SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the fiscal year ended November 29, 2003

[_]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the transition period from _____ to _____

                          Commission file number 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 ]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of The Act)

                        Yes [_]                  No [X]

         The aggregate market value at May 31, 2003 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
$33,000,000. 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 13,
2004, there were outstanding 5,215,031 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 120 days after the end of
the fiscal year covered by this Annual Report on Form 10K pursuant to Regulation
14A are incorporated by reference in Items 10 through 14 of Part III of this
Annual Report on Form 10-K.


<PAGE>

                              FAB INDUSTRIES, INC.

                               INDEX TO FORM 10-K

<TABLE>
<CAPTION>
ITEM NUMBER                                                                         PAGE

<S>                                                                                   <C>
PART I.................................................................................1
         Item 1. Business..............................................................1
         Item 2. Properties............................................................4
         Item 3. Legal Proceedings.....................................................6
         Item 4. Submission of Matters to a Vote of Security-Holders...................6

PART II................................................................................7
         Item 5. Market for Common Equity and Related Stockholder Matters..............7
         Item 6. Selected Consolidated Financial Data..................................8
         Item 7. Management's Discussion and Analysis of Financial
                 Condition and Results of Operations...................................9
         Item 7A. Quantitative and Qualitative Disclosures About Market Risk..........15
         Item 8. Financial Statements and Supplementary Data..........................15
         Item 9. Changes in Disagreements with Accountants on Accounting and
                      Financial Disclosure............................................15
         Item 9A Controls and Procedures..............................................16

PART III .............................................................................17
         Item 10. Directors and Executive Officers....................................17
         Item 11. Executive Compensation..............................................18
         Item 12. Security Ownership of Certain Beneficial Owners and Management......18
         Item 13. Certain Relationships and Related Transactions......................18
         Item 14. Principal Accountant Fees and Services..............................18

PART IV...............................................................................19
         Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....19
</TABLE>


<PAGE>

                                            PART I


ITEM 1.  BUSINESS

         Fab Industries, Inc. was incorporated on April 21, 1966, under the laws
of the State of Delaware and is a successor by merger to previously existing
businesses. References in this Annual Report to "Fab" or "us" or "our" or "the
Company" mean Fab Industries, Inc. and its subsidiaries on a consolidated basis,
unless the context otherwise requires.

          We are a manufacturer of warp and circular knit fabrics, raschel
laces, and laminated fabrics. We also produce comforters, sheets, blankets and
other bedding products.

         The Company's Board of Directors has determined that it is in the best
interests of its stockholders to sell the Company's textile business as a going
concern. In order to maximize stockholder value, the Board of Directors adopted
resolutions dated March 1, 2002 which authorized, subject to stockholder
approval, the sale of the Company's business pursuant to a Plan of Liquidation
and Dissolution (the "Plan"). The Company's stockholders approved the Plan at
the Company's annual meeting on May 30, 2002. The Plan provides the Company's
officers and directors will continue to operate the Company's textile business
in its current fashion and pursue a sale of the business as a going concern. The
Company's Board of Directors has approved the engagement of McFarland Dewey &
Co., LLC financial advisors in November 2002 to assist with the sale of the
business. The accompanying financial statements have been prepared on a going
concern basis. There can be no assurance, however, that the Company will be
successful in selling its business or if it does sell the business, that it will
be able to recover the full value of its assets, particularly its property,
plant and equipment. On August 1, 2003, and May 30, 2002 the Company's Board of
Directors declared a liquidating distribution of $4.00 per share and $10.00 per
share, respectively, which resulted in a payment to stockholders of $20,860,000
and $52,380,000 in August 2003 and June 2002, respectively. On February 18,
2004, the Company's Board of Directors declared a liquidating distribution of
$3.00 per share, to be payable on March 10, 2004, with a record date of February
28, 2004.

         Pursuant to resolutions adopted by the Company's Board of Directors,
upon approval of the Plan by the stockholders on May 30, 2002 the Employee Stock
Ownership Plan (the ESOP) was terminated and all shares of common stock of the
Company then held in the ESOP suspense account (86,456 shares) were transferred
to the Company, and held as treasury stock, in exchange for the cancellation of
the outstanding loan in the amount of $3,957,000 from the Company to the ESOP.
The Company recorded the related treasury stock at fair market value on the date
of the termination, which resulted in a $2.4 million charge to additional
paid-in-capital.

         Pursuant to resolutions adopted by the Company's Board of Directors and
documentation sent to and returned to the Company by option holders, effective
immediately following stockholder approval of the Plan on May 30, 2002, all
outstanding options under the Company's 1997 Stock Incentive Plan became vested,
and all options as to which optionees (including employees and directors) had
returned to the Company the appropriate forms (representing options held by all
but one optionee, who exercised via payment to the Company) were exercised
through the issuance of loans from the Company to the optionees, with stock of
the optionees held as collateral by the Company until the loans have been
satisfied. The amount loaned to the employees and directors to exercise their
options was approximately $1,495,000, which was all repaid prior to August 30,
2003. These options were subject to variable accounting at each reporting
period, until the loans were repaid. In June 2003, the Company repurchased
22,984 shares of its common stock at $9.48 per share from employees and
directors with outstanding loans from the Company and offset the related payment
against the loans due from such employees and directors, which were due as of
May 31, 2003 with a one month grace period. The Company purchased the number of
shares necessary for the employees and directors to pay off all outstanding
loans, including interest.


                                       (1)
<PAGE>

         On October 23, 2003, Fab received a preliminary, non-binding offer from
a management-led buyout group to acquire the business, as a going concern, for
$19,556,366 (or $3.75 per share), subject to certain terms and conditions. The
offer contemplated that the management-led group would acquire all of the
assets, and assume all of the liabilities, of Fab, and assumed that Fab will not
make any further cash distributions. In connection with its receipt of the
management-led offer, Fab formed a Special Committee comprised solely of
independent directors to review the offer.

         On November 26, 2003, the management-led buyout group offer to acquire
the business was withdrawn.

         The Company is currently in compliance with the 40% limitation on
holding investment securities set forth in the Investment Company Act of 1940
and intends to remain in compliance with such requirements in the future.

OPERATIONS

         Fab is a supplier of knitted fabrics and lace in the domestic textile
industry. The Company currently operates in three segments: (1) Apparel Fabrics,
(2) Home Fashions and Accessories, and (3) Other, consisting of the Gem Urethane
operation, the Over-the-Counter Retail operation, located at the Salisbury
Manufacturing facility, and Industrial Fabrics.

         APPAREL FABRICS

         The Company's textile fabrics are sold to a wide variety of
manufacturers of ready-to-wear and intimate apparel for women and children,
including dresses and sportswear, children's sleepwear, activewear, swimwear,
and recreational apparel.

         These fabrics are sold and marketed through the Company's Warp Knit and
Circular Knit Business Units. The fabrics are sold primarily in piece dyed form,
as well as "PFP" (prepared for printing), and heat transfer printed
configurations.

         Fab's raschel lace products are sold to manufacturers of intimate
apparel products consisting of lingerie, daywear, panty, bra and foundations,
ladies' sportswear, children's wear, swimwear, home furnishing, accessories, and
hobby and crafts.

         The Company's laces are sold in both narrow and all-over constructions.
Narrow band laces are offered with scalloped or galloon edges in rigid and
stretch constructions. All-over laces are offered with either straight or
galloon edges in rigid and stretch constructions utilizing both spandex and
helenca nylon.

         Fab's lace products are sold to manufacturers of intimate apparel
through the Raval Designer and Wiener Lace divisions. The Raval Lace division
sells and markets laces to manufacturers and jobbers of dresses and sportswear,
blouses, other related outwear industries, and to the home furnishing and
bedding industry.

         The Company's subsidiary, SMS Textiles, Inc. ("SMS"), specializes in
wide elastic fabrics for sale to manufacturers of intimate apparel, swimwear,
athleticwear, and sportswear.

