##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 20-F





|                               |  |                                                                                                      
|------------------------------ |  | -----------------------------------------------------------------------------------------------------
|(Mark One)                     |  |                                                                                                      
|o                              |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
    OF THE SECURITIES EXCHANGE ACT OF 1934   
|                              
|OR                            
|                              
|þ                              |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934             
|                               |  | For the fiscal year ended March 31, 2006                                                             
|                              
|OR                            
|                              
|o                              |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934         
|                              
|OR                            
|                              
|o                              |  | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934      
|                              
|                               |  | Date of event requiring this shell company report For the
    transition period
    from           to
|Commission file number 1-15240

JAMES HARDIE INDUSTRIES N.V.


(Exact name of Registrant as specified in its charter)


N/ A


(Translation of Registrants name into English)


|                                                |  |                                         
|----------------------------------------------- |  | ----------------------------------------
|The Netherlands                                 |  | Atrium, 8th floor                       
|(Jurisdiction of incorporation or organization) |  | Strawinskylaan 3077                     
|                                                |  | 1077 ZX Amsterdam, The Netherlands      
|                                                |  | (Address of principal executive offices)

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


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






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


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




þ o


o þ




þ o


12b-2


þ o o


o þ


12b-2 o þ










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TABLE OF CONTENTS


|             |           |     |                                                                                  |      |    
|------------ | --------- | --- | -------------------------------------------------------------------------------- | ---- | ---
|             |           |     |                                                                                  | Page
|             |           |     |                                                                                  |     
|PART I       |           | 1  
|             | Item 1.   |     | Identity of Directors, Senior Management
    and Advisers                        |      | 1  
|             | Item 2.   |     | Offer Statistics and Expected Timetable                                          |      | 1  
|             | Item 3.   |     | Key Information                                                                  |      | 1  
|             | Item 4.   |     | Information on the Company                                                       |      | 21 
|             | Item 4A.  |     | Unresolved Staff Comments                                                        |      | 62 
|             | Item 5.   |     | Operating and Financial Review and
    Prospects                                 |      | 62 
|             | Item 6.   |     | Directors, Senior Management and
    Employees                                   |      | 86 
|             | Item 7.   |     | Major Shareholders and Related Party
    Transactions                            |      | 123
|             | Item 8.   |     | Financial Information                                                            |      | 125
|             | Item 9.   |     | Listing Details                                                                  |      | 126
|             | Item 10.  |     | Additional Information                                                           |      | 128
|             | Item 11.  |     | Quantitative and Qualitative Disclosures
    About Market Risk                   |      | 142
|             | Item 12.  |     | Description of Securities Other Than Equity
    Securities                       |      | 144
|PART II      |           | 144
|             | Item 13.  |     | Defaults, Dividend Arrearages and
    Delinquencies                              |      | 144
|             | Item 14.  |     | Material Modifications to the Rights of
    Security Holders and Use of Proceeds |      | 144
|             | Item 15.  |     | Controls and Procedures                                                          |      | 144
|             | Item 16A. |     | Audit Committee Financial Expert                                                 |      | 145
|             | Item 16B. |     | Code of Business Conduct and Ethics                                              |      | 145
|             | Item 16C. |     | Principal Accountant Fees and Services                                           |      | 146
|             | Item 16D. |     | Exemptions from Listing Standards for Audit
    Committees                       |      | 146
|             | Item 16E. |     | Purchases of Equity Securities by the
    Issuer and Affiliated Purchasers       |      | 146
|             | Item 17.  |     | Financial Statements                                                             |      | 146
|PART III     |           | 147
|             | Item 18.  |     | Financial Statements                                                             |      | 147
|             | Item 19.  |     | Exhibits                                                                         |      | 147
|EXHIBIT 1.1 
|EXHIBIT 2.9 
|EXHIBIT 2.11
|EXHIBIT 4.4 
|EXHIBIT 4.5 
|EXHIBIT 4.6 
|EXHIBIT 4.17
|EXHIBIT 4.21
|EXHIBIT 4.22
|EXHIBIT 4.23
|EXHIBIT 4.24
|EXHIBIT 4.25
|EXHIBIT 4.26
|EXHIBIT 4.27
|EXHIBIT 4.28
|EXHIBIT 8.1 
|EXHIBIT 12.1
|EXHIBIT 12.2
|EXHIBIT 13.1
|EXHIBIT 15.1
|EXHIBIT 15.2
|EXHIBIT 99.1
|EXHIBIT 99.5



i



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##### Table of Contents






PART I







|        |                                                          
|------- | ---------------------------------------------------------
|Item 1. | Identity of Directors, Senior Management and
    Advisers








|        |                                        
|------- | ---------------------------------------
|Item 2. | Offer Statistics and Expected Timetable








|        |                
|------- | ---------------
|Item 3. | Key Information

In this annual report, unless the context otherwise
indicates, James Hardie Industries N.V., a naamloze
vennootschap, or a Dutch public limited liability company
incorporated and existing under the laws of The Netherlands, is
referred to as JHI NV. JHI NV together with its direct and
indirect wholly owned subsidiaries as of the time relevant to
the applicable reference, are collectively referred to as the
James Hardie Group. JHI NV and its current direct and indirect
wholly owned subsidiaries are collectively referred to as
we, us, our, JHI NV
and its wholly owned subsidiaries, or the
Company.


The term fiscal year refers to our fiscal year
ended March 31 of such year; the term dollars
or $ refers to U.S. dollars; the term
A$ refers to Australian dollars; the term
NZ$ refers to New Zealand dollars; the term
PHP refers to Philippine pesos; and the term
CLP refers to Chilean pesos. The term
msf or thousand square feet refers to
thousands of square feet, where a square foot is defined as a
standard square foot of 5/16 thickness and the term
mmsf or million square feet refers to
millions of square feet, where a square foot is defined as a
standard square foot of 5/16 thickness.


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


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


Selected Financial Data






1



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|                                                                        |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |        |         |       |   |       |       |       | 
|----------------------------------------------------------------------- | ---------------------------- | ------------------------------------------------------------- | ------ | ------- | ------- | - | ------ | ------- | ------- | - | ----- | ------- | ----- | ---- | ------ | ------- | ----- | - | ----- | ----- | ----- | 
|                                                                        |                              | Fiscal Years Ended March 31,                                  |       
|                                                                        |                              |                                                               |       
|                                                                        |                              | 2006                                                          |        |         | 2005    |   |        | 2004    |         |   | 2003  |         |       | 2002 |       
|                                                                        |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |       
|                                                                        |                              | (In millions, except sales price per unit and per share data) |       
|Consolidated Statements of Operations Data:                             |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |        |         |       |   |       |      
|Net Sales                                                               |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |        |         |       |   |       |      
|                                                                        | USA Fiber Cement             |                                                               | $      | 1,218.4 |         |   | $      | 939.2   |         |   | $     | 738.6   |       |      | $      | 599.7   |       |   | $     | 444.8 |      
|                                                                        | Asia Pacific Fiber Cement(1) |                                                               |        | 241.8   |         |   |        | 236.1   |         |   |       | 219.8   |       |      |        | 174.3   |       |   |       | 141.7 |      
|                                                                        | Other(2)                     |                                                               |        | 28.3    |         |   |        | 35.1    |         |   |       | 23.5    |       |      |        | 9.6     |       |   |       | 5.2   |      
|                                                                        |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |       
|                                                                        |                              | Total net sales                                               |        | $       | 1,488.5 |   |        | $       | 1,210.4 |   |       | $       | 981.9 |      |        | $       | 783.6 |   |       | $     | 591.7 | 
|                                                                        |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |       
|Operating (loss) income(3)                                              |                              | $                                                             | (434.9 | )       |         | $ | 196.2  |         |         | $ | 172.2 |         |       | $    | 128.8  |         |       | $ | 46.8  |      
|Interest expense                                                        |                              |                                                               | (7.2   | )       |         |   | (7.3   | )       |         |   | (11.2 | )       |       |      | (23.8  | )       |       |   | (18.4 | )    
|Interest income                                                         |                              |                                                               | 7.0    |         |         |   | 2.2    |         |         |   | 1.2   |         |       |      | 3.9    |         |       |   | 2.4   |      
|Other (expense) income(4)                                               |                              |                                                               |       |         |         |   | (1.3   | )       |         |   | 3.5   |         |       |      | 0.7    |         |       |   | (0.4  | )    
|                                                                        |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |       
|(Loss) income from continuing operations before income taxes            |                              |                                                               | (435.1 | )       |         |   | 189.8  |         |         |   | 165.7 |         |       |      | 109.6  |         |       |   | 30.4  |      
|Income tax expense                                                      |                              |                                                               | (71.6  | )       |         |   | (61.9  | )       |         |   | (40.4 | )       |       |      | (26.1  | )       |       |   | (3.1  | )    
|                                                                        |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |       
|(Loss) income from continuing operations                                |                              | $                                                             | (506.7 | )       |         | $ | 127.9  |         |         | $ | 125.3 |         |       | $    | 83.5   |         |       | $ | 27.3  |      
|                                                                        |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |       
|Net (loss) income                                                       |                              | $                                                             | (506.7 | )       |         | $ | 126.9  |         |         | $ | 129.6 |         |       | $    | 170.5  |         |       | $ | 30.8  |      
|                                                                        |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |       
|(Loss) income from continuing operations per common
    share  basic   |                              | $                                                             | (1.10  | )       |         | $ | 0.28   |         |         | $ | 0.27  |         |       | $    | 0.18   |         |       | $ | 0.06  |      
|Net (loss) income per common share  basic                              |                              | $                                                             | (1.10  | )       |         | $ | 0.28   |         |         | $ | 0.28  |         |       | $    | 0.37   |         |       | $ | 0.07  |      
|(Loss) income from continuing operations per common
    share  diluted |                              | $                                                             | (1.10  | )       |         | $ | 0.28   |         |         | $ | 0.27  |         |       | $    | 0.18   |         |       | $ | 0.06  |      
|Net (loss) income per common share  diluted                            |                              | $                                                             | (1.10  | )       |         | $ | 0.28   |         |         | $ | 0.28  |         |       | $    | 0.37   |         |       | $ | 0.07  |      
|Dividends paid per share                                                |                              | $                                                             | 0.10   |         |         | $ | 0.03   |         |         | $ | 0.05  |         |       | $    | 0.08   |         |       | $ | 0.05  |      
|Return of capital per share                                             |                              | $                                                             |       |         |         | $ |       |         |         | $ | 0.15  |         |       | $    | 0.20   |         |       | $ | 0.05  |      
|Weighted average number of common shares outstanding                    |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |        |         |       |   |       |      
|                                                                        | Basic                        |                                                               |        | 461.7   |         |   |        | 458.9   |         |   |       | 458.1   |       |      |        | 456.7   |       |   |       | 438.4 |      
|                                                                        | Diluted                      |                                                               |        | 461.7   |         |   |        | 461.0   |         |   |       | 461.4   |       |      |        | 459.4   |       |   |       | 440.4 |      
|Consolidated Cash Flow Information:                                     |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |        |         |       |   |       |      
|Cash flows provided by operating activities                             |                              | $                                                             | 240.6  |         |         | $ | 219.8  |         |         | $ | 162.6 |         |       | $    | 64.8   |         |       | $ | 76.6  |      
|Cash flows (used in) provided by investing activities                   |                              | $                                                             | (154.0 | )       |         | $ | (149.2 | )       |         | $ | (58.0 | )       |       | $    | 237.9  |         |       | $ | (77.2 | )    
|Cash flows provided by (used in) financing activities                   |                              | $                                                             | 116.5  |         |         | $ | 28.2   |         |         | $ | (87.9 | )       |       | $    | (279.4 | )       |       | $ | (40.8 | )    
|Other Data:                                                             |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |        |         |       |   |       |      
|Depreciation and amortization(5)                                        |                              | $                                                             | 45.3   |         |         | $ | 36.3   |         |         | $ | 36.4  |         |       | $    | 27.4   |         |       | $ | 23.5  |      
|Adjusted EBITDA(6)                                                      |                              | $                                                             | (389.6 | )       |         | $ | 232.5  |         |         | $ | 208.6 |         |       | $    | 156.2  |         |       | $ | 70.3  |      
|Capital expenditures(7)                                                 |                              | $                                                             | 162.8  |         |         | $ | 153.0  |         |         | $ | 74.1  |         |       | $    | 90.2   |         |       | $ | 50.8  |      
|Volume (million square feet)(8)                                         |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |        |         |       |   |       |      
|                                                                        | USA Fiber Cement             |                                                               |        | 2,182.8 |         |   |        | 1,855.1 |         |   |       | 1,519.9 |       |      |        | 1,273.6 |       |   |       | 988.5 |      
|                                                                        | Asia Pacific Fiber Cement(1) |                                                               |        | 368.3   |         |   |        | 376.9   |         |   |       | 362.1   |       |      |        | 349.9   |       |   |       | 320.7 |      
|Average sales price per unit (per thousand square feet)                 |                              |                                                               |        |         |         |   |        |         |         |   |       |         |       |      |        |         |       |   |       |      
|                                                                        | USA Fiber Cement             |                                                               | $      | 558     |         |   | $      | 506     |         |   | $     | 486     |       |      | $      | 471     |       |   | $     | 450   |      
|                                                                        | Asia Pacific Fiber Cement(1) |                                                               | A $    | 872     |         |   | A $    | 846     |         |   | A $   | 862     |       |      | A $    | 887     |       |   | A $   | 861   |      

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|                                 |  |                                                               |         |  |      |   |         |      |  |   |       |  |  |      |       |  |  |   |       | 
|-------------------------------- |  | ------------------------------------------------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ----- |  |  | ---- | ----- |  |  | - | ----- | 
|                                 |  | Fiscal Years Ended March 31,                                  |        
|                                 |  |                                                               |        
|                                 |  | 2006                                                          |         |  | 2005 |   |         | 2004 |  |   | 2003  |  |  | 2002 |      
|                                 |  |                                                               |         |  |      |   |         |      |  |   |       |  |  |      |      
|                                 |  | (In millions, except sales price per unit and per share data) |        
|Consolidated Balance Sheet Data: |  |                                                               |         |  |      |   |         |      |  |   |       |  |  |      |       |  |  |   |       | 
|Net current assets(9)            |  | $                                                             | 150.8   |  |      | $ | 180.2   |      |  | $ | 195.9 |  |  | $    | 159.4 |  |  | $ | 115.1 | 
|Total assets                     |  | $                                                             | 1,445.4 |  |      | $ | 1,088.9 |      |  | $ | 971.2 |  |  | $    | 851.8 |  |  | $ | 968.0 | 
|Long-term debt(10)               |  | $                                                             | 121.7   |  |      | $ | 147.4   |      |  | $ | 165.0 |  |  | $    | 165.0 |  |  | $ | 325.0 | 
|Common stock                     |  | $                                                             | 253.2   |  |      | $ | 245.8   |      |  | $ | 245.2 |  |  | $    | 269.7 |  |  | $ | 205.4 | 
|Shareholders equity             |  | $                                                             | 94.9    |  |      | $ | 624.7   |      |  | $ | 504.7 |  |  | $    | 434.7 |  |  | $ | 370.7 | 






| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Asia Pacific Fiber Cement includes all fiber cement manufactured
    in Australia, New Zealand and the Philippines and sold in
    Australia, New Zealand and Asia.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (2) | Includes fiber cement manufactured and sold in Chile (for fiscal
    year 2002 to July 2005 only), fiber reinforced concrete pipes
    manufactured and sold in the United States, fiber cement
    operations in Europe and a roofing pilot plant in the United
    States. Also includes general corporate income in fiscal year
    2002 comprised primarily of rental income from subleasing office
    space in Sydney, Australia. Our Chilean business was sold in
    July 2005. Our roofing pilot plant was closed and the business
    ceased operations in April 2006. See Item 4,
    Information on the Company  Capital
    Expenditures and Divestitures, Item 4
    Information on the Company  Recent
    Developments and Note 14 to our consolidated
    financial statements in Item 18.
|
| | (3) | For fiscal years 2006 and 2005, operating (loss) income includes
    Special Commission of Inquiry and other related expenses of
    $17.4 million and $28.1 million, respectively. In
    addition, operating loss in fiscal year 2006 includes
    $715.6 million related to the establishment of the asbestos
    provision and $13.4 million related to the impairment of
    our former roofing plant.                                                                                                                                                                                                                                                                                                                                                                                                      



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Operating (loss) income also includes restructuring and other
    operating income/expenses as follows: (i) for fiscal year
    2006, an $0.8 million loss related to the disposal of our
    Chilean fiber cement business; (ii) for fiscal year 2005,
    $6.0 million consisting of a settlement loss of
    $5.3 million related to an employee retirement plan and a
    $0.7 million loss on the sale of land in Sacramento,
    California; (iii) for fiscal year 2004, $2.1 million
    expense primarily related to an increase in cost provisions for
    our Australian and New Zealand business; (iv) for fiscal
    year 2003, $1.0 million income related to the settlement of
    a terminated derivative contract; and (v) for fiscal year
    2002, $12.6 million expense related to the roofing
    Class Action Settlement Agreement in the United States,
    $7.4 million expense associated with the corporate
    reorganization and $8.1 million expense related to the
    decrease in fair value of derivative contracts.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (4) | Consists primarily of the following: (i) for fiscal year
    2005, the $1.3 million expense consisted of a
    $2.1 million impairment charge that we recorded on an
    investment in a company that filed a voluntary petition for
    reorganization under Chapter 11 of the U.S. bankruptcy
    code, partly offset by a $0.8 million gain on a separate
    investment; (ii) for fiscal year 2004, the net gain
    achieved after accounting for income items, including a
    $4.5 million profit on the sale of our New Zealand
    property, was partially offset by expense items, including
    $3.2 million primarily due to a capital duty fee paid in
    conjunction with our Dutch corporate structure; (iii) for
    fiscal year 2003, investment income of $0.7 million; and
    (iv) for fiscal year 2002, investment expenses of
    $0.4 million.
|
| | (5) | Information for depreciation and amortization is for continuing
    businesses only.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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| |     |                                                                                                                                                                                                                                                           
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (6) | Adjusted EBITDA represents income from continuing operations
    before interest income, interest expense, income taxes, other
    nonoperating expenses, described in footnote four above, net,
    and depreciation and amortization charges as follows:

|                                          |                                                                                                  |                              |        |        |      |   |       |       |   |   |       |       |   |      |       |       |   |   |      |       |  
|----------------------------------------- | ------------------------------------------------------------------------------------------------ | ---------------------------- | ------ | ------ | ---- | - | ----- | ----- | - | - | ----- | ----- | - | ---- | ----- | ----- | - | - | ---- | ----- | -
|                                          |                                                                                                  | Fiscal Years Ended March 31, |       
|                                          |                                                                                                  |                              |       
|                                          |                                                                                                  | 2006                         |        |        | 2005 |   |       | 2004  |   |   | 2003  |       |   | 2002 |      
|                                          |                                                                                                  |                              |        |        |      |   |       |       |   |   |       |       |   |      |      
|                                          |                                                                                                  | (In millions)                |       
|Net cash provided by operating activities |                                                                                                  | $                            | 240.6  |        |      | $ | 219.8 |       |   | $ | 162.6 |       |   | $    | 64.8  |       |   | $ | 76.6 |      
|                                          | Adjustments to reconcile net (loss) income to net cash provided
    by operating activities, net |                              |        | (791.3 | )    |   |       | (61.2 | ) |   |       | (51.1 | ) |      |       | 62.1  |   |   |      | (41.1 | )
|                                          | Change in operating assets and liabilities, net                                                  |                              |        | 44.0   |      |   |       | (31.7 | ) |   |       | 18.1  |   |      |       | 43.6  |   |   |      | (4.7  | )
|                                          |                                                                                                  |                              |        |        |      |   |       |       |   |   |       |       |   |      |      
|Net (loss) income                         |                                                                                                  |                              | (506.7 | )      |      |   | 126.9 |       |   |   | 129.6 |       |   |      | 170.5 |       |   |   | 30.8 |      
|                                          | Loss (income) from discontinued operations                                                       |                              |        |       |      |   |       | 1.0   |   |   |       | (4.3  | ) |      |       | (87.0 | ) |   |      | (3.5  | )
|                                          | Income tax expense                                                                               |                              |        | 71.6   |      |   |       | 61.9  |   |   |       | 40.4  |   |      |       | 26.1  |   |   |      | 3.1   |  
|                                          | Interest expense                                                                                 |                              |        | 7.2    |      |   |       | 7.3   |   |   |       | 11.2  |   |      |       | 23.8  |   |   |      | 18.4  |  
|                                          | Interest income                                                                                  |                              |        | (7.0   | )    |   |       | (2.2  | ) |   |       | (1.2  | ) |      |       | (3.9  | ) |   |      | (2.4  | )
|                                          | Other expense (income)                                                                           |                              |        |       |      |   |       | 1.3   |   |   |       | (3.5  | ) |      |       | (0.7  | ) |   |      | 0.4   |  
|                                          | Depreciation and amortization                                                                    |                              |        | 45.3   |      |   |       | 36.3  |   |   |       | 36.4  |   |      |       | 27.4  |   |   |      | 23.5  |  
|                                          |                                                                                                  |                              |        |        |      |   |       |       |   |   |       |       |   |      |      
|Adjusted EBITDA                           |                                                                                                  | $                            | (389.6 | )      |      | $ | 232.5 |       |   | $ | 208.6 |       |   | $    | 156.2 |       |   | $ | 70.3 |      
|                                          |                                                                                                  |                              |        |        |      |   |       |       |   |   |       |       |   |      |      



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Adjusted EBITDA is not a measure of financial performance under
    U.S. GAAP and should not be considered an alternative to,
    or more meaningful than, income from operations, net income or
    cash flows as defined by U.S. GAAP or as a measure of our
    profitability or liquidity. Not all companies calculate Adjusted
    EBITDA in the same manner as we have and, accordingly, Adjusted
    EBITDA may not be comparable with other companies. We have
    included information concerning Adjusted EBITDA because we
    believe that this data is commonly used by investors to evaluate
    the ability of a companys earnings from its core business
    operations to satisfy its debt, capital expenditure and working
    capital requirements. To permit evaluation of this data on a
    consistent basis from period to period, Adjusted EBITDA has been
    adjusted for noncash charges such as goodwill and asset
    impairment charges, as well as nonoperating income and expense
    items. See our consolidated financial statements and our
    discussion under Operating and Financial Review and
    Prospects for further information to assist in identifying
    and evaluating trends in Adjusted EBITDA.



| |     |                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------
| | (7) | Information for capital expenditures includes both cash and
    credit purchases, and is for continuing businesses only.
|
| | (8) | Fiber cement volume is measured in
    5/16
    thick square feet, which are referred to as standard feet.             
|
| | (9) | Total current assets less total current liabilities.                                                                    



|     |                                            
|---- | -------------------------------------------
|(10) | Includes current portion of long-term debt.

4



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##### Table of Contents



Risk Factors


If the conditions precedent to the Final Funding Agreement
are met, our wholly owned Australian subsidiary, James Hardie
117 Pty Ltd (formerly known as LGTDD Pty Ltd), will be required
to start making payments to a special purpose fund. Even if the
conditions precedent to the Final Funding Agreement are not met
and the Final Funding Agreement is terminated, we may negotiate
an alternative settlement requiring cash settlement. Such
payments will reduce funds available for capital expenditures on
existing and new business opportunities, repayments of debt,
payments of dividends or other distributions; may restrict our
ability to access equity or debt capital markets; and will
adversely affect our financial position, liquidity, results of
operations and cash flows.










5



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##### Table of Contents



Even if the Final Funding Agreement is implemented, we may
be subject to potential additional liabilities (including claims
for compensation or property remediation outside the
arrangements reflected in the Final Funding Agreement) because
certain current and former James Hardie subsidiaries previously
manufactured products that contained asbestos.








We have agreed to indemnify the buyer of our former Gypsum
manufacturing facilities for certain asbestos-related
claims.




6



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##### Table of Contents



The Final Funding Agreement imposes certain non-monetary
obligations which could materially adversely affect our
financial position, results of operations, cash flows and
outlook.




The Final Funding Agreement does not eliminate the risk of
adverse action being taken against us.




We have incurred substantial costs in connection with the
events leading up to, and the negotiation and settlement of, the
Final Funding Agreement and may in the future continue to incur
substantial costs or be subject to further legal
proceedings.






7



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##### Table of Contents



If the conditions precedent to the full implementation of
the Final Funding Agreement are not satisfied or if the Final
Funding Agreement is terminated, the NSW Government may pass
legislation that would seek to impose liability on us for
asbestos claims.






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








8



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##### Table of Contents





Continued scrutiny resulting from ongoing investigations
may have an adverse effect on our business.




Our board of directors and senior management continue to
devote significant attention to seeking to implement the Final
Funding Agreement and associated issues.




Negative publicity may continue to adversely affect our
business.




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




Potential escalation in proven claims made against, and
associated costs of, the SPF could increase our annual funding
payments required to be made under the Final Funding Agreement,
which may cause us to have to increase our asbestos provision in
the future.




9



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##### Table of Contents





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






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






10



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##### Table of Contents





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


364-day


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




Our subsidiary, RCI Pty Ltd, has been required to post a
substantial cash deposit and may incur substantial expenses in
order to pursue an appeal of an assessment by the Australian
Taxation Office and, if it is unsuccessful in its appeal, our
financial position, liquidity, and cash flow will be materially
and adversely affected.






11



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##### Table of Contents







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


U.S.-Netherlands U.S.-NL U.S.-NL U.S.-NL U.S.-NL U.S.-NL U.S.-NL U.S.-NL


U.S.-NL U.S.-NL U.S.-NL U.S.-NL U.S.-NL




12



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








13



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##### Table of Contents





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




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


-


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


50-year


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




14



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##### Table of Contents







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




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




15



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##### Table of Contents





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




If our research and development efforts fail to generate
new, innovative products or processes, our overall profit
margins may decrease and demand for our products may fall, which
would have an adverse effect on our results of operations and
financial condition. In addition we may incur substantial
expenses and write-off charges related to unsuccessful research
and development efforts.




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




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




16



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##### Table of Contents



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






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



Our reliance on publicly available intellectual property
and other proprietary information subjects us to the risk that
competitors could copy our products or processes.




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




17



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


non-U.S. non-U.S.


Information technology systems integration issues could
disrupt our internal operations, which could have significant
adverse effects on our profitability.




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




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




18



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##### Table of Contents







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






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




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




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




19



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




We expect to incur substantial accounting and legal costs
in order to comply with the internal control over financial
reporting requirements of Section 404 of the Sarbanes-Oxley
Act of 2002, as codified by Item 308 of
Regulation S-K,
and we may experience a loss in investor confidence, and a
decrease in the market price of our ADRs, if we are unable to so
comply.


S-K. 20-F,


S-K. S-K,


Forward-Looking Statements


6-K,




| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | expectations that the conditions precedent to the Final Funding
    Agreement will be satisfied;                                                  
|
| |  | expectations about payments to a special purpose fund for the
    compensation of proven asbestos-related personal injury and
    death claims;   
|
| |  | expectations concerning the Australian Tax Office amended
    assessment;                                                                         
|
| |  | expectations that our credit facilities will be extended or
    renewed;                                                                          
|
| |  | projections of our results of operations or financial condition;                                                                                  
|
| |  | statements regarding our plans, objectives or goals, including
    those relating to competition, acquisitions, dispositions and
    our products;
|
| |  | statements about our future performance; and                                                                                                      
|
| |  | statements about product or environmental liabilities.                                                                                            



20



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##### Table of Contents



S-K.







|        |                           
|------- | --------------------------
|Item 4. | Information on the Company

History and Development of the Company


besloten vennootschap met beperkte
aansprakelijkheid naamloze
vennootschap


Corporate Restructuring








| |   |                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the formation of JHNV;                                                                                                                                                                                                                                                                      
|
| |  | the transfer to subsidiaries of JHNV of all of our fiber cement
    businesses, our U.S. gypsum wallboard business, our
    Australian and New Zealand building systems business and our
    Australian windows business, all of which, except for fiber
    cement, were subsequently sold;
|
| |  | a debt financing, consisting of an issuance of notes to
    U.S. purchasers, and the arrangement of an Australian
    credit facility; and                                                                                                                                                  
|
| |  | the relocation of most of our senior executives and managers to
    our operational headquarters in the United States.                                                                                                                                                                      



21



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





22



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

23



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Recent Developments




| |                                      
| | -------------------------------------
| | Australian Taxation Office Assessment



24



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##### Table of Contents









| |                                                                 
| | ----------------------------------------------------------------
| | ATO Decision on Tax Deductibility of SPF and Related
    Matters







| |                
| | ---------------
| | Debt Facilities

364-day




| |                               
| | ------------------------------
| | Closure of Roofing Pilot Plant

®




| |                                                           
| | ----------------------------------------------------------
| | Special Commission of Inquiry and Related
    Developments



25



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##### Table of Contents





| |                           
| | --------------------------
| | Disposal of Chile Business







| |                             
| | ----------------------------
| | Board and Management Changes























| |                            
| | ---------------------------
| | 2006 Annual General Meeting

20-F




| |                                                            
| | -----------------------------------------------------------
| | Election of Members of the Supervisory and Joint
    Boards



26



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##### Table of Contents





| |                               
| | ------------------------------
| | Supervisory Board Remuneration





| |                             
| | ----------------------------
| | Supervisory Board Share Plan

20-F




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Participation by members of the Supervisory Board in the SBSP
    2006 is not mandatory, and no holding lock applies to any shares
    acquired under the SBSP 2006;                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | The SBSP 2006 allows us to issue new shares or acquire shares on
    the market on behalf of the participant;                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | We will not provide any loans in relation to the issue or
    purchase of shares under the SBSP 2006;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | The number of shares issued or transferred to a member of the
    Supervisory Board will be determined by dividing the amount
    which the member elects to apply under the SBSP 2006 (net of any
    applicable taxes) by the market price (defined below);                                                                                                                                                                                                                                                                                                                           
|
| |  | The total remuneration of a Supervisory Board member will take
    into account any participation in the SBSP 2006. Accordingly,
    the maximum amount of his or her participation will be
    determined by the maximum remuneration payable to them.
    Therefore, the maximum number of shares that may be issued under
    the SBSP 2006 to all participants in any single year is equal to
    the aggregate remuneration payable to members of the Supervisory
    Board pursuant to Article 25 of our Articles of
    Association, divided by the market price (defined below);
|
| |  | Where new shares are issued under the SBSP 2006, the market
    price is the average of the closing prices for CUFS on the ASX
    during the period of five business days preceding the day of
    issue of the shares. Where shares are purchased on the market,
    the market price is the price at which the relevant CUFS are
    acquired;                                                                                                                                                                                                                                       
|
| |  | The SBSP 2006 is administered by the Managing Board and is
    governed by the laws of The Netherlands. The Managing Board may
    at any time vary or terminate the SBSP 2006 by resolution
    (subject to any applicable ASX listing rule requirements);                                                                                                                                                                                                                                                                                                                             
|
| |  | Shares under the SBSP 2006 will be issued no later than three
    years after the passing of the resolution approving the SBSP
    2006; and                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Any new member of the Supervisory Board will not be issued new
    shares under the SBSP 2006 until further shareholder approval is
    obtained pursuant to relevant ASX listing rules. However, any
    new member of the Supervisory Board appointed prior to the next
    Annual General Meeting may participate in the SBSP 2006 by the
    Company acquiring shares on the market (which does not require
    shareholder approval under ASX listing rules).                                                                                                                      





| |   |                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Within the six-year period up to August 2012, members of the
    Supervisory Board must accumulate a minimum of 1.5 times their
    annual remuneration (excluding fees for Committee or Deputy
    Chairmanship) in share ownership (either personally or through a
    personal superannuation or pension plan);

27



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Within the six-year period up to August 2012, the Chairman must
    accumulate a minimum of twice her or his annual remuneration in
    share ownership (either personally or through a personal
    superannuation or pension plan);                                                                                                                                                                                       
|
| |  | Newly-appointed members of the Supervisory Board will have six
    years from the date of joining the Supervisory Board to satisfy
    the minimum share ownership requirements mentioned above;                                                                                                                                                                                                                            
|
| |  | No director will be required to apply more than 50% of their
    fees, on a post-tax basis, over a six-year period toward
    satisfying the minimum share ownership requirements mentioned
    above;                                                                                                                                                                                                                      
|
| |  | Failure to comply (as determined by the Supervisory Board) with
    the minimum share ownership requirements mentioned above will
    not automatically result in a director being obliged to resign
    as a member of the Supervisory Board or Joint Board, but levels
    of director shareholding will be disclosed in our annual reports
    and thus our shareholders will be able to monitor such
    compliance; and
|
| |  | The minimum share ownership requirements mentioned above will
    not form part of the rules of the SBSP 2006 and are subject to
    change by the Supervisory Board from time to time.                                                                                                                                                                                                                                     





| |                         
| | ------------------------
| | Long Term Incentive Plan





| |   |                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the establishment of a plan, to be called the James Hardie
    Industries N.V. Long Term Incentive Plan 2006, which we refer to
    as the LTIP, to provide incentives to members of our Managing
    Board and to certain members of our management, which we refer
    to as Executives; and                                     
|
| |  | in accordance with certain LTIP rules, the issue of certain
    options or other rights over, or interests in, ordinary
    fully-paid shares in the Company, which we refer to as Shares,
    the issue and/or transfer of Shares under them, and the grant of
    cash awards to members of our Managing Board and to Executives.





| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | participation in the LTIP to a maximum of 1,000,000 options by
    Mr. Louis Gries;           
|
| |  | acquisition accordingly by Mr. Gries of Shares up to the
    stated maximum;                  
|
| |  | participation in the LTIP to a maximum of 155,000 options by
    Mr. Russell Chenu;           
|
| |  | acquisition accordingly by Mr. Chenu of Shares up to the
    stated maximum;                  
|
| |  | participation in the LTIP to a maximum of 263,000 options by
    Mr. Benjamin Butterfield; and
|
| |  | acquisition accordingly by Mr. Butterfield of Shares up to
    the stated maximum.            

20-F




| |                                                                   
| | ------------------------------------------------------------------
| | Renewal of Authority for the Company to Acquire its Own
    Shares

18-month


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| |                                                  
| | -------------------------------------------------
| | Renewal of Rights Relating to Takeover Provisions





| |   |                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the acquisition of control over CUFS or Shares takes place in an
    efficient, competitive and informed market;                                                                                                                                                                                                                                                                                  
|
| |  | each holder of any Shares or CUFS and also the members of the
    Managing Board, Joint Board, and Supervisory Board know the
    identity of any person who proposes to acquire a substantial
    interest in the Company, and are given reasonable time and
    enough information to consider and assess the merits of a
    proposal to acquire a substantial interest in the
    Company; and
|
| |  | as far as practicable, the holders of Shares or CUFS all have a
    reasonable and equal opportunity to participate in benefits
    accruing through a proposal to acquire a substantial interest in
    the Company.                                                                                                                                                                             

General Overview of Our Business


® ®






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|                        |                                |                                                |   |         |         |  |   |       |         |  |   |       |       | 
|----------------------- | ------------------------------ | ---------------------------------------------- | - | ------- | ------- |  | - | ----- | ------- |  | - | ----- | ----- | 
|                        |                                | Fiscal Year Ended March 31,                    |  
|                        |                                |                                                |  
|                        |                                | 2006                                           |   |         | 2005    |  |   | 2004  |        
|                        |                                |                                                |   |         |         |  |   |       |        
|                        |                                | (In millions)                                  |  
|Continuing Operations   |                                |                                                |   |         |         |  |   |       |         |  |   |      
|                        | USA Fiber Cement               |                                                | $ | 1,218.4 |         |  | $ | 939.2 |         |  | $ | 738.6 |      
|                        | Asia Pacific Fiber Cement      |                                                |   | 241.8   |         |  |   | 236.1 |         |  |   | 219.8 |      
|                        | Other                          |                                                |   | 28.3    |         |  |   | 35.1  |         |  |   | 23.5  |      
|                        |                                |                                                |   |         |         |  |   |       |        
|                        |                                | Total Continuing Operations                    |   | $       | 1,488.5 |  |   | $     | 1,210.4 |  |   | $     | 981.9 | 
|                        |                                |                                                |   |         |         |  |   |       |        
|Discontinued Operations |                                |                                                |   |         |         |  |   |       |         |  |   |      
|                        | Building Systems (New Zealand) |                                                | $ |        |         |  | $ |      |         |  | $ | 2.9   |      
|                        |                                |                                                |   |         |         |  |   |       |        
|                        |                                | Total Discontinued Operations                  |   | $       |        |  |   | $     |        |  |   | $     | 2.9   | 
|                        |                                |                                                |   |         |         |  |   |       |        
|                        |                                | Total (Continuing and Discontinued Operations) |   | $       | 1,488.5 |  |   | $     | 1,210.4 |  |   | $     | 984.8 | 
|                        |                                |                                                |   |         |         |  |   |       |        

Industry Overview




| |                                                                   
| | ------------------------------------------------------------------
| | U.S. Housing Industry, Fiber Cement Industry and Pipe
    Industry







30



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| |                                    
| | -----------------------------------
| | International Fiber Cement Industry







Products






31



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® ® ®








tm tm




32



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® ® ® ® ®


® ® ®


®


® ®


tm ® ® ® tm ® ® ® ®


® ® ®




Seasonality




Raw Materials




Cellulose Fiber.


33



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Silica.


Cement. just-in


Water.


Sales, Marketing and Distribution








34



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on-site




®








Research and Development




35



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| |   |                                                                   
| | - | ------------------------------------------------------------------
| |  | enhance our current products;                                     
|
| |  | develop new products for specific markets or
    applications; and
|
| |  | create or improve manufacturing platforms and processes.          











| |   |                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continue to lower the capital cost of each unit of production at
    new plants by learning from past projects and through continuing
    innovation in engineering;
|
| |  | reduce operating costs at each plant by improving manufacturing
    processes, raw materials yields and machine
    productivity; and                               
|
| |  | use our proprietary product formulations and process
    technologies to create lightweight and durable products for all
    climates.                              

