SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549


                                    FORM 10-Q

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

                       For the Quarter Ended June 30, 2001

                           Commission File No. 1-3660

                                  Owens Corning

                            One Owens Corning Parkway

                               Toledo, Ohio 43659

                            Area Code (419) 248-8000

                             A Delaware Corporation

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


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                Yes / X / No / /

 Shares of common stock, par value $.10 per share, outstanding at June 30, 2001

                                   55,342,947


<PAGE>


                                      - 2 -

                          PART I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS

                         OWENS CORNING AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF INCOME (LOSS)
                                   (unaudited)
<TABLE>
<S>                                                                      <C>             <C>           <C>            <C>

                                                                            Quarter Ended                Six Months Ended
                                                                               June 30,                      June 30,
                                                                               --------                      --------
                                                                         2001           2000           2001           2000
                                                                         ----           ----           ----           ----
                                                                            (In millions of dollars, except share data)

NET SALES                                                               $  1,239        $ 1,295     $   2,306      $  2,552
COST OF SALES                                                              1,014            996         1,910         1,967
                                                                        --------       --------     ---------      --------
     Gross margin                                                            225            299           396           585
                                                                       ---------       --------    ----------     ---------

OPERATING EXPENSES
     Marketing and administrative expenses                                   128            146           255           295
     Science and technology expenses                                          10             14            20            29
     Restructure costs (Note 4)                                                7              -            16             -
     Chapter 11 related reorganization items (Note 1)                         17              -            38             -
     Provision for asbestos litigation claims (Note 12)                        -            790             -           790
     Other                                                                     6            (13)           27             3
                                                                     -----------      ----------   ----------    ----------

        Total operating expenses                                             168            937           356         1,117
                                                                       ---------       --------     ---------      --------

INCOME (LOSS) FROM OPERATIONS                                                 57           (638)           40          (532)

OTHER
  Cost of borrowed funds (Note 1)                                              4             51             8            94
  Other                                                                       (2)             -            (6)            -
                                                                     ------------    ----------    -----------   -----------

INCOME (LOSS) BEFORE PROVISION (CREDIT)
  FOR INCOME TAXES                                                            55           (689)           38          (626)

Provision (credit) for income taxes (Note 6)                                  25           (267)           19          (254)
                                                                      ----------       ---------    ---------     ----------

INCOME (LOSS) BEFORE MINORITY INTEREST
  AND EQUITY IN NET INCOME (LOSS) OF                                                                                   (372)
  AFFILIATES                                                                  30           (422)           19

Minority Interest                                                             (1)            (2)           (2)           (4)

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

NET INCOME (LOSS)                                                      $      29        $  (425)    $      19      $   (377)
                                                                       =========        ========    =========      =========
NET INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per share                                      $     .53        $ (7.76)    $     .34      $  (6.90)
                                                                       ---------        --------    ---------      ---------
Diluted net income (loss) per share                                    $     .49        $ (7.76)    $     .32      $  (6.90)
                                                                       ---------        --------    ---------      ---------

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

   Basic                                                                    55.1           54.8          55.1          54.7
   Diluted                                                                  59.9           54.8          60.0          54.7

                   The accompanying notes are an integral part of this statement.
</TABLE>


<PAGE>


                                      - 3 -

                         OWENS CORNING AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                   (unaudited)
<TABLE>
<S>                                                                 <C>                      <C>                  <C>


                                                                   June 30,               December 31,          June 30,
                                                                     2001                     2000                2000
                                                                     ----                     ----                ----
                                                                                  (In millions of dollars)
ASSETS
------

CURRENT
     Cash and cash equivalents                                    $     520             $       550           $      497
     Restricted cash (Note 12)                                            -                       -                  250
     Restricted cash and securities - Fibreboard -
       current portion (Note 12)                                          -                       -                  525
     Receivables                                                        618                     488                  519
     Inventories (Note 7)                                               485                     469                  549
     Deferred income taxes                                                5                       6                  182
     Income tax receivable                                                5                      31                    4
     Other current assets                                                26                      20                   26
                                                                  ---------             -----------           ----------

           Total current                                              1,659                   1,564                2,552
                                                                  ---------             -----------           ----------

OTHER
     Insurance for asbestos litigation claims
      (Note 12)                                                          59                      59                   93
     Restricted cash - asbestos-related (Note 12)                       115                     164                    -
     Restricted cash, securities and other - Fibreboard
       (Notes 12 and 13)                                              1,271                   1,274                  874
     Deferred income taxes                                            1,047                   1,075                  827
     Goodwill                                                           627                     636                  654
     Investments in affiliates                                           56                      62                   90
     Other noncurrent assets                                            259                     257                  259
                                                                  ---------              ----------            ---------

           Total other                                                3,434                   3,527                2,797
                                                                  ---------              ----------            ---------

PLANT AND EQUIPMENT, at cost
Land                                                                     66                      60                   58
Buildings and leasehold improvements                                    663                     663                  732
Machinery and equipment                                               2,810                   2,717                2,504
Construction in progress                                                226                     327                  278
                                                                  ---------              ----------            ---------
                                                                      3,765                   3,767                3,572

  Less - accumulated depreciation                                    (1,983)                 (1,946)              (1,933)
                                                                  ---------              ----------           ---------

      Net plant and equipment                                         1,782                   1,821                1,639
                                                                  ---------              ----------            ---------

TOTAL ASSETS                                                      $   6,875              $    6,912            $   6,988
                                                                  =========              ==========            =========




                      The accompanying notes are an integral part of this statement.
</TABLE>

<PAGE>


                                      - 4 -

                         OWENS CORNING AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEET (continued)
                                   (unaudited)
<TABLE>
<S>                                                                           <C>               <C>                   <C>

                                                                           June 30,           December 31,        June 30,
                                                                              2001               2000               2000
                                                                              ----               ----               ----
LIABILITIES AND STOCKHOLDERS' EQUITY                                                     (In millions of dollars)
------------------------------------

CURRENT
     Accounts payable and accrued liabilities                                $    599        $      491        $      692
     Reserve for asbestos litigation claims - current portion
       (Note 12)                                                                    -                 -               925
     Asbestos-related liabilities - Fibreboard - current portion
       (Note 13)                                                                    -                 -               525
     Short-term debt                                                               45                50                43
     Long-term debt - current portion                                              67                68                75
                                                                            ---------       -----------        ----------

        Total current                                                             711               609             2,260
                                                                             --------        ----------         ---------

LONG-TERM DEBT                                                                      7                 7             2,698
                                                                           ----------      ------------         ---------

OTHER
  Reserve for asbestos litigation claims (Note 12)                                  -                 -             1,482
  Asbestos-related liabilities - Fibreboard  (Note 13)                              -                 -               874
  Other employee benefits liability                                               327               322               320
  Pension plan liability                                                           57                75                37
  Other                                                                           135               124               352
                                                                             --------        ----------        ----------

        Total other                                                               519               521             3,065
                                                                             --------        ----------         ---------

LIABILITIES SUBJECT TO COMPROMISE (Note 1)                                      6,805             6,935                 -
                                                                              -------         ---------       ------------

COMMITMENTS AND CONTINGENCIES

COMPANY OBLIGATED SECURITIES OF ENTITIES
  HOLDING SOLELY PARENT DEBENTURES - SUBJECT
  TO COMPROMISE                                                                   200               200               195
                                                                             --------        ----------        ----------

MINORITY INTEREST                                                                  39                39                48
                                                                            ---------       -----------       -----------

STOCKHOLDERS' EQUITY
  Preferred stock                                                                   -                 -                 -
  Common stock                                                                    697               699               701
  Deficit                                                                      (1,977)           (1,996)           (1,894)
  Accumulated other comprehensive income                                         (122)              (97)              (74)
  Other                                                                            (4)               (5)              (11)
                                                                           -----------     -------------      ------------

        Total stockholders' equity                                             (1,406)           (1,399)           (1,278)
                                                                              --------        ----------        ----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $ 6,875          $  6,912         $   6,988
                                                                              =======          ========         =========


                                     The accompanying notes are an integral part of this statement.
</TABLE>


<PAGE>


                                      - 5 -

                         OWENS CORNING AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (unaudited)
<TABLE>
<S>                                                          <C>              <C>           <C>              <C>

                                                                Quarter Ended                   Six Months Ended
                                                                   June 30,                         June 30,
                                                                   --------                         --------
                                                             2001            2000           2001             2000
                                                             ----            ----           ----             ----
                                                                            (In millions of dollars)

NET CASH FLOW FROM OPERATIONS

  Net income (loss)                                       $      29         $   (425)     $     19      $   (377)

  Reconciliation of net cash provided by
     operating activities
        Noncash items:
          Provision for asbestos litigation claims                -              790             -           790
          Provision for depreciation and
            amortization                                         56               45           110            93
          Provision (credit) for deferred income
            taxes                                                16             (292)           28          (288)
          Other                                                   7              (19)           30           (32)
        (Increase) decrease in receivables                      (25)             (33)         (152)         (214)
        (Increase) decrease in inventories                       23              (63)          (28)         (120)
        Increase (decrease) in accounts payable
          and accrued liabilities                                50               20            78           (60)
        Change in liabilities subject to
          compromise (Note 1)                                   (14)               -           (96)            -
        (Increase) decrease in restricted cash and
          other - asbestos-related (Note 12)                      -                6            49          (250)
        Proceeds from insurance for asbestos
          litigation claims, excluding Fibreboard
          (Note 12)                                               -              335             -           347
        Payments for asbestos litigation claims,
          excluding Fibreboard (Note 12)                          -             (141)            -          (364)
        Other                                                   (39)              19            (8)           38
                                                          ----------      ----------    -----------   ----------

            Net cash flow from operations                  $    103         $    242     $      30      $   (437)
                                                           --------         --------     ---------      ---------

NET CASH FLOW FROM INVESTING

        Additions to plant and equipment                   $    (41)       $     (97)    $     (83)     $   (165)
        Investment in subsidiaries, net of cash
          acquired                                                -                -             -            (4)
        Proceeds from the sale of  affiliate or
          business (Note 5)                                       -              143            20           193
        Other                                                    (4)             (34)             1          (36)
                                                         -----------       ----------   -----------    ----------

            Net cash flow from investing                   $    (45)       $      12     $     (62)    $     (12)
                                                           ---------       ---------     ----------    ----------



                                     The accompanying notes are an integral part of this statement.
</TABLE>


<PAGE>


                                      - 6 -

                         OWENS CORNING AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (unaudited)
<TABLE>
<S>                                                          <C>              <C>             <C>               <C>

                                                                Quarter Ended                     Six Months Ended
                                                                   June 30,                           June 30,
                                                                   --------                           --------
                                                             2001             2000            2001              2000
                                                             ----             ----            ----              ----
                                                                             (In millions of dollars)

NET CASH FLOW FROM FINANCING

  Net additions to long-term credit facilities            $    17           $   300         $     17        $     955
  Other additions to long-term debt                             -                22                -               22
  Other reductions to long-term debt                           (1)              (72)              (2)             (83)
  Net decrease in short-term debt                              (2)              (44)              (4)              (9)
  Subject to compromise (Note 1)                               (4)                -               (4)               -
  Dividends paid                                                -                (4)               -               (8)
  Other                                                         -                 -               (1)               -
                                                        ---------        ----------        ----------     -----------

      Net cash flow from financing                        $    10           $   202        $       6        $     877
                                                          -------           -------        ---------        ---------

Effect of exchange rate changes on cash                        (2)                -               (4)              (1)
                                                         ---------       ----------        ----------      -----------

Net increase (decrease) in cash and cash
  equivalents                                                  66               456              (30)             427

Cash and cash equivalents at beginning of
  period                                                      454                41              550               70
                                                          -------          --------         --------        ---------

Cash and cash equivalents at end of period                 $  520           $   497         $    520         $    497
                                                           ======           =======         ========         ========


                                   The accompanying notes are an integral part of this statement.
</TABLE>


<PAGE>


                                      - 7 -

                         OWENS CORNING AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11

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


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


The Debtors filed for relief under Chapter 11 to address the growing  demands on
Owens  Corning's  cash flow  resulting from its  multi-billion  dollar  asbestos
liability.  This  liability  is  discussed  in greater  detail in Note 12 to the
Consolidated Financial Statements.

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

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

Two creditors'  committees,  one representing  asbestos  claimants and the other
representing unsecured creditors,  have been appointed as official committees in
the Chapter 11 Cases and, in accordance  with the  provisions of the  Bankruptcy
Code,  will  have the right to be heard on all  matters  that  come  before  the
Bankruptcy Court. Owens Corning expects that the appointed committees,  together
with a legal  representative  of  future  asbestos  claimants  appointed  by the
Bankruptcy  Court,  will play  important  roles in the  Chapter 11 Cases and the
negotiation of the terms of any plan or plans of reorganization.

Owens Corning  anticipates that  substantially all liabilities of the Debtors as
of the date of the Filing will be resolved under one or more Chapter 11 plans of
reorganization to be proposed and voted on in the Chapter 11 Cases in accordance
with the provisions of the Bankruptcy Code.  Although the Debtors intend to file
and seek  confirmation of such a plan or plans,  there can be no assurance as to
when the Debtors will file such a plan or plans, or that such plan or plans will
be confirmed by the Bankruptcy Court and consummated.


<PAGE>


                                      - 8 -

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

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

As provided by the  Bankruptcy  Code,  the Debtors  initially  had the exclusive
right to propose a plan of  reorganization  for 120 days  following the Petition
Date, until February 2, 2001. On January 17, 2001, the Bankruptcy Court extended
such  exclusivity  period  until  August 2, 2001,  and  similarly  extended  the
Debtors' exclusive rights to solicit  acceptances of a reorganization  plan from
April 3, 2001 to October  3,  2001.  The  Debtors  have filed a motion  with the
Bankruptcy Court  requesting a further  extension of these  exclusivity  periods
through February 2, 2002 and April 3, 2002,  respectively,  without prejudice to
their  right to seek  further  extensions.  Pursuant  to the local  rules of the
Bankruptcy Court, the existing  exclusivity  periods are automatically  extended
until the  Bankruptcy  Court acts on such motion.  If the Debtors fail to file a
plan of  reorganization  prior to the  ultimate  expiration  of the  exclusivity
period,  or if such plan is not accepted by the  requisite  numbers of creditors
and equity  holders  entitled to vote on the plan,  other parties in interest in
the  Chapter  11  Cases  may be  permitted  to  propose  their  own  plan(s)  of
reorganization for the Debtors.

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

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

The  Bankruptcy  Court may  confirm a plan of  reorganization  only upon  making
certain  findings  required by the Bankruptcy  Code, and a plan may be confirmed
over the  dissent of  non-accepting  creditors  and equity  security  holders if
certain  requirements  of the  Bankruptcy  Code are met. The payment  rights and
other  entitlements of pre-petition  creditors and Owens Corning's  shareholders


<PAGE>


                                      - 9 -

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

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

may be substantially altered by any plan or plans of reorganization confirmed in
the Chapter 11 Cases. There is no assurance that there will be sufficient assets
to satisfy the Debtors'  pre-petition  liabilities  in whole or in part, and the
pre-petition  creditors of some Debtors may be treated differently than those of
other  Debtors.  Pre-petition  creditors  may receive under a plan or plans less
than  100% of the  face  value  of  their  claims,  and the  interests  of Owens
Corning's equity security  holders may be substantially  diluted or cancelled in
whole or in part. As noted above, it is not possible at this time to predict the
outcome of the Chapter 11 Cases,  the terms and  provisions of any plan or plans
of reorganization, or the effect of the Chapter 11 reorganization process on the
claims of the  creditors  of the  Debtors or the  interests  of Owens  Corning's
equity security holders.

