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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, 1997

                                       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

                                   ----------

     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 20, 1998, 1,000,010 SHARES OF THE REGISTRANT'S COMMON STOCK
WERE OUTSTANDING. ALL OF THE VOTING STOCK OF THE REGISTRANT IS HELD BY GAF
BUILDING MATERIALS CORPORATION.

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                                     PART I

ITEM 1. BUSINESS

BUILDING MATERIALS CORPORATION OF AMERICA

     Building Materials Corporation of America ("BMCA" or 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,
incorporated under the laws of Delaware in 1994, is a wholly-owned subsidiary of
GAF Building Materials Corporation ("GAFBMC"). The Company acquired the
operating assets and certain liabilities of GAFBMC in 1994. GAFBMC is a
wholly-owned subsidiary of G Industries Corp. ("G Industries"), which is a
holding company that also owns all of the capital stock of GAF Fiberglass
Corporation ("GFC"). 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"). GAF is controlled by Samuel J. Heyman, Chairman of the Board of
Directors and Chief Executive Officer of GAF, G-I Holdings, GFC and BMCA and
Chief Executive Officer of G Industries and GAFBMC. The Company does business
under the name "GAF Materials Corporation." The principal executive offices of
the Company are located at 1361 Alps Road, Wayne, New Jersey 07470, telephone
(973) 628-3000. As used herein, the "Company" includes BMCA's consolidated
subsidiaries.

     On January 1, 1997, GAF effected a series of transactions (collectively,
the "Separation Transactions") involving its subsidiaries that resulted in,
among other things, (1) the Company's glass fiber manufacturing facility in
Nashville, Tennessee (and certain related assets and liabilities) being
transferred to GFC, and (2) U.S. Intec, Inc. ("USI"), an indirect subsidiary of
GAF, becoming a subsidiary of the Company. In connection with the Separation
Transactions, GFC entered into a long-term supply agreement with the Company
pursuant to which GFC agreed to produce glass fiber for the Company. See Item
13, "Certain Relationships and Related Transactions." The financial and
statistical data regarding the Company presented herein reflect the results of
USI from and after October 20, 1995, the date on which USI was acquired by a
subsidiary of GAF, except as expressly set forth herein.

RESIDENTIAL ROOFING

     The Company is a leading manufacturer of a complete line of premium
residential roofing products, with residential roofing product sales
representing approximately 65% of the Company's net sales in 1997. The Company
has improved its sales mix of residential roofing products in recent years by
increasing its emphasis on its laminated products which generally are sold at
higher prices with more attractive profit margins than its standard strip
shingle products. The Company believes that it is the largest manufacturer of
laminated residential roofing shingles, and the second largest manufacturer of
standard shingles, in the United States. (Statements contained herein as to
theCompany's competitive position are based on industry information which the
Company believes to be reliable).

     The Company produces two principal lines of roofing shingles, the
Timberline(R) Series and the Sovereign(R) Series, as well as certain specialty
shingles for regional markets.

     The Timberline(R) Series. The Timberline(R) 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(R) 25
shingle, a mid-weight laminated shingle which serves as an economic trade-up for
consumers, with a 25-year limited warranty; the Timberline(R) shingle, with a
30-year limited warranty, offering a woodshake appearance, enhanced visual depth
and contrast simulating shadows and superior fire resistance and durability; and
the Timberline Ultra(R) shingle, with a 40-year limited warranty, a super
heavyweight laminated shingle with the same design features as the Timberline(R)
25 shingle, together with added durability.

     The Sovereign(R) Series. The Sovereign(R) Series includes the standard
3-tab Sentinel(R) shingle with a 20-year limited warranty; the Royal
Sovereign(R) 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(R) Weathermax(TM) shingle, a superior performing heavyweight 3-tab
shingle with a 30-year limited warranty.

     Specialty Shingles. The Company's specialty asphalt shingles include:
Slateline(R) and Slateline(R) Color Contrast(TM) shingles offering the
appearance of slate, labor savings in installation because of their larger size
and a

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30-year limited warranty; Dubl-Coverage(R) Tite-On(R) shingles offering a design
feature that enables the shingles to lock together to form a double layer roof,
and a 25-year limited warranty; and the Grand Sequoia(R) shingle, a premier
architectural shingle with a 40-year limited warranty.

     Weather Stopper(TM) Roofing System. In addition to shingles, the Company
supplies all the components necessary to install a complete roofing system. The
Company's Weather Stopper(TM) Roofing System begins with Weather Watch(R) and
Stormguard(TM) 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 rain. The Company's Weather Stopper(TM) Roofing System
also includes Shingle-Mate(R) glass reinforced underlayment, Timbertex(R),
Timber Ridge(TM), and Ridgetex(TM) 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(R)
Ridge Vent which provides attic ventilation.

     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 roofing felts and other felt and construction
paper products.

COMMERCIAL ROOFING

     The Company manufactures a full line of modified bitumen products, asphalt
built-up roofing, liquid-applied membrane systems and roofing accessories for
use in the application of commercial roofing. Commercial roofing represented
approximately 35% of the Company's net sales in 1997. Approximately 70% of
commercial roofing industry membrane unit sales utilize asphalt built-up roofing
and modified bitumen products, both of which the Company manufactures. The
Company believes that it is the second largest manufacturer of asphalt built-up
roofing products and the largest manufacturer of modified bitumen products in
the United States.

     The Company manufactures glass membranes under the trademarks GAFGLAS(R)
and Permaglas(R), which are made from asphalt impregnated glass fiber mat for
use as a component in asphalt built-up roofing systems. Most of the Company's
GAFGLAS(R) and Permaglas(R) 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. The Company also manufactures base sheets, flashings and other roofing
accessories for use in these systems, perlite roofing insulation products, which
consist of low thermal insulation that is installed as part of a commercial
roofing application below the roofing membrane, the TOPCOAT(R) roofing system, a
liquid-applied membrane system designed to protect and waterproof existing metal
roofing, and roof maintenance products. In addition, the Company sells
isocyanurate foam as roofing insulation, packaged asphalt and accessories, such
as vent stacks, roof insulation fasteners, cements and coating.

     Modified bitumen products are sold under the Ruberoid(R) trademark by the
Company and under the Brai(R) trademark by USI and are used primarily in
re-roofing applications or in combination with glass membranes in GAF
CompositeRoof(TM) 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.

     In July 1997, the Company acquired the assets of Major Group Incorporated,
the manufacturer of the TOPCOAT(R) roofing system.

MARKETING AND SALES

     The Company has one of the industry's largest sales forces, which is
supported by a staff of technical professionals who work directly with
architects, consultants, contractors and building owners. The Company markets
its roofing products through its own sales force of approximately 160
experienced full-time employees and independent sales representatives operating
from five regional sales offices located across the United States. USI markets
its roofing products through approximately 50 full-time employees and
independent sales representatives. A major portion of the Company's roofing
product sales are to wholesale distributors who resell the Company's products to
roofing contractors and retailers. The Company believes that the wholesale
distribution channel offers the

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most attractive margins of all roofing market distribution channels and
represents the principal distribution channel for professionally installed
asphalt roofing products, and believes that its nationwide coverage has
contributed to its roofing products being among the most recognized and
requested brands in the industry.

     In September 1997, the Company launched its Customer Advantage(TM) Program
to established a nationwide network of Master Elite(TM) contractors and
authorized installers. This program offers marketing and support services to
residential roofing contractors and has enrolled over 1,000 contractors.

     No single customer accounted for 10% or more of the Company's 1997 sales,
except for American Builders & Contractors Supply Co., Inc., which accounted for
approximately 10% of such sales.

RAW MATERIALS

     The major raw materials required for the manufacture of the Company's
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 and the Company currently has contracts with several
of these suppliers, with others 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.

     Five of the Company's roofing plants have easy access to deep water ports,
thereby permitting delivery of asphalt by ship, the most economical means of
transport. The Company's Chester, South Carolina plant manufactures glass fiber
mat substrate. The Company purchases from an affiliate, International Specialty
Products Inc. ("ISP"), substantially all its requirements for colored roofing
granules (except for the requirements of its California roofing plant which are
supplied by a third party) under a supply contract that was renewed for one year
effective January 1, 1998 and is subject to annual renewal unless terminated by
the Company or ISP. In addition, in December 1995, USI commenced purchasing
substantially all its requirements for colored roofing granules from ISP (except
for the requirements of its Stockton, California and Corvallis, Oregon plants
which are supplied by a third party) pursuant to a supply contract. As part of
the Separation Transactions, the Company transferred to GFC its Nashville,
Tennessee facility, which manufactures a significant portion of the Company's
glass fiber requirements, and entered into a supply contract with GFC under
which GFC produces glass fiber for the Company.

SEASONAL VARIATIONS AND WORKING CAPITAL

     Sales of roofing products in the northern regions of the United States
generally decline during the winter months due to adverse weather conditions.
Generally, the Company's 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

     The Company provides certain limited warranties covering most of its
residential roofing products for periods ranging from 20 to 40 years. Although
terms of warranties vary, the Company believes that its warranties generally are
consistent with those offered by its competitors. The Company also offers
limited warranties and guarantees of varying duration on its commercial roofing
products. The Company currently believes that the reserves established for
estimated probable future warranty claims are adequate.

COMPETITION

     The roofing products industry is highly competitive and includes a number
of national competitors, which in the residential roofing market 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. The Company believes that it is
well positioned in the marketplace as a result of its 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 the Company, have increased their laminated shingle
production capacity in recent years and, accordingly, the Company expects
increased competition in this area.

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RESEARCH AND DEVELOPMENT

     The Company's research and development activities are focused primarily on
the development of new products, process improvements and the testing of
alternative raw materials and supplies. The Company's 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. The Company's research and development expenditures were
approximately $3.1 million, $4.5 million and $5.4 million in 1995, 1996 and
1997, respectively.

PATENTS AND TRADEMARKS

     The Company owns or licenses approximately 79 domestic and 96 foreign
patents or patent applications and owns or licenses approximately 149 domestic
and 46 foreign trademark registrations or applications. While the Company
believes the patent protection covering certain of its products to be material
to those products, the Company does not believe that any single patent, patent
application or trademark is material to the Company's business or operations.

     The Company believes that the duration of the existing patents and patent
licenses is satisfactory.

ENVIRONMENTAL COMPLIANCE

     Since 1970, a wide variety of federal, state and local environmental laws
and regulations relating to environmental matters (the "Regulations") have been
adopted and amended. By reason of the nature of the operations of the Company
and its predecessor and certain of the substances that are or have been used,
produced or discharged at their plants or at other locations, the Company is
affected by the Regulations. The Company has made capital expenditures averaging
approximately $400,000 during each of the last three years in order to comply
with the Regulations (which expenditures are included in additions to property,
plant and equipment) and anticipates that aggregate capital expenditures
relating to environmental compliance in each of 1998 and 1999 will be
approximately $600,000.

     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. The Company believes that
its manufacturing facilities comply in all material respects with applicable
Regulations, and, while it cannot predict whether more burdensome requirements
will be adopted in the future, it believes that any potential liability for
compliance with the Regulations will not materially affect its business,
liquidity or financial position.

     The Company believes that its manufacturing facilities are being operated
in compliance in all material respects with applicable environmental, health and
safety laws and regulations, but cannot predict whether more burdensome
requirements will be imposed by governmental authorities in the future.

EMPLOYEES

     At December 31, 1997, the Company employed approximately 3,000 people
worldwide, approximately 1,200 of which were subject to 16 union contracts. The
contracts are effective for three- to four-year periods. During 1997, five labor
contracts expired and were renegotiated. The Company believes that its relations
with its employees and their unions are satisfactory.

ITEM 2. PROPERTIES

     The corporate headquarters and principal research and development
laboratories of the Company 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. The Company occupies its headquarters pursuant to its management
agreement with ISP. See Item 13, "Certain Relationships and Related
Transactions."

     The principal real properties either owned by, or leased to, the Company or
its subsidiaries are described below. Unless otherwise indicated, the properties
are owned in fee. In addition to the principal facilities listed below, the
Company maintains sales offices and warehouses, substantially all of which are
in leased premises under relatively short-term leases.

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<TABLE>
<CAPTION>

LOCATION                           FACILITY
--------                           --------
<S>                                <C>
Alabama
   Mobile .......................  Plant, Warehouses*
California
   Fontana ......................  Plant, Sales Office
   Hollister ....................  Plant, Plant*
   Ontario ......................  Plant, Sales Office
   Stockton .....................  Plant, Plant, Warehouses*
Florida
   Tampa ........................  Plant, Sales Office*
Georgia
   Monroe .......................  Plant, Warehouse*
   Savannah .....................  Plant, Sales Office
Indiana
   Mount Vernon .................  Plant, Sales Office
Illinois
   Naperville ...................  Sales Office*
Kentucky
   Florence .....................  Plant
Maryland
   Baltimore ....................  Plant
Massachusetts
   Millis .......................  Plant, Sales Office, Warehouse*
   Walpole ......................  Plant*
Minnesota
   Minneapolis ..................  Plant, Sales Office, Warehouse*
New Jersey
   Branchburg ...................  Warehouse*
   North Branch .................  Plant
   North Brunswick ..............  Sales Office*, Warehouse*
   Wayne ........................  Headquarters*, Corporate Administrative Offices*, Research Center*
New Mexico
   Albuquerque ..................  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, Warehouses*
   Fannett ......................  Warehouse
   Houston ......................  Plant, Warehouse
   Port Arthur ..................  Plant, Plant, Warehouse, Sales Office, Research Center
---------------
* Leased Property
</TABLE>

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     The Company believes that its 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 1997, the Company made capital expenditures in the amount of $46.8
million relating to plant, property and equipment.

