SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

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

For the fiscal year ended November 30, 1996      Commission file number 1-5901
-------------------------------------------      -----------------------------

                              FAB INDUSTRIES, INC.
                              --------------------
             (Exact name of registrant as specified in its charter)


              Delaware                               13-2581181
              --------                               ----------
      (State or other jurisdiction                (I.R.S. Employer
   of incorporation or organization)               Identification No.)

200 Madison Avenue, New York, NY                                      10016
--------------------------------------------------------------------------------
(Address of principal executive offices)                          (Zip Code)

Registrant's telephone number, including area code:  212-592-2700

Securities registered pursuant to Section 12(b) of the Act:

                                                Name of each exchange on
     Title of each class                             which registered
     -------------------                             ----------------

     Common Stock, $.20 par value               American Stock Exchange, Inc.

Securities  registered  pursuant  to Section  12(g) of the Act:  Share  Purchase
Rights

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  12 months,  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 at  February  20,  1997 of  shares of the
Registrant's  Common  Stock,  $.20 par value  (based upon the closing  price per
share of such  stock on the  Composite  Tape for issues  listed on the  American
Stock  Exchange),  held by  non-affiliates  of the registrant was  approximately
$116,058,000.  Solely  for the  purposes  of this  calculation,  shares  held by
directors  and  executive  officers  of the  Registrant  and  members  of  their
respective  immediate  families  sharing the same  household have been excluded.
Such  exclusion  should not be deemed a  determination  or an  admission  by the
Registrant that such individuals are, in fact, affiliates of the Registrant.

         Indicate the number of shares  outstanding of each of the  Registrant's
classes of common  stock,  as of the latest  practicable  date:  At February 20,
1997, there were outstanding 5,751,055 shares of Common Stock, $.20 par value.

Documents  Incorporated  by  Reference:  Certain  portions  of the  Registrant's
definitive proxy statement to be filed not later than March 31, 1997 pursuant to
Regulation 14A are  incorporated by reference in Items 10 through 13 of Part III
of this Annual Report on Form 10-K.

<PAGE>


                              FAB INDUSTRIES, INC.

                               INDEX TO FORM 10-K

Item Number                                                                Page


PART I.......................................................................1
         Item 1. Business....................................................1
         Item 2. Properties..................................................3
         Item 3. Legal Proceedings...........................................4
         Item 4. Submission of Matters to a Vote of Security-Holders.........4

PART II......................................................................6
         Item 5. Market for Registrant's Common Equity and 
                    Related Stockholder Matters..............................6
         Item 6. Selected Consolidated Financial Data........................7
         Item 7. Management's Discussion and Analysis of 
                    Financial Condition and Results of Operations............8
         Item 8. Financial Statements and Supplementary Data................10
         Item 9. Changes in and Disagreements with Accountants 
                    on Accounting and Financial Disclosure..................10

PART III....................................................................11
         Item 10. Directors and Executive Officers of the Registrant........11
         Item 11. Executive Compensation....................................11
         Item 12. Security Ownership of Certain Beneficial Owners 
                    and Management..........................................11
         Item 13. Certain Relationships and Related Transactions............11

PART IV.....................................................................12
         Item 14. Exhibits, Financial Statement Schedules, 
                    and Reports on Form 8-K.................................12

SIGNATURES..................................................................16


<PAGE>

                                     PART I

Item 1.  Business

         Fab Industries, Inc. (together with its subsidiaries, the "Company") is
a major  manufacturer  of warp knit textile  fabrics,  raschel  laces,  circular
knits,  novelty knits, and polyurethane coated bonded fabrics. In addition,  the
Company produces comforters, sheets, blankets and other bedding products.

         The Company was  incorporated on April 21, 1966,  under the laws of the
State  of  Delaware  and  is  a  successor  by  merger  to  previously  existing
businesses.

         The  Company's   textile   fabrics  are  sold  to  a  wide  variety  of
manufacturers of ready to wear and intimate apparel for men, women and children.
Applications include children's  sleepwear,  activewear,  recreational  apparel,
home  furnishings,  over-the-counter  fabrics,  industrial  fabrics,  upholstery
fabrics for  residential  and  contract  markets,  and health care and  consumer
products.

         While sales are  primarily  to  manufacturers  of finished  goods,  the
Company  also  uses its own  textile  fabrics  to  produce  100%  cotton  jersey
(T-shirt) sheets, flannel and satin sheets, as well as blankets,  comforters and
other  bedding  products  which  the  Company  sells to  chain,  department  and
specialty  stores,  catalogue and mail order companies,  as well as airlines and
health-care institutions.

         The Company's  Raval Lace Division  manufactures  raschel lace products
for sale to  manufacturers  of  lingerie  and  apparel,  ribbon,  craft and home
furnishings industries, and over-the-counter  retailers. Its Raval Designer Lace
Division produces more intricately designed laces for designer lingerie,  bridal
wear, dresses, blouses and sportswear.

         The Company's subsidiary, Gem Urethane Corporation,  produces a line of
polyurethane coated fabrics and a variety of flame,  adhesive and ultrasonically
bonded items for apparel, accessories, health care, environmental and industrial
products.

         The Company engages in research and product  development  activities to
create new fabrics and styles to meet the  continually  changing  demands of its
customers.  Direct  expenditures  in this area  aggregated  $4,347,000 in fiscal
1994,  $4,184,000 in fiscal 1995 and  $3,875,000  in fiscal 1996.  Through these
efforts,  the Company has developed a full line of proprietary  knitted  fabrics
for sale to  manufacturers  of men's,  women's  and  children's  apparel in both
domestic and foreign markets.  Similarly,  the Company has also developed a full
line of proprietary  sheets and blankets,  including  specialty blankets for the
airline industry.

         While the  Company  uses  various  trademarks  and  trade  names in the
promotion  and  sale of its  products,  it does  not  believe  that  the loss or
expiration  of any such  trademark  or trade name would have a material  adverse
effect on its operations.


                                        1


<PAGE>

         The Company markets its products  primarily through its full-time sales
personnel, as well as independent  representatives located throughout the United
States and abroad. In cooperation with yarn producers, it employs advertisements
in various media as a marketing  tool.  The Company also markets its products on
its web site: www.fab-industries.com.

         Historically,   the  Company's   business   reflects   minor   seasonal
fluctuations.  Somewhat  higher  sales  occur in the  second  and  third  fiscal
quarters,  as a result of purchases by  customers  in  anticipation  of Fall and
Holiday apparel sales. First and fourth fiscal quarter sales tend to be lower as
apparel customers limit their orders to refilling smaller inventory requirements
after Fall and Holiday sales and  forecasting  customer  reorders for Spring and
Summer fabrications.

         The  Company  does not believe its backlog of firm orders is a material
indicator of future  business  trends,  because goods subject to such orders are
shipped within two to ten weeks, depending on the availability of yarn and other
raw materials. On average, orders are filled within six weeks.

         For fiscal 1996, the Company's  aggregate  sales to companies under the
common control of Sara Lee Corporation  accounted for  approximately  12% of the
Company's  net sales.  The  receivables  from this group of customers  represent
approximately  13%  of the  Company's  November  30,  1996  accounts  receivable
balance. The Company's export sales are not material.

Supplies of Raw Materials

         The Company has not experienced  difficulties  in obtaining  sufficient
yarns,  chemicals,  dyes and other raw  materials  and supplies to maintain full
production.  The Company does not depend upon any single  source of supply,  and
alternative  sources are  available  for most of the raw  materials  used in its
business.

Inventories

         The  Company  maintains  adequate  inventories  of yarns  and other raw
materials to insure an uninterrupted  production flow. Greige and finished goods
are  maintained  as  inventory  to meet  varying  customer  demand and  delivery
requirements. The Company must maintain adequate working capital, because credit
terms  available  to customers  normally  exceed  credit  terms  extended to the
Company by suppliers of raw materials.

Competition

         The Company is engaged in a highly competitive  business which is based
largely upon product quality,  service and price and general consumer demand for
the finished  goods  utilizing  the Company's  products.  There are more than 20
other manufacturers for its products. The Company believes that it is one of the
major manufacturers of warp and circular knit, raschel lace and urethane product
in the United  States.  The  proportion  of imported  textile  goods sold in the
United  States has  increased  substantially  in the past few  years,  adversely
impacting domestically  manufactured textile products and the number of domestic
manufacturers of such products. As a result of significant expenditures on


                                        2


<PAGE>

production  equipment,  the Company's  strong  financial  position and increased
capacity  have enabled it to capture a larger share of the now smaller  domestic
textile market.

Employees

         The Company employs approximately 1,500 people, who are not represented
by  unions.   The  Company   considers   relations  with  its  employees  to  be
satisfactory.


Item 2.  Properties.

         The Company conducts its  manufacturing  operations in owned facilities
located in Lincolnton, Maiden, Cherryville and Salisbury, North Carolina, and in
leased  facilities  located  in  Amsterdam,  New  York.  All  of  the  Company's
facilities are operated mostly on a five day-a-week basis.

         The Company's  knitting,  dyeing-finishing  and printing operations are
conducted at the Lincolnton facility.  These operations include warp and raschel
knitting, various types of dyeing, framing, lace separating,  sueding, shearing,
napping, calendaring and heat-transfer printing. Dyeing-finishing operations are
also conducted at the  Cherryville  facility.  The  Lincolnton  and  Cherryville
facilities  also process and serve as warehouses for greige goods,  manufactured
and shipped from the Company's Amsterdam and Maiden plants.

         At the  Maiden  plant  facility,  the  Company  conducts  a variety  of
manufacturing operations, including warping for the tricot and lace machines and
single and double knitting of fabrics. The Salisbury facility is the site of the
Company's consumer and institutional  products  manufacturing,  retail and over-
the-counter operations. The Company's Amsterdam facilities are devoted to tricot
warping and knitting and warehousing.  Approximately  106,000 square feet in one
of the  Company's  Amsterdam  plants  is used  for the  production  of a line of
polyurethane coated fabrics and a variety of flame,  adhesive and ultrasonically
bonded items.

         The  following  table sets forth the location of each of the  Company's
manufacturing facilities, its principal use, approximate floor space, and, where
leased,  the lease  expiration date. No facility owned by the Company is subject
to any encumbrance.