Dependence on Trade Secrets and Research and Development




Governmental Regulation




| |                         
| | ------------------------
| | Environmental Regulation



36



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



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Organizational Structure






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

Capital Expenditures and Divestitures




| |                     
| | --------------------
| | Capital Expenditures



|                                              |                            |                              |       |       |      |   |       |       |  |   |      |      | 
|--------------------------------------------- | -------------------------- | ---------------------------- | ----- | ----- | ---- | - | ----- | ----- |  | - | ---- | ---- | 
|                                              |                            | Fiscal Years Ended March 31, |      
|                                              |                            |                              |      
|                                              |                            | 2006                         |       |       | 2005 |   |       | 2004  | 
|                                              |                            |                              |       |       |      |   |       |       | 
|                                              |                            | (In millions)                |      
|USA Fiber Cement                              |                            | $                            | 154.5 |       |      | $ | 144.8 |       |  | $ | 56.2 |     
|Asia Pacific Fiber Cement                     |                            |                              | 6.6   |       |      |   | 4.1   |       |  |   | 8.4  |     
|Chile, U.S. Pipes, U.S. Roofing and Europe(1) |                            |                              | 1.7   |       |      |   | 4.1   |       |  |   | 9.5  |     
|                                              |                            |                              |       |       |      |   |       |       | 
|                                              | Total Capital Expenditures |                              | $     | 162.8 |      |   | $     | 153.0 |  |   | $    | 74.1 | 
|                                              |                            |                              |       |       |      |   |       |       | 






|    |                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In July 2005, we sold our fiber cement business located in
    Chile. See Note 14 to our consolidated financial statements
    in Item 18. In April 2006, we closed our roofing pilot
    plant located in Fontana, California. For more information on
    these two discontinued operations in Chile and California, see
    Item 4, Information on the Company  Recent
    Developments.





| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the commencement of construction of a new fiber cement
    manufacturing plant in Pulaski, Virginia at a total estimated
    cost of $98.0 million. Construction of the plant began in
    March 2005. The plant will

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | include two manufacturing lines, each with an annual design
    capacity of 300 million square feet. At the end of fiscal
    year 2006, we completed construction on the first manufacturing
    line and, in April 2006, we commenced commercial production on
    this line. The plant produces external siding and interior
    backerboard products for new residential construction, repair
    and remodel and manufactured housing markets. As of
    March 31, 2006, we have incurred $89.3 million related
    to the construction of our Pulaski, Virginia plant;       
|
| |  | the continued implementation of our
    ColorPlus®
    strategy. This strategy includes constructing additional
    ColorPlus®
    coating capacity inside our existing plants. In fiscal year
    2006, we completed construction of, and commenced production on,
    a new
    ColorPlus®
    line at our Blandon, Pennsylvania plant. In addition, we began
    construction on new
    ColorPlus®
    coating lines at our Reno, Nevada and Pulaski, Virginia plants.
    As of March 31, 2006, we have incurred $44.7 million
    related to our
    ColorPlus®
    strategy;
|
| |  | the addition of a new fiber cement plant in Reno, Nevada at a
    cost of $58.0 million, which occurred during fiscal years
    2006, 2005 and 2004;                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | the addition of a new trim line at our Peru, Illinois plant. As
    of March 31, 2005, we were in pre-production and in fiscal
    year 2006 we commenced the
    ramp-up of this new
    trim line. As of March 31, 2006, we incurred a total cost
    of $58.5 million related to the construction of this new
    trim line. These expenditures occurred during fiscal years 2006,
    2005 and 2004;                                                                                                                                                                           
|
| |  | upgrades to our Blandon, Pennsylvania plant at a cost of
    approximately $17.1 million, which occurred during fiscal
    years 2005, 2004 and 2003; and                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | the addition of a panel production line at our Waxahachie, Texas
    plant at a cost of $26.5 million, which occurred during
    fiscal years 2004 and 2003.                                                                                                                                                                                                                                                                                                                                                                                                                       











| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | the second manufacturing line at our Pulaski, Virginia plant,
    discussed above, at an estimated cost of
    $12.0 million; and
|
| |  | the continued implementation of our
    ColorPlus®
    strategy, discussed above, at an estimated cost of
    $12.5 million.     





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| |             
| | ------------
| | Divestitures



| |                 
| | ----------------
| | Building Systems





| |                           
| | --------------------------
| | Disposal of Chile Business







| |       
| | ------
| | ABN 60





40



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Property, Plant and Equipment


®






41



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42



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| |                   
| | ------------------
| | Plants and Process



|                                                 |                                       |                                          |                                       |           |             |         |  |                |     |  |  |         |     |         | 
|------------------------------------------------ | ------------------------------------- | ---------------------------------------- | ------------------------------------- | --------- | ----------- | ------- |  | -------------- | --- |  |  | ------- | --- | ------- | 
|                                                 |                                       |                                          |                                       | Committed |             |         | 
|                                                 |                                       | Existing                                 |                                       |           | Additional  |         |  | Total          |    
|                                                 |                                       | Annual Design                            |                                       |           | Design      |         |  | Planned Design |    
|Location                                         |                                       | Capacity(1)                              |                                       |           | Capacity(1) |         |  | Capacity(1)    |    
|                                                 |                                       |                                          |                                       |           |             |         |  |                |    
|Fiber Cement Flat Sheet (in million square feet) |                                       |                                          |                                       |           |             |         |  |                |     |  |  |        
|                                                 | United States                         |                                          |                                       |           |             |         |  |                |     |  |  |         |    
|                                                 |                                       | Fontana, California                      |                                       |           | 180         |         |  |                |    |  |  |         | 180 |        
|                                                 |                                       | Plant City, Florida                      |                                       |           | 300         |         |  |                |    |  |  |         | 300 |        
|                                                 |                                       | Cleburne, Texas                          |                                       |           | 500         |         |  |                |    |  |  |         | 500 |        
|                                                 |                                       | Tacoma, Washington                       |                                       |           | 200         |         |  |                |    |  |  |         | 200 |        
|                                                 |                                       | Peru, Illinois                           |                                       |           | 560         |         |  |                |    |  |  |         | 560 |        
|                                                 |                                       | Waxahachie, Texas                        |                                       |           | 360         |         |  |                |    |  |  |         | 360 |        
|                                                 |                                       | Blandon, Pennsylvania                    |                                       |           | 200         |         |  |                |    |  |  |         | 200 |        
|                                                 |                                       | Summerville, South Carolina              |                                       |           | 190         |         |  |                |    |  |  |         | 190 |        
|                                                 |                                       | Reno, Nevada                             |                                       |           | 300         |         |  |                |    |  |  |         | 300 |        
|                                                 |                                       | Pulaski, Virginia(2)                     |                                       |           | 300         |         |  |                | 300 |  |  |         | 600 |        
|                                                 |                                       |                                          |                                       |           |             |         |  |                |    
|                                                 |                                       |                                          | Total United States                   |           |             | 3,090   |  |                |     |  |  |         |     | 3,390   | 
|                                                 | Australia                             |                                          |                                       |           |             |         |  |                |     |  |  |         |    
|                                                 |                                       | Sydney, New South Wales(3)               |                                       |           | 200         |         |  |                |    |  |  |         | 200 |        
|                                                 |                                       | Brisbane, Queensland (Carole Park)(3)(4) |                                       |           | 160         |         |  |                |    |  |  |         | 160 |        
|                                                 |                                       |                                          |                                       |           |             |         |  |                |    
|                                                 |                                       |                                          | Total Australia                       |           |             | 360     |  |                |     |  |  |         |     | 360     | 
|                                                 | New Zealand                           |                                          |                                       |           |             |         |  |                |     |  |  |         |    
|                                                 |                                       | Auckland(3)                              |                                       |           | 75          |         |  |                |    |  |  |         | 75  |        
|                                                 | The Philippines                       |                                          |                                       |           |             |         |  |                |     |  |  |         |    
|                                                 |                                       | Manila                                   |                                       |           | 145         |         |  |                |    |  |  |         | 145 |        
|                                                 |                                       |                                          |                                       |           |             |         |  |                |    
|                                                 |                                       |                                          | Total Fiber Cement Flat Sheet         |           |             | 3,670   |  |                |     |  |  |         |     | 3,970   | 
|Fiber Reinforced Concrete Pipes(in tons)(5)      |                                       |                                          |                                       |           |             |         |  |                |     |  |  |        
|                                                 | Plant City, Florida (pipes)           |                                          |                                       | 100,000   |             |         |  |               |     |  |  | 100,000 |    
|                                                 | Brisbane, Queensland (Meeandah)(3)(4) |                                          |                                       | 50,000    |             |         |  |               |     |  |  | 50,000  |    
|                                                 |                                       |                                          |                                       |           |             |         |  |                |    
|                                                 |                                       |                                          | Total Fiber Reinforced Concrete Pipes |           |             | 150,000 |  |                |     |  |  |         |     | 150,000 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Annual design capacity is based on managements historical
    experience with our production process and is calculated
    assuming continuous operation, 24 hours per day, seven days
    per week, producing 5/16 thickness siding at a target
    operating speed. Plants outside the United States produce a
    range of thicker products, which negatively affect their
    outputs. Actual production is affected by factors such as
    product mix, batch size, plant availability and production
    speeds and is usually less than annual design capacity.
|   
|(2) | Our plant in Pulaski, Virginia will feature two manufacturing
    lines with a total annual design capacity of 600 million
    square feet (300 million per line). Currently only one line
    is complete.                                                                                                                                                                                                                                                                                                                                                             
|   
|(3) | Prior to March 2004, the land and buildings on which these
    facilities are located were leased on a long-term basis from
    Amaca Pty Limited. In March 2004, various subsidiaries of
    Multiplex Property Trust (which we collectively refer to as
    Multiplex) an unrelated third party, acquired the land and
    buildings related to these four fiber cement manufacturing
    facilities from Amaca. Prior to July 2005, the land and                                                                                                                     

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | buildings on which these facilities are located was leased on a
    long-term basis from Multiplex. In July 2005, unrelated third
    parties, Penrose Land Trustee No. 1 Limited and Penrose
    Land Trustee No. 2 Limited (which we collectively refer to
    as the Penrose Land Trust) acquired from Multiplex the land and
    buildings related to our fiber cement manufacturing facilities
    in Auckland.
|   
|(4) | There are two manufacturing plants in Brisbane. Carole Park
    produces only flat sheets and Meeandah produces only pipes and
    columns.                                                                                                                                                                                                                                                                         
|   
|(5) | Pipe and column capacity is measured in tons rather than million
    square feet.                                                                                                                                                                                                                                                                                                                                   





|              |  |                |    |  
|------------- |  | -------------- | -- | -
|              |  | Capacity       |   
|Country       |  | Utilization(1) |   
|              |  |                |   
|United States |  |                | 84 | %
|Australia     |  |                | 56 | %
|New Zealand   |  |                | 75 | %
|Philippines   |  |                | 82 | %






|    |                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Capacity utilization is based on design capacity. Design
    capacity is based on managements estimates, as described
    above. No accepted industry standard exists for the calculation
    of fiber cement manufacturing facility capacities.



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| |      
| | -----
| | Mines



Legal Proceedings








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











| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the establishment of the SPF to provide compensation to
    Australian asbestos-related personal injury claimants with
    proven claims against the Former James Hardie Companies;                                                                                                                                                                                                                                            
|
| |  | initial funding of approximately A$154 million provided by
    the Performing Subsidiary to the SPF, calculated on the basis of
    an actuarial report prepared by KPMG Actuaries Pty Ltd, or KPMG
    Actuaries, as of March 31, 2006. That report provided an
    estimate of the discounted net present value of all present and
    future Australian asbestos-related personal injury claims
    against the Former James

45



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | Hardie Companies of A$1.52 billion ($1.14 billion).                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | subject to the cap described below, an annual contribution in
    advance to top up the funds in the SPF to equal the actuarially
    calculated estimate of expected Australian asbestos-related
    personal injury claims against the Former James Hardie Companies
    for the following three years, to be revised annually (so as to
    create a rolling cash buffer in the SPF);                                                                                                                               
|
| |  | a cap on the annual payments made by the Performing Subsidiary
    to the SPF, initially set at 35% of the Companys free cash
    flow (defined as cash from operations in accordance with
    U.S. GAAP in force at the date of the Final Funding
    Agreement) for the immediately preceding financial year, with
    provisions for the percentage to decline over time depending
    upon the Companys financial performance (and therefore the
    contributions already made to the SPF) and the claims outlook;
|
| |  | an initial term of approximately 40 years, at the end of
    which time the parties may either agree upon a final payment to
    be made by the Company in satisfaction of any further funding
    obligations, or have the term automatically extended for further
    periods of 10 years until such agreement is reached or the
    relevant asbestos-related liabilities cease to arise;                                                                                                                             
|
| |  | the entry by the parties and/or others into agreements ancillary
    to or connected with the Final Funding Agreement, which we
    collectively refer to as the Related Agreements;                                                                                                                                                                                                                                                                                                                                     
|
| |  | no cap on individual payments to asbestos claimants;                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | the Performing Subsidiarys payment obligations are
    guaranteed by JHI NV;                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | the SPFs claims to the funding payments required under the
    Final Funding Agreement will be subordinated to the claims of
    the Companys lenders; and                                                                                                                                                                                                                                                                                                                                                             
|
| |  | the compensation arrangements will extend to members of the
    Baryulgil community for asbestos-related claims arising from the
    activities of a former subsidiary of ABN 60, as described below.                                                                                                                                                                                                                                                                                                                    









46



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| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Key Events During and Since 2001 Leading to the Signing of
    the Final Funding Agreement



| |                                                          
| | ---------------------------------------------------------
| | Separation of Amaca Pty Ltd, Amaba Pty Ltd and ABN
    60



47



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##### Table of Contents









James Hardie
Former Subsidiaries (Special Provisions) Act 2005.




| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Potential for Claims Against the Former James Hardie
    Companies to be Made Against the Company





48



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##### Table of Contents





James
Hardie (Civil Liability) Act 2005 James Hardie
(Civil Penalty Compensation Release) Act 2005


Injury Prevention, Rehabilitation and Compensation Act 2001
(NZ).








49



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##### Table of Contents









| |                              
| | -----------------------------
| | Special Commission of Inquiry







| |   |                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | speedy, fair and equitable compensation for all existing and
    future claimants, including objective criteria to reduce
    superimposed inflation. Superimposed inflation is inflation in
    claim awards above the underlying rate of inflation and is
    sometimes called judicial inflation;
|
| |  | contributions to be made in a manner which provide certainty to
    claimants as to their entitlement, the scheme administrator as
    to the amount available for distribution, and the proposed
    contributors (including the Company) as to the ultimate amount
    of their contributions;    
|
| |  | significant reductions in legal costs through reduced and more
    abbreviated litigation; and                                                                                                                                                                                                      
|
| |  | limitation of legal avenues outside of the scheme.                                                                                                                                                                                                                                                  





50



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##### Table of Contents





| |                                           
| | ------------------------------------------
| | Principal Findings in Favor of the Company





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the establishment of the Foundation was legally effective and
    causes of action which the Foundation, Amaba or Amaca might have
    against the James Hardie Group, its officers and advisers would
    be unlikely to result in any significant increase in the funds
    of Amaba, Amaca or the Foundation (putting this finding
    conversely, the Company is unlikely to face any significant
    liability to the Foundation, Amaba or Amaba as a result of the
    then current causes of action of such entities against the
    current members of the James Hardie Group);
|
| |  | there was no finding that JHI NV had committed any material
    breach of any law as a result of the separation and
    reorganization transactions which took place in 2001;                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | many of the allegations and causes of action put forward by
    lawyers for the Foundation, Amaba and Amaca were
    speculative; and                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | the SCI rejected the suggestion that JHI NV had engaged in
    misleading or deceptive conduct or attempted to pervert the
    course of justice or obtained court orders by fraud in relation
    to the 2001 Reorganization due to the fact that neither the
    reorganization scheme documents prepared in 2001 nor the
    submissions or materials presented to the court for the 2001
    Reorganization referred to the possibility of the partly-paid
    shares being cancelled (the shares were cancelled in 2003).                                                         



| |                                                 
| | ------------------------------------------------
| | Other Principal Findings Relevant to the Company





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | as a practical (but not legal) matter, if the right
    amount (and not merely the minimum amount) of funding was not
    provided to the Foundation, the Company would face potential
    legislative, customer, union and public action to apply
    legislative and boycott measures and public pressure to ensure
    that the Company met any significant funding shortfall; and                                                                                                                                                   
|
| |  | the directors of ABN 60 at the time of the cancellation of the
    partly-paid shares (Messrs. Morley and Salter) effectively
    followed the instructions of JHI NV in relation to the
    cancellation. As a result, it might be concluded that JHI NV was
    a shadow director of ABN 60 at that time. However, while
    expressing some reservations about what occurred, the SCI did
    not find that the ABN 60 directors (including JHI NV as a
    shadow director) breached their duties in undertaking the
    cancellation.



| |                                                             
| | ------------------------------------------------------------
| | Principal Findings Against ABN 60 (formerly called
    JHIL)







51



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##### Table of Contents





| |  |                                                             
| |  | ------------------------------------------------------------
| |  | Principal Findings Against Mr. Macdonald and
    Mr. Shafron





| |   |                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | alleged false and misleading conduct associated with a
    February 16, 2001 press release, particularly regarding a
    statement that the Foundation was fully funded in
    contravention of New South Wales and Commonwealth legislation
    prohibiting false or misleading conduct;                                                                
|
| |  | allegedly breaching their duties as officers of ABN 60 by
    encouraging the board of directors of ABN 60 to act on the
    Trowbridge report, dated February 13, 2001 (which we refer
    to as the Trowbridge Report), in forming a view that the
    Foundation would be fully funded; and                                                           
|
| |  | criticisms, falling short of findings of contraventions of law,
    based on their respective roles in the separation and
    reorganization transactions. These included criticisms relating
    to their development, control over, reliance on and use of the
    Trowbridge Report, despite (in the SCIs view) their
    knowledge of its limitations.



| |                        
| | -----------------------
| | Other Relevant Findings







| |                                       
| | --------------------------------------
| | Findings Relating to Funding Shortfall







| |                                  
| | ---------------------------------
| | Events Following the SCI Findings





52



---



##### Table of Contents













| |                   
| | ------------------
| | Heads of Agreement



53



---



##### Table of Contents









| |                                                              
| | -------------------------------------------------------------
| | Extension of Heads of Agreement to Cover Baryulgil
    Claims





| |                                     
| | ------------------------------------
| | Interim Funding and ABN 60 Indemnity











54



---



##### Table of Contents











| |                              
| | -----------------------------
| | Releases From Civil Liability



James Hardie (Civil Liability) Act 2005 James
Hardie (Civil Penalty Compensation Release) Act 2005. Corporations Act 2001








| |                                 
| | --------------------------------
| | Actuarial Study; Claims Estimate



55



---



##### Table of Contents

















56



---



##### Table of Contents





| |            
| | -----------
| | Claims Data



|                                |  |             |     |  |      |  |     | 
|------------------------------- |  | ----------- | --- |  | ---- |  | --- | 
|                                |  | Years Ended |    
|                                |  | March 31,   |    
|                                |  |             |    
|                                |  | 2006        |     |  | 2005 | 
|                                |  |             |     |  |      | 
|Australia                       |  |             | 556 |  |      |  | 712 | 
|New Zealand                     |  |             |    |  |      |  |    | 
|Unknown-Court Not Identified(1) |  |             | 20  |  |      |  | 36  | 
|USA                             |  |             | 1   |  |      |  | 1   | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Unknown  Court Not Identified
    designation reflects that the information for such claims had
    not been, as of the date of publication, entered into the
    database which the Foundation maintains. Over time, as the
    details of unknown claims are provided to the
    Foundation, the Company believes the database is updated to
    reflect where such claims originate. Accordingly, the Company
    understands the number of unknown claims pending fluctuates due
    to the resolution of claims as well as the reclassification of
    such claims.



|                                               |  |                       |         |  |      |    |         |      |  |    |         | 
|---------------------------------------------- |  | --------------------- | ------- |  | ---- | -- | ------- | ---- |  | -- | ------- | 
|                                               |  | Australia             |        
|                                               |  | Years Ended March 31, |        
|                                               |  |                       |        
|                                               |  | 2006                  |         |  | 2005 |    |         | 2004 | 
|                                               |  |                       |         |  |      |    |         |      | 
|Number of claims filed                         |  |                       | 346     |  |      |    | 489     |      |  |    | 379     | 
|Number of claims dismissed                     |  |                       | 97      |  |      |    | 62      |      |  |    | 119     | 
|Number of claims settled or otherwise resolved |  |                       | 405     |  |      |    | 402     |      |  |    | 316     | 
|Average settlement amount per claim            |  | A$                    | 151,883 |  |      | A$ | 157,594 |      |  | A$ | 167,450 | 
|Average settlement amount per claim            |  | $                     | 114,322 |  |      | $  | 116,572 |      |  | $  | 116,127 | 

|                                               |  |                                |         |  |      |    |        |      |  |    |    | 
|---------------------------------------------- |  | ------------------------------ | ------- |  | ---- | -- | ------ | ---- |  | -- | -- | 
|                                               |  | Unknown  Court Not Identified |        
|                                               |  | Years Ended March 31,          |        
|                                               |  |                                |        
|                                               |  | 2006                           |         |  | 2005 |    |        | 2004 | 
|                                               |  |                                |         |  |      |    |        |      | 
|Number of claims filed                         |  |                                | 6       |  |      |    | 7      |      |  |    | 1  | 
|Number of claims dismissed                     |  |                                | 10      |  |      |    | 20     |      |  |    | 15 | 
|Number of claims settled or otherwise resolved |  |                                | 12      |  |      |    | 2      |      |  |    |   | 
|Average settlement amount per claim            |  | A$                             | 198,892 |  |      | A$ | 47,000 |      |  | A$ |   | 
|Average settlement amount per claim            |  | $                              | 149,706 |  |      | $  | 34,766 |      |  | $  |   | 

|                                               |  |                       |   |  |      |   |          |      |  |    |   | 
|---------------------------------------------- |  | --------------------- | - |  | ---- | - | -------- | ---- |  | -- | - | 
|                                               |  | USA                   |  
|                                               |  | Years Ended March 31, |  
|                                               |  |                       |  
|                                               |  | 2006                  |   |  | 2005 |   |          | 2004 | 
|                                               |  |                       |   |  |      |   |          |      | 
|Number of claims filed                         |  |                       |  |  |      |   |         |      |  |    |  | 
|Number of claims dismissed                     |  |                       |  |  |      |   | 3        |      |  |    | 1 | 
|Number of claims settled or otherwise resolved |  |                       |  |  |      |   | 1        |      |  |    |  | 
|Average settlement amount per claim            |  | A$                    |  |  |      | A | $228,293 |      |  | A$ |  | 
|Average settlement amount per claim            |  | $                     |  |  |      |   | $168,868 |      |  | $  |  | 

57



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|                                            |  |                 |          |  |      |   |          |      |  |   |          |  |  |      |          |  |  |   |          | 
|------------------------------------------- |  | --------------- | -------- |  | ---- | - | -------- | ---- |  | - | -------- |  |  | ---- | -------- |  |  | - | -------- | 
|                                            |  | As of March 31, |         
|                                            |  |                 |         
|                                            |  | 2006            |          |  | 2005 |   |          | 2004 |  |   | 2003     |  |  | 2002 |         
|                                            |  |                 |          |  |      |   |          |      |  |   |          |  |  |      |         
|Number of open claims at beginning of year  |  |                 | 749      |  |      |   | 743      |      |  |   | 814      |  |  |      | 671      |  |  |   | 569      | 
|Number of new claims                        |  |                 | 352      |  |      |   | 496      |      |  |   | 380      |  |  |      | 409      |  |  |   | 375      | 
|Number of closed claims                     |  |                 | 524      |  |      |   | 490      |      |  |   | 451      |  |  |      | 266      |  |  |   | 273      | 
|Number of open claims at year-end           |  |                 | 577      |  |      |   | 749      |      |  |   | 743      |  |  |      | 814      |  |  |   | 671      | 
|Average settlement amount per settled claim |  | A               | $153,236 |  |      | A | $157,223 |      |  | A | $167,450 |  |  | A    | $201,200 |  |  | A | $197,941 | 
|Average settlement amount per settled claim |  |                 | $115,341 |  |      |   | $116,298 |      |  |   | $116,127 |  |  |      | $112,974 |  |  |   | $101,603 | 
|Average settlement amount per case closed   |  | A               | $121,945 |  |      | A | $129,949 |      |  | A | $117,327 |  |  | A    | $177,752 |  |  | A | $125,435 | 
|Average settlement amount per case closed   |  |                 | $ 91,788 |  |      |   | $ 96,123 |      |  |   | $ 81,366 |  |  |      | $ 99,808 |  |  |   | $ 64,386 | 





58



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| |                               
| | ------------------------------
| | SCI and Other Related Expenses



|                                     |  |               |      |  |      |   |      | 
|------------------------------------ |  | ------------- | ---- |  | ---- | - | ---- | 
|                                     |  | Years Ended   |     
|                                     |  | March 31,     |     
|                                     |  |               |     
|                                     |  | 2006          |      |  | 2005 |  
|                                     |  |               |      |  |      |  
|                                     |  | (In millions) |     
|SCI                                  |  | $             |     |  |      | $ | 6.8  | 
|Internal investigation               |  |               |     |  |      |   | 4.9  | 
|ASIC investigation                   |  |               | 0.8  |  |      |   | 1.2  | 
|Severance and consulting             |  |               | 0.1  |  |      |   | 6.0  | 
|Resolution advisory fees             |  |               | 9.8  |  |      |   | 6.4  | 
|Funding advice                       |  |               | 2.9  |  |      |   | 0.6  | 
|Other                                |  |               | 3.8  |  |      |   | 2.2  | 
|                                     |  |               |      |  |      |  
|Total SCI and other related expenses |  | $             | 17.4 |  |      | $ | 28.1 | 
|                                     |  |               |      |  |      |  





| |                                                                   
| | ------------------------------------------------------------------
| | Australian Securities and Investments Commission
    Investigation



James Hardie (Investigations and Proceedings) Act
2004.






| |                                     
| | ------------------------------------
| | Financial Position of the Foundation



59



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James Hardie Former Subsidiaries (Winding Up and
Administration) Act 200 James Hardie Former Subsidiaries (Special
Provisions) Act 2005. status quo






| |                  
| | -----------------
| | Tax Contingencies











| |                                      
| | -------------------------------------
| | Australian Taxation Office Assessment



60



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|                                    |  |               |       |  |    |   |        | 
|----------------------------------- |  | ------------- | ----- |  | -- | - | ------ | 
|                                    |  | $             |       |  | A$ |  
|                                    |  |               |       |  |    |  
|                                    |  | (In millions) |      
|Primary tax after allowable credits |  | $             | 129.5 |  |    | A | $172.0 | 
|Penalties(1)                        |  |               | 32.4  |  |    |   | 43.0   | 
|General interest charges            |  |               | 122.7 |  |    |   | 163.0  | 
|                                    |  |               |       |  |    |  
|Total amended assessment            |  | $             | 284.6 |  |    | A | $378.0 | 
|                                    |  |               |       |  |    |  
















61



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|         |                          
|-------- | -------------------------
|Item 4A. | Unresolved Staff Comments








|        |                                             
|------- | --------------------------------------------
|Item 5. | Operating and Financial Review and Prospects



Overview






6-K 20-F




| |                                             
| | --------------------------------------------
| | The Company and the Building Product Markets



62



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Fiscal Year 2006 Key Results










®




Critical Accounting Policies




63



---



##### Table of Contents







| |                             
| | ----------------------------
| | Accounting for Contingencies





| |                                         
| | ----------------------------------------
| | Accounting for Asbestos-Related Payments













64



---



##### Table of Contents





| |      
| | -----
| | Sales





| |                    
| | -------------------
| | Accounts Receivable





| |          
| | ---------
| | Inventory





| |                         
| | ------------------------
| | Accrued Warranty Reserve

50-year




| |                          
| | -------------------------
| | Accounting for Income Tax



65



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Results of Operations






|                                                             |                           |                              |        |         |         |  |       |      |       |   |        |       |         |  |       |      |       |   |        |       |       |  |       |      |       | 
|------------------------------------------------------------ | ------------------------- | ---------------------------- | ------ | ------- | ------- |  | ----- | ---- | ----- | - | ------ | ----- | ------- |  | ----- | ---- | ----- | - | ------ | ----- | ----- |  | ----- | ---- | ----- | 
|                                                             |                           | Fiscal Years Ended March 31, |       
|                                                             |                           |                              |       
|                                                             |                           | 2006                         |        |         | 2005    |  |       | 2004 |      
|                                                             |                           |                              |        |         |         |  |       |      |      
|Net sales:                                                   |                           |                              |        |         |         |  |       |      |       |   |        |       |         |  |       |      |       |   |        |       |       |  |       |     
|                                                             | USA Fiber Cement          |                              | $      | 1,218.4 |         |  |       | 81.9 | %     |   | $      | 939.2 |         |  |       | 77.6 | %     |   | $      | 738.6 |       |  |       | 75.2 | %    
|                                                             | Asia Pacific Fiber Cement |                              |        | 241.8   |         |  |       | 16.2 |       |   |        | 236.1 |         |  |       | 19.5 |       |   |        | 219.8 |       |  |       | 22.4 |      
|                                                             | Other(1)                  |                              |        | 28.3    |         |  |       | 1.9  |       |   |        | 35.1  |         |  |       | 2.9  |       |   |        | 23.5  |       |  |       | 2.4  |      
|                                                             |                           |                              |        |         |         |  |       |      |       |   |        |       |         |  |       |      |       |  
|                                                             |                           | Total net sales              |        |         | 1,488.5 |  |       |      | 100.0 |   |        |       | 1,210.4 |  |       |      | 100.0 |   |        |       | 981.9 |  |       |      | 100.0 | 
|Cost of goods sold                                           |                           |                              | (937.7 | )       |         |  | (63.0 | )    |       |   | (784.0 | )     |         |  | (64.8 | )    |       |   | (623.0 | )     |       |  | (63.4 | )   
|                                                             |                           |                              |        |         |         |  |       |      |       |   |        |       |         |  |       |      |       |  
|Gross profit                                                 |                           |                              | 550.8  |         |         |  | 37.0  |      |       |   | 426.4  |       |         |  | 35.2  |      |       |   | 358.9  |       |       |  | 36.6  |     
|Selling, general and administrative expenses                 |                           |                              | (209.8 | )       |         |  | (14.1 | )    |       |   | (174.5 | )     |         |  | (14.4 | )    |       |   | (162.0 | )     |       |  | (16.5 | )   
|Research and development expenses                            |                           |                              | (28.7  | )       |         |  | (1.9  | )    |       |   | (21.6  | )     |         |  | (1.8  | )    |       |   | (22.6  | )     |       |  | (2.3  | )   
|SCI and other related expenses                               |                           |                              | (17.4  | )       |         |  | (1.2  | )    |       |   | (28.1  | )     |         |  | (2.3  | )    |       |   |       |       |       |  |      |     
|Impairment of roofing plant                                  |                           |                              | (13.4  | )       |         |  | (0.9  | )    |       |   |       |       |         |  |      |      |       |   |       |       |       |  |      |     
|Asbestos provision                                           |                           |                              | (715.6 | )       |         |  | (48.1 | )    |       |   |       |       |         |  |      |      |       |   |       |       |       |  |      |     
|Other operating expense                                      |                           |                              | (0.8   | )       |         |  |      |      |       |   | (6.0   | )     |         |  | (0.5  | )    |       |   | (2.1   | )     |       |  | (0.3  | )   
|                                                             |                           |                              |        |         |         |  |       |      |       |   |        |       |         |  |       |      |       |  
|Operating (loss) income                                      |                           |                              | (434.9 | )       |         |  | (29.2 | )    |       |   | 196.2  |       |         |  | 16.2  |      |       |   | 172.2  |       |       |  | 17.5  |     
|Interest expense                                             |                           |                              | (7.2   | )       |         |  | (0.5  | )    |       |   | (7.3   | )     |         |  | (0.6  | )    |       |   | (11.2  | )     |       |  | (1.1  | )   
|Interest income                                              |                           |                              | 7.0    |         |         |  | 0.5   |      |       |   | 2.2    |       |         |  | 0.2   |      |       |   | 1.2    |       |       |  | 0.1   |     
|Other (expense) income                                       |                           |                              |       |         |         |  |      |      |       |   | (1.3   | )     |         |  | (0.1  | )    |       |   | 3.5    |       |       |  | 0.4   |     
|                                                             |                           |                              |        |         |         |  |       |      |       |   |        |       |         |  |       |      |       |  
|(Loss) income from continuing operations before income taxes |                           |                              | (435.1 | )       |         |  | (29.2 | )    |       |   | 189.8  |       |         |  | 15.7  |      |       |   | 165.7  |       |       |  | 16.9  |     
|Income tax expense                                           |                           |                              | (71.6  | )       |         |  | (4.8  | )    |       |   | (61.9  | )     |         |  | (5.1  | )    |       |   | (40.4  | )     |       |  | (4.1  | )   
|                                                             |                           |                              |        |         |         |  |       |      |       |   |        |       |         |  |       |      |       |  
|(Loss) income from continuing operations                     |                           | $                            | (506.7 | )       |         |  | (34.0 | )%   |       | $ | 127.9  |       |         |  | 10.6  | %    |       | $ | 125.3  |       |       |  | 12.8  | %   
|                                                             |                           |                              |        |         |         |  |       |      |       |   |        |       |         |  |       |      |       |  






|    |                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes sales of fiber cement in Chile (fiscal year 2004
    through July 2005 only), fiber reinforced concrete pipes in the
    United States, a roofing pilot plant in the United States and
    fiber cement operations

66



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| |                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | in Europe. Our Chilean business was sold in July 2005. Our
    roofing pilot plant ceased operations in April 2006. See
    Item 4, Information on the Company 
    Capital Expenditures and Divestitures and Note 14 to
    our consolidated financial statements in Item 18.



|                               |  |                              |        |   |      |   |       |      |  |   |       |  
|------------------------------ |  | ---------------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | -
|                               |  | Fiscal Years Ended March 31, |       
|                               |  |                              |       
|                               |  | 2006                         |        |   | 2005 |   |       | 2004 | 
|                               |  |                              |        |   |      |   |       |      | 
|                               |  | (In millions)                |       
|USA Fiber Cement               |  | $                            | 342.6  |   |      | $ | 241.5 |      |  | $ | 195.6 |  
|Asia Pacific Fiber Cement      |  |                              | 41.7   |   |      |   | 46.8  |      |  |   | 37.6  |  
|Research and Development       |  |                              | (15.7  | ) |      |   | (17.5 | )    |  |   | (17.6 | )
|Other(1)                       |  |                              | (26.5  | ) |      |   | (11.8 | )    |  |   | (15.9 | )
|                               |  |                              |        |   |      |   |       |      | 
|Total segment operating income |  |                              | 342.1  |   |      |   | 259.0 |      |  |   | 199.7 |  
|General Corporate              |  |                              | (61.4  | ) |      |   | (62.8 | )    |  |   | (27.5 | )
|Asbestos provision             |  |                              | (715.6 | ) |      |   |      |      |  |   |      |  
|                               |  |                              |        |   |      |   |       |      | 
|Total operating (loss) income  |  | $                            | (434.9 | ) |      | $ | 196.2 |      |  | $ | 172.2 |  
|                               |  |                              |        |   |      |   |       |      | 






|    |                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes impairment charge of $13.4 million in fiscal year
    2006 related to the closure of our roofing pilot plant. See Item
    4, Information on the Company  Recent
    Developments.



| |                                                                    
| | -------------------------------------------------------------------
| | Year Ended March 31, 2006 Compared to Year Ended
    March 31, 2005

Total Net Sales.


USA Fiber Cement Net Sales.






® ®


67



---



##### Table of Contents



® ®


®




®


ramp-up ramp-up


Asia Pacific Fiber Cement Net Sales.


® tm ® ®




Other Sales. tm




68



---



##### Table of Contents









Gross Profit.






Selling, General and Administrative (SG&A) Expenses.


Research and Development Expenses.


SCI and Other Related Expenses.




69



---



##### Table of Contents





Asbestos Provision.


Conditions Precedent Under Discussion with the ATO.




Intention to Make Payments to Asbestos Claimants.




Operating Income.




70



---



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Net Interest Expense.


Income Tax Expense.


Income from Continuing Operations.




| |                                                                    
| | -------------------------------------------------------------------
| | Year Ended March 31, 2005 Compared to Year Ended
    March 31, 2004

Total Net Sales.


71



---



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USA Fiber Cement Net Sales.


® ® ® ® ®


® ®


ramp-up


Asia Pacific Fiber Cement Net Sales.


® ® ®




72



---



##### Table of Contents





Other Sales. tm








®


Gross Profit.






73



---



##### Table of Contents



Selling, General and Administrative (SG&A) Expenses.


Research and Development Expenses.


SCI and Other Related Expenses.






Other Operating Expenses.


Operating Income.




74



---



##### Table of Contents















Net Interest Expense.


Other (Expense) Income.


Income Tax Expense.


Income from Continuing Operations.