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, GAFBMC. As of March 30, 1997, BMCA had
paid all of its assumed asbestos-related liabilities. G-I Holdings and GAFBMC
have jointly and severally agreed to indemnify BMCA against any claims related
to asbestos-related liabilities, other than those contractually assumed by BMCA,
in the event that claims in connection with liabilities not assumed by BMCA are
asserted against it.

     GAF has advised BMCA that, as of December 27, 1997, it had been named as a
defendant in approximately 79,300 pending lawsuits involving alleged Asbestos
Claims, having resolved approximately 234,500 Asbestos Claims. During 1997, GAF
resolved approximately 11,000 Asbestos Claims and received notice of
approximately 30,900 new Asbestos Claims. Of the Asbestos Claims resolved in
1997, approximately 8,900 were resolved (including Asbestos Claims disposed of
at no cost to GAF) for an average cost of approximately $3,700 per claim. GAF's
share of the costs with respect to approximately 2,100 Asbestos Claims resolved
in 1997 has not yet been determined. There can be no assurance, however, that
the actual costs of resolving pending and future Asbestos Claims will
approximate GAF's historic average costs.

     GAF has stated that it is committed to effecting a comprehensive resolution
of Asbestos Claims, that it is exploring a number of options, both judicial and
legislative, to accomplish such resolution, but there can be no assurance that
this effort will be successful.

     BMCA believes that it will not sustain any additional liability in
connection with asbestos-related claims. While BMCA 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 BMCA, and
such enforcement could result in a change of control with respect to BMCA. See
Note 9 to Consolidated Financial Statements.

     Asbestos-in-Building Claims. GAF 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 16 years ago, GAF has not only
successfully disposed of approximately 144 such cases at an average disposition
cost (including cases disposed of at no cost to GAF) 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 five remaining lawsuits. See "--Insurance
Matters." BMCA has not assumed any liabilities with respect to Building Claims,
and G-I Holdings and GAFBMC have jointly and severally agreed to indemnify BMCA
in the event any such claims are asserted against it.

     Insurance Matters. GAF and G-I Holdings had available, as of December 31,
1997, to pay asbestos-related bodily injury claims aggregate insurance coverage
of $188.9 million, before discounting certain coverage, (which amount is reduced
as asbestos-related liabilities are satisfied), $13.2 million of which is the
subject of negotiations with various insurers and/or the Coverage Action
described below, and which $13.2 million of coverage GAF believes will be
available to it either by agreement with its insurance carriers or, if
necessary, by legal action. In addition to the $188.9 million of insurance
referred to above, GAF and G-I Holdings have $57.2 million of additional
insurance which may be available to pay a portion of the Asbestos Claims.

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<PAGE>

     In January 1993, the members of the Center for Claims Resolution (the
"CCR"), a non-profit organization of asbestos defendant companies, including
GAF, 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 sought a declaratory judgment on behalf of certain
CCR members, including GAF, against various third-party defendant product
liability insurers to the effect that those insurers are obligated to provide
coverage for Asbestos Claims. On June 27, 1997, GAF and other members of the CCR
filed a motion for leave to file amended complaints for coverage for Asbestos
Claims and for leave to consolidate their amended complaints. The insurers who
are defendants in GAF's amended complaint are Atlanta International, Employers
Mutual and Northbrook. The insurance carrier defendants have raised various
defenses to the Coverage Action, including that the action creates a procedural
morass and fails to name indispensable parties, and that the separate amended
complaints of the various CCR members should not be consolidated.

     In October 1983, GAF 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 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's defense costs have been paid by one of
its primary carriers. While GAF expects that such primary carrier will continue
to defend and indemnify GAF, such primary carrier has reserved its rights to
later refuse to defend and indemnify GAF and to seek reimbursement for some or
all of the fees paid to defend and resolve the Building Claims. GAF believes
that it will be able to resolve such cases for amounts within the total
indemnity obligations available from such primary carrier. GAF further believes
that it would prevail if the carrier's claims for reimbursement of fees paid to
defend and resolve these cases were determined by a court.

ENVIRONMENTAL LITIGATION

     The Company, together with other companies, is 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 GAFBMC relating to existing plant sites and the
business of BMCA as then conducted, and the estimates referred to below reflect
those environmental liabilities assumed by BMCA and other environmental
liabilities of the Company. The environmental liabilities of GAFBMC which were
not assumed by BMCA, for which G-I Holdings and GAFBMC have agreed to indemnify
BMCA, relate primarily to closed manufacturing facilities. G-I Holdings
estimates that, as of December 31, 1997, its liability in respect of the
environmental liabilities of GAFBMC not assumed by BMCA was approximately $14.0
million, before insurance recoveries reflected on its balance sheet of $7.7
million, as compared to BMCA's estimate of its liability as of December 31, 1997
in respect of assumed and other environmental liabilities of $1.1 million,
before insurance recoveries reflected on its balance sheet (discussed below) of
$0.8 million that relate to both past expenses and estimated future liabilities
("estimated recoveries").

     At most sites, the Company 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 the Company's evaluation of the financial
responsibility of the parties involved and their insurers, relevant legal issues
and cost sharing arrangements now in place, the Company 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,
the Company believes that it will receive the estimated recoveries and that
recoveries could be well in excess of the current estimated liability for all
Environmental Claims, although there can be no assurances in this regard. The
Company believes it is entitled to substantially full defense and indemnity
under its insurance policies for most Environmental Claims, although the
Company's insurers have not affirmed a legal obligation under the policies to
provide indemnity for such claims.

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<PAGE>

     On March 8, 1995, GAF 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 action was dismissed by
the Court in December 1997 for lack of federal jurisdiction, and one defendant
insurer has filed a notice of appeal. On June 16, 1997, GAF filed a similar
action against the insurers in the Superior Court of New Jersey, Somerset
County, which action is pending. While the Company believes that its claims are
meritorious, there can be no assurance that the Company will prevail in its
efforts to obtain amounts equal to, or in excess of, the estimated recoveries.

     BMCA believes that it will not sustain any liability for environmental
liabilities of GAFBMC other than those that it has contractually assumed or that
relate to the operations of its business. While the Company cannot predict
whether any claims for non-assumed environmental liabilities will be asserted
against it or its assets, or the outcome of any litigation relative 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, and G-I Holdings has advised the Company that it
believes it has and will have sufficient resources to enable it to satisfy its
environmental liabilities. The possible consequences to the Company of the
failure of G-I Holdings and GAFBMC 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 the Company and Elk Corporation of Dallas
("Elk") in the United States District Court for the Northern District of Texas
relating to certain aspects of the Company's laminated shingles, which Elk
claims infringe design and utility patents issued to it. Elk also asserts that
the Company has appropriated the trade dress of Elk's product. Elk seeks
injunctive relief, damages and attorneys' fees. The Company denies infringement
of Elk's patents or appropriation of Elk's trade dress, and has sued for a
declaration that Elk's patents are invalid and unenforceable and that the
Company's shingles do not infringe any of Elk's rights, and has 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 fraud and inequitable conduct. The Company believes that it
will prevail on the balance of Elk's claims as well.

     On or about April 29, 1996, an action was commenced in the Circuit Court of
Mobile County, Alabama against GAFBMC on behalf of a purported nationwide class
of purchasers of, or current owners of, buildings with asphalt shingles
manufactured by GAFBMC since January 1979. The action alleges, among other
things, that such shingles were defective and seeks unspecified damages on
behalf of the purported class. On or about January 7, 1997, an action was
commenced in the Superior Court of New Jersey, Middlesex County against GAFBMC
on behalf of a purported nationwide class of owners of buildings with shingles
manufactured by GAFBMC who allegedly have suffered damages since January 1991.
The action alleges, among other things, that such shingles were defective and
seeks unspecified damages on behalf of the purported class. In August 1997, the
Company filed a motion to deny class certification of the action, which motion
remains pending. On or about September 19, 1997, an action was commenced in the
Superior Court of New Jersey, Passaic County, against GAFBMC and GAF on behalf
of a nationwide class of owners of structures with roof shingles manufactured
and distributed by GAFBMC and which were installed from 1988 to 1993. The action
alleges, among other things, that such shingles were defective and seeks
unspecified damages on behalf of the purported class. On or about December 1,
1997, an action was commenced in the Supreme Court of the State of New York,
County of Nassau, against GAFBMC and GAF on behalf of a nationwide class of
owners of structures with roof shingles manufactured and distributed by GAFBMC
which were installed between 1985 and 1993. The action alleges, among other
things, that such shingles were defective and seeks unspecified damages on
behalf of the purported class. Plaintiffs have not moved for class certification
in any of these actions.

     On August 14, 1996, an action was commenced in Pointe Coupee Parish,
Louisiana, against GAF and GAFBMC on behalf of a purported nationwide class of
those who own or did own single family residences on which GAF Timberline(R)
shingles were installed. The Company was not served or otherwise notified of the
action until November 1996. Without any notice to the Company, in August 1996,
the court in Pointe Coupee conditionally certified the nationwide class,
reserving the right to decertify the class or otherwise modify its order. The
Company has appealed the state court's conditional class certification. The
action alleges that the shingles were defective and seeks unspecified damages on
behalf of the purported class.

                                       8


<PAGE>

     The Company does not believe certification of a class is warranted in any
of these actions, and intends to vigorously oppose them.

                                      * * *

     The Company believes 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 the Company's liquidity, financial position or results of operations.

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 the Registrant's common stock. All of the
Registrant's common stock is held by GAFBMC.

ITEM 6. SELECTED FINANCIAL DATA

     See page F-6.

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

     Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Index on page F-1 and Financial Statements and Supplementary Data on
pages F-7 to F-27.

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

         None.







                                       9
<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 the Company.

<TABLE>
<CAPTION>

NAME AND POSITION HELD(1)              AGE      PRESENT PRINCIPAL OCCUPATION AND FIVE-YEAR EMPLOYMENT HISTORY
-------------------------              ---      -------------------------------------------------------------
<S>                                     <C>   <C>
Samuel J. Heyman ...................    59    Mr.  Heyman has been a director  and  Chairman  of BMCA since its
 Director, Chairman and                         formation  and Chief  Executive  Officer of BMCA since June 1996.
  Chief Executive Officer                       He has served as a director and Chairman and Chief Executive Officer of
                                                ISP since its formation in May 1991 and Chief Executive Officer of
                                                GAFBMC since May 1994. Mr. Heyman has held the same offices with GAF,
                                                G-I Holdings and certain of its subsidiaries since April 1989, prior to
                                                which he held the same position with GAF's predecessor from December
                                                1983 to April 1989. Mr. Heyman has been a director of USI since October
                                                1995, and a director, Chairman and Chief Executive Officer of ISP
                                                Holdings Inc. ( "ISP Holdings "), the parent of ISP, since its
                                                formation. He 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 ........................    48    Mr. Kumar has been the President,  Chief Operating  Officer and a
 Director, President and                        director  of BMCA  since  July  1996,  March  1996 and May  1995,
  Chief Operating Officer                       respectively. He was President, Commercial Roofing Products Division,
                                                and Vice President of BMCA from February 1995 to March 1996. He has been
                                                Chairman of USI since March 1996 and a director of USI since October
                                                1995. He was Vice Chairman of USI from October 1995 to March 1996. 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. From 1982 to 1990, Mr. Kumar
                                                was President of Firestone Building Products Company, and from 1990 to
                                                1992 he was Vice President of Bridgestone/Firestone.