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

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

Substantially  all of the Company's  pre-petition  debt is now in default due to
the  Filing.  As  described  below,  the  accompanying   Consolidated  Financial
Statements present the Debtors' pre-petition debt under the caption "Liabilities
Subject  to  Compromise."  This  includes  debt  under the  Pre-Petition  Credit
Facility and  approximately  $1.4 billion of other outstanding debt. As required
by SOP 90-7, the Company,  beginning in the fourth quarter of 2000, recorded the
Debtors'  pre-petition debt instruments at the allowed amount, as defined by SOP
90-7.

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

Pursuant to the Bankruptcy  Code,  schedules have been filed by the Debtors with
the Bankruptcy  Court setting forth the assets and liabilities of the Debtors as
of the date of the Filing.  Differences  between amounts recorded by the Debtors
and claims filed by creditors will be  investigated  and resolved as part of the
proceedings  in the Chapter 11 Cases.  No bar dates have been set for the filing
of proofs of claim  against the Debtors.  Accordingly,  the ultimate  number and
allowed amount of such claims are not presently known.


<PAGE>


                                     - 10 -

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

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

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

Since the Petition Date, contractual interest expense not accrued or recorded on
pre-petition  debt totaled  $147  million,  of which $46 million  relates to the
quarter ended June 30, 2001.

At June 30, 2001, the Company had $520 million of Cash and Cash  Equivalents (of
which  approximately $42 million is subject to an administrative  freeze pending
the resolution of certain  alleged  set-off  rights which,  upon approval of the
Bankruptcy  Court,  may  be  exercised  by  certain  pre-petition  lenders).  In
addition,  in connection  with the Filing,  the Debtors  obtained a $500 million
debtor-in-possession  credit  facility  from a group of  lenders  led by Bank of
America,  N.A. (the "DIP  Financing").  At June 30, 2001,  this facility had not
been utilized except for  approximately $25 million of standby letters of credit
and similar uses.

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

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

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

The condensed financial statements of the Debtors are presented as follows:




<PAGE>


                                     - 11 -

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

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

                                             OWENS CORNING AND SUBSIDIARIES
                                        DEBTOR-IN-POSSESSION STATEMENT OF INCOME
                                   FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2001
<S>                                                                                         <C>                 <C>

                                                                                                       2001
                                                                                                       ----
                                                                                          Quarter           Six Months
                                                                                           Ended              Ended
                                                                                          June 30            June 30
                                                                                          -------            -------
                                                                                             (In millions of dollars)

NET SALES                                                                                  $   1,080       $    1,996
COST OF SALES                                                                                    916            1,710
                                                                                          ----------      -----------
     Gross margin                                                                                164              286
                                                                                          ----------      -----------

OPERATING EXPENSES
     Marketing and administrative expenses                                                       116              227
     Science and technology expenses                                                               9               18
     Restructure costs (Note 4)                                                                    6                9
     Chapter 11 reorganization items (Note 1)                                                     17               38
     Other (Including interest income from non-debtors of $14 million in the
        second quarter and $28 million for the six months ended)                                 (54)             (41)
                                                                                          -----------     ------------

        Total operating expenses                                                                  94              251
                                                                                          ----------      -----------

INCOME FROM OPERATIONS                                                                            70               35

OTHER
     Cost of borrowed funds                                                                       (8)              (2)
     Other (Note 13)                                                                              (2)              (6)
                                                                                          -----------     ------------

INCOME BEFORE PROVISION FOR INCOME TAXES                                                          80               43

Provision for income taxes                                                                        32               20
                                                                                          ----------      -----------

INCOME BEFORE EQUITY IN NET INCOME (LOSS) OF AFFILIATES                                           48               23

Equity in net income (loss) of affiliates                                                         (1)               1
                                                                                          -----------     -----------

NET INCOME                                                                                $       47      $        24
                                                                                          ==========      ===========



                                  The accompanying notes are an integral part of this statement.
</TABLE>


<PAGE>


                                     - 12 -

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

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)
<TABLE>
<S>                                                                                   <C>                       <C>
                                              OWENS CORNING AND SUBSIDIARIES
                                            DEBTOR-IN-POSSESSION BALANCE SHEET

                                                                                     June 30,             December 31,
                                                                                       2001                   2000
                                                                                       ----                   ----
                                                                                        (In millions of dollars)
ASSETS
------

CURRENT
     Cash and cash equivalents                                                         $     422             $    461
     Receivables, net                                                                        468                  338
     Receivables - non-debtors                                                               739                  672
     Inventories                                                                             355                  347
     Deferred income taxes                                                                     4                    4
     Income tax receivable                                                                     4                   31
     Other current assets                                                                     25                   18
                                                                                     -----------           ----------

           Total current                                                                   2,017                1,871
                                                                                       ---------              -------

OTHER
     Insurance for asbestos litigation claims (Note 12)                                       59                   59
     Restricted cash and other - asbestos-related (Note 12)                                  115                  164
     Restricted cash, securities and other - Fibreboard (Notes 12
       and 13)                                                                             1,271                1,274
     Deferred income taxes                                                                 1,022                1,058
     Goodwill, net                                                                           524                  530
     Investments in affiliates                                                                27                   38
     Investments in non-debtor subsidiaries                                                  736                  745
     Other noncurrent assets                                                                 215                  209
                                                                                      ----------            ---------

           Total other                                                                     3,969                4,077
                                                                                       ---------              -------

PLANT AND EQUIPMENT, at cost
     Land                                                                                     40                   34
     Buildings and leasehold improvements                                                    524                  522
     Machinery and equipment                                                               2,140                2,078
     Construction in progress                                                                214                  259
                                                                                      ----------            ---------
                                                                                           2,918                2,893

  Less:  Accumulated depreciation                                                         (1,534)              (1,502)
                                                                                       ----------             -------

      Net plant and equipment                                                              1,384                1,391
                                                                                       ---------             --------

TOTAL ASSETS                                                                           $   7,370              $ 7,339
                                                                                       =========              =======



                                     The accompanying notes are an integral part of this statement.
</TABLE>


<PAGE>


                                     - 13 -

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

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)
<TABLE>
<S>                                                                                 <C>                    <C>
                                            OWENS CORNING AND SUBSIDIARIES
                                           DEBTOR-IN-POSSESSION BALANCE SHEET

                                                                                  June 30,            December 31,
                                                                                    2001                  2000
                                                                                    ----                  ----
LIABILITIES AND STOCKHOLDERS' EQUITY                                                 (In millions of dollars)
------------------------------------

CURRENT
     Accounts payable and accrued liabilities                                   $     460                $    320
     Accounts payable and accrued liabilities - non-debtors                             7                      46
     Long-term debt - current portion                                                   -                       1
                                                                             ------------             -----------

        Total current                                                                 467                     367
                                                                               ----------               ---------

OTHER
  Other employee benefits liability                                                   313                     308
  Pension plan liability                                                               51                      68
  Other                                                                               110                      96
                                                                               ----------              ----------

        Total other                                                                   474                     472
                                                                               ----------               ---------

LIABILITIES SUBJECT TO COMPROMISE                                                   7,522                   7,623

STOCKHOLDERS' EQUITY
  Common stock                                                                        699                     699
  Deficit                                                                          (1,777)                 (1,807)
  Accumulated other comprehensive loss                                                (11)                    (12)
  Other                                                                                (4)                     (3)
                                                                              ------------             ----------

        Total stockholders' equity                                                 (1,093)                 (1,123)
                                                                                ----------                -------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $   7,370                 $ 7,339
                                                                                =========                 =======



                                    The accompanying notes are an integral part of this statement.
</TABLE>

<PAGE>


                                     - 14 -

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

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)
<TABLE>
<S>                                                                                            <C>              <C>
                                             OWENS CORNING AND SUBSIDIARIES
                                      DEBTOR-IN-POSSESSION STATEMENT OF CASH FLOWS
                                   FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2001

                                                                                                       2001
                                                                                                       ----
                                                                                          Quarter          Six Months
                                                                                           Ended              Ended
                                                                                          June 30            June 30
                                                                                          -------            -------
                                                                                             (In millions of dollars)

NET CASH FLOW FROM OPERATIONS

Net income                                                                                $       47      $        24
  Reconciliation of net cash provided by operating activities
        Noncash items:
            Provision for depreciation and amortization                                           40               78
            Credit for deferred income taxes                                                      28               40
            Other                                                                                  9               44
        Increase in receivables                                                                  (86)            (202)
        Increase in inventories                                                                   30              (11)
        Increase in accounts payable and accrued liabilities                                      12               62
        Decrease in restricted cash and other - asbestos-related                                   -               49
        Change in liabilities subject to compromise                                              (14)             (96)
        Other                                                                                      6               35
                                                                                          ----------      -----------

            Net cash flow from operations                                                 $        72     $        23
                                                                                          -----------     -----------

NET CASH FLOW FROM INVESTING

        Additions to plant and equipment                                                         (33)             (75)
        Other                                                                                     (4)               1
                                                                                          -----------     -----------

            Net cash flow from investing                                                  $       (37)    $       (74)
                                                                                          ------------    ------------

NET CASH FLOW FROM FINANCING

        Net additions to long-term credit facilities                                              17               17
        Subject to compromise                                                                     (4)              (4)
        Other                                                                                      -               (1)
                                                                                          ----------      ------------

        Net cash flow from financing                                                      $        13     $         12
                                                                                          -----------     ------------



                                     The accompanying notes are an integral part of this statement.
</TABLE>


<PAGE>


                                     - 15 -

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

1.   VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)
<TABLE>
<S>                                                                                     <C>                <C>
                                           OWENS CORNING AND SUBSIDIARIES
                                    DEBTOR-IN-POSSESSION STATEMENT OF CASH FLOWS
                                 FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2001

                                                                                     Quarter           Six Months
                                                                                      Ended               Ended
                                                                                     June 30             June 30
                                                                                     -------             -------
                                                                                        (In millions of dollars)

Net increase (decrease) in cash and cash equivalents                                $        48       $        (39)

Cash and cash equivalents at beginning of period                                            374                461
                                                                                    -----------       ------------

Cash and cash equivalents at end of period                                          $       422       $        422
                                                                                    ============      ============
</TABLE>


The amounts subject to compromise in the Consolidated  and  Debtor-in-Possession
Balance Sheets consist of the following items:
<TABLE>
<S>                                                                                 <C>                  <C>
                                                                                  June 30,          December 31,
                                                                                    2001                2000
                                                                                    ----                ----
                                                                                      (amounts in millions)

  Accounts payable                                                             $       197          $      255
  Accrued interest payable                                                              40                  39
  Accrued liabilities                                                                   50                  74
  Debt                                                                               2,838               2,832
  Income taxes payable                                                                 209                 212
  Reserve for asbestos litigation claims - Owens Corning (Note 12)                   2,200               2,249
  Reserve for asbestos litigation claims - Fibreboard
    (Notes 12 and 13)                                                                1,271               1,274
                                                                                ----------           ---------

         Total consolidated                                                          6,805               6,935

         Payables to non-debtors                                                       717                 688
                                                                               -----------          ----------

         Total debtor                                                           $    7,522            $  7,623
                                                                                ==========            ========
</TABLE>

The   amounts   for    reorganizational    items   in   the   Consolidated   and
Debtor-in-Possession  Income Statements consist of the following for the quarter
and six months ended June 30:
<TABLE>
<S>                                                                          <C>                        <C>
                                                                      Quarter Ended                Six Months Ended
                                                                          June 30                    June 30
                                                                          -------                    -------
                                                                                   (amounts in millions)

  Professional fees                                                         $     16                 $     34
  Payroll and compensation                                                         5                       12
  Interest income                                                                 (4)                      (9)
  Litigation related expenses and other                                            -                        1
                                                                          ----------               ----------

       Total                                                                $     17                 $     38
                                                                            ========                 ========
</TABLE>



<PAGE>


                                     - 16 -

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

2.   SEGMENT DATA

During 2000, the Company realigned its internal  operating  segments.  Following
this realignment,  the Company reviewed its segments in accordance with SFAS 131
and concluded that the aggregation of its operating segments into two reportable
segments was still  appropriate.  As a result of this realignment,  intersegment
transactions no longer exist between reportable  segments.  Net sales and income
from  operations  have been  restated for all periods  presented to reflect this
change.
<TABLE>
<S>                                                       <C>               <C>             <C>            <C>
                                                              Quarter Ended                   Six Months Ended
                                                                 June 30,                         June 30,
                                                                 --------                         --------
NET SALES                                                 2001             2000             2001            2000
                                                          ----             ----             ----            ----
                                                                         (In millions of dollars)
Reportable Operating Segments
-----------------------------

  Building Materials Systems
     United States                                   $       959      $       976       $     1,745    $     1,905
     Europe                                                    2               31                 3             88
     Canada and other                                         48               49                84             91
                                                     -----------      -----------       -----------    -----------

        Total Building Materials Systems                   1,009            1,056             1,832          2,084
                                                     -----------      -----------       -----------    -----------

  Composite Systems
     United States                                            96              105               197            205
     Europe                                                   90               87               190            172
     Canada and other                                         44               47                87             91
                                                     -----------      -----------       -----------    -----------

        Total Composite Systems                              230              239               474            468
                                                     -----------      -----------       -----------    -----------

        Total Reportable Operating Segments          $     1,239      $     1,295       $     2,306    $     2,552
                                                     ===========      ===========       ===========    ===========

External Customer Sales by Geographic Region
--------------------------------------------
     United States                                   $     1,055      $     1,081       $     1,942    $     2,110
     Europe                                                   92              118               193            260
     Canada and other                                         92               96               171            182
                                                     -----------      -----------       -----------    -----------

     Net Sales                                       $     1,239      $     1,295       $     2,306    $     2,552
                                                     ===========      ===========       ===========    ===========
</TABLE>
<PAGE>


                                     - 17 -

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

2.  SEGMENT DATA (continued)
<TABLE>
<S>                                                           <C>               <C>              <C>               <C>
                                                                  Quarter Ended                     Six Months Ended
                                                                     June 30,                           June 30,
                                                                     --------                           --------
                                                              2001              2000             2001              2000
                                                              ----              ----             ----              ----
                                                                              (In millions of dollars)
INCOME (LOSS) FROM OPERATIONS

Reportable Operating Segments
-----------------------------

  Building Materials Systems
    United States                                        $       66          $    121        $      88          $    211
    Europe                                                        -                 -                -                 1
    Canada and other                                              3                 9                4                13
                                                        ------------       ----------       ----------         ---------

       Total Building Materials Systems                          69               130               92               225
                                                        -----------         ---------        ---------          --------

   Composite Systems
     United States                                               25                22               42                51
     Europe                                                      10                 3               24                 3
     Canada and other                                              8                6               12                12
                                                        ------------       ----------        ---------         ---------

       Total Composite Systems                                   43                31               78                66
                                                        -----------         ---------        ---------          --------

       Total Reportable Operating Segments                $     112          $    161         $    170          $    291
                                                          ---------          --------         --------          --------

Geographic Regions
------------------
    United States                                        $       91          $    143         $    130          $    262
    Europe                                                       10                 3               24                 4
    Canada and other                                             11                15               16                25
                                                        -----------         ---------        ---------         ---------

        Total Reportable Operating Segments               $     112          $    161         $    170          $    291
                                                          =========          ========         ========          ========

Reconciliation to Consolidated Income
-------------------------------------
  Before Provision for Income Taxes
  ---------------------------------

   Restructuring and other charges                              (17)                -              (59)                -
   Chapter 11 related reorganization items                      (17)                -              (38)                -
   Provision for asbestos litigation claims                       -              (790)               -              (790)
   General corporate expense                                    (21)               (9)             (33)              (33)
   Cost of borrowed funds                                        (4)              (51)              (8)              (94)
   Other                                                           2                -                6                 -
                                                        ------------      -----------        ---------       -----------

      Consolidated Income (Loss) Before
         Provision (Credit) for Income Taxes             $       55          $   (689)       $      38          $   (626)
                                                         ==========          =========       =========          =========

</TABLE>

<PAGE>


                                     - 18 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (unaudited)
3.    GENERAL

The financial  statements  included in this Report are condensed and  unaudited,
pursuant  to  certain  Rules and  Regulations  of the  Securities  and  Exchange
Commission,  but include, in the opinion of the Company,  adjustments  necessary
for a fair statement of the results for the periods indicated,  which,  however,
are not  necessarily  indicative  of results  which may be expected for the full
year.

