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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
                            ------------------------
 
              /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
 
                                       OR
 
            / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE TRANSITION PERIOD FROM            TO
 
                            ------------------------
 
                        COMMISSION FILE NUMBER 33-81808
 
                   BUILDING MATERIALS CORPORATION OF AMERICA
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
                DELAWARE                               22-3276290
        (STATE OF INCORPORATION)          (I.R.S. EMPLOYER IDENTIFICATION NO.)
 
             1361 ALPS ROAD
           WAYNE, NEW JERSEY                             07470
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                (ZIP CODE)
 
              REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
                                 (973) 628-3000
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      None
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      None
 
                            ------------------------
 
                   SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
 
                            ------------------------
 
     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 _
 
     As of March 19, 1999, 1,015,010 shares of Class A Common Stock, $.001 par
value, and 15,000 shares of Class B Common Stock, $.001 par value, of Building
Materials Corporation of America were outstanding. There is no trading market
for the common stock of Building Materials Corporation of America.
 
     As of March 19, 1999, each of the additional registrants had the number of
shares outstanding which is shown on the table below. No shares were held by
non-affiliates.
 
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<PAGE>
                             ADDITIONAL REGISTRANTS
 
<TABLE>
<CAPTION>
                                                                                          ADDRESS, INCLUDING ZIP
                                     STATE OR OTHER                                     CODE AND TELEPHONE NUMBER,
           EXACT NAME OF             JURISDICTION OF      NO.         I.R.S. EMPLOYER      INCLUDING AREA CODE,
      REGISTRANT AS SPECIFIED        INCORPORATION OR   OF SHARES     IDENTIFICATION     OF REGISTRANT'S PRINCIPAL
          IN ITS CHARTER             ORGANIZATION       OUTSTANDING        NO.               EXECUTIVE OFFICES
-----------------------------------  ----------------   -----------   ---------------   ---------------------------
<S>                                  <C>                <C>           <C>               <C>
Building Materials
  Manufacturing Corporation........      Delaware             10         22-3626208     1361 Alps Road
                                                                                        Wayne, NJ 07470
                                                                                        (973) 628-3000
 
Building Materials
  Investment Corporation...........      Delaware             10         22-3626206     1361 Alps Road
                                                                                        Wayne, NJ 07470
                                                                                        (973) 628-3000
</TABLE>

<PAGE>
                                     PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
     Building Materials Corporation of America ("BMCA") is a leading national
manufacturer of a broad line of asphalt roofing products and accessories for the
residential and commercial roofing markets. We also manufacture specialty
building products and accessories for the professional and do-it-yourself
remodeling and residential construction industries. BMCA, incorporated under the
laws of Delaware in 1994, is a 97%-owned subsidiary of GAF Building Materials
Corporation. BMCA acquired the operating assets and certain liabilities of GAF
Building Materials Corporation in 1994. GAF Building Materials Corporation is a
wholly-owned subsidiary of G Industries Corp., which is a holding company that
also owns all of the capital stock of GAF Fiberglass Corporation. G Industries
is a wholly-owned subsidiary of G-I Holdings Inc., a wholly-owned subsidiary of
GAF Corporation. Samuel J. Heyman, Chairman of the Board of Directors and Chief
Executive Officer of GAF Corporation, G-I Holdings and GAF Fiberglass, Chairman
of the Board of Directors of BMCA and Chief Executive Officer of G Industries
and GAF Building Materials Corporation, beneficially owns (as defined in
Rule 13d-3 of the Securities Exchange Act of 1934) approximately 97% of GAF
Corporation. BMCA does business under the name "GAF Materials Corporation."
 
     Effective January 1, 1999, BMCA transferred all of its investment assets
and intellectual property assets to Building Materials Investment Corporation, a
newly-formed, wholly-owned subsidiary of BMCA. In connection with this transfer,
Building Materials Investment Corporation agreed to guarantee all of BMCA's
obligations under its credit agreement and all of its senior notes. BMCA also
transferred all of its manufacturing assets, other than those located in Texas,
to Building Materials Manufacturing Corporation, another newly-formed,
wholly-owned subsidiary of BMCA. In connection with this transfer, Building
Materials Manufacturing Corporation agreed to become a co-obligor on BMCA's 8%
Senior Notes due 2007 and to guarantee BMCA's obligations under its credit
agreement and all of its other senior notes. Building Materials Manufacturing
and Building Materials Investment were incorporated in Delaware in 1998.
 
     On January 1, 1997, GAF Corporation completed a series of transactions
involving its subsidiaries pursuant to which, among other things, (1) we
transferred our glass fiber manufacturing facility located in Nashville,
Tennessee and certain related assets and liabilities to GAF Fiberglass
Corporation and (2) U.S. Intec, Inc., an indirect subsidiary of GAF Corporation,
became one of our subsidiaries. In connection with these transactions, GAF
Fiberglass entered into a long-term supply agreement with us pursuant to which
GAF Fiberglass agreed to supply us with glass fiber. See Item 13,"Certain
Relationships and Related Transactions."
 
     Our executive offices and the executive offices of Building Materials
Manufacturing and Building Materials Investment are located at 1361 Alps Road,
Wayne, New Jersey 07470 and the telephone number is (973) 628-3000.
 
RESIDENTIAL ROOFING
 
     We are a leading manufacturer of a complete line of premium residential
roofing products. Residential roofing product sales represented approximately
65% of our net sales in 1998. We have improved our sales mix of residential
roofing products in recent years by increasing our emphasis on laminated
products which generally are sold at higher prices with more attractive profit
margins than our standard strip shingle products. We believe that we are the
largest manufacturer of laminated residential roofing shingles and the second
largest manufacturer of strip shingles in the United States. (Statements
contained in this report as to our competitive position are based on industry
information which we believe is reliable.)
 
     Our two principal lines of roofing shingles are the Timberline(Registered)
series and the Sovereign(Registered) series. We also produce certain specialty
shingles principally for regional markets.
 
     The Timberline(Registered) Series.  The Timberline(Registered) series
offers a premium laminated product line that adds dramatic shadow lines and
substantially improves the appearance of a roof. The series includes the
Timberline(Registered) 25 shingle, a mid-weight laminated shingle which serves
as an economic trade-up for consumers, with a 25-year limited warranty; the
Timberline(Registered) shingle, with a 30-year limited warranty, offering a
natural
 
                                       1
<PAGE>

random wood shake appearance with superior fire resistance and durability; and
the Timberline Ultra(Registered) shingle, with a 40-year limited warranty, a
super heavyweight laminated shingle with the same design features as the
Timberline(Registered) 25 shingle, together with added durability.
 
     The Sovereign(Registered) Series.  The Sovereign(Registered) series
includes the standard 3-tab Sentinel(Registered) shingle with a 20-year limited
warranty; the Royal Sovereign(Registered) shingle, a heavier 3-tab shingle with
a 25-year limited warranty, designed to capitalize on the "middle market" for
quality shingles; and the Marquis(Registered) Weathermax(Trademark) shingle, a
superior performing heavyweight 3-tab shingle with a 30-year limited warranty.
 
     Specialty Shingles.  Our specialty asphalt shingles include:
Slateline(Registered) and Slateline(Registered) Color Contrast(Trademark)
shingles, offering the appearance of slate, labor savings in installation
because of their larger size and a 30-year limited warranty; the Grand
Sequoia(Registered) shingle, a premier architectural shingle with a 40-year
limited warranty; and the Country Mansion(Trademark) shingle, a distinctive high
end architectural shingle with a limited lifetime warranty.
 
     Weather Stopper(Trademark) Roofing System.  In addition to shingles, we
supply all the components necessary to install a complete roofing system. Our
Weather Stopper(Trademark) Roofing System begins with Weather Watch(Registered)
and Stormguard(Trademark) waterproof underlayments for eaves, valleys and
flashings to prevent water seepage between the roof deck and the shingles caused
by ice build-ups and wind-driven rains. Our Weather Stopper(Trademark) Roofing
System also includes Shingle-Mate(Registered) glass reinforced underlayment,
Timbertex(Registered), TimberRidge(Trademark), and Ridgetex(Trademark) Hip and
Ridge shingles, which are significantly thicker and larger than standard hip and
ridge shingles and provide dramatic accents to the slopes and planes of a roof
and the Cobra(Registered) Ridge Vent which provides attic ventilation.
 
COMMERCIAL ROOFING
 
     We manufacture a full line of modified bitumen and asphalt built-up roofing
products, liquid applied membrane systems and roofing accessories for use in the
application of commercial roofing systems. We also market thermoset and
thermoplastic single-ply products. Commercial roofing represented approximately
30% of our net sales in 1998. Approximately 75% of commercial roofing industry
unit sales utilize asphalt built-up roofing, modified bitumen products and
thermoset and thermoplastic single-ply products, all of which we manufacture or
market. We believe that we are the second largest manufacturer of asphalt
built-up roofing products and the largest manufacturer of modified bitumen
products in the United States.
 
     We manufacture glass membranes under the trademarks GAFGLAS(Registered) and
Permaglas(Registered), which are made from asphalt impregnated glass fiber mat
for use as a component in asphalt built-up roofing systems. Most of our
GAFGLAS(Registered)and Permaglas(Registered) products are assembled on the roof
by applying successive layers of roofing membrane with asphalt and topped, in
some applications, with gravel. Thermal insulation may be applied beneath the
membrane. We also manufacture base sheets, flashings and other roofing
accessories for use in these systems, the TOPCOAT(Registered) roofing system, a
liquid-applied membrane system designed to protect and waterproof existing metal
roofing, and roof maintenance products. In addition, we market perlite roofing
insulation products, which consist of low thermal insulation that is installed
as part of a commercial roofing application below the roofing membrane,
isocyanurate foam as roofing insulation, packaged asphalt and accessories such
as vent stacks, roof insulation fasteners, cements and coating.
 
     We sell modified bitumen products under the Ruberoid(Registered) trademark,
and U.S. Intec sells these products under the Brai(Registered) trademark.
Modified bitumen products are used primarily in re-roofing applications or in
combination with glass membranes in GAF CompositeRoof(Trademark) systems. These
products consist of a roofing membrane utilizing polymer-modified asphalt, which
strengthens and increases flexibility and is reinforced with a polyester
non-woven mat or a glass mat. Modified bitumen systems provide high strength
characteristics, such as weatherability, water resistance, and labor cost
savings due to ease of application.
 
     Effective December 1, 1998, we sold our perlite insulation manufacturing
assets to Johns Manville Corporation. As part of the transaction, we entered
into a long-term agreement with Johns Manville pursuant to which Johns Manville
agreed to supply us with perlite insulation products. This agreement will enable
us to continue to serve our commercial roofing customers that purchase those
products from us.
 
                                       2
<PAGE>

SPECIALTY BUILDING PRODUCTS AND ACCESSORIES
 
     In June 1998, we acquired substantially all of the assets of Leslie-Locke,
Inc. for approximately $43.5 million. As a result of this acquisition, we
manufacture and market a variety of specialty building products and accessories
for the professional and do-it-yourself remodeling and residential construction
industries. Specialty building products and accessories represented
approximately 5% of our net sales in 1998. These products primarily consist of
residential attic ventilation systems, metal and fiberglass air distribution
products for the HVAC industry and ornamental iron security products (including
doors, windows and fencing).
 
MARKETING AND SALES
 
     We have one of the industry's largest sales forces. A staff of technical
professionals who work directly with architects, consultants, contractors and
building owners provide support to the sales force. We market our roofing and
specialty building products and accessories through our own sales force of
approximately 220 experienced, full-time employees and independent sales
representatives operating from six regional sales offices located across the
United States. A major portion of our roofing product sales are to wholesale
distributors who resell our products to roofing contractors and retailers. We
believe that the wholesale distribution channel offers the most attractive
margins of all roofing market distribution channels and represents the principal
distribution channel for professionally installed asphalt roofing products. We
believe that our nationwide coverage has contributed to certain of our roofing
products being among the most recognized and requested brands in the industry.
 
     In September 1997, we launched our Customer Advantage(Trademark) Program to
establish a nationwide network of MasterElite(Trademark) contractors and
Authorized Installers. This program offers marketing and support services to
residential roofing contractors. We view the Master Elite(Trademark) contractors
and Authorized Installers as an effective extension of our sales force which
takes our products directly to the homeowner.
 
     No single customer accounted for 10% or more of our net sales in 1998,
except for American Builders & Contractors Supply Company, Inc., which accounted
for approximately 11% of 1998 net sales.
 
RAW MATERIALS
 
     The major raw materials required for the manufacture of our roofing
products are asphalt, mineral stabilizer, glass fiber, glass fiber mat,
polyester mat and granules. Asphalt and mineral stabilizer are available from a
large number of suppliers. We currently have contracts with several of these
suppliers and others are available as substitutes. Prices of most raw materials
have been relatively stable, rising moderately with general industrial prices,
while the price of asphalt tends to move in step with the price of crude oil.
 
     The major raw materials required for the manufacture of our specialty
building products and accessories are steel tubes, sheet metal products,
aluminum motors and cartons. These raw materials, other than motors, are
commodity-type products, the pricing for which is driven by supply and demand.
Prices of other raw materials used in the manufacture of specialty building
products and accessories are more closely tied to movements in inflation rates.
Substantially all of the motors used in our ventilation products are purchased
from an overseas supplier. All of these raw materials, including motors, are
available from a large number of suppliers.
 
     Five of our roofing plants have easy access to deep water ports thereby
permitting delivery of asphalt by ship, the most economical means of transport.
Our Chester, South Carolina plant manufactures glass fiber mat substrate. We
purchase all our requirements for colored roofing granules from an affiliate,
International Specialty Products Inc. ("ISP"), (except for the requirements of
our California and Oregon roofing plants and a portion of the requirements of
our Indiana roofing plant which are supplied by a third party) under a
requirements contract. Effective January 1, 1999, this contract was amended to
cover, among other things, purchases of colored roofing granules by our
subsidiaries and was renewed for 1999. This contract is subject to annual
renewal unless terminated by either party to such agreement. We purchase a
significant portion of our glass fiber requirements from an affiliate, GAF
Fiberglass, a subsidiary of GAF, pursuant to a supply agreement.
 
                                       3
<PAGE>

SEASONAL VARIATIONS AND WORKING CAPITAL
 
     Sales of roofing and specialty building products and accessories in the
northern regions of the United States generally decline during the winter months
due to adverse weather conditions. Generally, our inventory practice includes
increasing inventory levels in the first and the second quarter in order to meet
peak season demand (June through November).
 
WARRANTY CLAIMS
 
     We provide certain limited warranties covering most of our residential
roofing products for periods generally ranging from 20 to 40 years. Although
terms of warranties vary, we believe that our warranties generally are
consistent with those offered by our competitors. We also offer limited
warranties and guarantees of varying duration on our commercial roofing products
and limited warranties covering most of our specialty building products and
accessories for periods generally ranging from 5 to 10 years. From time to time,
we review the reserves established for estimated probable future warranty
claims.
 
COMPETITION
 
     The roofing products industry is highly competitive and includes a number
of national competitors. These competitors in the residential roofing and
accessories markets are Owens-Corning, Tamko, Elcor and Celotex, and in the
commercial roofing market are Johns Manville, Celotex, Firestone and Carlisle.
In addition, there are numerous regional competitors.
 
     Competition is based largely upon products and service quality,
distribution capability, price and credit terms. We believe that we are well
positioned in the marketplace as a result of our broad product lines in both the
residential and commercial markets, consistently high product quality, strong
sales force and national distribution capabilities. As a result of the growth in
demand for premium laminated shingles, a number of roofing manufacturers,
including our company, have increased their laminated shingle production
capacity in recent years. We have experienced increased competition in this area
due to these factors.
 
     Our specialty roofing products and accessories business is highly
competitive with numerous competitors due to the breadth of the product lines we
market. Major competitors include Certainteed, Solar Group, ATCO Rubber Products
and Standex Air Distribution Products.
 
RESEARCH AND DEVELOPMENT
 
     We primarily focus our research and development activities on the
development of new products, process improvements and the testing of alternative
raw materials and supplies. Our research and development activities, dedicated
to residential, commercial and fiberglass products, are located at technical
centers at Wayne, New Jersey, Nashville, Tennessee and Port Arthur, Texas. Our
research and development expenditures were approximately $4.5 million,
$5.4 million and $6.0 million in 1996, 1997 and 1998, respectively.
 
PATENTS AND TRADEMARKS
 
     We own or license approximately 90 domestic and 81 foreign patents or
patent applications. In addition, we own or license approximately 250 domestic
and 72 foreign trademark registrations or applications. While we believe the
patent protection covering certain of our products to be material to those
products, we do not believe that any single patent, patent application or
trademark is material to our business or operations. We believe that the
duration of the existing patents and patent licenses is consistent with our
business needs.
 
ENVIRONMENTAL COMPLIANCE
 
     Since 1970, federal, state and local authorities have adopted and amended a
wide variety of federal, state and local environmental laws and regulations
relating to environmental matters. These regulations affect us because of the
nature of our operations and that of our predecessor and certain of the
substances that are, or have been used, produced or discharged at our or its
plants or at other locations. We have made capital expenditures of less than
$600,000 in each of the last three years in order to comply with these
regulations (which expenditures are included in additions to property, plant and
equipment) and anticipate that aggregate capital expenditures relating to
environmental compliance in 1999 and 2000 will be approximately $800,000
 
                                       4
<PAGE>

and $1,000,000, respectively. We anticipate incurring additional capital
expenditures of approximately $2,000,000 in the aggregate relating to
environmental compliance in connection with two new manufacturing facilities
that we expect to build in 1999 in Shafter, California and Michigan City,
Indiana.
 
     The regulations deal with air and water emissions or discharges into the
environment, as well as the generation, storage, treatment, transportation and
disposal of solid and hazardous waste, and the remediation of any releases of
hazardous substances and materials to the environment. We believe that our
manufacturing facilities comply in all material respects with applicable
regulations. Although we cannot predict whether more burdensome requirements
will be adopted in the future, we believe that any potential liability for
compliance with the regulations will not materially affect our business,
liquidity or financial position.
 
     See Item 3, "Legal Proceedings--Environmental Litigation."
 
EMPLOYEES
 
     At December 31, 1998, we employed approximately 3,300 people worldwide,
approximately 1,000 of which were subject to 14 union contracts. The contracts
are effective for three- to four-year periods. During 1998, four labor contracts
expired and were renegotiated. We believe that our relations with our employees
and their unions are satisfactory.
 
ITEM 2. PROPERTIES
 
     Our corporate headquarters and principal research and development
laboratories are located at a 100-acre campus-like office and research park
owned by a subsidiary of ISP, at 1361 Alps Road, Wayne, New Jersey 07470. We
occupy our headquarters pursuant to our management agreement with ISP. See Item
13, "Certain Relationships and Related Transactions."
 
     We own or lease the principal real properties described below. Unless
otherwise indicated, the properties are owned in fee. In addition to the
principal facilities listed below, we maintain sales offices and warehouses,
substantially all of which are in leased premises under relatively short-term
leases.
 
LOCATION                FACILITY
----------------------  ------------------------------------------------------
Alabama
  Mobile..............  Plant, Warehouses*
California
  Compton.............  Plant*, Warehouse*
  Fontana.............  Plant, Sales Office
  Hollister...........  Plant, Plant*
  Shafter.............  Plant (under construction)
  Stockton............  Plant, Plant, Warehouse*
Florida
  Tampa...............  Plant, Sales Office
Georgia
  Atlanta.............  Sales Office*
  Monroe..............  Plant, Warehouse*
  Savannah............  Plant, Sales Office

                                       5
<PAGE>

LOCATION                FACILITY
----------------------  ------------------------------------------------------
Indiana
  Mount Vernon........  Plant, Sales Office
Illinois
  Romeoville..........  Sales Office*
Maryland
  Baltimore...........  Plant
Massachusetts
  Millis..............  Plant, Sales Office, Warehouse*
  Walpole.............  Plant*
Minnesota
  Minneapolis.........  Plant, Sales Office, Warehouse*
New Jersey
  North Branch........  Plant, Warehouse*
  North Brunswick.....  Sales Office*, Warehouse*
  Wayne...............  Headquarters*, Corporate Administrative Offices*,
                          Research Center*
New Mexico
  Albuquerque.........  Plant
North Carolina
  Burgaw..............  Plant
  Goldsboro...........  Plant
Ohio
  Wadsworth...........  Plant*, Warehouse*
Oregon
  Corvallis...........  Plant
Pennsylvania
  Erie................  Plant, Sales Office, Warehouse*
  Wind Gap............  Plant
South Carolina
  Chester.............  Plant
Tennessee
  Nashville...........  Research Center*
Texas
  Dallas..............  Plant, Sales Office, Warehouse*
  Fannett.............  Warehouse
  Port Arthur.........  Plant, Plant, Warehouse, Sales Office,
                          Research Center
------------------
* Leased Property
 
     We believe that our plants and facilities, which are of varying ages and
are of different construction types, have been satisfactorily maintained, are in
good condition, are suitable for their respective operations and generally
provide sufficient capacity to meet production requirements. Each plant has
adequate transportation facilities for both raw materials and finished products.
In 1998, we made capital expenditures of $71.1 million relating to plant,
property and equipment, which is the highest amount of capital expenditures in
recent years.
 
ITEM 3. LEGAL PROCEEDINGS
 
     Bodily Injury Claims.  In connection with its formation, BMCA contractually
assumed and agreed to pay the first $204.4 million of liabilities for
asbestos-related bodily injury claims relating to the inhalation of asbestos
fiber ("Asbestos Claims") of its parent, GAF Building Materials Corporation. As
of March 30, 1997, BMCA had paid all of its assumed asbestos-related
liabilities. G-I Holdings and GAF Building Materials Corporation have jointly
and severally agreed to indemnify BMCA against any other existing or future
claims related to asbestos-related liabilities if asserted against BMCA.
 
                                       6
<PAGE>

     GAF Corporation has advised us that, as of December 28, 1998, it is
defending approximately 113,800 pending alleged Asbestos Claims (having received
notice of approximately 93,500 new Asbestos Claims during 1998) and has resolved
approximately 293,500 Asbestos Claims (including approximately 59,000 in 1998).
GAF Corporation has advised us that it believes that a significant portion of
the claims filed in 1998 were already pending against other defendants for some
period of time, with GAF Corporation being added as a defendant upon the lifting
in 1997 of the injunction relating to the Georgine class action settlement. This
injunction prevented plaintiffs from filing or proceeding with their Asbestos
Claims other than in accordance with the Georgine class action settlement, which
was rendered inoperable in 1997 by a United States Supreme Court ruling. GAF
Corporation's current estimated average cost for Asbestos Claims resolved in
1998 (including Asbestos Claims disposed of at no cost to GAF Corporation) is
approximately $3,500 per claim. Substantially all of the costs in respect of
these Asbestos Claims will be paid over several years. There can be no assurance
that the actual costs of resolving pending and future Asbestos Claims will
approximate GAF Corporation's estimated average costs for the Asbestos Claims
resolved in 1998.
 
     GAF Corporation has stated that it is committed to effecting a
comprehensive resolution of Asbestos Claims. It also has stated that it is
exploring a number of options to accomplish such resolution, but there can be no
assurance that this effort will be successful.
 
     We believe that we will not sustain any additional liability in connection
with asbestos-related claims. While we cannot predict whether any
asbestos-related claims will be asserted against us or our assets, or the
outcome of any litigation relating to such claims, we believe that we have
meritorious defenses to such claims. In addition, G-I Holdings and GAF Building
Materials Corporation have jointly and severally indemnified us with respect to
such claims, and G-I Holdings has advised us that it believes it has and will
have sufficient resources to enable it to satisfy these indemnification
obligations, if any. Should GAF Corporation or GAF Building Materials
Corporation, however, be unable to satisfy judgments against it in
asbestos-related lawsuits, its judgment creditors might seek to enforce their
judgments against the assets of GAF Corporation or GAF Building Materials
Corporation, including its holdings of our common stock. This enforcement could
result in a change of control with respect to our company. See Notes 10 and 15
to Consolidated Financial Statements.
 
     Asbestos-in-Building Claims.  GAF Corporation has also been named as a
co-defendant in asbestos-in-buildings cases for economic and property damage or
other injuries based upon an alleged present or future need to remove asbestos
containing materials from public and private buildings ("Building Claims").
Since these actions were first initiated approximately 17 years ago, GAF
Corporation has not only successfully disposed of approximately 145 such cases
at an average disposition cost (including cases disposed of at no cost to GAF
Corporation) of approximately $18,000 per case (all of which have been paid by
insurance under reservation of rights), but is a co-defendant in only three
remaining lawsuits. See "--Insurance Matters." BMCA has not assumed any
liabilities with respect to Building Claims, and G-I Holdings and GAF Building
Materials Corporation have jointly and severally agreed to indemnify BMCA
against any such liabilities in the event any such claims are asserted against
it.
 
     Insurance Matters.  GAF Corporation and G-I Holdings had available, as of
December 31, 1998, to pay asbestos-related bodily injury claims aggregate
insurance coverage of $140.7 million before discounting certain coverage (which
amount is reduced as asbestos-related liabilities are satisfied), $12.2 million
of which is the subject of negotiations with various insurers and/or the
Coverage Action described below, and which $12.2 million of coverage GAF
Corporation believes will be available to it either by agreement with its
insurance carriers or, if necessary, by legal action.
 