75



---



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Discontinued Operations


wind-up




| |                 
| | ----------------
| | Building Systems





| |       
| | ------
| | ABN 60







76



---



##### Table of Contents







| |                           
| | --------------------------
| | Disposal of Chile Business





Impact of Recent Accounting Pronouncements




| |                
| | ---------------
| | Inventory Costs





| |                           
| | --------------------------
| | American Jobs Creation Act





77



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##### Table of Contents





| |                                 
| | --------------------------------
| | Exchanges of Non-Monetary Assets





| |                    
| | -------------------
| | Share-Based Payment





| |                                         
| | ----------------------------------------
| | Conditional Asset Retirement Obligations





| |                                         
| | ----------------------------------------
| | Accounting Changes and Error Corrections





| |                        
| | -----------------------
| | Uncertain Tax Positions



Liquidity and Capital Resources




78



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|                                                                                                                                                    |  |                   |      |   |                |   |           |             |  |   |       | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---- | - | -------------- | - | --------- | ----------- |  | - | ----- | 
|                                                                                                                                                    |  | At March 31, 2006 |     
|                                                                                                                                                    |  |                   |     
|                                                                                                                                                    |  | Effective         |      |   |                |   | Principal |            
|Description                                                                                                                                         |  | Interest Rate     |      |   | Total Facility |   |           | Outstanding | 
|                                                                                                                                                    |  |                   |      |   |                |   |           |             | 
|                                                                                                                                                    |  | (In millions)     |     
|US$ notes, fixed interest, repayable annually in varying
    tranches from November 2006 through November 2013                                      |  |                   | 7.16 | % |                | $ | 121.7     |             |  | $ | 121.7 | 
|US$ 364-day facilities, can be drawn in US$, variable interest
    rates based on LIBOR plus margin, can be repaid and redrawn
    until June 2007  |  |                   | 5.41 | % |                |   | 110.0     |             |  |   | 81.0  | 
|US$ term facilities, can be drawn in US$, variable interest
    rates based on LIBOR plus margin, can be repaid and redrawn
    until December 2006 |  |                   | 5.27 | % |                |   | 245.0     |             |  |   | 100.0 | 
|                                                                                                                                                    |  |                   |      |   |                |   |           |             | 
|Total                                                                                                                                               |  |                   |      |   |                | $ | 476.7     |             |  | $ | 302.7 | 
|                                                                                                                                                    |  |                   |      |   |                |   |           |             | 



364-day 364-day U.S.-dollar






79



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U.S.-dollar U.S.-dollar U.S.-dollar






| |   |                                                            
| | - | -----------------------------------------------------------
| |  | existing cash and unutilized committed facilities;         
|
| |  | net operating cash flow during the current year;           
|
| |  | an extension of the term of existing credit facilities; and
|
| |  | the addition of proposed new funding facilities.           









| |                                                                                
| | -------------------------------------------------------------------------------
| | Cash Flow  Year Ended March 31, 2006
    compared to Year Ended March 31, 2005





80



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U.S.-dollar




| |                                                                                
| | -------------------------------------------------------------------------------
| | Cash Flow  Year Ended March 31, 2005
    compared to Year Ended March 31, 2004









| |                                   
| | ----------------------------------
| | Capital Requirements and Resources







81



---



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82



---



##### Table of Contents













| |                     
| | --------------------
| | Capital Expenditures



® ® ® ®




83



---



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| |                        
| | -----------------------
| | Contractual Obligations



|                           |       |               |       |                                     |      |   |       |              |  |   |              |      |  |            |      |      |  |   |      |      | 
|-------------------------- | ----- | ------------- | ----- | ----------------------------------- | ---- | - | ----- | ------------ |  | - | ------------ | ---- |  | ---------- | ---- | ---- |  | - | ---- | ---- | 
|                           |       | Payments Due  |      
|                           |       |               |      
|                           |       |               |       | During Fiscal Year Ending March 31, |     
|                           |       |               |       |                                     |     
|                           |       | Total         |       |                                     | 2007 |   |       | 2008 to 2009 |  |   | 2010 to 2011 |      |  | Thereafter |     
|                           |       |               |       |                                     |      |   |       |              |  |   |              |      |  |            |     
|                           |       | (In millions) |      
|Long-term Debt(1)          |       | $             | 121.7 |                                     |      | $ | 121.7 |              |  | $ |             |      |  | $          |     |      |  | $ |     |     
|Interest on Long-term Debt |       |               | 10.4  |                                     |      |   | 10.4  |              |  |   |             |      |  |            |     |      |  |   |     |     
|Operating Leases           |       |               | 142.8 |                                     |      |   | 15.8  |              |  |   | 26.3         |      |  |            | 22.0 |      |  |   | 78.7 |     
|Purchase Obligations(2)    |       |               | 22.2  |                                     |      |   | 22.2  |              |  |   |             |      |  |            |     |      |  |   |     |     
|                           |       |               |       |                                     |      |   |       |              |  |   |              |      |  |            |     
|                           | Total |               | $     | 297.1                               |      |   | $     | 170.1        |  |   | $            | 26.3 |  |            | $    | 22.0 |  |   | $    | 78.7 | 
|                           |       |               |       |                                     |      |   |       |              |  |   |              |      |  |            |     






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Under the terms of the
    U.S.-dollar
    non-collateralized notes agreement (fixed-rate debt), prepayment
    was permitted and on April 28, 2006, we issued a notice to
    all noteholders to prepay in full all outstanding notes on
    May 8, 2006. On May 8, 2006, the
    U.S.-dollar
    non-collateralized notes were prepaid in full, including a
    make-whole payment of $6.0 million.                                                                                                                                                   
|   
|(2) | Purchase Obligations are defined as agreements to purchase goods
    or services that are enforceable and legally-binding on us and
    that specify all significant terms, including: fixed or minimum
    quantities to be purchased; fixed, minimum or variable price
    provisions; and the approximate timing of the transactions.
    Purchase obligations listed above primarily represent
    commitments for capital expenditures, the majority of which
    relate to the construction of the plant we are building in
    Pulaski, Virginia.



asbestos-related


84



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Off-Balance Sheet Arrangements




Inflation




Seasonality and Quarterly Variability




Research and Development








Outlook










85



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##### Table of Contents


















|        |                                           
|------- | ------------------------------------------
|Item 6. | Directors, Senior Management and Employees

Board Practices and Senior Management




| |                
| | ---------------
| | Board Structure





www.jameshardie.com.




| |               
| | --------------
| | Managing Board



| |        
| | -------
| | Members







86



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| |                 
| | ----------------
| | Responsibilities





| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | the general affairs, operations and finance of the
    Company; and                     
|
| |  | ensuring the implementation of our goals, strategy and policies,
    to achieve results.









| |                  
| | -----------------
| | Supervisory Board



| |        
| | -------
| | Members







| |   |                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | such member(s) retire no later than the end of the first General
    Meeting following their appointment; and                                                                                                                               
|
| |  | the number of the members of the Supervisory Board appointed by
    the Supervisory Board at any given time does not exceed
    one-third of the aggregate number of members of the Supervisory
    Board as fixed by the Supervisory Board.





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| |                 
| | ----------------
| | Responsibilities





| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | supervising the policy and actions pursued by the Managing Board;                            
|
| |  | supervising the general course of our affairs and the business
    enterprise we operate; and
|
| |  | advising the Managing Board.                                                                 







| |            
| | -----------
| | Joint Board



| |        
| | -------
| | Members











| |                 
| | ----------------
| | Responsibilities

12-month










| |          
| | ---------
| | Processes



88



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##### Table of Contents









Directors




| |               
| | --------------
| | Qualifications







| |             
| | ------------
| | Independence

















89



---



##### Table of Contents















| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | undertaken to advise the Joint Board of any change in their
    circumstances that could affect their independence; and
|
| |  | completed a comprehensive questionnaire that confirms their
    independence.                                          



| |                     
| | --------------------
| | Director Orientation







| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | visits to our facilities, meetings with management and customers;                      
|
| |  | reviews of financial position, strategy, operating performance
    and risk management;
|
| |  | a review of his or her rights, duties and
    responsibilities; and                    
|
| |  | a discussion of the role of Supervisory Board Committees.                              







| |             
| | ------------
| | Remuneration





90



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| |                
| | ---------------
| | Indemnification





| |                      
| | ---------------------
| | Management Succession



Board Committees






| |                
| | ---------------
| | Audit Committee





| |                         
| | ------------------------
| | Members and Independence







91



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##### Table of Contents











| |                                     
| | ------------------------------------
| | Purpose, Duties and Responsibilities



Standards and Quality:


Financial Reports:


Risk Assessment and Management:




| |   |                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------
| |  | the identification of strategic, operational and financial risks;                                       
|
| |  | the establishment of effective systems to monitor, assess,
    prioritize, mitigate and manage risk; and
|
| |  | reporting systems for monitoring compliance with risk policies.                                         

External Audit:


Internal Audit:


Internal Controls:


92



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Disclosure Controls and Procedures:


Complaints:




| |         
| | --------
| | Meetings





| |               
| | --------------
| | Communications





| |                    
| | -------------------
| | Access and Advisors





| |          
| | ---------
| | Standards





| |        
| | -------
| | Charter





| |              
| | -------------
| | Annual Review





| |                      
| | ---------------------
| | Conflicts of Interest



93



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| |          
| | ---------
| | Reporting





| |                
| | ---------------
| | Special Reviews





| |                           
| | --------------------------
| | Annual Information Meeting





| |                             
| | ----------------------------
| | Certifying Financial Reports



20-F, 20-F




| |                                               
| | ----------------------------------------------
| | Audit Committees Risk Management Subcommittee





www.jameshardie.com




| |                                    
| | -----------------------------------
| | Nominating and Governance Committee





| |                         
| | ------------------------
| | Members and Independence





94



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| |                                     
| | ------------------------------------
| | Purpose, Duties and Responsibilities





| |                 
| | ----------------
| | Outside Advisors





| |         
| | --------
| | Meetings





| |       
| | ------
| | Report



www.jameshardie.com.




| |                       
| | ----------------------
| | Remuneration Committee





| |                         
| | ------------------------
| | Members and Independence





95



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16b-3








| |                                      
| | -------------------------------------
| | Purpose, Duties, and Responsibilities





| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | administers and makes recommendations on the Companys
    incentive compensation and equity-based remuneration plans;                                       
|
| |  | reviews the remuneration of Supervisory Board Directors for
    service on the Supervisory Board and Board committees;                                       
|
| |  | reviews the remuneration policy for members of the Managing
    Board; and                                                                                   
|
| |  | makes recommendations to the Supervisory Board on the
    Companys recruitment, retention and termination policies
    and procedures for senior management.



| |              
| | -------------
| | Subcommittees





| |                 
| | ----------------
| | Outside Advisors





| |         
| | --------
| | Meetings





| |       
| | ------
| | Report



www.jameshardie.com.


96



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| |                      
| | ---------------------
| | Policies and Programs





| |   |                                                
| | - | -----------------------------------------------
| |  | Risk Management;                               
|
| |  | Business Conduct and Ethics;                   
|
| |  | Ethics Hotline (Whistleblower);                
|
| |  | Continuous Disclosure and Market Communication;
|
| |  | Insider Trading; and                           
|
| |  | Corporate Governance Principles.               



| |                
| | ---------------
| | Risk Management





| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | the principal strategic, operational and financial risks are
    identified;                                               
|
| |  | effective systems are in place to monitor and manage
    risks; and                                                        
|
| |  | reporting systems, internal controls and arrangements for
    monitoring compliance with laws and regulations are adequate.





| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | established policies and procedures in relation to treasury
    operations, including the use of financial derivatives;                                                     
|
| |  | issued and revised standards and procedures in relation to
    environmental and health and safety matters;                                                                 
|
| |  | implemented and maintained training programs in relation to
    legal issues such as trade practices/antitrust, trade secrecy,
    and Intellectual Property protection; and
|
| |  | issued procedures requiring that significant capital and
    recurring expenditure is approved at the appropriate levels.                                                   









97



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20-F




| |                            
| | ---------------------------
| | Business Conduct and Ethics



www.jameshardie.com




| |                               
| | ------------------------------
| | Ethics Hotline (Whistleblower)





| |                                                          
| | ---------------------------------------------------------
| | Continuous Disclosure and Market Communication
    Policy







| |              
| | -------------
| | Communication





| |   |                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
| |  | management briefings and presentations to accompany quarterly
    results, which are accessible on a live webcast and
    teleconference;

98



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| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | audio webcasts of other management briefings and view webcasts
    of the shareholder information meeting;                                                                                                           
|
| |  | a comprehensive Investor Relations website that displays all
    Company announcements and notices as soon as they have been
    cleared by the ASX, as well as all major management and road
    show presentations;
|
| |  | United States and Australian site visits and briefings on
    strategy for investment analysts;                                                                                                                      
|
| |  | an e-mail alert service
    to advise investors and other interested parties of
    announcements and other events; and                                                                                              
|
| |  | equality of access for shareholders, investment analysts and the
    media to briefings, presentations and meetings.                                                                                                 



| |                            
| | ---------------------------
| | Shareholders Participation





www.jameshardie.com








www.jameshardie.com


www.jameshardie.com


99



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| |                
| | ---------------
| | Insider Trading







www.jameshardie.com




| |                                
| | -------------------------------
| | Corporate Governance Principles

www.jameshardie.com




| |                    
| | -------------------
| | Updated Information

www.jameshardie.com up-to


Current and Former Directors and Executive Officers




| |                    
| | -------------------
| | Recent Developments















100



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##### Table of Contents













|                     |  |     |    |  |          |                                                                                           |              |  |      | 
|-------------------- |  | --- | -- |  | -------- | ----------------------------------------------------------------------------------------- | ------------ |  | ---- | 
|Name                 |  | Age |    |  | Position |                                                                                           | Term Expires | 
|                     |  |     |    |  |          |                                                                                           |              | 
|Supervisory Board    |  |     |    |  |          |                                                                                           |              |  |      | 
|Meredith Hellicar    |  |     | 52 |  |          | Chairman of the Joint Board and Chairman of the Supervisory Board                         |              |  | 2009 | 
|John Barr            |  |     | 59 |  |          | Deputy Chairman of the Joint Board and Deputy Chairman of the
    Supervisory Board       |              |  | 2007 | 
|Michael Brown        |  |     | 60 |  |          | Member of the Joint Board and the Supervisory Board                                       |              |  | 2008 | 
|Michael Gillfillan   |  |     | 58 |  |          | Member of the Joint Board and the Supervisory Board                                       |              |  | 2009 | 
|James Loudon         |  |     | 63 |  |          | Member of the Joint Board and the Supervisory Board                                       |              |  | 2008 | 
|Donald McGauchie     |  |     | 56 |  |          | Member of the Joint Board and the Supervisory Board                                       |              |  | 2009 | 
|Managing Board       |  |     |    |  |          |                                                                                           |              |  |      | 
|Louis Gries          |  |     | 52 |  |          | Chief Executive Officer, Member of the Joint Board and Chairman
    of the Managing Board |              |  |      | 
|Russell Chenu        |  |     | 57 |  |          | Chief Financial Officer and Member of the Managing Board                                  |              |  |      | 
|Benjamin Butterfield |  |     | 46 |  |          | General Counsel, Member of the Managing Board and Company
    Secretary                   |              |  |      | 

|                                      |  |     |    |  |          |                                                    
|------------------------------------- |  | --- | -- |  | -------- | ---------------------------------------------------
|Other Senior Leadership Team Officers |  | Age |    |  | Position
|                                      |  |     |    |  |         
|Steve Ashe                            |  |     | 46 |  |          | Vice President  Investor Relations                
|Peter Baker                           |  |     | 55 |  |          | Executive Vice President  Australia               
|James Chilcoff                        |  |     | 42 |  |          | Vice President  International Business            
|Mark Fisher                           |  |     | 35 |  |          | Vice President  Research and Development          
|Grant Gustafson(1)                    |  |     | 44 |  |          | Vice President  Interiors and Business Development
|Nigel Rigby                           |  |     | 39 |  |          | Vice President  Emerging Markets                  
|Robert Russell                        |  |     | 40 |  |          | Vice President  Established Markets               
|Cathy Wallace(2)                      |  |     | 50 |  |          | Vice President  Global Human Resources            

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|                                                     |  |  |    |  |  |                                                                             
|---------------------------------------------------- |  |  | -- |  |  | ----------------------------------------------------------------------------
|Former Directors and Senior Leadership Team Officers |  |  |    | 
|                                                     |  |  |    | 
|Peter Cameron(3)                                     |  |  | 54 |  |  | Former Member of the Joint Board and Supervisory Board                      
|Gregory Clark(4)                                     |  |  | 63 |  |  | Former Member of the Joint Board and the Supervisory Board                  
|W. (Pim) Vlot(5)                                     |  |  | 41 |  |  | Former Interim Member of the Managing Board and Former Company
    Secretary
|Donald Merkley(6)                                    |  |  | 43 |  |  | Former Executive Vice President  Research and
    Development              
|David Merkley(7)                                     |  |  | 43 |  |  | Former Executive Vice President  Engineering and
    Process Development   






|    |                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Gustafson joined us as a Vice President in April 2006.                                                                                                                                                                                      
|   
|(2) | Ms. Wallace joined us as a Vice President in September 2005.                                                                                                                                                                                    
|   
|(3) | On January 19, 2006, Mr. Cameron resigned from our
    Joint and Supervisory Boards and from the Nominating and
    Governance Committee for health reasons. Mr. Cameron died
    in February 2006.                                             
|   
|(4) | On May 9, 2006, Dr. Clark resigned from our Joint
    Board, Supervisory Board, Audit Committee and Nominating and
    Governance Committee.                                                                                                    
|   
|(5) | Mr. Vlots temporary employment agreement, as amended,
    provided that unless an indefinite contract was negotiated, the
    contract would automatically terminate on June 30, 2005.
    The agreement expired by its terms on June 30, 2005.
|   
|(6) | On December 19, 2005, Mr. Donald Merkley resigned from
    his position as Executive Vice President  Research
    and Development and from the Company.                                                                                        
|   
|(7) | On September 1, 2006, Mr. David Merkley resigned from
    his position as Executive Vice President  Engineering
    and Process Development and from the Company.                                                                              

Directors


Meredith Hellicar


John Barr


102



---



##### Table of Contents





Michael Brown


Michael Gillfillan


James Loudon


103



---



##### Table of Contents



Donald McGauchie


Louis Gries


Russell Chenu


Benjamin Butterfield


Senior Leadership Team Officers


Steve Ashe


104



---



##### Table of Contents



Peter Baker


James Chilcoff


Mark Fisher ®


Grant Gustafson


Nigel Rigby


Robert Russell


105



---



##### Table of Contents





Cathy Wallace




Former Directors and Senior Leadership Team Officers




| |                 
| | ----------------
| | Former Directors

Peter Cameron


Gregory Clark U.S.-based


W. (Pim) Vlot


106



---



##### Table of Contents







| |                                       
| | --------------------------------------
| | Former Senior Leadership Team Officers

David Merkley


Donald Merkley


Employees




|                                             |                 |                    |       |       |      |  |       |       |  |  |       |       | 
|-------------------------------------------- | --------------- | ------------------ | ----- | ----- | ---- |  | ----- | ----- |  |  | ----- | ----- | 
|                                             |                 | Fiscal Years Ended |      
|                                             |                 | March 31,          |      
|                                             |                 |                    |      
|                                             |                 | 2006               |       |       | 2005 |  |       | 2004  | 
|                                             |                 |                    |       |       |      |  |       |       | 
|Fiber Cement United States and Canada        |                 |                    | 2,150 |       |      |  | 1,820 |       |  |  | 1,722 |      
|Fiber Cement Australia                       |                 |                    | 402   |       |      |  | 424   |       |  |  | 459   |      
|Fiber Cement New Zealand                     |                 |                    | 170   |       |      |  | 147   |       |  |  | 161   |      
|Fiber Cement Philippines                     |                 |                    | 202   |       |      |  | 211   |       |  |  | 225   |      
|Pipes (United States and Australia)          |                 |                    | 129   |       |      |  | 162   |       |  |  | 178   |      
|Fiber Cement Europe                          |                 |                    | 58    |       |      |  | 31    |       |  |  | 37    |      
|Roofing (United States)                      |                 |                    | 24    |       |      |  | 19    |       |  |  | 18    |      
|Fiber Cement Chile                           |                 |                    |      |       |      |  | 139   |       |  |  | 122   |      
|Research & Development, including Technology |                 |                    | 118   |       |      |  | 131   |       |  |  | 117   |      
|General Corporate                            |                 |                    | 50    |       |      |  | 38    |       |  |  | 34    |      
|                                             |                 |                    |       |       |      |  |       |       | 
|                                             | Total Employees |                    |       | 3,303 |      |  |       | 3,122 |  |  |       | 3,073 | 
|                                             |                 |                    |       |       |      |  |       |       | 

107



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##### Table of Contents





Compensation




| |             
| | ------------
| | Remuneration









|                        |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |         | 
|----------------------- | ---------------- | ---------- | - | ------- | -------- |  | - | ----------------- |  |  | ----- | ------ |  |  | - | ------- | 
|                        |                  | Primary    |   |         | Equity   |  |   | Post-employment   |  |  |      
|                        |                  |            |   |         |          |  |   |                   |  |  |      
|                        |                  | Directors |   |         | JHI NV   |  |   |                   |  | 
|Name                    |                  | Fees       |   |         | Stock(1) |  |   | Superannuation(2) |  |  | Total |       
|                        |                  |            |   |         |          |  |   |                   |  |  |       |       
|                        |                  | US$        |   |         | US$      |  |   | US$               |  |  | US$   |       
|Non-Executive Directors |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |        
|M. Hellicar             |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |        
|                        | Fiscal year 2006 |            | $ | 178,777 |          |  | $ | 20,000            |  |  | $     | 17,890 |  |  | $ | 216,667 | 
|                        | Fiscal year 2005 |            |   | 128,750 |          |  |   | 20,000            |  |  |       | 13,388 |  |  |   | 162,138 | 
|J. D. Barr              |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |        
|                        | Fiscal year 2006 |            |   | 51,100  |          |  |   | 10,000            |  |  |       |       |  |  |   | 61,100  | 
|                        | Fiscal year 2005 |            |   | 60,000  |          |  |   | 10,000            |  |  |       |       |  |  |   | 70,000  | 
|M. R. Brown             |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |        
|                        | Fiscal year 2006 |            |   | 50,598  |          |  |   | 10,000            |  |  |       | 5,454  |  |  |   | 66,052  | 
|                        | Fiscal year 2005 |            |   | 60,000  |          |  |   | 10,000            |  |  |       | 6,300  |  |  |   | 76,300  | 
|M. J. Gillfillan        |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |        
|                        | Fiscal year 2006 |            |   | 51,100  |          |  |   | 10,000            |  |  |       |       |  |  |   | 61,100  | 
|                        | Fiscal year 2005 |            |   | 55,000  |          |  |   | 10,000            |  |  |       |       |  |  |   | 65,000  | 
|J. R. H. Loudon         |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |        
|                        | Fiscal year 2006 |            |   | 47,767  |          |  |   | 10,000            |  |  |       |       |  |  |   | 57,767  | 
|                        | Fiscal year 2005 |            |   | 40,000  |          |  |   | 20,000            |  |  |       |       |  |  |   | 60,000  | 
|D. G. McGauchie         |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |        
|                        | Fiscal year 2006 |            |   | 50,598  |          |  |   | 10,000            |  |  |       | 5,454  |  |  |   | 66,052  | 
|                        | Fiscal year 2005 |            |   | 55,000  |          |  |   | 10,000            |  |  |       | 5,850  |  |  |   | 70,850  | 

108



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|                                               |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |         | 
|---------------------------------------------- | ---------------- | ---------- | - | ------- | -------- |  | - | ----------------- |  |  | ----- | ------ |  |  | - | ------- | 
|                                               |                  | Primary    |   |         | Equity   |  |   | Post-employment   |  |  |      
|                                               |                  |            |   |         |          |  |   |                   |  |  |      
|                                               |                  | Directors |   |         | JHI NV   |  |   |                   |  | 
|Name                                           |                  | Fees       |   |         | Stock(1) |  |   | Superannuation(2) |  |  | Total |       
|                                               |                  |            |   |         |          |  |   |                   |  |  |       |       
|                                               |                  | US$        |   |         | US$      |  |   | US$               |  |  | US$   |       
|Former Non-Executive Directors                 |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |        
|P. Cameron(3)                                  |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |        
|                                               | Fiscal year 2006 |            |   | 30,000  |          |  |   | 25,000            |  |  |       | 4,950  |  |  |   | 59,950  | 
|                                               | Fiscal year 2005 |            |   | 40,000  |          |  |   | 20,000            |  |  |       | 5,400  |  |  |   | 65,400  | 
|G. J. Clark(4)                                 |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |        
|                                               | Fiscal year 2006 |            |   | 51,100  |          |  |   | 10,000            |  |  |       |       |  |  |   | 61,100  | 
|                                               | Fiscal year 2005 |            |   | 50,000  |          |  |   | 10,000            |  |  |       |       |  |  |   | 60,000  | 
|Total Compensation for Non-Executive Directors |                  |            |   |         |          |  |   |                   |  |  |       |        |  |  |   |        
|                                               | Fiscal year 2006 |            | $ | 511,040 |          |  | $ | 105,000           |  |  | $     | 33,748 |  |  | $ | 649,788 | 
|                                               | Fiscal year 2005 |            | $ | 488,750 |          |  | $ | 110,000           |  |  | $     | 30,938 |  |  | $ | 629,688 | 

|                                           |                     |          |   |           |            |  |            |             |            |  |          |            |  |            |   |        |          |  |   |           |  |  |       |         |  |  |   |        |  |  |   |           | 
|------------------------------------------ | ------------------- | -------- | - | --------- | ---------- |  | ---------- | ----------- | ---------- |  | -------- | ---------- |  | ---------- | - | ------ | -------- |  | - | --------- |  |  | ----- | ------- |  |  | - | ------ |  |  | - | --------- | 
|                                           |                     |          |   | Post-     |            |  |            |             |            |  |         
|                                           |                     | Primary  |   |           | employment |  |            | Equity      |            |  | Other    |            |  |           
|                                           |                     |          |   |           |            |  |            |             |            |  |          |            |  |           
|                                           |                     |          |   | Super-    |            |  |            |             | Relocation |  |          |            |  |           
|                                           |                     |          |   | annuation |            |  |            |             | and        |  |          |            |  |           
|                                           |                     |          |   | Noncash   |            |  | and 401(k) |             |            |  |          | Expatriate |  |            |   |        |         
|Name                                       |                     | Base Pay |   |           | Bonuses(5) |  |            | Benefits(6) |            |  | Benefits |            |  | Options(7) |   |        | Benefits |  |   | Severance |  |  | Total |        
|                                           |                     |          |   |           |            |  |            |             |            |  |          |            |  |            |   |        |          |  |   |           |  |  |       |        
|                                           |                     | US$      |   |           | US$        |  |            | US$         |            |  | US$      |            |  | US$        |   |        | US$      |  |   | US$       |  |  | US$   |        
|Executive Directors                        |                     |          |   |           |            |  |            |             |            |  |          |            |  |            |   |        |          |  |   |           |  |  |       |         |  |  |   |        |  |  |   |          
|L. Gries                                   |                     |          |   |           |            |  |            |             |            |  |          |            |  |            |   |        |          |  |   |           |  |  |       |         |  |  |   |        |  |  |   |          
|                                           | Fiscal year 2006    |          | $ | 740,385   |            |  | $          | 1,890,363   |            |  | $        | 42,657     |  |            | $ | 10,478 |          |  | $ | 717,218   |  |  | $     | 110,774 |  |  | $ |       |  |  | $ | 3,511,875 | 
|                                           | Fiscal year 2005    |          |   | 576,654   |            |  |            | 1,160,452   |            |  |          | 136,012    |  |            |   | 13,000 |          |  |   | 233,155   |  |  |       |        |  |  |   |       |  |  |   | 2,119,273 | 
|R. Chenu                                   |                     |          |   |           |            |  |            |             |            |  |          |            |  |            |   |        |          |  |   |           |  |  |       |         |  |  |   |        |  |  |   |          
|                                           | Fiscal year 2006    |          |   | 564,546   |            |  |            | 159,832     |            |  |          | 18,558     |  |            |   | 50,809 |          |  |   | 62,736    |  |  |       | 70,454  |  |  |   |       |  |  |   | 926,935   | 
|                                           | Fiscal year 2005(8) |          |   | N/A       |            |  |            | N/A         |            |  |          | N/A        |  |            |   | N/A    |          |  |   | N/A       |  |  |       | N/A     |  |  |   | N/A    |  |  |   | N/A       | 
|B. Butterfield                             |                     |          |   |           |            |  |            |             |            |  |          |            |  |            |   |        |          |  |   |           |  |  |       |         |  |  |   |        |  |  |   |          
|                                           | Fiscal year 2006    |          |   | 311,250   |            |  |            | 450,450     |            |  |          | 30,410     |  |            |   | 9,913  |          |  |   | 128,369   |  |  |       | 215,717 |  |  |   |       |  |  |   | 1,146,109 | 
|                                           | Fiscal year 2005(9) |          |   | N/A       |            |  |            | N/A         |            |  |          | N/A        |  |            |   | N/A    |          |  |   | N/A       |  |  |       | N/A     |  |  |   | N/A    |  |  |   | N/A       | 
|Former Executive Director                  |                     |          |   |           |            |  |            |             |            |  |          |            |  |            |   |        |          |  |   |           |  |  |       |         |  |  |   |        |  |  |   |          
|P. Vlot(10)                                |                     |          |   |           |            |  |            |             |            |  |          |            |  |            |   |        |          |  |   |           |  |  |       |         |  |  |   |        |  |  |   |          
|                                           | Fiscal year 2006    |          |   | 17,250    |            |  |            |            |            |  |          |           |  |            |   |       |          |  |   |          |  |  |       |        |  |  |   | 60,880 |  |  |   | 78,130    | 
|                                           | Fiscal year 2005    |          |   | 136,436   |            |  |            |            |            |  |          |           |  |            |   | 3,619  |          |  |   |          |  |  |       |        |  |  |   |       |  |  |   | 140,055   | 
|Total Compensation for Executive Directors |                     |          |   |           |            |  |            |             |            |  |          |            |  |            |   |        |          |  |   |           |  |  |       |         |  |  |   |        |  |  |   |          
|                                           | Fiscal year 2006    |          | $ | 1,633,431 |            |  | $          | 2,500,645   |            |  | $        | 91,625     |  |            | $ | 71,200 |          |  | $ | 908,323   |  |  | $     | 396,945 |  |  | $ | 60,880 |  |  | $ | 5,663,049 | 
|                                           | Fiscal year 2005    |          | $ | 713,090   |            |  | $          | 1,160,452   |            |  | $        | 136,012    |  |            | $ | 16,619 |          |  | $ | 233,155   |  |  | $     |        |  |  | $ |       |  |  | $ | 2,259,328 | 

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|                                          |                      |          |   |           |            |  |        |             |  |  |          |         |  |            |   |        |               |  |   |           |  |  |   |         |  |  |   |           | 
|----------------------------------------- | -------------------- | -------- | - | --------- | ---------- |  | ------ | ----------- |  |  | -------- | ------- |  | ---------- | - | ------ | ------------- |  | - | --------- |  |  | - | ------- |  |  | - | --------- | 
|                                          |                      |          |   | Post-     |            |  |        |             |  |  |         
|                                          |                      | Primary  |   |           | employment |  |        | Equity      |  |  | Other    |         |  |           
|                                          |                      |          |   |           |            |  |        |             |  |  |          |         |  |           
|                                          |                      |          |   |           |            |  |        | Relocation  |  |  |         
|                                          |                      |          |   |           |            |  |        | Allowances  |  |  |         
|                                          |                      |          |   |           |            |  |        | and Other   |  |  |         
|                                          |                      |          |   | Noncash   |            |  | 401(k) |             |  |  |          | Non-    |  |            |  
|Name                                      |                      | Base Pay |   |           | Bonuses(5) |  |        | Benefits(6) |  |  | Benefits |         |  | Options(7) |   |        | recurring(11) |  |   | Total     | 
|                                          |                      |          |   |           |            |  |        |             |  |  |          |         |  |            |   |        |               |  |   |           | 
|                                          |                      | US$      |   |           | US$        |  |        | US$         |  |  | US$      |         |  | US$        |   |        | US$           |  |   | US$       | 
|Current Executive Officers                |                      |          |   |           |            |  |        |             |  |  |          |         |  |            |   |        |               |  |   |           |  |  |   |         |  |  |   |          
|J. Chilcoff                               |                      |          |   |           |            |  |        |             |  |  |          |         |  |            |   |        |               |  |   |           |  |  |   |         |  |  |   |          
|                                          | Fiscal year 2006     |          | $ | 290,385   |            |  | $      | 418,231     |  |  | $        | 13,899  |  |            | $ | 13,269 |               |  | $ | 157,409   |  |  | $ | 113,038 |  |  | $ | 1,006,231 | 
|                                          | Fiscal year 2005     |          |   | 234,231   |            |  |        | 259,688     |  |  |          | 31,956  |  |            |   | 12,000 |               |  |   | 27,172    |  |  |   | 104,971 |  |  |   | 670,018   | 
|M. T. Fisher                              |                      |          |   |           |            |  |        |             |  |  |          |         |  |            |   |        |               |  |   |           |  |  |   |         |  |  |   |          
|                                          | Fiscal year 2006     |          |   | 260,962   |            |  |        | 376,467     |  |  |          | 30,039  |  |            |   | 14,242 |               |  |   | 191,791   |  |  |   |        |  |  |   | 873,501   | 
|                                          | Fiscal year 2005     |          |   | 215,770   |            |  |        | 262,062     |  |  |          | 50,301  |  |            |   | 12,946 |               |  |   | 107,084   |  |  |   | 17,438  |  |  |   | 665,601   | 
|N. Rigby                                  |                      |          |   |           |            |  |        |             |  |  |          |         |  |            |   |        |               |  |   |           |  |  |   |         |  |  |   |          
|                                          | Fiscal year 2006     |          |   | 260,962   |            |  |        | 356,419     |  |  |          | 32,919  |  |            |   |       |               |  |   | 159,020   |  |  |   | 1,257   |  |  |   | 810,577   | 
|                                          | Fiscal year 2005(12) |          |   | N/A       |            |  |        | N/A         |  |  |          | N/A     |  |            |   | N/A    |               |  |   | N/A       |  |  |   | N/A     |  |  |   | N/A       | 
|R. P. Russell                             |                      |          |   |           |            |  |        |             |  |  |          |         |  |            |   |        |               |  |   |           |  |  |   |         |  |  |   |          
|                                          | Fiscal year 2006     |          |   | 260,962   |            |  |        | 374,403     |  |  |          | 35,100  |  |            |   | 14,338 |               |  |   | 195,253   |  |  |   | 10,192  |  |  |   | 890,248   | 
|                                          | Fiscal year 2005     |          |   | 233,751   |            |  |        | 234,542     |  |  |          | 32,366  |  |            |   | 12,833 |               |  |   | 111,733   |  |  |   |        |  |  |   | 625,225   | 
|Former Executive Officers                 |                      |          |   |           |            |  |        |             |  |  |          |         |  |            |   |        |               |  |   |           |  |  |   |         |  |  |   |          
|David Merkley(13)                         |                      |          |   |           |            |  |        |             |  |  |          |         |  |            |   |        |               |  |   |           |  |  |   |         |  |  |   |          
|                                          | Fiscal year 2006     |          | $ | 323,826   |            |  | $      | 761,679     |  |  | $        | 24,315  |  |            | $ | 14,372 |               |  | $ | 258,299   |  |  | $ | 7,306   |  |  | $ | 1,389,797 | 
|                                          | Fiscal year 2005     |          |   | 303,769   |            |  |        | 475,573     |  |  |          | 87,978  |  |            |   | 13,000 |               |  |   | 192,269   |  |  |   |        |  |  |   | 1,072,589 | 
|Donald Merkley(14)                        |                      |          |   |           |            |  |        |             |  |  |          |         |  |            |   |        |               |  |   |           |  |  |   |         |  |  |   |          
|                                          | Fiscal year 2006     |          |   | 254,800   |            |  |        | 16,515      |  |  |          | 15,222  |  |            |   | 8,540  |               |  |   | 708,790   |  |  |   | 75,829  |  |  |   | 1,079,696 | 
|                                          | Fiscal year 2005     |          |   | 334,000   |            |  |        | 521,656     |  |  |          | 65,245  |  |            |   | 13,000 |               |  |   | 195,177   |  |  |   |        |  |  |   | 1,129,078 | 
|Total Compensation for Executive Officers |                      |          |   |           |            |  |        |             |  |  |          |         |  |            |   |        |               |  |   |           |  |  |   |         |  |  |   |          
|                                          | Fiscal year 2006     |          | $ | 1,651,897 |            |  | $      | 2,303,714   |  |  | $        | 151,494 |  |            | $ | 64,761 |               |  | $ | 1,670,562 |  |  | $ | 207,622 |  |  | $ | 6,050,050 | 
|                                          | Fiscal year 2005     |          | $ | 1,321,521 |            |  | $      | 1,753,521   |  |  | $        | 267,846 |  |            | $ | 63,779 |               |  | $ | 633,435   |  |  | $ | 122,409 |  |  | $ | 4,162,511 | 






| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | The annual allocation to non-executive directors of JHI NV stock
    to the value of $10,000 was approved by shareholders at the
    Annual General Meeting held on July 19, 2002. The
    non-executive directors can elect to take additional stock in
    lieu of fees.                                                                                                                                                                                                                                                                                                                          
|
| | (2) | The superannuation benefits include Australian-mandated 9%
    superannuation guarantee contributions on the Australian
    directors total fees.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | (3) | On January 19, 2006, Mr. Cameron resigned from the
    Joint and Supervisory Boards and from the Nominating and
    Governance Committee for health reasons.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | (4) | On May 9, 2006, Dr. Clark resigned from our Joint
    Board, Supervisory Board, Audit Committee, and Nominating and
    Governance Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | (5) | Includes all incentive amounts paid in the year indicated,
    including the portion of any incentive awarded for performance
    in the indicated year that was paid in that year, as well as,
    any performance incentive amounts realized as a result of prior
    years performance and paid in the applicable year as a
    result of our achievement of predetermined financial targets
    pursuant to the terms of our Economic Profit Incentive Plan. See
    Other Compensation: Economic Profit Incentive Plan
    for a summary of the terms of our Economic Profit Incentive Plan.
|
| | (6) | Includes the aggregate amount of all noncash benefits received
    by the executive in the year indicated. Examples of noncash
    benefits that may be received by our executives include medical
    and life insurance benefits, car and airfare allowances,
    membership in executive wellness programs, long service leaves,
    and tax services.                                                                                                                                                                                                                                           

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (7) | Options are valued using the Black-Scholes option-pricing model
    and the fair value of options granted are included in
    compensation during the period in which the options vest. The
    weighted average assumptions and weighted average fair value
    used for grants in fiscal year 2006 were as follows: 1.2%
    dividend yield; 27.4% expected volatility; 4.8% risk free
    interest rate; 3.3 years of expected life; and A$1.35
    weighted fair value at grant date. The Companys Shadow
    Stock Plan and non-US based Employee Stock Plan were terminated
    at the end of February 2005 and the value on that day of all the
    outstanding shares of these plans were paid to participants.
|
| | (8) | Mr. Chenu only became a member of the Managing Board during
    fiscal year 2006, following his election by shareholders at the
    annual meeting held on August 22, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | (9) | Mr. Butterfield only became a member of the Managing Board
    during fiscal year 2006, following his election by shareholders
    at the annual meeting held on August 22, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | On June 30, 2005, Mr. Vlots temporary employment
    agreement expired by its terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    
|(11) | Other non-recurring includes cash paid in lieu of vacation
    accrued, as permitted under our U.S. vacation policy and
    California law.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|(12) | Mr. Rigbys fiscal year 2005 remuneration did not
    place him among the Companys most highly remunerated
    executives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|(13) | On September 1, 2006, Mr. David Merkley resigned from
    the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    
|(14) | On December 19, 2005, Mr. Donald Merkley resigned from
    the Company. Beginning in calendar 2006, he will receive as
    severance payment 18 monthly payments equal in total to his
    most recent annual salary and average bonus over the last three
    years. He will continue vesting in his stock options until the
    end of his post-employment consulting agreement with the
    Company. All of the expense associated with his stock options
    was recorded during fiscal year 2006. Mr. Merkley received
    cash of $75,829 as payment for his accrued vacation time and
    this amount is recorded as Other Non-Recurring in this table.