In connection with the condensed financial statements and notes included in this
Report,  reference  is  made  to the  financial  statements  and  notes  thereto
contained in the  Company's  2000 Annual  Report on Form 10-K, as filed with the
Securities and Exchange Commission.

4.    RESTRUCTURING OF OPERATIONS AND OTHER CHARGES

During the second  quarter of 2001,  the Company  continued  to  experience  the
impact of a soft  overall  economy,  resulting  in lower  volume  demand in both
Building  Materials  Systems and  Composite  Systems.  Due to this,  the Company
continues  to review its total cost  structures.  This review led to the Company
recording  a  $17  million   pretax  charge  to  income  from   operations   for
restructuring  and other  charges.  This  charge was  comprised  of a $7 million
pretax restructure charge and $10 million in pretax other charges.

The $7 million restructure charge has been classified as a separate component of
operating expenses on the Company's Consolidated Statement of Income (Loss). The
components of the  restructuring  charge included $5 million for the divestiture
of non-strategic  businesses and facilities,  which consisted mainly of non-cash
asset write-downs to fair value and exit cost liabilities.  Also included in the
restructure  charge was a $2 million charge for severance costs  associated with
the elimination of approximately 25 positions, primarily in the U.K. The primary
groups affected included manufacturing and administrative  personnel. As of June
30, 2001, approximately $1 million has been paid and charged against the reserve
for personnel reductions.

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

During the first  quarter of 2001,  the Company  recorded  $42 million in pretax
charges for  restructuring and other charges as a result of the continued impact
of a soft overall  economy.  The $42 million pretax charge was comprised of a $9
million pretax  restructure  charge, $2 million pretax loss from assets held for
sale, and $31 million in other pretax charges. The $9 million pretax restructure
charge   represented   severance  costs   associated  with  the  elimination  of
approximately  130 positions,  primarily in the U.S. The primary groups affected
included  manufacturing  and  administrative  personnel.  As of June  30,  2001,
approximately  $2 million  has been paid and  charged  against  the  reserve for
personnel  reductions.  The $2 million  pretax  loss from  assets  held for sale
represented the results of operations for the Company's  investments in its Pipe
joint ventures and  subsidiaries on a held-for-sale  basis for the first quarter
of 2001. This sale was completed in February 2001.

The $31 million in other  pretax  charges was  comprised of $10 million of asset
impairments,  principally the write-down of equipment;  $4 million to write down
inventory to reflect  updated  estimates of the net realizable  value of certain
inventories;   $4  million  of  payroll-related   charges  associated  with  the
realignment  of the Newark,  Ohio  manufacturing  facility;  and  various  other


<PAGE>


                                     - 19 -

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

4.    RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)

charges  totaling $13 million.  This $31 million pretax charge was accounted for
as an $18  million  charge  to cost of sales and a $13  million  charge to other
operating expenses.

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

The  $197  million  of other  charges  was  comprised  of $95  million  of asset
impairments,  $6 million charge for a settlement loss associated with one of our
U.S.  pension plans,  and $96 million of charges  focused on improving  business
operations. The $95 million of asset impairments included: 1) $54 million charge
to  write-down  the  Company's  investment  and related  assets in Alcopor Owens
Corning,  a building  materials joint venture in Europe, to estimated fair value
on a held for sale basis; 2) $12 million to write-down the Company's  investment
in the majority owned,  consolidated  venture in South Africa,  on a held-in-use
basis based upon management's  analysis of current and expected future financial
results and  constraints  on the  Company's  ability to fund future  significant
capital  investments  in this  subsidiary  as a  consequence  of the  bankruptcy
filing.  The $12 million  charge was offset by a $6 million credit to record the
minority  owner's  share,   recorded  in  the  minority  interest  line  on  the
Consolidated  Statement of Income  (Loss);  3) $8 million to  write-down to fair
value the investments in its Pipe joint ventures and  subsidiaries on a held for
sale basis. The sale of a majority of the investments and subsidiaries  held for
sale was completed in February 2001, with final approval obtained in June, 2001,
at which  time cash  proceeds  were  released  from  escrow;  4) $10  million to
write-down the equity investment in ImproveNet, due to a significant decrease in
market  value  which  management  believes is other than  temporary;  and 5) $11
million  associated with asset  impairments  within our Cultured Stone and other
businesses.

The $96 million  charge  consisted of $43 million to write-down  inventory  made
obsolete by changes in the Company's manufacturing and marketing strategies; $19
million to  write-down  equipment  and  receivables;  $15  million  to  increase
warranty  reserves  due to general  changes in estimates  associated  with these
reserves;  and various  other  charges  totaling  $19 million  recorded as other
operating expenses. As of June 30, 2001, approximately $12 million has been paid
and charged against the reserve for personnel reductions.

During 1997 and 1998,  the Company  recorded  pretax charges of $386 million for
restructuring  and other  actions to implement a program to close  manufacturing
facilities, enhance manufacturing productivity and reduce overhead. Of the total
pretax charge of $386 million,  $143 million was recorded in the fourth  quarter
of 1997 and the remaining $243 million was recorded during 1998.

The $386 million pretax charge was comprised of a $185 million charge associated
with the  restructuring  of the Company's  business  segments and a $201 million
charge  associated  with asset  impairments,  including  investments  in certain
affiliates.  The components of the restructuring charge include $115 million for
personnel   reductions;   $68  million  for  the  divestiture  of  non-strategic


<PAGE>


                                     - 20 -

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

4.     RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)

businesses  and  facilities,  of which $52 million  represented  non-cash  asset
revaluations and $16 million  represented exit cost  liabilities,  primarily for
leased  warehouse and office  facilities  that were vacated;  and $2 million for
other  actions.  The  divestiture  of  non-strategic  businesses  and facilities
included the closure of the Candiac, Quebec manufacturing  facility.  During the
second  quarter of 1999,  the Candiac  manufacturing  facility was  re-opened in
order to meet market demands.  As of June 30, 2001,  approximately  $104 million
has been  paid  and  charged  against  the  reserve  for  personnel  reductions,
representing the elimination of approximately  2,450 employees,  the majority of
whose  severance  payments  were  made over the  course  of 1998 and  1999,  and
approximately $13 million has been charged against exit cost liabilities.

The following table summarizes the status of the liabilities from the 1997, 1998
and 2000/2001 restructure program described above, including cumulative spending
and adjustments and the remaining balance as of June 30, 2001:
<TABLE>
<S>                                                     <C>                  <C>                    <C>

                                                       Original             Total          Liability at June 30,
         (In millions of dollars)                      Liability           Payments                2001
                                                       ---------           --------                ----

         Personnel Costs                                $   142        $     (119)                $      23
         Facility and Business Exit Costs                    20               (15)                        5
         Other                                                2                (2)                        -
                                                     ----------        -----------              -----------

         Total                                          $   164          $   (136)                $      28
                                                        =======          =========                =========
</TABLE>

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

5.    ACQUISITIONS AND DIVESTITURES OF BUSINESSES

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

On May 31,  2000,  the  Company  completed  the  sale of its  European  Building
Materials business to an unconsolidated joint venture, Alcopor Owens Corning, in
which  the  Company  has a 40%  interest.  Proceeds  from the  sale,  net of the
Company's $34 million cash infusion into the joint  venture,  were $177 million.
In connection  with this  transaction,  the joint venture assumed $62 million of
debt from Owens  Corning  and the  Company  incurred  fees of  approximately  $6
million,  resulting in net cash proceeds of approximately $109 million. A pretax
gain of approximately $5 million, including a $54 million write-off of goodwill,
was  realized  from the sale.  This pretax gain was  recorded as a reduction  of
other operating expenses on the consolidated statement of income.

The results of  operations  of the  European  Building  Materials  business  are


<PAGE>


                                     - 21 -

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

5.    ACQUISITIONS AND DIVESTITURES OF BUSINESSES (continued)

reflected in the Company's  consolidated  statement of income through the period
ending May 31,  2000.  For the six months ended June 30, 2000 and the year ended
December 31, 1999, the European  Building  Materials  business recorded sales of
approximately  $88  million  and $234  million,  respectively,  and income  from
operations of approximately $1 million and $12 million, respectively.  Effective
May 31, 2000, the Company  accounts for its ownership  interest in Alcopor Owens
Corning under the equity method. Please see Note 1 to the Consolidated Financial
Statements.

During the first quarter of 2000,  the Company  completed the sale of the assets
of Falcon Foam, a producer of foam  insulation in Michigan and  California.  Net
proceeds  from the sale  were  $50  million  and  resulted  in a pretax  loss of
approximately  $5  million,  including  transaction  costs.  This  net  loss was
recorded as other  operating  expenses on the  Consolidated  Statement of Income
(Loss).

6.     INCOME TAXES

The  reconciliation  between the U.S.  federal  statutory rate and the Company's
effective income tax rate is:
<TABLE>
<S>                                               <c>              <c>           <c>              <c>
                                                    Quarter Ended                  Six Months Ended
                                                        June 30,                       June 30,
                                                        --------                       --------
                                                  2001            2000           2001           2000
                                                  ----            ----           ----           ----

U.S. federal statutory rate                        35%             (35%)            35%          (35%)
State and local income taxes                        2               (5)              -            (5)
Special tax election (a)                            -                -               -            (2)
Interest                                            5                -               9             -
Foreign tax rate differences                        2                1               3             1
Other                                               1                -               3             -
                                             ----------       ----------     -----------    --------

Effective tax rate                                  45%            (39%)            50%          (41%)
                                             ==========         =======       =========       =======

(a)  Represents the implementation of a tax strategy associated with one of our foreign subsidiaries.

</TABLE>

7.    INVENTORIES
<TABLE>
<S>                                                              <C>                        <C>
                                                            June 30, 2001            December 31, 2000
                                                            -------------            -----------------
                                                                    (In millions of dollars)
Inventories are summarized as follows:

Finished goods                                               $       409                 $       397
Materials and supplies                                               172                         165
                                                            ------------                ------------
FIFO inventory                                                       581                         562
Less:  Reduction to LIFO basis                                       (96)                        (93)
                                                            ------------                ------------
Total Inventory                                              $       485                 $       469
                                                             ===========                 ===========

</TABLE>

Approximately $146 million and $300 million of total inventories were valued
using the LIFO method at June 30, 2001 and December 31, 2000, respectively.


<PAGE>


                                     - 22 -

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

8.    CONSOLIDATED STATEMENT OF CASH FLOWS

Cash  payments  (refunds)  for  income  taxes  and cost of  borrowed  funds  are
summarized as follows:
<TABLE>
<S>                                            <C>               <C>              <C>               <C>
                                                   Quarter Ended                     Six Months Ended
                                                     June 30,                            June 30,
                                                     --------                            --------
                                               2001              2000             2001              2000
                                               ----              ----             ----              ----
                                                               (In millions of dollars)

Income taxes                                $      6             $   10        $    (32)            $  (34)
Cost of borrowed funds                             1                 57               3                 99
</TABLE>


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

9.    COMPREHENSIVE INCOME

The Company's comprehensive income for the quarters ended June 30, 2001 and 2000
was income of $31 million and a loss of $434 million,  respectively. For the six
months  ended  June 30,  2001 and 2000,  comprehensive  income  was a loss of $6
million and a loss of $401 million,  respectively.  The Company's  comprehensive
income  includes  net  income  (loss),  currency  translation  adjustments,  and
deferred gains and losses on certain hedging transactions.

The  comprehensive  loss for the  quarter  and six months  ended  June 30,  2000
includes a  reclassification  from other  comprehensive  income to net income of
approximately   $13  million.   This   reclassification   reflects  the  expense
recognition of currency translation  adjustments  resulting from the sale of the
European Building Materials business to Alcopor Owens Corning (see Note 5).



<PAGE>


                                     - 23 -

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

10.   EARNINGS PER SHARE

The following table reconciles the net income (loss) and weighted average number
of shares used in the basic  earnings  per share  calculation  to the net income
(loss) and weighted  average number of shares used to compute  diluted  earnings
per share.
<TABLE>
<S>                                             <C>                    <C>                 <C>                <C>
                                                  Quarter Ended June 30,                  Six Months Ended June 30,
                                                2001                   2000               2001                2000
                                                ----                   ----               ----                ----
                                                          (In millions of dollars, except share data)

Net income (loss) used for
  basic earnings per share                    $        29          $        (425)    $        19         $     (377)
Net income effect of
  assumed conversion of
  preferred securities                                  -                      -               -                  -
                                            -------------        ---------------   -------------       ------------

Net income used for diluted
  earnings per share                          $        29          $        (425)    $        19         $     (377)
                                              ===========          ==============    ===========         ===========

Weighted average number of
  shares outstanding used for
  basic earnings per share
  (thousands)                                      55,076                 54,793          55,058             54,652
Deferred awards (thousands)                           303                      -             337                  -
Shares from assumed
  conversion of preferred
  securities (thousands)                            4,566                      -           4,566                  -
                                               ----------        ---------------      ----------       ------------

Weighted average number of
  shares outstanding and
  common equivalent shares
  used for diluted earnings per
  share (thousands)                                59,945                 54,793          59,961             54,652
                                               ==========            ===========       =========          =========
</TABLE>


11.   DERIVATIVE FINANCIAL INSTRUMENTS

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


<PAGE>


                                     - 24 -

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

12.   CONTINGENT LIABILITIES

Asbestos Liabilities
--------------------

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)

Numerous  claims have been  asserted  against Owens  Corning  alleging  personal
injuries  arising from  inhalation  of asbestos  fibers.  Virtually all of these
claims  arise  out  of  Owens  Corning's  manufacture,   distribution,  sale  or
installation  of  an  asbestos-containing  calcium  silicate,  high  temperature
insulation  product,  the manufacture and distribution of which was discontinued
in 1972. Owens Corning received  approximately  18,000 asbestos  personal injury
claims   during  2000,   approximately   32,000  such  claims  during  1999  and
approximately 69,000 such claims during 1998.