                                                Approximate           Lease
Location            Principal Use               Floor Space      Expiration Date
--------            -------------               -----------      ---------------

Lincolnton,         Dyeing and Finishing,       630,550 sq.ft.      (1)
North               Raschel and Tricot
Carolina            Warp Knitting, Printing
                    and Warehouse

Lincolnton,         Warehouse                   55,000 sq. ft.      (1)
North Carolina

Maiden,             Warping, Circular Single    224,013 sq.ft.      (1)
North Carolina      and Double Knitting and
                    Warehouse


                                        3


<PAGE>





Salisbury,          Manufacturing Finished       125,000 sq.ft.      (1)
North Carolina      Consumer Products and
                    Retail Over- the-Counter
                    Fabric

Amsterdam,          Polyurethane Coating         106,000 sq.ft.      12/31/99(2)
New York            Manufacturing
                    Operations and Bonding
                    and Laminating

Amsterdam,          Warping, Tricot  Knitting    367,000 sq.ft.      12/31/06(2)
New York            and Warehouse

Cherryville,        Dyeing and Finishing        197,000 sq. ft.      (1)
North
Carolina

New York,           Executive Offices and        33,000 sq. ft.       4/30/06
New York            Showroom Facilities


------------------------

(1)      Owned by the Company.
(2)      Capitalized building lease - See note 5 of Notes to Consolidated 
         Financial Statements.

         All of the Company's  facilities  are  constructed  of brick,  steel or
concrete,  and the Company  considers all  facilities to be adequate and in good
operating condition and repair.


Item 3.  Legal Proceedings.

         Neither  the  Company  nor any of its  subsidiaries  or  properties  is
subject to any material pending legal proceedings.


Item 4.  Submission of Matters to a Vote of Security-Holders.

         Not Applicable

Executive Officers of the Company

         The  following  table sets forth  certain  information  concerning  the
executive officers of the Company as of February 20, 1997.


Name                            Age      Positions and Offices

Samson Bitensky...............  77       Chairman of the Board of Directors, 
                                         President and Chief Executive Officer

David A. Miller...............  59       Vice President-Finance and Treasurer


                                        4


<PAGE>

Stanley August..................  65     Vice President

Steven Myers....................  48     Vice President

Sherman S. Lawrence.............  78     Secretary and Director


         Each of the Company's  executive officers serves at the pleasure of the
Board of Directors and until his or her successor is duly elected and qualifies.

         Samson  Bitensky  was among the founders of the Company in 1966 and has
served as Chairman of the Board of Directors and Chief Executive  Officer of the
Company  since such time.  Mr.  Bitensky  has also  served as  President  of the
Company since 1970.

         David A. Miller has been  employed  by the  Company  since 1966 and has
served as its Controller  from 1973 until December 7, 1995 and as Vice President
- Finance and Treasurer since December 7, 1995.

         Stanley  August  has  been  employed  by the  Company  since  1980  and
previously  served as General Sales Manager of its Circular Knit Division and as
Vice  President  - Sales.  Mr.  August  has  served as Vice  President  - Fabric
Operations from 1987 until 1992 and as Vice President since March 30, 1992.

         Steven Myers, an attorney,  has been employed by the Company in various
senior  administrative  and managerial  capacities since 1982. He served as Vice
President  - Sales for more than five years  prior to May 1988 and has served as
Vice President since that time. Mr. Myers is the son-in-law of Mr. Bitensky.

         Sherman S.  Lawrence has served as a Director of the Company since 1966
and as Secretary since 1968. Mr.  Lawrence has been a practicing  attorney since
1942 and has served as co-counsel to the Company since 1966.


                                        5


<PAGE>

                                     PART II

Item 5.  Market for Company's Common Equity and Related Stockholder Matters.

         The Company's  Common Stock is traded on the American  Stock  Exchange,
Inc.  (ticker  symbol - FIT).  The table below sets forth the high and low sales
prices of the Common Stock during the past two fiscal years.

Fiscal 1996

First Quarter.......................................   $ 31 7/8      $ 29 1/2

Second Quarter......................................   $ 29 7/8      $ 26 7/8

Third Quarter.......................................   $ 28 7/8      $ 24 3/4

Fourth Quarter......................................   $ 28 3/8      $ 25 7/8

Fiscal 1995

First Quarter.......................................   $ 32          $ 30

Second Quarter......................................   $ 31 7/8      $ 29

Third Quarter.......................................   $ 32 3/4      $ 30 1/4

Fourth Quarter......................................   $ 31 3/4      $ 29

         At February 20, 1997, there were approximately 598 holders of record of
Common  Stock.  For fiscal  1995,  a  quarterly  dividend  of $.16 per share was
declared on February  13, 1995 and  quarterly  dividends of $.175 per share were
declared on May 22, 1995,  August 21, 1995 and  November  27,  1995.  For fiscal
1996, quarterly dividends of $.175 per share were declared on February 12, 1996,
May 20, 1996, August 14, 1996 and November 24, 1996. The payment of further cash
dividends  will be at the  discretion  of the Board of Directors and will depend
upon,  among other  things,  earnings,  capital  requirements  and the financial
condition of the Company.


                                        6


<PAGE>

Item 6.           Selected Consolidated Financial Data.
<TABLE>
<CAPTION>

                                         As at or for the fiscal year ended
                        ---------------------------------------------------------------------
                        November 30,   December 2,   December 3,   November 27,  November 28,
                            1996          1995        1994 (2)        1993          1992
                                              (In thousands, except share data)

<S>                       <C>           <C>           <C>           <C>           <C>     
Net Sales                 $156,136      $182,000      $189,753      $189,586      $189,288

Income before taxes
  on income                 12,596        13,760        22,428        25,531        25,767

Net income                   8,796         9,410        15,093        17,006        16,917

Earnings per share            1.52          1.57          2.44          2.75          2.65

Total assets               160,980       161,027       163,133       157,499       138,952

Long-term debt                 620           678           731           799           822

Stockholders' equity       133,888       132,932       129,533       124,326       109,172

Book value per
  share (1)                  23.25         22.42         21.52         19.98         18.01

Cash dividends
  per share                    .70          .685           .64           .64           .50

Weighted average
 number of shares
 outstanding             5,797,228     5,981,690     6,189,831     6,181,186     6,390,706
</TABLE>

---------------------

(1)  Computed  by  dividing   stockholders'  equity  by  the  number  of  shares
     outstanding at year-end. 

(2)  Fifty-three weeks.


                                        7


<PAGE>


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

Results of Operations

         Fiscal 1996 Compared to Fiscal 1995

         Net sales for the 1996  fiscal  year were  $156,136,000  as compared to
$182,000,000  in 1995,  a  decrease  of 14.2%.  Business  conditions  within the
textile  industry  remained  under  pressure  as a result of  sluggish  consumer
demand, as well as highly competitive market conditions and foreign competition.

         Gross  margins as a percentage  of sales  declined from 14.9% to 14.5%.
Lower sales volume reduced operating  schedules at manufacturing  plants,  and a
less  profitable  mix also  exerted  unfavorable  pressures  on profit  margins.
Margins were  benefited by cost control  programs and favorable  LIFO  inventory
levels. In fiscal 1995, an addition to LIFO inventory  reserves in the amount of
$893,000 was made as a result of higher raw material prices  (primarily  fiber),
as  compared  to a decrease  of $742,000 in reserves in fiscal 1996 due to lower
average FIFO cost levels.

         Selling, general and administrative expenses declined by $3,192,000, or
18.4%,  and as a percentage of sales  declined to 9.1% from 9.5% last year.  The
decline  relates  primarily  to lower  incentive-based  compensation  and  lower
related  salaries and  commissions.  In  addition,  other  selling,  general and
administrative  expenses decreased as a result of the continued effectiveness of
the Company's expense containment program, which began in fiscal 1995.

         Interest and dividend income remained at approximately $3.7 million for
both years.

         The  effective  income tax rate for the year was 30.2% as against 31.6%
in fiscal 1995.  The decline was  primarily  attributable  to a  proportionately
higher percentage of tax exempt interest in fiscal 1996.

         As a result of these factors,  net income  declined to $8,796,000  from
$9,410,000 but as a percentage of sales increased to 5.6% from 5.2%.

         Earnings per share, which are based upon the weighted average number of
shares outstanding (5,797,228 vs. 5,981,690), were $1.52 as compared to $1.57 in
fiscal 1995.  There was no stock option related dilution in either year.

         Fiscal 1995 Compared to Fiscal 1994

         Net sales for the 1995  fiscal  year were  $182,000,000  as compared to
$189,753,000 in 1994, a decrease of 4.1%. The decline reflected an industry wide
slowdown in demand for knit fabrics as a result of weak  consumer  purchasing of
apparel  at the  national  retail  level as well as  highly  competitive  market
conditions.  Fiscal 1995 included 52 weeks of operations as compared to 53 weeks
in 1994, also contributing to the sales decline.


                                        8


<PAGE>

         Average gross profit  margins were 14.9% in fiscal 1995, as compared to
19.7% in 1994.  Increases in the cost of raw materials (primarily fiber prices),
a less favorable product mix, and highly  competitive market conditions have all
exerted  downward  pressures on profit margins.  Plant operations were adversely
impacted  by the  current  product  mix and  operating  rates  at  manufacturing
facilities  declined from year-ago levels.  In addition,  because of higher unit
inventory costs resulting from material price increases, LIFO inventory reserves
increased $893,000 during fiscal 1995 (with a corresponding charge to earnings),
as compared to an increase of $98,000 in the 1994 period.

         Selling,  general and administrative expenses declined by $420,000, and
as a percentage of sales remained  relatively  level at 9.5% for fiscal 1995 and
9.4%  for  1994.  The  decline  relates   primarily  to  lower  incentive  based
compensation.

         Interest and dividend income increased by 7.8% to $3,676,000 as against
$3,410,000 in fiscal 1994, as higher comparative  returns more than offset lower
average available investment balances.

         The Company had realized  gains from the sale of investment  securities
of $511,000 in fiscal 1995 as against losses of $473,000 in the 1994 period,  as
a result of improved market conditions.

         The  effective  income tax rate for the year was 31.6% as against 32.7%
in 1994. The decline was primarily attributable to higher tax exempt interest as
a percentage of pre-tax income in fiscal 1995.

         As a result of these factors, net income declined to $9,410,000 or 5.2%
of sales, from $15,093,000, or 8.0% of sales in fiscal 1994. Earnings per share,
which are based on the weighted average number of shares outstanding  (5,981,690
vs  6,189,831),  were $1.57 as  compared to $2.44 in fiscal  1994.  There was no
stock option related dilution in either year.

