitoperatesandhasbeen prior totaxyear2000.TheCompanyiscurrentlysubjectauditand subject toAustralianfederalexaminationsbytheATO fortaxyears year 2002.Withcertainlimitedexceptions,theCompanyisnolonger examinations byTheNetherlandstaxauthority, fortaxyearspriorto and includingtaxyear2004.TheCompanyisnolongersubjectto subject toUSfederalexaminationsbyIRSfortaxyearsprior including AustraliaandTheNetherlands.Companyisnolonger US federaljurisdiction,andvariousstatesforeignjurisdictions The Companyoroneofitssubsidiariesfilesincometaxreturnsinthe by theCompany. of amended incometaxreturns,whichgiverisetothebenefit recorded positions andadjustmentstoincometaxbalancesbasedonthefiling matters weresettled),theexpirationofstatuterelatedtocertaintax as aresultofthefinalisationcertaintaxaudits(whereby tax benefitofnil,US$10.4millionandUS$20.7million,respectively, In fiscalyears2008,2007and2006,theCompanyrecordedincome ultimate assessmentitexpects. in whichitdeterminesthattherecordedtaxliabilityislessthan necessary. TheCompanyrecordsadditionaltaxexpenseintheperiod period inwhichtheCompanydeterminesthatliabilityisnolonger Company reversestheliabilityandrecognisesataxbenefitduring determines thatpaymentoftheseamountsisunnecessary, the other non-currentliabilities,asappropriate.IftheCompanyultimately becomes available.Suchamountsareincludedintaxespayableor expected tobepaid,whichitupdatesovertimeasmoreinformation tax contingenciesbaseduponitsbestestimateofthetaxesultimately Company assertsonitsincometaxreturns.Theaccruesfor various taxmatters,includingchallengestopositionsthe Company issubjecttoongoingreviewsbytaxingjurisdictionson Due tothesizeofCompanyandnatureitsbusiness, earnings isimpracticabletodetermineatthistime. The amount ofthepotentialdeferredtaxliabilityrelatedtoundistributed for taxesthatwouldbepayableuponremittanceofthoseearnings. indefinitely reinvesttheseearnings,andaccordingly, hasnotprovided subsidiaries approximatedUS$744.7million.TheCompanyintendsto At 31March2008,theundistributedearningsofnon-Dutch authorities viewcertainissues. and settlements,thestatusofcurrent tax examinationsandhowthe taking intoaccountexistingtaxlaws, its experiencewithpreviousaudits audits baseduponknowledgeofallrelevantfactsandcircumstances, ultimate outcome.TheCompanyaccruesincometaxliabilitiesforthese being conducted,nonehaveprogressedsufficientlytopredicttheir will becompletedwithinthenext It isanticipatedthattheauditsandreviewscurrentlybeingconducted any obligationsofJHAFtotheATO givenitspriorwindingup. the ATO proceedings,themeritsofpotentialamendedassessmentand in respectofit.TheCompanyisconsideringitspositionwithto able toputitselfinapositionmeetanyultimatetaxliabilityassessed to determine,amongotherthings,whetherandwhatextentJHAFwas be likelytoinvolvetheappointmentofanewliquidator, whowouldneed issue isresolvedorabondposted.AnyreinstatementofJHAFwould A$88.0 million(US$80.7million).GICwillcontinuetoaccrueuntilthe (US$46.6 million) andasof30June2008estimatedGIC chargesof A$101.5 million (US$93.1million),estimatedpenalties ofA$50.8million taxof an amendedassessmentissuedtoJHAFwouldcompriseprimary year 2002.TheCompanyunderstandsthatitistheviewofATO that that hasbeenthefocusofATO’s inquiriesduringthetaxauditoffiscal the ATO issuinganamendedassessmentinrespectofonetheissues pre-requisiteto understands thatthereinstatementofJHAFisanecessary August 2005followingasubsidiary’s windingup.TheCompany voluntary reinstatement ofJHAFon18July2008.wasderegistered23 Finance PtyLimited(“JHAF”).TheFederalCourtwillfurtherconsiderthe of theCompany’s JamesHardieAustralia formerwholly-ownedsubsidiary the FederalCourtofAustralia(“FederalCourt”)seekingreinstatement 31 March2006.On18June2008,theATO commencedproceedingsin returns fortheyearsended31March2002and2004through In addition,theATO isauditingtheCompany’s Australianincometax calendar years2006and2007. more peryearinlateryearsthantheamountsindicatedNOPA for payable forlatercalendaryearsandsuchamountscouldbesignificantly total ofUS$13.0million.Additionaltax,interestandpenaltieswouldbe penalty through30June2008couldcontinuetoaccrueamaximum percent permonthuptoamaximumof25%.TheUS$7.0millionaccrued years 2006and2007willcontinuetoaccrueattherateofone-half the IRSorabondforsuchamountsisposted.Penaltiescalendar deposit ofthefullamounttax,interestandpenaltiesismadewith monthly Federalshort-termrateplus3%untiltheissueisresolvedora tax. Interestwillcontinuetoaccrueandcompounddailyatthepublished US$3.0 million ininterestandUS$7.0penaltiesrelatedtothat additional taxforcalendaryears2006and2007plus,asof30June2008, Company estimatesthatitwouldoweapproximatelyUS$37.0millionin to JHINVortheCompany’s Dutchfinancesubsidiary. Inthatevent,the any timeonorafter1 2006bytheCompany’sFebruary USsubsidiaries a 30%withholdingtaxondividend,interestandroyaltypaymentsmade IRS positionultimatelyweretoprevail,theCompanywouldbeliablefor through subsequentadministrativeappealsandpossiblylitigation.Ifthe 24 months.Of the auditscurrently

