SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K

                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                   For the Fiscal Year Ended December 31, 2001

                           Commission File No. 1-3660

                                  Owens Corning
                            One Owens Corning Parkway
                               Toledo, Ohio 43659
                            Area Code (419) 248-8000

                             A Delaware Corporation

                  I.R.S. Employer Identification No. 34-4323452

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

     Title of Each Class                              Name of Each Exchange on
                                                           Which Registered

     Common Stock - $.10 Par Value                    New York Stock Exchange


Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes / X / No / /

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

At February 28, 2002, the aggregate market value of Registrant's  $.10 par value
common  stock   (Registrant's   voting   stock)  held  by   non-affiliates   was
$120,468,284,  assuming for purposes of this computation only that all directors
and executive officers are considered affiliates.

At February 28, 2002, there were outstanding  55,319,957  shares of Registrant's
$.10 par value common stock.

<PAGE>


                                      - 2 -

                                     PART I

ITEM 1.   BUSINESS

Owens  Corning,  a global  company  incorporated  in  Delaware  in 1938,  serves
consumers  and  industrial   customers  with  building   materials  systems  and
composites  systems.  Owens Corning's executive offices are at One Owens Corning
Parkway,  Toledo, Ohio 43659; telephone (419) 248-8000. Owens Corning's web site
provides information on our business and products,  and assists our customers in
various building  projects.  It is located at  www.owenscorning.com.  Unless the
context requires otherwise, the terms "Owens Corning", "Company", "we" and "our"
in this report refer to Owens Corning and its subsidiaries.

PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

On October 5, 2000 (the  "Petition  Date"),  Owens  Corning and 17 of its United
States  subsidiaries,   including  Fibreboard  Corporation  (collectively,   the
"Debtors"), filed voluntary petitions for relief (the "Filing") under Chapter 11
of the  United  States  Bankruptcy  Code (the  "Bankruptcy  Code") in the United
States  Bankruptcy Court for the District of Delaware (the "USBC").  The Debtors
are currently operating their businesses as  debtors-in-possession in accordance
with  provisions  of the  Bankruptcy  Code.  The Chapter 11 cases of the Debtors
(collectively, the "Chapter 11 Cases") are being jointly administered under Case
No.  00-3837  (JKF).  The Chapter 11 Cases do not include  other  United  States
subsidiaries of Owens Corning or any of its foreign subsidiaries  (collectively,
the  "Non-Debtor  Subsidiaries").  The Chapter 11 Cases are discussed in greater
detail in Note 1 to the Consolidated Financial Statements.

The Debtors filed for relief under Chapter 11 to address the growing  demands on
Owens  Corning's  cash flow  resulting from its  multi-billion  dollar  asbestos
liability.  This  liability  is  discussed  in greater  detail in Note 19 to the
Consolidated Financial Statements.

OVERVIEW OF OPERATIONS

Owens  Corning  operates  in two  segments  -  Building  Materials  Systems  and
Composite  Solutions.  In 2001, the Building Materials Systems segment accounted
for approximately 80% of our total sales while Composite Solutions accounted for
the  remainder.  The  products and systems  provided by our  Building  Materials
Systems  segment  are used in  residential  remodeling  and  repair,  commercial
improvement,  new  residential  and commercial  construction,  and other related
markets. The products and systems offered by our Composite Solutions segment are
used  in   end-use   markets   such  as   building   construction,   automotive,
telecommunications,   marine,  aerospace,   energy,  appliance,   packaging  and
electronics.  Many of Owens  Corning's  products are marketed  under  registered
trademarks,  including  Propink(R),  Advantex(R),  Miravista(R) and/or the color
PINK.

Approximately  75% of Owens  Corning's  sales are  related to home  improvement,
non-residential  markets,  sales of composite  materials  and sales outside U.S.
markets.  Approximately  25% of our sales are  related  to new U.S.  residential
construction.

Owens Corning also has affiliate companies in a number of countries.  Generally,
affiliated  companies'  sales,  earnings  and assets are not  included in either
operating segment unless we own more than 50% of the affiliate and the ownership
is not considered temporary.


<PAGE>


                                      - 3 -

As part of our strategy to divest non-strategic businesses, we sold the majority
of our  Engineered  Pipe Business  during the first quarter of 2001 and sold our
40% interest in Alcopor Owens Corning,  our European  building  materials  joint
venture, during the fourth quarter of 2001.

Revenue  from  external  customers,  income  from  operations  and total  assets
attributable  to each of  Owens  Corning's  operating  segments  and  geographic
regions,  as well as  information  concerning  the  dependence  of our operating
segments on foreign operations,  for each of the years 2001, 2000, and 1999, are
contained  in  Note 2 to  Owens  Corning's  Consolidated  Financial  Statements,
entitled "Segment Data", on pages 67 through 72 hereof.

BUILDING MATERIALS SYSTEMS

Principal Products And Methods Of Distribution

Building  Materials Systems operates  primarily in North America.  It also has a
presence in Latin America and Asia Pacific.  Building  Materials Systems sells a
variety of products and systems in two major  categories:  (i) glass fiber, foam
and mineral  wool  insulation  systems and (ii)  exterior  systems for the home,
including roofing systems, vinyl and metal siding and accessories, vinyl windows
and patio doors,  rainware  (consisting  primarily  of gutters and  downspouts),
manufactured  stone  veneer and  rebranded  housewrap.  These  products are used
primarily in the home improvement,  new residential  construction,  manufactured
housing and commercial  construction  markets.  The businesses  responsible  for
these markets include:  Insulating  Systems,  Exterior Systems,  Cultured Stone,
Distribution and Fabricating Solutions.

Sales  of  building  insulation  systems,   roofing  shingles  and  accessories,
housewrap,  windows/patio doors, and vinyl siding are made through home centers,
lumberyards,  retailers and  distributors.  Other channels of  distribution  for
insulation systems in North America include insulation contractors, wholesalers,
specialty  distributors,   metal  building  insulation  laminators,   mechanical
insulation  distributors and fabricators,  manufactured  housing producers,  and
appliance,  office  products and automotive  manufacturers.  Foam insulation and
related   products  are  sold  to  distributors  and  retailers  who  resell  to
residential builders,  remodelers and do-it-yourself  customers;  commercial and
industrial  markets through specialty  distributors;  and, in some cases,  large
contractors, particularly in the agricultural and cold storage markets.

Owens Corning sells asphalt  products,  primarily for  industrial  and specialty
applications,  under the Trumbull brand name. There are three principal kinds of
industrial  asphalt:  Built-Up  Roofing Asphalt (BURA),  used in commercial flat
roof  systems  to  provide  waterproofing  and  adhesion;  saturants  or coating
asphalt, used to manufacture roofing mats, felts and residential  shingles;  and
industrial  specialty  asphalt,  used by  manufacturers in a variety of products
such as waterproofing systems, adhesives, coatings, dyes, and product extenders,
as well as in various  automotive  applications.  There are several  channels of
distribution for these products.  They are used internally in the manufacture of
residential  roofing products and are also sold to other shingle  manufacturers.
In addition,  asphalt is sold to roofing  contractors and  distributors for BURA
systems  and to  manufacturers  in a  variety  of  other  industries,  including
automotive,  chemical,  rubber  and  construction.  Glass  fiber  mat is used to
provide fire and mildew resistance in 95% of all asphalt roofing shingles. Owens
Corning sells glass fiber and/or mat directly to a small number of major shingle
manufacturers, including our own roofing business.

Outside North America, Owens Corning has a foam technology facility in Italy and
a joint venture foam plant in China and has licensed  others for the manufacture
of foam products at locations in Europe, the Middle East and Asia. Owens Corning
sells foam products through traditional agents and distributors.



<PAGE>


                                      - 4 -

In Latin  America,  Owens  Corning  produces and sells  building and  mechanical
insulation  primarily  through an affiliate joint venture in Mexico,  as well as
exports  from  U.S.  plants.  In  Asia  Pacific,  we sell  primarily  mechanical
insulation  through  joint  venture  businesses,  including  two majority  owned
insulation  plants and an  insulation  fabrication  center in China,  a minority
owned joint venture in Saudi Arabia, and licensees.

Seasonality

Sales in the Building  Materials  Systems  segment tend to follow  seasonal home
improvement,  remodeling and renovation, and new construction industry patterns.
Sales  levels for the  segment,  therefore,  are  typically  lower in the winter
months.

Major Customers

No customer in the Building Materials Systems segment accounted for more than 6%
of the segment's sales in 2001.

COMPOSITE SOLUTIONS

Principal Products and Methods of Distribution

Composite  Solutions operates in North America,  Europe,  Latin America and Asia
Pacific, with affiliates and licensees around the world.

Owens Corning is the world's  leading  producer of glass fiber materials used in
composites.  Composites  are made up of two or more  components  (e.g.,  plastic
resin and a fiber,  traditionally a glass fiber) used in various applications to
replace  traditional  materials,  such as  aluminum,  wood,  and  steel.  We are
increasingly  providing  systems  that  are  designed  for  a  specific  end-use
application,  and entail a material, a proprietary process and a fully assembled
part or  system.  The  global  composites  industry  has  thousands  of  end-use
applications.  Owens Corning has selected strategic markets and end-users, where
we     provide     integral     solutions,     such    as    the     automotive,
telecommunications/electronics,  and  building  construction  markets.  A  large
portion  of the  business  also  serves  thousands  of  applications  within the
consumer, industrial and infrastructure markets.

Tubs,  showers and other  related  internal  building  components  used for both
remodeling  and new  construction  are  also  major  applications  of  composite
materials in the  construction  market.  These end-use  products are some of the
first  successful  material  substitution  conversions  normally  encountered in
developing   countries.   Glass  fiber  reinforcements  and  composite  material
solutions  for  these  markets  are  sold  to  direct  accounts,   and  also  to
distributors around the world, who in turn service thousands of customers.

More  than  80%  of  transportation-related  composite  solutions  are  used  in
automotive  applications.  Non-automotive  transportation  applications  include
heavy trucks, rail cars, shipping containers,  refrigerated containers, trailers
and commercial ships. Growth continues in automotive applications,  as composite
systems  create  new  applications  or  displace  other  materials  in  existing
applications.  There are hundreds of  composites  applications,  including  body
panels, door modules,  integrated front-end systems,  instrument panels, chassis
and underbody  components  and systems,  pick-up truck beds,  and heat and noise
shields.  These  composite  parts are  either  produced  by  original  equipment
manufacturers (OEMs), or are purchased by OEMs from first-tier suppliers.



<PAGE>


                                      - 5 -

Within the  telecommunications  and electronics markets,  glass fiber composites
are used to protect and reinforce  fiber optic and copper cables.  Owens Corning
also produces central  strength  members for fiber optic cables.  Other end-uses
include  connectors,  circuit breaker boxes,  computer  housings,  electricians'
safety ladders, and hundreds of various electro/mechanical  components.  Through
its  49%  interest  in  a  yarns  joint  venture,  Owens  Corning  continues  to
participate in the yarns and specialty  material  markets,  where glass fiber is
used  extensively in printed  circuit boards made for the consumer  electronics,
transportation, and telecommunications industries.

The consumer,  industrial and infrastructure  markets include sporting goods and
marine  applications.  Owens Corning sells composite  materials to OEMs and boat
builders, both directly and through distributors.

Major Customers

No customer in the Composite Solutions segment accounted for more than 6% of the
segment's sales in 2001.

GENERAL

Raw Materials and Patents

Owens Corning considers the sources and availability of raw materials, supplies,
equipment  and  energy  necessary  for the  conduct of  business  in each of our
operating segments to be adequate.

During 2001, Owens Corning had several  arrangements  with units of Enron Corp.,
including for the supply of certain  energy  commodities,  that were impacted by
the collapse of Enron late in 2001. The Company has  implemented,  or expects to
be able to implement, alternative arrangements on acceptable terms to the extent
necessary or desirable.

Owens Corning has numerous U.S. and foreign patents issued and applied for
relating to our products and processes in each operating segment, resulting from
research and development efforts.

We have issued royalty-bearing patent licenses to companies in several foreign
countries. The licenses cover technology relating to both operating segments.

Including registered trademarks for the Owens Corning logo, the color PINK, and
FIBERGLAS, Owens Corning has approximately 300 trademarks registered in the
United States and approximately 1,400 trademarks registered in other countries.

We consider our patent and trademark positions to be adequate for the present
conduct of business in each of our operating segments.

Working Capital

Owens Corning's manufacturing operations in each operating segment are generally
continuous in nature and we warehouse much of our production prior to sale since
we operate primarily with short delivery cycles.

Number of Employees

Owens Corning averaged approximately 19,000 employees during 2001 and had
approximately 19,000 employees at December 31, 2001.


<PAGE>


                                      - 6 -

Research and Development

During 2001, 2000 and 1999, Owens Corning spent approximately $37 million, $52
million, and $59 million, respectively, for research and development activities.
Customer-sponsored research and development was not material in any of the last
three years.

Environmental Control

Owens Corning's capital expenditures relating to compliance with environmental
control requirements were approximately $12 million in 2001. We currently
estimate that such capital expenditures will be approximately $18 million in
2002 and $15 million in 2003.

We do not consider that we have experienced a material adverse effect upon our
capital expenditures or competitive position as a result of environmental
control legislation and regulations. Operating costs associated with
environmental compliance were approximately $30 million in 2001. We continue to
invest in equipment and process modifications to remain in compliance with
applicable environmental laws and regulations.

The 1990 Clean Air Act Amendments (Act) provide that the United States
Environmental Protection Agency (EPA) will issue regulations on a number of air
pollutants over a period of years. The EPA issued final regulations for wool
fiberglass and mineral wool in June 1999, for amino/phenolic resin in January
2000, and for secondary aluminum smelting in March 2000. The Company anticipates
that other sources to be regulated will be wet formed glass mat, asphalt
processing and roofing, metal coil coating, and open molded fiber-reinforced
plastics. Based on information now known to the Company, including the nature
and limited number of regulated materials Owens Corning emits, we do not expect
the Act to have a materially adverse effect on our results of operations,
financial condition or long-term liquidity.

Competition

Owens Corning's products compete with a broad range of products made from
numerous basic, as well as high-performance, materials.

We compete with a number of manufacturers in the United States of glass fibers
in primary forms, not all of which produce a broad line of glass fiber products.
Approximately one-half of these producers compete with our Building Materials
Systems operating segment in the sale of glass fibers in primary form. A similar
number compete with our Composite Solutions operating segment. Companies in
other countries export small quantities of glass fiber products to the United
States. We also compete outside the United States with a number of manufacturers
of glass fibers in primary forms.

We also compete with many manufacturers, fabricators and distributors in the
sale of products made from glass fibers. In addition, we compete with many other
manufacturers in the sale of roofing materials for sloped roofing, industrial
asphalts, vinyl siding, windows and patio doors, and other products.

Methods of competition include product performance, price, terms, service and
warranty.




<PAGE>




                                      - 7 -

ITEM 2.   PROPERTIES

PLANTS

Owens Corning's principal plants as of December 31, 2001, are listed below by
operating segment and primary products, and are owned except as noted. We
consider that these properties are in good condition and well maintained, and
are suitable and adequate to carry on our business. The capacity of each plant
varies depending upon product mix.

Certain of the facilities listed below are shown as "leased" properties.
Pursuant to the Bankruptcy Code, Owens Corning and the other Debtors in the
Chapter 11 Cases may elect to reject or assume unexpired pre-petition leases.
The Debtors are currently reviewing the leases for which such an election exists
to determine whether they should be accepted or rejected. The Bankruptcy Court
has extended the time period within which the Debtors must make their elections
through June 4, 2002, and may grant further extensions. In the process of their
review, the Debtors may conclude that certain of the arrangements constitute
secured financings rather than leases, in which event the applicable facility
will be owned rather than leased.

BUILDING MATERIALS SYSTEMS

Thermal and Acoustical Insulation
<TABLE>
<S>                                                                <C>
           Delmar, New York                                        Newark, Ohio
           Denver, Colorado                                        Palestine, Texas
           Eloy, Arizona                                           Phenix City, Alabama (1)
           Fairburn, Georgia                                       Salt Lake City, Utah
           Kansas City, Kansas                                     Santa Clara, California
           Ladysmith, Wisconsin (1)                                Waxahachie, Texas
           Mount Vernon, Ohio

           Anshan, China                                           Guangzhou, China
           Candiac, Canada                                         Scarborough, Canada
           Edmonton, Canada                                        Shanghai, China

(1)      Facility is leased.

Foam Insulation

           Rockford, Illinois                                      Tallmadge, Ohio

           Nanjing, China                                          Volpiano, Italy (1)
           Valleyfield, Canada

(1)      Facility is leased.

</TABLE>

<PAGE>


                                      - 8 -
<TABLE>
<S>                                                               <C>

Asphalt Processing

           Atlanta, Georgia                                        Kearny, New Jersey
           Channelview, Texas                                      Medina, Ohio
           Compton, California                                     Memphis, Tennessee
           Denver, Colorado                                        Minneapolis, Minnesota
           Detroit, Michigan                                       Mobile, Alabama (2)
           Ennis, Texas                                            Morehead City, North
           Ft. Lauderdale, Florida                                     Carolina (1)
           Houston, Texas                                          North Bend, Ohio
           Irving, Texas                                           Oklahoma City, Oklahoma
           Jacksonville, Florida                                   Portland, Oregon (3)
           Jessup, Maryland                                        Summit, Illinois

(1)      Facility is leased.
(2)      Operated under management agreement.
(3)      Two asphalt processing plants.

Roofing

           Adelanto, California (1)                                Jessup, Maryland
           Atlanta, Georgia                                        Kearny, New Jersey
           Brookville, Indiana                                     Medina, Ohio
           Compton, California                                     Memphis, Tennessee
           Denver, Colorado                                        Minneapolis, Minnesota
           Houston, Texas                                          Portland, Oregon
           Irving, Texas                                           Savannah, Georgia
           Jacksonville, Florida                                   Summit, Illinois

(1)      Facility is leased.

Glass Mat/Wet Chop

           Aiken, South Carolina                                   Jackson, Tennessee (1)
           Fort Smith, Arkansas

(1)      Facility is leased.

OEM Solutions Group

     Angola, Indiana                                               Indianapolis, Indiana (1)
     Athens, Alabama                                               Johnson City, Tennessee (1)
     Cleveland, Tennessee (1)                                      Los Angeles, California (1)
     Columbus, Ohio (1)                                            Louisville, Kentucky (1)
     Dallas, Texas (1)                                             Montgomery, Alabama (1)
     Grand Rapids, Michigan (1)                                    Springfield, Tennessee (1)
     Hazleton, Pennsylvania (1)                                    Tiffin, Ohio (1)
     Hebron, Ohio

     Brantford, Canada

(1)  Facility is leased.

</TABLE>

<PAGE>


                                      - 9 -
<TABLE>
<S>                                                               <C>

Manufactured Housing/Recreational Vehicles/Specialty Parts

           Douglas, Georgia                                        Nappanee, Indiana
           Goshen, Indiana                                         Waco, Texas (1)

(1)  Facility is leased.

Metal Products

           Ashville, Ohio                                          Bellwood, Virginia
           Beloit, Wisconsin (1)                                   Roxboro, North Carolina (2)

(1)  Facility is leased.
(2)  Two facilities, one of which is leased.

Cultured Stone Products

           Chester Co., South Carolina (1)                         Navarre, Ohio
           Napa, California

(1)  Facility is leased.

Vinyl Siding

           Atlanta, Georgia (1)                                    Joplin, Missouri
           Claremont, North Carolina                               Olive Branch, Mississippi

           London, Ontario

(1) Facility is leased.

Windows/Patio Doors

           Bradenton, Florida

In addition, Owens Corning has approximately 190 Specialty Distribution Centers
in 35 states in the U.S.

COMPOSITE SOLUTIONS

Textiles and Reinforcements

           Amarillo, Texas                                         Huntingdon, Pennsylvania (1)
           Anderson, South Carolina                                New Braunfels, Texas (1)
           Duncan, South Carolina (1)

           Apeldoorn, The Netherlands                              Liversedge, United Kingdom
           Battice, Belgium                                        Rio Claro, Brazil
           Birkeland, Norway                                       San Vincente deCastellet/
           Guelph, Canada                                            Barcelona, Spain
           Kimchon, Korea                                          Wrexham, United Kingdom
           L'Ardoise, France

(1)  Facility is leased.
</TABLE>

<PAGE>


                                     - 10 -

OTHER PROPERTIES

Owens Corning's principal executive offices are located in the Owens Corning
World Headquarters, Toledo, Ohio, a leased facility of approximately 400,000
square feet.

Owens Corning's research and development activities are primarily conducted at
our Science and Technology Center, located on approximately 500 acres of land
outside Granville, Ohio. It consists of more than 20 structures totaling more
than 600,000 square feet. Owens Corning is opening an Automotive Solutions
Center in Novi, Michigan, and also has Application Development Centers in
Battice, Belgium; Shanghai, China; and Bangalore, India.

ITEM 3.   LEGAL PROCEEDINGS

The paragraphs in Note 19 to Owens Corning's Consolidated Financial Statements,
entitled "Contingent Liabilities", on pages 96 through 109 hereof, are
incorporated here by reference.

On October 5, 2000 (the "Petition Date"), Owens Corning and the 17 United States
subsidiaries listed below (collectively, the "Debtors") filed voluntary
petitions for relief (the "Filing") under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for the District of Delaware (the "USBC"). The Debtors are currently operating
their businesses as debtors-in-possession in accordance with provisions of the
Bankruptcy Code. The Chapter 11 cases of the Debtors (collectively, the "Chapter
11 Cases") are being jointly administered under Case No. 00-3837 (JKF). The
Chapter 11 Cases do not include other United States subsidiaries of Owens
Corning or any of its foreign subsidiaries (collectively, the "Non-Debtor
Subsidiaries"). The subsidiary Debtors that filed Chapter 11 petitions for
relief are:
<TABLE>
<S>                                             <C>
         CDC Corporation                        Integrex Testing Systems LLC
         Engineered Yarns America, Inc.         HOMExperts LLC
         Falcon Foam Corporation                Jefferson Holdings, Inc.
         Integrex                               Owens-Corning Fiberglas Technology Inc.
         Fibreboard Corporation                 Owens Corning HT, Inc.
         Exterior Systems, Inc.                 Owens-Corning Overseas Holdings, Inc.
         Integrex Ventures LLC                  Owens Corning Remodeling Systems, LLC
         Integrex Professional Services LLC     Soltech, Inc.
         Integrex Supply Chain Solutions LLC
</TABLE>


In late 2001, the asbestos-related Chapter 11 cases pending in the District of
Delaware (the Chapter 11 Cases of Owens Corning and the cases of Armstrong World
Industries, Inc., W. R. Grace & Co., Federal-Mogul Global, Inc., and USG
Corporation) were ordered transferred to the United States District Court for
the District of Delaware (the "District Court") before Judge Alfred M. Wolin to
facilitate development and implementation of a coordinated plan for management
(the "Administrative Consolidation"). The District Court has entered an order
referring the Chapter 11 Cases back to the USBC, where they were previously
pending, subject to its ongoing right to withdraw such referral with respect to
any proceedings or issues (the applicable court from time to time responsible
for any particular aspect of the Chapter 11 Cases being hereinafter referred to
as the "Bankruptcy Court").

The Company anticipates that substantially all liabilities of the Debtors as of
the date of the Filing will be resolved under one or more Chapter 11 plans of
reorganization to be proposed and voted on in the Chapter 11 Cases in accordance
with the provisions of the Bankruptcy Code. As a consequence of the Filing, all

<PAGE>


                                     - 11 -

ITEM 3.   LEGAL PROCEEDINGS (continued)

pending litigation against the Debtors is stayed automatically by section 362 of
the Bankruptcy Code and, absent further order of the Bankruptcy Court, no party
may take any action to recover on pre-petition claims against the Debtors.
Please see Note 1 to the Consolidated Financial Statements.

Securities and Exchange Commission rules require us to describe certain
governmental proceedings arising under federal, state or local environmental
provisions unless we reasonably believe that the proceeding will result in
monetary sanctions of less than $100,000. The following proceeding is reported
in response to this requirement.

     As reported in Owens Corning's Annual Report on Form 10-K for the year
     ended December 31, 2000, Owens Corning had received information that the
     Ohio Environmental Protection Agency might be contemplating an enforcement
     action relating to our plant in Newark, Ohio, primarily involving alleged
     air emission violations that occurred in the early 1990's. On December 18,
     2001, the State of Ohio filed a complaint in the Common Pleas Court in
     Licking County, Ohio, alleging violations of air pollution regulations and
     permits by the Newark plant. Concurrently, the State filed a consent order
     settling all allegations raised by the complaint. Any required corrective
     actions were completed some time ago. With the approval of the Bankruptcy
     Court, the consent order provides for treatment of the $201,633 penalty as
     an unsecured claim in the Chapter 11 Cases.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Owens Corning has nothing to report under this Item.




<PAGE>


                                     - 12 -

                       Executive Officers of Owens Corning
                            (as of February 28, 2002)

The name, age and business experience during the past five years of Owens
Corning's executive officers as of February 28, 2002, are set forth below. Each
executive officer holds office until his or her successor is elected and
qualified or until his or her earlier resignation, retirement or removal. All
those listed have been employees of Owens Corning during the past five years
except as indicated.
<TABLE>
<S>                                                                  <C>

Name and Age                                                       Position*

Glen H. Hiner (67)                        Chairman of the Board and Chief  Executive  Officer  since  January 1992.
                                          Director since 1992.

                                          Mr.  Hiner  will  retire  as  Chairman and Chief  Executive  Officer
                                          of Owens Corning effective April 18, 2002.


Rhonda L. Brooks (50)                     Vice  President and  President,  Exterior  Systems  Business  since April
                                          2000;  formerly Vice President and President,  Roofing  Systems  Business
                                          (1998),  Vice President,  Investor  Relations (1997), and Vice President,
                                          Marketing, Composites.

David T. Brown (53)                       Executive  Vice  President  and Chief  Operating  Officer  since  January
                                          2001;   formerly  Vice  President  and  President,   Insulating   Systems
                                          Business  (1998),  and Vice President and President,  Building  Materials
                                          Sales and Distribution. Director since January 2002.

                                          Mr.  Brown  has  been  elected  President  and  Chief  Executive  Officer
                                          effective April 18, 2002.

Charles E. Dana (46)                      Vice President - Corporate  Controller and Global  Sourcing since January
                                          2002;  formerly Vice  President,  Global  Sourcing and eBusiness  (2001),
                                          Vice  President,  Owens  Corning  Supply  Chain  Solutions  (2000),  Vice
                                          President,   Global  Sourcing  Management  (1999),  and  Vice  President,
                                          Planning and Analysis - Composites Systems.

David L. Johns (43)                       Senior Vice President and Chief Supply Chain and  Information  Technology
                                          Officer  since  April 2001;  formerly  Senior  Vice  President  and Chief
                                          Technology Officer  (1999), and Chief Information Officer.

George E. Kiemle (54)                     Vice  President  and  President,   Insulating   Systems   Business  since
                                          February  2001;  formerly  Vice  President,   Manufacturing,   Insulating
                                          Systems Business.

</TABLE>

<PAGE>


                                     - 13 -
<TABLE>
<S>                                            <C>

Name and Age                              Position*

Richard D. Lantz (50)                     Vice  President  and  President,   Composite   Solutions  Business  since
                                          November 2001;  formerly Vice President and President,  Roofing Solutions
                                          Business  (2000),  Vice President and President,  Systems  Thinking Sales
                                          and Distribution Business (1998), Vice President-  Marketing,  Insulation
                                          Business  (1997),  and  Vice  President,  Marketing  and  Sales  Support,
                                          Building Materials Sales and Distribution.

Edward Mirra, Jr. (62)                    Senior Vice President,  Human  Resources  since July 2000;  formerly Vice
                                          President of Roofing  Operations  (1998),  and Vice  President,  Trumbull
                                          Asphalt.

Maura Abeln Smith (46)                    Chief   Restructuring   Officer  since  November  2000  and  Senior  Vice
                                          President,  General Counsel and Secretary  since February 1998;  formerly
                                          Vice  President  and  General  Counsel  of GE  Plastics.  Director  since
                                          January 2002.


Michael H. Thaman (37)                    Senior  Vice  President  and Chief  Financial  Officer  since April 2000;
                                          formerly  Vice  President  and  President,   Exterior   Systems  Business
                                          (1999),  Vice President and President,  Engineered  Pipe Systems  (1997),
                                          and General Manager, OEM Solutions Group.  Director since January 2002.

                                          Mr.  Thaman has been elected  Chairman of the Board  effective  April 18,
                                          2002.

</TABLE>

*Information in parentheses indicates year in which service in position began.


<PAGE>


                                     - 14 -

                                     PART II

ITEM 5.   MARKET FOR OWENS CORNING'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS

The principal market on which Owens Corning's common stock is traded is the New
York Stock Exchange. The high and low sales prices in dollars per share for
Owens Corning's common stock as reported in the consolidated transaction
reporting system for each quarter during 2000 and 2001 are set forth in the
following tables.
<TABLE>
<S>                          <C>         <C>                  <C>                  <C>            <C>
    2000                    High          Low                2001                 High           Low
---------------------------------------------------     -----------------------------------------------

First Quarter               20.375          13.625        First Quarter            3.74          0.875

Second Quarter              20.9375        9.2344         Second Quarter           2.96          2.01

Third Quarter               10.125         2.75           Third Quarter            2.18          1.14

Fourth Quarter                2.25         0.75           Fourth Quarter           2.09          1.10

---------------------------------------------------     ------------------------------------------------
</TABLE>

The number of stockholders of record of Owens Corning's common stock on February
28, 2002 was 6,829.

Owens Corning declared regular dividends of $.075 per share of common stock for
each of the first three quarters of 2000. As a result of the Filing on October
5, 2000, Owens Corning (1) did not pay the regular dividend declared for the
third quarter of 2000 and (2) will not pay additional cash dividends for the
foreseeable future.



<PAGE>


                                     - 15 -
<TABLE>
<S>                                                <C>              <C>           <C>           <C>          <C>

ITEM 6.   SELECTED FINANCIAL DATA

The following is a summary of certain financial information of the Company.

                                                   2001(a)        2000(a)        1999         1998(c)       1997(d)
                                                   -------        -------        ----         -------       -------
                                                 (In millions of dollars, except per share data and where noted)

Net sales                                     $ 4,762          $ 4,940      $  5,048        $   5,009     $   4,373
Cost of sales                                    3,938           4,014          3,815           3,933         3,482
Marketing, administrative
   and other expenses                               565            659            594             668           572
Science and technology
  Expenses                                            37            52             61              59            69
Restructure costs                                     26            32              -             117            68
Provision (credit) for asbestos litigation
  claims                                              (7)          790              -           1,415             -
Chapter 11 related reorganization
   items                                              87            24              -               -             -
Gain on sale of assets                                  -            -              -             359             -
Income (loss) from operations                       116           (631)           578            (824)          182
Cost of borrowed funds                                16           155            152             140           111
Other                                                 (2)            5              -               -             -
Income (loss) before provision
  for income taxes                                  102           (791)           426            (964)           71
Provision (credit) for income
  taxes                                              57           (312)           149            (306)            9
Net income (loss)                                    39           (478)           270            (705)           47
Net income (loss) per share
   Basic                                            .72          (8.71)          4.98          (13.16)          .89
   Diluted                                          .66          (8.71)          4.67          (13.16)          .88
Dividends per share on common
  stock
    Declared                                            -        .2250        .3000           .3000         .2750
    Paid                                                -        .2250        .3000           .3000         .2625
Weighted-average number of
  shares outstanding (in thousands)
    Basic                                       55,056          54,816         54,083          53,579        52,860
    Diluted                                     59,945          54,816         59,452          53,579        53,546
Net cash flow from operations                       478           (190)           (28)            124           131
Capital spending                                    270            476            244             253           227
Total assets                                     7,041           6,912          6,494           5,101         4,996
Long-term debt (b)                                     5             7          1,764           1,535         1,595
Liabilities subject to compromise (b)            6,804           6,935              -               -             -
Average number of employees
  (in thousands)                                      19            20             21              20            22
</TABLE>

(a)      During 2001, the Company recorded a pretax charge of $140 million ($89
         million after-tax) for restructuring and other charges, $87 million
         ($54 million after-tax) for Chapter 11 related reorganization expenses,
         and pretax income of $7 million ($4 million after-tax) for asbestos-
         related insurance recoveries. During 2000, the Company recorded a
         pretax charge of $790 million ($486 million after-tax) for asbestos
         litigation claims, $24 million ($15 million after-tax) for Chapter 11
         related reorganization expenses, and a pretax charge of $229 million
         ($149 million after-tax) for restructuring and other charges.


<PAGE>


                                     - 16 -

ITEM 6.   SELECTED FINANCIAL DATA (continued)

(b)      On October 5, 2000, Owens Corning and 17 of its United States
         subsidiaries filed voluntary petitions for relief under Chapter 11 of
         the United States Bankruptcy Code. In accordance with AICPA Statement
         of Position 90-7 "Financial Reporting by Entities in Reorganization
         under the Bankruptcy Code," beginning in October 2000, the Company
         classifies substantially all pre-petition liabilities of the Debtors
         (Note 1) as "Liabilities Subject to Compromise" on the Consolidated
         Balance Sheet. Included in this item at December 31, 2001 and 2000
         were:
<TABLE>
<S>                                                                                 <C>             <C>
                                                                                    2001           2000
                                                                                    ----           ----
                                                                                 (In millions of dollars)

  Accounts payable                                                                   $      195     $       255
  Accrued interest payable                                                                   40              39
  Accrued liabilities                                                                        36              74
  Debt                                                                                    2,843           2,832
  Income taxes payable                                                                      209             212
  Reserve for asbestos litigation claims - Owens Corning                                  2,197           2,249
  Reserve for asbestos litigation claims - Fibreboard                                     1,284           1,274
                                                                                      ---------      ----------

         Total consolidated                                                               6,804           6,935

         Payables to non-debtors                                                            761             688
                                                                                     ----------     -----------

         Total debtor                                                                 $   7,565       $   7,623
                                                                                      =========       =========
</TABLE>

(c)      During 1998, the Company recorded a pretax charge of $1.415 billion
         ($906 million after-tax) for asbestos litigation claims, a pretax
         charge of $243 million ($171 million after-tax) for restructuring and
         other actions, a pretax net credit of $275 million ($165 million
         after-tax) from the sale of the Company's yarns and other businesses, a
         pretax credit of $84 million ($52 million after tax) from the sale of
         its ownership interest in Alpha/Owens-Corning, LLC, a $39 million
         after-tax extraordinary loss from the early retirement of debt, and a
         $10 million charge for various tax adjustments.

(d)      During 1997, the Company recorded a pretax charge of $143 million ($104
         million after-tax) for restructuring and other actions as well as a $15
         million after-tax charge for the cumulative effect of the change in
         method of accounting for business process reengineering costs.
<PAGE>


                                     - 17 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

(All per share information discussed below is on a diluted basis.)

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements are subject
to risks and uncertainties that could cause actual results to differ materially
from those projected in the statements. Some of the important factors that may
influence possible differences are continued competitive factors and pricing
pressures, material costs, construction activity, interest rate movements,
issues involving implementation of new business systems, achievement of expected
cost reductions, developments in and the outcome of the Chapter 11 proceedings
described below, and general economic conditions.

GENERAL

Voluntary Petition for Relief Under Chapter 11
----------------------------------------------

On October 5, 2000 (the "Petition Date"), Owens Corning and the 17 United States
subsidiaries listed below (collectively, the "Debtors") filed voluntary
petitions for relief (the "Filing") under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for the District of Delaware (the "USBC"). The Debtors are currently operating
their businesses as debtors-in-possession in accordance with provisions of the
Bankruptcy Code. The Chapter 11 cases of the Debtors (collectively, the "Chapter
11 Cases") are being jointly administered under Case No. 00-3837 (JKF). The
Chapter 11 Cases do not include other United States subsidiaries of Owens
Corning or any of its foreign subsidiaries (collectively, the "Non-Debtor
Subsidiaries"). The subsidiary Debtors that filed Chapter 11 petitions for
relief are:
<TABLE>
<S>                                             <C>
         CDC Corporation                        Integrex Testing Systems LLC
         Engineered Yarns America, Inc.         HOMExperts LLC
         Falcon Foam Corporation                Jefferson Holdings, Inc.
         Integrex                               Owens-Corning Fiberglas Technology Inc.
         Fibreboard Corporation                 Owens Corning HT, Inc.
         Exterior Systems, Inc.                 Owens-Corning Overseas Holdings, Inc.
         Integrex Ventures LLC                  Owens Corning Remodeling Systems, LLC
         Integrex Professional Services LLC     Soltech, Inc.
         Integrex Supply Chain Solutions LLC
</TABLE>

The Debtors filed for relief under Chapter 11 to address the growing demands on
Owens Corning's cash flow resulting from its multi-billion dollar asbestos
liability. This liability is discussed in greater detail in Note 19 to the
Consolidated Financial Statements.