     In January 1993, the members of the Center for Claims Resolution, a
non-profit organization of asbestos defendant companies, including GAF
Corporation, filed an action with the United States District Court in
Philadelphia against certain product liability insurers whose policies will or
may be called upon to respond to asbestos-related bodily injury claims (the
"Coverage Action"). The Coverage Action seeks a declaratory judgment on behalf
of certain Center members, including GAF Corporation, against various
third-party defendant product liability insurers to the effect that those
insurers are obligated to provide coverage for Asbestos Claims. The insurers who
are defendants in GAF Corporation's amended complaint are Atlanta International,
Employers Mutual and Northbrook. The insurance carrier defendants have raised
various defenses to the Coverage Action.
 
                                       7
<PAGE>

     In October 1983, GAF Corporation filed a lawsuit in Los Angeles, California
Superior Court against its past insurance carriers to obtain a judicial
determination that such carriers were obligated to defend and indemnify it for
Building Claims. GAF Corporation is seeking declaratory relief as well as
compensatory damages. This action is presently in the pre-trial pleading stage.
The parties have agreed to hold this action in abeyance until such time as they
are better able to evaluate developments as they may occur in the Building
Claims. Because such litigation is in early stages and evidence and
interpretations of important legal questions are presently unavailable, it is
not possible to predict the future of such litigation.
 
     In all the Building Claims, GAF Corporation's defense costs have been paid
by one of its primary carriers. While GAF Corporation expects that such primary
carrier will continue to defend and indemnify GAF Corporation, such primary
carrier has reserved its rights to later refuse to defend and indemnify GAF
Corporation and to seek reimbursement for some or all of the fees paid to defend
and resolve the Building Claims. GAF Corporation believes that it will be able
to resolve such cases for amounts within the total indemnity obligations
available from such primary carrier.
 
ENVIRONMENTAL LITIGATION
 
     We, together with other companies, are a party to a variety of proceedings
and lawsuits involving environmental matters ("Environmental Claims") under the
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA")
and similar state laws, in which recovery is sought for the cost of cleanup of
contaminated sites, a number of which are in the early stages or have been
dormant for protracted periods.
 
     In connection with its formation, BMCA contractually assumed all
environmental liabilities of GAF Building Materials Corporation relating to
existing plant sites and the business of BMCA as then conducted. The estimates
referred to below reflect those environmental liabilities assumed by BMCA and
other environmental liabilities of our company. The environmental liabilities of
GAF Building Materials Corporation which were not assumed by BMCA, for which G-I
Holdings and GAF Building Materials Corporation have agreed to indemnify BMCA,
relate primarily to closed manufacturing facilities. G-I Holdings estimates
that, as of December 31, 1998, its liability in respect of the environmental
liabilities of GAF Building Materials Corporation not assumed by BMCA was
approximately $14.1 million, before insurance recoveries reflected on its
balance sheet of $8.1 million. BMCA estimates its liability as of December 31,
1998 in respect of assumed and other environmental liabilities is $0.8 million
and expects insurance recoveries reflected on its balance sheet (discussed
below) of $0.8 million. Insurance recoveries reflected on such balance sheets
relate to both past expenses and estimated future liabilities ("estimated
recoveries").
 
     At most sites, BMCA anticipates that liability will be apportioned among
the companies found to be responsible for the presence of hazardous substances
at the site. Although it is difficult to predict the ultimate resolution of
these claims, based on BMCA's evaluation of the financial responsibility of the
parties involved and their insurers, relevant legal issues and cost sharing
arrangements now in place, BMCA estimates that its liability in respect of all
Environmental Claims, including certain environmental compliance expenses, will
be as discussed above.
 
     After considering the relevant legal issues and other pertinent factors,
BMCA believes that it will receive the estimated recoveries and the legal
expenses incurred by GAF on BMCA's behalf and that recoveries could be well in
excess of the estimated recoveries for all Environmental Claims, although there
can be no assurances in this regard. BMCA believes it is entitled to
substantially full defense and indemnity under its insurance policies for most
Environmental Claims, although BMCA's insurers have not affirmed a legal
obligation under the policies to provide indemnity for such claims.
 
     In March 1995, GAF Corporation commenced litigation on behalf of itself and
its predecessors, successors, subsidiaries and related corporate entities in the
United States District Court for the District of New Jersey seeking amounts
substantially in excess of the estimated recoveries. The court dismissed this
action in December 1997 for lack of federal jurisdiction, and defendant insurers
appealed the dismissal. The appeal was denied by the Third Circuit Court of
Appeals in March 1999. In June 1997, GAF Corporation filed a similar action
against the insurers in the Superior Court of New Jersey, Somerset County, which
 
                                       8
<PAGE>

action is pending. While BMCA believes that its claims are meritorious, there
can be no assurance that BMCA will prevail in its efforts to obtain amounts
equal to, or in excess of, the estimated recoveries.
 
     We believe that we will not sustain any liability for environmental
liabilities of GAF Building Materials Corporation other than those that we have
contractually assumed or that relate to the operations of our business. While we
cannot predict whether any claims for non-assumed environmental liabilities will
be asserted against us or our assets, or the outcome of any litigation relative
to such claims, we believe that we have meritorious defenses to such claims. In
addition, G-I Holdings and GAF Building Materials Corporation have jointly and
severally indemnified us with respect to such claims. G-I Holdings has advised
us that it believes it has and will have sufficient resources to enable it to
satisfy these indemnification obligations, if any. The possible consequences to
us of the failure of G-I Holdings and GAF Building Materials Corporation to
satisfy judgments against them in environmental-related lawsuits are described
in the last paragraph of "Bodily Injury Claims."
 
OTHER LITIGATION
 
     Litigation is pending between us and Elk Corporation of Dallas ("Elk") in
the United States District Court for the Northern District of Texas relating to
certain aspects of our laminated shingles, which Elk claims infringe design and
utility patents issued to it. Elk also asserts that we have appropriated the
trade dress of Elk's product. Elk seeks injunctive relief, damages and
attorneys' fees. We have sued for a declaration that Elk's patents are invalid
and unenforceable and that our shingles do not infringe any of Elk's rights, and
have sought money damages for Elk's unfair competition. On October 10, 1997, the
court issued an opinion holding that Elk's design patent is unenforceable
because it was obtained through inequitable conduct. On February 11, 1999, the
United States Court of Appeals for the Federal Circuit affirmed the lower
court's ruling of enforceability. Elk filed a petition for rehearing on February
25, 1999. We believe that the petition will be denied, and that we will prevail
on Elk's remaining claims in the United States District Court.
 
     On or about April 29, 1996, an action was commenced in the Circuit Court of
Mobile County, Alabama against GAF Building Materials Corporation on behalf of a
purported nationwide class of purchasers of, or current owners of, buildings
with certain asphalt shingles manufactured by GAF Building Materials
Corporation. The action alleges, among other things, that such shingles were
defective and seeks unspecified damages on behalf of the purported class. On
September 25, 1998, we agreed to settle this litigation on a national,
class-wide basis for asphalt shingles manufactured between January 1, 1973 and
December 31, 1997. The court has granted preliminary approval of the class-wide
settlement pending the outcome of a fairness hearing that was held on March 12,
1999. Under the terms of the settlement, we will provide property owners whose
shingles were manufactured during this period and which suffer certain damages
during the term of their original warranty period, and who file a qualifying
claim, with an opportunity to receive certain limited benefits beyond those
already provided in their existing warranty. In October and December 1998, the
separate actions commenced in 1997 in the Superior Court of New Jersey,
Middlesex County, the Superior Court of New Jersey, Passaic County and the
Supreme Court of the State of New York, County of Nassau, and in 1996 in Pointe
Coupee Parish, Louisiana, on behalf of purported classes alleging that our
shingles were defective and seeking unspecified damages, were stayed pending the
outcome of the fairness hearing on the settlement agreement in the Mobile
County, Alabama action.
 
     In October 1998, GAF brought suit in the Superior Court of New Jersey,
Middlesex County, on behalf of itself and on our behalf, against certain of its
insurers for recovery of the defense costs in connection with the Mobile County,
Alabama class action and a declaration that the insurers are obligated to
provide indemnification for all damages paid pursuant to the settlement of this
class action and for other damages. This action is pending.
 
                                     * * *
 
     We believe that the ultimate disposition of the cases described above under
"Environmental Litigation," "Asbestos-in-Building Claims" and "Other Litigation"
will not, individually or in the aggregate, have a material adverse effect on
our liquidity, financial position or results of operations.
 
                                       9
<PAGE>

TAX CLAIM AGAINST GAF CORPORATION
 
     On September 15, 1997, GAF Corporation received a notice from the Internal
Revenue Service of a deficiency in the amount of $84.4 million (after taking
into account the use of net operating losses and foreign tax credits otherwise
available for use in later years) in connection with the formation in 1990 of
Rhone-Poulenc Surfactants and Specialties, L.P., a partnership in which GAF
Fiberglass holds an interest. The claim of the IRS for interest and penalties,
after taking into account the effect on the use of net operating losses and
foreign tax credits, could result in GAF Corporation incurring liabilities
significantly in excess of the deferred tax liability of $131.4 million that it
recorded in 1990 in connection with this matter. GAF Corporation has advised us
that it believes that it will prevail in this matter, although we cannot assure
you that will be the result. We believe that the ultimate disposition of this
matter will not have a material adverse effect on our business, financial
position or results of operations. GAF, G-I Holdings and certain subsidiaries of
GAF Corporation have agreed to jointly and severally indemnify us against any
tax liability associated with the surfactants partnership, for which we would be
severally liable, together with GAF Corporation and several current and former
subsidiaries of GAF Corporation, should GAF Corporation be unable to satisfy
this liability. The possible consequences to us of the failure of GAF
Corporation to satisfy this liability are described in the last paragraph of
"Bodily Injury Claims."
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     Not applicable.
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS
 
     There is no trading market for BMCA's common stock. As of March 19, 1999,
there were two holders of record of BMCA's Class A Common Stock and three
holders of record of its Class B Common Stock. See Item 12, "Security Ownership
of Certain Beneficial Owners and Management."
 
ITEM 6. SELECTED FINANCIAL DATA
 
     See page F-8.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
     See page F-2.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
     See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Financial Condition--Market-Sensitive
Instruments and Risk Management" on page F-5.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     See Index on page F-1 and Financial Statements and Supplementary Data on
pages F-10 to F-41.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
     None.
 
                                       10

<PAGE>
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The following table sets forth the name, age, position and other
information with respect to the directors and executive officers of BMCA,
Building Materials Manufacturing Corporation and Building Materials Investment
Corporation. Under the By-laws of each of these companies, each director and
executive officer continues in office until that Company's next annual meeting
of stockholders and until his successor is elected and qualified. On July 15,
1998, ISP merged with and into its parent, ISP Holdings Inc., and ISP Holdings
changed its name to International Specialty Products Inc. As used in this
section, "ISP" refers to both companies.

                                             PRESENT PRINCIPAL OCCUPATION
NAME AND POSITION HELD(1)(2)      AGE      AND FIVE-YEAR EMPLOYMENT HISTORY
--------------------------------  ---  -----------------------------------------
Samuel J. Heyman ...............  60   Mr. Heyman has been a director and
  Director and Chairman                  Chairman of BMCA since its formation.
                                         He was Chief Executive Officer of BMCA
                                         from June 1996 to January 1999 and has
                                         been Chief Executive Officer of GAF
                                         Building Materials Corporation since
                                         May 1994. He has served as a director
                                         and Chairman and Chief Executive
                                         Officer of ISP since its formation and
                                         has held the same offices with GAF
                                         Corporation, G-I Holdings and certain
                                         of its subsidiaries for more than five
                                         years. Mr. Heyman is also the Chief
                                         Executive Officer, Manager and General
                                         Partner of a number of closely held
                                         real estate development companies and
                                         partnerships whose investments include
                                         commercial real estate and a portfolio
                                         of publicly traded securities.
 
Sunil Kumar ....................  49   Mr. Kumar has been the President, Chief
  Director, President and Chief          Executive Officer and a director of
  Executive Officer                      BMCA since July 1996, January 1999 and
                                         May 1995, respectively. He also has
                                         been Chief Executive Officer of
                                         Building Materials Manufacturing and
                                         Building Materials Investment since
                                         January 1999 and President and a
                                         director of such corporations since
                                         their formation. He was Chief Operating
                                         Officer of BMCA from March 1996 to
                                         January 1999 and of Building Materials
                                         Manufacturing and Building Materials
                                         Investment from their formation to
                                         January 1999. Mr. Kumar also was
                                         President, Commercial Roofing Products
                                         Division, and Vice President of BMCA
                                         from February 1995 to March 1996. Mr.
                                         Kumar has also served as a director of
                                         GAF Corporation since January 1999.
                                         From 1992 to February 1995, he was
                                         Executive Vice President of
                                         Bridgestone/Firestone Inc., a retail
                                         distributor and manufacturer of tires
                                         and provider of automobile services.
 
James P. Rogers ................  48   Mr. Rogers has been a director of BMCA
  Director and Executive                 since its formation and Executive Vice
  Vice President                         President of BMCA since December 1996.
                                         He also has been Executive Vice
                                         President of Building Materials
                                         Manufacturing and Building Materials
                                         Investment since their formation.
                                         Mr. Rogers has been Executive Vice
                                         President and Chief Financial Officer
                                         of GAF Corporation, G-I Holdings and
                                         certain of its subsidiaries and
                                         Executive Vice President--Finance of
                                         ISP since December 1996. He was Senior
                                         Vice President of BMCA from its
                                         formation to December 1996 and of ISP
                                         from November 1993 to December 1996.
                                         Mr. Rogers was Treasurer of BMCA from
                                         its formation until December 1994.
                                         Mr. Rogers has served as Treasurer of
                                         G-I Holdings, GAF Corporation and
                                         certain of its subsidiaries since March
                                         1992.

                                       11
<PAGE>

Richard A. Weinberg ............  39   Mr. Weinberg has been Executive Vice
  Executive Vice President,              President and General Counsel of BMCA
  Secretary and General                  since May 1998 and was Senior Vice
  Counsel                                President and General Counsel from May
                                         1996 to May 1998. He also has been
                                         Executive Vice President and General
                                         Counsel of Building Materials
                                         Manufacturing and Building Materials
                                         Investment since their formation. He
                                         was Senior Vice President and General
                                         Counsel of GAF Corporation, G-I
                                         Holdings, ISP and certain of their
                                         subsidiaries from May 1996 to May 1998.
                                         He has served as Executive Vice
                                         President and General Counsel of these
                                         companies since May 1998. He was Vice
                                         President and General Counsel of BMCA
                                         from September 1994 to May 1996, Vice
                                         President--Law of BMCA from May 1994 to
                                         September 1994 and Vice President--Law
                                         of GAF Building Materials Corporation
                                         from April 1993 to May 1994.
 
William C. Lang ................  55   Mr. Lang has been Senior Vice President
  Senior Vice President and              and Chief Financial Officer of BMCA
  Chief Financial Officer                since April 1997. He also has held the
                                         same position with Building Materials
                                         Manufacturing and Building Materials
                                         Investment since their formation. He
                                         was Senior Vice President and Chief
                                         Financial Officer of Duane Reade, a
                                         regional drug store chain, from 1993 to
                                         1996.
 
Kem Scott ......................  50   Mr. Scott has been President and Chief
  Senior Vice President and              Operating Officer of U.S. Intec and
  General Manager, Commercial            Senior Vice President and General
  Roofing Products, BMCA;                Manager, Commercial Roofing Products of
  President and Chief Operating          BMCA since October 1998. He also has
  Officer, U.S. Intec                    been Senior Vice President and General
                                         Manager, Commercial Roofing Products of
                                         Building Materials Manufacturing and
                                         Building Materials Investment since
                                         their formation. From 1973 to October
                                         1998, Mr. Scott held various executive
                                         positions with the Carlisle group of
                                         companies, a manufacturer of
                                         elastomeric roofing systems, including
                                         President, Carlisle Syntec Systems and
                                         most recently from July 1997 to October
                                         1998, President of Carlisle Europe.
 
William W. Collins .............  48   Mr. Collins has been Senior Vice
  Senior Vice President--                President--Marketing and Sales,
  Marketing and Sales,                   Residential Roofing Products of BMCA
  Residential Roofing                    since November 1997. He also has held
  Products                               the same position with Building
                                         Materials Manufacturing and Building
                                         Materials Investment since their
                                         formation. He was Vice President--
                                         Marketing and Sales, Commercial Roofing
                                         Products of BMCA from March 1996 to
                                         November 1997, Vice President--Sales,
                                         Commercial of BMCA from December 1995
                                         to March 1996, Director of Insulation,
                                         Accessories and Cobra(Registered)
                                         Products of BMCA from February 1995 to
                                         December 1995 and Director of Special
                                         Projects of BMCA from July 1992 to
                                         February 1995.
 
                                       12

<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
 
SUMMARY COMPENSATION TABLE
 
     The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer and the four other most highly compensated executive officers of BMCA as
of December 31, 1998. The salaries and other compensation of Messrs. Heyman,
Rogers and Weinberg for services provided by them to our company are paid by ISP
in accordance with a management agreement between ISP and our company.
 
<TABLE>
<CAPTION>
                                                                              LONG TERM
                                                                             COMPENSATION
                                                                      --------------------------
                                                                                    SECURITIES
                                       ANNUAL COMPENSATION            RESTRICTED    UNDERLYING
                                 --------------------------------       STOCK       SARS (S)/           ALL OTHER
NAME AND PRINCIPAL POSITION(6)    YEAR     SALARY        BONUS(1)       AWARDS      OPTIONS(O)(1)      COMPENSATION
-------------------------------- ------   --------       --------     ----------    ------------       ------------
<S>                              <C>      <C>            <C>          <C>           <C>                <C>
Samuel J. Heyman ...............   1998           (6)            (6)                          (6)               (6)
  Chairman and Chief               1997           (6)            (6)                          (6)               (6)
  Executive Officer                1996           (6)            (6)                          (6)               (6)
Sunil Kumar ....................   1998   $305,325       $250,000     $2,490,000(2)         --          $1,444,887(2)
  President and Chief              1997    293,550        256,238                        7,609(O)           16,737(2)
  Operating Officer                1996    274,500        165,000                        2,190(O)/          13,561(2)
                                                                                         8,609(S)(7)
William C. Lang ................   1998   $207,083       $ 94,145                        4,200(O)       $   17,465(3)
  Senior Vice President and        1997    133,888(3)      87,094(3)                     3,837(O)(3)         5,682(3)
  Chief Financial Officer          1996           (3)            (3)                           (3)                (3)
Donald W. LaPalme ..............   1998   $169,575       $ 53,199                        2,285(O)       $   15,812(4)
  Senior Vice President--          1997    162,481         55,601                        3,612(O)           17,756(4)
  Operations                       1996    154,750         59,774                        1,200(O)           14,519(4)
William W. Collins .............   1998   $168,000       $ 69,871                        3,000(O)       $   14,899(5)
  Senior Vice                      1997    148,242         57,497                        8,218(O)           14,509(5)
  President--Marketing & Sales,    1996    128,333         42,588                          900(O)           12,092(5)
  Residential Roofing Products
</TABLE>
------------------
(1) Bonus amounts are payable pursuant to BMCA's Executive Incentive
    Compensation Program, except that a portion of the bonus amounts paid to Mr.
    Lang in 1997 and 1998 and to Dr. LaPalme in 1998 represented special bonus
    awards to those executive officers. The stock appreciation rights (S)
    relate to shares of GAF Corporation common stock. The options (O) relate to
    shares of redeemable convertible preferred stock of BMCA. See "--Options/
    SARs".

(2) Included in "All Other Compensation" for Mr. Kumar are $11,450, $11,450 and
    $10,750 representing BMCA's contribution under the GAF Capital Accumulation
    Plan in 1998, 1997 and 1996, respectively; $3,316, $3,324 and $1,636 for the
    premiums paid by BMCA for a life insurance policy in 1998, 1997 and 1996,
    respectively; and $1,963, $1,963 and $1,175 for the premiums paid by BMCA
    for a long-term disability policy in 1998, 1997 and 1996, respectively. In
    connection with the July 1998 merger of ISP Holdings and ISP, all options to
    purchase shares of redeemable convertible preferred stock of ISP Holdings
    and stock appreciation rights relating to ISP Holdings common stock,
    including options and stock appreciation rights held by Mr. Kumar, were
    cancelled. In consideration for this cancellation, Mr. Kumar was granted
    15,000 shares of Class A Common Stock of BMCA and 15,000 shares of Class B
    Common Stock of BMCA and, subject to satisfaction of certain future vesting
    requirements through December 2003 and to his remaining our employee at such
    vesting periods, Mr. Kumar is entitled to receive cash payments of
    $5,073,212 in the aggregate. Mr. Kumar received $1,428,158 of these cash
    payments in 1998. Included in "Restricted Stock Awards" is the value of the
    common stock granted to Mr. Kumar as of the date of grant. See Item 7,
    "Management's Discussion and Analysis of Financial Condition and Results of
    Operations." Mr. Kumar was elected Chief Executive Officer of BMCA,
    effective January 1, 1999.
                                              (Footnotes continued on next page)
 
                                       13
<PAGE>

(Footnotes continued from previous page)

(3) Included in "All Other Compensation" for Mr. Lang are $11,200 and $2,010,
    representing BMCA's contribution under the GAF Capital Accumulation Plan in
    1998 and 1997, respectively; $4,459 and $2,583 for the premiums paid by BMCA
    for a life insurance policy in 1998 and 1997, respectively; and $1,806 and
    $1,089 for the premiums paid on a long-term disability policy in 1998 and
    1997, respectively. Mr. Lang commenced employment with us in April 1997.

(4) Included in "All Other Compensation" for Dr. LaPalme are: $9,442, $11,700,
    and $11,000, representing BMCA's contribution under the GAF Capital
    Accumulation Plan in 1998, 1997 and 1996, respectively; $5,022, $4,781 and
    $2,754 for the premiums paid by BMCA for a life insurance policy in 1998,
    1997 and 1996, respectively; and $1,348, $1,275 and $765 for the premiums
    paid by BMCA for a long-term disability policy in 1998, 1997, and 1996,
    respectively.

(5) Included in these amounts for Mr. Collins are: $11,450, $11,513 and $10,633,
    representing BMCA's contribution under the GAF Capital Accumulation Plan in
    1998, 1997 and 1996, respectively; $2,122, $1,884 and $849 for the premiums
    paid by BMCA for a life insurance policy in 1998, 1997 and 1996,
    respectively; and $1,327, $1,112 and $610 for the premiums paid by BMCA for
    a long-term disability policy in 1998, 1997 and 1996, respectively.

(6) The salary and other compensation of Mr. Heyman are paid by ISP pursuant to
    our management agreement with ISP. No allocation of compensation for
    services to BMCA is made pursuant to the management agreement, except that
    BMCA reimbursed ISP $115,351 and $133,989 under the management agreement in
    respect of bonus amounts earned by Messrs. Rogers and Weinberg,
    respectively, for 1997 in connection with services performed by them for
    BMCA during that year. In addition, BMCA reimburses ISP, through payment of
    the management fees payable under the management agreement, for the
    estimated costs ISP incurs for providing the services of these officers. See
    Item 13, "Certain Relationships and Related Transactions--Management
    Agreement."

(7) Excluded are options to purchase redeemable preferred stock of ISP Holdings.
    As described in Note 2 above, these options were cancelled in connection
    with the July 1998 merger of ISP Holdings and ISP.
 
OPTIONS/SARS
 
     The following table summarizes options ("BMCA Preferred Options") to
acquire BMCA's redeemable convertible preferred stock granted during 1998 to the
executive officers named in the Summary Compensation Table above and the
potential realizable value of BMCA Preferred Options held by such persons. No
BMCA Preferred Options were exercised by such persons in 1998.
 
                 BMCA PREFERRED STOCK OPTION GRANTS IN 1998(1)
 
<TABLE>
<CAPTION>
                                                                        POTENTIAL REALIZABLE
                                                                              VALUE AT
                                                                        ASSUMED ANNUAL RATES
                                                                                 OF
                                                                             BOOK VALUE
                        NUMBER OF SECURITIES    % OF TOTAL OPTIONS          APPRECIATION
                        UNDERLYING OPTIONS      GRANTED TO EMPLOYEES    --------------------
                           GRANTED              IN FISCAL 1998             5%         10%
                        --------------------    --------------------    --------    --------
<S>                     <C>                     <C>                     <C>         <C>
Sunil Kumar..........              --                     --                  --          --
William C. Lang......           4,200                    7.5%           $100,902    $222,967
Donald W. LaPalme....           2,285                    4.0              54,895     121,305
William W. Collins...           3,000                    5.3              72,073     159,262
</TABLE>
------------------
(1) The BMCA Preferred Options represent options to purchase shares of
    redeemable convertible preferred stock of BMCA. Each share of preferred
    stock is convertible, at the holder's option, into shares of Class A Common
    Stock of BMCA at a formula price based on Book Value (as defined in the
    option agreement) as of the date of grant. The BMCA Preferred Options vest
    over five years from the date of
                                              (Footnotes continued on next page)
 
                                       14
<PAGE>

(Footnotes continued from previous page)

    grant. Dividends will accrue on the preferred stock from the date of
    issuance at the rate of 8% per annum. The preferred stock is redeemable, at
    BMCA's option, for a redemption price equal to the exercise price per share
    plus accrued and unpaid dividends. The Class A Common Stock of BMCA issuable
    upon conversion of the preferred stock is subject to repurchase by BMCA
    under certain circumstances at a price equal to current Book Value. The
    exercise price of the options is equal to the fair value per share of the
    preferred stock at the date of grant. The BMCA Preferred Options have no
    expiration date. The potential realizable values are calculated on the basis
    of a five-year period from the date of grant.
 