James P. Rogers ....................    47    Mr.  Rogers has been a director of BMCA since its  formation  and
 Director and Executive                         Executive  Vice  President of BMCA and USI since  December  1996.
  Vice President                                Mr. Rogers has been Executive Vice President and Chief Financial Officer
                                                of GAF, G-I Holdings and certain of its subsidiaries, Executive Vice
                                                President and Chief Financial Officer of ISP Holdings and Executive Vice
                                                President-Finance of ISP since December 1996. He was Senior Vice
                                                President of such corporations from November 1993 to December 1996, of
                                                BMCA and ISP Holdings from their formation to December 1996 and of USI
                                                from October 1995 to December 1996. Mr. Rogers has been a director of
                                                USI since October 1995. Mr. Rogers was Treasurer of BMCA from its
                                                formation until December 1994. Mr. Rogers has served as Treasurer of G-I
                                                Holdings, GAF and certain of its subsidiaries since March 1992 and was
                                                Vice President-Finance of such corporations from March 1992 to October
                                                1993. From August 1987 to March 1992, Mr. Rogers was Treasurer of
                                                Amphenol Corporation, a manufacturer of electronic connectors.
</TABLE>

                                                             10


<PAGE>

<TABLE>
<CAPTION>

NAME AND POSITION HELD(1)              AGE      PRESENT PRINCIPAL OCCUPATION AND FIVE-YEAR EMPLOYMENT HISTORY
-------------------------              ---      -------------------------------------------------------------
<S>                                     <C>   <C>
Richard A. Weinberg ................    38    Mr.  Weinberg has been Senior Vice President and General  Counsel
 Senior Vice President and                      of BMCA since May 1996.  He has been  Senior Vice  President  and
  General Counsel                               General Counsel of GAF, G-I Holdings, ISP and certain of their
                                                respective subsidiaries since May 1996 and of ISP Holdings since its
                                                formation. 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 GAFBMC from April 1993 to May
                                                1994. Mr. Weinberg was employed by Reliance Group Holdings Inc., a
                                                diversified insurance holding company, as Staff Counsel from October
                                                1987 to January 1990 and as Assistant Vice President and Corporate
                                                Counsel from January 1990 to April 1993.

Donald W. LaPalme ..................    60    Dr.  LaPalme has been Senior  Vice  President-Operations  of BMCA
 Senior Vice                                    and certain of its  subsidiaries  since  April 1996.  He was Vice
  President-Operations                          President-Operations of BMCA and certain of its subsidiaries from
                                                January 1994 to April 1996 and held the same position with GAFBMC from
                                                1987 to May 1994. From 1985 to 1987 he was plant manager and Director of
                                                Manufacturing Polymers of GFC's Calvert City, Kentucky manufacturing
                                                facility. From 1981 to 1984 he was Vice President of Manufacturing of
                                                GAF's Building Materials Division.

William C. Lang ....................    54    Mr.  Lang has been  Senior  Vice  President  and Chief  Financial
 Senior Vice President and                      Officer of BMCA since  April 1997.  He was Senior Vice  President
  Chief                                         Financial Officer and Chief Financial Officer of Duane Reade, a regional
                                                drug store chain, from 1993 to 1996. From 1990 to 1992, Mr. Lang was
                                                President and Chief Financial Officer of Furr's, Inc., a large
                                                supermarket chain.

Danny J. Adair .....................    53    Mr. Adair has been President and Chief Executive Officer of USI since 1982.
 President and Chief Executive
  Officer, U.S. Intec, Inc.

William W. Collins .................    47    Mr. Collins has been Senior Vice President-Marketing and Sales,
 Senior Vice President-                         Residential Roofing Products of BMCA since November 1997. He was Vice
  Marketing and Sales,                          President-Marketing and Sales, Commercial Roofing Products of BMCA from
  Residential Roofing                           March 1996 to November 1997, Vice President-Sales, Commercial of BMCA
  Products                                      from December 1995 to March 1996, Director of Insulation, Accessories
                                                and Cobra(R) Products of BMCA from February 1995 to December 1995 and
                                                Director of Special Projects of BMCA from July 1992 to February 1995.
                                                From February 1991 to July 1992, he was Vice President-Sales & Marketing
                                                of Berger Building Products, Incorporated.
</TABLE>

                                                           11


<PAGE>

<TABLE>
<CAPTION>

NAME AND POSITION HELD(1)              AGE      PRESENT PRINCIPAL OCCUPATION AND FIVE-YEAR EMPLOYMENT HISTORY
-------------------------              ---      -------------------------------------------------------------
<S>                                     <C>   <C>
Robert Tafaro ......................    47    Mr. Tafaro has been Vice President-Marketing and Sales,
 Vice President-Marketing and                   Commercial Roofing Products of BMCA since November 1997. He was
  Sales, Commercial Roofing                     Vice President-Residential Marketing of BMCA from May 1997 to
  Products                                      November 1997, Director of Residential Marketing of BMCA from
                                                February 1997 to May 1997, Eastern Regional Sales Manager of BMCA from
                                                July 1993 to February 1997 and Field Sales Manager of BMCA from August
                                                1989 to July 1993.
</TABLE>
---------------
 (1)  Under BMCA's By-laws, each director and executive officer continues in
      office until BMCA's next annual meeting of stockholders and until his
      successor is elected and qualified.

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, 1997.

<TABLE>
<CAPTION>

                                                                                              LONG TERM
                                                                                            COMPENSATION
                                                ANNUAL COMPENSATION                         ------------
                                  -------------------------------------------------          SECURITIES
                                                                       OTHER ANNUAL      UNDERLYING SARS(S)/        ALL OTHER
NAME AND PRINCIPAL POSITION(6)    YEAR     SALARY       BONUS(1)       COMPENSATION         OPTIONS(O)(1)          COMPENSATION
------------------------------    ----     ------       --------       ------------      ------------------        ------------
<S>                               <C>     <C>           <C>            <C>              <C>                         <C>
Samuel J. Heyman .............    1997            (6)        (6)             (6)                         (6)               (6)
  Chairman and Chief              1996            (6)        (6)             (6)                         (6)               (6)
  Executive Officer               1995            (6)        (6)             (6)                         (6)               (6)

Sunil Kumar ..................    1997    $293,550      $256,238       $     0                   7,609(O)           $16,693(2)
  President and Chief             1996     274,500       165,000             0          2,190(O)/8,609(S)(7)         13,561(2)
  Operating Officer               1995     208,336(2)     60,000(2)     28,608(2)                9,201(S)             8,475(2)

Danny J. Adair ...............    1997    $216,686      $ 35,815       $     0                   2,637(O)           $11,286(3)
  President and Chief             1996     216,686        53,093             0                   1,550(O)             3,972(3)
  Executive Officer,              1995     216,686(3)     25,000             0                       0                3,953(3)
  U.S. Intec, Inc.

Donald W. LaPalme Senior .....    1997    $162,481      $ 55,601       $     0                   3,076(O)           $16,102(4)
  Vice President-                 1996     154,750        59,774             0                   1,200(O)            14,519(4)
  Operations                      1995     148,500        34,000             0                       0               14,381(4)

William W. Collins ...........    1997    $148,242      $ 57,497       $     0                   8,218(O)           $13,828(5)
  Senior Vice President-          1996     128,000        42,588             0                     900(O)            12,092(5)
  Marketing & Sales,              1995     110,071        20,000             0                       0                9,859(5)
  Residential Roofing
  Products

</TABLE>
-------------
(1)   Bonus amounts are payable pursuant to BMCA's Executive Incentive
      Compensation Program. The stock appreciation rights (S) relate to shares
      of GAF common stock. The options (O) relate to shares of redeemable
      convertible preferred stock of BMCA. See "Options/SARs."

(2)   Included in "Other Annual Compensation" for Mr. Kumar are $19,897 in
      payment of moving related expenses and a "tax gross-up" of $8,711 in 1995.
      Included in "All Other Compensation" for Mr. Kumar are $11,450, $10,750
      and $5,664, representing BMCA's contribution under the GAF Capital
      Accumulation Plan in 1997, 1996 and 1995, respectively; $3,280, $1,636 and
      $1,636 for premiums paid by BMCA for a life insurance policy in 1997, 1996
      and 1995, respectively; and $1,963, $1,175 and $1,175 for the premiums
      paid by BMCA for a long-term disability policy in 1997, 1996 and 1995,
      respectively. Mr. Kumar commenced employment with the Company in February
      1995.

                                             (Footnotes continued on next page)

                                       12
<PAGE>

(Footnotes continued from previous page)

(3)   Included in "All Other Compensation" for Mr. Adair are: $3,244, $1,260 and
      $1,260 in 1997, 1996 and 1995, respectively, for premiums paid for a life
      insurance policy; $1,701, $2,212 and $2,193 for premiums paid on a
      long-term disability policy in 1997, 1996 and 1995, respectively; and
      $6,341, $500 and $500, representing the Company's contribution under the
      GAF Capital Accumulation Plan in 1997, 1996 and 1995, respectively. USI
      became a subsidiary of GAF in 1995.

(4)   Included in these amounts for Dr. LaPalme are: $11,700, $11,000 and
      $11,000, representing BMCA's contribution under the GAF Capital
      Accumulation Plan in 1997, 1996 and 1995, respectively; $3,127,$2,754 and
      $2,646 for premiums paid by BMCA for a life insurance policy in 1997, 1996
      and 1995, respectively; and $1,275, $765, $735 for premiums paid by BMCA
      for a long-term disability policy in 1997, 1996 and 1995, respectively.

(5)   Included in these amounts for Mr. Collins are: $11,513, $10,633 and
      $9,859, representing BMCA's contribution under the GAF Capital
      Accumulation Plan in 1997, 1996 and 1995, respectively; $1,244 and $849
      for the premiums paid by BMCA for a life insurance policy in 1997 and
      1996, respectively; and $1,071 and $610 for the premiums paid by BMCA for
      a long-term disability policy in 1997 and 1996, respectively.

(6)   The salaries and other compensation of Messrs. Heyman, Weinberg and Rogers
      are paid by ISP, an affiliate of BMCA. Mr. Heyman, Mr. Rogers and Mr.
      Weinberg render services to BMCA pursuant to a management agreement.
      No allocation of compensation for services to BMCA is made
      pursuant to such 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 such year. See
      Item 13, "Certain Relationships and Related Transactions--Management
      Agreement."

(7)   Excluded are options to purchase redeemable  convertible preferred stock
      of ISP Holdings. See Note (2) to the second table under "Options/SARs"
      below.

OPTIONS/SARS

     The following table summarizes options ("BMCA Preferred Options") to
acquire BMCA's redeemable convertible preferred stock granted during 1997 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 1997.

<TABLE>
<CAPTION>

                 BMCA PREFERRED STOCK OPTION GRANTS IN 1997 (1)

                                                                               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 1997         5%            10%
                                --------------------   --------------------   -------       --------
<S>                                    <C>                     <C>            <C>           <C>
Sunil Kumar ..................         7,609                   10.9%          $90,084       $328,506
Danny J. Adair ...............         2,637                    3.8            31,220        113,850
Donald W. LaPalme ............         3,076                    4.4            36,405        132,756
William W. Collins ...........         2,033                    2.9            24,066         87,761
                                       6,185                    8.8            67,920        247,680
</TABLE>
----------------
 (1)  The BMCA Preferred Options represent options to purchase shares of
      redeemable convertible preferred stock of BMCA (the "Preferred Stock").
      Each share of Preferred Stock is convertible, at the holder's option, into
      shares of 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 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 the Company's
      option, for a redemption price equal to the exercise price per share plus
      accrued and unpaid dividends. The common stock of BMCA issuable upon
      conversion of the Preferred Stock is subject to repurchase by the Company
      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.


                                       13
<PAGE>

<TABLE>

        BMCA PREFERRED STOCK OPTIONS/GAF STOCK APPRECIATION RIGHTS AND OPTIONS/SAR VALUES
                                    AT DECEMBER 31, 1997

<CAPTION>

                                            NUMBER OF SECURITIES
                                                 UNDERLYING                 VALUE OF UNEXERCISED
                                         UNEXERCISED BMCA PREFERRED      IN-THE-MONEY BMCA PREFERRED
                                          OPTIONS(O)/GAF SARs(S)(1)        OPTIONS(O)/GAF SARs(S)
                                                 AT 12/31/97                     AT 12/31/97
         NAME                             EXERCISABLE/UNEXERCISABLE       EXERCISABLE/UNEXERCISABLE
         ----                            --------------------------      ---------------------------
  <S>                                         <C>                           <C>
  Sunil Kumar(2) .......................      3,680/14,130(S)               $42,669/$233,282(S)
                                                876/ 8,923(O)                12,342/  18,523(O)(3)
  Danny J. Adair .......................        620/ 3,567(O)                 8,740/  13,110(O)(3)
  Donald W. LaPalme ....................        480/ 3,796(O)                 6,767/  10,150(O)(3)
  William W. Collins ...................        360/ 8,758(O)                 5,075/   7,613(O)(3)

</TABLE>
  ------------------
(1)   The stock appreciation rights relating to GAF common stock ("GAF SARs")
      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 over the
      determined initial book value per share of common stock of GAF (adjusted
      for the Separation Transactions) and interest on such book value at a
      specified rate. The GAF SARs vest over a five-year period, subject
      toearlier vesting under certain circumstances, including in connection
      with a change of control, and have no expiration date.

(2)   Excluded are options to purchase 24,095 shares of redeemable convertible
      preferred stock of ISP Holdings ("ISP Holdings Options") held by Mr.
      Kumar, none of which were exercisable, and all of which were in-the-money
      and had a value of $240,727 at December 31, 1997. Also excluded are 9,201
      stock appreciation rights relating to ISP Holdings common stock ("ISP
      Holdings SARs") held by Mr. Kumar, 3,680 of which were exercisable,
      in-the-money and had a value of $345,867 at December 31, 1997 and 5,521 of
      which were unexercisable, in-the-money and had a value of $518,801 at
      December 31, 1997. The ISP Holdings SARs are on substantially the same
      terms as the GAF SARs described in Note (1) above.