         Liquidity and Capital Resources

         The  Company's  principal  source  of funds  continues  to be cash flow
generated from operations.  Net cash provided by operating  activities in fiscal
1996 was $17,223,000 as compared to $13,155,000 in the comparative  1995 period.
Of this  increase,  $9,047,000  relates to a  comparative  decline  in  accounts
receivable,  which was offset by $4,407,000 related to a comparative increase in
inventories.

         Capital  expenditures  for the current  fiscal year were  $4,101,000 as
against  $5,215,000 in the comparable  1995 period.  In fiscal 1996, the Company
purchased  additional  knitting  and warping  machines  for two of its  knitting
mills.

         During  fiscal  1996,  the Company  repurchased  186,804  shares of its
common stock at a cost of $5,401,000  (an average price of $28.91).  The Company
intends to continue to purchase its shares of common stock from time-to-time, as
market conditions warrant and price criteria are met.

         During fiscal 1996, the Company  declared regular  quarterly  dividends
totaling $0.70 per share.


                                        9


<PAGE>

         Stockholders'  equity  rose to  $133,888,000,  or $23.25 book value per
share, from $132,932,000, or $22.42 per share, at the previous fiscal year-end.

         Management  believes that the current financial position of the Company
is more than adequate to internally  fund any future  expenditures  to maintain,
modernize  and expand  its  manufacturing  facilities,  pay  dividends  and make
acquisitions of textile related businesses if criteria relating to indebtedness,
market expansion and existing management are met.

         Inflation

         The  Company  does not  believe  the  effects of  inflation  have had a
significant impact on the consolidated financial statements.

         Recent Accounting Standards

         In  March  1995,  the  Financial   Accounting  Standards  Board  issued
Statement of Financial  Accounting  Standards No. 121 "Accounting for Impairment
of  Long-Lived  Assets and for Long- Lived  Assets to be Disposed Of" ("SFAS No.
121"). SFAS No. 121 requires,  among other things,  impairment loss of assets to
be held and gains or losses from  assets that are  expected to be disposed of be
included as a component  of income from  continuing  operations  before taxes on
income.  The Company adopted SFAS No. 121 in fiscal 1996 and its  implementation
did not have a material effect on the consolidated financial statements.

         In October  1995,  the  Financial  Accounting  Standards  Board  Issued
Statement of Financial  Accounting Standards No. 123 "Accounting for Stock-Based
Compensation"  ("SFAS No. 123"), which allows either the intrinsic or fair value
method.  SFAS No. 123  encourages,  but does not require,  entities to adopt the
fair value  method in place of the  intrinsic  value  method as provided  for in
Accounting  Principles  Board  Opinion No. 25  "Accounting  for Stock  Issued to
Employees"  ("APB No. 25"), for all arrangements  under which employees  receive
shares of stock or other  equity  instruments  of the  employer or the  employer
incurs  liabilities to employees in amounts based on the price of its stock. The
Company anticipates retaining the intrinsic value method when it adopts SFAS No.
123 in fiscal 1997.


Item 8.  Financial Statements and Supplementary Data.

         See pages F-1 and S-1.


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

         Not Applicable.


                                       10


<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Company.

         See  Part  I,  Item  4.  "Executive  Officers  of the  Company."  Other
information  required  by this  item  is  incorporated  by  reference  from  the
Company's  definitive  proxy statement to be filed not later than March 31, 1997
pursuant  to  Regulation  14A of the  General  Rules and  Regulations  under the
Securities Exchange Act of 1934, as amended ("Regulation 14A").

Item 11. Executive Compensation.

         The information required by this item is incorporated by reference from
the Company's  definitive  proxy  statement to be filed not later than March 31,
1997 pursuant to Regulation 14A.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

         The information required by this item is incorporated by reference from
the Company's  definitive  proxy  statement to be filed not later than March 31,
1997 pursuant to Regulation 14A.

Item 13. Certain Relationships and Related Transactions.

         The information required by this item is incorporated by reference from
the Company's  definitive  proxy  statement to be filed not later than March 31,
1997 pursuant to Regulation 14A.


                                       11


<PAGE>

                                     PART IV


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

          (a)(1) Financial Statements:  See the Index to Consolidated  Financial
                 Statements at page F-2.

          (2)  Financial  Statement  Schedules:   See  the  Index  to  Financial
               Statements Schedules at page S-2.

          (3)  Exhibits.

3.1     -  Restated Certificate of Incorporation, incorporated by reference to
           Exhibit 3.1 to the Company's Annual Report on Form 10-K for the
           fiscal year ended November 27, 1993 (the "1993 10-K").

3.2     -  Amended and Restated By-laws, incorporated by reference to Exhibit
           3.2 to the 1993 10-K.

3.3     -  Certificate of Amendment of Restated Certificate of Incorporation,
           incorporated by reference to Exhibit 3.3 to the Company's Annual
           Report on Form 10-K for the fiscal year ended December 3, 1994 (the
           "1994 10-K").

4.1     -  Specimen of Common Stock Certificate, incorporated by reference to
           Exhibit 4-A to Registration Statement No. 2-30163, filed on November
           4, 1968.

4.2     -  Rights Agreement dated as of June 6, 1990 between the Company
           and Manufacturers Hanover Trust Company, as Rights Agent, which
           includes as Exhibit A the form of Rights Certificate and as Exhibit 
           B the Summary of Rights to purchase Common Stock, incorporated by
           reference to Exhibit 4.2 to the 1993 10-K.

4.3     -  Amendment to the Rights Agreement between the Company and
           Manufacturers Hanover Trust Company dated as of May 24, 1991,
           incorporated by reference to Exhibit 4.3 to the 1993 10-K.

10.1    -  1987 Stock Option Plan of the Company, incorporated by reference to
           Exhibit 10.1 to the 1993 10-K.


                                       12


<PAGE>

10.2    -  Employment Agreement dated as of March 1, 1993, between the
           Company and Samson Bitensky, incorporated by reference to Exhibit
           10.2 to the 1993 10 -K.

10.3    -  Fab Industries, Inc. Hourly Employees Retirement Plan (the 
           "Retirement Plan"),  incorporated by reference to Exhibit 10.3 
           to the 1993 10-K.

10.4    -  Amendment to the Retirement Plan effective December 11, 1978,
           incorporated  by reference to Exhibit 10.4 to the 1993 10-K.

10.5    -  Amendment to the Retirement Plan effective December 1, 1981,
           incorporated by reference to Exhibit 10.5 to the 1993 10-K.

10.6    -  Amendment to the Retirement Plan dated November 21, 1983,
           incorporated by reference to Exhibit 10.6 to the 1993 10-K.

10.7    -  Amendment to the Retirement Plan dated August 29, 1986,
           incorporated by reference to Exhibit 10.7 to the 1993 10-K.
10.8    -  Amendment to the Retirement Plan effective as of December 1,
           1989, incorporated by reference to Exhibit 10.9 to the 1993 10-K.

10.9    -  Amendment to the Retirement Plan dated September 21, 1995,
           incorporated by reference to Exhibit 10.9 to the Company's Annual
           Report on Form 10-K for the fiscal year ended December 2, 1995 (the
           "1995 10-K").

10.10   -  Fab Lace, Inc. Employees Profit Sharing Plan (the "Profit Sharing
           Plan"), incorporated by reference to Exhibit 10.9 to the 1993 10-K.

10.11   -  Amendment  to the  Profit  Sharing  Plan  effective  as of
           December 1, 1978,  incorporated by reference to Exhibit 10.10
           to the 1993 10-K.

10.12   -  Amendment  dated  December  1, 1985 to the Profit  Sharing
           Plan,  incorporated by reference to Exhibit 10.11 to the 1993
           10-K.

10.13   -  Amendment  dated  February  5, 1987 to the Profit  Sharing
           Plan,  incorporated by reference to Exhibit 10.12 to the 1993
           10-K.


                                       13


<PAGE>

10.14  -  Amendment  dated  December  24, 1987 to the Profit  Sharing
          Plan,  incorporated by reference to Exhibit 10.13 to the 1993
          10-K.

10.15  -  Amendment  dated June 30, 1989 to the Profit  Sharing Plan,
          incorporated by reference to Exhibit 10.14 to the 1993 10-K.

10.16  -  Amendment  dated  February  1, 1991 to the Profit  Sharing
          Plan,  incorporated by reference to Exhibit 10.15 to the 1993
          10-K.

10.17  -  Amendment  dated  September  1, 1995 to the Profit  Sharing
          Plan,  incorporated by reference to Exhibit 10.17 to the 1995
          10-K.

10.18  -  Lease dated as of December 8, 1988 between Glockhurst
          Corporation N.V. and the Company, incorporated by
          reference to Exhibit 10.16 to the 1993 10-K.

10.19  -  Lease Modification Agreement dated as of April 8, 1991 between
          Glockhurst Corporation N.V. and the Company, incorporated by
          reference to Exhibit 10.17 to the 1993 10-K.

*10.20 -  Second Lease Modification Agreement dated May 23, 1996 between 200
          Madison Associates, L.P., and the Company.

10.21  -  Lease dated as of March 1, 1979 between City of Amsterdam
          Industrial Development Agency and Gem Urethane Corp., incorporated
          by reference to Exhibit 10.18 to the 1993 10-K.

10.22  -  Lease dated as of January 1, 1977 between City of Amsterdam
          Industrial Development by reference to Exhibit 10.19 to the 1993 10-
          K.

10.23  -  Form of Indemnification agreement between Company and its officers
          and directors, incorporated by reference to Exhibit 10.20 to the 1993
          10-K.

10.24  -  Company's Employee Stock Ownership Plan effective as of November
          25, 1991, incorporated by reference to Exhibit 10.24 to the 1993 10-
          K.


                                       12


<PAGE>

10.25  -  Amendment dated September 21, 1995 to the Employee Stock
          Ownership Plan, incorporated by reference to Exhibit 10.27 to the
          1995 10-K.

10.26  -  Company's Non-Qualified Executive Retirement Plan dated as of
          November 30, 1990, incorporated by reference to Exhibit 10.25 to
          the 1993 10-K.

21     -  Subsidiaries of the Company incorporated by reference to Exhibit 21 to
          the 1994 10-K.

*23    -  Consent of BDO Seidman, LLP.

**27   -  Financial Data Schedule pursuant to Article 5 of Regulation S-X.

-------------

*        Filed herewith.
**       Filed with EDGAR version only.

