<PAGE>

================================================================================

                      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, 2000

                         Commission File No. 333-72321

                             BGF Industries, Inc.
            (Exact name of registrant as specified in its charter)

        Delaware                         2221                   56-1600845
  (State of incorporation)  (Primary Standard Industrial    (I.R.S. Employer
                            Classification Code Number)    Identification No.)


    3802 Robert Porcher Way, Greensboro, North Carolina          27410
    (Address of registrants' principal executive office)      (Zip Code)

                                (336) 545-0011
             (Registrants' telephone number, including area code)
                               ________________

  Securities registered pursuant to Sections 12(b) or 12(g) of the Act: None

Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports) and (2) have 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 the registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. Yes [X] No [_]

There is no established trading market for the Common Stock of the registrant.
All shares of Common Stock are held by an affiliate of the registrant at March
23, 2001.

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date: 1,000 shares of common stock, $1.00 par value, as of March 23, 2001.

================================================================================

<PAGE>

                             BGF INDUSTRIES, INC.
              ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2000

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                 Page No.
                                                                                 --------
PART I.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
<S>          <C>                                                                    <C>
Item 1.      Business                                                                1
Item 2.      Properties                                                              9
Item 3.      Legal Proceedings                                                      10
Item 4.      Submission of Matters to a Vote of Security Holders                    10

PART II.
Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters  11
Item 6.      Selected Financial Data                                                11
Item 7.      Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                              12
Item 7A.     Quantitative and Qualitative Disclosure About Market Risk              21
Item 8.      Financial Statements and Supplementary Data                            22
Item 9.      Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosure                                               22

PART III.
Item 10.     Directors and Executive Officers of the Registrant                     23
Item 11.     Executive Compensation                                                 25
Item 12.     Security Ownership of Certain Beneficial Owners and Management         29
Item 13.     Certain Relationships and Related Transactions                         30

PART IV.
Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K        33
</TABLE>

SIGNATURE
<PAGE>

                                    PART I


Cautionary Statement Regarding Forward-Looking Statements

     Some of the information in this Annual Report may contain forward-looking
statements. These statements include, in particular, statements about our plans,
strategies and prospects within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify
forward-looking statements by our use of forward-looking terminology such as
"may," "will," "expect," "anticipate," "estimate," "continue" or other similar
words. Although we believe that our plans, intentions and expectations reflected
in or suggested by such forward-looking statements are reasonable, we cannot
assure you that our plans, intentions or expectations will be achieved. Such
statements are based on our current plans and expectations and are subject to
risks and uncertainties that exist in our operations and our business
environment that could render actual outcomes and results materially different
from those predicted. When considering such forward-looking statements, you
should keep in mind the following important factors that could cause our actual
results to differ materially from those contained in any forward-looking
statements:

     .  the impact of Owens Corning's unpredictable bankruptcy proceeding on the
        ongoing operations of Advanced Glassfiber Yarns which could result in
        the risk that obtaining raw materials from sources other than Advanced
        Glassfiber Yarns would be more costly;

     .  our significant level of indebtedness and limitations on our ability to
        incur additional debt;

     .  our dependence upon some of our suppliers to provide us with materials
        and services;

     .  a downturn in the electronics industry and the movement of electronics
        industry production outside of North America;

     .  the effect of highly competitive markets and recent competition from
        Asia for heavyweight glass fiber fabrics;

     .  our concentrated customer base and the competitive nature of our
        markets;

     .  a disruption of production at one of our facilities;

     .  an easing of import restrictions and duties with respect to glass fiber
        fabrics;

     .  our ability to comply with environmental and safety and health laws and
        requirements;

     .  our ability to address technological advances in the markets we serve;
        and

     .  changes in economic conditions generally.

     This list of risks and uncertainties, however, is not intended to be
exhaustive. You should also review the other cautionary statements we make in
this Annual Report and in other reports and registration statements we file with
the Securities and Exchange Commission.  All forward-looking statements
attributable to us or persons acting for us are expressly qualified in their
entirety by our cautionary statements.

     We do not have, and expressly disclaim, any obligation to release publicly
any updates or changes in our expectations or any changes in events, conditions
or circumstances on which any forward-looking statement is based.

Item 1. Business

General

     Our business focuses on the production of value-added specialty woven and
non-woven fabrics made from glass, carbon and aramid yarns. In both revenue and
market share, we believe

                                       1
<PAGE>

we are the second largest manufacturer of glass fiber fabrics and a leading
producer of other high performance fabrics in North America. Our fabrics are a
critical component in the production of a variety of electronic, filtration,
composite, insulation, construction and commercial products. Our glass fiber
fabrics are used by our customers in printed circuit boards, which are integral
to virtually all advanced electronic products, including computers and cellular
telephones. Our fabrics are also used by our customers to strengthen, insulate
and enhance the dimensional stability of hundreds of products that they make for
their own customers in various markets, including aerospace, transportation,
construction, power generation and oil refining.

   We began our glass fiber product development efforts in cooperation with
Owens Corning in 1938. As a result of our combined research and development
efforts, glass fiber fabrics were available to the market by 1941. In 1947, we
began to manufacture and sell glass fiber fabrics independently of Owens
Corning. In 1951, we merged with Horace Linton & Brothers, a narrow tape
manufacturer that had teamed with Owens Corning to develop and market glass
fiber electrical insulation tapes. In 1956, we were acquired by Burlington
Industries, Inc. (Burlington) and remained a division of Burlington until we
were purchased in 1988 by Porcher Industries.

   BGF is a Delaware corporation.  Our headquarters are located at 3802 Robert
Porcher Way, Greensboro, North Carolina  27410, and our telephone number is
(336) 545-0011.

   Glass fiber fabrics are a critical component in the production of numerous
products in the electronics industry, including primarily printed circuit
boards, as well as products in a variety of other markets that our customers
supply to, including the aerospace, transportation, construction power
generation and oil refining markets. In general, the industry we compete in is
characterized by:

   .  a limited number of domestic producers;

   .  barriers to entry consisting primarily of a limited supply of raw
      materials;

   .  diversified downstream markets; and

   .  a lack of product substitutes.

   Limited Number of Domestic Producers. We are one of a limited number of major
domestic manufacturers of glass fiber fabrics. We and our primary competitor,
Hexcel/Clark-Schwebel, account for approximately 90% of domestic capacity, which
is estimated to be 400 million yards. We estimate that Hexcel/Clark Schwebel
accounts for 50% of the domestic market share and BGF accounts for 40%.

   The major competitors in the global glass fabric weaving industry are
BGF/Porcher Industries, Hexcel/Clark-Schwebel, Nitto Boseki (Japan), Nan Ya
Plastics (Taiwan) and Taiwan Glass (Taiwan). Although direct imports of glass
fiber fabrics into the U.S. have been limited, increasing imports of laminates
and rigid printed circuit boards from Asia have been impacting demand for
domestically produced heavyweight glass fiber fabrics used in rigid printed
circuit boards.

                                       2
<PAGE>

   Barriers to Entry. There are a limited number of major global suppliers of
glass and carbon yarns to fabric producers such as BGF, and we have experienced
supply shortages from time to time. Accordingly, we believe that it would be
difficult for new competitors to ensure a constant and adequate supply of glass
and carbon yarns. Additionally, the process of producing high quality glass
fiber and other high performance fabrics requires extensive technological
expertise and research and development capability, both of which require
substantial know-how and capital compared to many less complex businesses.

   Diversified Markets and Uses. The unique characteristics of our fabrics make
them critical components in a variety of products manufactured for sale in the
electronics, composites, filtration, commercial, insulation and construction
markets. Within each of these markets, our fabrics have a variety of
applications, including:

   -  Printed circuit boards
   -  Helicopter blades
   -  Telecommunications equipment
   -  Reinforced concrete
   -  Filtration bags
   -  Roofing materials
   -  Heat shields
   -  Wall coverings
   -  Welding curtains
   -  Filtration equipment
   -  Aircraft laminates
   -  Sporting goods

   Lack of Product Substitutes. For many applications of our products, there are
a limited number of economical product substitutes, if any. For example,
substantially all printed circuit boards for high-end electronics applications
use glass fiber fabrics. The unique properties of glass fiber also make it a
critical component in high temperature filtration and insulation products. In
many composite products, only glass, carbon and aramid fibers can meet the
requisite strength-to-weight ratios.

   Glass fiber fabrics are the reinforcement for the vast majority of high-end
electronics products. Demand for electronics products has experienced
substantial growth in recent years and is expected to continue to grow due to
expanded applications, technological advancements and new computer products and
systems introductions. We believe this growth is primarily attributable to the
development of more complex and sophisticated electronics products, including
cellular telephones, pagers, personal computers and portable computing devices,
as well as the increasing electronic content of products in which such use has
been historically absent or limited, such as automobiles, home appliances and
medical equipment.

   Glass fiber fabrics offer an excellent combination of properties, from high
strength to fire resistance. Wide ranges of yarn sizes and weave patterns
provide broad design potential, enabling customers to choose the best
combination of material performance, economics and

                                       3
<PAGE>

product flexibility. Carbon fiber fabrics possess many of the same
characteristics of glass fiber fabrics and provide higher strength and lighter
weight in the products in which they are incorporated. Aramid fiber fabrics also
share many of the same characteristics as glass fiber fabrics and are lighter in
weight and provide greater impact resistance in the products in which they are
incorporated.

Business Strategy

   Our goal is to be the preferred supplier to markets that require a
technically complex application of fabrics made of glass, carbon and aramid
yarns.  To achieve this goal, we intend to pursue the following key strategies:

   Continue to Focus on Lightweight Fabrics for the Multi-Layer Printed Circuit
Board Market.  We seek to continue to expand our sales of lightweight glass
fiber fabrics to meet the growing demand for multi-layer printed circuit boards.
Our investment in the South Hill, Virginia, lightweight fabrics facility is an
important part of this strategy.  In addition, we have leased a portion of this
facility to Advanced Glassfiber Yarns to manufacture glass yarns exclusively for
our production of lightweight glass fiber fabrics.  We believe that this
arrangement strengthens the compatibility between our weaving process and the
glass yarns we use in our weaving process, thereby enabling us to produce the
highest quality lightweight glass fiber fabrics.  We also believe that the
quality of the products we manufacture at the South Hill facility will enable us
to enhance and expand our relationships with customers in the multi-layer
printed circuit board market.  We have increased our net sales of lightweight
glass fiber fabrics by 18.2%, from $60.5 million in 1998 to $71.5 million in
2000.

   Capitalize on the Growth in the Filtration and Composites Markets.  We
believe substantial opportunities exist to increase our sales and market share
in both the filtration and composites markets, which together accounted for
approximately 35.9% of our net sales in 1998, and 37.8% of our net sales in
1999, and 37.3% in 2000.

   We intend to leverage our already strong position in the high temperature
filtration market by developing new woven and non-woven high performance fabrics
for environmental applications in power generation, steel mills and other
industries that are subject to strict environmental regulations.  In addition,
we believe that there may be increased opportunities internationally in this
market as lesser developed countries adopt stricter environmental regulations.

   We also believe that we have substantial opportunities to increase our sales
in the composites market for applications in the transportation industry.  In
the composites market, we are pursuing strategic relationships with key
suppliers to the aerospace and automobile industries for the design and
manufacture of new products.  We have increased net sales in the filtration and
composites markets by 1.8%, from $73.9 million in 1998 to $75.2 million in 2000.

   Developing New Applications for Fabrics.  We plan to continue to leverage the
technical expertise and experience of our research and development and sales and
marketing staff to develop new applications for existing fabrics and to develop
new fabrics that meet customer

                                       4
<PAGE>

requirements for strength, weight, fire resistance and durability. We believe
that many opportunities exist to continue to develop both woven and non-woven
fabrics to replace traditional materials in markets which have historically not
utilized the fabrics we produce. For example, we have begun selling fabrics for
use in the reinforcement of metal automobile body parts.

Products and Markets

   We sell our products primarily in the United States and focus on the
following markets:

   Electronics. We produce glass fiber fabrics for multi-layer and rigid printed
circuit boards for use in the electronics industry. The demand for multi-layer
printed circuit boards, which primarily use lightweight glass fiber fabrics, has
been increasing. Furthermore, the demand for our heavyweight fabrics has
decreased due to competitive pressures from Asian laminate producers. As a
result of the increasing demand for multi-layer printed circuit boards, which
primarily use lightweight glass fiber fabrics, we have shifted our electronics
glass fiber fabrics manufacturing capacity mix in recent years from heavyweight
fabrics, which are typically used in rigid printed circuit boards, toward more
technologically advanced and higher margin lightweight fabrics. Sales of glass
fabrics to the electronics industry were $100.5 million in 2000, representing
50.0% of our net sales. Sales of heavyweight fabrics were negatively impacted in
1999 due to intense competition from Asia resulting in lower volumes and prices.
2000 showed an increase over 1999 in the heavyweight fabrics market due to
favorable pricing and increased sales volumes to Asia.

   Composites. Our glass, carbon and aramid fiber fabrics are used in various
composite materials, which are used in various applications, including
structural aircraft parts and interiors, helicopter rotor blades, tooling, brake
linings and ducting.   Net sales of fabrics for composites were $46.2 million in
2000, representing 22.9% of our net sales.

   Filtration. We produce fabrics for high temperature dust filtration used by
industrial customers to control emissions into the environment. Our filtration
bags are sold to utilities, producers of asphalt and carbon black, cement plants
and steel mills.  Sales of our filtration fabrics were $29.0 million in 2000,
representing 14.3% of our net sales.  Filtration sales were strong and at a
record level in 2000 due to incentive programs and large replacement orders.

   Commercial. Our glass fiber fabrics are used in commercial applications where
fire resistance and dimensional stability are critical. Applications for these
products include ceiling tile and acoustical facing fabrics, window coverings
and movie screens.  Sales in this segment in 2000 were comparable to 1999.

   Insulation. We produce materials for high-temperature, fire-resistant
insulation. Applications for these products include insulation for joints,
pipes, valves, transportation exhaust systems, heat shields and home appliances.
Sales in this segment in 2000 were comparable to 1999.

                                       5
<PAGE>

   Construction. The fire resistant qualities of glass fiber fabrics make them a
critical component of products used in the construction industry. Applications
for these products include smoke and fire barrier curtains, drywall bonding
tape, rubber mat backing and fabric structures, such as commercial tents and
roofs.  Sales in 2000 were down compared to 1999 due to the fact that no
deliveries were made for our Saudi Arabian fiberglass tents project which was
one of our largest projects for this market in 1999.

Sales and Marketing

   We sell our products through a direct sales force of seven sales
representatives, four market managers and two telemarketing representatives. All
of the sales representatives and three of the four market managers have been
with us for more than ten years. Our sales representatives have geographic
territories, while the market managers are responsible for specific product
lines. The sales representatives are compensated on a salary and commission
basis and the market managers are compensated on a salary and bonus basis. Each
sales representative has a technical orientation and the necessary expertise to
sell our full line of products. We maintain an internet web site, located at
www.bgf.com, which contains extensive product information.

   We sell our products to over 400 customers, including many leading companies
in their respective industry segments, including Cytec Fiberite, Polyclad
Laminates, Isola USA, BHA Group and Chemfab. We continually seek to strengthen
and expand our relationships with our customers. Due to the stringent quality,
delivery and performance standards demanded by many of our customers and the
ultimate users of our products in various markets, our customers are
increasingly moving toward single source supply and collaborative agreements
among both fabric producers, such as BGF, and their own customers. We believe
that we are well positioned to benefit from this trend because of our strong
competitive position within the industry, our investment in technical and
manufacturing expertise and our long-term relationships with customers and
suppliers. Our markets remain competitive, however, and this competitiveness is
exemplified by continual and rapid technological change. To effectively compete,
we must process and utilize effectively extensive technological and
manufacturing capabilities. We could face even further competition if cost
effective alternatives to glass, carbon or aramid fiber fabrics are developed.

   Two of our customers, Cytec Fiberite and Polyclad Laminates, each accounted
for more than 10% of our net sales and together accounted for 26.9% and 23.1% of
our net sales, respectively, in 1999 and in 2000.  Our top ten customers in 1999
and in 2000 accounted for 55.3% and 51.9% of our net sales, respectively. Our
customers are not contractually required to purchase any of our products and may
terminate their relationship with us at any time.

Industry Segments

   We operate in one business segment that manufactures specialty woven and
nonwoven fabrics for use in a variety of industrial and commercial applications.
Information related thereto can be found in footnote 11 of the consolidated
financial statements under Item 8 of this Report.

                                       6
<PAGE>

Research and Development

   Throughout our history, we have demonstrated that we are one of the
industry's leading innovators, by becoming the first to:

   [_] Weave glass fabrics;
   [_] Develop a patented process for heat cleaning glass fabrics to improve the
       physical properties of composites;
   [_] Develop unidirectional fabrics;
   [_] Develop a product using "DE" size (finer) filaments to improve composite
       strengths; and
   [_] Weave single yarns by developing and using an improved "warp size"
       (protective coating to prevent abrasion during weaving).

   We believe our innovations have enhanced existing customer relationships and
created new applications for our fabrics.