107 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 108 James Hardie Annual Report 2008 FINANCIAL STATEMENTS hrhles qiy(eii) 4. 116 1. 177 5.) (36.4) 36.0 change cannotbemade. (52.6) examinations, theexpirationofstatute oflimitations,orothercircumstances.Atthistime,anestimatethe rangeoft 33.9 or decreasewithinthenexttwelvemonths. Thesechangescouldresultfromthesettlementofongoinglitigation, thecompletion timing ofresolutionforuncertaintaxpositions.Itisreasonablypossiblethat theamountofunrecognisedtaxbenefitscould 127.7 A numberofyearsmayelapsebeforeanuncertaintaxpositionisauditedand ultimatelysettled.Itisdifficulttopredictthe 5.6 12.3 US$ tax benefitsthat,ifrecognised,wouldaffecttheeffectiverateisUS$61.9 millionandUS$47.0million,respectively. ThirdQuarterEnded 112.4 As of31March2008thetotalamountunrecognisedtaxbenefitsand totalamountofinterestandpenaltiesaccruedrelate (8.0) Previously 10.2 $ 16.0 of interestandpenaltiesrecognisedintaxexpensewasUS$7.3million. 31December2007 SecondQuarterEnded (8.9) 161.6 The Companyrecognisespenaltiesandinterestaccruedrelatedtounrecognised taxbenefitsinincomeexpense.During2008, $ 61.9 1.3 $ Previously Unrecognised taxbenefitsat31March2008 (26.8) 47.7 $ 39.0 Foreign translationadjustment $ 147.7 (27.6) FirstQuarterEnded 30September2007 $ Additions fortaxpositionsofprioryear Previously (35.6) Additions fortaxpositionsofthecurrentyear $ 46.2 Unrecognised taxbenefitsat1April2007 (36.4) 2,070.12,056.22,085.5 $ 2,070.2 2,208.5 Millions ofdollars 2,192.3 39.139.919.1 19.9 17.1 18.0 30June2007 A reconciliationofthebeginningandendingamountunrecognisedtaxbenefitsisasfollows: Shareholders’ equity(deficit) Total othercomprehensiveincome Total Net Income tax liabilities expense Reported income (Millions ofUSdollars) oftherevisionsareasf the quarterlyfinancialstatementfilingsforthoseperiodscancontinuetobereliedupon.Asummary for theyearended31March2008.Managementhasconcludedthaterrorsarenotmaterialtofinancialstatementstho associated withthepotentialtaxliabilityatgrossamountratherthannetoftax.Theimpactedfinancialstatementlinei for thequarterlyperiodsended30June2007,September2007and31December2007.TheCompanyincorrectlyrecordedinte During thefourthquarteroffiscal2008,CompanyidentifiedanerrorinFIN48liabilitypresenteditsconsolidated Revised treaty provisions. it couldbeliablefortaxesowedfromtheeffectivedateofamended increase beginninginthefiscalyearthatsuchdeterminationismadeand qualify fortreatybenefits,itseffectiveincometaxratecouldsignificantly changes donotmeetthenewrequirements,Companymay subsequent taxauditorrelatedprocess,theIRSdeterminesthatthese and shouldcontinuequalifyingfortreatybenefits.However, ifduringa requirements oftheamendedtreatyandbelievesthatitisincompliance changes toitsorganisationalandoperationalstructuresatisfythe its effectiveincometaxrate.Duringfiscalyear2006,theCompanymade must meetfortheCompanytocontinuequalifytreatybenefitsand treaty provides,amongotherthings,newrequirementsthattheCompany Reported 2006.Theamended and becameeffectivefortheCompanyon1February Netherlands taxtreaty. Thetreatywasamendedduringfiscalyear2005 The CompanycurrentlyderivessignificanttaxbenefitsundertheUS- James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS CONSOLIDATED Revised NOTES TO Reported Revised Company’s openingaccrualforinterestandpenaltiesisUS$39.7million. recognised, wouldaffecttheeffectivetaxrate.Asofadoptiondate, Company hadUS$39.0millionofgrossunrecognisedtaxbenefitsthat,if retained earningsofUS$78.0million.Astheadoptiondate, 48 resultedinthereductionofCompany’s consolidatedbeginning The CompanyadoptedFIN48on1April2007.adoptionof penalties, accountingininterimperiods,disclosureandtransition. FIN 48providesguidanceonderecognition,classification,interestand tax positiontakenorexpectedtobeinareturn.Additionally, attribute forthefinancialstatementrecognitionandmeasurementofa No. 109,FIN48prescribesarecognitionthresholdandmeasurement financial statementsinaccordancewithSFAS No.109.UnlikeSFAS accounting foruncertaintyinincometaxesrecognisedanenterprise’s of SFAS No.109,AccountingforIncomeTaxes”. FIN48clarifiesthe 48”), “AccountingforUncertaintyinIncomeTaxes, aninterpretation In June2006,theFASB issuedFASB InterpretationNo.48(“FIN tems werecorrectlystated he reasonablypossible ultimateoutcomeorthe financialstatements significantly increase ollows: d tounrecognised ofongoing se periodsandthat the totalamount rest expense rmr a fe loal rdt $ 5. A 172.0 A$ 157.8 $ Penalties taxafterallowablecredits Primary amended assessment. and thereforeithas notrecordedanyliabilityat31March 2008forthe requirements under FIN48forrecordingaliabilityhave notbeenmet year willbeupheldonappeal.Therefore, theCompanybelievesthat not thatthetaxpositionreportedinRCI’s taxreturnfor the1999fiscal amended assessment.TheCompany believes thatitismorelikelythan the transaction,duringATO enquiriesandfollowing receiptofthe The CompanyandRCIreceivedlegal andtaxadviceatthetimeof the taxpositionisaboutaslikelytobe correctasitisnotcorrect. tax.InAustralia,areasonablyarguableposition meansthat primary applyinthesecircumstances, to25%of tax thatwouldotherwise ATO reducedtheamountofpenaltyfromanautomatic50%primary year 1999taxreturnandthatPartIVA doesnotapply. Asaresult, the restructure carriedoutin1998hasbeenreportedcorrectlythefiscal the amountofnetcapitalgainsarisingasaresultcorporate ATO hasconfirmedthatRCIareasonablyarguableposition avenues ofappealtocontesttheATO’s positioninthismatter. The RCI stronglydisputestheamendedassessmentandispursuingall presently scheduledfor8December2008. with theFederalCourtofAustralia.ThehearingdateforRCI’s trialis the Company filedanapplicationappealingtheObjection Decision Company’s objectiontotheamendedassessment.On11July2007, On 30May2007,theATO issuedaNoticeofDecisiondisallowingthe A$3.3 million inGICrespectofthequarterended31 March2008. has beenpaidtotheATO. On15April2008,theCompanypaid quarterly basis.Upto31March2008,GICtotallingA$95.2million on theunpaidbalanceofamendedassessmentinarrearsa amended assessment.TheCompanyalsoagreedtopayGICaccruing of theamendedassessment,pendingoutcomeappeal Industries N.V. infavouroftheATO fortheremainingunpaid50% (US$168.8 million),andprovideaguaranteefromJamesHardie pay 50%ofthetotalamendedassessmentbeingA$184.0million accordance withtheATO ReceivablePolicy, theCompanywould During fiscalyear2007,theCompanyagreedwithATO thatin Mlin fdlas US$ 2 1 (Millions ofdollars) March 2008: revised toA$368.0millionandiscomprisedofthefollowingas31 charges (“GIC”)madebytheATO duringfiscalyear2007,thetotalwas of A$412.0million.However, aftertworemissionsofgeneralinterest 1936. TheoriginalamendedassessmentissuedtoRCIwasforatotal Taxation underPart IVA oftheAustralianIncomeTax AssessmentAct been issuedpursuanttothediscretiongrantedCommissionerof result ofaninternalcorporaterestructurecarriedoutin1998andhas assessment relatestotheamountofnetcapitalgainsarisingasa income taxreturnfortheyearended31March1999.Theamended received anamendedassessmentfromtheATO inrespectofRCI’s oftheCompany,In March2006,RCI,awholly-ownedsubsidiary 15. AMENDEDATO ASSESSMENT eea neetcags 4. 153.0 140.3 368.0 A$ 337.5 $ Total amendedassessment General interestcharges Represents 25% of primary tax. Represents25%ofprimary US$ amountscalculatedusingtheA$/US$foreignexchangespot rate at 31March2008. 2 39.4 43.0 1 A$ the vesting criteriatothoseoptions onthatbusiness day. 22 November 2008and22 2010,theCompanywillreapply unvested onthelast businessdayofeachsixmonthperiod following additional 2%oftheoptionsbecomeexercisable. Ifanyoptionsremain 1% incrementthattheCompany’s TSRisabove themedianTSR,an the Company’s peergroup,assetoutintheplan.Inaddition, foreach date wereatleastequaltothemedian TSR forthecompaniescomprising yield andcommonstockperformance) from22 November 2005tothat 2008 ifthetotalshareholderreturns(“TSR”) (essentiallyitsdividend become exercisableonthefirstbusinessdayorafter22November splits, rightsissuesandcapitalreconstructions.50%oftheseoptions adjusted ontheoccurrenceofcertainevents,includingnewissues,share exercise priceandthenumberofsharesavailableonmaybe Board Transitional StockOptionPlan.Assetoutintheplan rules,the per shareequaltoA$8.53theManagingDirectorsunder 1,320,000 sharesoftheCompany’s commonstockatanexerciseprice On 22November2005,theCompanygrantedoptionstopurchase options outstandingunderthisplan. 1,380,000 shares.At31March2008and2007,therewere1,320,000 subject tooutstandingoptionsunderthisplanshallnotexceed sharesthatmaybeissuedandoutstandingor number ofordinary incentive tothemembersofManagingBoard.Themaximum The ManagingBoardTransitional StockOptionPlanprovidesan Managing BoardTransitionalStockOptionPlan 31 March2008,2007and2006. and 2006.Noshareswereissuedunderthisplanduringyearsended no compensationexpenseduringtheyearsended31March2008,2007 applied tosharesgrantedafter31March1995.TheCompanyrecorded accounting, pursuanttotherequirementsofSFAS No.123R,hasbeen Share PurchasePlansharesgrantedpriorto1April1995andfairvalue for StockIssuedtoEmployees,”hasbeenappliedtheExecutive of AccountingPrinciplesBoard(“APB”)OpinionNo.25,“Accounting executive’s employment.Variable planaccountingundertheprovisions are generallyrepayablewithintwoyearsafterterminationofan of suchshares,includingdividendsandcapitalreturns.Theseloans indebtedness isreducedbyanyamountspayableJHILinrespect JHIL andcollateralisedbytheshares.Insuchcases,amountof of JHILshareswithnon-recourse,interest-freeloansprovidedby at theirmarketpricewhenissued.Executivesfundedpurchases the termsofPlan,eligibleexecutivespurchasedJHILshares stock underanExecutiveSharePurchasePlan(the“Plan”).Under Prior toJuly1998,JamesHardieIndustriesLimited(“JHIL”)issued Executive SharePurchasePlan Incentive Plan. BoardSharePlan2006andtheLong-TermPlan; theSupervisory Board Transitional StockOptionPlan;theJHINV2001EquityIncentive compensation plans:theExecutiveSharePurchasePlan;Managing At 31March2008,theCompanyhadfollowingstock-based 16. STOCK-BASEDCOMPENSATION a later dateasadeposit. and it istheCompany’s intentiontotreatanypaymentsbemadeat assessment thathavebeenmadeupto31March2008asadeposit the Companyhastreatedallpaymentsinrespectofamended successful initsappealagainsttheamendedassessment.Asaresult, assessment willberecoveredbyRCI(withinterest)atthetimeis The Companyexpectsthatamountspaidinrespectoftheamended

