SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

       For the fiscal year ended June 30, 1999 Commission File No. 1-12767

                               Chemfab Corporation
             (Exact name of registrant as specified in its charter)


             Delaware                                 03-0221503
     (State or other jurisdiction of                 (IRS Employer
     incorporation or organization)                Identification No.)

       701 Daniel Webster Highway
            P.O. Box 1137
        Merrimack, New Hampshire                        03054
(Address of principal executive offices)               (Zip Code)

                                 (603) 424-9000
                         (Registrant's telephone number)


           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      None



           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                          Common Stock, $0.10 par value



     Indicate  by  checkmark  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

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     The  aggregate   market  value  of   Registrant's   voting  stock  held  by
non-affiliates  of the  Registrant  at August 10,  1999 was  approximately  $132
million. 7,707,320 shares of the Registrant's common stock, $.10 par value, were
outstanding on August 10, 1999.


                       DOCUMENTS INCORPORATED BY REFERENCE

     Proxy  Statement  for  the  1999Annual   Meeting  of  Shareholders  of  the
Registrant  to be held on  October  26,  1999.  Certain  information  therein is
incorporated by reference into Part III hereof.

<PAGE>

                                     PART I

Item 1        Business

         CHEMFAB CORPORATION,  together with its subsidiaries (hereinafter,  the
Company),  is an international  manufacturer and marketer of engineered products
based on its expertise and technology in flexible polymeric composite materials.
Relative  to  alternative  materials,   the  Company's  polymer-based  composite
materials   exhibit  an  outstanding   range  and   combination  of  performance
properties, including superior thermal, chemical, electrical and surface release
properties,  retention of  flexibility-in-use,  mechanical  strength,  and other
performance properties tailored to the requirements of particular  applications.
The majority of the  Company's  composite  materials  are made by  encapsulating
woven glass fiber within a fluoropolymer resin matrix. The Company also produces
and sells specialty  fluoropolymer films, silicone elastomers and silicone-based
products.   Worldwide  end-use  applications  for  the  Company's  products  are
architectural,   aerospace,  communications,   electrical,  environmental,  food
processing,  laboratory test, packaging,  protective systems,  consumer bakeware
applications,  other industrial  markets,  medical  electronics,  personal care,
healthcare and specialty apparel markets.

         The  Company's  principal  executive  offices are located at 701 Daniel
Webster Highway,  P.O. Box 1137,  Merrimack,  New Hampshire 03054; its telephone
number is (603) 424-9000. The Company is incorporated under Delaware law.

         Previously  the  Company  operated  and  reported  under  one  business
segment.  Effective with this Annual Report on Form 10-K,  the Company  operates
under two principal  reportable  business segments,  its Americas Business Group
and European  Business Group.  Any references to business  segments in this Form
10-K have been restated to conform with the new groupings. (See Note 14 of Notes
to  Consolidated   Financial   Statements.)  The  Americas   Business  Group  is
principally  responsible for all manufacturing and sales of Engineered  Products
made in and to North America and South America,  and for Architectural  Membrane
Product sales worldwide.  The Americas Business Group manufactures and sells two
principal  product  groups,  Engineered  Products  and  Architectural  Products.
Engineered  Products  rely  principally  on the  performance  properties  of the
Company's  fluoropolymer-containing  composite  materials to create value-in-use
(herein,  "Engineered  Products").  These  products are described in more detail
below  and are  sold  into the  following  markets:  energy/environmental,  food
processing  and  consumer  bakeware,   communications,  and  protective  systems
(herein,  "Severe Service  Markets").  Architectural  Membrane Products (herein,
"Architectural  Products")  manufactured  and  sold  worldwide  by the  Americas
Business  Group are  typically  used as primary  structural  components  in roof
systems  and  large  skylights  for  athletic  facilities,   walkways,  entrance
canopies,   convention   centers  and  specialty  events   structures   (herein,
"Construction Markets").

         The  European  Business  Group  is  principally   responsible  for  all
manufacturing and sales of Engineered Products made in and to Europe, the Middle
East and Africa.  Similar to the Americas  Business Group, the European Business
Group primarily  manufactures  and sells  Engineered  Products to Severe Service
Markets.  This geographic focus of the Company's two principal  segments enables
the Company to reduce freight and tariffs,  to stay close to its customers,  and
to exploit changing local demand and economic conditions.

         The Company also has sales and serves markets  through its Asia Pacific
Business  Group  and its High  Performance  Elastomer  ("HPE")  Division,  which
includes   the  Canton   Bio-Medical   ("CBM")  and  other   silicone   contract
manufacturing  businesses.  The Asia  Pacific  Business  Group sells  Engineered
Products in the Asia Pacific markets. The HPE division designs, manufactures and
sells engineered  silicone  elastomer  products to serve the laboratory test and
biomedical markets, and the medical electronics, personal care, healthcare, food
processing and specialty apparel markets.

<PAGE>

Products

         The Company has three principal  product groups:  Engineered  Products,
High  Performance  Elastomer  Products  and  Architectural  Products.  Sales  of
Engineered  Products are summarized in the aggregate (see "Comparative  Sales by
Product   Group"  on  page  6)  because  the  products   manufactured   and  the
manufacturing processes in the U.S. and in Europe are substantially similar, and
the products rely  principally  on the  performance  properties of the Company's
fluoropolymer-containing  composite materials,  as described above and below, to
create value-in-use.  All Architectural  Products and High Performance Elastomer
Products are manufactured in the United States.

         Engineered Products.  Engineered Products,  whether manufactured in the
United  States or Europe,  consist of a broad range of  polymer-based  composite
materials  which are generally  characterized  by their  exceptional  ability to
withstand high temperatures, corrosive chemicals and other harsh conditions, and
by their excellent surface release properties. These products are generally used
in industrial  applications  involving  severe  service  environments,  but some
communications and protective  systems products are sold to the U.S.  Government
and have their own unique performance properties. The majority of the Engineered
Products  sold by the  Company  are  comprised  of  woven  fiberglass  or  other
high-strength  fibrous  reinforcements  coated or laminated with formulations of
polytetrafluoroethylene  (PTFE)  or other  fluoropolymer  resins.  By  designing
variations in the  reinforcements  and the coatings,  the Company has engineered
many products with specific  performance  characteristics.  The  combination  of
fluoropolymer  resins and reinforcing  fibers  provides the resultant  composite
materials  with  performance  properties  far  surpassing  those of the separate
component materials contained therein.

         The  Company's  Engineered  Products are sold into a number of specific
markets and the  polymer-based  composite  materials of which they are comprised
are tailored accordingly to satisfy specific requirements of the product in-use.
Selected examples of typical engineered products and their markets are described
below:

         Energy/Environmental  Market - The Company's  DARLYN(R) and FLUEFLEX(R)
         Chemical  Resistant  Membranes are used for  expansion  joints at power
         generating  stations  and in  chemical  processing  plants  to  provide
         extended life to flexible joints which are exposed to highly  corrosive
         flue duct condensates and gases at varying  temperatures.  In addition,
         the Company  manufactures a similar corrosion resistant composite which
         is  fabricated  into  floating  roof seals to retard  evaporation  from
         aboveground  petroleum bulk storage tanks, and under-tank liners to aid
         in leak detection.

         Food Processing and Consumer Bakeware Market - The Company manufactures
         and sells a broad range of high temperature conveyor belts and grilling
         release  sheets  used in  commercial  cooking  applications  and  quick
         service  restaurants.  These  products  rely on the  excellent  release
         properties of PTFE required by the food processing  industry for use in
         high-temperature cooking. The Company's bakeware liners rely on similar
         technology   and   performance   properties  to  service  the  consumer
         home-cooking market.

         Communications Market - The Company manufactures planar electromagnetic
         windows,  utilizing its proprietary  RAYDEL(R)  Microwave  Transmissive
         Composite, for commercial microwave communications. It also designs and
         manufactures  spherical radomes for radar and high frequency  satellite
         communications  that are sold  primarily  under  government  prime  and
         subcontracts.  These products rely on low signal loss over a wide range
         of  frequencies,  and  outstanding  hydrophobicity,  which  results  in
         minimal signal loss even in adverse weather conditions.

<PAGE>

         Protective  Systems  Markets - The Company  designs,  manufactures  and
         sells protective  clothing,  hoods, and transportable  shelters,  which
         protect the users from hazardous  industrial  chemicals and/or chemical
         biological  warfare  agents.  Typical  products  are  smoke  hoods  for
         commercial  airlines  and Navy  operations  worldwide,  commercial  and
         military  fully  encapsulating  vapor  protective  suits,  and chemical
         biological  protective shelter systems for the U.S. Army through Natick
         Development  Laboratories.  The Company serves these end-use markets by
         forward integrating Chemfab CHALLENGE(R) barrier materials.  Chemfab is
         currently  included in multi-year U.S. Army contracts for $12.5 million
         of self-contained  toxic  environment  outfit suits used in maintenance
         and decommissioning  the U.S. military stores of chemical weapons,  and
         for $17 million of chemical  biological  hospital  shelters for forward
         deployment of military  medical troops.  Initial  releases of scheduled
         multi-year orders are currently in full production.

         In addition  to these  specific  examples of products  that rely on the
highly tailored performance properties of the Company's  polymer-based composite
materials,  the Company sells fiber-reinforced  composite materials primarily in
the form of belting,  sheet and pressure sensitive adhesive coated products,  to
customers in the packaging,  textile,  floor covering and other  industries that
use the products as consumable processing aids in their manufacturing processes.
The Company also sells  fiber-reinforced  composite  materials and fluoropolymer
films in roll-stock form to end users and  distributors  for use in a variety of
industries where severe service environments exist.

         Architectural Products. The Company has developed and markets a line of
Architectural  Products  under the names  SHEERFILL(R)  Architectural  Membrane,
ULTRALUX(R)   Architectural  Membrane,   FABRASORB(R)  Acoustical  Membrane  and
CHEMGLAS(R)  Roof Membrane.  These  products are made of PTFE-coated  fiberglass
composite materials that are strong, translucent, fire resistant,  self-cleaning
and  long-lived.  SHEERFILL(R)  and  ULTRALUX(R)  are typically  used as primary
structural   components  in  roof  systems  and  large  skylights  for  athletic
facilities, walkways, entrance canopies, convention centers and specialty events
structures. The most visible and cost-effective  applications for these products
are  roofing  and  skylighting   systems   covering  large  domed  stadiums  and
transportation  terminals.  An  example  of such a  roofing  application  is the
Millenium Dome in London,  England,  which has the largest  continuous  membrane
roof in the world  (approximately  1,000,000  ft2).  FABRASORB(R) is used inside
such structures as a sound dampener and/or  decorative  liner.  CHEMGLAS(R) Roof
Membrane was designed  specifically to meet the demands of the Tent City project
in Mina,  Kingdom of Saudi Arabia.  Architectural  Products are designed to meet
demanding structural  requirements of this end use application;  however,  these
products share some of the same  characteristics and manufacturing  processes as
the Engineered Products.

         Since the inception of the permanent  membrane  structures  business in
1973,  establishing  and  maintaining  a  reliable  delivery  system to  install
permanent  membrane  structures has been a key element of the Company's strategy
to develop the market. Principally for this purpose, over the past twenty years,
the  Company  has held  equity  positions  in  several  companies  that  design,
fabricate,  and install permanent membrane  structures.  Throughout this period,
however,  the Company's primary focus has been on establishing itself as a world
leader  in the  development,  manufacture  and  sale of  architectural  membrane
products.

         As part of the market development strategy described above, the Company
has participated in two corporate joint ventures.  In 1985, the Company formed a
corporate  joint  venture,  now  named  Birdair,  Inc.  (Birdair),   to  provide
design/engineering,  fabrication and  installation  support  services related to
permanent  membrane  structures.  Effective March 27, 1992, the Company sold its
47.5% equity  interest (and 50% voting  interest) in this venture to Taiyo Kogyo
Corporation (Taiyo),  which owned the other 50% voting interest at that time. As
part of the  transaction,  the Company and Taiyo  entered into a 10-year  supply
agreement  pursuant to which the Company  continues to be Taiyo's and  Birdair's
principal  supplier of  architectural  membrane  products for  permanent  fabric
structure projects undertaken by each company throughout the world.

<PAGE>

         Also in 1985, the Company, together with Nitto Denko Corporation (Nitto
Denko) and Taiyo,  formed a joint venture  company in Japan,  Nitto Chemfab Co.,
Ltd. (Nitto Chemfab), for the purpose of manufacturing and selling architectural
and  industrial  products  into the Japanese  market.  As a result of changes in
economic  conditions  since the joint venture was  established and amendments to
its governing agreements,  Nitto Chemfab's business activities are now generally
limited to promoting  architectural membrane products in the Japanese market and
providing  related customer service and support.  Until December 30, 1997, Nitto
Chemfab was 39% owned by the Company,  with the  remaining  51% and 10% owned by
Nitto  Denko  and  Taiyo,  respectively  (see  Note 15 of Notes to  Consolidated
Financial Statements).

         Effective December 30, 1997, Nitto Chemfab repurchased the shares owned
by Nitto Denko and Taiyo for a sum of  $177,000  and  Chemfab  Corporation  paid
$116,000 to the selling  shareholders  for  non-competition  covenants and other
services.  Upon the  repurchase  of the  aforementioned  shares,  Nitto  Chemfab
canceled the repurchased shares. As a result, effective December 30, 1997, Nitto
Chemfab became a wholly owned subsidiary of Chemfab Corporation.

         During the fourth  quarter in fiscal  year 1999,  the  Company  reached
agreement  with Birdair  regarding  improved  ways to develop the  architectural
membrane  market.  The agreement  represents a concentrated  approach by the two
companies to exploit the anticipated continuation of strong worldwide demand for
architectural membrane products.

     High Performance  Elastomer Products.  The principal business activities of
this product group are:

         Lab Test/Biomedical  Market - The Company  manufactures a comprehensive
         product line of high  performance  elastomeric  closures for use in gas
         and liquid chromatography,  environmental testing and the packaging and
         storage of sterile biomedical  culture media. The products,  sold under
         the MICROSEP(R),  MICROLINK(R) and Pureseal(TM)  trademarks,  are based
         upon a combination of fluoropolymer and silicone  elastomer  processing
         technology.  The  performance of these  products  relies on the purity,
         inertness and physical integrity of fluoropolymer films, in combination
         with the elastomer  properties of silicone,  to create closures capable
         of containing the most sensitive  chemicals and samples without risk of
         sample contamination or seal degradation.

         Silicone  Elastomer  Products  - The  Company's  new  High  Performance
         Elastomer  (HPE)  Division  focuses on the design  and  manufacture  of
         finished  products  based  on  high-performance,  engineered  elastomer
         materials  addressing  the needs of the medical  electronics,  personal
         care, health care, food processing and specialty apparel markets.

HPE Products are manufactured in the United States and are marketed worldwide.

<PAGE>

Sales and Marketing

         The Company sells its  Engineered  Products and HPE Products  primarily
through a combination of direct sales efforts and  commissioned  representatives
and distributors.  Architectural  Products are primarily sold pursuant to supply
agreements with Birdair, Taiyo, and a customer in Australia. The Company's sales
and marketing  personnel strive to understand  their  customers'  businesses and
respond to their  specific  applications'  needs by drawing  from the  Company's
materials, weaving, coating, film manufacturing, laminating, design engineering,
fabricating and installation capabilities and technologies.

                       COMPARATIVE SALES BY PRODUCT GROUP

                                1999       1998       1997       1996       1995
                                ----       ----       ----       ----       ----
                                                (in thousands)

Engineered Products .....   $ 83,159   $ 79,908   $ 76,428   $ 67,273   $ 55,461
Architectural Products ..     38,377     19,496      9,744     12,736      8,185
HPE Products ............      4,944      5,056      4,611      3,873      4,334
                            --------   --------   --------   --------   --------
                            $126,480   $104,460   $ 90,783   $ 83,882   $ 67,980
                            ========   ========   ========   ========   ========

Manufacturing

          The Company's  manufacturing  processes include the weaving of fibrous
reinforcing materials, the application of formulated coatings to reinforcements,
the production of multi-layer  films,  and the  combination of such materials as
multi-layer composites by lamination. The Company's manufacturing processes also
include  extrusion,   liquid  injection  molding,   precision   calendering  and
lamination of silicone elastomers.