   We maintain a research and development staff of four chemical and three
laboratory technicians who work under our Research and Development Manager. We
have a modern, well-equipped research and development facility, located at our
headquarters in Greensboro, North Carolina, that divides its efforts among
developing new products and improving current products. The research and
development facility is divided into seven state-of-the-art laboratories
focusing on the following strategic areas of product development:

   [_] Applications and development;
   [_] Pilot processing;
   [_] Physical testing;
   [_] Composites development;
   [_] Microscopy;
   [_] Analytical testing; and
   [_] Filtration technology

   We have several United States patents, patent applications and trademarks.
While we consider our patents to be valuable assets, we do not believe that our
competitive position is dependent on patent protection or that our operations
are dependent on any individual patent or group of related patents. However, in
some instances, patents and patent protection may serve as a barrier to entry in
some of our product lines, such as commercial and insulation. Our policy is to
obtain patents on our new products and enforce our patent rights.

Raw Materials

   The principal materials we use to manufacture our products are glass, aramid
and carbon yarns. We purchase glass yarns from Advanced Glassfiber, PPG
Industries, Nitto Boseki and Vetrotex. Beginning in September 1998, Advanced
Glassfiber began to supply us with glass yarns produced at the South Hill,
Virginia lightweight fiber fabrics facility. The supply agreement expires on
December 31, 2008, unless extended by Advanced Glassfiber. Glass Holdings, our
parent corporation, through a wholly owned subsidiary, purchased a 51% interest

                                       7
<PAGE>

in Advanced Glassfiber from Owens Corning on September 30, 1998. Our main
suppliers of carbon yarns are Amoco, Toho and Hexcel and our main suppliers of
aramid yarns are DuPont and Akzo Nobel.

Competition

   Our primary competitor is Hexcel/Clark-Schwebel. Other competitors are
smaller and generally compete in niche markets. The major competitors in the
global glass fabric weaving industry are BGF/Porcher Industries, Hexcel/Clark-
Schwebel, Nitto Boseki (Japan), Nan Ya Plastics (Taiwan) and Taiwan Glass
(Taiwan).

   Beginning in the fourth quarter of 1997, we have experienced downward pricing
pressures on our heavyweight glass fiber fabrics due to foreign exchange
fluctuations between the dollar and various Asian currencies and over-capacity
in Asian heavyweight fabrics manufacturing, which has led to increased Asian
imports of laminates and printed circuit boards into the United States.

Employees

   As of December 31, 2000, we employed approximately 1,146 full time and part
time employees, 946 of which are hourly employees and 200 of which are paid on a
salary basis. All of our employees are located in the United States. Of these
employees, 1,064 were engaged in manufacturing and manufacturing related
services, and 82 were engaged in sales, marketing and administrative functions.
None of our employees is represented by a labor union. In May of 1999, we
eliminated 67 positions and incurred a pretax restructuring charge of $769,000.
We consider our relationship with our employees to be good.

Environmental and Health Matters

   Our past and present operations, including our ownership and operation of
real properties, are subject to extensive and changing federal, state, local and
foreign environmental laws and requirements including those governing discharges
to air and water, the handling and disposal of soils and hazardous substances
and wastes, and the remediation of contamination associated with releases of
hazardous substances at our facilities and off-site disposal locations. Our
operations are also governed by laws and requirements relating to workplace
safety and health. We believe that we are generally in material compliance with
currently applicable environmental laws and requirements.

   In the course of a September 1998 environmental site assessment, we
discovered reportable quantities of  polychlorinated biphenyls ("PCBs") in soil
at the Altavista plant in and around the former site of a heat transfer oil tank
that the previous owner of the facility had removed  in 1986, before BGF's 1988
acquisition.  We immediately reported the contamination to the United States
Environmental Protection Agency ("USEPA") Region 3 and the Virginia Department
of Environmental Quality ("VDEQ").

                                       8
<PAGE>

   The agencies have required additional sampling and site characterization,
which is ongoing.  With USEPA and VEDQ oversight, we have assessed the site to
determine the extent of the contamination and are developing a cleanup plan,
which we will begin to implement upon receiving approval from USEPA.   All
assessment and cleanup activities have been and will be conducted in compliance
with applicable state and federal regulatory requirements.  Cleanup costs remain
uncertain.  We may incur costs or liabilities relating to this and other
environmental or safety and health matters in the future, including those
relating to compliance with laws and requirements, remediation of contamination
or claims by third parties.

   Like all weavers of glass, carbon and aramid fibers, we are subject to laws
and regulations designed to reduce solid wastes by requiring, among other
things, regulated wastes to be degradable in landfills, minimum levels of
recycled content, various recycling requirements, disposal fees and limits on
the use of our products. In addition, various consumer and special interest
groups have lobbied from time to time for the implementation of additional
environmental protection measures. We do not believe that the legislation
promulgated to date and currently pending initiatives will have a material
adverse effect on our business, financial condition and results of operations.
We cannot assure you, however, that any future legislation or regulatory efforts
will not have a material adverse effect on our business, financial condition and
results of operations.

Item 2. Properties

   We own and operate four manufacturing facilities and a research and
development facility, together occupying over 786,000 square feet.  By
exchanging manufacturing technology and expertise with our international
affiliates within Porcher Industries, we are able to develop innovative,
efficient and flexible manufacturing processes. We were the first weaver of
glass fiber in the United States to be ISO 9002 certified, which evidences our
strong focus on high-quality manufacturing processes. The following table sets
forth the general location, principal uses and approximate size of our
properties and whether the properties are leased or owned.

                                       9
<PAGE>

<TABLE>
<CAPTION>
Facility                       Use                             Approximate      Leased or
--------                       ---                             Square Feet      Owned
                                                               -----------      -----
<S>                            <C>                             <C>              <C>
Greensboro, North Carolina     Headquarters; Research and          36,000       Owned
                               Development facility
Altavista, Virginia            Weaving glass fiber and            399,000       Owned
                               aramid fibers
South Hill, Virginia           Weaving heavyweight glass          147,000       Owned
Heavyweight Fiber Fabrics      fibers
Facility
South Hill, Virginia           Weaving lightweight glass          128,000       Owned
Lightweight Fiber Fabrics      fibers
Facility
Cheraw, South Carolina         Weaving carbon fibers               76,000       Owned
Altavista, Virginia            Warehouse                          101,000       Leased
Altavista, Virginia            Warehouse                           24,000       Leased
Altavista, Virginia            Warehouse                            6,000       Leased
Lynchburg, Virginia            Warehouse                           37,000       Leased
South Hill, Virginia           Warehouse                           33,000       Leased
Los Angeles, California        Warehouse                           20,000       Leased
</TABLE>


Item 3. Legal Proceedings

   From time to time, we are involved in various legal proceedings arising in
the ordinary course of business. None of the legal matters in which we are
currently involved, either individually or in the aggregate, is expected to have
a material adverse effect on our business, financial condition and results of
operations. See also "Item 1. Business - Environmental and Safety and Health
Matters."

Item 4. Submission of Matters to a Vote of Security Holders

   None

                                       10
<PAGE>

                                    PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters

   There is no established trading market for BGF's common stock.  All shares of
BGF's issued and outstanding common stock are held by Glass Holdings.

   We did not declare any dividends or make any distributions on our common
stock in 2000.  Further, we have no commitment or current plans to make
dividends or other distributions in 2001 and our senior credit facility
restricts our ability to pay dividends on other distributions.

Item 6.   Selected Financial Data


   The following table sets forth certain selected financial information derived
from our audited consolidated financial statements for the five-year period
ended December 31, 2000.  The table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and our consolidated financial statements and related notes and
other financial information included elsewhere in this Report.

<TABLE>
<CAPTION>

                                                                             Fiscal Year Ended

                                              December 31,     December 31,      December 31,      December 31,   December 31,
                                                 2000             1999              1998              1997            1996

                                                                        (dollars in thousands)
--------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>               <C>               <C>             <C>
Statement of Operations Data:
 Net sales/(1)/                               $ 201,419        $ 181,681         $  205,515        $ 222,066       $ 199,109
 Cost of goods sold/(1)/                        165,830          151,491            166,239          174,663         148,738
                                              ---------        ---------         ----------        ---------       ---------
 Gross profit                                    35,589           30,190             39,276           47,403          50,371
 Selling, general and
  administrative expenses                         9,253            7,410              9,700            9,739          10,220
 Restructuring charges/(2)/                         ---              769                ---              ---             ---
                                              ---------        ---------         ----------        ---------       ---------
 Operating income                                26,336           22,011             29,576           37,664          40,151
 Interest expense                                14,168           15,817              4,517            2,355           1,993
 Other expenses (income), net                    (1,844)          (1,485)              (112)             (73)         (1,868)
                                              ---------        ---------         ----------        ---------       ---------
 Income before taxes and
  extraordinary loss                             14,012            7,679             25,171           35,382          40,026
 Income tax expense                               5,632            2,911              9,854           13,652          15,996
                                              ---------        ---------         ----------        ---------       ---------
 Income before effect of
  extraordinary loss                              8,380            4,768             15,317           21,730          24,030
 Extraordinary loss on write-off of
  debt issuance costs, net of
  income taxes of $639/(3)/                         ---            1,029                ---              ---             ---
                                              ---------        ---------         ----------        ---------       ---------

 Net income                                   $   8,380        $   3,739         $   15,317        $  21,730       $  24,030
                                              =========        =========         ==========        =========       =========

Other Data:
 Depreciation and amortization/(4)/           $   8,584        $   8,206         $    7,399        $   6,759       $   6,085
 Capital Expenditures                             6,764            6,531             11,299            7,275          21,983
 EBITDA/(5)/                                     36,764           31,702             37,087           44,496          48,104
 Cash flows from operating activities             6,851           28,266             29,471           19,898          22,791
 Cash flows from investing activities            (6,728)          (6,472)           (11,283)          (7,275)        (25,425)
 Cash flows from financing activities              (132)         (21,795)           (18,199)         (12,759)          2,778

 Ratio of earnings to fixed charges/(6)/            2.0x             1.5x               6.1x            14.5x           17.4x
</TABLE>

                                       11
<PAGE>

<TABLE>
 <S>                                          <C>              <C>               <C>             <C>              <C>
 Balance sheet data
 (at period end):
   Working capital                            $  34,635        $  35,228         $  53,424       $  51,799        $  39,702
   Total assets                               $ 136,393        $ 127,184         $ 136,766       $ 136,476        $ 123,784
   Current debt                               $   3,106        $       0         $   1,000       $   5,000        $   9,526
   Long-term debt                             $ 114,477        $ 132,383         $ 150,000       $  20,000        $  26,750
   Total debt                                 $ 117,583        $ 132,383         $ 151,000       $  25,000        $  36,276
   Stockholder's equity (deficit)             $ (15,577)       $ (34,437)        $ (38,176)      $  83,297        $  66,480
</TABLE>

(1)  In order to conform with recent technical literature from the Emerging
     Issues Task Force, shipping and handling costs are now included in cost of
     goods sold and not presented as a part of net sales.  The prior period
     financial statements have been reclassified to conform to the current
     presentation.

(2)  In May 1999, the Company terminated 67 employees in connection with a
     restructuring plan.  As a result of the restructuring plan, BGF incurred
     charges for salaried employee severance.

(3)  On January 21, 1999, BGF issued $100 million of senior subordinated notes
     ($98 million net of discount) due 2009.  Net proceeds of approximately
     $95.3 million were used to repay outstanding indebtedness of $65.0 million
     under the senior subordinated credit facility, interest of $0.5 million
     under the senior subordinated credit facility, and $29.8 million under the
     revolver.  Interest is payable semiannually beginning in July 1999.  In
     addition, debt issuance costs of $1.7 million ($1.0 million net of tax)
     associated with the termination of the senior subordinated credit facility
     were written off in the first quarter of 1999 and recorded as an
     extraordinary charge in the financial statements.  Debt issuance costs of
     $0.3 million associated with the amendment dated December 16, 1999 were
     written off in the fourth quarter of 1999 and recorded as an additional
     amortization charge in the financial statements

(4)  Amounts do not include amortization of debt issuance costs and original
     issue discount, which is included in interest expense.

(5)  EBITDA is defined as net income before interest expense, income taxes,
     depreciation, amortization expense and non-recurring, non-cash charges.  We
     believe that EBITDA is a widely accepted financial indicator of a company's
     ability to service and/or incur indebtedness. EBITDA does not represent and
     should not be considered as an alternative to net income or cash flow from
     operations as determined by generally accepted accounting principles, and
     EBITDA does not necessarily indicate whether cash flow will be sufficient
     for cash requirements. Not every company calculates EBITDA in exactly the
     same fashion. As a result, EBITDA as presented below may not necessarily be
     comparable to similarly titled measures of other companies.  See also
     Exhibit 99.1 to this Report for a reconciliation of net income to EBITDA.

(6)  The ratio of earnings to fixed charges is computed by dividing earnings by
     fixed charges. Earnings consist of income before taxes and changes in
     accounting principles and fixed charges, excluding capitalized interest.
     Fixed charges consists of interest expense, capitalized interest,
     amortization of debt issuance costs and one-third of rental expense (the
     portion deemed representative of the interest factor). Earnings were
     adequate to cover fixed charges for the years ended December 31, 1996,
     1997, 1998, 1999, and 2000 by $39.8 million, $35.4 million, $25.0 million,
     $7.6 million, and $14.0 million, respectively.  See also Exhibit 12 to this
     Report for a computation of ratio of earnings to fixed charges.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

   This Report contains certain forward looking statements with respect to our
operations, industry, financial condition and liquidity.  These statements
reflect our assessment of a number of risks and uncertainties.  Our actual
results could differ materially from the results anticipated in these forward
looking statements as a result of certain factors set forth in this Report.  An
additional statement made pursuant to the Private Securities Litigation Reform
Act of 1995 and summarizing certain of the principal risks and uncertainties
inherent in our business is included in Part I of this Report under the caption
"Cautionary Statement Regarding Forward Looking Statements."  You are encouraged
to read this statement carefully.

   You should read the following discussion together with our consolidated
financial statements and related notes contained in this Report.

   In order to conform with recent technical literature from the Emerging Issues
Task Force, shipping and handling costs are now included in cost of goods sold
and not presented as a reduction of net sales.  The fiscal 1999 and 1998
financial information presented in this section

                                       12
<PAGE>

has been reclassified to conform to the current presentation. In addition, the
fiscal 1999 and 1998 financial statements as presented in "Item 14. Exhibits,
Financial Statement Schedules and Reports on Form 8-K" have been reclassified to
conform to the current presentation.

   Prior to the reclassification, revenues and cost of goods sold for fiscal
1999 were (in thousands) $178,539 and $148,349, respectively, and for fiscal
1998 were (in thousands) $201,754 and $162,478, respectively.  As a result of
the reclassification, revenues and cost of goods sold for fiscal 1999 are (in
thousands) $181,681 and $151,491, respectively, and for fiscal 1998 are (in
thousands) $205,515 and $166,239, respectively.  See footnote 1 of the
consolidated financial statements.

Overview

   Over the last 10 years, the demand for multi-layer printed circuit boards,
which primarily use lightweight glass fiber fabrics, has been increasing. In
contrast, over the last 3 years, the demand for our heavyweight fabrics has been
decreasing due to competitive pressures from Asian laminate producers. As a
result, we have shifted our electronics glass fiber fabrics manufacturing
capacity mix in recent years from heavyweight fabrics, which are typically used
in rigid printed circuit boards, toward more technologically advanced and
higher-margin lightweight fabrics. Beginning in the fourth quarter of 1997, we
have experienced downward pricing pressures on our heavyweight glass fiber
fabrics due to foreign exchange fluctuations between the dollar and various
Asian currencies and over-capacity in Asian heavyweight fabrics manufacturing,
which has led to increased imports of laminates and printed circuit boards into
the U.S. from Asia. However, our sales of the higher-margin, lightweight glass
fiber fabrics used in multi-layer printed circuit boards have continued to
increase. We believe that currently, there is no cost-effective substitute for
glass fiber fabrics that can satisfy the stringent quality and performance
criteria demanded of printed circuit boards.

   From 1998 to 2000, our net sales of heavyweight glass fiber fabrics to the
electronics industry have decreased from $42.7 million to $29.0 million, and net
sales of lightweight glass fiber fabrics to the electronics industry have
increased from $60.5 million to $71.5 million. In 2000, net sales of glass fiber
fabrics to the electronics industry represented 50.0% of our net sales.

   In 2000, we derived approximately 37.2% of our net sales from the sale of
products to the composites and filtration markets. Our sales to the composites
market are dependent on new aircraft building programs and the refurbishment of
existing aircraft. Our sales to the filtration market are dependent on
environmental laws regulating emissions by industrial customers into the
environment. We have continued to direct resources to these markets, which is
demonstrated  in part by an increase in net sales to the filtration market from
$26.6 million in 1999 to $29.0 million in 2000 and an increase in net sales to
the composite market from $42.1 million in 1999 to $46.2 million in 2000.

   We purchase glass yarns, our principal raw material, primarily from two
suppliers. While glass yarns have been in short supply from time to time,
currently the supply is adequate. We generally have been able to pass through
price increases in raw materials to our customers.