   BMCA PREFERRED STOCK OPTIONS/GAF CORPORATION STOCK APPRECIATION RIGHTS AND
                               OPTIONS/SAR VALUES
                              AT DECEMBER 31, 1998
 
<TABLE>
<CAPTION>
                           NUMBER OF SECURITIES
                                UNDERLYING                VALUE OF UNEXERCISED
                        UNEXERCISED BMCA PREFERRED    IN-THE-MONEY BMCA PREFERRED
                        OPTIONS(O)/GAF CORPORATION    OPTIONS (O)/GAF CORPORATION
                          SARs(S)(1) AT 12/31/98          SARs(S) AT 12/31/98
NAME                    EXERCISABLE/UNEXERCISABLE      EXERCISABLE/UNEXERCISABLE
---------------------   --------------------------    ---------------------------
<S>                     <C>                           <C>
Sunil Kumar..........          5,521/12,289(S)              $      0/$    0
                                2,836/6,963(O)                55,110/82,127(2)
William C. Lang......             767/7,270(O)                 6,799/27,545(2)
Donald W. LaPalme....           1,442/5,655(O)                28,565/37,948(2)
William W. Collins...           2,184/9,934(O)                23,568/36,319(2)
</TABLE>
------------------
(1) The stock appreciation rights relating to GAF Corporation common stock
    represent the right to receive a cash payment based upon the appreciation in
    value of the specified number of shares of common stock of GAF Corporation
    over the determined initial book value per share of common stock of GAF
    Corportion (adjusted for the separation transactions) and interest on such
    book value at a specified rate. The GAF Corporation stock appreciation
    rights vest over a five-year period, subject to earlier vesting under
    certain circumstances, including in connection with a change of control, and
    have no expiration date.

(2) Options for 9,799, 3,837, 4,812 and 9,118 shares of preferred stock were
    in-the-money for Messrs. Kumar, Lang, LaPalme and Collins, respectively, at
    December 31, 1998.
 
COMPENSATION OF DIRECTORS
 
     The directors of BMCA do not receive any compensation for their services as
such.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONS
 
     Compensation decisions are determined by our Board of Directors, each
member of which is also one of our executive officers. Messrs. Rogers and Heyman
are also executive officers of ISP, and Mr. Heyman is a member of the Board of
Directors of ISP. See Item 13, "Certain Relationships and Related Transactions."
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     Approximately 98.5% of our outstanding Class A Common Stock is owned of
record by GAF Building Materials Corporation. All of the outstanding common
stock of GAF Building Materials Corporation is owned of record by G Industries
which is 100% owned by G-I Holdings, which in turn is 100% owned by GAF
Corporation. All of our outstanding Class B Common Stock is owned of record by
trusts for the benefit of the children of Mr. Kumar.
 
     The following table sets forth information with respect to the ownership of
Common Stock, as of March 19, 1999, by each other person known to us to own
beneficially more than 5% of either class of the
 
                                       15
<PAGE>

Common Stock outstanding on that date, by each of our directors and by all of
our executive officers and directors as a group.
 
<TABLE>
<CAPTION>
                                                         AMOUNT AND
                                                         NATURE OF
                              NAME AND ADDRESS OF        BENEFICIAL      PERCENT OF    TOTAL VOTING
TITLE OF CLASS                BENEFICIAL OWNER(1)        OWNERSHIP         CLASS          POWER
-----------------------   ----------------------------   ----------      ----------    ------------
<S>                       <C>                            <C>             <C>           <C>
Class A Common Stock...   Samuel J. Heyman               1,000,010          98.5%(2)       97.0%(2)

                          Sunil Kumar                       15,000             1.5%           1.5%

                          All directors and executive
                          officers of BMCA as a
                          group (7 persons)              1,015,010         100.0%(2)       98.5%(2)

Class B Common Stock...   Sunil Kumar                       15,000(3)        100.0%           1.5%

                          All directors and executive
                          officers of BMCA as a
                          group (7 persons)                 15,000(3)        100.0%           1.5%
</TABLE>
------------------
(1) The business address for each of Messrs. Heyman and Kumar is 1361 Alps Road,
    Wayne, New Jersey 07470.
 
(2) The number of shares shown as being beneficially owned (as defined in
    Rule 13d-3 of the Exchange Act) by Mr. Heyman and by all directors and
    executive officers of the Company as a group attributes ownership of GAF
    Building Materials Corporation's shares to Mr. Heyman. As of March 19, 1999,
    Mr. Heyman beneficially owned (as defined in Rule 13d-3 of the Exchange Act)
    approximately 97% of the capital stock of GAF Corporation.
 
(3) The shares of Class B Common Stock are owned of record by trusts for the
    benefit of Mr. Kumar's children. Mr. Kumar disclaims beneficial ownership of
    all of these shares.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
MANAGEMENT AGREEMENTS
 
     Pursuant to a management agreement which expires December 31, 1999, ISP (of
which our Chairman, Samuel J. Heyman beneficially owns (as defined in Rule 13d-3
of the Exchange Act) approximately 76%) provides certain general management,
administrative, legal, telecommunications, information and facilities services
to us (including the use of our headquarters in Wayne, New Jersey). ISP charged
us $4.3 million in 1998 for providing these services. These charges consist of
management fees and other reimbursable expenses attributable to us, or incurred
by ISP for our benefit. They are based on an estimate of the costs ISP incurs to
provide such services. Effective January 1, 1999, the term of the management
agreement was extended through the end of 1999, and the management fees payable
under such agreement were increased. We also allocate a portion of the
management fees payable by us under the management agreement to separate lease
payments for the use of our headquarters. Based on the services provided by ISP
in 1998 under the management agreement, the aggregate amount payable by us to
ISP under the management agreement for 1999 is expected to be approximately
$5.3 million. Certain of our executive officers receive their compensation from
ISP. ISP is indirectly reimbursed for this compensation through payment of the
management fee and other reimbursable expenses payable under the management
agreement.
 
     As of January 1, 1997, we entered into a separate management agreement with
GAF Fiberglass under which we provide certain general management, administrative
and financial services to GAF Fiberglass. Under the management agreement which
was renewed for 1999 and expires December 31, 1999, GAF Fiberglass is obligated
to pay us an annual management fee of $1.0 million.
 
     Due to the unique nature of the services provided under the management
agreements, comparisons with third party arrangements are difficult. However, we
believe that the terms of each of the management agreements taken as a whole are
no less favorable to us than could be obtained from an unaffiliated third party.
 
                                       16
<PAGE>

CERTAIN PURCHASES
 
     We purchase all of our colored roofing granules requirements from ISP
(except for the requirements of our California and Oregon roofing plants and a
portion of the requirements of our Indiana roofing plant which are supplied by a
third party) under a requirements contract. Effective January 1, 1999, this
contract was amended to cover, among other things, purchases of colored roofing
granules by our subsidiaries and was renewed for 1999. This contract is subject
to annual renewal unless terminated by either party to such agreement. In 1997
and 1998, BMCA and its subsidiaries purchased in the aggregate approximately
$51.1 million and $62.6 million, respectively, of mineral products from ISP.
 
     As part of the separation transactions involving GAF and its subsidiaries
in January 1997, we transferred to GAF Fiberglass our Nashville, Tennessee
facility. GAF Fiberglass manufactures a significant portion of our glass fiber
requirements pursuant to a supply agreement on terms which we believe are at
least as favorable to us as could be obtained from an unaffiliated third party.
In 1997 and 1998, we purchased approximately $24.5 million and $26.1 million,
respectively, of glass fiber from GAF Fiberglass.
 
TAX SHARING AGREEMENT
 
     We have entered into a tax sharing agreement dated January 31, 1994 with
GAF Corporation and G-I Holdings with respect to the payment of federal income
taxes and certain related matters. During the term of the tax sharing agreement,
which is effective for the period during which we or any of our domestic
subsidiaries is included in a consolidated federal income tax return filed by
GAF Corporation, we are obligated to pay G-I Holdings an amount equal to those
federal income taxes we would have incurred if we (on behalf of ourselves and
our domestic subsidiaries) filed our own federal income tax return. Unused tax
attributes will carry forward for use in reducing amounts payable by us to G-I
Holdings in future years, but cannot be carried back. If we ever were to leave
the GAF Corporation consolidated tax group (the "GAF Group"), we would be
required to pay to G-I Holdings the value of any tax attributes to which we
would succeed under the consolidated return regulations to the extent such
attributes reduced the amounts otherwise payable by us under the tax sharing
agreement. Under certain circumstances, the provisions of the tax sharing
agreement could result in us having a greater liability under the agreement than
we would have had if we (and our domestic subsidiaries) had filed our own
separate federal income tax return. Under the tax sharing agreement, we and each
of our domestic subsidiaries are responsible for any taxes that would be payable
by reason of any adjustment to the tax returns of GAF Corporation or its
subsidiaries for years prior to the adoption of the tax sharing agreement that
relate to our business or assets or the business or assets of any of our
domestic subsidiaries. Although, as a member of the GAF Group, we are severally
liable for all federal income tax liabilities of the GAF Group, including tax
liabilities not related to our business, G-I Holdings and GAF Corporation have
agreed to indemnify us and our subsidiaries for all tax liabilities of the GAF
Group other than tax liabilities (1) arising from our operations and the
operations of our domestic subsidiaries and (2) for tax years pre-dating the tax
sharing agreement that relate to our business or assets and the business or
assets of any of our domestic subsidiaries. The tax sharing agreement provides
for analogous principles to be applied to any consolidated, combined or unitary
state or local income taxes. Under the tax sharing agreement, GAF Corporation
makes all decisions with respect to all matters relating to taxes of the GAF
Group. The provisions of the tax sharing agreement take into account both the
federal income taxes we would have incurred if we filed our own separate federal
income tax return and the fact that we are a member of the GAF Group for federal
income tax purposes.
 
INTERCOMPANY BORROWINGS
 
     BMCA makes loans to, and borrows from, G-I Holdings and its subsidiaries
from time to time at prevailing market rates (between 5.82% and 5.96% per annum)
during 1997 and 1998. The highest amount of loans made by BMCA to G-I Holdings
during 1997 and 1998 was $6.2 million. No loans were made to BMCA by G-I
Holdings and its subsidiaries during 1997 and 1998. As of December 31, 1998, no
loans were owed to BMCA by G-I Holdings, and no loans were owed by BMCA to
affiliates. In addition, BMCA makes non-interest bearing advances to affiliates,
of which $1.5 million were outstanding at December 31, 1998.
 
                                       17

<PAGE>
                                    PART IV
 
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
     The following documents are filed as part of this report:
 
     (a)(1) Financial Statements: See Index on page F-1.
 
     (a)(2) Financial Statement Schedules: See Index on page F-1.
 
     (a)(3) Exhibits:

EXHIBIT
NUMBER    DESCRIPTION
-------   ---------------------------------------------------------------------
  2.1     -- Reorganization Agreement, dated as of December 31, 1998, by and
             among BMCA, Building Materials Manufacturing Corporation and
             Building Materials Investment Corporation (incorporated by
             reference to Exhibit 2.1 to BMCA's Registration Statement on
             Form S-4 (Registration No. 333-69749) (the "2008 Notes S-4")).

  3.1     -- Certificate of Incorporation of BMCA (incorporated by reference to
             Exhibit 3.1 to BMCA's Form 10-Q for the quarter ended September
             27, 1998).

  3.2     -- By-laws of BMCA (incorporated by reference to Exhibit 3.2 to
             BMCA's Registration Statement on Form S-4 (Registration
             No. 33-81808)) (the "Deferred Coupon Note Registration
             Statement").

  3.3     -- Certificate of Incorporation of Building Materials Manufacturing
             Corporation.

  3.4     -- By-laws of Building Materials Manufacturing Corporation.

  3.5     -- Certificate of Incorporation of Building Materials Investment
             Corporation.

  3.6     -- By-laws of Building Materials Investment Corporation.

  4.1     -- Indenture, dated as of December 3, 1998, between BMCA and The Bank
             of New York, as trustee (incorporated by reference to Exhibit 4.1
             to the 2008 Notes S-4).

  4.2     -- First Supplemental Indenture dated as of January 1, 1999 to
             Indenture dated as of December 3, 1998 among BMCA, as issuer,
             Building Materials Manufacturing Corporation and Building
             Materials Investment Corporation, as guarantors and The Bank of
             New York, as trustee (incorporated by reference to Exhibit 4.4 to
             the 2008 Notes S-4).

  4.3     -- Registration Rights Agreement, dated December 3, 1998, between
             BMCA, Bear, Stearns & Co. Inc. and Chase Securities, Inc.
             (incorporated by reference to Exhibit 4.3 to the 2008 Notes S-4).

  4.4     -- Indenture, dated as of June 30, 1994, between BMCA and The Bank of
             New York, as trustee (incorporated by reference to Exhibit 4.1 to
             the Deferred Coupon Note Registration Statement).

  4.5     -- Indenture, dated as of December 9, 1996, between BMCA and The Bank
             of New York, as trustee (incorporated by reference to Exhibit 4.1
             to BMCA's Registration Statement on Form S-4 (Registration
             No. 333-20859) (the "2006 Notes Registration Statement")).

  4.6     -- Indenture, dated as of October 20, 1997, between BMCA and The Bank
             of New York, as trustee (incorporated by reference to Exhibit 4.1
             to BMCA's Registration Statement on Form S-4 (Registration
             No. 333-41531) (the "8% Notes Registration Statement")).

  4.7     -- Indenture, dated as of July 17, 1998, between BMCA and The Bank of
             New York, as trustee (incorporated by reference to Exhibit 4.1 to
             BMCA's Registration Statement on Form S-4 (Registration No.
             333-60633) (the "2005 Notes S-4")).

  4.8     -- First Supplemental Indenture, dated as of November 30, 1998, to
             Indenture dated as of June 30, 1994 between BMCA as issuer and
             The Bank of New York, as trustee (incorporated by reference to
             Exhibit 10.5 to the 2008 Notes S-4).

  4.9     -- Second Supplemental Indenture, dated as of January 1, 1999, to
             Indenture dated as of June 30, 1994, as previously amended, among
             BMCA, as issuer, Building Materials Manufacturing Corporation and
             Building Materials Investment Corporation, as guarantors and The
             Bank of New York, as trustee (incorporated by reference to
             Exhibit 10.6 to the 2008 Notes S-4).

                                       18
<PAGE>

  4.10    -- First Supplemental Indenture, dated as of January 1, 1999, to
             Indenture dated as of December 9, 1996 among BMCA, as issuer,
             Building Materials Manufacturing Corporation and Building
             Materials Investment Corporation, as guarantors and The Bank of
             New York, as trustee (incorporated by reference to Exhibit 10.7 to
             the 2008 Notes S-4).

  4.11    -- First Supplemental Indenture, dated as of January 1, 1999, to
             Indenture dated as of October 20, 1997 among BMCA, as issuer,
             Building Materials Manufacturing Corporation, as co-obligor,
             Building Materials Investment Corporation, as Guarantor and The
             Bank of New York, as trustee (incorporated by reference to
             Exhibit 10.8 to the 2008 Notes S-4).

  4.12    -- First Supplemental Indenture, dated as of January 1, 1999, to
             Indenture dated as of July 17, 1998 among BMCA, as issuer,
             Building Materials Manufacturing Corporation and Building
             Materials Investment Corporation, as guarantors and The Bank of
             New York, as trustee (incorporated by reference to Exhibit 10.9 to
             the 2008 Notes S-4).

 10.1     -- Amended and Restated Management Agreement, dated as of January 1,
             1999, among GAF, G-I Holdings, G Industries, Merick Inc.,
             GAF Fiberglass, ISP, GAF Building Materials Corporation, GAF
             Broadcasting Company, Inc., BMCA and ISP Opco Holdings Inc.

 10.2     -- Form of Option Agreement relating to Series A Cumulative
             Redeemable Convertible Preferred Stock (incorporated by reference
             to Exhibit 10.9 to BMCA's Form 10-K for the year ended
             December 31, 1996 (the "1996 Form 10-K")).*

 10.3     -- Forms of Amendment to Option Agreement relating to Series A
             Cumulative Redeemable Convertible Preferred Stock (incorporated by
             reference to Exhibit 10.12 to BMCA's Form 10-K for the year ended
             December 31, 1997 (the "1997 Form 10-K")).*

 10.4     -- Form of Option Agreement relating to Series A Cumulative
             Redeemable Preferred Stock (incorporated by reference to
             Exhibit 10.13 to the 1997 Form 10-K).*

 10.5     -- BMCA Preferred Stock Option Plan (incorporated by reference to
             Exhibit 4.2 to BMCA's Form S-8).*

 10.6     -- Tax Sharing Agreement, dated as of January 31, 1994, among GAF,
             G-I Holdings and BMCA (incorporated by reference to Exhibit 10.6
             to the Deferred Coupon Note Registration Statement).

 10.7     -- Reorganization Agreement, dated as of January 31, 1994, among GAF
             Building Materials Corporation, G-I Holdings and BMCA
             (incorporated by reference to Exhibit 10.9 to the Deferred Coupon
             Note Registration Statement).

 10.8     -- Stock Appreciation Right Agreement, dated January 1, 1997, between
             GAF Corporation and Sunil Kumar (incorporated by reference to
             Exhibit 10.11 to the 1996 Form 10-K).*

 10.9     -- Amended and Restated Stock Appreciation Right Agreement, dated
             January 1, 1997, between GAF Corporation and Sunil Kumar
             (incorporated by reference to Exhibit 10.12 to the 1996
             Form 10-K).*

 10.10    -- Letter Agreement, dated July 8, 1998, among BMCA, ISP Holdings and
             Sunil Kumar (incorporated by reference to Exhibit 10.18 to the
             2005 Notes S-4).*

 21       -- Subsidiaries of BMCA (incorporated by reference to Exhibit 21 to
             the 2008 Notes S-4).

 23       -- Consent of Arthur Andersen LLP.

 27       -- Financial Data Schedule for fiscal year 1998, which is submitted
             electronically to the Securities and Exchange Commission for
             information only.

------------------
 * Management and/or compensation plan or arrangement.

     (b) Reports on Form 8-K
 
     No reports on Form 8-K were filed in the fourth quarter of 1998.
 
                                       19

<PAGE>
                                   SIGNATURES
 
     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
 
                                       BUILDING MATERIALS CORPORATION OF AMERICA

                                       By:          /s/ WILLIAM C. LANG
                                           -------------------------------------
                                                      William C. Lang
                                              Senior Vice President and Chief
                                                     Financial Officer
Date: March 30, 1999
 
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

     SIGNATURE                          TITLE                          DATE
--------------------   ----------------------------------------   --------------

/s/ SAMUEL J. HEYMAN   Chairman of the Board and Director         March 30, 1999
--------------------
Samuel J. Heyman
 
/s/ SUNIL KUMAR        President, Chief Executive Officer and     March 30, 1999
--------------------   Director (Principal Executive Officer)
Sunil Kumar
 
/s/ JAMES P. ROGERS    Executive Vice President and Director      March 30, 1999
--------------------
James P. Rogers
 
/s/ WILLIAM C. LANG    Senior Vice President and Chief            March 30, 1999
--------------------   Financial Officer (Principal Financial
William C. Lang        and Accounting Officer)


                                       20
<PAGE>
                                   SIGNATURES
 
     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANTS HAVE DULY CAUSED THIS REPORT TO BE SIGNED
ON THEIR BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
 
                                    BUILDING MATERIALS MANUFACTURING CORPORATION

                                    BUILDING MATERIALS INVESTMENT CORPORATION

                                    By:       /s/ WILLIAM C. LANG
                                        -------------------------------
                                                William C. Lang
                                        Senior Vice President and Chief
                                               Financial Officer
Date: March 30, 1999
 
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANTS AND IN THE CAPACITIES AND ON THE DATES INDICATED.

     SIGNATURE                          TITLE                          DATE
--------------------   ----------------------------------------   --------------

/s/ SUNIL KUMAR        President, Chief Executive Officer and     March 30, 1999
--------------------   Director (Principal Executive Officer)
Sunil Kumar
 
/s/ WILLIAM C. LANG    Senior Vice President and Chief            March 30, 1999
--------------------   Financial Officer (Principal Financial
William C. Lang        and Accounting Officer)

                                       21

<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA
                                   FORM 10-K

          INDEX TO MANAGEMENT'S DISCUSSION AND ANALYSIS, CONSOLIDATED
                       FINANCIAL STATEMENTS AND SCHEDULES
 
<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                              ----
<S>                                                                                                           <C>
Management's Discussion and Analysis of Financial Condition and Results of Operations......................   F-2
 
Selected Financial Data....................................................................................   F-8
 
Report of Independent Public Accountants...................................................................   F-9
 
Consolidated Statements of Operations for the three years ended December 31, 1998..........................   F-10
 
Consolidated Balance Sheets as of December 31, 1997 and 1998...............................................   F-11
 
Consolidated Statements of Cash Flows for the three years ended December 31, 1998..........................   F-12
 
Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1998................   F-14
 
Notes to Consolidated Financial Statements.................................................................   F-15
 
Supplementary Data (Unaudited):
  Quarterly Financial Data (Unaudited).....................................................................   F-41
 
                                  SCHEDULES
 
Consolidated Financial Statement Schedules:
  Schedule II--Valuation and Qualifying Accounts...........................................................   S-1
</TABLE>
 
                                      F-1
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS
 
     Building Materials Corporation of America (the "Company"), an indirect
subsidiary of GAF Corporation ("GAF") and G-I Holdings Inc. ("G-I Holdings"),
was formed in January 1994 to acquire the operating assets and certain
liabilities of GAF Building Materials Corporation ("GAFBMC"), the Company's
parent. See Note 1 to Consolidated Financial Statements.
 
RESULTS OF OPERATIONS
 
  1998 Compared With 1997
 
     The Company recorded a net loss in 1998 of $10.6 million compared with net
income of $26.1 million in 1997. The net loss in 1998 reflected the impact of
$27.6 million of pre-tax nonrecurring charges ($17.1 million after-tax impact)
and after-tax extraordinary charges of $18.1 million. Excluding the effect of
these charges, the Company's results reflected higher operating and other
income, partially offset by increased interest expense.
 
     Net sales for 1998 were $1.088 billion, a 15.2% increase over net sales for
1997 of $944.6 million, principally due to increased sales in the residential
roofing product line and the acquisition of the Leslie-Locke business in June
1998 (see Note 4 to Consolidated Financial Statements), partially offset by
lower sales in the commercial roofing product line. The increase in residential
sales resulted from higher unit volumes and average selling prices, while the
commercial roofing product line experienced declines in both unit volumes and
average selling prices.
 
     The Company recorded pre-tax nonrecurring charges in 1998 aggregating
$27.6 million, of which $20.0 million related to the settlement of a national
class action lawsuit involving asphalt shingles manufactured between January 1,
1973 and December 31, 1997. Under the terms of the September 1998 settlement,
which has been granted preliminary approval by the court pending the outcome of
a fairness hearing, the Company will provide property owners whose GAF shingles
were manufactured during this period and which suffer certain damages during the
term of their original warranty period, and who file a qualifying claim, with an
opportunity to receive certain limited benefits beyond those already provided in
their existing warranty. If the court grants final approval of this settlement,
the settlement will resolve a class action filed against GAFBMC in Mobile
County, Alabama. Several other class action lawsuits that had been brought
against GAFBMC in 1996 and 1997 were stayed pending final approval of the Mobile
County, Alabama class action. Each of these lawsuits had alleged that certain
GAF shingles were defective and sought unspecified damages. The Company agreed
to the settlement, payments against which will be made over a number of years,
to avoid the expense required to defend such litigation. The Company believes
the court will grant final approval of the settlement, although there can be no
assurance in that regard. If the court does not grant final approval and the
settlement agreement is rendered inoperable, the Mobile County, Alabama action
would continue as if no settlement agreement had existed. In addition, the stays
of the other class actions could be lifted and those actions could continue. In
that event, the Company would reverse the pre-tax nonrecurring charge of
$20.0 million related to the settlement. In July 1998, the Company recorded a
pre-tax nonrecurring charge of $7.6 million related to a grant to its President
and Chief Executive Officer of 30,000 shares of restricted common stock of the
Company and related cash payments to be made over a specified period of time
(substantially all of which is earned) in connection with the termination by an
affiliate of preferred stock options and stock appreciation rights held by such
officer.
 
     Operating income, before the impact of the nonrecurring charges, was
$73.5 million for 1998, a 4.9% increase over the $70.1 million recorded in 1997.
This increase in operating income was primarily attributable to improved gross
profit margins due to increased plant capacity utilization and the inclusion of
the Leslie-Locke business since its acquisition in June 1998. Partially
offsetting these improvements were higher distribution costs due to rail carrier
service problems in the first nine months of 1998, and higher selling, general
and administrative expenses resulting from broader marketing efforts.
 
     Interest expense increased from $42.8 million in 1997 to $49.7 million in
1998, primarily due to higher debt levels, partially offset by lower average
interest rates. The lower average interest rates resulted from the
 
                                      F-2
<PAGE>

refinancing of $279.7 million in aggregate principal amount at maturity of the
Company's 11 3/4% Senior Deferred Coupon Notes due 2004 (the "Deferred Coupon
Notes") with substantially all of the net proceeds from the issuances of the
7 3/4% Senior Notes due 2005 (the "2005 Notes") and 8% Senior Notes due 2008
(the "2008 Notes") on July 17 and December 3, 1998, respectively. See the
discussion below under Liquidity and Financial Condition. In connection with
these transactions, the Company recorded after-tax extraordinary losses of
$18.1 million, related to premiums paid to purchase the Deferred Coupon Notes.
 
     Other income, net, was $15.9 million in 1998 compared with $15.5 million in
1997, with the improvement due primarily to the absence of a $3.0 million
provision recorded in 1997 for estimated obligations related to product warranty
claims for a discontinued product, and lower other miscellaneous expenses,
partially offset by $4.2 million lower investment income.
 