          Fab's Lida Stretch Fabrics Division specializes in circular knit
products blending nylon, cotton, polyester, and rayon with spandex to create
stretch fabrics in a variety of constructions. These fabrics are sold as piece
and yarn dyes to the ready-to-wear, aerobicwear, swimwear, and intimate apparel
markets. The broad range of products includes jerseys, ribs, jacquards, and
failles.

         The Company also offers a comprehensive line of heat transfer prints
for sleepwear, robewear, outerwear, and activewear applications.


                                       (2)
<PAGE>

         HOME FASHIONS AND ACCESSORIES

         The Company sells its fabrics and laces directly to manufactures in the
home fashion and bedding-related industries.

         In addition, Fab utilizes its own fabrics and laces to internally
produce flannel and satin sheets, blanket products, comforters, and other
bedding-related products, which are sold to specialty stores, catalogue and mail
order companies and airlines through the Company's subsidiary, Salisbury
Manufacturing Corporation.

         OTHER

         Included in this segment is (1) Gem Urethane Corporation, (2) the
Over-the-Counter Retail operation, and (3) Industrial and other miscellaneous
non-apparel fabrics.

         The Company's subsidiary, Gem Urethane produces a line of
ultrasonically, hot melt adhesive, flame and adhesive bonded products for
environmental, health care, industrial, and consumer markets.

           In addition, Gem Urethane does toll laminating and converting for
these markets as well as a fire resistant fabric, Sandel(R), through its
subsidiary Sandel International, to the seating, transportation and military
markets.

         Subsequent to year ended fiscal 2003,certain equipment was sold to a
customer which previously owned 50% of the equipment. The proceeds from the sale
amounted to $1,100,000. As a result, the customer at a future date will be doing
the production on its own.

         The Company also sells its fabrics and laces to the over-the-counter
retail market through its retail manufacturing operation located at the
Salisbury Manufacturing plant. Internally produced fabrics and laces are
transported to the Salisbury Manufacturing facility where the fabrics and laces
are "doubled and rolled" on specialized equipment, packaged, and then shipped to
various over-the counter retail customers.

         The Company also manufactures various engineered fabrics for specific
industrial and institutional end-uses, including Velcro-UBL (unbroken loop)
constructions, laminating and coating substrates, linings, and filtration.

GENERAL

         We engage in research and product development activities to create new
fabrics and styles to meet the continually changing demands of our customers.
Direct expenditures in this area aggregated $1,999,000 in fiscal 2001,
$1,690,000 in fiscal 2002, and $850,000 in fiscal 2003. Through these efforts,
we have 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, we have also developed a full line of flannel and
satin sheets and blankets, including specialty blankets for the airline and
health care institutions.

         While we use various trademarks and trade names in the promotion and
sale of our products, we do not believe that the loss or expiration of any such
trademark or trade name would have a material adverse effect on our operations.

         We market our products primarily through our full-time sales personnel,
as well as independent representatives located throughout the United States and
abroad.

         We do not believe our 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.

         During fiscal 2003, no single customer or group of affiliated customers
accounted for more than 10% of the year's net sales. Our export sales are not
material.


                                       (3)
<PAGE>

SUPPLIES OF RAW MATERIALS

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


INVENTORIES

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

COMPETITION

         Fab is engaged in a highly competitive global business which is based
largely upon price, product quality, service and general consumer demand for the
Company's finished goods. The portion 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. Our sales have declined from approximately
$151,000,000 in 1998 to approximately $51,000,000 in 2003, largely as a result
of increased foreign competition.

SEGMENT INFORMATION

         See Note 14 of the Notes to Consolidated Financial Statements.


EMPLOYEES

         At February 13, 2004, the Company employed approximately 500 people, of
whom approximately 475 are employed by our subsidiaries. The employees are not
represented by unions. We consider relations with our employees to be
satisfactory. The number of our employees has declined from approximately 1,600
at the end of 1998 to approximately 500 on February 13, 2004.

ITEM 2.  PROPERTIES.

         The Company conducts its manufacturing operations in Lincolnton and
Salisbury, North Carolina, and Amsterdam, New York.

         Yarn receiving and storage, dye and chemical receiving and storage,
knitting operations, and dyeing and finishing operations are conducted at the
Mohican Mills facility. These operations more specifically include tricot (warp
knit) and raschel warping, tricot knitting, raschel lace knitting, wide
elastic/stretch raschel knitting, circular and double-knit knitting, dyeing,
framing, surface finishing including sueding, napping, shearing, heat transfer
printing, lace separation, all facility-wide quality operations, laboratory
testing and certification, yielding, packaging, and shipping.

         The Mohican Mills facility also processes and serves as a warehouse for
greige and finished fabrics and lace.

          The Salisbury facility is the site of our consumer and institutional
finished products manufacturing, the Over-The-Counter Retail Operation, and the
Company's Mill Outlet Store.

         The Gem Urethane plant in Amsterdam, New York utilizes approximately
106,000 square feet for production.


                                       (4)
<PAGE>

         Fab closed two manufacturing plants, Travis Knits in Cherryville, North
Carolina and Adirondack Knitting in Amsterdam, New York, during the first week
of July 2001. The Adirondack Knitting Plant was on an operating lease which
expired at the time of closure. In addition, on November 16, 2001, Fab closed
its manufacturing plant in Maiden, North Carolina. The manufacturing operations
of each of these facilities were consolidated into the Company's Mohican Mills
facility located in Lincolnton, North Carolina. The Company is attempting to
sell its plants in Cherryville and Maiden, North Carolina.

         Over the past two years, the Company has reduced the floor space of its
executive offices and showroom facilities in its New York City headquarters.

         The following table sets forth the location of each of Fab's current
manufacturing facilities, its current principal use, if any, approximate floor
space and, where leased, the lease expiration date. There are no mortgages or
other encumbrances on any of our facilities. All the Company's operating
facilities are in good operating condition and repair.

<TABLE>
<CAPTION>
                                                                          APPROXIMATE         LEASE
LOCATION                         PRINCIPAL USE                            FLOOR SPACE     EXPIRATION DATE
--------                         -------------                          --------------    ---------------
<S>                              <C>                                    <C>                   <C>
Lincolnton,                      Dyeing and finishing,                  630,550 sq. ft.       (1)
North                            Carolina raschel and tricot knitting,
                                 circular single and double knitting,
                                 tricot and raschel warping, printing
                                 and warehousing.

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

Maiden, North Carolina           (3)                                    224,013 sq. ft.       (1)

Salisbury, North Carolina        Manufacturing finished consumer        125,000 sq. ft.       (1)
                                 and institutional products and
                                 retail and over-the- counter
                                 fabrics

Amsterdam, New York              Laminated fabrics, fire fighting       106,000 sq. ft.       (2)
                                 material manufacturing
                                 operations and bonding and
                                 laminating

Cherryville, North Carolina      (3)                                    197,000 sq. ft.       (1)

New York, New York               Executive offices and showroom         5,753 sq. ft.         7/31/05
                                 facilities
</TABLE>
(1)   Company owned.
(2)   The lease currently runs from month to month.
(3)   These facilities were closed during 2001 and are currently subject to a
      brokerage sale agreement. Manufacturing operations were consolidated into
      Fab's Mohican Mills facility located in Lincolnton, North Carolina.

         All of our facilities are constructed of brick, steel or concrete, and
we consider all facilities to be adequate and in good operating condition and
repair.


                                       (5)
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

         On November 10, 2003, a class action complaint was filed against the
Company. The complaint asserts claims against the Company and certain of its
officers and directors based on the management buy-out proposal at a price
allegedly lower than the cash value and book value of the Company's shares which
was an allegedly interested transaction, the amendment to Mr. Bitensky's
employment contract discussed below in Item 7, and the Company's failure to file
a certificate of dissolution with the Delaware Secretary of State. The complaint
alleges such actions constitute violations of defendants' fiduciary duties, as
well as the provisions of the Delaware General Corporation Law. The complaint
does not seek a specific amount of damages, and seeks to enjoin defendants from
effectuating the planned management buyout. The Company served an answer to the
complaint on December 11, 2003.