                                       13
<PAGE>

   Results of Operations

   The following table summarizes our historical results of operations as a
percentage of net sales for the years ended December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                 ------------------------------------------------------
                                                                        2000              1999               1998
                                                                      -------           -------             -------
<S>                                                              <C>                    <C>                <C>
Net Sales                                                              100.0%            100.0%             100.0%
Cost of goods sold                                                      82.3              83.4               80.9
                                                                       -----            ------             ------
   Gross profit                                                         17.7              16.6               19.1
Selling, general and administrative expenses                             4.6               4.1                4.7
Restructuring charge                                                      --               0.4                 --
                                                                       -----            ------             ------
Operating Income                                                        13.1              12.1               14.4
Other (income) expenses:
   Interest expense                                                      7.0               8.7                2.2
   Other income, net                                                    (0.9)             (0.8)               0.0
                                                                       -----            ------             ------
      Income before taxes and extraordinary loss                         7.0               4.2               12.2
Income tax expense                                                       2.8               1.6                4.8
                                                                       -----            ------             ------
      Income before extraordinary loss                                   4.2               2.6                7.4
Extraordinary loss write-off of debt issuance costs, net
 of income taxes of $639                                                  --               0.6                0.0
                                                                       -----            ------             ------
      Net income                                                         4.2%              2.0%               7.4%
                                                                       =====            ======             ======
</TABLE>

Fiscal Year 2000 Compared to Fiscal Year 1999

   Net Sales.  Net sales increased $19.7 million, or 10.8% to $201.4 million in
2000, from $181.7 million in 1999, primarily due to an increase of $8.9 million
or 14.2%, in the sales of lightweight fabrics used in multilayer printed circuit
boards, and an increase of $5.7 million, or 24.7%, in the sales of heavyweight
fabrics used in rigid printed circuit boards.

   Sales of our products in the composites market increased $4.1 million, or
9.7% from $42.1 million in 1999 to $46.2 million in 2000 due to an increase in
demand for aerospace products.

   Sales of our filtration products increased by $2.4 million, or 9.0%, from
$26.6 million in 1999 to $29.0 million in 2000, due to incentive programs and
large replacement orders.

   Gross Profit.  Gross profit margins increased from 16.6% in 1999 to 17.7% in
2000 due primarily to shifts in product mix and higher volumes resulting in more
absorption of fixed costs, as well as price increases in the specialty markets
and some electronics accounts in August of 2000.

   Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased to 4.6% of net sales in 2000 from 4.1% of net
sales in 1999.  This was primarily due to an increase in sales commissions and
employee profit sharing awards.

                                       14
<PAGE>

   Operating Income.  As a result of the aforementioned factors and charges of
$769,000 incurred in 1999 due to a restructuring plan that eliminated 67 jobs
across the company, operating income increased $4.3 million, to $26.3 million,
or 13.1% of net sales in 2000 from $22.0 million, or 12.1% of net sales, in
1999.

   Interest Expense.  Interest expense decreased $1.6 million or 10.1%, to $14.2
million in 2000, from $15.8 million in 1999, due to payments on the senior
credit facility.

   Income Tax Expense.  The effective tax rate in 2000 and 1999 of 40.2% and
37.9% respectively, was higher than the federal statutory rate of 35.0%
primarily due to state income tax.

   Net Income.  As a result of the aforementioned factors, and the write-off of
debt issuance costs of $1.0 million after tax associated with the repayment of
outstanding indebtedness in connection with the issuance of senior subordinated
notes in 1999, net income increased $4.6 million to $8.4 million in 2000, from
$3.7 million in 1999.

Fiscal Year 1999 Compared to Fiscal Year 1998

   Net Sales.  Net sales decreased $23.8 million, or 11.6% to $181.7 million in
1999, from $205.5 million in 1998, primarily due to a decrease of $19.5 million
or 45.6%, in the sales of heavyweight fabrics used in rigid printed circuit
boards.

   Sales of our products in the composites market decreased $11.2 million, or
21.0% from $53.3 million in 1998 to $42.1 million in 1999 due to a slow demand
for aerospace products.

   Sales of our filtration products increased by $6.0 million, or 29.0%, from
$20.6 million in 1998 to $26.6 million in 1999, due to incentive programs and
large replacement orders.

   Gross Profit.  Gross profit margins decreased from 19.1% in 1998 to 16.6% in
1999 due primarily to lower volumes resulting in less absorption of fixed costs
as well as price pressures in the electronics segment.

   Selling, General and Administrative Expenses.  Selling, general and
administrative expenses decreased to 4.1% of net sales in 1999 from 4.7% of net
sales in 1998.  This was primarily due to significantly lower expenses for
profit sharing and executive bonuses to take into account the current
profitability of BGF as well as lower sales commissions to agents because of
lower export sales.

                                       15
<PAGE>

   Restructuring Charges.  BGF incurred charges of $769,000 in 1999 due to a
restructuring plan announced on May 3, 1999 that resulted in the elimination of
67 jobs (20 salaried and 47 wage) across the company.

   Operating Income.  As a result of the aforementioned factors, operating
income decreased to $22.0 million, or 12.1% of net sales in 1999 from $29.6
million, or 14.4% of net sales, in 1998.

   Interest Expense.  Interest expense increased $11.3 million to $15.8 million
in 1999, from $4.5 million in 1998, due to the increase in debt, which was
incurred on September 30, 1998, in order to loan our parent company, Glass
Holdings, funds to enable AGY Holdings, a wholly owned subsidiary of Glass
Holdings, to purchase a 51% ownership interest in Advanced Glassfiber Yarns.

   Income Tax Expense.  The effective tax rate in 1999 and 1998 of 37.9% and
39.1% respectively was higher than the federal statutory rate of 35.0% primarily
due to state income tax.

   Net Income.  As a result of the aforementioned factors, and the write-off of
debt issuance costs of $1.0 million after tax associated with the repayment of
outstanding indebtedness in connection with the issuance of senior subordinated
notes, net income decreased $11.6 million to $3.7 million in 1999, from $15.3
million in 1998.

Liquidity and Capital Resources

   Historically, our primary sources of liquidity have been cash flow from
operations and borrowings under our credit facilities.  Our future need for
liquidity will arise primarily from interest payable on our 10 1/4% Senior
Subordinated Notes due 2009 and our senior credit facility, principal payments
on the senior credit facility and the funding of our capital expenditures and
working capital requirements.  We have no mandatory payments of principal on our
notes scheduled prior to their maturity.

   At December 31, 2000, we had outstanding $117.6 million of long-term debt,
consisting of $19.2 million under the Senior Credit Facility and $98.4 million
of Senior Subordinated Notes (net of discount of $1.6 million). We do not
believe that our current exposure to changes in interest rates under the senior
credit facility will have a material adverse effect on our business, financial
condition or results of operations. We have entered into interest rate swap
agreements to hedge our exposure to changes in interest rates under the senior
credit facility term loan such that our exposure under the term loan will not
have a material adverse effect on our business, financial condition or results
of operations.

   Net Cash Provided by Operating Activities.  Net cash provided by operating
activities was $6.9 million for 2000 and was primarily the result of net income
of $8.4 million, adjusted for non-cash charges/(credits) to net income for
depreciation of $8.4 million, amortization of $1.2 million, deferred income
taxes of $(5.0) million, and an increase in inventory of $(1.1) million, an
increase in accounts payable and accrued expenses of $2.5 million and an
increase in trade accounts receivable of $(8.3) million.  Net cash provided by
operating activities was $28.3

                                       16
<PAGE>

million in 1999. This was primarily a result of net income of $3.7 million,
depreciation of $8.0 million, amortization of $1.2 million, deferred income
taxes of $(6.5) million and a decrease in inventory of $6.9 million and an
increase in accounts payable and accrued expenses of $11.1 million. Net cash
provided by operating activities was $29.5 million for the year ended December
31, 1998 and was primarily the result of net income of $15.3 million and
depreciation of $7.2 million, offset by increases in working capital.

   Net Cash Used in Investing Activities.  Net cash used in investing activities
was $6.7 million, $6.5 million and $11.3 million, for the years ended December
31, 2000, 1999 and 1998, respectively, and was the result primarily of purchases
of property, plant and equipment.

   We have historically financed our capital expenditures through cash flow from
operations and borrowings under our credit facilities.  The principal capital
expenditures during 2000 and 1999 included:

     (1)  A total of $1.0 million in 2000 converting old looms at our
          heavyweight fabrics facility in South Hill, Virginia, in order to run
          lightweight fabrics.

     (2)  $0.3 million and $1.9 million in 2000 and 1999, respectively, of a
          $4.0 million new non-woven line for insulation applications; and

     (3)  $1.4 million and $1.1 million in 2000 and 1999, respectively, for the
          beginning of the second phase of our lightweight fabrics facility in
          South Hill, Virginia

   We are anticipating total capital expenditures in 2001 to be approximately
$18.0 million. Should business conditions not allow for this, we would spend a
lesser amount.

   Net Cash Used in Financing Activities.  Net cash used in financing activities
was $0.1 million for the year ended December 31, 2000, and was primarily a
result of net payments on debt of $15.0 million, offset by a $10.5 million
principal payment received on a loan to Glass Holdings and by an increase in the
book overdraft of $4.4 million.  Net cash used in financing activities was $21.8
million for 1999 and was primarily the result of payments on the senior
subordinated debt of $65.0 million, net payments on the revolving credit
facility of $26.0 million, and payments on the term loan of $25.8 million offset
by the proceeds from the notes of $98.0 million.   Net cash used in financing
activities was $18.2 million in 1998, resulting primarily from a loan to our
parent, Glass Holdings, of $136.8 million, payments on long-term debt and other
debt of $37.0 million and $4.6 million of debt issuance costs offset by
borrowings under our senior credit facility and senior subordinated credit
facility of $163.0 million.

   On January 21, 1999, BGF issued $100.0 million of 10 1/4% Senior Subordinated
Notes ($98 million net of discount) due 2009. The net proceeds to BGF from the
sales of these old notes were approximately $94.9 million, after deducting the
initial purchaser's discount and expenses. BGF used the net proceeds from the
offering to repay all $65.0 million of indebtedness under the senior
subordinated credit facility and $29.9 million of indebtedness under the
revolver under our senior credit facility, which was incurred on September 30,
1998 to fund the purchase by AGY Holdings of a 51% interest in Advanced
Glassfiber. Upon the repayment of the $65.0 million

                                       17
<PAGE>

of indebtedness under the senior subordinated credit facility, the facility was
terminated. On July 23, 1999, we exchanged the old notes for substantially
identical new notes that have been registered under the Securities Act.

   On September 30, 1998, we entered into a credit agreement with various
lenders and First Union National Bank, as Agent, pursuant to which these lenders
have provided us with our senior secured credit facility in an aggregate amount
of up to $125.0 million. This senior credit facility consisted of:

   .  a five-year revolving credit facility in an aggregate principal amount of
      up to $75.0 million; and

   .  a six-year amortizing term loan in an aggregate principal amount of $50.0
      million.

The revolver includes:

   .  a swingline loan facility with a $5.0 million sublimit; and

   .  a letter of credit facility with a $20.0 million sublimit.

On December 16, 1999, we amended the Senior Credit Facility as follows:

   .  we changed the level of two of the four financial covenants (leverage
      ratio and interest coverage ratio) to allow for more flexibility through
      the year 2000

   .  we reduced the revolver commitment by $15.0 million to $60.0 million

   .  we prepaid $10.0 million on the term loan effective December 31, 1999

   The swingline loan facility and the letter of credit facility remain
unchanged.  We paid a fee to the senior lenders equal to 1/8% of the reduced
commitments.

   As of December 31, 2000, we had no outstanding borrowings under the revolver
($60.0 million remained available for borrowings).

   The credit agreement governing the senior credit facility includes four
financial covenants: minimum net worth, leverage ratio, fixed charges coverage
ratio and interest coverage ratio.

   We also entered into a senior subordinated credit facility on September 30,
1998 which provided for a loan in the aggregate principal amount of $65.0
million. The senior subordinated credit facility, which was drawn down in full
on December 31, 1998 in connection with the purchase by Glass Holdings, our
parent company, of a 51% interest in Advanced Glassfiber, was repaid with the
proceeds of the offering of Senior Subordinated Notes issued January 21, 1999
and then terminated.

   Interest under the senior credit facility and the exchange notes was $13.2
million in 2000. Principal payments under the term loan for 2000 were $5.0
million.

                                       18
<PAGE>

   On September 30, 1998, AGY Holdings, an affiliate of BGF, purchased a 51%
ownership interest in Advanced Glassfiber Yarns LLC for aggregate consideration
of $338.9 million, including post-closing adjustments. In connection with the
acquisition, BGF loaned Glass Holdings approximately $138.6 million to provide
Glass Holdings a portion of the capital necessary to fund the acquisition. BGF
raised the proceeds for this loan by borrowing (1) $88.4 million under the
senior credit facility, and (2) $65.0 million under the senior subordinated
credit facility which was refinanced in 1999 with senior subordinated notes. The
loan from BGF to Glass Holdings is evidenced by promissory notes that bear
interest at the Cost of Funds Rate for BGF for the calendar year immediately
preceding the date on which any interest is due. With respect to any period of
determination, the Cost of Funds Rate means a rate per annum equal to the
blended interest rate, as reasonably calculated by BGF, applicable to borrowings
of BGF during such period in respect of indebtedness incurred by BGF, to fund
the loan to Glass Holdings. Accrued interest is due and payable on the first
business day of February of each year commencing on February 1, 1999 and on any
date on which any principal is due. The promissory notes are payable on October
31, 2008 or such later date as may be agreed to by BGF and Glass Holdings. BGF
has not recorded interest income earned under the terms of the loan agreement
due to the fact that full repayment of the loan and related interest by Glass
Holdings is contingent upon Glass Holdings' receipt of dividends and other
distributions from its two subsidiaries, BGF and Advanced Glassfiber, which are
currently restricted from paying dividends and other distributions under their
debt agreements. Interest in arrears as of December 31, 2000 and 1999 totaled
$27.4 million and $15.9 million, respectively. See also "Item 13. Certain
Relationships and Related Transactions." During December 2000, BGF received
payments from Glass Holdings totaling $12.7 million. While there are interest
amounts in arrears, BGF and Glass Holdings have agreed that any payments made on
the loan balance will be allocated approximately 90% to principal and 10% to
interest. Accordingly, BGF reflected $10.5 million of the cash payment received
as a reduction of principal and $1.2 million was recognized as interest income
(recorded in other income on the consolidated statement of operations in 2000).

   In connection with AGY Holdings' purchase of a 51% ownership interest in
Advanced Glassfiber, Advanced Glassfiber made a partnership election to step up
the basis of AGY Holdings' share of Advanced Glassfiber's assets. The resulting
increase in depreciation and amortization of the stepped-up basis allows the
consolidated U.S. tax group of Porcher Industries (which includes BGF,
hereinafter the "Porcher U.S. Tax Group") to significantly reduce its tax
liability.  As a result, the Porcher U.S. Tax Group has agreed to defer the
receipt of annual distributions which AGY Holdings would otherwise be required
to make in order to fund AGY Holdings' share of the Porcher U.S. Tax Group's tax
liability. Rather, Advanced Glassfiber accrues an unrecovered distribution
amount (the "Deferred Distribution") for AGY Holdings' tax distribution. The
Deferred Distribution earns interest at the same rate of interest as the senior
credit facility.  Advanced Glassfiber will distribute all accumulated annual
deferred distributions to the extent that:

 .  both before and after the distribution there is not a default under its
   senior credit facility or its senior subordinated notes; and
 .  there are funds to make the distribution from available cash or borrowings.
Thereafter, all deferred distributions will cease and Advanced Glassfiber will
make annual tax distributions to AGY Holdings.

                                       19
<PAGE>

   We believe that at some point in the future Advanced Glassfiber will have
sufficient funds available under its senior credit facility and available cash
to pay the deferred distribution and fund future tax distributions. However,
since we are a member of the same consolidated group as AGY Holdings for U.S.
federal income tax purposes, we may be liable for any unpaid amounts in the
event Advanced Glassfiber has insufficient funds to make distributions to AGY
Holdings to pay its tax liability in full or if all accumulated annual deferred
distributions are less than the tax liability. Based on our current level of
operations, we believe that cash flow from operations and borrowings under our
senior credit facility will be adequate to fund any tax liability generated by
AGY Holdings. However, we cannot assure you that we will generate sufficient
cash from operations or that our future borrowings will be available under the
senior credit facility to pay any tax liability related to AGY Holdings.

   Our ability to make scheduled payments of principal of, or to pay the
interest or liquidated damages, if any, on, or to refinance our indebtedness,
including the notes, or to fund planned capital expenditures will depend on our
future performance.  Our future performance, to some extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond our control.  Based upon the current level of our
operations, we believe that cash flow from operations and available cash,
together with availability under the senior credit facility, will be adequate to
meet our future liquidity needs for at least the next two years.  However, we
cannot assure you that we will generate sufficient cash flow from operations or
that future borrowings will be available under our senior credit facility in an
amount sufficient to enable us to service our indebtedness, including the notes,
or to fund our other liquidity needs.  In addition, we may need to refinance all
or a portion of the principal of the notes on or prior to maturity.  We cannot
assure you that we will be able to effect any refinancing on commercially
reasonable terms or at all.

Impact of Inflation.

   We generally attempt to pass cost increases on to our customers.  Costs are
affected by, among other things, inflation, and we may experience the effects of
inflation in future periods.  We believe, however, that inflation has not had a
material impact on us during the past three years.

Recent Developments.