  1997 Compared With 1996
 
     The Company recorded net income in 1997 of $26.1 million compared with net
income of $17.1 million in 1996. The 53.0% increase in net income was
attributable to higher operating and other income, partially offset by higher
interest expense.
 
     Net sales for 1997 increased $92.7 million, or 10.9%, to $944.6 million
compared with $852.0 million in 1996. The sales growth reflected increased unit
volumes of both the residential and commercial roofing product lines, as well as
the sales of the Leatherback Industries business of $30.2 million, which was
acquired in March 1997.
 
     Gross profit margin increased to 27.3% in 1997 compared with 27.0% in 1996,
resulting primarily from lower manufacturing costs and improved product mix.
Selling, general and administrative expenses increased 11.4% to $185.7 million
in 1997 from $166.7 million in 1996, primarily reflecting increased costs of
distribution. Selling, general and administrative expenses as a percentage of
net sales increased slightly from 19.6% in 1996 to 19.7% in 1997.
 
     Operating income in 1997 was $70.1 million, an increase of $8.7 million, or
14.2%, compared with $61.4 million in 1996. The increase in operating income was
attributable to the higher sales levels and improved margins.
 
     Interest expense was $42.8 million in 1997 compared with $32.0 million in
1996 due to higher debt levels, primarily resulting from the issuance in
December 1996 of $100 million in aggregate principal amount of 8 5/8% Senior
Notes due 2006 (the "8 5/8% Notes") and the issuance in October 1997 of
$100 million in aggregate principal amount of 8% Senior Notes due 2007 (the
"2007 Notes").
 
     Other income, net, was $15.5 million in 1997 compared with other expense,
net, of $1.5 million in 1996. The improvement was due principally to
$20.0 million higher investment income, partially offset by a $3.0 million
provision for estimated obligations related to product warranty claims for a
discontinued product.
 
LIQUIDITY AND FINANCIAL CONDITION
 
     Net cash inflow during 1998 was $61.6 million before financing activities,
and included $88.0 million of cash generated from operations, the reinvestment
of $71.1 million for capital programs, acquisitions of $59.2 million, including
the acquisition of the Leslie-Locke business for $43.5 million, proceeds of
$29.0 million from the sale of the Company's perlite insulation manufacturing
assets, and the generation of $74.9 million from net sales of available-for-sale
and held-to-maturity securities.
 
     Cash invested in additional working capital totaled $27.9 million during
1998, primarily reflecting increases in accounts payable and accrued liabilities
of $40.4 million, partially offset by a $10.9 million increase in inventories
and a $4.0 million increase in receivables. Accrued liabilities, including the
reserve for product warranty claims, increased by $40.7 million to
$80.1 million as a result of additional accrued interest payable, increases in
accrued distribution costs and other plant operating accruals and due to the
$8.6 million short-term portion of the $27.6 million of nonrecurring charges.
Cash from operating activities also reflected a $42.2 million cash inflow from
related party transactions as a result of repayments of advances which were made
by the Company in 1997, a $64.3 million cash outflow for net purchases of
trading securities and $17.4 million of cash
 
                                      F-3
<PAGE>

inflow from an increase in other liabilities and other operating activities,
mainly reflecting $19.0 million of the nonrecurring charges and $6.6 million of
net unrealized losses on trading securities and other short-term investments.
 
     Net cash used in financing activities totaled $49.5 million in 1998. The
Company generated $303.5 million from the issuances in 1998 of the 2005 Notes
and the 2008 Notes and $6.2 million from the repayment of a loan by a related
party. Offsetting such cash inflows was $287.9 million of repayments of
long-term debt, principally the repurchase of $279.7 million in aggregate
principal amount at maturity of the Deferred Coupon Notes, a $34.0 million
paydown of borrowings under the Company's bank credit facility, a $26.9 million
paydown of short-term borrowings, and $6.1 million of financing fees and
expenses.
 
     As a result of the foregoing factors, cash and cash equivalents increased
by $12.1 million during 1998 to $25.0 million, excluding $180.6 million of
trading, available-for-sale and held-to-maturity securities and other short-term
investments.
 
     In December 1998, the Company issued $155 million in aggregate principal
amount of the 2008 Notes and used substantially all of the net proceeds from
such issuance to purchase, and subsequently cancel, $147.1 million in aggregate
principal amount at maturity of the Deferred Coupon Notes.
 
     In July 1998, the Company issued $150 million in aggregate principal amount
of the 2005 Notes and used substantially all of the net proceeds from such
issuance to purchase, and subsequently cancel, $132.6 million in aggregate
principal amount at maturity of the Deferred Coupon Notes.
 
     The Company's bank credit facilities were replaced in August 1997 with a
new three-year, $75 million facility (the "Credit Agreement"). The terms of the
Credit Agreement provide for a $75 million unsecured revolving credit facility,
the full amount of which is available for letters of credit, provided that total
borrowings and outstanding letters of credit may not exceed $75 million in the
aggregate. As of December 31, 1998, no borrowings were outstanding under the
Credit Agreement and $29.9 million of letters of credit were outstanding. Under
the terms of the Credit Agreement, the Company is subject to certain financial
covenants, including interest coverage and leverage ratios, and dividends and
other restricted payments are limited. The Company was in compliance with such
covenants as of December 31, 1998.
 
     Additional borrowings by the Company are subject to certain covenants
contained in the indentures relating to the 8 5/8% Notes, the 2007 Notes, the
2005 Notes, the 2008 Notes (collectively, the "Other Senior Notes"), the
Deferred Coupon Notes and the Credit Agreement. The Company is currently limited
by certain of these covenants from incurring additional debt, except under
certain limited circumstances including under the Credit Agreement and the
refinancing of existing debt.
 
     The objectives of the Company in utilizing interest rate swap agreements
("swaps") are to lower funding costs, diversify sources of funding and manage
interest rate exposure. In June 1998, the Company terminated its outstanding
swaps related to its Deferred Coupon Notes with an aggregate ending notional
principal amount of $60.0 million, resulting in gains of $0.7 million. The gains
have been deferred and are being amortized as a reduction of interest expense
over the remaining original life of the swaps. By utilizing swaps, the Company
reduced its interest expense by $2.2, $2.0, and $1.9 million in 1996, 1997 and
1998, respectively. See Note 10 to Consolidated Financial Statements.
 
     See Note 10 to Consolidated Financial Statements for further information
regarding the debt instruments of the Company.
 
     Upon its formation on January 31, 1994, the Company assumed the first
$204.4 million of GAFBMC's liabilities relating to then-pending cases and
previously settled asbestos-related bodily injury cases, all of which were paid
as of March 30, 1997. See Item 3, "Legal Proceedings" for further information
regarding asbestos-related matters. At December 31, 1998, the Company had total
outstanding consolidated indebtedness of $592.7 million, of which $4.3 million
matures prior to December 31, 1999, and stockholders' equity of $44.9 million.
The Company anticipates funding such obligations from its cash and investments,
operations and/or borrowings, which may include borrowings from affiliates.
 
     In March 1993, the Company sold its trade accounts receivable
("receivables") to a trust, without recourse, pursuant to an agreement which
provided for a maximum of $75 million in cash to be made available to the
 
                                      F-4
<PAGE>

Company based on eligible receivables outstanding from time to time. In November
1996, the Company repurchased the receivables sold pursuant to the 1993
agreement and sold them to a special purpose subsidiary of the Company, BMCA
Receivables Corporation, without recourse, which in turn sold them to a new
trust, without recourse, pursuant to new agreements. The new agreements provide
for a maximum of $115 million in cash to be made available to the Company based
on eligible receivables outstanding from time to time. This facility expires in
December 2001.
 
     The Company makes loans to, and borrows from, G-I Holdings and its
subsidiaries at prevailing market rates. As of December 31, 1998, no loans were
owed to the Company by G-I Holdings and no loans were owed by the Company to
affiliates. In addition, the Company makes non-interest bearing advances to
affiliates, of which $1.5 million were outstanding at December 31, 1998.
 
     The parent corporations of the Company are essentially holding companies
without independent businesses or operations and, as such, are presently
dependent upon the cash flows of their subsidiaries, principally the Company, in
order to satisfy their obligations, including asbestos-related claims and
certain potential tax liabilities including tax liabilities relating to
Rhone-Poulenc Surfactants & Specialties, L.P., a Delaware limited partnership
which operates, among other businesses, GAF Fiberglass Corporation's ("GFC")
former surfactants chemicals business. The parent corporations of the Company
are GAF, G-I Holdings, G Industries Corp. and GAFBMC. Except for the Company,
the only significant asset of such parent corporations is GFC. GAF has advised
the Company that it expects to obtain funds to satisfy such obligations from,
among other things, dividends and loans from subsidiaries, principally the
Company, and from payments pursuant to the Tax Sharing Agreement between GAF and
the Company. The indentures relating to the Deferred Coupon Notes, the Other
Senior Notes and the Credit Agreement contain restrictions on the amount of
dividends, loans and other restricted payments, as defined therein, which may be
paid by the Company. As of December 31, 1998, after giving effect to the most
restrictive of the aforementioned restrictions, the Company could have paid
dividends and other restricted payments of up to $79.4 million. The Company does
not believe that the dependence of its parent corporations on the cash flows of
their subsidiaries should have a material adverse effect on the operations,
liquidity or capital resources of the Company. For further information, see
Notes 3, 6, 10, 14 and 15 to Consolidated Financial Statements.
 
     The Company uses capital resources to maintain existing facilities, expand
its operations and make acquisitions. In 1999, the Company expects to build a
new fiberglass roofing mat manufacturing facility in Shafter, California and a
new residential roofing shingle manufacturing facility in Michigan City,
Indiana. Funding for the Company's capital program is expected to be generated
from results of operations, additional borrowings and leasing transactions.
 
     The Company does not believe that inflation has had an effect on its
results of operations during the past three years. However, there can be no
assurance that the Company's business will not be affected by inflation in the
future.
 
  Market-Sensitive Instruments and Risk Management
 
     The Company's investment strategy is to seek returns in excess of money
market rates on its available cash while minimizing market risks. There can be
no assurance that the Company will be successful in implementing such a
strategy. The Company invests primarily in international and domestic arbitrage
and securities of companies involved in acquisition or reorganization
transactions, including at times, common stock short positions which are offsets
against long positions in securities which are expected, under certain
circumstances, to be exchanged or converted into the short positions. With
respect to its equity positions, the Company is exposed to the risk of market
loss. See Note 2 to Consolidated Financial Statements.
 
     The Company enters into financial instruments in the ordinary course of
business in order to manage its exposure to market fluctuations in interest
rates and on its short-term investments. The financial instruments the Company
employs to reduce market risk include swaps, futures, and other hedging
instruments. The financial instruments are primarily used to hedge the Company's
debt and short-term investment portfolios. The counterparties to these financial
instruments are major financial institutions with high credit standings. The
amounts subject to credit risk are generally limited to the amounts, if any, by
which the counterparties' obligations exceed the obligations of the Company. The
Company controls credit risk through credit approvals,
 
                                      F-5
<PAGE>

limits and monitoring procedures. The Company does not anticipate nonperformance
by counterparties to these instruments.
 
<TABLE>
<CAPTION>
                                           DECEMBER 31,         DECEMBER 31,
                                               1997                1998
                                        -----------------    -----------------
                                        NOTIONAL    FAIR     NOTIONAL    FAIR
                                        AMOUNT      VALUE    AMOUNT      VALUE
                                        --------    -----    --------    -----
                                                      (MILLIONS)
<S>                                     <C>         <C>      <C>         <C>
Equity-related financial instruments...  $   --     $ --      $178.4     $  0
Interest rate financial instruments....  $ 60.0     $3.1      $   --     $ --
</TABLE>
 
     All of the financial instruments in the above table have a maturity of less
than one year.
 
     In connection with the Deferred Coupon Notes, the Company entered into
fixed to floating interest rate swaps in order to balance out the Company's mix
of fixed and floating rate debt. As a result of the swaps, the effective
interest cost to the Company on the portion of the Deferred Coupon Notes covered
by the swaps varied at a fixed spread over LIBOR. The swaps had a notional
principal amount of $60 million and a final maturity of July 1, 1999, all of
which were terminated as of June 28, 1998.
 
     As of December 31, 1998, equity-related financial instruments employed by
the Company to reduce market risk include long contracts valued at $35.2 million
and short contracts valued at $143.2 million, which are marked-to-market each
month, with unrealized gains and losses included in the results of operations.
As such, there is no economic cost at December 31, 1998 to terminate these
instruments and therefore the fair market value is zero.
 
  Year 2000 Compliance
 
     The Company has implemented a Year 2000 program (i) to address its Year
2000 issues, i.e., the inability by some IT and non-IT equipment, including
embedded technology, to accurately read and process certain dates in the Year
2000 and afterwards, (ii) to investigate the Year 2000 issues of third parties
significant to the Company's business, and (iii) to establish contingency plans
where appropriate.
 
     The Company has completed an internal study and believes that it has
remediated substantially all of its core systems. The Company has also evaluated
and believes that it has remediated subtantially all of its personal computers,
mainframe computers and its computer network. The Company believes that the core
IT systems remediation has corrected Year 2000 programming issues in all
critical areas of the Company's business.
 
     In addition, the Company is working with outside consultants to certify the
compliance of the Company's core systems with externally developed and published
certification standards. The Company expects to complete this certification by
the third quarter of 1999. The Company's independent third party consultants
have inventoried and evaluated substantially all of the Company's non-IT
equipment, i.e., voice mail, telephone, fire and security systems and
numerically controlled production machinery and computer-based production
equipment, and the Company is in the process of remediating and testing this
equipment. The Company expects to complete these activities by the second
quarter of 1999.
 
     The Company has requested compliance information in the form of direct
questionnaires from vendors significant to the Company's business and is
planning to solicit compliance information from its significant customers. The
Company expects to complete this solicitation by June 1999. When appropriate, a
lack of a response to these questionnaires is being followed by additional
correspondence and finally direct contact. The Company has received compliance
information from substantially all of its key vendors. Each of these vendors has
advised the Company that they are or expect to be ready for the Year 2000 by the
end of 1999. The Company is evaluating these responses and is requesting more
information where appropriate to help the Company formulate contingency plans,
including the identification of secondary suppliers, to minimize the impact of
any Year 2000 related issues that may develop. The Company expects this phase of
evaluation to be completed by June 1999.
 
     The Company does not believe the costs of its Year 2000 program will be
material to its financial position or results of operations. The Company has
incurred outside costs of approximately $650,000 to date and anticipates
 
                                      F-6
<PAGE>

that additional outside costs should approximate no more than $1 million in the
aggregate. The Company will charge these costs, as incurred, against results of
operations.
 
     Management believes it has taken reasonable steps in developing its Year
2000 program. Notwithstanding these actions, there can be no assurance that all
of the Company's Year 2000 issues or those of its key suppliers, service
providers or customers will be resolved or addressed satisfactorily before the
Year 2000 commences. Management believes that the most reasonably likely "worst
case scenario" resulting from Year 2000 issues could be the failure by the
Company's key suppliers, service providers, customers and other third parties to
address their Year 2000 issues. If this were to occur, then the Company's usual
channels of supply and distribution could be disrupted and the Company could
experience a material adverse impact on its business, results of operations or
financial position.
 
                                    *  *  *
 
FORWARD-LOOKING STATEMENTS
 
     This Annual Report on Form 10-K contains both historical and
forward-looking statements. All statements other than statements of historical
fact are, or may be deemed to be, forward-looking statements within the meaning
of section 27A of the Securities Act of 1933 and section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are only predictions and
generally can be identified by use of statements that include phrases such as
"believe," "expect," "anticipate," "intend," "plan," "foresee" or other words or
phrases of similar import. Similarly, statements that describe the Company's
objectives, plans or goals also are forward-looking statements. The Company's
operations are subject to certain risks and uncertainties that could cause
actual results to differ materially from those contemplated by the relevant
forward-looking statement. The forward-looking statements included herein are
made only as of the date of this Annual Report on Form 10-K and the Company
undertakes no obligation to publicly update such forward-looking statements to
reflect subsequent events or circumstances. No assurances can be given that
projected results or events will be achieved.
 
                                      F-7
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

                            SELECTED FINANCIAL DATA
 
     Set forth below are selected consolidated financial data of the Company.
The historical financial information gives effect to the formation of the
Company as if it had occurred on January 1, 1994 and the Company's financial
statements have been prepared on a basis which retroactively reflects the
formation of the Company at the beginning of the periods presented, except that
the Company's assumption of the first $204.4 million of liability relating to
pending and previously settled asbestos-related bodily injury cases and related
income tax benefits of $79.7 million have been reflected as a charge of
$124.7 million to stockholder's equity upon the Company's formation as of
January 31, 1994. As of January 1, 1997, U.S. Intec, Inc. ("U.S. Intec") became
a subsidiary of the Company through a capital contribution to the Company by G-I
Holdings. Accordingly, the Company's historical consolidated financial
statements include U.S. Intec's results of operations and cash flows from the
date of its acquisition by G-I Holdings (October 20, 1995), including sales of
$21.8 and $99.0 million for the years ended December 31, 1995 and 1996,
respectively, and net income (loss) of $(0.5) and $1.3 million, respectively.
See Note 1 to Consolidated Financial Statements. The results for the year 1997
include the results of the Leatherback Industries business from the date of its
acquisition (March 14, 1997), including sales of $30.2 million. The results for
the year 1998 include the results of the Leslie-Locke business from the date of
its acquisition (June 1, 1998), including sales of $53.3 million.

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                  ------------------------------------------------
                                                                   1994      1995      1996      1997       1998
                                                                  ------    ------    ------    ------    --------
                                                                                     (MILLIONS)
<S>                                                               <C>       <C>       <C>       <C>       <C>
Operating Data:
  Net sales....................................................   $593.1    $687.2    $852.0    $944.6    $1,088.0
  Operating income.............................................     44.7      45.9      61.4      70.1        46.0
  Interest expense.............................................     13.1      24.8      32.0      42.8        49.7
  Income before income taxes and extraordinary losses..........     27.8      16.5      27.9      42.8        12.2
  Income before extraordinary losses...........................     16.7      10.1      17.1      26.1         7.6
  Net income (loss)............................................     16.7      10.1      17.1      26.1       (10.6)
 
<CAPTION>
                                                                                    DECEMBER 31,
                                                                  ------------------------------------------------
                                                                   1994      1995      1996      1997       1998
                                                                  ------    ------    ------    ------    --------
                                                                                     (MILLIONS)
<S>                                                               <C>       <C>       <C>       <C>       <C>
Balance Sheet Data:
  Total working capital........................................   $ 36.2    $ 54.6    $247.3    $284.8    $  220.7
  Total assets.................................................    452.3     559.3     701.6     807.3       847.5
  Long-term debt less current maturities.......................    229.2     310.3     405.7     555.4       588.4
  Stockholders' equity (deficit)...............................    (28.9)     15.8     143.2      83.0        44.9

<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                  ------------------------------------------------
                                                                   1994      1995      1996      1997       1998
                                                                  ------    ------    ------    ------    --------
                                                                                     (MILLIONS)
<S>                                                               <C>       <C>       <C>       <C>       <C>
Other Data:
  Depreciation.................................................   $ 16.8    $ 20.3    $ 23.9    $ 22.9    $   26.6
  Goodwill amortization........................................      1.1       1.2       1.7       1.9         2.1
  Capital expenditures and acquisitions........................     54.3      54.1      25.6      77.7       130.3
</TABLE>
 
                                      F-8
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Building Materials Corporation of America:
 
     We have audited the accompanying consolidated balance sheets of Building
Materials Corporation of America (a Delaware corporation and a 97%-owned
subsidiary of GAF Building Materials Corporation) and subsidiaries as of
December 31, 1997 and 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above, appearing on
Pages F-10 to F-40 of this Form 10-K, present fairly, in all material respects,
the financial position of Building Materials Corporation of America and
subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
 
     Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule appearing on page S-1 of
this Form 10-K is presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
 
                                          ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 12, 1999
 
                                      F-9
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                                              ----------------------------------
                                                                                1996        1997         1998
                                                                              --------    --------    ----------
                                                                                         (THOUSANDS)
<S>                                                                           <C>         <C>         <C>
Net sales..................................................................   $851,967    $944,629    $1,087,957
                                                                              --------    --------    ----------
Costs and expenses:
  Cost of products sold....................................................    622,234     686,992       776,908
  Selling, general and administrative......................................    166,706     185,653       235,416
  Goodwill amortization....................................................      1,664       1,891         2,111
  Nonrecurring charges.....................................................         --          --        27,563
                                                                              --------    --------    ----------
  Total costs and expenses.................................................    790,604     874,536     1,041,998
                                                                              --------    --------    ----------
Operating income...........................................................     61,363      70,093        45,959
Interest expense...........................................................    (32,044)    (42,784)      (49,674)
Other income (expense), net................................................     (1,455)     15,462        15,895
                                                                              --------    --------    ----------
Income before income taxes and extraordinary losses........................     27,864      42,771        12,180
Income taxes...............................................................    (10,809)    (16,680)       (4,628)
                                                                              --------    --------    ----------
Income before extraordinary losses.........................................     17,055      26,091         7,552
Extraordinary losses, net of income tax benefits of $11,101................         --          --       (18,113)
                                                                              --------    --------    ----------
Net income (loss)..........................................................   $ 17,055    $ 26,091    $  (10,561)
                                                                              --------    --------    ----------
                                                                              --------    --------    ----------
</TABLE>

         The accompanying Notes to Consolidated Financial Statements
                  are an integral part of these statements.

                                      F-10
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31,
                                                                                             --------------------
                                                                                               1997        1998
                                                                                             --------    --------
                                                                                                 (THOUSANDS)
<S>                                                                                          <C>         <C>
                                          ASSETS
Current Assets:
  Cash and cash equivalents...............................................................   $ 12,921    $ 24,987
  Investments in trading securities.......................................................     62,059      95,134
  Investments in available-for-sale securities............................................    161,290      56,461
  Investments in held-to-maturity securities..............................................        499       6,358
  Other short-term investments............................................................     19,488      22,671
  Accounts receivable, trade, less reserve of $2,752 and $4,035, respectively.............     13,643      24,249
  Accounts receivable, other..............................................................     50,839      54,795
  Receivable from related parties, net....................................................     11,303          --
  Inventories.............................................................................     72,254      93,364
  Other current assets....................................................................      6,243       4,144
                                                                                             --------    --------
    Total Current Assets..................................................................    410,539     382,163
Property, plant and equipment, net........................................................    241,946     314,400
Excess of cost over net assets of businesses acquired, net of accumulated amortization
  of $8,780 and $10,891, respectively.....................................................     70,046      72,093
Deferred income tax benefits..............................................................     35,981      60,427
Receivable from related parties...........................................................     31,661          --
Other assets..............................................................................     17,113      18,410
                                                                                             --------    --------
Total Assets..............................................................................   $807,286    $847,493
                                                                                             --------    --------
                                                                                             --------    --------
 
                           LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Short-term debt.........................................................................   $ 26,944    $     --
  Current maturities of long-term debt....................................................      3,801       4,273
  Accounts payable........................................................................     55,642      71,613
  Payable to related parties, net.........................................................         --       5,430
  Accrued liabilities.....................................................................     26,298      59,893
  Reserve for product warranty claims.....................................................     13,100      20,239
                                                                                             --------    --------
    Total Current Liabilities.............................................................    125,785     161,448
                                                                                             --------    --------
Long-term debt less current maturities....................................................    555,446     588,413
                                                                                             --------    --------
Reserve for product warranty claims.......................................................     23,881      28,393
                                                                                             --------    --------
Other liabilities.........................................................................     19,175      24,366
                                                                                             --------    --------
Commitments and Contingencies.............................................................
Stockholders' Equity:.....................................................................
  Series A Cumulative Redeemable Convertible Preferred Stock, $.01 par value per share;
    100,000 and 200,000 shares authorized, respectively; no shares issued.................         --          --
  Class A Common Stock, $.001 par value per share; 1,050,000 and 1,300,000 shares
    authorized, respectively; 1,000,010 and 1,015,010 shares issued and outstanding,
    respectively..........................................................................          1           1
  Class B Common Stock, $.001 par value per share; 0 and 100,000 shares authorized,
    respectively; 0 and 15,000 shares issued and outstanding, respectively................         --          --
  Additional paid-in capital..............................................................     86,910      89,400
  Accumulated deficit.....................................................................    (14,083)    (24,644)
  Accumulated other comprehensive income (loss)...........................................     10,171     (19,884)
                                                                                             --------    --------
Stockholders' Equity......................................................................     82,999      44,873
                                                                                             --------    --------
Total Liabilities and Stockholders' Equity................................................   $807,286    $847,493
                                                                                             --------    --------
                                                                                             --------    --------
</TABLE>

         The accompanying Notes to Consolidated Financial Statements
                  are an integral part of these statements.