Employment Contracts






| |                        
| | -----------------------
| | Chief Executive Officer



|                   |  |                                                                                                                                                                                                                                                                                      
|------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Components         |  | Details                                                                                                                                                                                                                                                                              
|                   |  |                                                                                                                                                                                                                                                                                      
|Length of contract |  | Three year term, commencing February 10, 2005. Term is
    automatically extended on 9th day of each February for an
    additional one year unless either party notifies the other,
    90 days in advance of the automatic renew date, that it
    does not want the term to renew.
|Base salary        |  | $750,000 per year. Salary will be reviewed annually by the
    JHI NV Board in April.                                                                                                                                                                                                

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|                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Components                  |  | Details                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Short-term incentive        |  | Annual incentive target is 100% of annual base salary:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                            |  |  80% of this incentive target is based on the Company
    meeting or exceeding aggressive performance objectives; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                            |  |  20% of this incentive target is based on the CEO
    meeting or exceeding personal performance objectives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                            |  | The Remuneration Committee recommends the Companys and
    CEOs performance objectives, and the performance against
    these objectives, to the Supervisory Board for approval. If the
    Companys performance exceeds the annual objective, the CEO
    realizes an incentive greater than his target incentive, but
    only one-third of the excess incentive is paid to the
    participant at the end of the fiscal year. The remaining
    two-thirds is then deposited with a notional bank and is paid to
    the CEO over the following two years if the Companys
    objectives are met in these years, or is reduced if the
    Companys objectives are not met.
|Long-term incentive         |  | The banking mechanism of the annual incentive plan is considered
    a long-term incentive. Upon the approval of the shareholders,
    stock options with performance hurdles will be granted each
    year. The recommended number of options to be granted will be
    appropriate for this level of executive in the U.S.                                                                                                                                                                                                                                                                                                                                                      
|Defined Contribution Plan   |  | The CEO may participate in the 401(k) defined contribution plan
    up to the annual IRS limit. The Company will match his
    contributions into the plan up to the annual IRS limit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Resignation                 |  | The CEO may cease his employment with the Company by providing
    written notice.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Termination by James Hardie |  | The Company may terminate the CEOs employment for cause or
    not for cause. If the Company terminates the employment, not for
    cause, or the CEO terminates his employment for good
    reason the Company will pay the following:                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                            |  | a. amount equivalent to 1.5 times the annual base salary at
    the time of termination; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                            |  | b. amount equivalent to 1.5 times the executives
    Average Annual Incentive actually paid in up to the previous
    three fiscal years as CEO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Post-termination Consulting |  | The Company will request the CEO, and the CEO will agree, to
    consult to the Company upon termination for a minimum of two
    years, as long as he maintains the Companys non-compete
    and confidentiality agreements, and he will receive his annual
    base salary and annual target and non-compete.                                                                                                                                                                                                                                                                                                                                                                  



| |                        
| | -----------------------
| | Chief Financial Officer



|                     |  |                                                                                                                                
|-------------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|Components           |  | Details                                                                                                                        
|                     |  |                                                                                                                                
|Length of contract   |  | Fixed period of two and a half (2.5) years concluding
    October 5, 2007.                                                     
|Base salary          |  | A$750,000 per year.                                                                                                            
|Short-term incentive |  | Annual incentive target is 33% of annual base salary based on
    the CFO meeting or exceeding personal performance objectives.

112



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|                                      |  |                                                                                                                                                                                                                                                                                                                             
|------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Components                            |  | Details                                                                                                                                                                                                                                                                                                                     
|                                      |  |                                                                                                                                                                                                                                                                                                                             
|Long-term incentive                   |  | Upon the approval of the shareholders, stock options with
    performance hurdles will be granted each year. The recommended
    number of options to be granted will equal one-third of the
    executives base salary.                                                                                                   
|Superannuation                        |  | The Company will contribute 9% of gross salary to Superannuation
    in the executives name.                                                                                                                                                                                                                               
|Resignation or Termination            |  | The Company or CFO may cease the CFOs employment with the
    Company by providing three months notice in writing.                                                                                                                                                                                                        
|Redundancy or material change in role |  | If the position of CFO is determined to be redundant or subject
    to a material adverse change the Company or the CFO may
    terminate the CFOs employment. The Company will pay the
    CFO a severance payment equal to the greater of
    12 months pay or the remaining proportion of the term
    of the contract.



| |                                      
| | -------------------------------------
| | Company Secretary and General Counsel



|                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Components                 |  | Details                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Length of contract         |  | Indefinite.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Base salary                |  | $315,000 per year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Short term incentive       |  | Annual incentive target is 65% of annual base salary:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                           |  |  80% of this incentive target is based on the Company
    meeting or exceeding aggressive performance objectives; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                           |  |  20% of this incentive target is based on the General
    Counsel and Company Secretary meeting or exceeding personal
    performance objectives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                           |  | The CEO recommends the General Counsel and Company
    Secretarys performance objectives and the performance
    against these objectives, to the Remuneration Committee and the
    Supervisory Board for approval. The Companys objectives
    are set by the Remuneration Committees recommendation to
    the Supervisory Board. If the Companys performance exceeds
    the annual objective, the executive realizes a incentive greater
    than his target incentive, but only one-third of the excess
    incentive is paid to the participant at the end of the fiscal
    year. The remaining two-thirds is then deposited with a notional
    bank and is paid to the General Counsel and Company Secretary
    over the following two years if the Companys objectives
    are met in these years, or is reduced if the Companys
    objectives are not met.
|Long-term incentive        |  | The banking mechanism of the annual incentive plan is considered
    a long-term incentive. Upon the approval of the shareholders,
    stock options with performance hurdles will be granted each
    year. The recommended number of options to be granted will be
    appropriate for this level of executive in the United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Defined Contribution Plan  |  | Since the General Counsel and Company Secretary may not
    participate in the U.S. 401(k) defined contribution plan up
    to the annual IRS limit while he is on assignment to The
    Netherlands, the Company will provide a payment up to the annual
    IRS limit directly to the executive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Resignation or Termination |  | The General Counsel and Company Secretary may cease his
    employment with the Company by providing written notice.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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|                            |  |                                                                                                                                                                                                                                                                                                                                                                
|--------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Components                  |  | Details                                                                                                                                                                                                                                                                                                                                                        
|                            |  |                                                                                                                                                                                                                                                                                                                                                                
|Termination by James Hardie |  | The Company may terminate the General Counsel and Company
    Secretarys employment for cause or not for cause.                                                                                                                                                                                                                                               
|Post-termination Consulting |  | The Company will request the General Counsel and Company
    Secretary, and he will agree, to consult to the Company upon
    termination for a minimum of two years, as long as he maintains
    the Companys non-compete and confidentiality agreements,
    and he will receive his annual base salary in exchange for this
    consulting and non-compete.





| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Benefits Contained in Contracts for CEO, CFO and Company
    Secretary and General Counsel



|                         |  |                                                                                                                                                                                                                                                                                                                            
|------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Components               |  | Details                                                                                                                                                                                                                                                                                                                    
|                         |  |                                                                                                                                                                                                                                                                                                                            
|International Assignment |  | The executives receive additional benefits due to international
    assignment: housing allowance, expatriate Goods and Services
    allowance, moving and storage.                                                                                                                                                        
|Other                    |  | Tax Equalization:The Company covers the extra personal
    tax burden for Managing Board Directors based in The Netherlands.                                                                                                                                                                                               
|                         |  | Tax Advice:The Company will pay the costs of filing the
    executives income tax returns to the required countries.                                                                                                                                                                                                      
|                         |  | Health, Welfare and Vacation Benefits:The executives are
    eligible to receive all health, welfare and vacation benefits
    offered to all U.S. employees. They are also eligible to
    participate in the Companys Executive Health and Wellness
    program.                                                        
|                         |  | Business Expenses:The executives are entitled to receive
    reimbursement for all reasonable and necessary travel and other
    business expenses they incur or pay for in connection with the
    performance of their services under this Agreement.                                                                    
|                         |  | Automobile:The Company will either purchase or lease an
    automobile for business and personal use by the executives, or,
    in the alternative, the executives will be entitled to an
    automobile lease allowance not to exceed $750 per month.
    Unused allowance or part thereof will be paid to the executives.



| |                                             
| | --------------------------------------------
| | Other Executive Officer Employment Contracts



|                     |  |                                                                                                                                                                                                                                                                                                                                                                
|-------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Components           |  | Details                                                                                                                                                                                                                                                                                                                                                        
|                     |  |                                                                                                                                                                                                                                                                                                                                                                
|Length of contract   |  | Indefinite.                                                                                                                                                                                                                                                                                                                                                    
|Base salary          |  | Base salary is subject to Remuneration Committee approval and
    reviewed annually in May for increase effective July 1.                                                                                                                                                                                                                                      
|Short-term incentive |  | An annual incentive target is set at a percentage of the
    executives salary. Targets typically range from 55-90%;
    80% of this incentive target is based on the Company meeting or
    exceeding aggressive performance objectives; 20% of this
    incentive target is based on the executive meeting or exceeding
    personal performance objectives.

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|                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Components                  |  | Details                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                            |  | The CEO recommends the executives performance objectives
    and the performance against these objectives, to the
    Remuneration Committee and Supervisory Board for approval. The
    Companys objectives are set by the Remuneration
    Committees recommendation to the Supervisory Board. If the
    Companys performance exceeds the annual objective, the
    executive realizes a incentive greater than his target
    incentive, but only one-third of the excess incentive is paid to
    the participant at the end of the fiscal year. The remaining
    two-thirds is then deposited with a notional bank and is paid to
    the executive over the following two years if the Companys
    objectives are met in these years, or is reduced if the
    Companys objectives are not met.
|Long-term incentive         |  | The banking mechanism of the annual incentive plan is considered
    a long term incentive. Upon the approval of our Supervisory
    Board, stock options have been granted each year under the JHI
    NV 2001 Equity Incentive Plan. It is anticipated that upon the
    approval of our Supervisory Board, equity will be granted under
    a new plan in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Defined Contribution Plan   |  | The executive may participate in the U.S. 401(k) defined
    contribution plan up to the annual IRS limit. The Company will
    match the executives contributions into the plan up to the
    annual IRS limit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Resignation                 |  | The executive may cease his employment with the Company by
    providing written notice.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Termination by James Hardie |  | The Company may terminate the executives employment for
    cause or not for cause. In the case of one executive, if the
    Company terminates the employment, not for cause, or the
    executive terminates his employment for good reason
    then the Company may pay up to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                            |  | a. an amount equivalent to 1.5 times the annual base salary
    at the time of termination; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                            |  | b. amount equivalent to 1.5 times the executives
    Average Annual Incentive actually paid in the previous three
    fiscal years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Post-termination Consulting |  | Depending on the executives individual contract, the
    Company may, or may be required to, request the executive, and
    the executive will agree, to consult to the Company for two
    years upon termination in exchange for the payment as designated
    in the individuals contract, as long as the executive
    maintains the Companys non-compete and confidentiality
    agreements. The payment amount ranges from the executives
    annual base salary to the annual base salary plus annual target
    incentive as of the termination date.                                                                                                                                                                                                                                             
|Other                       |  | Health, Welfare and Vacation Benefits:The executive is
    eligible to receive all health, welfare and vacation benefits
    offered to all U.S. employees. The executive is also
    eligible to participate in the Companys Executive Health
    and Wellness program.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                            |  | Business Expenses:The executive is entitled to receive
    reimbursement for all reasonable and necessary travel and other
    business expenses he or she incurs or pays in connection with
    the performance of his or her services under this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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|                         |  |                                                                                                                                                                                                                                                                                                             
|------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Components               |  | Details                                                                                                                                                                                                                                                                                                     
|                         |  |                                                                                                                                                                                                                                                                                                             
|                         |  | Automobile:The Company will either lease an automobile
    for business and personal use by the executive, or, in the
    alternative, the executive will be entitled to an automobile
    lease allowance not to exceed $750 per month. Unused
    allowance or part of this will be paid to the executive.
|International Assignment |  | Executives who are on assignment in countries other than their
    own receive additional benefits which may include tax
    equalization payment and tax advice, a car in the country they
    are assigned to, and financial assistance with housing, moving
    and storage.                             

Share Ownership




|                                         |  |              |           |  |            |  |   | 
|---------------------------------------- |  | ------------ | --------- |  | ---------- |  | - | 
|                                         |  | Number of    |           |  |           
|                                         |  | Shares       |           |  |           
|                                         |  | Beneficially |           |  | Percent of | 
|Name                                     |  | Owned(1)     |           |  | Class(2)   | 
|                                         |  |              |           |  |            | 
|Current Directors and Executive Officers |  |              |           |  |            |  |   | 
|Meredith Hellicar                        |  |              | 11,566    |  |            |  | * | 
|John Barr(3)                             |  |              | 22,826    |  |            |  | * | 
|Michael Brown                            |  |              | 14,727    |  |            |  | * | 
|Michael Gillfillan(4)                    |  |              | 54,727    |  |            |  | * | 
|James Loudon                             |  |              | 6,355     |  |            |  | * | 
|Donald McGauchie(5)                      |  |              | 9,569     |  |            |  | * | 
|Louis Gries                              |  |              | 1,154,719 |  |            |  | * | 
|Russell Chenu                            |  |              | 38,250    |  |            |  | * | 
|Benjamin Butterfield                     |  |              | 45,000    |  |            |  | * | 
|James Chilcoff                           |  |              | 356,570   |  |            |  | * | 
|Mark Fisher                              |  |              | 345,396   |  |            |  | * | 
|Nigel Rigby                              |  |              | 108,503   |  |            |  | * | 
|Robert Russell                           |  |              | 249,634   |  |            |  | * | 
|Former Directors and Executive Officers  |  |              |           |  |            |  |   | 
|Peter Cameron(6)                         |  |              | 15,613    |  |            |  | * | 
|Gregory Clark                            |  |              | 14,116    |  |            |  | * | 
|David Merkley                            |  |              | 325,000   |  |            |  | * | 
|Donald Merkley                           |  |              | 739,588   |  |            |  | * | 
|Pim Vlot                                 |  |              |          |  |            |  | * | 

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| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| | * | Indicates that the individual beneficially owns less than 1% of
    our shares of common stock.



|    |                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Since the Supervisory Board Share Plan, or SBSP, was approved at
    the 2002 Annual General Meeting, four general allotments have
    been made to non-executive directors. The number of beneficial
    shares includes the following SBSP allotments:

|                   |  |                            |       |  |             |  |       |            |  |  |            |  |  |  |       | 
|------------------ |  | -------------------------- | ----- |  | ----------- |  | ----- | ---------- |  |  | ---------- |  |  |  | ----- | 
|                   |  | Shares Allotted under SBSP |      
|                   |  |                            |      
|                   |  | November 22,               |       |  | December 3, |  |       | August 22, |  |  | August 27, | 
|Name               |  | 2005(a)                    |       |  | 2004(b)     |  |       | 2003(c)    |  |  | 2002(d)    | 
|                   |  |                            |       |  |             |  |       |            |  |  |            | 
|Meredith Hellicar  |  |                            | 1,515 |  |             |  | 2,117 |            |  |  | 2,225      |  |  |  | 2,948 | 
|John Barr          |  |                            | 758   |  |             |  | 1,068 |            |  |  |           |  |  |  |      | 
|Michael Brown      |  |                            | 758   |  |             |  | 1,068 |            |  |  | 1,260      |  |  |  | 1,641 | 
|Michael Gillfillan |  |                            | 758   |  |             |  | 1,068 |            |  |  | 1,260      |  |  |  | 1,641 | 
|James Loudon       |  |                            | 758   |  |             |  | 2,117 |            |  |  | 1,839      |  |  |  | 1,641 | 
|Donald McGauchie   |  |                            | 758   |  |             |  | 1,068 |            |  |  | 1,743      |  |  |  |      | 
|Former Directors   |  |                            |       |  |             |  |       |            |  |  |            |  |  |  |       | 
|Peter Cameron      |  |                            | 1,894 |  |             |  | 2,117 |            |  |  | 5,602      |  |  |  |      | 
|Gregory Clark      |  |                            | 758   |  |             |  | 1,068 |            |  |  | 5,602      |  |  |  | 6,688 | 
|Alan McGregor      |  |                            |      |  |             |  |      |            |  |  | 1,260      |  |  |  | 1,641 | 



| |     |                                                                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Each participants November 22, 2005 mandatory
    participation of 758 shares is subject to a two-year escrow
    period ending November 22, 2007. In the case of Peter
    Cameron, the escrow was released after he died in February 2006.       
|
| | (b) | Each participants December 3, 2004 mandatory
    participation of 1,068 shares is subject to a two-year
    escrow period ending on December 4, 2006. In the case of
    Peter Cameron, the escrow was released after he died in February
    2006.
|
| | (c) | Each participants August 22, 2003 mandatory
    participation of 1,260 shares were subject to a two-year
    escrow period until they were released on August 22, 2005.                                                                            
|
| | (d) | Each participants August 27, 2002 mandatory
    participation of 1,641 shares were subject to a two-year
    escrow period until they were released on August 27, 2004.                                                                            



|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(2) | Based on 463,326,011 shares of common stock outstanding at
    August 31, 2006 (all of which are subject to CUFS).               
|   
|(3) | As of August 31, 2006, 21,000 shares were held in a
    trust, of which Mr. Barr and his wife are trustees.                      
|   
|(4) | As of August 31, 2006, 50,000 shares were held in a
    trust, of which Mr. Gillfillan and his wife are trustees.                
|   
|(5) | As of August 31, 2006, 6,000 shares were held for the
    McGauchie Superannuation Fund for which Mr. McGauchie is a
    trustee.
|   
|(6) | As of August 31, 2006, 6,000 shares were held by
    Mr. Camerons wife and 9,613 shares were held by
    Mr. Camerons estate.  



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Option Ownership




|                                       |  |                  |           |       |                |    |              |                 |  |              
|-------------------------------------- |  | ---------------- | --------- | ----- | -------------- | -- | ------------ | --------------- |  | -------------
|                                       |  | Number of Shares |           |       |                |    |             
|                                       |  | Underlying       |           |       |                |    |             
|Name                                   |  | Options Owned    |           |       | Exercise Price |    |              | Expiration Date
|                                       |  |                  |           |       |                |    |              |                
|Current Executive Officers             |  |                  |           |       |                |    |              |                 |  |              
|Louis Gries                            |  |                  | 40,174    | (1,2) |                | A$ | 3.1321/share | (3,4,5)         |  | November 2009
|                                       |  |                  | 175,023   | (1,6) |                | A$ | 3.0921/share | (3,4,5)         |  | November 2010
|                                       |  |                  | 324,347   | (7)   |                | A$ | 5.0586/share | (4,5)           |  | December 2011
|                                       |  |                  | 325,000   | (8)   |                | A$ | 6.4490/share | (5)             |  | December 2012
|                                       |  |                  | 325,000   | (9)   |                | A$ | 7.05/share   |                 |  | December 2013
|                                       |  |                  | 1,000,000 | (10)  |                | A$ | 8.53/share   |                 |  | November 2015
|Russell Chenu                          |  |                  | 93,000    | (11)  |                | A$ | 6.30/share   |                 |  | February 2015
|                                       |  |                  | 90,000    | (10)  |                | A$ | 8.53/share   |                 |  | November 2015
|Benjamin Butterfield                   |  |                  | 180,000   | (11)  |                | A$ | 6.30/share   |                 |  | February 2015
|                                       |  |                  | 230,000   | (10)  |                | A$ | 8.53/share   |                 |  | November 2015
|James Chilcoff                         |  |                  | 40,174    | (1,2) |                | A$ | 3.1321/share | (3,4,5)         |  | November 2009
|                                       |  |                  | 92,113    | (1,6) |                | A$ | 3.0921/share | (3,4,5)         |  | November 2010
|                                       |  |                  | 68,283    | (7)   |                | A$ | 5.0586/share | (4,5)           |  | December 2011
|                                       |  |                  | 111,000   | (8)   |                | A$ | 6.4490/share | (5)             |  | December 2012
|                                       |  |                  | 180,000   | (14)  |                | A$ | 5.99/share   |                 |  | December 2014
|                                       |  |                  | 190,000   | (13)  |                | A$ | 8.90/share   |                 |  | December 2015
|Mark Fisher                            |  |                  | 92,113    | (1,6) |                | A$ | 3.0921/share | (3,4,5)         |  | November 2010
|                                       |  |                  | 68,283    | (7)   |                | A$ | 5.0586/share | (4,5)           |  | December 2011
|                                       |  |                  | 74,000    | (8)   |                | A$ | 6.4490/share | (5)             |  | December 2012
|                                       |  |                  | 132,000   | (9)   |                | A$ | 7.05/share   |                 |  | December 2013
|                                       |  |                  | 180,000   | (14)  |                | A$ | 5.99/share   |                 |  | December 2014
|                                       |  |                  | 190,000   | (13)  |                | A$ | 8.90/share   |                 |  | December 2015
|Nigel Rigby                            |  |                  | 20,003    | (7)   |                | A$ | 5.0586/share | (4,5)           |  | December 2011
|                                       |  |                  | 27,000    | (8)   |                | A$ | 6.4490/share | (5)             |  | December 2012
|                                       |  |                  | 33,000    | (9)   |                | A$ | 7.05/share   |                 |  | December 2013
|                                       |  |                  | 180,000   | (14)  |                | A$ | 5.99/share   |                 |  | December 2014
|                                       |  |                  | 190,000   | (13)  |                | A$ | 8.90/share   |                 |  | December 2015
|Robert Russell                         |  |                  | 27,634    | (1,6) |                | A$ | 3.0921/share | (3,4,5)         |  | November 2010
|                                       |  |                  | 111,000   | (8)   |                | A$ | 6.4490/share | (5)             |  | December 2012
|                                       |  |                  | 132,000   | (9)   |                | A$ | 7.05/share   |                 |  | December 2013
|                                       |  |                  | 180,000   | (14)  |                | A$ | 5.99/share   |                 |  | December 2014
|                                       |  |                  | 190,000   | (13)  |                | A$ | 8.90/share   |                 |  | December 2015
|Former Executive Director and Officers |  |                  |           |       |                |    |              |                 |  |              
|David Merkley                          |  |                  | 200,000   | (8)   |                | A$ | 6.4490/share | (5)             |  | December 2012
|                                       |  |                  | 250,000   | (9)   |                | A$ | 7.05/share   |                 |  | December 2013
|                                       |  |                  | 172,500   | (12)  |                | A$ | 5.99/share   |                 |  | December 2014
|                                       |  |                  | 190,000   | (13)  |                | A$ | 8.90/share   |                 |  | December 2015
|Donald Merkley                         |  |                  | 48,209    | (1,2) |                | A$ | 3.1321/share | (3,4,5)         |  | November 2009
|                                       |  |                  | 138,170   | (1,6) |                | A$ | 3.0921/share | (3,4,5)         |  | November 2010
|                                       |  |                  | 170,709   | (7)   |                | A$ | 5.0586/share | (4,5)           |  | December 2011
|                                       |  |                  | 200,000   | (8)   |                | A$ | 6.4490/share | (5)             |  | December 2012
|                                       |  |                  | 250,000   | (9)   |                | A$ | 7.05/share   |                 |  | December 2013
|                                       |  |                  | 230,000   | (14)  |                | A$ | 5.99/share   |                 |  | December 2014
|                                       |  |                  | 190,000   | (13)  |                | A$ | 8.90/share   |                 |  | December 2015
|Pim Vlot                               |  |                  |          |       |                |    |              |                 |  |              

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|    |                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This nonqualified stock option to purchase shares of our common
    stock was granted on October 19, 2001 under our 2001 Equity
    Incentive Plan in exchange for the termination of an award of
    shadow stock covering an equal number of shares of JHIL common
    stock. See Equity Plans  2001 Equity Incentive
    Plan under Item 6.



| |     |                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | All options vested and became exercisable in November 2004.                                                                                                                                        
|
| | (3) | The exercise price reflects an A$0.0965 per share price
    reduction due to a capital return paid to shareholders in
    December 2001.                                                           
|
| | (4) | The exercise price reflects an A$0.3804 per share price
    reduction due to a capital return paid to shareholders in
    November 2002.                                                           
|
| | (5) | The exercise price reflects an A$0.2110 per share price
    reduction due to a capital return paid to shareholders in
    November 2003.                                                           
|
| | (6) | All options vested and became exercisable in November 2005.                                                                                                                                        
|
| | (7) | Granted under the 2001 Equity Incentive Plan. All options vested
    and became exercisable in December 2004.                                                                                      
|
| | (8) | Granted under the 2001 Equity Incentive Plan. All options vested
    and became exercisable in December 2005.                                                                                      
|
| | (9) | Granted under the 2001 Equity Incentive Plan. Options vest and
    become exercisable in three installments: 25% on
    December 5, 2004; 25% on December 5, 2005; and 50% on
    December 5, 2006.



|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Granted under the Managing Board Transitional Stock Option Plan.
    Options vest and become exercisable on the first business day on
    or after November 22, 2008 if the following conditions are
    met: 50% vest if our total shareholder return, or TSR, is equal
    to or above the Median TSR and an additional 2% of the options
    shall vest for each 1% increment that the Companys TSR is
    above the Median TSR. If any options remain unvested on the last
    business day of each six month period between November 22,
    2008 and November 22, 2010, we will reapply the vesting
    criteria to those options on that business day.
|    
|(11) | Granted under the 2001 Equity Incentive Plan. Options vest and
    become exercisable in three installments: 25% on
    February 22, 2006; 25% on February 22, 2007; and 50%
    on February 22, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    
|(12) | Granted under the 2001 Equity Incentive Plan. Options vest and
    become exercisable: 33% on December 14, 2006; and 67% on
    December 14, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|(13) | Granted under the 2001 Equity Incentive Plan. Options vest and
    become exercisable in three installments: 25% on
    December 1, 2006; 25% on December 1, 2007; and 50% on
    December 1, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    
|(14) | Granted under the 2001 Equity Incentive Plan. Options vest and
    become exercisable in three installments: 25% on
    December 14, 2005; 25% on December 14, 2006; and 50%
    on December 14, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Stock-Based Compensation








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| |                           
| | --------------------------
| | 2001 Equity Incentive Plan







|                 |                   |                 |           |                           |            |  |           |            | 
|---------------- | ----------------- | --------------- | --------- | ------------------------- | ---------- |  | --------- | ---------- | 
|                 |                   |                 |           | Options Outstanding as of |           
|                 |                   | Number of       |           |                           | August 31, | 
|Share Grant Date |                   | Options Granted |           |                           | 2006       | 
|                 |                   |                 |           |                           |            | 
|October 2001(1)  |                   |                 | 5,468,829 |                           |            |  | 1,030,863 |           
|December 2001    |                   |                 | 4,248,417 |                           |            |  | 1,270,724 |           
|December 2002    |                   |                 | 4,037,000 |                           |            |  | 2,064,800 |           
|December 2003    |                   |                 | 6,179,583 |                           |            |  | 3,857,720 |           
|December 2004    |                   |                 | 5,391,100 |                           |            |  | 4,445,350 |           
|February 2005    |                   |                 | 273,000   |                           |            |  | 273,000   |           
|December 2005    |                   |                 | 5,224,100 |                           |            |  | 5,186,100 |           
|March 2006       |                   |                 | 40,200    |                           |            |  | 40,200    |           
|                 |                   |                 |           |                           |            | 
|                 | Total outstanding |                 |           |                           |            |  |           | 18,168,757 | 
|                 |                   |                 |           |                           |            | 






|    |                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Awarded to our employees on October 19, 2001 in exchange
    for the cancellation of JHIL shadow stock awards under the JHIL
    Key Management Equity Incentive Plan.





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Stock Options.


Performance Awards.


Restricted Stock Awards.


Stock Appreciation Rights.


Dividend Equivalent Rights.


Other Stock-Based Benefits.


Effect of Change in Control.


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##### Table of Contents







| |                                
| | -------------------------------
| | Stock Appreciation Rights Plans





| |                             
| | ----------------------------
| | Supervisory Board Share Plan





| |                                              
| | ---------------------------------------------
| | Managing Board Transitional Stock Option Plan



Other Compensation




| |                               
| | ------------------------------
| | Economic Profit Incentive Plan



122



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| |            
| | -----------
| | 401(k) Plan





| |                                           
| | ------------------------------------------
| | James Hardie Australia Superannuation Plan





| |                             
| | ----------------------------
| | Director Retirement Benefits








|        |                                                  
|------- | -------------------------------------------------
|Item 7. | Major Shareholders and Related Party Transactions

Major Shareholders






123



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|                                                  |  |              |            |  |               |  |        | 
|------------------------------------------------- |  | ------------ | ---------- |  | ------------- |  | ------ | 
|                                                  |  | Shares       |            |  | Percentage of | 
|                                                  |  | Beneficially |            |  | Shares        | 
|Shareholder                                       |  | Owned        |            |  | Outstanding   | 
|                                                  |  |              |            |  |               | 
|Commonwealth Bank of Australia (and subsidiaries) |  |              | 54,916,592 |  |               |  | 11.90% | 
|Lazard Asset Management Pacific Co.               |  |              | 46,309,135 |  |               |  | 9.99%  | 
|Schroder Investment Management Australia Limited  |  |              | 35,496,683 |  |               |  | 7.66%  | 
|The Capital Group Companies, Inc.                 |  |              | 32,960,346 |  |               |  | 7.12%  | 
|National Australia Bank Limited Group             |  |              | 28,198,184 |  |               |  | 6.15%  | 
|Concord Capital Ltd.                              |  |              | 23,646,400 |  |               |  | 5.10%  | 















Other Security Ownership Information




124



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Related Party Transactions






| |                                                                      
| | ---------------------------------------------------------------------
| | Existing Loans to our Directors and Directors of our
    Subsidiaries







| |                                                                       
| | ----------------------------------------------------------------------
| | Payments Made to Directors and Director-Related Entities
    of JHI NV


















|        |                      
|------- | ---------------------
|Item 8. | Financial Information



125



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|        |                
|------- | ---------------
|Item 9. | Listing Details

Price History


over-the






|                      |                    |      |  |      |       |  |  |      |  |  |       |      |  |  |  |      | 
|--------------------- | ------------------ | ---- |  | ---- | ----- |  |  | ---- |  |  | ----- | ---- |  |  |  | ---- | 
|Period                |                    | High |  |      | Low   | 
|                      |                    | (A$) |  |      | (US$) |  |  | (A$) |  |  | (US$) |     
|Fiscal year ended:    |                    |      |  |      |       |  |  |      |  |  |       |      |  |  |  |     
|                      | March 31, 2006     |      |  | 9.81 |       |  |  | 7.38 |  |  |       | 5.49 |  |  |  | 4.13 | 
|                      | March 31, 2005     |      |  | 7.23 |       |  |  | 5.35 |  |  |       | 4.95 |  |  |  | 3.66 | 
|                      | March 31, 2004     |      |  | 8.04 |       |  |  | 5.58 |  |  |       | 5.84 |  |  |  | 4.05 | 
|                      | March 31, 2003     |      |  | 7.06 |       |  |  | 3.96 |  |  |       | 5.56 |  |  |  | 3.12 | 
|                      | March 31, 2002     |      |  | 6.77 |       |  |  | 3.47 |  |  |       | 4.19 |  |  |  | 2.15 | 
|Fiscal quarter ended: |                    |      |  |      |       |  |  |      |  |  |       |      |  |  |  |     
|                      | June 30, 2006      |      |  | 9.95 |       |  |  | 7.43 |  |  |       | 7.12 |  |  |  | 5.32 | 
|                      | March 31, 2006     |      |  | 9.81 |       |  |  | 7.25 |  |  |       | 8.11 |  |  |  | 6.00 | 
|                      | December 31, 2005  |      |  | 9.03 |       |  |  | 6.72 |  |  |       | 7.65 |  |  |  | 5.69 | 
|                      | September 30, 2005 |      |  | 9.44 |       |  |  | 7.17 |  |  |       | 7.40 |  |  |  | 5.62 | 
|                      | June 30, 2005      |      |  | 7.75 |       |  |  | 5.96 |  |  |       | 5.49 |  |  |  | 4.22 | 
|                      | March 31, 2005     |      |  | 7.23 |       |  |  | 5.63 |  |  |       | 5.79 |  |  |  | 4.49 | 
|                      | December 31, 2004  |      |  | 6.77 |       |  |  | 5.09 |  |  |       | 5.50 |  |  |  | 4.13 | 
|                      | September 30, 2004 |      |  | 6.30 |       |  |  | 4.52 |  |  |       | 4.95 |  |  |  | 3.55 | 
|                      | June 30, 2004      |      |  | 6.88 |       |  |  | 4.92 |  |  |       | 5.22 |  |  |  | 3.73 | 
|Month ended:          |                    |      |  |      |       |  |  |      |  |  |       |      |  |  |  |     
|                      | August 31, 2006    |      |  | 7.05 |       |  |  | 5.39 |  |  |       | 6.31 |  |  |  | 4.82 | 
|                      | July 31, 2006      |      |  | 7.85 |       |  |  | 5.90 |  |  |       | 6.56 |  |  |  | 4.93 | 
|                      | June 30, 2006      |      |  | 8.59 |       |  |  | 6.35 |  |  |       | 7.12 |  |  |  | 5.26 | 
|                      | May 31, 2006       |      |  | 9.54 |       |  |  | 7.32 |  |  |       | 8.13 |  |  |  | 6.24 | 
|                      | April 30, 2006     |      |  | 9.95 |       |  |  | 7.32 |  |  |       | 9.18 |  |  |  | 6.76 | 
|                      | March 31, 2006     |      |  | 9.81 |       |  |  | 7.12 |  |  |       | 8.67 |  |  |  | 6.30 | 



126



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|                      |                    |       |  |       |       |  |  |       | 
|--------------------- | ------------------ | ----- |  | ----- | ----- |  |  | ----- | 
|Period                |                    | High  |  |       | Low   | 
|                      |                    |       |  |       |       | 
|                      |                    | (US$) |  |       | (US$) | 
|Fiscal year ended:    |                    |       |  |       |       |  |  |      
|                      | March 31, 2006     |       |  | 36.36 |       |  |  | 21.54 | 
|                      | March 31, 2005     |       |  | 27.21 |       |  |  | 18.10 | 
|                      | March 31, 2004     |       |  | 28.50 |       |  |  | 18.25 | 
|                      | March 31, 2003     |       |  | 19.95 |       |  |  | 15.29 | 
|                      | March 31, 2002     |       |  | 17.95 |       |  |  | 11.10 | 
|Fiscal quarter ended: |                    |       |  |       |       |  |  |      
|                      | June 30, 2006      |       |  | 36.80 |       |  |  | 25.90 | 
|                      | March 31, 2006     |       |  | 35.59 |       |  |  | 30.51 | 
|                      | December 31, 2005  |       |  | 34.80 |       |  |  | 29.60 | 
|                      | September 30, 2005 |       |  | 36.36 |       |  |  | 27.70 | 
|                      | June 30, 2005      |       |  | 30.00 |       |  |  | 21.54 | 
|                      | March 31, 2005     |       |  | 27.21 |       |  |  | 22.60 | 
|                      | December 31, 2004  |       |  | 26.52 |       |  |  | 20.50 | 
|                      | September 30, 2004 |       |  | 22.26 |       |  |  | 18.10 | 
|                      | June 30, 2004      |       |  | 25.05 |       |  |  | 18.82 | 
|Month ended:          |                    |       |  |       |       |  |  |      
|                      | August 31, 2006    |       |  | 26.73 |       |  |  | 24.75 | 
|                      | July 31, 2006      |       |  | 28.85 |       |  |  | 25.40 | 
|                      | June 30, 2006      |       |  | 31.91 |       |  |  | 25.90 | 
|                      | May 31, 2006       |       |  | 36.74 |       |  |  | 31.30 | 
|                      | April 30, 2006     |       |  | 36.80 |       |  |  | 33.45 | 
|                      | March 31, 2006     |       |  | 35.59 |       |  |  | 32.50 | 

Trading Markets




|                                   |  |  |                           | 
|---------------------------------- |  |  | ------------------------- | 
|Common Stock (in the form of CUFS) |  |  | Australian Stock Exchange | 
|ADRs                               |  |  | New York Stock Exchange   | 



Trading on the Australian Stock Exchange


Sub-register


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Trading on the New York Stock Exchange


www.adrbny.com non-U.S.







|         |                       
|-------- | ----------------------
|Item 10. | Additional Information

General


besloten vennootschap met
beperkte aansprakelijkheid naamloze vennootschap




Key Provisions of our Articles of Association of JHI NV




| |                       
| | ----------------------
| | Purpose of the Company





| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | to participate in, to take an interest in any other way in and
    to conduct the management of business enterprises of whatever
    nature;
|
| |  | to raise funds through the issuance of debt or equity or in any
    other way and to finance third parties;                                 
|
| |  | to provide guarantees, including guarantees for the debts of
    third parties; and                                                         
|
| |  | to perform all activities which are incidental to or which may
    be conducive to, or connected with, any of the foregoing.                



| |                                                                              
| | -----------------------------------------------------------------------------
| | Provisions of our Articles of Association or Charter
    Related to Directors

Power to vote when director is materially interested.






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Power to vote compensation.




Borrowing Powers.


Age Limit Requirement for Retirement or
Non-Retirement.


Number of shares for directors qualification.




| |                                      
| | -------------------------------------
| | Issuance of Shares; Preemptive Rights









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| |                     
| | --------------------
| | Repurchase of Shares







| |                           
| | --------------------------
| | Reduction of Share Capital

pro rata pro rata




| |                                        
| | ---------------------------------------
| | Shareholders Meetings and Voting Rights





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20-F,






| |              
| | -------------
| | Annual Report





| |                
| | ---------------
| | Indemnification





| |          
| | ---------
| | Dividends



131



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| |                                     
| | ------------------------------------
| | Amendment of Articles of Association





| |                   
| | ------------------
| | Liquidation Rights

pro rata




| |                                          
| | -----------------------------------------
| | Limitations on Right to Hold Common Stock



132



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| |   |                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | acquisitions that result from acceptances under a takeover bid,
    which complies with the Articles of Association, including the
    principles set forth above;                                                                                                                                                                                
|
| |  | acquisitions which result in a persons voting power
    increasing by not more than 3% in a six-month period;                                                                                                                                                                                                                                    
|
| |  | acquisitions which are consistent with the principles set forth
    above, conform to the other takeover principles set out in the
    Articles of Association (adjusting those principles as
    appropriate to meet the particular circumstances of the
    acquisitions) and have received the prior approval of the
    Supervisory Board; and
|
| |  | acquisitions approved at a general meeting of shareholders,
    subject to certain requirements being satisfied in relation to
    voting and the provision of information.                                                                                                                                                                       









| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) ASX requires an amendment to the takeover provisions in
    our Articles of Association to comply with the ASX Listing Rules
    as then in force; or
|
| | (ii) any waiver of the ASX Listing Rules permitting the
    inclusion of the takeovers provisions has ceased to have effect.                             





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| |                       
| | ----------------------
| | Disclosure of Holdings



www.sec.gov


Material Contracts


20-F, 20-F


Notes.


U.S. Dollar Cash Advance Facilities. 364-day U.S.-dollar


U.S.-dollar


134



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##### Table of Contents



Gypsum Indemnity.




ABN 60 Indemnities.


Exchange Controls






Taxation




U.S.-


135



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PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS
REGARDING THE PARTICULAR TAX CONSEQUENCES OF THEIR ACQUIRING,
OWNING AND DISPOSING OF OUR COMMON SHARES, INCLUDING THE EFFECT
OF ANY FOREIGN, STATE OR LOCAL TAXES.




| |                       
| | ----------------------
| | United States Taxation





Treatment of ADRs.


Taxation of Distributions.


136



---



##### Table of Contents



121-day






Credit of Foreign Taxes Withheld.




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##### Table of Contents





Sale or Other Disposition of Shares.


Capital Gains Rates.