In late 2001, the  asbestos-related  Chapter 11 cases pending in the District of
Delaware (the Chapter 11 Cases of Owens Corning and the cases of Armstrong World
Industries,  Inc.,  W.  R.  Grace & Co.,  Federal-Mogul  Global,  Inc.,  and USG
Corporation)  were ordered  transferred to the United States  District Court for
the District of Delaware (the "District  Court") before Judge Alfred M. Wolin to
facilitate  development and  implementation of a coordinated plan for management
(the  "Administrative  Consolidation").  The District Court has entered an order
referring the Chapter 11 Cases back to the USBC, where they were previously

<PAGE>


                                     - 18 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

pending, subject to its ongoing right to withdraw such referral with respect to
any proceedings or issues (the applicable court from time to time responsible
for any particular aspect of the Chapter 11 Cases being hereinafter referred to
as the "Bankruptcy Court"). Owens Corning is unable to predict what impact the
Administrative Consolidation will have on the timing, outcome or other aspects
of the Chapter 11 Cases.

Consequence of Filing
---------------------

As a consequence of the Filing, all pending litigation against the Debtors is
stayed automatically by section 362 of the Bankruptcy Code and, absent further
order of the Bankruptcy Court, no party may take any action to recover on
pre-petition claims against the Debtors. In addition, pursuant to section 365 of
the Bankruptcy Code, the Debtors may reject or assume pre-petition executory
contracts and unexpired leases, and other parties to contracts or leases that
are rejected may assert rejection damages claims as permitted by the Bankruptcy
Code.

Two creditors' committees, one representing asbestos claimants and the other
representing unsecured creditors, have been appointed as official committees in
the Chapter 11 Cases. In addition, the Bankruptcy Court has appointed James J.
McMonagle as legal representative for the class of future asbestos claimants
against one or more of the Debtors. The two committees and the futures
representative will have the right to be heard on all matters that come before
the Bankruptcy Court. Owens Corning expects that these committees and the
futures representative will play important roles in the Chapter 11 Cases and the
negotiation of the terms of any plan or plans of reorganization.

Owens Corning anticipates that substantially all liabilities of the Debtors as
of the date of the Filing will be resolved under one or more Chapter 11 plans of
reorganization to be proposed and voted on in the Chapter 11 Cases in accordance
with the provisions of the Bankruptcy Code. Although the Debtors intend to file
and seek confirmation of such a plan or plans, there can be no assurance as to
when the Debtors will file such a plan or plans, or that such plan or plans will
be confirmed by the Bankruptcy Court and consummated. Owens Corning is unable to
predict what impact the Administrative Consolidation will have on the timing of
the Debtors' filing or confirmation of such plan or plans or its effect, if any,
on the terms thereof.

As provided by the Bankruptcy Code, the Debtors initially had the exclusive
right to propose a plan of reorganization for 120 days following the Petition
Date, until February 2, 2001. By subsequent action, the Bankruptcy Court has
extended such exclusivity period until August 30, 2002. If the Debtors fail to
file a plan of reorganization prior to the ultimate expiration of the
exclusivity period, or if such plan is not accepted by the requisite numbers of
creditors and equity holders entitled to vote on the plan, other parties in
interest in the Chapter 11 Cases may be permitted to propose their own plan(s)
of reorganization for the Debtors.

Owens Corning is unable to predict at this time what the treatment of creditors
and equity holders of the respective Debtors will be under any proposed plan or
plans of reorganization. Such plan or plans may provide, among other things,
that all present and future asbestos-related liabilities of Owens Corning and
Fibreboard will be discharged and assumed and resolved by one or more
independently administered trusts established in compliance with Section 524(g)
of the Bankruptcy Code. Such plan or plans may also provide for the issuance of
an injunction by the Bankruptcy Court pursuant to Section 524(g) of the
Bankruptcy Code that will enjoin actions against the reorganized Debtors for the
purpose of,

<PAGE>


                                     - 19 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

directly or indirectly, collecting, recovering or receiving payment of, on, or
with respect to any claims resulting from asbestos-containing products allegedly
manufactured, sold or installed by Owens Corning or Fibreboard, which claims
will be paid in whole or in part by one or more Section 524(g) trusts. Similar
plans of reorganization have been confirmed in the Chapter 11 cases of other
companies involved in asbestos-related litigation. Section 524(g) of the
Bankruptcy Code provides that, if certain specified conditions are satisfied, a
court may issue a supplemental permanent injunction barring the assertion of
asbestos-related claims or demands against the reorganized company and
channeling those claims to an independent trust.

Owens Corning is unable to predict at this time what treatment will be accorded
under any such reorganization plan or plans to inter-company indebtedness,
licenses, transfers of goods and services and other inter-company and
intra-company arrangements, transactions and relationships that were entered
into prior to the Petition Date. These arrangements, transactions and
relationships may be challenged by various parties in the Chapter 11 Cases and
the outcome of those challenges, if any, may have an impact on the treatment of
various claims under such plan or plans. For example, Owens Corning is unable to
predict at this time what the treatment will be under any such plan or plans
with respect to (1) the guaranties issued by certain of Owens Corning's U.S.
subsidiaries, including Owens-Corning Fiberglas Technology Inc. ("OCFT") and
IPM, Inc., a Non-Debtor Subsidiary that holds Owens Corning's ownership interest
in a majority of Owens Corning's foreign subsidiaries ("IPM"), with respect to
Owens Corning's $1.8 billion pre-petition bank credit facility (the
"Pre-Petition Credit Facility" which is now in default) or (2) OCFT's license
agreements with Owens Corning and Exterior Systems, Inc., a wholly-owned
subsidiary of Owens Corning ("Exterior"), pursuant to which OCFT licenses
intellectual property to Owens Corning and Exterior.

The Bankruptcy Court may confirm a plan of reorganization only upon making
certain findings required by the Bankruptcy Code, and a plan may be confirmed
over the dissent of non-accepting creditors and equity security holders if
certain requirements of the Bankruptcy Code are met. The payment rights and
other entitlements of pre-petition creditors and Owens Corning's shareholders
may be substantially altered by any plan or plans of reorganization confirmed in
the Chapter 11 Cases. There is no assurance that there will be sufficient assets
to satisfy the Debtors' pre-petition liabilities in whole or in part, and the
pre-petition creditors of some Debtors may be treated differently than those of
other Debtors. Pre-petition creditors may receive under a plan or plans less
than 100% of the face value of their claims, and the interests of Owens
Corning's equity security holders may be substantially diluted or cancelled in
whole or in part. As noted above, it is not possible at this time to predict the
outcome of the Chapter 11 Cases, the effect of the Administrative Consolidation,
the terms and provisions of any plan or plans of reorganization, or the effect
of the Chapter 11 reorganization process on the claims of the creditors of the
Debtors or the interests of Owens Corning's equity security holders.

Pursuant to the Bankruptcy Code, schedules have been filed by the Debtors with
the Bankruptcy Court setting forth the assets and liabilities of the Debtors as
of the date of the Filing. Differences between amounts recorded by the Debtors
and claims filed by creditors will be investigated and resolved as part of the
proceedings in the Chapter 11 Cases.

Bar Dates for Filing Claims
---------------------------

In connection with the Chapter 11 Cases,  the Bankruptcy Court has set April 15,
2002 as the last  date by which  holders  of  pre-petition  claims  against  the
Debtors must file their claims. Any holder of a claim that is required to file a


<PAGE>


                                     - 20 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

claim by such date and does not do so will be barred from  asserting  such claim
against any of the Debtors and will not  participate in any  distribution in any
of the Chapter 11 Cases on account of such claim.  Such  deadline to file claims
does not apply to asbestos-related  personal injury claims and  asbestos-related
wrongful   death  claims  (other  than  claims  for   contribution,   indemnity,
reimbursement,  or  subrogation).  A bar date for filing proofs of claim against
the  Debtors  with  respect  to  asbestos-related  personal  injury  claims  and
asbestos-related  wrongful death claims has not been set.  Because the April 15,
2002 bar date has not yet  occurred  and the  asbestos bar date has not yet been
set, the  ultimate  number and allowed  amount of such claims are not  presently
known.

RESULTS OF OPERATIONS

Business Overview
-----------------

Owens Corning is committed to continuing to invest in our businesses and provide
quality products to our customers. In recent years, we have focused on
increasing sales and earnings by (i) achieving productivity improvements and
cost reductions in existing and acquired businesses, (ii) targeting growth
markets and (iii) forming strategic alliances and partnerships to complement our
existing businesses. We are also committed to taking full advantage of
e-Business opportunities. We are also expanding our role as a service provider
by offering complementary services in order to meet all of our consumers' needs.
In the Composite Solutions business, Owens Corning has partnered with end users,
OEMs, systems suppliers and other players within the supply chain for
development of substitution opportunities for our products.

Owens  Corning's   strategy  also  includes  the  divestiture  of  non-strategic
businesses and the realignment of existing businesses.  During the first quarter
of 2001, the Company  completed the sale of the majority of its Engineered  Pipe
Business, a producer of glass-reinforced plastic pipe. During the fourth quarter
of 2001, we sold our 40% interest in Alcopor Owens Corning,  a European building
materials joint venture.  We obtained this 40% ownership  interest in connection
with the sale of our  Building  Materials  business in Europe  during the second
quarter of 2000.  During  the first  quarter  of 2000,  we sold our Falcon  Foam
business  in the U.S.  Please  see Notes 2 and 6 to the  Consolidated  Financial
Statements.

During  2000,  we  experienced  significant  increases  in certain of our costs,
particularly  roofing  and vinyl raw  material  costs,  due to higher  crude oil
prices and tight supply conditions for polyvinyl  chloride (PVC),  respectively.
Increased energy costs,  reflecting  changes in the availability of natural gas,
also contributed to cost increases during 2000. These increases,  coupled with a
fall in demand for  building  materials  associated  with a  weakening  economy,
significantly reduced our margins and income from operations for the second half
of the year 2000 and into the  first  half of 2001.  During  2001,  the  overall
economy remained weak,  resulting in lower demand in both the Building Materials
and Composite Solutions markets.

As a result, during 2000 we implemented the first phase of a strategic
restructuring program, which continued throughout 2001. The specific objectives
of this program are discussed in "Restructuring of Operations and Other Charges"
below and in Note 5 to the Consolidated Financial Statements.

Years Ended December 31, 2001, 2000 and 1999
--------------------------------------------

Sales and Profitability
-----------------------

Net sales for the year ended December 31, 2001, were $4.762 billion, a 4%
decline from the 2000 level of $4.940 billion. Net sales in 1999 were $5.048
billion. Adjusted for the disposition of the Building

<PAGE>


                                     - 21 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

Materials business in Europe during the second quarter of 2000, sales in 2001
were relatively flat compared to 2000. Sales in 2001 reflect the benefit of
price increases in the Composite Solutions business, offset by volume decreases,
particularly in the U.S., and price decreases in U.S. Building Materials sales.
In addition, the impact of currency translation on sales denominated in foreign
currencies was unfavorable during 2001 compared to 2000, reflecting a stronger
U.S. dollar during 2001. Please see Note 2 to the Consolidated Financial
Statements.

Sales outside the U.S. represented 15% of total sales for the year ended
December 31, 2001, compared to 16% during 2000 and 18% during 1999. The decline
in non-U.S. sales is due to the sale of the Building Materials Europe business
in the second quarter of 2000. Gross margin for 2001 was 17% of net sales,
compared to 19% and 24% in 2000 and 1999, respectively.

For the year ended December 31, 2001, Owens Corning reported net income of $39
million, or $.66 per share, compared to a net loss of $478 million, or $8.71 per
share, for 2000 and net income of $270 million, or $4.67 per share, for 1999.
The net income in 2001 reflects reduced operating costs as well as the impact of
the Company's ongoing review of its cost structures as described below in
"Restructuring of Operations and Other Charges", $87 million of Chapter 11
reorganization related expenses and $7 million of pretax income for
asbestos-related insurance recoveries. Cost of borrowed funds during 2001 was
$16 million, $139 million lower than 2000, reflecting the cessation of interest
accruals on most debt as a result of the Chapter 11 Filing (From the Petition
Date through December 31, 2001, contractual interest expense not accrued or
recorded on pre-petition debt totaled $222 million, of which $171 million
relates to 2001 (please see Note 1 to the Consolidated Financial Statements)).

Marketing and administrative expenses were $524 million during 2001, compared to
$542 million in 2000. The decrease is primarily attributable to cost cutting
measures introduced in the second half of 2000 and continued into 2001.

For the year ended December 31, 2001, we reported $116 million of income from
operations. When adjusted for the cost of restructuring and other charges,
asbestos-related charges and recoveries and Chapter 11 related expenditures,
Owens Corning generated $336 million in income from ongoing operations for the
year ended December 31, 2001, compared to $412 million for the same period in
2000. On a comparative basis, the decline from 2000 reflects lower prices in
Building Materials, volume decreases primarily in Composite Solutions and
increased energy and labor costs, only partially offset by price increases in
Composite Solutions, lower raw material costs primarily in Building Materials
and reduced operating expenses as the result of productivity initiatives.

For the year ended December 31, 2000, we reported a net loss of $478 million,
reflecting a decrease in gross margin compared to 1999, attributable primarily
to the adverse impact of increased raw material and energy costs, as well as the
following special items: a $790 million pretax charge ($486 million after-tax)
for asbestos litigation claims, a $229 million pretax charge ($149 million
after-tax) for restructuring and other charges, and $24 million of Chapter 11
reorganization related expenses. Marketing and administrative expenses were $542
million during 2000, compared to $599 million in 1999. The reduction is
primarily attributable to cost cutting measures introduced in 2000.

Restructuring of Operation and Other Charges
--------------------------------------------

2001 Charges
------------

During 2001, the Company experienced the effects of an overall slowed economy in


<PAGE>


                                     - 22 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

both the building  materials and composites  industries.  A decline in net sales
and  margins  over the prior year led the Company to continue to review its cost
structures.  As a result of this review, the Company recorded approximately $140
million in pretax  charges which were  accounted for as a $26 million charge for
restructuring, a $79 million charge to cost of sales and a $35 million charge to
other operating expense. The Company recorded $46 million in the fourth quarter,
$35  million in the third  quarter,  $17  million in the second  quarter and $42
million in the first quarter.

Fourth Quarter 2001
-------------------

The fourth quarter charges, totaling $46 million pretax, consisted of a $2
million pretax restructure charge and $44 million in pretax other charges. The
$2 million restructure charge has been classified as a separate component of
operating expenses on the Company's Consolidated Statement of Income (Loss) and
represents severance costs associated with the elimination of approximately 145
positions, primarily in the U.S. and Canada. The primary groups impacted
included manufacturing and administrative personnel. As of December 31, 2001,
less than $1 million has been paid and charged against this reserve.

The $44 million in pretax other charges included $29 million of asset
impairments mainly associated with the building materials business, principally
to write down assets to estimated fair value on a held for use basis in certain
manufacturing facilities due to changes in the Company's manufacturing and
marketing strategies; $6 million in costs related to the Company's continuing
plan for the realignment of its Newark, Ohio manufacturing facility and various
other charges totaling $9 million. This $44 million pretax charge was accounted
for as a $34 million charge to cost of sales and a $10 million charge to other
operating expenses.

Third Quarter 2001
------------------

The third quarter charges,  totaling $35 million pretax, were comprised of an $8
million pretax restructure  charge and $27 million in pretax other charges.  The
restructure charge represents severance costs associated with the elimination of
approximately  160  positions,  primarily  in the U.S.  and the U.K. The primary
groups impacted  included  manufacturing  and  administrative  personnel.  As of
December 31, 2001,  approximately  $7 million has been paid and charged  against
this reserve.

The $27 million in pretax other charges included $15 million in costs associated
with the Company's previously announced plan to realign its Newark, Ohio
manufacturing facility; $4 million to write-down the Company's investment and
related assets in Alcopor Owens Corning to net realizable value (The sale of the
Company's investment in this joint venture was completed in the fourth quarter
of 2001) and various other charges totaling $8 million. This $27 million pretax
charge was accounted for as a $19 million charge to cost of sales and an $8
million charge to other operating expenses.

Second Quarter 2001
-------------------

The second quarter charges,  totaling $17 million pretax, were comprised of a $7
million pretax restructure  charge and $10 million in pretax other charges.  The
$7 million restructure charge primarily  represented a $5 million charge for the
divestiture of non-strategic  businesses and facilities,  which consisted mainly
of non-cash asset write-downs to fair value and exit cost liabilities. Also

<PAGE>


                                     - 23 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

included in the  restructure  charge was a $2 million charge for severance costs
associated with the elimination of approximately 25 positions,  primarily in the
U.K. The primary  groups  affected  included  manufacturing  and  administrative
personnel.  As of December 31, 2001,  approximately $1 million has been paid and
charged against this reserve.

The $10 million in pretax other charges included $4 million in costs related to
the Company's continuing plan for the realignment of the Newark, Ohio facility;
$2 million to write-down inventory made obsolete by changes in the Company's
manufacturing and marketing strategies; and various other charges totaling $4
million. This $10 million pretax charge was accounted for as an $8 million
charge to cost of sales and a $2 million charge to other operating expenses.

First Quarter 2001
------------------

The first quarter charges,  totaling $42 million pretax,  were comprised of a $9
million pretax  restructure  charge, $2 million pretax loss from assets held for
sale, and $31 million in other pretax charges. The $9 million pretax restructure
charge   represented   severance  costs   associated  with  the  elimination  of
approximately  130 positions,  primarily in the U.S. The primary groups affected
included  manufacturing and administrative  personnel.  As of December 31, 2001,
approximately $7 million has been paid and charged against this reserve.  The $2
million  pretax  loss from  assets  held for sale  represented  the  results  of
operations  for  the  Company's  investments  in its  Pipe  joint  ventures  and
subsidiaries on a  held-for-sale  basis for the first quarter of 2001. This sale
was completed in February 2001 (please see Note 5 to the Consolidated  Financial
Statements).

The $31 million in other pretax charges was comprised of $10 million of asset
impairments, principally the write-down of equipment; $4 million to write down
inventory to reflect updated estimates of the net realizable value; $4 million
of payroll-related charges associated with the realignment of the Newark, Ohio
manufacturing facility; and various other charges totaling $13 million. This $31
million pretax charge was accounted for as an $18 million charge to cost of
sales and a $13 million charge to other operating expenses.

2000 Charges
------------

During 2000, the Company recorded pretax charges of $229 million for
restructuring and other activities as a result of its reassessment of business
strategies with respect to investments in certain ventures, facilities and
overhead expenditures. The $229 million pretax charge was comprised of a $32
million charge associated with the restructuring of the Company's business
segments and $197 million of other charges, the majority of which represented
impairments of long-lived assets. In addition, the Company recorded a $6 million
pretax credit to minority interest resulting from charges related to a
majority-owned consolidated subsidiary. The components of the restructuring
charge included $16 million for personnel reductions, $10 million for the
divestiture of non-strategic businesses and facilities, and $6 million for asset
impairments associated with the planned closing of two lines at our Newark, Ohio
manufacturing facility. This represented the first phase of the Company's plan
to realign operations at the Newark facility.

<PAGE>


                                     - 24 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

The  $197  million  of other  charges  was  comprised  of $95  million  of asset
impairments,  a $6 million charge for a settlement  loss  associated with one of
the  Company's  U.S.  pension  plans,  and $96  million  of  charges  focused on
improving  business  operations and was accounted for as a $77 million charge to
cost of sales,  a $114  million  charge  to other  operating  expenses  and a $6
million  charge to marketing  and  administrative  expenses.  The $95 million of
asset  impairments   included:  1)  $54  million  to  write-down  the  Company's
investment  and related assets in Alcopor Owens  Corning,  a building  materials
joint venture in Europe,  to estimated  fair value on a held for sale basis;  2)
$12 million to write-down the Company's investment in a venture in South Africa,
on a held-in-use basis based upon management's  analysis of current and expected
future financial results and constraints on the Company's ability to fund future
significant  capital  investments  in  this  entity  as  a  consequence  of  the
bankruptcy  filing.  The $12 million charge was offset by a $6 million credit to
record the minority owner's share, recorded in the minority interest line on the
Consolidated  Statement of Income  (Loss);  3) $8 million to  write-down to fair
value the investments in the Company's Pipe joint ventures and subsidiaries on a
held for sale  basis;  4) $10 million to  write-down  the equity  investment  in
ImproveNet,  due to a  significant  decrease in market  value  which  management
believes  is other than  temporary;  and 5) $11  million  associated  with asset
impairments within our Cultured Stone and other businesses.

The $96 million charge consisted of $43 million to write-down inventory made
obsolete by changes in the Company's manufacturing and marketing strategies; $19
million to write-down equipment and receivables; $15 million to increase
warranty reserves due to general changes in estimates associated with these
reserves; and various other charges totaling $19 million recorded as other
operating expenses. As of December 31, 2001, approximately $13 million has been
paid and charged against the reserve for personnel reductions and approximately
$3 million has been charged against exit cost liabilities.

Due to timing of events, we anticipate that additional restructuring and other
charges will be recorded during 2002.

Building Materials Systems
--------------------------

In the Building Materials Systems segment, sales in 2001 decreased 3%, to $3.876
billion,  compared to 2000,  resulting mostly from the Building Materials Europe
divestiture.  Excluding the sales related to this divestiture, sales declined 1%
compared to 2000.  During 2001,  volume  increases in  distribution  and roofing
products were offset by price  decreases  attributable to insulation and roofing
products.  The  relatively  constant  level of sales in  Building  Materials  is
associated  with an overall  softness in the  industry,  reflecting a decline in
housing starts and the remodeling market during 2001.

Income from operations was $252 million in 2001, compared to $353 million in
2000. The decline primarily reflects lost margin due to price decreases. Please
see Note 2 to the Consolidated Financial Statements.

During 2000, sales decreased 4% compared to 1999, resulting mostly from the
Building Materials Europe and Falcon transactions. Excluding the sales related
to these divestitures, sales remained constant.

Income from operations was $353 million in 2000, compared to $523 million in
1999, reflecting raw material and energy cost increases and volume decreases,
only partially offset by price increases. The roofing and vinyl markets suffered
most from the raw material cost increases. Due to the rapid rise in

<PAGE>


                                     - 25 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

crude oil prices and significantly increased demand for PVC during 2000, Owens
Corning was unable to fully pass through to customers these costs. Actions taken
during the year to improve productivity partially narrowed the gap.

Composite Solutions
-------------------

In the Composite Solutions segment, sales during 2001 were down 5%, to $886
million, compared to 2000, reflecting volume decreases, primarily in the U.S.,
and the divestiture of the Engineered Pipe business. These volume decreases were
partially offset by price increases across all markets. The translation impact
of sales denominated in foreign currencies was a loss of approximately $23
million during 2001, reflecting a stronger U.S. dollar. Income from operations
was $133 million in 2001, compared to $108 million in 2000, reflecting price
increases and reduced operating costs. Please see Note 2 to the Consolidated
Financial Statements.

Sales during 2000 were up 7% compared to 1999, to $932 million, due to price
improvements and significant volume increases. Price increases were seen across
all markets, especially in Europe, and volume increases were significant in
Europe and the U.S. The translation impact of sales denominated in foreign
currencies was a loss of approximately $40 million during 2000, reflecting a
stronger U. S. dollar. Income from operations was $108 million in 2000, compared
to $83 million in 1999, reflecting price and volume increases, most notably in
Europe, partially offset by production inefficiencies in the U.S. and Canada.

LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS

Cash flow from operations was $478 million for the year ended December 31, 2001,
versus negative $190 million for the year ended December 31, 2000. The increase
in cash flow from operations was driven primarily by increased earnings in 2001
compared to 2000, the absence of payments for asbestos litigation claims in
2001, and increased cash from working capital. There was no cash outflow for
asbestos litigation claims in 2001, compared to $685 million in 2000 ($521
million for claims payments and $164 million paid into escrow as restricted
cash), which was partially offset by insurance proceeds of $380 million. This
net amount of $305 million paid in 2000 compares favorably to the net amount of
$680 million paid in 1999. Please see Notes 1 and 19 to the Consolidated
Financial Statements.

Inventories at December 31, 2001, were $437 million, a decrease of $32 million
from the December 31, 2000 level. Receivables at December 31, 2001 were $417
million, a $71 million decrease over the December 31, 2000 level, primarily due
to slightly reduced demand toward year-end and aggressive monitoring of customer
credit terms. The increase in accounts payable and accrued liabilities from $491
million at December 31, 2000, to $740 million at December 31, 2001, reflects
improvements in payment terms initially adversely affected by the Filing. At
December 31, 2001, our net working capital was $800 million and we had a current
ratio of 1.94, compared to $955 million and 2.57, respectively, at December 31,
2000. The change in working capital and current ratio is the result of
increasing accounts payable and accrued liabilities. Cash and cash equivalents
at December 31, 2001 reflect an increase of $214 million compared to December
31, 2000.

Owens  Corning  maintains  pension  plans for certain of its salaried and hourly
employees.  During 2001, the Company made  contributions of $196 million to such
plans,  including  approximately  $14 million in connection with the sale of its

<PAGE>

                                     - 26 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

remaining  interest  in  Alcopor  Owens  Corning  (please  see  Note  6  to  the
Consolidated  Financial  Statements).  The Company's  recorded long-term pension
plan  liability  increased  from $75 million at year-end 2000 to $291 million at
year-end  2001,  primarily  as  the  result  of  changes  in  certain  actuarial
assumptions and a decline in plan asset values due to market conditions  (please
see Note 9 to the Consolidated  Financial  Statements).  These factors were also
the primary contributors to the increase in accumulated other comprehensive loss
and the corresponding  decrease in stockholders'  equity. The ultimate cash flow
impact to the Company, if any, of the pension plan liability,  and the timing of
any such impact, will depend on numerous variables,  including future changes in
actuarial assumptions and market conditions.

At December 31, 2001, we had $2.843 billion of borrowings subject to compromise
and $114 million of other borrowings (of which $96 million were in default as a
consequence of the Filing) (please see Note 3 to the Consolidated Financial
Statements). Borrowings outstanding at December 31, 2000, were $2.832 billion
subject to compromise and $125 million of other borrowings (of which $94 million
were in default as a  consequence  of the Filing) (please see Notes 3 and 4 to
the Consolidated Financial Statements).

At December 31, 2001, the Company had $764 million of cash and cash  equivalents
(of which approximately $38 million was subject to administrative freeze pending
the  resolution  of  certain  alleged  set-off  rights by  certain  pre-petition
lenders).  In addition,  in connection with the Filing,  the Debtors  obtained a
$500 million debtor-in-possession credit facility from a group of lenders led by
Bank of America,  N.A. (the "DIP  Financing"),  which currently expires November
15, 2002.  Due to seasonal  year-end  declines in the  qualifying  inventory and
receivables  that  make up the  borrowing  base  under the DIP  Financing,  $407
million was  available  under this credit  facility at December 31, 2001.  There
were no  borrowings  outstanding  under the DIP  Financing at December 31, 2001,
however,  approximately  $40  million  of the  availability  under  this  credit
facility was  utilized as a result of the issuance of standby  letters of credit
and similar uses.

As a consequence of the Filing and the impact of certain provisions of the
Company's DIP Financing and in a cash management order entered by the Bankruptcy
Court, the Company and its subsidiaries are now subject to certain restrictions,
including on their ability to pay dividends and to transfer cash and other
assets to each other and to their affiliates.

The Company believes, based on information presently available to it, that its
cash and cash equivalents, cash available from operations, and the DIP Financing
will provide sufficient liquidity to allow it to continue as a going concern for
the foreseeable future. However, the ability of the Company to continue as a
going concern (including its ability to meet post-petition obligations of the
Debtors and to meet obligations of the Non-Debtor Subsidiaries) and the
appropriateness of using the going concern basis for its financial statements
are dependent upon, among other things, (i) the Company's ability to comply with
the terms of the DIP Financing and any cash management order entered by the
Bankruptcy Court from time to time in connection with the Chapter 11 Cases, (ii)
the ability of the Company to maintain adequate cash on hand, (iii) the ability
of the Company to generate cash from operations, (iv) the ability of the
Non-Debtor Subsidiaries to obtain necessary financing, (v) confirmation of a
plan or plans of reorganization under the Bankruptcy Code, and (vi) the
Company's ability to maintain profitability following such confirmation.

Capital spending for property, plant and equipment, excluding acquisitions, was
$270 million in 2001. We anticipate that 2002 capital spending, exclusive of
acquisitions, will be approximately $280 million,
the majority of which is uncommitted. The Company expects that funding for these
expenditures will be from the Company's operations, existing cash on hand and
the credit availability from the DIP Financing.


<PAGE>


                                     - 27 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

As of December 31, 2001 and 2000, the Company is contingently liable for
guarantees of indebtedness owed by certain unconsolidated affiliates of
approximately $38 million and $35 million, respectively. As of December 31,
2001, approximately $34 million of such indebtedness was alleged to be in
default as a result of the Filing. The affiliate that owed approximately $19
million of such indebtedness is in negotiations with its lenders and other
parties, including Owens Corning, concerning the status of this indebtedness.
Depending on the outcome of such negotiations, it is possible that the lender
will attempt to enforce the related guarantee against Owens Corning. Any such
claim would constitute a liability subject to compromise, since the claim would
relate to a pre-petition obligation of Owens Corning, and may give rise to a
loss of up to the full amount of the claim. Subject to the foregoing
uncertainties, the Company is of the opinion that its other unconsolidated
affiliates will be able to perform under their respective payment obligations in
connection with such guaranteed indebtedness and that no payments will be
required and no losses will be incurred by the Company under such guarantees.

Critical Accounting Policies
----------------------------

The Company's discussion and analysis of its financial condition and results of
operations is based upon its financial statements, which have been prepared in
accordance with U.S. generally accepted accounting principles. The preparation
of these financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. On an on-going basis, management evaluates its estimates and
judgments related to these assets, liabilities, revenues and expenses.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The Company believes the following critical
accounting policies, among others, affect its more significant judgments and
estimates used in the preparation of its consolidated financial statements.

The Company's Consolidated Financial Statements have been prepared in accordance
with AICPA Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code," and on a going concern
basis, which contemplates continuity of operations, realization of assets and
liquidation of liabilities in the ordinary course of business. However, as a
result of the Filing, such realization of assets and liquidation of liabilities
are subject to uncertainty. While operating as debtors-in-possession under the
protection of Chapter 11 of the Bankruptcy Code, and subject to Bankruptcy Court
approval or otherwise as permitted in the ordinary course of business, the
Debtors, or some of them, may sell or otherwise dispose of assets and liquidate
or settle liabilities for amounts other than those reflected in the Consolidated
Financial Statements. Further, a plan of reorganization could materially change
the amounts and classifications reported in the consolidated historical
financial statements.

The Company exercises judgment in evaluating its long-lived assets for
impairment. This requires estimating useful lives, future operating cash flows
and estimated fair value of the assets under review. Changes in management
intentions, market conditions or operating performance could indicate that
impairment charges might be necessary that would be material to the Company's
consolidated financial statements in any given period.

Accounting for pensions and other postretirement benefits involves estimating
the cost of benefits to be provided well into the future and attributing that
cost over the time period each employee works.

<PAGE>


                                     - 28 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

To accomplish this, extensive use is made of assumptions about inflation,
investment returns, mortality, turnover, medical costs and discount rates
through a collaborative effort by management and outside advisors such as
consultants, lawyers and actuaries. The results of this effort provide
management with the necessary information on which to base its judgments and
develop the estimates used to prepare the financial statements. Changes in
assumptions used could result in a material impact to the Company's consolidated
financial statements in any given period.

The Company estimates a reserve for asbestos-related liabilities that have been
asserted or are probable of assertion. The estimate of liabilities for pending
and expected future asbestos claims is subject to considerable uncertainty
because such liabilities are influenced by numerous variables that are
inherently difficult to predict, and such uncertainties significantly increased
as a result of the Chapter 11 Cases. The Company will continue to review its
asbestos reserve on a periodic basis and make such adjustments as may be
appropriate. However, it is possible that the Company will not be in a position
to conclude that a revision to the reserve is appropriate until significant
developments occur during the course of the Chapter 11 Cases, including the
resolution of uncertainties. Any such revision could, however, be material to
the Company's consolidated financial statements in any given period. Please see
Note 19 to the Consolidated Financial Statements for further discussion.

The determination of the Company's tax provision is complex due to operations in
several tax jurisdictions outside the U.S. In addition, realization of certain
deferred tax assets is dependent upon our ability to generate future taxable
income. The Company records a valuation allowance to reduce its deferred tax
assets to the amount that it believes is more likely than not to be realized.
While the Company has considered future taxable income and on-going tax planning
strategies in assessing the need for the valuation allowance, in the event the
Company was to determine that it would not be able to realize all or part of its
net deferred tax assets in the future, an adjustment to the deferred tax assets
would be charged to income in the period such determination was made. In
addition, the Company maintains tax reserves to cover Internal Revenue Service
(IRS) claims for income taxes and interest attributable to audits of open tax
years. While Owens Corning believes that the existing reserves are appropriate
in light of the audit issues involved, its defenses, its prior experience in
resolving audit issues, and its ability to realize certain challenged deductions
in subsequent tax returns if the IRS were successful, there can be no assurance
that such reserves will be sufficient. Owens Corning will continue to review its
tax reserves on a periodic basis and make such adjustments as may be
appropriate. Any such revision could be material to the Company's consolidated
financial position and results of operations in any given period.

Accounting Changes
------------------

Effective January 1, 2001, the Company implemented Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). This statement and its interpretations establish
accounting and reporting standards requiring derivative instruments (including
certain derivative instruments embedded in other contracts) to be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The impact of adoption at January 1, 2001 did not have a material effect in the
Consolidated Statement of Income (Loss) and resulted in other comprehensive
income of approximately $1 million.

Effective  January 1,  2002,  the  Company  will adopt  Statement  of  Financial
Accounting  Standards No. 142, "Goodwill and Other  Intangible Assets" (SFAS No.
142). SFAS No. 142 eliminates the amortization of goodwill and indefinite-lived
intangible  assets and initiates an annual review for  impairment.  Identifiable
intangible assets with a determinable useful life will continue to be amortized.




<PAGE>


                                     - 29 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

Goodwill acquired prior to June 30, 2001 will be affected upon adoption, which
will require the Company to perform an impairment test of its existing goodwill
by applying a fair-value test. The Company will apply SFAS No. 142 beginning in
the first quarter of 2002. The Company will test goodwill for impairment using
the two-step process prescribed in SFAS No. 142. The first step is a screen for
potential impairment, while the second step measures the amount of the
impairment, if any. The Company expects to perform the first of the required
impairment tests of goodwill as of January 1, 2002 in the first quarter of 2002.
Based on the steps the Company has taken to prepare for the adoption of SFAS No.
142, it is likely that between $450 and $500 million of the goodwill related to
Building Materials Systems will be impaired using the impairment test required
by SFAS No. 142. As of December 31, 2001, the Company has net unamortized
goodwill of $610 million and recognized amortization expense of $18 million, $19
million, and $21 million for the years ended December 31, 2001, 2000, and 1999,
respectively. An impairment that is required to be recognized when adopting SFAS
No. 142 will be reflected as a cumulative effect of a change in accounting
principle in the first quarter of 2002. The Company plans to complete the
measurement of the impairment loss in the second quarter of 2002 and will
address the tax implications, if any, on this impairment loss at that time.

Effective January 1, 2002, the Company will adopt Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." This statement replaces SFAS No. 121. The new statement
establishes a single accounting model for long-lived assets to be disposed of by
sale, and requires companies to measure long-lived assets at the lower of fair
value minus cost to sell or the carrying value. The impact of adoption has not
yet been determined.

Effective  January 1,  2003,  the  Company  will adopt  Statement  of  Financial
Accounting  Standards No. 143,  "Accounting for Asset  Retirement  Obligations."
This  statement  requires  that  the  fair  value  of a  liability  for an asset
retirement  obligation  be recognized in the period in which it is incurred if a
reasonable  estimate  of fair  value  can be made,  while the  associated  asset
retirement  costs  are  capitalized  as  part  of  the  carrying  amount  of the
long-lived  asset.  The  Company  does not expect the  effects of adoption to be
significant.