         (b)  Reports on Form 8-K: None


                                       15


<PAGE>


                      FAB INDUSTRIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                                FORM 10-K ITEM 8

             FISCAL YEARS ENDED NOVEMBER 30, 1996, DECEMBER 2, 1995
                              AND DECEMBER 3, 1994




                                       F-1


<PAGE>


                      FAB INDUSTRIES, INC. AND SUBSIDIARIES




                                    CONTENTS



Report of independent certified public accountants                     F-3

Consolidated financial statements:
  Balance sheets                                                       F-4
  Statements of income                                                 F-5
  Statements of stockholders' equity                                   F-6
  Statements of cash flows                                             F-7

Summary of accounting policies                                   F-8 - F-9

Notes to consolidated financial statements                     F-10 - F-20


                                       F-2

<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors
Fab Industries, Inc.
New York, New York



We have audited the  consolidated  balance  sheets of Fab  Industries,  Inc. and
subsidiaries  as of  November  30,  1996 and  December  2, 1995 and the  related
consolidated statements of income,  stockholders' equity and cash flows for each
of the three fiscal years in the period  ended  November 30, 1996.  We have also
audited  the  schedule  listed  in the  index on page  S-2.  These  consolidated
financial  statements  and  schedule  are the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
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  and schedule are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence supporting the amounts and disclosures in the financial  statements and
schedule.  An audit also includes  assessing the accounting  principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
presentation  of the  financial  statements  and  schedule.  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 financial position of Fab Industries, Inc.
and  subsidiaries  as of November 30, 1996 and December 2, 1995, and the results
of their  operations  and their cash flows for each of the three fiscal years in
the period  ended  November  30,  1996 in  conformity  with  generally  accepted
accounting principles.

Also, in our opinion,  the schedule presents fairly,  in all material  respects,
the information set forth therein.


                                                            /s/ BDO Seidman, LLP
                                                            --------------------
New York, New York                                              BDO Seidman, LLP
February 6, 1997


                                       F-3

<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                         November 30,      December 2,
                                                             1996              1995
                                                             ----              ----
ASSETS
<S>                                                     <C>              <C>          
Current:
    Cash and cash equivalents (Note 1)                  $   7,518,000    $   7,883,000
    Investment securities available-for-sale (Note 2)      60,880,000       54,674,000
    Accounts receivable, net of allowance of $600,000
     and $500,000 for doubtful accounts (Note 13)          28,797,000       35,217,000
    Inventories (Note 3)                                   28,947,000       27,267,000
    Other current assets                                    1,944,000        1,970,000
                                                        -------------    -------------
       Total current assets                               128,086,000      127,011,000

Property, plant and equipment - net (Note 4)               30,203,000       31,579,000
Other assets                                                2,691,000        2,437,000

                                                        $ 160,980,000    $ 161,027,000
                                                        =============    =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
    Accounts payable                                    $  12,076,000    $  12,661,000
    Corporate income and other taxes                        1,667,000        1,886,000
    Accrued payroll and related expenses                    3,403,000        4,295,000
    Dividends payable                                       1,007,000        1,038,000
    Other current liabilities                                 532,000          470,000
    Deferred income taxes (Note 9)                            761,000          246,000
                                                        -------------    -------------
       Total current liabilities                           19,446,000       20,596,000
Obligations under capital leases, net of current
 maturities (Note 5)                                          620,000          678,000
Other noncurrent liabilities                                2,364,000        1,961,000
Deferred income taxes (Note 9)                              4,662,000        4,860,000
                                                        -------------    -------------
       Total liabilities                                   27,092,000       28,095,000
Commitments (Notes 8 and 10)
Stockholders' equity (Notes 2, 6, 7, 8, 9 and 10):
     Preferred stock, $1 par value
     - shares authorized 2,000,000; none issued                    --               --
    Common stock, $.20 par value - shares authorized
     15,000,000; issued 6,564,194 and 6,549,894             1,313,000        1,309,000
    Additional paid-in capital                              6,410,000        6,150,000
    Retained earnings                                     157,223,000      152,473,000
    Loan to employee stock ownership plan                  (7,907,000)      (8,697,000)
    Net unrealized holding gain on investment
     securities available-for-sale, net of taxes              607,000          224,000
    Unearned restricted stock compensation                    (58,000)        (228,000)
    Cost of common stock held in treasury - 806,439
     and 619,635 shares                                   (23,700,000)     (18,299,000)
                                                        -------------    -------------
       Total stockholders' equity                         133,888,000      132,932,000
                                                        -------------    -------------
                                                        $ 160,980,000    $ 161,027,000
                                                        =============    =============
</TABLE>

                             See accompanying summary of accounting policies and
                                     notes to consolidated financial statements.


                                       F-4

<PAGE>



                                           FAB INDUSTRIES, INC. AND SUBSIDIARIES
                                             CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                                       Fiscal year ended
                                                                       -----------------
                                                          November 30,       December 2,       December 3,
                                                              1996              1995              1994
                                                              ----              ----              ----
<S>                                                       <C>              <C>              <C>          
Net sales (Note 13)                                       $ 156,136,000    $ 182,000,000    $ 189,753,000
Cost of goods sold                                          133,466,000      154,956,000      152,372,000
                                                            -----------      -----------    -------------
    Gross profit                                             22,670,000       27,044,000       37,381,000

Selling, shipping and administrative
 expenses                                                    14,150,000       17,342,000       17,762,000
                                                             ----------       ----------       ----------
    Operating income                                          8,520,000        9,702,000       19,619,000
                                                              ---------        ---------       ----------
Other income (expenses):
    Interest and dividend income (Note 12)                    3,660,000        3,676,000        3,410,000
    Interest expense                                           (124,000)        (129,000)        (128,000)
    Net gain (loss) on investment securities (Note 2)           540,000          511,000         (473,000)
                                                              ---------        ---------    -------------
     Total other income                                       4,076,000        4,058,000        2,809,000
                                                              ---------        ---------    -------------
Income before taxes                                          12,596,000       13,760,000       22,428,000

Taxes on income (Note 9)                                      3,800,000        4,350,000        7,335,000
                                                              ---------        ---------    -------------
Net income                                                $   8,796,000    $   9,410,000    $  15,093,000
                                                          =============    =============    =============
Earnings per share                                        $        1.52    $        1.57    $        2.44
                                                          =============    =============    =============
Weighted average number of shares of common
 stock outstanding                                            5,797,228        5,981,690        6,189,831
                                                          =============     ============    =============
Cash dividends declared per share (Note 11)               $         .70    $        .685    $         .64
                                                          =============    =============    =============
</TABLE>

                       See  accompanying  summary  of  accounting  policies  and
                                    notes to  consolidated financial statements.


                                       F-5


<PAGE>



                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                     Common Stock                                                                              
                                     ------------                                                                              
                                                                                                     Loan to          Net
                                                                                                    employee       unrealized  
                                                                     Additional                      stock          holding    
                                            Number of                 paid-in       Retained        ownership         gain     
                               Total         shares      Amount       capital       earnings          plan           (loss)    
                               -----         ------      ------       -------       --------          ----           ------    
<S>                        <C>              <C>         <C>          <C>          <C>              <C>             <C>         
Balance, November 27,
1993                       $ 124,326,000    6,477,694   $1,295,000   $4,931,000   $ 135,994,000    $(10,277,000)   $      --   
Net income -
fiscal 1994                   15,093,000           --           --           --      15,093,000              --           --   
Cash dividends                (3,933,000)          --           --           --      (3,933,000)             --           --   
Exercise of stock
options                          279,000       15,800        3,000      276,000              --              --           --   
Purchase of treasury
stock                         (7,023,000)          --           --           --              --              --           --   
Compensation under
restricted stock
plan (Note 6)                    315,000           --           --           --              --              --           --   
Payment of loan from
ESOP (Note 8)                    790,000           --           --           --              --         790,000           --   
Issuance of treasury
stock under restricted
stock plan                            --           --           --        7,000              --              --           --   
Net unrealized holding
loss on investment
securities available-
for-sale, net of taxes          (314,000)          --           --           --              --              --     (314,000)  
                             -----------    ---------    ---------    ---------     -----------      ----------      -------   
Balance, December 3,
1994                         129,533,000    6,493,494    1,298,000    5,214,000     147,154,000      (9,487,000)    (314,000)  
Net income -
fiscal 1995                    9,410,000           --           --           --       9,410,000              --           --   
Cash dividends                (4,091,000)          --           --           --      (4,091,000)             --           --   
Exercise of stock
options                          947,000       56,400       11,000      936,000              --              --           --   
Purchase of treasury
stock                         (4,519,000)          --           --           --              --              --           --   
Compensation under
restricted stock
plan (Note 6)                    324,000           --           --           --              --              --           --   
Change in net unrealized
holding gain (loss) on
investment securities
available-for-sale,
net of taxes                     538,000           --           --           --              --              --      538,000   
Payment of loan from
ESOP (Note 8)                    790,000           --           --           --              --         790,000           --   
                             -----------    ---------    ---------    ---------     -----------      ----------      -------   
Balance, December 2,
1995                         132,932,000    6,549,894    1,309,000    6,150,000     152,473,000      (8,697,000)     224,000   
Net income -
fiscal 1996                    8,796,000           --           --           --       8,796,000              --           --   
Cash dividends                (4,046,000)          --           --           --      (4,046,000)             --           --   
Exercise of stock
options                          228,000       14,300        4,000      224,000              --              --           --   
Purchase of treasury
stock                         (5,401,000)          --           --           --              --              --           --   
Compensation under
restricted stock
plan (Note 6)                    206,000           --           --       36,000              --              --           --   
Change in net unrealized
holding gain(loss) on
investment securities
available-for-sale,
net of taxes                     383,000           --           --           --              --              --      383,000   
Payment of loan from
ESOP (Note 8)                    790,000           --           --           --              --         790,000           --   
                           -------------    ---------   ----------    ---------    ------------    ------------      -------   
Balance, November 30,
1996                       $ 133,888,000    6,564,194   $1,313,000   $6,410,000   $ 157,223,000    $ (7,907,000)   $ 607,000  
                           =============    =========   ==========   ==========   =============    ============    =========  

Note: The Company has 2,000,000 shares of authorized, but unissued preferred stock.      
                                                                                         
                             See accompanying summary of accounting policies and
                                     notes to consolidated financial statements.