Controlled Foreign Corporation Status. 10-Percent


10-Percent




Passive Foreign Investment Company Status.




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##### Table of Contents





U.S. Federal Income Tax Provisions Applicable to
Non-United States Holders. Non-U.S. Non-U.S. Non-U.S. Non-U.S. Non-U.S. Non-U.S. Non-U.S.


U.S. Information Reporting and Backup Withholding. W-9 Non-U.S. non-U.S. U.S.-related






| |                     
| | --------------------
| | Netherlands Taxation



Treatment of ADRs.


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Dutch Dividend Withholding Tax.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) direct or indirect distributions in cash or in kind,
    deemed or constructive distributions, and repayments of
    additional paid-in capital not recognized as such for
    Netherlands dividend withholding tax purposes;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | (2) liquidation proceeds, proceeds of redemption of shares
    of common stock or, generally, except if a certain specific
    exemption applies, consideration paid by us for the repurchase
    of shares of common stock in excess of the average paid-in
    capital recognized for Netherlands dividend withholding tax
    purposes;                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (3) the par value of shares of common stock issued to a
    holder of shares of common stock or an increase of the par value
    of shares of common stock, as the case may be, to the extent
    that no contribution to capital, recognized for Netherlands
    dividend withholding tax purposes, was made or will be
    made; and                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | (4) the partial repayment of paid-in capital, recognized
    for Netherlands dividend withholding tax purposes, if and to the
    extent that there are net profits, or zuivere winst, for
    dividend withholding tax purposes, unless the general meeting of
    our shareholders has previously resolved to make such repayment
    and provided that the par value of the shares of common stock
    concerned has been reduced by a corresponding amount by changing
    our Articles of Association. As a result of contributions in
    kind (i.e., in shares) to our paid-in capital made prior to the
    listing of our common shares, a portion of such paid-in capital
    may not be recognized for Dutch dividend withholding tax
    purposes.



U.S.-NL U.S.-NL U.S.-NL U.S.-NL


U.S.-NL


140



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U.S.-NL


Taxes on Income and Capital Gains.




| |                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) such shareholder is neither resident nor deemed to be
    resident in The Netherlands, nor has elected to be subject to
    the rules of the Dutch Income Tax Act 2001 that apply to
    residents of The Netherlands;                                                                                                                                        
|
| | (2) such shareholder does not have a business or an
    interest in a business that is, in whole or in part, carried on
    through a permanent establishment or a permanent representative
    in The Netherlands and to which business or part of a business,
    as the case may be, the shares of common stock are attributable;                              
|
| | (3) such shareholder does not perform independent personal
    services in The Netherlands giving rise to a fixed base in The
    Netherlands to which the shares of common stock are
    attributable; and                                                                                                                                                       
|
| | (4) the shares of common stock owned by such shareholder do
    not form part of a substantial interest or a deemed substantial
    interest, as defined below, in the share capital of the Company
    or, if such shares of common stock do form part of such an
    interest, they form part of the assets of a business other than
    a Netherlands business.





U.S.-NL U.S.-NL


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U.S.-NL U.S.-NL


Other Taxes and Duties.


Documents Available for Review


th




| |   |                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | furnish our shareholders with annual reports containing
    consolidated financial statements examined by an independent
    registered public accounting firm; and                   
|
| |  | furnish quarterly reports for the first three quarters of each
    fiscal year containing unaudited consolidated financial
    information in filings with the SEC under
    Form 6-K.






|         |                                                               
|-------- | --------------------------------------------------------------
|Item 11. | Quantitative and Qualitative Disclosures About Market
    Risk







Foreign Currency Exchange Rate Risk


U.S.-dollar/


142



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|                                      |  |     |       |  |    |  |       |     |  |  |          |  |  |  |      | 
|------------------------------------- |  | --- | ----- |  | -- |  | ----- | --- |  |  | -------- |  |  |  | ---- | 
|                                      |  | US$ |       |  | A$ |  |       | NZ$ |  |  | Other(1) | 
|                                      |  |     |       |  |    |  |       |     |  |  |          | 
|Net sales                             |  |     | 82.9% |  |    |  | 11.0% |     |  |  | 3.6%     |  |  |  | 2.5% | 
|Cost of goods sold                    |  |     | 84.2% |  |    |  | 10.7% |     |  |  | 2.9%     |  |  |  | 2.2% | 
|Expenses(2)                           |  |     | 18.7% |  |    |  | 79.4% |     |  |  | 0.4%     |  |  |  | 1.5% | 
|Liabilities (excluding borrowings)(2) |  |     | 25.6% |  |    |  | 72.4% |     |  |  | 1.6%     |  |  |  | 0.4% | 



|                                   |  |     |       |  |    |  |       |     |  |  |          |  |  |  |      | 
|---------------------------------- |  | --- | ----- |  | -- |  | ----- | --- |  |  | -------- |  |  |  | ---- | 
|                                   |  | US$ |       |  | A$ |  |       | NZ$ |  |  | Other(1) | 
|                                   |  |     |       |  |    |  |       |     |  |  |          | 
|Net sales                          |  |     | 79.0% |  |    |  | 13.3% |     |  |  | 4.1%     |  |  |  | 3.6% | 
|Cost of goods sold                 |  |     | 81.5% |  |    |  | 12.0% |     |  |  | 3.1%     |  |  |  | 3.4% | 
|Expenses                           |  |     | 60.3% |  |    |  | 31.5% |     |  |  | 2.5%     |  |  |  | 5.7% | 
|Liabilities (excluding borrowings) |  |     | 73.9% |  |    |  | 17.6% |     |  |  | 5.1%     |  |  |  | 3.4% | 






|    |                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Comprises Philippine Pesos, Euros and Chilean Pesos.                                                                                                
|   
|(2) | Includes A$1.0 billion of asbestos provision recorded in
    the fourth quarter of fiscal year 2006, which is denominated in
    Australian dollars.



Interest Rate Risk




U.S.-dollar U.S.-dollar


Future Principal Repayments by Expected Maturity Date


|                               |  |                               |       |      |       |   |       |       |  |   |       | 
|------------------------------ |  | ----------------------------- | ----- | ---- | ----- | - | ----- | ----- |  | - | ----- | 
|                               |  | Year Ending March 31,         |      
|                               |  |                               |      
|                               |  |                               |       | Fair |      
|                               |  | 2007                          |       |      | Total |   |       | Value | 
|                               |  |                               |       |      |       |   |       |       | 
|                               |  | (In millions of U.S. dollars, |      
|                               |  | except percentages)           |      
|Fixed-rate debt                |  | $                             | 121.7 |      |       | $ | 121.7 |       |  | $ | 133.8 | 
|Weighted-average interest rate |  |                               | 7.16  | %    |       |   | 7.16  | %     |  |   |       | 

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Commodity Price Risk











|         |                                                           
|-------- | ----------------------------------------------------------
|Item 12. | Description of Securities Other Than Equity
    Securities






PART II







|         |                                                
|-------- | -----------------------------------------------
|Item 13. | Defaults, Dividend Arrearages and Delinquencies








|         |                                                                                 
|-------- | --------------------------------------------------------------------------------
|Item 14. | Material Modifications to the Rights of Security Holders
    and Use of Proceeds








|         |                        
|-------- | -----------------------
|Item 15. | Controls and Procedures

13a-15(e)




144



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|          |                                 
|--------- | --------------------------------
|Item 16A. | Audit Committee Financial Expert










|          |                                    
|--------- | -----------------------------------
|Item 16B. | Code of Business Conduct and Ethics















www.jameshardie.com


145



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|          |                                       
|--------- | --------------------------------------
|Item 16C. | Principal Accountant Fees and Services

Fees Paid to Our Independent Registered Public Accounting
Firm




|                      |  |                    |     |  |      |   |     |      |  |   |     | 
|--------------------- |  | ------------------ | --- |  | ---- | - | --- | ---- |  | - | --- | 
|                      |  | Fiscal Years Ended |    
|                      |  | March 31,          |    
|                      |  |                    |    
|                      |  | 2006               |     |  | 2005 |   |     | 2004 | 
|                      |  |                    |     |  |      |   |     |      | 
|                      |  | (In millions)      |    
|Audit Fees(1)         |  | $                  | 1.6 |  |      | $ | 3.1 |      |  | $ | 1.2 | 
|Audit-Related Fees(2) |  |                    | 0.1 |  |      |   | 0.2 |      |  |   | 0.1 | 
|Tax Fees(3)           |  |                    | 5.2 |  |      |   | 4.2 |      |  |   | 3.5 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit Fees include the aggregate fees for professional services
    rendered by our independent registered public accounting firm.
    Professional services include the audit of our annual financial
    statements and services that are normally provided in connection
    with statutory and regulatory filings. During the fiscal year
    ended March 31, 2005, total audit fees also included
    internal investigation fees of $1.9 million.
|   
|(2) | Audit-Related Fees include the aggregate fees billed for
    assurance and related services rendered by our independent
    registered public accounting firm. Our independent registered
    public accounting firm did not engage any temporary employees to
    conduct any portion of the audit of our financial statements for
    the fiscal year ended March 31, 2006.                                                                          
|   
|(3) | Tax Fees include the aggregate fees billed for tax compliance,
    tax advice and tax planning services rendered by our independent
    registered public accounting firm.                                                                                                                                                                                                                                                                             

Audit Committee Pre-Approval Policies and Procedures











|          |                                                           
|--------- | ----------------------------------------------------------
|Item 16D. | Exemptions from Listing Standards for Audit
    Committees








|          |                                                                           
|--------- | --------------------------------------------------------------------------
|Item 16E. | Purchases of Equity Securities by the Issuer and
    Affiliated Purchasers








|         |                     
|-------- | --------------------
|Item 17. | Financial Statements



146



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PART III







|         |                     
|-------- | --------------------
|Item 18. | Financial Statements






Item 19.     Exhibits




|        |   |                         |  |                                                                                                                                                                                                                                                                                                                                    
|------- | - | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |                        
|Number  |   | Description of Exhibits
|        |   |                        
|        | 1 | .1                      |  | Articles of Association, as amended on September 1, 2005 of
    James Hardie Industries N.V. (English Translation)                                                                                                                                                                                                                 
|        | 2 | .1                      |  | Letter Agreement of September 6, 2001 by and between James
    Hardie Industries N.V. and CHESS Depositary Nominees Pty
    Limited, as the depositary for CHESS Units of Foreign
    Securities(3)                                                                                                                                
|        | 2 | .2                      |  | Deposit Agreement dated as of September 24, 2001 between
    The Bank of New York, as depositary, and James Hardie Industries
    N.V.(3)                                                                                                                                                                                          
|        | 2 | .3                      |  | Note Purchase Agreement, dated as of November 5, 1998,
    among James Hardie Finance B.V., James Hardie N.V. and certain
    purchasers thereto re: $225,000,000 Guaranteed Senior Notes(3)                                                                                                                                       
|        | 2 | .4                      |  | Assignment and Assumption Agreement and First Amendment to Note
    Purchase Agreement, dated as of January 24, 2000, by and
    among James Hardie Finance B.V., James Hardie U.S. Funding,
    Inc., James Hardie N.V., James Hardie Aust Investco Pty Limited
    and certain noteholders thereto(3)                            
|        | 2 | .5                      |  | Second Amendment to the Note Purchase Agreement dated as of
    October 22, 2001, by and among, James Hardie
    U.S. Funding, Inc., James Hardie N.V., James Hardie Aust
    Investco Pty Limited, James Hardie Australia Finance Pty
    Limited, James Hardie International Finance B. V. and certain
    noteholders thereto(3)
|        | 2 | .6                      |  | Assignment and Assumption Agreement and Third Amendment to Note
    Purchase Agreement, dated as of November 18, 2002, among
    James Hardie U.S. Funding Inc, James Hardie International
    Finance B.V., James Hardie Industries N.V., James Hardie N.V.
    and certain noteholders thereto(1)                                
|        | 2 | .7                      |  | Common Terms Deed Poll dated June 15, 2005 between James
    Hardie International Finance B.V. and James Hardie Industries
    N.V.(3)                                                                                                                                                                                             
|        | 2 | .8                      |  | Form of Term Facility Agreement between James Hardie
    International Finance B.V. and Financier(3)                                                                                                                                                                                                                               
|        | 2 | .9                      |  | Form of Extension of Facilities and other matters for Term
    Facility Agreement between James Hardie International Finance
    B.V. and Financier                                                                                                                                                                                
|        | 2 | .10                     |  | Form of 364-day Facility Agreement between James Hardie
    International Finance B.V. and Financier(3)                                                                                                                                                                                                                            
|        | 2 | .11                     |  | Form of Extension Request for 364-day Facility Agreement between
    James Hardie International Finance B.V. and Financier                                                                                                                                                                                                         
|        | 2 | .12                     |  | Form of Guarantee Deed between James Hardie Industries N.V. and
    Financier(3)                                                                                                                                                                                                                                                   
|        | 4 | .1                      |  | James Hardie Industries N.V. 2001 Equity Incentive Plan(3)                                                                                                                                                                                                                                                                         
|        | 4 | .2                      |  | Economic Profit and Individual Performance Incentive Plans(3)                                                                                                                                                                                                                                                                      
|        | 4 | .3                      |  | JHI NV Stock Appreciation Rights Incentive Plan(3)                                                                                                                                                                                                                                                                                 
|        | 4 | .4                      |  | Supervisory Board Share Plan 2006                                                                                                                                                                                                                                                                                                  
|        | 4 | .5                      |  | James Hardie Industries N.V. Long Term Incentive Plan 2006                                                                                                                                                                                                                                                                         
|        | 4 | .6                      |  | 2005 Managing Board Transitional Stock Option Plan                                                                                                                                                                                                                                                                                 
|        | 4 | .7                      |  | Form of Joint and Several Indemnity Agreement among James Hardie
    N.V., James Hardie (USA) Inc. and certain indemnitees thereto(3)                                                                                                                                                                                              
|        | 4 | .8                      |  | Form of Joint and Several Indemnity Agreement among James Hardie
    Industries N.V., James Hardie Inc. and certain indemnitees
    thereto(3)                                                                                                                                                                                     

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|        |    |                         |  |                                                                                                                                                                                                                                                                                              
|------- | -- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 4  | .9                      |  | Form of Deed of Access to Documents, Indemnity and Insurance
    among James Hardie Industries N.V. and certain indemnitees
    thereto(3)                                                                                                                                                   
|        | 4  | .10                     |  | Form of Joint and Several Indemnity Agreement among James Hardie
    Industries N.V., James Hardie Building Products Inc. and certain
    indemnities thereto(3)                                                                                                                             
|        | 4  | .11                     |  | Lease Amendment, dated March 23, 2004, among Amaca Pty
    Limited (f/k/a/ James Hardie & Coy Pty Limited), James
    Hardie Australia Pty Limited and James Hardie Industries N.V. re
    premises at the corner of Cobalt & Silica Street,
    Carole Park, Queensland, Australia(2)       
|        | 4  | .12                     |  | Variation of Lease dated March 23, 2004, among Amaca Pty
    Limited (f/k/a/ James Hardie & Coy Pty Limited), James
    Hardie Australia Pty Limited and James Hardie Industries N.V. re
    premises at the corner of Colquhoun & Devon Streets,
    Rosehill, New South Wales, Australia(2)
|        | 4  | .13                     |  | Extension of Lease dated March 23, 2004, among Amaca Pty
    Limited (f/k/a/ James Hardie & Coy Pty Limited), James
    Hardie Australia Pty Limited and James Hardie Industries N.V. re
    premises at Rutland, Avenue, Welshpool, Western Australia,
    Australia(2)                     
|        | 4  | .14                     |  | Lease Amendment dated March 23, 2004, among Amaca Pty
    Limited (f/k/a/ James Hardie & Coy Pty Limited), James
    Hardie Australia Pty Limited and James Hardie Industries N.V. re
    premises at 46 Randle Road, Meeandah, Queensland, Australia(2)                                     
|        | 4  | .15                     |  | Lease Agreement dated March 23, 2004 among Studorp Limited,
    James Hardie New Zealand Limited and James Hardie Industries
    N.V. re premises at the corner of ORorke and Station
    Roads, Penrose, Auckland, New Zealand(2)                                                          
|        | 4  | .16                     |  | Lease Agreement dated March 23, 2004 among Studorp Limited,
    James Hardie New Zealand Limited and James Hardie Industries
    N.V. re premises at 44-74 ORorke Road, Penrose, Auckland,
    New Zealand(2)                                                                               
|        | 4  | .17                     |  | Ownership transfer related to corner of ORorke and Station
    Roads, Penrose, Auckland, New Zealand and 44-74 ORorke
    Road, Penrose, Auckland, New Zealand effective June 30, 2005                                                                                                     
|        | 4  | .18                     |  | Industrial Building Lease Agreement, effective October 6,
    2000, between James Hardie Building Products, Inc. and Fortra
    Fiber-Cement L.L.C., re premises at Waxahachie, Ellis County,
    Texas(3)                                                                                   
|        | 4  | .19                     |  | Asset Purchase Agreement by and between James Hardie Building
    Products, Inc. and Cemplank, Inc. dated as of December 12,
    2001(3)                                                                                                                                                     
|        | 4  | .20                     |  | Amended and Restated Stock Purchase Agreement dated
    March 12, 2002, between BPB U.S. Holdings, Inc. and
    James Hardie Inc.(3)                                                                                                                                                         
|        | 4  | .21                     |  | Final Funding Agreement                                                                                                                                                                                                                                                                      
|        | 4  | .22                     |  | Asbestos Injuries Compensation Fund Trust Deed by and between
    James Hardie Aust. Holdings Pty Limited and Asbestos Injuries
    Compensation Fund Limited                                                                                                                                
|        | 4  | .23                     |  | Deed of Release by and among James Hardie Industries N.V.,
    Australian Council of Trade Unions, Unions New South Wales, and
    Bernard Douglas Banton                                                                                                                                    
|        | 4  | .24                     |  | Parent Guarantee by and among Asbestos Injuries Compensation
    Fund Limited, The State of New South Wales, and James Hardie
    Industries N.V.                                                                                                                                            
|        | 4  | .25                     |  | Deed of Release by and between James Hardie Industries N.V.
    and The State of New South Wales                                                                                                                                                                                             
|        | 4  | .26                     |  | Irrevocable Power of Attorney by and between Asbestos Injuries
    Compensation Fund Limited and The State of New South Wales                                                                                                                                                                
|        | 4  | .27                     |  | Deed of Accession by and among Asbestos Injuries Compensation
    Fund Limited, James Hardie Industries N.V., LGTDD Pty Limited,
    and The State of New South Wales                                                                                                                        
|        | 4  | .28                     |  | Letters Extending the Condition Precedent Date for the Final
    Funding Agreement                                                                                                                                                                                                           
|        | 8  | .1                      |  | List of significant subsidiaries of James Hardie Industries N.V.                                                                                                                                                                                                                             
|        | 12 | .1                      |  | Certification of the Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                   
|        | 12 | .2                      |  | Certification of the Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                   
|        | 13 | .1                      |  | Certification of the Chief Executive Officer and Chief Financial
    Officer pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002                                                                                                                                                   

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|        |    |                         |  |                                                                                        
|------- | -- | ----------------------- |  | ---------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 15 | .1                      |  | Consent of independent registered public accounting firm                               
|        | 15 | .2                      |  | Consent of KPMG Actuaries Pty Ltd                                                      
|        | 99 | .1                      |  | Excerpts of the ASX Settlement and Transfer Corporation Pty Ltd
    as of June 10, 2005
|        | 99 | .2                      |  | Excerpts of the Financial Services Reform Act 2001, as of
    March 11, 2002(3)        
|        | 99 | .3                      |  | ASIC Class Order 02/311, dated November 3, 2002(3)                                     
|        | 99 | .4                      |  | ASIC Modification, dated March 7, 2002(3)                                              
|        | 99 | .5                      |  | ASIC Modification, dated February 26, 2004                                             






|    |                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------
|(1) | Previously filed as an exhibit to our Annual Report on
    Form 20-F dated
    July 2, 2003 and incorporated herein by reference.     
|   
|(2) | Previously filed as an exhibit to our Annual Report on
    Form 20-F dated
    November 22, 2004 and incorporated herein by reference.
|   
|(3) | Previously filed as an exhibit to our Annual Report on
    Form 20-F dated
    July 7, 2005 and incorporated herein by reference.     

149



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##### Table of Contents



SIGNATURES


20-F




| |                             
| | ----------------------------
| | JAMES HARDIE INDUSTRIES N.V.



| |     |                
| | --- | ---------------
| | By: | /s/ Louis Gries

| |                        
| | -----------------------
| |                        
| | Louis Gries            
| | Chief Executive Officer



150



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##### Table of Contents



JAMES HARDIE INDUSTRIES N.V.


INDEX


|                                                                                                                     |  |      |      | 
|-------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                                     |  | Page |     
|                                                                                                                     |  |      |     
|Report of Independent Registered Public
    Accounting Firm                                                          |  |      | F-2  | 
|Consolidated Balance Sheets as of
    March 31, 2006 and 2005                                                        |  |      | F-3  | 
|Consolidated Statements of Operations for
    the Years Ended March 31, 2006, 2005 and 2004                          |  |      | F-4  | 
|Consolidated Statements of Cash Flows for
    the Years Ended March 31, 2006, 2005 and 2004                          |  |      | F-5  | 
|Consolidated Statements of Changes in
    Shareholders Equity for the Years Ended March 31,
    2006, 2005 and 2004 |  |      | F-6  | 
|Notes to Consolidated Financial
    Statements                                                                       |  |      | F-7  | 
|Remuneration Disclosures (Unaudited)                                                                                 |  |      | F-56 | 
|Selected Quarterly Financial Data
    (Unaudited)                                                                    |  |      | F-58 | 

F-1



---



##### Table of Contents






Report of Independent Registered Public Accounting Firm










PricewaterhouseCoopers
LLP


PricewaterhouseCoopers
LLP










F-2



---



##### Table of Contents






James Hardie Industries N.V. and Subsidiaries


Consolidated Balance Sheets


|                                     |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |         |  |       |       |         | 
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -- | ------------------------ | ---- |  | ----- | ------ | ------- |  | ----- | ----- | ------- | 
|                                     |                                                                                                                                                                                                           |                                            |    | March 31                 |     
|                                     |                                                                                                                                                                                                           |                                            |    |                          |     
|                                     |                                                                                                                                                                                                           | Notes                                      |    |                          | 2006 |  |       | 2005   |        
|                                     |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |        
|                                     |                                                                                                                                                                                                           |                                            |    | (Millions of US dollars) |     
|ASSETS                              
|Current assets:                      |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |         |  |       |      
|                                     | Cash and cash equivalents                                                                                                                                                                                 |                                            |    | 3                        |      |  | $     | 315.1  |         |  | $     | 113.5 |        
|                                     | Accounts and notes receivable, net of allowance for doubtful
    accounts of $1.3 million and $1.5 million as of
    March 31, 2006 and March 31, 2005, respectively                                      |                                            |    | 4                        |      |  |       | 153.2  |         |  |       | 127.2 |        
|                                     | Inventories                                                                                                                                                                                               |                                            |    | 5                        |      |  |       | 124.0  |         |  |       | 99.9  |        
|                                     | Prepaid expenses and other current assets                                                                                                                                                                 |                                            |    |                          |      |  |       | 33.8   |         |  |       | 12.0  |        
|                                     | Deferred income taxes                                                                                                                                                                                     |                                            |    | 13                       |      |  |       | 30.7   |         |  |       | 26.0  |        
|                                     |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |        
|                                     |                                                                                                                                                                                                           | Total current assets                       |    |                          |      |  |       |        | 656.8   |  |       |       | 378.6   | 
|Property, plant and equipment, net   |                                                                                                                                                                                                           |                                            | 6  |                          |      |  | 775.6 |        |         |  | 685.7 |      
|Deferred income taxes                |                                                                                                                                                                                                           |                                            | 13 |                          |      |  | 4.8   |        |         |  | 12.3  |      
|Other assets                         |                                                                                                                                                                                                           |                                            |    |                          |      |  | 8.2   |        |         |  | 12.3  |      
|                                     |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |        
|                                     |                                                                                                                                                                                                           | Total assets                               |    |                          |      |  |       | $      | 1,445.4 |  |       | $     | 1,088.9 | 
|                                     |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |        
|                                    
|LIABILITIES AND SHAREHOLDERS EQUITY
|Current liabilities:                 |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |         |  |       |      
|                                     | Accounts payable and accrued liabilities                                                                                                                                                                  |                                            |    | 8                        |      |  | $     | 117.8  |         |  | $     | 94.0  |        
|                                     | Current portion of long-term debt                                                                                                                                                                         |                                            |    | 9                        |      |  |       | 121.7  |         |  |       | 25.7  |        
|                                     | Short-term debt                                                                                                                                                                                           |                                            |    | 9                        |      |  |       | 181.0  |         |  |       | 11.9  |        
|                                     | Accrued payroll and employee benefits                                                                                                                                                                     |                                            |    |                          |      |  |       | 46.3   |         |  |       | 35.7  |        
|                                     | Accrued product warranties                                                                                                                                                                                |                                            |    | 11                       |      |  |       | 11.4   |         |  |       | 8.0   |        
|                                     | Income taxes payable                                                                                                                                                                                      |                                            |    | 13                       |      |  |       | 24.5   |         |  |       | 21.4  |        
|                                     | Other liabilities                                                                                                                                                                                         |                                            |    |                          |      |  |       | 3.3    |         |  |       | 1.7   |        
|                                     |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |        
|                                     |                                                                                                                                                                                                           | Total current liabilities                  |    |                          |      |  |       |        | 506.0   |  |       |       | 198.4   | 
|Long-term debt                       |                                                                                                                                                                                                           |                                            | 9  |                          |      |  |      |        |         |  | 121.7 |      
|Deferred income taxes                |                                                                                                                                                                                                           |                                            | 13 |                          |      |  | 79.8  |        |         |  | 77.5  |      
|Accrued product warranties           |                                                                                                                                                                                                           |                                            | 11 |                          |      |  | 4.1   |        |         |  | 4.9   |      
|Asbestos provision                   |                                                                                                                                                                                                           |                                            | 12 |                          |      |  | 715.6 |        |         |  |      |      
|Other liabilities                    |                                                                                                                                                                                                           |                                            | 10 |                          |      |  | 45.0  |        |         |  | 61.7  |      
|                                     |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |        
|                                     |                                                                                                                                                                                                           | Total liabilities                          |    |                          |      |  |       |        | 1,350.5 |  |       |       | 464.2   | 
|                                     |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |        
|Commitments and contingencies        |                                                                                                                                                                                                           |                                            | 12 |                          |      |  |       |        |         |  |       |      
|Shareholders equity:                |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |         |  |       |      
|                                     | Common stock, Euro 0.59 par value, 2.0 billion shares
    authorized; 463,306,511 shares issued and outstanding at
    March 31, 2006 and 459,373,176 shares issued and
    outstanding at March 31, 2005 |                                            |    | 15                       |      |  |       | 253.2  |         |  |       | 245.8 |        
|                                     | Additional paid-in capital                                                                                                                                                                                |                                            |    | 15                       |      |  |       | 158.8  |         |  |       | 139.4 |        
|                                     | Retained (deficit) earnings                                                                                                                                                                               |                                            |    |                          |      |  |       | (288.3 | )       |  |       | 264.3 |        
|                                     | Employee loans                                                                                                                                                                                            |                                            |    | 15                       |      |  |       | (0.4   | )       |  |       | (0.7  | )      
|                                     | Accumulated other comprehensive loss                                                                                                                                                                      |                                            |    | 18                       |      |  |       | (28.4  | )       |  |       | (24.1 | )      
|                                     |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |        
|                                     |                                                                                                                                                                                                           | Total shareholders equity                 |    |                          |      |  |       |        | 94.9    |  |       |       | 624.7   | 
|                                     |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |        
|                                     |                                                                                                                                                                                                           | Total liabilities and shareholders equity |    |                          |      |  |       | $      | 1,445.4 |  |       | $     | 1,088.9 | 
|                                     |                                                                                                                                                                                                           |                                            |    |                          |      |  |       |        |        



F-3



---



##### Table of Contents






James Hardie Industries N.V. and Subsidiaries


Consolidated Statements of Operations


|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |       |       |   |        |       |       | 
|------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | -- | ----------------------------------- | ---- | - | ------- | ----- | ------ | - | ------- | ----- | ----- | - | ------ | ----- | ----- | 
|                                                       |                                                                                                                                                                       |                                                              |    | Years Ended March 31                |     
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |     
|                                                       |                                                                                                                                                                       | Notes                                                        |    |                                     | 2006 |   |         | 2005  |        |   | 2004    |      
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|                                                       |                                                                                                                                                                       |                                                              |    | (Millions of US dollars, except per |     
|                                                       |                                                                                                                                                                       |                                                              |    | share data)                         |     
|Net sales                                              |                                                                                                                                                                       |                                                              | 17 |                                     |      | $ | 1,488.5 |       |        | $ | 1,210.4 |       |       | $ | 981.9  |      
|Cost of goods sold                                     |                                                                                                                                                                       |                                                              |    |                                     |      |   | (937.7  | )     |        |   | (784.0  | )     |       |   | (623.0 | )    
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|                                                       |                                                                                                                                                                       | Gross profit                                                 |    |                                     |      |   |         |       | 550.8  |   |         |       | 426.4 |   |        |       | 358.9 | 
|Selling, general and administrative expenses           |                                                                                                                                                                       |                                                              |    |                                     |      |   | (209.8  | )     |        |   | (174.5  | )     |       |   | (162.0 | )    
|Research and development expenses                      |                                                                                                                                                                       |                                                              |    |                                     |      |   | (28.7   | )     |        |   | (21.6   | )     |       |   | (22.6  | )    
|SCI and other related expenses                         |                                                                                                                                                                       |                                                              | 12 |                                     |      |   | (17.4   | )     |        |   | (28.1   | )     |       |   |       |      
|Impairment of roofing plant                            |                                                                                                                                                                       |                                                              | 6  |                                     |      |   | (13.4   | )     |        |   |        |       |       |   |       |      
|Asbestos provision                                     |                                                                                                                                                                       |                                                              | 12 |                                     |      |   | (715.6  | )     |        |   |        |       |       |   |       |      
|Other operating expense                                |                                                                                                                                                                       |                                                              |    |                                     |      |   | (0.8    | )     |        |   | (6.0    | )     |       |   | (2.1   | )    
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|                                                       |                                                                                                                                                                       | Operating (loss) income                                      |    |                                     |      |   |         |       | (434.9 | ) |         |       | 196.2 |   |        |       | 172.2 | 
|Interest expense                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   | (7.2    | )     |        |   | (7.3    | )     |       |   | (11.2  | )    
|Interest income                                        |                                                                                                                                                                       |                                                              |    |                                     |      |   | 7.0     |       |        |   | 2.2     |       |       |   | 1.2    |      
|Other (expense) income                                 |                                                                                                                                                                       |                                                              |    |                                     |      |   |        |       |        |   | (1.3    | )     |       |   | 3.5    |      
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|                                                       |                                                                                                                                                                       | (Loss) income from continuing operations before income taxes |    |                                     | 17   |   |         |       | (435.1 | ) |         |       | 189.8 |   |        |       | 165.7 | 
|Income tax expense                                     |                                                                                                                                                                       |                                                              | 13 |                                     |      |   | (71.6   | )     |        |   | (61.9   | )     |       |   | (40.4  | )    
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|                                                       |                                                                                                                                                                       | (Loss) income from continuing operations                     |    |                                     |      |   |         |       | (506.7 | ) |         |       | 127.9 |   |        |       | 125.3 | 
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|Discontinued operations:                               |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |       |       |   |        |      
|                                                       | (Loss) income from discontinued operations, net of income tax
    benefit (expense) of nil, $0.2 million and
    ($0.1) million for 2006, 2005 and 2004, respectively |                                                              |    | 14                                  |      |   |         |      |        |   |         | (0.3  | )     |   |        | 0.2   |      
|                                                       | (Loss) gain on disposal of discontinued operations, net of
    income tax benefit of nil, nil and $4.8 million for 2006,
    2005 and 2004, respectively              |                                                              |    | 14                                  |      |   |         |      |        |   |         | (0.7  | )     |   |        | 4.1   |      
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|                                                       | (Loss) income from discontinued operations                                                                                                                            |                                                              |    |                                     |      |   |         |      |        |   |         | (1.0  | )     |   |        | 4.3   |      
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|                                                       |                                                                                                                                                                       | Net (loss) income                                            |    |                                     |      |   |         | $     | (506.7 | ) |         | $     | 126.9 |   |        | $     | 129.6 | 
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|(Loss) income per share  basic:                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |       |       |   |        |      
|                                                       | (Loss) income from continuing operations                                                                                                                              |                                                              |    |                                     |      |   | $       | (1.10 | )      |   | $       | 0.28  |       |   | $      | 0.27  |      
|                                                       | Income from discontinued operations                                                                                                                                   |                                                              |    |                                     |      |   |         |      |        |   |         |      |       |   |        | 0.01  |      
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|                                                       |                                                                                                                                                                       | Net (loss) income per share  basic                          |    |                                     |      |   |         | $     | (1.10  | ) |         | $     | 0.28  |   |        | $     | 0.28  | 
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|(Loss) income per share  diluted:                     |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |       |       |   |        |      
|                                                       | (Loss) income from continuing operations                                                                                                                              |                                                              |    |                                     |      |   | $       | (1.10 | )      |   | $       | 0.28  |       |   | $      | 0.27  |      
|                                                       | Income from discontinued operations                                                                                                                                   |                                                              |    |                                     |      |   |         |      |        |   |         |      |       |   |        | 0.01  |      
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|                                                       |                                                                                                                                                                       | Net (loss) income per share  diluted                        |    |                                     |      |   |         | $     | (1.10  | ) |         | $     | 0.28  |   |        | $     | 0.28  | 
|                                                       |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |      
|Weighted average common shares outstanding (Millions): |                                                                                                                                                                       |                                                              |    |                                     |      |   |         |       |        |   |         |       |       |   |        |      
|                                                       | Basic                                                                                                                                                                 |                                                              |    | 2                                   |      |   |         | 461.7 |        |   |         | 458.9 |       |   |        | 458.1 |      
|                                                       | Diluted                                                                                                                                                               |                                                              |    | 2                                   |      |   |         | 461.7 |        |   |         | 461.0 |       |   |        | 461.4 |      



F-4



---



##### Table of Contents






James Hardie Industries N.V. and Subsidiaries


Consolidated Statements of Cash Flows


|                                                                                             |                                                        |                                                     |        |       |        |   |        |       |        |   |       |       |       |  
|-------------------------------------------------------------------------------------------- | ------------------------------------------------------ | --------------------------------------------------- | ------ | ----- | ------ | - | ------ | ----- | ------ | - | ----- | ----- | ----- | -
|                                                                                             |                                                        | Years Ended March 31                                |       
|                                                                                             |                                                        |                                                     |       
|                                                                                             |                                                        | 2006                                                |        |       | 2005   |   |        | 2004  |       
|                                                                                             |                                                        |                                                     |        |       |        |   |        |       |       
|                                                                                             |                                                        | (Millions of US dollars)                            |       
|Cash Flows From Operating Activities                                                         |                                                        |                                                     |        |       |        |   |        |       |        |   |       |      
|Net (loss) income                                                                            |                                                        | $                                                   | (506.7 | )     |        | $ | 126.9  |       |        | $ | 129.6 |      
|Adjustments to reconcile net (loss) income to net cash provided
    by operating activities: |                                                        |                                                     |        |       |        |   |        |       |        |   |       |      
|                                                                                             | Loss (gain) on sale of land and buildings              |                                                     |        |      |        |   |        | 0.7   |        |   |       | (4.2  | )    
|                                                                                             | Loss (gain) on disposal of subsidiaries and businesses |                                                     |        |      |        |   |        | 2.1   |        |   |       | (1.9  | )    
|                                                                                             | Depreciation and amortization                          |                                                     |        | 45.3  |        |   |        | 36.3  |        |   |       | 36.4  |      
|                                                                                             | Deferred income taxes                                  |                                                     |        | 4.3   |        |   |        | 11.1  |        |   |       | 14.6  |      
|                                                                                             | Prepaid pension cost                                   |                                                     |        | 2.9   |        |   |        | 7.6   |        |   |       | 1.8   |      
|                                                                                             | Tax benefit from stock options exercised               |                                                     |        | 2.2   |        |   |        | 0.4   |        |   |       | 0.4   |      
|                                                                                             | Stock compensation                                     |                                                     |        | 5.9   |        |   |        | 3.0   |        |   |       | 3.3   |      
|                                                                                             | Asbestos provision                                     |                                                     |        | 715.6 |        |   |        |      |        |   |       |      |      
|                                                                                             | Impairment of roofing plant                            |                                                     |        | 13.4  |        |   |        |      |        |   |       |      |      
|                                                                                             | Other                                                  |                                                     |        | 1.7   |        |   |        |      |        |   |       | 0.7   |      
|Changes in operating assets and liabilities:                                                 |                                                        |                                                     |        |       |        |   |        |       |        |   |       |      
|                                                                                             | Accounts and notes receivable                          |                                                     |        | (24.0 | )      |   |        | (3.7  | )      |   |       | (24.8 | )    
|                                                                                             | Inventories                                            |                                                     |        | (26.6 | )      |   |        | 4.3   |        |   |       | (24.9 | )    
|                                                                                             | Prepaid expenses and other current assets              |                                                     |        | (24.8 | )      |   |        | 32.6  |        |   |       | 2.1   |      
|                                                                                             | Accounts payable and accrued liabilities               |                                                     |        | 24.4  |        |   |        | 15.0  |        |   |       | 1.3   |      
|                                                                                             | Other accrued liabilities and other liabilities        |                                                     |        | 7.0   |        |   |        | (16.5 | )      |   |       | 28.2  |      
|                                                                                             |                                                        |                                                     |        |       |        |   |        |       |       
|                                                                                             |                                                        | Net cash provided by operating activities           |        |       | 240.6  |   |        |       | 219.8  |   |       |       | 162.6 |  
|                                                                                             |                                                        |                                                     |        |       |        |   |        |       |       
|Cash Flows From Investing Activities                                                         |                                                        |                                                     |        |       |        |   |        |       |        |   |       |      
|Purchases of property, plant and equipment                                                   |                                                        |                                                     | (162.0 | )     |        |   | (153.2 | )     |        |   | (74.8 | )    
|Proceeds from sale of property, plant and equipment                                          |                                                        |                                                     |       |       |        |   | 3.4    |       |        |   | 10.9  |      
|Proceeds from disposal of subsidiaries and businesses, net of
    cash divested              |                                                        |                                                     | 8.0    |       |        |   |       |       |        |   | 5.0   |      
|                                                                                             |                                                        |                                                     |        |       |        |   |        |       |       
|                                                                                             |                                                        | Net cash used in investing activities               |        |       | (154.0 | ) |        |       | (149.8 | ) |       |       | (58.9 | )
|                                                                                             |                                                        |                                                     |        |       |        |   |        |       |       
|Cash Flows From Financing Activities                                                         |                                                        |                                                     |        |       |        |   |        |       |        |   |       |      
|Net proceeds from line of credit                                                             |                                                        |                                                     |       |       |        |   | 0.5    |       |        |   | 0.5   |      
|Proceeds from borrowings                                                                     |                                                        |                                                     | 181.0  |       |        |   |       |       |        |   |      |      
|Repayments of borrowings                                                                     |                                                        |                                                     | (37.6  | )     |        |   | (17.6  | )     |        |   |      |      
|Proceeds from issuance of shares                                                             |                                                        |                                                     | 18.7   |       |        |   | 2.6    |       |        |   | 3.2   |      
|Repayments of capital                                                                        |                                                        |                                                     |       |       |        |   |       |       |        |   | (68.7 | )    
|Dividends paid                                                                               |                                                        |                                                     | (45.9  | )     |        |   | (13.7  | )     |        |   | (22.9 | )    
|Collections on loans receivable                                                              |                                                        |                                                     | 0.3    |       |        |   | 0.6    |       |        |   | 0.9   |      
|                                                                                             |                                                        |                                                     |        |       |        |   |        |       |       
|                                                                                             |                                                        | Net cash provided by (used in) financing activities |        |       | 116.5  |   |        |       | (27.6  | ) |       |       | (87.0 | )
|                                                                                             |                                                        |                                                     |        |       |        |   |        |       |       
|Effects of exchange rate changes on cash                                                     |                                                        |                                                     | (1.5   | )     |        |   | (1.2   | )     |        |   | 0.5   |      
|Net increase in cash and cash equivalents                                                    |                                                        |                                                     | 201.6  |       |        |   | 41.2   |       |        |   | 17.2  |      
|Cash and cash equivalents at beginning of period                                             |                                                        |                                                     | 113.5  |       |        |   | 72.3   |       |        |   | 55.1  |      
|                                                                                             |                                                        |                                                     |        |       |        |   |        |       |       
|                                                                                             |                                                        | Cash and cash equivalents at end of period          |        | $     | 315.1  |   |        | $     | 113.5  |   |       | $     | 72.3  |  
|                                                                                             |                                                        |                                                     |        |       |        |   |        |       |       
|Components of Cash and Cash Equivalents                                                      |                                                        |                                                     |        |       |        |   |        |       |        |   |       |      
|                                                                                             | Cash at bank and on hand                               |                                                     | $      | 24.9  |        |   | $      | 28.6  |        |   | $     | 24.6  |      
|                                                                                             | Short-term deposits                                    |                                                     |        | 290.2 |        |   |        | 84.9  |        |   |       | 47.7  |      
|                                                                                             |                                                        |                                                     |        |       |        |   |        |       |       
|Cash and cash equivalents at end of period                                                   |                                                        | $                                                   | 315.1  |       |        | $ | 113.5  |       |        | $ | 72.3  |      
|                                                                                             |                                                        |                                                     |        |       |        |   |        |       |       
|Supplemental Disclosure of Cash Flow Activities                                              |                                                        |                                                     |        |       |        |   |        |       |        |   |       |      
|Cash paid during the period for interest, net of amounts
    capitalized                     |                                                        | $                                                   | 3.5    |       |        | $ | 10.7   |       |        | $ | 11.7  |      
|Cash paid (refunded) during the period for income taxes, net                                 |                                                        | $                                                   | 93.4   |       |        | $ | 15.7   |       |        | $ | (6.5  | )    