          Woven reinforcements are manufactured in widths up to fifteen feet, as
well as in narrower formats of specialty design.  The mechanical  performance of
coated or laminated composites is substantially a function of the uniformity and
quality of such reinforcements.  The Company's Merrimack, New Hampshire facility
is  believed  to  be  uniquely  adapted  to  the  manufacture  of  such  fibrous
reinforcements at the high level of quality required for their use in structural
composite materials.

          Coatings  are  produced  from aqueous  formulations  of  fluoropolymer
resins in the Company's North  Bennington,  Vermont;  Merrimack,  New Hampshire;
Kilrush,  Ireland;  Littleborough,  England and Sao Paulo,  Brazil,  facilities,
employing equipment and control systems  substantially  designed by the Company.
On June 29,  1999,  the  Company  announced  plans to  streamline  its  European
manufacturing  operations  from the  current two plant  operation  into a single
plant operation in Kilrush, Ireland

          Specialty fluoropolymer films are produced at the Company's Merrimack,
New Hampshire facility utilizing the Company's  proprietary  casting process and
other related  processes.  Lamination of  fluoropolymer-containing  materials is
performed  in the  Merrimack  facility  and in the  Company's  Kilrush,  Ireland
facility.

          High  performance  elastomeric  closures  (septa and cap  liners)  are
produced in the Company's Poestenkill,  New York facility.  Precision calendered
extrusions of silicone  elastomers,  often laminated to specialty  fluoropolymer
films,  are fabricated into a wide variety of closure parts.  Thermal welding of
liners into  plastic  caps is  performed  utilizing  the  Company's  proprietary
MICROLINK(R) technology. The custom design and contract manufacturing activities
of the Company's High Performance Elastomer (HPE) Division are also based at its
Poestenkill, New York facility. The HPE division has the capability of designing
and manufacturing liquid injection molded silicone products.

          Design/engineering  and fabrication of end-use  articles are primarily
carried  out  at  the  Company's  Merrimack,   New  Hampshire  facility.   Light
fabrication of conveyor belts, food processing release sheets and other products

<PAGE>

is also  performed  at the  Company's  North  Bennington,  Vermont;  Schaumburg,
Illinois; Kilrush, Ireland; Littleborough,  England; Cologne, Germany; Valencia,
Spain; Suzhou, China; Tokyo, Japan and Sao Paulo, Brazil facilities. On July 15,
1999,  the Company  acquired a light  fabricator  and  distributor in Perpignon,
France. The Company designs and builds  substantially all of the jigs, fixtures,
heat sealing machinery and other equipment required for fabrication.

Raw Materials

          The primary raw materials used by the Company in its weaving,  coating
and film manufacturing  operations are fiberglass yarns,  commercially available
woven fiberglass  reinforcements,  and  fluoropolymers  (principally  PTFE). The
fiberglass  yarns are supplied  principally by Advanced  Glassfiber Yarns (AGY),
formerly a business of Owens Corning (OC), and PPG Industries,  Inc. Alternative
sources of supply are available for all the Company's key raw materials,  except
for Beta(R) fiberglass yarn (Beta) used in the manufacture of certain structural
membrane products,  which is supplied to the Company solely by AGY. Beta(R) is a
registered trademark of AGY.

          In March 1997, the Company  entered into an agreement with OC aimed at
the development by OC, over the ensuing two years, of a new continuous  filament
fiberglass yarn to replace the former Beta yarns in those products  wherein Beta
had been utilized. This collaborative effort intended for the new glass fiber to
also provide,  relative to the former Beta,  improved  cost/performance  for the
benefit of the Company and enhanced  production  efficiencies for the benefit of
OC (now AGY). The development work is now essentially complete and all customers
have trialed and accepted the "new" Beta yarn. In April 1999,  AGY converted its
facilities to the production of the new Beta yarn, and the Company has continued
to produce and supply its architectural  products with the new Beta yarn without
interruption.

          The Company believes that it maintains adequate  inventories and close
working  relationships  with its  suppliers  to  provide  for a  continuous  and
adequate supply of raw materials for production.  Apart from previously reported
raw  material  shortages  and  quality  problems  experienced  in the Tent  City
project, the Company has not experienced any serious interruptions in production
due to a shortage of raw materials.

Backlog

          The Company's  backlog,  comprised of firm orders or unfilled portions
thereof, at the dates indicated were as follows:

                                                 At June 30,
                                               (in thousands)

                                              1999           1998           1997
                                              ----           ----           ----

Engineered Products ...............        $ 8,902        $ 8,610        $12,017
Architectural Products ............          3,393          4,944          1,670
HPE Products ......................          1,127          1,050          1,125
                                           -------        -------        -------
                                           $13,422        $14,604        $14,812
                                           =======        =======        =======

          Included in the June 30, 1999, 1998 and 1997, backlog is approximately
$2,386,000,  $2,034,000,  and $4,553,000  respectively,  attributable  to United
States Government prime contracts and subcontracts. All United States Government
contracts,  whether  funded or unfunded,  can be  terminated or curtailed at the
convenience of the Government.

          The   reduction  in  backlog  is  primarily  due  to  a  reduction  in
architectural  contracts.  The Company expects to recognize as revenue in fiscal
2000 virtually all of its June 30, 1999 backlog.

<PAGE>

Other

          In addition to normal  business risks,  operations  outside the United
States are subject to other risks including: the political,  economic and social
environment;  governmental laws and regulations;  and currency  revaluations and
fluctuations.

Research and Development

          Fiscal  1999   expenditures   for   Company-sponsored   research   and
development were $3,568,000, representing approximately 2.8% of consolidated net
sales, an amount which management  believes was sufficient to support continuing
new product and process  development.  Comparable  expenditures in 1998 and 1997
were $3,005,000 and $2,498,000,  respectively,  which represented  approximately
2.9% and 2.8% respectively of consolidated net sales.

          During fiscal 1999, the Company  devoted  research  efforts to support
existing business and new opportunities.  In support of existing  business,  the
Company has explored the development of new and modified polymeric compositions.
This continues to lead to new opportunities for applications for  pharmaceutical
closures  and  high  transmission   architectural   membranes.  In  this  latter
application,  as  previously  reported,  a U.S.  patent  has been  obtained  for
structural  membranes  facilitating  a 50-100%  increase  in light  transmission
relative to the Company's current  SHEERFILL(R) line of Architectural  Products.
Based on this performance,  a trademarked  product line known as ULTRALUX(R) has
been launched to exploit a growing  opportunity  for covered  sports  facilities
that may feature live turf instead of synthetic grass.

          Research  activities  in support of new  business  opportunities  have
explored new polymers and  combinations of materials  which offer  substantially
different  product  forms and  performance  benefits  compared to the  Company's
existing  composites.  Performance  features associated with this new technology
are designed to lead the Company into  significant  new markets and  application
areas while  maintaining the high  performance  characteristics  of its existing
products.

Competition

          The Company faces domestic,  international and global competition from
companies doing business in one or more of the Company's principal product lines
(see Part 1, Item 1 Business - Products).  The Company has met this  competition
through  the  integration  of its  materials,  equipment  design and  processing
technologies.   The  Company  also  competes  on  the  basis  of   technological
suitability,  quality and price of its products,  its ability to meet individual
customer  specifications,  and the quality of technical  assistance  and service
furnished to customers.

          The majority of the Company's  engineered products are composed of the
Company's    fluoropolymer-containing    composite   materials   and   specialty
fluoropolymer films. These materials are manufactured through the application of
a number of different production processes, including custom fiber reinforcement
weaving,  fluoropolymer coating,  fluoropolymer film casting, pressure sensitive
adhesive   coating,   and  fluoropolymer   film  lamination.   In  the  area  of
fluoropolymer coated composites, the Company has three major and several smaller
competitors  worldwide in a relatively mature marketplace.  The Company believes
that it is one of the market leaders in both the United States and Europe in the
majority of product lines based on this  production  methodology.  The Company's
multi-layer  fluoropolymer  films  and  products  made from  fluoropolymer  film
laminates are based on proprietary  technologies and,  accordingly,  through the
protection  and use of these  technologies  the  Company  can offer  specialized
multi-layer  fluoropolymer films and products using these process  technologies.
These  products do,  however,  compete with other valued  products  comprised of
similar and dissimilar materials.

<PAGE>

          In the area of high performance  elastomeric closures, the Company has
four  major  and  several  smaller  competitors  worldwide.  In  respect  of the
Company's E2(TM) business,  the Company has a total of ten major  competitors in
the markets E2(TM) addresses.

          The Company has a wide breadth of product offerings in these specialty
niches,  which has  enabled  the  Company to compete  effectively  in the global
markets where it does business. The Company's fluoropolymer-containing composite
materials are also fabricated into end-use  products.  The Company believes that
these fabricated  articles,  which include chemical protective suits,  spherical
radomes, and military shelters,  compete favorably against products manufactured
from other materials.

          The  Company's   architectural  membrane  products,   which  are  sold
primarily  through  supply  agreements  with Birdair,  Taiyo,  and a customer in
Australia, have been used in many high-profile projects worldwide, including the
recent  Millenium  Dome in London,  England  and the Tent City  project in Mina,
Kingdom of Saudi Arabia.  The Company believes its historically  strong sales in
this field are the result of its  expertise in  wide-width  weaving and coating,
coupled with the technical  experience and marketing efforts of its customers in
the  design/engineering  and  installation  of  permanent  membrane  structures.
SHEERFILL(R)  Architectural  Membrane  and  ULTRALUX(R)  Architectural  Membrane
products, and the Company's CHEMGLAS(R) Roof Membrane,  compete with alternative
construction  materials  and with  permanent  architectural  membrane  materials
manufactured by other companies. Continuation of sales of Architectural Products
at  strong  levels  from a  historical  perspective  depends  on  many  factors,
including the risk factors identified on page 22.

Patents and Trademarks

          The Company holds numerous  patents covering  manufacturing  processes
and  product  compositions.   In  addition,   the  Company  has  several  patent
applications on file,  including  applications  related to specific end-uses for
its products.

          The Company has pending applications for the same product in Japan and
Europe.  In addition,  a trademark  application  for  ULTRALUX(R)  Architectural
Membrane has been filed for use with this product. These high light-transmission
architectural  membranes  are  expected  to serve  markets  in sports  arena and
stadium applications.

          In the first quarter of fiscal year 2000 the Company expects to launch
commercialization of an air diffuser for use in HVAC applications,  for which it
received a patent in fiscal 1998 from the United States Patent Office.

          U.S. patents and trademarks,  and their foreign counterparts,  are key
elements  in the  Company's  strategy  to  maintain  and extend its  competitive
position  in  its  markets.  The  Company  also  relies  on  trade  secrets  and
proprietary know-how in the design and manufacture of its products.

Environmental Controls

          Federal, state, local, and foreign governmental  requirements relating
to the discharge of materials  into the  environment,  the disposal of hazardous
wastes and other factors affecting the environment have had, and will continue

<PAGE>

to have, an impact on the  manufacturing  operations of the Company (see Part 1,
Item 3 Legal  Proceedings).  Thus far, the Company believes compliance with such
provisions  has been  accomplished  without  material  effect  on the  Company's
capital expenditures, earnings and competitive position, and it is expected that
this will continue to be the case.

Employees

          At June  30,  1999,  the  Company  had 738  full-time  employees.  The
Company's U.S.-based  employees are non-unionized.  A majority of wage employees
at the  Company's  facilities  in  Littleborough,  England and Kilrush,  Ireland
(totaling approximately 98 employees) are members of local unions. The Company's
wholly-owned  subsidiaries  at each of these  facilities are a party to separate
collective bargaining agreements ("CBA"). However, the Company believes that the
risk of a strike,  walkout or other labor  disruption is not material (either in
terms of  probability  of  occurrence  or magnitude of impact) to the  Company's
global operations, in light of the following factors:

          (a)   good labor relations generally at both European facilities,  due
                to: (i) a competitive  rate of pay and work  conditions;  (ii) a
                history of successful CBA negotiations  and renewals;  and (iii)
                favorable  relations  between current local management and union
                representatives; and

          (b)   a low  probability  that a strike  might occur at both  European
                facilities at the same time, because the operating  subsidiaries
                are located in different  countries  (with  resulting  different
                economic  conditions)  and  have  CBAs  with  different  unions.
                Accordingly,  in the event of a strike at one or both locations,
                the Company would have the ability to source products  currently
                manufactured  at the subject  location from the Company's  other
                United  States or European  facilities,  as generally  described
                previously in this Form 10-K (see Part 1, Item 1 Business).

Item 2    Properties

          The  sales,  marketing,  administrative,   research  and  development,
manufacturing   and  distribution   facilities  used  by  the  Company  and  its
subsidiaries  are  located in four  different  states  within  the U.S.,  and in
Ireland,  England,  Germany, Spain, Japan, Brazil and China. The Company owns an
aggregate  of  approximately  318,000  square  feet of  facilities,  and  leases
approximately 216,000 square feet of additional space.

          The Company owns its Merrimack, New Hampshire headquarters site, which
consists of a 225,000  square foot  building  and 21 acres of land.  The Company
also has a 10-year  right  (expiring in 2003) to purchase an additional 32 acres
of adjacent undeveloped land.

          In  the  opinion  of  the  Company,  its  properties  have  been  well
maintained,  are in sound  operating  condition,  and contain all  equipment and
facilities necessary to conduct its business at present levels. A summary of the
square  footage  of  floor  space  currently  being  utilized  at the  Company's
facilities at June 30, 1999 is as follows:

                                                            No. of
            Primary Use                       Locations      Owned     Leased(1)

Manufacturing and engineering ........           13         266,000      174,000

Research and development, ............           14(2)       52,000       42,000
sales and administrative
office facilities
<PAGE>

                 (1)      The leases in New York and Vermont are  tenant-at-will
                          leases;   leases  in  Japan,  China,  Spain,  Ireland,
                          Germany and New Hampshire  expire in 2000,  England in
                          2001,  Illinois  in 2002,  and Brazil in 2004.  Leased
                          space in these locations is primarily used for storage
                          and/or sales and administrative  functions.  Principal
                          manufacturing facilities in New Hampshire, Vermont and
                          Ireland are owned by the Company.
                 (2)      Of the Company's  fourteen  research and  development,
                          sales and administrative  office  facilities,  all are
                          located  together with  manufacturing  and engineering
                          facilities.

Item 3        Legal Proceedings

         In March  1991,  the  United  States  Environmental  Protection  Agency
("EPA")  informed the Company it was one of a number of Potentially  Responsible
Parties ("PRPs") under the Comprehensive  Environmental  Response,  Compensation
and  Liability  Act  ("CERCLA")  and related  laws  concerning  the  disposal of
hazardous waste at the Bennington Landfill Superfund Site in Bennington, Vermont
(the "Site"). Under these statutes, PRPs may be jointly and severally liable for
the cost of study and  remediation  actions  at the Site and for other  damages.
While denying  liability,  the Company has worked with the approximately  twelve
(12) other Site PRPs to respond to the EPA's claim.

          In April 1997,  the EPA and the United  States  Department  of Justice
("DOJ")  issued a Consent  Decree to resolve  Site-related  claims  against  the
Company and the other PRPs. Under terms of the Consent Decree,  the Company is a
"de minimis" party, eligible for settlement under section 122 (g) of CERCLA, and
entitled to statutory contribution protection.  The United States District Court
entered the Consent Decree on August 18, 1997.

          Under the Consent  Decree,  the Company  received final covenants from
the Federal and State Governments prohibiting those entities from taking further
civil or administrative  action against the Company related to the Site, subject
to standard statutory  reopeners.  The Company is not aware of any other pending
or threatened claims or administrative  actions involving the Site, and believes
that any such claims or actions would be unlikely.

          The  Company is  involved  in a number of other  lawsuits  as either a
defendant  or a  plaintiff.  Although  the  outcome  of such  matters  cannot be
predicted  with  certainty,  and some  lawsuits  or claims  may be  disposed  of
unfavorably  to the Company,  management  believes that the  disposition  of its
current legal proceedings, to the extent not covered by insurance, will not have
a material adverse effect on the Company's consolidated financial statements.

Item 4    Submission of Matters to a Vote of Security Holders

          No matters  were  submitted to a vote of security  holders  during the
fourth quarter of fiscal 1999.