109 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 110 James Hardie Annual Report 2008 FINANCIAL STATEMENTS ac 07 $ .5 5,0 March2017 December2017 March2017 March2016 151,400 November2016 5,031,310 179,500 December2015 2015 February 40,200 3,499,490 December2014 December2013 5,224,100 273,000 December2012 December2011 6.38 8.35 5,391,100 A$ A$ 8.90 6,179,583 A$ 4,037,000 9.50 8.40 4,248,417 A$ A$ 8.90 The Companyisauthorisedtoissue45,077,100sharesunderthe2001Equity IncentivePlan. A$ 6.30 A$ A$0.38 fortheNovember2002returnofcapital. 5.99 A$ December 2001optiongrantswerereducedbyA$0.21fortheNovember2003returnofcapitalandgrantw 7.05 A$ events, includingnewissues,sharesplits,rightsissuesandcapitalreconstructions.Consequently, 6.66 theexercisepriceson OptionExpirationDate A$ As setoutintheplanrules,exercisepricesandnumberofsharesavailableonmaybeadjustedoccurre 5.65 A$ December 2007 March 2007 November2010 NumberofOptionsGranted March 2007 November2009 November 2006 OriginalExercisePrice March 2006 3,500,285 December 2005 1,968,544 2005 February December 2004 December 2003 December 2002 December 2001 Share GrantDate 3.78 A$ 3.82 A$ The followingtablesummarisestheadditionaloptiongrants: employee ceasestobeemployedbytheCompany. first year;25%afterthesecondand50%thirdyear. Allunexercisedoptionsexpire10yearsfromthedateofi OptionExpirationDate shareinthecapitalofJHINV.Each optionconferstherighttosubscribeforoneordinary Theoptionsmaybeexercisedasfol Under the2001EquityIncentivePlan,additionalgrantshavebeenmadeatfairmarketvaluetomanagementandotheremployeeso and A$0.10 fortheNovember2003,2002andDecember2001returnsofcapital,respectively. NumberofOptionsGranted including newissues,sharesplits,rightsissuesandcapitalreconstructions.Consequently, theexercisepriceswerereducedb As setoutintheplanrules,exercisepricesandnumberofsharesavailableonareadjustedoccurrence OriginalExercisePrice November 2000 October November 1999 Original ShadowShareGrantDate oftheoriginalshadowsharegrant. equal tranches(20%eachyear)startingwiththefirstanniversary Incentive Plan(“KMEIP”)shadowsharesthatwereoriginallygrantedinNovember2000and1999byJHIL.Theseoptionsmaybeexe 2001 EquityIncentivePlan(the“2001Plan”)tokeyUSexecutivesinexchangefortheirpreviouslygrantedKey On 19October2001(thegrantdate),JHINVgrantedoptionstopurchase5,468,829sharesoftheCompany’s commonstockunderth JHI NV2001EquityIncentivePlan James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS October CONSOLIDATED NOTES TO 2001 2001 ssue or90daysafterthe December2002and lows: 25%afterthe ofcertainevents, y A$0.21,A$0.38 nce ofcertain ManagementEquity f theCompany. rcised infive e JHINV as reducedby 61,792 shareshadbeenacquiredunderthisplan. in theSBSP2006andsharesunder2006.At31March2008, Boardmemberwill takeintoaccountanyparticipation of aSupervisory shares onthemarketbehalfofparticipant.Thetotalremuneration The SBSP2006allowstheCompanytoissuenewsharesoracquire BoardintheSBSP2006isnotmandatory.members oftheSupervisory BoardSharePlan2006(“SBSP2006”).Participationby Supervisory approved thereplacementofitsSBSPwithanewplancalled At the2006AnnualGeneralMeeting,Company’s shareholders Supervisory BoardSharePlan2006 the SBSPwerereleasedfromescrowinNovember2007. BoardSharePlan2006.Allremainingsharesissuedunder Supervisory to theSBSP. Duringfiscalyear2007,thisplanwasreplacedwiththe entered intobytheCompanyinrelationtograntofsharespursuant for thesharesismarketvalueattimeofissue.Noloanswere retain thosesharesforatleasttwoyearsfollowingissue.Theissueprice Boardto a two-yearescrowthatrequiredmembersoftheSupervisory componentoftheSBSPweresubjectto the US$10,000compulsory additional sharesinlieuoffeesattheirdiscretion.Sharesissuedunder least US$10,000oftheirfeesinsharesandalloweddirectorstoreceive portion oftheirdirectorfees.TheSBSPrequiredthatthedirectorstakeat Board receivesharesoftheCompany’s commonstockaspaymentfora that allnon-executivedirectorsontheJointBoardandSupervisory BoardSharePlan(“SBSP”),whichrequired approved aSupervisory At the2002AnnualGeneralMeeting,Company’s shareholders Supervisory BoardSharePlan in theyearsended31March2008,2007and2006,respectively. of US$0.1million,US$0.5millionandwasrecognised rights underSFAS No.123Rand,accordingly, compensationexpense the exerciseday. Theserightsareaccountedforasstockappreciation were exercisedatA$6.52,theclosingpriceofCompany’s stockon the remaining250,000ofthesestockappreciationrightsvestedand price oftheCompany’s stockontheexerciseday. InDecember2007, appreciation rightsvestedandwereexercisedatA$8.99,theclosing rights werecancelled.InDecember2006,250,000ofthesestock exercise priceofA$5.99.InApril2005,27,000stockappreciation Rights Incentive Plan(“StockAppreciationRightsPlan”)withan under thetermsandconditionsofJHINVStockAppreciation On 14December2004,527,000stockappreciationrightsweregranted JHI NVStockAppreciationRightsIncentivePlan at thetimeofoptiongrant. calculate dividendyieldusingthecurrentmanagementpolicy notes withtermssimilartotheexpectedtermofoptions.We stock pricevolatility. We basetherisk-freeinterestrateonUSTreasury We estimate thevolatilityofourcommonstockbasedonhistoricaldaily average termfromourhistoricalstockoptionexerciseexperience. We estimatetheexpected termofoptionsgrantedbycalculatingthe stock optionexercisebehaviours,risk-freerateandexpecteddividends. volatility overthetermofawards,actualandprojectedemployee subjective variables.Thesevariablesincludeourexpectedstockprice stock priceaswellassumptionsregardinganumberofcomplexand on thedateofgrantusinganoption-pricingmodelisaffectedbyour The determinationofthefairvaluestock-basedpaymentawards options requiresthatcertaintarget’performancehurdles’areachieved. LTIP werevaluedusingtheMonteCarlomethodsincevestingofthese condition.Optionsgrantedunderthe based solelyonarequisiteservice Black-Scholes option-pricingmodelsincethevestingoftheseoptionsis Managing BoardTransitional StockOptionPlanarevaluedusingthe method”). Optionsgrantedunderthe2001EquityIncentivePlanand model thatincorporatesaMonteCarloSimulation(the“Monte of grantusingeithertheBlack-Scholesoption-pricingmodeloralattice The Companyestimatesthefairvalueofeachoptiongrantondate expense overtheperiodsinwhichoptionsvest. pricing modelandrecognisethisestimatedvalueascompensation to estimatethevalueofstockoptionsissuedbaseduponanoption- value provisionsofSFAS No.123R,whichrequirestheCompany The Companyaccountsforstockoptionsinaccordancewiththefair Valuation andExpenseInformationUnderSFASNo.123R outstanding underthisplan. the dateofissue.At31March2008,therewere2,148,000options outlined intheLTIP rules.Unexercisedoptionsexpire10yearsfrom The vestingoftheseoptionsaresubjectto‘performancehurdles’as 1,016,000 optionsweregrantedtotheManagingBoardunderLTIP. under theLTIP totheManagingBoard.InAugust2007anadditional and toExecutives.InNovember2006,1,132,000optionsweregranted options intheCompanytomembersofCompany’s ManagingBoard also approved,inaccordancewithcertainLTIP rules,theissueof to certainmembersofitsmanagement(“Executives”).Theshareholders provide incentivestomembersoftheCompany’s ManagingBoardand approved theestablishmentofaLong-Term IncentivePlan(“LTIP”) to At the2006AnnualGeneralMeeting,Company’s shareholders Long-Term IncentivePlan

111 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 112 James Hardie Annual Report 2008 FINANCIAL STATEMENTS option-pricing modelduringtheyearended31March: The followingtableincludestheweightedaverageassumptionsandfairvaluesusedforgrantsvaluedusing James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS CONSOLIDATED NOTES TO el uhrsd – A$ – 7.52 22,190,237 A$ 15,564,294 – 18,939,817 ExercisePrice 19,420,793 Number 6.99 A$ 3,000,000 SharesAvailable forGrant 19,513,257 19,836,233 statements ofcashflowswerenil,US$1.8millionandUS$2.2forthe yearsended31March2008,2007and2006,respecti Windfall taxbenefitsrealisedintheUnitedStatesfromstockoptionsexercised andincludedincashflowsfromfinancingacti and 2006,respectively. The weightedaveragegrant-datefairvalueofstockoptionsgrantedwasA$1.47, A$2.61andA$2.78duringtheyearsended31Mar and 2006,respectively. The totalintrinsicvalueofstockoptionsexercisedwasA$1.2million,A$10.3 millionandA$11.5fortheyearsended3 Balance at31March2008 Forfeited 2,190,811 Exercised Granted (6,047,310) Newly Authorised Balance at31March2007 Forfeited 1,546,950 Exercised Granted (4,962,390) Newly Authorised Balance at31March2006 The followingtablesummarisesalloftheCompany’s sharesavailableforgrantandthemovementinallofCompany’s outstan General Share-BasedAwardInformation average amortisationperiodof1.5years. compensation balancerelatedtostockoptionswasUS$9.6millionafterestimatedforfeituresandwillberecognisedoveranest US$5.9 million fortheyearsended31March2008,2007 and2006,respectively. Asof31March2008,theunrecordeddeferredsto Compensation expensearisingfromstockoptiongrantsasestimatedusingoption-pricingmodelswasUS$7.7million,US$5.8milli Number ofstockoptions (2,190,811) Weighted averagefairvalue atgrantdate Risk freeinterestrate 6,047,310 Expected volatility Dividend yield (1,546,950) method duringtheyearended31March: The followingtableincludestheweightedaverageassumptionsandfairvaluesusedforgrantsvaluedusing 4,962,390 Number ofstockoptions Weighted averagefairvalueatgrantdate Expected lifeinyears Risk freeinterestrate Expected volatility Dividend yield A$ A$ A$ A$ 7.79 6.62 7.70 8.42 1,016,000 5,031,310 A$ 3.14 A$ 1.13 2008 2008 32.1% 30.0% 4.2% 5.0% 4.4 3.4% 5.0% – (606,079) A$ 6.33 A$ – (3,988,880) 5.96 11200 N/A 1,132,000 A$ N/A 3.30 4.6% N/A N/A 28.1% 1.6% N/A 3,830,390 6,584,300 $24 A$2.78 A$ 2.40 2007 2006 2007 2006 28.1% 27.9% vities intheconsolidated 5.1 5.6 4.6% 4.5% 1.5% 0.9% Outstanding Options 1 March2008,2007 imated weighted Weighted Average Black-Scholes MonteCarlo ding options: vely. ch 2008,2007 ck-based on and