Environmental Matters
---------------------

The Company has been deemed by the Environmental Protection Agency (EPA) to be a
Potentially  Responsible  Party  (PRP) with  respect to certain  sites under the
Comprehensive   Environmental   Response,   Compensation   and   Liability   Act
(Superfund). The Company has also been deemed a PRP under similar state or local
laws. In other instances, other PRPs have brought suits against the Company as a
PRP for  contribution  under such federal,  state or local laws. At December 31,
2001, a total of 54 such PRP  designations  remained  unresolved by the Company.
The Company is also involved with environmental  investigation or remediation at
a number of other sites at which it has not been designated a PRP.

The Company has established a $26 million reserve for our Superfund (and similar
state, local and private action) contingent liabilities.  In connection with the
Filing, the Company has initiated a program to identify and discharge contingent
environmental liabilities as part of its plan or plans of reorganization.  Under
the  program,  the  Company  will seek  settlements,  subject to approval of the
Bankruptcy Court, with various federal, state and local authorities,  as well as
private claimants. The Company will continue to review its environmental reserve
in light of such program and make such adjustments as may be appropriate.


<PAGE>


                                     - 30 -

ITEM 7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS (continued)

The 1990 Clean Air Act Amendments (Act) provide that the EPA will issue
regulations on a number of air pollutants over a period of years. The EPA issued
final regulations for wool fiberglass and mineral wool in June 1999, for
amino/phenolic resin in January 2000, and for secondary aluminum smelting in
March 2000. The Company anticipates that other sources to be regulated will be
wet formed glass mat, asphalt processing and roofing, metal coil coating, and
open molded fiber-reinforced plastics. Based on information now known to the
Company, including the nature and limited number of regulated materials Owens
Corning emits, we do not expect the Act to have a materially adverse effect on
our results of operations, financial condition or long-term liquidity.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  Company is exposed  to the impact of changes in foreign  currency  exchange
rates,  interest rates, and natural gas prices in the normal course of business.
The Company  manages such  exposures  through the use of certain  financial  and
derivative financial instruments. The Company's objective with these instruments
is to reduce exposure to fluctuations in earnings and cash flows.

The Company enters into various forward contracts and options, which change in
value as foreign currency exchange rates change, to preserve the carrying amount
of foreign currency-denominated assets, liabilities, commitments, and certain
anticipated foreign currency transactions and earnings.

The Company also enters into certain currency and interest rate swaps to protect
the carrying amount of its investments in certain foreign subsidiaries, to hedge
the principal and interest payments of certain debt instruments, and to manage
its exposure to fixed versus floating interest rates.

The Company also enters into cash-settled natural gas futures to protect against
changes in natural gas prices.

The Company's policy is to use foreign currency,  interest rate, and natural gas
derivative  financial  instruments  only  to  the  extent  necessary  to  manage
exposures as described above. The Company does not enter into such  transactions
for speculative purposes.

The Company uses a variance-covariance  Value at Risk (VAR) computation model to
estimate  the  potential  loss in the  fair  value of the  referenced  financial
instruments. The VAR model uses historical foreign exchange rates, interest, and
natural gas rates as an  estimate of the  volatility  and  correlation  of these
rates  in  future  periods.  It  estimates  a loss in fair  market  value  using
statistical modeling techniques.

The amounts presented below represent the maximum potential one-day loss in fair
value that the Company  would  expect from adverse  changes in foreign  currency
exchange  rates,  interest rates or natural gas prices assuming a 95% confidence
level:
<TABLE>
<S>                                                         <C>                              <C>
                                                          December 31,                     December 31,
                    Risk Category                             2001                             2000
                    -------------                             ----                             ----
                                                                     (In millions of dollars)
                    Foreign currency                       $      -                          $      1
                    Interest rate                          $     13                          $      8
                    Natural gas                            $      1                          $      -
</TABLE>

Virtually all of the potential loss associated with interest rate risk is
attributable to fixed-rate long-term debt instruments. The potential loss,
identified above, includes interest or debt subject to compromise.


<PAGE>


                                     - 31 -

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Pages 46 through 115 hereof are incorporated here by reference.


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE

Owens Corning has nothing to report under this Item.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF OWENS CORNING

INFORMATION CONCERNING DIRECTORS

At February 28, 2002, Owens Corning's Board of Directors was composed of
thirteen directors, divided into three classes. Each class of directors serves
for a term expiring at the third succeeding annual meeting of stockholders after
the year of election of such class, and until their successors are elected and
qualified. As of February 28, 2002, Owens Corning has not scheduled an annual
meeting of stockholders for 2002 or any subsequent period.

Information concerning each director of Owens Corning as of February 28, 2002,
is set forth below.

Class Expiring At First Succeeding Annual Meeting Of Stockholders

David T. Brown, 53. Executive Vice President and Chief Operating Officer,  Owens
Corning.  Mr. Brown has been elected  President and Chief  Executive  Officer of
Owens Corning effective April 18, 2002. Director since January 2002.

A graduate of Purdue University, Mr. Brown became Chief Operating Officer of
Owens Corning in January 2001. Previously, he held numerous leadership positions
in sales and marketing at Owens Corning, including serving as President of the
Insulating Systems Business beginning in 1997, President of Building Materials
Sales and Distribution beginning in 1996, and President of the Roofing and
Asphalt Business beginning in 1994. Mr. Brown joined Owens Corning in 1978 after
working for Procter & Gamble, Shearson Hammill and Eli Lilly.

Mr.  Brown is a past  board  member of the  National  Building  Museum,  Asphalt
Roofing  Manufacturers   Association   Executive  Committee,   National  Roofing
Contractors  Association  Advisory Board, and Thermal  Insulation  Manufacturers
Association.  He currently serves on the Board of Governors and is Vice Chairman
of the  Executive  Committee  of the  North  American  Insulation  Manufacturers
Association.  In addition,  he is a member of the U.S./China Council on Housing.
Mr. Brown also serves on the Board of Directors of the Erie Shores Credit Union.

Gaston Caperton, 62. President and Chief Executive Officer of The College Board,
not-for-profit educational association, New York, NY and Chairman of The
Caperton Group, a business investment and development company, Shepherdstown,
WV; former Governor of the State of West Virginia. Director since 1997.

A graduate of the University of North Carolina, Mr. Caperton began his career in
a small insurance agency, became its principal owner and chief operating


<PAGE>


                                     - 32 -

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF OWENS CORNING (continued)

officer, and led the firm to become the tenth largest privately-owned  insurance
brokerage  firm in the  U.S.  He also  has  owned a bank  and  mortgage  banking
company. Mr. Caperton was elected Governor of West Virginia in 1988 and 1992. In
1997,  Mr.  Caperton  taught at  Harvard  University  as a fellow at the John F.
Kennedy  Institute  of  Politics.  Prior to  beginning  his current  position in
mid-1999,  Mr. Caperton also taught at Columbia  University,  where he served as
Director of the Institute on Education and Government at Teachers  College.  Mr.
Caperton is a director of United  Bankshares,  Inc.  and Energy  Corporation  of
America.  He was the 1996 Chair of the Democratic  Governors'  Association,  and
served on the  National  Governors'  Association  executive  committee  and as a
member of the Intergovernmental Policy Advisory Committee on U.S. Trade. He also
was Chairman of the Appalachian Regional Commission, Southern Regional Education
Board, and the Southern Growth Policy Board.

William W. Colville, 67. Retired; former Senior Vice President,  General Counsel
and Secretary of Owens Corning. Director since 1995.

A graduate of Yale University and the Columbia University Law School, Mr.
Colville began his career at Owens Corning in 1984 as Senior Vice President and
General Counsel. Prior to joining Owens Corning, he was President of the Sohio
Processed Minerals Group from 1982 to 1984, and General Counsel of Kennecott
Corporation from 1980 to 1982.

Mr. Colville is a director of Nordson Corporation.

Landon Hilliard,  62. Partner,  Brown Brothers  Harriman & Co., private bankers,
New York, NY. Director since 1989.

A graduate of the University of Virginia, Mr. Hilliard began his career at
Morgan Guaranty Trust Company of New York. He joined Brown Brothers Harriman in
1974 and became a partner in 1979.

Mr.  Hilliard is a director of Norfolk  Southern  Corporation  and Western World
Insurance Company. He is also Chairman of the Board of Trustees of the Provident
Loan Society of New York and Secretary of The Economic Club of New York.

Glen H. Hiner,  67.  Chairman of the Board and Chief  Executive  Officer,  Owens
Corning.  Mr.  Hiner will  retire as  Chairman and Chief  Executive  Officer of
Owens Corning effective April 18, 2002. Director since 1992.

A graduate of West Virginia University, Mr. Hiner spent 35 years of his
professional career at General Electric Company, eventually becoming Senior Vice
President and head of GE Plastics. He was elected Chairman and Chief Executive
Officer of Owens Corning in January 1992.

Mr.  Hiner  is a  director  of Dana  Corporation,  Kohler  Co.,  and  Prudential
Financial, Inc.

Class Expiring At Second Succeeding Annual Meeting Of Stockholders

Ann Iverson, 58. Chairman of Brooks Sports, Inc., athletic footwear and apparel,
Bothell,  WA and President and Chief Executive Officer of International Link, an
international consulting firm, Scottsdale, AZ. Director since 1996.

Ms.  Iverson began her career in retailing and held various buying and executive
positions at retail stores in the U.S.  through 1989,  including  Bloomingdales,
Dayton  Hudson,  and US Shoe. She then joined British Home Stores as Director of
Merchandising and Operations in 1990; Mothercare as Chief Executive Officer in

<PAGE>


                                     - 33 -

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF OWENS CORNING (continued)

1992;  Kay-Bee Toy Stores as President and Chief Executive  Officer in 1994; and
Laura  Ashley  Holdings  plc. as Group Chief  Executive  in 1995.  In 1998,  she
founded and became President and Chief Executive Officer of International Link.

Ms. Iverson is a director of Candie's,  Inc., as well as several  privately-held
companies, including Brooks Sports, Inc.

W. Walker Lewis, 57. Chairman,  Devon Value Advisers,  financial  consulting and
investment banking firm, Greenwich, CT and New York, NY. Director since 1993.

Previously,  Mr.  Lewis  served as Senior  Advisor to SBC Warburg  Dillon  Read;
Senior Advisor to Marakon Associates;  and Managing Director,  Kidder, Peabody &
Co., Inc.  Prior to April 1994, he was  President,  Avon U.S. and Executive Vice
President,  Avon  Products,  Inc. Prior to March 1992, Mr. Lewis was Chairman of
Mercer  Management  Consulting,  Inc.,  a  wholly-owned  subsidiary  of  Marsh &
McLennan,  which is the successor to Strategic Planning Associates, a management
consulting firm he founded in 1972. He is a graduate of Harvard  College,  where
he was President and Publisher of the Harvard Lampoon.

Mr. Lewis is Chairman of London Fog Industries,  Inc. and a director of American
Management Systems,  Inc., Mrs. Fields' Original Cookies, Inc., Scientific Games
Corporation,  and  Unilab  Corporation.  He is also a member of the  Council  on
Foreign Relations,  the Washington Institute of Foreign Affairs, and The Harvard
Committee on University Resources.

Furman C.  Moseley,  Jr., 67.  Chairman of Sasquatch  Books,  Inc.,  publishing,
Seattle, WA. Director since 1983.

Mr.  Moseley  joined  Simpson  Paper Company in 1960 and retired in June 1995 as
Chairman of that company and President of Simpson Investment Company.

Mr. Moseley is a director of Eaton Corporation.

Michael H. Thaman, 37. Senior Vice President and Chief Financial Officer,  Owens
Corning.  Mr.  Thaman has been  elected  Chairman of the Board of Owens  Corning
effective April 18, 2002. Director since January 2002.

A graduate of Princeton University, Mr. Thaman joined Owens Corning in 1992 and
became Chief Financial Officer in 2000. Before assuming his current position,
Mr. Thaman held a variety of leadership positions at Owens Corning, including
serving as President of the Exterior Systems Business beginning in 1999 and
President of the Engineered Pipe Systems Business beginning in 1997.

Prior to joining Owens Corning, Mr. Thaman spent six years as a strategy
consultant at Mercer Management Consulting, including as a Vice President in
their New York office.

Class Expiring At Third Succeeding Annual Meeting Of Stockholders

Norman P. Blake,  Jr., 60.  Chairman,  President and Chief Executive  Officer of
Comdisco, Inc., global technology services, Rosemont, IL. Director since 1992.

A graduate of Purdue University, Mr. Blake previously has served as Chief
Executive Officer of the United States Olympic Committee; Chief Executive
Officer and President of Promus Hotel Corporation; Chairman, Chief Executive
Officer and President of USF&G Corporation; and Chairman and Chief Executive
Officer of Heller International Corporation of Chicago.


<PAGE>


                                     - 34 -

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF OWENS CORNING (continued)

Mr. Blake is a director of Enron Corporation and a member of the Community
Partnership for Education. He is also a member of the Purdue Research Foundation
and Purdue University's President's Council and Dean's Advisory Council,
Krannert Graduate School of Management. He is the recipient of the degree of
Doctor of Economics honoris causa from Purdue University, granted jointly by the
Krannert Graduate School of Management and School of Liberal Arts. He has also
been awarded The Ellis Island Medal of Honor.

Leonard S. Coleman,  Jr., 53.  Chairman of ARENACO,  a subsidiary of YankeeNets,
LLC, and Senior Advisor to Major League Baseball, professional sports, New York,
NY. Director since 1996.

A graduate of Princeton and Harvard Universities, Mr. Coleman became President
of The National League of Professional Baseball Clubs in 1994 after serving as
Executive Director, Market Development of Major League Baseball. He assumed his
current position with Major League Baseball in 1999 and became Chairman of
ARENACO in 2001.

Mr. Coleman is a director of H. J. Heinz Company,  the Omnicom Group, New Jersey
Resources,  Cendant  Corporation,  Radio Unica,  Electronic  Arts Inc.,  Aramark
Corporation,  and Churchill Downs Incorporated.  He also serves as a director of
The Metropolitan Opera, The Schumann Fund, The Jackie Robinson  Foundation,  The
Children's Defense Fund, and The National Urban League.

W. Ann  Reynolds,  64.  President of The  University  of Alabama at  Birmingham,
Birmingham, AL. Director since 1993.

A graduate of Kansas State Teachers College and the University of Iowa, Dr.
Reynolds assumed her current position in 1997. Previously, she was Chancellor of
City University of New York for seven years and served eight years as Chancellor
of the twenty-campus California State University system.

Dr.  Reynolds  is a director of Humana,  Inc.,  Abbott  Laboratories  and Maytag
Corporation.  She  is  also  a  member  of  the  American  Association  for  the
Advancement of Science,  the American  Association  of Anatomists,  the American
Board of Medical Specialties, the Society for Gynecological  Investigation,  and
the Perinatal Research Society.

Maura Abeln Smith,  46.  Senior Vice  President,  Chief  Restructuring  Officer,
General Counsel and Secretary, Owens Corning. Director since January 2002.

A graduate of Vassar College, Oxford University - where she was a Rhodes
Scholar, and the University of Miami School of Law, Ms. Smith joined Owens
Corning in 1998. Prior to joining Owens Corning, Ms. Smith worked at General
Electric, where she served as Vice President and General Counsel at GE Plastics.
Before her career at General Electric, Ms. Smith was a partner in the
international law firm of Baker & McKenzie.

INFORMATION CONCERNING EXECUTIVE OFFICERS

Certain information concerning Owens Corning's executive officers is included on
pages 12 through 13 hereof.

As indicated in Item 1 above, Owens Corning and 17 of its domestic  subsidiaries
filed for protection  under Chapter 11 of the United States  Bankruptcy  Code on
October 5, 2000.  All of the executive  officers  referenced  above,  except Mr.
Dana,  served as  executive  officers  of Owens  Corning  at or within two years
before  the time of such  filing.  In  addition,  Mesdames  Brooks and Smith and


<PAGE>


                                     - 35 -

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF OWENS CORNING (continued)

Messrs. Brown, Dana, Hiner, Kiemle, and Thaman also served as executive officers
of one or more of such domestic  subsidiaries  at or within two years before the
time of such filing.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 and Securities and Exchange
Commission regulations require Owens Corning's directors, and certain officers
and greater than ten percent stockholders, to file reports of ownership on Form
3 and changes in ownership on Forms 4 or 5 with the Securities and Exchange
Commission. Owens Corning undertakes to file such forms on behalf of the
reporting directors and officers pursuant to a power of attorney given to
certain attorneys-in-fact. Such reporting officers, directors and ten percent
stockholders are also required by Securities and Exchange Commission rules to
furnish Owens Corning with copies of all Section 16(a) reports they file.

Based solely on its review of copies of such reports received or written
representations from such executive officers, directors and ten percent
stockholders, Owens Corning believes that all Section 16(a) filing requirements
applicable to its directors, executive officers and ten percent stockholders
were complied with during fiscal year 2001.


<PAGE>


                                     - 36 -

ITEM 11.   EXECUTIVE COMPENSATION

Executive Officer Compensation

The following tables provide information on compensation and stock-based awards
received by Owens Corning's Chief Executive Officer and the four other highest
paid individuals who were serving as executive officers of Owens Corning at the
end of 2001 (these five individuals collectively are referred to as the "Named
Executive Officers").

                           Summary Compensation Table
                           --------------------------

The following table contains information about compensation paid, and certain
awards made, by Owens Corning to the Named Executive Officers for the three-year
period ended December 31, 2001.
<TABLE>
<S>                        <C>     <C>       <C>             <C>        <C>       <C>       <c>        <c>
                                                                    Long Term Compensation
                                                                   -----------------------

                  Annual Compensation                                 Awards            Payouts
 ---------------------------------------------------------            ------            -------
                                                                   Restricted  Securities
                                                      Other Annual   Stock     Underlying  LTIP      All Other
         Name and                 Salary     Bonus    Compensation  Award(s)  Options/    Payouts  Compensation
  Principal Position(1)     Year    ($)      ($)(2)      ($)(3)     ($)(4)   SARs(#)(5)     ($)         ($)
  ---------------------     ---- ---------  --------- ------------  -------- ------------ -------  ------------
Glen H. Hiner.............  2001 1,000,000  2,687,300       267,036         0         0            1,361,976(6)
   Chairman and Chief       2000 1,000,000  2,035,600       207,341         0         0              697,451
   Executive Officer        1999   970,833  3,029,000       224,907 2,280,219   243,000               35,688

David T. Brown............  2001   400,000    767,000                       0         0              483,550(6)
   Executive Vice President 2000   343,750    425,000                       0         0              245,275
   and Chief Operating      1999   300,000    771,900                 348,125    36,000               11,913
   Officer

Michael H. Thaman.........  2001   425,000    742,000                       0         0              517,800(6)
   Senior Vice President    2000   362,500    404,500                       0         0              261,900
   and Chief Financial      1999   275,000    497,500                 348,125    36,000               12,000
   Officer

Maura Abeln Smith.........  2001   500,000    727,000                       0         0              692,717(6)
   Senior Vice President,   2000   497,917    705,000                       0         0              345,090
   Chief Restructuring      1999   450,000    950,000                 452,562    50,000               15,896
   Officer, General
   Counsel and
   Secretary

David L. Johns............  2001   350,000    596,000                       0         0              335,100(6)
   Senior Vice President    2000   245,000    286,000                       0         0              168,100
   and Chief Supply Chain   1999   209,167    383,000                 139,250    16,000                6,400
   and Information
   Technology Officer
</TABLE>

(1)  Prior to January 2001,  Mr. Brown served as Vice President and President,
     Insulating Systems Business. Prior to April 2000, Mr. Thaman served as Vice
     President and President,  Exterior Systems Business; prior to January 1999,
     he served as Vice President and  President,  Engineered  Pipe Systems.  Ms.
     Smith  assumed  the  additional  duties of Chief  Restructuring  Officer in
     November  2000.  Prior to April  2001,  Mr.  Johns  served as  Senior  Vice
     President and Chief Technology Officer;  prior to September 1999, he served
     as Chief Information Officer.

(2)  The numbers shown for 2001 do not reflect amounts, if any, payable with
     respect to a peer group comparison performance measure that is not
     calculable through the latest practicable date.

(3)  "Other Annual Compensation" includes perquisites and personal benefits,
     where such perquisites and personal benefits exceed the lesser of $50,000
     or 10% of the Named Executive Officer's annual salary and bonus for the
     year, as well as certain other items of compensation. For the years shown,
     none of the Named Executive Officers received perquisites and/or personal
     benefits in excess of the applicable threshold.



<PAGE>


                                     - 37 -

ITEM 11.   EXECUTIVE COMPENSATION (continued)

     Mr. Hiner's numbers reflect  contractually  required tax payments on income
     from his Pension Preservation Trust account. The Pension Preservation Trust
     is described on page 39.

(4)  Reflects awards of restricted stock under the stockholder-approved Owens
     Corning Stock Performance Incentive Plan. The values of the restricted
     stock awards shown in the table were calculated by multiplying the number
     of shares awarded by the closing price of Owens Corning common stock on the
     date of award (as reported in the New York Stock Exchange Composite
     Transactions). There were no restricted stock awards to any of the Named
     Executive Officers in 2000 or 2001.

     At the end of 2001, Mr. Hiner held a total of 81,999 shares of restricted
     stock, valued at $155,798; Mr. Brown held a total of 12,516 shares of
     restricted stock, valued at $23,780; Mr. Thaman held a total of 11,700
     shares of restricted stock, valued at $22,230; Ms. Smith held a total of
     14,133 shares of restricted stock, valued at $26,853; and Mr. Johns held a
     total of 4,400 shares of restricted stock, valued at $8,360. The value of
     these aggregate restricted stock holdings was calculated by multiplying the
     number of shares held by the closing price of Owens Corning common stock on
     December 31, 2001 (as reported in the New York Stock Exchange Composite
     Transactions). Dividends are paid by Owens Corning on restricted stock held
     by the Named Executive Officers if paid on stock generally.

(5)  Represents shares of Owens Corning common stock underlying options granted
     under the Stock Performance Incentive Plan. The 1999 awards become
     exercisable five years after date of grant. Vesting may accelerate in the
     event of death, disability, retirement, involuntary termination due to job
     elimination, Change of Control (as defined in the Stock Performance
     Incentive Plan), and in certain other events at the discretion of the
     Compensation Committee. No stock options were awarded to any of the Named
     Executive Officers in 2000 or 2001 and no stock appreciation rights (SARs)
     were granted in 1999 through 2001.

(6)  Of Mr. Hiner's and Ms. Smith's  numbers,  $7,301 and $7,417,  respectively,
     were the present values (based upon the  Applicable  Federal Rate from date
     of payment to earliest date of repayment to Owens Corning) of  split-dollar
     life insurance  premiums paid by Owens Corning which were invested on their
     behalf in 2001. Upon termination of employment, Mr. Hiner and Ms. Smith are
     obligated to reimburse  Owens  Corning for all premiums  invested on his or
     her behalf.

     The numbers shown include  amounts payable for 2001 under the Owens Corning
     Key Employee Retention Incentive Plan, as follows:  Mr. Hiner,  $1,340,000;
     Mr. Brown,  $469,000;  Mr. Thaman,  $502,500;  Ms. Smith, $670,000; and Mr.
     Johns, $328,300.

     Except as indicated in the preceding paragraphs, the amount shown for each
     of the Named Executive Officers represents contributions made by Owens
     Corning to such officer's account in the Owens Corning Savings and Profit
     Sharing Plan during the year.


<PAGE>


                                     - 38 -

ITEM 11.   EXECUTIVE COMPENSATION (continued)

                               Option Grant Table
                               ------------------

No stock options or stock appreciation rights (SARs) were granted to any of the
Named Executive Officers during 2001.

                  Option/SAR Exercises and Year-End Value Table
                  ---------------------------------------------

The following table contains information about the options for Owens Corning
common stock that were exercised in 2001 by the Named Executive Officers, and
the aggregate values of these officers' unexercised options at the end of 2001.
None of the Named Executive Officers held stock appreciation rights (SARs) at
December 31, 2001.

     Aggregated Option/SAR Exercises in 2001, and 12/31/01 Option/SAR Values
<TABLE>
<S>                                           <C>           <C>              <C>             <C>


                                                                         Number of
                                                                         Securities          Value of
                                          Shares Acquired    Value       Underlying         Unexercised
Name                                      on Exercise (#)  Realized ($) Unexercised        In-the-Money
----                                      ---------------  ------------ Options/SARs at    Options/SARs at
                                                                       12/31/01 (#)        12/31/01 ($)(1)
                                                                        Exercisable/       Exercisable/
                                                                        Unexercisable      Unexercisable
                                                                       --------------     ----------------
Glen H. Hiner                                  --0--        --0--     371,666/243,000          0/0
David T. Brown                                 --0--        --0--      85,000/36,000           0/0
Michael H. Thaman                              --0--        --0--       46,657/36,000          0/0
Maura Abeln Smith                              --0--        --0--      52,000/50,000           0/0
David L. Johns                                 --0--        --0--      12,278/16,000           0/0
</TABLE>

(1)  No options were in-the-money at December 31, 2001.

                               Retirement Benefits
                               -------------------

Owens Corning maintains a tax-qualified Cash Balance Plan covering certain of
its salaried and hourly employees in the United States, including each of the
Named Executive Officers, in lieu of the qualified Salaried Employees'
Retirement Plan maintained prior to 1996 ("Prior Plan"), which provided
retirement benefits primarily on the basis of age at retirement, years of
service and average earnings from the highest three consecutive years of
service. In addition, Owens Corning has a non-qualified Executive Supplemental
Benefit Plan ("ESBP") to pay eligible employees leaving the Company the
difference between the benefits payable under Owens Corning's tax-qualified
retirement plan and those benefits which would have been payable except for
limitations imposed by the Internal Revenue Code. Named Executive Officers are
eligible to participate in both the Cash Balance Plan and the ESBP.

Cash Balance Plan - Under the Cash Balance Plan, each covered employee's earned
retirement benefit under the Prior Plan (including the ESBP) was converted to an
opening cash balance. Each year, Owens Corning credits to each covered
employee's account 2% of such employee's covered pay up to 50% of the Social
Security Taxable Wage Base and 4% of covered pay in excess of such wage base.
For this purpose, covered pay includes base pay, overtime pay, other wage
premium pay and annual incentive bonuses payable during the year. Cash Balance
Plan accounts earn monthly interest based on the average interest rate for
five-year U.S. treasury securities. Employees may receive their account balance
as a lump sum or as a monthly payment when they leave Owens Corning.

For  employees  who were at least age 40 with 10 years of service as of December
31,  1995   ("Grandfathered   Employees"),   including  Mr.  Brown,  the  credit

<PAGE>

                                     - 39 -

ITEM 11.   EXECUTIVE COMPENSATION (continued)

percentages  applied to covered pay are increased pursuant to a formula based on
age and years of service on such date. In addition,  Grandfathered Employees are
entitled to receive the greater of their  benefit under the Prior Plan frozen as
of December 31, 2000, or under the Cash Balance Plan (in each case including the
ESBP).

The  estimated  annual  annuity  amounts  payable  under the Cash  Balance  Plan
(including the ESBP) to the Named Executive  Officers at age 65 (or, in the case
of Mr. Hiner, age 67) are: Mr. Hiner, $150,354; Mr. Brown, $227,800; Mr. Thaman,
$262,710; Ms. Smith, $167,082; and Mr. Johns, $135,619.  These estimated amounts
assume  continued  employment  and current  levels of covered pay through age 65
(or, in the case of Mr.  Hiner,  age 67),  and are based on  estimated  interest
rates.

Supplemental Executive Retirement Plan - Owens Corning maintains a Supplemental
Executive Retirement Plan ("SERP") covering certain employees, including Ms.
Smith and Mr. Johns, who join Owens Corning in mid-career. The SERP provides for
a lump sum payment following termination of employment equal to a multiple of
the covered employee's Cash Balance Plan balance minus an offset equal to the
present value of retirement benefits attributable to prior employment. The
applicable multiplier for each covered employee ranges from 0 to 4 (determined
by the covered employee's age when first employed by Owens Corning) and is 1.7
and 1.1 in the case of Ms. Smith and Mr. Johns, respectively. The estimated
annual annuity amounts payable to Ms. Smith and Mr. Johns to satisfy the lump
sum obligation under this plan at age 65, under the assumptions described in the
preceding paragraph, are $284,039 and $149,181, respectively, less the
annualized offset due to prior employment.

Other Arrangements - Mr. Hiner's Employment Agreement calls for him to receive a
pension which will, together with amounts payable under his prior employer's
pension plan, any qualified defined benefit plan maintained by Owens Corning,
and Social Security, total 60% of his "average annual compensation" (the pension
he would have obtained had he remained with his prior employer until
retirement). His "average annual compensation" is one third of his highest 36
months of compensation from Owens Corning or his prior employer.

In 1992, Owens Corning established a Pension Preservation Trust for amounts
payable under the ESBP as well as under the individual pension arrangements
described above. Each year, the Compensation Committee determines (except with
respect to Mr. Hiner, where payments are contractually determined) the
participants in and any amounts to be paid with respect to the Pension
Preservation Trust, which may include a portion of benefits earned under the
ESBP and the pension agreements described above. Amounts paid into the Trust and
income from the Trust reduce the pension otherwise payable at retirement. During
2001, no payments were made to the Trust.

                       Employment and Severance Agreements
                       -----------------------------------

Mr. Hiner is employed under an amended agreement that continues through April
16, 2002. Under this agreement, Mr. Hiner would receive a lump sum termination
payment equal to 330% of his base salary if he were to be terminated by Owens
Corning without "cause," or if he should terminate his employment for "good
reason," as defined by the terms of the agreement. Mr. Hiner is entitled to an
annual salary review, and any salary approved may not be decreased in a later
year. Mr. Hiner is also to receive a contractual bonus calculated as a
percentage of base pay based upon mutually agreed entry, target and maximum
company performance objectives. For 2001, these performance objectives were the
same as those applicable to the other participants in Owens Corning's Corporate
Incentive Plan.

Owens Corning also has entered into severance arrangements with each of the
other Named Executive Officers. These agreements provide for the payment of an
amount equal to two times base salary plus annual

<PAGE>

                                     - 40 -

ITEM 11.   EXECUTIVE COMPENSATION (continued)

incentive bonuses (based on an average of the three previous years' annual
incentive payments or the average of the three previous years' annual incentive
targets, whichever is greater) plus continuation of insurance benefits for a
period of up to two years and, in the case of Messrs. Brown and Thaman, a
payment equal to the additional lump sum pension benefit that would have accrued
had such individuals been three years older, with three additional years of
service, at the time of employment termination. The base salaries as of December
31, 2001, of these Named Executive Officers were: Mr. Brown, $400,000; Mr.
Thaman, $425,000; Ms. Smith, $500,000; and Mr. Johns, $350,000.

Directors' Compensation

Retainer and Meeting Fees - In 2001, Owens Corning paid each director who was
not an Owens Corning employee an annual retainer of $25,000. Non-employee
Committee Chairmen receive an additional retainer of $4,000 each year. In
addition, Owens Corning paid non-employee directors a fee of $1,000 for (a)
attendance at one or more meetings of the Board of Directors on the same day,
(b) attendance at one or more meetings of each Committee of the Board of
Directors on the same day, and (c) for each day's attendance at other functions
in which directors were requested to participate.

Prior to December 2000, a director could elect to defer all or a portion of his
or her annual retainer and meeting fees under the Directors' Deferred
Compensation Plan, in which case his or her account was credited with the number
of shares of common stock that such deferred compensation could have purchased
on the date of payment. The account was also credited with the number of shares
that dividends on previously credited shares could have purchased on dividend
payment dates. Account balances are payable in cash based on the value of the
account, which is determined by the then fair market value of Owens Corning
common stock, at the time the participant ceases to be a director.

Stock Plan for Directors - Owens Corning maintains a stockholder approved Stock
Plan for Directors, applicable to each director who is not an Owens Corning
employee. The plan provides for two types of grants to each eligible director:
(1) a one-time non-recurring grant of options to each new outside director to
acquire 10,000 shares of common stock at a per share exercise price of 100
percent of the value of a share of common stock on the date of grant, and (2) an
annual grant of 500 shares of common stock on the fourth Friday in April.

Initial option grants become exercisable in equal installments over five years
from date of grant, subject to acceleration in certain events, and generally
expire ten years from date of grant. No grant may be made under the plan after
August 20, 2007, and a director may not receive an annual grant of common stock
in the same calendar year he or she receives an initial option grant. A director
entitled to receive an annual grant may elect to defer receipt of the common
stock until he or she leaves the Board of Directors.

In 2001, Messrs. Blake, Caperton, Coleman, Colville, Hilliard, Lewis, and
Moseley, Ms. Iverson and Dr. Reynolds each received an annual 500 share grant
valued at $1,120 on the date of grant (based on the closing price of Owens
Corning common stock as reported in the New York Stock Exchange Composite
Transactions).

Indemnity Agreements - Owens Corning has entered into an indemnity agreement
with each member of the Board of Directors which provides that, if the director
becomes involved in a claim (as defined in the agreement) by reason of an
indemnifiable event (as defined in the agreement), Owens Corning will indemnify
the director to the fullest extent authorized by Owens Corning's by-laws,
notwithstanding any subsequent amendment, repeal or modification of the by-laws,
against any and all expenses, judgments, fines, penalties and amounts paid in
settlement of the claim.

<PAGE>

                                     - 41 -

ITEM 11.   EXECUTIVE COMPENSATION (continued)

The indemnity agreement also provides that, in the event of a potential change
of control (as defined in the agreement), the director is entitled to require
the creation of a trust for his or her benefit, the assets of which would be
subject to the claims of Owens Corning's general creditors, and the funding of
such trust from time to time in amounts sufficient to satisfy Owens Corning's
indemnification obligations reasonably anticipated at the time of the funding
request.

Charitable Award Program - To recognize the interest of Owens Corning and its
directors in supporting worthy educational institutions and other charitable
organizations, Owens Corning permits each director who joined the Board prior to
December 31, 2001 (subject to certain vesting requirements) to nominate up to
two organizations to share a contribution of $1 million to be made in ten annual
installments after the death of the director. Owens Corning expects to fully
fund its contributions (as well as insurance premiums) from the proceeds of life
insurance policies that it maintains on directors. Directors will receive no
financial benefit from this program, since the charitable deduction and
insurance proceeds accrue solely to Owens Corning.

Compensation Committee Interlocks and Insider Participation

The Compensation  Committee  presently  consists of Landon Hilliard  (Chairman),
Norman P. Blake,  Jr., Leonard S. Coleman,  Jr., Furman C. Moseley,  Jr., and W.
Ann Reynolds.  Gaston Caperton also served on the Committee  during a portion of
2001. No other persons served on the Compensation Committee during 2001.

Mr. Hilliard is a partner of Brown Brothers  Harriman & Co.  ("BBH"),  a private
banking  firm.  BBH acts as one of the  investment  managers for the  Fibreboard
Settlement  Trust,  which  holds  certain  assets  that  are  available  to fund
asbestos-related  liabilities of Fibreboard  Corporation,  a subsidiary of Owens
Corning. During 2001, BBH was paid fees of approximately $700,000 from the Trust
for these  services.  In addition,  BBH serves as the custodian  and  investment
advisor of an escrow  account  funded by one of the Company's  excess  insurance
carriers  during  the  third  quarter  of  2001  (see  Note  19,  Item A, to the
Consolidated   Financial   Statements).   During   2001,   BBH  earned  fees  of
approximately $34,000 from the escrow account for these services.


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT

Major Stockholders

Based on statements filed with the Securities and Exchange Commission pursuant
to section 13(d) or 13(g) of the Securities Exchange Act of 1934, no person
beneficially owned more than 5% of Owens Corning common stock as of December 31,
2001.

As of February 28, 2002, Owens Corning employees, including officers,
beneficially owned 2,502,601 shares (4.5%) of Owens Corning common stock under
Owens Corning sponsored savings plans in the United States and Canada.

Stock Ownership of Management

The following table shows information concerning beneficial ownership of Owens
Corning common stock on February 28, 2002, by each of the directors, by each of
the Named Executive Officers, and by all directors and executive officers as a
group. With the exception of the ownership of Mr. Hiner (1.0%) and all directors
and executive officers as a group (2.0%), each ownership shown represents less
than 1% of the shares of common stock outstanding.