Item 4a        Officers of the Company

          The name,  age,  positions,  and offices  held with the  Company,  and
principal  occupations and employment  during the past five years of each of the
Officers of the Company, are as follows:

      Name              Age             Position or Office Held

John W. Verbicky        47       President and Chief Executive Officer
Michael P. Cushman      46       Vice President - Americas Business Group
Dennis L.  Filger       51       Vice President - Corporate Business
                                   Development and Technology
Moosa E. Moosa          42       Vice President - Finance, Treasurer,
                                   and Chief Financial Officer
Thomas C. Platt III     44       Vice President - General Counsel and
                                   Administration, and Secretary
Charles Tilgner III     64       Vice President and Director of U.S.
                                   Operations and Engineering
Hilary A. Arwine        39       Corporate Controller

         John W. Verbicky Ph.D. has served as the Company's  President and Chief
Executive Officer since January 1998. Dr. Verbicky joined the Company in January
1993 as Vice  President - Research & Development.  In April 1994,  Dr.  Verbicky
assumed the position of Vice President - U.S.  Business Group, and in March 1996
he was promoted to the position of Executive Vice President and Chief  Operating
Officer.  From November 1990 until the  commencement  of his employment with the
Company,  Dr.  Verbicky was employed by General  Electric (GE) as manager of the
Environmental  Technology Laboratory at GE's Research and Development Center. He
previously served as manager of the Chemical Synthesis  Laboratory after joining
GE in 1979.  In this role,  he led a series of research  and  development  teams
focused on product and process  development  efforts in the area of  engineering
thermoplastics   and  composites   supporting  the  GE  Plastics  and  Silicones
businesses.

         Dennis L. Filger Ph.D. joined the Company in May 1999 as Vice President
- Corporate  Business  Development and  Technology.  Dr. Filger comes to Chemfab
with more than 24 years of  experience  with the DuPont  Company  and DuPont Dow
Elastomers,  LLC.  During his tenure at DuPont  and DuPont Dow  Elastomers,  Dr.
Filger led efforts in research;  process  development;  product  development and
market application  development for fluoroelastomer and fluoroplastic  polymers.
He joined the DuPont Company in 1974 as a Research  Chemist.  From 1982 to 1985,
he led the product  development  effort for  DuPont's  Viton(R)  fluoroelastomer
business.  From  1985 to 1992,  he  undertook  a number of  assignments  leading
product development efforts in medical biomaterials and fabricated fluoropolymer
products.  In 1992,  he was  appointed  Global  Technology  Manager for DuPont's
Kalrez(R)  and  Viton(R)  fluoroelastomer  businesses.  He joined the DuPont Dow
Elastomers,  LLC joint  venture in 1996 as the  Global  Technology  Manager  for
fluoroelastomers.

         Michael P.  Cushman  joined the  Company in  February  1978 as Customer
Service Coordinator. He served in various product and sales management functions
and became  Director of the European  Business Group in June 1984. In July 1991,
he was named Director of the Asia Pacific Business Group. He assumed  leadership
of the Americas  Business Group as General  Manager in March 1996, and was named
Vice President - Americas Business Group effective July 1997.

          Moosa E.  Moosa  joined  the  Company  as Vice  President  -  Finance,
Treasurer  and Chief  Financial  Officer  in July  1996.  Prior to  joining  the
Company, Mr. Moosa was employed by Freudenberg Nonwovens LP as Vice President of
Finance and Chief  Financial  Officer since 1992.  Prior to that time, he worked
for KPMG, an international public accounting firm in the United States and South
Africa.

` Thomas C. Platt III joined the Company in July 1997 as Vice President  General
Counsel and  Administration,  and Secretary.  Prior to joining the Company,  Mr.
Platt was a senior level Director and Shareholder at the law firm of Orr & Reno,
P.A.  in  Concord,  New  Hampshire.  He had  worked  for  Orr & Reno  since  his
graduation from law school in 1980. Mr. Platt and his firm had served as outside
legal  counsel to the Company on many  business  matters  during the period from
1985-1997,  particularly in the areas of the architectural products business and
real estate and employment matters.

<PAGE>

         Charles Tilgner III joined the Company in January 1978 as the Company's
Manager of  Engineering.  In January 1984,  he was named Site  Manager,  Buffalo
Operations. In May 1985, Mr. Tilgner became Director of Technical Operations. He
was named Vice  President  -  Manufacturing  in October  1986,  and became  Vice
President  Engineering in September 1990. In September 1994, while retaining his
office  of  Vice  President,  he was  named  Director  of  U.S.  Operations  and
Engineering.

         Hilary A. Arwine  joined the Company in June 1996 as  Controller of the
Merrimack manufacturing facility. In June 1997, she was promoted to the position
of  Corporate  Controller.  Prior to joining the  Company,  Ms.  Arwine was Vice
President,  Finance  and  Administration  at  Saphikon  Inc.  where she had held
positions  of  increasing  responsibility  since 1989.  Prior to 1989,  she held
various finance positions at Hollis  Engineering and New Hampshire Ball Bearing,
Inc.

         All Officers  are elected  annually to serve at the  discretion  of the
Board of Directors.

<PAGE>

                                     PART II

Item 5 Market for the Registrant's Common Stock and Related Stockholder Matters

         The  common  stock of the  Company  is  traded  on the New  York  Stock
Exchange under the symbol "CFA". The following table sets forth, for the periods
indicated,  the high and low sale prices per share of the Company's common stock
as reported by the New York Stock Exchange.

                           Fiscal year ended           Fiscal year ended
                           June 30, 1999               June 30, 1998
                           --------------              ---------------
                           High         Low            High          Low
                           ----         ---            ----          ---
    First quarter          22 1/8       16 3/16        23            19 1/8
    Second quarter         22 7/8       18 3/4         24 3/4        20 5/8
    Third quarter          21 5/8       16 1/8         24 1/2        19 1/2
    Fourth quarter         21           16             25 1/4        20 3/16


         As of August 10, 1999,  the number of record  holders of the  Company's
stock was 479. At the present  time,  the Company  intends to follow a policy of
not paying any dividends  and retaining all earnings to finance the  development
and growth of the business.


Item 6    Selected Financial Data
          (in thousands except per share data)
                           For the year ended June 30,
                            1999 1998 1997 1996 1995
                                  ----       ----       ----     ----       ----


Net sales ...................$ 126,480   $104,460   $ 90,783  $83,882  $ 67,980

Gross profit ................   41,772     35,880     30,944   28,109    21,856

Other (income) expense ......      (55)        42       (213)      51      (111)

Special charge ..............    3,986       --         --       --         --

Income before income taxes ..   12,711     16,197     13,300   11,154     7,480

Net income ..................$   8,936   $ 10,932   $  9,106  $ 7,714  $  5,310

Weighted common shares outstanding
     Basic ..................    7,806      7,898      8,041    7,935     7,834
     Diluted ................    8,038      8,213      8,278    8,199     7,991

Net income per share
     Basic ..................$    1.14   $   1.38   $   1.13  $  0.97  $   0.68
     Diluted ................$    1.11   $   1.33   $   1.10  $  0.94  $   0.66

The Company has never paid a cash dividend.

<PAGE>

Item 6    Selected Financial Data (Continued)
          (in thousands)


                                                at June 30,
                                 1999     1998     1997     1996     1995
                                 ----     ----    -----     ----     ----


Net property, plant and
  equipment ...............  $ 29,952  $24,217  $21,472  $20,540  $19,833


Total assets ..............   106,368   89,104   80,565   73,662   70,619


Working capital ...........    27,555   37,290   33,226   28,292   25,501

Cash ......................     4,783   11,099    8,055    5,017    3,780


Short-term borrowings .....    11,028     --       --       --       --


Long-term borrowings
  including current portion      --       --       --      2,377    8,132

Shareholders' equity ......  $ 76,856  $72,354  $66,385  $58,505  $50,321


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

         The following table indicates the percentage  relationships of selected
financial items included in the Consolidated  Statements of Income for the three
fiscal years ended June 30, 1999,  1998, and 1997, and the pertinent  percentage
changes in those items for the year.

                                    Percent of net sales        Increase from
                                for the years ended June 30,       prior year
                                                                1999      1998
                                                                  vs.       vs.
                                   1999      1998      1997     1998      1997
                                   ----      ----      ----     ----      ----


Net sales ....................   100.0%    100.0%    100.0%    21.1%     15.1%


Gross profit .................    33.0%     34.3%     34.1%    16.4%     16.0%


Income before income taxes ...    10.0%     15.5%     14.7%   (21.5%)    21.8%


Net income ...................     7.1%     10.5%     10.0%   (18.3%)    20.1%


Net income excluding .........     9.4%     10.5%     10.0%     9.2%     20.1%
special charge

<PAGE>

                              1999 Compared to 1998

Sales

         The  Company's  fiscal  1999   consolidated   sales  increased  21%  to
$126,480,000  from $104,460,000 in 1998. This revenue growth was the result of a
4% increase over the prior year in worldwide  sales of  Engineered  Products and
97% increase in shipments of  Architectural  Products  relative to the preceding
year.  Incremental sales from acquisitions  accounted for 6% of engineered sales
from  fiscal  1998.  The  growth  in sales  for the  fiscal  year was  primarily
volume-related.

         The  Americas  Business  segment  sales (which  include all  Engineered
Product  sales from the  Company's  U.S.  manufacturing  plants  into  principal
geographic  markets in the Americas and  Architectural  Product sales worldwide)
increased 28% to  $83,663,000  from  $65,591,000  in the prior year.  This sales
increase  was  primarily  the result of an increase  in  sizeable  architectural
projects  completed to date  (including  the Tent City project) this year versus
last year offset by a decline in sales of protective  systems and  communication
products.

         The  European  Business  segment  sales (which  include all  Engineered
Product sales from the Company's  European  manufacturing  plants into principal
geographic  markets in Europe and  Africa)  increased  15% to  $31,692,000  from
$27,612,000 in the prior year. The three  acquisitions  completed in fiscal 1999
(See Note 3 of Notes to Consolidated Financial Statements) accounted for most of
the increase in the European  sales.  Had mainland  European  currencies and the
Pound  Sterling  remained  at the same  exchange  rates as last  year,  European
revenue would have increased by 16%.

         Sales  in  our  Asia  Pacific  Business  segment,  which  includes  all
engineered  product  sales to the Far East and  sales  from the  Company's  High
Performance Elastomer Division combined,  decreased slightly to $11,125,000 from
$11,257,000  in the prior year.  The decrease was  experienced  in the first two
quarters of the fiscal year 1999 and was the result of continued weakness of the
economies  of  certain  Asian  countries.  This trend  reversed  in the last two
quarters with increases over the corresponding quarters in the prior year.

         For fiscal 2000,  worldwide  demand for Engineered and High Performance
Elastomer  Products  is expected to remain  generally  strong from a  historical
perspective. However, sales of Architectural Products are expected to decline to
historical  average  levels,  as a result  of the  expiration  of the  Company's
contract to supply CHEMGLAS(R) Roof Membrane to the Tent City project.  Sales of
architectural  products  may also be  impacted  by the  cyclical  nature  of the
architectural business.

Gross Profit Margins

         Gross  profit  margins as a  percentage  of net sales for  fiscal  1999
decreased  to 33% from 34% in fiscal 1998.  The margin  decline is mainly due to
low margins on the Tent City project.  Strong  margins in the Americas  Business
Group helped to mitigate some of the competitive pressures in Europe.

Selling, Administrative, Research and Development Expenses

         Selling,  general and administrative  expenses increased to $21,295,000
in fiscal 1999 from $16,995,000 in fiscal 1998. This increase  resulted from the
combined  effects of the higher  cost  structure  in place  (including  goodwill
amortization) to support the Company's newly acquired  businesses in Germany, as
well as higher  shipping  expense  associated  with the Tent City  project.  The
percentage of selling,  general and  administrative  expenses to sales in fiscal
1999 was 17%, up from 16% in fiscal 1998.

<PAGE>

         Research and  development  (R&D)  expenses  increased to  $3,568,000 in
fiscal 1999 from  $3,005,000 in fiscal 1998.  R&D  expenses,  as a percentage of
revenues,  were  approximately  2.8% of sales in fiscal 1999, down slightly from
2.9% in fiscal 1998. At the present time,  management believes that R&D spending
in the range of 3% of sales will be generally  adequate to support the Company's
present new product and process development programs.

Interest (Income) Expense

         In fiscal 1999, net interest expense was $267,000  compared to $359,000
net interest  income in fiscal 1998. This was mainly a result of a lower average
cash balance and borrowings  made to fund  acquisitions  (see Note 3 of Notes to
Consolidated Financial Statements) and the Tent City project.

Special Charge

          A special  charge in the fourth  quarter and for the year  amounted to
$3,986,000 and was comprised of:

          (1)  Approximately  $3,194,000  related to the Company's June 29, 1999
               announcement  that it will streamline its European  manufacturing
               operations from the current  two-plant to a single  manufacturing
               plant  and  it  will  consolidate  its  three  recently  acquired
               fabricating  distributors in Germany into a single location.  The
               plan  anticipates the redundancy of  approximately  45 employees,
               principally in manufacturing.  This program, which is expected to
               be substantially completed by the end of fiscal 2000, is aimed at
               improving the efficiencies of the European operations.  The costs
               of the streamlining actions include the termination and severance
               and related  costs  associated  with the  announced  reduction in
               force,  lease termination  costs,  contract  cancellation  costs,
               certain  equipment  write downs and other  notice and  associated
               costs.

          (2)  A $792,000  charge for the cost of goods  supplied in  connection
               with  changes  to a  marketing  agreement.  The  Company  did not
               recognize any revenue or associated  margin upon  supplying  this
               free merchandise.

Income Taxes

          In fiscal 1999, the Company recorded  $3,775,000 of income tax expense
as compared to $5,265,000 in 1998. The Company's effective tax rate for 1999 was
29.7% as compared to 32.5% in the prior year.  The decrease in the effective tax
rate was primarily due to a greater proportion of international  sales in fiscal
1999.

Profitability

         The Company earned net income before taxes of $12,711,000  for the year
ended  June 30,  1999,  as  compared  to  $16,197,000  in the prior  year.  This
represents  a  decrease  in  pre-tax  income of 22% over the prior year on a 21%
increase in revenues.  Net income  decreased 18% to  $8,936,000  for fiscal 1999
from  $10,932,000 in 1998.  Diluted  earnings per share  decreased to $1.11 from
$1.33 in fiscal 1998.  These figures  include the impact of a special  charge of
$3,986,000  taken in the fourth quarter.  Excluding the special  charge,  profit
before  taxes in 1999 would  have  increased  by 3.1% and net income  would have
increased  by  9.2%.  The  special  charge  was  primarily  associated  with the
restructuring   and  streamlining  of  European   operations  and  the  cost  of
merchandise  supplied in  connection  with  changes to the  Company's  marketing
agreement for Architectural Products.

         Excluding the net impact of the special charge, net income for the full
year would have increased 9% to $11,939,000 from $10,932,000 for the prior year,
and diluted  earnings per share would have increased 12% to $1.49 per share from
$1.33 in fiscal 1998.

<PAGE>

                              1998 Compared to 1997

Sales

         The  Company's  fiscal  1998   consolidated   sales  increased  15%  to
$104,460,000  from  $90,783,000 in 1997. This revenue growth was the result of a
5% increase over the prior year in worldwide  sales of  engineered  products and
100% increase in shipments of architectural  products  relative to the preceding
year. The growth in sales for the fiscal year was primarily volume-related.

         The  Americas  Business  Segment  sales (which  include all  engineered
product  sales from the  Company's  U.S.  manufacturing  plants  into  principal
geographic  markets are the Americas and architectural  product sales worldwide)
increased 28% to  $65,591,000  from  $51,417,000  in the prior year.  This sales
increase was  broad-based,  with sales of  fabricated  products and shipments in
food processing being particularly strong relative to the prior year.

         The  European  Business  Segment  sales (which  include all  engineered
product  sales  from the  Company's  European  manufacturing  plants;  principal
geographic  markets  are  Europe,  Africa  and the  Far  East)  decreased  4% to
$27,612,000  from  $28,853,000  in the prior year.  During the fiscal year,  the
British Pound,  which is the currency in which the Company's  European sales are
recorded,  continued to strengthen  relative to mainland  Europe  currencies and
relative to the U.S.  Dollar.  Had mainland  European  currencies  and the Pound
Sterling  remained at the same  exchange  rates as last year,  European  revenue
would have increased by 3%.