                                      F-11
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31,
                                                                              -----------------------------------
                                                                                1996         1997         1998
                                                                              ---------    ---------    ---------
                                                                                          (THOUSANDS)
<S>                                                                           <C>          <C>          <C>
Cash and cash equivalents, beginning of year...............................   $  45,989    $ 124,560    $  12,921
                                                                              ---------    ---------    ---------
Cash provided by (used in) operating activities:
  Net income (loss)........................................................      17,055       26,091      (10,561)
  Adjustments to reconcile net income (loss) to net cash provided by (used
     in) operating activities:
       Extraordinary losses................................................          --           --       18,113
       Depreciation........................................................      23,857       22,936       26,579
       Goodwill amortization...............................................       1,664        1,891        2,111
       Deferred income taxes...............................................      10,609       16,481        4,128
       Noncash interest charges............................................      23,718       27,222       23,877
  (Increase) decrease in working capital items.............................     (14,905)      17,859       27,898
  Purchases of trading securities..........................................     (33,824)    (123,483)    (189,197)
  Proceeds from sales of trading securities................................      30,394       55,378      124,931
  (Increase) decrease in other assets......................................      (1,711)       1,773          483
  Increase (decrease) in other liabilities.................................      (4,158)      (9,356)       7,779
  Change in net receivable from/payable to related parties.................        (341)     (39,099)      42,242
  Other, net...............................................................         787       (8,001)       9,581
                                                                              ---------    ---------    ---------
Net cash provided by (used in) operating activities........................      53,145      (10,308)      87,964
                                                                              ---------    ---------    ---------
Cash provided by (used in) investing activities:
  Capital expenditures.....................................................     (25,629)     (46,844)     (71,073)
  Acquisitions.............................................................          --      (30,861)     (59,187)
  Proceeds from sale of assets.............................................          --           --       29,019
  Purchases of available-for-sale securities...............................    (139,355)    (223,804)     (89,324)
  Purchases of held-to-maturity securities.................................          --       (4,591)      (6,357)
  Purchases of other short-term investments................................        (660)          --           --
  Proceeds from sales of available-for-sale securities.....................     101,095      173,547      170,055
  Proceeds from held-to-maturity securities................................          --       11,361          499
                                                                              ---------    ---------    ---------
Net cash used in investing activities......................................     (64,549)    (121,192)     (26,368)
                                                                              ---------    ---------    ---------
Cash provided by (used in) financing activities:
  Proceeds (repayments) from sale of accounts receivable...................       8,015      (35,332)      (4,754)
  Increase (decrease) in short-term debt...................................          --       26,944      (26,944)
  (Increase) decrease in loan receivable from related party................          --       (6,152)       6,152
  Proceeds from issuance of debt...........................................      99,502       99,916      304,019
  Increase (decrease) in borrowings under revolving credit facility........          --       34,000      (34,000)
  Repayments of long-term debt.............................................     (34,856)      (3,521)    (287,904)
  Capital contribution from (distributions to) parent company..............      86,077      (91,000)          --
  Payments of asbestos claims..............................................     (66,224)      (3,062)          --
  Financing fees and expenses..............................................      (2,539)      (1,932)      (6,099)
                                                                              ---------    ---------    ---------
Net cash provided by (used in) financing activities........................      89,975       19,861      (49,530)
                                                                              ---------    ---------    ---------
Net change in cash and cash equivalents....................................      78,571     (111,639)      12,066
                                                                              ---------    ---------    ---------
Cash and cash equivalents, end of year.....................................   $ 124,560    $  12,921    $  24,987
                                                                              ---------    ---------    ---------
                                                                              ---------    ---------    ---------
</TABLE>

                                      F-12
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

               CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)

<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31,
                                                                              -----------------------------------
                                                                                1996         1997         1998
                                                                              ---------    ---------    ---------
                                                                                          (THOUSANDS)
<S>                                                                           <C>          <C>          <C>
Supplemental Cash Flow Information:
  Effect on cash from (increase) decrease in working capital items*:
     Accounts receivable...................................................   $  (5,122)   $   7,773    $  (4,018)
     Inventories...........................................................      (8,123)       8,001      (10,853)
     Other current assets..................................................         756       (3,029)       2,367
     Accounts payable......................................................      (4,096)      10,210       10,228
     Accrued liabilities...................................................       1,680       (5,096)      30,174
                                                                              ---------    ---------    ---------
Net effect on cash from (increase) decrease in working capital items.......   $ (14,905)   $  17,859    $  27,898
                                                                              ---------    ---------    ---------
                                                                              ---------    ---------    ---------
Cash paid during the period for:
  Interest (net of amount capitalized).....................................   $   6,442    $  14,001    $  19,714
  Income taxes (including taxes paid pursuant to the Tax Sharing
     Agreement)............................................................         537          346        1,174
 
  Acquisition of Leatherback Industries business, net of $8 cash acquired:
     Fair market value of assets acquired..................................                $  27,167
     Purchase price of acquisition.........................................                   25,531
                                                                                           ---------
     Liabilities assumed...................................................                $   1,636
                                                                                           ---------
                                                                                           ---------
  Acquisition of Leslie-Locke business:
     Fair market value of assets acquired..................................                             $  59,318
     Purchase price of acquisition.........................................                                43,468
                                                                                                        ---------
     Liabilities assumed...................................................                             $  15,850
                                                                                                        ---------
                                                                                                        ---------
</TABLE>
------------------
* Working capital items exclude cash and cash equivalents, short-term
  investments, short-term debt and net receivables from/payables to related
  parties. Working capital acquired in connection with acquisitions is reflected
  in "Acquisitions". The effects of reclassifications between noncurrent and
  current assets and liabilities are excluded from the amounts shown above. In
  addition, the increase in receivables shown above does not reflect the cash
  proceeds from the sale of certain of the Company's receivables (see Note 7);
  such proceeds are reflected in cash from financing activities. As discussed in
  Notes 1 and 2, in connection with the Separation Transactions, G-I Holdings
  made a noncash contribution to the Company in December 1996 of $2.8 million of
  available-for-sale securities, $7.1 million of held-to-maturity securities and
  $13.2 million of other short-term investments.

         The accompanying Notes to Consolidated Financial Statements
                  are an integral part of these statements.

                                      F-13
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                               CAPITAL
                                                              STOCK AND    ACCUMULATED
                                                              ADDITIONAL      OTHER
                                                               PAID-IN     COMPREHENSIVE   ACCUMULATED   COMPREHENSIVE
                                                               CAPITAL     INCOME (LOSS)    DEFICIT      INCOME (LOSS)
                                                              ----------   -------------   -----------   -------------
                                                                            (THOUSANDS)
<S>                                                           <C>          <C>             <C>           <C>
Balance, December 31, 1995..................................   $ 73,374      $    (363)     $ (57,229)
  Comprehensive income--year ended December 31, 1996:
    Net income..............................................         --             --         17,055      $  17,055
                                                                                                           ---------
    Other comprehensive income, net of tax:
    Unrealized holding gains, net of income taxes of
       $1,883...............................................                     3,020                         3,020
    Less: Reclassification adjustment for gains included in
       net income, net of income tax effect of $1,550.......                     2,498                         2,498
                                                                             ---------                     ---------
    Unrealized gains on available-for-sale securities.......         --            522             --            522
    Minimum pension liability adjustment....................         --            552             --            552
                                                                                                           ---------
  Comprehensive income......................................                                               $  18,129
                                                                                                           ---------
                                                                                                           ---------
  Capital contribution from parent company..................    109,326             --             --
                                                               --------      ---------      ---------
Balance, December 31, 1996..................................   $182,700      $     711      $ (40,174)
  Comprehensive income--year ended December 31, 1997:
    Net income..............................................         --             --         26,091      $  26,091
                                                                                                           ---------
    Other comprehensive income, net of tax:
    Unrealized holding gains, net of income taxes of
       $5,043...............................................                     7,886                         7,886
    Less: Reclassification adjustment for losses included in
       net income, net of income tax effect of $1,548.......                    (2,422)                       (2,422)
                                                                             ---------                     ---------
    Unrealized gains on available-for-sale securities.......         --         10,308             --         10,308
    Minimum pension liability adjustment....................         --           (848)            --           (848)
                                                                                                           ---------
  Comprehensive income......................................                                               $  35,551
                                                                                                           ---------
                                                                                                           ---------
  Distributions to parent company...........................    (91,000)            --             --
  Transfer of Nashville, Tennessee plant to GAF Fiberglass
    Corporation.............................................     (4,789)            --             --
                                                               --------      ---------      ---------
Balance, December 31, 1997..................................   $ 86,911      $  10,171      $ (14,083)
  Comprehensive income (loss)--year ended December 31, 1998:
    Net loss................................................         --             --        (10,561)     $ (10,561)
                                                                                                           ---------
    Other comprehensive income, net of tax:
    Unrealized holding losses, net of income tax benefit of
       $10,409..............................................                   (16,504)                      (16,504)
    Less: Reclassification adjustment for gains included in
       net loss, net of income tax effect of $7,064.........                    11,526                        11,526
                                                                             ---------                     ---------
    Change in unrealized loss on available-for-sale
       securities...........................................         --        (28,030)            --        (28,030)
    Minimum pension liability adjustment....................         --         (2,025)            --         (2,025)
                                                                                                           ---------
  Comprehensive income (loss)...............................                                               $ (40,616)
                                                                                                           ---------
                                                                                                           ---------
  Issuance of 30,000 shares of restricted common stock......      2,490             --             --
                                                               --------      ---------      ---------
Balance, December 31, 1998..................................   $ 89,401      $ (19,884)     $ (24,644)
                                                               --------      ---------      ---------
                                                               --------      ---------      ---------
</TABLE>

         The accompanying Notes to Consolidated Financial Statements
                  are an integral part of these statements.

                                      F-14
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
     Building Materials Corporation of America ("BMCA" or the "Company") was
formed on January 31, 1994 and is a 97%-owned subsidiary of GAF Building
Materials Corporation ("GAFBMC"), which is a wholly-owned subsidiary of G
Industries Corp. ("G Industries"). G Industries is a wholly-owned subsidiary of
G-I Holdings Inc. ("G-I Holdings"), which is a wholly-owned subsidiary of GAF
Corporation ("GAF").
 
NOTE 1. FORMATION OF THE COMPANY
 
     Effective as of January 31, 1994, GAFBMC transferred to the Company all of
its business and assets, other than three closed manufacturing facilities,
certain deferred tax assets and receivables from affiliates. The Company
recorded the assets and liabilities related to such transfer at GAFBMC's
historical costs. The Company contractually assumed all of GAFBMC's liabilities,
except (i) all of GAFBMC's environmental liabilities, other than environmental
liabilities relating to the Company's plant sites and its business as
then-conducted, (ii) all of GAFBMC's tax liabilities, other than tax liabilities
arising from the operations or business of the Company and (iii) all of GAFBMC's
asbestos-related liabilities, other than the first $204.4 million of such
liabilities (whether for indemnity or defense) relating to then-pending
asbestos-related bodily injury cases and previously settled asbestos-related
bodily injury cases which the Company contractually assumed and agreed to pay.
G-I Holdings and GAFBMC have agreed, jointly and severally, to indemnify the
Company from liabilities not assumed by the Company, including asbestos-related
and environmental liabilities not expressly assumed by the Company. See Note 3.
 
     The Company's Consolidated Financial Statements have been prepared on a
basis which retroactively reflects the formation of the Company, as discussed
above, for all periods presented prior to 1995, except that the Company's
assumption of $204.4 million of asbestos-related liabilities described above and
related income tax benefits of $79.7 million have been reflected as a charge of
$124.7 million to stockholder's equity upon the Company's formation as of
January 31, 1994.
 
     In October 1995, G-I Holdings acquired all of the outstanding shares of
U.S. Intec, Inc. ("U.S. Intec"), which manufactures commercial roofing products,
for a purchase price of $27.5 million and assumed $35.0 million of U. S. Intec's
indebtedness. As of January 1, 1997, U.S. Intec became a wholly-owned subsidiary
of the Company through a capital contribution to the Company by G-I Holdings.
Accordingly, the Company's historical consolidated financial statements include
U.S. Intec's results of operations and cash flows from the date of its
acquisition by G-I Holdings (October 20, 1995), including sales and net income
of $99.0 and $1.3 million, respectively, for the year ended December 31, 1996.
The Company recorded the assets and liabilities of U.S. Intec at G-I Holdings'
purchase accounting basis.
 
     On January 1, 1997, GAF effected a series of transactions involving its
subsidiaries (the "Separation Transactions") that resulted in, among other
things, (i) the approximately 83.5% of the issued and outstanding common stock
of International Specialty Products Inc. ("ISP"), an affiliate, owned by a
subsidiary of GAF, being distributed to ISP Holdings Inc., a subsidiary of GAF,
and the capital stock of ISP Holdings being distributed to the stockholders of
GAF, (ii) the Company's glass fiber manufacturing facility in Nashville,
Tennessee, and certain related assets and liabilities, being transferred to GAF
Fiberglass Corporation ("GFC"), (iii) U.S. Intec becoming a subsidiary of the
Company and (iv) G-I Holdings making a contribution to the Company in December
1996 of $82.5 million in cash and short-term investments. As a result of the
Separation Transactions, ISP Holdings and ISP are no longer direct or indirect
subsidiaries of GAF, while the Company and GFC have remained subsidiaries of
GAF. On July 15, 1998, ISP merged with and into ISP Holdings and ISP Holdings
changed its name to International Specialty Products Inc. The Company recorded
the transfer of the Nashville facility as a distribution to its indirect parent,
G-I Holdings, at its net book value. G-I Holdings then made a capital
contribution to GFC equal to such net book value. The results of operations,
cash flows and assets and liabilities of the Nashville facility are included in
the Company's consolidated financial statements for all periods prior to the
date of transfer of January 1, 1997.
 
     The parent corporations of the Company are GAF, G-I Holdings, G Industries
and GAFBMC. Except for the Company, the only other significant asset of such
parent corporations is GFC. As a result of the Separation
 
                                      F-15
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 1. FORMATION OF THE COMPANY--(CONTINUED)

Transactions, dividends from ISP are not available to GAF and G-I Holdings, and
loans from ISP to GAF, G-I Holdings and the Company are prohibited by certain of
ISP's debt instruments.
 
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Principles of Consolidation
 
     All subsidiaries are consolidated and intercompany transactions have been
eliminated.
 
  Financial Statement Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates.
Actual results could differ from those estimates. In the opinion of management,
the financial statements herein contain all adjustments necessary to present
fairly the financial position and the results of operations and cash flows of
the Company for the periods presented. The Company has a policy to review the
recoverability of long-lived assets and identify and measure any potential
impairments. The Company does not anticipate any changes in management estimates
that would have a material impact on operations, liquidity or capital resources,
subject to the matters discussed in Note 15 (Commitments and Contingencies).
 
  Short-term Investments
 
     For securities classified as "trading" (including short positions),
unrealized gains and losses are reflected in income. For securities classified
as "available-for-sale," unrealized gains and losses, net of income tax effect,
are included in a separate component of stockholders' equity, "Accumulated other
comprehensive income (loss)," and were $11.1 and $(16.9) million as of
December 31, 1997 and 1998, respectively. Investments classified as
"held-to-maturity" securities are carried at amortized cost in the Consolidated
Balance Sheets.
 
     "Other income (expense), net" includes $6.4, $26.4 and $21.5 million of net
realized and unrealized gains on securities in 1996, 1997 and 1998,
respectively. The determination of cost in computing realized gains and losses
is based on the specific identification method.
 
     In connection with the Separation Transactions (see Note 1), in December
1996, G-I Holdings made a capital contribution to the Company of $2.8 million of
available-for-sale securities, $7.1 million of held-to-maturity securities and
$13.2 million of other short-term investments.
 
     As of December 31, 1997 and 1998, the market value of the Company's equity
securities held long was $223.0 and $172.5 million, respectively, and the
Company had $18.6 and $144.1 million, respectively, of short positions in common
stocks, based on market value. As of December 31, 1997 and 1998, the market
value of the Company's held-to-maturity securities was $0.5 and $6.4 million,
respectively. The Company enters into equity-related financial instruments with
off-balance-sheet risk as a means to manage its exposure to market fluctuations
on its short-term investments. As of December 31, 1998, the market value of
equity-related short contracts was $143.2 million, while the value of
equity-related long contracts was $35.2 million, both of which are marked-to-
market each month, with unrealized gains and losses included in results of
operations. The market values referred to above are based on quotations as
reported by various stock exchanges and major broker-dealers. With respect to
its investments in securities, the Company is exposed to the risk of market
loss.
 
     "Other short-term investments" are investments in limited partnerships
which are accounted for by the equity method. Gains and losses are reflected in
"Other income (expense), net." Liquidation of partnership interests generally
require a 30 to 45 day notice period.
 
     Cash and cash equivalents include cash on deposit and debt securities
purchased with original maturities of three months or less.
 
                                      F-16
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

  Inventories
 
     Inventories are stated at the lower of cost or market. The LIFO (last-in,
first-out) method is utilized to determine cost for a portion of the Company's
inventories. All other inventories are determined principally based on the FIFO
(first-in, first-out) method.
 
  Property, Plant and Equipment
 
     Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is computed principally on the straight-line method
based on the estimated economic lives of the assets. The Company uses an
economic life of 5-25 years for land improvements, 10-40 years for buildings and
building equipment, and 3-20 years for machinery and equipment, which includes
furniture and fixtures. Certain interest charges are capitalized during the
period of construction as part of the cost of property, plant and equipment.
 
  Excess of Cost Over Net Assets of Businesses Acquired ("Goodwill")
 
     Goodwill is amortized on the straight-line method over a period of
approximately 40 years. The Company believes that the goodwill is recoverable.
To determine if goodwill is recoverable, the Company compares the net carrying
amount to undiscounted projected cash flows of the underlying businesses to
which the goodwill pertains. If goodwill is not recoverable, the Company would
record an impairment based on the difference between the net carrying amount and
fair value.
 
  Debt Issuance Costs
 
     Debt issuance costs are amortized to expense over the life of the related
debt.
 
  Revenue Recognition
 
     Revenue is recognized at the time products are shipped to the customer.
 
  Interest Rate Swaps
 
     Gains (losses) on interest rate swap agreements ("swaps") are deferred and
amortized as a reduction (increase) of interest expense over the shorter of the
remaining life of the swaps or the remaining period to maturity of the debt
issue with respect to which the swaps were entered.
 
  Research and Development
 
     Research and development expenses are charged to operations as incurred and
were $4.5, $5.4 and $6.0 million in 1996, 1997 and 1998, respectively.
 
  Warranty Claims
 
     The Company provides certain limited warranties covering most of its
residential roofing products for periods ranging from 20 to 40 years. The
Company also offers limited warranties and guarantees of varying duration on its
commercial roofing products and limited warranties covering most of its
specialty building products and accessories for periods ranging from 5 to
10 years. Income from warranty contracts related to commercial roofing products
is recognized over the life of the agreements. The Company believes that the
reserves established for estimated probable future warranty claims are adequate.
 
     The Company's 1997 Consolidated Statement of Operations includes a
provision of $3.0 million in connection with the Company's estimated obligations
related to product warranty claims for a discontinued product. See also Note 5.
 
                                      F-17
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

  Environmental Liability
 
     The Company, together with other companies, is a party to a variety of
proceedings and lawsuits involving environmental matters. The Company estimates
that its liability in respect of such environmental matters, and certain other
environmental compliance expenses, as of December 31, 1998, is $0.8 million,
before reduction for insurance recoveries reflected on its balance sheet of
$0.8 million. The Company's liability is reflected on an undiscounted basis. See
Item 3, "Legal Proceedings--Environmental Litigation," which is incorporated
herein by reference, for further discussion with respect to environmental
liabilities and estimated insurance recoveries.
 
  Accumulated Other Comprehensive Income
 
     In June 1997, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 130, "Reporting Comprehensive Income", which establishes standards for
reporting comprehensive income and its components in annual and interim
financial statements. The Company adopted SFAS No. 130 as of January 1, 1998 and
has reclassified financial statements for earlier periods. In the Company's
case, comprehensive income includes net income, unrealized gains and losses from
investments in available-for-sale securities, net of income tax effect, and
minimum pension liability adjustments. The Company has chosen to disclose
Comprehensive Income in the Consolidated Statements of Stockholders' Equity.
 
     Changes in the components of "Accumulated other comprehensive income
(loss)" for the years 1996, 1997 and 1998 are as follows:
 
<TABLE>
<CAPTION>
                                                            UNREALIZED GAINS       MINIMUM      ACCUMULATED
                                                             (LOSSES) ON           PENSION         OTHER
                                                            AVAILABLE-FOR-SALE    LIABILITY     COMPREHENSIVE
                                                             SECURITIES           ADJUSTMENT    INCOME (LOSS)
                                                            ------------------    ----------    -------------
                                                                               (THOUSANDS)
<S>                                                         <C>                   <C>           <C>
Balance, December 31, 1995...............................        $    272          $   (635)      $    (363)
Change for the year 1996.................................             522               552           1,074
                                                                 --------          --------       ---------
Balance, December 31, 1996...............................        $    794          $    (83)      $     711
Change for the year 1997.................................          10,308              (848)          9,460
                                                                 --------          --------       ---------
Balance, December 31, 1997...............................        $ 11,102          $   (931)      $  10,171
Change for the year 1998.................................         (28,030)           (2,025)        (30,055)
                                                                 --------          --------       ---------
Balance, December 31, 1998...............................        $(16,928)         $ (2,956)      $ (19,884)
                                                                 --------          --------       ---------
                                                                 --------          --------       ---------
</TABLE>
 
  New Accounting Standard
 
     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement. SFAS No. 133
is effective for fiscal years beginning after June 15, 1999, but may be adopted
earlier. If the Company had adopted SFAS No. 133 for the year ended
December 31, 1998, there would have been no significant impact on results of
operations. The Company has not yet determined the timing, method or effect on
the Consolidated Balance Sheets of adoption of SFAS No. 133.
 
NOTE 3. ASBESTOS-RELATED BODILY INJURY CLAIMS
 
     In connection with its formation, the Company contractually assumed and
agreed to pay the first $204.4 million of liabilities for asbestos-related
bodily injury claims relating to the inhalation of asbestos fiber
 
                                      F-18
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 3. ASBESTOS-RELATED BODILY INJURY CLAIMS--(CONTINUED)

("Asbestos Claims") of its parent, GAFBMC. As of March 30, 1997, the Company had
paid all of its assumed asbestos-related liabilities. See also Note 1. G-I
Holdings and GAFBMC have jointly and severally agreed to indemnify the Company
against any other existing or future claims related to asbestos-related
liabilities if asserted against the Company.
 
     GAF has advised the Company that, as of December 28, 1998, it is defending
approximately 113,800 pending alleged Asbestos Claims (having received notice of
approximately 93,500 new Asbestos Claims during 1998) and has resolved
approximately 293,500 Asbestos Claims (including approximately 59,000 in 1998).
GAF has advised the Company that it believes that a significant portion of the
claims filed in 1998 were already pending against other defendants for some
period of time, with GAF being added as a defendant upon the lifting in 1997 of
the injunction relating to the Georgine class action settlement. This injunction
prevented plaintiffs from filing or proceeding with their Asbestos Claims other
than in accordance with the Georgine class action settlement, which was rendered
inoperable in 1997 by a United States Supreme Court ruling. GAF's current
estimated average cost for Asbestos Claims resolved in 1998 (including Asbestos
Claims disposed of at no cost to GAF) is approximately $3,500 per claim.
Substantially all of the costs in respect of these Asbestos Claims will be paid
over several years. There can be no assurance that the actual costs of resolving
pending and future Asbestos Claims will approximate GAF's estimated average
costs for the Asbestos Claims resolved in 1998.
 
     GAF has stated that it is committed to effecting a comprehensive resolution
of Asbestos Claims, that it is exploring a number of options to accomplish such
resolution, but there can be no assurance that this effort will be successful.
 
     The Company believes that it will not sustain any additional liability in
connection with asbestos-related claims. While the Company cannot predict
whether any asbestos-related claims will be asserted against it or its assets,
or the outcome of any litigation relating to such claims, it believes that it
has meritorious defenses to such claims. Moreover, it has been jointly and
severally indemnified by G-I Holdings and GAFBMC with respect to such claims.
Should GAF or GAFBMC be unable to satisfy judgments against it in
asbestos-related lawsuits, its judgment creditors might seek to enforce their
judgments against the assets of GAF or GAFBMC, including its holdings of common
stock of the Company, and such enforcement could result in a change of control
with respect to the Company. See Note 10 for information regarding the Company's
debt instruments and facilities.
 
     For a further discussion with respect to the foregoing, see Item 3, "Legal
Proceedings," which is incorporated herein by reference.
 
NOTE 4. ACQUISITIONS AND DISPOSITION
 
     On March 14, 1997, the Company acquired the assets of the Leatherback
Industries division of Hollinee Corporation, which is engaged in the manufacture
and sale of asphalt-saturated felts and other felt and construction paper
products. The acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price was allocated to the estimated fair
values of the identifiable net assets acquired, and the excess was recorded as
goodwill. The results of the Leatherback business, including sales of
$30.2 million for 1997, are included from the date of acquisition; the net
effects of this acquisition were not material to 1997 results of operations.
 
     Effective June 1, 1998, the Company purchased for approximately $43.5
million substantially all of the assets of Leslie-Locke Inc. ("Leslie-Locke"), a
wholly-owned subsidiary of Leslie Building Products, Inc., which manufactures
and markets a variety of specialty building products and accessories for the
professional and do-it-yourself remodeling and residential construction
industries from manufacturing facilities in Burgaw, North Carolina and Compton,
California. The acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price was allocated to the estimated fair
values of the identifiable net assets acquired, and the excess was recorded as
goodwill. The results of the Leslie-Locke business, including sales of
 
                                      F-19
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 4. ACQUISITIONS AND DISPOSITION--(CONTINUED)

$53.3 million for 1998, are included from the date of acquisition; the net
effects of this acquisition were not material to 1998 results of operations.
 
     Effective December 1, 1998, the Company sold its perlite insulation
manufacturing assets to Johns Manville Corporation for net cash proceeds of
approximately $29.0 million. The pre-tax gain as a result of this sale was not
significant to the Company's results of operations. In addition, as part of the
transaction, Johns Manville and the Company entered into a long-term agreement
to supply the Company with perlite insulation products, which will enable the
Company to continue to serve its commercial roofing customers. As a result, the
sale is not expected to have a material impact on the Company's results of
operations.
 