   On October 5, 2000, Owens Corning, which owns a 49% economic interest in
Advanced Glassfiber Yarns LLC (a major supplier of glass yarns to BGF), and
certain of Owens Corning's United States subsidiaries (collectively, the
"Debtors") filed voluntary petitions with the United States Bankruptcy Court for
the District of Delaware seeking relief under Chapter 11 of the United States
Bankruptcy Code. According to filings made by Owens Corning with the SEC, the
Debtors will continue to manage their properties and operate their businesses as
"debtors-in-possession" in accordance with the applicable provisions of the
United States Bankruptcy Code. To date, Advanced Glassfiber, and consequently
BGF, has not experienced interruptions in operations or supply of material.
Although no assurances can be provided, we do not believe that Owens Corning's
bankruptcy will have a material adverse effect on our business, financial
condition or results of operations. However, this forward-looking statement is
subject to risks and uncertainties that exist in our

                                       20
<PAGE>

operations and our business environment. See "--Cautionary Statement Regarding
Forward-Looking Statements."

Recently Issued Accounting Standards

   On June 8, 1999, the Financial Accounting Standards Board issued SFAS No.
137, "Deferral of the Effective Date of SFAS 133," which changes the effective
date of SFAS 133 to all fiscal quarters of all fiscal years beginning after June
15, 2000.  SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" requires entities to recognize all derivative instruments on the
balance sheet at their fair value.  Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction.  Due to our limited use of
derivative instruments, the adoption of SFAS No. 133 does not have a significant
effect on our financial condition or results of operations.

   In order to conform with recent technical literature from the Emerging Issues
Task Force, shipping and handling costs are now included in cost of goods sold
and not presented as part of net sales.  The prior period financial statements
have been reclassified to conform to the current presentation.

   In December, 1999, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 101, ("SAB 101"), "Revenue Recognition in
Financial Statements," as amended by SAB 101B, which is effective no later than
the year ended December 31, 2000.  The bulletin clarifies the SEC's views
regarding recognition of revenue.  The Company adopted SAB 101 in the fourth
quarter of 2000.  The application of the guidance in SAB 101 did not have a
material impact on the Company's annual or quarterly results of operations.

Seasonality

   Our business is not materially subject to seasonality.

Item 7a.  Quantitative and Qualitative Disclosures About Market Risk

   Our senior credit facility is subject to market risks, including interest
rate risk. Our financial instruments are not currently subject to foreign
currency risk or commodity price risk. We have no financial instruments held for
trading or speculative purposes.

   We are exposed to market risk related to changes in interest rates on
borrowings under our senior credit facility. The senior credit facility bears
interest based on LIBOR.

   We entered into an interest rate swap agreement to manage our exposure to
interest rate changes under the senior credit facility. The swap involves the
exchange of fixed and variable interest rate payments based on a contractual
principal amount and time period. Payments or receipts on the agreement are
recorded as adjustments to interest expense. At December 31, 2000, we had an
interest rate swap agreement effective through September 30, 2004 on a notional
amount of $19.2 million. Under this agreement, we have secured a fixed LIBOR
rate of

                                       21
<PAGE>

interest of 5.04% on the notional amount which is reduced in a manner consistent
with the amortization of the principal on our term loan. This swap effectively
changes our payment of interest on $19.2 million of variable rate debt for the
contract period.

   The fair value of the interest rate swap agreement represents the estimated
receipts or payments that would be made to terminate the agreement. At December
31, 2000, we would have received approximately $0.3 million to terminate the
agreement. A 1% decrease in LIBOR would decrease the amount received by
approximately $0.02 million.  The fair value is based on dealer quotes,
considering current interest rates.

Item 8. Financial Statements and Supplementary Data

   The financial statements and financial statement schedules in Part IV; Item
14(a)(1) and (2) of this Report are incorporated by reference into this Item 8.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

   None

                                       22
<PAGE>

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant

   The names, ages and positions of the Directors and Executive Officers and
other senior managers of BGF as of March 15, 2001 are set forth below. Each of
the directors of BGF is also a director of Glass Holdings. All Directors are
elected annually and hold office until their successors are elected and
qualified or until their earlier removal or resignation.

<TABLE>
<CAPTION>
Name                       Age     Positions with BGF
----                       ---     ------------------
<S>                        <C>     <C>
Robert Porcher             72      Chairman of the Board, Chief Executive
                                   Officer and Director
Philippe Porcher           47      Vice Chairman
Graham A. Pope             67      Director
Richard L. Cromer          57      President
Philippe R. Dorier         44      Senior Vice President, Chief Financial
                                   Officer, Secretary and Treasurer
James R. Henderson         63      Executive Vice President Sales and
                                   Merchandising
Charles H. Alligood        61      Vice President Quality Assurance and
                                   Industrial Engineering
Edward P. Cardille         61      Vice President Information Systems
Robert A. Frank            58      Vice President Operations
Thomas E. Mann, Jr.        47      Vice President Human Resources
Gerald F. Mitchell         53      Vice President Manufacturing
</TABLE>

   Robert Porcher has been our Chairman of the Board and Chief Executive Officer
and one of our directors since 1988. Mr. Porcher has maintained various
positions with Porcher Industries, including Chairman of the Board of Directors
and Chief Executive Officer of Porcher Industries, since 1952. Since December 9,
1998, Mr. Porcher has served as Chairman of the Supervisory Board of Porcher
Industries. Mr. Porcher beneficially owns a controlling interest in Porcher
Industries, which owns 100% of the outstanding capital stock of our parent,
Glass Holdings. See "Item 12. Security Ownership of Certain Beneficial Owners
and Management."

   Philippe Porcher has been our Vice Chairman since April 1998. He has also
served as Vice President of Porcher Industries since March 1993. Before becoming
Vice President of Porcher Industries, Mr. Philippe Porcher served as Director of
Porcher Industries' industrial division. Mr. Philippe Porcher is the son of
Robert Porcher, who is our Chairman of the Board and Chief Executive Officer and
one of our directors. Since December 9, 1998, Mr. Philippe Porcher has served as
President of the Executive Board of Porcher Industries.

   Graham A. Pope has been one of our directors since 1989. From 1989 until
1998, Mr. Pope served as our President and Chief Operating Officer. From 1959 to
1988, Mr. Pope served in various positions with Burlington, including Division
Manufacturing Manager of Burlington's Glass Division. Since December 9, 1998,
Mr. Pope has served as a member of the Supervisory Board of Porcher Industries.

                                       23
<PAGE>

   Richard L. Cromer was named President of BGF in April 1998. Prior to joining
BGF, Mr. Cromer was employed by Owens Corning for 31 years in various
capacities, including as Director of Operations Strategy from 1997 to 1998,
General Manager-Textiles from 1994 to 1997 and Director of Operations Support
from 1989 to 1994. Since December 9, 1998, Mr. Cromer has served as a member of
the Executive Board of Porcher Industries.

   Philippe R. Dorier has been our Senior Vice President, Chief Financial
Officer, Secretary and Treasurer since 1993. From 1988 to 1993, he served as our
Vice President International Audit. From 1984 until 1988, Mr. Dorier served as
the Vice President of Finance of Babolat VS, S.A., and from 1980 until 1983, as
the Administration and Finance Manager of Syva-Biomerieux S.A. Since December 9,
1998, Mr. Dorier has served as a member of the Executive Board of Porcher
Industries.

   James R. Henderson has been Executive Vice President Sales and Merchandising
since joining BGF in 1989. Prior to joining BGF, Mr. Henderson was employed for
31 years with United Merchants and Manufacturers, Inc., a company engaged in the
textile business. Mr. Henderson served as the Senior Vice President of United
Merchants and Manufacturers, President of their Uniglass Division, and as
Chairman of the Board of United's Marglass subsidiary in England.

Charles H. Alligood has been our Vice President Quality Assurance and Industrial
Engineering since 1993.  From 1988 to 1993, he served as our Corporate Manager
of Industrial Engineering.  From 1964 until 1988, Mr. Alligood served in various
positions including as Division Industrial Engineer for Burlington's Glass
Fabrics from 1983 until 1988 and as division cost reduction coordinator for
Burlington's Industrial Division from 1981 to 1983.

   Edward P. Cardille has been our Vice President Information Systems since
1997. From 1991 until 1997, Mr. Cardille served as our Director of Information
Systems. From 1968 until 1991, Mr. Cardille served in various positions with
Burlington, including as Manager of Systems and Programming for Burlington's
Carpet Division from 1983 until 1991.

   Robert A. Frank has been our Vice President Operations since 1988. From 1967
until 1988, Mr. Frank held various planning and marketing positions with
Burlington, including Market Manager of Burlington's Electronics Applications,
Operations Manager of Burlington's Glass Division and Vice President of
Operations.

   Thomas E. Mann, Jr. was named Vice President Human Resources of BGF in
December 1998. Since 1997, he had served as our Director of Human Resources.
From 1993 until 1997, Mr. Mann served as our Corporate Planning Manager, and
from 1988 until 1993, as a Plant Personnel Manager of BGF.

                                       24
<PAGE>

   Gerald F. Mitchell has been our Vice President Manufacturing since 1991. From
1970 until 1991, Mr. Mitchell was employed with Burlington in various
capacities, including as a Plant Manager of Burlington's Knit Division from 1989
to 1991 and as the Vice President, Manufacturing of Burlington's Lees Carpet
Division from 1986 to 1989.

Item 11.  Executive Compensation

The following table shows, for the fiscal year ended December 31, 2000, the
compensation paid to or earned by our Chief Executive Officer and our four other
most highly compensated executive officers who were serving at the end of 2000.

<TABLE>
<CAPTION>
                                                                                          Other
                                                                                          -----
      Name and Principal Position          Salary (1)               Bonus              Compensation
      ---------------------------          ----------               -----              ------------
<S>                                        <C>                   <C>                   <C>
Robert Porcher
Chairman of the Board, Chief Executive
Officer and Director
     2000:..............................   $120,000/(2)/         $190,000/(3)/          $98,993/(4)/
     1999:..............................   $120,000/(2)/         $120,000/(3)/          $52,070/(4)/
     1998:..............................   $120,000/(2)/         $120,000/(3)/          $49,805/(4)/
Philippe Porcher
Vice Chairman
     2000:..............................   $120,000/(2)/         $115,000/(3)/               --
     1999:..............................   $120,000/(2)/         $ 72,000/(3)/               --
     1998:..............................   $120,000/(2)/         $120,000/(3)/               --
Richard L. Cromer
President
     2000:..............................   $221,268              $160,000               $29,423/(6)/
     1999:..............................   $209,697              $100,000               $ 8,622/(6)/
     1998:..............................   $155,331/(5)/         $110,500               $ 6,607/(6)/
Philippe R. Dorier
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
     2000:..............................   $160,680/(3)/         $116,400/(3)/          $ 9,100/(7)/
     1999:..............................   $156,000/(3)/         $ 72,750/(3)/          $13,216/(7)/
     1998:..............................   $141,828/(3)/         $ 90,000/(3)/          $15,096/(7)/
James R. Henderson
Executive Vice President Sales and
Merchandising
     2000:..............................   $158,400              $116,400               $ 8,844/(8)/
     1999:..............................   $153,288              $ 72,756               $12,413/(8)/
     1998:..............................   $146,058              $120,000               $13,280/(8)/
</TABLE>


(1)  Includes the following amounts deferred at the election of the following
     executive officers pursuant to BGF's 401(k) plan in 2000, 1999, and 1998,
     respectively: Mr. Dorier--$9,790, $9,983, and $7,738; and Mr. Henderson--
     $7,075, $10,000, and $10,000; and Mr. Cromer--$3,158, $0, and $0.

(2)  Represents a "management fee" paid by BGF Services, Inc., an affiliate of
     BGF, to Messrs. Robert and Philippe Porcher and reimbursed by BGF to cover
     services provided by Messrs.

                                       25
<PAGE>

     Robert and Philippe Porcher to BGF. See "Item 13. Certain Relationships and
     Related Party Transactions".

(3)  Paid for by BGF Services and reimbursed by BGF to BGF Services in the form
     of "management fees" to cover services rendered to BGF. See "Item 13.
     Relationships and Related Party Transactions."

(4)  In 2000, includes $5,596 for club membership fees; $478 for maintenance of
     automobile; $25,841 depreciation associated with cost of residence; and
     $67,078 associated with maintenance of residence in 2000.  In 1999,
     includes $3,640 for club membership fees; $1,447 for maintenance of
     automobile; $25,840 depreciation associated with cost of residence; and
     $21,143 associated with maintenance of residence in 1999.  In 1998,
     includes $3,086 for club membership fees; $932 for maintenance of
     automobile; $25,824 depreciation associated with cost of residence; and
     $19,963 associated with maintenance of residence in 1998.

(5)  Based on an annualized gross salary of $207,108.  Mr. Cromer has served as
     President of BGF since April 1, 1998.

(6)  Represents $9,484, $8,622, and $6,607 in 2000, 1999, and 1998,
     respectively, of personal use of company car, gross annual profit sharing
     distributions of $3,158 in 2000, and $16,781 in relocation fees in 2000.

(7)  Represents gross annual profit sharing distributions of $3,120, $6,382 and
     $8,262 in 2000, 1999, and 1998 respectively, and $5,980, $6,834 and $6,834
     in 2000, 1999, and 1998, respectively, of personal use of a company car.

(8)  Represents gross annual profit sharing distributions of $3,066, $6,572 and
     $8,470 in 2000, 1999, and 1998, respectively, and $5,778, $5,841, and
     $4,810 in 2000, 1999, and 1998, respectively, for personal use of a company
     car.

Retirement Plans

   Retirement System. The Retirement System of BGF Industries, Inc. covers
substantially all employees of BGF after they have completed one year of
service. Employees with five or more years of service are entitled to benefits
beginning at normal retirement age. This plan also provides reduced benefits to
participants electing to retire early, beginning at age 55. Participants are
required to contribute three percent of covered compensation per year and
interest is credited on employee contributions. In general, the normal
retirement benefit is payable as an annuity. Participants may also elect a lump-
sum distribution of their accrued benefit.

   Normal retirement benefits are determined by reference to an employee's
"accumulated contributions." Accumulated contributions are the sum of all
required employee contributions plus interest credited on the contributions,
compounded annually at the rate of 120% of the federal mid-term rate in effect
under section 1274 of the Internal Revenue Code for the first

                                       26
<PAGE>

month of the plan year. In general, the annual normal retirement benefit is
equal to 50% of the accumulated employee contributions, plus 3/4% of employee
plan compensation up to $6,600 for the plan year 1989.

   The estimated annual benefits payable upon retirement at normal retirement
age for the executive officers listed in the "Executive Compensation" table
above is as follows: Mr. Cromer--$23,619; Mr. Dorier--$60,593; Mr. Henderson--
$24,014. These calculations are based on 2000 compensation, assume benefits are
payable as a straight-life annuity, and assume that each individual will work
until age 65.  Mr. Robert Porcher and Mr. Philippe Porcher do not participate in
the Retirement System.

   401(k) Plan. The Employees' Profit Sharing and Tax Savings Plan of BGF
Industries, Inc. covers most employees of BGF, after they have completed one
year of service. Employees may defer up to 15% of their plan compensation each
year, subject to Internal Revenue Code limitations. We may, in our discretion,
match employees' elective deferrals up to a specified limitation each year and
may make a discretionary employer contribution. All contributions are 100%
vested and nonforfeitable at all times. Benefits are payable after separation
from service in a lump sum in cash.

Compensation of Directors

   Our directors did not receive separate compensation for their services as
directors in 2000.

Compensation Committee Interlocks and Insider Participation

   Mr. Robert Porcher, who serves as both an executive officer and as a member
of the board of directors of BGF, serves as the Chairman of the Supervisory
Board of Porcher Industries, which is the equivalent of a board of directors.
Mr. Robert Porcher also serves as an executive officer of Glass Holdings, AGY
Holdings, Belmont of America, BGF Services, Inc., BGF Overseas, Inc., Advanced
Glassfiber Yarns, LLC and AGY Capital Corp., all of which are affiliates of BGF.
He is a member of the board of directors for Glass Holdings, AGY Holdings, BGF
Services, BGF Overseas, Advanced Glassfiber Yarns and AGY Capital Corp.  Messrs.
Cromer and Dorier also serve as members of the Executive Board of Porcher
Industries, whose members are equivalent to executive officers.  Mr. Dorier also
serves as an executive officer of Glass Holdings, AGY Holdings, Belmont of
America, BGF Services, BGF Overseas and as a director of Glass Holdings, AGY
Holdings and BGF Services.  Mr. Philippe Porcher serves as Chairman of the
Executive Board of Porcher Industries.  He also serves as an executive officer
of Belmont of America and as a director of Belmont of America, Advanced
Glassfiber Yarns and AGY Capital Corp.  These positions effectively create
interlocks between BGF and Glass Holdings, AGY Holdings, Belmont of America, BGF
Services, BGF Overseas, Advanced Glassfiber Yarns and AGY Capital Corp.  See
also "Item 13. Certain Relationships and Related Party Transactions."

Deferred Compensation Agreements

   We have entered into Deferred Compensation Agreements with Messrs. Pope,
Cromer and Henderson and we are the guarantor of Mr. Dorier's Deferred
Compensation Agreement with

                                       27
<PAGE>

BGF Services. The agreements provide for both pre-retirement survivor benefits,
as well as post-retirement benefits to the executive. The agreements also
contain a non-competition provision. Generally, under each of the agreements, if
the executive dies before the age of 65, his beneficiary or, if none, his estate
will receive monthly payments for a 10-year period of an amount equal to 50% of
the greater of:

     (A)  the executive's monthly base salary in effect on the January 1 prior
          to his death; or

     (B)  the executive's average monthly base salary on January 1 of the five
          years prior to his death.