7.29 At 31 March2008,therewerenomaterial contractsoutstanding. mature whensettlementoftheunderlying transactionisduetooccur. exchangecontractstimedto the Companymayenterintoforward generated. Inordertoprotectagainst foreign exchangeratemovements, functional currencyofthebusinessin whichtherelatedtransactionis finished productforamountsdenominated incurrenciesotherthanthe The Companypurchasesrawmaterialsandfixedassetssellssome results ofoperationsandcashflows. Company isexposedtochangesinexchangerateswhichaffectits operations inforeigncountries.Asaresultoftheseactivities,the As amultinationalcorporation,theCompanymaintainssignificant Foreign Currency 18. FINANCIALINSTRUMENTS cancelled 35.0 million shareson31March2008. 1 April 2008andthedateofthisreport.TheCompanyofficially Company hadnotpurchasedanysharesduringtheperiodbetween average spotratesforthedaysonwhichshareswerepurchased.The (US$5.83). TheUSdollaramountsweredeterminedusingtheweighted and theaveragepricepaidpershareofcommonstockwasA$6.62 shares hadanaggregatecostofA$236.4million(US$208.0million) common stockduringtheyearended31March2008.Therepurchased 46.8 millionshares.TheCompanyrepurchased35.7sharesof program ofupto10%theCompany’s issuedcapital,approximately On 15August2007,theCompanyannouncedasharerepurchase 17. SHAREREPURCHASEPROGRAM rc Nme Lf i er) rc Vle ubr rc Value Price Number 7.7 Total 22,190,237 40,200 7.9 OptionsExercisable 9.50 A$ A$ 1,295,306 A$3.09 9.50 – 8.90 3,901,100 20,100 7.7 409,907 Value 1,320,000 8.53 9.50 – 7.7 – – 8.90 8.40 3,747,340 – 151,400 8.53 – 8.6 9.0 8.35 2,000,425 A$ 1,295,306 A$3.09 5.99713,862 5.06787,017 1,016,000 8.40 7.83 8.35 – – Price 9.4 37,850 – 8.90 2,745,625 660,582 – – 3.13313,357 686,349 7.05 2,280,750 2.6 5.99713,862 8.35 – 7.83 – 100,435 5.06787,017 5.7 6.7 6.45 901,500 8.40 – 3.7 3.13313,357 4,822,398 Life(inYears)7.05 6.38 93,000 – 2,745,625 4.6 1.6 9.7 6.9 660,582 6.30 Number 409,907 2,280,750 6.38 – 100,435 Exercise Intrinsic 6.30 – 6.45 14,286 5.99 93,000 – 7.05 – 6.38 – 5.06 6.30 – 901,500 3.13 Remaining Exercise Intrinsic A$3.09 6.45 Price – OptionsOutstanding Exercise (In Australiandollars) The followingtablesummarisesoutstandingandexercisableoptionsasof31March2008: Average Weighted Average Weighted Aggregate Weighted Average Aggregate holders exercisedtheiroptionsasofthatdate. than theCompany’s closingstockpriceofA$6.25as31March2008,whichwouldhavebeenreceivedbytheoptionholdershad The aggregateintrinsicvalueintheprecedingtablerepresentstotalpre-taxbasedonstockoptionswitha

.9A ,0,4 99089 A$ 9,950,809 7.29 A$ 3,109,542 The Companyhashistoricallynotincurred significantcreditlosses. customer’s financialconditionand,generally, collateralisnotrequired. cement products.Creditisextendedbasedonanevaluationofeach to theconcentrationofdistributionchannelsforCompany’s fibre Credit riskwithrespecttotradeaccountsreceivableisconcentrateddue contracts wasnotmaterial. exchange 2008 and2007,totalcreditexposurearisingfromforward value ofallcontractsoutstandingwiththatcounterparty. At31March credit exposuretotheCompanyiscalculatedasmark-to-market the eventthatcounterpartiesfailtodelivercontractedamount.The exchange contractsin The Companyisexposedtolossesonforward with anyoneinstitution. and, whereappropriate,placeslimitsontheamountofcreditexposure evaluations oftherelativecreditstandingthesefinancialinstitutions insured limits.To minimisethisrisk,theCompanyperformsperiodic institutions. Attimes,thesefinancialinstrumentsmaybeinexcessof and certainotherfinancialinstrumentswithvariousmajor The Companymaintainscashandequivalents,investments trade accountsreceivable. risk consistprimarilyofcashandequivalents,investments Financial instrumentswhichpotentiallysubjecttheCompanytocredit Credit Risk

6.83 A$ n exercisepriceless those option

3,109,542

113 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 114 James Hardie Annual Report 2008 FINANCIAL STATEMENTS Other General Corporate Segments total Other Research andDevelopment Asia PacificFibreCement USA FibreCement (Millions ofUSdollars) Worldwide total General Corporate Segments total Research andDevelopment Floating Long-term debt: (Millions ofUSdollars) estimated fairvalueoftheCompany’s long-termdebt(includingcurrentportionofdebt): accrued liabilitiesareareasonableestimateoftheirfairvalueduetotheshort-termnaturetheseinstruments.Thefollow valuesofcashandequivalents,short-terminvestments,accountsreceivable,borrowingsaccoun The carrying Fair Values James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS CONSOLIDATED NOTES TO USA FibreCement (Millions ofUSdollars) Worldwide total Other Asia PacificFibreCement USA FibreCement (Millions ofUSdollars) The followingaretheCompany’s operatingsegmentsandgeographicalinformation: Operating Segments managed separatelyduetotheirdifferentproductsand/orgeographicallocation. to ceaseproductionatitsPlantCity, FloridaHardiePipeplantintheUS.TheCompany’s operatingsegmentsarestrategicoper the UnitedStates.TheroofingplantwasclosedandbusinessceasedoperationsinApril2006.On22May2008,Companya includes themanufactureandsaleoffibrecementreinforcedpipesinUnitedStates,operationsEurope sold inAustralia,NewZealandandAsia.ResearchDevelopmentrepresentsthecostincurredbyresearchdevelopment products intheUnitedStates.AsiaPacificFibreCementincludesallfibrecementmanufacturedAustralia,NewZealandandt the ManagingBoardofDirectors.USAFibreCementmanufacturesandsellsfibrecementinteriorlinings,exteriorsidingrel The Companyhasreporteditsoperatingsegmentinformationintheformatthatisavailableto 19. OPERATING SEGMENTINFORMATION ANDCONCENTRATIONS OFRISK Worldwide total Net interestincome(expense) Total operatingloss Asia PacificFibreCement Total Fixed Fair valuesoflong-termdebtweredeterminedbyreferencetothe31March2008and2007marketforcomparablyrateddeb 4

8,9 5,6 2,3

Carrying Fair 7. $174.5 $ 174.5 7. $174.5 $ 174.5 Value – 2008 $ (35.5) $ 1,468.8 $ 1,144.8 $ 2,179.9 $ 268.0 $ 835.8 2007 1,078.6 1,101.3 (304.0) 218.3 267.4 298.3 (18.1) (32.8) (36.6) Total IdentifiableAssets 2008 2008 2008 Years Ended31March 10.6 13.9 50.3 25.7 1.1 31 March Cryn Fair Carrying $ Value Value $ Loss BeforeIncomeTaxes Net SalestoCustomers Years Ended31March Years Ended31March 3 24 $ 342.6 $ 362.4 ,4. $1,488.5 $ 1,542.9 $1,218.4 $ 1,262.3 $ 2,128.1 (31 $ (435.1) $ $ (93.1) $ 893.0 1,144.8

(462.0) (777.0) 199.3 375.4 342.1 105.0 $ 251.7 241.8 983.3 105.0 $ ing tablesummarisesthe (17.1) (15.7) (86.6) (434.9) 2007 2007 2006 2007 2006 41.6 10.9 39.4 41.7 28.9 28.3 (9.3) (26.5) (6.5) (0.2) – ating unitsthatare roofing operationsin he Philippinesand ated accessories

andevaluatedby ts payableand centres. Other t instruments. nnounced plans 1

105.0 105.0 – Research anddevelopmentexpendituresareexpensedasincurredintotalamounted toUS$27.3million,US$25.9millionand 9 8 7 6 5 4 3 2 1 General Corporate Segments total Other Countries New Zealand Australia USA (Millions ofUSdollars) Worldwide total Other Countries New Zealand Australia USA (Millions ofUSdollars) Geographic Areas Worldwide total The Companydoesnotreportnetinterestexpense foreachoperatingsegmentassegmentsarenothelddirectlyaccou Includes costsofnil,US$13.6millionandUS$17.4 millionforSCIandotherrelatedexpensesinfiscalyears2008,20072 The principalcomponentsofGeneralCorporateareofficerandemployeecompensationrelatedbenefits;professionalle Included intheOthersegmentforyearsended31March2008and2006areassetimpairmentcharges of US$25.4millionand Included inUSAFibreCementfortheyearended31March2008areassetimpairmentchargesofUS$45.6million. Research anddevelopmentcostsofUS$7.4million,US$10.8millionUS$13.2infiscalyears2008,20072006,re Export salesandinter-segmental salesarenotsignificant. Asbestos-related assetsat31March2008and 2007areUS$817.1millionandUS$727.6million,respectively, andarei The Companydoesnotreportdeferredtaxassets andliabilitiesforeachoperatingsegmentassegmentsarenotheld respectively. SeeNote12. expense. Includedinnetinterestincome(expense)isAICF ofUS$9.4million,nilandinfiscalyears2008, respectively andAICFSG&AexpensesofUS$4.0million,nilinfiscal years2008,2007and2006,respectively. unfavourable asbestosadjustmentsofUS$240.1million,US$405.5millionandUS$715.6infiscalyears2008,2007200 administrative costs;andrentalexpense,netofincome,ontheCompany’s corporateoffices.AlsoincludedinGeneralCo respectively. US$28.7 million fortheyearsended31March2008,2007 and2006,respectively. expenses ofUS$0.1million,US$4.1millionandUS$3.4infiscalyears2008,20072006,respectively. 2006, respectively, wereexpensedintheOthersegment.TheResearchandDevelopmentsegmentalsoincludedselling,general Development segment.ResearchandcostsofUS$0.3million,millionUS$0.9infiscalyears2008, US$18.0 million,US$13.0millionandUS$12.3infiscalyears2008,20072006,respectively, wereexpensedintheRe fiscal years2008,2007and2006,respectively, wereexpensedintheAsiaPacificFibreCementsegment.Researchanddevelopmen were expensedintheUSAFibreCementsegment.ResearchanddevelopmentcostsofUS$1.6million,US$1.8millionUS$2.3mill accountable fordeferredincometaxes.Alltaxesareincluded inGeneralCorporate. the GeneralCorporatesegment.SeeNote 12. 8,9