NOTE 5. NONRECURRING CHARGES
 
     The Company recorded pre-tax nonrecurring charges in the third quarter of
1998 aggregating $27.6 million, of which $20.0 million related to the settlement
of a national class action lawsuit involving asphalt shingles manufactured
between January 1, 1973 and December 31, 1997. Under the terms of the September
1998 settlement, which has been granted preliminary approval by the court
pending the outcome of a fairness hearing, the Company will provide property
owners whose GAF shingles were manufactured during this period and which suffer
certain damages during the term of their original warranty period, and who file
a qualifying claim, with an opportunity to receive certain limited benefits
beyond those already provided in their existing warranty. If the court grants
final approval of this settlement, the settlement will resolve a class action
filed against GAFBMC in Mobile County, Alabama. Several other class action
lawsuits that had been brought against GAFBMC in 1996 and 1997 were stayed
pending final approval of the Mobile County, Alabama class action. Each of these
lawsuits had alleged that certain GAF shingles were defective and sought
unspecified damages. The Company agreed to the settlement, payments against
which will be made over a number of years, to avoid the expense required to
defend such litigation. The Company believes the court will grant final approval
of the settlement, although there can be no assurance in that regard. If the
court does not grant final approval and the settlement agreement is rendered
inoperable, the Mobile County, Alabama action would continue as if no settlement
agreement had existed. In addition, the stays of the other class actions could
be lifted and those actions could continue. In that event, the Company would
reverse the pre-tax nonrecurring charge of $20.0 million related to the
settlement.
 
     In July 1998, the Company recorded a pre-tax nonrecurring charge of
$7.6 million related to a grant to its President and Chief Executive Officer of
30,000 shares of restricted common stock of the Company and related cash
payments to be made over a period of time (substantially all of which is earned)
in connection with the termination by an affiliate of preferred stock options
and stock appreciation rights held by such officer.
 
NOTE 6. INCOME TAXES
 
     Income tax provision, which has been computed on a separate return basis,
consists of the following:
 
<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                         -------------------------------
                                                                           1996        1997       1998
                                                                         --------    --------    -------
                                                                                   (THOUSANDS)
<S>                                                                      <C>         <C>         <C>
Federal--deferred.....................................................   $ (9,241)   $(14,081)   $(4,082)
                                                                         --------    --------    -------
State and local:
  Current.............................................................       (200)       (200)      (500)
  Deferred............................................................     (1,368)     (2,399)       (46)
                                                                         --------    --------    -------
     Total state and local............................................     (1,568)     (2,599)      (546)
                                                                         --------    --------    -------
Income tax provision..................................................   $(10,809)   $(16,680)   $(4,628)
                                                                         --------    --------    -------
                                                                         --------    --------    -------
</TABLE>

                                      F-20
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 6. INCOME TAXES--(CONTINUED)

     The differences between the income tax provision computed by applying the
statutory Federal income tax rate to pre-tax income, and the income tax
provision reflected in the Consolidated Statements of Operations are as follows:
 
<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                         -------------------------------
                                                                           1996        1997       1998
                                                                         --------    --------    -------
                                                                                   (THOUSANDS)
<S>                                                                      <C>         <C>         <C>
Statutory provision...................................................   $ (9,752)   $(14,970)   $(4,263)
Impact of:
  State and local taxes, net of Federal benefits......................     (1,019)     (1,689)      (355)
  Nondeductible goodwill amortization.................................       (484)       (564)      (641)
  Other, net..........................................................        446         543        631
                                                                         --------    --------    -------
Income tax provision..................................................   $(10,809)   $(16,680)   $(4,628)
                                                                         --------    --------    -------
                                                                         --------    --------    -------
</TABLE>
 
     The components of the net deferred tax assets are as follows:
 
<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                          --------------------
                                                                            1997        1998
                                                                          --------    --------
                                                                              (THOUSANDS)
<S>                                                                       <C>         <C>
Deferred tax liabilities related to property, plant and equipment......   $(14,742)   $(14,803)
                                                                          --------    --------
Deferred tax assets related to:
  Expenses not yet deducted for tax purposes...........................     29,294      47,507
  Net operating losses not yet utilized under the Tax Sharing
     Agreement.........................................................     21,429      27,723
                                                                          --------    --------
Total deferred tax assets..............................................     50,723      75,230
                                                                          --------    --------
Net deferred tax assets................................................   $ 35,981    $ 60,427
                                                                          --------    --------
                                                                          --------    --------
</TABLE>
 
     As of December 31, 1998, the Company had $73.0 million of net operating
loss carryforwards available to offset future taxable income, as follows:

 YEAR OF
EXPIRATION   (THOUSANDS)
----------   -----------
  2009....     $26,705
  2010....       4,271
  2011....      41,982
               -------
               $72,958
               -------
               -------

     Management has determined, based on the Company's history of prior earnings
and its expectations for the future, that future taxable income will more likely
than not be sufficient to utilize fully the deferred tax assets recorded.
 
     The Company and its subsidiaries entered into a tax sharing agreement (the
"Tax Sharing Agreement") dated January 31, 1994 with GAF and G-I Holdings under
which the Company is obligated to pay G-I Holdings an amount equal to those
Federal income taxes the Company would have incurred if the Company (on behalf
of itself and its subsidiaries) filed its own Federal income tax return. Unused
tax attributes will carry forward for use in reducing amounts payable by the
Company to G-I Holdings in future years, but cannot be carried back. If the
Company were no longer a member of the GAF consolidated tax group (the "GAF
Group"), it would be required to pay to G-I Holdings the value of any tax
attributes it would succeed to under the consolidated return regulations to the
extent such attributes reduced the amounts otherwise payable by the Company
under the Tax Sharing Agreement. Under certain circumstances, the provisions of
the Tax Sharing Agreement could result in
 
                                      F-21
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 6. INCOME TAXES--(CONTINUED)

the Company having a greater liability thereunder than it would have had if it
(and its subsidiaries) had filed its own separate Federal income tax return.
Under the Tax Sharing Agreement, the Company and each of its subsidiaries are
responsible for any taxes that would be payable by reason of any adjustment to
the tax returns of GAF or its subsidiaries for years prior to the adoption of
the Tax Sharing Agreement that relate to the business or assets of the Company
or any subsidiary of the Company. Although, as a member of the GAF Group, the
Company is severally liable for all Federal income tax liabilities of every
member of the GAF Group, including tax liabilities not related to the business
of the Company, G-I Holdings and GAF have agreed to indemnify the Company and
its subsidiaries for all tax liabilities of the GAF Group other than tax
liabilities (i) arising from the operations of the Company and its subsidiaries
and (ii) for tax years pre-dating the Tax Sharing Agreement that relate to the
business or assets of the Company and its subsidiaries. The Tax Sharing
Agreement provides for analogous principles to be applied to any consolidated,
combined or unitary state or local income taxes. Under the Tax Sharing
Agreement, GAF makes all decisions with respect to all matters relating to taxes
of the GAF Group. The provisions of the Tax Sharing Agreement take into account
both the Federal income taxes the Company would have incurred if it filed its
own separate Federal income tax return and the fact that the Company is a member
of the GAF Group for Federal income tax purposes. In accordance with the Tax
Sharing Agreement, effective January 31, 1994, tax benefits generated by net
operating losses and credits will reduce future tax sharing payments to G-I
Holdings.
 
     On September 15, 1997, GAF received a notice from the Internal Revenue
Service (the "Service") of a deficiency in the amount of $84.4 million (after
taking into account the use of net operating losses and foreign tax credits
otherwise available for use in later years) in connection with the formation in
1990 of Rhone-Poulenc Surfactants and Specialties, L.P. (the "surfactants
partnership"), a partnership in which GFC holds an interest. The claim of the
Service for interest and penalties, after taking into account the effect on the
use of net operating losses and foreign tax credits, could result in GAF
incurring liabilities significantly in excess of the deferred tax liability of
$131.4 million that it recorded in 1990 in connection with this matter. GAF has
advised the Company that it believes that it will prevail in this matter,
although there can be no assurance in this regard. However, if GAF is
unsuccessful in challenging its tax deficiency notice, the ability of GAF to
satisfy its tax obligation would be dependent on the cash flows of the Company
and GFC. The Company believes that the ultimate disposition of this matter will
not have a material adverse effect on its business, financial position or
results of operations. GAF, G-I Holdings and certain subsidiaries of GAF have
agreed to jointly and severally indemnify the Company against any tax liability
associated with the surfactants partnership, which the Company would be
severally liable for, together with GAF and several current and former
subsidiaries of GAF, should GAF be unable to satisfy such liability.
 
NOTE 7. SALE OF ACCOUNTS RECEIVABLE
 
     In March 1993, the Company sold its trade accounts receivable
("receivables") to a trust, without recourse, pursuant to an agreement which
provided for a maximum of $75 million in cash to be made available to the
Company based on eligible receivables outstanding from time to time. In November
1996, the Company entered into new agreements, pursuant to which it sold the
receivables to a special purpose subsidiary of the Company, BMCA Receivables
Corporation, without recourse, which in turn sold them to a new trust, without
recourse. The new agreements provide for a maximum of $115 million in cash to be
made available to the Company based on eligible receivables outstanding from
time to time. This facility expires in December 2001. The excess of accounts
receivable sold over the net proceeds received is included in "Accounts
receivable, other." The effective cost to the Company varies with LIBOR and is
included in "Other income (expense), net" and amounted to $5.2, $5.1 and $5.1
million in 1996, 1997 and 1998, respectively.
 
                                      F-22
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 8. INVENTORIES
 
     At December 31, 1997 and 1998, $7.8 and $10.2 million, respectively, of
inventories were valued using the LIFO method. Inventories consist of the
following:
 
<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                           ------------------
                                                                            1997       1998
                                                                           -------    -------
                                                                              (THOUSANDS)
<S>                                                                        <C>        <C>
Finished goods..........................................................   $38,459    $58,266
Work in process.........................................................    10,180      8,488
Raw materials and supplies..............................................    24,670     27,296
                                                                           -------    -------
  Total.................................................................    73,309     94,050
Less LIFO reserve.......................................................    (1,055)      (686)
                                                                           -------    -------
Inventories.............................................................   $72,254    $93,364
                                                                           -------    -------
                                                                           -------    -------
</TABLE>
 
NOTE 9. PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment consists of the following:
 
<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                         --------------------
                                                                           1997        1998
                                                                         --------    --------
                                                                             (THOUSANDS)
<S>                                                                      <C>         <C>
Land and land improvements............................................   $ 26,052    $ 26,851
Buildings and building equipment......................................     48,525      55,917
Machinery and equipment (including equipment under capitalized leases
  of $15,466 and $12,468--see Note 10)................................    183,108     217,094
Construction in progress..............................................     40,775      78,337
                                                                         --------    --------
  Total...............................................................    298,460     378,199
Less accumulated depreciation and amortization........................    (56,514)    (63,799)
                                                                         --------    --------
Property, plant and equipment, net....................................   $241,946    $314,400
                                                                         --------    --------
                                                                         --------    --------
</TABLE>
 
NOTE 10. LONG-TERM DEBT
 
     Long-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                                         --------------------
                                                                           1997        1998
                                                                         --------    --------
                                                                             (THOUSANDS)
<S>                                                                      <C>         <C>
11 3/4% Senior Deferred Coupon Notes due 2004.........................   $261,203    $ 28,273
7 3/4% Senior Notes due 2005..........................................         --     149,401
8 5/8% Senior Notes due 2006..........................................     99,554      99,604
8% Senior Notes due 2007..............................................     99,268      99,343
8% Senior Notes due 2008..............................................         --     154,165
Borrowings under revolving credit facility............................     34,000          --
Industrial revenue bonds with various interest rates and maturity
  dates to 2012.......................................................     11,125      11,125
Obligations on mortgaged properties...................................      4,230       3,248
Obligations under capital leases (Note 15)............................     49,594      46,814
Other notes payable...................................................        273         713
                                                                         --------    --------
  Total...............................................................    559,247     592,686
Less current maturities...............................................     (3,801)     (4,273)
                                                                         --------    --------
Long-term debt less current maturities................................   $555,446    $588,413
                                                                         --------    --------
                                                                         --------    --------
</TABLE>
 
                                      F-23
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 10. LONG-TERM DEBT--(CONTINUED)
 
     On December 3, 1998, the Company issued $155 million in aggregate principal
amount of 8% Senior Notes due 2008 (the "2008 Notes"). The Company used
substantially all of the net proceeds from such issuance to purchase, and
subsequently cancel, $147.1 million in aggregate principal amount at maturity of
the Company's 11 3/4% Senior Deferred Coupon Notes due 2004 (the "Deferred
Coupon Notes"). In connection with this purchase, the Company recorded an
after-tax extraordinary charge of $8.8 million.
 
     On July 17, 1998, the Company issued $150 million in aggregate principal
amount of 7 3/4% Senior Notes due 2005 (the "2005 Notes"). The Company used
substantially all of the net proceeds from such issuance to purchase, and
subsequently cancel, $132.6 million in aggregate principal amount at maturity of
the Company's Deferred Coupon Notes. In connection with this purchase, the
Company recorded an after-tax extraordinary charge of $9.3 million.
 
     In October 1997, the Company issued $100 million in aggregate principal
amount of 8% Senior Notes due 2007 (the "2007 Notes"). In December 1996, the
Company issued $100 million in aggregate principal amount of 8 5/8% Senior Notes
due 2006 (the "8 5/8% Notes"). In June 1994, the Company issued $310 million in
principal amount of Deferred Coupon Notes for net proceeds of $169.3 million.
The Deferred Coupon Notes will accrete to face value on July 1, 1999, and cash
interest will accrue from and after that date. Holders of the Deferred Coupon
Notes, the 2005 Notes, the 2007 Notes, the 2008 Notes and the 8 5/8% Notes have
the right under the indentures governing such notes to require the Company to
purchase the Deferred Coupon Notes at a price of 101% of Accreted Value (as
defined therein) and the 2005 Notes, the 2007 Notes, the 2008 Notes and the
8 5/8% Notes (collectively, the "Other Senior Notes") at a price of 101% of the
principal amount thereof, and the Company has the right to redeem the Deferred
Coupon Notes at Accreted Value and the Other Senior Notes at a price of 101% of
the principal amount thereof, plus, in each case, the Applicable Premium (as
defined therein), together with any accrued and unpaid interest, in the event of
a Change of Control (as defined therein).
 
     The indentures relating to the Deferred Coupon Notes, the Other Senior
Notes and the Credit Agreement (see below) contain covenants that, among other
things, limit the ability of the Company and its subsidiaries to pay certain
dividends or make certain other restricted payments and restricted investments,
incur liens, engage in transactions with affiliates, and agree to certain
additional limitations on dividends and other payment restrictions affecting
subsidiaries. As of December 31, 1998, after giving effect to the most
restrictive of the aforementioned restrictions, the Company could have paid
dividends and other restricted payments of up to $79.4 million. Additional
borrowings by the Company are subject to certain covenants contained in the
indentures relating to the Other Senior Notes and the Credit Agreement. The
Company is currently limited by certain of these covenants from incurring
additional debt, except under certain limited circumstances including under the
Credit Agreement and the refinancing of existing debt.
 
     In connection with the Deferred Coupon Notes, the Company entered into
interest rate swap agreements ("swaps") with banks, with an aggregate ending
notional principal amount of $142.0 million and a final maturity of July 1,
1999, all of which were terminated as of June 28, 1998. In 1997, the Company
terminated swaps with an aggregate ending notional principal amount of $82.0
million, resulting in gains totaling $2.1 million. In June 1998, the Company
terminated swaps with an aggregate ending notional principal amount of $60.0
million, resulting in gains of $0.7 million. The gains have been deferred and
are being amortized as a reduction of interest expense over the remaining
original life of the swaps. As a result of the swaps, the effective interest
cost to the Company of the portion of the Deferred Coupon Notes covered by the
swaps varied at a fixed spread over LIBOR.
 
     In August 1997, the Company entered into a new three-year bank credit
facility (the "Credit Agreement"). The terms of the Credit Agreement provide for
a $75 million revolving credit facility, the full amount of which is available
for letters of credit, provided that total borrowings and outstanding letters of
credit may not exceed $75 million in the aggregate. As of December 31, 1998,
$29.9 million of letters of credit were outstanding and no borrowings were
outstanding under the Credit Agreement. Under the terms of the Credit Agreement,
the
 
                                      F-24
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 10. LONG-TERM DEBT--(CONTINUED)

Company is subject to certain financial covenants, including interest coverage
and leverage ratios, and dividends and other restricted payments are limited.
Additionally, if a change of control (as defined in the Credit Agreement)
occurs, the credit facility could be terminated and the loans thereunder
accelerated by the lenders party thereto, an event which could also cause the
Deferred Coupon Notes and the Other Senior Notes to be accelerated. As of
December 31, 1998, the Company was in compliance with such covenants. The Credit
Agreement replaced previous bank credit facilities which provided up to $42
million in total borrowings and outstanding letters of credit.
 
     In December 1995, the Company consummated a $40 million sale-leaseback of
certain equipment located at its Chester, South Carolina roofing facility, in a
transaction accounted for as a capital lease, and the gain has been deferred.
The lessor was granted a security interest in certain equipment at the Chester
facility. The lease term extends to December 2005. In December 1994, the Company
consummated a $20.4 million sale-leaseback of certain equipment located at its
Baltimore, Maryland roofing facility, in a transaction accounted for as a
capital lease, and the gain has been deferred. The lessor was granted a security
interest in the land, buildings, and certain equipment at the Baltimore
facility. The lease term extends to December 2004. In December 1993, the Company
obtained a loan of $7.3 million, which is secured by manufacturing equipment
located at its Dallas plant. The loan is being repaid over a seven-year period
and has a fixed interest rate. The Company has two industrial revenue bond
issues outstanding, which bear interest at short-term floating rates. Interest
rates on the foregoing obligations ranged between 3.60% and 8.87% as of
December 31, 1998.
 
     The Company believes that the fair value of its non-public indebtedness
approximates the book value of such indebtedness, because the interest rates on
such indebtedness are at floating short-term rates. With respect to the
Company's publicly traded debt securities, the Company has obtained estimates of
the fair values from an independent source believed to be reliable. The
estimated fair value of the Deferred Coupon Notes as of December 31, 1997 and
1998 was $293.0 and $28.8 million, respectively. The estimated fair value of the
8 5/8% Notes as of December 31, 1997 and 1998 was $103.6 and $101.3 million,
respectively. The estimated fair value of the 2007 Notes as of December 31, 1997
and 1998 was $99.6 and $99.1 million, respectively. The estimated fair value of
the 2005 Notes and the 2008 Notes as of December 31, 1998 was $147.2 and
$154.8 million, respectively.
 
     The aggregate maturities of long-term debt as of December 31, 1998 for the
next five years are as follows:
 
<TABLE>
<CAPTION>
                                                                (THOUSANDS)
                                                                -----------
<S>                                                             <C>
1999.........................................................     $ 4,273
2000.........................................................       6,228
2001.........................................................       5,026
2002.........................................................      14,988
2003.........................................................      20,244
</TABLE>
 
     In the above table, maturities for the year 2002 include $11.7 million
related to the Baltimore capital lease. Maturities for the year 2003 include
$20.2 million related to the Chester capital lease.
 
                                      F-25
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 11. BENEFIT PLANS
 
     Eligible, full-time employees of the Company are covered by various benefit
plans, as described below.
 
  Defined Contribution Plan
 
     The Company provides a defined contribution plan for eligible employees.
The Company contributes up to 7% of participants' compensation and also
contributes fixed amounts, ranging from $50 to $750 per year depending on age,
to the accounts of participants who are not covered by a Company-provided
postretirement medical benefit plan. The aggregate contributions by the Company
were $3.0, $3.5 and $4.2 million for 1996, 1997 and 1998, respectively.
 
     U.S. Intec provides a defined contribution plan for eligible employees.
U.S. Intec may contribute a discretionary matching contribution equal to 100% of
each participant's eligible contributions each plan year up to a maximum of $500
for each participant. Such contributions by U.S. Intec were $0.2, $0.1 and
$0.1 million for 1996, 1997, and 1998, respectively.
 
  Defined Benefit Plans
 
     The Company provides a noncontributory defined benefit retirement plan for
hourly employees (the "Hourly Retirement Plan"). Benefits under this plan are
based on stated amounts for each year of service. The Company's funding policy
is consistent with the minimum funding requirements of ERISA.
 
     The Company's net periodic pension cost for the Hourly Retirement Plan
included the following components:
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                                   ---------------------------
                                                                   1996      1997       1998
                                                                   -----    -------    -------
                                                                           (THOUSANDS)
<S>                                                                <C>      <C>        <C>
Service cost....................................................   $ 631    $   658    $   754
Interest cost...................................................     686        754        842
Expected return on plan assets..................................    (829)    (1,034)    (1,296)
Amortization of unrecognized prior service cost.................      35         30         31
                                                                   -----    -------    -------
Net periodic pension cost.......................................   $ 523    $   408    $   331
                                                                   -----    -------    -------
                                                                   -----    -------    -------
</TABLE>
 
                                      F-26
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 11. BENEFIT PLANS--(CONTINUED)

     The following tables set forth, for the years 1997 and 1998,
reconciliations of the beginning and ending balances of the benefit obligation,
fair value of plan assets, funded status, amounts recognized in the Consolidated
Balance Sheets and changes in Accumulated Other Comprehensive Income (Loss)
related to the Hourly Retirement Plan:
 
<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                           ------------------
                                                                            1997       1998
                                                                           -------    -------
                                                                              (THOUSANDS)
<S>                                                                        <C>        <C>
Change in benefit obligation:
  Benefit obligation at beginning of year...............................   $10,028    $11,817
  Service cost..........................................................       658        754
  Interest cost.........................................................       754        842
  Actuarial losses......................................................       765        492
  Benefits paid.........................................................      (388)      (450)
                                                                           -------    -------
  Benefit obligation at end of year.....................................    11,817     13,455
                                                                           -------    -------
Change in plan assets:
  Fair value of plan assets at beginning of year........................     9,530     11,472
  Actual return on plan assets..........................................       951       (237)
  Employer contributions................................................     1,379        757
  Benefits paid.........................................................      (388)      (450)
                                                                           -------    -------
  Fair value of plan assets at end of year..............................    11,472     11,542
                                                                           -------    -------
Reconciliation of funded status:
  Funded status.........................................................      (345)    (1,913)
  Unrecognized prior service cost.......................................       307        277
  Unrecognized actuarial losses.........................................       931      2,956
                                                                           -------    -------
  Net amount recognized in Consolidated Balance Sheets..................   $   893    $ 1,320
                                                                           -------    -------
                                                                           -------    -------
Amounts recognized in Consolidated Balance Sheets:
  Accrued benefit cost..................................................   $  (345)   $(1,913)
  Intangible asset......................................................       307        277
  Accumulated other comprehensive (income) loss.........................       931      2,956
                                                                           -------    -------
  Net amount recognized.................................................   $   893    $ 1,320
                                                                           -------    -------
                                                                           -------    -------
Change for the year in accumulated other comprehensive (income) loss:
  Change in intangible asset............................................   $    30    $    30
  Change in additional minimum liability................................       818      1,995
                                                                           -------    -------
  Total.................................................................   $   848    $ 2,025
                                                                           -------    -------
                                                                           -------    -------
</TABLE>
 
     In determining the projected benefit obligation, the weighted average
assumed discount rate was 7.25% and 7% for 1997 and 1998, respectively. The
expected long-term rate of return on assets, used in determining net periodic
pension cost, was 11% for 1997 and 1998.
 
     The Company also provides a nonqualified defined benefit retirement plan
for certain key employees. Expense accrued for this plan was immaterial for
1996, 1997 and 1998.
 
                                      F-27
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 11. BENEFIT PLANS--(CONTINUED)

  Book Value Appreciation Unit Plan
 
     A Book Value Appreciation Unit Plan was implemented effective January 1,
1996. Under the plan, employees were granted units which vest over five years.
Upon exercise, employees are entitled to receive a cash payment based on the
increase in Book Value (as defined in the plan). Expense accrued under this plan
was $0.1, $0.4 and $1.3 million for 1996, 1997 and 1998, respectively.
 
  Postretirement Medical and Life Insurance
 
     The Company generally does not provide postretirement medical and life
insurance benefits, although it subsidizes such benefits for certain employees
and certain retirees. Such subsidies were reduced or ended as of January 1,
1997.
 