     This amount is decreased progressively if the executive dies after the age
of 60 but before 65. The agreements also provide for post-retirement benefits in
the form of:

     (1)  monthly payments over 10 years, the sum of which is equal to the
          "applicable percentage" multiplied by the greater of (a) the
          executive's annual base salary on January 1 immediately preceding or
          concurrent with his retirement or (b) the average of the executive's
          annual base salary on January 1 of the five years prior to his
          retirement; and

     (2)  a payment on death equal to three-quarters of his annual base salary
          on the January 1 immediately preceding or concurrent with his
          retirement. The "applicable percentage" for Mr. Pope is two and one
          quarter. The "applicable percentage" for Mr. Cromer, Mr. Dorier and
          Mr. Henderson is one and one-half. Mr. Pope's agreement has been
          amended to pay his death benefit over the 10-year period mentioned in
          (1) above. If the executive dies prior to receiving all of the monthly
          payments, the payments are made to his designated beneficiary or, if
          none, his estate. Reduced benefits are paid if the executive retires
          prior to age 65.

     In 1998, we entered into an agreement with Mr. Pope with regard to his
executive life insurance policies, which obligates us on or before March 2001 to
either:

(1)  at the event of his death the benefits will be paid to his estate or
     beneficiaries or,

(2)  transfer ownership of the life insurance to Mr. Pope. The cash surrender
     value of these policies was $153,375 at December 31, 2000.

                                       28
<PAGE>

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The following table shows information regarding

   (1)  those person(s) known by management of BGF to own beneficially more than
        5% of BGF's outstanding common stock, $1.00 par value,

   (2)  the directors of BGF,

   (3)  the executive officers of BGF named in the "Executive Compensation"
        table in this prospectus, and

   (4)  all of the directors and executive officers of BGF as a group.

   This information is provided as of March 15, 2001. An asterisk in the percent
of class column indicates beneficial ownership of less than 1% of the
outstanding common stock.

   As noted in the table, Porcher Industries indirectly owns 100% of the
outstanding common stock of BGF. The address of Porcher Industries is Porcher
Industries S.A., Badinieres, 38300 Bourgoin-Jallieu, France.

   As reflected in the graphic below the table, Mr. Robert Porcher may be deemed
to beneficially own 56.05% of the outstanding capital stock of Porcher
Industries, and thus Glass Holdings and BGF, through (1) his 7.22% direct
ownership interest in Porcher Industries and (2) his ownership interest in
Societe Civile des Terres Froides. Mr. Robert Porcher's address is c/o Porcher
Industries S.A., Badinieres, 38300 Bourgoin-Jallieu, France.

   Mr. Robert Porcher's 56.05% interest includes a 0.7% interest of his son,
Philippe Porcher, an executive officer of BGF, in Societe Civile des Terres
Froides. Mr. Robert Porcher controls the voting and investment of these shares.
The asterisk aside the name of Philippe Porcher represents this interest.

   Finally, as indicated in the table below, other than Messrs. Robert Porcher
and Philippe Porcher, no other director or executive officer of BGF directly or
indirectly owns any of BGF's outstanding common stock.

<TABLE>
<CAPTION>
       Name of Beneficial Owner                    Percent of Class
       ------------------------                    ----------------
<S>                                                <C>
Porcher Industries                                      100.00%
Robert T. Porcher                                        56.05%
Philippe Porcher                                             *
Richard L. Cromer                                           --
Philippe R. Dorier                                          --
James R. Henderson                                          --
All directors and executive officers
 as a group (6 persons)                                  56.05%
</TABLE>

                                       29
<PAGE>

   The following graphic further illustrates the information described above:
[Flow chart appears here with four tiers.

   Top tier contains boxes with the names of the following four individuals:
Philippe Porcher (Son of Robert Porcher); Robert Porcher; Claire Porcher (Wife
of Robert Porcher); and Francoise Giraud-Porcher (Daughter of Robert Porcher).
From each of these boxes are lines which note a percentage interest of 0.7%,
49.3%, 49.3% and 0.7%, respectively, which lines then merge vertically to meet
the box on the second tier, which contains the name "Societe Civile des Terres
Froides (non- commercial holding entity)." There is an asterisk on this name and
at the bottom of the chart the asterisk is referenced to note that "Mr. Robert
Porcher effectively controls the voting and investment power of this entity."
From this second tier box there is a line with the percentage interest 69.6%
noted next to it, leading to one (and the left-most) of eleven boxes on the
third tier, containing the name "Societe Saumuroise de Participations S.A." The
remaining ten boxes to the right of this box, in order from left to right,
contain the names of the following entities: Letra S.A.; Groupe Banexi; Robert
Porcher; Societe Civil des Terres Froides; Credit Lyonnais; Groupe Siparex; Cita
S.A.; Natexis S.A.; Other French Nationals; and Estate of Gilbert Porcher (there
is an additional line running horizontally from right to left between Letra S.A.
to Societe Saumuroise de Participations S.A. noting that Letra owns 30.4% of
Saumuroise). Below these eleven boxes are vertical lines with the following
percentage interests, respectively: 66.91%; 10.62%; 8.01%; 7.22%; 2.26%; 2.05%;
1.89%; .57%; .40%; .06%; and .01%. These eleven lines from the third tier join
together to the box on the next tier containing the name "Porcher Industries
S.A." From this box is a line to the next tier containing one box for Glass
Holdings, with a notation of 100% beside the line between these boxes. Extending
down from the box for Glass Holdings is a line with a 100% notation, leading to
the box for BGF Industries, Inc., on the final tier of the chart.]

* Mr. Robert Porcher effectively controls the voting and investment power of
this entity.

Item 13.  Certain Relationships and Related Transactions

   We are wholly owned by Porcher Industries through its U.S. holding company,
Glass Holdings. We have on-going financial, managerial and commercial agreements
and arrangements with Porcher Industries, Glass Holdings and other wholly-owned
subsidiaries of Glass Holdings, as well as other affiliates of Porcher
Industries. Mr. Robert Porcher, our Chairman of the Board and Chief Executive
Officer, beneficially owns a controlling interest in Porcher Industries. See
"Item 12. Security Ownership of Certain Beneficial Owners and Management."

   We pay management fees to BGF Services, Inc., a wholly owned subsidiary of
Glass Holdings, that cover the periodic management services of Robert Porcher
and his son Philippe Porcher, the Vice President of Porcher Industries, and the
full time services of Philippe Dorier, our Chief Financial Officer. We also
reimburse BGF Services for the costs associated with automobiles provided to
Messrs. Robert Porcher and Dorier and maintenance and upkeep of Robert Porcher's
Greensboro, North Carolina residence, which is owned by BGF Services and has a
net book value of approximately $1.0 million. In connection with these
arrangements, we

                                       30
<PAGE>

incurred expenses of $949,000 in 2000. BGF Services does not derive a profit
from this arrangement and therefore these terms cannot be considered comparable
to those that would be provided to third parties.

   Porcher Industries and its French parent company provide general management
and strategic planning advice to us in exchange for management fees that
reimburse these companies for a portion of the compensation of Robert Porcher,
Philippe Porcher and other employees who allocate their time among us and other
Porcher Industries affiliates. We incurred expenses of $490,000 in connection
with this arrangement in 2000. The amounts billed are based on the estimated
value of services provided and are comparable to that which would be given to
third parties. However, we believe that Porcher Industries and its parent would
not provide these services to a third party.

   We purchase carbon fibers and finished products from Porcher Industries. We
purchased $5.4 million in 2000 for these products. We sell finished goods and
occasionally unfinished goods directly to Porcher and its affiliates. In 2000,
we billed Porcher Industries and its affiliates $1.9 million for these goods.
Porcher Industries billed us for commissions for sales of its products in Asia,
Europe, and Australia of $389,000 in 2000. We believe that prices and
commissions paid or received by us for these transactions are comparable to
those paid to third parties.

   We collect and deposit customer payments on behalf of two wholly owned
subsidiaries of Porcher Industries in exchange for fees equal to 2% of amounts
collected. We billed $32,000 in fees for these services incurred in 2000. We
believe that these fees are comparable to those that would be paid to third
parties.

   On April 14, 1998, we loaned $365,258 to Richard L. Cromer, our President,
for the purchase of a residence in Greensboro, North Carolina. The loan was non-
interest bearing and was payable upon the sale of Mr. Cromer's residence in
Toledo, Ohio and thus was on terms more favorable than we would provide to third
parties.  The loan was paid in full in 2000.

   Graham A. Pope, a director of BGF performs certain consulting services for
BGF regarding Shanghai Porcher.  We paid Mr. Pope $11,500 in consulting fees in
2000.

   On September 30, 1998, AGY Holdings purchased its 51% ownership interest in
Advanced Glassfiber for aggregate consideration of approximately $338.9 million,
including post-closing adjustments. We loaned Glass Holdings approximately
$138.6 million to provide it with a portion of the capital necessary to fund the
acquisition. Additionally, BGF had a non-interest bearing loan payable to Glass
Holdings from prior years of $1.8 million resulting in a net loan amount to
Glass Holdings of $136.8 million. Our loan to Glass Holdings is evidenced in
part by promissory notes.  In 2000, Glass Holdings paid down $10.5 million in
principal and $1.2 million interest.  We believe that these transactions were on
terms no more favorable than if Glass Holdings had borrowed the funds directly
from a third party.

   Currently, Advanced Glassfiber leases approximately 27,200 square feet of
segregated space at our South Hill, Virginia lightweight fiber fabric facility
for the purpose of manufacturing glass

                                       31
<PAGE>

yarns for exclusive supply to us under a supply contract, extendible at the
option of Advanced Glassfiber, that expires on December 31, 2008. We also
provide Advanced Glassfiber with leased employees and administrative and
technical support services. We billed Advanced Glassfiber approximately $1.3
million pursuant to this agreement in 2000. We also purchased approximately
$41.3 million of raw materials from Advanced Glassfiber in the twelve months
ended December 31, 2000. We believe that each of these arrangements are on terms
no more favorable than those that would be provided to third parties.

   See also note 13 to the consolidated financial statements filed as part of
this Annual Report in Item 14.

                                       32
<PAGE>

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)  1.   Financial Statements

     The following financial statements of BGF Industries, Inc., incorporated by
     reference into Item 8, are attached hereto beginning on page F-1:

          Report of Independent Accountants

          Consolidated Balance Sheets at December 31, 2000 and 1999

          Consolidated Statements of Operations for the years ended December 31,
          2000, 1999 and 1998

          Consolidated Statements of Cash Flows for the years ended December 31,
          2000, 1999 and 1998

          Consolidated Statements of Stockholder's Equity (Deficit) for the
          years ended December 31, 2000, 1999 and 1998

          Notes to Consolidated Financial Statements

     2.   Financial Statement Schedule

     The following, incorporated by reference into Item 8, are attached hereto
     beginning on page S-1:

          Valuation and Qualifying Accounts

     All other schedules are omitted because they are not applicable or the
     required information is shown in the financial statements or notes thereto.

     3.   Exhibits

     Unless indicated below, the exhibits are incorporated herein from BGF's
     Registration Statement on Form S-4 (File No. 333-72321) filed with the
     Securities and Exchange Commission. Copies of such exhibits will be
     furnished to any requesting stockholder of BGF upon request to Secretary,
     BGF Industries, Inc., 3802 Robert Porcher Way, Greensboro, North Carolina
     27410.

                                       33
<PAGE>

<TABLE>
<CAPTION>
        Exhibit No.                          Description of Exhibit
        -----------                          ----------------------
        <S>                <C>
            3.1            Certificate of Incorporation of BGF Industries, Inc.,
                           as amended

            3.2            Bylaws of BGF Industries, Inc., as amended

            4.1            Indenture, dated as of January 21, 1999, among BGF
                           Industries, Inc. and The Bank of New York, as
                           trustee, relating to $100 million principal amount of
                           10 1/4% Senior Subordinated Notes Due 2009

            4.2            Form of 10 1/4% Series A and Series B Senior
                           Subordinated Notes due 2009 (included in Exhibit 4.1)

            4.3            Registration Rights Agreement dated as of January 21,
                           1999, by and between BGF Industries, Inc. and the
                           Initial Purchaser

           10.1            Deferred Compensation Agreement, dated November 13,
                           1995, by and between BGF Industries, Inc. and Graham
                           A. Pope /(1)/

           10.2            Deferred Compensation Agreement, dated April 1, 1998,
                           by and between BGF Industries, Inc. and Richard L.
                           Cromer /(1)/

           10.3            Deferred Compensation Agreement, dated April 16,
                           1990, by and between BGF, Industries, Inc. and James
                           R. Henderson /(1)/

           10.4            Deferred Compensation Agreement, dated January 28,
                           1993, by and between BGF Services, Inc. and Philippe
                           Dorier /(1)/

           10.5            Lease, dated March 20, 1996, between E.R. English,
                           Sr., as lessor, and BGF Industries, Inc., as lessee

           10.6            Purchase Order (Lease), dated November 26, 1996,
                           between K&C Brokerage, as lessor, and BGF Industries,
                           Inc., as lessee

           10.7            Lease, dated November 1, 1991, by and between H.V.
                           Johns, Jr., as lessor, and BGF Industries, Inc. as
                           lessee

           10.8            Agreement between Contractor and Owner (Warehouse
                           Lease), dated February 1, 1998, between Boyd
                           Warehouse/Emmett Williams, as lessor, and BGF
                           Industries, as lessee

           10.9            Note Purchase Agreement dated January 15, 1999
                           between BFG Industries, Inc., Inc. and the Initial
                           Purchaser

           10.10           Senior Credit Agreement dated September 30, 1999
                           among BGF
</TABLE>

                                       34
<PAGE>

<TABLE>

        Exhibit No.                          Description of Exhibit
        -----------                          ----------------------
        <S>                <C>
                           Industries, Inc., as Borrower, its Domestic
                           Subsidiaries from time to time party thereto, as
                           Guarantors, the Lenders Parties thereto and First
                           Union National Bank, as Agent

           10.11           Senior Subordinated Credit Agreement dated as of
                           September 30, 1998 among BGF Industries, Inc., as
                           Borrower, certain subsidiaries from time to time
                           party thereto, as Guarantors, and First Union
                           Investors, Inc., as Agent

           10.12           Promissory Note, dated September 30, 1998, from Glass
                           Holdings Corp. to BGF Industries, Inc. for the
                           original principal amount of $135,043,844.62

           10.13           Promissory Note, dated December 23, 1998, from Glass
                           Holdings Corp. to BGF Industries, Inc. for the
                           original principal amount of $2,681,000

           10.14+          Second Amendment to Credit Agreement, dated December
                           16, 1999, by and among BGF Industries, Inc. (the
                           "Borrower"), certain Domestic Subsidiaries of the
                           Borrower party thereto (collectively the
                           "Guarantors"), several banks and other financial
                           institutions party thereto (the "Lenders") and First
                           Union National Bank (the "Agent").

           10.15++         Syndication Amendment and Assignment, dated November
                           30, 1998, by and among BGF Industries, Inc. (the
                           "Borrower"), certain Domestic Subsidiaries of the
                           Borrower party thereto (collectively the
                           "Guarantors"), the Existing Lender (as defined
                           therein), the New Lenders (as defined therein), and
                           First Union National Bank (the "Agent").

           10.16+++        Lease Agreement, dated December 1, 1999 by and
                           between Lawson Family LLC and BGF Industries, Inc.

           10.17*          Lease Agreement, dated October 1, 2000 by and between
                           Edgar J.T. Perrow and BGF Industries, Inc.

           12*             Statement of Computation of Ratios

           21*             Subsidiaries of BGF

           24*             Powers of Attorney (included on signature page)

           99.1*           Reconciliation of net income to EBITDA
</TABLE>

                                       35
<PAGE>

-----------------------------

+     Exhibit is incorporated by reference herein to Exhibit 99.1 to the
      Company's Form 8-K, dated March 8, 2000.
++    Exhibit is incorporated by reference herein to Exhibit 99.2 to the
      Company's Form 8-K, dated March 8, 2000.
+++   Exhibit is incorporated by reference herein to Exhibit 10.16 to the
      Company's Form 10-K for the fiscal year ended December 31, 1999, as filed
      with the Securities and Exchange Commission on March 30, 2000.
*     Filed herewith.
(1)   Management contract or compensatory plan or arrangement required to be
      filed as an exhibit to this Form 10-K pursuant to Item 14(C) of this
      Report.

      (b)  Reports on Form 8-K.

           The Registrant did not file any reports on Form 8-K during the
           quarter ended December 31, 2000.

                                       36
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of BGF Industries, Inc.:

     In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 (a)(1) on page 33 present fairly, in all material
respects, the financial position of BGF Industries, Inc. and its subsidiaries at
December 31, 2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America.  In addition, in our opinion, the financial statement schedule listed
in the index appearing under Item 14(a)(2) on page 33 presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.  These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion expressed
above.