NetSalestoCustomers $ 1,468.8 $ 1,153.1 $ 2,179.9 $ 846.6 1,078.6 1,101.3 139.0 198.6 Total IdentifiableAssets 2008 2008 Years Ended31March 66.9 26.1 49.8 67.3 Years Ended31March ,4. $1,488.5 $ 1,542.9 $1,233.7 $ 1,279.4 $ 2,128.1 1,144.8 $935.7 127.1 169.0 164.5 983.3 2007 2007 2006 58.9 23.1 40.1 36.7 54.4 53.6 2007and2006, directly rporate are 006, respectively. gal fees; ntable forinterest US$13.4 million, ncluded in spectively, search and t costsof administrative 1 2007 and 6, ion in

115 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 116 James Hardie Annual Report 2008 FINANCIAL STATEMENTS Years Ended31March flows oftheCompany’s non-USoperationsontranslationintoUSdollars. Consequently, changesinthevalueofforeigncurrenciescouldsignificantlyaffectconsolidatedfinancialposition,result Approximately 22%oftheCompany’s fiscalyear2008netsalesfromcontinuingoperationswerederivedoutsidetheUnitedS Total Customer C Customer B Customer A (Millions ofUSdollars) respectively. Thefollowingaregrosssalesgeneratedbythesethreecustomers,whichallfromtheUSAFibreCementsegment These threecustomers’accountsreceivablerepresented42%and58%oftheCompany’s tradeaccountsreceivableat31March2008 customers thatindividuallyaccountforover10%oftheCompany’s netsales. a materialadverseeffectontheCompany’s consolidatedfinancialposition,resultsofoperationsandcashflows.TheCompanyh customers, therecanbenoassurancethattheCompanywillabletofindareplacement.Therefore,lossofoneormorecu The distributionchannelsfortheCompany’s fibrecementproductsareconcentrated.IftheCompanyweretoloseoneormoreof Concentrations ofRisk James HardieIndustriesNVandSubsidiaries FINANCIAL STATEMENTS CONSOLIDATED NOTES TO Total accumulatedothercomprehensiveincome(loss) Foreign currencytranslationadjustments Unrealised lossonrestrictedshort-terminvestments (net ofUS$1.0millionandUS$1.2taxbenefit,respectively) Pension andpost-retirementbenefitadjustments (Millions ofUSdollars) Accumulated othercomprehensiveincome(loss)consistsofthefollowingcomponents: 20. ACCUMULATED OTHERCOMPREHENSIVEINCOME (LOSS) $ $

706.8 167.3 10.8 108.2 7.0 431.3 27.9 8. $751.3 $787.5 2008 20 2006 2007 % % % 4. 2. $462 35.0 $426.2 26.7 12.9 10.1 168.9 156.6 $446.3 13.8 10.3 172.3 168.5 $ $

2008 16.9 23.4 (4.4) (2.1) 54 $(28.4) 5.4 $ 8.1 (28.4) 27 $ – $(2.7) – – 2007 2006 s ofoperationsandcash stomers couldhave as threemajor its major : tates. and 2007, ar 7,667 on thesametermsandconditionsthatappliedtootherholders. N/A The JHINVdividendspaidtoDirectorsandtheirrelatedentitieswere – N/A N/A director-related entities,disposedofanysharesin the Company. Other thanMrButterfield,noDirectororFormerDirector, ortheir (90,000) – underlying shares. 5,000 5,032 sharesand sold the options toacquire90,000additionalordinary shares werecancelled.InDecember2007,MrButterfieldexercised 4,410 – the separation,90,000ofhis621,000optionstoacquireordinary – 5,803 Managing Boarddirectoreffective1October2007.Asaresultof 10,377 Mr BButterfieldseparatedfromthecompanyandresignedasa – 3,903 6,124 – 6,300 – B Butterfield – 6,859 J Barr – Former directors R Chenu 9,000 L Gries Managing Boarddirectors C Walter AM R vanderMeer D McGauchieAO J Loudon D DeFosset D Andrews B Anderson M Hammes Supervisory Boarddirectors Purchases/(Sales) On fiscal year2008.Directors’acquisitionswereasfollows: Mr M Hammes andMr R Chenu alsomadeonmarket-purchasesduring approved byJHINVshareholderson17August2007.MrJLoudon, BoardSharePlan2006whichwas the termsofSupervisory 2008 participatedinanacquisitionofsharesatA$5.7352,under SBSP Boardmembers(otherthanMrJLoudon)on14March Supervisory sharesat31March2008and2007,respectively.3,914,544 ordinary respectively, sharesand andoptionstoacquire4,750,544ordinary sharesat31March2008and2007, shares and210,530ordinary and theirdirector-related entitiesheldanaggregateof275,426ordinary Market The Company’s Directors(andFormerDirectors’fortherelevantyear) Securities Transactions JHI NVDirectors’andFormer 21. RELATED PARTY TRANSACTIONS and conditions. and werenegotiatedinaccordancewith usualcommercialterms the Company. Thepaymentswereinrespectofprofessional services of and DirectoLawOffices.RBernaldoisadirectorofsubsidiary 31 March 2008and2007,respectively, weremadetoBernaldo,Mirador Payments totallingUS$5,979andUS$5,364fortheyearsended negotiated inaccordancewithusualcommercialtermsandconditions. andwere subsidiaries. Thepaymentswereinrespectoflegalservices Hyzler Advocates.DrJJVella wasadirectorofonetheCompany’s 2008 and2007,respectively, weremadetoGrech,Vella, Tortell & Payments ofUS$4,507andfortheyearsended31March described belowarisebecauseoftheserequirements. which requirethatatleastonedirectorbealocalresident.Allpayments The Companyhassubsidiarieslocatedinvariouscountries,manyof of Subsidiaries ofJHINV Payments madetoDirectorandRelatedEntities Directors hadsignificantinfluenceoverthesetransactions. normal commercialtermsandconditions.Itisnotconsideredthatthese totheCompany.services Alltransactionswereinaccordancewith Nederland N.V. EntitiesintheINGGroupprovidevariousfinancial director ofINGBankNederlandN.V. andINGVerzekeringen (Insurance) Board BoardDirectorRvanderMeerisSupervisory Supervisory Limited fromwhomtheCompanypurchasescommunicationsservices. Deputy ChairmanDGMcGauchieAOisadirectorofTelstra Corporation of JHI NVduringtheYear Payments MadetoDirectorsandDirectorRelatedEntities from thedateoftheirrespectiveresignations. Under thetermsofPlan,eachloanmustberepaidwithintwoyears resignedwithloansoutstandingofUS$16,075. director ofasubsidiary outstanding ofUS$14,123andduringfiscalyear2008,anexecutive resignedwithloans year 2007,anexecutivedirectorofasubsidiary loan wasrepaidinfulltheyearended31March2007.Duringfiscal had twoyearsfromthedateofhisresignationtorepaysuchloan.The outstanding ofUS$117,688.UnderthetermsPlan,thisdirector resignedwithloans year 2005,anexecutivedirectorofasubsidiary in respectofthePlanfromAT KneeshawandDAJSalter. Duringfiscal During fiscalyear2008,repaymentstotallingUS$5,419werereceived modifications toexistingloanshavebeenmadesinceDecember1997. or executiveofficersofJHINV, andno underthePlanorotherwise, are collateralisedbyCUFSunderthePlan.NonewloanstoDirectors or capitalreturnsfrom,securitiesacquiredunderthePlan.Theloans Plan areinterestfreeandrepayablefromdividendincomeearnedby, of theExecutiveSharePurchasePlan(the“Plan”).Loansunder directors ofsubsidiariesJHINVunderthetermsandconditions respectively, wereoutstandingfromcertainexecutivedirectorsorformer At 31March2008and2007,loanstotallingUS$29,267US$30,774, of James HardieSubsidiaries Existing LoanstotheCompany’sDirectorsand

117 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 118 James Hardie Annual Report 2008 FINANCIAL STATEMENTS Tax Fees Audit-Related Fees All OtherFees 3 2 FiscalYears Ended31March 1 Audit Fees (Millions ofUSdollars) as follows: firm forservicesprovidedfiscalyears2008,2007and2006were Fees paidtothecompany’sindependentregisteredpublicaccounting Accounting Firm Fees PaidtotheIndependentRegisteredPublic REGISTERED PUBLICACCOUNTINGFIRM REMUNERATION OFINDEPENDENT James HardieIndustriesNVandSubsidiaries (Unaudited, notformingpartoftheConsolidatedFinancialStatements) DISCLOSURES REMUNERATION Tax Feesincludetheaggregatefeesbilledfortaxcompliance, Audit-Related Feesinclude theaggregatefeesbilledforassuranceand Audit Feesincludetheaggregatefeesforprofessionalservices registered publicaccountingfirm. advice andtaxplanningservicesrenderedbytheindependent ended 31 March 2008. of theauditcompany’sfinancialstatementsforfiscalyear firm didnotengageanytemporaryemployeestoconductportion public accountingfirm.Theindependentregistered related servicesrenderedbythecompany’sindependentregistered fees performedforfiscalyear2007,butpaidin2008. US$0.8 million, US$0.4millionofwhichrelatedtostatutory reporting March 2008,totalauditfeesincludesforstatutoryreportingof but paidinfiscalyear2008.Inaddition,duringended31 Sarbanes-Oxley compliancetestingperformedforfiscalyear2007, testing ofUS$2.0million,US$0.8millionwhichrelatedto 2008, totalauditfeesincludesforSarbanes-Oxleycompliance statutory andregulatoryfilings.Duringfiscalyearended31March statements andservicesthatarenormallyprovidedinconnectionwith firm. Professionalservicesincludetheauditofannualfinancial rendered bythecompany’sindependentregisteredpublicaccounting 3