<PAGE>


                                     - 42 -

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT (continued)
<TABLE>
<S>                                                                                  <C>
                                                                                Amount And Nature
                                               Name                         Of Beneficial Ownership
            ----------------------------------------------------------      -----------------------

            Norman P. Blake, Jr.......................................            14,620(1)(3)
            David T. Brown............................................            98,484(1)(2)
            Gaston Caperton...........................................            12,032(1)(3)
            Leonard S. Coleman, Jr....................................            12,552(1)(3)
            William W. Colville.......................................            10,000(1)
            Landon Hilliard...........................................             7,075(3)
            Glen H. Hiner.............................................           549,174(1)(2)
            Ann Iverson...............................................            12,532(1)(3)
            David L. Johns............................................            17,148(1)(2)
            W. Walker Lewis...........................................            14,120(1)(3)
            Furman C. Moseley, Jr.....................................            46,082(3)
            W. Ann Reynolds...........................................            16,327(1)(3)(4)
            Maura Abeln Smith.........................................            65,785(1)(2)
            Michael H. Thaman.........................................            61,247(1)(2)
            All Directors and Executive Officers (including Named
               Executive Officers) (19 persons).......................         1,148,635(1)(2)(3)(4)

(1)  Includes shares which are not owned but are unissued  shares subject to exercise of options,  or which will be
     subject to exercise of options  under Owens Corning  benefit plans within 60 days after  February 28, 2002, as
     follows:  Mr. Blake,  10,000;  Mr. Brown,  85,000; Mr. Caperton,  10,000;  Mr. Coleman,  10,000; Mr. Colville,
     10,000; Mr. Hiner, 371,666; Ms. Iverson,  10,000; Mr. Johns, 12,278; Mr. Lewis, 10,000; Dr. Reynolds,  10,000;
     Ms. Smith, 52,000; Mr. Thaman, 46,657; All Directors and Executive Officers (19 persons), 812,767.

(2)  Includes  shares over which there is sole voting  power,  but no  investment  power,  as follows:  Mr.  Brown,
     11,350;  Mr. Hiner,  76,333;  Mr. Johns,  4,400;  Ms. Smith,  13,566;  Mr. Thaman,  10,800;  All Directors and
     Executive Officers (19 persons), 151,423.

(3)  Includes deferred shares over which there is currently no voting or investment  power, as follows:  Mr. Blake,
     3,620; Mr. Caperton,  1,532; Mr. Coleman,  2,052; Mr. Hilliard,  2,575; Ms. Iverson,  1,532; Mr. Lewis, 3,620;
     Mr. Moseley, 6,232; Dr. Reynolds, 3,097; All Directors and Executive Officers (19 persons), 24,260.

(4)      Does not  include  shares of common  stock  held by family  members  as to which  beneficial  interest  is
     disclaimed, as follows: Dr. Reynolds, 700; All Directors and Executive Officers (19 persons), 700.
</TABLE>

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Owens Corning has nothing additional to report under this Item.


<PAGE>


                                     - 43 -

                                     PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
              ON FORM 8-K

(a)    DOCUMENTS FILED AS PART OF THIS REPORT

 1.    See Index to Financial Statements on page 45 hereof

 2.    See Index to Financial Statement Schedules on page 116 hereof

 3.    See Exhibit Index beginning on page 118 hereof

          Management contracts and compensatory plans and arrangements  required
          to be filed as an  exhibit  pursuant  to Item  14(c) of Form  10-K are
          denoted in the Exhibit Index by an asterisk ("*").

(b)    REPORTS ON FORM 8-K

       No report on Form 8-K was filed during the fourth quarter of 2001.


<PAGE>


                                     - 44 -

                                   Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S>                                                                <C>

OWENS CORNING

By        /s/  Glen H. Hiner                                       Date   March 21, 2002
          ------------------------------------------                   ----------------------------
          Glen H. Hiner, Chairman of the Board
          and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

          /s/  Glen H. Hiner                                       Date   March 21, 2002
          ------------------------------------------                    ----------------------------
          Glen H. Hiner, Chairman of the Board,
          Chief Executive Officer and Director

          /s/  Michael H. Thaman                                   Date   March 20, 2002
          ------------------------------------------                    ----------------------------
          Michael H. Thaman, Senior Vice President,
          Chief Financial Officer and Director

          /s/  Charles E. Dana                                     Date   March 20, 2002
          ------------------------------------------                    ----------------------------
          Charles E. Dana, Vice President -
          Corporate Controller and Global Sourcing

          /s/  Norman P. Blake, Jr.                                Date   March 21, 2002
          ------------------------------------------                    ----------------------------
          Norman P. Blake, Jr., Director

          /s/  David T. Brown                                      Date   March 21, 2002
          ------------------------------------------                    ----------------------------
          David T. Brown, Director

          /s/                                                      Date
          ------------------------------------------                    ----------------------------
          Gaston Caperton, Director

          /s/                                                      Date
          ------------------------------------------                    ----------------------------
          Leonard S. Coleman, Jr., Director

          /s/                                                      Date
          ------------------------------------------                    ----------------------------
          William W. Colville, Director

          /s/  Landon Hilliard                                     Date   March 21, 2002
          ------------------------------------------                    ----------------------------
          Landon Hilliard, Director

          /s/                                                      Date
          ------------------------------------------                    ----------------------------
          Ann Iverson, Director

          /s/  W. Walker Lewis                                     Date   March 20, 2002
          ------------------------------------------                    ----------------------------
          W. Walker Lewis, Director

          /s/                                                      Date
          ------------------------------------------                    ----------------------------
          Furman C. Moseley, Jr., Director

          /s/  W. Ann Reynolds                                     Date   March 20, 2002
          ------------------------------------------                    ----------------------------
          W. Ann Reynolds, Director

          /s/  Maura Abeln Smith                                   Date   March 21, 2002
          -------------------------------------------                   ----------------------------
          Maura Abeln Smith, Director

</TABLE>

                                     - 45 -

                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S>                                                                                                   <C>

Item                                                                                                  Page
----                                                                                                  ----

Report of Independent Public Accountants................................................................46

Summary of Significant Accounting Policies.........................................................47 - 48

Consolidated Statement of Income (Loss) - for the
   years ended December 31, 2001, 2000 and 1999....................................................49 - 50

Consolidated Statement of Comprehensive Income (Loss) -
   for the years ended December 31, 2001, 2000 and 1999.................................................51

Consolidated Balance Sheet -  December 31, 2001 and 2000...........................................52 - 53

Consolidated Statement of Stockholders' Equity -
   for the years ended December 31, 2001, 2000 and 1999.................................................54

Consolidated Statement of Cash Flows - for the years
   ended December 31, 2001, 2000 and 1999..........................................................55 - 56

Notes to Consolidated Financial Statements
   Notes 1 through 22.............................................................................57 - 115
</TABLE>



<PAGE>


                                     - 46 -





                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------

To the Stockholders and Board of Directors of Owens Corning:

We have audited the accompanying consolidated balance sheet of OWENS CORNING (a
Delaware corporation) and subsidiaries (the "Company") as of December 31, 2001,
and 2000, and the related consolidated statements of income (loss),
comprehensive income (loss), stockholders' equity and cash flows for each of the
three years in the period ended December 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Owens Corning and subsidiaries
as of December 31, 2001, and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company voluntarily filed for Chapter 11
bankruptcy protection on October 5, 2000. This action, which was taken primarily
as a result of asbestos litigation as discussed in Note 19 to the consolidated
financial statements, raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the Index to Financial
Statement Schedules is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.




/s/ ARTHUR ANDERSEN LLP


January 23, 2002,
Toledo, Ohio.


<PAGE>


                                     - 47 -

                         OWENS CORNING AND SUBSIDIARIES
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

Owens Corning and subsidiaries' (the "Company") consolidated financial
statements generally include the accounts of majority owned subsidiaries, unless
ownership is considered temporary. Intercompany accounts and transactions are
eliminated.

Revenue Recognition

The Company recognizes revenue when goods are shipped and title passes to the
customer. Provisions for discounts and rebates to customers, returns and other
adjustments are provided in the same period that the related sales are recorded.

Net Income per Share

Basic net income per share is computed using the weighted average number of
common shares outstanding during the period. Diluted net income per share
reflects the dilutive effect of common equivalent shares and increased shares
that would result from the conversion of debt and equity securities. The effects
of anti-dilution are not presented. Unless otherwise indicated, all per share
information included in the Notes to the Consolidated Financial Statements is
presented on a diluted basis.

Inventory Valuation

Inventories are stated at cost, which is less than market value, and include
material, labor and manufacturing overhead. The majority of the U.S. inventories
are valued using the first-in, first-out (FIFO) method and the balance of
inventories are generally valued using the last-in, first-out (LIFO) method.

Investments in Affiliates

Investments in affiliates are accounted for using the equity method, under which
the Company's share of earnings of these affiliates is reflected in income as
earned and dividends are credited against the investment in affiliates when
received.

Capitalization of Software Developed for Internal Use

The Company capitalizes the direct external and internal costs incurred in
connection with the development, testing and installation of software for
internal use. Internally developed software is included in plant and equipment
and is amortized over its estimated useful life using the straight-line method.

Goodwill

Goodwill is carried at cost, less accumulated amortization, and is amortized on
a straight-line basis over a period of forty years. The Company continually
evaluates whether events and circumstances have occurred that indicate the
remaining estimated useful life of goodwill may warrant revision or that the
remaining balance may not be recoverable. When factors indicate that goodwill
should be evaluated for possible impairment, the Company uses an estimate of the
undiscounted cash flows of the related business over the remaining life of the
goodwill in assessing whether the goodwill is recoverable.

Depreciation

For assets placed in service prior to January 1, 1992, the Company's plant and
equipment is depreciated

<PAGE>


                                     - 48 -

                         OWENS CORNING AND SUBSIDIARIES
             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

primarily using the double-declining balance method for the first half of an
asset's estimated useful life and the straight-line method thereafter. For
assets placed in service on or after January 1, 1992, the Company's plant and
equipment is depreciated using the straight-line method.

Derivative Financial Instruments

Effective January 1, 2001, the Company implemented Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). This statement and its interpretations establish
accounting and reporting standards requiring derivative instruments (including
certain derivative instruments embedded in other contracts) to be recorded in
the balance sheet as either an asset or liability measured at its fair value and
related gains and losses to be recorded in income or other comprehensive income
as appropriate.

Stock Based Compensation Plans

The  Company  applies  Statement  of  Financial  Accounting  Standards  No. 123,
"Accounting  for  Stock-Based  Compensation"  (SFAS 123) for  disclosures of its
stock based compensation plans. The Company applies Accounting  Principles Board
Opinion No. 25 and related  Interpretations for expense recognition as permitted
by SFAS 123.

Reorganization Items and Other Expenses

In accordance with the American Institute of Certified Public Accountants
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
under the Bankruptcy Code" (SOP 90-7), revenues, expenses (including
professional fees), realized gains and losses, and provisions for losses that
can be directly associated with the reorganization and restructuring of the
business are reported separately as reorganization items in the Consolidated
Statement of Income (Loss).

Foreign Currency Translation

The functional currency of the Company's subsidiaries is generally the
applicable local currency. Assets and liabilities of foreign subsidiaries are
translated into U.S. dollars at the period-end rate of exchange and their
statement of income (loss) and statement of cash flows are converted on an
ongoing basis at the rate of exchange when transactions occur. The resulting
translation adjustment is included in "Accumulated other comprehensive loss" in
the Consolidated Statement of Stockholders' Equity Transaction gains and losses
that arise from exchange rate fluctuations on transactions denominated in a
currency other than the functional currency are included in the Consolidated
Statement of Income (Loss) as incurred.

Shipping and Handling Costs

The Company incurs certain expenses related to preparing, packaging and shipping
its products to its customers, mainly third-party transportation fees. All costs
related to these activities are included as a component of cost of goods sold in
the Consolidated Statement of Income (Loss).

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.



<PAGE>


                                     - 49 -

                         OWENS CORNING AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF INCOME (LOSS)
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<TABLE>
<S>                                                                          <C>              <C>              <C>
                                                                             2001             2000             1999
                                                                             ----             ----             ----
                                                                           (In millions of dollars, except share data)

NET SALES                                                               $       4,762    $      4,940     $      5,048
COST OF SALES (Note 5)                                                          3,938          4,014            3,815
                                                                        --------------   ------------     ------------

    Gross margin                                                                   824            926            1,233
                                                                        --------------   ------------     ------------

OPERATING EXPENSES
  Marketing and administrative expenses (Note 5)                                    524            542              599
  Science and technology expenses                                                    37            52               61
  Provision (credit) for asbestos litigation claims (Note 19)                       (7)           790                -
  Restructure costs (Note 5)                                                         26            32                -
  Chapter 11 related reorganization items (Note 1)                                   87            24                -
  Other (Note 5)                                                                     41           117               (5)
                                                                        ---------------  ------------     -------------

     Total operating expenses                                                      708          1,557              655
                                                                        --------------   ------------     ------------

INCOME (LOSS) FROM OPERATIONS                                                      116           (631)             578

OTHER
  Cost of borrowed funds (Notes 1, 3, 4 and 18)                                      16           155              152
  Other (Notes 3, 18 and 20)                                                       (2)              5                -
                                                                        -------------    ------------     ------------

INCOME (LOSS) BEFORE PROVISION (CREDIT) FOR
  INCOME TAXES                                                                     102           (791)             426

Provision (credit) for income taxes (Notes 10 and 19)                               57           (312)             149
                                                                        --------------   -------------    ------------

INCOME (LOSS) BEFORE MINORITY INTEREST AND
  EQUITY IN NET INCOME (LOSS) OF AFFILIATES                                         45           (479)             277

Minority interest (Notes 5 and 7)                                                   (4)            (2)              (6)

Equity in net income (loss) of affiliates (Note 13)                                 (2)             3               (1)
                                                                        ---------------  ------------     -------------

NET INCOME (LOSS)                                                       $          39    $        (478)   $        270
                                                                        ==============   ==============   ============

</TABLE>




                     The accompanying summary of significant
                      accounting policies and notes are an
                        integral part of this statement.


<PAGE>


                                     - 50 -

                         OWENS CORNING AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF INCOME (LOSS)
        FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (continued)
<TABLE>

<S>                                                                          <C>              <C>              <C>
                                                                             2001             2000             1999
                                                                             ----             ----             ----
                                                                           (In millions of dollars, except share data)
NET INCOME (LOSS) PER COMMON SHARE (Note 17)

Basic                                                                   $         .72    $         (8.71) $         4.98
                                                                        =============    ================ ==============


Diluted                                                                 $         .66    $         (8.71) $         4.67
                                                                        =============    ================ ==============





Weighted average number of common shares outstanding and common equivalent
  shares during the period (in millions)

Basic                                                                           55.1            54.8             54.1

Diluted                                                                         59.9            54.8             59.5

</TABLE>


                     The accompanying summary of significant
                      accounting policies and notes are an
                        integral part of this statement.

                                     <PAGE>


                                     - 51 -

                         OWENS CORNING AND SUBSIDIARIES
              CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<TABLE>

<S>                                                                          <C>              <C>              <C>
                                                                             2001             2000             1999
                                                                             ----             ----             ----
                                                                                    (In millions of dollars)

Net Income (Loss)                                                      $          39     $     (478)      $      270

Other comprehensive income (loss), net of tax:
    Currency translation adjustment                                              (30)           (41)             (21)
    Minimum pension liability adjustment (net of taxes
      of $153 million in 2001, $2 million in 2000 and $1
      million in 1999)                                                         (227)             (3)               2
    Deferred gains (losses) on hedges                                            (1)             (2)               5
                                                                       -------------     -----------      ----------

Other comprehensive loss                                                        (258)           (46)             (14)
                                                                       --------------    -----------      -----------

Comprehensive income (loss)                                            $       (219)     $     (524)      $      256
                                                                       =============     ===========      ==========
</TABLE>




                     The accompanying summary of significant
                      accounting policies and notes are an
                        integral part of this statement.

<PAGE>


                                     - 52 -

                         OWENS CORNING AND SUBSIDIARIES
             CONSOLIDATED BALANCE SHEET - DECEMBER 31, 2001 AND 2000
<TABLE>

<S>                                                                                 <C>                 <C>
                                                                                    2001                2000
                                                                                    ----                ----
ASSETS                                                                              (In millions of dollars)
------

CURRENT
Cash and cash equivalents (Note 1)                                            $        764        $        550
Receivables, less allowances of $29 million in 2001 and
   2000 (Note 11)                                                                    417                  488
Inventories (Note 12)                                                                437                  469
Deferred income taxes (Note 10)                                                         1                   6
Income tax receivable (Note 10)                                                         5                  31
Other current assets                                                                      25               20
                                                                             ---------------      -----------

  Total current                                                                      1,649              1,564
                                                                             -------------        -----------

OTHER
Insurance for asbestos litigation claims (Note 19)                                      4                  59
Restricted cash - asbestos and insurance related (Note 19)                           169                  164
Restricted cash, securities, and other - Fibreboard (Notes 19 and 20)                1,284              1,274
Deferred income taxes (Note 10)                                                      1,187              1,075
Goodwill, less accumulated amortization of $131 million in 2001
   and $113 million in 2000 (Notes  5 and 6)                                         610                  636
Investments in affiliates (Notes 5 and 13)                                             48                  62
Other noncurrent assets (Note 9)                                                        247               257
                                                                             --------------       -----------

  Total other                                                                        3,549              3,527
                                                                             -------------        -----------


PLANT AND EQUIPMENT, at cost
Land                                                                                   67                  60
Buildings and leasehold improvements                                                 669                  663
Machinery and equipment                                                              2,854              2,717
Construction in progress                                                                256               327
                                                                             --------------       -----------
                                                                                     3,846              3,767
Less:  Accumulated depreciation                                                     (2,003)            (1,946)
                                                                             --------------       ------------

  Net plant and equipment                                                            1,843              1,821
                                                                             -------------        -----------

TOTAL ASSETS                                                                  $     7,041         $     6,912
                                                                             ============         ===========
</TABLE>


                     The accompanying summary of significant
                      accounting policies and notes are an
                        integral part of this statement.

<PAGE>


                                     - 53 -

                         OWENS CORNING AND SUBSIDIARIES
       CONSOLIDATED BALANCE SHEET - DECEMBER 31, 2001 AND 2000 (continued)
<TABLE>

<S>                                                                                <C>              <C>
                                                                                   2001             2000
                                                                                   ----             ----
LIABILITIES AND STOCKHOLDERS' EQUITY                                             (In millions of dollars)
------------------------------------

CURRENT
Accounts payable and accrued liabilities (Note 14)                            $     740        $        491
Short-term debt (Note 4)                                                             43                 50
Long-term debt - current portion (Note 3)                                              66               68
                                                                              -----------      -----------

   Total current                                                                     849               609
                                                                              ----------       -----------

LONG-TERM DEBT (Note 3)                                                                  5               7
                                                                              ------------     -----------

OTHER
Other employee benefits liability (Note 8)                                          331                322
Pension plan liability (Note 9)                                                       291               75
Other                                                                                 141              124
                                                                              -----------      -----------

  Total other                                                                         763              521
                                                                              -----------      -----------

LIABILITIES SUBJECT TO COMPROMISE (Notes 1, 3, 7 and 19)                           6,804             6,935
                                                                              ----------       -----------

COMMITMENTS AND CONTINGENCIES (Notes 16, 18 and 19)

COMPANY-OBLIGATED SECURITIES OF ENTITIES
  HOLDING SOLELY PARENT DEBENTURES - SUBJECT TO
  COMPROMISE (Note 7)                                                                 200              200
                                                                              -----------      -----------

MINORITY INTEREST                                                                       37              39
                                                                              ------------     -----------

STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized 8 million shares,
  none outstanding                                                                   -                   -
Common stock, par value $.10 per share; authorized 100
  million shares; issued 2001 - 55.3 million and 2000 - 55.4
  million shares (Notes 6 and 17)                                                      697             699
Deficit                                                                           (1,957)           (1,996)
Accumulated other comprehensive loss (Note 9)                                        (355)             (97)
Other (Note 17)                                                                          (2)            (5)
                                                                              --------------   ------------

    Total stockholders' equity                                                    (1,617)           (1,399)
                                                                              -----------      ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $    7,041       $     6,912
                                                                              ==========       ===========
</TABLE>




                     The accompanying summary of significant
                      accounting policies and notes are an
                        integral part of this statement.

<PAGE>


                                     - 54 -

                         OWENS CORNING AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<TABLE>

<S>                                                                        <C>              <C>               <C>
                                                                           2001             2000              1999
                                                                           ----             ----              ----
COMMON STOCK                                                         (In millions of dollars)

Balance beginning of year                                            $        699      $      695      $      679
Awards (forfeitures) of stock under
   stock compensation plans (Note 17)                                         (2)               4              16
                                                                     ------------      ----------      ----------

Balance end of year                                                          697              699             695
                                                                     -----------       ----------      ----------

DEFICIT

Balance beginning of year                                                 (1,996)          (1,510)         (1,762)
Net income (loss)                                                             39             (478)            270
Cash dividends declared                                                           -            (8)            (18)
                                                                     ---------------   -----------     -----------

Balance end of year                                                       (1,957)          (1,996)         (1,510)
                                                                     ------------      -----------     -----------

ACCUMULATED OTHER COMPREHENSIVE LOSS

Balance beginning of year

  Currency translation adjustment                                           (103)             (62)            (41)
  Minimum pension liability adjustment                                        (3)               -              (2)
  Deferred gains on hedges                                                     9               11               6
                                                                     ------------      ----------      ----------

                                                                             (97)             (51)            (37)

Adjustments

  Currency translation adjustment                                           (30)              (41)            (21)
  Minimum pension liability adjustment                                     (227)               (3)              2
  Deferred gains (losses) on hedges                                          (1)               (2)              5
                                                                     ---------------   -----------     ----------

                                                                           (258)              (46)            (14)

Balance end of year

  Currency translation adjustment                                          (133)             (103)            (62)
  Minimum pension liability adjustment                                     (230)               (3)              -
  Deferred gains on hedges                                                    8                 9              11
                                                                     ----------        ----------      ----------

Balance end of year                                                        (355)              (97)            (51)
                                                                     -----------       -----------     -----------

OTHER

Balance beginning of year                                                    (5)              (15)            (14)
Net increase (decrease)                                                       3                10              (1)
                                                                     ----------        ----------      -----------

Balance end of year                                                             (2)            (5)            (15)
                                                                     --------------    -----------     -----------

STOCKHOLDERS' EQUITY                                                 $   (1,617)        $  (1,399)     $     (881)
                                                                     ===========       ===========     ===========

</TABLE>



                     The accompanying summary of significant
                      accounting policies and notes are an
                        integral part of this statement.


<PAGE>


                                     - 55 -

                         OWENS CORNING AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<TABLE>

<S>                                                                        <C>           <C>           <C>
                                                                           2001          2000          1999
                                                                           ----          ----          ----
                                                                               (In millions of dollars)
NET CASH FLOW FROM OPERATIONS

  Net income (loss)                                                    $      39      $     (478)  $       270

  Reconciliation of net cash from operating activities:

     Noncash items:
       Provision (credit) for asbestos litigation claims (Note 19)            (7)            790             -
       Provision for depreciation and amortization                           237             203           210
       Provision (credit) for deferred income taxes (Note 10)                 47            (361)          163
       Other (Note 5)                                                         87             126            (2)
   (Increase) decrease in receivables (Note 11)                               41            (198)          112
   (Increase) decrease in inventories                                         19             (78)          (25)
    Increase (decrease) in accounts payable and accrued
       liabilities                                                           188              218          (113)
   (Increase) decrease in restricted cash - asbestos and
       insurance related (Note 19)                                            (5)           (164)            -
   Change in liabilities subject to compromise (Note 1)                      (75)           (100)            -
   Proceeds from insurance for asbestos litigation claims,
       excluding Fibreboard (Note 19)                                          62            380           180
   Payments for asbestos litigation claims, excluding
       Fibreboard (Note 19)                                                     -           (521)         (860)
   Pension fund contribution                                                (196)              -             -
   Other                                                                      41              (7)           37
                                                                       ---------     ------------  -----------

Net cash flow from operations                                                478            (190)          (28)
                                                                       ---------     ------------  ------------

NET CASH FLOW FROM INVESTING

  Additions to plant and equipment                                          (270)           (476)         (244)
  Investment in subsidiaries, net of cash acquired                             (7)            (4)           (1)
  Proceeds from the sale of affiliate or business (Note 6)                    34             193             -
  Other                                                                       (6)            (45)           20
                                                                       ----------    ------------  -----------

Net cash flow from investing                                           $    (249)    $       (332) $      (225)
                                                                       ----------    ------------- ------------
</TABLE>



                     The accompanying summary of significant
                      accounting policies and notes are an
                        integral part of this statement.


<PAGE>


                                     - 56 -

                         OWENS CORNING AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
        FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (continued)
<TABLE>

<S>                                                                            <C>            <C>              <C>
                                                                               2001           2000             1999
                                                                               ----           ----             ----
                                                                                      (In millions of dollars)
NET CASH FLOW FROM FINANCING (Notes 3 and 4)


  Net additions to long-term credit facilities                             $        -     $    1,073      $        91
  Other additions to long-term debt                                                 -             29              253
  Other reductions to long-term debt                                               (4)           (91)             (38)
  Net increase (decrease) in short-term debt                                       (6)             7              (24)
  Net increase (decrease) in short-term debt subject to compromise                 (4)             -                -
  Dividends paid                                                                    -            (12)             (16)
  Other                                                                             -             (4)               2
                                                                           ----------    ------------     -----------

    Net cash flow from financing                                                  (14)         1,002              268
                                                                           -----------   -----------      -----------

Effect of exchange rate changes on cash                                            (1)             -                1
                                                                           -----------   -----------      -----------

Net increase in cash and cash equivalents                                         214            480               16

Cash and cash equivalents at beginning of year                                    550             70               54
                                                                           ------------  -----------      -----------

Cash and cash equivalents at end of year                                   $      764    $       550      $        70
                                                                           ==========    ============     ===========
</TABLE>

                     The accompanying summary of significant
                      accounting policies and notes are an
                        integral part of this statement.

<PAGE>




                                     - 57 -

                         OWENS CORNING AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11

On October 5, 2000 (the "Petition Date"), Owens Corning and the 17 United States
subsidiaries listed below (collectively, the "Debtors") filed voluntary
petitions for relief (the "Filing") under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for the District of Delaware (the "USBC"). The Debtors are currently operating
their businesses as debtors-in-possession in accordance with provisions of the
Bankruptcy Code. The Chapter 11 cases of the Debtors (collectively, the "Chapter
11 Cases") are being jointly administered under Case No. 00-3837 (JKF). The
Chapter 11 Cases do not include other United States subsidiaries of Owens
Corning or any of its foreign subsidiaries (collectively, the "Non-Debtor
Subsidiaries"). The subsidiary Debtors that filed Chapter 11 petitions for
relief are:
<TABLE>

<S>                                                   <C>
         CDC Corporation                             Integrex Testing Systems LLC
         Engineered Yarns America, Inc.              HOMExperts LLC
         Falcon Foam Corporation                     Jefferson Holdings, Inc.
         Integrex                                    Owens-Corning Fiberglas Technology Inc.
         Fibreboard Corporation                      Owens Corning HT, Inc.
         Exterior Systems, Inc.                      Owens-Corning Overseas Holdings, Inc.
         Integrex Ventures LLC                       Owens Corning Remodeling Systems, LLC
         Integrex Professional Services LLC          Soltech, Inc.
         Integrex Supply Chain Solutions LLC
</TABLE>

The Debtors filed for relief under Chapter 11 to address the growing demands on
Owens Corning's cash flow resulting from its multi-billion dollar asbestos
liability. This liability is discussed in greater detail in Note 19 to the
Consolidated Financial Statements.

In late 2001, the asbestos-related Chapter 11 cases pending in the District of
Delaware (the Chapter 11 Cases of Owens Corning and the cases of Armstrong World
Industries, Inc., W. R. Grace & Co., Federal-Mogul Global, Inc., and USG
Corporation) were ordered transferred to the United States District Court for
the District of Delaware (the "District Court") before Judge Alfred M. Wolin to
facilitate development and implementation of a coordinated plan for management
(the "Administrative Consolidation"). The District Court has entered an order
referring the Chapter 11 Cases back to the USBC, where they were previously
pending, subject to its ongoing right to withdraw such referral with respect to
any proceedings or issues (the applicable court from time to time responsible
for any particular aspect of the Chapter 11 Cases being hereinafter referred to
as the "Bankruptcy Court"). Owens Corning is unable to predict what impact the
Administrative Consolidation will have on the timing, outcome or other aspects
of the Chapter 11 Cases.

Consequence of Filing
---------------------

As a consequence of the Filing, all pending litigation against the Debtors is
stayed automatically by section 362 of the Bankruptcy Code and, absent further
order of the Bankruptcy Court, no party may take any action to recover on
pre-petition claims against the Debtors. In addition, pursuant to section 365 of
the Bankruptcy Code, the Debtors may reject or assume pre-petition executory
contracts and unexpired leases, and other parties to contracts or leases that
are rejected may assert rejection damages claims as permitted by the Bankruptcy
Code.

Two creditors'  committees,  one representing  asbestos  claimants and the other
representing unsecured creditors,  have been appointed as official committees in


<PAGE>




                                     - 58 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

the Chapter 11 Cases. In addition,  the Bankruptcy  Court has appointed James J.
McMonagle as legal  representative  for the class of future  asbestos  claimants
against  one or  more  of the  Debtors.  The  two  committees  and  the  futures
representative  will have the right to be heard on all matters  that come before
the  Bankruptcy  Court.  Owens  Corning  expects that these  committees  and the
futures representative will play important roles in the Chapter 11 Cases and the
negotiation of the terms of any plan or plans of reorganization.

Owens Corning anticipates that substantially all liabilities of the Debtors as
of the date of the Filing will be resolved under one or more Chapter 11 plans of
reorganization to be proposed and voted on in the Chapter 11 Cases in accordance
with the provisions of the Bankruptcy Code. Although the Debtors intend to file
and seek confirmation of such a plan or plans, there can be no assurance as to
when the Debtors will file such a plan or plans, or that such plan or plans will
be confirmed by the Bankruptcy Court and consummated. Owens Corning is unable to
predict what impact the Administrative Consolidation will have on the timing of
the Debtors' filing or confirmation of such plan or plans or its effect, if any,
on the terms thereof.

As provided by the Bankruptcy Code, the Debtors initially had the exclusive
right to propose a plan of reorganization for 120 days following the Petition
Date, until February 2, 2001. By subsequent action, the Bankruptcy Court has
extended such exclusivity period until August 30, 2002. If the Debtors fail to
file a plan of reorganization prior to the ultimate expiration of the
exclusivity period, or if such plan is not accepted by the requisite numbers of
creditors and equity holders entitled to vote on the plan, other parties in
interest in the Chapter 11 Cases may be permitted to propose their own plan(s)
of reorganization for the Debtors.

Owens Corning is unable to predict at this time what the treatment of creditors
and equity holders of the respective Debtors will be under any proposed plan or
plans of reorganization. Such plan or plans may provide, among other things,
that all present and future asbestos-related liabilities of Owens Corning and
Fibreboard will be discharged and assumed and resolved by one or more
independently administered trusts established in compliance with Section 524(g)
of the Bankruptcy Code. Such plan or plans may also provide for the issuance of
an injunction by the Bankruptcy Court pursuant to Section 524(g) of the
Bankruptcy Code that will enjoin actions against the reorganized Debtors for the
purpose of, directly or indirectly, collecting, recovering or receiving payment
of, on, or with respect to any claims resulting from asbestos-containing
products allegedly manufactured, sold or installed by Owens Corning or
Fibreboard, which claims will be paid in whole or in part by one or more Section
524(g) trusts. Similar plans of reorganization have been confirmed in the
Chapter 11 cases of other companies involved in asbestos-related litigation.
Section 524(g) of the Bankruptcy Code provides that, if certain specified
conditions are satisfied, a court may issue a supplemental permanent injunction
barring the assertion of asbestos-related claims or demands against the
reorganized company and channeling those claims to an independent trust.

Owens Corning is unable to predict at this time what treatment will be accorded
under any such reorganization plan or plans to inter-company indebtedness,
licenses, transfers of goods and services and other inter-company and
intra-company arrangements, transactions and relationships that were entered
into prior to the Petition Date. These arrangements, transactions and
relationships may be challenged by various parties in the Chapter 11 Cases and
the outcome of those challenges, if any, may have an impact on the treatment of
various claims under such plan or plans. For example, Owens Corning is unable to
predict at this time what the treatment will be under any such plan or plans


<PAGE>
                                     - 59 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

with respect to (1) the  guaranties  issued by certain of Owens  Corning's  U.S.
subsidiaries,  including  Owens-Corning  Fiberglas  Technology Inc. ("OCFT") and
IPM, Inc., a Non-Debtor Subsidiary that holds Owens Corning's ownership interest
in a majority of Owens Corning's foreign subsidiaries  ("IPM"),  with respect to
Owens   Corning's   $1.8  billion   pre-petition   bank  credit   facility  (the
"Pre-Petition  Credit  Facility"  which is now in default) or (2) OCFT's license
agreements  with Owens  Corning  and  Exterior  Systems,  Inc.,  a  wholly-owned
subsidiary  of Owens  Corning  ("Exterior"),  pursuant  to which  OCFT  licenses
intellectual property to Owens Corning and Exterior.

The Bankruptcy Court may confirm a plan of reorganization only upon making
certain findings required by the Bankruptcy Code, and a plan may be confirmed
over the dissent of non-accepting creditors and equity security holders if
certain requirements of the Bankruptcy Code are met. The payment rights and
other entitlements of pre-petition creditors and Owens Corning's shareholders
may be substantially altered by any plan or plans of reorganization confirmed in
the Chapter 11 Cases. There is no assurance that there will be sufficient assets
to satisfy the Debtors' pre-petition liabilities in whole or in part, and the
pre-petition creditors of some Debtors may be treated differently than those of
other Debtors. Pre-petition creditors may receive under a plan or plans less
than 100% of the face value of their claims, and the interests of Owens
Corning's equity security holders may be substantially diluted or cancelled in
whole or in part. As noted above, it is not possible at this time to predict the
outcome of the Chapter 11 Cases, the effect of the Administrative Consolidation,
the terms and provisions of any plan or plans of reorganization, or the effect
of the Chapter 11 reorganization process on the claims of the creditors of the
Debtors or the interests of Owens Corning's equity security holders.

Pursuant to the Bankruptcy Code, schedules have been filed by the Debtors with
the Bankruptcy Court setting forth the assets and liabilities of the Debtors as
of the date of the Filing. Differences between amounts recorded by the Debtors
and claims filed by creditors will be investigated and resolved as part of the
proceedings in the Chapter 11 Cases.

Bar Dates for Filing Claims
---------------------------

In connection with the Chapter 11 Cases, the Bankruptcy Court has set April 15,
2002 as the last date by which holders of pre-petition claims against the
Debtors must file their claims. Any holder of a claim that is required to file a
claim by such date and does not do so will be barred from asserting such claim
against any of the Debtors and will not participate in any distribution in any
of the Chapter 11 Cases on account of such claim. Such deadline to file claims
does not apply to asbestos-related personal injury claims and asbestos-related
wrongful death claims (other than claims for contribution, indemnity,
reimbursement, or subrogation). A bar date for filing proofs of claim against
the Debtors with respect to asbestos-related personal injury claims and
asbestos-related wrongful death claims has not been set. Because the April 15,
2002 bar date has not yet occurred and the asbestos bar date has not yet been
set, the ultimate number and allowed amount of such claims are not presently
known.

Certain Post-petition Matters
-----------------------------

The Debtors have received approval from the Bankruptcy Court to pay or otherwise
honor certain of their pre-petition obligations, including employee wages,
salaries, benefits and other employee obligations, pre-petition claims of
critical vendors, and certain other pre-petition claims including certain
customer program and warranty claims.


<PAGE>


                                     - 60 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

As a result of the Filing, contractual interest expense has not been accrued or
recorded on pre-petition debt of the Debtors since the Petition Date. From the
Petition Date through December 31, 2001, contractual interest expense not
accrued or recorded on pre-petition debt totaled $222 million, of which $171
million relates to 2001.