     Net periodic postretirement benefit cost included the following components:
 
<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                                                 -----------------------
                                                                                 1996     1997     1998
                                                                                 -----    -----    -----
                                                                                       (THOUSANDS)
<S>                                                                              <C>      <C>      <C>
Service cost..................................................................   $  95    $  98    $ 104
Interest cost.................................................................     597      554      467
Amortization of unrecognized prior service cost...............................      --      (88)     (88)
Amortization of net gains from earlier periods................................    (232)    (186)    (240)
                                                                                 -----    -----    -----
Net periodic postretirement benefit cost......................................   $ 460    $ 378    $ 243
                                                                                 -----    -----    -----
                                                                                 -----    -----    -----
</TABLE>
 
     The following table sets forth, for the years 1997 and 1998,
reconciliations of the beginning and ending balances of the postretirement
benefit obligation, funded status and amounts recognized in the Consolidated
Balance Sheets related to postretirement medical and life insurance benefits:
 
<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                          --------------------
                                                                            1997        1998
                                                                          --------    --------
                                                                              (THOUSANDS)
<S>                                                                       <C>         <C>
Change in benefit obligation:
  Benefit obligation at beginning of year..............................   $  7,421    $  7,926
  Service cost.........................................................         98         104
  Interest cost........................................................        554         467
  Actuarial (gains) losses.............................................        209        (905)
  Benefits paid........................................................       (356)       (457)
                                                                          --------    --------
  Benefit obligation at end of year....................................      7,926       7,135
                                                                          --------    --------
Change in plan assets:
  Fair value of plan assets at beginning of year.......................         --          --
  Employer contributions...............................................        356         457
  Benefits paid........................................................       (356)       (457)
                                                                          --------    --------
  Fair value of plan assets at end of year.............................         --          --
                                                                          --------    --------
Reconciliation of funded status:
  Funded status........................................................     (7,926)     (7,135)
  Unrecognized prior service cost......................................       (790)       (702)
  Unrecognized actuarial losses........................................     (2,766)     (3,431)
                                                                          --------    --------
Net amount recognized in Consolidated Balance Sheets
  as accrued benefit cost..............................................   $(11,482)   $(11,268)
                                                                          --------    --------
                                                                          --------    --------
</TABLE>
 
                                      F-28
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 11. BENEFIT PLANS--(CONTINUED)

     For purposes of calculating the accumulated postretirement benefit
obligation, the following assumptions were made. Retirees as of December 31,
1998 who were formerly salaried employees (with certain exceptions) were assumed
to receive a Company subsidy of $700 to $1,000 per year. For retirees over age
65, this subsidy may be replaced by participation in a managed care program.
With respect to retirees who were formerly hourly employees, most such retirees
are subject to a $5,000 per person lifetime maximum benefit. Subject to such
lifetime maximum, a 12% and 6% annual rate of increase in the Company's per
capita cost of providing postretirement medical benefits was assumed for 1999
for such retirees under and over age 65, respectively. To the extent that the
lifetime maximum benefits have not been reached, the foregoing rates were
assumed to decrease gradually to an ultimate rate of 7% and 6%, respectively, by
the year 2003 and remain at that level thereafter. The weighted average assumed
discount rate used in determining the accumulated postretirement benefit
obligation was 7.25% and 7% for 1997 and 1998, respectively.
 
     The health care cost trend rate assumption has an effect on the amounts
reported. To illustrate, increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1997 and 1998 by $410,000 and $90,000,
respectively, and the aggregate of the service and interest cost components of
the net periodic postretirement benefit cost for the years 1997 and 1998 by
$41,000 and $6,000, respectively. A decrease of one percentage point in each
year would decrease the accumulated postretirement benefit obligation as of
December 31, 1998 by $80,000 and the aggregate of the service and interest cost
components of the net periodic postretirement benefit cost for the year 1998 by
$6,000.
 
NOTE 12. PREFERRED STOCK OPTION PLAN
 
     On January 1, 1996, the Company established a plan to issue options to
certain employees to purchase shares of redeemable convertible preferred stock
("Preferred Stock") of the Company, exercisable at a price of $100 per share.
Each share of Preferred Stock is convertible, at the holder's option, into
shares of common stock of the Company at a formula price based on Book Value (as
defined in the option agreement) as of the date of grant. The options vest over
five years. Dividends will accrue on the Preferred Stock from the date of
issuance at the rate of 8% per annum. The Preferred Stock is redeemable, at the
Company's option, for a redemption price equal to $100 per share plus accrued
and unpaid dividends. The Preferred Stock, and common stock issuable upon
conversion of Preferred Stock into common stock, is subject to repurchase by the
Company under certain circumstances, at a price equal to current Book Value (as
defined in the option agreement). The exercise price of the options to purchase
Preferred Stock was equal to estimated fair value per share of the Preferred
Stock at the date of grant. No expense is recorded in connection with the
Preferred Stock options.
 
     The following is a summary of transactions pertaining to the plan:
 
<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                           ----------------------------
                                                                            1996      1997       1998
                                                                           ------    -------    -------
                                                                                (NUMBER OF SHARES)
<S>                                                                        <C>       <C>        <C>
Outstanding, January 1..................................................       --     23,290    102,595
Granted.................................................................   23,290     84,953     57,073
Exercised...............................................................       --         --         --
Forfeited...............................................................       --     (5,648)   (19,616)
                                                                           ------    -------    -------
Outstanding, December 31................................................   23,290    102,595    140,052
                                                                           ------    -------    -------
                                                                           ------    -------    -------
Options exercisable, December 31........................................       --      4,278     20,663
                                                                           ------    -------    -------
                                                                           ------    -------    -------
</TABLE>
 
                                      F-29
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 13. BUSINESS SEGMENT INFORMATION
 
     The Company is a leading national manufacturer of a broad line of asphalt
roofing products and accessories for the residential and commercial roofing
markets. The Company also manufactures and markets specialty building products
and accessories for the professional and do-it-yourself remodeling and
residential construction industries. The residential roofing product line
primarily consists of premium laminated shingles, strip shingles, and certain
specialty shingles principally for regional markets. Sales of residential
roofing products represented 65% of the Company's net sales in 1998. The
Company's commercial roofing product line includes a full line of modified
bitumen products, asphalt built-up roofing, liquid applied membrane, and roofing
accessories. Sales of commercial roofing products and accessories represented
30% of the Company's net sales in 1998. Sales of the specialty building products
and accessories product line represented 5% of the Company's net sales in 1998.
 
     In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which establishes standards for
companies to report information about operating segments in annual financial
statements, based on the approach that management utilizes to organize the
segments within the Company for management reporting and decision making. In
accordance with the provisions of SFAS No. 131, the Company aggregates the
residential and commercial product lines into one operating segment, based on
the fact that they have similar economic characteristics and are similar in each
of the following areas: (i) the nature of the products and services are similar
in that they perform the same function--the protection and covering of
residential and commercial roofs; (ii) the nature of the production processes
are similar; (iii) the type or class of customer for their products and services
are similar; (iv) the residential and commercial products have the same
distribution channels, whereby the main customers are wholesalers or
distributors; and (v) regulatory requirements are generally the same for both
the residential and commercial product lines. Sales of the specialty building
products and accessories product line did not meet the quantitative thresholds
in 1998 to be considered as a reportable segment.
 
     Revenues in 1997 and 1998 included sales to American Builders & Contractors
Supply Co., Inc., which accounted for approximately 10% and 11%, respectively,
of the Company's net sales. No other customer accounted for as much as 10% of
net sales in 1997 or 1998.
 
NOTE 14. RELATED PARTY TRANSACTIONS
 
     Included in the Consolidated Balance Sheets are the following receivable
(payable) balances with related parties, which arise from operating and
financing transactions between the Company and its affiliates:
 
<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                           ------------------
                                                                            1997       1998
                                                                           -------    -------
                                                                              (THOUSANDS)
<S>                                                                        <C>        <C>
Receivable from (payable to):
  GAF/G-I Holdings/G Industries.........................................   $ 9,684    $   251
  Loan receivable from G-I Holdings.....................................     6,152         --
  GAFBMC................................................................       713      1,168
  GFC...................................................................    (1,559)    (1,304)
  ISP...................................................................    (3,687)    (5,545)
                                                                           -------    -------
  Receivable from (payable to) related parties, net.....................   $11,303    $(5,430)
                                                                           -------    -------
                                                                           -------    -------
</TABLE>
 
     The Company makes loans to, and borrows from, G-I Holdings and its
subsidiaries at prevailing market rates (between 5.82% and 5.96% during 1997 and
1998). The highest amount of loans made by the Company to G-I Holdings during
1997 and 1998 was $6.2 million. No loans were made to the Company by G-I
Holdings and its subsidiaries during 1997 and 1998. As of December 31, 1997,
$6.2 million in loans were owed to the Company by G-I Holdings, at a weighted
average interest rate of 5.95%, and no loans were owed by the Company to
affiliates. In addition, the Company advances funds on a non-interest bearing
basis to GAF, G-I Holdings and their subsidiaries. The balance of such advances
as of December 31, 1997 and 1998 was $41.7 and
 
                                      F-30
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 14. RELATED PARTY TRANSACTIONS--(CONTINUED)

$1.5 million, respectively, of which $10.0 and $1.5 million, respectively, was
classified as a short-term receivable from related parties, net, in the table
above, and $31.7 million and $0, respectively, was classified as a long-term
receivable from related parties in the Consolidated Balance Sheets. During 1997
and 1998, the Company made distributions of $91.0 million and $0, respectively,
to its parent company.
 
     Mineral Products:  The Company purchases all of its colored roofing
granules requirements (except for the requirements of its California and Oregon
roofing plants and a portion of the requirements of its Indiana roofing plant,
which are supplied by a third party) from ISP under a requirements contract.
Effective January 1, 1999, this contract was amended to cover, among other
things, purchases of colored roofing granules by the Company's subsidiaries and
was renewed for 1999. This contract is subject to annual renewal unless
terminated by either party to such agreement. Such purchases by the Company and
its subsidiaries totaled $50.5, $51.1 and $62.6 million for 1996, 1997 and 1998,
respectively. The amount payable to ISP at December 31, 1997 and 1998 for such
purchases was $2.7 and $4.9 million, respectively.
 
     Glass Fiber Supply Agreement:  The Company purchases glass fiber from an
affiliate, GFC, pursuant to an agreement which expires December 31, 2003.
Purchases under this agreement totaled $24.5 and $26.1 million for 1997 and
1998, respectively.
 
     Management Agreements:  The Company is a party to a Management Agreement
with ISP (the "Management Agreement"), which expires December 31, 1999, pursuant
to which ISP provides certain general management, administrative, legal,
telecommunications, information and facilities services to the Company
(including the use of the Company's headquarters in Wayne, New Jersey). Charges
to the Company by ISP for providing such services aggregated $5.0, $4.8 and $4.3
million for 1996, 1997 and 1998, respectively. Such charges consist of
management fees and other reimbursable expenses attributable to, or incurred by
ISP for the benefit of, the Company. Effective January 1, 1999, the term of the
Management Agreement was extended through the end of 1999, and the management
fees payable thereunder were increased. The Company and ISP also allocate a
portion of the management fees payable by the Company under the Management
Agreement to separate lease payments for the use of BMCA's headquarters. Based
on the services provided by ISP to the Company in 1998 under the Management
Agreement, the aggregate amount payable by the Company to ISP under the
Management Agreement for 1999 is expected to be approximately $5.3 million.
Certain of the Company's executive officers receive their compensation from ISP,
with ISP being indirectly reimbursed therefor by virtue of the management fee
and other reimbursable expenses payable under the Management Agreement.
 
     As of January 1, 1997, the Company and GFC entered into a management
agreement under which the Company provides certain general management,
administrative and financial services to GFC. Under the management agreement,
which expires December 31, 1999, GFC is obligated to pay the Company an annual
management fee of $1.0 million.
 
     Tax Sharing Agreement:  See Note 6.
 
NOTE 15. COMMITMENTS AND CONTINGENCIES
 
     The discussions as to legal matters involving the Company contained in
Item 3, "Legal Proceedings--Environmental Litigation" and "--Other Litigation"
are incorporated herein by reference.
 
     GAF, G-I Holdings, G Industries and GAFBMC are presently dependent upon the
earnings and cash flows of their subsidiaries, principally the Company, in order
to satisfy their net obligations of approximately $252.3 million reflected on
their books as of December 31, 1998, plus any obligation accrued after such
date, including the asbestos-related liability discussed in Note 3 and various
tax and other liabilities (net of certain insurance receivables), including tax
liabilities relating to the surfactants partnership (discussed in Note 6). Of
such obligations, approximately $75.0 million (net of estimated insurance
recoveries of approximately
 
                                      F-31
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 15. COMMITMENTS AND CONTINGENCIES--(CONTINUED)

$57.0 million) is estimated to be payable during the twelve months ended
December 31, 1999. GAF has advised the Company that it expects to obtain funds
to satisfy such obligations from, among other things, dividends and loans from
subsidiaries (principally the Company), as to which there are restrictions under
the indentures relating to the Deferred Coupon Notes, the Other Senior Notes and
the Credit Agreement, and from payments pursuant to the Tax Sharing Agreement
between GAF and the Company. The Company does not believe that the dependence of
its parent corporations on the cash flows of their subsidiaries should have a
material adverse effect on the operations, liquidity or capital resources of the
Company. See Notes 3, 6 and 10.
 
     The leases for certain property, plant and equipment at certain of the
Company's roofing facilities are accounted for as capital leases (see Note 10).
The Company is also a lessee under operating leases principally for warehouses
and production, transportation and computer equipment. Rental expense on
operating leases was $8.3, $9.2 and $11.0 million for 1996, 1997 and 1998,
respectively. Future minimum lease payments for properties which were held under
long-term noncancellable leases as of December 31, 1998 were as follows:
 
<TABLE>
<CAPTION>
                                                                          CAPITAL     OPERATING
                                                                           LEASES      LEASES
                                                                          --------    ---------
                                                                               (THOUSANDS)
<S>                                                                       <C>         <C>
1999...................................................................   $  6,953     $ 4,708
2000...................................................................      7,463       3,838
2001...................................................................      8,108       2,828
2002...................................................................     17,558       1,348
2003...................................................................     21,407         827
Later years............................................................         --       2,861
                                                                          --------     -------
Total minimum payments.................................................     61,489     $16,410
                                                                                       -------
                                                                                       -------
Less interest included above...........................................    (14,675)
                                                                          --------
Present value of net minimum lease payments............................   $ 46,814
                                                                          --------
                                                                          --------
</TABLE>
 
NOTE 16. GUARANTOR FINANCIAL INFORMATION
 
     Effective January 1, 1999, BMCA ("Parent Company") transferred all of its
investment assets and intellectual property assets to Building Materials
Investment Corporation ("BMIC"), a newly-formed, wholly-owned subsidiary. In
connection with this transfer, BMIC agreed to guarantee all of the Company's
obligations under the Credit Agreement, the Deferred Coupon Notes and the Other
Senior Notes. BMCA also transferred all of its manufacturing assets, other than
those located in Texas, to Building Materials Manufacturing Corporation
("BMMC"), another newly-formed, wholly-owned subsidiary. In connection with this
transfer, BMMC agreed to become a co-obligor on the 2007 Notes and to guarantee
the Company's obligations under the Credit Agreement, the Deferred Coupon Notes
and the Other Senior Notes.
 
     In addition, in connection with the above transactions, the Company and
BMMC entered into license agreements, effective January 1, 1999, for the right
to use intellectual property, including patents, trademarks, know-how, and
franchise rights owned by BMIC for a license fee stated as a percentage of net
sales. The license agreements are for a period of one year and can be terminated
with 60 days written notice. Also, effective January 1, 1999, BMMC will sell all
finished goods to the Company at a manufacturing profit.
 
     Presented below is combined, condensed financial information for BMIC and
BMMC, prepared on a basis which retroactively reflects the formation of such
companies, as discussed above, for all periods presented. This financial
information should be read in conjunction with the Consolidated Financial
Statements and other notes related thereto.
 
                                      F-32
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
 
                   BUILDING MATERIALS CORPORATION OF AMERICA
                   COMBINED CONDENSED STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 1996
                                  (THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                 NON-
                                                   PARENT     GUARANTOR       GUARANTOR
                                                  COMPANY     SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS    CONSOLIDATED
                                                  --------    ------------    ------------    ------------    ------------
<S>                                               <C>         <C>             <C>             <C>             <C>
Net sales......................................   $745,576      $     --        $106,391       $       --       $851,967
Intercompany net sales.........................      5,400       479,283          60,500         (545,183)            --
                                                  --------      --------        --------       ----------       --------
Total net sales................................    750,976       479,283         166,891         (545,183)       851,967
                                                  --------      --------        --------       ----------       --------
Costs and expenses:
  Cost of products sold........................    575,959       454,051         137,407         (545,183)       622,234
  Selling, general and administrative..........    119,100        25,232          22,374                         166,706
  Goodwill amortization........................        641                         1,023                           1,664
                                                  --------      --------        --------       ----------       --------
     Total costs and expenses..................    695,700       479,283         160,804         (545,183)       790,604
                                                  --------      --------        --------       ----------       --------
Operating income...............................     55,276            --           6,087               --         61,363
Equity in loss of subsidiaries.................       (787)                                           787             --
Interest expense, net..........................    (17,726)       (5,073)         (9,245)                        (32,044)
Other income (expense), net....................     (8,397)        6,946              (4)                         (1,455)
                                                  --------      --------        --------       ----------       --------
Income (loss) before income taxes..............     28,366         1,873          (3,162)             787         27,864
Income tax (provision) benefit.................    (11,311)         (731)          1,233                         (10,809)
                                                  --------      --------        --------       ----------       --------
Net income (loss)..............................   $ 17,055      $  1,142        $ (1,929)      $      787       $ 17,055
                                                  --------      --------        --------       ----------       --------
                                                  --------      --------        --------       ----------       --------
</TABLE>
 
                                      F-33
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
 
                   BUILDING MATERIALS CORPORATION OF AMERICA
                   COMBINED CONDENSED STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 1996
                                  (THOUSANDS)
 
<TABLE>
<CAPTION>
                                                             PARENT       GUARANTOR      NON-GUARANTOR
                                                             COMPANY     SUBSIDIARIES    SUBSIDIARIES     CONSOLIDATED
                                                            ---------    ------------    -------------    ------------
<S>                                                         <C>          <C>             <C>              <C>
Cash and cash equivalents, beginning of year.............   $       1     $   45,594        $   394        $   45,989
                                                            ---------     ----------        -------        ----------
Cash provided by (used in) operating activities:
Net income (loss)........................................      17,842          1,142         (1,929)           17,055
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
     Depreciation........................................       2,551         17,044          4,262            23,857
     Goodwill amortization...............................         641                         1,023             1,664
     Deferred income taxes...............................      10,609                                          10,609
     Noncash interest charges............................      23,718                                          23,718
  (Increase) decrease in working capital items...........     (17,932)         8,182         (5,155)          (14,905)
  Purchases of trading securities........................                    (33,824)                         (33,824)
  Proceeds from sales of trading securities..............                     30,394                           30,394
  (Increase) decrease in other assets....................      (1,885)           120             54            (1,711)
  Decrease in other liabilities..........................      (3,098)                       (1,060)           (4,158)
  Change in net receivable from/payable to related
     parties.............................................    (157,095)       117,094         39,660              (341)
  Other, net.............................................       2,346          1,017         (2,576)              787
                                                            ---------     ----------        -------        ----------
Net cash provided by (used in) operating activities......    (122,303)       141,169         34,279            53,145
                                                            ---------     ----------        -------        ----------
Cash provided by (used in) investing activities:
  Capital expenditures...................................      (1,705)       (17,299)        (6,625)          (25,629)
  Purchases of available-for-sale securities.............                   (139,355)                        (139,355)
  Purchases of other short-term investments..............                       (660)                            (660)
  Proceeds from sales of available-for-sale securities...                    101,095                          101,095
                                                            ---------     ----------        -------        ----------
Net cash used in investing activities....................      (1,705)       (56,219)        (6,625)          (64,549)
                                                            ---------     ----------        -------        ----------
Cash provided by (used in) financing activities:
  Proceeds from sale of accounts receivable..............       8,015                                           8,015
  Proceeds from issuance of debt.........................      99,502                                          99,502
  Repayments of long-term debt...........................        (822)        (7,960)       (26,074)          (34,856)
  Capital contribution from parent company...............      86,077                                          86,077
  Payments of asbestos claims............................     (66,224)                                        (66,224)
  Financing fees and expenses............................      (2,539)                                         (2,539)
                                                            ---------     ----------        -------        ----------
Net cash provided by (used in) financing activities......     124,009         (7,960)       (26,074)           89,975
                                                            ---------     ----------        -------        ----------
Net change in cash and cash equivalents..................           1         76,990          1,580            78,571
                                                            ---------     ----------        -------        ----------
Cash and cash equivalents, end of year...................   $       2     $  122,584        $ 1,974        $  124,560
                                                            ---------     ----------        -------        ----------
                                                            ---------     ----------        -------        ----------
</TABLE>
 
                                      F-34
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
 
                   BUILDING MATERIALS CORPORATION OF AMERICA
                   COMBINED CONDENSED STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 1997
                                  (THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                 NON-
                                                   PARENT     GUARANTOR       GUARANTOR
                                                  COMPANY     SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS    CONSOLIDATED
                                                  --------    ------------    ------------    ------------    ------------
<S>                                               <C>         <C>             <C>             <C>             <C>
Net sales......................................   $793,566      $     --        $151,063       $       --       $944,629
Intercompany net sales.........................      2,683       519,452          64,699         (586,834)            --
                                                  --------      --------        --------       ----------       --------
Total net sales................................    796,249       519,452         215,762         (586,834)       944,629
                                                  --------      --------        --------       ----------       --------
Costs and expenses:
  Cost of products sold........................    609,542       494,087         170,197         (586,834)       686,992
  Selling, general and administrative..........    128,153        25,365          32,135                         185,653
  Goodwill amortization........................        641                         1,250                           1,891
                                                  --------      --------        --------       ----------       --------
     Total costs and expenses..................    738,336       519,452         203,582         (586,834)       874,536
                                                  --------      --------        --------       ----------       --------
Operating income...............................     57,913            --          12,180               --         70,093
Equity in earnings of subsidiaries.............     13,997                                        (13,997)            --
Interest expense, net..........................    (26,258)       (5,810)        (10,716)                        (42,784)
Other income (expense), net....................    (11,830)       27,292                                          15,462
                                                  --------      --------        --------       ----------       --------
Income before income taxes.....................     33,822        21,482           1,464          (13,997)        42,771
Income taxes...................................     (7,731)       (8,378)           (571)                        (16,680)
                                                  --------      --------        --------       ----------       --------
Net income.....................................   $ 26,091      $ 13,104        $    893       $  (13,997)      $ 26,091
                                                  --------      --------        --------       ----------       --------
                                                  --------      --------        --------       ----------       --------
</TABLE>
 
                                      F-35
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
 
                   BUILDING MATERIALS CORPORATION OF AMERICA
                        COMBINED CONDENSED BALANCE SHEET
                               DECEMBER 31, 1997
                                  (THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                   NON-
                                                       PARENT    GUARANTOR      GUARANTOR
                                                      COMPANY    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                      --------   ------------   ------------   ------------   ------------
<S>                                                   <C>        <C>            <C>            <C>            <C>
                       ASSETS
Current Assets:
  Cash and cash equivalents.........................  $     35     $ 12,061       $    825      $       --      $ 12,921
  Investments in trading securities.................                 62,059                                       62,059
  Investments in available-for-sale securities......                161,290                                      161,290
  Investments in held-to-maturity securities........                    499                                          499
  Other short-term investments......................                 19,488                                       19,488
  Accounts receivable, trade........................                                13,643                        13,643
  Accounts receivable, other........................    48,392        2,297            150                        50,839
  Receivable from (payable to) related
     parties, net...................................    13,413       (2,059)           (51)                       11,303
  Inventories.......................................    29,701       22,183         20,370                        72,254
  Other current assets..............................     2,064        2,719          1,460                         6,243
                                                      --------     --------       --------      ----------      --------
     Total Current Assets...........................    93,605      280,537         36,397              --       410,539
Investment in subsidiaries..........................   233,627                                    (233,627)           --
Intercompany loans including accrued interest.......    80,199                     (80,199)                           --
Due from (to) subsidiaries, net.....................    23,724          171        (23,895)                           --
Property, plant and equipment, net..................    32,847      138,889         70,210                       241,946
Excess of cost over net assets of businesses
  acquired, net.....................................    20,021                      50,025                        70,046
Deferred income tax benefits........................    35,981                                                    35,981
Receivable from related parties.....................    31,661                                                    31,661
Other assets........................................    12,691        3,990            432                        17,113
                                                      --------     --------       --------      ----------      --------
Total Assets........................................  $564,356     $423,587       $ 52,970      $ (233,627)     $807,286
                                                      --------     --------       --------      ----------      --------
                                                      --------     --------       --------      ----------      --------
        LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Short-term debt...................................  $     --     $ 26,944       $     --      $       --      $ 26,944
  Current maturities of long-term debt..............       938        2,775             88                         3,801
  Accounts payable..................................    27,147       12,424         16,071                        55,642
  Accrued liabilities...............................     7,088       13,749          5,461                        26,298
  Reserve for product warranty claims...............    12,000                       1,100                        13,100
                                                      --------     --------       --------      ----------      --------
     Total Current Liabilities......................    47,173       55,892         22,720              --       125,785
Long-term debt less current maturities..............   397,926      157,212            308                       555,446
Reserve for product warranty claims.................    18,078                       5,803                        23,881
Other liabilities...................................    18,180                         995                        19,175
                                                      --------     --------       --------      ----------      --------
Total Liabilities...................................   481,357      213,104         29,826              --       724,287
                                                      --------     --------       --------      ----------      --------
Stockholders' equity, net...........................    82,999      210,483         23,144        (233,627)       82,999
                                                      --------     --------       --------      ----------      --------
Total Liabilities and Stockholders' Equity..........  $564,356     $423,587       $ 52,970      $ (233,627)     $807,286
                                                      --------     --------       --------      ----------      --------
                                                      --------     --------       --------      ----------      --------
</TABLE>
 
                                      F-36
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
 
                   BUILDING MATERIALS CORPORATION OF AMERICA
                   COMBINED CONDENSED STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 1997
                                  (THOUSANDS)
 