         Sales in the our Asia  Pacific  Business  segment  which  includes  all
engineered  product  sales to the Far East and  sales  from the  Company's  High
Performance  Elastomer  Division  combined,  increased  7% to  $11,257,000  from
$10,513,000 in the prior year.

Gross Profit Margins

         Gross  profit  margins as a  percentage  of net sales for  fiscal  1998
increased to 34.3% from 34.1% in fiscal 1997.  Consolidated gross profit margins
benefited from improved  manufacturing  efficiencies and a continuing commitment
to effective  expense  management  offset by traditionally  lower  architectural
margin. Strong margins in the Americas Business Group helped to mitigate some of
the competitive pressures in Europe and the strong British Pound.

Selling, Administrative, Research and Development Expenses

         Selling,  general and administrative  expenses increased to $16,995,000
in fiscal 1998 from $15,539,000 in fiscal 1997.  Increased selling,  general and
administration  expenditures  resulted  from the combined  effects of the higher
cost structure in place to support the Company's  newly  emerging  operations in
China,  Brazil  and Japan  (Japan was  established  after the first half of last
year), as well as normal  increases in salaries and other costs.  The percentage
of selling,  general and administrative expenses to sales was 16%, down from 17%
in fiscal 1997.

         Research and  development  (R&D)  expenses  increased to  $3,005,000 in
fiscal 1998 from  $2,498,000 in fiscal 1997.  R&D  expenses,  as a percentage of
revenues, were approximately 2.9% of sales in fiscal 1998, up slightly from 2.8%
in fiscal 1997.

Interest (Income) Expense and Other (Income) Expense

         In fiscal 1998, net interest  income was $359,000  compared to $180,000
in fiscal 1997.  This increase  derived from the  generation of more cash during
the fiscal year 1998,  compared  with lower  average  cash  balances  during the
fiscal year 1997.

<PAGE>

         Other income,  net in fiscal 1997,  included $115,000 of income related
to a fire insurance claim and realized foreign exchange gains of $83,000.

Income Taxes

         In fiscal 1998, the Company  recorded  $5,265,000 of income tax expense
as compared to $4,194,000 in 1997. The Company's effective tax rate for 1998 was
32.5% as compared to 31.5% in the prior year.  The increase in the effective tax
rate  is  due  primarily  to  the  increased  proportion  of  income  from  U.S.
operations, as compared to income from operations in lower tax jurisdictions.

Profitability

       The Company  earned net income before taxes of  $16,197,000  for the year
ended  June 30,  1998,  as  compared  to  $13,300,000  in the prior  year.  This
represents  an  increase  in pre-tax  income of 22% over the prior year on a 15%
increase in revenues.  Net income increased 20% to $10,932,000,  for fiscal 1998
from  $9,106,000  in 1997.  Diluted  earnings per share  increased to $1.33 from
$1.10 in fiscal 1997.

                        Recent Accounting Pronouncements

         In June 1998, the FASB issued SFAS No. 133,  Accounting for Derivative
Instruments  and Hedging  Activities.  SFAS No. 133, as amended by SFAS No. 137,
which  must  be  adopted  by  the  Company  in  fiscal  year  2001,  provides  a
comprehensive  and consistent  standard for the  recognition  and measurement of
derivatives and hedging activities in which the Company engages.

         The Company has not  determined  the likely impact of adopting this new
standard on the Company's financial position or results of operations.

                                   Year 2000

          In 1993,  the  Company  began its program to prepare for the Year 2000
issues.  The Company  has made steady  progress  since then in  addressing  this
computer programming challenge.  The Company is continuing to analyze operations
to  determine  and  implement  the  procedures  necessary  to ensure  timely and
effective  Year  2000  compliance.  The  Company  has  generally  completed  the
identification  and  assessment  phase of its Year  2000  program.  The  Company
believes  that  the  vast  majority  of its  major  information  management  and
operations systems are currently Year 2000 compliant.

          The Company currently expects total out-of-pocket costs to become Year
2000  capable  to  approximate  $1,525,000,  of  which  the  Company  had  spent
$1,225,000  by June 30, 1999.  The Company  expects  that the  remainder of such
costs  will not have a material  effect on the  Company's  financial  condition,
operations or liquidity.

          The Company has also identified and been in communication with its key
third party  vendors and  suppliers,  both to determine  the extent to which the
Company might be  vulnerable to such parties'  failure to resolve their own Year
2000  issues,  and  to  plan  for  the  satisfactory   resolution  of  any  such
contingencies.  Where  practicable,  the  Company  will  assess  and  attempt to
mitigate its risks with respect to the failure of its  suppliers to be Year 2000
ready. The Company intends to complete the survey of its key customers by August
31, 1999, and  thereafter,  to determine and make plans regarding their state of
Year 2000 readiness.

          The Company has had  continuing  discussions  with its key vendors and
customers about  contingency plans for operational,  systems and  infrastructure
failures  resulting  from the Year  2000  problem.  One  contingency  plan,  for
example,  provides  for the Company to continue to serve its  customers  through
redundant manual order-entry and other systems.

<PAGE>

          While no assurance  can be given,  the Company does not  anticipate at
this time that the Year 2000 problem will have a material  adverse impact on the
Company's business, financial condition or results of operation. In the event of
a business interruption as a result of a Year 2000 problem at one facility,  the
Company plans to shift  necessary  production to the extent  possible to utilize
capacity at other sites. Similarly,  most of the Company's vendors and customers
have more than one production site from, or to, which orders can be fulfilled or
sent.  In the worst  case,  however,  there  could be a  temporary  shutdown  of
production  and an  associated  slippage or even loss of revenues (to the extent
not made up in subsequent time periods).

                                  Euro Currency

         The  Company  derived  approximately  32% of its revenue in fiscal 1999
from its  operations in Europe.  Historically  transactions  in Europe have been
denominated in a variety of currencies.

         On  January  1, 1999  eleven of the  fifteen  member  countries  of the
European  Union adopted the Euro as their common legal  currency.  Following the
introduction  of the Euro,  the local  currencies  are scheduled to remain legal
tender in the  participating  countries  until  January  1,  2002.  During  this
transition  period,  goods and services may be paid for by using either the Euro
or the participating country's local currency.  Thereafter, the local currencies
will be canceled and the Euro currency will be used for all  transactions by and
between the eleven participating members of the European Union.

         The Euro conversion raises strategic as well as operational issues. The
conversion  is  expected  to  result  in  a  number  of  changes  including  the
stimulation  of  cross-border   competition  by  creating   cross-border   price
transparency.   The  Company's  software   applications  have  been  updated  to
accommodate  the new Euro  currency.  No major  system-related  issues have been
encountered and none are anticipated.

         The Company is evaluating the  implications  of the Euro conversion and
is uncertain as to the potential impact on its operations.

                              Effects of Inflation

         Inflation rates over the past three years have remained  relatively low
and as a result have not had a material  impact on the financial  results of the
Company.

                         Liquidity and Capital Resources

         During  fiscal  1999 the  Company  generated  $9,230,000  of cash  from
operations  and an  additional  $1,835,000  from the exercise of stock  options.
During this same period,  the Company spent  $10,416,000 for capital  additions,
and expended  $3,875,000 for the  acquisition of treasury shares (see Note 10 of
Notes to  Consolidated  Financial  Statements).  Also during  fiscal  1999,  the
Company  completed three  acquisitions  requiring  $12,368,000 in cash payments.
Most of the funding  required  for these  acquisitions  was  obtained  from bank
borrowings.

         Working  capital  decreased  to  $27,555,000  at  June  30,  1999  from
$37,290,000 at June 30, 1998.  Current assets increased from $52,288,000 in 1998
to $55,016,000 at June 30, 1999. Current liabilities increased to $27,461,000 at
June 30, 1999 from $14,998,000 at June 30, 1998. The decrease in working capital
was primarily due to an increase in short-tem  borrowings of $11,028,000 and the
$2,331,000 accrual for special charge.

<PAGE>

         As of June 30,  1999,  the Company had an  aggregate  line of credit of
approximately   $20,000,000  under  its  domestic  and  international  borrowing
facility.  As of  June  30,  1999,  the  Company  had  approximately  $6,161,000
available under this facility.

         In June 1999, the Company entered into an agreement to acquire UroQuest
Medical Corporation  (UroQuest).  The agreement calls for the Company to acquire
all of the  outstanding  capital  stock of UroQuest  in a cash merger  valued at
$29,000,000,  subject to certain  adjustments.  The Company  anticipates closing
this  transaction by the end of calendar 1999,  subject to the  satisfaction  of
certain  contingencies.  In  connection  with this  transaction,  the Company is
negotiating a $60,000,000  borrowing  facility that would fund this  acquisition
and replace the existing credit facility.

         Management  believes that cash and cash equivalents  together with cash
expected to be generated from  operations  and the current credit  facilities or
the expected new credit facilities  mentioned above, will be adequate to finance
operations during fiscal 2000 and the foreseeable future.

                           Forward-Looking Statements

         Statements  in  this  report  that  are  not  historical  facts  may be
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform  Act of 1995.  Without  limiting  the  foregoing,  the  words
"believes," "anticipates," "plans," "expects," "assumes" and similar expressions
are intended to identify forward-looking statements.  Forward-looking statements
are inherently  uncertain and there are a number of important factors that could
cause actual results to differ  materially  from those expressed or suggested in
any forward-looking  statement made by the Company.  These factors include,  but
are not limited to:

     -        The  strength  of  industrial   economies  around  the  world,  in
              particular  the economies of the United States,  Germany,  England
              and Japan,  and the regional impact of weaknesses in the economies
              of those countries.

     -        The impact of changes in foreign  currency  exchange  rates on the
              level and  translation  of  sales,  and on gross  profit  margins,
              expenses, and net income.

     -        The impact of strategic  changes that may be required as a result
              of the adoption of the Euro currency.

     -        The ability of the Company to successfully integrate,  transition,
              and where appropriate, consolidate the acquisitions it has already
              completed .

     -        The  level and  timing of  architectural  product  sales  over the
              course of the fiscal  year,  considering  the  cyclical  nature of
              demand  for such  products  and the  expiration  of the  Company's
              contract  to supply  CHEMGLAS(R)  Roof  Membrane  to the Tent City
              project.

     -        The level and timing of U.S. Government contract awards (either as
              prime contractor or as a sub-contractor)  in particular for radome
              systems,   and  the  completion   (i.e.,   non-   cancellation  or
              curtailment) of such contracts after award.

     -        The  ability of the Company to  penetrate  the  consumer  bakeware
              liner market and of the Company's E2(TM) Division to penetrate the
              medical  electronics,  personal care, health care, food processing
              and specialty apparel markets.

<PAGE>

     -        The uninterrupted  availability,  at reasonable prices, of key raw
              materials  used  in  the  production  of  the  Company's  products
              including, without limitation, fluoropolymer resins and fiberglass
              yarns  in  various  fiber  diameters  (see  Part I,  Item  1,  Raw
              Materials).

     -        The  ability of the Company  and the  entities  with which it does
              business to address and resolve the Year 2000 issues.

     -        The availability  of  new  and  enhanced  credit  facilities,   at
              reasonable prices, to complete pending acquisitions announced.

Item 7A       Quantitative and Qualitative Disclosures about Market Risk.

         The Company maintains foreign operations in England,  Ireland, Germany,
Spain, China, Japan and Brazil and conducts business in many other countries. As
a result of these international activities, the Company is exposed to changes in
foreign currency exchange rates,  which could have some impact on the results of
operations. The Company manages exposure to changes in foreign currency exchange
rates through its normal operating and financing activities,  as well as through
the use of some financial instruments. Generally, the only financial instruments
the Company utilizes are forward exchange or option contracts.

         The purpose of the  Company's  hedging  activities  is to mitigate  the
impact of changes in foreign  currency  exchange rates.  The Company attempts to
hedge transaction  exposures through natural offsets.  To the extent this is not
practicable,  the Company  utilizes  foreign currency forward exchange or option
contracts.  The Company's forward exchange or option contracts  generally do not
exceed 12 months,  and are  designed to coincide  with  settlement  dates of the
related transactions.

         The  Company  does not  engage in  speculative  or  trading  derivative
activities.  At June 30, 1999 the Company's contractual amounts,  related to the
hedging of foreign currency denominated receivables were immaterial.  There were
no option contract activities in fiscal 1998.

         The   Company's   short-term   borrowings  at  June  30,  1999  totaled
$11,028,000 and  approximated  fair value as the interest rate is variable.  The
average  interest rate on these  borrowings for the year ended June 30, 1999 was
4.7%.

Item 8    Financial Statements and Supplementary Data

          The financial  statements and supplementary  data listed in Item 14 in
Part IV commencing on Page 26, are filed as part of this report.

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

         None.

                                    PART III

Item 10       Directors and Officers of the Registrant

         See the  information  under the  captions  "Nominees  for  Election  As
Directors" and  "Information As To Directors and Nominees For Director" on pages
3 and 4, of the Proxy  Statement for the 1999 Annual Meeting of  Shareholders of
the Company to be held on October 26, 1999,  which  information is  incorporated
herein by reference.  See also the  information  with respect to Officers of the
Company under Item 4a of Part I hereof.

<PAGE>

Item 11       Executive Compensation

         See  the  information  under  the  caption   "Executive   Compensation"
beginning  on page 7 of the  Proxy  Statement  for the 1999  Annual  Meeting  of
Shareholders  of the  Company,  which  information  is  incorporated  herein  by
reference.

Item 12       Security Ownership of Certain Beneficial Owners and Management

         See the information  under the captions  "Principal  Shareholders"  and
"Ownership  of Equity  Securities by  Management"  on pages 2 and 6 of the Proxy
Statement  for the 1999 Annual  Meeting of  Shareholders  of the Company,  which
information is incorporated herein by reference.

Item 13       Certain Relationships and Related Transactions

         See the information under the caption "Certain Transactions" on page 14
of the Proxy  Statement  for the 1999  Annual  Meeting  of  Shareholders  of the
Company, which information is incorporated herein by reference.

                                     PART IV

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

  (a) Listed below are all of the documents filed as part of the Report:   Page
                                                                           ----

      (1)     Exhibits                                                       24

      (2)     Financial Statements of Chemfab Corporation
              Report of Ernst & Young LLP Independent Auditors               28

              Consolidated Balance Sheets at June 30, 1999 and 1998       29-30

              For the three years ended June 30, 1999, 1998 and 1997:
                  Consolidated Statements of Income                          31
                  Consolidated Statements of Shareholders' Equity            32
                  Consolidated Statements of Cash Flows                      33

              Notes to Consolidated Financial Statements
                  June 30, 1999, 1998 and 1997                            34-51

              Quarterly Financial Data (unaudited)                           52

      (3)     Financial Statement Schedules of Chemfab Corporation

              II      - Valuation and Qualifying Accounts                   S-1

         All other schedules have been omitted since the required information is
not present or not present in amounts  sufficient  to require  submission of the
schedule,  or because the information  required is included in the  Consolidated
Financial Statements or the notes thereto.

<PAGE>

           (3)  Exhibits

          3(a)  Certificate  of  Incorporation  of the Company  filed as Exhibit
                3(a) to the  Company's  Annual  Report on Form 10-K for the year
                ended June 30, 1996 is incorporated herein by reference.

       3(a)(1)  Certificate of Amendment to Certificate of  Incorporation of the
                Company (effective November 6, 1991) filed as Exhibit 3(a)(1) to
                the Company's Annual Report on Form 10-K for the year ended June
                30, 1996 is incorporated herein by reference.

          3(b)  By-Laws of the Company  filed as Exhibit  3(b) to the  Company's
                Registration  Statement  on Form S-1  (File No.  2-85949)  filed
                November 10, 1983 is incorporated herein by reference.

          4(a)  Specimen Common Stock  Certificate  filed as Exhibit 4(a) to the
                Company's Annual Report on Form 10-K for the year ended June 30,
                1997 is incorporated herein by reference.

          4(b)  See Exhibit 3(a) above.

          4(c)  See Exhibit 3(b) above.

      10(a)(1)  The Company's  1986 Stock Option Plan filed as Exhibit  10(a)(1)
                to the  Company's  Annual Report on Form 10-K for the year ended
                June 30, 1996 is incorporated herein by reference.