F-5



---



##### Table of Contents






James Hardie Industries N.V. and Subsidiaries


Consolidated Statements of Changes in Shareholders
Equity


|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |   |       |   |      |      |       |        |      |        |  
|----------------------------------------------------------------------------------------------------------------- | ---------------------------------- | ------------------------------------------------------------------------ | -------------------------- | ---------- | ------- | -------- | -------- | ------------ | - | ----------- | -------- | ------------- | - | ------ | ---- | - | ----- | - | ----- | - | ---- | ---- | ----- | ------ | ---- | ------ | -
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   | Accumulated |          |               |  
|                                                                                                                  |                                    |                                                                          |                            |            |         | Retained |          |              |   |             | Other    |               |   |       
|                                                                                                                  |                                    |                                                                          |                            | Additional |         |          | Earnings |              |   |             |          | Comprehensive |   |        |     
|                                                                                                                  |                                    | Common                                                                   |                            |            | Paid-In |          |          | (Accumulated |   |             | Employee |               |   | Income |      |   |      
|                                                                                                                  |                                    | Stock                                                                    |                            |            | Capital |          |          | Deficit)     |   |             | Loans    |               |   | (Loss) |      |   | Total |  
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  
|                                                                                                                  |                                    | (Millions of US dollars)                                                 |                           
|Balances as of March 31, 2003                                                                                     |                                    | $                                                                        | 269.7                      |            |         | $        | 171.3    |              |   | $           | 44.4     |               |   | $      | (1.7 | ) |       | $ | (49.0 | ) |      | $    | 434.7 |       
|Comprehensive income:                                                                                             |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |   |       |   |      |      |       |       
|                                                                                                                  | Net income                         |                                                                          |                            |           |         |          |          |             |   |             |          | 129.6         |   |        |      |  |       |   |       |  |      |      |       | 129.6  |     
|                                                                                                                  | Other comprehensive income (loss): |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |   |       |   |      |      |       |        |     
|                                                                                                                  |                                    | Amortization of unrealized transition loss on derivative
    instruments |                            |            |        |          |          |              |  |             |          |               |  |        |      |   |      |   |       |   | 1.1  |      |       |        | 1.1  |       
|                                                                                                                  |                                    | Foreign currency translation gain                                        |                            |            |        |          |          |              |  |             |          |               |  |        |      |   |      |   |       |   | 16.0 |      |       |        | 16.0 |       
|                                                                                                                  |                                    | Unrealized loss on available-for-sale securities                         |                            |            |        |          |          |              |  |             |          |               |  |        |      |   |      |   |       |   | (0.1 | )    |       |        | (0.1 | )     
|                                                                                                                  |                                    | Additional minimum pension liability adjustment                          |                            |            |        |          |          |              |  |             |          |               |  |        |      |   |      |   |       |   | 7.7  |      |       |        | 7.7  |       
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  
|                                                                                                                  |                                    |                                                                          | Other comprehensive income |            |         |         |          |              |   |            |          |               |   |       |      |   |       |  |       |   |      | 24.7 |       |        |      | 24.7   |  
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  
|                                                                                                                  |                                    |                                                                          | Total comprehensive income |            |         |          |          |              |   |             |          |               |   |        |      |   |       |   |       |   |      |      |       |        |      | 154.3  |  
|Dividends paid                                                                                                    |                                    |                                                                          |                           |            |         |          |         |              |   |             | (22.9    | )             |   |        |     |   |       |   |      |   |      |      | (22.9 | )     
|Conversion of common stock from Euro 0.64 par value to Euro
    0.73 par value                                    |                                    |                                                                          | 48.4                       |            |         |          | (48.4    | )            |   |             |         |               |   |        |     |   |       |   |      |   |      |      |      |       
|Conversion of common stock from Euro 0.73 par value to Euro
    0.5995 par value and subsequent return of capital |                                    |                                                                          | (68.7                      | )          |         |          |         |              |   |             |         |               |   |        |     |   |       |   |      |   |      |      | (68.7 | )     
|Conversion of common stock from Euro 0.5995 par value to
    Euro 0.59 par value                                  |                                    |                                                                          | (5.0                       | )          |         |          | 5.0      |              |   |             |         |               |   |        |     |   |       |   |      |   |      |      |      |       
|Stock compensation                                                                                                |                                    |                                                                          |                           |            |         |          | 3.3      |              |   |             |         |               |   |        |     |   |       |   |      |   |      |      | 3.3   |       
|Tax benefit from stock options exercised                                                                          |                                    |                                                                          |                           |            |         |          | 0.4      |              |   |             |         |               |   |        |     |   |       |   |      |   |      |      | 0.4   |       
|Employee loans repaid                                                                                             |                                    |                                                                          |                           |            |         |          |         |              |   |             |         |               |   |        | 0.4  |   |       |   |      |   |      |      | 0.4   |       
|Stock options exercised                                                                                           |                                    |                                                                          | 0.8                        |            |         |          | 2.4      |              |   |             |         |               |   |        |     |   |       |   |      |   |      |      | 3.2   |       
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  
|Balances as of March 31, 2004                                                                                     |                                    | $                                                                        | 245.2                      |            |         | $        | 134.0    |              |   | $           | 151.1    |               |   | $      | (1.3 | ) |       | $ | (24.3 | ) |      | $    | 504.7 |       
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  
|Comprehensive income:                                                                                             |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |   |       |   |      |      |       |       
|                                                                                                                  | Net income                         |                                                                          |                            |           |         |          |          |             |   |             |          | 126.9         |   |        |      |  |       |   |       |  |      |      |       | 126.9  |     
|                                                                                                                  | Other comprehensive income (loss): |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |   |       |   |      |      |       |        |     
|                                                                                                                  |                                    | Amortization of unrealized transition loss on derivative
    instruments |                            |            |        |          |          |              |  |             |          |               |  |        |      |   |      |   |       |   | 1.1  |      |       |        | 1.1  |       
|                                                                                                                  |                                    | Foreign currency translation loss                                        |                            |            |        |          |          |              |  |             |          |               |  |        |      |   |      |   |       |   | (0.9 | )    |       |        | (0.9 | )     
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  
|                                                                                                                  |                                    |                                                                          | Other comprehensive income |            |         |         |          |              |   |            |          |               |   |       |      |   |       |  |       |   |      | 0.2  |       |        |      | 0.2    |  
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  
|                                                                                                                  |                                    |                                                                          | Total comprehensive income |            |         |          |          |              |   |             |          |               |   |        |      |   |       |   |       |   |      |      |       |        |      | 127.1  |  
|Dividends paid                                                                                                    |                                    |                                                                          |                           |            |         |          |         |              |   |             | (13.7    | )             |   |        |     |   |       |   |      |   |      |      | (13.7 | )     
|Stock compensation                                                                                                |                                    |                                                                          |                           |            |         |          | 3.0      |              |   |             |         |               |   |        |     |   |       |   |      |   |      |      | 3.0   |       
|Tax benefit from stock options exercised                                                                          |                                    |                                                                          |                           |            |         |          | 0.4      |              |   |             |         |               |   |        |     |   |       |   |      |   |      |      | 0.4   |       
|Employee loans repaid                                                                                             |                                    |                                                                          |                           |            |         |          |         |              |   |             |         |               |   |        | 0.6  |   |       |   |      |   |      |      | 0.6   |       
|Stock options exercised                                                                                           |                                    |                                                                          | 0.6                        |            |         |          | 2.0      |              |   |             |         |               |   |        |     |   |       |   |      |   |      |      | 2.6   |       
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  
|Balances as of March 31, 2005                                                                                     |                                    | $                                                                        | 245.8                      |            |         | $        | 139.4    |              |   | $           | 264.3    |               |   | $      | (0.7 | ) |       | $ | (24.1 | ) |      | $    | 624.7 |       
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  
|Comprehensive loss:                                                                                               |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |   |       |   |      |      |       |       
|                                                                                                                  | Net loss                           |                                                                          |                            |           |         |          |          |             |   |             |          | (506.7        | ) |        |      |  |       |   |       |  |      |      |       | (506.7 | )   
|                                                                                                                  | Other comprehensive income (loss): |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |   |       |   |      |      |       |        |     
|                                                                                                                  |                                    | Amortization of unrealized transition loss on derivative
    instruments |                            |            |        |          |          |              |  |             |          |               |  |        |      |   |      |   |       |   | 0.5  |      |       |        | 0.5  |       
|                                                                                                                  |                                    | Foreign currency translation loss                                        |                            |            |        |          |          |              |  |             |          |               |  |        |      |   |      |   |       |   | (4.8 | )    |       |        | (4.8 | )     
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  
|                                                                                                                  |                                    |                                                                          | Other comprehensive loss   |            |         |         |          |              |   |            |          |               |   |       |      |   |       |  |       |   |      | (4.3 | )     |        |      | (4.3   | )
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  
|                                                                                                                  |                                    |                                                                          | Total comprehensive loss   |            |         |          |          |              |   |             |          |               |   |        |      |   |       |   |       |   |      |      |       |        |      | (511.0 | )
|Dividends paid                                                                                                    |                                    |                                                                          |                           |            |         |          |         |              |   |             | (45.9    | )             |   |        |     |   |       |   |      |   |      |      | (45.9 | )     
|Stock compensation                                                                                                |                                    |                                                                          |                           |            |         |          | 5.9      |              |   |             |         |               |   |        |     |   |       |   |      |   |      |      | 5.9   |       
|Tax benefit from stock options exercised                                                                          |                                    |                                                                          |                           |            |         |          | 2.2      |              |   |             |         |               |   |        |     |   |       |   |      |   |      |      | 2.2   |       
|Employee loans repaid                                                                                             |                                    |                                                                          |                           |            |         |          |         |              |   |             |         |               |   |        | 0.3  |   |       |   |      |   |      |      | 0.3   |       
|Stock options exercised                                                                                           |                                    |                                                                          | 7.4                        |            |         |          | 11.3     |              |   |             |         |               |   |        |     |   |       |   |      |   |      |      | 18.7  |       
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  
|Balances as of March 31, 2006                                                                                     |                                    | $                                                                        | 253.2                      |            |         | $        | 158.8    |              |   | $           | (288.3   | )             |   |        | (0.4 | ) |       | $ | (28.4 | ) |      | $    | 94.9  |       
|                                                                                                                  |                                    |                                                                          |                            |            |         |          |          |              |   |             |          |               |   |        |      |   |       |  



F-6



---



##### Table of Contents






James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial Statements




|   |                                     
|-- | ------------------------------------
|1. | Background and Basis of Presentation



| |                     
| | --------------------
| | Nature of Operations





| |           
| | ----------
| | Background









| |                      
| | ---------------------
| | Basis of Presentation





|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies



| |                      
| | ---------------------
| | Accounting Principles





| |                 
| | ----------------
| | Use of Estimates



F-7



---



##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




| |                  
| | -----------------
| | Reclassifications





| |                             
| | ----------------------------
| | Foreign Currency Translation





| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |            
| | -----------
| | Inventories

first-in,




| |                              
| | -----------------------------
| | Property, Plant and Equipment



|                               |  |       |         | 
|------------------------------ |  | ----- | ------- | 
|                               |  | Years |        
|                               |  |       |        
|Buildings                      |  |       | 40      | 
|Building improvements          |  |       | 5 to 10 | 
|Manufacturing machinery        |  |       | 20      | 
|General equipment              |  |       | 5 to 10 | 
|Computer equipment             |  |       | 3 to 4  | 
|Office furniture and equipment |  |       | 3 to 10 | 





| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets



F-8



---



##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




| |              
| | -------------
| | Environmental





| |                          
| | -------------------------
| | Mineral Acquisition Costs







| |                    
| | -------------------
| | Revenue Recognition





| |                   
| | ------------------
| | Cost of Goods Sold





| |                      
| | ---------------------
| | Shipping and Handling





| |                                    
| | -----------------------------------
| | Selling, General and Administrative



F-9



---



##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




| |            
| | -----------
| | Advertising





| |                           
| | --------------------------
| | Accrued Product Warranties





| |             
| | ------------
| | Income Taxes





| |                      
| | ---------------------
| | Financial Instruments







| |                         
| | ------------------------
| | Stock-Based Compensation



F-10



---



##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




| |                       
| | ----------------------
| | Employee Benefit Plans





| |          
| | ---------
| | Dividends





| |                   
| | ------------------
| | Earnings Per Share



|                                  |  |                      |       |  |      |  |       |      |  |  |       | 
|--------------------------------- |  | -------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                  |  | Years Ended March 31 |      
|                                  |  |                      |      
|                                  |  | 2006                 |       |  | 2005 |  |       | 2004 | 
|                                  |  |                      |       |  |      |  |       |      | 
|                                  |  | (Millions of shares) |      
|Basic common shares outstanding   |  |                      | 461.7 |  |      |  | 458.9 |      |  |  | 458.1 | 
|Dilutive effect of stock options  |  |                      |      |  |      |  | 2.1   |      |  |  | 3.3   | 
|                                  |  |                      |       |  |      |  |       |      | 
|Diluted common shares outstanding |  |                      | 461.7 |  |      |  | 461.0 |      |  |  | 461.4 | 
|                                  |  |                      |       |  |      |  |       |      | 

|                                      |  |      |      |   |      |   |      |      |  |   |      | 
|------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | 
|(Continuing operations  US dollar)   |  | 2006 |      |   | 2005 |   |      | 2004 | 
|                                      |  |      |      |   |      |   |      |      | 
|Net (loss) income per share  basic   |  | ($   | 1.10 | ) |      | $ | 0.28 |      |  | $ | 0.28 | 
|Net (loss) income per share  diluted |  | ($   | 1.10 | ) |      | $ | 0.28 |      |  | $ | 0.28 | 





| |                                              
| | ---------------------------------------------
| | Accumulated Other Comprehensive Income (Loss)



F-11



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements



| |                
| | ---------------
| | Inventory Costs





| |                           
| | --------------------------
| | American Jobs Creation Act







| |                                 
| | --------------------------------
| | Exchanges of Non-Monetary Assets





| |                    
| | -------------------
| | Share-Based Payment



F-12



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)






| |                                         
| | ----------------------------------------
| | Conditional Asset Retirement Obligations





| |                                         
| | ----------------------------------------
| | Accounting Changes and Error Corrections





| |                        
| | -----------------------
| | Uncertain Tax Positions





|   |                          
|-- | -------------------------
|3. | Cash and Cash Equivalents





|                         |                                 |                          |       |       |      |   |      |       | 
|------------------------ | ------------------------------- | ------------------------ | ----- | ----- | ---- | - | ---- | ----- | 
|                         |                                 | March 31                 |      
|                         |                                 |                          |      
|                         |                                 | 2006                     |       |       | 2005 |  
|                         |                                 |                          |       |       |      |  
|                         |                                 | (Millions of US dollars) |      
|Cash at bank and on hand |                                 | $                        | 24.9  |       |      | $ | 28.6 |      
|Short-term deposits      |                                 |                          | 290.2 |       |      |   | 84.9 |      
|                         |                                 |                          |       |       |      |  
|                         | Total cash and cash equivalents |                          | $     | 315.1 |      |   | $    | 113.5 | 
|                         |                                 |                          |       |       |      |  



F-13



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




|   |                              
|-- | -----------------------------
|4. | Accounts and Notes Receivable



|                                |                                     |                          |       |       |      |   |       |       | 
|------------------------------- | ----------------------------------- | ------------------------ | ----- | ----- | ---- | - | ----- | ----- | 
|                                |                                     | March 31                 |      
|                                |                                     |                          |      
|                                |                                     | 2006                     |       |       | 2005 |  
|                                |                                     |                          |       |       |      |  
|                                |                                     | (Millions of US dollars) |      
|Trade receivables               |                                     | $                        | 146.5 |       |      | $ | 121.6 |      
|Other receivables and advances  |                                     |                          | 8.0   |       |      |   | 7.1   |      
|Allowance for doubtful accounts |                                     |                          | (1.3  | )     |      |   | (1.5  | )    
|                                |                                     |                          |       |       |      |  
|                                | Total accounts and notes receivable |                          | $     | 153.2 |      |   | $     | 127.2 | 
|                                |                                     |                          |       |       |      |  



|                     |  |                          |      |   |      |   |      |  
|-------------------- |  | ------------------------ | ---- | - | ---- | - | ---- | -
|                     |  | Years Ended March 31     |     
|                     |  |                          |     
|                     |  | 2006                     |      |   | 2005 |  
|                     |  |                          |      |   |      |  
|                     |  | (Millions of US dollars) |     
|Balance at April 1   |  | $                        | 1.5  |   |      | $ | 1.2  |  
|Charged to expense   |  |                          | 0.3  |   |      |   | 0.4  |  
|Costs and deductions |  |                          | (0.5 | ) |      |   | (0.1 | )
|                     |  |                          |      |   |      |  
|Balance at March 31  |  | $                        | 1.3  |   |      | $ | 1.5  |  
|                     |  |                          |      |   |      |  



|   |            
|-- | -----------
|5. | Inventories



|                                                        |                   |                          |      |       |      |   |      |      | 
|------------------------------------------------------- | ----------------- | ------------------------ | ---- | ----- | ---- | - | ---- | ---- | 
|                                                        |                   | March 31                 |     
|                                                        |                   |                          |     
|                                                        |                   | 2006                     |      |       | 2005 |  
|                                                        |                   |                          |      |       |      |  
|                                                        |                   | (Millions of US dollars) |     
|Finished goods                                          |                   | $                        | 84.1 |       |      | $ | 71.1 |     
|Work-in-process                                         |                   |                          | 9.2  |       |      |   | 8.5  |     
|Raw materials and supplies                              |                   |                          | 33.0 |       |      |   | 22.4 |     
|Provision for obsolete finished goods and raw materials |                   |                          | (2.3 | )     |      |   | (2.1 | )   
|                                                        |                   |                          |      |       |      |  
|                                                        | Total inventories |                          | $    | 124.0 |      |   | $    | 99.9 | 
|                                                        |                   |                          |      |       |      |  

F-14



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




|   |                              
|-- | -----------------------------
|6. | Property, Plant and Equipment



|                                         |                |                          |      |      |           |           |       |           |              |   |             |       |  |       |       |       |  |   |        |       | 
|---------------------------------------- | -------------- | ------------------------ | ---- | ---- | --------- | --------- | ----- | --------- | ------------ | - | ----------- | ----- |  | ----- | ----- | ----- |  | - | ------ | ----- | 
|                                         |                |                          |      |      |           | Machinery |       |           |              |   |            
|                                         |                |                          |      |      |           | and       |       |           | Construction |   |             |      
|                                         |                | Land                     |      |      | Buildings |           |       | Equipment |              |   | in Progress |       |  | Total |      
|                                         |                |                          |      |      |           |           |       |           |              |   |             |       |  |       |      
|                                         |                | (Millions of US dollars) |     
|Balance at April 1, 2004:                |                |                          |      |      |           |           |       |           |              |   |             |       |  |       |       |       |  |   |        |      
|Cost                                     |                | $                        | 11.3 |      |           | $         | 135.0 |           |              | $ | 562.8       |       |  | $     | 63.0  |       |  | $ | 772.1  |      
|Accumulated depreciation                 |                |                          |     |      |           |           | (21.0 | )         |              |   | (184.0      | )     |  |       |      |       |  |   | (205.0 | )    
|                                         |                |                          |      |      |           |           |       |           |              |   |             |       |  |       |      
|                                         | Net book value |                          |      | 11.3 |           |           |       | 114.0     |              |   |             | 378.8 |  |       |       | 63.0  |  |   |        | 567.1 | 
|Changes in net book value:               |                |                          |      |      |           |           |       |           |              |   |             |       |  |       |       |       |  |   |        |      
|Capital expenditures                     |                |                          | 0.2  |      |           |           | 3.2   |           |              |   | 32.5        |       |  |       | 117.1 |       |  |   | 153.0  |      
|Retirements and sales                    |                |                          |     |      |           |           |      |           |              |   |            |       |  |       | (4.1  | )     |  |   | (4.1   | )    
|Depreciation                             |                |                          |     |      |           |           | (4.5  | )         |              |   | (31.8       | )     |  |       |      |       |  |   | (36.3  | )    
|Other movements                          |                |                          |     |      |           |           |      |           |              |   | 3.4         |       |  |       |      |       |  |   | 3.4    |      
|Foreign currency translation adjustments |                |                          |     |      |           |           |      |           |              |   | 2.6         |       |  |       |      |       |  |   | 2.6    |      
|                                         |                |                          |      |      |           |           |       |           |              |   |             |       |  |       |      
|                                         | Total changes  |                          |      | 0.2  |           |           |       | (1.3      | )            |   |             | 6.7   |  |       |       | 113.0 |  |   |        | 118.6 | 
|Balance at March 31, 2005:               |                |                          |      |      |           |           |       |           |              |   |             |       |  |       |       |       |  |   |        |      
|Cost                                     |                |                          | 11.5 |      |           |           | 131.1 |           |              |   | 606.6       |       |  |       | 176.6 |       |  |   | 925.8  |      
|Accumulated depreciation                 |                |                          |     |      |           |           | (24.4 | )         |              |   | (215.7      | )     |  |       |      |       |  |   | (240.1 | )    
|                                         |                |                          |      |      |           |           |       |           |              |   |             |       |  |       |      
|                                         | Net book value |                          | $    | 11.5 |           |           | $     | 106.7     |              |   | $           | 390.9 |  |       | $     | 176.6 |  |   | $      | 685.7 | 
|                                         |                |                          |      |      |           |           |       |           |              |   |             |       |  |       |      

|                                         |                |      |      |      |           |           |       |           |              |   |             |       |  |       |       |       |  |   |         |       | 
|---------------------------------------- | -------------- | ---- | ---- | ---- | --------- | --------- | ----- | --------- | ------------ | - | ----------- | ----- |  | ----- | ----- | ----- |  | - | ------- | ----- | 
|                                         |                |      |      |      |           | Machinery |       |           |              |   |            
|                                         |                |      |      |      |           | and       |       |           | Construction |   |             |      
|                                         |                | Land |      |      | Buildings |           |       | Equipment |              |   | in Progress |       |  | Total |      
|                                         |                |      |      |      |           |           |       |           |              |   |             |       |  |       |      
|Balance at April 1, 2005:                |                |      |      |      |           |           |       |           |              |   |             |       |  |       |       |       |  |   |         |      
|Cost                                     |                | $    | 11.5 |      |           | $         | 131.1 |           |              | $ | 606.6       |       |  | $     | 176.6 |       |  | $ | 925.8   |      
|Accumulated depreciation                 |                |      |     |      |           |           | (24.4 | )         |              |   | (215.7      | )     |  |       |      |       |  |   | (240.1  | )    
|                                         |                |      |      |      |           |           |       |           |              |   |             |       |  |       |      
|                                         | Net book value |      |      | 11.5 |           |           |       | 106.7     |              |   |             | 390.9 |  |       |       | 176.6 |  |   |         | 685.7 | 
|Changes in net book value:               |                |      |      |      |           |           |       |           |              |   |             |       |  |       |       |       |  |   |         |      
|Capital expenditures                     |                |      | 4.1  |      |           |           | 16.4  |           |              |   | 90.8        |       |  |       | 51.5  |       |  |   | 162.8   |      
|Retirements and sales                    |                |      |     |      |           |           |      |           |              |   | (8.9        | )     |  |       |      |       |  |   | (8.9    | )    
|Depreciation                             |                |      |     |      |           |           | (7.3  | )         |              |   | (38.0       | )     |  |       |      |       |  |   | (45.3   | )    
|Impairment                               |                |      |     |      |           |           |      |           |              |   | (13.4       | )     |  |       |      |       |  |   | (13.4   | )    
|Other movements                          |                |      |     |      |           |           |      |           |              |   | (0.9        | )     |  |       |      |       |  |   | (0.9    | )    
|Foreign currency translation adjustments |                |      |     |      |           |           |      |           |              |   | (4.4        | )     |  |       |      |       |  |   | (4.4    | )    
|                                         |                |      |      |      |           |           |       |           |              |   |             |       |  |       |      
|                                         | Total changes  |      |      | 4.1  |           |           |       | 9.1       |              |   |             | 25.2  |  |       |       | 51.5  |  |   |         | 89.9  | 
|Balance at March 31, 2006:               |                |      |      |      |           |           |       |           |              |   |             |       |  |       |       |       |  |   |         |      
|Cost                                     |                |      | 15.6 |      |           |           | 147.5 |           |              |   | 669.8       |       |  |       | 228.1 |       |  |   | 1,061.0 |      
|Accumulated depreciation                 |                |      |     |      |           |           | (31.7 | )         |              |   | (253.7      | )     |  |       |      |       |  |   | (285.4  | )    
|                                         |                |      |      |      |           |           |       |           |              |   |             |       |  |       |      
|                                         | Net book value |      | $    | 15.6 |           |           | $     | 115.8     |              |   | $           | 416.1 |  |       | $     | 228.1 |  |   | $       | 775.6 | 
|                                         |                |      |      |      |           |           |       |           |              |   |             |       |  |       |      



F-15



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)






|   |                 
|-- | ----------------
|7. | Retirement Plans









| |   |                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to achieve a rate of return (net of tax and investment expenses)
    that exceeds inflation (CPI) increases by at least
    3% per annum over a moving five year period;
|
| |  | to achieve a rate of return (net of tax and investment expenses)
    above the median result for the Mercer Pooled Fund Survey over a
    rolling three year period; and
|
| |  | over shorter periods, outperform the notional return of the
    benchmark mix of investments.                                                                           



day-to


|                  |  |  |        |  
|----------------- |  |  | ------ | -
|Equity securities |  |  | 40- 75 | %
|Debt securities   |  |  | 15- 60 | %
|Real estate       |  |  | 0- 20  | %

F-16



---



##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




|                  |       |          |      |       |      |  |      |       |  
|----------------- | ----- | -------- | ---- | ----- | ---- |  | ---- | ----- | -
|                  |       | March 31 |     
|                  |       |          |     
|                  |       | 2006     |      |       | 2005 | 
|                  |       |          |      |       |      | 
|Equity securities |       |          | 48.8 | %     |      |  | 36.6 | %    
|Fixed interest    |       |          | 15.1 |       |      |  | 12.7 |      
|Real estate       |       |          | 5.7  |       |      |  | 4.7  |      
|Cash              |       |          | 30.4 |       |      |  | 46.0 |      
|                  |       |          |      |       |      | 
|                  | Total |          |      | 100.0 | %    |  |      | 100.0 | %
|                  |       |          |      |       |      | 



|                                              |                           |                          |      |     |      |   |      |      |  |   |      |     | 
|--------------------------------------------- | ------------------------- | ------------------------ | ---- | --- | ---- | - | ---- | ---- |  | - | ---- | --- | 
|                                              |                           | Years Ended March 31     |     
|                                              |                           |                          |     
|                                              |                           | 2006                     |      |     | 2005 |   |      | 2004 | 
|                                              |                           |                          |      |     |      |   |      |      | 
|                                              |                           | (Millions of US dollars) |     
|Service cost                                  |                           | $                        | 1.9  |     |      | $ | 2.5  |      |  | $ | 2.9  |    
|Interest cost                                 |                           |                          | 2.3  |     |      |   | 2.5  |      |  |   | 2.9  |    
|Expected return on plan assets                |                           |                          | (2.6 | )   |      |   | (3.2 | )    |  |   | (3.6 | )  
|Amortization of unrecognized transition asset |                           |                          |     |     |      |   |     |      |  |   | (0.9 | )  
|Amortization of prior service costs           |                           |                          |     |     |      |   | 0.1  |      |  |   | 0.1  |    
|Recognized net actuarial loss                 |                           |                          | 0.4  |     |      |   | 0.4  |      |  |   | 0.4  |    
|                                              |                           |                          |      |     |      |   |      |      | 
|                                              | Net periodic pension cost |                          |      | 2.0 |      |   |      | 2.3  |  |   |      | 1.8 | 
|Settlement loss                               |                           |                          | 0.9  |     |      |   | 5.3  |      |  |   |     |    
|                                              |                           |                          |      |     |      |   |      |      | 
|                                              | Net pension cost          |                          | $    | 2.9 |      |   | $    | 7.6  |  |   | $    | 1.8 | 
|                                              |                           |                          |      |     |      |   |      |      | 





|                                          |  |          |     |  |      |  |     |      |  |  |     | 
|----------------------------------------- |  | -------- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                                          |  | March 31 |    
|                                          |  |          |    
|                                          |  | 2006     |     |  | 2005 |  |     | 2004 | 
|                                          |  | %        |     |  | %    |  |     | %    | 
|                                          |  |          |     |  |      |  |     |      | 
|Net Periodic Benefit Cost Assumptions:    |  |          |     |  |      |  |     |      |  |  |     | 
|Discount rate                             |  |          | 6.5 |  |      |  | 6.5 |      |  |  | 6.8 | 
|Rate of increase in compensation          |  |          | 4.0 |  |      |  | 4.0 |      |  |  | 3.5 | 
|Expected return on plan assets            |  |          | 6.5 |  |      |  | 6.5 |      |  |  | 6.8 | 
|Projected Benefit Obligation Assumptions: |  |          |     |  |      |  |     |      |  |  |     | 
|Discount rate                             |  |          | 6.0 |  |      |  | 6.5 |      |  |  | 6.5 | 
|Rate of increase in compensation          |  |          | 4.0 |  |      |  | 4.0 |      |  |  | 4.0 | 

10-year


F-17



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)






|                               |                                      |                                       |     |      |      |   |     |       |      | 
|------------------------------ | ------------------------------------ | ------------------------------------- | --- | ---- | ---- | - | --- | ----- | ---- | 
|                               |                                      | Years Ended March 31                  |    
|                               |                                      |                                       |    
|                               |                                      | 2006                                  |     |      | 2005 |  
|                               |                                      |                                       |     |      |      |  
|                               |                                      | (Millions of US dollars)              |    
|Changes in benefit obligation: |                                      |                                       |     |      |      |   |     |      
|                               | Benefit obligation at April 1        |                                       | $   | 37.6 |      |   | $   | 40.7  |     
|                               | Service cost                         |                                       |     | 1.9  |      |   |     | 2.5   |     
|                               | Interest cost                        |                                       |     | 2.3  |      |   |     | 2.5   |     
|                               | Plan participants contributions     |                                       |     | 0.6  |      |   |     | 0.9   |     
|                               | Actuarial loss                       |                                       |     | 2.7  |      |   |     | 2.0   |     
|                               | Benefits paid                        |                                       |     | (6.7 | )    |   |     | (11.4 | )   
|                               | Foreign currency translation         |                                       |     | (2.8 | )    |   |     | 0.4   |     
|                               |                                      |                                       |     |      |      |  
|                               |                                      | Benefit obligation at March 31        |     | $    | 35.6 |   |     | $     | 37.6 | 
|                               |                                      |                                       |     |      |      |  
|Changes in plan assets:        |                                      |                                       |     |      |      |   |     |      
|                               | Fair value of plan assets at April 1 |                                       | $   | 37.7 |      |   | $   | 41.2  |     
|                               | Actual return on plan assets         |                                       |     | 6.6  |      |   |     | 4.7   |     
|                               | Employer contributions               |                                       |     | 1.2  |      |   |     | 1.8   |     
|                               | Participant contributions            |                                       |     | 0.6  |      |   |     | 0.9   |     
|                               | Benefits paid                        |                                       |     | (6.7 | )    |   |     | (11.4 | )   
|                               | Foreign currency translation         |                                       |     | (2.9 | )    |   |     | 0.5   |     
|                               |                                      |                                       |     |      |      |  
|                               |                                      | Fair value of plan assets at March 31 |     | $    | 36.5 |   |     | $     | 37.7 | 
|                               |                                      |                                       |     |      |      |  
|Funded status                  |                                      | $                                     | 0.9 |      |      | $ | 0.1 |      
|Unrecognized actuarial loss    |                                      |                                       | 5.2 |      |      |   | 8.3 |      
|                               |                                      |                                       |     |      |      |  
|                               |                                      | Other assets                          |     | $    | 6.1  |   |     | $     | 8.4  | 
|                               |                                      |                                       |     |      |      |  



|                                 |  |                          |      |  |      |   |      | 
|-------------------------------- |  | ------------------------ | ---- |  | ---- | - | ---- | 
|                                 |  | Years Ended March 31     |     
|                                 |  |                          |     
|                                 |  | 2006                     |      |  | 2005 |  
|                                 |  |                          |      |  |      |  
|                                 |  | (Millions of US dollars) |     
|Projected benefit obligation     |  | $                        | 35.6 |  |      | $ | 37.6 | 
|Accumulated benefit obligation   |  |                          | 35.6 |  |      |   | 37.6 | 
|Fair market value of plan assets |  |                          | 36.5 |  |      |   | 37.7 | 

F-18



---



##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)






|          |                                   |                          |      |      | 
|--------- | --------------------------------- | ------------------------ | ---- | ---- | 
|          |                                   | Years Ended              |     
|          |                                   | March 31                 |     
|          |                                   |                          |     
|          |                                   | (Millions of US dollars) |     
|2007      |                                   | $                        | 3.2  |     
|2008      |                                   |                          | 2.1  |     
|2009      |                                   |                          | 2.2  |     
|2010      |                                   |                          | 2.6  |     
|2011      |                                   |                          | 2.6  |     
|2012-2016 |                                   |                          | 13.0 |     
|          |                                   |                          |     
|          | Estimated future benefit payments |                          | $    | 25.7 | 
|          |                                   |                          |     



|   |                                         
|-- | ----------------------------------------
|8. | Accounts Payable and Accrued Liabilities



|                             |                                                |                          |      |       |      |   |      |      | 
|---------------------------- | ---------------------------------------------- | ------------------------ | ---- | ----- | ---- | - | ---- | ---- | 
|                             |                                                | March 31                 |     
|                             |                                                |                          |     
|                             |                                                | 2006                     |      |       | 2005 |  
|                             |                                                |                          |      |       |      |  
|                             |                                                | (Millions of US dollars) |     
|Trade creditors              |                                                | $                        | 66.0 |       |      | $ | 65.3 |     
|Other creditors and accruals |                                                |                          | 51.8 |       |      |   | 28.7 |     
|                             |                                                |                          |      |       |      |  
|                             | Total accounts payable and accrued liabilities |                          | $    | 117.8 |      |   | $    | 94.0 | 
|                             |                                                |                          |      |       |      |  



|   |                         
|-- | ------------------------
|9. | Short and Long-Term Debt



|                                                |                                  |                          |       |       |      |   |       |       | 
|----------------------------------------------- | -------------------------------- | ------------------------ | ----- | ----- | ---- | - | ----- | ----- | 
|                                                |                                  | March 31                 |      
|                                                |                                  |                          |      
|                                                |                                  | 2006                     |       |       | 2005 |  
|                                                |                                  |                          |       |       |      |  
|                                                |                                  | (Millions of US dollars) |      
|US$ noncollateralized notes  current portion   |                                  | $                        | 121.7 |       |      | $ | 25.7  |      
|US$ noncollateralized notes  long-term portion |                                  |                          |      |       |      |   | 121.7 |      
|                                                |                                  |                          |       |       |      |  
|                                                | Total debt at 7.11% average rate |                          | $     | 121.7 |      |   | $     | 147.4 | 
|                                                |                                  |                          |       |       |      |  





F-19



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




364-day


364-day






| |   |                                                            
| | - | -----------------------------------------------------------
| |  | existing cash and unutilized committed facilities;         
|
| |  | net operating cash flow during the current year;           
|
| |  | an extension of the term of existing credit facilities; and
|
| |  | the addition of proposed new funding facilities.           