At December 31, 2001, the Company had $764 million of cash and cash equivalents
(of which approximately $38 million was subject to administrative freeze pending
the resolution of certain alleged set-off rights by certain pre-petition
lenders). In addition, in connection with the Filing, the Debtors obtained a
$500 million debtor-in-possession credit facility from a group of lenders led by
Bank of America, N.A. (the "DIP Financing"), which currently expires November
15, 2002. Due to seasonal year-end declines in the qualifying inventory and
receivables that make up the borrowing base under the DIP Financing, $407
million was available under this credit facility at December 31, 2001. There
were no borrowings outstanding under the DIP Facility at December 31, 2001,
however, approximately $40 million of the availability under this credit
facility was utilized as a result of the issuance of standby letters of credit
and similar uses.

As a consequence of the Filing and the impact of certain provisions of the
Company's DIP Financing and in a cash management order entered by the Bankruptcy
Court, the Company and its subsidiaries are now subject to certain restrictions,
including on their ability to pay dividends and to transfer cash and other
assets to each other and to their affiliates.

The Company believes, based on information presently available to it, that its
cash and cash equivalents, cash available from operations, and the DIP Financing
will provide sufficient liquidity to allow it to continue as a going concern for
the foreseeable future. However, the ability of the Company to continue as a
going concern (including its ability to meet post-petition obligations of the
Debtors and to meet obligations of the Non-Debtor Subsidiaries) and the
appropriateness of using the going concern basis for its financial statements
are dependent upon, among other things, (i) the Company's ability to comply with
the terms of the DIP Financing and any cash management order entered by the
Bankruptcy Court from time to time in connection with the Chapter 11 Cases, (ii)
the ability of the Company to maintain adequate cash on hand, (iii) the ability
of the Company to generate cash from operations, (iv) the ability of the
Non-Debtor Subsidiaries to obtain necessary financing, (v) confirmation of a
plan or plans of reorganization under the Bankruptcy Code, and (vi) the
Company's ability to maintain profitability following such confirmation.

Financial Statement Presentation
--------------------------------

The Company's Consolidated Financial Statements have been prepared in accordance
with AICPA Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code," and on a going concern
basis, which contemplates continuity of operations, realization of assets and
liquidation of liabilities in the ordinary course of business. However, as a
result of the Filing, such realization of assets and liquidation of liabilities
are subject to uncertainty. While operating as debtors-in-possession under the
protection of Chapter 11 of the Bankruptcy Code, and subject to Bankruptcy Court
approval or otherwise as permitted in the ordinary course of business, the
Debtors, or some of them, may sell or otherwise dispose of assets and liquidate
or settle liabilities for amounts other than those reflected in the Consolidated
Financial Statements. Further, a plan of reorganization could materially change
the amounts and classifications reported in the consolidated historical
financial statements.

Substantially all of the Company's pre-petition debt is now in default due to
the Filing. As described below, the accompanying Consolidated Financial


<PAGE>




                                     - 61 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

Statements present the Debtors' pre-petition debt under the caption "Liabilities
Subject  to  Compromise."  This  includes  debt  under the  Pre-Petition  Credit
Facility and  approximately  $1.4 billion of other outstanding debt. As required
by SOP 90-7, the Company,  beginning in the fourth quarter of 2000, recorded the
Debtors'  pre-petition debt instruments at the allowed amount, as defined by SOP
90-7.

As reflected in the Consolidated Financial Statements, "Liabilities Subject to
Compromise" refer to Debtors' liabilities incurred prior to the commencement of
the Chapter 11 Cases. The amounts of the various liabilities that are subject to
compromise are set forth below following the debtor-in-possession financial
statements. These amounts represent Owens Corning's estimate of known or
potential pre-petition claims to be resolved in connection with the Chapter 11
Cases. Such claims remain subject to future adjustments. Adjustments may result
from (1) negotiations; (2) actions of the Bankruptcy Court; (3) further
developments with respect to disputed claims; (4) rejection of executory
contracts and unexpired leases; (5) the determination as to the value of any
collateral securing claims; (6) proofs of claim; or (7) other events. Payment
terms for these amounts will be established in connection with the Chapter 11
Cases.

Debtor-In-Possession Financial Statements
-----------------------------------------

The condensed financial statements of the Debtors are presented below. These
statements reflect the financial position and results of operations of the
combined Debtor entities, including certain amounts and activities between
Debtors and non-debtor entities of Owens Corning which are eliminated in the
Consolidated Financial Statements.






<PAGE>


                                     - 62 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

                         OWENS CORNING AND SUBSIDIARIES
                    DEBTOR-IN-POSSESSION STATEMENT OF INCOME (LOSS)
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
<TABLE>

<S>                                                                           <C>                       <C>
                                                                              2001                      2000
                                                                              -----                     ----
                                                                                  (In millions of dollars)
NET SALES                                                                         $  4,161                $   4,218
COST OF SALES                                                                        3,542                   3,509
                                                                                     -----                   -----
     Gross margin                                                                      619                     709
                                                                                   -------                  ------

OPERATING EXPENSES
     Marketing and administrative expenses                                             474                     460
     Science and technology expenses                                                    32                      47
     Provision (credit) for asbestos litigation claims                                  (7)                    790
     Restructure costs                                                                  16                      26
     Chapter 11 related reorganization items                                            87                      24
     Other (Including interest income from non-Debtors of
    $56                                                                                (90)                    (94)
                                                                                    -------                --------
         million in 2001 and $82 million in 2000)

        Total operating expenses                                                       512                   1,253
                                                                                  --------                   -----

INCOME (LOSS) FROM OPERATIONS                                                          107                    (544)

OTHER
     Cost of borrowed funds                                                              1                     174
     Other                                                                              (2)                      5
                                                                                 ----------               --------

INCOME (LOSS) BEFORE  PROVISION (CREDIT) FOR
  INCOME TAXES                                                                         108                    (723)

Provision (credit) for income taxes                                                     52                    (340)
                                                                                 ---------                  -------

INCOME (LOSS) BEFORE EQUITY IN NET LOSS OF
  AFFILIATES                                                                            56                    (383)

Equity in net loss of affiliates                                                        (3)                     (2)
                                                                                ------------              ---------

NET INCOME (LOSS)                                                               $       53                 $  (385)
                                                                                ==========                 ========
</TABLE>



                     The accompanying summary of significant
                      accounting policies and notes are an
                        integral part of this statement.

<PAGE>


                                     - 63 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

                         OWENS CORNING AND SUBSIDIARIES
                       DEBTOR-IN-POSSESSION BALANCE SHEET
                           DECEMBER 31, 2001 AND 2000
<TABLE>

<S>                                                                                    <C>                <C>
                                                                                       2001               2000
                                                                                       ----               ----
                                                                                       (In millions of dollars)
ASSETS

CURRENT
     Cash and cash equivalents                                                             $     605       $      461
     Receivables, net                                                                            315              338
     Receivables - non-debtors                                                                   849              759
     Inventories                                                                                 311              347
     Deferred income taxes                                                                         4                4
     Income tax receivable                                                                         4               31
     Other current assets                                                                         25               18
                                                                                             -------          -------

           Total current                                                                       2,113            1,958
                                                                                               -----            -----

OTHER
     Insurance for asbestos litigation claims                                                      4               59
     Restricted cash - asbestos and insurance related                                            169              164
     Restricted cash, securities and other - Fibreboard                                        1,284            1,274
     Deferred income taxes                                                                     1,143            1,058
     Goodwill, net                                                                               513              530
     Investments in affiliates                                                                    29               38
     Investments in non-debtor subsidiaries                                                      758              745
     Other noncurrent assets                                                                     138              122
                                                                                              ------           ------

           Total other                                                                         4,038            3,990
                                                                                               -----            -----

PLANT AND EQUIPMENT, at cost
     Land                                                                                         41               34
     Buildings and leasehold improvements                                                        533              522
     Machinery and equipment                                                                   2,194            2,078
     Construction in progress                                                                    217              259
                                                                                             -------          -------
                                                                                               2,985            2,893
Less:  Accumulated depreciation                                                               (1,548)          (1,502)
                                                                                              -------          -------

      Net plant and equipment                                                                  1,437            1,391
                                                                                               -----            -----

TOTAL ASSETS                                                                               $   7,588       $    7,339
                                                                                           =========       ==========
</TABLE>




                     The accompanying summary of significant
                      accounting policies and notes are an
                        integral part of this statement.

<PAGE>


                                     - 64 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

                         OWENS CORNING AND SUBSIDIARIES
                       DEBTOR-IN-POSSESSION BALANCE SHEET
                           DECEMBER 31, 2001 AND 2000
<TABLE>

<S>                                                                                                   <C>             <C>
                                                                                                      2001            2000
                                                                                                      ----            ----
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                (In millions of dollars)
------------------------------------

CURRENT
     Accounts payable and accrued liabilities                                                      $     589     $       320
     Accounts payable and accrued liabilities - non-debtors                                               12              46
     Long-term debt - current portion                                                                      1               1
                                                                                                   ----------      ----------


        Total current                                                                                    602             367
                                                                                                    --------        --------

OTHER
  Other employee benefits liability                                                                      318             308
  Pension plan liability                                                                                 264              68
  Other                                                                                                  110              96
                                                                                                    --------      ----------

        Total other                                                                                      692             472
                                                                                                    --------       ---------

LIABILITIES SUBJECT TO COMPROMISE                                                                      7,565           7,623

STOCKHOLDERS' EQUITY
  Common stock                                                                                           697             699
  Deficit                                                                                             (1,747)         (1,807)
  Accumulated other comprehensive loss                                                                  (219)            (12)
  Other                                                                                                   (2)             (3)
                                                                                                   ----------     -----------

        Total stockholders' equity                                                                    (1,271)         (1,123)
                                                                                                      -------         -------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                          $  7,588      $    7,339
                                                                                                    ========      ==========
</TABLE>




                     The accompanying summary of significant
                      accounting policies and notes are an
                        integral part of this statement.

<PAGE>


                                     - 65 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

                         OWENS CORNING AND SUBSIDIARIES
                  DEBTOR-IN-POSSESSION STATEMENT OF CASH FLOWS
                  FOR THE YEAR ENDED DECEMBER 31, 2001 AND 2000
<TABLE>

<S>                                                                                        <C>             <C>
                                                                                           2001            2000
                                                                                           ----            ----
                                                                                           (In millions of dollars)

NET CASH FLOW FROM OPERATIONS

Net income (loss)                                                                              $      53      $    (385)
  Reconciliation of net cash flow from operating activities
        Noncash items:
          Provision (credit) for asbestos litigation claims                                           (7)           790
          Provision for depreciation and amortization                                                176            142
          Provision (credit) for deferred income taxes                                                79           (345)
          Other                                                                                       91            116
        Increase in receivables                                                                     (168)          (154)
        (Increase) decrease in inventories                                                            34            (70)
        Increase in accounts payable and accrued liabilities                                         175            452
        (Increase) decrease in restricted cash - asbestos  and insurance related                      (5)          (164)
        Change in liabilities subject to compromise                                                  (75)          (100)
        Proceeds from insurance for asbestos litigation claims, excluding
          Fibreboard                                                                                  62            380
        Payments for asbestos litigation claims, excluding Fibreboard                                  -           (521)
        Pension fund contribution                                                                   (182)             -
        Other                                                                                        145           (167)
                                                                                                --------       ---------

            Net cash flow from operations                                                            378            (26)
                                                                                               ---------      ----------

NET CASH FLOW FROM INVESTING

        Additions to plant and equipment                                                            (220)          (422)
        Investment in non-debtor subsidiaries, net of cash acquired                                   (5)            (5)
        Proceeds from liquidation of non-debtor subsidiaries                                           -             83
        Investment in non-debtor subsidiaries                                                          -           (146)
        Proceeds from the sale of subsidiary                                                           -             50
        Other                                                                                         (5)            (7)
                                                                                               ----------     ----------

            Net cash flow from investing                                                            (230)          (447)
                                                                                                 --------      ---------
</TABLE>


                     The accompanying summary of significant
                      accounting policies and notes are an
                        integral part of this statement.

<PAGE>


                                     - 66 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

                         OWENS CORNING AND SUBSIDIARIES
                  DEBTOR-IN-POSSESSION STATEMENT OF CASH FLOWS
                  FOR THE YEAR ENDED DECEMBER 31, 2001 AND 2000
<TABLE>

<S>                                                                                       <C>              <C>
                                                                                          2001             2000
                                                                                          ----             ----
                                                                                        (In millions of dollars)

NET CASH FLOW FROM FINANCING

  Net additions to long-term credit facilities                                              $        -         $   1,088
  Other additions to long-term debt                                                                  -                 7
  Other reductions to long-term debt                                                                 -               (61)
  Net decrease in short-term debt (subject to compromise in 2001)                                   (4)              (21)
  Dividends paid                                                                                     -               (12)
  Other                                                                                              -               (79)
                                                                                               --------         ----------

      Net cash flow from financing                                                                  (4)              922
                                                                                               --------       ----------

Net increase in cash and cash equivalents                                                          144               449

Cash and cash equivalents at beginning of year                                                     461                12
                                                                                               -------       -----------

Cash and cash equivalents at end of year                                                       $   605       $       461
                                                                                               =======       ===========

</TABLE>

The amounts subject to compromise in the Consolidated and Debtor-in-Possession
Balance Sheets consist of the following items at December 31:
<TABLE>

<S>                                                                                        <C>            <C>
                                                                                           2001           2000
                                                                                           ----           ----
                                                                                         (In millions of dollars)

  Accounts payable                                                                            $     195   $       255
  Accrued interest payable                                                                           40            39
  Accrued liabilities                                                                                36            74
  Debt                                                                                            2,843         2,832
  Income taxes payable                                                                              209           212
  Reserve for asbestos litigation claims - Owens Corning                                          2,197         2,249
  Reserve for asbestos litigation claims - Fibreboard                                             1,284         1,274
                                                                                              ---------     ---------

         Total consolidated                                                                       6,804         6,935

         Payables to non-debtors                                                                    761           688
                                                                                             ----------    ----------

         Total debtor                                                                          $  7,565      $  7,623
                                                                                               ========      ========
</TABLE>


      The accompanying summary of significant accounting policies and notes
                     are an integral part of this statement

<PAGE>


                                     - 67 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

The amounts for Chapter 11 related reorganization items in the Consolidated and
Debtor-in-Possession Income Statements consist of the following for the years
ended December 31:
<TABLE>

<S>                                                                                  <C>             <C>
                                                                                     2001            2000
                                                                                     ----            ----
                                                                                  (In millions of dollars)

Accelerated amortization of debt issuance costs                                          $      -            $  30
Professional fees                                                                              60                6
Payroll and compensation                                                                       29                9
Interest income                                                                               (17)              (5)
Other                                                                                          15              (16)
                                                                                            ------           ------

     Total                                                                                 $   87            $  24
                                                                                           ======            =====
</TABLE>

2.   SEGMENT DATA

The Company has identified two reportable segments and has reported financial
and descriptive information about each of those segments below on a basis that
is used internally for evaluating segment performance and deciding how to
allocate resources to those segments.

The Company's two reportable segments are defined as follows:

Building Materials Systems
--------------------------

     Production and sale of glass wool fibers formed into thermal and acoustical
     insulation  and  air  ducts;  extruded  polystyrene   insulation;   roofing
     shingles,  glass fiber mat and asphalt materials;  windows and doors; vinyl
     and metal siding and  accessories;  cast stone building  products;  and the
     branded sale of housewrap.

Composite Solutions
-------------------

     Production and sale of glass fiber rovings and veils; long-fibre reinforced
     thermoplastic compounds, tailored Composite Solutions for the automotive,
     building and telecommunications markets, and composite manufacturing
     services.

Income  (loss) from  operations  by segment  consists of net sales less  related
costs and  expenses  and is  presented  on a basis that is used  internally  for
evaluating segment  performance.  Certain categories of expenses such as cost of
borrowed funds,  general  corporate  expenses or income,  and certain expense or
income items are excluded from the internal  evaluation of segment  performance.
Accordingly,  these items are not reflected in income (loss) from operations for
the Company's  reportable  segments.  Reference is made to the reconciliation of
reportable  segment income from operations to consolidated  income before income
taxes below for additional information about such items.

Total  assets  by  reportable  segment  are  those  assets  that are used in the
Company's  operations  in each  segment  and do not  include  general  corporate
assets. General corporate assets consist primarily of cash and cash equivalents,
deferred taxes,  asbestos-related  assets, and corporate property and equipment.
Reference  is  made  to the  reconciliation  of  reportable  segment  assets  to
consolidated total assets below for additional information about such items.




<PAGE>


                                     - 68 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2.   SEGMENT DATA (continued)

External customer sales by geographic region are attributed based upon the
location from which the product is shipped. Long-lived assets by geographic
region are attributed based upon the location of the assets and include net
plant and equipment.

During 2000, the Company realigned its internal operating segments. Following
this realignment, the Company reviewed its segments in accordance with SFAS 131
and concluded that the aggregation of its operating segments into two reportable
segments was still appropriate. As a result of this realignment, intersegment
transactions no longer exist between reportable segments. Net sales and income
from operations have been restated for all periods presented to reflect this
change.
<TABLE>

<S>                                                                          <C>              <C>              <C>
NET SALES                                                                    2001             2000             1999
                                                                             ----             ----             ----
                                                                                    (In millions of dollars)
Reportable Segments
-------------------

  Building Materials Systems
     United States                                                      $    3,687       $     3,728      $     3,757
     Europe                                                                      6                90              234
     Canada and other                                                            183             190              188
                                                                        ------------     -----------      -----------

        Total Building Materials Systems                                      3,876            4,008            4,179
                                                                        -----------      -----------      -----------

  Composite Solutions
     United States                                                               375             410              374
     Europe                                                                     336              340              338
     Canada and other                                                            175             182              157
                                                                        ------------     -----------      -----------

        Total Composite Solutions                                                886             932              869
                                                                        ------------     -----------      -----------

        Total Reportable Segments                                       $    4,762       $     4,940      $     5,048
                                                                        ==========       ===========      ===========

External Customer Sales by Geographic Region
--------------------------------------------
  United States                                                         $    4,062       $     4,138      $     4,131
  Europe                                                                         342             430              572
  Canada and other                                                               358             372              345
                                                                        ------------     -----------      -----------

     Net Sales                                                          $    4,762       $     4,940      $     5,048
                                                                        ==========       ===========      ===========

</TABLE>

<PAGE>


                                     - 69 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2.   SEGMENT DATA (continued)
<TABLE>

<S>                                                                       <C>       <C>      <C>
INCOME (LOSS) FROM OPERATIONS                                             2001     2000     1999
                                                                          -----    -----    -----
                                                                         (In millions of dollars)
Reportable Segments
-------------------

  Building Materials Systems
     United States                                                       $ 237    $ 318    $ 480
     Europe                                                                  -        2       10
     Canada and other                                                       15       33       33
                                                                         -----    -----    -----

        Total Building Materials Systems                                   252      353      523
                                                                         -----    -----    -----

  Composite Solutions
     United States                                                          67       73       68
     Europe                                                                 45       15        -
     Canada and other                                                       21       20       15
                                                                         -----    -----    -----

        Total Composite Solutions                                          133      108       83
                                                                         -----    -----    -----

        Total Reportable Segments                                        $ 385    $ 461    $ 606
                                                                         =====    =====    =====

Geographic Regions
------------------

  United States                                                          $ 304    $ 391    $ 548
  Europe                                                                    45       17       10
  Canada and other                                                          36       53       48
                                                                         -----    -----    -----

     Total Reportable Segments                                           $ 385    $ 461    $ 606
                                                                         =====    =====    =====

Reconciliation to Consolidated Income (Loss) Before
---------------------------------------------------
  Provision (Credit) for Income Taxes
  -----------------------------------

  Restructuring and other charges (Note 5)                                (140)    (229)       -
  Chapter 11 related reorganization items (Note 1)                         (87)     (24)       -
  Asbestos litigation claims (Note 19)                                       7     (790)       -
  General corporate expense                                                (49)     (49)     (28)
  Cost of borrowed funds                                                   (16)    (155)    (152)
  Other                                                                      2       (5)       -
                                                                         -----    -----    -----


Consolidated Income (Loss) Before Provision (Credit)
  for Income Taxes                                                       $ 102    $(791)   $ 426
                                                                         =====    =====    =====
</TABLE>


<PAGE>


                                     - 70 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2.  SEGMENT DATA (continued)
<TABLE>

<S>                                                                        <C>                <c>                  <c>
                                                                                           December 31,
TOTAL ASSETS                                                                    2001            2000               1999
                                                                                ----            ----               ----
                                                                                     (In millions of dollars)
Reportable Segments
-------------------

  Building Materials Systems
     United States                                                    $        2,177     $      2,094       $      2,020
     Europe                                                                      5                  6                226
     Canada and other                                                          164                184                193
                                                                      ------------       -------------       -----------

        Total Building Materials Systems                                     2,346              2,284              2,439
                                                                      ------------       ------------       ------------

  Composite Solutions
     United States                                                             434                492                282
     Europe                                                                    198                294                201
     Canada and other                                                          235                283                317
                                                                      ------------       ------------       ------------

        Total Composite Solutions                                              867              1,069                800
                                                                      ------------       ------------       ------------

        Total Reportable Segments                                     $       3,213      $      3,353       $      3,239
                                                                      =============      ============       ============

Reconciliation to Consolidated Total Assets
-------------------------------------------

  Restricted cash - asbestos and insurance related                             169                164                  -
  Insurance for asbestos litigation claims                                       4                 59                230
  Deferred income taxes                                                      1,188              1,081                732
  Income tax receivable                                                          5                 31                 61
  Cash and cash equivalents                                                    764                550                 70
  Restricted cash, securities and other - Fibreboard                         1,284              1,274              1,838
  Investments in affiliates                                                     48                 62                 65
  LIFO inventory valuation adjustment                                          (91)               (93)               (66)
  Other general corporate assets                                               457                431                325
                                                                      ------------       ------------       ------------

     Consolidated Total Assets                                         $     7,041       $      6,912       $      6,494
                                                                      ============       ============       ============

LONG-LIVED ASSETS BY GEOGRAPHIC REGION
--------------------------------------

  United States                                                        $     1,448       $      1,402       $      1,138
  Europe                                                                       152                157                277
  Canada and other                                                             243                262                285
                                                                      ------------       ------------       ------------

     Total Long-Lived Assets                                           $     1,843       $      1,821       $      1,700
                                                                      ============       ============       ============
</TABLE>




<PAGE>


                                     - 71 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2.   SEGMENT DATA (continued)
<TABLE>

<S>                                                                         <C>                 <C>            <C>
PROVISION FOR DEPRECIATION AND
  AMORTIZATION                                                              2001              2000             1999
                                                                            ----              ----             ----
                                                                                   (In millions of dollars)
Reportable Segments
-------------------

  Building Materials Systems
     United States                                                    $           100    $            92  $          95
     Europe                                                                       -                 17               20
     Canada and other                                                              10                 10             13
                                                                      ---------------    ---------------  -------------

        Total Building Materials Systems                                         110                119             128
                                                                      --------------     --------------   -------------

  Composite Solutions
     United States                                                               18                 16               16
     Europe                                                                      20                 20               19
     Canada and other                                                               19                  9            18
                                                                      ----------------   ---------------- -------------
         Total Composite Solutions                                                  57                 45             53
                                                                      ---------------    ---------------  -------------

        Total Reportable Segments                                     $          167     $          164   $         181
                                                                      ==============     ==============   =============

Geographic Regions
------------------
  United States                                                        $          118     $          108  $         111
  Europe                                                                         20                 37               39
  Canada and other                                                                 29                 19             31
                                                                      ---------------    ---------------  -------------

       Total Reportable Segments                                      $          167     $          164   $         181
                                                                      ==============     ==============   =============

Reconciliation to Consolidated Provision for
--------------------------------------------
  Depreciation and Amortization
  -----------------------------

  General Corporate Depreciation and Amortization                                   70                 39            29
                                                                      ----------------   ---------------- -------------

     Consolidated Provision for Depreciation and
          Amortization                                                $          237     $          203   $         210
                                                                      ==============     ==============   =============
</TABLE>



<PAGE>


                                     - 72 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2.   SEGMENT DATA (continued)
<TABLE>

<S>                                                                         <C>                 <C>              <C>
ADDITIONS TO LONG-LIVED ASSETS
------------------------------

ADDITIONS TO PLANT AND EQUIPMENT
                                                                            2001              2000              1999
                                                                            ----              ----              ----
                                                                                    (In millions of dollars)
Reportable Segments
-------------------

  Building Materials Systems
     United States                                                     $         145      $        180    $         127
     Europe                                                                           -              5               17
     Canada and other                                                                6                  5             9
                                                                     ----------------    --------------- -------------
        Total Building Materials Systems                                          151               190             153
                                                                      ---------------     -------------   -------------
  Composite Solutions
     United States                                                                  50             135               12
     Europe                                                                         26              66               18
     Canada and other                                                               12               59              25
                                                                      ----------------   --------------   -------------
        Total Composite Solutions                                                 88               260               55
                                                                      --------------     -------------    -------------
        Total Reportable Segments                                     $          239      $        450    $         208
                                                                      ==============      ============    =============

Geographic Regions
------------------
  United States                                                       $          195      $        315    $         139
  Europe                                                                            26              71               35
  Canada and other                                                                  18               64              34
                                                                      ----------------   --------------   -------------
       Total Reportable Segments                                      $          239      $        450    $         208
                                                                      ===============     ============    =============
</TABLE>

<PAGE>


                                     - 73 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

3.   LONG-TERM DEBT
<TABLE>
<S>                                                                                    <C>              <C>
                                                                                       2001             2000
                                                                                       ----             ----
                                                                                      (In millions of dollars)
Long-Term Debt:
--------------
Guaranteed debentures due in 2001, 10%                                            $        42      $        42
Asian credit facility due in 2003, variable interest rate                                 22                22
Other long-term debt due through 2004, at rates from 7.24% to 11.45%                       7                 11
                                                                                  ----------       ------------
                                                                                          71                75
Less:  current portion                                                                   (66)               (68)
                                                                                  -----------      -------------
     Total long-term debt                                                          $          5    $          7
                                                                                   ============    ============

Long-Term Debt Subject to Compromise:
------------------------------------
U.S. credit facility due in 2002, variable                                         $  1,469         $    1,443
Debentures due in 2005, 7.5%                                                            300                300
Debentures due in 2008, 7.7%                                                            250                250
Debentures due in 2009, 7.0%                                                            250                250
Debentures due in 2018, 7.5%                                                            400                400
Debentures due in 2002, 8.875%                                                           40                 40
Debentures due in 2012, 9.375%                                                            7                  7
Bonds due in 2000, 7.25%, payable in Deutsche marks (Note 18)                            60                 63
Other long-term debt due through 2012, at rates from 6.25% to 13.80%                     62                 70
                                                                                  -------------    ------------
    Total long-term debt subject to compromise                                     $  2,838         $    2,823
                                                                                  ==========        ==========
</TABLE>

Due to the Filing (see Note 1), pre-petition long-term debt of the Debtors has
been reclassified to the caption Subject to Compromise in the above table and on
the Consolidated Balance Sheet. From the Petition Date through December 31,
2001, contractual interest expense not accrued or recorded on pre-petition debt
totaled $222 million, of which $171 million relates to 2001. At December 31,
2001 and 2000, the amounts shown under the caption "Long-Term Debt" in the table
above represent long-term debt of non-Debtor subsidiaries.

In connection with the Filing, the Company obtained a $500 million
debtor-in-possession credit facility from a group of lenders led by Bank of
America, N.A., which currently expires November 15, 2002. The interest rate
applicable is a floating rate varying from .75% - 2.00%, based upon the average
daily outstanding balance, plus LIBOR. The facility had a commitment fee on
unused portions of .375% at December 31, 2001 and 2000. The amount available
under the facility depends on a borrowing base of qualifying receivables and
inventory of the Debtors. Due to seasonal year-end declines in the components of
the borrowing base, $407 million was available under this facility at December
31, 2001. While the Company had no outstanding borrowings from the facility at
year-end 2001 or 2000, approximately $40 million and $15 million, respectively,
of this facility was utilized at such times for standby letters of credit and
similar uses. This facility has super priority in the bankruptcy proceeding.


The Asian credit facility is payable in U.S. dollars and had a rate of interest
at December 31, 2001 and 2000, of 2.53% and 7.24%, respectively. As a result of
the Filing, the Company violated a non-financial covenant of this facility and
it is considered callable at the discretion of the financial institution. The
liability has been moved to current at December 31, 2001 and 2000.


After the Filing, the Company discontinued debt payments to its non-Debtor
subsidiary responsible for the $42 million in guaranteed debentures due 2001. As
this subsidiary has no assets other than this intercompany receivable, it was
unable to make required payments and is in default. At December 31, 2001 and
2000, this instrument was classified as a current liability.


<PAGE>


                                     - 74 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

3.   LONG-TERM DEBT (continued)

As is typical for bank credit facilities, the agreements relating to the
facilities described above contain restrictive covenants, including requirements
for a minimum EBITDA and limitations on additional borrowings, among other
restrictions. The agreements include a provision that would result in all of the
unpaid principal and accrued interest of the facilities becoming due immediately
upon a change of control in ownership of the Company. A material adverse change
in the Company's business, assets, liabilities, financial condition or results
of operations constitutes default under the agreements.


The  aggregate  maturities  for all  long-term  debt issues for each of the five
years following December 31, 2001 are:
<TABLE>
<S>                                                                      <C>

                                       Year               (In millions of dollars)
                                       ----

                                       2002                     $        66
                                       2003                               2
                                       2004                               2
                                       2005                               1
                                       2006                               -

</TABLE>

4.   SHORT-TERM DEBT
<TABLE>

<S>                                                                          <C>                <C>
                                                                             2001               2000
                                                                             ----               ----
  Short-Term Debt:                                                           (In millions of dollars)
  ---------------

  Balance outstanding at December 31                                         $  43             $ 50

  Weighted average interest rates on short-term debt
     outstanding at December 31                                               7.2%              7.5%

                                                                             2001               2000
                                                                             ----               ----
  Short-Term Debt Subject to Compromise:                                     (In millions of dollars)
  -------------------------------------

  Balance outstanding at December 31                                         $  5               $  9

</TABLE>

The Company had unused short-term lines of credit totaling $6 million and $7
million at December 31, 2001 and 2000, respectively.

After the Filing, the Company discontinued debt payments to its non-Debtor
European subsidiary responsible for $32 million in short-term debt. As this
subsidiary has no assets other than this intercompany receivable, it was unable
to make required payments and is in default.



<PAGE>


                                     - 75 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5.    RESTRUCTURING OF OPERATIONS AND OTHER CHARGES

2001 Charges
------------

During 2001, the Company experienced the effects of an overall slowed economy in
both the building materials and composites industries. A decline in net sales
and margins over the prior year led the Company to continue to review its cost
structures. As a result of this review, the Company recorded approximately $140
million in pretax charges which were accounted for as a $26 million charge for
restructuring, a $79 charge to cost of sales and a $35 million charge to other
operating expense. The Company recorded $46 million in the fourth quarter, $35
million in the third quarter, $17 million in the second quarter and $42 million
in the first quarter.

Fourth Quarter 2001
-------------------

The fourth quarter charges, totaling $46 million pretax, consisted of a $2
million pretax restructure charge and $44 million in pretax other charges. The
$2 million restructure charge has been classified as a separate component of
operating expenses on the Company's Consolidated Statement of Income (Loss) and
represents severance costs associated with the elimination of approximately 145
positions, primarily in the U.S. and Canada. The primary groups impacted
included manufacturing and administrative personnel. As of December 31, 2001,
less than $1 million has been paid and charged against this reserve.

The $44 million in pretax other charges included $29 million of asset
impairments mainly associated with the building materials business, principally
to write-down assets to net estimated fair value on a held in use basis in
certain manufacturing facilities due to changes in the Company's manufacturing
and marketing strategies; $6 million in costs related to the Company's
continuing plan for the realignment of its Newark, Ohio manufacturing facility
and various other charges totaling $9 million. This $44 million pretax charge
was accounted for as a $34 million charge to cost of sales and a $10 million
charge to other operating expenses.

Third Quarter 2001
------------------

The third quarter charges,  totaling $35 million pretax, were comprised of an $8
million pretax restructure  charge and $27 million in pretax other charges.  The
restructure charge represents severance costs associated with the elimination of
approximately  160  positions,  primarily  in the U.S.  and the U.K. The primary
groups impacted  included  manufacturing  and  administrative  personnel.  As of
December 31, 2001,  approximately  $7 million has been paid and charged  against
this reserve.

The $27 million in pretax other charges included $15 million in costs associated
with the Company's previously announced plan to realign its Newark, Ohio
manufacturing facility; $4 million to write-down the Company's investment and
related assets in Alcopor Owens Corning to net realizable value (The sale of the
Company's investment in this joint venture was completed in the fourth quarter
of 2001) and various other charges totaling $8 million. This $27 million pretax
charge was accounted for as a $19 million charge to cost of sales and an $8
million charge to other operating expenses.


<PAGE>


                                     - 76 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5.    RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)

Second Quarter 2001
-------------------

The second quarter charges,  totaling $17 million pretax, were comprised of a $7
million pretax restructure  charge and $10 million in pretax other charges.  The
$7 million restructure charge primarily  represented a $5 million charge for the
divestiture of non-strategic  businesses and facilities,  which consisted mainly
of non-cash  asset  write-downs  to fair value and exit cost  liabilities.  Also
included in the  restructure  charge was a $2 million charge for severance costs
associated with the elimination of approximately 25 positions,  primarily in the
U.K. The primary  groups  affected  included  manufacturing  and  administrative
personnel.  As of December 31, 2001,  approximately $1 million has been paid and
charged against this reserve.

The $10 million in pretax other charges included $4 million in costs related to
the Company's continuing plan for the realignment of the Newark, Ohio facility;
$2 million to write-down inventory made obsolete by changes in the Company's
manufacturing and marketing strategies; and various other charges totaling $4
million. This $10 million pretax charge was accounted for as an $8 million
charge to cost of sales and a $2 million charge to other operating expenses.

First Quarter 2001
------------------

the first quarter charges,  totaling $42 million pretax,  were comprised of a $9
million pretax  restructure  charge, $2 million pretax loss from assets held for
sale, and $31 million in other pretax charges. The $9 million pretax restructure
charge   represented   severance  costs   associated  with  the  elimination  of
approximately  130 positions,  primarily in the U.S. The primary groups affected
included  manufacturing and administrative  personnel.  As of December 31, 2001,
approximately $7 million has been paid and charged against this reserve.  The $2
million  pretax  loss from  assets  held for sale  represented  the  results  of
operations  for  the  Company's  investments  in its  Pipe  joint  ventures  and
subsidiaries on a  held-for-sale  basis for the first quarter of 2001. This sale
was completed in February 2001.

The $31 million in other pretax charges was comprised of $10 million of asset
impairments, principally the write-down of equipment; $4 million to write down
inventory to reflect updated estimates of the net realizable value; $4 million
of payroll-related charges associated with the realignment of the Newark, Ohio
manufacturing facility; and various other charges totaling $13 million. This $31
million pretax charge was accounted for as an $18 million charge to cost of
sales and a $13 million charge to other operating expenses.

2000 Charges
------------

During 2000, the Company recorded pretax charges of $229 million for
restructuring and other activities as a result of its reassessment of business
strategies with respect to investments in certain ventures, facilities and
overhead expenditures. The $229 million pretax charge was comprised of a $32
million charge associated with the restructuring of the Company's business
segments and $197 million of other charges, the majority of which represented
impairments of long-lived assets. In addition, the Company

<PAGE>


                                     - 77 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5.    RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)

recorded a $6 million pretax credit to minority interest resulting from charges
related to a majority-owned consolidated subsidiary. The components of the
restructuring charge included $16 million for personnel reductions, $10 million
for the divestiture of non-strategic businesses and facilities, and $6 million
for asset impairments associated with the planned closing of two lines at our
Newark, Ohio manufacturing facility. This represented the first phase of the
Company's plan to realign operations at the Newark facility.

The  $197  million  of other  charges  was  comprised  of $95  million  of asset
impairments,  a $6 million charge for a settlement  loss  associated with one of
the  Company's  U.S.  pension  plans,  and $96  million  of  charges  focused on
improving  business  operations and was accounted for as a $77 million charge to
cost of sales,  a $114  million  charge  to other  operating  expenses  and a $6
million  charge to marketing  and  administrative  expenses.  The $95 million of
asset  impairments   included:  1)  $54  million  to  write-down  the  Company's
investment  and related assets in Alcopor Owens  Corning,  a building  materials
joint venture in Europe,  to estimated  fair value on a held for sale basis;  2)
$12 million to write-down the Company's investment in a venture in South Africa,
on a held-in-use basis based upon management's  analysis of current and expected
future financial results and constraints on the Company's ability to fund future
significant  capital  investments  in  this  entity  as  a  consequence  of  the
bankruptcy  filing.  The $12 million charge was offset by a $6 million credit to
record the minority owner's share, recorded in the minority interest line on the
Consolidated  Statement of Income (Loss); 3) $8 million write-down to fair value
the investments in the Company's Pipe joint ventures and  subsidiaries on a held
for  sale  basis;  4)  $10  million  to  write-down  the  equity  investment  in
ImproveNet,  due to a  significant  decrease in market  value  which  management
believes  is other than  temporary;  and 5) $11  million  associated  with asset
impairments within our Cultured Stone and other businesses.