<TABLE>
<CAPTION>
                                                             PARENT       GUARANTOR      NON-GUARANTOR
                                                             COMPANY     SUBSIDIARIES    SUBSIDIARIES     CONSOLIDATED
                                                            ---------    ------------    -------------    ------------
<S>                                                         <C>          <C>             <C>              <C>
Cash and cash equivalents, beginning of year.............   $       2     $  122,584        $ 1,974        $  124,560
                                                            ---------     ----------        -------        ----------
Cash provided by (used in) operating activities:
Net income...............................................      12,094         13,104            893            26,091
Adjustments to reconcile net income to net cash provided
  by (used in) operating activities:
     Depreciation........................................       3,062         14,689          5,185            22,936
     Goodwill amortization...............................         641                         1,250             1,891
     Deferred income taxes...............................      16,481                                          16,481
     Noncash interest charges............................      27,222                                          27,222
  (Increase) decrease in working capital items...........      32,601        (19,305)         4,563            17,859
  Purchases of trading securities........................                   (123,483)                        (123,483)
  Proceeds from sales of trading securities..............                     55,378                           55,378
  (Increase) decrease in other assets....................       3,735         (1,924)           (38)            1,773
  Decrease in other liabilities..........................      (7,422)                       (1,934)           (9,356)
  Change in net receivable from/payable to related
     parties.............................................      46,608        (93,374)         7,667           (39,099)
  Other, net.............................................       3,882         (8,507)        (3,376)           (8,001)
                                                            ---------     ----------        -------        ----------
Net cash provided by (used in) operating activities......     138,904       (163,422)        14,210           (10,308)
                                                            ---------     ----------        -------        ----------
Cash provided by (used in) investing activities:
  Capital expenditures...................................      (5,436)       (26,049)       (15,359)          (46,844)
  Acquisitions...........................................     (30,861)                                        (30,861)
  Purchases of available-for-sale securities.............                   (223,804)                        (223,804)
  Purchases of held-to-maturity securities...............                     (4,591)                          (4,591)
  Proceeds from sales of available-for-sale securities...                    173,547                          173,547
  Proceeds from held-to-maturity securities..............                     11,361                           11,361
                                                            ---------     ----------        -------        ----------
Net cash used in investing activities....................     (36,297)       (69,536)       (15,359)         (121,192)
                                                            ---------     ----------        -------        ----------
Cash provided by (used in) financing activities:
  Repayments from sale of accounts receivable............     (35,332)                                        (35,332)
  Increase in short-term debt............................                     26,944                           26,944
  Increase in loan receivable from related party.........      (6,152)                                         (6,152)
  Proceeds from issuance of debt.........................                     99,916                           99,916
  Increase in borrowings under revolving credit
     facility............................................      34,000                                          34,000
  Repayments of long-term debt...........................      (1,028)        (2,493)                          (3,521)
  Distributions to parent company........................     (91,000)                                        (91,000)
  Payments of asbestos claims............................      (3,062)                                         (3,062)
  Financing fees and expenses............................                     (1,932)                          (1,932)
                                                            ---------     ----------        -------        ----------
Net cash provided by (used in) financing activities......    (102,574)       122,435             --            19,861
                                                            ---------     ----------        -------        ----------
Net change in cash and cash equivalents..................          33       (110,523)        (1,149)         (111,639)
                                                            ---------     ----------        -------        ----------
Cash and cash equivalents, end of year...................   $      35     $   12,061        $   825        $   12,921
                                                            ---------     ----------        -------        ----------
                                                            ---------     ----------        -------        ----------
</TABLE>
 
                                      F-37
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
 
                   BUILDING MATERIALS CORPORATION OF AMERICA
                   COMBINED CONDENSED STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 1998
                                  (THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                 NON-
                                                   PARENT     GUARANTOR       GUARANTOR
                                                  COMPANY     SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS    CONSOLIDATED
                                                  --------    ------------    ------------    ------------    ------------
<S>                                               <C>         <C>             <C>             <C>             <C>
Net sales......................................   $885,364      $     --        $202,593       $       --      $1,087,957
Intercompany net sales.........................      3,413       571,038          72,188         (646,639)             --
                                                  --------      --------        --------       ----------      ----------
Total net sales................................    888,777       571,038         274,781         (646,639)      1,087,957
                                                  --------      --------        --------       ----------      ----------
Costs and expenses:
  Cost of products sold........................    658,587       538,499         226,461         (646,639)        776,908
  Selling, general and administrative..........    155,184        32,539          47,693                          235,416
  Goodwill amortization........................        641                         1,470                            2,111
  Nonrecurring charges.........................     27,563                                                         27,563
                                                  --------      --------        --------       ----------      ----------
  Total costs and expenses.....................    841,975       571,038         275,624         (646,639)      1,041,998
                                                  --------      --------        --------       ----------      ----------
Operating income (loss)........................     46,802            --            (843)              --          45,959
Equity in loss of subsidiaries.................       (581)                                           581              --
Interest expense, net..........................    (26,535)      (11,000)        (12,139)                         (49,674)
Other income (expense), net....................     (7,150)       23,114             (69)                          15,895
                                                  --------      --------        --------       ----------      ----------
Income (loss) before income taxes and
  extraordinary losses.........................     12,536        12,114         (13,051)             581          12,180
Income tax (provision) benefit.................     (4,984)       (4,603)          4,959                           (4,628)
                                                  --------      --------        --------       ----------      ----------
Income (loss) before extraordinary losses......      7,552         7,511          (8,092)             581           7,552
Extraordinary losses, net of income tax
  benefits.....................................    (18,113)                                                       (18,113)
                                                  --------      --------        --------       ----------      ----------
Net income (loss)..............................   $(10,561)     $  7,511        $ (8,092)      $      581      $  (10,561)
                                                  --------      --------        --------       ----------      ----------
                                                  --------      --------        --------       ----------      ----------
</TABLE>
 
                                      F-38
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
 
                   BUILDING MATERIALS CORPORATION OF AMERICA
                        COMBINED CONDENSED BALANCE SHEET
                               DECEMBER 31, 1998
                                  (THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                 NON-
                                                   PARENT     GUARANTOR       GUARANTOR
                                                  COMPANY     SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS    CONSOLIDATED
                                                  --------    ------------    ------------    ------------    ------------
<S>                                               <C>         <C>             <C>             <C>             <C>
                    ASSETS
Current Assets:
  Cash and cash equivalents....................   $      3      $ 21,746        $  3,238       $       --       $ 24,987
  Investments in trading securities............                   95,134                                          95,134
  Investments in available-for-sale
     securities................................                   56,461                                          56,461
  Investments in held-to-maturity securities...                    6,358                                           6,358
  Other short-term investments.................                   22,671                                          22,671
  Accounts receivable, trade...................                                   24,249                          24,249
  Accounts receivable, other...................     52,806           323           1,666                          54,795
  Inventories..................................     44,886        18,825          29,653                          93,364
  Other current assets.........................        125         2,893           1,126                           4,144
                                                  --------      --------        --------       ----------       --------
     Total Current Assets......................     97,820       224,411          59,932               --        382,163
Investment in subsidiaries.....................    250,156                                       (250,156)            --
Intercompany loans including accrued
  interest.....................................    140,298                      (140,298)                             --
Due from (to) subsidiaries, net................    (27,369)       42,972         (15,603)                             --
Property, plant and equipment, net.............     34,620       167,587         112,193                         314,400
Excess of cost over net assets of businesses
  acquired, net................................     19,380                        52,713                          72,093
Deferred income tax benefits...................     60,427                                                        60,427
Other assets...................................     14,844         3,229             337                          18,410
                                                  --------      --------        --------       ----------       --------
Total Assets...................................   $590,176      $438,199        $ 69,274       $ (250,156)      $847,493
                                                  --------      --------        --------       ----------       --------
                                                  --------      --------        --------       ----------       --------
     LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Current maturities of long-term debt.........   $  1,170      $  3,016        $     87       $       --       $  4,273
  Accounts payable.............................     22,688        33,248          15,677                          71,613
  Payable to related parties, net..............      1,721         3,495             214                           5,430
  Accrued liabilities..........................     20,257        26,181          13,455                          59,893
  Reserve for product warranty claims..........     19,139                         1,100                          20,239
                                                  --------      --------        --------       ----------       --------
     Total Current Liabilities.................     64,975        65,940          30,533               --        161,448
Long-term debt less current maturities.........    433,929       154,265             219                         588,413
Reserve for product warranty claims............     24,159                         4,234                          28,393
Other liabilities..............................     22,240                         2,126                          24,366
                                                  --------      --------        --------       ----------       --------
Total Liabilities..............................    545,303       220,205          37,112               --        802,620
                                                  --------      --------        --------       ----------       --------
Stockholders' equity, net......................     44,873       217,994          32,162         (250,156)        44,873
                                                  --------      --------        --------       ----------       --------
Total Liabilities and Stockholders' Equity ....   $590,176      $438,199        $ 69,274       $ (250,156)      $847,493
                                                  --------      --------        --------       ----------       --------
                                                  --------      --------        --------       ----------       --------
</TABLE>
 
                                      F-39
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 16. GUARANTOR FINANCIAL INFORMATION--(CONTINUED)
 
                   BUILDING MATERIALS CORPORATION OF AMERICA
                   COMBINED CONDENSED STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 1998
                                  (THOUSANDS)
 
<TABLE>
<CAPTION>
                                                             PARENT       GUARANTOR      NON-GUARANTOR
                                                             COMPANY     SUBSIDIARIES    SUBSIDIARIES     CONSOLIDATED
                                                            ---------    ------------    -------------    ------------
<S>                                                         <C>          <C>             <C>              <C>
Cash and cash equivalents, beginning of year.............   $      35     $   12,061        $   825        $   12,921
                                                            ---------     ----------        -------        ----------
Cash provided by (used in) operating activities:
Net income (loss)........................................      (9,980)         7,511         (8,092)          (10,561)
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
     Extraordinary losses................................      18,113                                          18,113
     Depreciation........................................       3,383         16,217          6,979            26,579
     Goodwill amortization...............................         641                         1,470             2,111
     Deferred income taxes...............................       4,128                                           4,128
     Noncash interest charges............................      23,877                                          23,877
  (Increase) decrease in working capital items...........       4,583         38,414        (15,099)           27,898
  Purchases of trading securities........................                   (189,197)                        (189,197)
  Proceeds from sales of trading securities..............                    124,931                          124,931
  (Increase) decrease in other assets....................        (482)           761            204               483
  Increase in other liabilities..........................       7,568                           211             7,779
  Change in net receivable from/payable to related
     parties.............................................      28,210          4,138          9,894            42,242
  Other, net.............................................       3,703          7,324         (1,446)            9,581
                                                            ---------     ----------        -------        ----------
Net cash provided by (used in) operating activities......      83,744         10,099         (5,879)           87,964
                                                            ---------     ----------        -------        ----------
Cash provided by (used in) investing activities:
  Capital expenditures...................................      (4,799)       (45,637)       (20,637)          (71,073)
  Acquisitions...........................................     (59,187)                                        (59,187)
  Proceeds from sale of assets...........................                                    29,019            29,019
  Purchases of available-for-sale securities.............                    (89,324)                         (89,324)
  Purchases of held-to-maturity securities...............                     (6,357)                          (6,357)
  Proceeds from sales of available-for-sale securities...                    170,055                          170,055
  Proceeds from held-to-maturity securities..............                        499                              499
                                                            ---------     ----------        -------        ----------
Net cash provided by (used in) investing activities......     (63,986)        29,236          8,382           (26,368)
                                                            ---------     ----------        -------        ----------
Cash provided by (used in) financing activities:
  Repayments from sale of accounts receivable............      (4,754)                                         (4,754)
  Decrease in short-term debt............................                    (26,944)                         (26,944)
  Decrease in loan receivable from related party.........       6,152                                           6,152
  Proceeds from issuance of debt.........................     304,019                                         304,019
  Decrease in borrowings under revolving credit
     facility............................................     (34,000)                                        (34,000)
  Repayments of long-term debt...........................    (285,108)        (2,706)           (90)         (287,904)
  Financing fees and expenses............................      (6,099)                                         (6,099)
                                                            ---------     ----------        -------        ----------
Net cash used in financing activities....................     (19,790)       (29,650)           (90)          (49,530)
                                                            ---------     ----------        -------        ----------
Net change in cash and cash equivalents..................         (32)         9,685          2,413            12,066
                                                            ---------     ----------        -------        ----------
Cash and cash equivalents, end of year...................   $       3     $   21,746        $ 3,238        $   24,987
                                                            ---------     ----------        -------        ----------
                                                            ---------     ----------        -------        ----------
</TABLE>
 
                                      F-40
<PAGE>
                   BUILDING MATERIALS CORPORATION OF AMERICA

                         SUPPLEMENTARY DATA (UNAUDITED)

                      QUARTERLY FINANCIAL DATA (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                   1997 BY QUARTER                         1998 BY QUARTER
                                         ------------------------------------    ------------------------------------
                                         FIRST     SECOND    THIRD     FOURTH    FIRST     SECOND    THIRD     FOURTH
                                         ------    ------    ------    ------    ------    ------    ------    ------
                                                                          (MILLIONS)
<S>                                      <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Net sales.............................   $193.3    $255.9    $274.4    $221.0    $212.4    $286.3    $313.6    $275.7
Cost of products sold.................    143.2     180.2     197.9     165.7     158.0     200.5     220.3     198.1
                                         ------    ------    ------    ------    ------    ------    ------    ------
Gross profit..........................   $ 50.1    $ 75.7    $ 76.5    $ 55.3    $ 54.4    $ 85.8    $ 93.3    $ 77.6
                                         ------    ------    ------    ------    ------    ------    ------    ------
                                         ------    ------    ------    ------    ------    ------    ------    ------
Operating income (loss)*..............   $  9.3    $ 24.9    $ 25.6    $ 10.3    $  6.0    $ 26.7    $ (1.2)   $ 14.5
                                         ------    ------    ------    ------    ------    ------    ------    ------
                                         ------    ------    ------    ------    ------    ------    ------    ------
Interest expense......................   $  9.8    $ 10.3    $ 10.4    $ 12.3    $ 12.7    $ 12.7    $ 12.3    $ 12.0
                                         ------    ------    ------    ------    ------    ------    ------    ------
                                         ------    ------    ------    ------    ------    ------    ------    ------
Income (loss) before income taxes and
  extraordinary losses................   $  2.9    $ 16.6    $ 18.7    $  4.6    $  3.6    $ 18.1    $ (7.0)   $ (2.5)
Income tax (provision) benefit........     (1.1)     (6.5)     (7.3)     (1.8)     (1.4)     (7.1)      2.8       1.0
                                         ------    ------    ------    ------    ------    ------    ------    ------
Income (loss) before extraordinary
  losses..............................      1.8      10.1      11.4       2.8       2.2      11.0      (4.2)     (1.5)
Extraordinary losses..................       --        --        --        --        --        --      (9.3)     (8.8)
                                         ------    ------    ------    ------    ------    ------    ------    ------
Net income (loss).....................   $  1.8    $ 10.1    $ 11.4    $  2.8    $  2.2    $ 11.0    $(13.5)   $(10.3)
                                         ------    ------    ------    ------    ------    ------    ------    ------
                                         ------    ------    ------    ------    ------    ------    ------    ------
</TABLE>
------------------
* The operating loss for the third quarter of 1998 reflects $27.6 million of
  nonrecurring charges. See Note 5 to Consolidated Financial Statements.
 
                                      F-41
<PAGE>
                                                                     SCHEDULE II
 
                   BUILDING MATERIALS CORPORATION OF AMERICA

                       VALUATION AND QUALIFYING ACCOUNTS

                          YEAR ENDED DECEMBER 31, 1996
                                  (THOUSANDS)
<TABLE>
<CAPTION>
                                                                  BALANCE      CHARGED TO                   BALANCE
                                                                 JANUARY 1,    SALES OR                    DECEMBER 31,
DESCRIPTION                                                        1996        EXPENSES      DEDUCTIONS       1997
--------------------------------------------------------------   ----------    ----------    ----------    ------------
<S>                                                              <C>           <C>           <C>           <C>
Valuation and Qualifying Accounts
  Deducted from Assets to Which
  They Apply:
     Allowance for doubtful accounts..........................    $  3,217      $    716      $  1,959(a)    $  1,974(b)
     Allowance for discounts..................................      18,797        73,936        70,265         22,468
     Reserve for inventory market valuation...................         574         2,025            90          2,509
</TABLE>
 
                          YEAR ENDED DECEMBER 31, 1997
                                  (THOUSANDS)
<TABLE>
<CAPTION>
                                                        BALANCE      CHARGED TO                             BALANCE
                                                       JANUARY 1,    SALES OR                              DECEMBER 31,
DESCRIPTION                                              1997        EXPENSES      DEDUCTIONS    OTHER        1997
----------------------------------------------------   ----------    ----------    ----------    ------    ------------
<S>                                                    <C>           <C>           <C>           <C>       <C>
Valuation and Qualifying Accounts
  Deducted from Assets to Which
  They Apply:
     Allowance for doubtful accounts................    $  1,974      $  2,224      $  1,530(a)  $   84(c)   $  2,752(b)
     Allowance for discounts........................      22,468        80,989        88,443      4,389(c)     19,403
     Reserve for inventory market valuation.........       2,509           821         1,824         --         1,506
</TABLE>
 
                          YEAR ENDED DECEMBER 31, 1998
                                  (THOUSANDS)
<TABLE>
<CAPTION>
                                                          BALANCE      CHARGED TO                            BALANCE
                                                         JANUARY 1,    SALES OR                             DECEMBER 31,
DESCRIPTION                                                1998        EXPENSES      DEDUCTIONS    OTHER       1998
------------------------------------------------------   ----------    ----------    ----------    -----    ------------
<S>                                                      <C>           <C>           <C>           <C>      <C>
Valuation and Qualifying Accounts
  Deducted from Assets to Which
  They Apply:
     Allowance for doubtful accounts..................    $  2,752      $  1,419      $    486     $350(c)    $  4,035(b)
     Allowance for discounts..........................      19,403        91,569        87,109       --         23,863
     Reserve for inventory market valuation...........       1,506         1,458           918      500(c)       2,546
</TABLE>
------------------
Notes:
 
(a) Represents write-offs of uncollectible accounts net of recoveries.
 
(b) The balances at December 31, 1996, 1997 and 1998 primarily reflect a reserve
    for receivables sold to a trust (see Note 7 to Consolidated Financial
    Statements).
 
(c) Represents balance acquired in acquisitions.
 
                                      S-1
<PAGE>
                                EXHIBIT INDEX

EXHIBIT
NUMBER    DESCRIPTION
-------   ---------------------------------------------------------------------
  2.1     -- Reorganization Agreement, dated as of December 31, 1998, by and
             among BMCA, Building Materials Manufacturing Corporation and
             Building Materials Investment Corporation (incorporated by
             reference to Exhibit 2.1 to BMCA's Registration Statement on
             Form S-4 (Registration No. 333-69749) (the "2008 Notes S-4")).

  3.1     -- Certificate of Incorporation of BMCA (incorporated by reference to
             Exhibit 3.1 to BMCA's Form 10-Q for the quarter ended September
             27, 1998).

  3.2     -- By-laws of BMCA (incorporated by reference to Exhibit 3.2 to
             BMCA's Registration Statement on Form S-4 (Registration
             No. 33-81808)) (the "Deferred Coupon Note Registration
             Statement").

  3.3     -- Certificate of Incorporation of Building Materials Manufacturing
             Corporation.

  3.4     -- By-laws of Building Materials Manufacturing Corporation.

  3.5     -- Certificate of Incorporation of Building Materials Investment
             Corporation.

  3.6     -- By-laws of Building Materials Investment Corporation.

  4.1     -- Indenture, dated as of December 3, 1998, between BMCA and The Bank
             of New York, as trustee (incorporated by reference to Exhibit 4.1
             to the 2008 Notes S-4).

  4.2     -- First Supplemental Indenture dated as of January 1, 1999 to
             Indenture dated as of December 3, 1998 among BMCA, as issuer,
             Building Materials Manufacturing Corporation and Building
             Materials Investment Corporation, as guarantors and The Bank of
             New York, as trustee (incorporated by reference to Exhibit 4.4 to
             the 2008 Notes S-4).

  4.3     -- Registration Rights Agreement, dated December 3, 1998, between
             BMCA, Bear, Stearns & Co. Inc. and Chase Securities, Inc.
             (incorporated by reference to Exhibit 4.3 to the 2008 Notes S-4).

  4.4     -- Indenture, dated as of June 30, 1994, between BMCA and The Bank of
             New York, as trustee (incorporated by reference to Exhibit 4.1 to
             the Deferred Coupon Note Registration Statement).

  4.5     -- Indenture, dated as of December 9, 1996, between BMCA and The Bank
             of New York, as trustee (incorporated by reference to Exhibit 4.1
             to BMCA's Registration Statement on Form S-4 (Registration
             No. 333-20859) (the "2006 Notes Registration Statement")).

  4.6     -- Indenture, dated as of October 20, 1997, between BMCA and The Bank
             of New York, as trustee (incorporated by reference to Exhibit 4.1
             to BMCA's Registration Statement on Form S-4 (Registration
             No. 333-41531) (the "8% Notes Registration Statement")).

  4.7     -- Indenture, dated as of July 17, 1998, between BMCA and The Bank of
             New York, as trustee (incorporated by reference to Exhibit 4.1 to
             BMCA's Registration Statement on Form S-4 (Registration No.
             333-60633) (the "2005 Notes S-4")).

  4.8     -- First Supplemental Indenture, dated as of November 30, 1998, to
             Indenture dated as of June 30, 1994 between BMCA as issuer and
             The Bank of New York, as trustee (incorporated by reference to
             Exhibit 10.5 to the 2008 Notes S-4).

  4.9     -- Second Supplemental Indenture, dated as of January 1, 1999, to
             Indenture dated as of June 30, 1994, as previously amended, among
             BMCA, as issuer, Building Materials Manufacturing Corporation and
             Building Materials Investment Corporation, as guarantors and The
             Bank of New York, as trustee (incorporated by reference to
             Exhibit 10.6 to the 2008 Notes S-4).

<PAGE>

  4.10    -- First Supplemental Indenture, dated as of January 1, 1999, to
             Indenture dated as of December 9, 1996 among BMCA, as issuer,
             Building Materials Manufacturing Corporation and Building
             Materials Investment Corporation, as guarantors and The Bank of
             New York, as trustee (incorporated by reference to Exhibit 10.7 to
             the 2008 Notes S-4).

  4.11    -- First Supplemental Indenture, dated as of January 1, 1999, to
             Indenture dated as of October 20, 1997 among BMCA, as issuer,
             Building Materials Manufacturing Corporation, as co-obligor,
             Building Materials Investment Corporation, as Guarantor and The
             Bank of New York, as trustee (incorporated by reference to
             Exhibit 10.8 to the 2008 Notes S-4).

  4.12    -- First Supplemental Indenture, dated as of January 1, 1999, to
             Indenture dated as of July 17, 1998 among BMCA, as issuer,
             Building Materials Manufacturing Corporation and Building
             Materials Investment Corporation, as guarantors and The Bank of
             New York, as trustee (incorporated by reference to Exhibit 10.9 to
             the 2008 Notes S-4).

 10.1     -- Amended and Restated Management Agreement, dated as of January 1,
             1999, among GAF, G-I Holdings, G Industries, Merick Inc.,
             GAF Fiberglass, ISP, GAF Building Materials Corporation, GAF
             Broadcasting Company, Inc., BMCA and ISP Opco Holdings Inc.

 10.2     -- Form of Option Agreement relating to Series A Cumulative
             Redeemable Convertible Preferred Stock (incorporated by reference
             to Exhibit 10.9 to BMCA's Form 10-K for the year ended
             December 31, 1996 (the "1996 Form 10-K")).*

 10.3     -- Forms of Amendment to Option Agreement relating to Series A
             Cumulative Redeemable Convertible Preferred Stock (incorporated by
             reference to Exhibit 10.12 to BMCA's Form 10-K for the year ended
             December 31, 1997 (the "1997 Form 10-K")).*

 10.4     -- Form of Option Agreement relating to Series A Cumulative
             Redeemable Preferred Stock (incorporated by reference to
             Exhibit 10.13 to the 1997 Form 10-K).*

 10.5     -- BMCA Preferred Stock Option Plan (incorporated by reference to
             Exhibit 4.2 to BMCA's Form S-8).*

 10.6     -- Tax Sharing Agreement, dated as of January 31, 1994, among GAF,
             G-I Holdings and BMCA (incorporated by reference to Exhibit 10.6
             to the Deferred Coupon Note Registration Statement).

 10.7     -- Reorganization Agreement, dated as of January 31, 1994, among GAF
             Building Materials Corporation, G-I Holdings and BMCA
             (incorporated by reference to Exhibit 10.9 to the Deferred Coupon
             Note Registration Statement).

 10.8     -- Stock Appreciation Right Agreement, dated January 1, 1997, between
             GAF Corporation and Sunil Kumar (incorporated by reference to
             Exhibit 10.11 to the 1996 Form 10-K).*

 10.9     -- Amended and Restated Stock Appreciation Right Agreement, dated
             January 1, 1997, between GAF Corporation and Sunil Kumar
             (incorporated by reference to Exhibit 10.12 to the 1996
             Form 10-K).*

 10.10    -- Letter Agreement, dated July 8, 1998, among BMCA, ISP Holdings and
             Sunil Kumar (incorporated by reference to Exhibit 10.18 to the
             2005 Notes S-4).*

 21       -- Subsidiaries of BMCA (incorporated by reference to Exhibit 21 to
             the 2008 Notes S-4).

 23       -- Consent of Arthur Andersen LLP.

 27       -- Financial Data Schedule for fiscal year 1998, which is submitted
             electronically to the Securities and Exchange Commission for
             information only.

------------------
 * Management and/or compensation plan or arrangement.