F-20



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




|    |                              
|--- | -----------------------------
|10. | Non-Current Other Liabilities



|                      |                                     |                          |      |      |      |   |      |      | 
|--------------------- | ----------------------------------- | ------------------------ | ---- | ---- | ---- | - | ---- | ---- | 
|                      |                                     | March 31                 |     
|                      |                                     |                          |     
|                      |                                     | 2006                     |      |      | 2005 |  
|                      |                                     |                          |      |      |      |  
|                      |                                     | (Millions of US dollars) |     
|Employee entitlements |                                     | $                        | 17.0 |      |      | $ | 5.3  |     
|Product liability     |                                     |                          | 0.7  |      |      |   | 4.7  |     
|Other                 |                                     |                          | 27.3 |      |      |   | 51.7 |     
|                      |                                     |                          |      |      |      |  
|                      | Total non-current other liabilities |                          | $    | 45.0 |      |   | $    | 61.7 | 
|                      |                                     |                          |      |      |      |  



|    |                   
|--- | ------------------
|11. | Product Warranties

50-year






|                                         |  |                          |      |   |      |   |      |  
|---------------------------------------- |  | ------------------------ | ---- | - | ---- | - | ---- | -
|                                         |  | Years Ended March 31     |     
|                                         |  |                          |     
|                                         |  | 2006                     |      |   | 2005 |  
|                                         |  |                          |      |   |      |  
|                                         |  | (Millions of US dollars) |     
|Balance at beginning of period           |  | $                        | 12.9 |   |      | $ | 12.0 |  
|Accruals for product warranties          |  |                          | 6.2  |   |      |   | 4.3  |  
|Settlements made in cash or in kind      |  |                          | (3.4 | ) |      |   | (3.4 | )
|Foreign currency translation adjustments |  |                          | (0.2 | ) |      |   |     |  
|                                         |  |                          |      |   |      |  
|Balance at end of period                 |  | $                        | 15.5 |   |      | $ | 12.9 |  
|                                         |  |                          |      |   |      |  



F-21



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




|    |                              
|--- | -----------------------------
|12. | Commitments and Contingencies



| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | Commitment to provide funding on a long-term basis in
    respect of asbestos-related liabilities of former
    subsidiaries











| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the establishment of the SPF to provide compensation to
    Australian asbestos-related personal injury claimants with
    proven claims against the Former James Hardie Companies;                                                                                                                                                                                                                                                                                                                                    
|
| |  | initial funding of approximately A$154 million provided by
    the Performing Subsidiary to the SPF, calculated on the basis of
    an actuarial report prepared by KPMG Actuaries Pty Ltd
    (KPMG Actuaries) as of March 31, 2006. That
    report provided an estimate of the discounted net present value
    of all present and future Australian asbestos-related personal
    injury claims against the Former James Hardie Companies of
    A$1.52 billion ($1.14 billion).                                 
|
| |  | a two-year rolling cash buffer in the SPF and, subject to the
    cap described below, an annual contribution in advance to top up
    those funds to equal the actuarially calculated estimate of
    expected Australian asbestos-related personal injury claims
    against the Former James Hardie Companies for the following
    three years, to be revised annually;                                                                                                                                            
|
| |  | a cap on the annual payments made by the Performing Subsidiary
    to the SPF, initially set at 35% of the Companys free cash
    flow (defined as cash from operations in accordance with US GAAP
    in force at the date of the Final Funding Agreement) for the
    immediately preceding financial year, with provisions for the
    percentage to decline over time depending upon the
    Companys financial performance (and therefore the
    contributions already made to the SPF) and the claims outlook;
|
| |  | an initial term of approximately 40 years, at which time
    the parties may either agree upon a final payment to be made by
    the Company in satisfaction of any further funding obligations,
    or have the term automatically extended for further periods of
    10 years until such agreement is reached or the relevant
    asbestos-related liabilities cease to arise;                                                                                                                                      
|
| |  | the entry by the parties and/or others into agreements to or
    connected with the Final Funding Agreements (the Related
    Agreements);                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | no cap on individual payments to asbestos claimants;                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-22



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




| |   |                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Performing Subsidiarys payment obligations are
    guaranteed by the James Hardie Industries N.V.;                                                                                               
|
| |  | the SPFs claims to the funding payments required under the
    Final Funding Agreement will be subordinated to the claims of
    the Companys lenders; and                                          
|
| |  | the compensation arrangements will extend to members of the
    Baryulgil community for asbestos-related claims arising from the
    activities of a former subsidiary of ABN 60 (as described below).











F-23



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)






| |                                                                                
| | -------------------------------------------------------------------------------
| | Key events since 2001 leading to the signing of the Final
    Funding Agreement



| |                                                         
| | --------------------------------------------------------
| | Separation of Amaca Pty Ltd and Amaba Pty Ltd and ABN 60







James Hardie
Former Subsidiaries (Special Provisions) Act 2005.




| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Potential for claims against the Former James Hardie
    Companies to be made against the Company



F-24



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)






James
Hardie (Civil Liability) Act 2005 James Hardie
(Civil Penalty Compensation Release) Act 2005








F-25



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)










| |                              
| | -----------------------------
| | Special Commission of Inquiry







| |   |                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | speedy, fair and equitable compensation for all existing and
    future claimants, including objective criteria to reduce
    superimposed inflation. Superimposed inflation is inflation in
    claim awards above the underlying rate of inflation and is
    sometimes called judicial inflation;

F-26



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




| |   |                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | contributions to be made in a manner which provide certainty to
    claimants as to their entitlement, the scheme administrator as
    to the amount available for distribution, and the proposed
    contributors (including the Company) as to the ultimate amount
    of their contributions;
|
| |  | significant reductions in legal costs through reduced and more
    abbreviated litigation; and                                                                                                                                                                                                  
|
| |  | limitation of legal avenues outside of the scheme.                                                                                                                                                                                                                                              









| |                                           
| | ------------------------------------------
| | Principal findings in favor of the Company





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the establishment of the Foundation was legally effective and
    causes of action which the Foundation, Amaba or Amaca might have
    against the James Hardie Group, its officers and advisers would
    be unlikely to result in any significant increase in the funds
    of Amaba, Amaca or the Foundation (putting this finding
    conversely, the Company is unlikely to face any significant
    liability to the Foundation, Amaba or Amaba as a result of the
    then current causes of action of such entities against the
    current members of the James Hardie Group);
|
| |  | there was no finding that JHI NV had committed any material
    breach of any law as a result of the separation and
    reorganization transactions which took place in 2001;                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | many of the allegations and causes of action put forward by
    lawyers for the Foundation, Amaba and Amaca were
    speculative; and                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | the SCI rejected the suggestion that JHI NV had breached any law
    or was part of a conspiracy in relation to the fact that the
    reorganization scheme documents prepared in 2001 did not refer
    to the possibility of the partly-paid shares being cancelled
    (the shares were cancelled in 2003).                                                                                                                                                                                                                                                                         



| |                                                 
| | ------------------------------------------------
| | Other principal findings relevant to the Company





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | as a practical (but not legal) matter, if the right
    amount (and not merely the minimum amount) of funding was not
    provided to the Foundation, the Company would face potential
    legislative, customer, union and public action to apply
    legislative and boycott measures and public pressure to ensure
    that the Company met any significant funding shortfall; and                                                                                                                                                  
|
| |  | the directors of ABN 60 at the time of the cancellation of the
    partly-paid shares (Messrs Morley and Salter) effectively
    followed the instructions of JHI NV in relation to the
    cancellation. As a result, it might be concluded that JHI NV was
    a shadow director of ABN 60 at that time. However, while
    expressing some reservations about what occurred, the SCI did
    not find that the ABN 60 directors (including JHI NV as a
    shadow director) breached their duties in undertaking the
    cancellation.

F-27



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




| |                                                         
| | --------------------------------------------------------
| | Principal findings against ABN 60 (formerly called JHIL)









| |                                                             
| | ------------------------------------------------------------
| | Principal findings against Mr. Macdonald and
    Mr. Shafron





| |   |                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | alleged false and misleading conduct associated with a
    February 16, 2001 press release, particularly regarding a
    statement that the Foundation was fully funded in
    contravention of New South Wales and Commonwealth legislation
    prohibiting false or misleading conduct;                                                                
|
| |  | allegedly breaching their duties as officers of ABN 60 by
    encouraging the board of directors of ABN 60 to act on the
    Trowbridge report, dated February 13, 2001 (the
    Trowbridge Report), in forming a view that the
    Foundation would be fully funded; and                                                                              
|
| |  | criticisms, falling short of findings of contraventions of law,
    based on their respective roles in the separation and
    reorganization transactions. These included criticisms relating
    to their development, control over, reliance on and use of the
    Trowbridge Report, despite (in the SCIs view) their
    knowledge of its limitations.





F-28



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)








| |                                  
| | ---------------------------------
| | Events Following the SCI Findings









F-29



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)






| |                   
| | ------------------
| | Heads of Agreement







| |                                                          
| | ---------------------------------------------------------
| | Extension of Heads of Agreement to cover Baryulgil claims





| |                                     
| | ------------------------------------
| | Interim Funding and ABN 60 Indemnity





F-30



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)














| |                              
| | -----------------------------
| | Releases From Civil Liability



James Hardie (Civil Liability) Act 2005 James
Hardie (Civil Penalty Compensation Release) Act 2005.




F-31



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)






| |                                 
| | --------------------------------
| | Actuarial Study; Claims Estimate













F-32



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)








| |            
| | -----------
| | Claims Data



|                                  |  |             |     |  |      |  |     | 
|--------------------------------- |  | ----------- | --- |  | ---- |  | --- | 
|                                  |  | Years Ended |    
|                                  |  | March 31    |    
|                                  |  |             |    
|                                  |  | 2006        |     |  | 2005 | 
|                                  |  |             |     |  |      | 
|Australia                         |  |             | 556 |  |      |  | 712 | 
|New Zealand                       |  |             |    |  |      |  |    | 
|Unknown  Court Not Identified(1) |  |             | 20  |  |      |  | 36  | 
|USA                               |  |             | 1   |  |      |  | 1   | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Unknown  Court Not Identified
    designation reflects that the information for such claims had
    not been, as of the date of publication, entered into the
    database which the Foundation maintains. Over time, as the
    details of unknown claims are provided to the
    Foundation, the Company believes the database is updated to
    reflect where such claims originate. Accordingly, the Company
    understands the number of unknown claims pending fluctuates due
    to the resolution of claims as well as the reclassification of
    such claims.



|                                               |  |                      |         |  |      |     |         |      |  |     |         | 
|---------------------------------------------- |  | -------------------- | ------- |  | ---- | --- | ------- | ---- |  | --- | ------- | 
|                                               |  | Australia            |        
|                                               |  | Years Ended March 31 |        
|                                               |  |                      |        
|                                               |  | 2006                 |         |  | 2005 |     |         | 2004 | 
|                                               |  |                      |         |  |      |     |         |      | 
|Number of claims filed                         |  |                      | 346     |  |      |     | 489     |      |  |     | 379     | 
|Number of claims dismissed                     |  |                      | 97      |  |      |     | 62      |      |  |     | 119     | 
|Number of claims settled or otherwise resolved |  |                      | 405     |  |      |     | 402     |      |  |     | 316     | 
|Average settlement amount per claim            |  | A$                   | 151,883 |  |      | A$  | 157,594 |      |  | A$  | 167,450 | 
|Average settlement amount per claim            |  | US$                  | 114,322 |  |      | US$ | 116,572 |      |  | US$ | 116,127 | 

F-33



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)


|                                               |  |                                |         |  |      |     |        |      |  |     |    | 
|---------------------------------------------- |  | ------------------------------ | ------- |  | ---- | --- | ------ | ---- |  | --- | -- | 
|                                               |  | Unknown  Court Not Identified |        
|                                               |  | Years Ended March 31           |        
|                                               |  |                                |        
|                                               |  | 2006                           |         |  | 2005 |     |        | 2004 | 
|                                               |  |                                |         |  |      |     |        |      | 
|Number of claims filed                         |  |                                | 6       |  |      |     | 7      |      |  |     | 1  | 
|Number of claims dismissed                     |  |                                | 10      |  |      |     | 20     |      |  |     | 15 | 
|Number of claims settled or otherwise resolved |  |                                | 12      |  |      |     | 2      |      |  |     |   | 
|Average settlement amount per claim            |  | A$                             | 198,892 |  |      | A$  | 47,000 |      |  | A$  |   | 
|Average settlement amount per claim            |  | US$                            | 149,706 |  |      | US$ | 34,766 |      |  | US$ |   | 

|                                               |  |                      |   |  |      |     |         |      |  |     |   | 
|---------------------------------------------- |  | -------------------- | - |  | ---- | --- | ------- | ---- |  | --- | - | 
|                                               |  | USA                  |  
|                                               |  | Years Ended March 31 |  
|                                               |  |                      |  
|                                               |  | 2006                 |   |  | 2005 |     |         | 2004 | 
|                                               |  |                      |   |  |      |     |         |      | 
|Number of claims filed                         |  |                      |  |  |      |     |        |      |  |     |  | 
|Number of claims dismissed                     |  |                      |  |  |      |     | 3       |      |  |     | 1 | 
|Number of claims settled or otherwise resolved |  |                      |  |  |      |     | 1       |      |  |     |  | 
|Average settlement amount per claim            |  | A$                   |  |  |      | A$  | 228,293 |      |  | A$  |  | 
|Average settlement amount per claim            |  | US$                  |  |  |      | US$ | 168,868 |      |  | US$ |  | 



|                                            |  |                      |         |  |      |     |         |      |  |     |         |  |  |      |         |  |  |     |         | 
|------------------------------------------- |  | -------------------- | ------- |  | ---- | --- | ------- | ---- |  | --- | ------- |  |  | ---- | ------- |  |  | --- | ------- | 
|                                            |  | Years Ended March 31 |        
|                                            |  |                      |        
|                                            |  | 2006                 |         |  | 2005 |     |         | 2004 |  |     | 2003    |  |  | 2002 |        
|                                            |  |                      |         |  |      |     |         |      |  |     |         |  |  |      |        
|Number of open claims at beginning of year  |  |                      | 749     |  |      |     | 743     |      |  |     | 814     |  |  |      | 671     |  |  |     | 569     | 
|Number of new claims                        |  |                      | 352     |  |      |     | 496     |      |  |     | 380     |  |  |      | 409     |  |  |     | 375     | 
|Number of closed claims                     |  |                      | 524     |  |      |     | 490     |      |  |     | 451     |  |  |      | 266     |  |  |     | 273     | 
|Number of open claims at year-end           |  |                      | 577     |  |      |     | 749     |      |  |     | 743     |  |  |      | 814     |  |  |     | 671     | 
|Average settlement amount per settled claim |  | A$                   | 153,236 |  |      | A$  | 157,223 |      |  | A$  | 167,450 |  |  | A$   | 201,200 |  |  | A$  | 197,941 | 
|Average settlement amount per case closed   |  | A$                   | 121,945 |  |      | A$  | 129,949 |      |  | A$  | 117,327 |  |  | A$   | 177,752 |  |  | A$  | 125,435 | 
|Average settlement amount per settled claim |  | US$                  | 115,341 |  |      | US$ | 116,298 |      |  | US$ | 116,127 |  |  | US$  | 112,974 |  |  | US$ | 101,603 | 
|Average settlement amount per case closed   |  | US$                  | 91,788  |  |      | US$ | 96,123  |      |  | US$ | 81,366  |  |  | US$  | 99,808  |  |  | US$ | 64,386  | 



F-34



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)






| |                               
| | ------------------------------
| | SCI and Other Related Expenses



|                         |                                      |                          |     |      |      |   |     |      | 
|------------------------ | ------------------------------------ | ------------------------ | --- | ---- | ---- | - | --- | ---- | 
|                         |                                      | Years Ended March 31     |    
|                         |                                      |                          |    
|                         |                                      | 2006                     |     |      | 2005 |  
|                         |                                      |                          |     |      |      |  
|                         |                                      | (Millions of US dollars) |    
|SCI                      |                                      | $                        |    |      |      | $ | 6.8 |     
|Internal investigation   |                                      |                          |    |      |      |   | 4.9 |     
|ASIC investigation       |                                      |                          | 0.8 |      |      |   | 1.2 |     
|Severance and consulting |                                      |                          | 0.1 |      |      |   | 6.0 |     
|Resolution advisory fees |                                      |                          | 9.8 |      |      |   | 6.4 |     
|Funding advice           |                                      |                          | 2.9 |      |      |   | 0.6 |     
|Other                    |                                      |                          | 3.8 |      |      |   | 2.2 |     
|                         |                                      |                          |     |      |      |  
|                         | Total SCI and other related expenses |                          | $   | 17.4 |      |   | $   | 28.1 | 
|                         |                                      |                          |     |      |      |  





| |     
| | ----
| | ASIC



F-35



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)


James Hardie (Investigations and Proceedings) Act
2004.






| |                                     
| | ------------------------------------
| | Financial Position of the Foundation



James Hardie Former Subsidiaries (Winding Up and
Administration) Act 2005) James Hardie Former Subsidiaries (Special
Provisions) Act 2005 status quo






| |                        
| | -----------------------
| | Environmental and Legal





F-36



---



##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




| |                 
| | ----------------
| | Operating Leases



|                       |       |                          |      |       | 
|---------------------- | ----- | ------------------------ | ---- | ----- | 
|Years Ending March 31: |       | (Millions of US dollars) |     
|                       |       |                          |     
|2007                   |       | $                        | 15.8 |      
|2008                   |       |                          | 14.0 |      
|2009                   |       |                          | 12.3 |      
|2010                   |       |                          | 11.1 |      
|2011                   |       |                          | 10.9 |      
|Thereafter             |       |                          | 78.7 |      
|                       |       |                          |     
|                       | Total |                          | $    | 142.8 | 
|                       |       |                          |     





| |                    
| | -------------------
| | Capital Commitments





|    |             
|--- | ------------
|13. | Income Taxes



|                                                              |             |                          |        |        |       |   |       |      |       |   |       |       |       |  
|------------------------------------------------------------- | ----------- | ------------------------ | ------ | ------ | ----- | - | ----- | ---- | ----- | - | ----- | ----- | ----- | -
|                                                              |             | Years Ended March 31     |       
|                                                              |             |                          |       
|                                                              |             | 2006                     |        |        | 2005  |   |       | 2004 |      
|                                                              |             |                          |        |        |       |   |       |      |      
|                                                              |             | (Millions of US dollars) |       
|Income from continuing operations before income taxes:        |             |                          |        |        |       |   |       |      |       |   |       |      
|                                                              | Domestic(1) |                          | $      | 113.7  |       |   | $     | 90.5 |       |   | $     | 103.5 |      
|                                                              | Foreign     |                          |        | (548.8 | )     |   |       | 99.3 |       |   |       | 62.2  |      
|                                                              |             |                          |        |        |       |   |       |      |      
|(Loss) income from continuing operations before income taxes: |             | $                        | (435.1 | )      |       | $ | 189.8 |      |       | $ | 165.7 |      
|                                                              |             |                          |        |        |       |   |       |      |      
|Income tax expense:                                           |             |                          |        |        |       |   |       |      |       |   |       |      
|                                                              | Current:    |                          |        |        |       |   |       |      |       |   |       |       |      
|                                                              |             | Domestic(1)              |        | $      | (9.0  | ) |       | $    | (14.1 | ) |       | $     | (6.7  | )
|                                                              |             | Foreign                  |        |        | (91.5 | ) |       |      | (37.1 | ) |       |       | (20.4 | )
|                                                              |             |                          |        |        |       |   |       |      |      
|Current income tax expense                                    |             |                          | (100.5 | )      |       |   | (51.2 | )    |       |   | (27.1 | )    
|                                                              |             |                          |        |        |       |   |       |      |      

F-37



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)


|                                                   |             |                          |       |      |      |   |       |       |   |   |       |      |  
|-------------------------------------------------- | ----------- | ------------------------ | ----- | ---- | ---- | - | ----- | ----- | - | - | ----- | ---- | -
|                                                   |             | Years Ended March 31     |      
|                                                   |             |                          |      
|                                                   |             | 2006                     |       |      | 2005 |   |       | 2004  |  
|                                                   |             |                          |       |      |      |   |       |       |  
|                                                   |             | (Millions of US dollars) |      
|Deferred:                                          |             |                          |       |      |      |   |       |       |   |   |       |     
|                                                   | Domestic(1) |                          |       | (0.3 | )    |   |       | 5.0   |   |   |       | (3.9 | )
|                                                   | Foreign     |                          |       | 29.2 |      |   |       | (15.7 | ) |   |       | (9.4 | )
|                                                   |             |                          |       |      |      |   |       |       |  
|Deferred income tax expense                        |             |                          | 28.9  |      |      |   | (10.7 | )     |   |   | (13.3 | )   
|                                                   |             |                          |       |      |      |   |       |       |  
|Total income tax expense for continuing operations |             | $                        | (71.6 | )    |      | $ | (61.9 | )     |   | $ | (40.4 | )   
|                                                   |             |                          |       |      |      |   |       |       |  






|    |                                                                                           
|--- | ------------------------------------------------------------------------------------------
|(1) | Since JHI NV is the Dutch parent holding company, domestic
    represents The Netherlands.



|                                                   |                          |                          |        |       |      |   |       |       |   |   |       |       |  
|-------------------------------------------------- | ------------------------ | ------------------------ | ------ | ----- | ---- | - | ----- | ----- | - | - | ----- | ----- | -
|                                                   |                          | Years Ended March 31     |       
|                                                   |                          |                          |       
|                                                   |                          | 2006                     |        |       | 2005 |   |       | 2004  |  
|                                                   |                          |                          |        |       |      |   |       |       |  
|                                                   |                          | (Millions of US dollars) |       
|Income tax expense computed at statutory tax rates |                          | $                        | 121.0  |       |      | $ | (65.3 | )     |   | $ | (60.7 | )    
|US state income taxes, net of the federal benefit  |                          |                          | (7.1   | )     |      |   | (5.3  | )     |   |   | (0.2  | )    
|Asbestos provision                                 |                          |                          | (214.7 | )     |      |   |      |       |   |   |      |      
|Benefit from Dutch financial risk reserve regime   |                          |                          | 12.7   |       |      |   | 18.1  |       |   |   | 24.8  |      
|Expenses not deductible                            |                          |                          | (3.4   | )     |      |   | (2.3  | )     |   |   | (2.5  | )    
|Non-assessable items                               |                          |                          | 1.4    |       |      |   |      |       |   |   | 1.3   |      
|Losses not available for carryforward              |                          |                          | (2.6   | )     |      |   | (2.4  | )     |   |   |      |      
|Change in reserves                                 |                          |                          | 20.7   |       |      |   | (3.7  | )     |   |   | (3.9  | )    
|Other items                                        |                          |                          | 0.4    |       |      |   | (1.0  | )     |   |   | 0.8   |      
|                                                   |                          |                          |        |       |      |   |       |       |  
|                                                   | Total income tax expense |                          | $      | (71.6 | )    |   | $     | (61.9 | ) |   | $     | (40.4 | )
|                                                   |                          |                          |        |       |      |   |       |       |  
|Effective tax rate                                 |                          |                          | 16.5   | %     |      |   | 32.6  | %     |   |   | 24.4  | %    
|                                                   |                          |                          |        |       |      |   |       |       |  



|                     |                                         |                                                      |       |      |      |  |       |      |      | 
|-------------------- | --------------------------------------- | ---------------------------------------------------- | ----- | ---- | ---- |  | ----- | ---- | ---- | 
|                     |                                         | March 31                                             |      
|                     |                                         |                                                      |      
|                     |                                         | 2006                                                 |       |      | 2005 | 
|                     |                                         |                                                      |       |      |      | 
|                     |                                         | (Millions of US dollars)                             |      
|Deferred tax assets: |                                         |                                                      |       |      |      |  |       |     
|                     | Provisions and accruals                 |                                                      | $     | 33.2 |      |  | $     | 29.0 |     
|                     | Net operating loss carryforwards        |                                                      |       | 8.9  |      |  |       | 12.8 |     
|                     | Capital loss carryforwards              |                                                      |       | 31.2 |      |  |       | 33.7 |     
|                     | Taxes on intellectual property transfer |                                                      |       | 8.3  |      |  |       | 10.0 |     
|                     |                                         |                                                      |       |      |      | 
|                     |                                         | Total deferred tax assets                            |       |      | 81.6 |  |       |      | 85.5 | 
|Valuation allowance  |                                         |                                                      | (35.2 | )    |      |  | (38.1 | )   
|                     |                                         |                                                      |       |      |      | 
|                     |                                         | Total deferred tax assets net of valuation allowance |       |      | 46.4 |  |       |      | 47.4 | 
|                     |                                         |                                                      |       |      |      | 

F-38



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)


|                          |                               |                                |  |       |       |   |  |       |       |  
|------------------------- | ----------------------------- | ------------------------------ |  | ----- | ----- | - |  | ----- | ----- | -
|                          |                               | March 31                       | 
|                          |                               |                                | 
|                          |                               | 2006                           |  |       | 2005  |  
|                          |                               |                                |  |       |       |  
|                          |                               | (Millions of US dollars)       | 
|Deferred tax liabilities: |                               |                                |  |       |       |   |  |      
|                          | Property, plant and equipment |                                |  | (91.7 | )     |   |  | (86.9 | )    
|                          | Prepaid pension cost          |                                |  | (1.8  | )     |   |  | (2.5  | )    
|                          |                               |                                |  |       |       |  
|                          |                               | Total deferred tax liabilities |  |       | (93.5 | ) |  |       | (89.4 | )
|                          | Foreign currency movements    |                                |  | 2.8   |       |   |  | 2.8   |      
|                          |                               |                                |  |       |       |  
|                          |                               | Net deferred tax liabilities   |  | $     | (44.3 | ) |  | $     | (39.2 | )
|                          |                               |                                |  |       |       |  

















F-39



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)








|                                    |                          |                       |       |       |    |    |       |       | 
|----------------------------------- | ------------------------ | --------------------- | ----- | ----- | -- | -- | ----- | ----- | 
|                                    |                          | US$                   |       |       | A$ |   
|                                    |                          |                       |       |       |    |   
|                                    |                          | (Millions of dollars) |      
|Primary tax after allowable credits |                          | $                     | 129.5 |       |    | A$ | 172.0 |      
|Penalties(1)                        |                          |                       | 32.4  |       |    |    | 43.0  |      
|General interest charges            |                          |                       | 122.7 |       |    |    | 163.0 |      
|                                    |                          |                       |       |       |    |   
|                                    | Total amended assessment |                       | $     | 284.6 |    |    | A$    | 378.0 | 
|                                    |                          |                       |       |       |    |   






|    |                              
|--- | -----------------------------
|(1) | Represents 25% of primary tax







F-40



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)












|    |                        
|--- | -----------------------
|14. | Discontinued Operations



| |                 
| | ----------------
| | Building Systems





| |       
| | ------
| | ABN 60



F-41



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)










| |                           
| | --------------------------
| | Disposal of Chile Business





|                   |                                              |                          |                   |      |      |      |   |       |     |     | 
|------------------ | -------------------------------------------- | ------------------------ | ----------------- | ---- | ---- | ---- | - | ----- | --- | --- | 
|                   |                                              | Years Ended March 31     |                  
|                   |                                              |                          |                  
|                   |                                              | 2006                     |                   |      | 2005 |     
|                   |                                              |                          |                   |      |      |     
|                   |                                              | (Millions of US dollars) |                  
|Chile Fibre Cement |                                              |                          |                   |      |      |      |   |      
|                   | Net sales                                    |                          | $                 | 5.1  |      |      | $ | 13.3  |    
|                   | Cost of goods sold                           |                          |                   | (3.5 | )    |      |   | (10.1 | )  
|                   |                                              |                          |                   |      |      |     
|                   |                                              | Gross profit             |                   |      | 1.6  |      |   |       | 3.2 |    
|                   | Selling, general and administrative expenses |                          |                   | (1.2 | )    |      |   | (2.0  | )  
|                   | Loss on disposal of business                 |                          |                   | (0.8 | )    |      |   |      |    
|                   |                                              |                          |                   |      |      |     
|                   |                                              | Operating (loss) income  |                   |      | (0.4 | )    |   |       | 1.2 |    
|                   | Interest expense                             |                          |                   | (0.2 | )    |      |   | (0.4  | )  
|                   |                                              |                          |                   |      |      |     
|                   |                                              |                          | Net (loss) income |      | $    | (0.6 | ) |       | $   | 0.8 | 
|                   |                                              |                          |                   |      |      |     

F-42



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




|                  |                                                   |                                              |   |      |   |  |      |      |      |   |   |      |     | 
|----------------- | ------------------------------------------------- | -------------------------------------------- | - | ---- | - |  | ---- | ---- | ---- | - | - | ---- | --- | 
|                  |                                                   | Years Ended March 31                         |  
|                  |                                                   |                                              |  
|                  |                                                   | 2006                                         |   | 2005 |   |  | 2004 |     
|                  |                                                   |                                              |   |      |   |  |      |     
|                  |                                                   | (Millions of US dollars)                     |  
|Building Systems  |                                                   |                                              |   |      |   |  |      |      |      |   |   |     
|                  | Net sales                                         |                                              | $ |     |   |  | $    |     |      |   | $ | 2.9  |    
|                  | Income before income tax expense                  |                                              |   |     |   |  |      |     |      |   |   | 0.3  |    
|                  | Income tax expense                                |                                              |   |     |   |  |      |     |      |   |   | (0.1 | )  
|                  |                                                   |                                              |   |      |   |  |      |      |     
|                  |                                                   | Net income                                   |   |      |  |  |      |      |     |   |   |      | 0.2 | 
|                  |                                                   |                                              |   |      |   |  |      |      |     
|Building Services |                                                   |                                              |   |      |   |  |      |      |      |   |   |     
|                  | Net sales                                         |                                              |   |     |   |  |      |     |      |   |   |     |    
|                  | Loss before income tax benefit                    |                                              |   |     |   |  |      | (0.5 | )    |   |   |     |    
|                  | Income tax benefit                                |                                              |   |     |   |  |      | 0.2  |      |   |   |     |    
|                  |                                                   |                                              |   |      |   |  |      |      |     
|                  |                                                   | Net loss                                     |   |      |  |  |      |      | (0.3 | ) |   |      |    | 
|                  |                                                   |                                              |   |      |   |  |      |      |     
|Total             |                                                   |                                              |   |      |   |  |      |      |      |   |   |     
|                  | Net sales                                         |                                              |   |     |   |  |      |     |      |   |   | 2.9  |    
|                  | (Loss) income before income tax benefit (expense) |                                              |   |     |   |  |      | (0.5 | )    |   |   | 0.3  |    
|                  | Income tax benefit (expense)                      |                                              |   |     |   |  |      | 0.2  |      |   |   | (0.1 | )  
|                  |                                                   | Net (loss) income                            |   |      |  |  |      |      | (0.3 | ) |   |      | 0.2 | 
|                  |                                                   | (Loss) gain on disposal, net of income taxes |   |      |  |  |      |      | (0.7 | ) |   |      | 4.1 | 
|                  |                                                   |                                              |   |      |   |  |      |      |     
|                  |                                                   | (Loss) income from discontinued operations   |   | $    |  |  |      | $    | (1.0 | ) |   | $    | 4.3 | 
|                  |                                                   |                                              |   |      |   |  |      |      |     



|    |                         
|--- | ------------------------
|15. | Stock-Based Compensation







|                                          |  |                      |      |   |      |    |      |      |  |    |      |  
|----------------------------------------- |  | -------------------- | ---- | - | ---- | -- | ---- | ---- |  | -- | ---- | -
|                                          |  | Years Ended March 31 |     
|                                          |  |                      |     
|                                          |  | 2006                 |      |   | 2005 |    |      | 2004 | 
|                                          |  |                      |      |   |      |    |      |      | 
|Dividend yield                            |  |                      | 1.2  | % |      |    | 1.1  | %    |  |    | 1.0  | %
|Expected volatility                       |  |                      | 27.4 | % |      |    | 29.1 | %    |  |    | 26.0 | %
|Risk free interest rate                   |  |                      | 4.8  | % |      |    | 3.2  | %    |  |    | 2.7  | %
|Expected life in years                    |  |                      | 3.3  |   |      |    | 3.3  |      |  |    | 3.3  |  
|Weighted average fair value at grant date |  | A$                   | 1.35 |   |      | A$ | 1.35 |      |  | A$ | 1.42 |  

F-43



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)






| |                              
| | -----------------------------
| | Executive Share Purchase Plan





| |                                              
| | ---------------------------------------------
| | Managing Board Transitional Stock Option Plan







| |                           
| | --------------------------
| | 2001 Equity Incentive Plan



F-44



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)


|                                 |  |          |      |              |           |  |           |            |  |  |               | 
|-------------------------------- |  | -------- | ---- | ------------ | --------- |  | --------- | ---------- |  |  | ------------- | 
|                                 |  |          |      | October 2001 |           |  |          
|                                 |  | Original |      |              | Number of |  |           | Option     | 
|                                 |  | Exercise |      |              | Options   |  |           | Expiration | 
|Original Shadow Share Grant Date |  | Price    |      |              | Granted   |  |           | Date       | 
|                                 |  |          |      |              |           |  |           |            | 
|November 1999                    |  | A$       | 3.82 |              |           |  | 1,968,544 |            |  |  | November 2009 | 
|November 2000                    |  | A$       | 3.78 |              |           |  | 3,500,285 |            |  |  | November 2010 | 





|                 |  |          |      |  |           |  |           |            |  |  |                | 
|---------------- |  | -------- | ---- |  | --------- |  | --------- | ---------- |  |  | -------------- | 
|                 |  | Original |      |  | Number of |  |           | Option     | 
|                 |  | Exercise |      |  | Options   |  |           | Expiration | 
|Share Grant Date |  | Price    |      |  | Granted   |  |           | Date       | 
|                 |  |          |      |  |           |  |           |            | 
|December 2001    |  | A$       | 5.65 |  |           |  | 4,248,417 |            |  |  | December  2011 | 
|December 2002    |  | A$       | 6.66 |  |           |  | 4,037,000 |            |  |  | December  2012 | 
|December 2003    |  | A$       | 7.05 |  |           |  | 6,179,583 |            |  |  | December  2013 | 
|December 2004    |  | A$       | 5.99 |  |           |  | 5,391,100 |            |  |  | December  2014 | 
|February 2005    |  | A$       | 6.30 |  |           |  | 273,000   |            |  |  | February 2015  | 
|December 2005    |  | A$       | 8.90 |  |           |  | 5,224,100 |            |  |  | December  2015 | 
|March 2006       |  | A$       | 9.50 |  |           |  | 40,200    |            |  |  | March 2016     | 







|                                        |  |                      |            |   |      |  |            |      |  |  |            |  
|--------------------------------------- |  | -------------------- | ---------- | - | ---- |  | ---------- | ---- |  |  | ---------- | -
|                                        |  | Years Ended March 31 |           
|                                        |  |                      |           
|Shares Available for Grant              |  | 2006                 |            |   | 2005 |  |            | 2004 | 
|                                        |  |                      |            |   |      |  |            |      | 
|Shares available at beginning of period |  |                      | 24,340,258 |   |      |  | 27,293,210 |      |  |  | 32,884,940 |  
|Awards granted                          |  |                      | (5,264,300 | ) |      |  | (5,664,100 | )    |  |  | (6,179,583 | )
|Options forfeited                       |  |                      | 700,275    |   |      |  | 2,711,148  |      |  |  | 587,853    |  
|                                        |  |                      |            |   |      |  |            |      | 
|Shares available at end of period       |  |                      | 19,776,233 |   |      |  | 24,340,258 |      |  |  | 27,293,210 |  
|                                        |  |                      |            |   |      |  |            |      | 

F-45



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




|                                   |  |                         |            |          |          |    |      |           |          |  |            |   |  |           |      |  |          |  |            |   |  |    |      | 
|---------------------------------- |  | ----------------------- | ---------- | -------- | -------- | -- | ---- | --------- | -------- |  | ---------- | - |  | --------- | ---- |  | -------- |  | ---------- | - |  | -- | ---- | 
|                                   |  | 2006                    |            |          | 2005     |    |      | 2004      |         
|                                   |  |                         |            |          |          |    |      |           |         
|                                   |  |                         |            | Weighted |          |    |      |           | Weighted |  |            |   |  | Weighted  |     
|                                   |  |                         |            | Average  |          |    |      |           | Average  |  |            |   |  | Average   |     
|                                   |  | Number of               |            |          | Exercise |    |      | Number of |          |  | Exercise   |   |  | Number of |      |  | Exercise | 
|                                   |  | Shares                  |            |          | Price    |    |      | Shares    |          |  | Price      |   |  | Shares    |      |  | Price    | 
|                                   |  |                         |            |          |          |    |      |           |          |  |            |   |  |           |      |  |          | 
|                                   |  | (In Australian dollars) |           
|Outstanding at beginning of period |  |                         | 20,128,610 |          |          | A$ | 5.75 |           |          |  | 17,978,707 |   |  | A$        | 5.72 |  |          |  | 13,410,024 |   |  | A$ | 5.20 | 
|Granted                            |  |                         | 6,584,300  |          |          |    | 8.83 |           |          |  | 5,664,100  |   |  |           | 6.00 |  |          |  | 6,179,583  |   |  |    | 7.05 | 
|Exercised                          |  |                         | (3,925,378 | )        |          |    | 4.79 |           |          |  | (803,049   | ) |  |           | 4.13 |  |          |  | (1,023,047 | ) |  |    | 4.38 | 
|Forfeited                          |  |                         | (3,274,275 | )        |          |    | 5.68 |           |          |  | (2,711,148 | ) |  |           | 6.56 |  |          |  | (587,853   | ) |  |    | 5.79 | 
|                                   |  |                         |            |          |          |    |      |           |          |  |            |   |  |           |      |  |          | 
|Outstanding at end of period       |  |                         | 19,513,257 |          |          | A$ | 6.99 |           |          |  | 20,128,610 |   |  | A$        | 5.75 |  |          |  | 17,978,707 |   |  | A$ | 5.72 | 
|                                   |  |                         |            |          |          |    |      |           |          |  |            |   |  |           |      |  |          | 
|Options exercisable at March 31    |  |                         | 7,234,897  |          |          | A$ | 5.82 |           |          |  | 7,155,625  |   |  | A$        | 5.08 |  |          |  | 3,858,736  |   |  | A$ | 4.54 | 
|                                   |  |                         |            |          |          |    |      |           |          |  |            |   |  |           |      |  |          | 

|                        |  |                         |            |           |             |  |          |          |                     |    |                |          |  |          |           |  |  |    |      | 
|----------------------- |  | ----------------------- | ---------- | --------- | ----------- |  | -------- | -------- | ------------------- | -- | -------------- | -------- |  | -------- | --------- |  |  | -- | ---- | 
|                        |  | Options Outstanding     |            |           |             |  |         
|                        |  |                         |            |           |            
|                        |  |                         |            | Weighted  |             |  |          |          | Options Exercisable |   
|                        |  |                         |            | Average   |             |  |          |          |                     |   
|                        |  |                         |            | Remaining |             |  | Weighted |          |                     |    |                | Weighted | 
|                        |  | Number                  |            |           | Contractual |  |          | Average  |                     |    | Number         |          |  | Average  |          
|                        |  | Outstanding at          |            |           | Life (in    |  |          | Exercise |                     |    | Exercisable at |          |  | Exercise |          
|Range of Exercise Price |  | March 31, 2006          |            |           | Years)      |  |          | Price    |                     |    | March 31, 2006 |          |  | Price    |          
|                        |  |                         |            |           |             |  |          |          |                     |    |                |          |  |          |          
|                        |  | (In Australian dollars) |           
|A$3.09                  |  |                         | 773,750    |           |             |  | 4.6      |          |                     | A$ | 3.09           |          |  |          | 773,750   |  |  | A$ | 3.09 | 
|3.13                    |  |                         | 257,113    |           |             |  | 3.6      |          |                     |    | 3.13           |          |  |          | 257,113   |  |  |    | 3.13 | 
|5.06                    |  |                         | 1,270,724  |           |             |  | 5.7      |          |                     |    | 5.06           |          |  |          | 1,270,724 |  |  |    | 5.06 | 
|5.99                    |  |                         | 4,464,850  |           |             |  | 8.7      |          |                     |    | 5.99           |          |  |          | 967,900   |  |  |    | 5.99 | 
|6.30                    |  |                         | 273,000    |           |             |  | 8.9      |          |                     |    | 6.30           |          |  |          | 68,250    |  |  |    | 6.30 | 
|6.45                    |  |                         | 2,064,800  |           |             |  | 6.7      |          |                     |    | 6.45           |          |  |          | 2,064,800 |  |  |    | 6.45 | 
|7.05                    |  |                         | 3,857,720  |           |             |  | 7.7      |          |                     |    | 7.05           |          |  |          | 1,832,360 |  |  |    | 7.05 | 
|8.53                    |  |                         | 1,320,000  |           |             |  | 9.7      |          |                     |    | 8.53           |          |  |          |          |  |  |    |     | 
|8.90                    |  |                         | 5,191,100  |           |             |  | 9.7      |          |                     |    | 8.90           |          |  |          |          |  |  |    |     | 
|9.50                    |  |                         | 40,200     |           |             |  | 9.9      |          |                     |    | 9.50           |          |  |          |          |  |  |    |     | 
|                        |  |                         |            |           |             |  |          |          |                     |    |                |          |  |          |          
|A$3.09 to A$9.50        |  |                         | 19,513,257 |           |             |  | 8.2      |          |                     | A$ | 6.99           |          |  |          | 7,234,897 |  |  | A$ | 5.82 | 
|                        |  |                         |            |           |             |  |          |          |                     |    |                |          |  |          |          



| |                             
| | ----------------------------
| | Supervisory Board Share Plan