         On each of November 21 and November 26, 2003, additional class action
lawsuits were initiated against the Company, asserting substantially the same
allegations as those described above.

         The Company believes that each of the claims described above is without
merit. Further, certain of the claims described above have been rendered moot by
the withdrawal of the preliminary offer by the management-led buyout group to
acquire the Company.

         A number of other claims and lawsuits are pending against the Company.
It is impossible at this time for the Company to predict with any certainty the
outcome of such litigation. However, management is of the opinion, based upon
information presently available, that it is unlikely that any liability, to the
extent not provided for through insurance or otherwise, would be material in
relation to the Company's consolidated financial position or results of
operations.

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

         Not Applicable


                                       (6)
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         Fab'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 2003                                     HIGH              LOW
         -----------                                     ----              ---
First Quarter.....................................     $  9.00          $  8.15

Second Quarter....................................     $  9.75          $  8.98

Third Quarter.....................................     $ 11.25          $  6.70

Fourth Quarter....................................     $  7.50          $  4.63

         FISCAL 2002
         -----------
First Quarter.....................................     $ 18.70          $ 12.75

Second Quarter....................................     $ 19.05          $ 17.50

Third Quarter.....................................     $  8.67          $  7.70

Fourth Quarter....................................     $  9.00          $  6.90

           At February 3, 2004, there were approximately 683 holders of record
of Common Stock. On May 30, 2002, the Company's Board of Directors declared an
initial liquidating distribution of $10.00 per share, which was paid on June 24,
2002, with a record date of June 10, 2002. Accordingly, $52,380,000 was paid on
June 24, 2002. On August 1, 2003, the Company's Board of Directors declared a
second liquidating distribution of $4.00 per share, which was paid on August 22,
2003, with a record date of August 11, 2003. Accordingly, $20,860,000 was paid
on August 22, 2003.

           The Company has terminated all of its stock option plans and as a
result there are no options outstanding or available for grant.


                                       (7)
<PAGE>

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA.
  (in thousands, except for share and per share data)

<TABLE>
<CAPTION>
                                                     AS AT OR FOR THE FISCAL YEAR ENDED
                                   ----------------------------------------------------------------
                                       NOVEMBER     NOVEMBER     DECEMBER     DECEMBER     NOVEMBER
                                       29, 2003     30, 2002      1, 2001    2, 2000 (1)   27, 1999
<S>                                     <C>          <C>          <C>         <C>          <C>
Net Sales                               $51,173      $62,965      $80,036     $118,185     $128,889
Income (loss) before taxes               (1,545)       3,010      (15,488)       4,178         (338)
    on income (2)
Net income (loss) (2)                    (1,370)       1,970       (8,623)       3,033          517
Earnings (loss) per share:
     Basic                                 (.26)         .38        (1.64)         .57          .10
     Diluted                               (.26)         .38        (1.64)         .57          .10
Total assets                             58,075       81,229      131,528      151,412      152,178
Long-term debt                               --           --          311          362          409
Stockholders'    equity                  48,929       64,571      113,503      123,855      123,788
Book value                                 9.38        12.33        21.79        23.45        22.91
per share (3)
Cash dividends per share                   4.00        10.00          .40         .475          .70
Weighted average    number of
shares outstanding:
     Basic                            5,226,902    5,222,812    5,258,353    5,336,958    5,414,687
     Diluted                          5,226,902    5,222,812    5,258,353    5,336,958    5,419,130
===================================================================================================
</TABLE>
(1)  Fifty-three week period.

(2)  Fiscal year ended December 1, 2001 amounts include asset impairment and
     restructuring charges of $14,530,000.

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


                                       (8)
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

CRITICAL ACCOUNTING ESTIMATES

        Our critical accounting estimates are those which we believe require our
most significant judgments about the effect of matters that are inherently
uncertain. A discussion of our critical accounting estimates, the underlying
judgments and uncertainties used to make them and the likelihood that materially
different estimates would be reported under different conditions or using
different assumptions, is set forth below:


Accruals and Contingencies

        We periodically assess the potential liabilities related to any lawsuits
or claims brought against us, as well as for other known unasserted claims,
including environmental, legal and tax matters. While it is typically very
difficult to determine the timing and ultimate outcome of these matters, we use
our best judgment to determine if it is probable that we will incur an expense
related to the settlement or final adjudication of such matters and whether a
reasonable estimation of such probable loss, if any, can be made. In assessing
probable losses, we make estimates of the amount of insurance recoveries, if
any. We accrue a liability when we believe a loss is probable and the amount of
the loss can be reasonably estimated, in accordance with the provisions of SFAS
No. 5, "Accounting for Contingencies," as amended. See Note 9 in the
accompanying financial statements for additional information concerning our
contingencies.

        Given the inherent uncertainty related to the eventual outcome of these
matters and potential insurance recoveries, it is possible that all or some of
these matters may be resolved for amounts materially different from any
provisions or disclosures that we may have made with respect to their
resolution. In addition as new information becomes available, we may need to
reassess the amount of probable liability that needs to be accrued related to
our contingencies. All such revisions in our estimates could materially impact
our results of operations and financial position.

        We maintain an accrual for workers compensation, which is classified as
other current liabilities in our consolidated balance sheets. We determine the
adequacy of the accrual by periodically evaluating our historical experience and
trends related to workers compensation claims and payments, information provided
to us by our insurance broker and industry experience and trends. If such
information indicates that our accrual is overstated or understated, we will
adjust the assumptions utilized in our methodologies and reduce or provide for
additional accruals as appropriate.

Revenue Recognition

        We recognize our revenues upon shipment of the related goods. Allowances
for estimated returns are provided when sales are recorded.

Bad Debt

        We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.


                                       (9)
<PAGE>

Impairment of Long-lived Assets

         Whenever events or circumstances indicate that the carrying values of
long-lived assets (including property, plant and equipment) may be impaired, we
perform an analysis to determine the recoverability of the asset's carrying
value. The carrying value of the asset includes the original purchase price (net
of depreciation) plus the value of all capital improvements (net of
depreciation). If the analysis indicates that the carrying value is not
recoverable from future cash flows, we write down the asset to its estimated
fair value and recognize an impairment loss. The estimated fair value is based
on what we estimate the current sale price of the asset to be based on
comparable sales information or other estimates of the asset's value. Any
impairment losses we recognize are recorded as operating expenses. In 2001, we
recognized $13.2 million of impairment losses. We did not recognize any
impairment losses in 2002. In 2003, the Company reviewed assets held for sale
and determined an additional $685,000 was required.

         We make estimates of the undiscounted cash flows from the expected
future operations of the asset. In projecting the expected future operations of
the asset, we base our estimates on future budgeted earnings before interest
expense, income taxes, depreciation and amortization, or EBITDA, and use growth
assumptions to project these amounts out over the expected life of the
underlying asset. If actual conditions differ from those in our assumptions, the
actual results of each asset's actual future operations could be significantly
different from the estimated results we used in our analysis. Our operating
results are also subject to the risks set forth under "Summary of Accounting
Policies - Risk and Uncertainties."


Results of Operations

FISCAL 2003 COMPARED TO FISCAL 2002

         Net sales for the fiscal 2003 were $51,173,000 as compared to
$62,965,000 in fiscal 2002, a decrease of 18.7%. Since 1998, a flood of low-cost
foreign imports continued to take a sustained toll in the U.S. textile
manufacturing sector and negatively impacted segment decline in sales and
production

         Apparel external sales for fiscal 2003 were $39.1 million, a decrease
of $12.2 million or 23.8%, as compared to $51.3 million for fiscal 2002.

         Home Fashion and Accessories external sales for fiscal 2003 were $4.2
million compared to $4.7 million in fiscal 2002, a decrease of $0.5 million or
10.6%.

         Other external sales for fiscal 2003 were $7.8 million, compared to
$7.0 million in fiscal 2002, an increase of $0.8 million or 11.4%.