The $96 million charge consisted of $43 million to write-down inventory made
obsolete by changes in the Company's manufacturing and marketing strategies; $19
million to write-down equipment and receivables; $15 million to increase
warranty reserves due to general changes in estimates associated with these
reserves; and various other charges totaling $19 million recorded as other
operating expenses. As of December 31, 2001, approximately $13 million has been
paid and charged against the reserve for personnel reductions and approximately
$3 million has been charged against exit cost liabilities.

The following table summarizes the status of the liabilities from the 2000 and
2001 restructure program described above, including cumulative spending and
adjustments and the remaining balance as of December 31, 2001:
<TABLE>
<S>                                                   <C>                 <C>               <C>
                                                                                        Liability at
                                                     Original            Total          December 31,
    (In millions of dollars)                       Liability          Payments             2001
                                                   ---------          --------             ----

    Personnel Costs                                 $    37         $      (28)         $       9
    Facility and Business Exit Costs                      4                 (3)                 1
                                                   --------       -------------         ---------

    Total                                           $    41         $      (31)          $     10
                                                    =======         ===========          ========
</TABLE>

During 1997 and 1998, the Company implemented a restructuring program related to
closing manufacturing locations and reducing overhead. As of December 31, 2001,
approximately $15 million in reserves remain and are primarily related to
ongoing personnel severance costs.


<PAGE>
                                     - 78 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5.    RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)

The Company continually evaluates whether events and circumstances have occurred
that indicate that the carrying amount of certain long-lived assets is
recoverable. When factors indicate that a long-lived asset should be evaluated
for possible impairment, the Company uses an estimate of the expected
undiscounted cash flows to be generated by the asset to determine whether the
carrying amount is recoverable or if impairment exists. When it is determined
that an impairment exists, the Company uses the fair market value of the asset,
usually measured by the discounted cash flows to be generated by the asset, to
determine the amount of the impairment to be recorded in the financial
statements.


6.   DIVESTITURES OF BUSINESSES

In the fourth quarter of 2001, the Company sold its remaining 40% interest in
Alcopor Owens Corning, an unconsolidated joint venture. The Company reduced its
investment in the joint venture to net realizable value during the third quarter
of 2001. See Note 5 to the Consolidated Financial Statements. Net proceeds on
the divestiture were approximately $23 million, of which approximately $9
million remained in escrow at December 31, 2001  and was received in January
2002. As part of the divestiture, the Company was obligated to fund certain U.K
pension obligations in the amount of approximately $14 million.

During the first quarter of 2001, the Company completed the sale of the majority
of its Engineered Pipe Business, a producer of glass-reinforced plastic pipe
with operations mostly in Europe. Net proceeds from the sale were $22 million.

During the second quarter of 2000, the Company completed the sale of its
European Building Materials business to Alcopor Owens Corning, in which the
Company had a 40% interest. Proceeds from the sale, net of the Company's $34
million cash infusion into the joint venture, were $177 million. In connection
with this transaction, the joint venture assumed $62 million of debt from Owens
Corning and the Company incurred fees of approximately $6 million, resulting in
net cash proceeds of approximately $109 million. A pretax gain of approximately
$5 million, including a $54 million write-off of goodwill, was realized from the
sale. During the fourth quarter of 2000, the Company reduced its investment in
Alcopor Owens Corning to estimated net realizable value. See Note 5 to the
Consolidated Financial Statements.

The results of operations of the European Building Materials business are
reflected in the Company's Consolidated Statement of Income (Loss) through the
period ending May 31, 2000. For the five months ended May 31, 2000, and the year
ended December 31, 1999, the European Building Materials business generated
sales of approximately $79 million and $234 million, respectively, and income
from operations of approximately $3 million and $12 million, respectively.
Effective May 31, 2000, the Company accounted for its ownership interest in
Alcopor Owens Corning under the equity method.

During the first quarter of 2000, the Company completed the sale of the assets
of Falcon Foam, a producer of foam insulation in Michigan and California. Net
proceeds from the sale were $50 million and resulted in a pretax loss of
approximately $5 million, including a $32 million write-off of goodwill.




<PAGE>


                                     - 79 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

7.   CONVERTIBLE MONTHLY INCOME PREFERRED SECURITIES

In 1995, Owens Corning Capital, LLC ("OC Capital"), a Delaware limited liability
company, all of the common limited liability company interests in which are
owned indirectly by Owens Corning (the "Common Securities"), completed a private
offering of 4 million shares of 6-1/2% Convertible Monthly Income Preferred
Securities ("Preferred Securities"). The aggregate purchase price for the
offering was $200 million.

The only asset of OC Capital is $253 million of 6-1/2% Convertible Subordinated
Debentures due 2025 of Owens Corning (the "Debentures"), which were issued in
exchange for the proceeds of the Preferred Securities and the Common Securities.

As a result of the Filing (see Note 1), Owens Corning is no longer making
interest payments to OC Capital on the Debentures. As a result, OC Capital no
longer has funds available to pay distributions on the Preferred Securities and
stopped paying such distributions in October 2000.

Distributions of $10 million ($6 million after-tax) and $13 million ($8 million
after-tax) for 2000 and 1999, respectively, have been recorded net of tax as
minority interest on the Company's Consolidated Statement of Income (Loss).

8.   POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company and its subsidiaries maintain health care and life insurance benefit
plans for certain retired employees and their dependents. The health care plans
in the U.S. are nonfunded and pay either 1) stated percentages of covered
medically necessary expenses, after subtracting payments by Medicare or other
providers and after stated deductibles have been met or, 2) fixed amounts of
medical expense reimbursement.

Employees become eligible to participate in the health care plans upon
retirement under the Company's pension plans if they have accumulated 10 years
of service after age 45. Some of the plans are contributory, with some retiree
contributions adjusted annually. The Company has reserved the right to change or
eliminate these benefit plans subject to the terms of collective bargaining
agreements.

In accordance with Statement of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits," the
following tables provide a reconciliation of the changes in the accumulated
postretirement benefits obligation and the accrued benefits cost liability at
October 31, 2001 and 2000, as reflected on the Consolidated Balance Sheet at
December 31, 2001 and 2000:



<PAGE>


                                     - 80 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 8.   POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
      (continued)
<TABLE>

<S>                                                                                 <C>                <C>
                                                                                    2001               2000
                                                                                    ----               ----
                                                                                   (In millions of dollars)
Change in Accumulated Postretirement Benefit Obligation
-------------------------------------------------------

Benefits obligation at beginning of period                                   $           374     $         319
Service cost                                                                             8                  7
Interest cost                                                                               28             24
Amendments                                                                                    5             -
Actuarial loss                                                                              91             50
Currency gain                                                                               (1)            (1)
Benefits paid                                                                              (28)           (25)
                                                                             ------------------  -------------
Benefits obligation at end of period                                         $            477    $         374
                                                                             ================    =============

Funded status                                                                $          (477)    $        (374)
Unrecognized net actuarial loss                                                           142              52
Benefit payments subsequent to valuation date                                                7              5
                                                                             -----------------   ------------

 Accrued benefit cost (includes current liabilities of
   $25 million in 2001 and 2000)                                             $          (328)    $        (317)
                                                                             ================    ==============

Weighted-average assumptions as of December 31                                      2001               2000
----------------------------------------------                                      ----               ----
Discount rate                                                                         7.0%             8.0%

The following table presents the components of net periodic benefits cost during
2001, 2000 and 1999:

Components of net periodic benefit cost                                   2001         2000         1999
---------------------------------------                                 ---------    ---------    ---------
                                                                            (In millions of dollars)
Service cost                                                            $     8       $      7      $      8
Interest cost                                                                28             24            24
Amortization of prior service cost                                           -               -            (9)
                                                                        ----------   ----------     ---------
Net periodic benefit cost                                               $    36      $      31      $      23
                                                                        ==========   ==========     =========
</TABLE>

For measurement purposes, an 8 - 15% annual rate of increase in the per capita
cost of covered health care claims was assumed for 2002, varying by plan. The
assumed rate decreases to 5 - 6% by 2006. The health care cost trend rate
assumption has a significant effect on the amounts reported. To illustrate, a
one-percentage point change in the assumed health care cost trend rate would
have the following effects as of October 31, 2001 and 2000:
<TABLE>
<S>                                                       <C>                                   <C>
                                                          2001                                  2000
                                                          ----                                  ----
                                                   1-Percentage Point                    1-Percentage Point

                                               Increase           Decrease             Increase          Decrease
                                               --------           --------             --------          --------
                                                                   (In millions of dollars)
Effect on total of service and
  interest cost components                    $     4              $    (4)             $     4         $     (3)
Effect on accumulated
  postretirement benefit                           47                  (40)                  37              (31)
obligation

</TABLE>

<PAGE>


                                     - 81 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 8.   POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
      (continued)

The Company also recognizes the obligation to provide benefits to former or
inactive employees after employment but before retirement under certain
conditions. These benefits include, but are not limited to, salary continuation,
supplemental unemployment benefits, severance benefits, disability-related
benefits (including workers' compensation), job training and counseling, and
continuation of benefits such as health care and life insurance coverage. The
accrued postemployment benefits cost liabilities at October 31, 2001 and 2000,
as reflected on the balance sheet at December 31, 2001 and 2000, were $33
million and $34 million, respectively, including current liabilities of $4
million in both years. The net postemployment benefits expense was approximately
$4 million in 2001 and 2000 and $2 million in 1999.

9.    PENSION PLANS

The Company has several  defined  benefit pension plans covering most employees.
Under the plans,  pension  benefits are generally based on an employee's pay and
number of years of service.  Company  contributions  to these  pension plans are
determined  by  an  independent  actuary  to  meet  or  exceed  minimum  funding
requirements.  Plan  assets  consist  primarily  of equity  securities  with the
balance  in fixed  income  investments.  The  unrecognized  cost of  retroactive
amendments and actuarial  gains and losses are amortized over the average future
service period of plan participants expected to receive benefits.

In  accordance  with  Statement  of  Financial  Accounting  Standards  No.  132,
"Employers'  Disclosures about Pensions and Other Postretirement  Benefits," the
following  tables  provide a  reconciliation  of the  changes  in the  projected
pension benefits obligation, the changes in the pension plan assets, and the net
pension liability at October 31, 2001 and 2000, as reflected on the consolidated
balance sheet at December 31, 2001 and 2000:
<TABLE>

<S>                                                                            <C>                 <C>
                                                                               2001                2000
                                                                               ----                ----
                                                                               (In millions of dollars)
Change in Projected Pension Benefit Obligation
----------------------------------------------

Benefits obligation at beginning of period                                    $   979             $   865
Service cost                                                                       15                  18
Interest cost                                                                      70                  64
Amendments                                                                          7                  55
Impact of curtailment                                                               -                   3
Impact of foreign currency translation                                             (2)                (24)
Actuarial loss                                                                    217                 117
Employee contributions                                                              1                   2
Benefits paid                                                                    (130)               (121)
                                                                              --------            ---------
Benefits obligation at end of period                                          $ 1,157             $   979
                                                                              ========            =========
</TABLE>

Benefits paid during 2001 and 2000 include payments resulting from the Company's
restructuring program and the sale of certain businesses (see Notes 5 and 6).



<PAGE>


                                     - 82 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

9.  PENSION PLANS (continued)
<TABLE>
<S>                                                                               <C>              <C>
Change in Pension Plan Assets                                                     2001             2000
-----------------------------                                                     ----             ----
                                                                                (In millions of dollars)

Fair value of plan assets at beginning of period                            $        936      $        977
Actual return on plan assets                                                       (129)               91
Impact of foreign currency translation                                               (3)              (23)
Employer contributions                                                              182                 3
Employee contributions                                                                -                 2
Benefits paid                                                                      (128)             (114)
                                                                            ------------      ------------
Fair value of plan assets at end of period                                  $       858       $       936
                                                                            ===========       ===========


Funded status                                                               $      (299)      $       (43)
Contributions subsequent to valuation date                                             14               -
Unrecognized net transition asset                                                   (12)              (17)
Unrecognized net actuarial loss                                                     457                37
Unrecognized prior service cost                                                      30                30
                                                                            -----------       -----------
Prepaid benefit cost                                                        $       190       $         7
                                                                            ===========       ===========
</TABLE>

<TABLE>
<S>                                                                               <C>              <C>

Amounts Recognized in the Consolidated Balance Sheet                              2001             2000
----------------------------------------------------                              ----             ----
                                                                                (In millions of dollars)

Prepaid benefit cost                                                        $           71      $       56
Accrued benefit liability (includes current liabilities of $3 million
   and $5 million in 2001, and 2000, respectively)                                    (294)            (80)
Intangible asset                                                                        28              26
Accumulated other comprehensive loss                                                   230               3
Deferred tax asset                                                                     155               2
                                                                            --------------     -----------

Net amount recognized                                                       $          190      $        7
                                                                            ==============      ==========
</TABLE>

The combination of the decline in asset value,  noted above, and the decrease in
the discount rate, noted below, caused a significant other comprehensive loss in
2001.
<TABLE>
<S>                                                                               <C>              <C>

Weighted-average assumptions as of  December 31                                   2001             2000
-----------------------------------------------                                   ----             ----

Discount rate                                                                         7.00%         8.00%
Expected return on plan assets                                                        9.00%         9.00%
Rate of compensation increase                                                         5.50%         5.50%
</TABLE>


<PAGE>


                                     - 83 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

9.   PENSION PLANS (continued)

The following table presents the components of net periodic pension cost during
2001, 2000 and 1999:
<TABLE>
<S>                                                               <C>            <C>              <C>

  Components of Net Periodic Pension Cost                         2001           2000            1999
  ---------------------------------------                         ----           ----            ----
                                                                       (In millions in dollars)

  Service cost                                               $         15    $      18      $      19
  Interest cost                                                         70          64             65
  Expected return on plan assets                                      (73)         (73)           (75)
  Amortization of transition amount                                     (5)         (5)            (5)
  Amortization of prior service cost                                     -          (2)            (4)
  Amortization of net actuarial loss                                     1           1              5
  Curtailment/settlement (gain) loss                                     7           9             (6)
                                                             -------------   ---------      ----------
  Net periodic benefit cost                                  $         15    $       12     $      (1)
                                                             ============    ==========     ==========
</TABLE>

Certain of the Company's pension plans have an accumulated benefit obligation
(ABO) in excess of the fair value of plan assets. The ABO and fair value of plan
assets for such plans are $1,046 million and $761 million, respectively, at
October 31, 2001, and $742 million and $669 million, respectively, at October
31, 2000.

Certain of the Company's pension plans are not funded. The portion of the total
projected benefit obligation attributable to unfunded plans is approximately $12
million and $9 million at October 31, 2001 and 2000, respectively.

The Company also sponsors defined  contribution plans available to substantially
all U.S. employees.  Company contributions reflect a matching of a percentage of
employee  savings  up to a maximum  savings  level and  certain  profit  sharing
awards.  The Company  recognized  expense of $31 million in 2001, $26 million in
2000, and $29 million in 1999.

10.   INCOME TAXES
<TABLE>

<S>                                                                      <C>             <C>             <C>
                                                                         2001            2000            1999
                                                                         ----            ----            ----
                                                                               (In millions in dollars)
  Income (loss) before provision (credit) for income taxes:

    U.S.                                                            $       24       $      (849)     $    374
    Foreign                                                                  78               58            52
                                                                    -----------      -----------      --------

       Total                                                        $     102        $      (791)     $    426
                                                                    =========        ============     ========
</TABLE>


<PAGE>


                                     - 84 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

10.   INCOME TAXES (continued)
<TABLE>

<S>                                                                      <C>             <C>             <C>
                                                                         2001            2000            1999
                                                                         ----            ----            ----
                                                                               (In millions in dollars)
  Provision (credit) for income taxes:

    Current
    U.S.                                                            $       25        $       7       $    (56)
    State and local                                                        (32)              (1)            (2)
    Foreign                                                                  17              31             16
                                                                    -----------      ----------        -------

       Total current                                                         10              37            (42)
                                                                    -----------      ----------        -------

    Deferred
    U.S.                                                                     (3)           (330)           158
    State and local                                                          36             (23)            25
    Foreign                                                                  14               4              8
                                                                    -----------      ----------        -------

       Total deferred                                                        47            (349)           191
                                                                    -----------      -----------       -------

       Total provision (credit) for income taxes                    $       57       $     (312)       $   149
                                                                    ==========       ===========       =======
</TABLE>

The  reconciliation  between the U.S.  federal  statutory rate and the Company's
effective income tax rate is:
<TABLE>

<S>                                                               <C>               <C>              <C>
                                                                  2001              2000             1999
                                                                  ----              ----             ----
  U.S. federal statutory rate                                      35%               (35)%              35%
  State and local income taxes                                      4                 (4)                4
  Operating losses of foreign subsidiaries                          -                  1                 2
  Adjustment to estimated liability for tax claims                  9                  -                 -
  Other, net                                                        7                 (2)               (6)
                                                                  -----             ----              ----
  Effective tax rate                                               55%               (40)%              35%
                                                                  =====             ====              ====

</TABLE>

As of December 31, 2001, the Company has not provided for withholding or U.S.
federal income taxes on approximately $365 million of accumulated undistributed
earnings of its foreign subsidiaries as they are considered by management to be
permanently reinvested. If these undistributed earnings were not considered to
be permanently reinvested, approximately $53 million of deferred income taxes
would have been provided.

At December 31, 2001, the Company had net operating loss carryforwards for
certain of its foreign subsidiaries and certain of its state tax jurisdictions,
the tax benefit of which is approximately $312 million. Tax benefits of $276
million expire over the period from 2002 through 2021, and the remaining $36
million have an indefinite carryforward.

The cumulative temporary differences giving rise to the deferred tax assets and
liabilities at December 31, 2001 and 2000 are as follows:



<PAGE>


                                     - 85 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

10.   INCOME TAXES (continued)
<TABLE>

<S>                                                     <C>                             <C>
                                                        2001                            2000
                                                        ----                            ----

                                                            Deferred                       Deferred
                                              Deferred          Tax         Deferred           Tax
                                            Tax Assets      Liabilities   Tax Assets       Liabilities
                                            ----------      -----------   ----------       -----------
                                                               (In millions of dollars)

  Asbestos litigation claims                $     876       $        -    $     847        $       -
  Other employee benefits                         152               -           146                -
  Pension plans                                   155              61            15               21
  Depreciation                                      -             303             -              303
  Operating loss carryforwards                    325               -           290                -
  State and local taxes                             -              58             -               52
  Other                                           521             338           492              252
                                            ---------        --------     ---------         --------
    Subtotal                                    2,029             760         1,790              628
  Valuation allowances                             (81)               -         (81)               -
                                            -----------     -----------   ----------       ------------
  Total deferred taxes                      $   1,948       $     760     $   1,709        $     628
                                            =========       =========     =========        =========
</TABLE>

Management fully expects to realize its net deferred tax assets through income
from future operations.

11.   ACCOUNTS RECEIVABLE SECURITIZATION

Prior to its expiration in October 2000, Owens Corning, through its subsidiary
Owens Corning Funding Corporation, had an agreement allowing sale, on a
revolving basis, of accounts receivable, up to a maximum of $125 million.

In 2001, 2000 and 1999, the Company also sold certain accounts receivable of
certain European operations. At December 31, 2001 and 2000, $22 million and $21
million had been sold, respectively, and the sale was reflected as a reduction
of accounts receivable in the Company's Consolidated Balance Sheet.

The Company maintains an allowance for doubtful accounts based upon the expected
collectibility of all consolidated trade accounts receivable, including
receivables sold. Discounts of $1 million, $8 million, and $9 million on
receivables sold were recorded as other expenses on the Company's Consolidated
Statement of Income (Loss) for the years ended December 31, 2001, 2000 and 1999,
respectively.


<PAGE>


                                     - 86 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

12.   INVENTORIES

Inventories are summarized as follows:
<TABLE>
<S>                                                                       <C>                 <C>
                                                                          2001                2000
                                                                          ----                ----
                                                                          (In millions of dollars)
  Finished goods                                                     $     378           $       397
  Materials and supplies                                                   150                   165
                                                                  ------------          ------------
  FIFO inventory                                                           528                   562
  Less:  reduction to LIFO basis                                           (91)                  (93)
                                                                  -------------        --------------
    Total inventory                                                  $     437           $       469
                                                                  ============           ===========
</TABLE>

Approximately $120 million and $300 million of total inventories were valued
using the LIFO method at December 31, 2001 and 2000, respectively.

13.   INVESTMENTS IN AFFILIATES

At December 31, 2001 and 2000, the Company's affiliates, which generally are
engaged in the manufacture of fibrous glass and related products for the
insulation, construction, reinforcements, and textile markets, include:
<TABLE>
                                                                                           Percent Ownership
<S>                                                                                      <C>            <C>
                                                                                         2001           2000
                                                                                         ----           ----

      Advanced Glassfiber Yarns, LLC (U. S.)                                               49%           49%
      Alcopor Owens Corning Holding AG                                                      -            40%
      Amiantit Fiberglass Industries, Ltd. (Saudi Arabia)                                   -            30%
      Arabian Fiberglass Insulation Company, Ltd. (Saudi Arabia)                           49%           49%
        Automotive Composite Solutions (International)                                     26%            -
      Fiberteq LLC (U. S.)                                                                 50%           50%
(a)   Flowtite Argentina  (Argentina)                                                       -           100%
      Flowtite (Botswana) (Proprietary) Limited (Botswana)                                  -            49%
(a)   Flowtite Iberica, S.A. (Spain)                                                        -           100%
      Owens Corning Energy LLC (U. S.)                                                     50%           50%
      Owens Corning (India) Limited (India)                                                49%           49%
(b)   Owens Corning (Nanjing) (China)                                                      90%           50%
      Owens Corning Yapi Merkezi Boru Sanayi VeTicaret A.S. (Turkey)                       50%           50%
(a)   Owens-Corning Eternit Rohre GmbH (Germany)                                            -           100%
      Siam Fiberglass Co., Ltd. (Thailand)                                                  -            17%
      Stamax B.V. (Netherlands)                                                            50%           50%
      Stamax NA LLC (U. S.)                                                                50%           50%
      Vitro-Fibras, S.A. (Mexico)                                                          40%           40%

</TABLE>

(a)      Although the Company owned 100% of Flowtite Argentina, Flowtite Iberica
         and Owens-Corning Eternit Rohre GmbH, it considered its ownership to be
         temporary and therefore accounted for these entities as unconsolidated
         affiliates under the equity method.

(b)      During 2001, the Company increased its ownership interest in Owens
         Corning (Nanjing) to 90% and has consolidated this subsidiary.



<PAGE>


                                     - 87 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

13.   INVESTMENTS IN AFFILIATES (continued)

The following table provides summarized financial information on a combined 100%
basis for the Company's affiliates accounted for under the equity method:
<TABLE>

<S>                                                                <C>                <C>               <C>
                                                                   2001               2000              1999
                                                                   ----               ----              ----
                                                                             (In millions of dollars)
At December 31:

  Current assets                                                  $114               $266               $239
  Noncurrent assets                                                 528               827                623
  Current liabilities                                                 98              188                171
  Noncurrent liabilities                                            457               706                514

For the year ended December 31:

  Net sales                                                          369              699                477
  Gross margin                                                       116              172                138
  Net income                                                           18              22                  7

The Company's equity in undistributed earnings of affiliates was $6 million at
December 31, 2001.

Net sales, gross margin, and net income for the year ended December 31, 2000,
have been presented on a full year basis for Alcopor Owens Corning Holding AG.
The Company's former European building materials business is included in the
consolidated financial statements through the period ending May 31, 2000 (Note
6).
</TABLE>

14.   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<S>                                                                                   <C>               <C>
                                                                                      2001              2000
                                                                                 --------------    -------------
                                                                                     (In millions of dollars)

     Accounts payable                                                            $         362               $235
     Payroll and vacation pay                                                              144                 48
     Payroll, property, and miscellaneous taxes                                             46                 30
     Other employee benefits liability (Note 8)                                             30                 29
     Restructure costs (Note 5)                                                             16                 24
     Other                                                                                 142                125
                                                                                 --------------              ------
          Total                                                                  $         740               $491
                                                                                 ==============              ======
</TABLE>

15.   CONSOLIDATED STATEMENT OF CASH FLOWS

Cash payments (refunds) for income taxes and cost of borrowed funds are
summarized as follows:
<TABLE>
<S>                                                               <C>               <C>                <C>
                                                                  2001              2000               1999
                                                             -----------         ---------         ----------
                                                                          (In millions of dollars)

     Income taxes                                            $      (22)         $    (26)         $     (77)
     Cost of borrowed funds (Note 3)                                  8               154                154
</TABLE>

The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.


<PAGE>


                                     - 88 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

15.   CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

As a result of the Filing (see Note 1), contractual interest expense has not
been paid on pre-petition debt of the Debtors since the Petition Date.

During the years ended December 31, 2000 and 1999, gross payments for asbestos
litigation claims filed against Fibreboard were approximately $820 million and
$136 million, respectively, all of which were paid/reimbursed by Fibreboard's
insurers or the Fibreboard Settlement Trust.

16.   LEASES

The Company leases certain equipment and facilities under operating leases, some
of which  include cost  escalation  clauses,  expiring on various  dates through
2015.  Total rental expense charged to operations was $124 million in 2001, $185
million in 2000,  and $143 million in 1999.  At December  31, 2001,  the minimum
future rental  commitments under  noncancellable  leases with initial maturities
greater than one year payable over the remaining lives of the leases are:
<TABLE>

<S>                                                                  <C>
                                                             Minimum Future
                                Period                     Rental Commitments
                                ------                     ------------------
                                                        (In millions of dollars)

                                 2002                               $     112
                                 2003                                      88
                                 2004                                      56
                                 2005                                      41
                                 2006                                      28
                           2007 through 2015                              127
                                                                   ----------
                                                                    $     452
                                                                   ==========
</TABLE>

Pursuant to the Bankruptcy Code, Owens Corning and the other Debtors in the
Chapter 11 Cases may elect to reject or assume unexpired pre-petition leases.
The Debtors are currently reviewing the leases for which such an election exists
to determine whether they should be accepted or rejected. The Bankruptcy Court
has extended the time period within which the Debtors must make their elections
as to leases of real property through June 4, 2002, and may grant further
extensions.


<PAGE>


                                     - 89 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

17.   STOCK COMPENSATION PLANS

The Company currently has three stock-based compensation plans. The Company's
Stock Performance Incentive Plan ("SPIP") grants stock options, restricted
stock, performance restricted stock and phantom performance units. The Owens
Corning 1995 Stock Plan ("95 Stock Plan") grants options, restricted stock and
performance stock awards. The SPIP and the 95 Stock Plan (collectively, the
"Plans") permit up to 2 percent and 1 percent, respectively, of common shares
outstanding at the beginning of each calendar year to be awarded as stock
options and restricted stock (with 25% of this amount as the maximum permitted
number of restricted stock awards). The Company may carry forward, independently
for each plan, unused shares from prior years and may increase the shares
available for awards in any calendar year through an advance of up to 25% of the
subsequent year's allocation (determined by using 25% of the current year's
allocation). These shares are also subject to the 25% limit for restricted stock
awards. During 2001, the maximum number of shares available under the Plans for
stock awards was 2,345,348 shares. The following are descriptions of the awards
granted under the Plans:

Stock Options
-------------

    Under the Plans, the exercise prices of each option equal the market price
    of the Company's common stock on the date of grant and an option's maximum
    term is 10 years. Shares issued from the exercise of options are recorded in
    the common stock accounts at the option price. The awards and vesting
    periods of such awards are determined at the discretion of the compensation
    committee of the Board of Directors. No stock options were awarded in 2001.
    During 2000 and 1999, respectively, 1,531,244 and 1,930,292 stock options
    were awarded under the Plans.

Restricted Stock Awards
-----------------------

    Under the Plans, compensation expense is measured based on the market price
    of the stock at date of grant and is recognized on a straight-line basis
    over the vesting period. Stock restrictions lapse, subject to alternate
    vesting plans for death, disability, approved early retirement and
    involuntary termination, over various periods ending in 2006. At December
    31, 2001, the Company had 220,978 shares of restricted stock outstanding.
    There were no restricted stock grants in 2001. During 2000 and 1999, 11,000,
    and 284,500 shares of restricted stock were granted, respectively. The
    weighted-average grant-date fair value for shares granted was $15.37 and
    $34.81 for 2000 and 1999, respectively.

Performance Restricted Stock Awards
-----------------------------------

    Under the Plans, certain officers are awarded performance shares.
    Performance shares represent the opportunity to earn up to a specified
    number of shares of the Company's common stock, if the Company achieves
    specified performance goals during the designated performance period. Any
    portion of the award not earned during the performance period is forfeited
    by the officer at the end of such period. Compensation expense is measured
    based on market price of the Company's common stock and is recognized over
    the performance period, which is generally three years. At December 31,
    2001, the Company had no performance units outstanding and none were granted
    during 2001, 2000 and 1999.



<PAGE>


                                     - 90 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

17.   STOCK COMPENSATION PLANS (continued)

Phantom Performance Units
-------------------------

    Under the Plans, certain officers are awarded phantom performance units.
    Each unit provides the holder the opportunity to earn a cash award equal to
    the fair market value of the Company's common stock upon the attainment of
    certain performance goals. Any portion of the award not earned during the
    performance period is forfeited by the officer at the end of such period.
    Compensation expense is measured based on market price of the Company's
    common stock and is recognized over the performance period, which is
    generally three years. At December 31, 2001, the Company had no phantom
    performance units outstanding and none were granted during 2001, 2000 and
    1999.

Performance Stock Awards
------------------------

    Under the Plans, certain employees are awarded unrestricted stock based upon
    achievement of certain goals within a designated performance period.
    Compensation cost for these awards is accrued over the performance period
    based upon a base compensation level and the performance level achieved.
    Stock awards are issued in the year subsequent to the performance period.
    The number of shares issued is based upon the market price of the stock on
    date of issuance and the level of compensation earned. No performance stock
    awards were issued in 2001. In 2000 and 1999, respectively, 638,541 and
    267,711 shares were issued to employees.

The Company also has a plan to award stock and stock options to non-employee
directors. The receipt of the stock awards may be deferred at the discretion of
the directors. Approximately 349,000 shares were available under this plan at
December 31, 2001. As of December 31, 2001, 24,259 deferred awards were
outstanding. In 2001 and 2000, there were no options issued, however, 4,500
stock awards were granted and issued in 2001. In 2000, 5,000 stock awards were
granted, 1,000 of which were issued. In 1999, 10,000 options and 5,000 stock
awards were granted, 500 of which were issued. The weighted-average grant-date
fair value for shares granted in 2001, 2000 and 1999 was $2.24, $17.97 and
$36.53, respectively.

The Company applies Financial Accounting Standards Board Statement No. 123 (SFAS
123) for disclosures of its stock based compensation plans. The Company applies
Accounting Principles Board Opinion No. 25 and related Interpretations for
expense recognition as permitted by SFAS 123. All stock options issued by the
Company are exercisable at a price equal to the market price at the date of
grant. Accordingly, no compensation cost has been recognized for any of the
options granted under the Plans. The compensation cost that has been recorded
for awards other than options was $0.3 million in 2001, $1 million in 2000 and
$21 million in 1999.


<PAGE>


                                     - 91 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

17.   STOCK COMPENSATION PLANS (continued)

A summary of the status of the Company's plans that issue options as of December
31, 2001, 2000, and 1999 and changes during the years ending on those dates is
presented below:
<TABLE>

<S>                                         <C>                         <C>                          <C>
                                            2001                        2000                         1999
                                            ----                        ----                         ----

                                             Weighted-                   Weighted-                    Weighted-
                             Number          Average      Number         Average       Number         Average
                             of              Exercise     of             Exercise      of             Exercise
                             Shares          Price        Shares         Price         Shares         Price
                             ------          -----        ------         -----         ------         -----

Beginning of year               8,130,529    $   32.98       7,720,367   $   36.29     6,095,968      $   36.72

Options granted                         -    $         -     1,531,244   $   15.37     1,940,292      $   34.81

Options exercised                       -    $         -          (183)  $   15.37         (79,850)   $   28.66

Options canceled               (924,129)     $   30.92    (1,120,899)    $   31.68        (236,043)   $   38.02
                             -----------                  -----------                  ------------


End of year                     7,206,400    $   33.27       8,130,529   $   32.98     7,720,367      $   36.29
                                =========                    =========                 =========


Exercisable                     5,145,431    $   36.46       4,903,779   $   37.42     4,426,982      $    37.22

Weighted-average
fair-value of options
granted during the
year                                         $       -                   $     7.03                   $    12.14
</TABLE>

The following table summarizes information about options outstanding at December
31, 2001:
<TABLE>

<S>                        <C>                 <C>              <C>                  <C>            <C>
                                        Options Outstanding                             Options Exercisable
                        -------------------------------------------------        -------------------------------
                           Number                 Weighted-Average                 Number        Weighted-
    Range of             Outstanding          Remaining          Exercise        Exercisable      Average
Exercise Prices          at 12/31/01      Contractual Life         Price         at 12/31/01     Exercise Price
---------------          -----------      ----------------    -----------        -----------     --------------

$14.187 - $28.437        1,986,337              6.81          $20.307               978,300        $25.392
$29.875 - $34.812        2,105,839              5.06          $33.691             1,055,240        $32.576
$34.875 - $40.500        1,525,843              3.46          $38.448             1,523,510        $38.448
$40.687 - $45.000        1,419,387              3.92          $43.765             1,419,387        $43.765
$45.500 - $45.500          168,994              4.26          $45.500               168,994        $45.500
</TABLE>


<PAGE>


                                     - 92 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

17.   STOCK COMPENSATION PLANS (continued)

The fair value of each option granted in 2000 and 1999 was estimated on the date
of grant using the Black-Scholes option-pricing model and the weighted average
assumptions shown below. No options were granted in 2001.
<TABLE>

<S>                                                    <C>            <C>
               Assumptions                             2000           1999
         ----------------------                  ---------------------------

         Risk-free interest rate                     6.50%             4.79%
         Expected life (in years)                        5                5
         Expected volatility                        40.72%            32.44%
         Expected dividends                           .00%              .61%
</TABLE>


Had compensation cost for the Plans been determined based on the fair value at
the grant dates for awards under those plans consistent with the method
described in SFAS 123, the Company's net income (loss) and net income (loss) per
share would have been reduced to the pro forma amounts indicated below:
<TABLE>

<S>                                                              <C>          <C>          <C>
                                                                 2001         2000         1999
                                                               ---------    ---------   --------
                                                           (In millions of dollars, except share data)

    Net income (loss)                    As reported          $       39     $    (478)   $    270
                                         Pro forma            $       33     $    (487)   $    260

    Basic net income                     As reported          $     0.72     $   (8.71)   $   4.98
       (loss) per share                  Pro forma            $     0.60     $   (8.88)   $   4.80

    Diluted net income                   As reported          $     0.66     $   (8.71)   $   4.67
        (loss) per share                 Pro forma            $     0.55     $   (8.88)   $   4.50
</TABLE>

The following table reconciles the net income (loss) and weighted average number
of shares used in the basic earnings per share calculation to the net income
(loss) and weighted average number of shares used to compute diluted earnings
per share.


<PAGE>


                                     - 93 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

17.   STOCK COMPENSATION PLANS (continued)
<TABLE>

<S>                                                                           <C>               <C>             <C>
                                                                              2001              2000            1999
                                                                              ----              ----            ----
                                                                          (In millions of dollars, except share data)

Net income (loss) used for basic earnings per share                         $    39         $   (478)     $      270

Net income effect of assumed conversion of
   preferred securities                                                           -                -               8
                                                                            ---------       ---------     ----------

Net income (loss) used for diluted earnings per share                       $     39        $   (478)     $      278
                                                                            =========       =========     ==========
Weighted-average number of shares outstanding
   used for basic earnings per share (thousands)                               55,056         54,816          54,083

     Non-vested restricted shares (thousands)                                     299              -             614

     Deferred awards (thousands)                                                   24              -             189

     Shares from assumed conversion of
        preferred securities (thousands)(see Note 7)                            4,566              -           4,566
                                                                            ---------       --------      ----------

Weighted-average number of shares outstanding and
   common equivalent shares used for diluted earnings
   per share (thousands)                                                       59,945         54,816          59,452
                                                                               ======         ======          ======
</TABLE>

Due to their anti-dilutive effect, diluted shares outstanding during 2000
excluded approximately 4.6 million common shares from the potential conversion
of preferred securities (see Note 7) and approximately 500 thousand non-vested
restricted shares and deferred awards.

