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, 2000

                           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, 2000

                                   55,446,027


<PAGE>


                                      - 2 -

                          PART I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS

                         OWENS CORNING AND SUBSIDIARIES
                        CONSOLIDATED STATEMENT OF INCOME
                                   (unaudited)

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

                                                                         Quarter Ended                  Six Months Ended
                                                                            June 30,                        June 30,
                                                                      2000           1999           2000             1999
                                                                      ----           ----           ----             ----
                                                                           (In millions of dollars, except share data)

NET SALES                                                            $  2,552     $   2,440        $ 1,295         $  1,310
COST OF SALES                                                             996           987          1,968            1,858
                                                                     --------     ---------       --------        ---------
     Gross margin                                                         299           323            584              582
                                                                     --------     ---------       --------        ---------

OPERATING EXPENSES
     Marketing and administrative expenses                                146           152            295              288
     Science and technology expenses                                       14            14             28               28
     Provision for asbestos litigation claims (Note 11)                   790              -           790                -
     Other (Note 4)                                                       (13)            2              3                1
                                                                     --------     ---------       --------        ---------

        Total operating expenses                                          937           168          1,116              317
                                                                     --------     ---------       --------        ---------

INCOME (LOSS) FROM OPERATIONS                                            (638)          155           (532)             265

OTHER
  Cost of borrowed funds                                                   51            39             94               72
  Other (Note 12)                                                           -             -               -               -
                                                                     --------     ---------       ---------       ---------


INCOME (LOSS) BEFORE PROVISION (CREDIT)
  FOR INCOME TAXES                                                       (689)          116           (626)             193

Provision (credit) for income taxes                                      (267)           41           (254)              68
                                                                     ---------    ---------       ---------       ---------

INCOME (LOSS) BEFORE MINORITY INTEREST
  AND EQUITY IN NET INCOME (LOSS) OF
  AFFILIATES                                                             (422)           75           (372)             125

Minority Interest                                                          (2)            (1)           (4)              (3)

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

NET INCOME (LOSS)                                                     $  (425)    $      76       $   (377)       $     120
                                                                      ========    =========       =========       =========

NET INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per share                                     $ (7.76)     $   1.41       $  (6.90)      $     2.22
                                                                      --------     --------       ---------      ----------
Diluted net income (loss) per share                                   $ (7.76)     $   1.31       $  (6.90)      $     2.08
                                                                      --------     --------       ---------      ----------

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

   Basic                                                                 54.8         54.1            54.7            54.0
   Diluted                                                               54.8         59.7            54.7            59.5

</TABLE>


               The accompanying notes are an integral part of this statement.

<PAGE>


                                      - 3 -

                         OWENS CORNING AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                   (unaudited)

<TABLE>
<S>                                                                     <C>                       <C>                  <C>
                                                                   June 30,              December 31,             June 30,
                                                                     2000                    1999                   1999
                                                                     ----                    ----                   ----
                                                                                    (In millions of dollars)
ASSETS
------

CURRENT
     Cash and cash equivalents                                   $      497            $         70             $       26
     Restricted cash (Note 11)                                          250                       -                      -
     Restricted cash and securities - Fibreboard -
       current portion (Note 12)                                        525                     900                      -
     Receivables                                                        519                     358                    611
     Inventories                                                        549                     466                    502
     Insurance for asbestos litigation claims -
        current portion (Note 11)                                         -                      25                    150
     Deferred income taxes                                              182                     185                    366
     Income tax receivable                                                4                      61                      3
     Other current assets                                                26                      23                     24
                                                                 ----------             -----------             ----------

           Total current                                              2,552                   2,088                  1,682
                                                                 ----------             -----------             ----------

OTHER
     Insurance for asbestos litigation claims
      (Note 11)                                                          93                     205                    228
     Restricted cash and securities - Fibreboard
       (Note 12)                                                        874                     938                      -
     Asbestos costs to be reimbursed - Fibreboard                         -                       -                     62
     Deferred income taxes                                              827                     547                    493
     Goodwill (Note 4)                                                  654                     743                    750
     Investments in affiliates                                           90                      65                     51
     Other noncurrent assets                                            259                     208                    243
                                                                  ---------             -----------             ----------

           Total other                                                2,797                   2,706                  1,827
                                                                  ---------             -----------             ----------

PLANT AND EQUIPMENT, at cost

Land                                                                     58                      70                     70
Buildings and leasehold improvements                                    732                     725                    810
Machinery and equipment                                               2,504                   2,639                  2,502
Construction in progress                                                278                     258                    244
                                                                  ---------             -----------             ----------
                                                                      3,572                   3,692                  3,626

  Less - accumulated depreciation                                    (1,933)                 (1,992)                (1,944)
                                                                  ---------             -----------             ----------

      Net plant and equipment                                         1,639                   1,700                  1,682
                                                                  ---------             -----------             ----------

TOTAL ASSETS                                                      $   6,988             $     6,494             $    5,191
                                                                  =========             ===========             ==========
</TABLE>


         The accompanying notes are an integral part of this statement.

<PAGE>


                                      - 4 -

                         OWENS CORNING AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEET (continued)
                                   (unaudited)

<TABLE>
<S>                                                                              <C>                   <C>              <C>
                                                                            June 30,          December 31,         June 30,
                                                                              2000               1999                1999
                                                                              ----               ----                ----
LIABILITIES AND STOCKHOLDERS' EQUITY                                                     (In millions of dollars)
------------------------------------

CURRENT
     Accounts payable and accrued liabilities                              $      692        $      839            $      708
     Reserve for asbestos litigation claims - current
       portion (Note 11)                                                          925               950                 1,050
     Asbestos-related liabilities - Fibreboard - current
       portion (Note 12)                                                          525               900                     -
     Short-term debt                                                               43                68                   121
     Long-term debt - current portion                                              75               159                    27
                                                                            ---------        ----------            ----------

        Total current                                                           2,260             2,916                 1,906
                                                                            ---------        ----------            ----------

LONG-TERM DEBT                                                                  2,698             1,764                 2,068
                                                                            ---------        ----------            ----------

OTHER
  Reserve for asbestos litigation claims (Note 11)                              1,482               820                 1,210
  Asbestos-related liabilities - Fibreboard  (Note 12)                            874               938                    67
  Other employee benefits liability                                               320               318                   325
  Pension plan liability                                                           37                42                    52
  Other                                                                           352               339                   345
                                                                            ---------        ----------            ----------

        Total other                                                             3,065             2,457                 1,999
                                                                            ---------        ----------            ----------

COMPANY OBLIGATED SECURITIES OF
  ENTITIES HOLDING SOLELY PARENT
  DEBENTURES                                                                      195               194                   195
                                                                            ---------        ----------            ----------

MINORITY INTEREST                                                                  48                44                    45
                                                                            ---------        ----------            ----------

STOCKHOLDERS' EQUITY
  Common stock                                                                    701               695                   698
  Deficit                                                                      (1,894)           (1,510)               (1,650)
  Accumulated other comprehensive income                                          (74)              (51)                  (48)
  Other                                                                           (11)              (15)                  (22)
                                                                           ----------        ----------            ----------

        Total stockholders' equity                                             (1,278)             (881)               (1,022)
                                                                           ----------        ----------            ----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  $   6,988         $   6,494            $    5,191
                                                                            =========         ==========           ==========
</TABLE>




         The accompanying notes are an integral part of this statement.

<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,
                                                             2000            1999           2000             1999
                                                             ----            ----           ----             ----
                                                                            (In millions of dollars)

NET CASH FLOW FROM OPERATIONS

  Net income (loss)                                        $   (425)      $       76      $   (377)    $     120
  Reconciliation of net cash provided by
     operating activities
        Noncash items:
          Provision for asbestos litigation claims              790                -           790             -
          Provision for depreciation and
            amortization                                         45               50            93           101
          Provision (credit) for deferred income
            taxes                                              (292)              16          (288)           39
          Other                                                 (19)               -           (32)            5
        (Increase) decrease in receivables                      (33)             (56)         (214)         (142)
        (Increase) decrease in inventories                      (63)              (7)         (120)          (60)
        Increase (decrease) in accounts payable
          and accrued liabilities                                20              (45)          (60)         (226)
        (Increase) decrease in income tax
           receivable                                            12               24            62           104
        (Increase) decrease in restricted cash                    6                -          (250)            -
        Proceeds from insurance for asbestos
          litigation claims, excluding Fibreboard
          (Note 11)                                             335               13           347            32
        Payments for asbestos litigation claims,
          excluding Fibreboard (Note 11)                       (141)            (175)         (364)         (370)
        Other                                                     7                5           (24)           (6)
                                                           --------       ----------      --------    ----------

            Net cash flow from operations                  $    242       $      (99)     $   (437)   $     (403)
                                                           --------       ----------      --------    ----------

NET CASH FLOW FROM INVESTING

        Additions to plant and equipment                  $     (97)      $      (59)     $   (165)   $      (99)
        Investment in subsidiaries, net of cash
          acquired                                                -                -            (4)            -
        Proceeds from the sale of  affiliate or
          business (Note 4)                                     143                -           193             -
        Other (Note 4)                                          (34)             (16)          (36)           (27)
                                                          ---------       ----------     ---------    -----------

            Net cash flow from investing                  $      12       $      (75)    $     (12)   $      (126)
                                                          ---------       -----------    ----------   -----------

</TABLE>


         The accompanying notes are an integral part of this statement.

<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,
                                                             2000             1999            2000              1999
                                                             ----             ----            ----              ----
                                                                             (In millions of dollars)

NET CASH FLOW FROM FINANCING

  Net additions to long-term credit facilities            $   300         $     170        $     955          $     261
  Other additions to long-term debt                            22                 1               22                251
  Other reductions to long-term debt                          (72)              (33)             (83)               (33)
  Net increase (decrease) in short-term debt                  (44)               10               (9)                28
  Dividends paid                                               (4)               (4)              (8)                (8)
  Other                                                         -                 3                -                  -
                                                          -------         ---------        ---------          ---------

      Net cash flow from financing                        $   202         $     147        $     877          $     499
                                                          -------         ---------        ---------          ---------

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

Net increase (decrease) in cash and cash
  equivalents                                                 456               (25)             427                (28)

Cash and cash equivalents at beginning of
  period                                                       41                51               70                 54
                                                          -------         ---------         --------          ---------

Cash and cash equivalents at end of period                $   497         $      26         $    497          $      26
                                                          =======         =========         ========          =========

</TABLE>



         The accompanying notes are an integral part of this statement.