(3)   Options for 2,190, 1,550, 1,200 and 900 shares of Preferred Stock were
      in-the-money for Messrs. Kumar, Adair, LaPalme and Collins, respectively,
      at December 31, 1997.

COMPENSATION OF DIRECTORS

     The directors of BMCA do not receive any compensation for their services as
such.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     All of the outstanding common stock of BMCA (the "Common Stock") is owned
of record by GAFBMC. All of the outstanding common stock of GAFBMC is owned of
record by G Industries, which is 100% owned of record by G-I Holdings, which in
turn is 100% owned of record by GAF.

     The following table sets forth information with respect to the ownership of
Common Stock, as of March 20, 1998, by each other person known to BMCA to own
beneficially more than 5% of the Common Stock outstanding on that date, by each
executive officer and director of BMCA and by all executive officers and
directors of BMCA as a group:

<TABLE>
<CAPTION>

                                                           AMOUNT AND
                                                            NATURE OF                            PERCENT OF
                           NAME AND ADDRESS OF             BENEFICIAL         PERCENT OF        TOTAL VOTING
TITLE OF CLASS              BENEFICIAL OWNER                OWNERSHIP           CLASS              POWER
--------------             -------------------             ----------         ----------        ------------
<S>                     <C>                                 <C>                 <C>                <C>
Common Stock            Samuel J. Heyman                    1,000,010           100%(1)            100%(1)
                          1361 Alps Road
                          Wayne, New Jersey 07470

                        All directors and executive
                          officers of BMCA
                          as a group (9 persons)            1,000,010           100%(1)            100%(1)
</TABLE>

----------------
(1)   The number of shares shown as being beneficially owned by Mr. Heyman and
      by all directors and executive officers of the Company as a group
      attributes ownership of GAFBMC's shares to Mr. Heyman. As of March 20,
      1998, Mr. Heyman beneficially owned approximately 96% of the capital stock
      of GAF.


                                       14


<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

MANAGEMENT AGREEMENT

     Pursuant to a management agreement (the "Management Agreement") which
expires December 31, 1998, ISP (which is controlled by BMCA's Chief Executive
Officer, Samuel J. Heyman) provides certain general management, administrative,
legal, telecommunications, information and facilities services to the Company
(including the use of BMCA's headquarters in Wayne, New Jersey). Charges to BMCA
by ISP for providing such services aggregated $4.8 million in 1997. Such charges
consist of management fees and other reimbursable expenses attributable to, or
incurred by ISP for the benefit of, the Company, which are based on an estimate
of the costs ISP incurs to provide such services. Effective January 1, 1998, the
term of the Management Agreement was extended through the end of 1998, and the
management fees payable thereunder were adjusted, including an adjustment to
reflect the direct payment by BMCA of the costs for certain services rendered by
third parties that were previously included in the management fees payable to
ISP. The Company and ISP further modified the agreement to allocate a portion of
the management fees payable by BMCA under the Management Agreement to separate
lease payments for the use of BMCA's headquarters. Based on the services
provided by ISP in 1997 under the Management Agreement, after taking into
account the modifications to the agreement described above, the aggregate amount
payable by the Company to ISP under the Management Agreement for 1998 is
expected to be approximately $4.7 million. BMCA also expects to pay directly
certain third party costs, which aggregated approximately $0.4 million in 1997,
that were previously included in the management fees. In addition, BMCA
currently anticipates that in 1998 it will require additional space for its
headquarters and will pay additional rent based on the square footage to be
occupied. Certain of BMCA'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, BMCA and GFC entered into a management agreement
under which BMCA provides certain general management, administrative and
financial services to GFC. Under the management agreement which was renewed for
1998 and expires December 31, 1998, GFC is obligated to pay BMCA an annual
management fee of $1,000,000.

     Due to the unique nature of the services provided under the management
agreements, comparisons with third party arrangements are difficult. However,
BMCA believes that the terms of each of the management agreements taken as a
whole are no less favorable to BMCA than could be obtained from an unaffiliated
third party.

CERTAIN PURCHASES

     BMCA purchases from ISP all of its colored mineral granules requirements,
except for the requirements of its California roofing plant, under a
requirements contract which was renewed for one year, effective as of January 1,
1998, and is subject to annual renewal unless terminated by BMCA or ISP. In
December 1995, USI commenced purchasing substantially all of its requirements
for colored roofing granules from ISP (except for the requirements of its
Stockton, California and Corvallis, Oregon plants which are supplied by a third
party) pursuant to a supply contract. In 1997, BMCA and USI purchased in the
aggregate approximately $51.1 million of mineral products from ISP.

     As part of the Separation Transactions, the Company transferred to GFC its
Nashville, Tennessee facility, which manufactures a significant portion of the
Company's glass fiber requirements, and entered into a supply contract with GFC
under which GFC produces glass fiber for the Company on terms which the Company
believes are at least as favorable to the Company as could be obtained from an
unaffiliated third party. In 1997, the Company purchased approximately $24.5
million of glass fiber from GFC.

TAX SHARING AGREEMENT

     BMCA and its subsidiaries have entered into a tax sharing agreement dated
January 31, 1994 with GAF and G-I Holdings with respect to the payment of
federal income taxes and certain related matters (the "Tax Sharing Agreement").
During the term of the Tax Sharing Agreement, which shall be effective for the
period during which BMCA or any of its domestic subsidiaries is included in a
consolidated federal income tax return filed by GAF, BMCA is obligated to pay
G-I Holdings an amount equal to those federal income taxes BMCA would have
incurred if BMCA (on behalf of itself and its domestic subsidiaries) filed its
own federal income tax return. Unused tax attributes will carry forward for use
in reducing amounts payable by BMCA to G-I Holdings in future years, but cannot
be

                                       15


<PAGE>

carried back. Were BMCA to leave 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 BMCA under the
Tax Sharing Agreement. Under certain circumstances, the provisions of the Tax
Sharing Agreement could result in BMCA having a greater liability thereunder
than it would have had if it (and its domestic subsidiaries) had filed its own
separate federal income tax return. Under the Tax Sharing Agreement, BMCA and
each of its domestic 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 BMCA or any domestic subsidiary of BMCA.
Although, as a member of the GAF Group, BMCA is severally liable for all federal
income tax liabilities of the GAF Group, including tax liabilities not related
to the business of BMCA, G-I Holdings and GAF have agreed to indemnify BMCA and
its subsidiaries for all tax liabilities of the GAF Group other than tax
liabilities (i) arising from the operations of BMCA and its domestic
subsidiaries and (ii) for tax years pre-dating the Tax Sharing Agreement that
relate to the business or assets of BMCA and its 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 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 BMCA would have incurred if it filed its
own separate federal income tax return and the fact that BMCA is 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 5.85% and 5.95% per annum
during 1997). The highest amount of loans made by BMCA to G-I Holdings during
1997 was $6.2 million, and no loans were made to BMCA by G-I Holdings and its
subsidiaries during 1997. As of December 31, 1997, $6.2 million in loans were
owed to BMCA by G-I Holdings, at a weighted average interest rate of 5.95%, and
no loans were owed by BMCA to affiliates. In addition, BMCA makes non-interest
bearing advances to affiliates, of which $41.7 million were outstanding at
December 31, 1997.

                                       16
<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
-------     -----------
 3.1      --Certificate of Incorporation of BMCA, as amended.

 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")).

 4.1      --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 "Senior Notes Registration Statement")).

 4.2      --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).

 4.3      --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")).

10.1      --Management Agreement, dated as of March 3, 1992 ("Management
            Agreement"), among GAF, G-I Holdings, G Industries, ISP, GAFBMC and
            GAF Broadcasting Company, Inc. (incorporated by reference to Exhibit
            10.9 to the Registration Statement on Form S-4 of G-I Holdings
            (Registration No. 33-72220)).

10.2      --Amendment No. 1, dated as of January 1, 1994, to the Management
            Agreement (incorporated by reference to Exhibit 10.10 to G-I
            Holdings' Annual Report on Form 10-K for the year ended December 31,
            1993).

10.3      --Amendment No. 2, dated as of May 31, 1994, to the Management
            Agreement (incorporated by reference to Exhibit 10.1 to G-I
            Holdings' Quarterly Report on Form 10-Q for the quarter ended July
            3, 1994)).

10.4      --Amendment No. 3, dated as of December 31, 1994, to the Management
            Agreement (incorporated by reference to Exhibit 10.4 to ISP's Annual
            Report on Form 10-K for the year ended December 31, 1994).

10.5      --Amendment No. 4, dated as of December 31, 1995, to the Management
            Agreement (incorporated by reference to Exhibit 10.6 to G-I
            Holdings' Registration Statement on Form S-4 (Registration No.
            333-2436)).

10.6      --Amendment No. 5, dated as of October 18, 1996, to the Management
            Agreement (incorporated by reference to Exhibit 10.6 to ISP
            Holdings' Registration Statement on Form S-4 (Registration No.
            333-17827)).

10.7      --Amendment No. 6, dated as of January 1, 1997, to the Management
            Agreement (incorporated by reference to Exhibit 10.8 to the Senior
            Notes Registration Statement).

10.8      --Amendment No. 7, dated as of December 31, 1997, to the Management
            Agreement (incorporated by reference to Exhibit 10.10 to the 8%
            Notes Registration Statement).


                                       17
<PAGE>


10.9      --Amendment No. 8, dated as of January 1, 1998, to the Management
            Agreement (incorporated by reference to Exhibit 10.11 to the 8%
            Notes Registration Statement).

10.10     --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).

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

10.12     --Forms of Amendment to Option Agreement relating to Series A
            Cumulative Redeemable Convertible Preferred Stock.*

10.13     --Form of Option Agreement relating to Series A Cumulative Redeemable
            Convertible Preferred Stock.*

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

10.15     --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).*

10.16     --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).*

21        --Subsidiaries of BMCA.

27        --Financial Data Schedule for fiscal year 1997, which is submitted
            electronically to the Securities and Exchange Commission for
            information only.

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

     (b) Reports on Form 8-K.

     None.







                                       18
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1933, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                      BUILDING MATERIALS CORPORATION OF AMERICA

                                                   /s/ JAMES P. ROGERS
                                        By ____________________________________
                                                      JAMES P. ROGERS
                                                 EXECUTIVE VICE PRESIDENT

Date: March 30, 1998

     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.

<TABLE>
<CAPTION>

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


<S>                                   <C>                                       <C>
    /s/ SAMUEL J. HEYMAN
---------------------------------     Chairman, Chief Executive                 March 30, 1998
        SAMUEL J. HEYMAN                Officer and Director (Principal
                                        Executive Officer)

       /s/ SUNIL KUMAR
---------------------------------     President, Chief Operating Officer        March 30, 1998
          SUNIL KUMAR                   and Director

      /s/ JAMES P. ROGERS
---------------------------------     Executive Vice President and              March 30, 1998
        JAMES P. ROGERS                 Director

     /s/ WILLIAM C. LANG
---------------------------------     Senior Vice President and Chief           March 30, 1998
        WILLIAM C. LANG                 Financial Officer (Principal
                                        Financial and Accounting
                                        Officer)

</TABLE>


                                       19
<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-6

Report of Independent Public Accountants ................................................................  F-7

Consolidated Statements of Income for the three years ended December 31, 1997 ...........................  F-8

Consolidated Balance Sheets as of December 31, 1996 and 1997 ............................................  F-9

Consolidated Statements of Cash Flows for the three years ended December 31, 1997 .......................  F-10

Consolidated Statements of Stockholder's Equity (Deficit) for the three years ended December 31, 1997 ...  F-12

Notes to Consolidated Financial Statements ..............................................................  F-13

Supplementary Data (Unaudited):
  Quarterly Financial Data (Unaudited) ..................................................................  F-27



                                                      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. As a result of the Separation Transactions consummated on January 1,
1997, U.S. Intec, Inc. ("USI") became a subsidiary of the Company through a
capital contribution to the Company by G-I Holdings. See Note 1 to Consolidated
Financial Statements. Accordingly, the Company's historical consolidated
financial statements include USI's results of operations 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. The Separation
Transactions also included transferring the Company's glass fiber manufacturing
facility in Nashville, Tennessee (and certain related assets and liabilities) to
GAF Fiberglass Corporation ("GFC") and a contribution by G-I Holdings to the
Company in December 1996 of $82.5 million in cash and short-term investments. In
that connection, GFC entered into a long-term supply agreement with the Company
under which GFC has agreed to produce glass fiber for the Company. See Note 11
to Consolidated Financial Statements.

RESULTS OF OPERATIONS

  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% increase in net income was attributable
to higher operating and other income, net, partially offset by higher interest
expense.

     Net sales for 1997 increased $92.7 million (11%) to $944.6 million compared
with $852.0 million in 1996. The sales growth reflected increased unit volumes
of both residential and commercial roofing products, as well as the sales of the
Leatherback Industries business ($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% 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
(14%) 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 at maturity 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 at maturity of 8% Senior
Notes due 2007 (the "8% 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 higher
investment income (up $20.0 million), partially offset by a $3.0 million
provision for estimated obligations related to product warranty claims for a
discontinued product.