Prior to October 5, 2000,  when the Debtors,  including  Fibreboard  (see Item B
below),  filed  voluntary  petitions  for relief under  Chapter 11 of the United
States  Bankruptcy Code, the vast majority of asserted  asbestos personal injury
claims were in the process of being  resolved  through the  National  Settlement
Program  described below. As a result of the Filing,  all pre-petition  asbestos
claims and pending litigation against the Debtors,  including without limitation
claims arising under the National Settlement Program,  were automatically stayed
(see Note 1). Owens Corning  expects that all pending and future asbestos claims
against  Owens  Corning and  Fibreboard  will be resolved  pursuant to a plan or
plans of  reorganization.  Owens  Corning  is unable to  determine  at this time
whether  asbestos-related  claims asserted against Fibreboard will be treated in
the same  manner as those  asserted  against  Owens  Corning in any such plan or
plans.

National Settlement Program
---------------------------

Beginning in late 1998, Owens Corning  implemented a National Settlement Program
("NSP") to resolve personal injury asbestos claims through settlement agreements
with individual plaintiffs' law firms. The NSP was intended to better manage the
asbestos  liabilities of Owens Corning and Fibreboard (see Item B below), and to
help Owens Corning  better  predict the timing and amount of indemnity  payments
for both pending and future asbestos claims.

The number of law firms  participating in the NSP expanded from approximately 50
when the NSP was established to approximately  120 as of the Petition Date. Each
of these  participating  law firms  agreed to a long-term  settlement  agreement
which  varied by firm ("NSP  Agreement")  extending  through at least 2008 which
provided for the resolution of their existing asbestos claims, including unfiled
claims  pending with the  participating  law firm at the time it entered into an
NSP Agreement ("Initial Claims"). The NSP agreements also established procedures
and fixed payments for resolving without  litigation claims against either Owens
Corning or Fibreboard,  or both, arising after a participating firm entered into
an NSP Agreement ("Future Claims").

Terms and Conditions of NSP Agreements
--------------------------------------

Settlement  amounts for both Initial  Claims and Future  Claims were  negotiated
with each firm  participating  in the NSP, and each firm was to communicate with
its respective clients to obtain authority to settle individual claims. Payments
to individual claimants were to vary based on a number of factors, including the
type and severity of disease, age and occupation. All such payments were subject


<PAGE>


                                     - 25 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)  (continued)

to delivery of  satisfactory  evidence of a  qualifying  medical  condition  and
exposure to Owens Corning's and/or Fibreboard's products,  delivery of customary
releases by each claimant,  and other  conditions.  Certain  claimants  settling
non-malignancy  claims with Owens Corning and/or  Fibreboard were entitled to an
agreed pre-determined amount of additional  compensation if they later developed
a more severe asbestos-related medical condition.

As to  Future  Claims,  each  participating  NSP firm  agreed  (consistent  with
applicable  legal  requirements)  to recommend to its future  clients,  based on
appropriately   exercised  professional  judgment,  to  resolve  their  asbestos
personal  injury  claims  against  Owens Corning  and/or  Fibreboard  through an
administrative  processing arrangement,  rather than litigation.  In the case of
Future  Claims  involving  non-malignancy,  claimants  were  required to present
medical  evidence of  functional  impairment,  as well as the  product  exposure
criteria and other requirements set forth above, to be entitled to compensation.

Owens  Corning  and  Fibreboard  (see Item B below) each  retained  the right to
terminate  any  individual  NSP  Agreement  if in any year more than a specified
number of plaintiffs  represented by the plaintiffs'  firm in question  rejected
and ultimately opted out of such agreement. Opt out procedures were specified in
the settlement  agreements,  and provided for mediation and further  negotiation
before a claimant could pursue his or her case in the court system.  Through the
Petition  Date,  fewer than 300  claimants  had  elected to reject the  original
settlement proposal, and to mediate under the terms of the NSP Agreement.

As of the Petition Date, the NSP covered  approximately  240,000 Initial Claims,
approximately 148,000 of which had satisfied all conditions to final settlement,
including  receipt of executed  releases,  or other  resolution  (the "Final NSP
Settlements")  at an average cost per claim of approximately  $9,000.  As of the
Petition Date,  approximately 88,000 of such Final NSP Settlements had been paid
in full or otherwise resolved,  and approximately 60,000 were unpaid in whole or
in part. As of such date, the remaining  balance payable under NSP Agreements in
connection  with these  unpaid  Final NSP  Settlements  was  approximately  $539
million.  Through the Petition  Date,  Owens Corning had received  approximately
3,800 Future Claims under the NSP.

At this time,  Owens  Corning  is unable to predict  the manner in which the NSP
Agreements  and the  resolution of claims  thereunder  will be treated under the
terms of any plan or plans of reorganization.

Non-NSP Claims
--------------

As of the Petition Date,  approximately  36,000 asbestos  personal injury claims
were  pending   against  Owens  Corning   outside  the  NSP.  This  compares  to
approximately  25,300 such claims pending on December 31, 1999. The  information
needed for a critical  evaluation  of pending  claims,  including the nature and
severity of disease and definitive identifying information concerning claimants,
typically becomes available only through the discovery process or as a result of
settlement  negotiations,  which often occur years after  particular  claims are
filed.  As a result,  Owens Corning has limited  information  about many of such
claims,  and the  actual  number of  pending  claims  may vary from the  numbers
indicated.


<PAGE>


                                     - 26 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)  (continued)

Owens  Corning  resolved  (by  settlement  or  otherwise)  approximately  10,200
asbestos  personal injury claims outside the NSP during 1998,  4,800 such claims
during 1999 and 3,100 such claims  during 2000 prior to the Petition  Date.  The
average  cost of  resolution  was  approximately  $35,900  per claim for  claims
resolved  during 1998,  $34,600 per claim for claims  resolved  during 1999, and
$44,800 per claim for claims resolved during 2000 prior to the Petition Date. As
a rule,  these claims were settled as they were  scheduled  for trial,  and they
typically  involved  more serious  injuries  and  diseases.  Accordingly,  Owens
Corning   does  not  believe  that  such  average   costs  of   resolution   are
representative  of the value of the  non-NSP  claims  then  pending  against the
Company.

At this time,  Owens  Corning is unable to predict  the manner in which  non-NSP
claims will be treated under the terms of any plan or plans of reorganization.

Asbestos-Related Payments
-------------------------

As a result  of the  Filing,  Owens  Corning  has not made any  asbestos-related
payments  since the Petition Date except for  approximately  $12 million paid on
its  behalf by third  parties  pursuant  to  appeal  bonds  issued  prior to the
Petition Date. During 1999 and 2000 (prior to the Petition Date),  Owens Corning
(excluding Fibreboard) made asbestos-related  payments falling within four major
categories:  (1) Settlements in respect of verdicts  incurred or claims resolved
prior  to the  implementation  of  the  NSP  ("Pre-NSP  Settlements");  (2)  NSP
settlements; (3) Non-NSP settlements covering cases not resolved by the NSP; and
(4) Defense, claims processing and administrative expenses, as follows:
<TABLE>
<S>                                                                         <C>                         <C>
                                                                                  (In millions of dollars)
                                                                                                   2000 (through
                                                                            1999                 October 4, 2000)
                                                                            ----                 ----------------

Pre-NSP Settlements                                                      $    170                   $     51
NSP Settlements                                                               570                        538
Non-NSP Settlements                                                            30                         42
Defense, Claims Processing and Administrative Expenses                         90                         54
                                                                        ---------                  ---------
                                                                          $   860                    $   685
                                                                          =======                    =======
</TABLE>

Prior to the Petition Date,  Owens Corning  deposited  certain amounts in escrow
accounts  to  facilitate  claims  processing  under  the  NSP   ("Administrative
Deposits").  Amounts deposited into escrow in  Administrative  Deposits during a
reporting  period are included in the payments shown for NSP Settlements  during
the period.  At June 30,  2001,  approximately  $115  million of  Administrative
Deposits  previously  made by Owens Corning had not been finally  distributed to
claimants  ("Undistributed   Administrative  Deposits")  and,  accordingly,  are
reflected in Owens  Corning's  consolidated  balance sheet as restricted  assets
(under the caption  "Restricted cash and other - asbestos related") and have not
been subtracted from Owens Corning's reserve for asbestos personal injury claims
(discussed  below).  At this time,  Owens  Corning is unable to predict what the
treatment of funds held in Undistributed  Administrative  Deposits will be under
the terms of any plan or plans of reorganization.





<PAGE>


                                     - 27 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)  (continued)

Owens  Corning  notes  that  its  Undistributed  Administrative  Deposits  (and,
correspondingly, Owens Corning's reserve for asbestos personal injury claims) at
June 30, 2001,  reflect a reduction of $49 million from the amounts  reported at
December 31, 2000. The reduction is attributable to information  received during
2001 from the holders of Administrative  Deposits concerning  distributions from
such Deposits prior to the Petition Date.

All  amounts  discussed  above  are  before  tax and  application  of  insurance
recoveries.

Tax Legislation
---------------

On April 4, 2001, the United States House of Representatives introduced proposed
legislation  (HR 1412,  also known as the Asbestos  Tax Fairness  Act) to exempt
income  earned  by  qualifying   asbestos-related  settlement  funds,  including
qualifying trusts  established under Section 524(g) of the Bankruptcy Code, from
federal  income tax. The exemption  from income tax would benefit the Fibreboard
Settlement Trust (described  below) by having the effect of enlarging the corpus
of the trust through tax-free income accumulation.  In addition, the legislation
would allow  asbestos  defendants to carry-back  net operating  losses  ("NOLs")
created  by  asbestos  payments  to the years in which the  products  containing
asbestos were produced or distributed  (and to each subsequent year) in order to
obtain a refund of federal  income taxes paid in those  periods.  In the case of
Owens  Corning,  this would  entitle the Company to  carry-back  its NOLs to the
early 1950s. The bill has strong  bipartisan  support in the form of 72 original
cosponsors,  including  a  majority  of the  members of the House Ways and Means
Committee.

On June 14, 2001, a companion  bill  identical to HR 1412 was  introduced in the
United States Senate (S 1048). This bill also has strong bipartisan support.

Despite the  foregoing  developments,  there can be no  assurance  that any such
legislation  will be ultimately  enacted.  Moreover,  as a result of the Filing,
there is uncertainty regarding the impact of the proposed tax legislation on the
Debtors' respective estates.

Other Asbestos-Related Litigation
---------------------------------

As  previously  reported,  the Company  believes  that it has spent  significant
amounts to resolve  claims of asbestos  claimants  whose injuries were caused or
exacerbated  by cigarette  smoking.  Owens Corning and  Fibreboard  are pursuing
litigation  against  tobacco  companies  (discussed  below) to obtain payment of
monetary damages (including punitive damages) for payments made by Owens Corning
and Fibreboard to asbestos  claimants who developed  smoking  related  diseases.
There  can be no  assurance  that  any  such  litigation  will go to trial or be
successful.

In October 1998,  the Circuit Court for Jefferson  County,  Mississippi  granted
leave to file an amended  complaint in an existing action to add claims by Owens
Corning  against  seven tobacco  companies  and several  other tobacco  industry
defendants.  On June 17, 2001, the Jefferson  court entered an order  dismissing
Owens Corning's case in response to the defendants'  motion for summary judgment
on the basis that Owens  Corning's  injuries  were  indirect and thus too remote
under  Mississippi  law to allow  recovery.  The  Company  plans to appeal  such
dismissal.


<PAGE>


                                     - 28 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)  (continued)

In addition to the  Mississippi  lawsuit,  a lawsuit brought in December 1997 by
Owens  Corning  and  Fibreboard  is pending in the  Superior  Court for  Alameda
County,  California  against  the  same  tobacco  companies.  No  trial  date is
currently  set for this action.  The Company is uncertain  about what effect the
dismissal order entered in the  Mississippi  lawsuit will have on the California
action.  The Company  anticipates,  however,  that the defendants will challenge
Owens Corning's and Fibreboard's right to proceed in the California action based
upon the Mississippi result.

Insurance
---------

As of June 30, 2001, Owens Corning's financial statements reflect $59 million in
unexhausted insurance coverage (net of deductibles and self-insured  retentions)
under its liability  insurance  policies  applicable to asbestos personal injury
claims. This amount represented unconfirmed potential non-products coverage with
excess level  insurance  carriers,  as to which Owens  Corning had estimated its
probable  recoveries.  Late in the second quarter of 2001, Owens Corning entered
into a settlement  agreement with one of such  carriers,  subject to approval of
the Bankruptcy  Court.  The Court approved such settlement in July. As a result,
during the third  quarter of 2001,  the carrier  will fund $55  million  into an
escrow account to be released in conjunction with  implementation of an approved
plan of  reorganization,  and the  Company's  recorded  insurance  asset will be
reduced.

Owens  Corning  also has a  significant  amount of other  unconfirmed  potential
non-products  coverage  with excess level  carriers.  Owens  Corning is actively
pursuing non-products  insurance recoveries under these policies. The amount and
timing of  recoveries  from excess  level  policies  will  depend on  subsequent
negotiations and/or proceedings.

Reserve
-------

Owens  Corning  estimates  a  reserve  in  accordance  with  generally  accepted
accounting  principles to reflect  asbestos-related  liabilities  that have been
asserted or are probable of  assertion,  in which  liabilities  are probable and
reasonably estimable. This reserve was established initially through a charge to
income in 1991, with additional  charges to income of $1.1 billion in 1996, $1.4
billion in 1998, and $1.0 billion in 2000.

As of June 30, 2001, a reserve of approximately $2.2 billion in respect of Owens
Corning's  asbestos-related  liabilities  was one of the items included in Owens
Corning's  consolidated balance sheet under the category "Liabilities Subject to
Compromise."  For periods prior to the Petition  Date,  these  liabilities  were
reflected  as current  or other  liabilities  (depending  on the period in which
payment was  expected)  under the  category  "Reserve  for  asbestos  litigation
claims."

The approximate balances of the components of the reserve at September 30, 2000
(the ending date of the last reporting period preceding the Petition Date) were:
<TABLE>
<S>                                                                                            <C>
                                                                                        September 30, 2000
                                                                                        ------------------
                                                                                     (In billions of dollars)
NSP backlog                                                                                 $     1.10
Non-NSP backlog                                                                                   0.30
Future Claims                                                                                     0.70
Defense, Claims Processing and Administrative Expenses                                            0.10

</TABLE>


<PAGE>


                                     - 29 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD) (continued)

In connection with this asbestos reserve, Owens Corning notes that:

-    The "NSP backlog"  component  represented  the remaining  estimated cost of
     resolving Initial Claims under the NSP.