         The decreases in the apparel and home fashions segments were due to the
continued influx of low-cost foreign imports and continued weakness in the
domestic textile industry. The increase in other is due primarily to our
subsidiary, Gem Urethane Corporation.

         The apparel and home fashions segments implemented measures beginning
in fiscal 2001 to reduce operating costs including a reduction in the number of
employees which reduced fixed overhead.

         Gross margins as a percentage of sales decreased to 8.3% compared to
10.4% in the similar 2002 period. Lower sales volumes reduced operating
schedules at production facilities. Due to lower average FIFO cost levels, LIFO
inventory reserves decreased by $607,000 and $96,000 in fiscal 2003 and 2002,
respectively. Management is hopeful that gross margins will show an improvement
over last year's performance tempered, however, by the continuing deterioration
in domestic textile manufacturing due to foreign imports and currency valuations
issues.


                                      (10)
<PAGE>

         Selling, general and administrative expenses decreased by $1,371,000,
or 18.6% as compared to fiscal year 2002. The decrease in expenses results
primarily from the reduction in the number of employees and related expenses,
moving its executive offices and showroom facilities to smaller premises in July
2002, and the continued effectiveness of the cost containment programs. The
decreases also resulted from the gain on sales of fixed assets totaling $443,000
and $817,000 for fiscal 2003 and 2002, respectively.

         During fiscal 2003, the Company reviewed assets held for sale and
determined an additional charge of $685,000 was required.

         For the fiscal year ended November 29, 2003, a charge of $1,659,000 was
recorded which represents certain amendments to the agreement with the Chief
Executive Officer. See Note 9 to the Consolidated Financial Statements.

         In March 2002, the Company settled a dispute without admitting
liability for $750,000. See Note 16 to the Consolidated Financial Statements.

         Apparel operating loss for fiscal 2003 was $4.6 million compared to an
operating loss of $0.7 million for fiscal 2002. Lower sales volume and lower
selling margins contributed to the increase in operating loss. In addition, the
financial results include other expenses of $1.7 million, which represents
agreement with the Chief Executive Officer (See Note 9). This was allocated
between segments with a majority included in the apparel segment (See Note 9).
The financial results include a charge for asset impairment of fixed assets
$685,000.

         Home Fashion and Accessories operating loss for fiscal 2003 was $0.2,
compared to an operating loss of $1.1 million for fiscal 2002. In fiscal 2002,
the financial results includes a charge of $750,000 for settlement of a dispute
without admitting liability. See Note 16 to the Consolidated Financial
Statements.

         Other segments operating income for fiscal 2003 was $0.7 million
compared to an operating income of $0.2 million for fiscal 2002. Higher margins
and reduction of costs increased operating income.

         Interest and dividend income decreased by $1,134,000 or 47.0% as
compared to fiscal year 2002. On August 22, 2003, the Company distributed a
second liquidating distribution of $4.00 per share, or $20,860,000. Accordingly,
the Company had lower invested balances which were invested primarily in United
States Treasury Obligations resulting in lower risks and lower yields. The
Company realized gains from the sale of investment securities of $1,266,000 in
fiscal 2003 as compared to $2,179,000 in fiscal 2002.

         The Company realized a tax benefit for fiscal 2003 which had an
effective tax rate of 11.3% as compared to an effective income tax rate of 34.6%
in the comparative 2002 period. See Note 8 to the Consolidated Financial
Statements.

         As a result of these factors, the Company had a net loss of $1,370,000,
or $0.26 basic and diluted loss per share, as compared to net income of
$1,970,000, or $0.38 basic and diluted earnings per share in fiscal 2002.


FISCAL 2002 COMPARED TO FISCAL 2001

         Net sales for fiscal 2002 were $62,965,000 as compared to $80,036,000
in fiscal 2001, a decrease of 21.3%. The decrease was caused substantially by
lower volume as business conditions within the domestic textile industry
remained depressed, and low-cost foreign imports continued to take a toll on the
U.S. textile manufacturing sector. These factors have negatively impacted sales
and production.

         Apparel external sales for fiscal 2002 were $51.3 million, a decrease
of $9.6 million or 15.8%, as compared to $60.9 million for fiscal 2001.

         Home fashions and Accessories external sales for fiscal 2002 were $4.7
million, a decrease of $5.7 million or 55.0 %, as compared to $10.4 million for
fiscal 2001.


                                      (11)
<PAGE>

         Other external sales for fiscal 2002 were $7.0 million, a decrease of
$1.8 million or 19.9%, as compared to $8.8 million for fiscal 2001.

         The decreases across our segments were due to a flood of low-priced
imports from Asia, weak market conditions and a weak economy which has continued
to take a toll on the U.S. textile manufacturing sector.

         The apparel and home fashions segments implemented measures beginning
in fiscal 2001 to reduce operating costs including a reduction in the number of
employees which reduced fixed overhead.

         Gross margins as a percentage of sales increased to 10.4% from 1.9% as
compared to similar 2001 period. A more favorable product mix and the
consolidation of three manufacturing facilities, combined with a reduction in
costs due to employee terminations, a decrease in depreciation expense and other
related costs resulted in the higher margins. Due to lower average FIFO cost
levels, LIFO inventory reserves decreased by $96,000 and $1,518,000 in fiscal
2002 and fiscal 2001, respectively.

         The financial results for the fiscal year ended December 1, 2001
include a charge of $14,530,000, which includes $13,230,000 for the writedown of
fixed assets to fair value less costs of disposal. Such fixed assets are
comprised of machinery and equipment from the knitting, dyeing, and finishing
activities of the business, and also include the building facilities in North
Carolina. The marketability of the assets held for disposal are subject to
worldwide economic conditions which can affect the sale of such buildings and
machinery. Additionally, for the fiscal year ended December 1, 2001, the Company
expended approximately $1,300,000 to remove and transfer machinery and equipment
to the Company's Mohican Mills facility which was included in the asset
impairment and restructuring charges.

         Selling, general and administrative expenses decreased by $2,376,000,
or 24.4%, as compared to fiscal year 2001. The decrease in expenses resulted
primarily from the reduction in the number of employees and related expenses,
moving executive offices and showroom facilities to smaller premises and the
continued effectiveness of the cost containment programs. The decrease also
resulted from the gain on sale of fixed assets totaling $817,000 for fiscal
2002.

         In March 2002, the Company settled a dispute without admitting
liability for $750,000. See Note 16 to the consolidated financial statements.

         Apparel operating loss for fiscal 2002 was $0.7 million as compared to
a operating loss of $22.3 million for fiscal 2001. A more favorable product mix
and the consolidation of three manufacturing facilities, combined with a
reduction in costs resulted in higher margins. In fiscal 2001, the financial
results include a charge for impairment of fixed assets and restructuring
charges of approximately $13.8 million.

         Home Fashions and Accessories operating loss for fiscal 2002 was $1.1
million compared to a operating income of $0.7 million for fiscal 2001. These
decreases were due primarily to lower sales volume. Additionally, in fiscal 2002
the financial results includes a charge of $750,000 for settlement of a dispute
without admitting liability. See Note 16 to consolidated financial statements.

         Other segments operating income for fiscal 2002 was $0.2 million
compared to an operating loss of $1.1 million for fiscal 2001.Higher margins and
reduction of costs increased operating income. In fiscal 2001, the financial
results include a charge of approximately $750,000 for impairment of fixed
assets and a restructuring charge.

         Interest and dividend income decreased by $1,876,000, or 43.7% as
compared to fiscal 2001. On June 24, 2002, the Company distributed an initial
liquidating distribution of $10.00 per share, or $52,380,000. Accordingly, the
Company had lower average invested balances which were invested primarily in
United States Treasury obligations resulting in lower risks and lower yields.
The Company realized gains from the sale of investment securities of $2,179,000
in fiscal 2002 as compared to $3,025,000 in fiscal 2001.