      10(a)(2)  Forms of Stock Option  Agreements under the Company's 1986 Stock
                Option Plan and for Non-Plan  Options filed as Exhibit  10(a)(2)
                to the  Company's  Annual Report on Form 10-K for the year ended
                June 30, 1996 are incorporated herein by reference.

      10(a)(3)  Forms of Stock Option  Agreements under the Company's 1991 Stock
                Option Plan filed as Exhibit  10(a)(8) to the  Company's  Annual
                Report  on Form  10-K  for the  year  ended  June  30,  1995 are
                incorporated herein by reference.

      10(a)(4)  Form of  Amendment  to 1986  and/or  1991 Stock  Option Plan
                Agreements.

      10(a)(5)  Letter  Agreement  with Mr.  Moosa E. Moosa  dated June 25, 1996
                filed as Exhibit  10(a)(11) to the  Company's  Annual  Report on
                Form  10-K for the year  ended  June  30,  1997 is  incorporated
                herein by reference.

      10(a)(6)  Letter  Agreement  with Mr.  Thomas C.  Platt III dated June 26,
                1997  filed as  Exhibit  10(a)(13)  to the  Company's  Quarterly
                Report on Form 10-Q for the quarter ended  September 28, 1997 is
                incorporated herein by reference.

      10(a)(7)  Employment  Agreement  with Dr. John W. Verbicky dated August 5,
                1997  filed as  Exhibit  10(a)(14)  to the  Company's  Quarterly
                Report on Form 10-Q for the quarter ended  September 28, 1997 is
                incorporated herein by reference.

<PAGE>

      10(a)(8)  Forms of Stock  Option  Agreements  under  Plan,  for  Officers,
                Directors,  Director  Consultants,  and  Non-Officer  Employees,
                relative  to options  issued on or after the  effective  date of
                Amendment No. 2 to the Plan,  filed as Exhibit  10(a)(16) to the
                Company's  Quarterly  Report on Form 10-Q for the quarter  ended
                December 28, 1997 is incorporated here in by reference.

      10(a)(9)  Third Amended and Restated Chemfab Corporation 1991 Stock Option
                Plan. Filed as Exhibit  10(a)(15) to the Company's Annual Report
                on Form 10-K for the year  ended June 30,  1998 is  incorporated
                herein by reference.

      10(a)(10) Letter  Agreement with Dr. Dennis L. Filger,  dated February 15,
                1999.

      10(b)(1)  Share Purchase  Agreement,  dated January 18, 1991,  relating to
                Fluorocarbon  Fabrication Limited,  filed as Exhibit 10(b)(1) to
                the Company's Annual Report on Form 10-K for the year ended June
                30, 1997 is incorporated herein by reference.

      10(b)(2)  Supply  Agreement,  dated  January  18,  1991,  by  and  between
                Chemical Fabrics Europe and Aerovac Systems  (Keighley)  Limited
                filed as Exhibit 10(b)(6) to the Company's Annual Report on Form
                10-K for the year ended June 30, 1996 is incorporated  herein by
                reference.

      10(b)(3)  Purchase and Sale Agreement,  relating to Birdair, Inc. dated as
                of March  27,  1992  between  Taiyo  Kogyo  Corporation  and the
                Company,  filed as Exhibit  10(b)(3) to the Company's  Quarterly
                Report on Form 10-Q for the quarter ended  September 28, 1997 is
                incorporated herein by reference.

      10(b)(4)  Asset Purchase  Agreement between Chemfab  Corporation,  Chemfab
                U.K. Ltd., Courtaulds plc and Courtaulds Aerospace Limited dated
                February  13, 1995 filed as Exhibit  10(b)(8)  to the  Company's
                Form 8-K  dated  February  17,  1995 is  incorporated  herein by
                reference.

      10(b)(5)  $20,000,000 Credit Agreement by and between Chemfab  Corporation
                as borrower and The First  National  Bank of Boston and The Bank
                of  Ireland as lenders  filed as Exhibit  6(a) to the  Company's
                Quarterly  Report on Form 10-Q for the quarter  ending  December
                29, 1996 is incorporated herein by reference.

      10(b)(6)  Consulting  Agreement  dated  October 30, 1997  between  Chemfab
                Corporation and Chemfab Director,  Dr. Nicholas Pappas, filed as
                Exhibit 10(b)(9) to the Company's  Quarterly Report on Form 10-Q
                for the quarter ended December 28, 1997 is  incorporated  herein
                by reference.

      10(b)(7)  Firm Fixed Price Memorandum of Agreement dated as of December 1,
                1997  between  Chemfab  Corporation  and  Virginia   Polytechnic
                Institute and State  University  and Virginia Tech  Intellectual
                Properties,   filed  as  Exhibit   10(b)(10)  to  the  Company's
                Quarterly Report on Form 10-Q for the quarter ended December 28,
                1997 is incorporated herein by reference.

      10(b)(8)  Agreement  and Plan of  Merger  dated  June 3, 1999 by and among
                Chemfab Corporation,  Urok Acquisition Corporation, and UroQuest
                Medical  Corporation,  filed  as  Exhibit  2.1 to the  Company's
                Current  Report on Form 8-K dated June 14, 1999 is  incorporated
                herein by reference

      10(b)(9)  Asset  Purchase   Agreement  between  Chemfab   Corporation  and
                Vdb/hi-tex  Technische Gewebe Gmbh dated July 17, 1999, filed as
                Exhibit 10(b)(10) to the Company's Quarterly Report on Form 10-Q
                for the quarter ending September 27, 1998 is incorporated herein
                by reference.

     21         List of Subsidiaries of Chemfab Corporation.

     23         Consent of Ernst & Young LLP, Independent Auditors.

<PAGE>

     24         Power of  Attorney  authorizing  certain  persons  to sign  this
                Annual  Report on Form 10-K on behalf of certain  directors  and
                officers of this Company.

     27         Financial Data Schedule.

     (b)        Reports on Form 8-K

                The Company filed a Current Report on Form 8-K on June 14, 1999.

<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934,  the  Registrant  has duly caused this Annual Report to be
signed on behalf of the Registrant and in the capacities indicated.

                               CHEMFAB CORPORATION
                                  (Registrant)

                               By
                               John W. Verbicky
                               President and Chief Executive Officer

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report  has been  signed  below on the 16th day of  September  1999 by the
following persons on behalf of the Registrant and in the capacities indicated.

         By                          *
         John W. Verbicky, President, Chief Executive Officer
         (principal executive officer) and Director

         By                         *
         Moosa E. Moosa, Vice President Finance, Treasurer and
         Chief Financial Officer (principal financial officer)

         By                         *
         Hilary A. Arwine, Corporate Controller (principal
         accounting officer)

         By                         *
         Paul M. Cook, Director

         By                         *
         Warren C. Cook, Director

         By                         *
         Robert E. McGill, III, Director

         By                         *
         James E. McGrath, Director

         By                         *
         Duane C. Montopoli, Director

         By                         *
         Nicholas Pappas, Director

                        *By   /S/ John W. Verbicky
                        John W. Verbicky, Attorney-In-Fact*

*By authority of power of attorney filed herewith.

<PAGE>
Chemfab Corporation

                Report of Ernst & Young LLP Independent Auditors


The Board of Directors and Shareholders
Chemfab Corporation


We  have  audited  the  accompanying  consolidated  balance  sheets  of  Chemfab
Corporation  as of  June  30,  1999  and  1998,  and  the  related  consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended June 30, 1999.  Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial statements
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 consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Chemfab
Corporation  at June 30,  1999 and 1998,  and the  consolidated  results  of its
operations  and its cash flows for each of the three  years in the period  ended
June 30, 1999, in conformity  with  generally  accepted  accounting  principles.
Also, in our opinion, the related financial statement schedule,  when considered
in relation to the basic financial statements taken as a whole,  presents fairly
in all material respects the information set forth therein.




Boston, Massachusetts
July 23, 1999

<PAGE>

Consolidated  Balance Sheets                                 Chemfab Corporation
June 30, 1999 and 1998
(in thousands except par value amounts)

Assets ..............................................          1999         1998
================================================================================
Current assets
Cash and cash equivalents ...........................      $  4,783      $11,099
Receivables:
     Trade, net of allowance for doubtful
     accounts of  $462 ($397 in 1998) ...............        25,020       20,946
     Other ..........................................            92           17
Inventories .........................................        19,649       17,403
Costs and estimated earnings in excess
     of billings on uncompleted contracts ...........           958        1,373
Prepaid expenses and other current assets ...........         3,266          720
Deferred tax assets .................................         1,248          730
                                                           --------     --------
     Total current assets ...........................        55,016       52,288
                                                             ------       ------

Property, plant and equipment, at cost
Land ................................................           634          634
Buildings ...........................................        12,858       11,802
Machinery and equipment .............................        45,557       37,455
Leasehold improvements ..............................           369          369
                                                         ----------    ---------
                                                             59,418       50,260
Less: accumulated depreciation and
     amortization ...................................        29,466       26,043
                                                             ------       ------
     Property, plant and equipment, net .............        29,952       24,217
                                                             ------       ------

Goodwill, net of accumulated amortization
of $5,033 ($3,854 in 1998) ..........................        19,297        9,926
Other assets ........................................         2,103        2,673
                                                         ----------        -----
         Total assets ...............................      $106,368      $89,104
                                                            =======      =======


See accompanying notes to Consolidated Financial Statements.

<PAGE>

Consolidated Balance Sheets                                  Chemfab Corporation
June 30, 1999 and 1998


                                                                1999       1998
============================================================= ==================
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable ........................................  $   6,793   $  6,863
Accrued liabilities .....................................      8,181      5,444
Accrued income taxes ....................................      1,209      2,540
Billings in excess of costs and estimated earnings
    On uncompleted contracts ............................        250        151
Short-term borrowings ...................................     11,028       --
                                                              ------  ---------
    Total current liabilities ...........................     27,461     14,998
                                                              ------     ------

Deferred tax liabilities ................................      2,051      1,752
Shareholders' equity
Preferred stock, par value $.50: authorized-
    1,000; none issued ..................................       --         --
Common stock, par value $.10: authorized-
    15,000; issued - 8,828 in 1999
    and 8,689 in 1998 ...................................        883        869
Additional paid-in capital ..............................     26,829     25,008
Retained earnings .......................................     69,972     61,036
Treasury stock, at cost, (1,091 shares in
    1999 and 877 in 1998) ...............................    (19,012)   (15,137)
Accumulated other comprehensive income ..................     (1,816)       578
                                                             ------------------
    Total shareholders' equity ..........................     76,856     72,354
                                                            --------  ---------

          Total liabilities and shareholders' equity ....  $ 106,368   $ 89,104
                                                             =======   ========
<PAGE>

Consolidated Statements of Income                            Chemfab Corporation
For the years ended June 30, 1999, 1998 and 1997
(in thousands, except per share data)



                                                    1999        1998       1997
================================================================================
Net sales ...................................  $ 126,480   $ 104,460   $ 90,783
Cost of sales ...............................     84,708      68,580     59,839
                                               ---------  ----------   --------
    Gross profit ............................     41,772      35,880     30,944
                                                --------  ----------   --------

Selling, general and administrative
    expenses ................................     21,295      16,995     15,539
Research and development expenses ...........      3,568       3,005      2,498
Special charge ..............................      3,986        --         --
Interest expense ............................        529           4         80
Interest income .............................       (262)       (363)      (260)
Other (income) expense ......................        (55)         42       (213)
                                            ------------------------ ----------
    Income before income taxes ..............     12,711      16,197     13,300
Provision for income taxes ..................      3,775       5,265      4,194
                                              ----------  ----------   --------
    Net income ..............................  $   8,936   $  10,932   $  9,106
                                               =========    ========    =======

Net income per share
       Basic ................................  $    1.14   $    1.38   $   1.13
       Diluted ..............................  $    1.11   $    1.33   $   1.10

Weighted average common shares outstanding
       Basic ................................      7,806       7,898      8,041
       Diluted ..............................      8,038       8,213      8,278




See accompanying notes to Consolidated Financial Statements.

<PAGE>

Consolidated  Statements of  Shareholders'  Equity          Chemfab  Corporation
For the years ended June 30, 1999, 1998 and 1997
(in thousands)

<TABLE>
<CAPTION>
                                 Common     Stock
                                                                                    Accumulated
                                 Number            Additional                          Other
                                   of                Paid-In   Retained   Treasury  Comprehensive          Comprehensive
                                 Shares    Amount    Capital   Earnings     Stock      Income      Total       Income
=========================================================================================================================
<S>                              <C>     <C>        <C>        <C>      <C>          <C>         <C>         <C>
Balance at June 30, 1996 ...     8,086   $    809   $ 18,314   $40,998  $   (943)    $  (673)    $58,505
Net income .................                                     9,106                             9,106     $   9,106
Foreign currency
    translation adjustment .                                                           1,360       1,360         1,360
Options exercised ..........       435         43      4,435                                       4,478
Purchase of shares
    for treasury ...........                                              (7,064)                 (7,064)
Comprehensive income for ...                                                                                  $ 10,466
year ended June 30, 1997
=========================================================================================================================
Balance at June 30, 1997 ...     8,521        852     22,749    50,104    (8,007)        687      66,385
Net income .................                                    10,932                            10,932      $ 10,932
Foreign currency
    translation adjustment .                                                            (109)       (109)         (109)
Options exercised ..........       168         17      2,259                                       2,276
Purchase of shares
    for treasury ...........                                              (7,130)                 (7,130)
Comprehensive income for ...                                                                                  $ 10,823
year ended June 30, 1998
=========================================================================================================================
Balance at June 30, 1998 ...     8,689        869     25,008    61,036   (15,137)        578      72,354
Net income .................                                     8,936                             8,936      $  8,936
Foreign currency
    translation adjustment .                                                          (2,394)     (2,394)       (2,394)
Options exercised ..........       139         14      1,821                                       1,835
Purchase of shares
    for treasury ...........                                              (3,875)                 (3,875)
Comprehensive income for
year ended June 30, 1999 ...                                                                                  $   6,542
=========================================================================================================================
Balance at June 30, 1999 ...     8,828   $    883   $ 26,829   $69,972  $(19,012)    $(1,816)    $76,856
=========================================================================================================================
</TABLE>

See accompanying notes to Consolidated Financial Statements.

<PAGE>

<TABLE>

Consolidated  Statements of Cash Flows                                                 Chemfab  Corporation
Years ended June 30, 1999, 1998 and 1997 (in thousands)
 <CAPTION>
                                                                         1999          1998            1997
=============================================================================================================
Cash flows from operating activities
<S>                                                                   <C>             <C>         <C>
Net income..........................................................  $ 8,936         $ 10,932    $  9,106
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation........................................................    3,777            3,390       3,194
Amortization........................................................    1,843            1,393       1,317
Special charge..........................................................3,986              ---         ---
Change in working capital:
    Receivables.....................................................   (3,335)          (3,414)        950
    Inventories.....................................................   (2,433)          (1,117)     (2,405)
    Costs and estimated earnings in excess of billings on
       uncompleted contracts, net...................................      514              417      (1,066)
    Prepaid expenses and other current assets.......................     (901)             422          96
    Other assets....................................................       73             (533)       (489)
    Accounts payable and accrued liabilities........................   (1,769)           2,146         406
    Income taxes....................................................   (1,242)             424         554
    Deferred tax assets and liabilities.............................     (219)               2         291
                                                                    ---------        ---------    --------
         Total adjustments..........................................      294            3,130       2,848
                                                                    ----------       ---------    --------
              Net cash provided by operating activities.............    9,230           14,062      11,954
                                                                     --------         --------    --------

Cash flows from investing activities
Acquisitions........................................................  (12,368)             ---         ---
Prepaid acquisition.................................................   (1,802)             ---         ---
Capital expenditures (net)..........................................  (10,416)          (6,137)     (3,860)
                                                                     ---------       ----------   --------

              Net cash used in investing activities.................  (24,586)          (6,137)     (3,860)
                                                                      --------       ---------    --------

Cash flows from financing activities
Proceeds from short-term borrowings (net)...........................   11,276              ---         ---
Repayment of long-term debt.........................................      ---              ---      (2,447)
Proceeds from exercise of stock options.............................    1,835            2,276       4,478
Purchase of treasury shares.........................................   (3,875)          (7,130)     (7,064)
                                                                     ---------       ---------    --------
              Net cash provided by (used in) financing activities...    9,236           (4,854)     (5,033)
                                                                     --------        ---------    --------
Effect of exchange rate changes on cash.............................     (196)             (27)        (23)
                                                                     ---------       ---------    --------
Net (decrease) increase in cash and cash equivalents................   (6,316)           3,044       3,038
Cash and cash equivalents at beginning of year......................   11,099            8,055       5,017
                                                                      -------        ---------    --------
Cash and cash equivalents at end of year............................  $ 4,783         $ 11,099     $ 8,055
                                                                      =======         ========     =======
Interest paid.......................................................  $   504         $      4     $   106
Income taxes paid...................................................  $ 4,837         $  4,413     $ 2,270
</TABLE>

See accompanying notes to Consolidated Financial Statements.