-    The "Non-NSP backlog" component represented the estimated cost of resolving
     asbestos  personal  injury claims pending against Owens Corning outside the
     NSP.

-    The "Future claims"  component  represented the estimated cost of resolving
     (i) Future Claims under the NSP and (ii) non-NSP claims subsequently made.

As Owens Corning has discussed in previous public  filings,  any estimate of its
liabilities  for  pending  and  expected  future  asbestos  claims is subject to
considerable  uncertainty  because such  liabilities  are influenced by numerous
variables that are inherently  difficult to predict. As discussed further below,
such uncertainties  significantly increased as a result of the Chapter 11 Cases.
Prior to the Petition Date, such variables  included,  among others, the cost of
resolving  pending  non-NSP  claims;  the disease mix and severity of disease of
pending NSP claims; the number,  severity of disease, and jurisdiction of claims
filed in the future  (especially  the number of mesothelioma  claims);  how many
future claimants were covered by an NSP Agreement;  the extent, if any, to which
individual  claimants  exercised a right to opt out of an NSP  Agreement  and/or
engage  counsel  not  participating  in the NSP;  the  extent,  if any, to which
counsel not bound by an NSP Agreement  undertook the  representation of asbestos
personal injury plaintiffs  against Owens Corning;  the extent, if any, to which
Owens Corning exercised its right to terminate one or more of the NSP Agreements
due to excessive  opt-outs or for other reasons;  and Owens Corning's success in
controlling the costs of resolving future non-NSP claims.

As one  example of the  difficulties  inherent  in  estimating  future  asbestos
claims,  Owens Corning notes that the Manville Personal Injury Settlement Trust,
a  trust   established  to  settle   asbestos   claims  against  Johns  Manville
Corporation,  announced in June 2001 that it was reducing its initial settlement
distributions  by fifty  percent on the basis of the  continued  record  pace of
asbestos  claim  filings and the  prediction of its  consultants  that the trust
might receive 1.5 to 2.5 million additional claims.

The  Chapter 11 Cases  significantly  increase  the  inherent  difficulties  and
uncertainties  involved  in  estimating  the  number and cost of  resolution  of
present and future  asbestos-related  claims  against Owens Corning and may have
the effect of  increasing  the number and ultimate  cost of  resolution  of such
claims, perhaps substantially.  In particular,  the status of the NSP Agreements
and the  treatment of pending and future  claims  thereunder  will depend on the
outcome of negotiations among the various constituencies in the Chapter 11 Cases
and  determinations  by the Bankruptcy Court as to the issues involved,  none of
which can be  predicted  at this time.  The  uncertainties  associated  with the
status of the NSP Agreements and the treatment of claims thereunder  include the
following:

-    It is possible that one or more  constituencies in the Chapter 11 Cases may
     seek to set aside the NSP Agreements on various  grounds.  In any event, it
     is highly uncertain how any plan or plans of reorganization  will treat the


<PAGE>


                                     - 30 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD) (continued)

     various types of NSP claims,  including  without  limitation claims with no
     evidence of  significant  medical  impairment,  or whether such  unimpaired
     claims will be treated as allowed claims thereunder.

-    The settlement values for specified  categories of disease set forth in the
     NSP  Agreements  were  established  by  arms-length  negotiations  with the
     participating  law  firms  in  circumstances   very  different  from  those
     prevailing  in the Chapter 11 Cases.  The  settlement  values  available to
     individual  claimants under the  arrangements to be included in any plan or
     plans of reorganization  may vary  substantially from those contemplated by
     the NSP  Agreements.  Because Owens  Corning's  estimate of  liabilities in
     respect of non-NSP claims assumed  payment of settlement  values similar to
     those contained in the NSP Agreements,  such estimate is subject to similar
     uncertainty.

Additional uncertainties raised by the Chapter 11 Cases include the following:

-    As a result of the  Filing,  all of the  holders of  pre-petition  asbestos
     claims against Owens Corning or Fibreboard  will be required to file proofs
     of claim in the form and manner  prescribed by the  Bankruptcy  Court.  The
     filing of a proof of claim will be a precondition to any pre-petition claim
     being  considered  for payment as an allowed claim.  Moreover,  the Filing,
     including the  significant  publicity  associated with the Chapter 11 Cases
     and notices required by the Bankruptcy Code that must be given to creditors
     and other  parties in interest,  has  significantly  increased the inherent
     difficulties and  uncertainties  involved in estimating the number and cost
     of resolution of not only  pre-petition  claims but also additional  claims
     that may be  asserted  in the course of the  Chapter 11 Cases.  Among other
     things, it is not possible to predict at this time how many proofs of claim
     will be timely  filed,  how many  proofs of claim  will  represent  allowed
     claims, or the aggregate value of such allowed claims.


-    Owens Corning  anticipates that the number and estimated aggregate value of
     allowed  future  claims  will be  determined  as a result  of  negotiations
     involving a legal representative for the class of future asbestos claimants
     and the other interested constituencies, or if necessary, by the Bankruptcy
     Court.  It is not possible to predict the outcome of such  negotiations  at
     this time. In connection with such  negotiations,  it is anticipated that a
     number of interested  constituencies,  including the representatives of the
     pre-petition   and  future  asbestos   claimants  and  other   pre-petition
     creditors,  will develop  analyses of liability for both  pre-petition  and
     future  asbestos  claims.  Owens Corning and  Fibreboard  will also prepare
     analyses  for  use in the  negotiation  process.  Such  analyses  are  also
     required  in  connection  with  the  establishment,  as part of the plan of
     reorganization,  of a Section  524(g)  trust for the  benefit  of  asbestos
     claimants.  These  analyses could vary  substantially  from one another and
     from the amounts of Owens  Corning's and  Fibreboard's  existing  reserves.
     Such analyses will be prepared  solely for use in the negotiation of a plan
     of reorganization  and will not involve the same type of estimation process
     required in connection with the preparation of financial  statements  under
     generally accepted accounting principles.


Ultimately,  Owens  Corning's (and  Fibreboard's)  total  liability for asbestos
claims  will be  determined  after a lengthy  period  of  negotiations  and,  if
necessary,  by the  Bankruptcy  Court  following the bar date for  submission of
proofs of claim,  taking  into  account  numerous  factors  not present in Owens
Corning's pre-petition environment. Such factors include the claims of competing


<PAGE>


                                     - 31 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)  (continued)

creditor groups as to the  appropriate  treatment of their allowed claims in the
plan or plans of reorganization,  the size of the total asbestos liability,  the
total number of present  asbestos  claims allowed and the total amount of future
asbestos claims allowed.

At June 30, 2001,  as a result of the Filing and the  uncertainties  referred to
above,   the   approximate   balances  of  the  components  of  Owens  Corning's
asbestos-related reserve were:
<TABLE>
<S>                                                                                         <C>
                                                                                          Balance
                                                                                          -------
                                                                                  (In billions of dollars)
Unpaid Final Settlements (NSP and other)                                                 $    0.70
Other Pending and Future Claims                                                               1.50
</TABLE>


In connection with this asbestos reserve, Owens Corning notes that:

-    The  "Unpaid  Final  Settlements"   component   represented  the  remaining
     estimated  cost for all asbestos  personal  injury claims  pending  against
     Owens Corning which were subject to final  settlement  agreements for which
     releases from claimants were obtained, and under which all other conditions
     to settlement had been satisfied, as of the Petition Date.

-    The "Other Pending and Future Claims"  component  represented the estimated
     cost of resolving (i) asbestos personal injury claims pending against Owens
     Corning which were subject to resolution under NSP Agreements but for which
     releases were not obtained from claimants  prior to the Petition Date; (ii)
     all other asbestos  personal  injury claims  pending  against Owens Corning
     which  were not  subject  to any  settlement  agreement;  and (iii)  future
     asbestos  personal  injury  claims  against  Owens  Corning  made after the
     Petition Date.

Owens Corning will continue to review its asbestos  reserve on a periodic  basis
and make such  adjustments as may be appropriate.  However,  it is possible that
Owens  Corning  will not be in a position  to  conclude  that a revision  to the
reserve is appropriate until significant developments occur during the course of
the Chapter 11 Cases, including resolution of the uncertainties described above.
Any such revision  could,  however,  be material to the  Company's  consolidated
financial position and results of operations in any given period.

ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING)

Prior to 1972, Fibreboard  manufactured insulation products containing asbestos.
Fibreboard  has since been named as  defendant  in many  thousands  of  personal
injury claims for injuries  allegedly  caused by asbestos  exposure.  Fibreboard
received approximately 21,600 asbestos personal injury claims during 2000. Prior
to the Petition Date, the vast majority of Fibreboard  asbestos  personal injury
claims were in the  process of being  resolved  through  the NSP,  as  described
below. As a result of the Filing,  all pre-petition  asbestos claims and pending
litigation  against the Debtors  were  automatically  stayed (see Note 1). Owens
Corning  expects  that all  pending and future  asbestos  claims  against  Owens
Corning  and  Fibreboard  will  be  resolved  pursuant  to a plan  or  plans  of


<PAGE>


                                     - 32 -

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

12.   CONTINGENT LIABILITIES

ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING) (continued)

reorganization.  Owens  Corning  is unable  to  determine  at this time  whether
asbestos-related  claims asserted against Fibreboard will be treated in the same
manner as those asserted against Owens Corning in any such plan or plans.

National Settlement Program
---------------------------

Fibreboard  is a  participant  in the NSP and is a party  to the NSP  Agreements
discussed in Item A. The NSP Agreements became effective as to Fibreboard in the
fourth quarter of 1999, when the Insurance  Settlement  (discussed below) became
effective.  The NSP Agreements  settled asbestos personal injury claims that had
been filed against Fibreboard by participating  plaintiffs' law firms and claims
that could have been  filed  against  Fibreboard  by such  firms  following  the
lifting,  in the third quarter of 1999,  of an  injunction  which had barred the
filing of asbestos personal injury claims against Fibreboard.

As of the Petition Date, the NSP covered  approximately  212,000  Initial Claims
against Fibreboard,  approximately 116,000 of which had satisfied all conditions
to final settlement, including receipt of executed releases, or other resolution
as Final NSP Settlements at an average cost per claim of  approximately  $7,500.
As of the Petition Date,  approximately 61,000 of such Final NSP Settlements had
been paid in full or otherwise resolved and approximately  55,000 were unpaid in
whole or in part.  As of such date,  the  remaining  balance  payable  under NSP
Agreements  in  connection   with  these  unpaid  Final  NSP   Settlements   was
approximately $357 million.  The NSP Agreements also provided for the resolution
of Future  Claims  against  Fibreboard  through  the  administrative  processing
arrangement  described  in Item A.  Through the Petition  Date,  Fibreboard  had
received approximately 3,800 Future Claims under the NSP.

At this time,  Owens  Corning  is unable to predict  the manner in which the NSP
Agreements and the resolution of Fibreboard  claims  thereunder  will be treated
under the terms of any plan or plans of reorganization.

Non-NSP Claims
--------------

As of the Petition Date,  approximately  15,000 asbestos  personal injury claims
were pending against  Fibreboard outside the NSP. This compares to approximately
1,000  such  claims  pending on  December  31,  1999.  Fibreboard  resolved  (by
settlement or otherwise)  approximately  2,300 asbestos  personal  injury claims
outside the NSP during  2000 prior to the  Petition  Date at an average  cost of
resolution  of  approximately  $45,000 per claim.  Generally,  these claims were
settled as they were  scheduled  for trial,  and they  typically  involved  more
serious injuries and diseases.  Accordingly, Owens Corning does not believe that
such average costs of resolution are  representative of the value of the non-NSP
claims then pending against Fibreboard.

At this time,  Owens Corning is unable to predict the manner in which Fibreboard
non-NSP  claims  will be  treated  under  the  terms  of any  plan or  plans  of
reorganization.

Insurance Settlement
--------------------

In  1993,  Fibreboard  and two of its  insurers,  Continental  Casualty  Company


<PAGE>


                                     - 33 -

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

12.   CONTINGENT LIABILITIES

ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING) (continued)

("Continental")  and Pacific  Indemnity  Company  ("Pacific"),  entered into the
Insurance  Settlement.  The Insurance  Settlement became effective in the fourth
quarter of 1999, is final and is not subject to appeal.

Since 1993,  Continental and Pacific paid,  either directly or through an escrow
account funded by them, for  substantially  all  settlements of asbestos  claims
reached  prior to the  initiation of the NSP.  Under the  Insurance  Settlement,
Continental  and Pacific  provided  $1,873  million during the fourth quarter of
1999 to fund costs of  resolving  pending and future  asbestos  claims,  whether
under the NSP, in the tort system, or otherwise.

As of June 30, 2001, the Insurance Settlement funds were held in and invested by
the  Fibreboard  Settlement  Trust.  As of that  date,  $1,136  million  (net of
outstanding  payables)  was held in the  Fibreboard  Settlement  Trust  and $135
million  was  held  in  Undistributed  Administrative  Deposits  in  respect  of
Fibreboard  claims.  On an  ongoing  basis,  the  funds  held in the  Fibreboard
Settlement  Trust  will be  subject to  investment  earnings/losses  and will be
reduced if and as applied to  satisfy  asbestos-related  liabilities.  Under the
terms of the Fibreboard Settlement Trust, any of such assets that ultimately are
not used to fund Fibreboard's  asbestos-related  liabilities must be distributed
to  charity.  It will not be known  whether  any such  assets  will  remain  for
distribution until the conclusion of the Chapter 11 Cases.

Funds held in the Fibreboard  Settlement  Trust and  Fibreboard's  Undistributed
Administrative  Deposits are reflected on Owens Corning's  consolidated  balance
sheet as restricted  assets.  At June 30, 2001,  these assets were  reflected as
non-current   assets,   denoted   "Restricted  cash,   securities  and  other  -
Fibreboard."  See Note 13 for additional  information  concerning the Fibreboard
Settlement Trust.

Owens  Corning notes that  Fibreboard's  Undistributed  Administrative  Deposits
(and, correspondingly,  Fibreboard's reserve for asbestos personal injury claims
(discussed below)) at June 30, 2001, reflect a reduction of $35 million from the
amounts  reported at  December  31,  2000.  The  reduction  is  attributable  to
information  received  during 2001 from the holders of  Administrative  Deposits
concerning distributions from such Deposits prior to the Petition Date.

At this time,  Owens  Corning is unable to predict  what the  treatment of funds
held in the  Fibreboard  Settlement  Trust and in  Undistributed  Administrative
Deposits in respect of Fibreboard  claims will be under the terms of any plan or
plans of reorganization.