<PAGE>


                                      - 7 -

                         OWENS CORNING AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)
<TABLE>
<S>                                                          <C>             <C>            <C>              <C>

1.  SEGMENT DATA
                                                                Quarter Ended                   Six Months Ended
                                                                   June 30,                         June 30,
                                                             2000            1999           2000             1999
                                                             ----            ----           ----             ----
                                                                            (In millions of dollars)
NET SALES

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

  Building Materials
    United States                                           $    942      $       946    $   1,834       $  1,760
    Europe                                                        31               58           88            121
    Canada and other                                              62               60          117            105
                                                            --------      -----------    ---------       --------

       Total Building Materials                                1,035            1,064        2,039          1,986
                                                            --------      -----------    ---------       --------

   Composite Materials
     United States                                               157              150          316            278
     Europe                                                       87               86          171            168
     Canada and other                                             47               40           91             69
                                                            --------      -----------    ---------       --------

       Total Composite Materials                                 291              276          578            515
                                                            --------       ----------    ---------       --------

       Total Reportable Operating
         Segments                                            $ 1,326       $    1,340     $  2,617       $  2,501

Reconciliation to Consolidated Net Sales
----------------------------------------
  Composite Materials U.S. Sales to
    Building Materials U.S.                                      (31)             (30)         (65)           (61)
                                                             -------       ----------    ---------      --------

       Net sales                                             $ 1,295       $    1,310     $  2,552       $  2,440
                                                             =======       ==========     ========       ========

External Customer Sales by Geographic
-------------------------------------
  Region
--------
  United States                                              $ 1,068       $    1,066     $  2,085       $  1,977
  Europe                                                         118              144          259            289
  Canada and other                                               109              100          208            174
                                                             -------       ----------     --------       --------

       Net Sales                                             $ 1,295       $    1,310     $  2,552       $  2,440
                                                             =======       ==========     ========       ========
</TABLE>

<PAGE>


                                      - 8 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (unaudited)
<TABLE>
<S>                                                           <C>               <C>              <C>               <C>


1.  SEGMENT DATA (continued)
                                                                  Quarter Ended                     Six Months Ended
                                                                     June 30,                           June 30,
                                                              2000              1999             2000              1999
                                                              ----              ----             ----              ----
                                                                              (In millions of dollars)
INCOME (LOSS) FROM OPERATIONS

Reportable Operating Segments
-----------------------------
  Building Materials
    United States                                         $     103         $     118         $    174          $     188
    Europe                                                        -                 1                1                  4
    Canada and other                                              9                12               13                 16
                                                          ---------         ---------         --------          ---------
       Total Building Materials                                 112               131              188                208
                                                          ---------         ---------         --------          ---------

   Composite Materials
     United States                                               40                33               88                 61
     Europe                                                       4                (4)               3                 (4)
     Canada and other                                             5                 4               12                  7
                                                          ---------         ---------         --------          ---------
       Total Composite Materials                                 49                33              103                 64
                                                          ---------         ---------         --------          ---------
       Total Reportable Operating Segments                $     161         $     164         $    291          $     272
                                                          ---------         ---------         --------          ---------

Geographic Regions
------------------
    United States                                         $     143         $     151         $    262          $     249
    Europe                                                        4                (3)               4                  -
    Canada and other                                             14                16               25                 23
                                                          ---------         ---------         --------          ---------
        Total Reportable Operating Segments               $     161         $     164         $    291          $     272
                                                          =========         =========         ========          =========
Reconciliation to Consolidated Income
-------------------------------------
  Before Provision for Income Taxes
  ---------------------------------

   Provision for asbestos litigation claims                    (790)                -             (790)                 -
   General corporate income (expense)                            (9)               (9)             (33)                (7)
   Cost of borrowed funds                                       (51)              (39)             (94)               (72)
                                                           --------         ---------         --------          ---------
      Consolidated Income (Loss) Before
         Provision (Credit) for Income Taxes               $   (689)        $     116         $   (626)         $     193
                                                           --------         ---------         --------          ---------

</TABLE>

<PAGE>


                                      - 9 -

                         OWENS CORNING AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (unaudited)
2.    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  1999 Annual  Report on Form 10-K, as filed with the
Securities and Exchange Commission.

3.    RESTRUCTURING OF OPERATIONS AND OTHER ACTIONS

During 1997 and 1998,  the Company  recorded  pretax charges of $386 million for
restructuring and other actions to implement the Company's  announced 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,  $16  million  for 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.

The $115 million for personnel reductions represented severance costs associated
with the elimination of  approximately  2,450 positions  worldwide.  The primary
groups affected included manufacturing and administrative  personnel. As of June
2000,  approximately  $103 million has been paid and charged against the reserve
for personnel  reductions.  Charges of approximately  $13 million have been made
against exit cost  liabilities  through June 2000. No adjustments have been made
to the liabilities.

The  following  table   summarizes  the  status  of  the  liabilities  from  the
restructure   program  described  above,   including   cumulative  spending  and
adjustments and the remaining balance as of June 30, 2000:

<TABLE>
<S>                                                        <C>                <C>               <C>
                                                        Beginning            Total             Ending
                                                        Liability           Payments         Liability
                                                        ---------           --------         ---------
(In millions of dollars)

Personnel Costs                                         $   115             $   (103)         $    12
Facility and Business Exit Costs                             16                  (13)               3
Other                                                         2                   (2)               -
                                                        -------             --------          -------

Total                                                   $   133             $   (118)         $    15
                                                        =======             ========          =======
</TABLE>



<PAGE>



                                     - 10 -

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

3.    RESTRUCTURING OF OPERATIONS AND OTHER ACTIONS (continued)

The Company continually evaluates whether events and circumstances have occurred
that  indicate  that  the  carrying  amount  of  certain  long-lived  assets  is
recoverable.  When factors  indicate that a long-lived asset should be evaluated
for  possible  impairment,   the  Company  uses  an  estimate  of  the  expected
undiscounted  cash flows to be generated  by the asset to determine  whether the
carrying amount is recoverable or if 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.

4.    ACQUISITIONS AND DIVESTITURES OF BUSINESSES

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
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 a $32 write-off of goodwill.  This loss was
recorded as other operating  expenses on the  consolidated  statement of income.
During the first  quarter of 2000,  the Company also  realigned its vinyl siding
manufacturing  operations,  resulting  in the closure of its Fair  Bluff,  North
Carolina  manufacturing  plant. This realignment resulted in a $9 million pretax
expense,  all  of  which  was  recorded  as  other  operating  expenses  on  the
consolidated statement of income.

In connection  with a proposal  received from its Korean joint venture  partner,
the  Company  infused  approximately  $29  million of cash into this  venture in
March, 1999. As a result of this investment,  along with additional  investments
by the other  partner,  the Company  increased its  ownership  interest in Owens
Corning  Korea to 70%.  The Company  accounted  for this  transaction  under the
purchase  method of  accounting  whereby  the assets  acquired  and  liabilities
assumed,  including $84 million in debt, have been recorded at their fair values
and  the  results  of  operations  have  been  consolidated  since  the  date of
acquisition.  Prior to that date,  the Company  accounted for this joint venture
under the equity method.


<PAGE>


                                     - 11 -

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

5.     LONG-TERM DEBT

During the first quarter of 1999, the Company issued $250 million of senior debt
securities  ("the  securities") as unsecured  obligations of the Company.  These
securities,  which  mature in 2009,  bear an annual  rate of  interest  of 7.0%,
payable  semiannually.  The proceeds from the issuance of these  securities were
used to  reduce  borrowings  under  the  Company's  long-term  revolving  credit
agreement.

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                          Six Months
                                                          Ended                              Ended
                                                         June 30,                           June 30,
                                                         --------                           --------
                                                  2000             1999            2000           1999
                                                  ----             ----            ----           ----

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

Effective tax rate                                (39%)             35%            (41%)            35%
                                              =======           =======         =======         ======

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



7.    INVENTORIES
<TABLE>
<S>                                                               <C>                      <C>
                                                            June 30, 2000            December 31, 1999
                                                            -------------            -----------------
                                                                    (In millions of dollars)
Inventories are summarized as follows:

Finished goods                                               $       413                  $      374
Materials and supplies                                               205                         158
                                                             -----------                  ----------
FIFO inventory                                                       618                         532
Less:  Reduction to LIFO basis                                       (69)                        (66)
                                                             -----------                  ----------
Total Inventory                                              $       549                  $      466
                                                             ===========                  ==========

Approximately  $389  million and $269 million of total  inventories  were valued using the LIFO method at June 30, 2000
and December 31, 1999, respectively.
</TABLE>


<PAGE>


                                     - 12 -

                         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                           Six Months
                                                       Ended                              Ended
                                                     June 30,                            June 30,
                                                     --------                            --------
                                               2000              1999             2000              1999
                                               ----              ----             ----              ----
                                                               (In millions of dollars)

Income taxes                                  $   10             $   2           $  (34)         $   (80)
Cost of borrowed funds                            57                46               99               73
</TABLE>

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

Please refer to Notes 4 and 12 for disclosure of Non-Cash activities.

9.    COMPREHENSIVE INCOME

The Company's comprehensive income for the quarters ended June 30, 2000 and 1999
was a loss of $434 million and income of $76 million,  respectively. For the six
months  ended June 30,  2000 and 1999,  comprehensive  income was a loss of $401
million and income of $109 million,  respectively.  The Company's  comprehensive
income includes net income, 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 4).


<PAGE>


                                     - 13 -

                         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 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,
                                                2000                 1999                2000               1999
                                                ----                 ----                ----               ----
                                                          (In millions of dollars, except share data)

Net income (loss) used for
  basic earnings per share                  $        (425)       $        76          $     (377)        $      120
Net income (loss) effect of
  assumed conversion of
  preferred securities                                  -                  2                   -                  4
                                            -------------        -----------          ----------         ----------

Net income used for diluted
  earnings per share                        $        (425)       $        78          $     (377)        $      124
                                            ==============       ===========          ==========         ==========

Weighted average number of
  shares outstanding used for
  basic earnings per share
  (thousands)                                      54,793             54,116              54,652             54,011
Deferred awards and stock
  options (thousands)                                   -              1,014                   -                903
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)                                54,793             59,696              54,652             59,480
                                             ============        ===========          ==========          =========
</TABLE>


<PAGE>


                                     - 14 -

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

11.   CONTINGENT LIABILITIES

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

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)

Numerous  claims have been  asserted  against Owens  Corning  alleging  personal
injury 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. The vast
majority of these  claims are being  resolved  through the  National  Settlement
Program described below. As a result of this program, the number of new lawsuits
filed against Owens Corning has been sharply reduced from historical levels, and
compared to other co-defendants in the litigation.

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

Beginning in late 1998,  Owens  Corning has  implemented  a National  Settlement
Program ("NSP") to resolve  personal  injury asbestos claims through  settlement
agreements with individual  plaintiffs' law firms.  The number of  participating
law firms has expanded from approximately 50 when the NSP was established to 117
as of June 30, 2000. The NSP continues to expand.  The NSP is designed to better
manage Owens Corning's  asbestos  liability,  and that of Fibreboard (see Item B
below),  and to help  Owens  Corning  better  predict  the  timing and amount of
indemnity payments for both pending and future claims.

Under the NSP, each participating law firm has agreed to a long-term  settlement
agreement  ("NSP  Agreement")  that  extends  through  at  least  2008.  All NSP
Agreements  provide for the  resolution of asbestos  claims,  including  unfiled
claims,  pending with a participating law firm at the time it enters into an NSP
Agreement ("Initial Claims") and also establishes  procedures and fixed payments
for  resolving   without   litigation  those  claims  that  may  arise  after  a
participating firm enters into an NSP Agreement ("Future Claims") against either
Owens Corning or Fibreboard,  or both. The NSP is designed to allow both holders
of Initial Claims and Future Claims to receive prompt payment without  incurring
the significant  delays and  uncertainties  of litigation,  while enabling Owens
Corning and Fibreboard to manage their  respective  businesses  predictably  and
efficiently.