/s/ PricewaterhouseCoopers LLP
Greensboro, North Carolina
March 2, 2001

                                      F-1
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

                          CONSOLIDATED BALANCE SHEETS
                   (dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                             December 31,     December 31,
                                                                                 2000             1999
                                                                             ------------     ------------
                              ASSETS
<S>                                                                          <C>              <C>
Current assets:
  Cash and cash equivalents                                                       $       8       $      17
  Trade accounts receivable, less allowance for returns and doubtful
    accounts of $663 and $770 respectively                                           28,709          20,366
  Inventories (Note 2)                                                               36,745          35,597
  Other current assets (Note 3)                                                       3,070           3,801
                                                                                  ---------       ---------
     Total current assets                                                            68,532          59,781
                                                                                  ---------       ---------
Net property, plant and equipment (Note 4)                                           54,488          56,566
Other noncurrent assets, net (Note 5)                                                13,373          10,837
                                                                                  ---------       ---------
     Total assets                                                                 $ 136,393       $ 127,184
                                                                                  =========       =========

          LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

Current liabilities:
  Book overdraft                                                                  $   5,652       $   1,264
  Accounts payable                                                                   11,233           6,670
  Accrued liabilities (Note 6)                                                       13,906          16,619
  Current portion of long-term debt (Note 7)                                          3,106               -
                                                                                  ---------       ---------
     Total current liabilities                                                       33,897          24,553
Long-term debt, net of discount of $1,617 and $1,817 respectively (Note 7)          114,477         132,383

Deferred income taxes (Note 8)                                                            0           1,537
Postretirement benefit and pension obligations (Note 9)                               3,596           3,148
                                                                                  ---------       ---------
     Total liabilities                                                              151,970         161,621
                                                                                  ---------       ---------

Commitments and contingencies (Note 12)

Stockholder's equity (deficit):
  Common stock, $1.00 par value. Authorized 3,000 shares; issued                          1               1
    and outstanding 1,000 shares
  Capital in excess of par value                                                     34,999          34,999
  Retained earnings                                                                  75,733          67,353
  Loan to parent (Note 13)                                                         (126,310)       (136,790)
                                                                                  ---------       ---------
     Total stockholder's equity (deficit)                                           (15,577)        (34,437)
                                                                                  ---------       ---------
     Total liabilities and stockholder's equity (deficit)                         $ 136,393       $ 127,184
                                                                                  =========       =========
</TABLE>

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

                                      F-2
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                            For the year ended December 31,
                                                    ------------------------------------------------
                                                          2000             1999             1998
                                                    ------------------------------------------------
<S>                                                 <C>               <C>              <C>
Net sales                                                 $201,419         $181,681         $205,515
Cost of goods sold                                         165,830          151,491          166,239
                                                          --------         --------         --------
  Gross profit                                              35,589           30,190           39,276
Selling, general and administrative expenses                 9,253            7,410            9,700
Restructuring charge                                            --              769               --
                                                          --------         --------         --------
  Operating income                                          26,336           22,011           29,576
Interest expense                                            14,168           15,817            4,517
Other income, net                                           (1,844)          (1,485)            (112)
                                                          --------         --------         --------
  Income before income taxes and extraordinary loss         14,012            7,679           25,171
Income tax expense                                           5,632            2,911            9,854
                                                          --------         --------         --------
  Income before extraordinary loss                           8,380            4,768           15,317
Extraordinary loss on write-off of debt issuance
  costs, net of income taxes of $639                            --            1,029               --
                                                          --------         --------         --------
Net income                                                $  8,380         $  3,739         $ 15,317
                                                          ========         ========         ========
</TABLE>

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

                                      F-3
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                            For the year ended December 31,
                                                                         -----------------------------------
                                                                             2000        1999        1998
                                                                         -----------------------------------
<S>                                                                        <C>         <C>         <C>
Cash flows from operating activities:
 Net income                                                                 $  8,380    $  3,739   $  15,317
 Adjustment to reconcile net income to net cash provided by operating
  activities:
   Depreciation                                                                8,404       8,026       7,218
   Amortization                                                                  969       1,241         370
   Amortization of discount on notes                                             200         183          --
   Extraordinary loss                                                             --       1,668          --
   Restructuring charge                                                           --         217          --
   Loss on disposal of equipment                                                  94          10          23
   Deferred income taxes                                                      (5,046)     (6,476)      1,027
   Postretirement benefit and pension obligations                                448         455         126
 Change in assets and liabilities:
   Trade accounts receivable, net                                             (8,343)        442      11,878
   Other current assets                                                          851       1,118      (1,330)
   Inventories                                                                (1,148)      6,935      (1,666)
   Other assets                                                                 (118)        (99)        (72)
   Accounts payable                                                            4,871        (151)     (1,967)
   Accrued liabilities                                                        (2,711)     10,958      (1,453)
                                                                            --------    --------   ---------
    Net cash provided by operating activities                                  6,851      28,266      29,471
                                                                            --------    --------   ---------
Cash flows from investing activities:
   Purchases of property, plant and equipment                                 (6,764)     (6,531)    (11,299)
   Proceeds from sale of equipment                                                36          59          16
                                                                            --------    --------   ---------
    Net cash used in investing activities                                     (6,728)     (6,472)    (11,283)
                                                                            --------    --------   ---------
Cash flows from financing activities:
   Book overdraft                                                              4,388         607      (2,811)
   Principal payments of long-term debt                                           --          --     (20,000)
   Proceeds from borrowing of term loan                                           --          --      50,000
   Payments on term loan                                                      (5,000)    (25,800)         --
   Proceeds from revolving credit facility                                    24,000      27,000      48,000
   Payments on revolving credit  facility                                    (34,000)    (53,000)    (12,000)
   Proceeds from bridge facility                                                  --          --      65,000
   Payments on bridge facility                                                    --     (65,000)         --
   Proceeds from senior subordinated notes                                        --      98,000
   Net repayments on working capital line of credit                               --          --      (5,000)
   Debt issuance costs                                                            --      (3,602)     (4,598)
   Loan to parent                                                                 --          --    (136,790)
   Payment received on loan to parent                                         10,480         ---         ---
                                                                            --------    --------   ---------
    Net cash used in financing activities                                       (132)    (21,795)    (18,199)
                                                                            --------    --------   ---------
   Net decrease in cash and cash equivalents                                      (9)         (1)        (11)
   Cash and cash equivalents at beginning of period                               17          18          29
                                                                            --------    --------   ---------
   Cash and cash equivalent at end of period                                $      8    $     17   $      18
                                                                            ========    ========   =========
Supplemental disclosures of cash flow information:
   Cash paid during the year for interest                                   $ 13,263    $ 10,271   $   3,833
                                                                            ========    ========   =========
   Cash paid for income taxes                                               $  1,884    $    895   $  10,399
                                                                            ========    ========   =========
Supplemental disclosure of non-cash investing activities
   Property and equipment financed in accounts payable                      $    418    $    725   $     698
                                                                            ========    ========   =========
</TABLE>

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

                                      F-4
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

           CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                              Total
                                                                                                          Stockholder's
                                                       Common     Paid-In    Retained        Loan to         Equity
                                                        Stock     Capital    Earnings        Parent         (Deficit)
                                                      ---------  ---------  ----------    -------------  ---------------
<S>                                                   <C>        <C>        <C>           <C>            <C>
Balance, December 31, 1997                             $      1    $34,999     $48,297     $      --        $  83,297
  Net income                                                 --         --      15,317            --           15,317
  Loan to parent                                             --         --          --      (138,590)        (138,590)
  Non-interest bearing loan payable reclassified to
    offset loan to parent                                    --         --          --         1,800            1,800
                                                      ---------    -------     -------     ---------        ---------
                                                                                                  --
Balance, December 31, 1998                                    1     34,999      63,614      (136,790)         (38,176)
  Net income                                                 --         --       3,739            --            3,739
                                                      ---------    -------     -------     ---------        ---------

Balance, December 31, 1999                                    1     34,999      67,353      (136,790)         (34,437)
  Net income                                                 --         --       8,380            --            8,380
  Payment received on loan to parent (Note 13)               --         --          --        10,480           10,480
                                                      ---------    -------     -------     ---------        ---------

Balance, December 31, 2000                             $      1    $34,999     $75,733     $(126,310)       $ (15,577)
                                                      =========    =======     =======     =========        =========
</TABLE>

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

                                      F-5
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (dollars in thousands)

1.   Summary of Significant Accounting Policies

     Principles of Consolidation. BGF Industries, Inc. is a wholly owned
subsidiary of Glass Holdings Corp. ("Glass Holdings"), which is a wholly owned
subsidiary of Porcher Industries, S.A. These consolidated financial statements
include the accounts of BGF Industries, Inc. and its wholly owned subsidiary,
BGF Overseas, Inc. (collectively ''BGF''). All intercompany transactions and
balances are eliminated in consolidation. BGF manufactures high-quality glass,
aramid and carbon fiber fabrics for use in a variety of electronic, composite,
insulation, construction, filtration, and commercial applications. The principal
market is the United States.

     Cash and Cash Equivalents. For purposes of the statements of cash flows,
BGF considers cash on hand, cash deposited in financial institutions and money
market accounts with maturities of less than ninety days at date of purchase to
be cash equivalents. These are stated at cost which approximates market value.
The book overdrafts in bank accounts consist of outstanding checks which have
not been presented to a bank for payment.

     Inventories.   Inventories are stated at the lower of cost or market value.
Cost is determined using the first-in, first-out (FIFO) method.

     Property, Plant and Equipment. Property, plant and equipment are stated at
cost, less accumulated depreciation. Depreciation of property, plant and
equipment is calculated principally on the straight-line method over the
estimated useful lives of the assets. Repairs and maintenance costs are expensed
as incurred; major replacements and improvements are capitalized. When assets
are retired or sold, the cost and related accumulated depreciation are removed
from the accounts with any resulting gain or loss reflected in operations.

     The estimated useful lives of the assets are as follows:


          Buildings.........................   15-40 years
          Machinery and equipment...........    3-10 years

     In the event that facts and circumstances indicate that the cost of long
lived assets may not be recoverable, the estimated future undiscounted cash
flows is compared to the asset's carrying value and if less, an impairment loss
is recognized in an amount by which the carrying value exceeds its fair value.

     Income Taxes. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases based on enacted tax laws and statutory rates. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period in which the legislation is enacted. A
valuation allowance against deferred tax assets is required if, based on the
weight of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.

     Intangible Assets. The excess of acquisition cost over assigned value of
net assets acquired is amortized over 40 years, using the straight-line method.
Debt issuance costs are amortized over the terms of the respective debt
agreements using the interest method. BGF assesses the recoverability of long-
lived assets, including goodwill, by determining whether the carrying value of
the asset balances over their remaining lives can be recovered through
undiscounted future operating cash flows.

                                      F-6
<PAGE>

                               BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)

1.   Summary of Significant Accounting Policies--(Continued)

     Revenue Recognition.   Revenue from product sales and the related cost of
goods sold are recognized at the time both risk of loss and legal title transfer
to the customer.

     Financial Instruments. BGF selectively enters into interest rate protection
agreements to mitigate changes in interest rates on its variable rate
borrowings. None of these agreements are used for speculative or trading
purposes. The fair value of BGF's interest rate swap agreement is the estimated
amount BGF would have to pay or receive to terminate the swap agreement as of
the reporting date, taking into account current interest rates, and is disclosed
in Note 12. The interest rate swaps are accounted for as hedges on the basis
that such derivatives reduce the risk of changes in interest rates on BGF's
variable rate debt. The interest differentials from these swaps are recorded in
interest expense.

     BGF enters into foreign currency exchange contracts to manage exposures
related to specific foreign currency transactions or anticipated cash flows.

     Rates currently available to BGF for debt with similar terms and remaining
maturities are used to estimate fair value of existing debt. The carrying
amounts of BGF's long-term debt approximates fair value.

     Pension Plans and Other Postretirement Benefits.   BGF has a contributory
defined benefit pension plan covering most employees. Pension expense for the
plan is determined using the projected unit credit method. BGF also provides
certain retirement health care benefits, the estimated cost for which is accrued
within the employees' active service lives. BGF's customary funding policy of
these plans is to contribute amounts permitted by the Internal Revenue Code and
in conformance with ERISA guidelines.

     Research and Development.   BGF expenses research and development costs as
incurred. These costs were approximately $1,172, $1,425, and $1,376 for the
years ended December 31, 2000, 1999, and 1998, respectively.

     Advertising and Promotion. BGF expenses advertising and promotion costs as
incurred and these costs are included as selling, general and administrative
expenses. Such amounts were not material for 2000, 1999 and 1998.

     Foreign Currency Transactions. Gains (losses) resulting from foreign
currency transactions are included in other income or other expenses, and
amounted to ($65), $177, and ($58) in 2000, 1999, and 1998 respectively.

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

                                      F-7
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)


1.   Summary of Significant Accounting Policies--(Continued)

     Recently Issued Accounting Standards. On June 8, 1999, the Financial
Accounting Standards Board issued SFAS No. 137, "Deferral of the Effective Date
of SFAS 133," which changes the effective date of SFAS 133 to all fiscal
quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" requires entities
to recognize all derivative instruments on the balance sheet at their fair
value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. Due to the Company's limited use of derivative
instruments, the adoption of SFAS No. 133 does not have a significant effect on
the Company's financial condition or results of operations.

     In December, 1999, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 101, ("SAB 101"), "Revenue Recognition in
Financial Statements," as amended by SAB 101B, which is effective no later than
the year ended December 31, 2000. The bulletin clarifies the SEC's views
regarding recognition of revenue. The Company adopted SAB 101 in the fourth
quarter of 2000. The application of the guidance in SAB 101 did not have a
material impact on the Company's annual or quarterly results of operations.

     Reclassifications. Certain amounts from the prior consolidated financial
statements have been reclassified to conform to the current presentation. In
order to conform with recent technical literature from the Emerging Issues Task
Force, net sales and cost of goods sold have been adjusted to reflect the
inclusion of shipping and handling costs as a component of cost of goods sold
instead of a reduction of net sales.

2.   Inventories

     Inventories consist of the following:

<TABLE>
<CAPTION>
                                                    December 31,   December 31,
                                                        2000           1999
                                                    ------------   ------------
<S>                                                 <C>            <C>
  Supplies                                            $ 1,896        $ 1,657
  Raw materials                                         4,607          3,325
  Stock-in-process                                      6,536          6,120
  Finished goods                                       23,706         24,495
                                                      -------        -------
    Total inventories                                 $36,745        $35,597
                                                      =======        =======
</TABLE>

3.   Other Current Assets

     Other current assets consist of the following:

<TABLE>
<CAPTION>
                                                    December 31,   December 31,
                                                       2000            1999
                                                    ------------   ------------
<S>                                                 <C>             <C>
  Deferred income taxes                                $2,443         $2,323
  Prepaid expenses and other                              627          1,478
                                                       ------         ------
    Total other current assets                         $3,070         $3,801
                                                       ======         ======
</TABLE>


                                      F-8
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)

4.   Net Property Plant and Equipment

     Net property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
                                                                  December 31,   December 31,
                                                                     2000           1999
                                                                     ----           ----
<S>                                                            <C>            <C>
  Land                                                             $  3,155       $  3,129
  Buildings                                                          36,322         36,055
  Machinery and equipment                                            98,964         95,432
                                                                   --------       --------
  Gross property, plant and equipment                               138,441        134,616
  Less: accumulated depreciation                                    (83,953)       (78,050)
                                                                   --------       --------
  Net property, plant and equipment                                $ 54,488       $ 56,566
                                                                   ========       ========
</TABLE>


5.   Other Noncurrent Assets

     Other noncurrent assets consist of the following:

<TABLE>
<CAPTION>
                                                                            December 31,  December 31,
                                                                               2000           1999
                                                                               ----           ----
<S>                                                                         <C>           <C>
   Excess of acquisition cost over assigned value of net assets acquired       $ 5,809        $ 5,809
  Debt issuance costs                                                            6,143          6,143
                                                                               -------        -------
                                                                                11,952         11,952
  Accumulated amortization                                                      (2,515)        (1,546)
                                                                               -------        -------
                                                                                 9,437         10,406
  Deferred income taxes                                                          3,387             --
  Other                                                                            549            431
                                                                               -------        -------
                                                                               $13,373        $10,837
                                                                               =======        =======
</TABLE>

     Amortization of deferred financing charges of $788, $792 and $189for the
years ended December 31, 2000, 1999 and 1998, respectively, have been included
in interest expense. During January 1999, the Company wrote off net debt
issuance costs of $1,668 related to the termination of the senior subordinated
credit facility. These costs have been classified as an extraordinary item in
the accompanying financial statements. In December 1999, BGF wrote off $268 of
net debt issuance costs related to the revolving credit facility due to an
amendment dated December 16, 1999. These costs have been classified as interest
expense in the accompanying financial statements.