Asbestos-Related Payments
-------------------------

As a result of the Filing, Fibreboard has not made any asbestos-related payments
since the  Petition  Date.  During  2000  (prior to the  Petition  Date),  gross
payments  for  asbestos-related  claims  against  Fibreboard,  all of which were
paid/reimbursed  by the  Fibreboard  Settlement  Trust,  fell  within four major
categories, as follows:
<TABLE>
<S>                                                                                           <C>
                                                                                  (In millions of dollars)
                                                                               2000 (through October 4, 2000)
                                                                               ------------------------------
     Pre-NSP Settlements                                                                   $     29
     NSP Settlements                                                                            705
     Non-NSP Settlements                                                                         41
     Defense, Claims Processing and  Administrative Expenses                                     45
                                                                                          ---------

                                                                                            $   820
</TABLE>

<PAGE>


                                     - 34 -

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

12.   CONTINGENT LIABILITIES

ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING) (continued)

The payments for NSP  Settlements  include  Administrative  Deposits  during the
reporting period in respect of Fibreboard claims.

Reserve
-------

Owens Corning  estimates a reserve for  Fibreboard in accordance  with generally
accepted accounting principles to reflect  asbestos-related  liabilities.  As of
June 30,  2001,  a reserve of  approximately  $1.25  billion in respect of these
liabilities  was one of the  items  included  in  Owens  Corning's  consolidated
balance  sheet  under the  category  "Liabilities  Subject to  Compromise."  For
periods  prior to the  Petition  Date,  they were  reflected as current or other
liabilities  (depending on the period in which  payment was expected)  under the
category   "Asbestos-related   liabilities  -  Fibreboard."   These  liabilities
(including any reserve for the  charitable  remainder) are always at least equal
to  the  funds  held  in  the  Fibreboard   Settlement  Trust  and  Fibreboard's
Undistributed  Administrative  Deposits since, under the terms of the Trust, the
funds held in the Trust must be expended either in connection with  Fibreboard's
asbestos-related  liabilities,  or to satisfy the obligation  under the Trust to
distribute  to  charity  the  assets,  if  any,  remaining  in the  Trust  after
satisfaction of all such liabilities (see Note 13).

The  approximate  balances of the components of the Fibreboard  asbestos-related
reserve at  September  30, 2000 (the ending  date of the last  reporting  period
preceding the Petition Date) were:
<TABLE>
<S>                                                                                           <C>
                                                                                     September 30, 2000
                                                                                     ------------------
                                                                                  (In billions of dollars)

  NSP backlog                                                                             $     0.80
  Non-NSP backlog                                                                               0.10
  Future Claims                                                                                 0.30
  Defense, Claims Processing and Administrative Expenses                                        0.05
</TABLE>


In connection with this asbestos reserve, Owens Corning notes that:

-    The "NSP backlog"  component  represented  the remaining  estimated cost of
     resolving Initial Claims against Fibreboard under the NSP.

-    The "Non-NSP backlog" component represented the estimated cost of resolving
     asbestos personal injury claims pending against Fibreboard outside the NSP.

-    The "Future claims"  component  represented the estimated cost of resolving
     (i) Future Claims against  Fibreboard under the NSP and (ii) non-NSP claims
     subsequently made against Fibreboard.

As noted  in Item A above as to Owens  Corning,  the  estimate  of  Fibreboard's
liabilities  for  pending  and  expected  future  asbestos  claims is subject to
considerable  uncertainty  because such  liabilities  are influenced by numerous
variables  that are  inherently  difficult  to predict,  and such  uncertainties
significantly  increased as a result of the Filing  including those set forth in
Item A above. In addition,  as noted above, at this time Owens Corning is unable
to predict what the treatment of funds held in the Fibreboard  Settlement  Trust


<PAGE>


                                     - 35 -

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

12.   CONTINGENT LIABILITIES

ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING) (continued)

and in  Undistributed  Administrative  Deposits in respect of Fibreboard  claims
will be under the terms of any plan or plans of reorganization.

At June 30, 2001,  as a result of the Filing and the  uncertainties  referred to
above,   the   approximate   balances  of  the   components  of  the  Fibreboard
asbestos-related reserve were:
<TABLE>
<S>                                                                                       <C>
                                                                                        Balance
                                                                                        -------
                                                                                (In billions of dollars)
Unpaid Final Settlements (NSP and other)                                                 $0.40
Other Pending and Future Claims                                                           0.85
</TABLE>


In connection with this asbestos reserve, Owens Corning notes that:

-    The  "Unpaid  Final  Settlements"   component   represented  the  remaining
     estimated  cost for all asbestos  personal  injury claims  pending  against
     Fibreboard  which were  subject to final  settlement  agreements  for which
     releases from claimants were obtained, and under which all other conditions
     to settlement had been satisfied, as of the Petition Date.

-    The "Other Pending and Future Claims"  component  represented the estimated
     cost of resolving  (i) asbestos  personal  injury  claims  pending  against
     Fibreboard  which were subject to resolution  under NSP  Agreements but for
     which releases were not obtained from claimants prior to the Petition Date;
     (ii) all other asbestos  personal injury claims pending against  Fibreboard
     which  were not  subject  to any  settlement  agreement;  and (iii)  future
     asbestos personal injury claims against  Fibreboard made after the Petition
     Date.

Owens  Corning  will  continue  to review  Fibreboard's  asbestos  reserve  on a
periodic basis and make such adjustments as may be appropriate.  However,  it is
possible  that  Owens  Corning  will not be in a  position  to  conclude  that a
revision to the reserve is  appropriate  until  significant  developments  occur
during  the  course  of  the  Chapter  11  Cases,  including  resolution  of the
uncertainties  described above. Any such revision could, however, be material to
the Company's  consolidated  financial position and results of operations in any
given period.

Non-Asbestos Liabilities
------------------------

Securities Litigation
---------------------

On or about  April  30,  2001,  certain  of the  Company's  current  and  former
directors  and  officers,  as  well  as  certain  underwriters,  were  named  as
defendants in a lawsuit captioned John Hancock Life Insurance Company, et al. v.
Goldman,  Sachs & Co.,  et al.  in the  United  States  District  Court  for the
District of  Massachusetts.  An amended complaint was filed by the plaintiffs on
or about  July 5, 2001.  Owens  Corning  is not named in the  lawsuit.  The suit
purports to be a  securities  class  action on behalf of  purchasers  of certain
unsecured  debt  securities of Owens Corning in offerings  occurring on or about
April 30, 1998 and July 23, 1998.  The complaint  alleges that the  registration
statements  pursuant  to which the  offerings  were made  contained  untrue  and
misleading statements of material fact and omitted to state material facts which

<PAGE>


                                     - 36 -

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

12.   CONTINGENT LIABILITIES

ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING) (continued)

were  required  to be  stated  therein  and  which  were  necessary  to make the
statements therein not misleading,  in violation of sections 11, 12(a)(2) and 15
of the Securities Act of 1933. The amended complaint seeks an unspecified amount
of damages or, where appropriate,  rescission of the plaintiffs' purchases.  The
Company believes that the claim is without merit.

Tax Claim
---------

Owens Corning's federal income tax returns typically are audited by the Internal
Revenue  Service  ("IRS") in multi-year  audit  cycles.  The audit for the years
1992-1995  was  completed  in  late  2000.  Due  to the  Filing,  the  IRS  also
accelerated  and completed the audit of the years 1996-1999 by March of 2001. As
the result of these audits and  unresolved  issues from prior audit cycles,  the
IRS is  asserting  claims for  approximately  $390  million in income taxes plus
interest of approximately  $175 million.  In accordance with generally  accepted
accounting  principles,  Owens  Corning  maintains  tax  reserves to cover audit
issues.  While Owens Corning believes that the existing reserves are appropriate
in light of the audit issues  involved,  its defenses,  its prior  experience in
resolving audit issues, and its ability to realize certain challenged deductions
in subsequent tax returns if the IRS were successful,  there can be no assurance
that such reserves will be sufficient. Owens Corning will continue to review its
tax  reserves  on  a  periodic  basis  and  make  such  adjustments  as  may  be
appropriate.  Any such revision could be material to the Company's  consolidated
financial position and results of operations in any given period.

13.   FIBREBOARD SETTLEMENT TRUST

Under  the  Insurance  Settlement  described  in Note  12,  two of  Fibreboard's
insurers  provided  $1.873 billion during the fourth quarter of 1999 to fund the
costs of resolving  pending and future asbestos claims. As of June 30, 2001, the
Insurance  Settlement  funds  were  held  in  and  invested  by  the  Fibreboard
Settlement Trust (the "Trust"). On an ongoing basis, the funds held in the Trust
will be  subject  to  investment  earnings/losses  and will be reduced if and as
applied to satisfy Fibreboard asbestos-related  liabilities.  Under the terms of
the Trust,  any Trust assets that  ultimately are not used to fund  Fibreboard's
asbestos-related liabilities must be distributed to charity.

The Trust is a qualified settlement fund for federal income tax purposes, and is
taxed  separately from Owens Corning on its net taxable income,  after deduction
for related  administrative  expenses.  While there can be no assurance that the
proposed  Asbestos  Tax  Fairness  Bill  discussed  in Note 12,  Item A, will be
enacted  by  Congress,  such  legislation  would  benefit  the Trust  during the
pendency of the Chapter 11 proceedings by eliminating the tax on income, thereby
enlarging the corpus of the Trust through tax-free income accumulation.

At this  time,  Owens  Corning is unable to predict  what the  treatment  of the
Fibreboard  Settlement  Trust  will be under  the  terms of any plan or plans of
reorganization.

General Accounting Treatment
----------------------------

The  assets  of the  Trust  are  comprised  of cash  and  marketable  securities


<PAGE>


                                     - 37 -

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

13.   FIBREBOARD SETTLEMENT TRUST (continued)

(collectively,   the  "Trust  Assets")  and,  with  Fibreboard's   Undistributed
Administrative  Deposits,  are reflected on Owens Corning's consolidated balance
sheet as restricted  assets.  At June 30, 2001,  these assets were  reflected as
non-current   assets,   denoted   "Restricted  cash,   securities  and  other  -
Fibreboard." Owens Corning estimates a reserve for Fibreboard in accordance with
generally accepted accounting principles to reflect asbestos-related liabilities
(see Note 12, Part B). As of June 30, 2001,  these  liabilities  were one of the
items included in Owens Corning's  consolidated balance sheet under the category
"Liabilities  Subject to  Compromise."  For periods prior to the Petition  Date,
they were reflected as current or other liabilities  (depending on the period in
which payment was expected) under the category  "Asbestos-related  liabilities -
Fibreboard."  These  liabilities  (including  any  reserve  for  the  charitable
remainder)  are  always  at  least  equal to the  funds  held in the  Trust  and
Fibreboard's Undistributed Administrative Deposits since, under the terms of the
Trust,  the funds held in the Trust must be expended  either in connection  with
Fibreboard's  asbestos-related  liabilities,  or to satisfy the obligation under
the Trust to  distribute to charity the assets,  if any,  remaining in the Trust
after  satisfaction  of all such  liabilities.  It will not be known whether any
such assets will remain for distribution  until the conclusion of the Chapter 11
Cases.  At  June  30,  2001,  the  Consolidated   Financial  Statements  reflect
Fibreboard's  asbestos-related  liabilities at $1.215  billion,  with a residual
obligation to charity of $56 million.

For accounting  purposes,  the Trust Assets are classified  from time to time as
"available for sale" or "held to maturity" and are reported in the  Consolidated
Financial  Statements in accordance  with SFAS No. 115,  "Accounting for Certain
Investments in Debt and Equity Securities."  Accordingly,  marketable securities
classified  as  available  for  sale  are  recorded  at fair  market  value  and
marketable  securities  designated as held to maturity are recorded at amortized
cost.

Any unrealized  increase/decrease  in fair market value is reflected as a change
in the carrying amount of the asset on the consolidated balance sheet as well as
an increase/decrease to other comprehensive income within stockholders'  equity,
net of tax.  The  residual  liability  that  may be paid to  charity  will  also
increase/decrease,  with a  related  decrease/increase  to  other  comprehensive
income within stockholders' equity, net of tax.

Any earnings and realized  gains/losses  on the Trust Assets are reflected as an
increase/decrease  in the  carrying  amount of such  assets on the  consolidated
balance sheet as well as other  income/expense on the consolidated  statement of
income.

The residual liability that may be paid to charity will also  increase/decrease,
with related other expense/ income on the consolidated statement of income. Cost
for purposes of computing realized gains/losses is determined using the specific
identification method.

Results for the Period Ending June 30, 2001
-------------------------------------------

Trust Assets generated  interest/dividend  earnings of approximately $13 million
and $18 million,  respectively,  during the second quarter of 2001 and 2000 ($29
million and $38  million,  respectively,  for the first six months of the year),
which have been recorded as an increase in the carrying  amount of the assets on
Owens  Corning's   consolidated  balance  sheet  and  as  other  income  on  the
Consolidated  Statement of Income (Loss). This income,  however, has been offset
by an equal  charge  to other  expense,  which  represents  an  increase  in the
residual liability to charity.


<PAGE>


                                     - 38 -

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

13.   FIBREBOARD SETTLEMENT TRUST (continued)

As a result of the  Filing,  there were no  payments  from the Trust  during the
first half of 2001.  Payments  for  asbestos  litigation  claims  from the Trust
during the second  quarter of 2000 were  approximately  $249 million,  and total
$634 million for the year.  As the result of the sale of  securities,  the Trust
realized an  immaterial  gain during the second  quarter of 2001,  compared to a
gain of less than $1 million  during the same  period of 2000 (for the first six
months of such years,  the Trust realized gains of  approximately $4 million and
$1 million, respectively).  Realized gains or losses from the sale of securities
are reflected on the Company's financial statements in the same manner as actual
returns on Trust Assets, described above.

At June 30, 2001 and 2000, the fair market value adjustment for those securities
designated as available for sale resulted in an unrealized loss of approximately
$1 million and an unrealized  gain of  approximately  $1 million,  respectively.
These amounts have been reflected in the Company's consolidated balance sheet as
a change to the carrying amount of the asset and to other comprehensive  income.
These amounts have also been  reflected as a change to the liability to charity,
with a corresponding effect to other comprehensive income.

At June 30, 2001, the fair value of Trust Assets was $1.271  billion,  which was
comprised of $1.154 billion of marketable securities, $18 million of outstanding
payables and $135 million of restricted  cash,  which  represents  undistributed
administrative deposits.