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

Settlement  amounts for both Initial and Future Claims have been negotiated with
each  participating  firm,  and each firm has  communicated  with its respective
current clients to obtain  authority to settle  individual  claims.  Payments to
each  claimant  may vary based on a number of  factors,  including  the type and
severity of disease, age and occupation. All payments are subject to delivery of
satisfactory  evidence of a qualifying  medical  condition and exposure to Owens
Corning's and/or Fibreboard's  products,  delivery of customary releases by each
claimant, and other conditions. Certain claimants settling non-malignancy claims
with  Owens  Corning  and/or  Fibreboard  are or will be  entitled  to an agreed
pre-determined  amount of additional  compensation  if they later develop a more
severe asbestos-related medical condition.

As to Future Claims,  each  participating  NSP firm has agreed  (consistent with
applicable  legal  requirements)  to recommend to its future  clients,  based on


<PAGE>


                                     - 15 -

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

11.   CONTINGENT LIABILITIES

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

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 must 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  retains  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 reject and
ultimately  opt out of such  agreement.  Opt out procedures are specified in the
settlement agreements,  and provide for mediation and further negotiation before
a claimant  may pursue his or her case in the court  system.  Through June 2000,
fewer  than 200  claimants  have  elected  to  reject  the  original  settlement
proposal, and to mediate under the terms of the NSP Agreement.

As of June 30, 2000, Owens Corning has settled, through the NSP, a total of more
than  237,000  Initial  Claims.  To date,  Owens  Corning  has paid more than $1
billion (including Administrative Deposits as described below) of the settlement
amounts  payable under the NSP in  connection  with these  Initial  Claims;  the
balance  is  scheduled  to  be  paid  as  part  of  Owens  Corning's   estimated
asbestos-related  payments through 2004 (described below under "Asbestos-Related
Payments").  Through July 2000, Owens Corning has received  approximately  1,300
Future Claims under the NSP for payment in 2003,  provided that such claims meet
the  criteria  for  payment  under the NSP  Agreements.  If all such claims were
approved for payment, estimated payments for those claims would be less than $50
million.

Claims approval and payments to claimants for both Initial and Future Claims are
being  managed  by  Integrex,  a  wholly-owned  Owens  Corning  subsidiary  that
specializes in, among other things, claims processing.

NSP Initial Claims Payment Schedules
------------------------------------

Payments  under the NSP for Initial  Claims will generally be made through 2004.
It is anticipated  that payments for a limited number of "exigent" Future Claims
(principally  those of living malignancy  claimants) will continue to be made as
promptly as possible, limited by Owens Corning's available cash flow.

In addition to the right to defer payments for Future Claims as described below,
Owens Corning has requested that NSP participating firms agree to defer payments
in 2000  through 2002 on Initial  Claims to the extent  necessary to ensure that
Owens  Corning  limits  its total  asbestos-related  payments  to the  following
schedule:  $950 million in 2000,  $400 million in 2001, and $250 million in 2002
("Deferral  Program").  An  Executive  Committee  appointed  by the NSP firms to
consider  the  request,   conduct   appropriate   due  diligence,   and  make  a
recommendation  concerning  the program  has agreed to  recommend  the  Deferral
Program.  To facilitate  implementation of the Deferral  Program,  each NSP firm
will receive a revised  payment  schedule.  The Deferral  Program is designed to
facilitate  continued  predictability  and manageability of Owens Corning's cash
flow, while taking into account the ongoing  expansion of the NSP, the timing of
expected future  insurance  recoveries,  efficient tax planning,  and compliance
with ongoing loan  covenants.  On the basis of  preliminary  information,  Owens
Corning  estimates  that the  Deferral  Program  may result in the  deferral  of


<PAGE>


                                     - 16 -

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

11.   CONTINGENT LIABILITIES

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

approximately $500 million of anticipated NSP payments.  As part of the Deferral
Program,  Owens Corning has agreed to pay any such deferred amounts in two equal
installments in 2003 and 2004, subject to then applicable loan covenants.

NSP Future Claims Payment Schedules
-----------------------------------

Payments for other qualifying Future Claims will begin in 2003, and will be made
on the  following  schedule,  based on when such  claims are  accepted  by Owens
Corning for payment:

<TABLE>
<S>                                                        <C>

-------------------------------------------------------- ------------------------------------
Date Accepted for Payment                                Year in which Claim Will be Paid
-------------------------------------------------------- ------------------------------------
-------------------------------------------------------- ------------------------------------
January 1, 1999 through June 30, 2000                    2003
-------------------------------------------------------- ------------------------------------
-------------------------------------------------------- ------------------------------------
July 1, 2000 through December 31, 2001                   2004
-------------------------------------------------------- ------------------------------------
-------------------------------------------------------- ------------------------------------
January 1, 2002 through June 30, 2003                    2005
-------------------------------------------------------- ------------------------------------
-------------------------------------------------------- ------------------------------------
July 1, 2003 through December 31, 2004                   2006
-------------------------------------------------------- ------------------------------------
-------------------------------------------------------- ------------------------------------
January 1, 2005 through June 30, 2006                    2007
-------------------------------------------------------- ------------------------------------
-------------------------------------------------------- ------------------------------------
July 1, 2006 or later                                    60 days to one year after acceptance
-------------------------------------------------------- ------------------------------------
</TABLE>

The  schedule  of payments  provided  for  qualifying  Future  Claims  under NSP
Agreements  that have been  entered  into during the fourth  quarter of 1999 and
thereafter  will be delayed by at least one year from the dates for  payment set
forth above.

Pursuant to existing NSP  Agreements,  if, in any calendar year after 2002,  the
payment of any amounts  under the NSP in respect of Future  Claims  would not be
permitted under Owens  Corning's then  prevailing loan covenants,  Owens Corning
will have the right to defer  payment of such amounts  until  February 15 of the
following year.  Commencing in 2003,  subject to the variables and uncertainties
discussed below,  Owens Corning expects that its payments for Future Claims will
not exceed $150  million  per year,  plus any  amounts  payable  pursuant to the
Deferral Program discussed above. Additional settlement payments will be made by
Fibreboard (see Item B below).

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

As of June 30, 2000,  approximately  27,000 asbestos personal injury claims were
pending  against  Owens  Corning  outside  the NSP.  Owens  Corning  notes  that
information  necessary to allow critical  evaluation of these claims,  including
the nature  and  severity  of disease  and  definitive  identifying  information
concerning the claimant,  typically becomes available only through the discovery
process or as a result of settlement  negotiations,  often not  occurring  until
years after the claim is filed. In view of the  indefiniteness  of the available
information,  the  actual  number of  pending  claims  may vary from the  number
indicated.  From the information available, it appears that fewer than 5 percent
of the claims in this non-NSP backlog are mesothelioma  claims.  However,  Owens
Corning  cautions that the number of new  mesothelioma  filings from non-NSP law
firms, including new firms without prior asbestos litigation experience, exceeds
those filed by NSP firms during the same period.

From the beginning of 1999 through June 30, 2000, Owens Corning has resolved (by
settlement or otherwise)  approximately  6,000 asbestos  personal  injury claims


<PAGE>


                                     - 17 -

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

11.   CONTINGENT LIABILITIES

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

outside the NSP. Generally, these claims were settled as they were scheduled for
trial, and typically involved more serious injuries and diseases.

During the  implementation  of the NSP,  Owens  Corning has  attempted to settle
individual non-NSP claims for payments generally consistent with payments to NSP
claimants.  Such settlements are preferable to trials,  provided that the agreed
settlement is fair in relation to similarly situated NSP claimants, because both
the timing and amount of such payments are more predictable. Owens Corning notes
that,  since late 1999,  it has  received a number of  settlement  demands  from
non-NSP plaintiffs'  counsel which have exceeded historical  settlement averages
for like cases. In the event this trend  continues,  and Owens Corning is unable
to reach acceptable settlements, Owens Corning may have to take certain cases to
trial in order to attempt to obtain  fair and  appropriate  resolution  of those
cases,  and  to  pay  settlement  amounts  that  more  closely  approximate  NSP
settlement values. If this strategy is successful, non-participating plaintiffs'
counsel  may  elect to join  the NSP  rather  than  continue  to seek  excessive
settlement values. However, the possibility of adverse verdicts which exceed NSP
settlement  values,  the increased costs of defense and appeals,  and the delays
inherent in litigation, may affect the aggregate payments for non-NSP claims.

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

In the second quarter of 2000, Owens Corning made  approximately $135 million of
asbestos-related payments, falling within four major categories: (1) Settlements
in respect of verdicts  incurred or claims resolved prior to the  implementation
of the NSP ("Pre-NSP Settlements"); (2) NSP settlements; (3) Non-NSP settlements
covering cases not resolved by the NSP; and (4) Defense,  claims  processing and
administrative expenses, as follows:



<PAGE>


<TABLE>
<S>                                                                                         <C>
                                                                    (In millions of dollars)

Pre-NSP Settlements                                                         $   20
NSP Settlements                                                                 78
Non-NSP Settlements                                                             19
Defense, Claims Processing and Administrative Expenses                          18
                                                                            ------
                                                                            $  135
</TABLE>


Owens Corning has  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, 2000,
approximately $250 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 have not been subtracted  from Owens Corning's  reserve for asbestos
personal injury claims (discussed below).

All  amounts  discussed  above  are  before  tax and  application  of  insurance
recoveries. Owens Corning currently estimates that it will make asbestos-related


<PAGE>


                                     - 18 -

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

11.   CONTINGENT LIABILITIES

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

payments  (including  Administrative  Deposits)  before tax and  application  of
insurance  recoveries  of  approximately  $950  million  during  2000 (of  which
approximately  $614 million had been made as of June 30),  $400 million in 2001,
$250  million  in 2002 and $400  million in each of 2003 and 2004.  The  amounts
shown for 2003 and 2004 include  $250 million in each year to pay the  estimated
$500 million  amount that may be deferred under the Deferral  Program  described
above.  The actual  amounts of such payments will depend on numerous  variables,
including: (1) the rate at which NSP claims are submitted and processed; (2) the
severity of disease involved in such claims;  (3) the number and type of non-NSP
claims resolved; (4) the cost of resolving such claims, including defense costs;
(5) the amount of insurance recoveries obtained;  and (6) the implementation and
continued applicability of the Deferral Program described above.

Asbestos Legislation
--------------------

In the fall of 1999, both the United States Senate and House of  Representatives
held hearings on proposed  legislation  (S 758 and HR 1283)  intended to address
the problem of  asbestos  litigation.  Although  the  original  House and Senate
proposals  were  virtually  identical,  the House has been active in considering
revisions  to HR 1283.  In the  first  quarter  of  2000,  the  House  Judiciary
Committee  approved HR 1283,  amended to protect private settlement plans and to
make such plans enforceable. Owens Corning believes that key members of Congress
view the NSP  favorably  and that,  if any asbestos  legislation  is  eventually
enacted, it will be consistent with the continued implementation of the NSP.