                                      (12)
<PAGE>

         The effective income tax rate for fiscal 2002 was 34.6% compared to a
tax benefit of 44.3% for fiscal 2001. The fiscal 2001 tax benefit included
approximately $1.5 million of certain tax reserves recorded in prior years,
which were reversed in the fourth quarter of fiscal 2001 due to changes in
estimates for tax contingency items.

         As a result of these factors, the Company generated net income of
$1,970,000, or $.38 basic and diluted per share in fiscal 2002. In fiscal 2001,
the Company had a net loss of $8,623,000 which included asset impairment and
restructuring charges of $9,590,000 net of income tax benefit. For fiscal 2001,
basic and diluted losses per share were $1.64, including asset impairment and
restructuring charges of $1.82 per share.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash provided by operating activities in fiscal 2003 amounted to
$3,313,000, as compared to $8,758,000 in fiscal 2002. Of this decrease, major
changes were as follows: $3,340,000 decrease in net income, $2,743,000 in
accounts receivable, $1,094,000 in inventories, $418,000 in compensation
relating to acceleration of stock options, and $216,000 to depreciation. These
decreases were offset by $685,000 in non-cash asset impairment, a decrease of
$913,000 in net gain on investment securities, $273,000 in other current and
other assets and $374,000 in net gain on disposition of fixed assets.

         Net proceeds from sales of investment securities were $17,441,000
compared to $38,650,000 for fiscal 2002. For the fiscal year ended November 29,
2003, the Company used the proceeds for the second liquidating distribution of
$4.00 per share or $20,860,000. For the fiscal year ended November 30, 2002, the
Company used proceeds for the initial distribution of 10.00 per share, or
$52,380,000.

         Stockholders' equity was $48,929,000, ($9.38 book value per share), at
November 29, 2003, as compared to $64,571,000, ($12.33 book value per share), at
the previous fiscal year November 30, 2002. The reduction in stockholders equity
was primarily due to the second liquidating dividend of $4.00 per share declared
on August 1, 2003 by the Company's Board of Directors, which was paid on August
22, 2003. This was partially offset by a re-classification of redeemable common
stock to non-redeemable common stock. The Company's plan of liquidation provides
the Company's officers and directors will continue to operate the Company's
textile business in its current fashion and pursue the sale of the business a
going concern. If the Company is not sold by May 2005, all assets will be
transferred to a liquidating trust. The liquidating trust would then succeed to
all our remaining assets, liabilities and obligations.

         On February 18, 2004 the Company's Board of Directors declared a
liquidating distribution of $3.00 per share to be payable March 10, 2004 with a
record date of February 28, 2004,which is expected to total approximately $15.6
million.

         In June 2003, the Company repurchased 22,984 shares of its common stock
at $9.48 per share from employees and directors with outstanding loans from the
Company and offset the related payment against the loans due from such employees
and directors, which were due as of May 31, 2003 with a one month grace period.
The Company purchased the number of shares necessary for the employees and
directors to pay off all outstanding loans, including interest.

         Management believes that the Company's current financial position is
adequate to satisfying working capital requirements and to internally fund any
future expenditures to maintain its manufacturing facilities for the next twelve
months.

Inflation

         Management does not believe that the effects of inflation have had a
significant impact during fiscal years 2003, 2002 and 2001.


                                      (13)
<PAGE>

COMMITMENTS

The Company and Mr. Bitensky amended the Employment Agreement between the
Company and Mr. Bitensky dated as of March 1, 1993 to provide that at such time
as the Company is sold or liquidated pursuant to the plan, in lieu of the annual
consulting fees due under such agreement over the five year consulting period
provided therein, Mr. Bitensky will receive a lump sum payment equal to the
aggregate net present value of each payment due under such an agreement, such
present value to be determined utilizing the prevailing prime rate at the time
of the payment as determined by the Board. Accordingly, the Company recorded a
charge of $856,000, which was included in other expense for the 52 weeks ended
November 29, 2003.

Such amendment to the Employment Agreement also provides that Mr. Bitensky
relinquishes his right under the terms of the original agreement to require the
Company to purchase upon his death approximately $10,000,000 of shares of common
stock from his estate. In consideration of Mr. Bitensky relinquishing such
right, the Company agreed to transfer to Mr. Bitensky ownership of the three
life insurance policies on Mr. Bitensky's life owned by the Company. The Company
transferred these policies having an aggregate cash surrender value at November
29, 2003 of approximately $803,000. Accordingly, the Company recorded a charge
of $803,000, which was included in other expenses for the 52 weeks ended
November 29, 2003.

OFF BALANCE SHEET ARRANGEMENTS

The Company does not utilize off Balance Sheet arrangements.

AGGREGATE CONTRACTUAL OBLIGATIONS

The following table provided information as of November 29, 2003.

                             CONTRACTUAL OBLIGATIONS

                                 (In Thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                           PAYMENTS DUE BY PERIOD
------------------------------------------------------------------------------------------------------------------------
CONTRACTUAL OBLIGATIONS                             TOTAL      LESS THAN       1-3 YEARS       3-5 YEARS      MORE THAN
                                                                1 YEAR (1)                                      5 YEARS
------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>            <C>             <C>           <C>
Long - Term debt                                $      --        $    --        $     --        $     --      $     --
------------------------------------------------------------------------------------------------------------------------
Capital Lease Obligations                              --             --              --              --            --
------------------------------------------------------------------------------------------------------------------------
Operating Leases                                      309             39             270              --            --
------------------------------------------------------------------------------------------------------------------------
Purchase Obligations                                   --             --              --              --            --
------------------------------------------------------------------------------------------------------------------------
Other Long-Term Liabilities Reflected on the        2,526             --                              --            --
Registrant's Balance Sheet under GAAP                                              2,526
------------------------------------------------------------------------------------------------------------------------
Total                                           $   2,835        $    39        $  2,526        $     --      $     --
------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  On Feb.18, 2004 the Company's Board of Directors declared a liquidating
     distribution of $3.00 per share to be payable on March 10, 2004 with a
     record date of February 28, 2004, which is expected to total approximately
     $15.6 million.


                                      (14)
<PAGE>

FORWARD-LOOKING INFORMATION

         Certain statements in this report are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. All
forward-looking statements involve risks and uncertainties. In particular, any
statement contained herein, in press releases, written statements or other
documents filed with the Securities and Exchange Commission, or in our
communications and discussions with investors and analysts in the normal course
of business including, but not limited to, meetings, phone calls and conference
calls, regarding the sale of our assets pursuant to a plan of liquidation and
dissolution, as well as expectations with respect to future sales and operating
efficiencies prior to a sale of the company, are subject to known and unknown
risks, uncertainties and contingencies, many of which are beyond our control and
which may cause actual results, performance or achievements to differ materially
from anticipated results, performances or achievements. Forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words "may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative of them or other variations of them or
comparable terminology.

         Factors that could have a material adverse effect on our operations and
future prospects include, but are not limited to: our ability to find qualified
buyers for our assets; overall economic and business conditions; our continuing
ability to support the demand for our goods and services; competitive factors in
the industries in which we compete; changes in government regulation; changes in
tax requirements (including tax rate changes, new tax laws and revised tax law
interpretations); interest rate fluctuations and other capital market
conditions, including foreign currency rate fluctuations; material contingencies
provided for in a sale of our assets; de-listing of our common stock from the
American Stock Exchange; our ability to retain key employees through any wind
down period; and any litigation arising as a result of our plan to wind down our
operations. These risks and uncertainties should be considered in evaluating any
forward-looking statements contained in the Form 10-K.

         We undertake no obligation to update or revise a forward-looking
statement, whether as a result of new information, future events, or otherwise,
other than required by law.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         See "Summary of Accounting Policies - Risks And Uncertainties" and
"-Investments" in the Consolidated Financial Statements attached hereto. See
also Note 2 of the Notes to Consolidated Financial Statements.

ITEM 8   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         See the Consolidated Financial Statements, the Notes to Consolidated
Financial Statements and the Consolidated Financial Statements Schedules
attached hereto.