  1996 Compared With 1995

     The Company recorded net income in 1996 of $17.1 million compared with net
income of $10.1 million in 1995. The 69% increase in net income was attributable
to higher operating income and lower other expense, net, partially offset by
higher interest expense.

     Net sales for 1996 increased $164.8 million (24%) to $852.0 million
compared with $687.2 million in 1995. The sales growth reflected a 13% increase
in sales for the Company (excluding the effect of USI sales) due to increased

                                      F-2


<PAGE>

unit volumes of both residential and commercial roofing products and higher
average residential selling prices, and also reflected USI sales of $99.0
million for the full year 1996 compared with $21.8 million for the period in
1995 after the date of acquisition.

     Gross profit margin improved to 27.0% in 1996 from 26.4% in 1995, resulting
primarily from higher average residential selling prices, partially offset by
higher raw materials costs. Selling, general and administrative expenses
increased 24% to $166.7 million in 1996 from $134.1 million in 1995, primarily
reflecting higher distribution and selling costs to support the increased level
of sales, and also reflecting $13.0 million higher expenses as a result of the
inclusion of USI for the full year 1996. Selling, general and administrative
expenses as a percentage of net sales increased slightly from 19.5% in 1995 to
19.6% in 1996.

     Operating income in 1996 was $61.4 million, an increase of $15.5 million
(34%) compared with $45.9 million in 1995. The higher operating income was
attributable to the increased sales and improved gross profit margins and
included $4.3 million operating income from USI.

     Interest expense was $32.0 million in 1996 compared with $24.8 million in
1995, principally reflecting higher debt levels. Other expense, net, decreased
to $1.5 million in 1996 from $4.5 million in 1995. The improvement was primarily
attributable to higher investment income (up $4.8 million) partially offset by
increased expenses related to the sale of the Company's receivables (up $0.6
million) and certain litigation costs.

LIQUIDITY AND FINANCIAL CONDITION

     The Company used $10.3 million of cash for operations during 1997,
reinvested $77.7 million for capital programs and acquisitions, and invested
$43.5 million for net purchases of available-for-sale and held-to-maturity
securities, for a net cash outflow of $131.5 million before financing
activities. Cash used in operations included a cash outflow of $68.1 million for
net purchases of trading securities and a $39.1 million outflow for related
party transactions (see Note 11 to Consolidated Financial Statements).

     Cash generated from a decrease in working capital totaled $17.9 million
during 1997. This amount primarily reflected a decrease in receivables of $7.8
million, a decrease in inventories of $8.0 million and a $5.1 million increase
in payables and accrued liabilities.

     The Company generated $19.9 million from financing activities in 1997. On
October 20, 1997, the Company issued $100 million principal amount at maturity
of the 8% Notes. Financing activities also included $34.0 million of borrowings
under the Company's bank revolving credit facility and $26.9 million of
short-term borrowings. The above cash flows were mostly offset by $91.0 million
of distributions to the Company's parent, $35.3 million of repayments related to
the Company's receivables financing program, a $6.2 million loan to the
Company's parent, and $3.5 million in repayments of long-term debt.

     As a result of the foregoing factors, cash and cash equivalents decreased
by $111.6 million during 1997 to $12.9 million (excluding $243.3 million of
trading, available-for-sale and held-to-maturity securities and other short-term
investments).

     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's bank credit facilities were replaced on August 29, 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, 1997, $30.9 million of letters of
credit were outstanding and $34.0 million had been borrowed under the Credit
Agreement. Under the terms of the

                                      F-3


<PAGE>

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, 1997.

     Additional borrowings by the Company are subject to certain covenants
contained in the indentures relating to the Company's 11 3/4% Deferred Coupon
Notes due 2004 (the "Deferred Coupon Notes"), the 8 5/8% Notes, the 8% Notes
and the Credit Agreement.

     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. As of December 31, 1997, the Company had swaps
outstanding which have a remaining aggregate ending notional principal amount of
$60.0 million and a final maturity of July 1, 1999. By utilizing swaps, the
Company reduced its interest expense by $1.5, $2.2 and $2.0 million in 1995,
1996 and 1997, respectively. See Note 9 to Consolidated Financial Statements.

     See Note 9 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. Accordingly, as of January 31, 1994, the Company's
stockholder's equity reflected a charge of $124.7 million, representing the
Company's assumption of the aforementioned asbestos liabilities net of a
corresponding income tax benefit. At December 31, 1997, the Company had total
outstanding consolidated indebtedness of $586.2 million, of which $3.8 million
matures prior to December 31, 1998, and stockholder's equity of $83.0 million.
The Company anticipates funding such obligations from its cash and investments,
operations and/or borrowings (which may include borrowings from affiliates). See
Item 3, "Legal Proceedings" for further information regarding asbestos-related
matters.

     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 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, 1997, loans in the
amount of $6.2 million 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 $41.7 million were
outstanding at December 31, 1997.

     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, GFC's former surfactants chemicals
business. The parent corporations of the Company are GAF, G-I Holdings, G
Industries Corp. and GAFBMC, and, 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 8 5/8% Notes, the 8% Notes, the Deferred Coupon
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, 1997, after giving effect to the most
restrictive of the aforementioned restrictions, the Company could have paid
dividends and other restricted payments of up to $17.0 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, 5, 9, 11 and 12 to Consolidated Financial Statements.

                                      F-4


<PAGE>

     The Company believes that it will have access to working capital or other
assets sufficient to meet its capital and operating needs for the foreseeable
future. The Company intends to use a substantial amount of the net proceeds from
the issuance of the 8% Notes to fund the cost of its capital expenditure
programs.

     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.

     The Company has significantly upgraded its information systems capabilities
and is in the process of finalizing the roll-out of an interactive network
connecting all of its locations. The Company is addressing its "Year 2000"
compliance issues in conjunction with this initiative. The Company does not
believe that the costs of addressing or the impact of the Company's Year 2000
compliance issues will have a material adverse effect on the operations,
liquidity or capital resources of the Company. At this time, the Company has no
information concerning the impact of Year 2000 issues on its suppliers and
customers.


                                   *  *  *


FORWARD-LOOKING STATEMENTS

     The discussions in this Annual Report on Form 10-K contain both historical
information and forward-looking statements. Although the Company believes that
any such forward-looking statements are based on reasonable assumptions, these
statements involve uncertainties that affect, among other things, the Company's
operations, markets, products, services and prices. These uncertainties include
economic, competitive, governmental and technological factors. Forward-looking
statements contained herein are not historical facts, but only predictions. No
assurances can be given that projected results or events will be achieved.












                                      F-5
<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, 1993 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, USI 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 USI's results of operations
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 its date of
acquisition (March 14, 1997), including sales of $30.2 million.

<TABLE>
<CAPTION>

                                                                       YEAR ENDED DECEMBER 31,
                                                        -------------------------------------------------------
                                                         1993       1994        1995         1996         1997
                                                        ------     ------      ------       ------       ------
                                                                             (MILLIONS)

<S>                                                    <C>         <C>         <C>          <C>          <C>
Operating Data:
  Net sales ........................................   $559.2      $593.1      $687.2       $852.0       $944.6
  Operating income .................................     41.5        44.7        45.9         61.4         70.1
  Interest expense .................................      2.0        13.1        24.8         32.0         42.8
  Income before income taxes .......................     33.0        27.8        16.5         27.9         42.8
  Net income .......................................     20.4        16.7        10.1         17.1         26.1

<CAPTION>

                                                                            DECEMBER 31,
                                                        -------------------------------------------------------
                                                         1993       1994        1995         1996         1997
                                                        ------     ------      ------       ------       ------
                                                                             (MILLIONS)
<S>                                                    <C>         <C>         <C>          <C>          <C>
Balance Sheet Data:
  Total working capital ............................   $  4.8      $ 36.2      $ 54.6       $247.3       $284.8
  Total assets .....................................    259.4       452.3       559.3        701.6        807.3
  Long-term debt less current maturities ...........     38.7       229.2       310.3        405.7        555.4
  Stockholder's equity (deficit) ...................     85.9       (28.9)       15.8        143.2         83.0

<CAPTION>

                                                                       YEAR ENDED DECEMBER 31,
                                                        -------------------------------------------------------
                                                         1993       1994        1995         1996         1997
                                                        ------     ------      ------       ------       ------
                                                                             (MILLIONS)
<S>                                                    <C>         <C>         <C>          <C>          <C>
Other Data:
  Depreciation .....................................   $ 14.5      $ 16.8      $ 20.3       $ 23.9       $ 22.9
  Goodwill amortization ............................      0.6         1.1         1.2          1.7          1.9
  Capital expenditures and acquisitions ............     19.0        54.3        54.1         25.6         77.7
</TABLE>


                                                             F-6
<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 wholly-owned
subsidiary of GAF Building Materials Corporation) and subsidiaries as of
December 31, 1996 and 1997, and the related consolidated statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1997. 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-8 to F-26 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, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, 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 20, 1998





                                      F-7
<PAGE>
                    BUILDING MATERIALS CORPORATION OF AMERICA

                        CONSOLIDATED STATEMENTS OF INCOME

                                                    YEAR ENDED DECEMBER 31,
                                              ---------------------------------
                                                1995         1996        1997
                                              --------     --------    --------
                                                          (THOUSANDS)

Net sales ..................................  $687,184     $851,967    $944,629
                                              --------     --------    --------
Costs and expenses:
  Cost of products sold ....................   506,012      622,234     686,992
  Selling, general and administrative ......   134,145      166,706     185,653
  Goodwill amortization ....................     1,170        1,664       1,891
                                              --------     --------    --------
    Total costs and expenses ...............   641,327      790,604     874,536
                                              --------     --------    --------
Operating income ...........................    45,857       61,363      70,093
Interest expense ...........................   (24,822)     (32,044)    (42,784)
Other income (expense), net ................    (4,486)      (1,455)     15,462
                                              --------     --------    --------
Income before income taxes .................    16,549       27,864      42,771
Income taxes ...............................    (6,450)     (10,809)    (16,680)
                                              --------     --------    --------
Net income .................................  $ 10,099     $ 17,055    $ 26,091
                                              ========     ========    ========


















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


                                      F-8
<PAGE>


                    BUILDING MATERIALS CORPORATION OF AMERICA

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                             DECEMBER 31,
                                                                                       -----------------------
                                                                                         1996            1997
                                                                                       --------        -------
                                                                                             (THOUSANDS)
                                     ASSETS

<S>                                                                                    <C>             <C>
 Current Assets:
   Cash and cash equivalents ........................................................  $124,560        $ 12,921
   Investments in trading securities ................................................     1,065          62,059
   Investments in available-for-sale securities .....................................    82,016         161,290
   Investments in held-to-maturity securities .......................................     7,169             499
   Other short-term investments .....................................................    15,944          19,488
   Accounts receivable, trade, less reserve of $1,974 and $2,752, respectively ......     9,870          13,643
   Accounts receivable, other .......................................................    23,235          50,839
   Receivable from related parties, net .............................................       --            5,151
   Loan receivable from related party ...............................................       --            6,152
   Inventories ......................................................................    77,196          72,254
   Other current assets .............................................................     3,751           6,243
                                                                                       --------        --------
     Total Current Assets ...........................................................   344,806         410,539
 Property, plant and equipment, net .................................................   220,500         241,946
 Excess of cost over net assets of businesses acquired, net of
   accumulated amortization of $6,889 and $8,780, respectively ......................    60,469          70,046
 Deferred income tax benefits .......................................................    59,053          35,981
 Receivable from related parties ....................................................       --           31,661
 Other assets .......................................................................    16,755          17,113
                                                                                       --------        --------
 Total Assets .......................................................................  $701,583        $807,286
                                                                                       ========        ========
                      LIABILITIES AND STOCKHOLDER'S EQUITY

 Current Liabilities:

   Short-term debt ..................................................................  $    --         $ 26,944
   Current maturities of long-term debt .............................................     3,412           3,801
   Accounts payable .................................................................    47,879          55,642
   Payable to related parties, net ..................................................     2,287             --
   Accrued liabilities ..............................................................    27,938          26,298
   Reserve for asbestos claims ......................................................     3,062             --
   Reserve for product warranty claims ..............................................    12,914          13,100
                                                                                       --------        --------
     Total Current Liabilities ......................................................    97,492         125,785
                                                                                       --------        --------
 Long-term debt less current maturities .............................................   405,690         555,446
                                                                                       --------        --------
 Reserve for product warranty claims ................................................    30,755          23,881
                                                                                       --------        --------
 Other liabilities ..................................................................    24,409          19,175
                                                                                       --------        --------
 Commitments and Contingencies
 Stockholder's Equity:
   Series A Cumulative Redeemable Convertible Preferred Stock, $.01 par value
     per share; 100,000 shares authorized; no shares issued .........................       --              --
   Common Stock, $.001 par value per share; 1,050,000 shares authorized;
     1,000,010 shares issued and outstanding                                                  1               1
   Additional paid-in capital .......................................................   182,699          86,910
   Accumulated deficit ..............................................................   (40,174)        (14,083)
   Unrealized gains on available-for-sale securities, net of tax effect, and other ..       711          10,171
                                                                                       --------        --------
 Stockholder's Equity ...............................................................   143,237          82,999
                                                                                       --------        --------
 Total Liabilities and Stockholder's Equity .........................................  $701,583        $807,286
                                                                                       ========        ========
</TABLE>