                                      F-9
<PAGE>

                             BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                            (dollars in thousands)

6.   Accrued Liabilities

     Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                       December 31,  December 31,
                                                                            2000         1999
                                                                          -------       -------
<S>                                                                   <C>           <C>
  Income taxes                                                             $ 4,883       $ 8,154
  Payroll                                                                      173           321
  Profit sharing and other benefits                                          2,664         1,391
  Interest                                                                   4,817         4,901
  Other                                                                      1,369         1,852
                                                                           -------       -------
    Total accrued liabilities                                              $13,906       $16,619
                                                                           =======       =======
</TABLE>

7.   Long-term Debt

     Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                         December 31,   December 31,
                                                                             2000          1999
                                                                         ------------   ------------
<S>                                                                      <C>           <C>
  Senior Credit Facility
    Amortizing Term Loan                                                     $ 19,200     $ 24,200
    Revolving Credit Facility                                                      --       10,000
  Senior Subordinated Notes, net of unamortized discount of
    $1,617 and $1,817, respectively                                            98,383       98,183
                                                                             --------     --------
                                                                              117,583      132,383
  Less current portion                                                          3,106           --
                                                                             --------     --------
    Total long-term debt                                                     $114,477     $132,383
                                                                             ========     ========
</TABLE>

     BGF entered into a senior credit facility dated as of September 30, 1998,
as amended on November 24, 1998 and December 16, 1999, with a syndicate of
lenders and First Union National Bank, as agent. The senior credit facility, as
amended, provides BGF with a total of up to $110.0 million of credit consisting
of (i) a five-year revolving credit facility for up to $60.0 million and (ii) a
six-year amortizing term loan in the amount of $50.0 million. The revolver
contains two sub facilities: a $5.0 million swingline facility for working
capital requirements and a $20.0 million letter of credit facility. At December
31, 2000 BGF had no outstanding borrowings under the revolving credit facility.
Under the senior credit facility, BGF may be required to use the proceeds for
the following transactions to prepay in part, the term loan and the revolver if
it:

     .    sells assets in transactions outside the ordinary course of business;

     .    issues debt or equity securities; or

     .    receives insurance proceeds for casualty losses and does not repair or
          replace the damaged facilities.

     These prepayments would be applied first to the term loan, and upon payment
of the term loan, to permanently pay outstanding loans under the revolver.

                                      F-10
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)

7.   Long-term Debt--(Continued)

     The senior credit facility is collateralized by a first priority lien on
substantially all of BGF's real and personal property. The lien also covers (1)
100% of the capital stock of each direct or indirect domestic subsidiary of BGF,
(2) 65% of the capital stock of each first tier foreign subsidiary of BGF and
(3) certain promissory notes issued by affiliates of BGF. The senior credit
facility is also collateralized by a non-recourse pledge by Glass Holdings, the
parent of BGF, of capital stock of certain affiliates of BGF.

     The annual interest rate applicable to the revolver and the term loan is a
fluctuating rate of interest measured, at BGF's option, by reference to either
(1) LIBOR or (2) the greater of the published prime rate of First Union National
Bank or the overnight federal funds rate plus 0.5%, plus, in either case, an
additional amount which fluctuates based upon BGF's leverage ratio. This
additional amount ranges from 2.00% to 2.75% for LIBOR based borrowings and
0.75% to 1.50% for borrowings with an interest rate based on either of the
alternative rates described in clause (2) in the prior sentence.

     During 1998, BGF entered into an interest rate swap transaction which
expires September 30, 2004, on an initial notional amount on $50,000 in order to
limit its exposure to interest rate fluctuations under the term loan portion of
the senior credit facility. Under the swap agreement, BGF has secured a fixed
LIBOR rate of interest of 5.04% on the notional amount which is correlated in a
manner consistent with the amortization of the term loan principal. During 1999,
BGF terminated portions of the interest rate swap relating to early payment of
$25,000 on the term loan. During 2000, BGF terminated a portion of the interest
rate swap relating to early payment of $5,000 on the term loan. The company
recognized a gain of $94 and $890 related to the terminations in 2000 and 1999,
respectively, which have been included as other income in the accompanying
financial statements. The amount of the term loan covered by this swap was
$19,200 and $24,200 as of December 31, 2000 and 1999, respectively. The fair
value of the interest rate swap agreement representing the estimated amount that
BGF would receive to terminate the swap agreement was $283 at December 31, 2000
and $1,309 at December 31, 1999; however, BGF has no intention of terminating
the swap agreement.

     The senior credit facility provides for an annual administrative fee to be
paid to the agent, an unused commitment fee payable to the lenders and certain
other fees payable in connection with letters of credit issued under the
revolver.

     The senior credit facility requires BGF to maintain a certain maximum
leverage ratio and minimum consolidated net worth, interest coverage and fixed
charge coverage ratios. The December 16, 1999 amendment to the credit agreement
changed the required leverage ratio and interest coverage ratio. As of December
31, 2000 and December 31, 1999, BGF was in compliance with these amended
covenants.

     On September 30, 1998, BGF also entered into a ten-year senior subordinated
credit agreement with First Union Investors, Inc. as agent. Subsequently, other
institutions became lenders under this senior subordinated credit facility. The
senior subordinated credit facility is an unsecured senior subordinated
obligation of BGF. Amounts outstanding under the senior subordinated credit
facility accrued interest at a fixed rate of 10.25%.

     On June 18, 1999, the Securities and Exchange Commission declared effective
the company's Registration Statement on Form S-4 relating to its offering of
$100,000 of 10 1/4% series B senior subordinated notes due 2009. The notes
issued in the Offering were exchanged on July 23, 1999 for 10 1/4% senior
subordinated notes due 2009 that were privately issued January, 21, 1999.
Interest on the 10 1/4% series B senior subordinated notes is payable
semiannually beginning July 15, 1999.

                                      F-11
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)

7.   Long-term Debt--(Continued)

     The aggregate maturities of long-term debt at December 31, 2000 are as
follows:

                 2001                               3,106
                 2002                               6,070
                 2003                               7,765
                 2004                               2,259
                 2005                                  --
                 Thereafter                       100,000


8.   Income Taxes

     Income tax expense consists of the following:

<TABLE>
<CAPTION>
                                                                   2000
                                                  --------------------------------------
                                                  Current         Deferred         Total
                                                  -------         --------        ------
<S>                                              <C>           <C>               <C>
  Federal                                         $ 9,265          $(4,340)       $4,925
  State                                             1,413             (706)          707
                                                  -------          -------        ------
                                                  $10,678          $(5,046)       $5,632
                                                  =======          =======        ======
<CAPTION>
                                                                 1999
                                                  --------------------------------------
                                                  Current         Deferred         Total
                                                  -------         ---------  -----------
<S>                                               <C>           <C>               <C>
  Federal                                          $8,333          $(5,570)       $2,763
  State                                             1,054             (906)          148
                                                   ------          -------        ------
                                                   $9,387          $(6,476)       $2,911
                                                   ======          =======        ======
<CAPTION>
                                                                 1998
                                                  -------------------------------------
                                                  Current        Deferred         Total
                                                  -------        ---------  -----------
<S>                                               <C>           <C>              <C>
  Federal                                          $7,649          $   933       $8,582
  State                                             1,178               94        1,272
                                                   ------          -------       ------
                                                   $8,827          $ 1,027       $9,854
                                                   ======          =======       ======
</TABLE>

     A reconciliation of the difference between the federal statutory rate and
the effective income tax rate as a percentage of income before taxes is as
follows:

<TABLE>
<CAPTION>
                                                       2000             1999             1998
                                                       ----             ----             ----
<S>                                                <C>                <C>              <C>
  Federal statutory tax rate                           35.0%            35.0%            35.0%
  State income taxes, net of federal benefit            5.0%             1.7%             3.9%
  Other                                                 0.2%             1.2%             0.2%
                                                       ----             ----             ----
                                                       40.2%            37.9%            39.1%
                                                       ====             ====             ====
</TABLE>


                                      F-12
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)

8.   Income Taxes--(Continued)

     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:

<TABLE>
<CAPTION>
                                                           December 31,
                                                  ----------------------------
                                                           2000           1999
                                                  ----------------------------
<S>                                                 <C>           <C>
  Deferred tax assets:
     Loan to parent                                     $10,516        $ 6,105
     Inventories                                            759          1,166
     Accrued liabilities                                    900            935
     Reserves                                                --            220
     Accounts receivable                                    126             --
     Tax credits                                            630             --
     Retirement                                             635            600
                                                        -------        -------
        Total gross deferred tax assets                  13,566          9,026
                                                        -------        -------
  Deferred tax liabilities:
     Accounts receivable                                     --            (26)
     Depreciation                                        (6,586)        (7,066)
     Other                                               (1,150)        (1,148)
                                                        -------        -------
        Total gross deferred tax liabilities             (7,736)        (8,240)
                                                        -------        -------
        Net deferred tax asset                          $ 5,830        $   786
                                                        =======        =======
</TABLE>

     BGF is included in the consolidated federal tax return of Glass Holdings.
Pursuant to a tax sharing agreement, BGF is required to make tax sharing
payments to Glass Holdings with respect to BGF's pro rata share of consolidated
federal income tax liabilities which does not differ significantly from that
which would be determined on a stand alone basis.

9.   Employee Benefits

     Defined Contribution Plan. BGF has a 401(k) savings plan for all employees.
Company contributions, if any, are made at the discretion of BGF's Board of
Directors. BGF allows participants an election of receiving their profit
sharing, when applicable, in cash or as an employer contribution to the 401(k)
plan. Plan expense in 2000 amounted to $2,500, $778, and $1,743 in 2000, 1999
and 1998, respectively.

                                      F-13
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)

9.   Employee Benefits--(Continued)

     Defined Benefit Pension Plan. BGF has a defined benefit pension plan
covering substantially all of its employees. Participating employees are
required to contribute to the pension plan. BGF contributions to the pension
plan for 2000, 1999 and 1998 amounted to $0, $0 and $123, respectively.

A summary of the components of the defined benefit pension plans' net periodic
pension cost is as follows:

<TABLE>
<CAPTION>
                                                             2000        1999         1998
                                                           -------      -------      -------
<S>                                                     <C>          <C>          <C>
  Service cost-benefits earned during the period           $   677      $   996      $   934
  Interest cost on projected benefit obligation              1,038        1,040        1,009
  Expected return on plan assets                            (1,212)      (1,214)      (1,191)
  Recognized net actuarial gain                               (135)          --           --
  Net amortization and deferral                                  7            7            7
                                                           -------      -------      -------
  Net periodic pension expense                                 375          829          759
  Settlement gain                                               --         (539)          --
                                                           -------      -------      -------
  Total pension expense                                    $   375      $   290      $   759
                                                           =======      =======      =======

  Assumptions used:
    Weighted-average discount rates                           7.50%        8.00%        6.75%
    Rate of increase in compensation levels                   4.00%        4.00%        5.00%
    Expected long-term rate of return on assets               8.00%        8.00%        8.00%
</TABLE>

                                      F-14
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)

9.   Employee Benefits--(Continued)

     The change in projected benefit obligation, the change in fair value of
plan assets and the funded status of BGF's pension plan at December 31 is
summarized below:

<TABLE>
<CAPTION>
                                                                  2000           1999
                                                                -------         -------
<S>                                                             <C>             <C>
Change in projected benefits obligations:
  Projected benefit obligation at beginning of year             $13,977         $16,739
  Service cost                                                      677             996
  Interest cost                                                   1,038           1,040
  Actuarial (gain)/loss                                             704          (3,495)
  Benefits paid                                                    (848)             (2)
  Plan participants' contributions                                  840             805
  Settlement                                                         --          (2,106)
                                                                -------         -------
  Projected benefit obligation at end of year                   $16,388         $13,977
                                                                =======         =======

Change in fair value of plan assets:
  Fair value of plan assets at beginning of year                $15,572         $15,542
  Actual return on plan assets                                     (187)          1,554
  Employee contributions                                            840             805
  Benefits paid                                                    (848)             (2)
  Settlement                                                         --          (2,327)
                                                                -------         -------
  Fair value of plan assets at end of year                      $15,377         $15,572
                                                                =======         =======

Funded status                                                   $(1,011)        $ 1,595
Unrecognized prior service cost                                      48              54
Unrecognized gain                                                (1,001)         (3,239)
                                                                -------         -------
Net amount recognized in accrued liabilities                    $(1,964)        $(1,590)
                                                                =======         =======
</TABLE>

     During 1999, the Company recognized a settlement gain of $539 as a
reduction in pension expense in the accompanying financial statements. The
recognition of the gain results from a significant number of participants in the
current year accepting lump sum payments as settlement of their pension
benefits.

                                      F-15
<PAGE>

                             BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                            (dollars in thousands)

9.   Employee Benefits--(Continued)

     Postretirement Benefits.   In addition to providing pension benefits, BGF
provides certain retirement health care benefits to eligible employees.
Employees become eligible for these benefits by attaining specified age and
service requirements.

     A summary of the components of the other postretirement benefit plan's net
periodic cost is as follows:

<TABLE>
<CAPTION>
                                                                2000         1999         1998
                                                               -----       ------        -----
<S>                                                         <C>            <C>          <C>
Other postretirement benefit plans:
  Service cost-benefits earned during the period               $  78       $   70        $  54
  Interest cost on projected benefit obligation                  138           95           74
  Recognized net actuarial (gain) or loss                         11           --           (2)
                                                               -----       ------        -----
  Total postretirement benefit expense                         $ 227       $  165        $ 126
                                                               =====       ======        =====

Assumptions used:
  Weighted-average discount rates                               7.50%        8.00%        6.75%
  Medical Trend Rate
    First year rate                                             9.00%       10.00%        5.25%
    Ultimate rate                                               6.00%        6.00%        5.25%
    Select period                                            3 years      4 years          N/A
</TABLE>

     The change in projected benefit obligation, the change in fair value of
plan assets and the funded status of BGF's postretirement benefit plan at
December 31 is summarized below:

<TABLE>
<CAPTION>
                                                                   2000          1999
                                                                 -------        -------
<S>                                                              <C>            <C>
Change in projected benefit obligations:
  Projected benefit obligation at beginning of year              $ 1,612        $ 1,458
  Service cost                                                        78             70
  Interest cost                                                      138             95
  Plan participant contributions                                      98            114
  Actuarial loss                                                     157             32
  Benefits paid                                                     (173)          (157)
                                                                 -------        -------
     Projected benefit obligation at end of year                 $ 1,910        $ 1,612
                                                                 =======        =======

Change in fair value of plan assets:
  Fair value of plan assets at beginning of year                 $     0        $     0
  Actual return on plan assets                                         0              0
  Employer contributions                                              75             43
  Employee contributions                                              98            114
  Benefits paid                                                     (173)          (157)
                                                                 -------        -------
  Fair value of plan assets at end of year                       $     0        $     0
                                                                 =======        =======

Funded status                                                    $(1,910)       $(1,612)
Unrecognized loss                                                    320             53
                                                                 -------        -------
Net amount recognized                                            $(1,590)       $(1,559)
                                                                 =======        =======
</TABLE>


                                      F-16
<PAGE>

                             BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)

9.   Employee Benefits--(Continued)

     Assumed health care trend rates have a significant effect on the amounts
reported for the postretirement benefit obligation. A one-percentage point
change in assumed health care cost trend rates would have the following effects:

<TABLE>
<CAPTION>
                                                                     2000           1999
                                                                    -----          -----
<S>                                                              <C>            <C>
1% increase:
  Effect on total of service and interest cost components           $  30          $  25
  Effect on postretirement benefit obligation                       $ 199          $ 170

1% decrease:
  Effect on total of service and interest cost components           $ (25)         $ (21)
  Effect on postretirement benefit obligation                       $(172)         $(146)
</TABLE>


10.  Concentrations

     BGF's cash and cash equivalents are placed in major domestic and
international banks. Deposits in such banks may exceed federally insured limits.

     Substantially all of BGF's raw materials are purchased from two suppliers.
In the event suppliers are unable or unwilling to deliver glass, aramid or
carbon yarns, the business, financial condition and results of operations could
be materially adversely affected.

     Substantially all of BGF's trade accounts receivable are due from companies
in the electronics, composites, insulation, filtration, construction and
commercial industries. Management periodically performs credit evaluations of
its customers and generally does not require collateral. Credit losses have
historically been within management's expectations.

     The following table presents a summary of sales of significant customers as
a percentage of BGF's net sales:

<TABLE>
<CAPTION>
                                           2000           1999           1998
                                           ----           ----           ----
<S>                                     <C>               <C>            <C>
  Customer A                               12.3%          13.7%          11.2%
                                           ====           ====           ====
  Customer B                               10.8%          13.7%          10.5%
                                           ====           ====           ====
</TABLE>


11.  Segment Information

     BGF operates in one business segment that manufactures specialty woven and
non-woven fabrics for use in a variety of industrial and commercial
applications. BGF's principal market is the United States. Net sales by
geographic area is presented below, with sales based on the location of the
customer. BGF does not have any long-lived assets outside the United States.

<TABLE>

                                          2000          1999          1998
                                      --------      --------      --------
<S>                                   <C>           <C>           <C>
  United States                       $186,050      $170,831      $186,144
  Foreign                               15,369        10,850        19,371
                                      --------      --------      --------
                                      $201,419      $181,681      $205,515
                                      ========      ========      ========
</TABLE>


                                      F-17
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)


12.  Commitments and Contingencies

     Leases.   BGF leases facilities and equipment. Generally, these leases
contain renewal options under cancelable and noncancelable operating leases.
Rent expense amounted to $711, $662 and $879 for the years ended December 31,
2000, 1999 and 1998, respectively. Under the terms of noncancelable operating
leases, BGF is committed to the following future minimum lease payments at
December 31, 2000:


               Fiscal Year
               -----------
               2001....................................   $476
               2002....................................    258
               2003....................................    166
               2004....................................     83
               2005....................................     17

     Legal and Environmental Matters. From time to time BGF is involved in
various legal proceedings arising in the ordinary course of business. Management
believes that the ultimate resolution of these legal matters will not have a
material adverse impact on BGF's financial position or results of operations.

     In the course of a September 1998 environmental site assessment, BGF
discovered reportable quantities of polychlorinated biphenyls ("PCBs") in the
soil at a plant site in and around the former site of a heat transfer oil tank
that the previous owner of the facility had removed in 1986, before BGF's 1988
acquisition.  BGF has reported the contamination to the United States
Environmental Protection Agency ("USEPA") Region 3 and the Virginia Department
of Environmental Quality ("VDEQ").