<PAGE>

Notes to Consolidated Financial Statements                   Chemfab Corporation

Note 1 - Description of Business

         The  Company  is  an   international   manufacturer   and  marketer  of
polymer-based  engineered  products  and  material  systems  for  use  in  harsh
conditions such as high temperature and/or corrosive chemical environments.  The
majority  of the  Company's  products,  which  are also  characterized  by their
retention  of   flexibility-in-use   and  by  their  excellent  surface  release
properties,  are made by embedding  interlaced glass fiber  reinforcement into a
fluoropolymer  resin  matrix.  The Company  also  produces  and sells  specialty
fluoropolymer films, silicone elastomers and silicone-based products.  Worldwide
end-use applications for the Company's products are in architectural, aerospace,
communications,   electrical,   environmental,   food   processing,   packaging,
laboratory test,  protective  systems,  consumer  bakeware  applications,  other
industrial markets, medical electronics, personal care, healthcare and specialty
apparel markets.

Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation:  The consolidated  financial statements include the
accounts of the  Company  and its wholly  owned  subsidiaries.  All  significant
intercompany transactions and amounts have been eliminated in consolidation.

Use of Estimates:  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts  reported in the consolidated  financial
statements and accompanying  notes. Such estimates include,  but are not limited
to,  allowances for doubtful  accounts,  provisions for  slow-moving or obsolete
inventory, provisions for environmental matters, provisions for consolidation of
facilities and severance amounts, contract costs and various other accruals.
Actual results could differ from those estimates.

Cash and Cash  Equivalents:  Cash and cash equivalents  consist of cash on hand,
cash deposited in highly liquid money market  accounts,  and investments in high
grade  commercial  paper or treasury notes having  maturities of three months or
less  when  purchased.   There  were  no  commercial  paper  or  treasury  notes
outstanding at June 30, 1999 and 1998.

Revenue Recognition: The Company recognizes revenues on most long-term contracts
under the  percentage-of-completion  method. Under the  percentage-of-completion
method,  profit on contracts is recognized  based on the ratio of costs incurred
to date to estimated final costs. Revisions in costs and estimated final profits
are  reflected  in the  accounting  period in which the facts that  require  the
revisions  become known.  At the time a loss on a contract  becomes  known,  the
entire amount of the estimated  loss is accrued.  Revenues on certain  long-term
contracts  are  recognized  on a units of  delivery  basis.  In all other  cases
revenue is recognized upon shipment of products.

Inventories:  Inventories  are  valued at the lower of cost or  market.  Cost is
determined on a first-in, first-out basis.

Goodwill:  Costs in  excess  of net  assets  acquired  is  amortized  using  the
straight-line method over the estimated useful lives, generally fifteen years.

Property, Plant and Equipment:  Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.
<PAGE>

Long-lived  Assets:  The  Company  will  evaluate  when  required,  the  cost of
long-lived  assets  or other  assets  that may be  impaired.  If  indicators  of
impairment  are present in those assets,  and future cash flows are not expected
to be sufficient to recover the assets carrying amount, an impairment loss would
be charged to expense  in the period  identified.  No event has been  identified
that  would   indicate  an  impairment  of  the  value  of  long-lived   assets,
identifiable intangibles, and goodwill recorded in the accompanying consolidated
financial statements.

Comprehensive  Income:  Effective July 1, 1998, the Company adoped SFAS No. 130,
Reporting  Comprehensive  Income,  which establishes new rules for the reporting
and display of comprehensive income and its components. The adoption of SFAS No.
130 has no impact on the Company's net income or shareholders'  equity. SFAS No.
130 requires the Company's change in foreign currency translation adjustments to
be included in other  comprehensive  income. The accumulated other comprehensive
income  balance  as of June  30,  1999,  1998  and 1997  comprised  of  currency
translation   adjustments.   Prior  years'   financial   statements   have  been
reclassified to conform to these requirements.

Segment  Reporting:  Effective July 1, 1998,  the Company  adopted SFAS No. 131,
Disclosures  about Segments of an Enterprise and Related  Information.  SFAS No.
131 established  standards for the way that businesses report  information about
operating  segments  in annual  financial  statements  and  requires  that those
enterprises  report selected  information  about  operating  segments in interim
financial  reports.   SFAS  No.  131  also  establishes  standards  for  related
disclosures  about products and services,  geographic areas and major customers.
The  adoption  of SFAS  No.  131 did not  affect  the  operations  or  financial
position, but did affect the disclosure of segment information.  (See Note 14 of
Notes to Consolidated Financial Statements.)

Retirement Benefit Plans:  Effective June 30, 1999, the Company adopted SFAS No.
132, Employers'  Disclosures about Pensions and Other Post-Retirement  Benefits.
SFAS No. 132 did not change the  measurement or  recognition of such plans,  but
revises disclosure about pensions and other post-retirement benefit plans.

Income  Taxes:  The Company uses the liability  method of accounting  for income
taxes.  Under this method,  deferred tax assets and  liabilities  are determined
based on differences  between financial reporting values and tax bases of assets
and  liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse.

Transactions  in Foreign  Currency:  The Company  enters into  forward  exchange
contracts to reduce the impact of foreign currency fluctuations on certain sales
and  material  purchase  transactions.  The  gains  or  losses  on  these  hedge
contracts,  as measured by quoted market  prices,  are recognized in income when
the underlying purchase or sale transaction is recorded.  The carrying values of
these contracts at June 30, 1999 and 1998, which  approximated  fair value based
on exchange  rates at June 30, 1999 and 1998,  were  approximately  $240,000 and
$358,000,  respectively.  In addition, the Company recognizes in current income,
gains or losses from the remeasurement of transactions denominated in currencies
other than the Company's functional currencies.  Translation adjustments arising
from  the   consolidation  of  foreign   subsidiaries   have  been  included  in
comprehensive  income.  The  functional  currencies  of  the  Company's  foreign
subsidiaries are generally the local currency of the subsidiary.

Earnings Per Share:  Basic earnings per share is based upon the weighted average
number of common  shares  outstanding  during the period.  Diluted  earnings per
share reflects the effect of dilutive securities.

Stock-based Compensation:.  The Company uses the intrinsic value-based method of
accounting for employee stock-based  compensation plans as prescribed by APB No.
25 and has  adopted  the pro  forma  disclosure  provisions  of  SFAS  No.  123,
Accounting for Stock-Based  Compensation.  Accordingly,  no compensation expense
has been  recognized  for its stock option  awards as they are granted at prices
not less than fair market value of the stock on date of grant.

<PAGE>

Accounting  Pronouncements:  In  June  1998,  the  FASB  issued  SFAS  No.  133,
Accounting for Derivative  Instruments and Hedging Activities.  SFAS No. 133, as
amended by SFAS No.  137,  which must be adopted by the  Company in fiscal  year
2001,  provides a comprehensive and consistent  standard for the recognition and
measurement of derivatives and hedging activities in which the Company engages.

         The Company has not yet  determined  the  potential  impact of adopting
this new standard on the Company's financial position or results of operations.

Note 3 - Acquisitions

         During fiscal 1999, the Company  completed the purchase of the business
assets  and  assumed  certain  liabilities   (principally  inventory,   accounts
receivable,  equipment,  certain liabilities and accounts payable,  accruals and
intangibles) of Vdb/hi-tex  Technische  Gewebe Gmbh (Vdb),  Breitenborn Gmbh and
Synthetica W. Muller Gmbh & Co. for approximately $12,368,000 in cash, including
associated  transaction  costs.  These acquisitions were accounted for using the
purchase  method of  accounting  and include the  results of  operations  of the
acquired  entities from the respective  acquisition  dates to June 30, 1999. The
allocation of the purchase  price and the final payment for  Synthetica  has not
yet  been  completed.  Prior to the  acquisitions,  each of the  entities'  main
business was in the  fabrication  and  distribution  of PTFE composite  products
principally  purchased from Chemfab.  These businesses are expected to continue.
The acquired  operations'  primary  markets are in Germany and Eastern  European
countries.  These  acquisitions  resulted  in the  recognition  of  goodwill  of
approximately  $11,493,000,  which is being amortized on a  straight-line  basis
over the estimated useful life of 15 years.

         The following are the Company's  unaudited  proforma results for fiscal
1999 and 1998, assuming the acquisitions occurred at the beginning of the fiscal
year.  These pro forma results have been prepared for comparative  purposes only
and do not purport to be indicative of the results of operations  which actually
would have  resulted had the  acquisitions  occurred on the date  indicated,  or
which may result in the future.

                                                  1999               1998
                      (in thousands, except per share data)

Net sales...........................      $    133,287         $  117,231

Net income..........................      $      9,170         $   11,450

Diluted income per share............      $       1.14         $     1.39

         In January  1999,  the Company  entered  into an  agreement  to acquire
control of a PTFE  coating  and  fabrication  operation  in South  America.  The
agreement contains certain  contingencies  which are expected to be fulfilled in
calendar  year 1999,  at which time the Company will  complete the  acquisition.
Included  in prepaid  expenses  and other  current  assets at June 30, 1999 is a
$688,000  prepayment and cash of $1,114,000 in escrow pending  completion of the
transaction.

          In June  1999,  the  Company  entered  into an  agreement  to  acquire
UroQuest  Medical  Corporation  (UroQuest).  The agreement  anticipates that the
Company will acquire all of the outstanding  capital stock of UroQuest in a cash
merger valued at $29,000,000, subject to certain adjustments.  UroQuest designs,
manufactures and markets proprietary  disposable silicone elastomer products and
silicone  elastomer  components  used in  products  serving the  healthcare  and
personal care industry,  and is a market leader in the design and manufacture of
silicone elastomer products for airway management applications.

<PAGE>

          In July 1999, the Company  completed the purchase of the capital stock
of Holding Christian Cases S.A. (HCC), for approximately $1,500,000 in net cash,
including associated transaction costs. The purchase agreement also requires the
payment  of  approximately  $100,000  in each of the  following  two years for a
non-compete  agreement.  The  acquisition  was  accounted for using the purchase
method of accounting. Prior to the acquisition, the main business of HCC and its
subsidiaries was in the fabrication and distribution of PTFE composite  products
in France  principally  purchased  from  Chemfab.  The  business  is expected to
continue. The allocation of the purchase price has not yet been completed.

Note 4 - Inventories

         Inventories at June 30 consisted of the following:
                                                      1999                1998
                                                           (in thousands)

         Finished goods...................        $  7,541            $  5,674

         Work in process..................           6,160               7,396

         Raw materials....................           5,948               4,333
                                                  --------            --------

                                                   $19,649             $17,403
                                                    ======              ======


Note 5 - Accrued Liabilities

         Accrued liabilities at June 30, consisted of the following:

                                                      1999                1998
                                                           (in thousands)

         Accrued payroll and related expenses...    $1,675              $1,717

         Accrued performance incentive .........       100               1,300

         Accrued restructuring charge...........     2,331                ---
         Other accrued expenses.................     4,075               2,427
                                                   -------            --------
                                                    $8,181              $5,444
                                                    ======              ======

Note 6 - Debt

         In October 1996, the Company entered into a three year revolving credit
agreement jointly with two commercial banks, one based in the U.S. and the other
in  Ireland.  Under the terms of the  agreement,  the  Company  has  available a
$20,000,000  unsecured  credit facility until October 4, 1999.  Thereafter,  any
balance  outstanding  will convert  into a four-year  term loan with a five-year
amortization  schedule  and a lump sum payment  due  October 4, 2003.  Borrowing
under this  facility is at the higher of the bank's base rate (7.75% at June 30,
1999),  or 0.5% over the federal funds rate (5.12% at June 30, 1999), as defined
in the agreement.  The Company has also secured Eurocurrency pricing options for
certain  debt as defined in the  agreement.  Borrowings  under this  option bear
interest  at 1% over the Libor rate (2.63% at June 30,  1999).  At June 30, 1999
the amount outstanding under this facility was $11,028,000. The amount available
on the line of credit was  $6,161,000 at June 30, 1999 and  $20,000,000  at June
30, 1998.  The Company is  obligated  to pay a  commitment  fee of 0.125% of the
unused portion of the line.

         The revolving credit agreement contains financial  covenants with which
the Company must comply including  maintenance of minimum levels of debt service
coverage and tangible net worth.  These covenants also limit the net losses that
the Company may incur over any six-month period.

         In connection with the planned acquisition of UroQuest,  the Company is
currently  negotiating  to replace its existing  credit  facility to provide for
additional borrowing capacity.

<PAGE>

Note 7 - Financial Instruments and Risk Management

         At June  30,  1999  and  1998,  the  carrying  value  of the  Company's
financial  instruments,  including cash and cash  equivalents,  foreign currency
contracts and short-term borrowings  approximates their fair values based on the
short-term maturities of these instruments and contracts.

         Financial   instruments  which  potentially   subject  the  Company  to
concentrations of credit risk consist primarily of cash and cash equivalents and
trade  receivables.  The Company  has cash  investment  policies  that limit the
amount of credit exposure to any one financial institution and require placement
of investments in financial institutions evaluated as highly creditworthy.

         At June 30, 1999 balances due from two customers comprise approximately
27% of total trade accounts receivable.  Other concentrations of credit risk for
trade  accounts  receivable are limited due to the large number of customers and
their dispersion across many geographic  locations.  The Company's customer base
includes a large number of customers dispersed across a wide geographic location
including Europe and Asia.

         It was not  practicable  to  estimate  the fair value of the  Company's
investment in preferred stock of Birdair, Inc. (a customer for its architectural
products)  because of the lack of a quoted  market  price and the  inability  to
estimate fair value without  incurring  excessive costs.  The $533,000  carrying
amount at June 30, 1999  represents the original cost of the  investment,  which
management believes is not impaired. Dividends received for the years ended June
30, 1999, 1998 and 1997 were $43,000, $45,000 and $45,000, respectively.