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


                                                F-9
<PAGE>

                                     BUILDING MATERIALS CORPORATION OF AMERICA

                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                 YEAR ENDED DECEMBER 31,
                                                                          -------------------------------------
                                                                            1995           1996          1997
                                                                          --------       --------      --------
                                                                                       (THOUSANDS)

<S>                                                                       <C>            <C>           <C>
  Cash and cash equivalents, beginning of year ........................   $ 29,015       $ 45,989      $124,560
                                                                          --------       --------      --------
  Cash provided by (used in) operating activities:
   Net income .........................................................     10,099         17,055        26,091
   Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
     Depreciation .....................................................     20,252         23,857        22,936
     Goodwill amortization ............................................      1,170          1,664         1,891
     Deferred income taxes ............................................      6,250         10,609        16,481
     Noncash interest charges .........................................     21,432         23,718        27,222
   (Increase) decrease in working capital items .......................     (8,050)       (14,905)       17,859
   Purchases of trading securities ....................................        --         (33,824)     (123,483)
   Proceeds from sales of trading securities ..........................        --          30,394        55,378
   (Increase) decrease in other assets ................................      1,924         (1,711)        1,773
   Decrease in other liabilities ......................................     (4,502)        (4,158)       (9,356)
   Change in net receivable from/payable to related parties ...........      1,939           (341)      (39,099)
   Other, net .........................................................        112            787        (8,001)
                                                                          --------       --------      --------
  Net cash provided by (used in) operating activities .................     50,626         53,145       (10,308)
                                                                          --------       --------      --------
  Cash provided by (used in) investing activities:
   Capital expenditures and acquisitions ..............................    (54,111)       (25,629)      (77,705)
   Purchases of available-for-sale securities .........................    (45,706)      (139,355)     (223,804)
   Purchases of held-to-maturity securities ...........................        --             --         (4,591)
   Purchases of other short-term investments ..........................     (2,069)          (660)          --
   Proceeds from sales of available-for-sale securities ...............      8,416        101,095       173,547
   Proceeds from held-to-maturity securities ..........................        --             --         11,361
                                                                          --------      ---------      --------
  Net cash used in investing activities ...............................    (93,470)       (64,549)     (121,192)
                                                                          --------      ---------      --------
  Cash provided by (used in) financing activities:
   Proceeds (repayments) from sale of accounts receivable .............      7,919          8,015       (35,332)
   Increase in short-term debt                                                 --             --         26,944
   (Increase) decrease in loans receivable from related party .........     23,633            --         (6,152)
   Proceeds from issuance of debt .....................................     40,002         99,502        99,916
   Increase in borrowings under revolving credit facility .............        --             --         34,000
   Repayments of long-term debt .......................................    (10,440)       (34,856)       (3,521)
   Decrease in restricted cash ........................................     24,484            --            --
   Capital contribution from (distribution to) parent company .........     34,312         86,077       (91,000)
   Payments of asbestos claims ........................................    (59,795)       (66,224)       (3,062)
   Financing fees and expenses ........................................       (297)        (2,539)       (1,932)
                                                                          --------       --------      --------
  Net cash provided by financing activities ...........................     59,818         89,975        19,861
                                                                          --------       --------      --------
  Net change in cash and cash equivalents .............................     16,974         78,571      (111,639)
                                                                          --------       --------      --------
  Cash and cash equivalents, end of year ..............................   $ 45,989       $124,560      $ 12,921
                                                                          ========       ========      ========
</TABLE>

                                                       F-10


<PAGE>



                                  BUILDING MATERIALS CORPORATION OF AMERICA

                              CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>

                                                                                 YEAR ENDED DECEMBER 31,
                                                                          -------------------------------------
                                                                            1995           1996          1997
                                                                          --------       --------      --------
                                                                                       (THOUSANDS)

<S>                                                                       <C>            <C>           <C>
  Supplemental Cash Flow Information:
  Effect on cash from (increase) decrease in working capital items*:
   Accounts receivable ................................................   $    666       $ (5,122)     $  7,773
   Inventories ........................................................     (4,557)        (8,123)        8,001
   Other current assets ...............................................      1,760            756        (3,029)
   Accounts payable ...................................................     (6,093)        (4,096)       10,210
   Accrued liabilities ................................................        174          1,680        (5,096)
                                                                          --------       --------      --------
   Net effect on cash from (increase) decrease in
    working capital items .............................................   $ (8,050)      $(14,905)     $ 17,859
                                                                          ========       ========      ========
  Cash paid during the period for:
   Interest (net of amount capitalized) ...............................   $  2,796       $  6,442      $ 14,001
   Income taxes (including taxes paid pursuant to the Tax
    Sharing Agreement) ................................................        213            537           346
  Acquisition of U.S. Intec, Inc., net of $180 cash acquired:
   Fair market value of assets acquired ...............................   $105,285
   Purchase price of acquisition ......................................     27,358
                                                                          --------
   Liabilities assumed ................................................   $ 77,927
                                                                          ========

  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
                                                                                                       ========
</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 "Capital expenditures and 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 6); 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-11
<PAGE>

                                  BUILDING MATERIALS CORPORATION OF AMERICA

                       CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>

                                                                           CAPITAL      UNREALIZED
                                                                          STOCK AND      GAINS ON
                                                                         ADDITIONAL   AVAILABLE-FOR-
                                                                          PAID-IN     SALE SECURITIES   ACCUMULATED
                                                                           CAPITAL       AND OTHER        DEFICIT
                                                                          --------        -------        --------
                                                                                       (THOUSANDS)

<S>                                                                       <C>             <C>            <C>
  Balance, December 31, 1994 ..........................................   $ 46,936        $  (588)       $(67,328)
   Net income .........................................................       --             --            10,099
   Capital contribution from parent company ...........................     34,312           --              --
   Reclassification to additional paid-in capital of the
    excess of purchase price over the adjusted historical
    cost of predecessor company shares ................................     (7,874)          --              --
   Unrealized gains on available-for-sale securities, net of
    income tax effect of $174 .........................................       --              272            --
   Adjustment of additional minimum pension liability .................       --              (47)           --
                                                                          --------        -------        --------
  Balance, December 31, 1995 ..........................................   $ 73,374        $  (363)       $(57,229)
   Net income .........................................................       --             --            17,055
   Capital contribution from parent company ...........................    109,326           --              --
   Unrealized gains on available-for-sale securities, net of
    income tax effect of $333 .........................................       --              522            --
   Adjustment of additional minimum pension liability .................       --              552            --
                                                                          --------        -------        --------
  Balance, December 31, 1996 ..........................................   $182,700        $   711        $(40,174)
   Net income .........................................................       --             --            26,091
   Distribution to parent company .....................................    (91,000)          --              --
   Transfer of Nashville, Tennessee plant to GAF Fiberglass
    Corporation .......................................................     (4,789)          --              --
   Unrealized gains on available-for-sale securities, net of
    income tax effect of $6,591 .......................................       --           10,308            --
   Adjustment of additional minimum pension liability .................       --             (848)           --
                                                                          --------        -------        --------
  Balance, December 31, 1997 ..........................................   $ 86,911        $10,171        $(14,083)
                                                                          ========        =======        ========

</TABLE>











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

                                      F-12
<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 wholly-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").

     The Company is a leading national manufacturer of a broad line of asphalt
roofing products and accessories for the residential and commercial roofing
markets.

 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. ("USI"), which manufactures commercial roofing products, for a
purchase price of $27.5 million and assumed $35.0 million of USI's indebtedness.
As of January 1, 1997, USI 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 USI's results of
operations 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) million and $1.3
million, respectively.

     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. ("ISP Holdings"), 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) USI 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 remain
subsidiaries of GAF.

     The parent corporations of the Company are GAF, G-I Holdings, G Industries
and GAFBMC, and, except for the Company, the only other significant asset of
such parent corporations is GFC. As a result of the Separation 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 ISP Holdings' debt
instruments.

                                      F-13


<PAGE>


                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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 12 (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 stockholder's equity, "Unrealized gains
on available-for-sale securities, net of tax effect, and other", and were $0.8
and $11.1 million as of December 31, 1996 and 1997, respectively. Investments
classified as "held-to-maturity" securities are carried at amortized cost in the
Consolidated Balance Sheets.

     "Other income (expense), net" includes $0.4, $6.4 and $26.4 million of net
realized and unrealized gains on securities in 1995, 1996 and 1997,
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.

     During the fourth quarter of 1995, the Company redesignated certain equity
securities held long (which were offsets against short positions in certain
other securities), with a fair market value of $6.3 million, as "trading" and
recorded unrealized gains on such securities, through the date of redesignation,
in the amount of $0.5 million as "Other income".

     As of December 31, 1996 and 1997, the market value of the Company's equity
securities held long was $82.5 and $223.0 million, respectively, and the Company
had $5.6 and $18.6 million, respectively, of short positions in common stocks,
based on market value. As of December 31, 1996 and 1997, the market value of the
Company's held-to-maturity securities was $7.6 and $0.5 million, respectively.
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.

  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.

                                      F-14


<PAGE>

                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

   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 Purchase Price Over the Adjusted Historical Cost of Predecessor
   Company Shares

     Stockholder's equity reflects a reduction of $7.9 million which arose from
a management-led buyout in March 1989 of the predecessor company to GAF (the
"Acquisition"), because certain members of the management group owned shares of
the predecessor company's common stock before the Acquisition and own shares of
GAF after the Acquisition. Accordingly, a step-up in asset values to fair value
as required by the purchase method of accounting (which was applied to the
Acquisition) does not apply to their shares. Such amount has been reclassified
to be reflected as a reduction of additional paid-in capital.

   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.
The primary financial indicator to assess recoverability of goodwill is
operating income before amortization of goodwill. The assessment is based on an
undiscounted analysis.

   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.

     Revenues in 1996 and 1997 included sales to American Builders & Contractors
Supply Co., Inc., which accounted for approximately 11% and 10%, respectively,
of the Company's net sales.

   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 $3.1, $4.5 and $5.4 million for 1995, 1996 and 1997, 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; 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 Income includes a provision of
$3.0 million in connection with the Company's estimated obligations related to
product warranty claims for a discontinued product.

                                      F-15


<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, 1997, is $1.1 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.

   New Accounting Standards

     In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting comprehensive
income and its components in annual and interim financial statements. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods is required. The
adoption of SFAS No. 130 will have no impact on the Company's consolidated
results of operations, financial position or cash flows.

     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
addition, SFAS No. 131 requires that companies report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, and major customers. SFAS
No. 131 is effective for financial statements for fiscal years beginning after
December 15, 1997. Financial statement disclosures for prior periods are
required to be restated. The adoption of SFAS No. 131 will have no impact on the
Company's consolidated results of operations, financial position or cash flows.

NOTE 3. RESERVE FOR 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 ("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
claims related to asbestos-related liabilities, other than those contractually
assumed by the Company, in the event that claims in connection with liabilities
not assumed by the Company are asserted against it.

     GAF has advised the Company that, as of December 27, 1997, it had been
named as a defendant in approximately 79,300 pending lawsuits involving alleged
Asbestos Claims, having resolved approximately 234,500 Asbestos Claims. During
1997, GAF resolved approximately 11,000 Asbestos Claims and received notice of
approximately 30,900 new Asbestos Claims. Of the Asbestos Claims resolved in
1997, approximately 8,900 were resolved (including Asbestos Claims disposed of
at no cost to GAF) for an average cost of approximately $3,700 per claim. GAF's
share of the costs with respect to approximately 2,100 Asbestos Claims resolved
in 1997 has not yet been determined. There can be no assurance, however, that
the actual costs of resolving pending and future Asbestos Claims will
approximate GAF's historic average costs.

     GAF has stated that it is committed to effecting a comprehensive resolution
of Asbestos Claims, that it is exploring a number of options, both judicial and
legislative, 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

                                      F-16


<PAGE>


                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 3. RESERVE FOR ASBESTOS-RELATED BODILY INJURY CLAIMS (CONTINUED)

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 9 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. ACQUISITION

     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 effects were
not material to 1997 operations.