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

In the spring of 2000,  the United  States House of  Representatives  introduced
proposed legislation (HR 4543) which would exempt investment income earned by an
asbestos-related  trust  from  federal  income  tax,  and 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
manufactured  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 exemption of investment income would
benefit the Fibreboard  Settlement Trust (described  below) by having the effect
of enlarging the corpus of the trust through tax-free interest accumulation. The
Senate is  considering a similar bill (S 2955).  There can be no assurance that
any such legislation will be enacted.

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

As previously  reported,  Owens Corning  believes that it has spent  significant
amounts to resolve  claims of asbestos  claimants  whose injuries were caused or
exacerbated by cigarette smoking.  Owens Corning is 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.


<PAGE>


                                     - 19 -

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

11.   CONTINGENT LIABILITIES

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

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.  The court has set a February  2001 trial date for this  action.  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.

Insurance
---------

During  the second  quarter  of 2000,  Owens  Corning  received  a $335  million
settlement  payment  from a  group  of  excess  insurers,  resolving  a  dispute
concerning  coverage  from  such  insurers  for  non-products   asbestos-related
personal injury claims. Of this amount, $125 million had been reflected on Owens
Corning's financial statements as a probable insurance recovery.  The balance of
$210 million was recorded as pre-tax income in the second quarter.

As of June 30, 2000, Owens Corning's financial statements reflect $93 million in
unexhausted insurance coverage (net of deductibles and self-insured  retentions)
under its liability  insurance  policies  applicable to asbestos personal injury
claims.  Most of  this  amount  represents  unconfirmed  potential  non-products
coverage  with excess level  insurance  carriers,  as to which Owens Corning has
estimated its probable  recoveries.  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
estimable.  This reserve was established initially through a charge to income in
1991, with additional charges to income of $1.1 billion in 1996 and $1.4 billion
in  1998.  During  the  second  quarter  of 2000,  Owens  Corning  reviewed  the
sufficiency of its provision for asbestos-related liabilities in light of recent
trends  and  developments  in the  administration  of the  NSP  and in  asbestos
litigation generally. These trends and developments included:

o    Additional information obtained in reviewing,  processing and approving for
     payment  more  than  90,000 of the  claims  submitted  under the NSP.  This
     information  allowed Owens Corning to better determine the disease type and
     value of the claims  submitted  under the NSP,  including  the  substantial
     number of claims originally classified as of "unknown" disease type and the
     more  than  60,000  claims  that  have  been  added  to the NSP  since  its
     inception.  As the result of such information,  Owens Corning's estimate of
     the average value of an NSP claim has increased by approximately $2,000.

o    Increased  settlement demands (as described above) and higher than expected
     costs, particularly in 2000, to settle non-NSP claims.


<PAGE>


                                     - 20 -

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

11.   CONTINGENT LIABILITIES

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

o    Recent large verdict awards  against other  asbestos  defendants in several
     jurisdictions, including Madison County, Illinois and Orange County, Texas.

o    Additional  information  from  plaintiffs'  firms as to their  expectations
     concerning the number and nature of future filings.

As the result of its review, Owens Corning increased its asbestos reserves by $1
billion  in  the  second  quarter  of  2000.  The  approximate  balances  of the
components of the reserve at June 30, 2000 are:

<TABLE>
<S>                                                                                   <C>
          ----------------------------------------------------------- -------------------------------------
                                                                                    Balance
          ----------------------------------------------------------- -------------------------------------
          ----------------------------------------------------------- -------------------------------------
                                                                            (In billions of dollars)
          ----------------------------------------------------------- -------------------------------------
          ----------------------------------------------------------- -------------------------------------
          NSP backlog                                                                   1.2
          ----------------------------------------------------------- -------------------------------------
          ----------------------------------------------------------- -------------------------------------
          Non-NSP backlog                                                               0.3
          ----------------------------------------------------------- -------------------------------------
          ----------------------------------------------------------- -------------------------------------
          Future claims                                                                 0.7
          ----------------------------------------------------------- -------------------------------------
          ----------------------------------------------------------- -------------------------------------
          Defense and administrative processing costs                                   0.1
          ----------------------------------------------------------- -------------------------------------
          ----------------------------------------------------------- -------------------------------------
          Pre-NSP Settlements                                                           0.1
          ----------------------------------------------------------- -------------------------------------

</TABLE>

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

o    The "NSP backlog"  component  represents  the remaining  estimated  cost of
     resolving Initial Claims (as of June 30, 2000) under the NSP. Owens Corning
     is scheduled to pay these costs as part of its  estimated  asbestos-related
     payments through 2004 (described above under "Asbestos-Related Payments").

o    The "Non-NSP backlog" component  represents the estimated cost of resolving
     asbestos  personal  injury claims pending against Owens Corning outside the
     NSP as of June 30, 2000.

o    The "Future  claims"  component  represents the estimated cost of resolving
     (i) Future Claims under the NSP and (ii) non-NSP claims made after June 30,
     2000.

o    The  reserve  as  a  whole   reflects  $250  million  of   Undistributed
     Administrative Deposits.

Owens  Corning  cautions  that its estimate of its  liabilities  for pending and
expected  future  asbestos  claims is influenced by numerous  variables that are
difficult  to  predict  and that such  estimate  therefore  remains  subject  to
considerable  uncertainty.  Such variables  include,  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 are covered by an NSP Agreement;  the extent,  if any, to which
an individual claimant exercises his or her right to opt out of an NSP Agreement
and/or  utilize  counsel not  participating  in the NSP; the extent,  if any, to
which   counsel  that  are  not  bound  by  an  NSP   Agreement   undertake  the
representation of asbestos personal injury plaintiffs against Owens Corning; the
extent,  if any, to which Owens Corning  exercises 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.


<PAGE>


                                     - 21 -

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

11.   CONTINGENT LIABILITIES

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

As  referenced  above,  Owens  Corning  also notes that in recent  months it has
received a number of settlement demands from non-NSP  plaintiffs'  counsel which
have exceeded historical settlement averages for like cases. In addition,  there
have been recent large  verdict  awards  against  other  asbestos  defendants in
several  jurisdictions,  including  Madison County,  Illinois and Orange County,
Texas.  While the impact of these events to date was  considered  in  connection
with the increase in Owens Corning's asbestos reserves during the second quarter
of 2000 (described above), these events, and the possibility that either or both
will  continue  at  the  same  or  worse  levels,  further  contributes  to  the
uncertainty surrounding Owens Corning's estimate of its liabilities for asbestos
claims.  Recent  bankruptcies  of two other  defendants  in the personal  injury
litigation may also have an adverse impact on future NSP claimants'  willingness
to accept agreed NSP values to resolve  their claims,  as well as on the cost of
resolving future non-NSP claims.

Owens  Corning  will  continue  to  review  the  adequacy  of its  estimates  of
liabilities  and insurance on a periodic basis and make such  adjustments as may
be appropriate.

Management Opinion
------------------

As  described  above,  Owens  Corning has agreed to make  payments  for asbestos
liabilities  through at least 2004. These payments will require  dedication of a
significant  portion of Owens  Corning's  sources of  liquidity  expected  to be
available  during this  period.  Depending  on  operational  cash flow and other
sources of cash, such as insurance recoveries,  divestitures and tax refunds, it
is possible  that Owens  Corning  will  require  additional  financing.  In this
respect, Owens Corning notes that its current $1.8 billion long-term bank credit
facility expires in June 2002. As a result,  such facility will become a current
liability in the second quarter of 2001. Prior to its expiration,  Owens Corning
will need to replace  it, in a similar  or larger  amount,  or obtain  alternate
financing,  on acceptable terms ("Refinancing").  Management believes that it is
likely  that such  Refinancing  will  place  limits  on  payments  for  asbestos
liabilities and may impose other  restrictive  terms and conditions.  Therefore,
accommodations  in addition to the Deferral  Program may be  required.  Although
Owens Corning intends to continue to work with the Executive Committee appointed
by the NSP firms, there can be no assurance that such additional  accommodations
or  other  conditions  of the  Refinancing  will be  acceptable  to  plaintiffs'
attorneys.

In addition to the foregoing risk factors,  Owens Corning notes that, in view of
the  variables  and  uncertainties  described  above,  additional  uninsured and
unreserved  costs may arise out of personal  injury  asbestos  claims,  and such
additional costs may be substantial over time.


<PAGE>


                                     - 22 -

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

11.   CONTINGENT LIABILITIES

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

Although  any  opinion  is  necessarily  judgmental  and  must  be  based  on an
assessment of the variables and  uncertainties  described  above,  provided that
Refinancing can be obtained on acceptable  terms,  NSP firms continue to support
the Deferral  Program and agree to any necessary  additional  accommodations  or
other  conditions  of the  Refinancing,  Owens  Corning is not  required to make
asbestos-related  payments  during  the  period  through  2004 in  excess of its
estimated payments described above under "Asbestos-Related  Payments", and Owens
Corning's  results of operations  do not  deteriorate  significantly  during the
period,  management  believes  that  asbestos-related  costs will not impair the
ability of Owens Corning to meets its obligations.  The process of obtaining the
Refinancing,  obtaining necessary additional accommodations,  and limiting total
asbestos-related  payments  will involve  complex  negotiations  among  numerous
parties with  varying  interests.  Moreover,  many factors not in the control of
Owens Corning affect the Company's financial performance. As a result, there can
be no assurance that the necessary steps will be successfully completed.

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.  The vast
majority of these claims are being resolved through the NSP, as described below.

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  settle 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 June 30,
2000,  Fibreboard has settled,  through the NSP,  approximately  200,000 Initial
Claims.  The NSP  Agreements  also provide for the  resolution  of Future Claims
against Fibreboard through the administrative  processing  arrangement described
in Item A. The  timing  of  payments  for  Initial  and  Future  Claims  against
Fibreboard  will be  consistent,  generally,  with the  timing of Owens  Corning
payments, described in Item A.

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

In  1993,  Fibreboard  and two of its  insurers,  Continental  Casualty  Company
("Continental")  and Pacific  Indemnity  Company  ("Pacific"),  entered into the
Insurance  Settlement.  The Insurance  Settlement became effective in the fourth
quarter of 1999 and is final and not subject to appeal.


<PAGE>


                                     - 23 -

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

11.   CONTINGENT LIABILITIES

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

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 Fibreboard's costs of resolving pending and future asbestos claims,
whether under the NSP, in the tort system, or otherwise.

The  Insurance  Settlement  funds  are held in and  invested  by the  Fibreboard
Settlement  Trust and are available to satisfy  Fibreboard's  pending and future
asbestos-related  liabilities.  As of June  30,  2000,  $1,249  million  (net of
outstanding  payables)  was held in the  Fibreboard  Settlement  Trust  and $150
million  was  held  in  Undistributed   Administrative  Deposits  on  behalf  of
Fibreboard.  On an ongoing basis, the funds held in the Trust will be subject to
investment   earnings/losses   and  will  be   reduced  as  applied  to  satisfy
Fibreboard's  asbestos-related  liabilities.  Generally,  it  is  expected  that
payments of Fibreboard's  asbestos-related  liabilities will be paid directly by
the Fibreboard  Settlement Trust on behalf of Fibreboard.  Any  asbestos-related
amounts  paid  directly  by  Fibreboard  are subject to  reimbursement  from the
Trust's assets. Under the terms of the Trust, any of such assets that ultimately
are  not  used  to  fund  Fibreboard's   asbestos-related  liabilities  must  be
distributed to charity.