18.      DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL
         INSTRUMENTS

The Company is a party to financial instruments in the normal course of business
to reduce exposure to fluctuating  foreign  currency  exchange  rates,  interest
rates, and commodity prices.  The Company is exposed to credit loss in the event
of  nonperformance by the other parties to the financial  instruments  described
below.  However,  the Company does not  anticipate  nonperformance  by the other
parties.  The Company does not engage in trading activities with these financial
instruments  and does not  generally  require  collateral  or other  security to
support these financial  instruments.  The amounts of derivatives  summarized in
the foreign  currency  exchange risk and interest rate risk  management  section
below do not generally represent the amounts exchanged by the parties and, thus,
are not a measure of the exposure of the Company through its use of derivatives.
The amounts  exchanged were calculated on the basis of the notional  amounts and
the other terms of the  derivatives,  which relate to interest  rates,  exchange
rates, securities prices, financial, or other indices.

Foreign Currency Exchange Risk and Interest Rate Risk Management
----------------------------------------------------------------

The Company enters into various types of derivative financial instruments to
manage its foreign currency exchange risk and interest rate risk, as indicated
in the following table.


<PAGE>


                                     - 94 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

18.  DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL
     INSTRUMENTS (continued)
<TABLE>

<S>                                                       <C>                      <C>
                                                     Notional Amount         Notional Amount
                                                    December 31, 2001       December 31, 2000
                                                    -----------------       -----------------
                                                            (In millions of dollars)
     Forward currency exchange contracts                    $ 30                     $ 9
     Interest rate swaps                                      19                      18


     Commodity future contract                       540,000 MMBTU                     -
                                                        per month
</TABLE>

The Company  enters  into  forward  currency  exchange  contracts  to manage its
exposure against foreign currency fluctuations on certain assets and liabilities
denominated  in foreign  currencies.  As of December 31, 2001, the Company has 2
forward currency  exchange  contracts  maturing in 2002 that exchange 75 million
Norwegian krone and approximately 14 million euros. As of December 31, 2000, the
Company had 3 forward  currency  exchange  contracts  that exchanged less than 1
million euros,  approximately  1 million U.S.  dollars,  and less than 1 million
British  pounds.  Through  December 31, 2000,  gains and losses on these foreign
currency  hedges were included in the carrying  amount of the related assets and
liabilities.  These  transactions  are considered a natural hedge as the gain or
loss on the hedge offsets the gain or loss from currency value fluctuations. The
Company has elected not to apply hedge  accounting in 2001,  but rather mark the
contracts to market through the statement of income, the effect of which was not
material during 2001.

During 2001 and 2000, the Company also entered into a foreign currency  exchange
contract  to reduce  its  exposure  to  certain  U.S.  dollar  denominated  debt
instruments in China.  The 2001 contract,  which matures in 2002,  will exchange
approximately 82 million Chinese renminbi against  approximately 10 million U.S.
dollars. The 2000 contract,  which matured in 2001,  exchanged  approximately 66
million Chinese renminbi  against  approximately 8 million U.S.  dollars.  These
transactions  are  considered  a natural  hedge as the gain or loss on the hedge
offsets  the gain or loss from  currency  value  fluctuations.  The  Company has
elected not to apply hedge  accounting,  but rather mark the  contract to market
through the  statement of income,  the effect of which was not  material  during
2001.

During  2001,  the Company  invested  excess cash in South  America in Brazilian
certificates of deposit,  treasury bonds and debentures.  At the same time these
investments are made, the Brazilian real are swapped into U.S. dollars at a U.S.
dollar  interest rate with perfectly  matching  investment  amounts and maturity
dates.  The  purpose  of this  hedge is to reduce  the  impact of changes in the
Brazilian real and U.S. dollar exchange rates. At December 31, 2001,  there were
18 such  cross-currency  interest rate swaps outstanding at a notional amount of
$19  million  U.S.   dollars.   At  December  31,  2000,   there  were  17  such
cross-currency  interest  rate swaps  outstanding  at a  notional  amount of $18
million U.S. dollars.

During 2001,  the Company  entered into a swap  agreement  for  approximately  5
million  MMBTU's of natural gas to hedge its exposure to  fluctuating  commodity
prices.  The swap is a cash flow hedge and is  recorded  in other  comprehensive
income  (loss),  except to the extent of  inefficiencies  which are  recorded as
other income in the statement of income. At December 31, 2001, accumulated other
comprehensive  income (loss) related to the swap was a loss of  approximately $2
million and the inefficiency recorded as other income (loss) was not material.


<PAGE>


                                     - 95 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

18.  DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL
     INSTRUMENTS (continued)

Other Financial Instruments with Off-Balance-Sheet Risk
-------------------------------------------------------

As of  December  31,  2001 and 2000,  the  Company  is  contingently  liable for
guarantees  of  indebtedness  owed  by  certain  unconsolidated   affiliates  of
approximately  $38 million and $35  million,  respectively.  As of December  31,
2001,  approximately  $34  million  of such  indebtedness  was  alleged to be in
default as a result of the Filing.  The affiliate  that owed  approximately  $19
million of such  indebtedness  is in  negotiations  with its  lenders  and other
parties,  including Owens Corning,  concerning the status of this  indebtedness.
Depending on the outcome of such  negotiations,  it is possible  that the lender
will attempt to enforce the related  guarantee  against Owens Corning.  Any such
claim would constitute a liability subject to compromise,  since the claim would
relate to a  pre-petition  obligation of Owens  Corning,  and may give rise to a
loss  of  up to  the  full  amount  of  the  claim.  Subject  to  the  foregoing
uncertainties,  the  Company  is of the  opinion  that its other  unconsolidated
affiliates will be able to perform under their respective payment obligations in
connection  with  such  guaranteed  indebtedness  and that no  payments  will be
required and no losses will be incurred by the Company under such guarantees.


Concentrations of Credit Risk
-----------------------------

As of December 31, 2001 and 2000, the Company has no significant group
concentrations of credit risk.

Fair Value of Financial Instruments
-----------------------------------

The following methods and assumptions were used to estimate the fair value of
each category of financial instruments:

        Cash and short-term financial instruments
        -----------------------------------------

        The carrying amount approximates fair value due to the short maturity of
        these instruments.

        Restricted cash, securities and other - Fibreboard
        --------------------------------------------------

        The fair values of cash and marketable securities in the Fibreboard
        Settlement Trust have been estimated by traded market values or by
        obtaining quotes from brokers.

        Long-term notes receivable
        --------------------------

        The fair value has been estimated using the expected future cash flows
        discounted at market interest rates.

        Long-term debt
        --------------

        The fair value of the Company's long-term debt, which is not subject to
        compromise, has been estimated based on quoted market prices for the
        same or similar issues, or on the current rates offered to the Company
        for debt of the same remaining maturities. The Company is unable to
        estimate the fair value of long-term debt of the Debtors which is
        subject to compromise at December 31, 2001, due to the uncertainties
        associated with the Filing.


<PAGE>


                                     - 96 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

18.  DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL
     INSTRUMENTS (continued)

        Foreign currency swaps and interest rate swaps
        ----------------------------------------------

        The fair values of foreign currency swaps and interest rate swaps have
        been estimated by traded market values or by obtaining quotes from
        brokers.

Forward currency exchange contracts, option contracts, and financial guarantees
-------------------------------------------------------------------------------

The fair values of forward currency exchange contracts, option contracts, and
financial guarantees are based on the estimated cost to acquire similar
agreements or on the estimated cost to terminate these agreements or otherwise
settle the obligations with the counter parties at the reporting date.

The estimated fair values of the Company's financial instruments as of December
31, 2001, and 2000, which have fair values different than their carrying
amounts, are as follows:
<TABLE>

<S>                                                               <C>                     <C>
                                                                  2001                    2000
                                                                  ----                    ----
                                                        Carrying         Fair         Carrying         Fair
                                                         Amount          Value        Amount           Value
                                                         ------          ------       -------          -----
                                                                        (In millions of dollars)
Assets
------

  Long-term notes receivable                             $   26          $  26         $   24          $   24

Liabilities
-----------

  Long-term debt                                              5              5              7               7

</TABLE>

The  Company's  estimates  of fair  value  approximate  carrying  value  for all
derivative financial instruments.

As of December 31, 2001 and 2000, the Company is contingently liable for
guarantees of indebtedness owed by certain unconsolidated affiliates. There is
no market for these guarantees and they were issued without explicit cost.
Therefore, it is not practicable to establish their fair value.

19.  CONTINGENT LIABILITIES

Asbestos Liabilities
--------------------

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)

Numerous claims have been asserted against Owens Corning alleging personal
injuries arising from inhalation of asbestos fibers. Virtually all of these
claims arise out of Owens Corning's manufacture, distribution, sale or
installation of an asbestos-containing calcium silicate, high temperature
insulation product, the manufacture and distribution of which was discontinued
in 1972. Owens Corning received approximately 18,000 asbestos personal injury
claims during 2000, approximately 32,000 such claims during 1999 and
approximately 69,000 such claims during 1998.

Prior to October 5, 2000, when the Debtors, including Fibreboard (see Item B
below), filed voluntary petitions for relief under Chapter 11 of the United
States Bankruptcy Code, the vast majority of asserted asbestos personal injury
claims were in the process of being resolved through the National Settlement

<PAGE>


                                     - 97 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

19.   CONTINGENT LIABILITIES (continued)

Program described below. As a result of the Filing, all pre-petition asbestos
claims and pending litigation against the Debtors, including without limitation
claims arising under the National Settlement Program, were automatically stayed
(see Note 1). Owens Corning expects that all pending and future asbestos claims
against Owens Corning and Fibreboard will be resolved pursuant to a plan or
plans of reorganization. Owens Corning is unable to determine at this time
whether asbestos-related claims asserted against Fibreboard will be treated in
the same manner as those asserted against Owens Corning in any such plan or
plans.

National Settlement Program
---------------------------

Beginning in late 1998, Owens Corning implemented a National Settlement Program
("NSP") to resolve personal injury asbestos claims through settlement agreements
with individual plaintiffs' law firms. The NSP was intended to better manage the
asbestos liabilities of Owens Corning and Fibreboard (see Item B below), and to
help Owens Corning better predict the timing and amount of indemnity payments
for both pending and future asbestos claims.

The number of law firms participating in the NSP expanded from approximately 50
when the NSP was established to approximately 120 as of the Petition Date. Each
of these participating law firms agreed to a long-term settlement agreement
which varied by firm ("NSP Agreement") extending through at least 2008 which
provided for the resolution of their existing asbestos claims, including unfiled
claims pending with the participating law firm at the time it entered into an
NSP Agreement ("Initial Claims"). The NSP agreements also established procedures
and fixed payments for resolving without litigation claims against either Owens
Corning or Fibreboard, or both, arising after a participating firm entered into
an NSP Agreement ("Future Claims").

Terms and Conditions of NSP Agreements
--------------------------------------

Settlement amounts for both Initial Claims and Future Claims were negotiated
with each firm participating in the NSP, and each firm was to communicate with
its respective clients to obtain authority to settle individual claims. Payments
to individual claimants were to vary based on a number of factors, including the
type and severity of disease, age and occupation. All such payments were subject
to delivery of satisfactory evidence of a qualifying medical condition and
exposure to Owens Corning's and/or Fibreboard's products, delivery of customary
releases by each claimant, and other conditions. Certain claimants settling
non-malignancy claims with Owens Corning and/or Fibreboard were entitled to an
agreed pre-determined amount of additional compensation if they later developed
a more severe asbestos-related medical condition.

As to Future Claims, each participating NSP firm agreed (consistent with
applicable legal requirements) to recommend to its future clients, based on
appropriately exercised professional judgment, to resolve their asbestos
personal injury claims against Owens Corning and/or Fibreboard through an
administrative processing arrangement, rather than litigation. In the case of
Future Claims involving non-malignancy, claimants were required to present
medical evidence of functional impairment, as well as the product exposure
criteria and other requirements set forth above, to be entitled to compensation.

Owens Corning and Fibreboard (see Item B below) each retained the right to
terminate any individual NSP Agreement if in any year more than a specified
number of plaintiffs represented by the plaintiffs' firm in question rejected
and ultimately opted out of such agreement. Opt out procedures were specified in

<PAGE>


                                     - 98 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

19.      CONTINGENT LIABILITIES (continued)

the settlement  agreements,  and provided for mediation and further  negotiation
before a claimant could pursue his or her case in the court system.  Through the
Petition  Date,  fewer than 300  claimants  had  elected to reject the  original
settlement proposal, and to mediate under the terms of the NSP Agreement.

As of the Petition Date, the NSP covered  approximately  240,000 Initial Claims,
approximately 148,000 of which had satisfied all conditions to final settlement,
including  receipt of executed  releases,  or other  resolution  (the "Final NSP
Settlements")  at an average cost per claim of approximately  $9,000.  As of the
Petition Date,  approximately 88,000 of such Final NSP Settlements had been paid
in full or otherwise resolved,  and approximately 60,000 were unpaid in whole or
in part. As of such date, the remaining  balance payable under NSP Agreements in
connection  with these  unpaid  Final NSP  Settlements  was  approximately  $539
million.  Through the Petition  Date,  Owens Corning had received  approximately
3,800 Future Claims under the NSP.

At this time, Owens Corning is unable to predict the manner in which the NSP
Agreements and the resolution of claims thereunder will be treated under the
terms of any plan or plans of reorganization.

Non-NSP Claims
--------------

As of the Petition Date, approximately 36,000 asbestos personal injury claims
were pending against Owens-Corning outside the NSP. This compares to
approximately 25,300 such claims pending on December 31, 1999. The information
needed for a critical evaluation of pending claims, including the nature and
severity of disease and definitive identifying information concerning claimants,
typically becomes available only through the discovery process or as a result of
settlement negotiations, which often occur years after particular claims are
filed. As a result, Owens Corning has limited information about many of such
claims, and the actual number of pending claims may vary from the numbers
indicated.

Owens Corning resolved (by settlement or otherwise) approximately 10,200
asbestos personal injury claims outside the NSP during 1998, 4,800 such claims
during 1999 and 3,100 such claims during 2000 prior to the Petition Date. The
average cost of resolution was approximately $35,900 per claim for claims
resolved during 1998, $34,600 per claim for claims resolved during 1999, and
$44,800 per claim for claims resolved during 2000 prior to the Petition Date. As
a rule, these claims were settled as they were scheduled for trial, and they
typically involved more serious injuries and diseases. Accordingly, Owens
Corning does not believe that such average costs of resolution are
representative of the value of the non-NSP claims then pending against the
Company.

At this time, Owens Corning is unable to predict the manner in which non-NSP
claims will be treated under the terms of any plan or plans of reorganization.

Asbestos-Related Payments
-------------------------

As a result of the Filing, Owens Corning has not made any asbestos-related
payments since the Petition Date except for approximately $14 million paid on
its behalf by third parties pursuant to appeal bonds issued prior to the
Petition Date. During 1999 and 2000 (prior to the Petition Date), Owens Corning
(excluding Fibreboard) made asbestos-related payments falling within four major
categories: (1) Settlements in respect of verdicts incurred or claims resolved
prior to the implementation of the NSP ("Pre-NSP Settlements"); (2) NSP
settlements; (3) Non-NSP settlements covering cases not resolved by the NSP; and
(4) Defense, claims processing and administrative expenses, as follows:


<PAGE>


                                     - 99 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

19.   CONTINGENT LIABILITIES (continued)
<TABLE>
<S>                                                                         <C>                       <C>
                                                                                (In millions of dollars)
                                                                                                 2000 (through
                                                                            1999               October 4, 2000)
                                                                            ----               ----------------

Pre-NSP Settlements                                                       $   170                $    51
NSP Settlements                                                               570                    538
Non-NSP Settlements                                                            30                     42
Defense, Claims Processing and Administrative Expenses                         90                     54
                                                                        ---------              ---------
                                                                          $   860                $   685
                                                                          =======                =======
</TABLE>

Prior to the Petition Date, Owens Corning deposited certain amounts in escrow
accounts to facilitate claims processing under the NSP ("Administrative
Deposits"). Amounts deposited into escrow in Administrative Deposits during a
reporting period are included in the payments shown for NSP Settlements during
the period. At December 31, 2001, approximately $113 million of Administrative
Deposits previously made by Owens Corning had not been finally distributed to
claimants ("Undistributed Administrative Deposits") and, accordingly, are
reflected in Owens Corning's consolidated balance sheet as restricted assets
(under the caption "Restricted cash - asbestos and insurance related") and have
not been subtracted from Owens Corning's reserve for asbestos personal injury
claims (discussed below).

At this time, Owens Corning is unable to predict what the treatment of funds
held in Undistributed Administrative Deposits will be under the terms of any
plan or plans of reorganization. However, in 2001, the holder of approximately
$49 million of Undistributed Administrative Deposits for Owens Corning (and
approximately $28 million of similar Undistributed Administrative Deposits for
Fibreboard) filed a motion with the Bankruptcy Court requesting an order
authorizing distribution of the deposits it holds to the escrow beneficiaries.
At a February 25, 2002 hearing on this motion, the Bankruptcy Court ruled that
escrow beneficiaries that had received both written notice of approval for
payment and an initial payment from the escrow deposits prior to the Petition
Date would be entitled to receive their remaining payments from the principal of
the escrow deposits, with the balance of the deposits, if any, plus any
investment proceeds to be returned to Owens Corning (or Fibreboard). The ruling
is subject to entry of a final order by the Bankruptcy Court and appeal by any
of the parties in interest.

All amounts discussed above are before tax and application of insurance
recoveries.

Tax Legislation
---------------

On April 4, 2001, the United States House of Representatives introduced proposed
legislation (HR 1412, also known as the Asbestos Tax Fairness Act) to exempt
income earned by qualifying asbestos-related settlement funds, including
qualifying trusts established under Section 524(g) of the Bankruptcy Code, from
federal income tax. The exemption from income tax would benefit the Fibreboard
Settlement Trust (described below) by having the effect of enlarging the corpus
of the trust through tax-free income accumulation. In addition, the legislation
would allow asbestos defendants to carry-back net operating losses ("NOLs")
created by asbestos payments to the years in which the products containing
asbestos were produced or distributed (and to each subsequent year) in order to
obtain a refund of federal income taxes paid in those periods. In the case of
Owens Corning, this would entitle the Company to carry-back its NOLs to the
early 1950s. The bill has strong bipartisan support in the form of 72 original
cosponsors, including a majority of the members of the House Ways and Means
Committee.


<PAGE>


                                     - 100 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

19.   CONTINGENT LIABILITIES (continued)

On June 14, 2001, a companion bill identical to HR 1412 was introduced in the
United States Senate (S 1048). This bill also has strong bipartisan support.

Despite the strong bipartisan support for both bills, the apparent movement of
the Federal budget from surplus to deficit is expected to adversely impact the
chances for passage of tax bills such as HR 1412 and S 1048. Consequently, there
can be no assurance that any such legislation ultimately will be enacted.
Moreover, as a result of the Filing, there is uncertainty regarding the impact
of the proposed tax legislation on the Debtors' respective estates even if such
legislation were enacted.

Other Asbestos-Related Litigation
---------------------------------

As previously reported, the Company believes that it has spent significant
amounts to resolve claims of asbestos claimants whose injuries were caused or
exacerbated by cigarette smoking. Owens Corning and Fibreboard are pursuing
litigation against tobacco companies (discussed below) to obtain payment of
monetary damages (including punitive damages) for payments made by Owens Corning
and Fibreboard to asbestos claimants who developed smoking related diseases.
There can be no assurance that any such litigation will go to trial or be
successful.

In October 1998, the Circuit Court for Jefferson County, Mississippi granted
leave to file an amended complaint in an existing action to add claims by Owens
Corning against seven tobacco companies and several other tobacco industry
defendants. On June 17, 2001, the Jefferson court entered an order dismissing
Owens Corning's case in response to the defendants' motion for summary judgment
on the basis that Owens Corning's injuries were indirect and thus too remote
under Mississippi law to allow recovery. The Company has appealed such dismissal
to the Supreme Court of Mississippi.

In addition to the Mississippi lawsuit, a lawsuit brought in December 1997 by
Owens Corning and Fibreboard is pending in the Superior Court for Alameda
County, California against the same tobacco companies. In August 2001, the
defendants filed motions to dismiss Owens Corning's and Fibreboard's claims on
the basis of the decision in the Mississippi lawsuit as well as California law.
As the result of a hearing on these motions on November 20, 2001, the California
court denied the motion to dismiss Fibreboard's claims on the basis of the
decision in the Mississippi lawsuit and otherwise stayed the proceeding pending
the outcome of the Mississippi suit.

Insurance
---------

As previously reported, late in the second quarter of 2001, Owens Corning
entered into a settlement agreement with one of its excess insurance carriers,
resolving a dispute concerning coverage from such insurer for non-products
asbestos-related personal injury claims. As a result, during the third quarter
of 2001, the carrier funded $55 million into an escrow account to be released in
conjunction with implementation of an approved plan of reorganization, and the
Company's recorded insurance asset was reduced. The escrowed funds plus earnings
are reflected on Owens Corning's consolidated balance sheet as restricted
assets, under the category "Restricted cash - asbestos and insurance related."
During the third and fourth quarters of 2001, Owens Corning also received
payments of approximately $5 million and $2 million, respectively, in respect of
previous settlements with bankrupt insurance carriers. These amounts were
recorded in income in the relevant periods.


<PAGE>


                                     - 101 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

19.   CONTINGENT LIABILITIES (continued)

As of December 31, 2001, Owens Corning's financial statements reflect $4 million
in unexhausted insurance coverage (net of deductibles and self-insured
retentions) under its liability insurance policies applicable to asbestos
personal injury claims. This amount represented unconfirmed potential
non-products coverage with excess level insurance carriers, as to which Owens
Corning had estimated its probable recoveries.

Owens Corning also has other unconfirmed potential non-products coverage with
excess level carriers. Owens Corning is actively pursuing non-products insurance
recoveries under these policies. In October, 2001, Owens Corning filed a lawsuit
in Lucas County, Ohio, against ten excess level carriers for declaratory relief
and damages for failure to make payments under its non-products insurance
coverage. The amount and timing of recoveries from excess level policies will
depend on the outcome of litigation or other proceedings, possible settlements
of those proceedings, or other negotiations.

Reserve
-------

Owens Corning estimates a reserve in accordance with generally accepted
accounting principles to reflect asbestos-related liabilities that have been
asserted or are probable of assertion, in which liabilities are probable and
reasonably estimable. This reserve was established initially through a charge to
income in 1991, with additional charges to income of $1.1 billion in 1996, $1.4
billion in 1998, and $1.0 billion in 2000.

As of December 31, 2001, a reserve of approximately $2.2 billion in respect of
Owens Corning's asbestos-related liabilities was one of the items included in
Owens Corning's consolidated balance sheet under the category "Liabilities
Subject to Compromise." For periods prior to the Petition Date, these
liabilities were reflected as current or other liabilities (depending on the
period in which payment was expected) under the category "Reserve for asbestos
litigation claims."

The approximate balances of the components of the reserve at September 30, 2000
(the ending date of the last reporting period preceding the Petition Date) were:
<TABLE>
<S>                                                                                           <C>
                                                                                        September 30, 2000
                                                                                        ------------------
                                                                                     (In billions of dollars)

NSP backlog                                                                                 $     1.10
Non-NSP backlog                                                                                   0.30
Future Claims                                                                                     0.70
Defense, Claims Processing and Administrative Expenses                                            0.10
</TABLE>

In connection with this asbestos reserve, Owens Corning notes that:

-      The "NSP backlog" component represented the remaining estimated cost of
       resolving Initial Claims under the NSP.

-      The "Non-NSP backlog" component represented the estimated cost of
       resolving asbestos personal injury claims pending against Owens Corning
       outside the NSP.

-      The "Future claims" component represented the estimated cost of resolving
       (i) Future Claims under the NSP and (ii) non-NSP claims subsequently
       made.


<PAGE>


                                     - 102 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

19.   CONTINGENT LIABILITIES (continued)

As Owens Corning has discussed in previous public filings, any estimate of its
liabilities for pending and expected future asbestos claims is subject to
considerable uncertainty because such liabilities are influenced by numerous
variables that are inherently difficult to predict. As discussed further below,
such uncertainties significantly increased as a result of the Chapter 11 Cases.
Prior to the Petition Date, such variables included, among others, the cost of
resolving pending non-NSP claims; the disease mix and severity of disease of
pending NSP claims; the number, severity of disease, and jurisdiction of claims
filed in the future (especially the number of mesothelioma claims); how many
future claimants were covered by an NSP Agreement; the extent, if any, to which
individual claimants exercised a right to opt out of an NSP Agreement and/or
engage counsel not participating in the NSP; the extent, if any, to which
counsel not bound by an NSP Agreement undertook the representation of asbestos
personal injury plaintiffs against Owens Corning; the extent, if any, to which
Owens Corning exercised its right to terminate one or more of the NSP Agreements
due to excessive opt-outs or for other reasons; and Owens Corning's success in
controlling the costs of resolving future non-NSP claims.

As one example of the difficulties inherent in estimating future asbestos
claims, Owens Corning notes that the Manville Personal Injury Settlement Trust,
a trust established to settle asbestos claims against Johns Manville
Corporation, announced in June 2001 that it was reducing its initial settlement
distributions by fifty percent on the basis of the continued record pace of
asbestos claim filings and the prediction of its consultants that the trust
might receive 1.5 to 2.5 million additional claims.

The Chapter 11 Cases significantly increase the inherent difficulties and
uncertainties involved in estimating the number and cost of resolution of
present and future asbestos-related claims against Owens Corning and may have
the effect of increasing the number and ultimate cost of resolution of such
claims, perhaps substantially. In particular, the status of the NSP Agreements
and the treatment of pending and future claims thereunder will depend on the
outcome of negotiations among the various constituencies in the Chapter 11 Cases
and determinations by the Bankruptcy Court as to the issues involved, none of
which can be predicted at this time. The uncertainties associated with the
status of the NSP Agreements and the treatment of claims thereunder include the
following:

-        It is possible that one or more constituencies in the Chapter 11 Cases
         may seek to set aside the NSP Agreements on various grounds. In any
         event, it is highly uncertain how any plan or plans of reorganization
         will treat the various types of NSP claims, including without
         limitation claims with no evidence of significant medical impairment,
         or whether such unimpaired claims will be treated as allowed claims
         thereunder.

-        The settlement values for specified categories of disease set forth in
         the NSP Agreements were established by arms-length negotiations with
         the participating law firms in circumstances very different from those
         prevailing in the Chapter 11 Cases. The settlement values available to
         individual claimants under the arrangements to be included in any plan
         or plans of reorganization may vary substantially from those
         contemplated by the NSP Agreements. Because Owens Corning's estimate of
         liabilities in respect of non-NSP claims assumed payment of settlement
         values similar to those contained in the NSP Agreements, such estimate
         is subject to similar uncertainty.


<PAGE>



                                     - 103 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


19.   CONTINGENT LIABILITIES (continued)

Additional uncertainties raised by the Chapter 11 Cases include the following:

-        The impact, if any, the Administrative Consolidation will have on the
         timing, outcome or other aspects of the Chapter 11 Cases.

-        As a result of the Filing, all of the holders of pre-petition asbestos
         claims against Owens Corning or Fibreboard will be required to file
         proofs of claim in the form and manner prescribed by the Bankruptcy
         Court. The filing of a proof of claim will be a precondition to any
         pre-petition claim being considered for payment as an allowed claim.
         Moreover, the Filing, including the significant publicity associated
         with the Chapter 11 Cases and notices required by the Bankruptcy Code
         that must be given to creditors and other parties in interest, has
         significantly increased the inherent difficulties and uncertainties
         involved in estimating the number and cost of resolution of not only
         pre-petition claims but also additional claims that may be asserted in
         the course of the Chapter 11 Cases. Among other things, it is not
         possible to predict at this time how many proofs of claim will be
         timely filed, how many proofs of claim will represent allowed claims,
         or the aggregate value of such allowed claims.

-        Owens Corning anticipates that the number and estimated aggregate value
         of allowed future claims will be determined as a result of negotiations
         involving the legal representative for the class of future asbestos
         claimants and the other interested constituencies or, if necessary, by
         the Bankruptcy Court. It is not possible to predict the outcome of such
         negotiations at this time. In connection with such negotiations, it is
         anticipated that a number of interested constituencies, including the
         representatives of the pre-petition and future asbestos claimants and
         other pre-petition creditors, will develop analyses of liability for
         both pre-petition and future asbestos claims. Owens Corning and
         Fibreboard will also prepare analyses for use in the negotiation
         process. Such analyses are also required in connection with the
         establishment, as part of the plan of reorganization, of a Section
         524(g) trust for the benefit of asbestos claimants. These analyses
         could vary substantially from one another and from the amounts of Owens
         Corning's and Fibreboard's existing reserves. Such analyses will be
         prepared solely for use in the negotiation of a plan of reorganization
         and will not involve the same type of estimation process required in
         connection with the preparation of financial statements under generally
         accepted accounting principles.

Ultimately, Owens Corning's (and Fibreboard's) total liability for asbestos
claims will be determined after a lengthy period of negotiations and, if
necessary, by the Bankruptcy Court, taking into account numerous factors not
present in Owens Corning's pre-petition environment. Such factors include the
claims of competing creditor groups as to the appropriate treatment of their
allowed claims in the plan or plans of reorganization, the size of the total
asbestos liability, the total number of present asbestos claims allowed, the
total amount of future asbestos claims allowed, and the impact of the
Administrative Consolidation.

At December 31, 2001, as a result of the Filing and the uncertainties referred
to above, the approximate balances of the components of Owens Corning's
asbestos-related reserve were:
<TABLE>
<S>                                                                                       <C>
                                                                                         Balance
                                                                                         -------
                                                                                 (In billions of dollars)

Unpaid Final Settlements (NSP and other)                                                $    0.60
Other Pending and Future Claims                                                              1.60
</TABLE>


<PAGE>


                                     - 104 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

19.  CONTINGENT LIABILITIES (continued)

In connection with this asbestos reserve, Owens Corning notes that:

-        The "Unpaid Final Settlements" component represented the remaining
         estimated cost for all asbestos personal injury claims pending against
         Owens Corning which were subject to final settlement agreements for
         which releases from claimants were obtained, and under which all other
         conditions to settlement had been satisfied, as of the Petition Date.

-        The "Other Pending and Future Claims" component represented the
         estimated cost of resolving (i) asbestos personal injury claims pending
         against Owens Corning which were subject to resolution under NSP
         Agreements but for which releases were not obtained from claimants
         prior to the Petition Date; (ii) all other asbestos personal injury
         claims pending against Owens Corning which were not subject to any
         settlement agreement; and (iii) future asbestos personal injury claims
         against Owens Corning made after the Petition Date.

Owens Corning will continue to review its asbestos reserve on a periodic basis
and make such adjustments as may be appropriate. However, it is possible that
Owens Corning will not be in a position to conclude that a revision to the
reserve is appropriate until significant developments occur during the course of
the Chapter 11 Cases, including resolution of the uncertainties described above.
Any such revision could, however, be material to the Company's consolidated
financial position and results of operations in any given period.

ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING)

Prior to 1972, Fibreboard manufactured insulation products containing asbestos.
Fibreboard has since been named as defendant in many thousands of personal
injury claims for injuries allegedly caused by asbestos exposure. Fibreboard
received approximately 21,600 asbestos personal injury claims during 2000. Prior
to the Petition Date, the vast majority of Fibreboard asbestos personal injury
claims were in the process of being resolved through the NSP, as described
below. As a result of the Filing, all pre-petition asbestos claims and pending
litigation against the Debtors were automatically stayed (see Note 1). Owens
Corning expects that all pending and future asbestos claims against Owens
Corning and Fibreboard will be resolved pursuant to a plan or plans of
reorganization. Owens Corning is unable to determine at this time whether
asbestos-related claims asserted against Fibreboard will be treated in the same
manner as those asserted against Owens Corning in any such plan or plans.

National Settlement Program
---------------------------

Fibreboard is a participant in the NSP and is a party to the NSP Agreements
discussed in Item A. The NSP Agreements became effective as to Fibreboard in the
fourth quarter of 1999, when the Insurance Settlement (discussed below) became
effective. The NSP Agreements settled asbestos personal injury claims that had
been filed against Fibreboard by participating plaintiffs' law firms and claims
that could have been filed against Fibreboard by such firms following the
lifting, in the third quarter of 1999, of an injunction which had barred the
filing of asbestos personal injury claims against Fibreboard.

As of the Petition Date, the NSP covered approximately 212,000 Initial Claims
against Fibreboard, approximately 116,000 of which had satisfied all conditions
to final settlement, including receipt of executed releases, or other resolution
as Final NSP Settlements at an average cost per claim of approximately $7,500.
As of the Petition Date, approximately 61,000 of such Final NSP Settlements had

<PAGE>


                                     - 105 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

19.  CONTINGENT LIABILITIES (continued)

been paid in full or otherwise resolved and approximately 55,000 were unpaid in
whole or in part. As of such date, the remaining balance payable under NSP
Agreements in connection with these unpaid Final NSP Settlements was
approximately $357 million. The NSP Agreements also provided for the resolution
of Future Claims against Fibreboard through the administrative processing
arrangement described in Item A. Through the Petition Date, Fibreboard had
received approximately 3,800 Future Claims under the NSP.

At this time, Owens Corning is unable to predict the manner in which the NSP
Agreements and the resolution of Fibreboard claims thereunder will be treated
under the terms of any plan or plans of reorganization.

Non-NSP Claims
--------------

As of the Petition Date, approximately 15,000 asbestos personal injury claims
were pending against Fibreboard outside the NSP. This compares to approximately
1,000 such claims pending on December 31, 1999. Fibreboard resolved (by
settlement or otherwise) approximately 2,300 asbestos personal injury claims
outside the NSP during 2000 prior to the Petition Date at an average cost of
resolution of approximately $45,000 per claim. Generally, these claims were
settled as they were scheduled for trial, and they typically involved more
serious injuries and diseases. Accordingly, Owens Corning does not believe that
such average costs of resolution are representative of the value of the non-NSP
claims then pending against Fibreboard.

At this time, Owens Corning is unable to predict the manner in which Fibreboard
non-NSP claims will be treated under the terms of any plan or plans of
reorganization.

Insurance Settlement
--------------------

In 1993, Fibreboard and two of its insurers, Continental Casualty Company
("Continental") and Pacific Indemnity Company ("Pacific"), entered into the
Insurance Settlement. The Insurance Settlement became effective in the fourth
quarter of 1999, is final and is not subject to appeal.

Since 1993, Continental and Pacific paid, either directly or through an escrow
account funded by them, for substantially all settlements of asbestos claims
reached prior to the initiation of the NSP. Under the Insurance Settlement,
Continental and Pacific provided $1,873 million during the fourth quarter of
1999 to fund costs of resolving pending and future Fibreboard asbestos-related
liabilities, whether under the NSP, in the tort system, or otherwise.

As of December 31, 2001, the Insurance Settlement funds were held in and
invested by the Fibreboard Settlement Trust. As of that date, $1,151 million
(net of outstanding payables) was held in the Fibreboard Settlement Trust and
$133 million was held in Undistributed Administrative Deposits in respect of
Fibreboard claims. On an ongoing basis, the funds held in the Fibreboard
Settlement Trust will be subject to investment earnings/losses and will be
reduced if and as applied to satisfy asbestos-related liabilities. Under the
terms of the Fibreboard Settlement Trust, any of such assets that ultimately are
not used to fund Fibreboard's asbestos-related liabilities must be distributed
to charity. It will not be known whether any such assets will remain for
distribution until the conclusion of the Chapter 11 Cases.


<PAGE>


                                     - 106 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

19.   CONTINGENT LIABILITIES (continued)

Funds held in the Fibreboard Settlement Trust and Fibreboard's Undistributed
Administrative Deposits are reflected on Owens Corning's consolidated balance
sheet as restricted assets. At December 31, 2001, these assets were reflected as
non-current assets, under the category "Restricted cash, securities and other -
Fibreboard." See Note 20 for additional information concerning the Fibreboard
Settlement Trust.