NOTE 5. INCOME TAXES

     Income tax provision, which has been computed on a separate return basis,
consists of the following:


                                                YEAR ENDED DECEMBER 31,
                                             -----------------------------
                                                1995      1996      1997
                                               -------   -------   -------
                                                       (THOUSANDS)

     Federal--deferred ..................    $ (5,424) $ (9,241) $(14,081)
                                             --------  --------  --------
     State and local:
       Current ..........................        (200)     (200)     (200)
       Deferred .........................        (826)   (1,368)   (2,399)
                                             --------  --------  --------
         Total state and local ..........      (1,026)   (1,568)   (2,599)
                                             --------  --------  --------
     Income tax provision ...............    $ (6,450) $(10,809) $(16,680)
                                             ========  ========  ========

     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 Income are as follows:


                                                  YEAR ENDED DECEMBER 31,
                                             ------------------------------
                                                1995      1996      1997
                                              --------   -------  ---------
                                                       (THOUSANDS)

     Statutory provision ................   $ (5,792)  $ (9,752)   $(14,970)
      Impact of:
      State and local taxes, net of
       Federal benefits .................       (667)    (1,019)     (1,689)
      Nondeductible goodwill
       amortization .....................       (260)      (484)       (564)
      Other, net ........................        269        446         543
                                            --------   --------    --------
     Income tax provision ...............   $ (6,450)  $(10,809)   $(16,680)
                                            ========   ========    ========


                                      F-17
<PAGE>


                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

 NOTE 5. INCOME TAXES (CONTINUED)

     The components of the net deferred tax assets are as follows:

                                                               DECEMBER 31,
                                                          -------------------
                                                           1996         1997
                                                          -------    -------
                                                              (THOUSANDS)

Deferred tax liabilities related to property,
 plant and equipment ...............................     $(11,782)     $(14,742)
                                                         --------      --------
Deferred tax assets related to:
  Expenses not yet deducted for tax purposes:
   Reserve for asbestos claims .....................        1,195            --
   Other ...........................................       38,774        29,294
  Net operating losses not yet utilized under
   the Tax Sharing Agreement .......................       30,866        21,429
                                                         --------      --------
Total deferred tax assets ..........................       70,835        50,723
                                                         --------      --------
Net deferred tax assets ............................     $ 59,053      $ 35,981
                                                         ========      ========

     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 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 GFC
incurring liabilities significantly in excess of the deferred tax liability of

                                      F-18


<PAGE>


                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

 NOTE 5. INCOME TAXES (CONTINUED)

$131.4 million that GAF recorded in 1990 in connection with this matter. GAF has
advised the Company that it believes that GFC will prevail in this matter,
although there can be no assurance in this regard. The Company believes that the
ultimate disposition of this matter will not have a material adverse effect on
its 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 GFC be unable to satisfy such liability.

NOTE 6. 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 $4.6, $5.2 and $5.1
million in 1995, 1996 and 1997, respectively.

 NOTE 7. INVENTORIES

     At December 31, 1996 and 1997, $7.6 and $7.8 million, respectively, of
inventories were valued using the LIFO method. Inventories consist of the
following:

                                                           DECEMBER 31,
                                                        ------------------
                                                         1996      1997
                                                        ------   --------
                                                             (THOUSANDS)

Finished goods .............................          $41,201           $38,459
Work in process ............................           10,844            10,180
Raw materials and supplies .................           26,206            24,670
                                                      -------           -------
  Total ....................................           78,251            73,309
Less LIFO reserve ..........................           (1,055)           (1,055)
                                                      -------           -------
Inventories ................................          $77,196           $72,254
                                                      =======           =======

NOTE 8. PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consists of the following:

                                                              DECEMBER 31,
                                                            --------------------
                                                              1996       1997
                                                            -------     -------
                                                                (THOUSANDS)

Land and land improvements ............................    $ 25,722    $ 26,052
Buildings and building equipment ......................      46,001      48,525
Machinery and equipment (including equipment under
 capitalized leases of $17,660 and $15,466--see Note 9)     178,190     183,108
Construction in progress ..............................      19,039      40,775
                                                           --------    --------
  Total ...............................................     268,952     298,460
Less accumulated depreciation and amortization ........     (48,452)    (56,514)
                                                           --------    --------
Property, plant and equipment, net ....................    $220,500    $241,946
                                                           ========    ========

                                      F-19
<PAGE>


                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


NOTE 9. LONG-TERM DEBT

     Long-term debt consists of the following:

                                                           DECEMBER 31,
                                                      --------------------
                                                         1996      1997
                                                        -------   -------
                                                          (THOUSANDS)

   11 3/4% Senior Deferred Coupon Notes due 2004     $233,018     $261,203
   8 5/8% Senior Notes due 2006 .................      99,504       99,554
   8% Senior Notes due 2007 .....................          --       99,268
   Borrowings under revolving credit facility ...          --       34,000
   Industrial revenue bonds with various interest
    rates  and maturity dates to 2012 ...........      19,625       11,125
   Obligations on mortgaged properties ..........       5,155        4,503
   Obligations under capital leases (Note 12) ...      51,800       49,594
                                                     --------     --------
    Total .......................................     409,102      559,247
   Less current maturities ......................      (3,412)      (3,801)
                                                     --------     --------
   Long-term debt less current maturities .......    $405,690     $555,446
                                                     ========     ========

     On October 20, 1997, the Company issued $100 million in aggregate principal
amount at maturity of 8% Senior Notes due 2007 (the "8% Notes"). In December
1996, the Company issued $100 million in aggregate principal amount at maturity
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 11 3/4% Deferred Coupon Notes
due 2004 (the "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 8% 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 8% Notes
and 8 5/8% Notes (collectively, the "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 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 Notes, the Deferred Coupon 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, 1997, after giving effect to the most restrictive of the
aforementioned restrictions, the Company could have paid dividends of up to
$17.0 million. Under the indentures relating to the Notes and the Deferred
Coupon Notes, the incurrence of additional debt by the Company and the issuance
by the Company of preferred stock would be restricted unless, at the time of
such issuance and after giving effect thereto, the ratio of the Company's
consolidated net income before income taxes, interest, depreciation and
amortization expense to its consolidated interest expense for its most recently
completed four fiscal quarters is at least 2 to 1. For the four quarters ended
December 31, 1997, the Company was in compliance with such covenants.

     In connection with the Deferred Coupon Notes, the Company entered into
interest rate swap agreements ("swaps") with banks which have a remaining
aggregate ending notional principal amount of $60.0 million and a final maturity
of July 1, 1999. 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 varies
at a fixed spread over LIBOR. Based on the fair value of the swaps at December
31, 1996 and 1997, the Company would have incurred gains of $8.0 and $3.1
million, respectively, representing the estimated amount that would be
receivable by the Company if the swaps were terminated at such dates. No cash
interest will be paid on the swaps until maturity. In 1997, the Company
terminated swaps with an aggregate ending notional principal amount of $82.0
million, resulting in gains totaling $2.1 million.

                                      F-20

<PAGE>


                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

 NOTE 9. LONG-TERM DEBT (CONTINUED)

The gains have been deferred and will be amortized as a reduction of interest
expense over the remaining life of the swaps. The Company may be considered to
be at risk, to the extent of the costs of replacing such swaps at current market
rates, in the event of nonperformance by counterparties. However, since the
counterparties are major financial institutions, the credit ratings of which are
continually monitored by the Company, the risk of such nonperformance is
considered by the Company to be remote.

     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, 1997,
$30.9 million of letters of credit were outstanding and $34.0 million had been
borrowed under the Credit Agreement. 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. 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 Notes to be accelerated. As of December
31, 1997, 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 connection with the Credit Agreement, USI's revolving credit facility,
which provided for borrowings of up to $29.6 million and letters of credit of up
to $2.0 million (such total borrowings and outstanding letters of credit not to
exceed $29.6 million), was terminated.

     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 3.85% and 8.87% as of December
31, 1997. The weighted average interest rate on the Company's $26.9 million of
short-term borrowings as of December 31, 1997 was 6.3%.

     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, 1996 and
1997 was $268.9 and $293.0 million, respectively. The estimated fair value of
the 8 5/8% Notes as of December 31, 1996 and 1997 was $100.0 and $103.6
million, respectively. The estimated fair value of the 8% Notes as of December
31, 1997 was $99.6 million.

     The aggregate maturities of long-term debt as of December 31, 1997 for the
next five years are as follows:

                                                     (THOUSANDS)
                                                     ----------
                 1998 ...........................      $ 3,801
                 1999 ...........................        4,127
                 2000 ...........................       40,060
                 2001 ...........................        4,873
                 2002 ...........................       14,988

     In the above table, maturities in 2000 include the $34.0 million of
borrowings outstanding under the Credit Agreement as of December 31, 1997, based
on the expiration of the Credit Agreement in August 2000.

                                      F-21

<PAGE>


                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


NOTE 10. 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 $2.7, $3.0 and $3.5 million for 1995, 1996 and 1997, respectively.

     USI provides a defined contribution plan for eligible employees. USI 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 USI were immaterial for the period of
1995 after the acquisition of USI and were $157,000 and $130,000 for 1996 and
1997, 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:

                                       YEAR ENDED DECEMBER 31,
                                       -----------------------
                                       1995    1996      1997
                                       ----    ----      ----
                                            (THOUSANDS)

  Service cost ...................    $463     $631     $  658
  Interest cost ..................     598      686        754
  Actual income on plan assets ...    (432)    (829)    (1,034)
  Net deferral and amortization of
   unrecognized prior service
   cost and actuarial losses .....      97       35         30
                                      ----     ----     ------
  Net periodic pension cost ......    $726     $523     $  408
                                      ====     ====     ======


      The following table sets forth the funded status of the Hourly Retirement
 Plan:

                                                            DECEMBER 31,
                                                         -------------------
                                                           1996        1997
                                                          ------     -------
                                                            (THOUSANDS)

Accumulated benefit obligation:
 Vested .............................................    $ 8,407     $ 9,907
 Nonvested ..........................................      1,621       1,910
                                                         -------     -------
Total accumulated benefit obligation ................    $10,028     $11,817
                                                         =======     =======
Projected benefit obligation ........................    $10,028     $11,817
Fair value of plan assets, primarily listed
 stocks and U.S. Government securities ..............     (9,530)    (11,472)
                                                         -------     -------
Projected benefit obligation in excess of plan assets        498         345
Unrecognized prior service cost .....................       (338)       (307)
Unrecognized net loss ...............................        (83)       (931)
                                                         -------     -------
Unfunded accrued (prepaid) pension cost .............    $    77     $  (893)
                                                         =======     =======

     At December 31, 1997, the difference between the "Projected benefit
obligation in excess of plan assets" and the "Unfunded accrued (prepaid) pension
cost," in the amount of $1,238,000 has been recorded by the Company as an

                                      F-22
<PAGE>


                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


NOTE 10. BENEFIT PLANS (CONTINUED)

intangible asset in the amount of $307,000 and a reduction of stockholder's
equity in the amount of $931,000. The foregoing amounts will be amortized to
expense over a period of approximately 15 years, as the Company continues to
fund the benefits under the Hourly Retirement Plan.

     In determining the projected benefit obligation, the weighted average
assumed discount rate was 7.75% and 7.25% for 1996 and 1997, respectively. The
expected long-term rate of return on assets, used in determining net periodic
pension cost, was 11% for 1996 and 1997.

     The Company also provides a nonqualified defined benefit retirement plan
for certain key employees. Expense accrued for this plan was immaterial for
1995, 1996 and 1997.

   Preferred Stock Option Plan

     On January 1, 1996, the Company issued options to certain employees to
purchase 24,509 shares of redeemable convertible preferred stock ("Preferred
Stock") of the Company, exercisable at a price of $100 per share. Options to
purchase 71,578 shares of Preferred Stock were issued in 1997, 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 seven 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 under the option agreements). 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 accrued in
connection with the Preferred Stock options.

   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 seven 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 million for 1996 and $0.4 million for 1997.

   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.

     The following table shows the components of the accrued postretirement
health care cost obligation as of December 31, 1996 and 1997:

<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                                     ----------------
                                                                      1996      1997
                                                                     ------    ------
                                                                        (THOUSANDS)
<S>                                                                   <C>      <C>
Accumulated postretirement benefit obligation:
 Retirees, dependents and beneficiaries eligible for benefits ...   $ 5,108   $ 5,485
 Active employees fully eligible for benefits ...................     1,131     1,139
 Active employees not fully eligible for benefits ...............     1,182     1,302
                                                                    -------   -------
Total accumulated postretirement benefit obligation .............     7,421     7,926
Fair value of plan assets .......................................        --        --
Unrecognized prior service cost and net gain from earlier periods     4,039     3,556
                                                                    -------   -------
Accrued postretirement benefit obligation .......................   $11,460   $11,482
                                                                    =======   =======

</TABLE>

                                      F-23
<PAGE>


                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


NOTE 10. BENEFIT PLANS (CONTINUED)

     Net periodic postretirement benefit cost included the following components:

<TABLE>
<CAPTION>

                                                                YEAR ENDED DECEMBER 31,
                                                                -----------------------
                                                                 1995    1996     1997
                                                                 ----    ----     ----
                                                                     (THOUSANDS)
<S>                                                             <C>      <C>      <C>

Service cost ...............................................    $ 79     $ 95     $ 98
Interest cost ..............................................     645      597      554
Amortization of unrecognized prior service cost and net gain
 from earlier periods ......................................    (415)    (232)    (274)
                                                                ----     ----     ----
Net periodic postretirement benefit cost ...................    $309     $460     $378
                                                                ====     ====     ====

</TABLE>

     For purposes of calculating the accumulated postretirement benefit
obligation, the following assumptions were made. Retirees as of December 31,
1997 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 1998
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 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 7.75% and
7.25% for 1996 and 1997, 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 by $410,000 and the aggregate of the
service and interest cost components of the net periodic postretirement benefit
cost for the year 1997 by $41,000.