     The USEPA and VDEQ have required additional sampling and site
characterization, which is ongoing.  BGF is currently developing a cleanup plan
in conjunction with USEPA and VEDQ oversight.  BGF will begin to implement this
plan upon receiving approval from USEPA.  Accordingly, actual cleanup costs
remain uncertain.  BGF may incur costs or liabilities relating to this and other
environmental or safety and health matters in the future, including those
relating to compliance with laws and requirements, remediation of contamination
or claims by third parties.

     Machinery and Equipment.   On December 31, 2000, the Company had
outstanding purchase commitments on machinery and equipment of approximately
$2.0 million.

                                      F-18
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)

13.  Related Party Transactions

     Related party balances at December 31, 2000, 1999 and 1998 and transactions
for the years ended December 31 were as follows:

<TABLE>
<CAPTION>
                                                                                      2000          1999         1998
                                                                                  --------      --------     --------
<S>                                                                            <C>          <C>           <C>
Trade accounts receivable from Porcher.......................................     $     42      $     98     $    213
                                                                                  ========      ========     ========
Trade accounts receivable from other affiliated companies....................     $    822      $     94     $     --
                                                                                  ========      ========     ========
Receivable for reimbursable expenses from Porcher............................     $     13      $    183     $     37
                                                                                  ========      ========     ========
Sales to Porcher and affiliates..............................................     $  1,946      $  1,001     $  1,672
                                                                                  ========      ========     ========
Management fees to affiliate of Porcher......................................     $    478      $    350     $    312
                                                                                  ========      ========     ========
Management fees included in accounts payable.................................     $    124      $     78     $    158
                                                                                  ========      ========     ========
Management fees to Porcher...................................................     $     12      $     43     $     12
                                                                                  ========      ========     ========
Fees to a subsidiary of Glass Holdings.......................................     $    949      $    585     $    950
                                                                                  ========      ========     ========
Fees to an affiliate included in accounts payable............................     $     22      $     21     $     --
                                                                                  ========      ========     ========
Due from affiliate in other current assets...................................     $     80      $    537     $  1,430
                                                                                  ========      ========     ========
Purchases from Porcher and affiliated companies, excluding Advanced
 Glassfiber Yarns, LLC.......................................................     $  5,419      $  7,123     $  7,023
                                                                                  ========      ========     ========
Affiliated purchases included in accounts payable............................     $    775      $  2,073     $  1,097
                                                                                  ========      ========     ========
Payable to Glass Holdings, for taxes included in accrued expenses............     $  4,883      $  8,154     $    855
                                                                                  ========      ========     ========
Non-interest bearing loan receivable from affiliate of Glass Holdings........     $    150      $     --     $     --
                                                                                  ========      ========     ========
Loan receivable from Glass Holdings..........................................     $126,310      $136,790     $136,790
                                                                                  ========      ========     ========
Payable to Advanced Glassfiber Yarns LLC.....................................     $  3,158      $  2,211     $  2,903
                                                                                  ========      ========     ========
Receivable from Advanced Glassfiber Yarns LLC................................     $    411      $    228     $    110
                                                                                  ========      ========     ========
Reimbursable expenses and lease income from Advanced Glassfiber Yarns LLC.....    $  1,282      $  1,465     $    796
                                                                                  ========      ========     ========
Purchases from Advanced Glassfiber Yarns LLC.................................     $ 41,279      $ 34,727     $ 11,185
                                                                                  ========      ========     ========
Management accounting and administrative fee income from a subsidiary
   of Glass Holdings.........................................................     $     --      $    351     $    658
                                                                                  ========      ========     ========
Management, technological support and administrative income from a joint
   venture of Glass Holdings.................................................     $     --      $      2     $     52
                                                                                  ========      ========     ========
Commissions to Porcher.......................................................     $    389      $     98     $    363
                                                                                  ========      ========     ========
Service fees from subsidiaries of Porcher....................................     $     32      $     24     $     43
                                                                                  ========      ========     ========
Purchase of assets from affiliate............................................     $     --      $    465     $     --
                                                                                  ========      ========     ========
Consulting fees to a director of BGF.........................................     $     11      $     15     $     --
                                                                                  ========      ========     ========
Interest income from Glass Holdings                                               $  1,200      $     --     $     --
                                                                                  ========      ========     ========
</TABLE>

     In 1998, BGF loaned an officer $365. The loan was non-interest bearing and
was payable upon the sale of the officer's former residence. The loan was paid
in full in 2000.

                                      F-19
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)

13.  Related Party Transactions--(Continued)

     On September 30, 1998, AGY Holdings, an affiliate of BGF, purchased a 51%
ownership interest in Advanced Glassfiber Yarns LLC for aggregate consideration
of $338.9 million, including post-closing adjustments. In connection with the
acquisition, BGF loaned Glass Holdings approximately $138.6 million to provide
Glass Holdings a portion of the capital necessary to fund the acquisition. BGF
raised the proceeds for this loan by borrowing (1) $88.4 million under the
senior credit facility, and (2) $65.0 million under the senior subordinated
credit facility which was refinanced in 1999 with senior subordinated notes
(Note 7). The loan from BGF to Glass Holdings is evidenced by promissory notes
that bear interest at the Cost of Funds Rate for BGF for the calendar year
immediately preceding the date on which any interest is due. With respect to any
period of determination, the Cost of Funds Rate means a rate per annum equal to
the blended interest rate, as reasonably calculated by BGF, applicable to
borrowings of BGF during such period in respect of indebtedness incurred by BGF,
to fund the loan to Glass Holdings. Accrued interest is due and payable on the
first business day of February of each year commencing on February 1, 1999 and
on any date on which any principal is due. The promissory notes are payable on
October 31, 2008 or such later date as may be agreed to by BGF and Glass
Holdings. BGF has not recorded interest income earned under the terms of the
loan agreement due to the fact that full repayment of the loan and related
interest by Glass Holdings is contingent on Glass Holdings' receipt of dividends
and other distributions from its two subsidiaries, BGF and Advanced Glassfiber,
which are currently restricted from paying dividends and other distributions
under their debt agreements. Interest in arrears as of December 31, 2000 and
1999 totaled $27.4 million and $15.9 million, respectively. During December
2000, BGF received payments from Glass Holdings totaling $12.7 million. While
there are interest amounts in arrears, BGF and Glass Holdings have agreed that
any payments made on the loan balance will be allocated approximately 90% to
principal and 10% to interest. Accordingly, BGF reflected $10.5 million of the
cash payment received as a reduction of principal and $1.2 million was
recognized as interest income (recorded in other income on the consolidated
statement of operations in 2000). At December 31, 2000 and 1999, the loan to
Glass Holdings has been included as a contra equity account in the financial
statements.

     On October 5, 2000, Owens Corning, which owns a 49% economic interest in
Advanced Glassfiber Yarns LLC (a major supplier of glass yarns to BGF), and
certain of Owens Corning's United States subsidiaries (collectively, the
"Debtors") filed voluntary petitions with the United States Bankruptcy Court for
the District of Delaware seeking relief under Chapter 11 of the United States
Bankruptcy Code.  According to filings made by Owens Corning with the SEC, the
Debtors will continue to manage their properties and operate their businesses as
"debtors-in-possession" in accordance with the applicable provisions of the
United States Bankruptcy Code. To date, Advanced Glassfiber, and consequently
BGF, has not experienced interruptions in operations or supply of material.
Although no assurances can be provided, the Company does not believe that Owens
Corning's bankruptcy will have a material adverse effect on BGF's business,
financial condition or results of operations.

                                      F-20
<PAGE>

                              BGF INDUSTRIES, INC.
              (a wholly owned subsidiary of Glass Holdings Corp.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                             (dollars in thousands)

14.  Quarterly Financial Information (Unaudited)

     The following table sets forth summary quarterly financial information for
the years ended December 31, 2000 and 1999:

<TABLE>
<CAPTION>
2000 By Quarter                               First             Second              Third              Fourth
---------------                               -----             ------              -----              ------
<S>                                          <C>               <C>                <C>                 <C>
Net sales                                    $46,736            $48,280             $51,410           $54,993
Gross profit                                   7,890              7,921               9,452            10,326
Operating income                               5,745              5,757               7,425             7,409
Income before extraordinary item               1,362              1,551               2,401             3,066
Net income                                     1,362              1,551               2,401             3,066
</TABLE>


<TABLE>
<CAPTION>
1999 By Quarter                               First             Second              Third              Fourth
---------------                               -----             ------              -----              ------
<S>                                          <C>                <C>                <C>                 <C>
Net sales                                    $45,832             $44,968             $44,770           $46,111
Gross profit                                   6,288               6,978               7,338             9,586
Operating income                               4,357               4,632               5,379             7,648
Income before extraordinary item                 355                 573               1,161             2,684
Net income                                      (674)                573               1,161             2,684
</TABLE>


15.  Restructuring Charge

     In April 1999, management approved a restructuring plan which resulted in
the reduction of BGF's workforce by 67 hourly and salary employees across the
company. Employees affected by the plan were notified in May of 1999 and were
terminated during 1999. As a result of the restructuring, BGF incurred charges
of $769, included as a component of operating income in the accompanying 1999
financial statements. The charges incurred were costs for salaried employee
severance. All restructuring costs were paid by June 2000.

                                      F-21
<PAGE>

                Schedule II - Valuation and Qualifying Accounts


                                (In thousands)


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                            Column C
------------------------------------------------------------------------------------------------------------------------------------
            Column A                            Column B                    Additions                 Column D         Column E
------------------------------------------------------------------------------------------------------------------------------------
                                               Balance at        Charged to           Charged        Deductions     Balance at End
                                              of Beginning       Costs and         (Credited) to                       of Period
                                                 Period           Expenses        Other Accounts)
------------------------------------------------------------------------------------------------------------------------------------
 Allowance for doubtful accounts,
 returned goods and discounts deducted
 from accounts receivable
 in the balance sheets:
------------------------------------------------------------------------------------------------------------------------------------
 <S>                                          <C>                <C>              <C>                <C>            <C>
 Year ended December 31, 2000...........            $  769             $ --                $ (54)          $ 52             $  663
------------------------------------------------------------------------------------------------------------------------------------
 Year ended December 31, 1999...........            $  696             $ 83                $  --           $ 10             $  769
------------------------------------------------------------------------------------------------------------------------------------
 Year ended December 31, 1998...........            $  723             $ --                $ (23)          $  4             $  696
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
 Allowance for obsolete inventory:
------------------------------------------------------------------------------------------------------------------------------------
 Year ended December 31, 2000...........            $1,372             $319                $  --           $ --             $1,691
------------------------------------------------------------------------------------------------------------------------------------
 Year ended December 31, 1999...........            $1,138             $234                $  --           $ --             $1,372
------------------------------------------------------------------------------------------------------------------------------------
 Year ended December 31, 1998...........            $1,067             $ 71                $  --           $ --             $1,138
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>



                                      S-1
<PAGE>

                                  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, on March 28, 2001.

                                             BGF INDUSTRIES, INC.


                                             By: /s/ Richard L. Cromer
                                                 ------------------------
                                                     Richard L. Cromer
                                                         President


     KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of BGF Industries, Inc. hereby severally constitute Richard L. Cromer
and Philippe R. Dorier, and each of them singly, our true and lawful attorneys
with full power to them, and each of them singly, to sign for us and in our
names in the capacities indicated below, the Report filed herewith and any and
all amendments to said Report and generally to do all such things in our names
and in our capacities as officers and directors to enable BGF Industries, Inc.
to comply with the provisions of the Securities Exchange Act of 1934, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signature as they may be signed by our said attorneys, or any of
them, to said Report and any and all amendments thereto.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant in
the capacities indicated on March 28, 2001.

          Signature                               Title
          ---------                               -----



/s/ Robert Porcher                Chairman of the Board of Directors, Chief
-----------------------           Executive Officer and Director (Principal
Robert Porcher                    Executive Officer)


/s/ Graham A. Pope                Director
-----------------------
Graham A. Pope


/s/ Richard L. Cromer             President
-----------------------
Richard L. Cromer


/s/ Philippe R. Dorier            Chief Financial Officer (Principal Financial
-----------------------           and Accounting Officer)
Philippe R. Dorier

<PAGE>

                                 EXHIBIT INDEX

Unless indicated below, the exhibits are incorporated herein from BGF's
Registration Statement on Form S-4 (File No. 333-72321) filed with the
Securities and Exchange Commission. Copies of such exhibits will be furnished to
any requesting stockholder of BGF upon request to Secretary, BFG Industries,
Inc., 3802 Robert Porcher Way, Greensboro, North Carolina 27410.


Exhibit No.                          Description of Exhibit
-----------                          ----------------------

   3.1         Certificate of Incorporation of BGF Industries, Inc., as amended

   3.2         Bylaws of BGF Industries, Inc., as amended

   4.1         Indenture, dated as of January 21, 1999, among BGF Industries,
               Inc. and The Bank of New York, as trustee, relating to $100
               million principal amount of 10 1/4% Senior Subordinated Notes Due
               2009

   4.2         Form of 10 1/4% Series A and Series B Senior Subordinated Notes
               due 2009 (included in Exhibit 4.1)

   4.3         Registration Rights Agreement dated as of January 21, 1999, by
               and between BGF Industries, Inc. and the Initial Purchaser

   10.1        Deferred Compensation Agreement, dated November 13, 1995, by and
               between BGF Industries, Inc. and Graham A. Pope /(1)/

   10.2        Deferred Compensation Agreement, dated April 1, 1998, by and
               between BGF Industries, Inc. and Richard L. Cromer /(1)/

   10.3        Deferred Compensation Agreement, dated April 16, 1990, by and
               between BGF, Industries, Inc. and James R. Henderson /(1)/

   10.4        Deferred Compensation Agreement, dated January 28, 1993, by and
               between BGF Services, Inc. and Philippe Dorier /(1)/

   10.5        Lease, dated March 20, 1996, between E.R. English, Sr., as
               lessor, and BGF Industries, Inc., as lessee

   10.6        Purchase Order (Lease), dated November 26, 1996, between K&C
               Brokerage, as lessor, and BGF Industries, Inc., as lessee

   10.7        Lease, dated November 1, 1991, by and between H.V. Johns, Jr., as
               lessor, and BGF Industries, Inc. as lessee
<PAGE>

Exhibit No.                          Description of Exhibit
-----------                          ----------------------


   10.8        Agreement between Contractor and Owner (Warehouse Lease), dated
               February 1, 1998, between Boyd Warehouse/Emmett Williams, as
               lessor, and BGF Industries, as lessee

   10.9        Note Purchase Agreement dated January 15, 1999 between BFG
               Industries, Inc., Inc. and the Initial Purchaser

   10.10       Senior Credit Agreement dated September 30, 1999 among BGF
               Industries, Inc., as Borrower, its Domestic Subsidiaries from
               time to time party thereto, as Guarantors, the Lenders Parties
               thereto and First Union National Bank, as Agent

   10.11       Senior Subordinated Credit Agreement dated as of September 30,
               1998 among BGF Industries, Inc., as Borrower, certain
               subsidiaries from time to time party thereto, as Guarantors, and
               First Union Investors, Inc., as Agent

   10.12       Promissory Note, dated September 30, 1998, from Glass Holdings
               Corp. to BGF Industries, Inc. for the original principal amount
               of $135,043,844.62

   10.13       Promissory Note, dated December 23, 1998, from Glass Holdings
               Corp. to BGF Industries, Inc. for the original principal amount
               of $2,681,000

   10.14+      Second Amendment to Credit Agreement, dated December 16, 1999, by
               and among BGF Industries, Inc. (the "Borrower"), certain Domestic
               Subsidiaries of the Borrower party thereto (collectively the
               "Guarantors"), several banks and other financial institutions
               party thereto (the "Lenders") and First Union National Bank (the
               "Agent").

   10.15++     Syndication Amendment and Assignment, dated November 30, 1998, by
               and among BGF Industries, Inc. (the "Borrower"), certain Domestic
               Subsidiaries of the Borrower party thereto (collectively the
               "Guarantors"), the Existing Lender (as defined therein), the New
               Lenders (as defined therein), and First Union National Bank (the
               "Agent").

   10.16+++    Lease Agreement, dated December 1, 1999 by and between Lawson
               Family LLC and BGF Industries, Inc.


<PAGE>

Exhibit No.                          Description of Exhibit
-----------                          ----------------------

   10.17*      Lease Agreement, dated October 1, 2000 by and between Edgar J.T.
               Perrow and BGF Industries, Inc.

   12*         Statement of Computation of Ratios

   21*         Subsidiaries of BGF

   24*         Powers of Attorney (included on signature page)

   99.1*       Reconciliation of net income to EBITDA


_____________________________

+    Exhibit is incorporated by reference herein to Exhibit 99.1 to the
     Company's Form 8-K, dated March 8, 2000.

++   Exhibit is incorporated by reference herein to Exhibit 99.2 to the
     Company's Form 8-K, dated March 8, 2000.

+++  Exhibit is incorporated by reference herein to Exhibit 10.16 to the
     Company's Form 10-K for the fiscal year ended December 31, 1999, as filed
     with the Securities and Exchange Commission on March 30, 2000.

*    Filed herewith.

(1)  Management contract or compensatory plan or arrangement required to be
     filed as an exhibit to this Form 10-K pursuant to Item 14(C) of this
     Report.