<PAGE>

<CAPTION>

                                          Treasury Stock         
                                          --------------         
                                                                 
                         Unearned                                
                         restricted                              
                           stock       Number of                 
                         compensation   shares      Cost         
                         ------------   ------      ----         
<S>                      <C>          <C>         <C>            
                                                                 
Balance, November 27,    
1993                     $(832,000)   (253,861)   $ (6,785,000)   
Net income -                                                      
fiscal 1994                     --          --              --    
Cash dividends                  --          --              --    
Exercise of stock                                                 
options                         --          --              --    
Purchase of treasury                                              
stock                           --    (221,843)     (7,023,000)   
Compensation under                                                
restricted stock                                                  
plan (Note 6)              315,000          --              --    
Payment of loan from                                              
ESOP (Note 8)                   --          --              --    
Issuance of treasury                                              
stock under restricted                                            
stock plan                 (35,000)      1,000          28,000    
Net unrealized holding                                            
loss on investment                                                
securities available-                                             
for-sale, net of taxes          --          --              --    
                          --------    --------     -----------    
Balance, December 3,                                              
1994                       (552,000)   (474,704)    (13,780,000)  
Net income -                                                      
fiscal 1995                     --          --              --    
Cash dividends                  --          --              --    
Exercise of stock                                                 
options                         --          --              --    
Purchase of treasury                                              
stock                           --    (144,931)     (4,519,000)   
Compensation under                                                
restricted stock                                                  
plan (Note 6)              324,000          --              --    
Change in net unrealized                                          
holding gain (loss) on                                            
investment securities                                             
available-for-sale,                                               
net of taxes                    --          --              --    
Payment of loan from                                              
ESOP (Note 8)                   --          --              --    
                          --------    --------     -----------    
Balance, December 2,                                              
1995                      (228,000)   (619,635)    (18,299,000)   
Net income -                                                      
fiscal 1996                     --          --              --    
Cash dividends                  --          --              --    
Exercise of stock                                                 
options                         --          --              --    
Purchase of treasury                                              
stock                           --    (186,804)     (5,401,000)   
Compensation under                                                
restricted stock                                                  
plan (Note 6)              170,000          --              --    
Change in net unrealized                                          
holding gain(loss) on                                             
investment securities                                             
available-for-sale,                                               
net of taxes                    --          --              --    
Payment of loan from                                              
ESOP (Note 8)                   --          --              --    
                         ---------    --------    ------------    
Balance, November 30,                                             
1996                     $ (58,000)   (806,439)   $(23,700,000)   
                         =========    ========    ============    
</TABLE>


                                       F-6


<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (NOTE 11)
<TABLE>
<CAPTION>

                                                                Fiscal year ended
                                                                -----------------
                                                     November 30,     December 2,    December 3,
                                                        1996            1995           1994
                                                        ----            ----           ----
Cash flows from operating activities:
<S>                                                <C>             <C>             <C>         
    Net income                                     $  8,796,000    $  9,410,000    $ 15,093,000
    Adjustments to reconcile net
       income to net cash provided
       by operating activities:
          Provision for doubtful accounts               400,000         400,000         300,000
          Depreciation and amortization               5,477,000       5,568,000       5,425,000
          Deferred income taxes                          61,000        (121,000)        402,000
          Compensation under restricted
             stock plan                                 206,000         324,000         315,000
          Net (gain) loss on investment
             securities                                (540,000)       (511,000)        473,000
          Decrease (increase) in:
             Accounts receivable                      6,020,000      (3,027,000)      2,793,000
             Inventories                             (1,680,000)      2,727,000      (5,672,000)
             Other current assets                        26,000         385,000         (37,000)
             Other assets                              (254,000)       (250,000)       (175,000)
          Increase (decrease) in:
             Accounts payable                          (585,000)     (1,628,000)        777,000
             Accruals and other liabilities            (704,000)       (122,000)     (1,107,000)
                                                   ------------    ------------    ------------
Net cash provided by operating activities            17,223,000      13,155,000      18,587,000
                                                   ------------    ------------    ------------
Cash flows from investing activities:
    Purchases of property, plant and equipment       (4,101,000)     (5,215,000)     (7,364,000)
    Proceeds from sales of investment securities      9,660,000       9,746,000       7,110,000
    Acquisition of investment securities            (14,687,000)    (10,350,000)     (8,429,000)
                                                   ------------    ------------    ------------
Net cash used in investing activities                (9,128,000)     (5,819,000)     (8,683,000)
                                                   ------------    ------------    ------------
Cash flows from financing activities:
    Purchase of treasury stock                       (5,401,000)     (8,317,000)     (3,225,000)
    Principal repayment on loan to employee
       stock ownership plan                             790,000         790,000         790,000
    Dividends                                        (4,077,000)     (4,016,000)     (6,953,000)
    Exercise of stock options                           228,000         947,000         279,000
                                                   ------------    ------------    ------------
Net cash used in financing activities                (8,460,000)    (10,596,000)     (9,109,000)
                                                   ------------    ------------    ------------
Increase (decrease) in cash and cash equivalents       (365,000)     (3,260,000)        795,000

Cash and cash equivalents, beginning of year          7,883,000      11,143,000      10,348,000
                                                   ------------    ------------    ------------
Cash and cash equivalents, end of year             $  7,518,000    $  7,883,000    $ 11,143,000
                                                   ============    ============    ============
</TABLE>

                       See  accompanying  summary  of  accounting  policies  and
                                    notes to  consolidated financial statements.


                                       F-7


<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                         SUMMARY OF ACCOUNTING POLICIES

BUSINESS:
     Fab  Industries,  Inc. (the  "Company") is a major  manufacturer of knitted
textile fabrics, laces and finished home products as well as polyurethane coated
fabrics. Sales of textile products comprised  substantially all of the Company's
sales in fiscal  1996,  1995 and 1994,  and such  sales were  primarily  made to
United  States  customers.  Accordingly,  the  Company  considers  itself  to be
operating in a single segment business.

PRINCIPLES OF CONSOLIDATION:
     The  financial  statements  include  the  accounts  of the  Company and its
subsidiaries,   all  of  which  are  wholly  owned.   Significant   intercompany
transactions and balances have been eliminated.

FISCAL YEAR:
     The  Company's  fiscal year ends on the  Saturday  closest to November  30.
Fiscal  1996 and 1995 had  fifty- two weeks,  and  fiscal  1994 had fifty  three
weeks.

RISKS AND UNCERTAINTIES:

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

     Financial   instruments   which   potentially   subject   the   Company  to
concentrations of credit risk consist  principally of cash and cash equivalents,
investment  securities,  and trade receivables.  The Company places its cash and
cash equivalents with high credit quality financial institutions. By policy, the
Company  limits the amount of credit  exposure to any one financial  institution
and  determines  that,  with respect to investment  securities,  each  custodian
maintains  appropriate  insurance  coverage to protect the Company's  investment
portfolio.  Concentrations  of credit risk with respect to trade receivables are
limited due to the diverse group of manufacturers,  wholesalers and retailers to
whom the Company  sells (see Note 13). The Company  reviews a customer's  credit
history before  extending  credit.  The Company has established an allowance for
doubtful  accounts  based upon factors  surrounding  the credit risk of specific
customers, historical trends and other information.

CASH EQUIVALENTS:
     For purposes of the  statement  of cash flows,  the Company  considers  all
highly liquid debt instruments with original  maturities of three months or less
to be cash equivalents.

INVESTMENTS:
     The Company has adopted Statement of Financial Accounting Standards No. 115
("SFAS  115"),   "Accounting   for  Certain   Investments  in  Debt  and  Equity
Securities".  SFAS 115 addresses  accounting  and reporting for  investments  in
equity  securities  that  have  readily  determinable  fair  values  and for all
investments  in  debt  securities.  Investments  in  such  securities  are to be
classified  as either  held-to-maturity,  trading,  or  available-for-sale.  The
Company classifies all of its investments as available-for-sale. The investments
are recorded at their fair value and the unrealized  gain or loss, net of income
taxes, is recorded in stockholders' equity.

   Gains and losses on sales of  investment  securities  are computed  using the
specific identification method.


                                       F-8

<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                         SUMMARY OF ACCOUNTING POLICIES

INVENTORIES:
     Inventories  are valued at the lower of cost or market.  For a majority  of
the inventories, cost is determined by the last-in, first-out (LIFO) method with
the balance being  determined by the first-in,  first-out  (FIFO) method,  which
approximates replacement cost (see Note 3).

PROPERTY, PLANT AND EQUIPMENT:
     Property,  plant and equipment are stated at cost. Depreciation is computed
using principally the straight-line  method. The range of estimated useful lives
is 15 to 33 years for  buildings  and building  improvements,  4 to 10 years for
machinery and  equipment,  10 years for leasehold  improvements  and 5 years for
trucks (see Note 4).

RESEARCH AND DEVELOPMENT COSTS:
     Research and development costs are charged to expenses in the year incurred
and amounted to $3,875,000,  $4,184,000 and $4,347,000 in fiscal 1996,  1995 and
1994, respectively.

TAXES ON INCOME:
     The Company follows the liability  method of accounting for income taxes in
accordance  with  Statement of  Financial  Accounting  Standards  No. 109 ("SFAS
109"),"Accounting for Income Taxes".

     Provision  is made for  deferred  income  taxes which  result from  various
temporary   differences,   principally   relating  to  the  use  of  accelerated
depreciation for tax purposes (see Note 9).

EARNINGS PER SHARE:
     Earnings per share has been computed by dividing net income by the weighted
average  number  of  shares  of  common  stock  and  common  stock   equivalents
outstanding during the period.

REVENUE RECOGNITION:
     The Company  recognizes  substantially all of its revenues upon shipment of
the related goods.  Allowances for estimated returns are provided when sales are
recorded.

RECENT ACCOUNTING STANDARDS:
     In March 1995, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  121  "Accounting  for the  Impairment  of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121").
SFAS No. 121 requires, among other things,  impairment loss of assets to be held
and gains or losses from assets that are  expected to be disposed of be included
as a component of income from continuing  operations before taxes on income. The
Company adopted SFAS No. 121 in fiscal 1996 and its  implementation did not have
a material effect on the consolidated financial statements.