$ 4.2 2008 4.9 – – 0.1 $ 2.1 $ 1.6 8.05.2 – 2007 2006 report onpages46-68ofthisannualreport. performance, issetoutintheRemunerationReportwithinDirectors’ and ManagingBoarddirectorsseniorexecutives,thelinkto A detaileddescriptionofthecompany’s Board policiesforSupervisory Remuneration ofdirectorsandseniorexecutives providers asneeded. fromotherservice accounting firm.Thecompanyobtainstheseservices fromitsindependentregisteredpublic certain non-auditservices of interest,thelawprohibitsapubliclytradedcompanyfromobtaining under theSEC’s auditorindependencerules.To avoidpotentialconflicts pre-approvedbytheAuditCommitteearepermissible All oftheservices beingperformed. Committee approvalinadvanceoftheservice to performwillbesetforthinaseparatedocumentrequestingAudit the companymayaskitsindependentregisteredpublicaccountingfirm that Anyadditionalservices andotherservices. taxservices services, audit-related inthefollowingcategories:auditservices, audit services Audit Committee.Pre-approvalincludesalistofspecificauditandnon- registered publicaccountingfirmarepre-approvedannuallybythe requirements ofthelaw, providedbytheindependent allservices In accordancewiththecompany’s AuditCommittee’s policyandthe Audit CommitteePre-ApprovalPoliciesandProcedures nto 04mlino a) – – . – – – – 0.9 – – 323.1 103.1 (26.0) (8.0) – (215.8) (20.9) 21.1 19.3 34.6 (32.3) – 41.0 (146.9) 36.8 17.1 (227.1) 68.9 19.1 (228.8) (8.9) (256.2) Net income(loss) 39.1 (27.6) (181.5) (netof$0.4milliontax) (257.8) 25.2 stock-based (36.4) inaccountingprinciplefor compensation (205.7) 44.7 Cumulated effectofchange (224.3) 1.20.20.5 3.6 continuing (0.2)(1.5)(4.7) (251.3) 4.5 (5.6) operations 2.2 1.8 3.7 75.0 (2.5) Income (loss)from (4.4) (1.3)(2.9) (257.5) Income tax(expense)benefit operationsbeforeincometaxes Income (loss)fromcontinuing Interest Interest Operating income(loss) income expense Gross profit Cost ofgoodssold Net sales (Millions ofUSdollars) interim amountsforitemsthatarenormallydeterminableonly on an annual basis. adjustments areofanormalrecurringnature.Interimfinancialstatementsbynecessity somewhat tentative;judgmentsareu forafairstatementofthefinancialresults adjustments which,intheopinionofmanagement,arenecessary the respective The informationfurnishedintheselectedquarterlyfinancialdataforyearsended31March2008and2007isunauditedbut James HardieIndustriesNVandSubsidiaries (Unaudited, notformingpartoftheConsolidatedFinancialStatements) FINANCIAL DATA SELECTED QUARTERLY 91 $19.1 $ $ 17.1 $ 39.1 (146.9) $312.9 $341.4 $390.1 $ 424.4 166.9 138.8 117.1 107.2 75.5 46.7 26.0 (183.7) Fourth First SecondThird Year Ended31March2008 By Quarter Year Ended31March2007 1. $414 5. $360.9 $355.1 $411.4 157.7 $415.5 155.2 126.3 133.8 3. $ 11 80 $103.1 $ (8.0) $ 21.1 $ 35.5 66.9 42.0 18.0 (220.0) is eod ThirdFourth First Second By Quarter interim periods.Such sed toestimate includes all

119 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 120 James Hardie Annual Report 2008 FINANCIAL STATEMENTS Long-term debt Total assets Net currentassets Balance Sheet Dividends paid Income (loss)fromcontinuingoperations Income tax(expense)benefit (Loss) incomefromcontinuingoperationsbeforetaxes Other (expense)income,net Capital expenditures Net interestincome(expense) Diluted Total operating(loss)income Basic Weighted averagenumber ofcommonsharesoutstanding: Asbestos adjustments Number ofshareholders General Corporate Total fromcontinuingoperations Segments total Corporate Other Other Research andDevelopment Research andDevelopment Asia PacificFibreCement USA FibreCement Operating Income Asia PacificFibreCement Worldwide total USA FibreCement Number ofemployees: Other Statistics Basic earnings(loss)pershare–continuingoperations Other Gearing ratio Diluted earnings(loss)pershare–continuingoperations Depreciation andamortisation Notes: Dividends paidpershare Shareholders’ (deficit)equity Return ofcapitalpershare Asia PacificFibreCement USA FibreCement Net Sales Profit andLossAccount (Millions ofUSdollars) James HardieIndustriesNVandSubsidiaries (Unaudited, notformingpartoftheConsolidatedFinancialStatements) STATISTICS GROUP 2 1 8 7 6 5 4 3 Borrowingsless cash (netdebt)divided bynetdebtplus totalshareholders’ equity. Diluted EPS issimilartobasicEPSexceptthat the weightedaveragenumberofcommon sharesoutstandingisincreasedto incl andemployeeshareson issuedurin Income (loss) fromcontinuingoperationsdivided bytheweightedaveragenumber ofordinary On 19November2003,theCompanypaidacapitalreturnofUS$0.15 persharetoshareholdersforatotalofUS$68.7million. andemployeesharesonissueduring theyear. Dividendspaiddividedbytheweightedaveragenumberofordinary Informationfordepreciationandamortisationiscontinuing operationsonly. Capitalinvestmentonproperty, plantandequipmentincludesbothcashcredit purchases,andisforcontinuingoperations Includescurrentportionoflongtermdebt.TheUS$noteswere repaid on8May2006.SeeNote9page97. of additional commonsharesthatwould havebeenoutstandingifthedilutive potentialcommonshares,suchas options,hadbeen On 1November2002,theCompanypaid acapitalreturnofUS$0.20persharetoshareholdersfortotal$94.8 million. 8