<PAGE>

Note 8 - Income Taxes

       The components of the income tax provision were as follows:

                                                           Years ended June 30

                                                         1999      1998     1997
                                                         ----      ----     ----
                                                              (in thousands)
       Current:
         Federal ...................................  $ 2,743   $ 3,296  $ 1,972
         State .....................................      427       827      472
         Foreign ...................................      824     1,140    1,459
                                                      -------   -------  -------
                                                        3,994     5,263    3,903
                                                      -------   -------  -------


       Deferred:
         Federal ...................................      134        51      112
         State .....................................       23        13       29
         Foreign ...................................     (376)      (62)     150
                                                      --------  -------  -------

                                                         (219)        2      291
                                                      --------  -------  -------
       Total income taxes ..........................  $ 3,775  $ 5,265   $ 4,194
                                                       ======   =======  =======

       The components of income before income taxes were as follows:

                                                           Years ended June 30

                                                        1999      1998      1997
                                                        ----      ----      ----
                                                             (in thousands)

        United States ..............................  $ 9,294  $10,529    $7,046
        Foreign ....................................    3,417    5,668     6,254
                                                      ------   -------   -------

        Total ......................................  $12,711  $16,197   $13,300
                                                      =======  =======   =======

<PAGE>

The U.S.  statutory  federal  income  tax rate is  reconciled  to the  Company's
consolidated effective tax rate as follows:



                                                          Years ended June 30

                                                     1999       1998       1997
                                                     ----       ----       ----

Statutory tax rate .................                 35.0%      35.0%      35.0%

State income taxes, net of federal
  income tax benefit ...............                  2.3        3.5        2.8

Earnings of foreign subsidiaries taxed at rates less than the U.S.
  statutory rate ...................                 (7.6)      (6.5)      (6.3)

FSC benefit ........................                 (2.6)       (.4)       (.5)
Non-deductible goodwill amortization
  relating to foreign acquisitions .                  2.0        1.5        1.7

Other, net .........................                  0.6       (0.6)      (1.2)
                                                    -----      ------     ------


Effective tax rate .................                 29.7%      32.5%      31.5%
                                                    =====      =====      =====

Significant components of the Company's deferred tax liabilities and assets were
as follows:

                                                 Domestic     Foreign
              June 30, 1999                     Operations  Operations    Total
-----------------------------------             ----------  ----------   -------
                                                          (in thousands)
Deferred Tax Liabilities:



Plant and equipment ................              $ 1,337    $   267    $ 1,604
Intangibles ........................                   --        415        415
Other ..............................                  (34)        66         32
                                                    -----     ------      -----

Total deferred tax liabilities .....                1,303        748      2,051
                                                    -----     ------      -----

Deferred Tax Assets:

Inventories ........................                 (542)        --       (542)
Reserves ...........................                 (242)      (348)      (590)
Other ..............................                 (116)        --       (116)
                                                    -----    -------     ------

Total deferred tax assets ..........                 (900)      (348)    (1,248)
                                                    -----      -----    -------

Net deferred tax liabilities .......              $   403    $   400    $   803
                                                  =======     ======     ======

<PAGE>

                                       Domestic         Foreign
              June 30, 1998           Operations      Operations         Total
----------------------------------    ----------      ----------        --------
                                 (in thousands)
Deferred Tax Liabilities:

Plant and equipment .................   $1,035           $  279          $1,314
Intangibles..........................      ---              427             427
Other................................      (67)              78              11
                                        ------          -------          ------

Total deferred tax liabilities.......      968              784           1,752
                                       -------           ------           -----

Deferred Tax Assets:

Inventories..........................     (530)             ---            (530)
Reserves.............................      (86)             ---             (86)
Other................................     (116)               2            (114)
                                         ------          -------          ------

Total deferred tax assets............     (732)               2            (730)
                                        -------          -------         -------

Net deferred tax liabilities.........  $   236           $  786          $1,022
                                        =======           ======          ======

         The  Company  does  not  provide  for  federal   income  taxes  on  the
undistributed  earnings of its foreign subsidiaries.  These earnings,  which are
deemed to be permanently  reinvested,  aggregated  approximately  $29,401,000 at
June 30, 1999. Chemfab Europe,  the Company's Irish subsidiary,  was exempt from
Irish  taxes on its income  from  manufacturing  operations  until  April  1990.
Manufacturing  profits  earned each year from April 1990 through  April 2010 are
subject to a 10% tax rate.

Note 9 - Earnings Per Share

         The  following  table sets forth the  computation  of basic and diluted
earnings per share:

                               Years ended June 30

                                           1999           1998           1997
                      (in thousands, except per share data)

Numerator:
Net income for both basic and
         diluted earnings per share......$ 8,936        $ 10,932       $  9,106
                                         =======        ========       ========

<PAGE>


                               Years ended June 30
                                                  -------------------
                                           1999           1998           1997
                                           ----           ----           ----
Denominator:                              (in thousands, except per share data)
Denominator for basic earnings per
         share - weighted average
         outstanding shares............... 7,806         7,898          8,041

Effect of dilutive securities:
         Stock options to employees and
         directors .......................   232           315            237
                                          ------        ------          -----


Denominator for diluted earnings per
         share ........................... 8,038         8,213          8,278
                                           =====         =====          =====

Net income per share:
         Basic ........................... $1.14        $ 1.38         $ 1.13
                                           =====        ======         ======
         Diluted.......................... $1.11        $ 1.33         $ 1.10
                                           =====        ======         ======

         At June 30, 1999, options to purchase 522,475 shares of common stock at
prices  ranging  from  $19.31  to  $24.25  per  share  were  anti-dilutive  and,
therefore,  were excluded  from the  computation  of fully diluted  earnings per
share.  At June 30,  1998 and 1997,  no  outstanding  options  having a material
anti-dilutive  effect on the  calculation  of  diluted  earnings  per share were
excluded from the calculation.

Note 10 - Common Stock and Stock Options

         During fiscal 1992, the Board of Directors adopted and the shareholders
ratified  the 1991 Stock  Option Plan which  reserved  750,000  shares of common
stock for issuance upon exercise of option grants to key  employees,  directors,
and consultants.  The shareholders  ratified the adoption of the increase in the
maximum  number of shares  available for option under the 1991 plan to 1,050,000
in fiscal 1993,  to 1,500,000 in fiscal 1996 and up to 1,950,000 in fiscal 1998.
Under this plan,  options vest at the  discretion  of the Board of Directors but
generally  at the rate of 25% per year on the  anniversary  of the date of grant
except for  non-employee  directors  whose  options  vest at the rate of 25% per
quarter.  At June 30, 1999, there were 1,273,294 options outstanding and 186,706
shares available for grant under the 1991 Stock Option Plan.

         During fiscal 1992,  the Company also adopted the "1991  Employee Stock
Option Plan" which  reserved  75,000  shares of common  stock for issuance  upon
exercise of grants to specific eligible employees with a minimum of two years of
service on the date of the grant.  At June 30, 1999,  there were 43,050  options
outstanding  and 15,750 shares  available for grant under this plan, held by 287
employees.

         During fiscal 1987,  the Company's  Board of Directors  adopted and the
shareholders  subsequently  ratified a non-qualified stock option plan (the 1986
Plan). The 1986 Plan at the time of adoption reserved 1,125,000 shares of common
stock for issuance  upon exercise of option grants under this plan to employees,
directors and  consultants.  During fiscal 1990, the  shareholders  ratified the
adoption of an increase in the  maximum  number of shares  available  for option
under the 1986 Plan to 1,500,000. The options under the 1986 Plan generally vest
at the rate of 25% per year on the  anniversary of the grant.  At June 30, 1999,
there were 105,750 options outstanding under this plan, and the Company does not
intend to grant any further options or stock appreciation  rights under the 1986
Plan.

         A summary of stock  option  activity  related  to all of the  Company's
plans for fiscal 1997, 1998 and 1999 is as follows:
<PAGE>

                                                          Weighted Average
                                                    Options              Price

          June 30, 1996 Outstanding.........      1,450,051               9.98
                          Granted...........        245,500              14.47
                          Cancelled.........        (89,351)             11.70
                          Exercised.........       (435,503)              7.92
                                                 ----------           --------

          June 30, 1997 Outstanding.........      1,170,697              11.55
                          Granted...........        324,500              20.49
                          Cancelled.........        (11,859)             13.83
                          Exercised.........       (167,869)             10.39
                                                 ----------            -------

          June 30, 1998 Outstanding.........      1,315,469             $13.89
                          Granted...........        264,600              20.69
                          Cancelled..........       (18,811)             17.03
                          Exercised.........       (139,164)              9.56
                                                  ----------           -------
         June 30, 1999    Outstanding.......      1,422,094             $15.54
                                                  =========            =======

         The  following  table  summarizes   information   about  stock  options
outstanding at June 30, 1999:

                              Options Outstanding            Options Exercisable

                                     Weighted
                                      Average  Weighted                 Weighted
                                    Remaining   Average                  Average
Range of                          Contractual  Exercise                 Exercise
Exercise Prices        Shares   Life(in Years)    Price       Shares       Price


$ 7.00  - $11.91....  316,448        4.61         $9.07      283,130       $8.99
$11.92 - $19.94.....  740,096        5.80         15.08      436,128       15.19
$19.95 - $24.25.....  365,550        8.71         22.12      102,700       22.16
                      -------        ----         -----      -------       -----

$ 7.00  - $24.25....1,422,094        6.41        $15.54      821,958      $13.26
                    =========        ====        ======      =======      ======

         As of June 30, 1998 and 1997,  options to purchase  719,773 and 692,435
shares  were  exercisable  at a weighted  average  exercise  price of $11.67 and
$10.90 per share, respectively.

         The following pro forma disclosures  required by SFAS No. 123 have been
prepared as if the Company  accounted  for its employee  stock options using the
fair value-based method of accounting:

<PAGE>

                                                   Years ended June 30
                                            1999          1998            1997
Net income (in thousands)
     As reported......................... $8,936       $10,932          $9,106
     Pro forma........................... $7,933       $10,239          $8,750

Net income per share (as reported)
     Basic...............................  $1.14         $1.38           $1.13
     Diluted.............................  $1.11         $1.33           $1.10
Pro forma net income per share
      Basic..............................  $1.02         $1.30           $1.09
      Diluted............................  $0.99         $1.25           $1.06

         The fair value of each option  grant is  estimated on the date of grant
using the following weighted-average assumptions for fiscal 1999, 1998 and 1997:

                                            1999          1998            1997
                                            ----          ----            ----
Risk-free Interest Rate                     5.9%          5.9%             6.5%
Expected Stock Price Volatility..........  30.6%         26.0%            21.8%
Expected Life of Options (in years)......   4.0           3.3              3.2

         The  weighted-average  fair value of options  granted  during the years
ended June 30, 1999, 1998, and 1997 were $6.87,  $5.42 and $3.59,  respectively.
The Company  amortizes  the  estimated  fair value of options  over the options'
vesting  period.  In estimating the fair value of each option,  the Company uses
the Black-Scholes option valuation method. The Black-Scholes model was developed
for use in  estimating  the fair  value of traded  options  that have no vesting
restrictions and are fully transferable.  In addition,  option valuation models,
such  as the  Black-Scholes  model,  require  the  input  of  highly  subjective
assumptions  including the expected stock price  volatility which are subject to
change  from time to time.  For this  reason,  and because the SFAS No. 123 fair
value-based  method of accounting has not been applied to options  granted prior
to July 1, 1995, the resulting pro forma  compensation costs are not necessarily
indicative of costs to be expected in future years.

         Effective in August 1997, and until amended, modified or withdrawn, the
Board of Directors has  authorized the repurchase of up to 600,000 shares of the
Company's common stock during any one fiscal year.

Note 11 - Retirement Plans

Defined Benefit Plans

         In February  1998,  the  Financial  Accounting  Standards  Board issued
Statement  of  Financial   Accounting   Standard  (SFAS)  No.  132,   Employers'
Disclosures about Pensions and Other Postretirement  Benefits. SFAS No. 132 does
not  change  the  measurement  or  recognition  of  those  plans,   but  revises
disclosures about pensions and other post-retirement  benefit plans. The Company
adopted  SFAS No. 132 in fiscal  1999.  The  Company has three  defined  benefit
pension plans covering  substantially all of its employees.  The Retirement Plan
for Employees of Chemfab Corporation ("U.S. Plan") provides pension benefits for
the Company's domestic employees.  The "Irish Pension Plan" provides benefits to
employees of the Company's subsidiary in Ireland and the "Tygaflor Pension Plan"
provides  pension  benefits to employees of the Company's U.K.  subsidiary.  The
plans provide pension benefits that are based on the employee's compensation and
service.  The Company's funding policy is to fund amounts required by applicable
government  regulations.  The U.S. plan is non-contributory  while the Irish and
Tygaflor   pension  plans  require   employee   contributions   of  5%  and  6%,
respectively, of pensionable salary.

<PAGE>

The follow  table sets forth the funded  status of the  Company's  domestic  and
foreign defined benefit pension plans at June 30.
                                               Domestic           Foreign
                                               --------           -------
                                            1999      1998      1999      1998
                                         -------   -------   -------   -------
Change in benefit obligation
Benefit obligation at
    beginning of fiscal year .........   $ 6,278   $ 5,459   $ 2,327   $ 1,665
Service cost .........................       469       437       320       307
Interest cost ........................       470       399       173       150
Plan participant contributions .......         0         0       194       190
Actuarial loss (gain) ................       252        83      (105)      147
Benefits paid ........................       (95)     (100)      (39)      (38)
Currency translation effect ..........        --        --      (l64)      (94)
                                         -------   -------   -------   -------
Benefit obligation at end of year ....   $ 7,374   $ 6,278   $ 2,706     2,327
                                         -------   -------   -------   -------

Change in plan assets
Fair value of plan assets
    at beginning of year .............   $ 6,483   $ 5,263   $ 2,587   $ 1,725
Actual return on plan assets .........       375       899        74       570
Employer contributions ...............       471       421       295       243
Employee contributions ...............        --        --       194       190
Benefits paid ........................       (95)     (100)      (39)      (38)
Currency translation effect ..........       --         --      (176)     (103)
                                         -------   -------   -------    -------
Fair value of plan assets at .........   $ 7,234   $ 6,483   $ 2,935    $ 2,587
 end of year .........................       --         --        --

Funded status ........................   $  (140)  $   205   $   229    $   260
Unrecognized net actuarial (loss) gain      (645)   (1,164)        3       (226)
Unrecognized prior service cost ......       261       356        --         --
Currency translation effect ..........       --         --        (3)         3
                                         -------   -------    -------   -------
Prepaid (accrued) benefit cost .......   $  (524)  $  (603)   $   229   $    37
                                         =======   =======    =======   =======

Net periodic benefit cost of plans included the following components:

<TABLE>

<CAPTION>
                                                          Domestic                       Foreign
Year ended June 30,                               1999      1998      1997       1999      1998      1997
-------------------                               ----      ----      ----       ----      ----      ----
<S>                                               <C>       <C>       <C>        <C>       <C>       <C>
Service cost ..................................  $ 469     $ 437     $ 376      $ 320     $ 307     $ 248
Interest cost .................................    470       399       340        173       150       118
Return on plan assets, net of deferred gain ...   (622)     (510)     (399)      (330)     (174)     (113)
Amortization of prior service cost ............     96        96        96         --        --        --
Amortization of gain ..........................    (20)      (21)      (10)        --        --        --
                                                 -----     -----     -----      -----     -----     -----
Net periodic benefit cost .....................  $ 393     $ 401     $ 403      $ 163     $ 283     $ 253
                                                 -----     -----     -----      -----     -----     -----

The actuarial assumptions were as follows:
                                                         Domestic                                                     Foreign
Year ended June 30, ...........................   1999      1998      1997       1999      1998      1997
                                                 -----     -----     -----      -----     -----     -----

Discount rate .................................  7.25%     7.25%     7.25%      6.00%     6.50%     8.00%
Return on plan assets, net of deferred gain ...  9.00%     9.00%     9.00%      8.00%     7.50%     8.00%
Rate of compensation increase .................  4.50%     4.50%     4.50%      3.50%     4.50%     5.00%
</TABLE>

<PAGE>

Defined Contribution Plan

         The  Company  sponsors  a Savings  and  Security  Plan and Trust  ("the
Savings Plan") for its eligible U.S. employees.  Subject to certain limitations,
eligible  employees  may elect to  contribute  a  percentage  of their  salaries
ranging from 1% to 12%. The Savings Plan also contains an employer  contribution
formula  equal to 25% of the  first 6% of  compensation  that  each  participant
defers under the Savings Plan.  In addition,  the Savings Plan provides that the
Company  may  make an  annual  supplemental  discretionary  contribution  to the
Savings Plan based on its  profitability.  The  discretionary  contributions are
allocated to eligible U.S.  employees  employed by the Company at the end of the
relevant plan year based upon years of service and employee  contributions  made
during the plan year.  Total  employer  contributions  made to this plan for the
fiscal years ended June 30, 1999, 1998 and 1997 were as follows:

                                      (in thousands)
                  1999 ...................      $267
                  1998 . . . . . . . . . .      $262
                  1997 . . . . . . . . . .      $237

Note 12 - Lease Commitments

         The  Company  incurred  rent  expense  for  office  and   manufacturing
facilities, vehicles and office equipment of $1,240,000,  $909,000, and $883,000
in fiscal 1999,  1998 and 1997,  respectively,  under various  operating  leases
expiring through 2004. Future minimum rental  commitments at June 30, 1999 under
existing, non-cancelable operating leases with initial terms of one year or more
are as follows:

                                      (in thousands)
                  2000....................      $966
                  2001....................      $573
                  2002....................      $392
                  2003....................      $180
                  2004....................      $  5

Note 13 - Contingencies

         In  connection  with  obtaining  incentive  grants from the  Industrial
Development Authority of Ireland to subsidize investments in plant and equipment
in Ireland,  the  Company's  Irish  subsidiary,  Chemfab  Europe,  has agreed to
restrict  repatriation  of 410,000 Irish Pounds (U.S.  $538,000) of its retained
earnings  to fund  repayment  of the  grants in the event of  default  under the
agreement.  Chemfab  Corporation has also provided a parent company guarantee in
the event that the  subsidiary's  equity,  so  restricted,  is not sufficient to
repay any amounts due.