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.  These assets are  reflected as current  assets or
other  assets,  with each category  denoted  "Restricted  cash and  securities -
Fibreboard".  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.  Accordingly,  Owens Corning's
consolidated  balance sheet also  reflects  liabilities  in an aggregate  amount
equal  to  the  funds   held  in  the  Trust  and   Fibreboard's   Undistributed
Administrative  Deposits.   These  liabilities,   denoted  as  "Asbestos-related
liabilities  -  Fibreboard",  are  reflected  as current  or other  liabilities,
depending on the period in which  payment is expected.  At June 30, 2000,  Owens
Corning estimates Fibreboard's  asbestos-related  liabilities at $1,365 million.
This amount  includes an  increase of $99 million  during the second  quarter of
2000 as the result of Owens Corning's  review of  Fibreboard's  asbestos-related
liabilities.  See Note 12 for additional  information  concerning the Fibreboard
Settlement Trust.

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

In the second  quarter  of 2000,  gross  payments  for  asbestos-related  claims
against  Fibreboard  were   approximately  $249  million,   all  of  which  were
paid/reimbursed  by the Fibreboard  Settlement Trust. These payments fell within
four major categories, as follows:
<TABLE>
<S>                                                                                   <C>
                                                                           (In millions of dollars)



Pre-1993 and Interim Claims                                                           $     7
NSP Settlements                                                                           208
Non-NSP Settlements                                                                        17
Defense, Claims Processing and Administrative Expenses                                     17
                                                                                      -------
                                                                                       $  249
</TABLE>


<PAGE>


                                     - 24 -

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

11.   CONTINGENT LIABILITIES

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

The payments for NSP  Settlements  include  Administrative  Deposits  during the
quarter on behalf of Fibreboard. At June 30, 2000, there were approximately $150
million of Undistributed  Administrative  Deposits made on behalf of Fibreboard.
As described above, these Undistributed  Administrative Deposits are included as
restricted  assets,   under  the  caption  "Restricted  cash  and  securities  -
Fibreboard", on Owens Corning's consolidated balance sheet.

In addition to the Deferral Program for Owens Corning asbestos-related  payments
(described in Item A), Owens Corning has requested that NSP participating  firms
agree to modify the Fibreboard NSP payment  obligations so as to slow early year
payments and allow  earnings in the Fibreboard  Settlement  Trust to accumulate.
Owens Corning is currently  working with the NSP Executive  Committee to develop
an acceptable  payment  schedule.  There can be no assurance  that an acceptable
schedule will be agreed upon. Owens Corning currently  estimates that Fibreboard
will incur total asbestos-related  payments (including  Administrative Deposits)
of approximately $700 million in 2000, all of which are payable/reimbursable  by
the Fibreboard  Settlement Trust as described above.  Fibreboard payments beyond
2000 will depend upon  whether an  acceptable  alternative  payment  schedule is
agreed upon.  Fibreboard  payments  will also depend on the same  variables  and
uncertainties as those described above affecting Owens Corning's payments.

Management Opinion
------------------

Owens  Corning  cautions  that its  estimate  of  Fibreboard's  asbestos-related
liabilities  is  influenced  by the same  types of  variables  and is subject to
similar  uncertainty  as in the case of Owens  Corning.  Although any opinion is
necessarily  judgmental  and must be based on an assessment of the variables and
uncertainties described above, Owens Corning believes the amounts available from
the Fibreboard  Settlement Trust will be adequate to fund  Fibreboard's  ongoing
defense and indemnity  costs  associated with  asbestos-related  personal injury
claims for the foreseeable future.

Other Liabilities
-----------------

Various other  lawsuits and claims  arising in the normal course of business are
pending  against  Owens  Corning,  some of  which  allege  substantial  damages.
Management  believes that the outcome of these lawsuits and claims will not have
a materially adverse effect on Owens Corning's  financial position or results of
operations.



<PAGE>


                                     - 25 -

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

12.   FIBREBOARD SETTLEMENT TRUST

Under  the  Insurance  Settlement  described  in Note  11,  two of  Fibreboard's
insurers  provided  $1.873  billion  during the  fourth  quarter of 1999 to fund
Fibreboard's  costs  of  resolving  pending  and  future  asbestos  claims.  The
Insurance Settlement funds are held in and invested by the Fibreboard Settlement
Trust (the "Trust") and are available to satisfy Fibreboard's pending and future
asbestos-related  liabilities.  On an ongoing basis, the funds held in the Trust
will be subject to investment  earnings/losses and will be reduced as applied to
satisfy  Fibreboard's  asbestos  liabilities.  Under the terms of the Trust, any
Trust  assets  which  ultimately  are not  used to  fund  Fibreboard's  asbestos
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.

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

The  assets  of the  Trust  are  comprised  of cash  and  marketable  securities
(collectively,   the  "Trust  Assets")  and,  with  Fibreboard's   Undistributed
Administrative  Deposits,  are reflected on Owens Corning's consolidated balance
sheet as  restricted  assets.  These assets are  reflected as current  assets or
other  assets,  with each category  denoted  "Restricted  cash and  securities -
Fibreboard".  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.  Accordingly,  Owens Corning's
consolidated  balance sheet also  reflects  liabilities  in an aggregate  amount
equal  to  the  funds   held  in  the  Trust  and   Fibreboard's   Undistributed
Administrative  Deposits.   These  liabilities,   denoted  as  "Asbestos-related
liabilities  -  Fibreboard,"  are  reflected  as current  or other  liabilities,
depending on the period in which  payment is expected.  At June 30, 2000,  Owens
Corning estimates Fibreboard's  asbestos-related  liabilities at $1.365 billion,
with a residual  obligation  to charity of $34 million.  Payments from the Trust
and   distributions    from    Undistributed    Administrative    Deposits   for
asbestos-related  liabilities reduce both the assets and related  liabilities on
the consolidated balance sheet.

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  Company's
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  to  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


<PAGE>


                                     - 26 -

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

12.   FIBREBOARD SETTLEMENT TRUST (continued)

income.   The   residual   liability   to  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.

Adjustments
-----------

Periodically,  the Company evaluates the amount of Fibreboard's asbestos-related
liabilities.  During the second  quarter of 2000,  the Company  determined  that
Fibreboard's  asbestos-related  liabilities  required an increase of $99 million
(see Note 11). Accordingly, the Company increased Fibreboard's  asbestos-related
liabilities  and reduced the amount payable to charity by this amount during the
second quarter of 2000.

Results for the Period Ending June 30, 2000
-------------------------------------------

Trust Assets generated  interest/dividend  earnings of approximately $18 million
in the second  quarter  of 2000 and $38  million  year to date,  which have been
recorded as an increase in the carrying  amount of the assets on Owens Corning's
consolidated balance sheet and as other income on the consolidated  statement of
income.  This  income,  however,  has been  offset  by an equal  charge to other
expense,  which represents the increase in the residual  liability to be paid to
charity.

Payments for asbestos-related claims  from  the Trust (including  Administrative
Deposits) during the second quarter of 2000 were  approximately $249 million and
total $634 million for the year.  Such  payments were funded by existing cash in
the  Trust  or  proceeds  from the sale of  securities.  The sale of  securities
resulted  in a net  realized  gain of less than $1  million  during  the  second
quarter of 2000 and  approximately  $1 million year to date.  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.

During  2000,  fair  market  value  adjustments  for  securities  designated  as
available  for sale have resulted in a net  unrealized  gain of $1 million since
their  valuation at December 31, 1999. As the investments had an unrealized loss
of  approximately  $1 million at December 31, 1999,  there is no net  unrealized
gain or loss on these investments at June 30, 2000. The gain in the current year
has been reflected in the Company's consolidated balance sheet as an increase to
the carrying amount of the asset and an increase to other comprehensive  income.
This gain has also been reflected as an increase to the charity liability,  with
a corresponding decrease to other comprehensive income.

At June 30, 2000, the fair value of Trust Assets was $1.399 billion,  net of $29
million in  outstanding  payables.  Total trust  assets of $1.278  billion  were
invested   in   marketable   securities.   The  fair   value  of   Undistributed
Administrative  Deposits was $150 million and was held as restricted  cash. $525
million  of these  assets  have been  classified  as a current  asset  while the
remaining securities have been classified as noncurrent assets.

The amortized cost, gross unrealized  holding gains and losses and fair value of
the investment  securities  available for sale at June 30, 2000 and December 31,
1999 are as follows:



<PAGE>


                                     - 27 -

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

12.   FIBREBOARD SETTLEMENT TRUST (continued)
<TABLE>
<S>                                   <C>                   <C>                         <C>               <C>
                                                                    June 30, 2000
                                                                    -------------
                                  Amortized         Gross Unrealized              Gross Unrealized
                                     Cost                Gain                           Loss         Fair Value
                                     ----                ----                           ----         ----------
                                                              (In millions of dollars)

Corporate Bonds                     $     532               $      -                  $      -       $     532
Corporate Notes                            73                      -                         -              73
Municipal Bonds                           204                      -                         -             204
Mutual Funds                              247                      -                         -             247
US Government Bonds                       222                      -                         -             222
                                    ---------               --------                  --------       ---------

Total                               $   1,278               $      -                  $      -       $   1,278
</TABLE>

<TABLE>
<S>                                       <C>                   <C>                      <C>                <C>
                                                                     December 31, 1999
                                                                     -----------------
                                       Amortized      Gross Unrealized         Gross Unrealized
                                          Cost              Gain                     Loss             Fair Value
                                          ----              ----                     ----             ----------
                                                                 (In millions of dollars)

Corporate Bonds                        $      85              $       -              $         -      $       85
Corporate Notes                            1,334                      -                       (1)          1,333
Municipal Bonds                              199                      -                        -             199
US Government Bonds                          221                      -                        -             221
                                       ---------              ---------              -----------      ----------

Total                                  $   1,839              $       -              $        (1)     $    1,838
</TABLE>

Maturities of investment securities classified as available for sale at June 30,
2000 and December  31, 1999 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, 2000                 December 31, 1999
                                                              -------------                 -----------------
                                                       Amortized                        Amortized
                                                         Cost          Fair Value          Cost        Fair Value
                                                         ----          ----------          ----        ----------
                                                                        (In millions of dollars)

Due within one year                                   $      537        $     537       $    1,152     $    1,152
Due after one year through five years                         47               47               72             72
Due after five years through ten years                        26               26               87             87
Due after ten years                                          668              668              528            527
                                                      ----------        ---------      ------------   -----------
Total                                                  $   1,278         $  1,278       $    1,839     $    1,838
</TABLE>



<PAGE>


                                     - 28 -

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

12.   FIBREBOARD SETTLEMENT TRUST (continued)

The table below summarizes Trust and  Administrative  Deposits  activity for the
first half of 2000:
<TABLE>
<S>                          <C>         <C>        <C>        <C>          <C>       <C>           <C>       <C>           <C>
                                      Interest   Unrealized    Sale       Realized
                           Balance       and       Gain/        of         Gain/                                          Balance
                           12/31/99   Dividends   (Loss)    Securities    (Loss)   Adjustments     Other    Payments      6/30/00
                           --------   ---------   ------    ----------    ------   -----------     -----    --------      -------
Assets
------
Cash (Note 11)           $       -   $    -     $    -      $   605      $    -     $     -       $   -     $   (634)    $   (29)
Restricted Cash
 (Note 11)                       -        -          -            -           -           -         150            -          150
Marketable Securities:
  Available for Sale         1,838       38          1         (605)          1           -           5            -        1,278
                         ---------   --------   --------    --------     -------     ------       -----     --------     --------

Total Assets             $   1,838   $   38     $    1      $     -      $    1      $    -       $ 155     $   (634)    $  1,399
                         =========   ========   ========    ========     =======     ======       =====     ========     ========

Liabilities
-----------
Asbestos Litigation
  Claims (Note 11)       $   1,750   $    -     $    -      $     -      $    -      $   99       $ 150     $   (634)    $  1,365
Charity                         88       38          1            -           1         (99)          5            -           34
                         ---------   --------   --------    --------     -------     ------       -----     --------     --------

Total  Liabilities       $   1,838   $   38     $    1      $     -      $    1      $    -       $ 155     $   (634)    $  1,399
                         =========   ========   ========    ========     =======     ======       =====     ========     ========
</TABLE>



<PAGE>


                                     - 29 -

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, issues involving asbestos-related liabilities, availability and
cost of financing, and general economic conditions.