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

         Not Applicable


                                      (15)
<PAGE>

ITEM 9A. CONTROLS AND PROCEDURES

(A)      DISCLOSURE CONTROLS AND PROCEDURES. Our Chief Executive Officer and
Chief Financial Officer have concluded, based on their evaluation, as of the end
of the period covered by this report, that our disclosure controls and
procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e)
and 15(d)-15(e)) are (1) effective to ensure that material information required
to be disclosed by us in reports filed or submitted by us under the Securities
Exchange act of 1934, as amended, is recorded, processed, summarized, and
reported within the time periods specified in the SEC's rules and forms, and (2)
designed to ensure that material information required to be disclosed by us in
such reports is accumulated, organized and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriated, to allow timely decisions regarding required disclosure.

(B)      INTERNAL CONTROL OVER FINANCIAL REPORTING. There were no changes in the
Company's internal control over financial reporting (as defined in Rules
13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934 , as
amended) that occurred during Fab's most recent quarter that has materially
affected, or is reasonably likely to materially affect Fab's internal control
over financial reporting.

It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute assurance that the
objectives of the system will be met. In addition, the design of any control
system is based in part upon certain assumptions about the likelihood of future
events. Because of these and other inherent limitations of control systems,
there is only reasonable assurance that our controls will succeed in achieving
their stated goals under all potential future conditions.


                                      (16)
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.

EXECUTIVE OFFICERS

         The following table sets forth certain information concerning our
executive officers as of February 13, 2004.

<TABLE>
NAME                         AGE       POSITIONS AND OFFICES
----                         ---       ---------------------
<S>                          <C>       <C>
Samson Bitensky..........    84        Chairman of the Board of Directors and Chief Executive Officer
Steven Myers.............    55        President, Chief Operating Officer
David A. Miller..........    66        Vice President-Finance, Treasurer, and Chief Financial Officer
Jerry Deese..............    52        Vice President-Controller of Plant Operations
Sam Hiatt ...............    56        Vice President-Sales
</TABLE>

         Each of our executive officers serves at the pleasure of the Board of
Directors and until his or her successor is duly elected and qualified.

         SAMSON BITENSKY was one of Fab's founders in 1966 and has served as
Chairman of the Board of Directors and Chief Executive Officer of Fab since such
time. Mr. Bitensky also served as President of Fab from 1970 until May 1, 1997.

         STEVEN MYERS, an attorney, has been employed by Fab in various senior
administrative and managerial capacities since 1979. He served as Vice President
- Sales for more than five years prior to May 1988 and as Vice President from
May 1988 to May 1, 1997 and Co-President, Chief Operating Officer from May 1,
1997 to November 27, 2001. On November 27, 2001, he became President, Chief
Operating Officer upon the retirement of our former Co-President, Stanley
August. Mr. Myers is the son-in-law of Mr. Bitensky.

         DAVID A. MILLER has been employed by Fab since 1966 and has served as
Controller from 1973 until December 7, 1995, as Vice President - Finance and
Treasurer since December 7, 1995, and as Chief Financial Officer since May 1,
1997.

         JERRY DEESE has been employed by Fab in various senior administrative
and managerial capacities since 1978. Mr. Deese served as Divisional Controller
from 1994 until 1998 and has served as Vice President-Controller of Plant
Operations since May 12, 1998.

         SAM HIATT has been employed by Fab since 1978 and previously had
various management responsibilities in the warp knit area. He has served as Vice
President-Sales since May 12, 1998.

         Other information required by this item is incorporated by reference
from our definitive proxy statement to be filed not later than 120 days after
the end of the fiscal year covered by this Annual Report on Form 10-K pursuant
to Regulation 14A of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended ("Regulation 14A").


                                      (17)
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION.

         The information required by this item is incorporated by reference from
our definitive proxy statement to be filed not later than 120 days after the end
of the fiscal year covered by this Annual Report on Form 10-K 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
our definitive proxy statement to be filed not later than 120 days after the end
of the fiscal year covered by this Annual Report on Form 10-K pursuant to
Regulation 14A.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item is incorporated by reference from
our definitive proxy statement to be filed not later than 120 days after the end
of the fiscal year covered by this Annual Report on Form 10-K pursuant to
Regulation 14A.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

         The information required by this item is incorporated by reference from
our definitive proxy statement to be filed not later than 120 days after the end
of the fiscal year covered by this Annual Report on Form 10-K pursuant to
Regulation 14A.


                                      (18)
<PAGE>

                                     PART IV


ITEM 15. 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 Consolidated
                  Financial Statements Schedules at page S-2.

         (3)      Exhibit List


EXHIBIT      DESCRIPTION OF EXHIBIT
-------      ----------------------

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").

3.4      -   Amendments to the Amended and Restated By-laws, incorporated by
             reference to Exhibit 3.4 of the Company's Annual Report on Form
             10-K for the fiscal year ended November 29, 1997.

3.5      -   Amendment to the Amended and Restated By-laws, incorporated by
             reference to Exhibit 3.5 of the Company's Annual Report on Form
             10-K for the fiscal year ended November 27, 1999.

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     -   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.


                                      (19)

<PAGE>

EXHIBIT      DESCRIPTION OF EXHIBIT
-------      ----------------------

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

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

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

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

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

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

10.8     -   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").

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

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

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

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

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

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

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

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

10.17    -   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.


                                      (20)
<PAGE>

EXHIBIT      DESCRIPTION OF EXHIBIT
-------      ----------------------

10.18    -   Lease Modification Agreement dated April 2, 1991 between Glockhurst
             Corporation, N.V. and the Company, incorporated by reference to
             Exhibit 10.17 to the 1993 10-K.

10.19    -   Second Lease Modification Agreement dated May 23, 1996 between 200
             Madison Associates, L.P. and the Company, incorporated by reference
             to Exhibit 10.20 to the Company's Annual Report on Form 10-K for
             the fiscal year ended November 30, 1996.

10.20    -   Third Lease Modification Agreement dated April 24, 2000 between 200
             Madison Associates, L.P. and the Company, incorporated by reference
             to Exhibit 10.21 to the Company's Annual Report on Form 10-K for
             the fiscal year ended November 30, 2001.

10.21    -   Fourth Lease Modification Agreement dated April 11, 2002 between
             200 Madison Associates, L.P. and the Company, incorporated by
             reference to Exhibit 10.22 to the Company's Annual Report on Form
             10-K for the fiscal year ended November 30, 2002.

10.22    -   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.

10.23    -   Lease dated as of January 1, 1977 between City of Amsterdam
             Industrial Development Agency and Lamatronics Industries, Inc.,
             incorporated by reference to Exhibit 10.19 to the 1993 10-K.

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

10.25    -   Fab Industries, Inc. Employee Stock Ownership Plan effective as of
             Nov. 25, 1991, incorporated by reference to Exhibit 10.24 to the
             1993 10-K.

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

10.27    -   Fab Industries, Inc. Non-Qualified Executive Retirement Plan dated
             as of November 30, 1990, incorporated by reference to Exhibit 10.25
             to the 1993 10-K.

10.28    -   Form of loan agreement, dated May 30, 2002, entered into between
             Fab Industries, Inc. and certain of its executive officers and
             directors, incorporated by reference to Exhibit 10.31 to the
             Company's Annual Report on Form 10-K for the fiscal year ended
             November 30, 2002.

10.29    -   Amendment dated July 25, 2003 to the Employment Agreement between
             Fab Industries, Inc. and Samson Bitensky, incorporated by reference
             to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
             filed for the quarter ended August 30, 2003.


                                      (21)
<PAGE>

EXHIBIT      DESCRIPTION OF EXHIBIT
-------      ----------------------

 21      -   Subsidiaries of the Company, incorporated by reference to Exhibit
             21 to the Company's Annual Report on Form 10-K for the fiscal year
             ended December 2, 2000.

*31.1    -   Certification of Samson Bitensky pursuant to Section 302 of the
             Sarbanes-Oxley Act of 2002.

*31.2    -   Certification of David A. Miller pursuant to Section 302 of the
             Sarbanes-Oxley Act of 2002.