At this time, Owens Corning is unable to predict what the treatment of funds
held in the Fibreboard Settlement Trust and in Undistributed Administrative
Deposits in respect of Fibreboard claims (see Item A) will be under the terms of
any plan or plans of reorganization.

Asbestos-Related Payments
-------------------------

As a result of the Filing, Fibreboard has not made any asbestos-related payments
since the Petition Date. During 2000 (prior to the Petition Date), gross
payments for asbestos-related claims against Fibreboard, all of which were
paid/reimbursed by the Fibreboard Settlement Trust, fell within four major
categories, as follows:
<TABLE>
<S>                                                                                           <C>
                                                                                   (In millions of dollars)
                                                                                2000 (through October 4, 2000)
                                                                                ------------------------------

     Pre-NSP Settlements                                                                   $     29
     NSP Settlements                                                                            705
     Non-NSP Settlements                                                                         41
     Defense, Claims Processing and  Administrative Expenses                                     45
                                                                                          ---------
                                                                                            $   820
                                                                                          =========
</TABLE>


The payments for NSP Settlements include Administrative Deposits during the
reporting period in respect of Fibreboard claims.

Reserve
-------

Owens Corning estimates a reserve for Fibreboard in accordance with generally
accepted accounting principles to reflect asbestos-related liabilities. As of
December 31, 2001, a reserve of approximately $1.3 billion in respect of these
liabilities was one of the items included in Owens Corning's consolidated
balance sheet under the category "Liabilities Subject to Compromise." For
periods prior to the Petition Date, they were reflected as current or other
liabilities (depending on the period in which payment was expected) under the
category "Asbestos-related liabilities - Fibreboard." These liabilities
(including any reserve for the charitable remainder) are always at least equal
to the funds held in the Fibreboard Settlement Trust and Fibreboard's
Undistributed Administrative Deposits since, under the terms of the Trust, the
funds held in the Trust must be expended either in connection with Fibreboard's
asbestos-related liabilities, or to satisfy the obligation under the Trust to
distribute to charity the assets, if any, remaining in the Trust after
satisfaction of all such liabilities (see Note 20).

The approximate balances of the components of the Fibreboard asbestos-related
reserve at September 30, 2000 (the ending date of the last reporting period
preceding the Petition Date) were:


<PAGE>


                                     - 107 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

19.      CONTINGENT LIABILITIES (continued)
<TABLE>
<S>                                                                                        <C>
                                                                                     September 30, 2000
                                                                                     ------------------
                                                                                  (In billions of dollars)

  NSP backlog                                                                             $     0.80
  Non-NSP backlog                                                                               0.10
  Future Claims                                                                                 0.30
  Defense, Claims Processing and Administrative Expenses                                        0.05
</TABLE>

In connection with this asbestos reserve, Owens Corning notes that:

-        The "NSP backlog" component represented the remaining estimated cost of
         resolving Initial Claims against Fibreboard under the NSP.

-        The "Non-NSP backlog" component represented the estimated cost of
         resolving asbestos personal injury claims pending against Fibreboard
         outside the NSP.

-        The "Future claims" component represented the estimated cost of
         resolving (i) Future Claims against Fibreboard under the NSP and (ii)
         non-NSP claims subsequently made against Fibreboard.

As noted in Item A above as to Owens Corning, the estimate of Fibreboard's
liabilities for pending and expected future asbestos claims is subject to
considerable uncertainty because such liabilities are influenced by numerous
variables that are inherently difficult to predict, and such uncertainties
significantly increased as a result of the Filing, including those set forth in
Item A above. In addition, as noted above, at this time Owens Corning is unable
to predict what the treatment of funds held in the Fibreboard Settlement Trust
and in Undistributed Administrative Deposits in respect of Fibreboard claims
will be under the terms of any plan or plans of reorganization.

At December 31, 2001, as a result of the Filing and the uncertainties referred
to above, the approximate balances of the components of the Fibreboard
asbestos-related reserve were:
<TABLE>
<S>                                                                                     <C>
                                                                                       Balance
                                                                                       -------
                                                                               (In billions of dollars)

Unpaid Final Settlements (NSP and other)                                               $  0.40
Other Pending and Future Claims                                                           0.90
</TABLE>

In connection with this asbestos reserve, Owens Corning notes that:

-     The "Unpaid Final Settlements" component represented the remaining
      estimated cost for all asbestos personal injury claims pending against
      Fibreboard which were subject to final settlement agreements for which
      releases from claimants were obtained, and under which all other
      conditions to settlement had been satisfied, as of the Petition Date.

-     The "Other Pending and Future Claims" component represented the estimated
      cost of resolving (i) asbestos personal injury claims pending against
      Fibreboard which were subject to resolution under NSP Agreements but for
      which releases were not obtained from claimants prior to the Petition
      Date; (ii) all other asbestos personal injury claims pending against


<PAGE>


                                     - 108 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

19.   CONTINGENT LIABILITIES (continued)

     Fibreboard  which were not subject to any settlement  agreement;  and (iii)
     future asbestos  personal  injury claims against  Fibreboard made after the
     Petition  Date.  This  component  also included the residual  obligation to
     charity under the Fibreboard Settlement Trust (see Note 20).

Owens Corning will continue to review Fibreboard's asbestos reserve on a
periodic basis and make such adjustments as may be appropriate. However, it is
possible that Owens Corning will not be in a position to conclude that a
revision to the reserve is appropriate until significant developments occur
during the course of the Chapter 11 Cases, including resolution of the
uncertainties described above. Any such revision could, however, be material to
the Company's consolidated financial position and results of operations in any
given period.

Non-Asbestos Liabilities
------------------------

Securities Litigation
---------------------

On or about April 30, 2001, certain of the Company's current and former
directors and officers, as well as certain underwriters, were named as
defendants in a lawsuit captioned John Hancock Life Insurance Company, et al. v.
Goldman, Sachs & Co., et al. in the United States District Court for the
District of Massachusetts. An amended complaint was filed by the plaintiffs on
or about July 5, 2001. Owens Corning is not named in the lawsuit. The suit
purports to be a securities class action on behalf of purchasers of certain
unsecured debt securities of Owens Corning in offerings occurring on or about
April 30, 1998 and July 23, 1998. The complaint alleges that the registration
statements pursuant to which the offerings were made contained untrue and
misleading statements of material fact and omitted to state material facts which
were required to be stated therein and which were necessary to make the
statements therein not misleading, in violation of sections 11, 12(a)(2) and 15
of the Securities Act of 1933. The amended complaint seeks an unspecified amount
of damages or, where appropriate, rescission of the plaintiffs' purchases. The
defendants filed a motion to dismiss the action on November 20, 2001. The
Company believes that the claim is without merit.

Tax Claim
---------

Owens Corning's federal income tax returns typically are audited by the Internal
Revenue Service ("IRS") in multi-year audit cycles. The audit for the years
1992-1995 was completed in late 2000. Due to the Filing, the IRS also
accelerated and completed the audit for the years ended 1996-1999 by March of
2001. As the result of these audits and unresolved issues from prior audit
cycles, the IRS is asserting claims for approximately $390 million in income
taxes plus interest of approximately $175 million.

Pending audit of Owens Corning's federal income tax return for the year 2000,
the IRS has also filed a protective claim in the amount of approximately $50
million, covering a tax refund received by Owens Corning for such year, plus
interest.

In accordance with generally accepted accounting principles, Owens Corning
maintains tax reserves to cover audit issues. While Owens Corning believes that
the existing reserves are appropriate in light of the audit issues involved, its
defenses, its prior experience in resolving audit issues, and its ability to
realize certain challenged deductions in subsequent tax returns if the IRS were
successful, there can be no assurance that such reserves will be sufficient.
Owens Corning will continue to review its tax reserves on a periodic basis

<PAGE>


                                     - 109 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

19.   CONTINGENT LIABILITIES (continued)

and make such adjustments as may be appropriate. Any such revision could be
material to the Company's consolidated financial position and results of
operations in any given period.

20.   FIBREBOARD SETTLEMENT TRUST

Under the Insurance Settlement described in Note 19, two of Fibreboard's
insurers provided $1.873 billion during the fourth quarter of 1999 to fund the
costs of resolving pending and future Fibreboard asbestos-related liabilities.
As of December 31, 2001, the Insurance Settlement funds were held in and
invested by the Fibreboard Settlement Trust (the "Trust"). On an ongoing basis,
the funds held in the Trust will be subject to investment earnings/losses and
will be reduced if and as applied to satisfy Fibreboard asbestos-related
liabilities. Under the terms of the Trust, any Trust assets that ultimately are
not used to fund Fibreboard's asbestos-related liabilities must be distributed
to charity.

The Trust is a qualified settlement fund for federal income tax purposes, and is
taxed separately from Owens Corning on its net taxable income, after deduction
for related administrative expenses. While there can be no assurance that the
proposed Asbestos Tax Fairness Bill discussed in Note 19, Item A, will be
enacted by Congress, such legislation would benefit the Trust during the
pendency of the Chapter 11 proceedings by eliminating the tax on income, thereby
enlarging the corpus of the Trust through tax-free income accumulation.

At this time, Owens Corning is unable to predict what the treatment of the
Fibreboard Settlement Trust will be under the terms of any plan or plans of
reorganization.

General Accounting Treatment
----------------------------

The assets of the Trust are comprised of cash and marketable securities
(collectively, the "Trust Assets") and, with Fibreboard's Undistributed
Administrative Deposits, are reflected on Owens Corning's consolidated balance
sheet as restricted assets. At December 31, 2001, these assets were reflected as
non-current assets, under the category "Restricted cash, securities and other -
Fibreboard." Owens Corning estimates a reserve for Fibreboard in accordance with
generally accepted accounting principles to reflect asbestos-related liabilities
(see Note 19, Part B). As of December 31, 2001, these liabilities were one of
the items included in Owens Corning's consolidated balance sheet under the
category "Liabilities Subject to Compromise." For periods prior to the Petition
Date, they were reflected as current or other liabilities (depending on the
period in which payment was expected) under the category "Asbestos-related
liabilities - Fibreboard." These liabilities (including any reserve for the
charitable remainder) are always at least equal to the funds held in the Trust
and Fibreboard's Undistributed Administrative Deposits since, under the terms of
the Trust, the funds held in the Trust must be expended either in connection
with Fibreboard's asbestos-related liabilities, or to satisfy the obligation
under the Trust to distribute to charity the assets, if any, remaining in the
Trust after satisfaction of all such liabilities. It will not be known whether
any such assets will remain for distribution until the conclusion of the Chapter
11 Cases. At December 31, 2001, the Consolidated Financial Statements reflect
Fibreboard's liabilities for asbestos litigation claims at $1.213 billion, with
a residual obligation to charity of $71 million.

For accounting  purposes,  the Trust Assets are classified  from time to time as
"available for sale" or "held to maturity" and are reported in the  Consolidated
Financial  Statements in accordance  with SFAS No. 115,  "Accounting for Certain
Investments in Debt and Equity Securities." Accordingly, marketable securities

<PAGE>


                                     - 110 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

20.   FIBREBOARD SETTLEMENT TRUST (continued)

classified as available for sale are recorded at fair market value and
marketable securities designated as held to maturity are recorded at amortized
cost.

Any unrealized increase/decrease in fair market value is reflected as a change
in the carrying amount of the asset on the consolidated balance sheet as well as
an increase/decrease to other comprehensive income within stockholders' equity,
net of tax. The residual liability that may be paid to charity will also
increase/decrease, with a related decrease/increase to other comprehensive
income within stockholders' equity, net of tax.

Any earnings and realized gains/losses on the Trust Assets are reflected as an
increase/decrease in the carrying amount of such assets on the consolidated
balance sheet as well as other income/expense on the consolidated statement of
income.

The residual liability that may be paid to charity will also increase/decrease,
with related other expense/ income on the consolidated statement of income. Cost
for purposes of computing realized gains/losses is determined using the specific
identification method.

Results for the Period Ending December 31, 2001 and 2000
--------------------------------------------------------

During 2001 and 2000, respectively, Trust Assets generated interest/dividend
earnings of approximately $55 million and $71 million, which have been recorded
as an increase in the carrying amount of the assets on Owens Corning's
consolidated balance sheet and as other income on the consolidated statement of
income. This income, however, has been offset by an equal charge to other
expense, which represents the increase in the residual liability to charity.

Payments for asbestos litigation claims from the Trust during 2000 were
approximately $820 million. As a result of the Filing, there were no payments
from the Trust during 2001. However, approximately $12 million was paid for
taxes related to earnings of the Trust. Such payments were funded by existing
cash in the Trust or proceeds from the sale of securities. The sale of
securities during 2001 and 2000 resulted in a realized gain of $4 million and $2
million, respectively. Realized gains or losses from the sale of securities are
reflected on the Company's financial statements in the same manner as actual
returns on Trust Assets, described above.

At December 31, 2001 and 2000, the fair market value adjustment for those
securities designated as available for sale resulted in an unrealized gain of
less than $1 million and approximately $1 million, respectively. These amounts
have been reflected in the Company's consolidated balance sheet as a change to
the carrying amount of the asset and to other comprehensive income. These
amounts have also been reflected as a change to the liability to charity, with a
corresponding effect to other comprehensive income.

At December 31, 2001, the fair value of Trust Assets was $1.284 billion, which
was comprised of $1.169 billion of marketable securities, $18 million of
outstanding payables and $133 million of restricted cash, which represents
undistributed administrative deposits. These marketable securities have been
classified as noncurrent assets.




<PAGE>


                                     - 111 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

20.   FIBREBOARD SETTLEMENT TRUST (continued)

The amortized cost, gross unrealized holding gains and losses and fair value of
the investment securities available for sale at December 31, 2001, are as
follows:
<TABLE>
<S>                                        <C>              <C>                <C>               <C>
                                                           Gross              Gross
                                         Amortized       Unrealized        Unrealized
                                           Cost             Gain              Loss           Fair Value
                                           ----             ----              ----           ----------
                                                            (In millions of dollars)

Municipal Bonds                           $ 1,150       $       -           $      -         $  1,150
Mutual Funds                                   19               -                  -               19
                                       ----------      ----------          ---------       -----------

Total                                     $ 1,169       $       -           $      -         $  1,169
                                          =======       =========           ========         ========
</TABLE>

The amortized cost, gross unrealized holding gains and losses and fair value of
the investment securities available for sale at December 31, 2000, are as
follows:
<TABLE>
<S>                                         <C>             <C>               <C>              <C>
                                                           Gross              Gross
                                         Amortized       Unrealized        Unrealized
                                           Cost             Gain              Loss           Fair Value
                                           ----             ----              ----           ----------
                                                            (In millions of dollars)

Corporate Bonds                         $     148       $       -         $        -         $    148
Corporate Notes                               449               1                  -              450
Municipal Bonds                               284               -                  -              284
Mutual Funds                                  116               -                  -              116
Time Deposits                                  37               -                  -               37
US Government Bonds                            57               -                  -               57
                                       -----------      ---------        -----------        ---------

Total                                    $  1,091        $      1         $        -          $ 1,092
                                         ========        ========         ==========          =======
</TABLE>


Maturities of investment securities classified as available for sale by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to recall or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<S>                                               <C>               <C>              <C>                 <C>
                                                          2001                               2000
                                                          ----                               ----
                                               Amortized                           Amortized
                                                  Cost           Fair Value          Cost          Fair Value
                                                  ----           ----------          ----          ----------

Due within one year                              $   91           $    91            $ 656            $ 656
Due after one year through five years               679               679                2                2
Due after five years through ten years              171               171               51               51
Due after ten years                                 228               228              382              383
                                                 ---------       ---------        ---------        ---------

Total                                            $1,169           $ 1,169          $ 1,091          $ 1,092
                                                 =========       =========          =======          =======
</TABLE>


<PAGE>



                                     - 112 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

20.   FIBREBOARD SETTLEMENT TRUST (continued)

The table below summarizes Trust and Administrative Deposits activity for the
year ended December 31, 2001:
<TABLE>
<S>                                           <C>        <C>       <C>            <C>       <C>         <C>       <C>        <C>
                                                                                  Net
                                                      Interest  Unrealized     Purchases  Realized
                                            Balance      and       Gain/           of      Gain/                           Balance
                                            12/31/00  Dividends   (Loss)       Securities  (Loss)      Other    Payments   12/31/01
                                            --------  ---------   ------       ----------  ------      -----    --------   --------
Assets
------                                                                        (In millions of dollars)

Cash (payable for purchase of securities)   $    12   $     -     $      -     $   (30)    $   -     $     -    $   -      $   (18)
Restricted Cash                                 170         -            -           -         -         (37)       -          133
Marketable Securities:
  Available for Sale                          1,092        55            -          30         4           -      (12)       1,169
                                            -------   ---------   ----------   ---------   -------   -------    -------    -------

Total Assets                                $ 1,274   $    55     $      -     $     -     $   4     $   (37)   $ (12)     $ 1,284
                                            =======   =========   ==========   =========   =======   =======    =======    =======

Liabilities
-----------
Asbestos Litigation Claims                  $ 1,250   $     -     $      -     $     -     $   -     $   (37)   $   -      $ 1,213
Charity                                          24        55            -           -         4           -      (12)          71
                                            -------   ---------   ----------   ---------   -------   -------    -------    -------

Total  Liabilities                          $ 1,274   $    55     $      -     $     -     $   4     $   (37)   $ (12)     $ 1,284
                                            =======   =========   ==========   =========   =======   =======    =======    =======
</TABLE>



<PAGE>


                                     - 113 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

20.   FIBREBOARD SETTLEMENT TRUST (continued)

The table below summarizes Trust activity for the year ended December 31, 2000:
<TABLE>
<S>                           <C>          <C>       <C>       <C>          <C>        <C>           <C>          <C>        <C>
                                        Interest  Unrealized Net Sales    Realized
                             Balance       and      Gain/      of          Gain/                                           Balance
                             12/31/99   Dividends  (Loss)   Securities    (Loss)    Adjustments     Other    Payments      12/31/00
                             --------   ---------  ------   ----------    ------    -----------     -----    --------      --------
                                                                  (In millions of dollars)
Assets
------
Cash                          $    -      $  -      $ -       $ 832        $  -        $  -         $   -     $(820)         $   12
Restricted Cash                    -         -        -           -           -           -           170         -             170
Marketable Securities:
  Available for Sale          $1,838      $ 71      $ 1       $(832)          2           -            12         -          $1,092
                              ------      ----      ----      ------       -----       -----        ------    ------         ------
Total Assets                  $1,838      $ 71      $ 1       $   -        $  2        $  -         $ 182     $(820)         $1,274
                              ======      ====      ====      ======       =====       =====        ======    ======         ======

Liabilities
-----------
Asbestos Litigation Claims    $1,750      $  -      $ -       $   -        $  -        $ 150        $  170    $(820)         $1,250
Charity                       $   88      $ 71      $ 1           -           2         (150)           12        -          $   24
                              ------      ----      ----      -----        -----       -----        ------    ------         ------
Total Liabilities             $1,838      $ 71      $ 1       $   -        $  2        $   -        $  182    $(820)         $1,274
                              ======      ====      ====      =====        =====       =====        ======    ======         ======
</TABLE>



<PAGE>




                                     - 114 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

21.   QUARTERLY FINANCIAL INFORMATION (unaudited)
<TABLE>
<S>                                                      <C>               <C>              <C>             <C>
                                                                                   Quarter
                                                     -------------------------------------------------------------
                                                        First            Second            Third            Fourth
                                                       -------          --------          -------          --------
                                                                (In millions of dollars, except share data)
2001
----

Net sales                                          $ 1,067           $  1,239         $  1,291           $  1,165

Cost of sales                                            896             1,014            1,046                 982
                                                   ---------         ---------        ---------          ----------

Gross margin                                       $    171          $     225        $     245          $     183
                                                   ========          =========        =========          =========

Tax Provision (credit)                             $      (5)        $       25         $      26        $       11
                                                   ==========        ==========         =========        ==========

Net income (loss)                                  $    (10)         $       29         $      27        $      (7)
                                                   =========         ==========         =========        ==========
Net income (loss) per share:

       Basic net income (loss) per share           $   (.19)         $      .53         $    .50           $   (.12)
                                                   =========         ==========         =========         ==========
       Diluted net income (loss) per share         $   (.19)         $      .49         $    .46           $   (.12)
                                                   =========         ==========         =========         ==========
</TABLE>


<TABLE>
<S>                                                      <C>               <C>              <C>             <C>
                                                                                  Quarter
                                                     -------------------------------------------------------------
                                                        First            Second            Third            Fourth
                                                       -------          --------          -------          --------
                                                                (In millions of dollars, except share data)
2000
----

Net sales                                          $    1,257        $   1,295         $    1,281        $   1,107

Cost of sales                                             972              996              1,036            1,010
                                                   ----------        ---------         ----------        ---------

Gross margin                                       $      285        $     299         $      245        $      97
                                                   ==========        =========         ==========        =========

Tax Provision (credit)                             $       13        $    (267)        $       10        $     (68)
                                                   ==========        ==========        ==========        ==========

Net income (loss)                                  $       48        $    (425)        $       14        $    (115)
                                                   ==========        ==========        ==========        ==========
Net income (loss) per share:

       Basic net income (loss) per share           $      .88        $   (7.76)        $      .25        $  (2.08)
                                                   ==========        ==========        ==========        =========
       Diluted net income (loss) per share         $      .84        $   (7.76)        $      .25        $  (2.08)
                                                   ==========        ==========        ==========        =========
</TABLE>



<PAGE>


                                     - 115 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

22.   ACCOUNTING PRONOUNCEMENTS

Business Combinations - The Financial Accounting Standards Board ("FASB") has
issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations", the provisions of which apply to all business combinations
initiated after June 30, 2001. This statement requires that all business
combinations be accounted for under the purchase method. In addition, this
statement requires the separate recognition of certain intangible assets.

Goodwill and Other Intangibles - The FASB has issued SFAS No. 142, "Goodwill and
Other  Intangible  Assets",  which is effective for fiscal years beginning after
December 15, 2001.  SFAS No. 142  eliminates  the  amortization  of goodwill and
indefinite-lived   intangible   assets  and   initiates  an  annual  review  for
impairment.  Identifiable intangible assets with a determinable useful life will
continue  to be  amortized.  Goodwill  acquired  prior to June 30,  2001 will be
affected upon adoption,  requiring the Company to perform an impairment  test of
its existing  goodwill by applying a fair-value  test.  The Company is currently
assessing  the  potential  impact  of SFAS No.  142  related  to the  impairment
analysis  of  goodwill.  Based on the steps the  Company  has taken  thus far to
prepare for the  adoption of SFAS No.  142, it is likely that  between  $450 and
$500  million of the  goodwill  related to Building  Materials  Systems  will be
impaired.  As of December 31, 2001, the Company has net unamortized  goodwill of
$610 million and recognized amortization expense of $18 million, $19 million and
$21 million for the years ended December 31, 2001, 2000 and 1999,  respectively.
The Company  plans to complete the  measurement  of the  impairment  loss in the
second  quarter of 2002 and will address the tax  implications,  if any, on this
impairment loss at that time.

Asset Retirement Obligations - The FASB has issued SFAS No. 143, "Accounting for
Asset Retirement Obligations", which is effective for fiscal years beginning
after June 15, 2002. This statement requires that the fair value of a liability
for an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The Company does
not expect the effects of the adoption to be significant.

Impairment or Disposal of Long-Lived Assets - The FASB has issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", which is
effective for fiscal years beginning after December 15, 2001. This statement
addresses the financial accounting and reporting for the impairment of or
disposal of long-lived assets. The impact of adoption has not yet been
determined.




<PAGE>


                                     - 116 -

                     INDEX TO FINANCIAL STATEMENT SCHEDULES
                     --------------------------------------
<TABLE>
<S>                 <C>                                                                                  <C>

Number            Description                                                                            Page
------            -----------                                                                            ----

II                Valuation and Qualifying Accounts and Reserves -
                    for the years ended December 31, 2001, 2000, and 1999.................................117
</TABLE>



<PAGE>


                                     - 117 -

                         OWENS CORNING AND SUBSIDIARIES
          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<S>                                  <C>                <C>              <C>               <C>            <C>
                                                              Additions
                                                 ---------------------------------
                                  Balance at        Charged to        Charged to                       Balance
                                  Beginning        Costs and          Other                            at End
Classification                    of Period         Expenses          Accounts         Deductions     of Period
--------------                   -----------      ------------      ------------       ----------     ---------
                                                           (In millions of dollars)
FOR THE YEAR ENDED
   DECEMBER 31, 2001:
   Allowance deducted from
     asset to which it applies -
       Doubtful Accounts              $   29         $   11              $ -             $ 11(A)         $  29
   Reserve to which it applies -
       Restructure Costs                  33             21                                29(B)            25(E)


FOR THE YEAR ENDED
   DECEMBER 31, 2000:
   Allowance deducted from
     asset to which it applies -
       Doubtful Accounts              $   26         $    5              $ -             $  2(A)         $  29
   Reserve to which it applies -
       Restructure Costs                  21             23                -               11(B)            33(D)


FOR THE YEAR ENDED
   DECEMBER 31, 1999:
   Allowance deducted from
     asset to which it applies -
       Doubtful Accounts              $   23         $    5              $ -             $  2(A)         $  26
   Reserve to which it applies -
       Restructure Costs                  49              -                -               28(B)            21(C)

</TABLE>



Notes:

(A)      Uncollectible accounts written off, net of recoveries.
(B)      Cash payments.
(C)      Includes non-current liabilities of $4 million.
(D)      Includes non-current liabilities of $7 million.
(E)      Includes non-current liaiblities of $15 million.


<PAGE>


                                     - 118 -

                                  EXHIBIT INDEX
                                  -------------

Exhibit
Number                        Document Description
-------                       --------------------

(3)           Articles of Incorporation and By-Laws.

               (i)  Certificate of  Incorporation  of Owens Corning,  as amended
                    (incorporated  herein by  reference  to Exhibit (3) to Owens
                    Corning's  quarterly  report on Form 10-Q (File No.  1-3660)
                    for the quarter ended March 31, 1997).

               (ii) By-Laws of Owens Corning, as amended (incorporated herein by
                    reference to Exhibit (3) to Owens Corning's annual report on
                    Form 10-K (File No. 1-3660) for the year 1999).

(4)           Instruments Defining the Rights of Security Holders, Including
              Indentures.

              Final Order Under 11 U.S.C. ss.ss. 105, 345(b) and 363 (I)
              Authorizing (A) Maintenance of Certain Existing Bank Accounts, (B)
              Continued Use of Existing Business Forms, (C) Use of Modified Cash
              Management System, and (D) Transfers of Funds to Debtor and
              Non-Debtor Affiliates; and (II) Waiving Investment and Deposit
              Requirements of 11 U.S.C. ss. 345(b) (filed herewith).

              Standstill and Waiver Agreement among Owens Corning, certain
              affiliates of Owens Corning, Credit Suisse First Boston, and
              certain bank lenders (incorporated herein by reference to Exhibit
              (99) to Owens Corning's quarterly report on Form 10-Q (File No.
              1-3660) for the quarter ended June 30, 2001).

              The following documents are incorporated herein by reference to
              Exhibit (4) to Owens Corning's annual report on Form 10-K (File
              No. 1-3660) for the year ended December 31, 2000:

               -    Post-Petition  Credit  Agreement,  dated as of  December  8,
                    2000,  among  Owens  Corning and the  subsidiaries  of Owens
                    Corning  named  therein,  the financial  institutions  named
                    therein, and Bank of America, N.A., as Agent.

               -    License Agreement, made as of October 1, 1991, between Owens
                    Corning and  Owens-Corning  Fiberglas  Technology  Inc.  and
                    Amendment thereto, dated as of December 8, 1993.

               -    Standstill Agreement,  dated as of January 30, 2001, between
                    Owens Corning and Owens-Corning Fiberglas Technology Inc.

               -    License  Agreement,  made  as of  April  27,  1999,  between
                    Owens-Corning   Fiberglas   Technology  Inc.  and  AmeriMark
                    Building Products, Inc. (now Exterior Systems, Inc.).

               -    Standstill Agreement,  dated as of January 30, 2001, between
                    Exterior   Systems,   Inc.   and   Owens-Corning   Fiberglas
                    Technology Inc.

              Indenture, dated as of May 5, 1997, between Owens Corning and The
              Bank of New York, as Trustee (incorporated herein by reference to
              Exhibit 4.5.1 to Owens Corning's current report on Form 8-K (File
              No. 1-3660), filed May 14, 1997).


<PAGE>


                                     - 119 -

                                  EXHIBIT INDEX
                                  -------------
Exhibit
Number                        Document Description
-------                       --------------------

              Credit Agreement, dated as of June 26, 1997, among Owens Corning,
              other Borrowers and Guarantors, the Banks listed on Annex A
              thereto, and Credit Suisse First Boston, as Agent (incorporated
              herein by reference to Exhibit (4) to Owens Corning's quarterly
              report on Form 10-Q (File No. 1-3660) for the quarter ended June
              30, 1997), as amended by Amendment No. 1 thereto (incorporated
              herein by reference to Exhibit (4) to Owens Corning's annual
              report on Form 10-K (File No. 1-3660) for the year ended December
              31, 1997) and Amendment No. 2 thereto (incorporated herein by
              reference to Exhibit (4) to Owens Corning's annual report on Form
              10-K (File No. 1-3660) for the year ended December 31, 1998).

              Owens Corning agrees to furnish to the Securities and Exchange
              Commission, upon request, copies of all instruments defining the
              rights of holders of long-term debt of Owens Corning where the
              total amount of securities authorized under each issue does not
              exceed ten percent of Owens Corning's total assets.


(10)          Material Contracts.

              Standstill and Waiver Agreement among Owens Corning, certain
              affiliates of Owens Corning, Credit Suisse First Boston, and
              certain bank lenders (incorporated herein by reference to Exhibit
              (99) to Owens Corning's quarterly report on Form 10-Q (File No.
              1-3660) for the quarter ended June 30, 2001).

              The following documents are incorporated herein by reference to
              Exhibit (4) to Owens Corning's annual report on Form 10-K (File
              No. 1-3660) for the year ended December 31, 2000:

               -    Post-Petition  Credit  Agreement,  dated as of  December  8,
                    2000,  among  Owens  Corning and the  subsidiaries  of Owens
                    Corning  named  therein,  the financial  institutions  named
                    therein, and Bank of America, N.A., as Agent.

               -    License Agreement, made as of October 1, 1991, between Owens
                    Corning and  Owens-Corning  Fiberglas  Technology  Inc.  and
                    Amendment thereto, dated as of December 8, 1993.

               -    Standstill Agreement,  dated as of January 30, 2001, between
                    Owens Corning and Owens-Corning Fiberglas Technology Inc.

               -    License  Agreement,  made  as of  April  27,  1999,  between
                    Owens-Corning   Fiberglas   Technology  Inc.  and  AmeriMark
                    Building Products, Inc. (now Exterior Systems, Inc.).

               -    Standstill Agreement,  dated as of January 30, 2001, between
                    Exterior   Systems,   Inc.   and   Owens-Corning   Fiberglas
                    Technology Inc.


<PAGE>


                                     - 120 -

                                  EXHIBIT INDEX
                                  -------------

Exhibit
Number                        Document Description
-------                       --------------------

              Credit Agreement, dated as of June 26, 1997, among Owens Corning,
              other Borrowers and Guarantors, the Banks listed on Annex A
              thereto, and Credit Suisse First Boston, as Agent (incorporated
              herein by reference to Exhibit (4) to Owens Corning's quarterly
              report on Form 10-Q (File No. 1-3660) for the quarter ended June
              30, 1997), as amended by Amendment No. 1 thereto (incorporated
              herein by reference to Exhibit (4) to Owens Corning's annual
              report on Form 10-K (File No. 1-3660) for the year ended December
              31, 1997) and Amendment No. 2 thereto (incorporated herein by
              reference to Exhibit (4) to Owens Corning's annual report on Form
              10-K (File No. 1-3660) for the year ended December 31, 1998).

          *   Director's Charitable Award Program, as amended (filed herewith).

          *   Key Management Severance Agreement with David L. Johns (filed
              herewith).

          *   Owens Corning Senior Leader Emergence Incentive Plan (incorporated
              herein by reference to Exhibit (10) to Owens Corning's quarterly
              report on Form 10-Q (File No. 1-3660) for the quarter ended March
              31, 2001).

          *   Key Management Severance Agreement with Michael H. Thaman
              (incorporated herein by reference to Exhibit (10) to Owens
              Corning's annual report on Form 10-K (File No. 1-3660) for the
              year ended December 31, 2000).

          *   Owens Corning Key Employee Retention Incentive Plan (incorporated
              herein by reference to Exhibit (10) to Owens Corning's quarterly
              report on Form 10-Q (File No. 1-3660) for the quarter ended June
              30, 2000).

          *   Key Management Severance Agreement with David T. Brown
              (incorporated herein by reference to Exhibit (10) to Owens
              Corning's annual report on Form 10-K (File No. 1-3660) for the
              year ended December 31, 1999).

          *   Corporate Incentive Plan Terms Applicable to Key Employees Other
              Than Certain Executive Officers (incorporated herein by reference
              to Exhibit (10) to Owens Corning's quarterly report on Form 10-Q
              (File No. 1-3660) for the quarter ended June 30, 1999).

              The following documents are incorporated herein by reference to
              Exhibit (10) to Owens Corning's quarterly report on Form 10-Q
              (File No. 1-3660) for the quarter ended March 31, 1999:

          *    -   Owens Corning Deferred Compensation Plan.

          *    -   Corporate Incentive Plan Terms Applicable to Certain
                   Executive Officers.

          The following documents are incorporated herein by reference to
          Exhibit (10) to Owens Corning's annual report on Form 10-K (File No.
          1-3660) for the year ended December 31, 1998:

          *    -   Stock Performance Incentive Plan, as amended.

<PAGE>



                                     - 121 -

                                  EXHIBIT INDEX
                                  -------------
Exhibit
Number                        Document Description
-------                       --------------------

          *    -   Key Management Severance Agreement with Maura Abeln Smith.

          *    -   Letter to Maura Abeln Smith.

          *    Owens Corning Supplemental Executive Retirement Plan, effective
               as of January 1, 1998, (incorporated herein by reference to
               Exhibit (10) to Owens Corning's quarterly report on Form 10-Q
               (File No. 1-3660) for the quarter ended June 30, 1998).

          *    Renewal Agreement, effective as of July 31, 1999, with Glen H.
               Hiner (incorporated herein by reference to Exhibit (10) to Owens
               Corning's annual report on Form 10-K (File No. 1-3660) for the
               year ended December 31, 1997).

          *    1987 Stock Plan for Directors, as amended (incorporated herein by
               reference to Exhibit (10) to Owens Corning's quarterly report on
               Form 10-Q (File No. 1-3660) for the quarter ended June 30, 1997).

          *    Executive Supplemental Benefit Plan, as amended (incorporated
               herein by reference to Exhibit (10) to Owens Corning's quarterly
               report on Form 10-Q (File No. 1-3660) for the quarter ended March
               31, 1993).

          *    Employment Agreement, dated as of December 15, 1991, with Glen H.
               Hiner (incorporated herein by reference to Exhibit (10) to Owens
               Corning's annual report on Form 10-K (File No. 1-3660) for the
               year ended December 31, 1991), as amended by First Amending
               Agreement made as of April 1, 1992 (incorporated herein by
               reference to Exhibit (19) to Owens Corning's quarterly report on
               Form 10-Q (File No. 1-3660) for the quarter ended June 30, 1992).

          *    Form of Directors' Indemnification Agreement (incorporated herein
               by reference to Exhibit (10) to Owens Corning's annual report on
               Form 10-K (File No. 1-3660) for the year ended December 31,
               1989).

          *    Deferred Compensation Plan for Directors, as amended
               (incorporated herein by reference to Exhibit (10) to Owens
               Corning's annual report on Form 10-K (File No. 1-3660) for the
               year ended December 31, 1987).

(11)           Statement re Computation of Per Share Earnings (filed herewith).

(21)           Subsidiaries of Owens Corning (filed herewith).

(23)           Consent of Arthur Andersen LLP (filed herewith).

(99)           Additional Exhibits

               Owens Corning letter to the Securities and Exchange Commission
               concerning audit representations of Arthur Andersen LLP (filed
               herewith).

*      Denotes management contract or compensatory plan or arrangement required
       to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.