RESULTS OF OPERATIONS

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

Owens  Corning's  growth agenda has focused on increasing  sales and earnings by
(i) acquiring  businesses  with  products  that can be sold through  existing or
complementary  distribution channels,  (ii) achieving productivity  improvements
and cost  reductions  in existing and acquired  businesses,  (iii)  entering new
growth  markets  and  (iv)  forming  strategic  alliances  and  partnerships  to
complement  our existing  businesses,  including the  development of our service
businesses.  We have implemented two major initiatives,  the System Thinking(TM)
strategy and Advantage  2000,  to enhance sales growth and achieve  productivity
improvements  across all businesses.  System Thinking for the Home leverages our
broad product offering and strong brand recognition to increase our share of the
building  materials  and  home  improvement   markets.   This  systems  approach
represents a focus on  systems-driven  solutions  that combine  Owens  Corning's
insulation,   roofing,   exterior  and  acoustic  systems,  to  provide  a  high
performance,  cost-effective  building "envelope" for the home. We are also very
committed  to  taking  full  advantage  of  e-Business  opportunities.   Through
alliances with BuildNet and  ImproveNet,  for example,  we are working  directly
with  consumers  to help  them  find  solutions  for  their  needs.  We are also
expanding  our  role as a  service  provider  for  our  customers.  Through  our
HOMExperts(TM) Home Maintenance Service and  Sell-Furnish-Install  test markets,
we are offering  complementary  services in order to meet all of our  consumers'
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.  In addition,
Owens Corning has virtually  completed the  implementation  of Advantage 2000, a
fully integrated business technology system designed to reduce costs and improve
business processes.

Owens  Corning's   strategy  also  includes  the  divestiture  of  non-strategic
businesses.  This  strategy  resulted in the sale of our Falcon Foam business in
the U.S. during the first quarter of 2000 and the sale of our Building Materials
business in Europe during the second quarter of 2000 to an unconsolidated  joint
venture,  Alcopor Owens Corning, in which we have a 40% ownership interest.  The
joint venture  partnership  with Alcopor  enables us to continue our presence in
the  European  building  materials  market.  Please  see  Notes  1 and 4 to  the
Consolidated Financial Statements.

During  1998  and  1999,  we  realized  the  benefits  of  pricing  improvements
applicable  to many of our  products  and  cost  reductions  resulting  from our
strategic   restructuring  program  and  other  profitability  and  productivity
initiatives.  Pricing  improvements  over the  course of 1999,  particularly  in
residential  insulation,  resulted in  approximately a $140 million  increase in
income  from  operation  compared  to 1998.  These cost  reductions  and pricing
improvements  have  continued  into 2000.  However,  during the first and second



<PAGE>


                                     - 30 -

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

quarters of 2000, we experienced  significant increases in certain of our costs,
particularly roofing and vinyl raw material costs, which are directly related to
higher crude oil prices and increased demand for PVC, respectively.

Quarter and Six Months Ended June 30, 2000
------------------------------------------

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

Net sales for the quarter ended June 30, 2000 were $1.295 billion, down slightly
from the  second  quarter  1999 level of $1.310  billion.  The  decrease  is due
largely to volume  decreases in North American  Building  Materials  businesses,
particularly  in insulation,  roofing and exteriors  markets.  The sales decline
also  reflects the sale of our Falcon Foam  business in the U.S. in January 2000
(the  "Falcon  transaction")  and the sale of the  European  Building  Materials
business into an  unconsolidated  joint venture in which we have a 40% ownership
(the "Building Materials Europe transaction") at the end of May 2000. The effect
of volume decreases was partially  offset by price  improvements in all three of
these markets. In the Composites business,  sales reflect both steady volume and
price  increases in composites  markets  during the second  quarter of 2000. The
volume and price  increases in composites  served to partially  offset the sales
declines in the Building  Materials  businesses.  On a consolidated  basis,  the
currency  translation  impact on sales  denominated  in foreign  currencies  was
slightly  unfavorable  during the second  quarter of 2000 compared to the second
quarter  of  1999.  Please  see  Notes  1 and 4 to  the  Consolidated  Financial
Statements.

Sales outside the U.S.  represented 18% of total sales during the second quarter
of 2000, compared to 19% during the second quarter of 1999. The relative decline
in non-U.S. sales is primarily due to the Building Materials Europe transaction.
Gross margin for the quarter ended June 30, 2000 was 23% of net sales,  which is
down from 25% in the  second  quarter  of 1999.  The  decrease  in gross  margin
percentage  reflects  the increase in raw material  costs  throughout  the year,
offset partially by price increases.

For the quarter ended June 30, 2000,  Owens Corning  reported a net loss of $425
million, or $7.76 per share, compared to net income of $76 million, or $1.31 per
share,  for the quarter ended June 30, 1999.  The net loss in the second quarter
of 2000  reflects two  asbestos-related  items:  a $1 billion  pretax charge for
addition to our reserve for asbestos  claims and a $210  million  benefit as the
result of an  insurance  recovery.  The net  effect of the two  asbestos-related
items was a $790 million pretax charge ($486 million  after-tax).  See also Note
11 to the Consolidated Financial Statements and "Asbestos Litigation" below. The
net loss also reflects the adverse impact of increased raw material costs during
the quarter,  offset partially by pricing  improvements.  Cost of borrowed funds
during the second  quarter of 2000 was $51 million,  $12 million higher than the
second quarter 1999 level, due to increased debt, supporting payments associated
with the National Settlement Program, and higher rates on floating rate debt.

Marketing  and  administrative  expenses  were $146  million  during  the second
quarter of 2000,  compared to $152  million in the second  quarter of 1999.  The
decrease is primarily attributable to effective cost-cutting measures introduced
during the second quarter of 2000.

Net sales for the six months  ended June 30, 2000 were $2.552  billion,  up from
the $2.440 billion  reported for the first six months of 1999.  Price  increases
across  North  American  Building   Materials   markets,   including  a  partial
pass-through of raw material cost increases,  and price and volume  increases in
the Composites business resulted in the sales growth.

The net loss for the six months ended June 30, 2000 was $377  million,  or $6.90
per share  compared  to net income of $120  million,  or $2.08 per share for the
same period  ended in 1999.  Included in the net loss for the first half of 2000
are a $790 million pretax asbestos-related charge ($486 million after tax), a $5
million pretax gain from the Building  Materials Europe  transaction,  and a $22


<PAGE>


                                     - 31 -

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

million  increase in cost of borrowed funds,  due to increased debt,  supporting
payments associated with the National  Settlement  Program,  and higher rates on
floating  rate debt.  Despite the  effective  cost-cutting  measures  introduced
during the second quarter of 2000, marketing and administrative expenses for the
six months  ended June 30, 2000  increased  by $7 million  compared to the prior
year's period due to increased spending in first quarter 2000. Additionally, net
income for the six months  ended June 30,  2000  reflects an  approximately  $60
million increase in raw material costs, of which only approximately one half was
able to be passed through to the customers. We also recorded a $5 million pretax
loss  from  the  sale  of  Falcon  Foam,  a $9  million  pretax  charge  for the
realignment  of our Fair Bluff,  North  Carolina  plant,  and an $11 million tax
benefit from the  implementation  of a tax strategy  associated  with one of our
foreign  subsidiaries during the first quarter of 2000. Please see Note 4 to the
Consolidated Financial Statements.

Building Materials
------------------

In the Building Materials  segment,  sales decreased 3% to $1.035 billion in the
second  quarter  of 2000  compared  to the second  quarter  of 1999,  reflecting
decreased volume in U.S. insulation,  roofing and exteriors products, as well as
a decrease in sales resulting from the Building  Materials  Europe  transaction.
There was a slight currency  translation  impact on sales denominated in foreign
currencies  during the second quarter of 2000.  Income from  operations was $112
million during the second quarter of 2000, which is down  approximately 15% from
the same period in 1999.  Income from  operations in the second  quarter of 2000
reflects  volume  decreases  and raw material cost  increases.  These include an
increase in asphalt and PVC resin raw material  costs,  associated  with roofing
and vinyl products, of approximately $30 million during the quarter ($60 million
year-to-date).   There  were  pricing   increases  in  all  Building   Materials
businesses,  which served to partially  offset the volume decreases and past and
current  cost  increases.  Due to  the  rapid  rise  in  crude  oil  prices  and
significantly  increased  market  demand for PVC during 2000,  Owens Corning has
been unable to fully pass  through the rapidly  rising  costs of asphalt and PVC
resin. Actions taken during the year to improve productivity and increase prices
partially  narrowed the gap.  Our  intention is to continue to reduce the gap of
price versus cost going forward. Please see Note 1 to the Consolidated Financial
Statements.

Composite Materials
-------------------

In the Composite Materials segment, sales were up 5%, to $291 million during the
second quarter of 2000, compared to the second quarter of 1999, due to price and
significant volume increases. Price and volume increases were experienced across
all markets.  The currency  translation  impact on sales  denominated in foreign
currencies  was  unfavorable  during the second  quarter  of 2000.  Income  from
operations  was $49  million in the  second  quarter  of 2000,  compared  to $33
million in the  prior-year  period,  reflecting  the volume and price  increases
discussed above. Please see Note 1 to the Consolidated Financial Statements.

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

We are assessing the impact of SFAS 133 on our financial  statements and plan to
adopt this  accounting  change  effective  January 1, 2001. We have completed an
inventory of both our freestanding  derivatives,  including  forward  contracts,
option contracts,  currency swaps and interest rate swaps, and derivatives which
are embedded in other  contracts.  We have assessed the impact of adoption based
on our current  derivatives  position.  During the third quarter, we will review
our risk management  policies,  perform an information systems  assessment,  and
modify our business  processes as needed in order to comply with SFAS 133 and to
temper the volatility in earnings and other comprehensive income.