$ 56.5 (71.6) $ $ 1,468.8 $ (202.6) $ 268.0 $ 38.5 1,144.8 $ $ 183.7 $ $ 126.2 $ 2,179.9 $ $ 174.5 $ 14,012 (240.1) (15.7¢) (15.7¢) 455.0 455.0 2,882 267.4 1,809 298.3 27.0¢ (36.1) (35.5) (36.6) (63.9) (32.8) (18.1) 2008 50.3 25.7 111 834 1.1 48 80 – – – 2007 2006 2005 2004 5. $ 108 8. $ 195.9 $ 180.2 $ 150.8 $ 259.0 $ ,4. $1485 ,1. $981.9 1,210.4 $ $1,488.5 $ 1,542.9 ,6. $1284 $ $738.6 $1,218.4 939.2 $ 1,262.3 5. $ 49 2. $ 504.7 $ 624.7 $ 94.9 $ 258.7 $ 0. $ 117 4. $ 165.0 $ 147.4 $ 121.7 $ 105.0 $ $ $ $ $ 22.9 13.7 42.1 45.9 9. $ 128 5. $ 74.1 $ 153.0 $ 162.8 $ 92.1 $ 5. $ 4. $ 3. $ 36.4 $ 36.3 $ 45.3 $ 50.7 $ 5. $ 567 $ 179 125.3 $ 127.9 $ (506.7) $ 150.8 $ 324 326 215 195.6 $ 241.5 $ 342.6 $ 362.4 $ 2181 1454 1089 971.2 $ 1,088.9 $ 1,445.4 $ $ 2,128.1 4761,7 17,347 14,776 14,679 22,600 12.8% (1.6)% 6.8% 17.0% 455 756 – – – (405.5) (715.6) 243.9 (71.6) (61.9) 243.9 (71.6) (40.4) 6. 6. 461.0 466.4 461.7 461.4 6. 6. 458.9 464.6 461.7 458.1 ,4 ,0 3,122 2,944 3,303 3,073 7. 4. 259.0 375.4 342.1 199.7 ,6 ,7 1,820 1,868 2,174 1,722 5. 4. 236.1 251.7 241.8 219.8 32.3¢ (110.0¢) 27.7¢ 27.2¢ 27.7¢ 32.3¢ (110.0¢) 27.4¢ 27.9¢ 32.5¢ (110.0¢) 9.)(3.) 189.8 165.7 (93.1) (435.1) 8.)(3.) 196.2 172.2 (86.6) (434.9) 5.)(14 (62.8) (56.5) (61.4) (27.5) 1.)(57 (17.5) (17.1) (15.7) (17.6) 944. 46.8 39.4 41.7 37.6 892. 35.1 28.9 28.3 23.5 .¢1.¢ 3.0¢ 5.0¢ 9.0¢ 10.0¢ 65 02 (5.1) (6.5) (0.2) (10.0) 93 2.) (11.8) (9.3) (26.5) (15.9) 0 1 131 101 118 117 3 5 892 835 854 955 05 38 50 34 017 241 90 107 245 – (1.3) 3.5 – – 15.0¢ only. ude thenumber issued. g theyear. ovlePyLd 10993 .5 20 18 19 0.25 16 15 0.33 1,099,993 0.28 0.45 12 0.57 1,418,280 1,224,600 1,955,780 0.92 8 2,469,000 10 3,970,709 2.17 1.31 9,416,232 1 5,660,404 Total Gonville PtyLtd Sheoaks (NSW)PtyLimited Millenium PtyLimited 5.10 7.12 % Bond StreetCustodiansLimited 5.23 Promina EquitiesLimited 3April2008 Argo InvestmentsLimited 17June2008 6.51 16May2008 DateofNotice Citicorp NomineesPtyLimited HSBC CustodyNominees(Australia)Limited-GSCOECSA 16June2004 Madingley NomineesPtyLtd 30,810,723 22,097,739 22,659,318 Holdings UBS NomineesPtyLimited 5.68 Australian FoundationInvestmentCompanyLimited 6.86 7.61 28,198,184 ANZ NomineesLimited 15.11 24December 2007 Tasman AssetManagementLtd 14August2007 17March2006 20,053,224 AustraliaNomineesPtyLimited RBC GlobalServices 24,577,253 7.17 24April2008 Queensland InvestmentCorporation 218 15,193,641 29,696,066 32,960,346 Citicorp NomineesPtyLimited 2007 8January Cogent NomineesPtyLimited 364,728,365 44 65,424,399 HSBC Custody(Australia)NomineesLimited 432,948,363 National NomineesLimited 31,024,755 JP MorganNomineesAustraliaLimited Name Note 14,012 386,072,105 Holdings James HardieIndustriesNV20largestCUFSholdersandtheirholdingsasatJune2008: Vanguard Investments AustraliaLtd 110 Holders Orion AssetManagementLimited Baillie Gifford&Coanditsaffiliatedcompanies National AustraliaBankLtdGroup Holdings Suncorp-Metway Limitedanditssubsidiaries Concord Capital Schroder InvestmentManagementAustraliaLimited The CapitalGroupCompanies,Inc Holders Lazard AssetManagementPacificCo Name 84.23 Holdings shownbelowareasdisclosedinsubstantialholdingnoticeslodgedwiththeASX. Holdings James HardieIndustriesNVsubstantialCUFSholdersasat20June2008: In the1–1,000range,490CUFSholdersheldlessthanamarketableparcel. CUFS Totals 100,001 andover 10,001–100,000 855 5,001–10,000 1,292 1,001–5,000 6,101 1–1,000 5,654 Size ofHoldingRange CUFS James HardieIndustriesNVdistributionscheduleasat20June2008: novotingrights. sharesonaonevoteperCUFSbasis.Optionscarry CDN howtovotetheordinary sharecarriestherighttoonevote.CUFShol NomineesPtyLtd(CDN)onbehalfof14,012CUFSholders.Eachordinary Depositary sharesheldby CHE As of20June2008JamesHardieIndustriesNVhadonissue432,948,363CUFSissuedoverordinary CUFS James HardieIndustriesNVvotingrights: % 19,748,625 9,287,307 James HardieIndustriesNVandSubsidiaries 14,967,304 (Not formingpartoftheConsolidatedFinancialStatements) 2,873,022 INFORMATION Options SHARE/CUFS 117 31 26 Position – 4,540,224 248,332 71,027 – Entities whichholdinterests intheCUFSsolelyasanominee ortrusteeforanotherpersonmay havethoseinterestsdisregar CUFS for holderswhichinclude thesubstantial shareholdersnamed above. of thetakeoverand substantialshare/CUFSholderprovisions containedintheArticlesofAssociation oftheCompany. Thosenom 1 1 1 1 1 1 1 1 1 1 1 1 14938 .4 17 0.34 1,479,378 14 0.79 3,407,185 13 0.79 3,423,662 11 1.06 4,593,195 9 1.70 7,358,090 7 6 2.30 9,977,241 5 3.52 15,249,671 4 5.46 23,625,532 6.28 3 27,171,082 2 12.79 55,376,610 1 19.86 86,004,272 23.06 99,847,449 ded forthepurposes inees mayhold ders candirect SS

121 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 122 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 2001 schemeofarrangement)mayalsobeeffectedunderDutchlaw. Association ofJHINV, amerger(whichissimilartoCorporationsAct In additiontoatakeoverbidmadeinaccordancewiththeArticlesof interest isacquiredinJHINV. the AustralianTakeovers Code,arecompliedwithifasubstantial provisions istoensurethattheEgglestonprinciples,whichunderpin Takeovers Code)inamorelimitedform.Thepurposeofthese regime establishedbytheCorporationsAct2001(theAustralian include takeoverprovisionswhichseektoreproducethe The ArticlesofAssociationJamesHardieIndustriesNV(JHINV) James HardieIndustriesNVtakeoverregime on 31March2008. date ofthisreport.Thecompanyofficiallycancelled35.0millionshares purchased anysharesduringtheperiodbetween1April2008and The on-marketbuy-backremainscurrent,butthecompanyhadnot average spotratesforthedaysonwhichshareswerebought. (US$5.83). TheUSdollaramountsweredeterminedusingtheweighted and theaveragepricepaidpershareofcommonstockwasA$6.62 shares hadanaggregatecostofA$236.4million(US$208.0million) common stockduringtheyearended31March2008.Thebought-back 46.8 millionshares.Thecompanyrepurchased35.7sharesof program ofupto10%thecompany’s issuedcapital,approximately On 15August2007,thecompanyannouncedasharebuy-back James HardieIndustriesNVon-marketbuy-back Domicile ofHolders Size ofHoldingRange COMPOSITION OFOURSHAREHOLDERBASE James HardieIndustriesNVandSubsidiaries (Not formingpartoftheConsolidatedFinancialStatements) INFORMATION SHARE/CUFS 1,001-5,000 43.54% 0-1,000 40.35% Other 4.84% Australia 95.16% te 0.41% 0.39% 0.54% Other USA UK New Zealand3.50% Other includes 10,001 andover 6.89% 5,001-10,000 9.22% was 25September2006. 5yearsortheylapse.Thelastrenewalbyshareholders approval every by complyingwiththeseproceduresmustberenewedshareholder to makesubmissions.Thecompany’s righttoexercisethesepowers a seniorcorporatebarristerorsolicitorwherethebidderhasright recourse tothecourtifcompanyreceivesadviceeffectfrom occurring. Alternatively, thesepowersmaybeexercisedwithouthaving jurisdiction thatabreachoftheprohibitionhasoccurredandis only ifithasfirstobtainedarulingfromcourtofcompetent BoardmaycauseJHINVtoexercisethesepowers The Supervisory disregard theexerciseofvotesandsuspendeddividendrights. breach. TheseincludepowerstorequirethedisposalofJHINVshares, powers availabletoitundertheArticlesofAssociationenforce If theprohibitionoutlinedaboveisbreached,JHINVhasseveral (b) Enforcement the votingrightswhichanyperson(includingholder)directlyor (ii) thenumberofJHINVsharesinwhichany person(includingthe (i) acquisition ofarelevantinterestbyanypersoninthatshare: prohibits apersonfromholdingJHINVsharesif,becauseofan The takeoverregimecontainedintheJHINVArticlesofAssociation (a) OutlineoftheJHINVtakeoverregime relevant interest. writing settingout certain prescribeddetailsrelatingtothe holder’s within twobusinessdaysafterreceiving thenoticeastatementin company (orprocureanyrelevantperson togivethecompany) to requiretheholderofaJHINVshare orJHINVCUFStogivethe that foundintheCorporationsAct2001 thatgivesJHINVthepower The ArticlesofAssociationalsoinclude aprovisionanalogousto (d) Tracingofbeneficialinterests shareholder notificationrequirementapplies. holdings canbedisregardedwhenconsideringwhetherasubstantial As withthetakeoverbidthresholds,certainnomineeandtrustee over bidforthesecuritiesofJHINV. a movementofatleast1%initsholdingorifthatpersonmakestake- substantial holding,ifthatpersonhasaholdingandthereis the ASXofcertaininformationifthatpersonobtainsorceasestohavea substantial holding)andrequiretheholdertoadvisecompany the totalnumberofvotesattachingtoallJHINVsharesorCUFS(a in whichthepersonhasarelevantinterestisequalto5%ormoreof Code. Thoseprovisionsapplywherethevotesattachedtoshares shareholder noticeprovisionscontainedintheAustralianTakeovers The ArticlesofAssociationJHINValsoreplicatethesubstantial (c) SubstantialShareholderNotices at ageneralmeetingofshareholders. number ofsuchvotingrightswhichmaybeexercisedbyanyperson a startingpointthatisabove20%andbelow90%,ofthetotal increases from20%orbelowtoover20%, indirectly isentitledtoexerciseatageneralmeetingofshareholders the outstandingsharecapitalofJHINV; or starting pointthatisabove20%andbelow90%,oftheissued from 20%orbelowtoover20%,increasesastarting holder) directlyorindirectlyacquiresarelevantinterestincreases 24 September 2007 James HardieadvisesthatBenjaminButterfieldhas 24 September2007 BoardofJamesHardieappoints TheSupervisory 3 September2007 ResultsforQ1FY08:JamesHardieannouncesa 15 August2007 JamesHardieannouncesitwillimplementan 15 August2007 JamesHardieannouncesthatithasfiledits 7 July2007 BoardofJamesHardieappoints TheSupervisory 29 June2007 Thecompany’s dividendofUS15centspershare 15 June2007 ResultsforQ4andfullyearFY07:JamesHardie 28 May2007 JamesHardieannouncesthatDonDeFosset 2 April2007 Calendar 2007 at www.jameshardie.com (selectInvestorRelations,thenNews). fiscal year2008.Completeannouncementsareavailableonourwebsite website. Following is alistofthemajorannouncementsmadeduring acknowledgement fromtheASX,wepostannouncementsonour affect the company’s shareprice.Assoonaspossibleafterwereceive James HardieinformstheASXandSECofanythingthatmight MAJOR ANNOUNCEMENTS 1 October 2007. 1 October and memberoftheManagingBoard,effective resigned asCompanySecretary, GeneralCounsel Joint Boardseffective1 September 2007. David Andrewstothecompany’s and Supervisory last year. an increaseof9%comparedtothesameperiod asbestos, forthequarterended30June2007, US$68.6 millionnetoperatingprofit,excluding shares). 46.8 million up to10%ofitsissuedcapital(approximately on-market buy-backprogramforthepurchaseof Exchange Commission. 2007 with theUnitedStates’Securitiesand annual report onForm20-Fforfiscalyear Joint Boards,effective1 July 2007. Catherine Walter to thecompany’s and Supervisory rate on14June2007. Australian centsperCUF, basedontheexchange announced on28May2007convertsto17.89 an increaseof6%comparedtotheprior full year. tax benefit,forthefullyearended31March2007, profit, excludingasbestosadjustmentsandrelated today announcedaUS$222.2millionnetoperating 2007. 1 April company’s andJointBoardseffective Supervisory has beenappointedChairmanofthe 8Fbur 08 ResultsforQ3andninemonthsFY08:James 2008 28 February JamesHardieannouncesthatMichaelHammes 2008 1 February Calendar 2008 Thecompany’s dividendofUS12centspershare 4 December2007 JamesHardieissuesastatementthattheallegation 28 November2007 JamesHardieexpressesitscondolencesto 27 November2007 ResultsforQ2andhalfyearFY08:JamesHardie 19 November2007 JamesHardieannouncesplanstosuspend 31 October2007 James Hardie. to inciteangerandadverseopinionagainst today iswrongandappearstobedesignedsolely compared tothesameperiodlastyear. ended 31December2007,adecreaseof7% Blandon, Pennsylvaniafacility, forthequarter profit, excludingasbestosandimpairmentofthe Hardie announcesaUS$34.1millionnetoperating 2008. 31 January company’s andJointBoardseffective Supervisory is replacingDonDeFossetasChairmanofthe on theexchangerate 4 December2007. coverts to13.71AustraliancentsperCUFS,based made inanarticlethe death today. the family ofMrBernieBanton,followinghis the sameperiodlastyear. September 2007,adecreaseof32%comparedto excluding asbestos,for the quarterended30 announces aUS$46.5millionnetoperatingprofit, housing marketconditions. in NorthAmericaresponsetothecurrentUS production atitsBlandon,Pennsylvania,plant Sydney DailyTelegraph