Note 14 - Business Segment and Foreign Operations

         In June 1997, SFAS No. 131, Disclosures about Segments of an Enterprise
and Related  Information,  was issued  effective  for fiscal  years ending after
December 15, 1998. The  information for 1997 and 1998 has been restated in order
to conform to the 1999 presentation.

         The Company operates  predominantly in one industry segment, that being
the  development,   manufacture  and  marketing  of  high-performance   flexible
composite  materials.  The Company's  reportable segments are strategic business
units which are managed separately due largely to their geographic location.

         The  Company  has  two  principal  reportable  business  segments,  its
Americas Business Group and European Business Group. The Americas Business Group
is  principally  responsible  for all  manufacturing  and  sales  of  Engineered
Products made in and to North  America and South  America and for  architectural
product sales worldwide.  The European Business Group is principally responsible
for all  manufacturing  and sales of Engineered  Products made in and to Europe,
the Middle East and Africa.

<PAGE>

         The company has two non-reportable  business segments, its Asia Pacific
Business Group and its High Performance  Elastomer Division.  These segments are
reported under Other below due to their size.

         The  accounting  policies of the  reportable  segments  are the same as
those described in Note 1 of Notes to the Consolidated Financial Statements. The
Company  evaluates the  performance  of its operating  segments  based on income
before  income  taxes and after  applying a charge for  capital  employed by the
segment.  The charge for capital employed is based on an established rate and on
capital  employed  as  defined  by the  Company  and not a measure as defined by
generally  accepted  accounting   principles.   Accordingly,   the  Company  has
reconciled below to its consolidated results.  Corporate related items have been
allocated to the business segments based on revenues of the segment.

         The  geographic  distributions  of the Company's  identifiable  assets,
operating income and revenues are summarized in the following table:

                                    Americas    European
                                    Business    Business
                                      Group       Group     Other  Consolidation
1999
Revenue from external customers      $83,663   $ 31,692    $11,125    $126,480
Intersegment sales                     4,741        995        ---       5,736
Depreciation & amortization            2,877      2,286        457       5,620
Special charge                         1,038      2,777        171       3,986
Interest charge on capital employed    3,770      2,323        300       6,393
Operating profit (loss)                6,105       (915)     1,395       6,585
Segment assets                        59,113     43,049      4,206     106,368

1998
Revenue from external customers      $65,591    $27,612    $11,257    $104,460
Intersegment sales                     3,481      1,037        ---       4,518
Depreciation & amortization            2,628      1,716        439       4,783
Interest charge on capital employed    3,259      1,522        318       5,099
Operating profit                       7,239      1,953      1,547      10,739
Segment assets                        53,095     31,482      4,527      89,104

1997
Revenue from external customers      $51,417    $28,853    $10,513     $90,783
Intersegment sales                     3,962        842          0       4,804
Depreciation & amortization            2,389      1,722        400       4,511
Interest charge on capital employed    2,886      2,080        376       5,342
Operating profit (loss)                4,670      3,632      (524)       7,778
Segment assets                        46,026     29,507      5,032      80,565

Reconciliation from Segment Reporting to Consolidated Results:

                                                    1999      1998        1997
Revenue
Total external revenues for reportable segments $115,355  $ 93,203    $ 80,270
Intersegment revenues for reportable segments      5,736     4,518       4,804
Other                                             11,125    11,257      10,513
Elimination of intersegment revenue               (5,736)   (4,518)     (4,804)
                                                --------   -------     -------
Total consolidated revenues                     $126,480  $104,460    $ 90,783

<PAGE>

Operating Profit
Total profit for reportable segments           $   6,585  $ 10,739    $  7,778
Interest charge on capital employed                6,393     5,099       5,342
Net interest income (expense)                       (267)      359         180
                                                 -------  --------    --------
Income before income taxes                     $  12,711  $ 16,197    $ 13,300

Geographic Information:
                                                                     Long-lived
                                                 Revenue               Assets
1999
United States                                   $ 67,569               $25,838
Europe                                            31,692                25,287
Saudi Arabia (1)                                  23,000                   ---
Other foreign countries                            4,219                   227
                                               ---------              --------
Total                                           $126,480               $51,352
1998
United States                                   $ 69,403               $22,987
Europe                                            27,612                13,171
Other foreign countries                            7,445                   658
                                               ---------              --------
Total                                           $104,460               $36,816

1997
United States                                   $ 55,510               $19,663
Europe                                            28,853                14,555
Other foreign countries                            6,420                   731
                                                 -------              --------
Total                                           $ 90,783               $34,949

(1)  Represents  revenue from one customer of the  Company's  Americas  Business
Group.

Sales to Major Customers

         Sales  to the  United  States  Government  under  prime  contracts  and
subcontracts  for the fiscal  years ended June 30,  1999,  1998 and 1997 were as
follows:

                               (in thousands)
           1999 ...................    $4,298
           1998 . . . . . . . . . .    $7,452
           1997 . . . . . . . . . .    $7,607

Employees

          At June  30,  1999,  the  Company  had 738  full-time  employees.  The
Company's  wholly-owned  subsidiary  at  both  the  Littleborough,  England  and
Kilrush,  Ireland  facilities  is a party to  collective  bargaining  agreements
expiring on September 30, 2000.  Approximately  98 employees at these facilities
are members of the local unions. The Company believes that the risk of a strike,
walkout  or  other  labor  disruptions  is not  material  (either  in  terms  of
probability  of  occurrence  or  magnitude  of impact) to the  Company's  global
operations. The Company's U.S.-based employees are non-unionized.

<PAGE>

Export sales

         The Company's  export sales from the United States for the fiscal years
ended June 30, were as follows:

                                             1999           1998            1997
                                 (in thousands)

          Far East....................    $ 3,280        $ 4,199         $ 6,830
          Canada......................      1,148          1,072             850
          Mexico......................      1,270          1,171             959
          Australia...................      2,723            959           1,210
          Europe and other............     19,119            313             258
          Central and South America...        274            152             180
                                       ----------      ---------      ----------

                                          $27,814        $ 7,866         $10,287
                                          =======        =======         =======


Note 15 - Related Parties

         The  Company's   Board  of  Directors   (with  Dr.  Pappas  absent  and
abstaining) negotiated and, upon recommendation of its Audit Committee, approved
entering into a consulting  relationship with Dr. Nicholas Pappas, who currently
serves as Chairman of the Company's Board of Directors. On October 30, 1997, the
Company  accordingly  entered into a  Consulting  Agreement  with Dr.  Pappas to
reflect the terms negotiated and approved by the Board. The Consulting Agreement
requires that Dr. Pappas provide various on-going strategic  consulting services
to the Company  from and after  October 30,  1997.  In  consideration  for these
consulting  services,  Dr.  Pappas was awarded a one-time,  non-qualified  stock
option to purchase 20,000 shares of Company's Common Stock at a price of $21.125
per share (the closing  price on the  date-the-Board  of Directors  approved the
Consulting  Agreement).  This option vests at a rate of 25% per year, commencing
with the first 25% on October 30, 1997 and  continuing  on each  anniversary  of
that date for the ensuing three years.  The  Consulting  Agreement also requires
the Company to pay Dr.  Pappas  $10,000  quarterly  with the first payment being
made on December 30, 1997. The Consulting Agreement continues in effect, but may
be canceled by either party with thirty days notice.

         On-December  1,  1997,  the  Company   entered  into  a  contract  (the
"Contract") for a twelve-month  research with Virginia Polytechnic Institute and
State University and Virginia Tech  Intellectual  Properties  ("VPI).  Under the
terms of the Contract,  the Company paid VPI $60,000 over twelve months to cover
facilities  and  equipment  costs  and the costs of time and  materials  for the
research services  rendered by VPI graduate students  supervised by Drs. McGrath
and Wilkes (an associate of Dr. McGrath). Under the agreement no compensation or
any other  consideration was paid to Dr. McGrath or Dr. Wilkes.  The Company has
the right under the  Contract,  upon  payment of  additional  consideration,  to
acquire  exclusive  license(s) for inventions  and other  intellectual  property
conceived (in whole or in part) by VPI from this  Contract.  Dr.  McGrath is the
Ethyl  Chaired  Professor  of  Chemistry  at VPI and serves as a Director of the
Company.  The  Board  of  Directors  (with  Dr.  McGrath  abstaining),  upon the
recommendation of its Audit Committee, found that the Contract was negotiated at
arm's length, and concluded that the Contract with VPI was in the Company's best
interests,  and approved and ratified its execution. The Contract has expired in
accordance with its terms.

         Effective December 30, 1997, Nitto Chemfab (until then was 39% owned by
the Company), repurchased the shares owned by Nitto Denko and Taiyo for a sum or
$177,000 and a payment of $116,000 by Chemfab  Corporation  for  non-competition
covenants and other services.  Upon the repurchase of the aforementioned shares,
Nitto Chemfab canceled the repurchased  shares. As a result,  effective December
30, 1997, Nitto Chemfab became a wholly-owned subsidiary of Chemfab Corporation.

<PAGE>

         The Company's balances and transactions with Nitto Chemfab Co., Ltd. as
of and for the years ended June 30, were as follows:

                            1999              1998               1997
                            ----              ----               ----
                                         (in thousands)

Purchases from Company      ----               ---              $ 402

Amount due to Company       ----               ---                 83


         Amounts  due to the  Company  in  fiscal  1997  are  principally  trade
receivables carrying standard trade terms.

         In  February  1995,  two  employees  (one of whom was an officer of the
Company,  both who were  previously  consultants  to the  Company),  acquired an
ownership interest in Fothergill Engineered Fabrics ("FEF"), a commercial weaver
of  specialty  fibers in  England.  FEF is also a raw  material  supplier to the
Company's U.K. and Irish subsidiaries,  and an affiliate of FEF owns the site on
which the U.K. subsidiary operates. The Company's transactions and balances with
FEF and its affiliate for the years ended June 30, were as follows:

                                           1999         1998           1997
                                           ----         ----           ----
                                 (in thousands)

Sales to Company                         $2,207       $1,351         $1,801

Payments for shared services and rent       567          542            516

Amount due from Company                     468          362            318


          Each of the above transactions was negotiated at arms-length,  and the
Company  believes  that each was on terms no less  favorable to the Company than
could have been obtained in arms-length negotiations with third parties.

Note 16 - Special Charge

          A special  charge in the fourth  quarter and for the year  amounted to
$3,986,000 and was comprised of:

          (1)  Approximately  $3,194,000  related to the Company's June 29, 1999
               announcement  that it will streamline its European  manufacturing
               operations from the current  two-plant to a single  manufacturing
               plant  and  it  will  consolidate  its  three  recently  acquired
               fabricating  distributors in Germany into a single location.  The
               plan  anticipates the redundancy of  approximately  45 employees,
               principally in manufacturing.  This program, which is expected to
               be substantially completed by the end of fiscal 2000, is aimed at
               improving the efficiencies of the European operations.  The costs
               of the streamlining actions include the termination and severance
               and related  costs  associated  with the  announced  reduction in
               force,  lease termination  costs,  contract  cancellation  costs,
               certain  equipment  write downs and other  notice and  associated
               costs.

          (2)  A $792,000  charge for the cost of goods  supplied in  connection
               with  changes  to a  marketing  agreement.  The  Company  did not
               recognize any revenue or associated  margin upon  supplying  this
               free merchandise.

         The  major  components  of the  fiscal  1999  special  charge  and  the
remaining accrual balance as of June 30, 1999 were as follows:

<PAGE>

                                                                  Accrued
                                                        Amounts Restructuring
                                             Charge    Utilized    Charge
Employee termination and severance costs    $  1,213        ---   $ 1,213
Exit costs                                  $  1,128         10    $1,118
Write downs - noncash                       $    853        853       ---
Market agreement costs                      $    792    $   792       ---
                                            --------    -------    ------
                                            $  3,986    $ 1,655    $2,331
                                             =======    =======    ======

Note 17 - Legal Proceedings

         In March  1991,  the  United  States  Environmental  Protection  Agency
("EPA")  informed the Company it was one of a number of Potentially  Responsible
Parties ("PRPs") under the Comprehensive  Environmental  Response,  Compensation
and  Liability  Act  ("CERCLA")  and related  laws  concerning  the  disposal of
hazardous waste at the Bennington Landfill Superfund Site in Bennington, Vermont
(the "Site"). Under these statutes, PRPs may be jointly and severally liable for
the cost of study and  remediation  actions  at the Site and for other  damages.
While denying  liability,  the Company has worked with the approximately  twelve
(12) other Site PRPs to respond to the EPA's claim.

          In April 1997,  the EPA and the United  States  Department  of Justice
("DOJ")  issued a Consent  Decree to resolve  Site-related  claims  against  the
Company and the other PRPs. Under terms of the Consent Decree,  the Company is a
"de minimis" party, eligible for settlement under section 122 (g) of CERCLA, and
entitled to statutory contribution protection.  The United States District Court
entered the Consent Decree on August 18, 1997.

          Under the Consent  Decree,  the Company  received final covenants from
the Federal and State Governments prohibiting those entities from taking further
civil or administrative  action against the Company related to the Site, subject
to standard statutory  reopeners.  The Company is not aware of any other pending
or threatened claims or administrative  actions involving the Site, and believes
that any such claims or actions would be unlikely.

          The  Company is  involved  in a number of other  lawsuits  as either a
defendant  or a  plaintiff.  Although  the  outcome  of such  matters  cannot be
predicted  with  certainty,  and some  lawsuits  or claims  may be  disposed  of
unfavorably  to the Company,  management  believes that the  disposition  of its
current legal proceedings, to the extent not covered by insurance, will not have
a material adverse effect on the Company's consolidated financial statements.

<PAGE>

Chemfab Corporation Quarterly Financial Data (Unaudited)
(in thousands, except per share data)
                                                      Basic Per     Diluted Per
       1999                                          Share Data(1) Share Data(1)
       ----                                          ------------- -------------

                        Net        Gross        Net       Net          Net
       Quarter         Sales      Profit      Income    Income       Income

       First        $ 25,233    $  8,437     $ 2,393     $0.31        $0.30
       Second         27,892       9,462       2,508      0.32         0.31
       Third          44,457      13,723       3,235      0.41         0.40
       Fourth         28,898      10,150         800(2)   0.10         0.10
                      ------      ------     -------     -----        -----

       Year         $126,480     $41,772     $ 8,936     $1.14        $1.11
                    ========     =======     =======     =====        =====

                                                      Basic Per     Diluted Per
       1998                                          Share Data(1) Share Data(1)
       ----                                          ------------- -------------

                        Net        Gross        Net       Net          Net
       Quarter         Sales      Profit      Income    Income       Income

       First       $  22,154     $ 7,559     $ 2,038     $0.26        $0.25
       Second         25,902       8,734       2,549      0.32         0.31
       Third          27,257       9,274       2,808      0.36         0.34
       Fourth         29,147      10,313       3,537      0.45         0.43
                      ------      ------     -------     -----        -----

       Year         $104,460     $35,880     $10,932     $1.38        $1.33
                    ========     =======     =======     =====        =====




(1)  Computations  of earnings per share for each quarter are independent and do
     not necessarily equal the amount computed for the year.
(2)  Includes special charge of $3,986. See Note 16 of Notes to the Consolidated
     Financial Statements.

<PAGE>

                               CHEMFAB CORPORATION
                        VALUATION AND QUALIFYING ACCOUNTS
                                   SCHEDULE II
                    Years Ended June 30, 1999, 1998 and 1997
                                 (in thousands)

                         Balance at  Charges                Balance at
                          beginning     to     Deductions     end
                           of year   Expense  and Other(1)    of year

1999

Allowance for               $397       $127        $ (62)      $462
                            ====       ====        ======      ====
doubtful accounts




1998

Allowance for
doubtful accounts           $367       $ 78        $ (48)      $397
                            ====       ====        ======      ====


1997

Allowance for
doubtful accounts           $382       $112        $(127)      $367
                            ====       ====        ======      ====










(1)      Uncollectible accounts written off, net of recoveries.


                                       S-1