<PAGE>


                                     - 32 -

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

LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS

Cash flow from  operations was $242 million for the quarter ended June 30, 2000,
compared to  negative  $99 million  for the  quarter  ended June 30,  1999.  The
increase in cash flow from  operations for the second quarter of 2000 is largely
attributable  to the  receipt  of  $335  million  from  insurance  for  asbestos
litigation claims, partially offset by $141 million of payments for such claims.
This compares to insurance  proceeds of $13 million and payments of $175 million
during the second quarter of 1999. We anticipate  $950 million of total payments
for asbestos  litigation claims during 2000,  excluding  Fibreboard.  Please see
Notes  8 and  11 to  the  Consolidated  Financial  Statements.  Cash  flow  from
operations also reflects an increase in inventories of approximately $50 million
compared to the second quarter of 1999, due primarily to the effect of increased
raw  material  costs on  inventory  valuation,  offset  partially by a decreased
outflow attributable to accounts payable and accrued liabilities.

Inventories  at June 30,  2000  were $549  million,  $83  million  more than the
December 31, 1999 level.  Adjusted for the Building  Materials Europe and Falcon
transactions,  inventories increased by $111 million.  Approximately half of the
increase is due to higher raw material  costs and the remainder is the result of
the  seasonal  build of  inventories.  Receivables  at June 30,  2000  were $519
million.  Adjusted  for the $48 million  decrease  associated  with the Building
Materials  Europe  and  Falcon  transactions,  this  represents  a $209  million
increase over the December 31, 1999 level. This increase is largely attributable
to the seasonal  increase in sales and the low level of  receivables at December
31, 1999, which reflected the benefits of collection  efforts at the end of last
year and normal practices in the building  materials  industry.  The decrease in
accounts payable and accrued  liabilities from $839 million at December 31, 1999
to $692  million  at June 30,  2000,  $48  million of which is the result of the
European Building  Materials and Falcon  transactions,  reflects typical payment
patterns  during  the  first  half  of the  year  as  well  as a  corporate-wide
initiative to decrease spending.

At June 30, 2000,  Owens  Corning's net working capital was $292 million and our
current ratio was 1.13, compared to negative $828 million and .72, respectively,
at December 31, 1999 and negative  $224 million and .88,  respectively,  at June
30, 1999. The increase in working  capital at June 30, 2000 compared to June 30,
1999 is largely the result of an increase in cash and cash  equivalents  of $471
million,  of which  $109  million  represents  net  proceeds  from the  European
Building  Materials  transaction  and $335  million  represents  the  receipt of
insurance for asbestos  litigation  claims, of which $125 million had previously
been recorded as an insurance  asset.  The current  portion of the Owens Corning
asbestos  reserve,  net of  insurance  and  restricted  cash,  declined  by $225
million.  Accounts  receivable  have decreased $92 million  compared to June 30,
1999. This decrease is attributable to the collection efforts at the end of 1999
as described  above and the sale of the European  Building  Materials  business.
Additionally,  there has been a decrease in the current  portion of the deferred
tax asset and short-term debt since the second quarter of 1999.

Total borrowings at June 30, 2000 were $2.816 billion,  $825 million higher than
at year-end 1999,  reflecting  increased payments for asbestos litigation claims
and seasonal working capital increases. As of June 30, 2000, we had unused lines
of credit of $254 million  available under long-term bank credit  facilities and
an  additional  $203 million  under  short-term  facilities,  compared to $1.239
billion and $174 million,  respectively,  at year-end  1999. The net decrease in
unused available lines of credit reflects Owens Corning's  increased  borrowings
at June 30, 2000  compared to December 31, 1999.  Letters of credit issued under
the bank credit  facility,  most of which support appeals from asbestos  trials,
also reduce the available  credit.  The impact of such reduction is reflected in
the  unused  lines  of  credit  discussed  above.  Please  see  Note  5  to  the
Consolidated Financial Statements.


<PAGE>


                                     - 33 -

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
$97 million in the second quarter of 2000.  Owens Corning  anticipates that 2000
capital spending,  exclusive of acquisitions and investments in affiliates, will
be  approximately  $280  million,  the  majority  of which has been  spent or is
committed.  We  expect  that  funding  for these  expenditures  will be from our
operations and external sources as required.

Asbestos Litigation
-------------------

Please see also Note 11 to the Consolidated Financial Statements.

Beginning in late 1998,  Owens  Corning has  implemented  a National  Settlement
Program ("NSP") to resolve  personal  injury asbestos claims through  settlement
agreements with individual  plaintiffs' law firms.  The number of  participating
law firms has expanded from approximately 50 when the NSP was established to 117
as of June 30, 2000. The NSP continues to expand.

Under the NSP, each participating law firm has agreed to a long-term  settlement
agreement  ("NSP  Agreement")  that  extends  through  at  least  2008.  All NSP
Agreements  provide for the  resolution of asbestos  claims,  including  unfiled
claims,  pending with a participating law firm at the time it enters into an NSP
Agreement ("Initial Claims") and also establishes  procedures and fixed payments
for  resolving   without   litigation  those  claims  that  may  arise  after  a
participating firm enters into an NSP Agreement ("Future Claims") against either
Owens Corning or Fibreboard, or both.

As of June 30, 2000, Owens Corning has settled, through the NSP, a total of more
than 237,000  Initial  Claims  against it. To date,  Owens Corning has paid more
than $1 billion  (including  Administrative  Deposits) of the settlement amounts
payable under the NSP in connection  with these Initial  Claims;  the balance is
scheduled  to be  paid as part of  Owens  Corning's  estimated  asbestos-related
payments  through 2004 (described  below).  Through July 2000, Owens Corning has
received  approximately  1,300 Future  Claims under the NSP for payment in 2003,
provided  that  such  claims  meet  the  criteria  for  payment  under  the  NSP
Agreements. If all such claims were approved for payment, estimated payments for
those claims would be less than $50 million.

Payments  under the NSP for Initial  Claims will generally be made through 2004.
It is anticipated  that payments for a limited number of "exigent" Future Claims
(principally  those of living malignancy  claimants) will continue to be made as
promptly as possible, limited by Owens Corning's available cash flow.

In addition to the right to defer payments for Future Claims as described below,
Owens Corning has requested that NSP participating firms agree to defer payments
in 2000  through 2002 on Initial  Claims to the extent  necessary to ensure that
Owens  Corning  limits  its total  asbestos-related  payments  to the  following
schedule:  $950 million in 2000,  $400 million in 2001, and $250 million in 2002
("Deferral  Program").  An  Executive  Committee  appointed  by the NSP firms to
consider  the  request,   conduct   appropriate   due  diligence,   and  make  a
recommendation  concerning  the program  has agreed to  recommend  the  Deferral
Program.  To facilitate  implementation of the Deferral  Program,  each NSP firm
will receive a revised  payment  schedule.  The Deferral  Program is designed to
facilitate  continued  predictability  and manageability of Owens Corning's cash
flow, while taking into account the ongoing  expansion of the NSP, the timing of
expected future  insurance  recoveries,  efficient tax planning,  and compliance
with ongoing loan  covenants.  On the basis of  preliminary  information,  Owens
Corning  estimates  that the  Deferral  Program  may result in the  deferral  of
approximately $500 million of anticipated NSP payments.  As part of the Deferral
Program,  Owens Corning has agreed to pay any such deferred amounts in two equal
installments in 2003 and 2004, subject to then applicable loan covenants.


<PAGE>


                                     - 34 -

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

Payments for other qualifying Future Claims will begin in 2003, and will be made
on the  following  schedule,  based on when such  claims are  accepted  by Owens
Corning for payment:
<TABLE>
<S>                                                        <C>

-------------------------------------------------------- --------------------------------------
Date Accepted for Payment                                Year in which Claim Will be Paid
-------------------------------------------------------- --------------------------------------
-------------------------------------------------------- --------------------------------------
January 1, 1999 through June 30, 2000                    2003
-------------------------------------------------------- --------------------------------------
-------------------------------------------------------- --------------------------------------
July 1, 2000 through December 31, 2001                   2004
-------------------------------------------------------- --------------------------------------
-------------------------------------------------------- --------------------------------------
January 1, 2002 through June 30, 2003                    2005
-------------------------------------------------------- --------------------------------------
-------------------------------------------------------- --------------------------------------
July 1, 2003 through December 31, 2004                   2006
-------------------------------------------------------- --------------------------------------
-------------------------------------------------------- --------------------------------------
January 1, 2005 through June 30, 2006                    2007
-------------------------------------------------------- --------------------------------------
-------------------------------------------------------- --------------------------------------
July 1, 2006 or later                                    60 days to one year after acceptance
-------------------------------------------------------- --------------------------------------
</TABLE>

The  schedule  of payments  provided  for  qualifying  Future  Claims  under NSP
Agreements  that have been  entered  into during the fourth  quarter of 1999 and
thereafter  will be delayed by at least one year from the dates for  payment set
forth above.

Pursuant to existing NSP  Agreements,  if, in any calendar year after 2002,  the
payment of any amounts  under the NSP in respect of Future  Claims  would not be
permitted under Owens  Corning's then  prevailing loan covenants,  Owens Corning
will have the right to defer  payment of such amounts  until  February 15 of the
following year.  Commencing in 2003,  subject to the variables and uncertainties
discussed in Note 11 to the  Consolidated  Financial  Statements,  Owens Corning
expects  that its  payments  for Future  Claims will not exceed $150 million per
year, plus any amounts payable pursuant to the Deferral Program discussed above.
Additional settlement payments will be made by Fibreboard, as discussed below.

In the second  quarter  of 2000,  gross  payments  for  asbestos-related  claims
(including Administrative Deposits) by Owens Corning (excluding Fibreboard) were
approximately   $135  million.   Proceeds  from  insurance  were  $335  million,
reflecting a settlement  payment  from a group of excess  insurers,  resolving a
dispute concerning coverage from such insurers for non-products asbestos-related
personal injury claims. Of this amount, $125 million had been reflected on Owens
Corning's financial statements as a probable insurance recovery.

Owens  Corning  currently  estimates  that it (excluding  Fibreboard)  will make
asbestos-related  payments  (including  Administrative  Deposits) before tax and
application of insurance  recoveries of  approximately  $950 million during 2000
(of which  approximately $614 million had been made as of June 30), $400 million
in 2001,  $250 million in 2002,  and $400 million in each of 2003 and 2004.  The
amounts  shown for 2003 and 2004  include  $250  million in each year to pay the
estimated $500 million  amount that may be deferred  under the Deferral  Program
described  above.  The actual  amounts of such  payments will depend on numerous
variables,  including:  (1) the rate at  which  NSP  claims  are  submitted  and
processed;  (2) the severity of disease involved in such claims;  (3) the number
and type of non-NSP  claims  resolved;  (4) the cost of  resolving  such claims,
including defense costs; (5) the amount of insurance  recoveries  obtained;  and
(6) the  implementation  and  continued  applicability  of the Deferral  Program
described above.