     In October 1995, the Financial  Accounting Standards Board issued Statement
of  Financial   Accounting   Standards  No.  123   "Accounting  for  Stock-Based
Compensation"  ("SFAS No. 123"), which allows either the intrinsic or fair value
method.  SFAS No. 123  encourages,  but does not require,  entities to adopt the
fair value  method in place of the  intrinsic  value  method as provided  for in
Accounting  Principles  Board  Opinion No. 25  "Accounting  for Stock  Issued to
Employees"  ("APB No. 25"), for all arrangements  under which employees  receive
shares of stock or other  equity  instruments  of the  employer or the  employer
incurs  liabilities to employees in amounts based on the price of its stock. The
Company anticipates retaining the intrinsic value method when it adopts SFAS No.
123 in fiscal 1997.


                                       F-9


<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Cash and Cash Equivalents
-------------------------------------------------------------------------------
     Cash and cash  equivalents  at  November  30,  1996 and  December  2,  1995
consisted of the following (in thousands):

                                                  1996                 1995
                                                 ------              -------
Cash                                             $1,700              $ 1,335
Tax-free short-term debt instruments              5,818                6,548
                                                 ------              -------

                                                 $7,518              $ 7,883
                                                 ======              =======

Note 2 - Investment Securities
-------------------------------------------------------------------------------
     Investment securities  available-for-sale at November 30, 1996 and December
2, 1995 consisted of the following (in thousands):



                                        Gross         Gross
                                      Unrealized    Unrealized
                              Cost    Holding Gain  Holding Loss  Fair Value
                              ----    ------------  ------------  ----------
       1996:                                       
       -----                                       
Equities                    $ 7,251     $   624      $   (218)   $ 7,657
U.S. Treasury obligations        37          --            --         37
Tax-exempt obligations       46,891         513           (25)    47,379
Corporate bonds               5,689         155           (37)     5,807
                            -------     -------      ---------   -------
                                                   
                            $59,868     $ 1,292      $   (280)   $60,880
                            =======     =======      ========    =======
                                                   
       1995:                                       
       -----                                       
Equities                    $ 1,814     $   109      $   (259)   $ 1,664
U.S. Treasury obligations        52          --            --         52
Tax-exempt obligations       47,769         578           (79)    48,268
Corporate bonds               4,665         116           (91)     4,690
                            -------     -------      ---------   -------
                                                   
                            $54,300     $   803      $   (429)   $54,674
                            =======     =======      ========    =======


                                      F-10
                                                 
<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The carrying  values and  approximate  fair values of  investments  in debt
securities  available-for-sale,  at November 30, 1996 and  December 2, 1995,  by
contractual maturity are as shown below:
<TABLE>
<CAPTION>

                                                    November 30, 1996           December 2, 1995
                                                    -----------------           ----------------
                                                    Cost       Fair Value       Cost      Fair Value
                                                    ----       ----------       ----      ----------
<S>                                               <C>           <C>           <C>           <C>    
Maturing in one year or less                      $ 4,995       $ 5,030       $11,321       $11,333
Maturing after one year through five years         45,853        46,402        31,711        32,117
Maturing after five years through ten years         1,769         1,791         9,454         9,560
                                                  -------       -------       -------       -------

                                                  $52,617       $53,223       $52,486       $53,010
                                                  =======       =======       =======       =======
</TABLE>


     Gross and net realized  gains and losses on sales of investment  securities
were:

                                1996           1995           1994
                                ----           ----           ----

Gross realized gains           $ 1,518        $ 762        $   640
Gross realized losses             (978)        (251)        (1,113)
                               -------        -----        -------

Net realized gain (loss)       $   540        $ 511        $  (473)
                               =======        =====        =======

Note 3 - Inventories
-------------------------------------------------------------------------------


   Inventories  at November  30,  1996 and  December  2, 1995  consisted  of the
following (in thousands, except for percentages):

                                                     1996           1995
                                                   --------       ------

Raw materials                                      $10,504        $11,753
Work-in process                                     10,087          7,675
Finished goods                                       8,356          7,839
                                                   -------        -------

                                                   $28,947        $27,267
                                                   =======        =======

Approximate percentage of inventories
valued under LIFO method                                65%            66%
                                                   =======        =======

Excess of FIFO valuation over LIFO valuation       $ 7,161        $ 7,903
                                                   =======        =======


                                      F-11


<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 4 - Property, Plant and Equipment
-------------------------------------------------------------------------------


     Property,  plant and  equipment  at November  30, 1996 and December 2, 1995
consisted of the following (in thousands):

                                                         1996           1995
                                                       -------         -----
Owned by the Company:
 Land and improvements                                $    698       $    698
 Buildings and improvements                             12,703         12,668
 Machinery and equipment                                90,459         86,405
 Trucks and automobiles                                  1,547          1,538
 Office equipment                                          659            656
 Leasehold improvements                                    808            808
                                                      --------       --------

                                                       106,874        102,773
Property under capital leases:
 Land                                                       18             18
 Buildings and improvements                              1,432          1,432
                                                      --------       --------

                                                       108,324        104,223
Less: Accumulated depreciation and amortization         78,121         72,644
                                                      --------       --------

                                                      $ 30,203       $ 31,579
                                                      ========       ========


                                      F-12


<PAGE>


                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 - Obligations Under Capital Leases
-------------------------------------------------------------------------------


     Obligations  under capital leases at November 30, 1996 and December 2, 1995
consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                       1996       1995
                                                                       ----       ----
<S>                                                                     <C>        <C> 
Obligations under capital leases through 2006 payable in monthly
  installments of $11 including interest at 10% per annum               $648       $706

Less:    Current maturities (included with other current
         liabilities)                                                     28         28
                                                                         ---        ---


                                                                        $620       $678
                                                                        ====       ====
</TABLE>

Aggregate  installments  on obligations  under capital leases 
maturing after one year are as follows:

Fiscal year ending (in thousands):
                                            1998                   $ 67
                                            1999                     73
                                            2000                     79
                                            2001                     85
                                            Thereafter              316
                                                                    ---
                                                                   $620
                                                                   ====

Note 6 - Stock Compensation Plans
-------------------------------------------------------------------------------

Stock Option Plan:

     Under the  Company's  1987 stock option plan,  the Company may grant to key
employees  either  nonqualified  or incentive  stock options to purchase up to a
maximum of 650,000  shares of common  stock at the fair market value at the date
of the grant.

     During  fiscal 1996 and fiscal 1994,  options  covering  50,000  shares and
10,000 shares,  respectively  were granted.  During fiscal 1995, no options were
granted.

     During fiscal 1996,  1995 and 1994,  options  covering  14,300,  56,400 and
15,800 shares, respectively,  were exercised and during the same periods options
for 10,000, 1,800 and 13,400 shares were cancelled.

     As of the end of fiscal 1996, 1995 and 1994, respectively,  the Company had
outstanding  incentive  stock  options for the purchase of 154,900,  129,200 and
187,400  shares;  128,800,  168,800 and 167,000 shares were still  available for
future grants; and 113,700,  127,400 and 173,720 were exercisable.  The exercise
prices  range from $15.44 to $33.88 per share,  expiring  at various  dates from
1996 to 2006.


                                      F-13


<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Plan:

     During  fiscal 1991,  the Company  approved a  restricted  stock plan which
awarded  60,000  shares of common stock  previously  held in its treasury to key
employees. Shares are awarded in the name of the employee, who has all rights of
a shareholder,  subject to certain  restrictions  or forfeiture.  Vesting occurs
over a  five-year  period  from the  date the  shares  were  awarded.  Dividends
associated  with the shares  will be held by the  Company and will vest over the
same  five-year  period.  3,000  shares  were  forfeited  in fiscal 1996 and the
balance became fully vested.

     The shares were  recorded at their quoted market value at the date of grant
of $26 per  share,  or  $1,560,000.  The  compensation  element  related  to the
awarding of such shares is  recognized  ratably over the  five-year  restriction
period.

     During fiscal 1996 and 1994,  an additional  2,400 shares and 1,000 shares,
respectively, were awarded under terms similar to those described above.

     Compensation  expense  related  to the above  restricted  shares for fiscal
1996, 1995 and 1994 was $181,000, $324,000 and $315,000, respectively.


Note 7 - Stockholder Rights Plan
-------------------------------------------------------------------------------

     During fiscal 1990, the Company's Board of Directors  adopted a Stockholder
Rights Plan ("Rights  Plan").  The Rights Plan was  subsequently  amended in May
1991,  following a 2 for 1 stock split.  In connection  with the Rights Plan, as
amended,  the Company  declared a dividend of one-half  share  purchase right (a
"Right") on each of its common  shares.  Each Right  entitles the holders to buy
from the Company one-half of a common share for every share owned at an exercise
price of $60 per share.  The Rights have a term of ten years and can only become
exercisable upon Board of Directors'  approval if a person or group acquires 20%
or more of the Company's common shares, or announces that it intends to commence
a tender offer which would result in the  ownership of 30% or more of the common
shares as defined in the Rights Plan. Until they become exercisable,  the Rights
will be evidenced by the common stock  certificates and will be transferred only
with such certificates. The Company is entitled to redeem the Rights at $.01 per
Right at any time prior to the Rights' becoming exercisable. Upon an acquisition
or similar transaction, the Rights will become exercisable at a 50% discount for
common shares of an acquiring person.  The Rights attach to all of the Company's
common shares outstanding as of June 6, 1990, or subsequently issued, and expire
on June 6, 2000.


Note 8 - Benefit Plans
-------------------------------------------------------------------------------

Profit Sharing Plans:

     A qualified plan, which covers the majority of salaried employees, provides
for discretionary contributions up to a maximum of 15% of eligible salaries. The
distribution of the contribution to the Plan's  participants is based upon their
annual base  compensation.  Contributions  for fiscal  1996,  1995 and 1994 were
$439,000, $415,000 and $538,000, respectively.

     The Company established in fiscal 1990 a nonqualified, defined contribution
retirement plan for key employees who are ineligible for the salaried  employees
qualified profit sharing plan. Contributions for fiscal 1996, 1995 and 1994 were
$98,000, $123,000 and $156,000, respectively.


                                      F-14


<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pension Plan:

     The Company's  defined benefit plan covers all eligible  hourly  production
employees.  The  benefits  are  based  on years of  service.  Contributions  are
intended to provide benefits attributable to both past and future services.