The amortized cost, gross unrealized  holding gains and losses and fair value of
the investment  securities  available for sale at June 30, 2001 and December 31,
2000 are as follows:
<TABLE>
<S>                                  <C>                   <C>                    <C>                   <C>
                                                                    June 30, 2001
                                                                    -------------
                                  Amortized         Gross Unrealized       Gross Unrealized
                                     Cost                 Gain                   Loss              Fair Value
                                     ----                 ----                   ----              ----------
                                                              (In millions of dollars)

Corporate Bonds                   $        23         $           -           $          -        $        23
Corporate Notes                            30                     -                      -                 30
Municipal Bonds                         1,088                     -                     (1)             1,087
Mutual Funds                                4                     -                      -                  4
US Government Bonds                        10                     -                      -                 10
                                  -----------         -------------           ------------        -----------

Total                              $    1,155         $           -            $        (1)        $    1,154
</TABLE>


<TABLE>
<S>                                          <C>               <C>                     <C>                <C>
                                                                    December 31, 2000
                                                                    -----------------
                                         Amortized        Gross Unrealized      Gross Unrealized
                                            Cost                Gain                  Loss            Fair Value
                                            ----                ----                  ----            ----------
                                                                 (In millions of dollars)

Corporate Bonds                          $    148         $       -                $      -           $    148
Corporate Notes                               449                 1                       -                450
Municipal Bonds                               284                 -                       -                284
Mutual Funds                                  116                 -                       -                116
Time Deposits                                  37                 -                       -                 37
US Government Bonds                            57                 -                       -                 57
                                       ----------        ----------               ---------         ----------

Total                                     $ 1,091         $       1                $      -            $ 1,092
                                          =======         =========                ========            =======
</TABLE>


<PAGE>


                                     - 39 -

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

13.   FIBREBOARD SETTLEMENT TRUST (continued)

Maturities of investment securities classified as available for sale at June 30,
2001 and December  31, 2000 by  contractual  maturity are shown below.  Expected
maturities will differ from contractual  maturities  because  borrowers may have
the right to recall or prepay  obligations  with or without  call or  prepayment
penalties.
<TABLE>
<S>                                                      <C>                <C>             <C>           <C>
                                                              June 30, 2001                 December 31, 2000
                                                              -------------                 -----------------
                                                       Amortized                        Amortized
                                                         Cost          Fair Value          Cost        Fair Value
                                                         ----          ----------          ----        ----------
                                                                        (In millions of dollars)

Due within one year                                    $      34        $      34        $     656      $     656
Due after one year through five years                        542              542                2              2
Due after five years through ten years                       237              237               51             51
Due after ten years                                          342              341              382            383
                                                       ---------        ---------        ---------      ---------
Total                                                   $  1,155         $  1,154         $  1,091       $  1,092
</TABLE>



<PAGE>


                                     - 40 -

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

13.   FIBREBOARD SETTLEMENT TRUST (continued)

The table below summarizes Trust and  Administrative  Deposits  activity for the
first half of 2001:
<TABLE>
<S>                             <C>              <C>       <C>            <C>            <C>       <C>           <c>          <c>
                                              Interest  Unrealized      Net Sales      Realized
                               Balance          and        Gain/           of            Gain/                              Balance
                               12/31/00      Dividends    (Loss)       Securities       (Loss)       Other     Payments     6/30/01
                               --------      ---------    ------       ----------       ------       -----     --------     -------
 Assets
 ------
 Cash                          $     12       $      -      $   -       $    (30)    $       -     $       -    $    -     $    (18)
 Restricted Cash                    170              -          -              -             -           (35)        -          135
 Marketable Securities:
   Available for Sale             1,092             29         (1)            30             4             -         -        1,154
                              ---------       --------      ------      --------     ---------     ---------    ------    ---------

 Total Assets                 $   1,274        $    29      $  (1)      $       -     $      4      $    (35)   $    -     $  1,271
                              =========       ========      ======      =========     ========      =========   ======    =========

 Liabilities
 -----------
 Asbestos Litigation Claims     $ 1,250       $      -      $    -      $       -    $       -      $    (35)   $    -     $  1,215
 Charity                             24             29          (1)            -             4             -         -           56
                              ---------       --------      -------     --------     ---------     ---------    ------    ---------

 Total  Liabilities             $ 1,274       $     29      $  (1)      $       -    $       4      $    (35)   $    -     $  1,271
                              =========       ========      ======      =========    =========      =========   ======    =========
</TABLE>



<PAGE>


                                     - 41 -

ITEM 2.       MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS

(All per share information in Item 2 is on a diluted basis.)

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

GENERAL

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

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


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


The Debtors filed for relief under Chapter 11 to address the growing  demands on
Owens  Corning's  cash flow  resulting from its  multi-billion  dollar  asbestos
liability.  This  liability  is  discussed  in greater  detail in Note 12 to the
Consolidated Financial Statements.

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

As a consequence of the Filing,  all pending  litigation  against the Debtors is
stayed  automatically  by section 362 of the Bankruptcy Code and, absent further
order of the  Bankruptcy  Court,  no party  may take any  action to  recover  on
pre-petition claims against the Debtors. In addition, pursuant to section 365 of
the  Bankruptcy  Code, the Debtors may reject or assume  pre-petition  executory


<PAGE>


                                     - 42 -

ITEM 2.       MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS (continued)

contracts  and unexpired  leases,  and other parties to contracts or leases that
are rejected may assert rejection  damages claims as permitted by the Bankruptcy
Code.

Two creditors'  committees,  one representing  asbestos  claimants and the other
representing unsecured creditors,  have been appointed as official committees in
the Chapter 11 Cases and, in accordance  with the  provisions of the  Bankruptcy
Code,  will  have the right to be heard on all  matters  that  come  before  the
Bankruptcy Court. Owens Corning expects that the appointed committees,  together
with a legal  representative  of  future  asbestos  claimants  appointed  by the
Bankruptcy  Court,  will play  important  roles in the  Chapter 11 Cases and the
negotiation of the terms of any plan or plans of reorganization.

Owens Corning  anticipates that  substantially all liabilities of the Debtors as
of the date of the Filing will be resolved under one or more Chapter 11 plans of
reorganization to be proposed and voted on in the Chapter 11 Cases in accordance
with the provisions of the Bankruptcy Code.  Although the Debtors intend to file
and seek  confirmation of such a plan or plans,  there can be no assurance as to
when the Debtors will file such a plan or plans, or that such plan or plans will
be confirmed by the Bankruptcy Court and consummated.

As provided by the  Bankruptcy  Code,  the Debtors  initially  had the exclusive
right to propose a plan of  reorganization  for 120 days  following the Petition
Date, until February 2, 2001. On January 17, 2001, the Bankruptcy Court extended
such  exclusivity  period  until  August 2, 2001,  and  similarly  extended  the
Debtors' exclusive rights to solicit  acceptances of a reorganization  plan from
April 3, 2001 to October  3,  2001.  The  Debtors  have filed a motion  with the
Bankruptcy Court  requesting a further  extension of these  exclusivity  periods
through February 2, 2002 and April 3, 2002,  respectively,  without prejudice to
their  right to seek  further  extensions.  Pursuant  to the local  rules of the
Bankruptcy Court, the existing  exclusivity  periods are automatically  extended
until the  Bankruptcy  Court acts on such motion.  If the Debtors fail to file a
plan of  reorganization  prior to the  ultimate  expiration  of the  exclusivity
period,  or if such plan is not accepted by the  requisite  numbers of creditors
and equity  holders  entitled to vote on the plan,  other parties in interest in
the  Chapter  11  Cases  may be  permitted  to  propose  their  own  plan(s)  of
reorganization for the Debtors.

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

Owens Corning is unable to predict at this time what  treatment will be accorded
under  any such  reorganization  plan or plans  to  inter-company  indebtedness,
licenses,   transfers  of  goods  and  services  and  other   inter-company  and
intra-company  arrangements,  transactions and  relationships  that were entered

<PAGE>


                                     - 43 -

ITEM 2.       MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS (continued)

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

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

Pursuant to the Bankruptcy  Code,  schedules have been filed by the Debtors with
the Bankruptcy  Court setting forth the assets and liabilities of the Debtors as
of the date of the Filing.  Differences  between amounts recorded by the Debtors
and claims filed by creditors will be  investigated  and resolved as part of the
proceedings  in the Chapter 11 Cases.  No bar dates have been set for the filing
of proofs of claim  against the Debtors.  Accordingly,  the ultimate  number and
allowed amount of such claims are not presently known.

RESULTS OF OPERATIONS

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

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

Owens  Corning's   strategy  also  includes  the  divestiture  of  non-strategic
businesses and the realignment of existing businesses. This strategy resulted in
the sale of our  Engineered  Pipe Business  during the first quarter of 2001. In
2000,  it included the sale of the Falcon Foam  business in the U.S.  during the
first  quarter and the sale of our Building  Materials  business in Europe to an


<PAGE>


                                     - 44 -

ITEM 2.       MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS (continued)

unconsolidated joint venture in the second quarter.  Please see Notes 2 and 5 to
the Consolidated Financial Statements.  During the second quarter of 2001, Owens
Corning  signed a Letter of Intent  with our joint  venture  partner  in Alcopor
Owens  Corning to sell our  remaining  40% interest in the joint  venture.  Also
during this time, the Bankruptcy Court approved the proposed  divestiture.  This
sale is scheduled to be completed in the third quarter of 2001.

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

As a result,  during  late 2000 we  implemented  the first  phase of a strategic
restructuring  program,  which  continues into 2001. The specific  objectives of
this program are discussed in  "Restructuring  of Operations  and Other Charges"
below and in Note 4 to the Consolidated Financial Statements.

During the first half of 2001,  the overall  economy  remained  weak.  The North
American  housing  market did  reflect  favorable  seasonably  adjusted  housing
starts.  However,  the significantly  softer environment  experienced during the
second half of 2000 created  excess  inventories in the  distribution  channels.
During the first half of 2001, these  inventories have slowly been depleted thus
resulting in decreased demand for building materials during the first six months
of 2001.

Quarter and Six Months Ended June 30, 2001
------------------------------------------

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

Net sales for the quarter ended June 30, 2001 were $1.239 billion,  down 4% from
the second  quarter 2000 level of $1.295  billion.  The decrease is due to price
and volume declines in North American Building Materials businesses,  as well as
the sale of the Falcon Foam and European Building Materials businesses. Adjusted
for the disposition of these  businesses,  sales in 2001 declined 2% compared to
the second quarter of 2000. In the Building  Materials Systems  business,  sales
during the second quarter of 2001 reflect volume and price decreases in the U.S.
insulation  market and price decreases in U.S.  roofing markets offset partially
by volume  increases in roofing,  compared to the second quarter of 2000. In the
Composite Systems business,  sales reflect price increases in composites markets
during the second  quarter of 2001 offset by volume  decreases  primarily in the
U.S.  On  a  consolidated  basis,  the  currency  translation  impact  of  sales
denominated in foreign  currencies was unfavorable  during the second quarter of
2001  compared  to the second  quarter of 2000.  Please see Notes 2 and 5 to the
Consolidated Financial Statements.

Sales outside the U.S.  represented 15% of total sales during the second quarter
of 2001,  compared to 18% during the second  quarter of 2000. The slight decline
in non-U.S.  sales is primarily due to volume decreases in 2001  attributable to
the  disposition of Building  Materials  Europe as well as decreases in Building
Materials and Composite volumes in the Canadian market.

For the quarter ended June 30, 2001,  Owens  Corning  reported net income of $29
million,  or $.49 per share,  compared to a net loss of $425 million, or $(7.76)
per share,  for the  quarter  ended June 30,  2000.  On a pre-tax  basis,  Owens
Corning  reported income from operations of $57 million in the second quarter of
2001. When adjusted for $17 million in costs of restructuring  and other charges


<PAGE>


                                     - 45 -

ITEM 2.       MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS (continued)

and $17 million in Chapter 11 related expenditures,  Owens Corning generated $91
million  in income  from  operations  compared  to $152  million  for the second
quarter of 2000  (adjusted  for  asbestos-related  charges).  Net income for the
second  quarter 2001  reflects the price and volume  decreases  described  above
compounded  by  continued  increase in energy  costs  recognized  as well as the
impact of the  Company's  review of the cost  structures  as described  below in
"restructuring  and other  charges".  Cost of borrowed  funds  during the second
quarter of 2001 was $4 million,  $47 million lower than the second  quarter 2000
level,  due to the  cessation  of  interest  (totaling  $46  million  during the
quarter,  and $96 million  year to date  (please see Note 1 to the  Consolidated
Financial Statements)) on most debt as a result of the Chapter 11 Filing.

Marketing  and  administrative  expenses  were $128  million  during  the second
quarter of 2001,  compared to $146  million in the second  quarter of 2000.  The
decrease is primarily  attributable to recognized  benefits  associated with the
restructuring  actions  taken  in the  fourth  quarter  of  2000  and  continued
effective cost-cutting measures implemented throughout the first half of 2001.

Net sales for the six months ended June 30, 2001 were $2.306 billion,  down from
the $2.552 billion  reported for the first six months of 2000.  Price and volume
decreases across North American  Building  Materials markets and the disposition
of Building  Materials Europe resulted in the sales decline.  The net income for
the six months ended June 30, 2001 was $19 million,  or $.32 per share  compared
to a net loss of $377 million, or $(6.90) per share for the same period in 2000.

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

In the Building Materials Systems segment,  sales decreased 4% to $1.009 billion
in the second quarter of 2001 compared to the second quarter of 2000.  Excluding
the sales  related  to the  divestiture  of Falcon  Foam and  Building  Material
Europe,  sales were down 2%. This  downturn  in sales  resulted  primarily  from
decreased pricing and volume in U.S. and Canadian insulation products, partially
offset by volume increases in U.S.  residential  roofing  products.  Income from
operations was $69 million during the second quarter of 2001, down approximately
47% from the same period in 2000.  The decline in income from  operations in the
second quarter of 2001 reflects the combined  effects of price decreases and raw
material cost increases.

Composite Systems
-----------------

In the Composite Systems segment, sales were down 3%, to $230 million during the
second  quarter of 2001,  compared  to the second  quarter of 2000 due to volume
decreases partially offset by increases in price. Income from operations was $43
million in the second quarter of 2001, compared to $31 million in the prior-year
period as a result of  increased  gross margin due to price  increases,  process
improvements  and  reduction of  manufacturing  costs.  Please see Note 1 to the
Consolidated Financial Statements.

Restructuring of Operations and Other Charges
---------------------------------------------

During the second  quarter of 2001,  the Company  continued  to  experience  the
impact of a soft  overall  economy,  resulting  in lower  volume  demand in both
Building  Materials  Systems and  Composite  Systems.  Due to this,  the Company
continues  to review its total cost  structures.  This review led to the Company
recording  a  $17  million   pretax  charge  to  income  from   operations   for
restructuring  and other  charges.  This  charge was  comprised  of a $7 million
pretax restructure charge and $10 million in pretax other charges.

The $7 million restructure charge has been classified as a separate component of
operating expenses on the Company's Consolidated Statement of Income (Loss). The


<PAGE>


                                     - 46 -

ITEM 2.       MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS (continued)

components of the  restructuring  charge included $5 million for the divestiture
of non-strategic  businesses and facilities,  which consisted mainly of non-cash
asset write-downs to fair value and exit cost liabilities.  Also included in the
restructure  charge was a $2 million charge for severance costs  associated with
the elimination of approximately 25 positions, primarily in the U.K. The primary
groups affected included manufacturing and administrative  personnel. As of June
30, 2001, approximately $1 million has been paid and charged against the reserve
for personnel reductions.