During the second quarter of 2000, Owens Corning reviewed the sufficiency of its
provision  for  asbestos-related  liabilities  in light  of  recent  trends  and
developments  in the  administration  of the  NSP  and  in  asbestos  litigation
generally.  As the result of its review,  Owens  Corning  increased its asbestos
reserves by $1 billion in the second quarter of 2000.


<PAGE>


                                     - 35 -

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

Fibreboard  is a  participant  in the NSP and is a party to the NSP  Agreements,
which became  effective as to Fibreboard in the fourth quarter of 1999, when the
Insurance  Settlement  (discussed below) became effective.  As of June 30, 2000,
Fibreboard has settled,  through the NSP,  approximately  200,000 Initial Claims
against it. The NSP Agreements  also provide for the resolution of Future Claims
against Fibreboard through the administrative  processing  arrangement described
above for Owens  Corning.  The timing of payments for Initial and Future  Claims
against  Fibreboard  will be  consistent,  generally,  with the  timing of Owens
Corning payments, described above.

Under the Insurance  Settlement,  two of Fibreboard's  insurers  provided $1,873
million  during  the  fourth  quarter  of  1999 to fund  Fibreboard's  costs  of
resolving pending and future asbestos claims, whether under the NSP, in the tort
system, or otherwise. The Insurance Settlement funds are held in and invested by
the  Fibreboard  Settlement  Trust and are  available  to  satisfy  Fibreboard's
pending and future  asbestos-related  liabilities.  As of June 30, 2000,  $1,249
million (net of  outstanding  payables)  was held in the  Fibreboard  Settlement
Trust and $150  million  was held in  Undistributed  Administrative  Deposits on
behalf of Fibreboard.  On an ongoing basis,  the funds held in the Trust will be
subject to investment  earnings/losses and will be reduced as applied to satisfy
Fibreboard's  asbestos-related  liabilities.  Generally,  it  is  expected  that
payments of Fibreboard's  asbestos-related  liabilities will be paid directly by
the Fibreboard  Settlement Trust on behalf of Fibreboard.  Any  asbestos-related
amounts  paid  directly  by  Fibreboard  are subject to  reimbursement  from the
Trust's assets. Under the terms of the Trust, any of such assets that ultimately
are  not  used  to  fund  Fibreboard's   asbestos-related  liabilities  must  be
distributed to charity.

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.  These assets are  reflected as current  assets or
other  assets,  with each category  denoted  "Restricted  cash and  securities -
Fibreboard".  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.  Accordingly,  Owens Corning's
Consolidated  Balance Sheet also  reflects  liabilities  in an aggregate  amount
equal  to  the  funds   held  in  the  Trust  and   Fibreboard's   Undistributed
Administrative  Deposits.   These  liabilities,   denoted  as  "Asbestos-related
liabilities  -  Fibreboard",  are  reflected  as current  or other  liabilities,
depending on the period in which  payment is expected.  At June 30, 2000,  Owens
Corning estimates Fibreboard's  asbestos-related  liabilities at $1,365 million,
with a residual  obligation to charity of $34 million.  The amount reflected for
Fibreboard includes an increase of $99 million during the second quarter of 2000
as the  result  of  Owens  Corning's  review  of  Fibreboard's  asbestos-related
liabilities. See Note 12 to the Consolidated Financial Statements for additional
information concerning the Fibreboard Settlement Trust.

In the second  quarter  of 2000,  gross  payments  for  asbestos-related  claims
(including  Administrative  Deposits) against Fibreboard were approximately $249
million, all of which were  paid/reimbursed by the Fibreboard  Settlement Trust.
In addition to the Deferral Program for Owens Corning asbestos-related  payments
(described  above),  Owens Corning has requested  that NSP  participating  firms
agree to modify the Fibreboard NSP payment  obligations so as to slow early year
payments and allow  earnings in the Fibreboard  Settlement  Trust to accumulate.
Owens Corning is currently  working with the NSP Executive  Committee to develop
an acceptable  payment  schedule.  There can be no assurance  that an acceptable
schedule will be agreed upon. Owens Corning currently  estimates that Fibreboard
will incur  total  asbestos  payments  (including  Administrative  Deposits)  of
approximately $700 million in 2000, all of which are payable/reimbursable by the
Fibreboard Settlement Trust as described above.  Fibreboard payments beyond 2000
will depend upon whether an acceptable  alternative  payment  schedule is agreed
upon.


<PAGE>


                                     - 36 -

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

As  described  above,  Owens  Corning has agreed to make  payments  for asbestos
liabilities  through at least 2004. These payments will require  dedication of a
significant  portion of Owens  Corning's  sources of  liquidity  expected  to be
available  during this  period.  Depending  on  operational  cash flow and other
sources of cash, such as insurance recoveries,  divestitures and tax refunds, it
is possible  that Owens  Corning  will  require  additional  financing.  In this
respect, Owens Corning notes that its current $1.8 billion long-term bank credit
facility expires in June 2002. As a result,  such facility will become a current
liability in the second quarter of 2001. Prior to its expiration,  Owens Corning
will need to replace  it, in a similar  or larger  amount,  or obtain  alternate
financing,  on acceptable terms ("Refinancing").  Management believes that it is
likely  that such  Refinancing  will  place  limits  on  payments  for  asbestos
liabilities and may impose other  restrictive  terms and conditions.  Therefore,
accommodations  in addition to the Deferral  Program may be  required.  Although
Owens Corning intends to continue to work with the Executive Committee appointed
by the NSP firms, there can be no assurance that such additional  accommodations
or  other  conditions  of the  Refinancing  will be  acceptable  to  plaintiffs'
attorneys.

In addition to the foregoing risk factors,  Owens Corning notes that, in view of
the  variables  and  uncertainties  described  above,  additional  uninsured and
unreserved  costs may arise out of personal  injury  asbestos  claims,  and such
additional costs may be substantial over time.

Although  any  opinion  is  necessarily  judgmental  and  must  be  based  on an
assessment of the variables and  uncertainties  described  above,  provided that
Refinancing can be obtained on acceptable  terms,  NSP firms continue to support
the Deferral  Program and agree to any necessary  additional  accommodations  or
other  conditions  of the  Refinancing,  Owens  Corning is not  required to make
asbestos-related  payments  during  the  period  through  2004 in  excess of its
estimated payments described above, and Owens Corning's results of operations do
not  deteriorate  significantly  during the  period,  management  believes  that
asbestos-related costs will not impair the ability of Owens Corning to meets its
obligations.  The process of  obtaining  the  Refinancing,  obtaining  necessary
additional  accommodations,  and limiting total  asbestos-related  payments will
involve  complex  negotiations  among numerous  parties with varying  interests.
Moreover,  many factors not in the control of Owens Corning affect the Company's
financial performance. As a result, there can be no assurance that the necessary
steps will be successfully completed.

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. During the first six
months of 2000, we were  designated as a PRP in such  federal,  state,  local or
private proceedings for 3 additional sites, while three cases were closed during
this  period.  At June 30, 2000,  a total of 46 such PRP  designations  remained
unresolved. 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 $29 million reserve for our Superfund (and similar state,
local  and  private  action)  contingent  liabilities.  Based  upon  information
presently  available to us, and without regard to the  application of insurance,
we believe that,  considered in the aggregate,  the additional  costs associated
with such contingent  liabilities,  including any related litigation costs, will
not have a materially  adverse  effect on our results of  operations,  financial
condition or long-term liquidity.


<PAGE>


                                     - 37 -

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

The 1990  Clean  Air Act  Amendments  (Act)  provide  that  the EPA  will  issue
regulations on a number of air pollutants over a period of years. The EPA issued
regulations   for  wool  fiber  glass  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 fiber 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.

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                                 2000                    1999
               -------------                                 ----                    ----
                                                                (In millions of dollars)
               Foreign currency                               $1                      $-
               Interest rate                                  $7                      $6

</TABLE>

Virtually  all of the  potential  loss  associated  with  interest  rate risk is
attributable to fixed-rate long-term debt instruments.

<PAGE>


                                     - 38 -

                           PART II. OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

See Note 11, Contingent  Liabilities,  to Owens Corning's Consolidated Financial
Statements above, which is incorporated here by reference.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

(a)  None of the constituent  instruments  defining the rights of the holders of
     any class of Owens Corning's registered  securities was materially modified
     in the quarter ended June 30, 2000.

(b)  None of the rights  evidenced  by any class of Owens  Corning's  registered
     securities  was  materially  limited or qualified in the quarter ended June
     30, 2000 by the issuance or modification of any other class of securities.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

(a)  During the quarter  ended June 30, 2000,  there was no material  default in
     the payment of principal,  interest, sinking or purchase fund installments,
     or any other material default not cured within 30 days, with respect to any
     indebtedness  of  Owens  Corning  or any of  our  significant  subsidiaries
     exceeding 5 percent of the total assets of Owens  Corning and  consolidated
     subsidiaries.

(b)  During the  quarter  ended June 30,  2000,  no  material  arrearage  in the
     payment of dividends occurred,  and there was no other material delinquency
     not cured within 30 days,  with respect to any class of preferred  stock of
     Owens  Corning  which is  registered  or which  ranks prior to any class of
     registered  securities,  or with respect to any class of preferred stock of
     any significant subsidiary of Owens Corning.

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

(a)  Owens Corning's annual meeting of stockholders was held April 20, 2000.

(c) The matters  voted upon at the meeting,  and the votes with respect to each,
were:

     1.   Election of three  directors  for a term  expiring in 2003:  Norman P.
          Blake,  Jr. - 46,537,566  votes cast for election and 2,187,231  votes
          withheld; Leonard S. Coleman, Jr. - 46,570,857 votes cast for election
          and 2,153,940 votes withheld;  and W. Ann Reynolds - 46,505,041  votes
          cast for election and 2,219,756 votes withheld.

     2.   Approval of the action of the Board of Directors  in selecting  Arthur
          Andersen  LLP as  independent  public  accountants  for the year 2000:
          47,767,672  votes cast for the  proposal;  641,200 votes cast against;
          and 315,924 shares abstained.

     3.   Approval of proposal  concerning  classified  board:  26,954,389 votes
          cast for the proposal;  13,310,869 votes cast against;  688,993 shares
          abstained; and 7,770,546 broker non-votes.


<PAGE>


                                     - 39 -

                     PART II. OTHER INFORMATION (continued)

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.

         During the  quarter  ended  June 30,  2000,  Owens  Corning  filed the
         following  current  report on Form 8-K:

              - Filed  June 26,  2000, under Item 5, "Other Events".

<PAGE>



                                     - 40 -

                                   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 11, 2000                          By:  /s/  Michael H. Thaman
    --------------------------                     --------------------------
                                                Michael H. Thaman
                                                Senior Vice President and
                                                Chief Financial Officer
                                                (as duly authorized officer)



Date:  August 11, 2000                          By:  /s/  Deyonne F. Epperson
    --------------------------                     ----------------------------
                                                Deyonne F. Epperson
                                                Vice President and Controller


<PAGE>


                                     - 41 -

                                  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).

(10)       Material Contracts

           Owens Corning Key Employee Retention Incentive Plan (filed herewith).

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

(27)       Financial Data Schedule (filed herewith).

(99)       Additional Exhibits

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