*32.1    -   Certification of Samson Bitensky pursuant to 18 U.S.C. Section
             1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
             of 2002.

*32.2    -   Certification of David A. Miller pursuant to 18 U.S.C. Section
             1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
             of 2002.

_________________________

*    Filed herewith.

     (b)     Reports on Form 8-K.

             The Company furnished on October 14, 2003 a report on Form 8-K
             announcing its earnings for the 39 weeks and 13 weeks ended August
             30, 2003.

             The Company furnished on October 23, 2003 a report on Form 8-K
             announcing that it had received a preliminary offer from
             management-led buyout group to acquire the business, as a going
             concern, for $19,556,366 (or $3.75 per share), subject to certain
             terms and conditions.

             The Company furnished on November 14, 2003 a report on Form 8-K
             announcing a special committee of Fab's Board of Directors, which
             was appointed on October 23, 2003, following receipt by Fab of a
             management-led buy out group's preliminary non-binding offer for
             all of Fab's assets, has begun to consider the offer and to review
             various alternatives to maximize stockholder value. The report also
             announces that on November 10, 2003 a stockholder filed a complaint
             in Delaware Chancery Court, captioned Belanger v. Fab Industries
             Inc. ET. AL. DEL. Ch., C.A. No. 054-N, naming as defendants Fab
             Industries, Inc. and each of its directors, seeking class
             certification, preliminary and permanent injunction against the
             proposed management-led buy out, and unspecified damages.

             The Company furnished on November 26, 2003 a report on Form 8-K
             announcing that the management-led buyout group that had previously
             made a preliminary offer to acquire the business, as a going
             concern, has withdrawn its offer.


                                      (22)
<PAGE>

                              FAB INDUSTRIES, INC.
                                AND SUBSIDIARIES







                                CONSOLIDATED FINANCIAL STATEMENTS
                                                 FORM 10-K ITEM 8
      FISCAL YEARS ENDED NOVEMBER 29, 2003, NOVEMBER 30, 2002 AND
                                                 DECEMBER 1, 2001



<PAGE>


                      FAB INDUSTRIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                                FORM 10-K ITEM 8

          FISCAL YEARS ENDED NOVEMBER 29, 2003, NOVEMBER 30, 2002,
                              AND DECEMBER 1, 2001




                                                                             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-15

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                   F-16 - F-43





                                                                             F-2
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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

We have audited the accompanying consolidated balance sheets of Fab Industries,
Inc. and subsidiaries as of November 29, 2003 and November 30, 2002, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the fiscal years ended November 29, 2003, November 30, 2002, and
December 1, 2001. We have also audited the financial statement schedule listed
in the index on page S-2. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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.

As discussed in the summary of accounting policies, on March 1, 2002, the
Company's Board of Directors adopted resolutions which authorize, subject to
shareholder approval, the sale of the business pursuant to a plan of
liquidation. The Company's stockholders approved the Plan at the Company's
annual meeting on May 30, 2002.

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 at November 29, 2003 and November 30, 2002, and the results of
their operations and their cash flows for the fiscal years ended November 29,
2003, November 30, 2002, and December 1, 2001 in conformity with accounting
principles generally accepted in the United States of America.

Also, in our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.

/s/BDO SEIDMAN, LLP
-------------------
New York, New York
February 10, 2004, except for Note 17, as to which the date is February 18, 2004




                                                                             F-3
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                     CONSOLIDATED BALANCE SHEETS

================================================================================

<TABLE>
<CAPTION>
                                                                        NOVEMBER 29, 2003     NOVEMBER 30, 2002
 ----------------------------------------------------------------------------------------------------------------
 <S>                                                                    <C>                   <C>
 ASSETS
 CURRENT:
    Cash and cash equivalents (Note 1)                                  $    3,397,000        $    3,146,000
    Investment securities available-for-sale (Note 2)                       29,004,000            45,551,000
    Accounts receivable, net of allowance of $900,000 and $1,000,000
       for doubtful accounts                                                 7,171,000             7,548,000
    Inventories (Note 3)                                                     5,531,000             8,386,000
    Deferred income taxes (Note8)                                              506,000                    --
    Other current assets                                                       701,000               867,000
 ----------------------------------------------------------------------------------------------------------------
         TOTAL CURRENT ASSETS                                               46,310,000            65,498,000
 PROPERTY, PLANT AND EQUIPMENT - NET (NOTE 4)                                9,484,000            12,007,000
 DEFERRED TAX ASSET (NOTE 8)                                                        --               528,000
 OTHER ASSETS (NOTE 7)                                                       2,281,000             3,196,000
 ----------------------------------------------------------------------------------------------------------------
                                                                           $58,075,000           $81,229,000
 ================================================================================================================
 LIABILITIES AND STOCKHOLDERS' EQUITY
 CURRENT:
    Accounts payable                                                    $    1,913,000        $    2,858,000
    Corporate income and other taxes                                           861,000             1,980,000
    Accrued payroll and related expenses                                       763,000               903,000
    Other current liabilities                                                1,106,000               940,000
    Deferred income taxes (Note 8)                                                  --                 9,000
 ----------------------------------------------------------------------------------------------------------------
         TOTAL CURRENT LIABILITIES                                           4,643,000             6,690,000
 DEFERRED INCOME TAXES  (NOTE 8)                                                52,000                    --
 OTHER NONCURRENT LIABILITIES (NOTE 7)                                       4,451,000             2,968,000
 ----------------------------------------------------------------------------------------------------------------
         TOTAL LIABILITIES                                                   9,146,000             9,658,000
 ----------------------------------------------------------------------------------------------------------------
 COMMITMENTS AND CONTINGENCIES (NOTES 7 AND 9)
 REDEEMABLE COMMON STOCK (NOTE 9)                                                   --             7,000,000
 ----------------------------------------------------------------------------------------------------------------
 STOCKHOLDERS' EQUITY (NOTES 2, 6, 7, AND 9):
    Preferred stock, $1 par value - shares authorized 2,000,000;
       none issued                                                                  --                    --
    Common stock, $.20 par value - shares authorized 15,000,000;
       issued 6,724,944 and 6,724,944                                        1,345,000             1,345,000
    Retained earnings                                                       85,225,000           100,455,000
    Accumulated other comprehensive gain (loss)                               (186,000)              229,000
    Cost of common stock  held in treasury - 1,509,913 and
       1,486,929 shares                                                    (37,455,000)          (37,237,000)
    Notes receivable from stockholders (Note 6)                                     --              (221,000)
 ----------------------------------------------------------------------------------------------------------------
         TOTAL STOCKHOLDERS' EQUITY                                         48,929,000            64,571,000
 ----------------------------------------------------------------------------------------------------------------
                                                                           $58,075,000           $81,229,000
 ================================================================================================================
</TABLE>

                                 SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
                                 AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                                             F-4
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                           CONSOLIDATED STATEMENTS OF OPERATIONS