F-46



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




| |                                          
| | -----------------------------------------
| | Peter Donald Macdonald Share Option Plans



| |                                         
| | ----------------------------------------
| | Peter Donald Macdonald Share Option Plan





| |                                              
| | ---------------------------------------------
| | Peter Donald Macdonald Share Option Plan 2001





| |                                              
| | ---------------------------------------------
| | Peter Donald Macdonald Share Option Plan 2002



F-47



---



##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)






| |                                           
| | ------------------------------------------
| | Key Management Shadow Stock Incentive Plan





| |                               
| | ------------------------------
| | Stock Appreciation Rights Plan





|    |                      
|--- | ---------------------
|16. | Financial Instruments



| |                 
| | ----------------
| | Foreign Currency







| |            
| | -----------
| | Credit Risk







mark-to


F-48



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)






| |            
| | -----------
| | Fair Values



|                |          |                          |   |       |       |  |   |          |       |  |       |       |       |  |   |       |       | 
|--------------- | -------- | ------------------------ | - | ----- | ----- |  | - | -------- | ----- |  | ----- | ----- | ----- |  | - | ----- | ----- | 
|                |          | March 31                 |  
|                |          |                          |  
|                |          | 2006                     |   |       | 2005  | 
|                |          |                          |   |       |       | 
|                |          | Carrying                 |   |       | Fair  |  |   | Carrying |       |  | Fair  |      
|                |          | Value                    |   |       | Value |  |   | Value    |       |  | Value |      
|                |          |                          |   |       |       |  |   |          |       |  |       |      
|                |          | (Millions of US dollars) |  
|Long-term debt: |          |                          |   |       |       |  |   |          |       |  |       |       |       |  |   |      
|                | Floating |                          | $ |      |       |  | $ |         |       |  | $     |      |       |  | $ |      |      
|                | Fixed    |                          |   | 121.7 |       |  |   | 133.8    |       |  |       | 147.4 |       |  |   | 173.6 |      
|                |          |                          |   |       |       |  |   |          |       |  |       |      
|                |          | Total                    |   | $     | 121.7 |  |   | $        | 133.8 |  |       | $     | 147.4 |  |   | $     | 173.6 | 
|                |          |                          |   |       |       |  |   |          |       |  |       |      





|    |                                                         
|--- | --------------------------------------------------------
|17. | Operating Segment Information and Concentrations of Risk





| |                   
| | ------------------
| | Operating Segments



|                          |                                            |                           |         |         |      |   |       |         |  |   |       |       | 
|------------------------- | ------------------------------------------ | ------------------------- | ------- | ------- | ---- | - | ----- | ------- |  | - | ----- | ----- | 
|                          |                                            | Net Sales to Customers(1) |        
|                          |                                            | Years Ended March 31      |        
|                          |                                            |                           |        
|                          |                                            | 2006                      |         |         | 2005 |   |       | 2004    | 
|                          |                                            |                           |         |         |      |   |       |         | 
|                          |                                            | (Millions of US dollars)  |        
|USA Fiber Cement          |                                            | $                         | 1,218.4 |         |      | $ | 939.2 |         |  | $ | 738.6 |      
|Asia Pacific Fiber Cement |                                            |                           | 241.8   |         |      |   | 236.1 |         |  |   | 219.8 |      
|Other                     |                                            |                           | 28.3    |         |      |   | 35.1  |         |  |   | 23.5  |      
|                          |                                            |                           |         |         |      |   |       |         | 
|                          | Worldwide total from continuing operations |                           | $       | 1,488.5 |      |   | $     | 1,210.4 |  |   | $     | 981.9 | 
|                          |                                            |                           |         |         |      |   |       |         | 

F-49



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)


|                             |                               |                                            |        |        |        |   |       |       |       |   |       |       |       | 
|---------------------------- | ----------------------------- | ------------------------------------------ | ------ | ------ | ------ | - | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                             |                               | (Loss) Income From Continuing              |       
|                             |                               | Operations Before Income Taxes             |       
|                             |                               | Years Ended March 31                       |       
|                             |                               |                                            |       
|                             |                               | 2006                                       |        |        | 2005   |   |       | 2004  |      
|                             |                               |                                            |        |        |        |   |       |       |      
|                             |                               | (Millions of US dollars)                   |       
|USA Fiber Cement(2)          |                               | $                                          | 342.6  |        |        | $ | 241.5 |       |       | $ | 195.6 |      
|Asia Pacific Fiber Cement(2) |                               |                                            | 41.7   |        |        |   | 46.8  |       |       |   | 37.6  |      
|Research and Development(2)  |                               |                                            | (15.7  | )      |        |   | (17.5 | )     |       |   | (17.6 | )    
|Other                        |                               |                                            | (26.5  | )      |        |   | (11.8 | )     |       |   | (15.9 | )    
|                             |                               |                                            |        |        |        |   |       |       |      
|                             | Segments total                |                                            |        | 342.1  |        |   |       | 259.0 |       |   |       | 199.7 |      
|General Corporate(3),(4)     |                               |                                            | (61.4  | )      |        |   | (62.8 | )     |       |   | (27.5 | )    
|Asbestos provision           |                               |                                            | (715.6 | )      |        |   |      |       |       |   |      |      
|                             |                               |                                            |        |        |        |   |       |       |      
|                             | Total operating (loss) income |                                            |        | (434.9 | )      |   |       | 196.2 |       |   |       | 172.2 |      
|Net interest expense(5)      |                               |                                            | (0.2   | )      |        |   | (5.1  | )     |       |   | (10.0 | )    
|Other income (expense), net  |                               |                                            |       |        |        |   | (1.3  | )     |       |   | 3.5   |      
|                             |                               |                                            |        |        |        |   |       |       |      
|                             |                               | Worldwide total from continuing operations |        | $      | (435.1 | ) |       | $     | 189.8 |   |       | $     | 165.7 | 
|                             |                               |                                            |        |        |        |   |       |       |      

|                          |                 |                           |       |         |      |   |       |         | 
|------------------------- | --------------- | ------------------------- | ----- | ------- | ---- | - | ----- | ------- | 
|                          |                 | Total Identifiable Assets |      
|                          |                 | March 31                  |      
|                          |                 |                           |      
|                          |                 | 2006                      |       |         | 2005 |  
|                          |                 |                           |       |         |      |  
|                          |                 | (Millions of US dollars)  |      
|USA Fiber Cement          |                 | $                         | 826.0 |         |      | $ | 670.1 |        
|Asia Pacific Fiber Cement |                 |                           | 170.4 |         |      |   | 181.4 |        
|Other                     |                 |                           | 54.8  |         |      |   | 79.4  |        
|                          |                 |                           |       |         |      |  
|                          | Segments total  |                           |       | 1,051.2 |      |   |       | 930.9   | 
|General Corporate(6)      |                 |                           | 394.2 |         |      |   | 155.8 |        
|                          |                 |                           |       |         |      |  
|                          | Worldwide total |                           | $     | 1,445.4 |      |   | $     | 1,086.7 | 
|                          |                 |                           |       |         |      |  

|                          |                 |                          |       |       |      |   |       |       |  |   |      |      | 
|------------------------- | --------------- | ------------------------ | ----- | ----- | ---- | - | ----- | ----- |  | - | ---- | ---- | 
|                          |                 | Additions to Property,   |      
|                          |                 | Plant and Equipment(7)   |      
|                          |                 | Years Ended March 31     |      
|                          |                 |                          |      
|                          |                 | 2006                     |       |       | 2005 |   |       | 2004  | 
|                          |                 |                          |       |       |      |   |       |       | 
|                          |                 | (Millions of US dollars) |      
|USA Fiber Cement          |                 | $                        | 154.5 |       |      | $ | 144.8 |       |  | $ | 56.2 |     
|Asia Pacific Fiber Cement |                 |                          | 6.6   |       |      |   | 4.1   |       |  |   | 8.4  |     
|Other                     |                 |                          | 1.7   |       |      |   | 4.1   |       |  |   | 9.5  |     
|                          |                 |                          |       |       |      |   |       |       | 
|                          | Worldwide total |                          | $     | 162.8 |      |   | $     | 153.0 |  |   | $    | 74.1 | 
|                          |                 |                          |       |       |      |   |       |       | 

F-50



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)


|                          |                 |                          |      |      |      |   |      |      |  |   |      |      | 
|------------------------- | --------------- | ------------------------ | ---- | ---- | ---- | - | ---- | ---- |  | - | ---- | ---- | 
|                          |                 | Depreciation and         |     
|                          |                 | Amortization             |     
|                          |                 | Years Ended March 31     |     
|                          |                 |                          |     
|                          |                 | 2006                     |      |      | 2005 |   |      | 2004 | 
|                          |                 |                          |      |      |      |   |      |      | 
|                          |                 | (Millions of US dollars) |     
|USA Fiber Cement          |                 | $                        | 32.4 |      |      | $ | 23.1 |      |  | $ | 25.1 |     
|Asia Pacific Fiber Cement |                 |                          | 10.0 |      |      |   | 10.1 |      |  |   | 9.7  |     
|Other                     |                 |                          | 2.9  |      |      |   | 3.1  |      |  |   | 1.5  |     
|                          |                 |                          |      |      |      |   |      |      | 
|                          | Segments total  |                          |      | 45.3 |      |   |      | 36.3 |  |   |      | 36.3 | 
|General Corporate         |                 |                          |     |      |      |   |     |      |  |   | 0.1  |     
|                          |                 |                          |      |      |      |   |      |      | 
|                          | Worldwide total |                          | $    | 45.3 |      |   | $    | 36.3 |  |   | $    | 36.4 | 
|                          |                 |                          |      |      |      |   |      |      | 

|                 |                                            |                           |         |         |      |   |       |         |  |   |       |       | 
|---------------- | ------------------------------------------ | ------------------------- | ------- | ------- | ---- | - | ----- | ------- |  | - | ----- | ----- | 
|                 |                                            | Net Sales to Customers(1) |        
|                 |                                            | Years Ended March 31      |        
|                 |                                            |                           |        
|Geographic Areas |                                            | 2006                      |         |         | 2005 |   |       | 2004    | 
|                 |                                            |                           |         |         |      |   |       |         | 
|                 |                                            | (Millions of US dollars)  |        
|USA              |                                            | $                         | 1,233.7 |         |      | $ | 955.7 |         |  | $ | 748.9 |      
|Australia        |                                            |                           | 164.5   |         |      |   | 160.5 |         |  |   | 154.9 |      
|New Zealand      |                                            |                           | 53.6    |         |      |   | 49.6  |         |  |   | 40.6  |      
|Other Countries  |                                            |                           | 36.7    |         |      |   | 44.6  |         |  |   | 37.5  |      
|                 |                                            |                           |         |         |      |   |       |         | 
|                 | Worldwide total from continuing operations |                           | $       | 1,488.5 |      |   | $     | 1,210.4 |  |   | $     | 981.9 | 
|                 |                                            |                           |         |         |      |   |       |         | 

|                     |                 |                           |       |         |      |   |       |         | 
|-------------------- | --------------- | ------------------------- | ----- | ------- | ---- | - | ----- | ------- | 
|                     |                 | Total Identifiable Assets |      
|                     |                 | March 31                  |      
|                     |                 |                           |      
|                     |                 | 2006                      |       |         | 2005 |  
|                     |                 |                           |       |         |      |  
|                     |                 | (Millions of US dollars)  |      
|USA                  |                 | $                         | 870.3 |         |      | $ | 729.2 |        
|Australia            |                 |                           | 108.5 |         |      |   | 118.8 |        
|New Zealand          |                 |                           | 18.7  |         |      |   | 21.4  |        
|Other Countries      |                 |                           | 53.7  |         |      |   | 61.5  |        
|                     |                 |                           |       |         |      |  
|                     | Segments total  |                           |       | 1,051.2 |      |   |       | 930.9   | 
|General Corporate(6) |                 |                           | 394.2 |         |      |   | 155.8 |        
|                     |                 |                           |       |         |      |  
|                     | Worldwide total |                           | $     | 1,445.4 |      |   | $     | 1,086.7 | 
|                     |                 |                           |       |         |      |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Export sales and inter-segmental sales are not significant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(2) | Research and development costs of $13.2 million,
    $7.6 million and $6.3 million in fiscal years 2006,
    2005 and 2004, respectively, were expensed in the USA Fiber
    Cement operating segment. Research and development costs of
    $2.3 million, $1.9 million and $2.2 million in
    fiscal years 2006, 2005 and 2004, respectively, were expensed in
    the Asia Pacific Fiber Cement segment. Research and development
    costs of $12.3 million, $12.0 million and
    $14.1 million in fiscal years 2006, 2005 and 2004,
    respectively, were expensed in the Research and Development
    segment. Research and Development costs of $0.9 million,
    $0.1 million and nil in fiscal years 2006, 2005 and 2004,
    respectively, were expensed in Other segment. Research and
    Development costs also include selling, general and
    administrative expenses of $3.4 million, $5.5 million
    and $3.5 million in fiscal years 2006, 2005 and 2004,
    respectively.



| |                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Research and development expenditures are expensed as incurred
    and in total amounted to $28.7 million, $21.6 million
    and $22.6 million for the years ended March 31, 2006,
    2005 and 2004, respectively.

F-51



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




|    |                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | The principal components of General Corporate are officer and
    employee compensation and related benefits, professional and
    legal fees, administrative costs and rental expense, net of
    rental income, on the Companys corporate offices.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Net periodic pension cost related to the Australian Defined
    Benefit Plan for the Asia Pacific Fiber Cement segment totaling
    $2.0 million, $2.3 million and $1.8 million in
    fiscal years 2006, 2005 and 2004, respectively, has been
    included in the General Corporate segment. Also, a settlement
    loss of $0.9 million and $5.3 million on the Defined
    Benefit Plan in fiscal years 2006 and 2005, respectively, has
    been included in the General Corporate segment.



|    |                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Includes costs of $17.4 million and $28.1 million for
    SCI and other related expenses in fiscal years 2006 and 2005,
    respectively. See Note 12.                                                                                  
|   
|(5) | The Company does not report net interest expense for each
    operating segment as operating segments are not held directly
    accountable for interest expense.                                                                       
|   
|(6) | The Company does not report deferred tax assets and liabilities
    for each operating segment as operating segments are not held
    directly accountable for deferred taxes. All deferred taxes are
    included in General Corporate.
|   
|(7) | Additions to property, plant and equipment are calculated on an
    accrual basis, and therefore differ from property, plant and
    equipment in the consolidated statements of cash flows.                                            



| |                       
| | ----------------------
| | Concentrations of Risk





|           |       |                          |       |       |      |   |       |       |  |   |       |       | 
|---------- | ----- | ------------------------ | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|           |       | Years Ended March 31     |      
|           |       |                          |      
|           |       | 2006                     |       |       | 2005 |   |       | 2004  | 
|           |       |                          |       |       |      |   |       |       | 
|           |       | (Millions of US dollars) |      
|Customer A |       | $                        | 168.5 |       |      | $ | 131.8 |       |  | $ | 111.3 |      
|Customer B |       |                          | 426.2 |       |      |   | 295.4 |       |  |   | 252.2 |      
|Customer C |       |                          | 156.6 |       |      |   | 131.7 |       |  |   | 112.9 |      
|           |       |                          |       |       |      |   |       |       | 
|           | Total |                          | $     | 751.3 |      |   | $     | 558.9 |  |   | $     | 476.4 | 
|           |       |                          |       |       |      |   |       |       | 



F-52



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




|    |                         
|--- | ------------------------
|18. | Other Comprehensive Loss



|                                                                                        |                                            |                          |       |       |      |   |       |       |  
|--------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------ | ----- | ----- | ---- | - | ----- | ----- | -
|                                                                                        |                                            | Years Ended March 31     |      
|                                                                                        |                                            |                          |      
|                                                                                        |                                            | 2006                     |       |       | 2005 |  
|                                                                                        |                                            |                          |       |       |      |  
|                                                                                        |                                            | (Millions of US dollars) |      
|Unrealized transition loss on derivative instruments classified
    as cash flow hedges |                                            | $                        |      |       |      | $ | (0.5  | )    
|Foreign currency translation adjustments                                                |                                            |                          | (28.4 | )     |      |   | (23.6 | )    
|                                                                                        |                                            |                          |       |       |      |  
|                                                                                        | Total accumulated other comprehensive loss |                          | $     | (28.4 | )    |   | $     | (24.1 | )
|                                                                                        |                                            |                          |       |       |      |  





|    |                           
|--- | --------------------------
|19. | Related Party Transactions



| |                                          
| | -----------------------------------------
| | JHI NV Directors Securities Transactions





|                |       |          |       |       | 
|--------------- | ----- | -------- | ----- | ----- | 
|                |       | Shares   |      
|Director        |       | Allotted |      
|                |       |          |      
|M. Hellicar     |       |          | 1,515 |      
|J. Barr         |       |          | 758   |      
|M.R. Brown      |       |          | 758   |      
|P.S. Cameron    |       |          | 1,894 |      
|G.J. Clark      |       |          | 758   |      
|M.J. Gillfillan |       |          | 758   |      
|J.R.H. Loudon   |       |          | 758   |      
|D.G. McGauchie  |       |          | 758   |      
|                |       |          |      
|                | Total |          |       | 7,957 | 
|                |       |          |      



F-53



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)




| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | Existing Loans to the Companys Directors and
    Directors of James Hardie Subsidiaries







| |                                                                                       
| | --------------------------------------------------------------------------------------
| | Payments made to Directors and Director Related Entities
    of JHI NV during the Year









| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Payments made to Director and Director Related Entities of
    Subsidiaries of JHI NV









F-54



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Notes to Consolidated Financial
Statements  (Continued)










|    |                  
|--- | -----------------
|20. | Subsequent Events





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On June 29, 2006, the ATO issued a ruling to the Company to
    the effect that James Hardies contributions to the SPF
    would be tax deductible over the anticipated life of the
    arrangements in accordance with the recent blackhole
    expenditure Federal Legislation which was enacted in April
    2006.                                                                                                                                                                                                        
|
| |  | On June 23, 2006, the ATO advised the Company that it has
    refused to endorse the SPF as a tax concession charity, arguing
    that, in its opinion, the scope of its activities under the
    Trust Deed and the Final Funding Agreement does not meet
    current legislative requirements for such an endorsement. The
    Company is reviewing the implications of this development.
    Having the SPF qualify for tax exempt status remains a condition
    precedent to the completion of the Final Funding Agreement.
|
| |  | On June 23, 2006, following negotiation with the ATO
    regarding the payment options in relation to the amended
    assessment referred to in Note 13, the ATO advised the
    Company that it may make a partial payment of 50% of the
    A$378 million amended assessment (A$189 million)
    pending the outcome of an appeal. This amount was paid on
    July 5, 2006.                                                                                                                                                  
|
| |  | In June 2006, the Companys lenders agreed to extend the
    maturity date of its
    364-day facilities from
    December 2006 to June 2007 and to extend the maturity date of
    its term facilities from June 2006 to December 2006.                                                                                                                                                                                                                                                                                        

F-55



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries





Remuneration Disclosures


(unaudited, not forming part of the consolidated financial
statements)


Remuneration of Directors




Sub-committees.


Director Retirement Benefits






Remuneration of Executives










Remuneration of Independent Registered Public Accounting
Firm






| |           
| | ----------
| | Audit Fees



F-56



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries


Remuneration Disclosures


(unaudited, not forming part of the consolidated financial
statements)






| |                   
| | ------------------
| | Audit-Related Fees





| |         
| | --------
| | Tax Fees



F-57



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##### Table of Contents



James Hardie Industries N.V. and Subsidiaries





Selected Quarterly Financial Data


(unaudited, not forming part of the consolidated financial
statements)




|                                                             |                                                                          |                           |        |   |                           |   |        |       |  |   |        |   |  |       |        |   |        |   |        |       |   |   |        |     |  |   |        |      |   |   |        |   | 
|------------------------------------------------------------ | ------------------------------------------------------------------------ | ------------------------- | ------ | - | ------------------------- | - | ------ | ----- |  | - | ------ | - |  | ----- | ------ | - | ------ | - | ------ | ----- | - | - | ------ | --- |  | - | ------ | ---- | - | - | ------ | - | 
|                                                             |                                                                          | Year Ended March 31, 2006 |        |   | Year Ended March 31, 2005 |  
|                                                             |                                                                          | By Quarter                |        |   | By Quarter                |  
|                                                             |                                                                          |                           |        |   |                           |  
|                                                             |                                                                          | First                     |        |   | Second                    |   |        | Third |  |   | Fourth |   |  | First |        |   | Second |   |        | Third |   |   | Fourth |    
|                                                             |                                                                          |                           |        |   |                           |   |        |       |  |   |        |   |  |       |        |   |        |   |        |       |   |   |        |    
|                                                             |                                                                          | (Millions of US dollars)  |       
|Net sales                                                    |                                                                          | $                         | 359.4  |   |                           | $ | 376.6  |       |  | $ | 362.7  |   |  | $     | 389.8  |   |        | $ | 306.1  |       |   | $ | 300.9  |     |  | $ | 287.0  |      |   | $ | 316.4  |  
|Cost of goods sold                                           |                                                                          |                           | (214.1 | ) |                           |   | (239.3 | )     |  |   | (234.0 | ) |  |       | (250.3 | ) |        |   | (194.8 | )     |   |   | (203.8 | )   |  |   | (190.3 | )    |   |   | (195.1 | )
|                                                             |                                                                          |                           |        |   |                           |   |        |       |  |   |        |   |  |       |        |   |        |   |        |       |   |   |        |    
|Gross profit                                                 |                                                                          |                           | 145.3  |   |                           |   | 137.3  |       |  |   | 128.7  |   |  |       | 139.5  |   |        |   | 111.3  |       |   |   | 97.1   |     |  |   | 96.7   |      |   |   | 121.3  |  
|Operating income (loss)                                      |                                                                          |                           | 86.9   |   |                           |   | 76.4   |       |  |   | 64.4   |   |  |       | (662.6 | ) |        |   | 58.3   |       |   |   | 40.0   |     |  |   | 33.3   |      |   |   | 64.6   |  
|Interest expense                                             |                                                                          |                           | (1.7   | ) |                           |   | (2.2   | )     |  |   | (1.1   | ) |  |       | (2.2   | ) |        |   | (2.8   | )     |   |   | (1.9   | )   |  |   | (1.3   | )    |   |   | (1.3   | )
|Interest income                                              |                                                                          |                           | 1.0    |   |                           |   | 1.2    |       |  |   | 1.9    |   |  |       | 2.9    |   |        |   | 0.3    |       |   |   | 0.6    |     |  |   | 0.6    |      |   |   | 0.7    |  
|Other (expense) income, net                                  |                                                                          |                           |       |   |                           |   |       |       |  |   |       |   |  |       |       |   |        |   |       |       |   |   | (1.9   | )   |  |   | 0.4    |      |   |   | 0.2    |  
|                                                             |                                                                          |                           |        |   |                           |   |        |       |  |   |        |   |  |       |        |   |        |   |        |       |   |   |        |    
|Income (loss) from continuing operations before income taxes |                                                                          |                           | 86.2   |   |                           |   | 75.4   |       |  |   | 65.2   |   |  |       | (661.9 | ) |        |   | 55.8   |       |   |   | 36.8   |     |  |   | 33.0   |      |   |   | 64.2   |  
|Income tax (expense) benefit                                 |                                                                          |                           | (30.3  | ) |                           |   | (27.8  | )     |  |   | (24.5  | ) |  |       | 11.0   |   |        |   | (18.7  | )     |   |   | (12.1  | )   |  |   | (13.2  | )    |   |   | (17.9  | )
|Income (loss) from continuing operations                     |                                                                          |                           | 55.9   |   |                           |   | 47.6   |       |  |   | 40.7   |   |  |       | (650.9 | ) |        |   | 37.1   |       |   |   | 24.7   |     |  |   | 19.8   |      |   |   | 46.3   |  
|Discontinued operations:                                     |                                                                          |                           |        |   |                           |   |        |       |  |   |        |   |  |       |        |   |        |   |        |       |   |   |        |     |  |   |        |      |   |   |        |  
|                                                             | Loss from discontinued operations net of income tax                      |                           |        |  |                           |   |        |      |  |   |        |  |  |       |        |  |        |   |        |      |   |   |        |    |  |   |        | (0.3 | ) |   |        |  | 
|                                                             | (Loss) gain on disposal of discontinued operations net of income
    tax |                           |        |  |                           |   |        |      |  |   |        |  |  |       |        |  |        |   |        | (0.8  | ) |   |        | 0.1 |  |   |        |     |   |   |        |  | 
|                                                             |                                                                          |                           |        |   |                           |   |        |       |  |   |        |   |  |       |        |   |        |   |        |       |   |   |        |    
|                                                             | (Loss) income from discontinued operations                               |                           |        |  |                           |   |        |      |  |   |        |  |  |       |        |  |        |   |        | (0.8  | ) |   |        | 0.1 |  |   |        | (0.3 | ) |   |        |  | 
|                                                             |                                                                          |                           |        |   |                           |   |        |       |  |   |        |   |  |       |        |   |        |   |        |       |   |   |        |    
|Net income (loss)                                            |                                                                          | $                         | 55.9   |   |                           | $ | 47.6   |       |  | $ | 40.7   |   |  | $     | (650.9 | ) |        | $ | 36.3   |       |   | $ | 24.8   |     |  | $ | 19.5   |      |   | $ | 46.3   |  
|                                                             |                                                                          |                           |        |   |                           |   |        |       |  |   |        |   |  |       |        |   |        |   |        |       |   |   |        |    

F-58



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##### Table of Contents



Exhibit Index


|        |   |                         |  |                                                                                                                                                                                                                                                                                                                                    
|------- | - | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |                        
|Number  |   | Description of Exhibits
|        |   |                        
|        | 1 | .1                      |  | Articles of Association, as amended on September 1, 2005 of
    James Hardie Industries N.V. (English Translation)                                                                                                                                                                                                                 
|        | 2 | .1                      |  | Letter Agreement of September 6, 2001 by and between James
    Hardie Industries N.V. and CHESS Depositary Nominees Pty
    Limited, as the depositary for CHESS Units of Foreign
    Securities(3)                                                                                                                                
|        | 2 | .2                      |  | Deposit Agreement dated as of September 24, 2001 between
    The Bank of New York, as depositary, and James Hardie Industries
    N.V.(3)                                                                                                                                                                                          
|        | 2 | .3                      |  | Note Purchase Agreement, dated as of November 5, 1998,
    among James Hardie Finance B.V., James Hardie N.V. and certain
    purchasers thereto re: $225,000,000 Guaranteed Senior Notes(3)                                                                                                                                       
|        | 2 | .4                      |  | Assignment and Assumption Agreement and First Amendment to Note
    Purchase Agreement, dated as of January 24, 2000, by and
    among James Hardie Finance B.V., James Hardie U.S. Funding,
    Inc., James Hardie N.V., James Hardie Aust Investco Pty Limited
    and certain noteholders thereto(3)                            
|        | 2 | .5                      |  | Second Amendment to the Note Purchase Agreement dated as of
    October 22, 2001, by and among, James Hardie
    U.S. Funding, Inc., James Hardie N.V., James Hardie Aust
    Investco Pty Limited, James Hardie Australia Finance Pty
    Limited, James Hardie International Finance B. V. and certain
    noteholders thereto(3)
|        | 2 | .6                      |  | Assignment and Assumption Agreement and Third Amendment to Note
    Purchase Agreement, dated as of November 18, 2002, among
    James Hardie U.S. Funding Inc, James Hardie International
    Finance B.V., James Hardie Industries N.V., James Hardie N.V.
    and certain noteholders thereto(1)                                
|        | 2 | .7                      |  | Common Terms Deed Poll dated June 15, 2005 between James
    Hardie International Finance B.V. and James Hardie Industries
    N.V.(3)                                                                                                                                                                                             
|        | 2 | .8                      |  | Form of Term Facility Agreement between James Hardie
    International Finance B.V. and Financier(3)                                                                                                                                                                                                                               
|        | 2 | .9                      |  | Form of Extension of Facilities and other matters for Term
    Facility Agreement between James Hardie International Finance
    B.V. and Financier                                                                                                                                                                                
|        | 2 | .10                     |  | Form of 364-day Facility Agreement between James Hardie
    International Finance B.V. and Financier(3)                                                                                                                                                                                                                            
|        | 2 | .11                     |  | Form of Extension Request for 364-day Facility Agreement between
    James Hardie International Finance B.V. and Financier                                                                                                                                                                                                         
|        | 2 | .12                     |  | Form of Guarantee Deed between James Hardie Industries N.V. and
    Financier(3)                                                                                                                                                                                                                                                   
|        | 4 | .1                      |  | James Hardie Industries N.V. 2001 Equity Incentive Plan(3)                                                                                                                                                                                                                                                                         
|        | 4 | .2                      |  | Economic Profit and Individual Performance Incentive Plans(3)                                                                                                                                                                                                                                                                      
|        | 4 | .3                      |  | JHI NV Stock Appreciation Rights Incentive Plan(3)                                                                                                                                                                                                                                                                                 
|        | 4 | .4                      |  | Supervisory Board Share Plan 2006                                                                                                                                                                                                                                                                                                  
|        | 4 | .5                      |  | James Hardie Industries N.V. Long Term Incentive Plan 2006                                                                                                                                                                                                                                                                         
|        | 4 | .6                      |  | 2005 Managing Board Transitional Stock Option Plan                                                                                                                                                                                                                                                                                 
|        | 4 | .7                      |  | Form of Joint and Several Indemnity Agreement among James Hardie
    N.V., James Hardie (USA) Inc. and certain indemnitees thereto(3)                                                                                                                                                                                              
|        | 4 | .8                      |  | Form of Joint and Several Indemnity Agreement among James Hardie
    Industries N.V., James Hardie Inc. and certain indemnitees
    thereto(3)                                                                                                                                                                                     
|        | 4 | .9                      |  | Form of Deed of Access to Documents, Indemnity and Insurance
    among James Hardie Industries N.V. and certain indemnitees
    thereto(3)                                                                                                                                                                                         
|        | 4 | .10                     |  | Form of Joint and Several Indemnity Agreement among James Hardie
    Industries N.V., James Hardie Building Products Inc. and certain
    indemnities thereto(3)                                                                                                                                                                   
|        | 4 | .11                     |  | Lease Amendment, dated March 23, 2004, among Amaca Pty
    Limited (f/k/a/ James Hardie & Coy Pty Limited), James
    Hardie Australia Pty Limited and James Hardie Industries N.V. re
    premises at the corner of Cobalt & Silica Street,
    Carole Park, Queensland, Australia(2)                                             
|        | 4 | .12                     |  | Variation of Lease dated March 23, 2004, among Amaca Pty
    Limited (f/k/a/ James Hardie & Coy Pty Limited), James
    Hardie Australia Pty Limited and James Hardie Industries N.V. re
    premises at the corner of Colquhoun & Devon Streets,
    Rosehill, New South Wales, Australia(2)                                      
|        | 4 | .13                     |  | Extension of Lease dated March 23, 2004, among Amaca Pty
    Limited (f/k/a/ James Hardie & Coy Pty Limited), James
    Hardie Australia Pty Limited and James Hardie Industries N.V. re
    premises at Rutland, Avenue, Welshpool, Western Australia,
    Australia(2)                                                           



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##### Table of Contents



|        |    |                         |  |                                                                                                                                                                                                                                                         
|------- | -- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 4  | .14                     |  | Lease Amendment dated March 23, 2004, among Amaca Pty
    Limited (f/k/a/ James Hardie & Coy Pty Limited), James
    Hardie Australia Pty Limited and James Hardie Industries N.V. re
    premises at 46 Randle Road, Meeandah, Queensland, Australia(2)
|        | 4  | .15                     |  | Lease Agreement dated March 23, 2004 among Studorp Limited,
    James Hardie New Zealand Limited and James Hardie Industries
    N.V. re premises at the corner of ORorke and Station
    Roads, Penrose, Auckland, New Zealand(2)                     
|        | 4  | .16                     |  | Lease Agreement dated March 23, 2004 among Studorp Limited,
    James Hardie New Zealand Limited and James Hardie Industries
    N.V. re premises at 44-74 ORorke Road, Penrose, Auckland,
    New Zealand(2)                                          
|        | 4  | .17                     |  | Ownership transfer related to corner of ORorke and Station
    Roads, Penrose, Auckland, New Zealand and 44-74 ORorke
    Road, Penrose, Auckland, New Zealand effective June 30, 2005                                                                
|        | 4  | .18                     |  | Industrial Building Lease Agreement, effective October 6,
    2000, between James Hardie Building Products, Inc. and Fortra
    Fiber-Cement L.L.C., re premises at Waxahachie, Ellis County,
    Texas(3)                                              
|        | 4  | .19                     |  | Asset Purchase Agreement by and between James Hardie Building
    Products, Inc. and Cemplank, Inc. dated as of December 12,
    2001(3)                                                                                                                
|        | 4  | .20                     |  | Amended and Restated Stock Purchase Agreement dated
    March 12, 2002, between BPB U.S. Holdings, Inc. and
    James Hardie Inc.(3)                                                                                                                    
|        | 4  | .21                     |  | Final Funding Agreement                                                                                                                                                                                                                                 
|        | 4  | .22                     |  | Asbestos Injuries Compensation Fund Trust Deed by and between
    James Hardie Aust. Holdings Pty Limited and Asbestos Injuries
    Compensation Fund Limited                                                                                           
|        | 4  | .23                     |  | Deed of Release by and among James Hardie Industries N.V.,
    Australian Council of Trade Unions, Unions New South Wales, and
    Bernard Douglas Banton                                                                                               
|        | 4  | .24                     |  | Parent Guarantee by and among Asbestos Injuries Compensation
    Fund Limited, The State of New South Wales, and James Hardie
    Industries N.V.                                                                                                       
|        | 4  | .25                     |  | Deed of Release by and between James Hardie Industries N.V.
    and The State of New South Wales                                                                                                                                                        
|        | 4  | .26                     |  | Irrevocable Power of Attorney by and between Asbestos Injuries
    Compensation Fund Limited and The State of New South Wales                                                                                                                           
|        | 4  | .27                     |  | Deed of Accession by and among Asbestos Injuries Compensation
    Fund Limited, James Hardie Industries N.V., LGTDD Pty Limited,
    and The State of New South Wales                                                                                   
|        | 4  | .28                     |  | Letters Extending the Condition Precedent Date for the Final
    Funding Agreement                                                                                                                                                                      
|        | 8  | .1                      |  | List of significant subsidiaries of James Hardie Industries N.V.                                                                                                                                                                                        
|        | 12 | .1                      |  | Certification of the Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                              
|        | 12 | .2                      |  | Certification of the Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                              
|        | 13 | .1                      |  | Certification of the Chief Executive Officer and Chief Financial
    Officer pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002                                                                                                              
|        | 15 | .1                      |  | Consent of independent registered public accounting firm                                                                                                                                                                                                
|        | 15 | .2                      |  | Consent of KPMG Actuaries Pty Ltd                                                                                                                                                                                                                       
|        | 99 | .1                      |  | Excerpts of the ASX Settlement and Transfer Corporation Pty Ltd
    as of June 10, 2005                                                                                                                                                                 
|        | 99 | .2                      |  | Excerpts of the Financial Services Reform Act 2001, as of
    March 11, 2002(3)                                                                                                                                                                         
|        | 99 | .3                      |  | ASIC Class Order 02/311, dated November 3, 2002(3)                                                                                                                                                                                                      
|        | 99 | .4                      |  | ASIC Modification, dated March 7, 2002(3)                                                                                                                                                                                                               
|        | 99 | .5                      |  | ASIC Modification, dated February 26, 2004                                                                                                                                                                                                              






|    |                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------
|(1) | Previously filed as an exhibit to our Annual Report on
    Form 20-F dated
    July 2, 2003 and incorporated herein by reference.     
|   
|(2) | Previously filed as an exhibit to our Annual Report on
    Form 20-F dated
    November 22, 2004 and incorporated herein by reference.
|   
|(3) | Previously filed as an exhibit to our Annual Report on
    Form 20-F dated
    July 7, 2005 and incorporated herein by reference.