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

During the first  quarter of 2001,  the Company  recorded  $42 million in pretax
charges for  restructuring and other charges as a result of the continued impact
of a soft overall  economy.  The $42 million pretax charge was comprised of a $9
million pretax  restructure  charge, $2 million pretax loss from assets held for
sale, and $31 million in other pretax charges. The $9 million pretax restructure
charge   represented   severance  costs   associated  with  the  elimination  of
approximately  130 positions,  primarily in the U.S. The primary groups affected
included  manufacturing  and  administrative  personnel.  As of June  30,  2001,
approximately  $2 million  has been paid and  charged  against  the  reserve for
personnel  reductions.  The $2 million  pretax  loss from  assets  held for sale
represented the results of operations for the Company's  investments in its Pipe
joint ventures and  subsidiaries on a held-for-sale  basis for the first quarter
of 2001. This sale was completed in February 2001,  subject to final  regulatory
approval (see Note 5). This  approval was obtained in June,  2001, at which time
the cash proceeds were released from escrow.

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

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

The  $197  million  of other  charges  was  comprised  of $95  million  of asset
impairments,  $6 million charge for a settlement loss associated with one of our
U.S.  pension plans,  and $96 million of charges  focused on improving  business
operations. The $95 million of asset impairments included: 1) $54 million charge
to  write-down  the  Company's  investment  and related  assets in Alcopor Owens
Corning,  a building  materials joint venture in Europe, to estimated fair value
on a held for sale basis; 2) $12 million to write-down the Company's  investment
in the majority owned,  consolidated  venture in South Africa,  on a held-in-use

<PAGE>


                                     - 47 -

ITEM 2.      MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS (continued)

basis based upon management's  analysis of current and expected future financial
results and  constraints  on the  Company's  ability to fund future  significant
capital  investments  in this  subsidiary  as a  consequence  of the  bankruptcy
filing.  The $12 million  charge was offset by a $6 million credit to record the
minority  owner's  share,   recorded  in  the  minority  interest  line  on  the
Consolidated  Statement of Income  (Loss);  3) $8 million to  write-down to fair
value the investments in its Pipe joint ventures and  subsidiaries on a held for
sale basis. The sale of a majority of the investments and subsidiaries  held for
sale was completed in February 2001, with final approval obtained in June, 2001,
at which  time cash  proceeds  were  released  from  escrow;  4) $10  million to
write-down the equity investment in ImproveNet, due to a significant decrease in
market  value  which  management  believes is other than  temporary;  and 5) $11
million  associated with asset  impairments  within our Cultured Stone and other
businesses.

The $96 million  charge  consisted of $43 million to write-down  inventory  made
obsolete by changes in the Company's manufacturing and marketing strategies; $19
million to  write-down  equipment  and  receivables;  $15  million  to  increase
warranty  reserves  due to general  changes in estimates  associated  with these
reserves;  and various  other  charges  totaling  $19 million  recorded as other
operating expenses. As of June 30, 2001, approximately $12 million has been paid
and charged against the reserve for personnel reductions.

During 1997 and 1998,  the Company  recorded  pretax charges of $386 million for
restructuring  and other  actions to implement a program to close  manufacturing
facilities, enhance manufacturing productivity and reduce overhead. Of the total
pretax charge of $386 million,  $143 million was recorded in the fourth  quarter
of 1997 and the remaining $243 million was recorded during 1998.

The $386 million pretax charge was comprised of a $185 million charge associated
with the  restructuring  of the Company's  business  segments and a $201 million
charge  associated  with asset  impairments,  including  investments  in certain
affiliates.  The components of the restructuring charge include $115 million for
personnel   reductions;   $68  million  for  the  divestiture  of  non-strategic
businesses  and  facilities,  of which $52 million  represented  non-cash  asset
revaluations and $16 million  represented exit cost  liabilities,  primarily for
leased  warehouse and office  facilities  that were vacated;  and $2 million for
other  actions.  The  divestiture  of  non-strategic  businesses  and facilities
included the closure of the Candiac, Quebec manufacturing  facility.  During the
second  quarter of 1999,  the Candiac  manufacturing  facility was  re-opened in
order to meet market demands.  As of June 30, 2001,  approximately  $104 million
has been  paid  and  charged  against  the  reserve  for  personnel  reductions,
representing the elimination of approximately  2,450 employees,  the majority of
whose  severance  payments  were  made over the  course  of 1998 and  1999,  and
approximately $13 million has been charged against exit cost liabilities.

Due to timing of events,  we anticipate that additional  restructuring and other
charges will be recorded during 2001.

LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS

Cash flow from  operations was $103 million for the quarter ended June 30, 2001,
compared to $242  million for the quarter  ended June 30,  2000.  Cash flow from
operations  for the quarter ended June 2000 was  favorably  impacted by proceeds
from  insurance for asbestos  claims of $335 million  offset by payments of $141
million.  As a result of the Filing,  cash  payments to asbestos  claimants  are
stayed.

Inventories  at June 30,  2001  were $485  million,  $16  million  more than the
December  31, 2000  level,  due largely to the  seasonal  build of  inventories.


<PAGE>


                                     - 48 -

ITEM 2.       MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS (continued)

Receivables at June 30, 2001 were $618 million, a $130 million increase over the
December  31, 2000 level  attributable  to the seasonal  increase in sales.  The
increase  in  accounts  payable and  accrued  liabilities  from $491  million at
December  31, 2000 to $599 million at June 30, 2001,  reflects  typical  payment
patterns  during the first half of the year as well as  improvements  in payment
terms adversely affected by the Filing.

At June 30, 2001,  Owens  Corning's net working capital was $948 million and our
current  ratio was 2.33,  compared to $955  million and 2.57,  respectively,  at
December 31, 2000 and $292 million and 1.13, respectively, at June 30, 2000. The
change in working  capital and current  ratio at June 30, 2001  compared to June
30, 2000 is the direct result of the Filing,  which reclassified  liabilities of
Debtors  outstanding  at the  date of the  Filing  to  "Liabilities  Subject  to
Compromise." Please see Note 1 to the Consolidated Financial Statements.

At June 30, 2001,  we had $2.8 billion of borrowings  subject to compromise  and
$74 million of other long-term  borrowings (of which $67 million were in default
as a  consequence  of the  Filing  and  therefore  classified  as current on the
Consolidated Balance Sheet).  Long-term borrowings  outstanding at June 30, 2000
were $ 2.773 billion.

At June 30, 2001, the Company had $520 million of Cash and Cash  Equivalents (of
which  approximately $42 million is subject to an administrative  freeze pending
the resolution of certain  alleged  set-off  rights which,  upon approval of the
Bankruptcy  Court,  may  be  exercised  by  certain  pre-petition  lenders).  In
addition,  in connection  with the Filing,  the Debtors  obtained a $500 million
debtor-in-possession  credit  facility  from a group of  lenders  led by Bank of
America,  N.A. (the "DIP  Financing").  At June 30, 2001,  this facility had not
been utilized except for  approximately $25 million of standby letters of credit
and similar uses.

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

Owens  Corning  maintains  pension  plans for certain of its salaried and hourly
employees.  Based on current  actuarial  projections  performed  by  independent
actuaries in the course of their annual review of the Company's U.S. plans,  the
Company  anticipates  making up to $300 million in  contributions  to such plans
over the next 3 years. While the timing of these  contributions has not yet been
determined,  it is possible that a significant  portion of the contributions may
be made during the third quarter of 2001. The Company believes it has sufficient
liquidity to make these contributions regardless of timing.

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


<PAGE>


                                     - 49 -

ITEM 2.       MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS (continued)

Capital spending for property, plant and equipment,  excluding acquisitions, was
$41 million in the second quarter of 2001.  Owens Corning  anticipates that 2001
capital spending,  exclusive of acquisitions and investments in affiliates, will
be  approximately  $300 million.  We expect that funding for these  expenditures
will be from our operations and the credit availability from the DIP Financing.

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

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

Effective  January 1, 2002,  we will adopt  Statements  of Financial  Accounting
Standards  No.  141,  Business  Combinations,  and No. 142,  Goodwill  and Other
Intangible Assets.  The first of these statements require business  combinations
initiated  after June 30, 2001 to be accounted  for using the  purchase  method.
With  the  adoption  of  Statement  142,   Goodwill  is  no  longer  subject  to
amortization  over its estimated useful life,  rather it is subject to an annual
assessment for impairment charge.  During the third and fourth quarters of 2001,
we will review the impairment analysis set forth in Statement 142 and assess the
impact of adoption.

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

Owens Corning has been deemed by the Environmental Protection Agency (EPA) to be
a  Potentially  Responsible  Party (PRP) with respect to certain sites under the
Comprehensive   Environmental   Response,   Compensation   and   Liability   Act
(Superfund).  We have also been deemed a PRP under  similar state or local laws.
In other instances,  other PRPs have brought suits or claims against us as a PRP
for  contribution  under such federal,  state or local laws. At June 30, 2001, a
total of 44 such PRP  designations  remained  unresolved by the Company.  We are
also involved with  environmental  investigation  or  remediation at a number of
other sites at which Owens Corning has not been designated a PRP.

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

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


<PAGE>


                                     - 50 -

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Owens Corning is exposed to the impact of changes in foreign  currency  exchange
rates and  interest  rates in the  normal  course of  business.  We manage  such
exposures  through  the  use  of  certain  financial  and  derivative  financial
instruments.  Our  objective  with these  instruments  is to reduce  exposure to
fluctuations  in  earnings  and cash flows  associated  with  changes in foreign
currency exchange rates and interest rates.

We enter into various  forward  contracts and options,  which change in value as
foreign  currency  exchange  rates  change,  to preserve the carrying  amount of
foreign  currency-denominated  assets,  liabilities,  commitments,  and  certain
anticipated  foreign  currency  transactions  and  earnings.  We also enter into
certain  currency  and  interest  rate swaps to protect the  carrying  amount of
investments in certain foreign subsidiaries, to hedge the principal and interest
payments of certain  debt  instruments,  and to manage  exposure to fixed versus
floating interest rates.

Our policy is to use foreign  currency and interest  rate  derivative  financial
instruments only to the extent necessary to manage exposures as described above.
We do not enter into foreign  currency or interest rate derivative  transactions
for speculative purposes.

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

The amounts presented below represent the maximum potential one-day loss in fair
value that we would expect from  adverse  changes in foreign  currency  exchange
rates or interest rates assuming a 95% confidence level:
<TABLE>
<S>                                                          <C>                     <C>
                                                           June 30,              December 31,
               Risk Category                                 2001                    2000
               -------------                                 ----                    ----
                                                                (In millions of dollars)
               Foreign currency                               $1                    $1
               Interest rate                                  $8                    $8
</TABLE>


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






<PAGE>


                                     - 51 -

                           PART II. OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

See Note 12, Contingent Liabilities, to Owens Corning's Consolidated Financial
Statements above, which is incorporated here by reference.

On October 5, 2000 (the "Petition Date"), Owens Corning and the 17 United States
subsidiaries  listed  below  (collectively,   the  "Debtors"),  filed  voluntary
petitions  for relief  (the  "Filing")  under  Chapter  11 of the United  States
Bankruptcy Code (the  "Bankruptcy  Code") in the United States  Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court"). The Debtors are currently
operating  their   businesses  as   debtors-in-possession   in  accordance  with
provisions  of the  Bankruptcy  Code.  The  Chapter  11  cases  of  the  Debtors
(collectively, the "Chapter 11 Cases") are being jointly administered under Case
No.  00-3837 (JKF).  The subsidiary  Debtors that filed Chapter 11 petitions for
relief are:
<TABLE>
<S>                                                  <C>

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


The Company  anticipates that substantially all liabilities of the Debtors as of
the date of the Filing  will be resolved  under one or more  Chapter 11 plans of
reorganization to be proposed and voted on in the Chapter 11 Cases in accordance
with the provisions of the Bankruptcy Code. As a consequence of the Filing,  all
pending litigation against the Debtors is stayed automatically by section 362 of
the Bankruptcy Code and, absent further order of the Bankruptcy  Court, no party
may take action to recover on  pre-petition  claims against the Debtors.  Please
see Note 1 to the Consolidated Financial Statements.

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

As a  consequence  of the Filing and the  impact of  certain  provisions  of the
Company's DIP Financing and in a cash management order entered by the Bankruptcy
Court, the Company and its subsidiaries are now subject to certain restrictions,
including  on their  ability to pay  dividends  and to  transfer  cash and other
assets to each other and to their affiliates. See Note 1, Voluntary Petition for
Relief Under Chapter 11, to Owens Corning's  Consolidated  Financial  Statements
above.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

Substantially  all of the Company's  pre-petition  debt is now in default due to
the Filing. See Note 1, Voluntary Petition for Relief Under Chapter 11, to Owens
Corning's  Consolidated  Financial Statements above. As described in Note 1, the
Consolidated  Financial Statements present the Debtors'  pre-petition debt under
the caption  "Liabilities  Subject to Compromise."  This includes debt under the
Pre-Petition Credit Facility and approximately $1.4 billion of other outstanding
debt. As required by SOP 90-7,  the Company,  beginning in the fourth quarter of
2000, recorded the Debtors' pre-petition debt instruments at the allowed amount,
as defined by SOP 90-7.


<PAGE>


                                     - 52 -

                     PART II. OTHER INFORMATION (continued)

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

No matter was submitted to a vote of security  holders  during the quarter ended
June 30, 2001.

ITEM 5.       OTHER INFORMATION

Owens Corning does not elect to report any information under this item.

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.

         See Exhibit Index below, which is incorporated here by reference.

(b)      Reports on Form 8-K.

         The Company  did not file any  reports on Form 8-K during the quarter
         ended June 30, 2001.






<PAGE>

                                     - 53 -

                                   SIGNATURES

Pursuant to the  requirements  of the  Securities  Exchange  Act of 1934,  Owens
Corning  has  duly  caused  this  report  to be  signed  on  its  behalf  by the
undersigned, thereunto duly authorized.


                                             OWENS CORNING

                                             Registrant

Date:   August 10, 2001                      By:  /s/  Michael H. Thaman
    ----------------------------                ------------------------------
                                             Michael H. Thaman
                                             Senior Vice President and
                                             Chief Financial Officer
                                             (as duly authorized officer)



Date:   August 10, 2001                      By:  /s/  Deyonne F. Epperson
    ----------------------------                ------------------------------
                                             Deyonne F. Epperson
                                             Vice President and Controller

<PAGE>


                                     - 54 -

                                  EXHIBIT INDEX

Exhibit
Number                     Document Description
-------                    --------------------

 (3)          Articles of Incorporation and By-Laws.

              (i)  Certificate of Incorporation of Owens Corning, as amended
                   (incorporated herein by reference to Exhibit (3) to Owens
                   Corning's quarterly report on Form 10-Q (File No. 1-3660) for
                   the quarter ended March 31, 1997).

              (ii) By-Laws of Owens Corning, as amended (incorporated herein by
                   reference to Exhibit (3) to Owens Corning's annual report on
                   Form 10-K (File No. 1-3660) for the year 1999).

(11)          Statement re Computation of Per Share Earnings (filed herewith).

(99)          Additional Exhibits

              Subsidiaries of Owens Corning, as amended (filed herewith).

              Standstill and Waiver Agreement among Owens Corning, certain
              affiliates of Owens Corning, Credit Suisse First Boston, and
              certain bank lenders (filed herewith).

<PAGE>