   The net periodic  pension  cost of the defined  benefit plan for fiscal 1996,
1995 and 1994 is as follows (in thousands):
<TABLE>
<CAPTION>

                                                     1996           1995          1994
                                                     ----           ----          ----

<S>                                                 <C>            <C>            <C>  
Service cost                                        $   178        $   160        $ 182
Interest cost on projected benefit obligation           161            162          148
Actual return on plan assets                         (1,267)        (1,024)         213
Net amortization and deferral                           924            768         (525)
                                                    -------        -------        -----

Net periodic pension cost                           $    (4)       $    66        $  18
                                                    =======        =======        =====
</TABLE>


     The following table presents a  reconciliation  of the funded status of the
Plan for fiscal 1996 and 1995 (in thousands):

<TABLE>
<CAPTION>

                                                                           1996              1995
                                                                          ------            -----

<S>                                                                       <C>            <C>
Accumulated benefit obligations including vested benefits
of ($2,080) and ($2,242)                                                  $(2,235)       $(2,560)
                                                                          =======        =======

Projected benefit obligation for service rendered to date                 $(2,235)       $(2,560)
Plans assets at fair value, primarily listed stocks                         4,350          3,432
                                                                          -------        -------
Projected plan assets in excess of benefit obligation                       2,115            872

Unrecognized net gain from past experience different
from that assumed and effects of changes in assumptions                    (2,194)          (930)

Unrecognized prior service cost                                                37             41

Unrecognized net asset at transition being recognized over 11 years           (56)           (84)
                                                                          -------        -------

Accrued pension costs included in other current liabilities               $   (98)       $  (101)
                                                                          =======        =======
</TABLE>
     The average  discount rate was 7 1/2% in fiscal 1996 and 8% in fiscal 1995,
and the expected rate of return on assets for both fiscal 1996 and 1995 was 8%.



                                      F-15


<PAGE>


                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Employee Stock Ownership Plan:
     On November 25, 1991, the Company  established an Employee Stock  Ownership
Plan (ESOP) which covers all full time  employees who have completed one year of
service. On December 18, 1991, the ESOP purchased 340,000 shares of common stock
from the  Chairman of the Board of  Directors  and  President of the Company for
$34.875 per share,  which  represented  5.5% of the Company's  then  outstanding
common  stock.  The ESOP was funded by the  Company,  pursuant  to a loan pledge
agreement  dated December 18, 1991 for  $11,857,000.  The loan is payable by the
ESOP to the  Company  from  contributions  to be made in  fifteen  equal  annual
principal  installments plus interest at the prime rate.  Employee rights to the
common  shares  vest over a  seven-year  period and are  payable at  retirement,
death, disability or termination of employment.

     Annual  principal  installments of $790,000 plus interest at prime are paid
by the ESOP to the Company. The balance on the ESOP indebtedness at November 30,
1996 of $7,907,000  is reflected as a reduction of the  Company's  stockholders'
equity in the consolidated balance sheet.

     ESOP  contributions  are recorded for financial  reporting  purposes as the
ESOP  shares  become  allocable  to the Plan  participants.  All ESOP shares are
considered outstanding in the determination of earnings per share.

     The portion of the common stock dividends  declared relating to ESOP shares
totaled  $232,000,  $229,000  and  $216,000  for  fiscal  1996,  1995 and  1994,
respectively.  Of these amounts,  $75,000,  $60,000 and $50,000 for fiscal 1996,
1995 and 1994, respectively,  related to allocated shares and $157,000, $169,000
and  $166,000  for  fiscal  1996,  1995  and  1994,  respectively,   related  to
unallocated  shares.  The dividends related to the unallocated  shares are being
applied towards the $790,000 annual principal installments referred to above.

     As of November 30, 1996 and December 2, 1995,  ESOP shares  information was
as follows:


                                                          1996            1995
                                                         -----            ----

       Allocated                                       123,694         102,281
       Committed to be released                         25,693          27,113
       In suspense                                     178,965         204,639
                                                      --------        --------

           Total shares held by ESOP                   328,352         334,033
                                                      ========        ========


                                      F-16


<PAGE>



                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The net charges to earnings for fiscal 1996,  1995 and 1994 were as follows
(in thousands):

                                             1996         1995         1994
                                             ----         ----         ----

Contribution to ESOP                        $1,297       $1,513       $1,332
Less: Interest income on loan to ESOP          738          840          708
                                            ------       ------       ------

Net charge to earnings                      $  559       $  673       $  624
                                            ======       ======       ======


   The  contribution  to the ESOP is allocated  between  costs of goods sold and
operating  expenses;  the  interest  income is included in interest and dividend
income.

Note 9 - Income Taxes
-------------------------------------------------------------------------------

     Provisions for Federal,  state and local income taxes for fiscal 1996, 1995
and 1994 consisted of the following components (in thousands):


                                   1996          1995          1994
                                   ----          ----          ----
Current:
         Federal                 $3,415       $ 3,924        $6,104
         State and local            324           547           829
                                 ------       -------        ------
                                  3,739         4,471         6,933
Deferred:
         Federal and state           61          (121)          402
                                 ------       -------        ------

                                 $3,800       $ 4,350        $7,335
                                 ======       =======        ======

     The net  deferred  tax  liability at November 30, 1996 and December 2, 1995
consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                  1996           1995
                                                                  ----           ----
<S>                                                            <C>            <C>
Long-term Portion:
  Gross deferred tax liability (asset) for:
   Excess depreciation for tax purposes                        $ 5,738        $ 5,835
   Future tax deductions for employee benefit plans             (1,076)          (933)
   Other                                                             -            (42)
                                                               -------        -------
                  Net long-term liability                        4,662          4,860
                                                               -------        -------

Current Portion:
  Gross deferred tax liability (asset) for:
   Allowance for doubtful accounts                                (108)           (92)
   Net unrealized holding gain on investment securities
    available-for-sale, included in stockholders' equity           405            150
   ESOP contribution accrued for tax purposes                      417            416
   Other                                                            47           (228)
                                                               -------        -------
                  Net current liability                            761            246
                                                               -------        -------

  Net deferred tax liability                                   $ 5,423        $ 5,106
                                                               =======        =======
</TABLE>


                                      F-17

<PAGE>



                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


   The  differences  between  the  Company's  effective  tax  rate  and  Federal
statutory tax rate for fiscal 1996, 1995 and 1994 arose from the following:

<TABLE>
<CAPTION>
                                                                  1996         1995         1994 
                                                                  ----         ----         ---- 
                                                                        (% of pretax income)

<S>                                                               <C>          <C>          <C>  
Federal tax expense at statutory rate                             35.0%        35.0%        35.0%
State and local income taxes, net of Federal benefit               2.4          3.0          2.7
Tax-free interest income and dividends received deduction         (6.4)        (6.2)        (3.3)
Other                                                             (0.8)        (0.2)        (1.7)
                                                                  ----         ----         ----
Effective tax rate                                                30.2%        31.6%        32.7%
                                                                  ====         ====         ====
</TABLE>


Note 10 - Commitments
-------------------------------------------------------------------------------


Stock Repurchase:
   In March  1993,  the  Company  entered  into a five year  agreement  with the
Chairman of the Board of Directors  and  President  ("Chairman").  The agreement
provides that, in the event of the Chairman's  death,  his estate has the option
to sell, and the Company the  obligation to purchase, certain stock owned by the
Chairman.  The amount of stock  subject to purchase is equal to the lesser of $7
million  or  10%  of the  book  value  of the  Company  at the  end of the  year
immediately  following his death, plus the $3 million proceeds from insurance on
his life for which the Company is the beneficiary.

Lease:
   The Company  leases its New York City offices and  showrooms  until 2006,  at
average  minimum  annual  rentals of  $503,000  until  April  2001 and  $660,000
thereafter  until April 2006, plus  escalation and other costs.  The Company has
the option to cancel the lease effective April 2001.

   Rental expense for operating  leases in fiscal 1996, 1995 and 1994 aggregated
$643,000, $671,000 and $662,000, respectively.

   Future minimum annual payments over the remaining  noncancelable  term of the
Company's New York City operating lease are as follows:

     Fiscal year ending (in thousands):

         1997                                    $  487
         1998                                       494
         1999                                       530
         2000                                       559
         2001                                       235
                                                 ------

                                                 $2,305
                                                 ======


                                      F-18

<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 11 - Statement of Cash Flows
-------------------------------------------------------------------------------


   Cash outlays for  corporate  income taxes and interest for fiscal 1996,  1995
and 1994 were as follows (in thousands):

                                    Corporate
                                   income taxes          Interest
                                   ------------          --------

         1996                            $3,840             $ 124
         1995                             4,634               129
         1994                             7,865               128

Non-cash investing and financing activities:

   In fiscal 1996,  a net  unrealized  holding  gain of  $639,000,  less related
income taxes of  $256,000,  on  investment  securities  available-for-sale,  was
recorded as an increase in stockholders' equity.

   In fiscal 1995,  a net  unrealized  holding  gain of  $902,000,  less related
income taxes of  $364,000,  on  investment  securities  available-for-sale,  was
recorded as an increase in stockholders' equity.

   In fiscal 1994,  a net  unrealized  holding  loss of  $528,000,  less related
income taxes of  $214,000,  on  investment  securities  available-for-sale,  was
recorded as a reduction of stockholders' equity.


Note 12 - Interest and Dividend Income
-------------------------------------------------------------------------------


   Interest and dividend  income for the past three fiscal years were as follows
(in thousands):

                             Interest          Dividend
                              income            income            Total
                              ------            ------            -----


         1996                  $3,505             $ 155           $3,660
         1995                   3,546               130            3,676
         1994                   3,112               298            3,410


Note 13 - Major Customer
-------------------------------------------------------------------------------


   For fiscal  1996,  1995 and 1994,  sales to a group of  customers  affiliated
through  common  control  accounted  for  approximately  12%, 16% and 10% of net
sales,  respectively.  The receivables from this group of customers  represented
approximately 13% and 22% of the November 30, 1996 and December 2, 1995 accounts
receivable balances, respectively.