123 James Hardie Annual Report 2008 FINANCIAL STATEMENTS 124 James Hardie Annual Report 2008 FINANCIAL STATEMENTS New York:YorkStockExchangeInc JHI NVCUFStradeunderthecodeJHX. NomineesPtyLtd. ownership ofwhichisheldbyCHESSDepositary Australia: AustralianSecuritiesExchange New York stockexchanges. James HardieIndustriesNV’s securitiesarelistedontheAustralianand Stock ExchangeListings *Future datesareindicativeonlyandmaychange FY09Quarter4andfullyearresults 25 May EndofJHINVFinancialYear 2009 31 Mar FY09Quarter3andninemonthsresultsannouncement 6 Feb Calendar 2009* FY09Quarter2andhalfyearresultsannouncement 17 Nov AnnualGeneralMeeting,Amsterdam 22 Aug DirectionFormsclose4.00pmSydneytimeforAnnual 20 Aug AnnualInformationMeeting,Sydney 20 Aug FY09Quarter1resultsannouncementandmanagement Dividendpaymentdateforshare/CUFSholders 20 Aug 11 Jul 2008AnnualReportreleased AnnouncementofdividendinAustraliancurrencyequivalent 30 Jun Recorddatefordividendtobepaidon11July2008 4 Jun 4 Jun FY08Quarter4andfullyearresultsdividend 22 May EndofJHINVFiscalYear (FY)2008 31 Mar Calendar 2008* (CET) onFriday, 22August2008. 1077ZX Amsterdam,TheNetherlandsat10.00amCentralEuropeTime The 2008AGMwillbeheldatAtrium,8thfloor, Strawinskylaan3077, (AEST) onWednesday, 20August2008. Sydney, NSW, Australiaat1.00pmAustralianEasternStandardTime Hardie IndustriesNVwillbeheldatTheMint,10MacquarieStreet, The 2008AnnualInformationMeetingofCUFSholdersJames Annual Meeting INFORMATION FORSECURITYHOLDERS James HardieIndustriesNVandSubsidiaries (Not formingpartoftheConsolidatedFinancialStatements)(continued) INFORMATION SHARE/CUFS management presentation presentation and management management presentation General Meeting presentation announcement andmanagementpresentation code JHX. and tradeontheNewYork StockExchangeunderthe New York-issued Receipt(orADR) AmericanDepositary In theUnitedStates,fiveJHINVCUFSequaloneBankof represent beneficialownershipofJHINVshares,thelegal CHESS UnitsofForeignSecurities(orCUFS).CUFS Australian SecuritiesExchange(ASX)intheformof James HardieIndustriesNVsharesarelistedonthe – webcasting andconferencecallfacilitiesthatmakequarterlyresults – quarterly resultsandmanagementpresentations activities, using: James Hardieaimstoensurethewidestpossibledisclosureofits Disclosure Tax).Dutch Withholding then com underInvestorRelations(selectShareholderServices, Further information isavailableonourwebsiteatwww.jameshardie. Dividends paidbyJHINVaresubjecttoDutchwithholdingtax. Dutch withholdingtax contactComputershareattheaboveaddress. the electronicservice, transfer toanAustralianbankaccountorbycheque.To participatein Dividends andothercashdistributionscanbepaidbyelectronicfunds to share/CUFSholders Payment ofdividendsandothercashdistributions Website: www.computershare.com Email: [email protected] Facsimile: (612)82358150 Telephone outsideAustralia:(613)94154000 Telephone withinAustralia:1300855080 or GPOBox7045,SydneyNSW2001,Australia Level 3,60CarringtonStreet,SydneyNSW2000,Australia PtyLtd Computershare InvestorServices be directedto: Limited. Allenquiriesandcorrespondenceregardingholdingsshould JHI NV’s Pty ismanagedbyComputershareInvestorServices registry Share/CUFS registry Email: [email protected] Telephone outsideUSA:212-815-3700 Telephone withinUSA:1-888-BNY-ADRs New York, NY10286-1258 PO Box11258 Church StreetStation Shareowner Services BNY Mellon www.adrbny.com orcontact: The BankofNewYork Mellon,whichcanbecontactedviathewebsite: All enquiriesandcorrespondenceregardingADRsshouldbereferredto the CorporateGovernance areaofthewebsite. events orannouncements. OurformalDisclosurePolicy iscontainedin are alsoareaswhere visitorscanregistertoreceiveemail alertsofkey briefings, managementpresentations and pastannualreports.There website (www.jameshardie.com) containsmediareleases,results Along withtheseannouncements,the InvestorRelationsareaofour – immediate postingsonourwebsiteofannouncements,resultsand – extensive disclosureoffinancialresultsaswelldetailed information aboutothermaterialevents. explanations aboutthekeyperformancedrivers available toallsecurityholders CORPORATE OFFICES Corporate Headquarters Atrium, 8th Floor Strawinskylaan 3077 1077ZX Amsterdam, Netherlands Telephone +31 (0) 20 301 2986 Facsimile +31 (0) 20 404 2544 USA Regional Office 26300 La Alameda, Suite 100 Mission Viejo, California 92691 United States of America Telephone +1 (949) 348 1800 Facsimile +1 (949) 348 4534 Australian Regional Office Level 3, 22 Pitt Street Sydney NSW 2000, Australia Telephone +61 (2) 8274 5274 Facsimile +61 (2) 8274 5217 BUSINESS UNIT OFFICES AUSTRALIA James Hardie Building Products 10 Colquhoun Street Rosehill, 2142, NSW, Australia Facsimile 1800 818 819 www.jameshardie.com.au Ask James Hardie™ Telephone 13 1103 James Hardie FRC Pipes 46 Randle Road Meeandah, 4008 Queensland, Australia Telephone 1800 659 850 Facsimile 1800 639 908 www.jameshardie.com.au EUROPE James Hardie Building Products Atrium, 8th Floor Strawinskylaan 3077 1077ZX Amsterdam, Netherlands Telephone +31 (0) 20 301 6750 Facsimile +31 (0) 20 642 5357 www.jameshardieeu.com Customer Toll Free Service Help Line within UK - 0800 068 3103 Customer Toll Free Service Help Line within France - 0800 903 069 NEW ZEALAND James Hardie Building Products 50 O’Rorke Road Penrose, Auckland New Zealand Telephone +64 (9) 579 9919 Facsimile +64 (9) 525 4810 www.jameshardie.co.nz Ask James Hardie™ Helpline Toll Free 0800 808 868 PHILIPPINES James Hardie Building Products Barangay San Isidro Cabuyao, Laguna, 4025 Philippines Telephone +63 (2) 897 8131 Facsimile +63 (2) 895 2994 www.jameshardie.com.ph NORTH AMERICA James Hardie Building Products 26300 La Alameda, Suite 250 Mission Viejo California 92691 United States of America Telephone +1 (949) 348 1800 Facsimile +1 (949) 367 0185 www.jameshardie.com Customer Service 1 (866) 4HARDIE