NOTE 11. RELATED PARTY TRANSACTIONS

     Included in the Consolidated Balance Sheets are the following receivable
(payable) balances with related parties, which arise from operating transactions
between the Company and its affiliates:

                                                          DECEMBER 31,
                                                      ------------------
                                                        1996       1997
                                                      --------   -------
                                                          (THOUSANDS)
Receivable from (payable to):
 GAF/G-I Holdings/G Industries ...................      $274     $9,684
 GAFBMC ..........................................       115        713
 GFC .............................................        --     (1,559)
 ISP .............................................    (2,676)    (3,687)
                                                     -------     ------
 Receivable from (payable to) related parties, net   $(2,287)    $5,151
                                                     =======     ======

      The Company makes loans to, and borrows from, G-I Holdings and its
 subsidiaries at prevailing market rates (between 5.68% and 6.03% during 1996
 and between 5.85% and 5.95% during 1997). The highest amount of loans made by
 the Company to G-I Holdings during 1996 and 1997 was $45.4 million. No loans
 were made to the Company by G-I Holdings and its subsidiaries during 1997, and
 the highest amount of loans made to the Company by G-I Holdings and its
 subsidiaries during 1996 was $24.3 million. As of December 31, 1996, no loans
 were owed to the Company by G-I Holdings, and no loans were owed by the Company
 to affiliates. 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


                                      F-24
<PAGE>


                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


NOTE 11. RELATED PARTY TRANSACTIONS (CONTINUED)

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 was $41.7
million, of which $10.0 million was classified as a short-term receivable from
related parties, net, in the table above, and $31.7 million was classified as a
long-term receivable from related parties in the Consolidated Balance Sheet.
Also, during 1997, the Company made distributions of $91.0 million to its parent
company.

     Mineral Products: The Company purchases all of its colored roofing granules
requirements (except for the requirements of its California roofing plant) from
ISP under a requirements contract. In addition, in December 1995, USI commenced
purchasing substantially all of its requirements for colored roofing granules
from ISP (except for the requirements of its Stockton, California and Corvallis,
Oregon plants) pursuant to a requirements contract. Each such requirements
contract was renewed for 1998 and is subject to annual renewal unless terminated
by either party to the respective agreement. Such purchases by BMCA and USI
totaled $45.8, $50.5 and $51.1 million for 1995, 1996 and 1997, respectively.
The amount payable to ISP at December 31, 1996 and 1997 for such purchases was
$3.2 and $2.7 million, respectively.

     Glass Fiber Supply Agreement: As a result of the Separation Transactions
(see Note 1), the Company's glass fiber manufacturing facility in Nashville,
Tennessee, which manufactures a significant portion of the Company's glass fiber
requirements, was transferred to GFC as of January 1, 1997. In connection with
that transaction, the Company entered into a seven-year supply agreement with
GFC under which GFC produces glass fiber for the Company. Purchases under this
agreement totaled $24.5 million for the year 1997.

     Management Agreements: The Company is a party to a Management Agreement
with ISP (the "Management Agreement"), which expires December 31, 1998, 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 $4.4, $5.0 and $4.8
million for 1995, 1996 and 1997, 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, 1998, the term of the
Management Agreement was extended through the end of 1998, and the management
fees payable thereunder were adjusted, including an adjustment to reflect the
direct payment by the Company of the costs for certain services rendered by
third parties that were previously included in the management fees payable to
ISP. The Company and ISP further modified the agreement to 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 1997 under the Management Agreement,
after taking into account the modifications to the agreement described above,
the aggregate amount payable by the Company to ISP under the Management
Agreement for 1998 is expected to be approximately $4.7 million. The Company
also expects to pay directly certain third party costs, which aggregated
approximately $0.4 million in 1997, that were previously included in the
management fee. In addition, BMCA currently anticipates that in 1998 it will
require additional space for its headquarters and will pay additional rent based
on the square footage to be occupied. 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, 1998, GFC is obligated to pay the Company an annual
management fee of $1.0 million.

Tax Sharing Agreement: See Note 5.

     Stock Appreciation Rights: An executive officer of the Company was granted
stock appreciation rights in 1995 and 1996 relating to GAF's common stock.
Compensation expense in connection with such stock appreciation rights is
reflected in G-I Holdings' operating expenses, and was immaterial for 1995, 1996
and 1997.

                                      F-25


<PAGE>


                   BUILDING MATERIALS CORPORATION OF AMERICA

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


NOTE 12. 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 $177.4 million, including as
of December 31, 1997, the asbestos-related liability discussed in Note 3, the
G-I Holdings 11.125% Senior Discount Notes due 1998, and various tax and other
liabilities (net of certain tax and insurance receivables), including tax
liabilities relating to the surfactants partnership (discussed in Note 5).
During the twelve months ended December 31, 1998, such parent companies expect
net receipts of $48.9 million, principally from insurance recoveries and a tax
refund. 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 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 and 5.

     The leases for certain property, plant and equipment at certain of the
Company's roofing facilities are accounted for as capital leases (see Note 9).
The Company is also a lessee under operating leases principally for warehouses
and production, transportation and computer equipment. Rental expense on
operating leases was $7.0, $8.3 and $9.2 million for 1995, 1996 and 1997,
respectively. Future minimum lease payments for properties which were held under
long-term noncancellable leases as of December 31, 1997 were as follows:

                                                           CAPITAL   OPERATING
                                                           LEASES      LEASES
                                                          --------   ---------
                                                              (THOUSANDS)

     1998 ............................................   $  6,953     $2,499
     1999 ............................................      6,953      2,161
     2000 ............................................      7,463      1,503
     2001 ............................................      8,108        852
     2002 ............................................     17,558        304
     Later years .....................................     21,407        412
                                                         --------     ------
     Total minimum payments ..........................     68,442     $7,731
                                                                      ======
     Less interest included above ....................    (18,848)
                                                         --------
     Present value of net minimum lease payments .....   $ 49,594
                                                         ========


                                      F-26



<PAGE>

                    BUILDING MATERIALS CORPORATION OF AMERICA

                         SUPPLEMENTARY DATA (UNAUDITED)

                      QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

                                            1996 BY QUARTER                          1997 BY QUARTER
                                  ------------------------------------     ------------------------------------
                                   FIRST   SECOND     THIRD     FOURTH     FIRST    SECOND     THIRD    FOURTH
                                  ------   ------     -----     ------     ------   -------    -----    -------
                                                                   (MILLIONS)
  <S>                             <C>        <C>       <C>      <C>        <C>       <C>       <C>       <C>
  Net sales ................      $166.7    $230.2    $251.6    $203.5     $193.3    $255.9    $274.4    $221.0
  Cost of products sold ....       124.3     165.6     180.9     151.5      143.2     180.2     197.9     165.7
                                  ------    ------    ------    ------     ------    ------    ------     -----
  Gross profit .............      $ 42.4    $ 64.6    $ 70.7    $ 52.0     $ 50.1    $ 75.7    $ 76.5    $ 55.3
                                  ======    ======    ======    ======     ======    ======    ======    ======
  Operating income .........      $  7.7    $ 20.7    $ 22.8    $ 10.2     $  9.3    $ 24.9    $ 25.6    $ 10.3
                                  ======    ======    ======    ======     ======    ======    ======    ======
  Interest expense .........      $  7.8    $  8.0    $  7.9    $  8.3     $  9.8    $ 10.3    $ 10.4    $ 12.3
                                  ======    ======    ======    ======     ======    ======    ======    ======
  Income (loss) before
   income taxes ............      $ (0.3)   $ 12.4    $ 14.9    $  0.9     $  2.9    $ 16.6    $ 18.7     $ 4.6
  Income tax (provision)
   benefit .................         0.1      (4.8)     (5.8)     (0.3)      (1.1)     (6.5)     (7.3)     (1.8)
                                  ------    ------    ------    ------     ------    ------    ------     -----
  Net income (loss) ........      $ (0.2)   $  7.6    $  9.1    $  0.6     $  1.8    $ 10.1    $ 11.4     $ 2.8
                                  ======    ======    ======    ======     ======    ======    ======     =====

</TABLE>

                                      F-27

<PAGE>


                                                                    SCHEDULE II

                    BUILDING MATERIALS CORPORATION OF AMERICA

                        VALUATION AND QUALIFYING ACCOUNTS



                          YEAR ENDED DECEMBER 31, 1995
                                   (THOUSANDS)

<TABLE>
<CAPTION>
                                                             CHARGED
                                                BALANCE         TO                                   BALANCE
                                               JANUARY 1,    SALES OR                              DECEMBER 31,
DESCRIPTION                                      1995        EXPENSES     DEDUCTIONS     OTHER        1995
-----------                                    ----------    --------     ----------     -----     ------------
<S>                                             <C>          <C>         <C>           <C>          <C>
Valuation and Qualifying Accounts
 Deducted from Assets To Which
 They Apply:
  Allowance for doubtful accounts ..........    $ 1,908      $   478     $   920(a)    $1,751(c)    $ 3,217(b)
  Allowance for discounts ..................     15,435       65,057      61,695           --        18,797
  Reserve for inventory market valuation ...        604           --          30           --           574
</TABLE>



                          YEAR ENDED DECEMBER 31, 1996
                                   (THOUSANDS)
<TABLE>
<CAPTION>
                                                                CHARGED
                                                BALANCE            TO                                 BALANCE
                                               JANUARY 1,       SALES OR                            DECEMBER 31,
DESCRIPTION                                      1996           EXPENSES         DEDUCTIONS            1996
-----------                                   ----------       --------          ----------        -------------
<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>

                                                            CHARGED
                                                BALANCE        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>
-----------------
Notes:
(a)   Represents write-offs of uncollectible accounts net of recoveries.

(b)   The balances at December 31, 1995, 1996 and 1997 primarily reflect a
      reserve for receivables sold to a trust (see Note 6 to Consolidated
      Financial Statements).

(c)   Represents balance acquired in acquisitions.


                                      S-1
<PAGE>

                                 EXHIBIT INDEX
                                 -------------

EXHIBIT
NUMBER      DESCRIPTION
-------     -----------
 3.1      --Certificate of Incorporation of BMCA, as amended.

 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")).

 4.1      --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 "Senior Notes Registration Statement")).

 4.2      --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).

 4.3      --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")).

10.1      --Management Agreement, dated as of March 3, 1992 ("Management
            Agreement"), among GAF, G-I Holdings, G Industries, ISP, GAFBMC and
            GAF Broadcasting Company, Inc. (incorporated by reference to Exhibit
            10.9 to the Registration Statement on Form S-4 of G-I Holdings
            (Registration No. 33-72220)).

10.2      --Amendment No. 1, dated as of January 1, 1994, to the Management
            Agreement (incorporated by reference to Exhibit 10.10 to G-I
            Holdings' Annual Report on Form 10-K for the year ended December 31,
            1993).

10.3      --Amendment No. 2, dated as of May 31, 1994, to the Management
            Agreement (incorporated by reference to Exhibit 10.1 to G-I
            Holdings' Quarterly Report on Form 10-Q for the quarter ended July
            3, 1994)).

10.4      --Amendment No. 3, dated as of December 31, 1994, to the Management
            Agreement (incorporated by reference to Exhibit 10.4 to ISP's Annual
            Report on Form 10-K for the year ended December 31, 1994).

10.5      --Amendment No. 4, dated as of December 31, 1995, to the Management
            Agreement (incorporated by reference to Exhibit 10.6 to G-I
            Holdings' Registration Statement on Form S-4 (Registration No.
            333-2436)).

10.6      --Amendment No. 5, dated as of October 18, 1996, to the Management
            Agreement (incorporated by reference to Exhibit 10.6 to ISP
            Holdings' Registration Statement on Form S-4 (Registration No.
            333-17827)).

10.7      --Amendment No. 6, dated as of January 1, 1997, to the Management
            Agreement (incorporated by reference to Exhibit 10.8 to the Senior
            Notes Registration Statement).

10.8      --Amendment No. 7, dated as of December 31, 1997, to the Management
            Agreement (incorporated by reference to Exhibit 10.10 to the 8%
            Notes Registration Statement).



<PAGE>


10.9      --Amendment No. 8, dated as of January 1, 1998, to the Management
            Agreement (incorporated by reference to Exhibit 10.11 to the 8%
            Notes Registration Statement).

10.10     --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).

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

10.12     --Forms of Amendment to Option Agreement relating to Series A
            Cumulative Redeemable Convertible Preferred Stock.*

10.13     --Form of Option Agreement relating to Series A Cumulative Redeemable
            Convertible Preferred Stock.*


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

10.15     --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).*

10.16     --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).*

21        --Subsidiaries of BMCA.

27        --Financial Data Schedule for fiscal year 1997, which is submitted
            electronically to the Securities and Exchange Commission for
            information only.

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