                                      F-19


<PAGE>

                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 14 - Quarterly Financial Data (unaudited)
-------------------------------------------------------------------------------


   Quarterly  earnings  were as follows (in  thousands,  except for earnings per
share):


<TABLE>
<CAPTION>

                                       First            Second             Third           Fourth
                                     Quarter           Quarter           Quarter          Quarter             Total
                                     -------           -------           -------          -------             -----

<S>                                  <C>               <C>               <C>              <C>              <C>     
Fiscal 1996:
Net sales                            $35,588           $40,768           $40,016          $39,764          $156,136
Cost of goods sold                    31,040            34,753            33,704           33,969           133,466
Net income                             1,594             2,156             2,420            2,626             8,796
Earnings per share                      $.27              $.37              $.42             $.46             $1.52


Fiscal 1995:
Net sales                            $41,433           $48,318           $44,879          $47,370          $182,000
Cost of goods sold                    35,324            40,146            38,485           41,001           154,956
Net income                             1,978             3,139             1,919            2,374             9,410
Earnings per share                      $.33              $.52              $.32             $.40             $1.57
</TABLE>


                                      F-20

<PAGE>






                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                      -------------------------------------

                          FINANCIAL STATEMENTS SCHEDULE
                                FORM 10-K ITEM 14
                                -----------------

             FISCAL YEARS ENDED NOVEMBER 30, 1996, DECEMBER 2, 1995
             ------------------------------------------------------
                              AND DECEMBER 3, 1994
                              --------------------



                                       S-1

<PAGE>


                      FAB INDUSTRIES, INC. AND SUBSIDIARIES



                                    CONTENTS
                                    --------



SCHEDULE:

  II. Valuation and qualifying accounts                   S-3





                                       S-2

<PAGE>

                                   SCHEDULE II
                      FAB INDUSTRIES, INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In Thousands)




<TABLE>
<CAPTION>


Col. A                                     Col. B                   Col. C                    Col. D       Col. E
------                                     ------                   ------                    ------       ------


                                                                     Additions
                                                      --------------------------------
                                                             (1)                (2)
                                       Balance at          Charged                                        Balance
                                        beginning         to costs           Charged to                    at end
Description                             of year       and expenses       other accounts    Deductions     of year
-----------                             -------       ------------       --------------    ----------     -------


<S>                                        <C>            <C>             <C>               <C>            <C>
Fiscal year ended November 30, 1996:
   Allowance for doubtful accounts         $  500         $400  (i)             -           $(300)(ii)     $  600
                                           ======         =========       ========          ==========     ======


Fiscal year ended December 2, 1995:
   Allowance for doubtful accounts         $  950         $400 (i)              -           $(850)(ii)      $ 500
                                           ======         ========        ========          ==========      =====


Fiscal year ended December 3, 1994:
   Allowance for doubtful accounts         $1,600         $300 (i)              -           $(950)(ii)      $ 950
                                           ======         ========        ========          ==========      =====
</TABLE>





(i) Current year's provision.

(ii) Accounts receivable written-off, net of recoveries.


                                       S-3


<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, as amended,  the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                            FAB INDUSTRIES, INC.
                                            (Company)


                                            By:/s/ Samson Bitensky
                                               ---------------------
                                                     Samson Bitensky
                                            Chairman of the Board, Chief 
                                            Executive Officer and President
                                            

                                                February 27, 1997
                                                -----------------
                                                       Date

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended,  this report has been signed by the following  persons on behalf of the
Company and in the capacities and on the dates indicated.

Signature                  Date             Capacity in Which Signed
---------                  ----             ------------------------


/s/Samson Bitensky
---------------------
Samson Bitensky         February 27, 1997  Chairman of the Board, Chief 
                                           Executive Officer, President and 
                                           Director 
                                           (Principal Executive Officer)


/s/David A. Miller
---------------------
David A. Miller         February 27, 1997  Vice President-Finance and Treasurer
                                           (Principal Financial and Accounting  
                                           Officer)  


/s/Sherman S. Lawrence
----------------------
Sherman S. Lawrence     February 27, 1997  Secretary and Director


/s/Lawrence Bober
----------------------
Lawrence Bober          February 27, 1997  Director


/s/Richard Marlin
----------------------
Richard Marlin          February 27, 1997  Director


/s/Louis Feil 
----------------------
Louis Feil              February 27, 1997  Director


/s/Oscar Kunreuther 
----------------------
Oscar Kunreuther        February 27, 1997  Director


                                       16


<PAGE>

                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>

                                                                                       Page Number In
                                                                                       Sequentially
Exhibit Description of Exhibit                                                         Numbered Copy

<S>     <C>                                                                            <C>
3.1     -  Restated Certificate of Incorporation, incorporated by reference to
           Exhibit 3.1 to the Company's Annual Report on Form 10-K for the
           fiscal year ended November 27, 1993 (the "1993 10-K").

3.2     -  Amended and Restated By-laws, incorporated by reference to Exhibit
           3.2 to the 1993 10-K.

3.3     -  Certificate of Amendment of Restated Certificate of Incorporation,
           incorporated by reference to Exhibit 3.3 to the Company's Annual
           Report on Form 10-K for the fiscal year ended December 3, 1994 (the
           "1994 10-K").

4.1     -  Specimen of Common Stock Certificate, incorporated by reference to
           Exhibit 4-A to Registration Statement No. 2-30163, filed on November
           4, 1968.

4.2     -  Rights Agreement dated as of June 6, 1990 between the Company
           and Manufacturers Hanover Trust Company, as Rights Agent, which
           includes as Exhibit A the form of Rights Certificate and as Exhibit 
           B the Summary of Rights to purchase Common Stock, incorporated by
           reference to Exhibit 4.2 to the 1993 10-K.

4.3     -  Amendment to the Rights Agreement between the Company and
           Manufacturers Hanover Trust Company dated as of May 24, 1991,
           incorporated by reference to Exhibit 4.3 to the 1993 10-K.

10.1    -  1987 Stock Option Plan of the Company, incorporated by reference to
           Exhibit 10.1 to the 1993 10-K.

10.2    -  Employment Agreement dated as of March 1, 1993, between the
           Company and Samson Bitensky, incorporated by reference to Exhibit
           10.2 to the 1993 10 -K.

10.3    -  Fab Industries, Inc. Hourly Employees Retirement Plan (the 
           "Retirement Plan"),  incorporated by reference to Exhibit 10.3 
           to the 1993 10-K.

10.4    -  Amendment to the Retirement Plan effective December 11, 1978,
           incorporated  by reference to Exhibit 10.4 to the 1993 10-K.

10.5    -  Amendment to the Retirement Plan effective December 1, 1981,
           incorporated by reference to Exhibit 10.5 to the 1993 10-K.

10.6    -  Amendment to the Retirement Plan dated November 21, 1983,
           incorporated by reference to Exhibit 10.6 to the 1993 10-K.

10.7    -  Amendment to the Retirement Plan dated August 29, 1986,
           incorporated by reference to Exhibit 10.7 to the 1993 10-K.
</TABLE>


                                       17

<PAGE>


<TABLE>
<CAPTION>

                                                                                       Page Number In
                                                                                       Sequentially
Exhibit Description of Exhibit                                                         Numbered Copy

<S>     <C>                                                                            <C>

10.8   -  Amendment to the Retirement Plan effective as of December 1,
          1989, incorporated by reference to Exhibit 10.9 to the 1993 10-K.

10.9   -  Amendment to the Retirement Plan dated September 21, 1995,
          incorporated by reference to Exhibit 10.9 to the Company's Annual
          Report on Form 10-K for the fiscal year ended December 2, 1995 (the
          "1995 10-K").

10.10  -  Fab Lace, Inc. Employees Profit Sharing Plan (the "Profit Sharing
          Plan"), incorporated by reference to Exhibit 10.9 to the 1993 10-K.

10.11  -  Amendment  to the  Profit  Sharing  Plan  effective  as of
          December 1, 1978,  incorporated by reference to Exhibit 10.10
          to the 1993 10-K.

10.12  -  Amendment  dated  December  1, 1985 to the Profit  Sharing
          Plan,  incorporated by reference to Exhibit 10.11 to the 1993
          10-K.

10.13  -  Amendment  dated  February  5, 1987 to the Profit  Sharing
          Plan,  incorporated by reference to Exhibit 10.12 to the 1993
          10-K.

10.14  -  Amendment  dated  December  24, 1987 to the Profit  Sharing
          Plan,  incorporated by reference to Exhibit 10.13 to the 1993
          10-K.

10.15  -  Amendment  dated June 30, 1989 to the Profit  Sharing Plan,
          incorporated by reference to Exhibit 10.14 to the 1993 10-K.

10.16  -  Amendment  dated  February  1, 1991 to the Profit  Sharing
          Plan,  incorporated by reference to Exhibit 10.15 to the 1993
          10-K.

10.17  -  Amendment  dated  September  1, 1995 to the Profit  Sharing
          Plan,  incorporated by reference to Exhibit 10.17 to the 1995
          10-K.

10.18  -  Lease dated as of December 8, 1988 between Glockhurst
          Corporation N.V. and the Company, incorporated by
          reference to Exhibit 10.16 to the 1993 10-K.

10.19  -  Lease Modification Agreement dated as of April 8, 1991 between
          Glockhurst Corporation N.V. and the Company, incorporated by
          reference to Exhibit 10.17 to the 1993 10-K.

*10.20 -  Second Lease Modification Agreement dated May 23, 1996 between 200
          Madison Associates, L.P., and the Company.

10.21  -  Lease dated as of March 1, 1979 between City of Amsterdam
          Industrial Development Agency and Gem Urethane Corp., incorporated
          by reference to Exhibit 10.18 to the 1993 10-K.

10.22  -  Lease dated as of January 1, 1977 between City of Amsterdam
          Industrial Development by reference to Exhibit 10.19 to the 1993 10-
          K.

10.23  -  Form of Indemnification agreement between Company and its officers
          and directors, incorporated by reference to Exhibit 10.20 to the 1993
          10-K.
</TABLE>


                                       18

<PAGE>

<TABLE>
<CAPTION>

                                                                                       Page Number In
                                                                                       Sequentially
Exhibit Description of Exhibit                                                         Numbered Copy

<S>     <C>                                                                            <C>

10.24  -  Company's Employee Stock Ownership Plan effective as of November
          25, 1991, incorporated by reference to Exhibit 10.24 to the 1993 10-
          K.

10.25  -  Amendment dated September 21, 1995 to the Employee Stock
          Ownership Plan, incorporated by reference to Exhibit 10.27 to the
          1995 10-K.

10.26  -  Company's Non-Qualified Executive Retirement Plan dated as of
          November 30, 1990, incorporated by reference to Exhibit 10.25 to
          the 1993 10-K.

21     -  Subsidiaries of the Company incorporated by reference to Exhibit 21 to
          the 1994 10-K.

*23    -  Consent of BDO Seidman, LLP.

**27   -  Financial Data Schedule pursuant to Article 5 of Regulation S-X.

</TABLE>

-------------

*        Filed herewith.
**       Filed with EDGAR version only.

                                       19