================================================================================

<TABLE>
<CAPTION>
 ---------------------------------------------------------------------------------------------------------------------
 FISCAL YEAR ENDED
 ---------------------------------------------------------------------------------------------------------------------
                                                            NOVEMBER 29, 2003  NOVEMBER 30, 2002    DECEMBER 1, 2001
 ---------------------------------------------------------------------------------------------------------------------
 <S>                                                             <C>                 <C>                 <C>
 NET SALES (NOTE 14)                                             $ 51,173,000        $62,965,000         $80,036,000
 COST OF GOODS SOLD                                                46,918,000         56,412,000          78,518,000
 ---------------------------------------------------------------------------------------------------------------------
         GROSS PROFIT                                               4,255,000          6,553,000           1,518,000
 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                       6,001,000          7,372,000           9,748,000
 ASSET IMPAIRMENT AND RESTRUCTURING CHARGES (NOTE 12)                 685,000                 --          14,530,000
 OTHER EXPENSES (NOTES 9 AND 16)                                    1,659,000            750,000                  --
 ---------------------------------------------------------------------------------------------------------------------
         OPERATING LOSS                                            (4,090,000)        (1,569,000)        (22,760,000)
 ---------------------------------------------------------------------------------------------------------------------
 OTHER INCOME (EXPENSE):
    Interest and dividend income (Note 11)                          1,279,000          2,413,000           4,289,000
    Interest expense                                                       --            (13,000)            (42,000)
    Net gain on investment securities (Note 2)                      1,266,000          2,179,000           3,025,000
 ---------------------------------------------------------------------------------------------------------------------
         TOTAL OTHER INCOME                                         2,545,000          4,579,000           7,272,000
 ---------------------------------------------------------------------------------------------------------------------
         INCOME (LOSS) BEFORE TAXES ON INCOME                      (1,545,000)         3,010,000         (15,488,000)
 INCOME TAX EXPENSE (BENEFIT) (NOTE 8)                               (175,000)         1,040,000          (6,865,000)
 ---------------------------------------------------------------------------------------------------------------------
 NET INCOME (LOSS)                                               $ (1,370,000)       $ 1,970,000         $(8,623,000)
 ---------------------------------------------------------------------------------------------------------------------
 EARNINGS (LOSS) PER SHARE (NOTE 13):
    Basic                                                        $       (.26)       $       .38         $     (1.64)
    Diluted                                                      $       (.26)       $       .38         $     (1.64)
 ---------------------------------------------------------------------------------------------------------------------
 CASH DIVIDENDS DECLARED PER SHARE                               $       4.00        $     10.00         $       .40
 =====================================================================================================================
</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                                                 ACCUMULATED
                                            -----------------------   ADDITIONAL                  LOAN TO        OTHER
                                               NUMBER                  PAID-IN      RETAINED  EMPLOYEE STOCK  COMPREHENSIVE
                                  TOTAL      OF SHARES      AMOUNT     CAPITAL      EARNINGS  OWNERSHIP PLAN  INCOME (LOSS)
----------------------------------------------------------------------------------------------------------------------------
<S>                          <C>             <C>          <C>         <C>         <C>           <C>            <C>
Balance, December 2, 2000    $123,855,000   6,591,944    $1,319,000   $6,967,000  $154,947,000 $ (4,747,000)   $ (297,000)
Net loss - fiscal 2001         (8,623,000)         --            --           --    (8,623,000)          --            --
Change in net unrealized
   holding gain on
   investment securities
   available-for-sale, net
   of taxes                       631,000          --            --           --            --           --       631,000
Total comprehensive loss       (7,992,000)         --            --           --            --           --            --
Cash dividends                 (2,100,000)         --            --           --    (2,100,000)          --            --
Purchase of treasury stock     (1,050,000)         --            --           --            --           --            --
Payment of loan from ESOP
   (Note 7)                       790,000          --            --           --            --      790,000            --
----------------------------------------------------------------------------------------------------------------------------
Balance, December 1, 2001     113,503,000   6,591,944     1,319,000    6,967,000   144,224,000   (3,957,000)      334,000
Net Income - fiscal 2002        1,970,000          --            --           --     1,970,000           --            --
Minimum pension liability
   adjustment of $164,000,
   net of tax benefit of
   $59,000                       (105,000)         --            --           --            --           --      (105,000)
Total comprehensive income      1,865,000          --            --           --            --           --            --
Cash dividends                (52,380,000)         --            --   (6,641,000)  (45,739,000)          --            --
Acceleration of stock
   options (Note 6)               418,000          --            --      418,000            --           --            --
Exercise of stock options
   (Note 6)                     1,445,000     133,000        26,000    1,640,000            --           --
Purchase of treasury stock       (280,000)         --            --       17,000            --           --            --
Termination of Employee
   Stock Ownership Plan                            --    (2,401,000)          --     3,957,000           --       (86,456)
----------------------------------------------------------------------------------------------------------------------------
Balance, November 30, 2002     64,571,000    6,724,944    1,345,000           --   100,455,000           --       229,000
Net loss - fiscal 2003         (1,370,000)          --           --           --    (1,370,000)          --            --
Change in net unrealized
   holding gain on
   investment securities
   available-for-sale, net
   of taxes                      (223,000)          --           --           --            --           --      (223,000)
Minimum pension liability
   of $300,000 net of tax
   benefit of $108,000           (192,000)                                                                       (192,000)
Total comprehensive loss       (1,785,000)          --           --           --            --           --            --
Cash dividends                (20,860,000)          --           --           --   (20,860,000)          --            --
Repayment of  notes
   receivable from
   stockholders                   221,000           --           --           --            --           --            --
Purchase of treasury stock       (218,000)          --           --           --            --           --            --
Reclass of  redeemable
   common stock to non
   redeemable common stock      7,000,000           --           --           --     7,000,000           --            --
----------------------------------------------------------------------------------------------------------------------------
Balance, November 29, 2003    $48,929,000    6,724,944   $1,345,000           --   $85,225,000           --    $ (186,000)
============================================================================================================================
</TABLE>

--------------------------------------------------------------------
                                    TREASURY STOCK          NOTES
                               ------------------------   RECEIVABLE
                                  NUMBER                    FROM
                                OF SHARES       COST    STOCKHOLDERS
--------------------------------------------------------------------
Balance, December 2, 2000    (1,310,458) $ (34,334,000)          --
Net loss - fiscal 2001               --             --           --
Change in net unrealized
   holding gain on
   investment securities
   available-for-sale, net
   of taxes                          --             --           --
Total comprehensive loss             --             --           --
Cash dividends                       --             --           --
Purchase of treasury stock      (73,116)    (1,050,000)          --
Payment of loan from ESOP
   (Note 7)                          --             --           --
--------------------------------------------------------------------
Balance, December 1, 2001    (1,383,574) $ (35,384,000)          --
Net Income - fiscal 2002                                         --
Minimum pension liability
   adjustment of $164,000,
   net of tax benefit of
   $59,000                                                       --
Total comprehensive income                                       --
Cash dividends                                                   --
Acceleration of stock
   options (Note 6)
Exercise of stock options
   (Note 6)                                                (221,000)
Purchase of treasury stock      (16,899)      (297,000)          --
Termination of Employee
   Stock Ownership Plan         (86,456)    (1,556,000)          --
--------------------------------------------------------------------
Balance, November 30, 2002   (1,486,929)   (37,237,000)    (221,000)
Net loss - fiscal 2003               --             --           --
Change in net unrealized
   holding gain on
   investment securities
   available-for-sale, net
   of taxes                          --             --           --
Minimum pension liability
   of $300,000 net of tax
   benefit of $108,000
Total comprehensive loss             --             --           --
Cash dividends                       --             --           --
Repayment of notes
   receivable from
   stockholders                      --             --      221,000
Purchase of treasury stock      (22,984)      (218,000)          --
Reclass of  redeemable
   common stock to non
   redeemable common stock           --             --           --
--------------------------------------------------------------------
Balance, November 29, 2003   (1,509,913) $ (37,455,000)         --
====================================================================



                                 SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
                                 AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                                             F-6
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                       (NOTE 10)
================================================================================

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                         NOVEMBER 29,      NOVEMBER 30,         DECEMBER 1,
FISCAL YEAR ENDED                                                            2003              2002                 2001
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                     $   (1,370,000)    $   1,970,000     $  (8,623,000)
   Adjustments to reconcile net income (loss) to net cash provided
      by operating activities:
        Provision for doubtful accounts                                         400,000           400,000           400,000
        Depreciation and amortization                                         1,927,000         2,143,000         4,609,000
        Deferred income taxes                                                   214,000            38,000        (6,555,000)
        Non-cash asset impairment and restructuring charges                     685,000                --        13,241,000
        Compensation relating to acceleration of stock options                       --           418,000                --
        Net gain on investment securities                                    (1,266,000)       (2,179,000)       (3,025,000)
        Gain on disposition of fixed assets                                    (443,000)         (817,000)         (261,000)
             Decrease (increase) in:
           Accounts receivable                                                  (23,000)        2,720,000         6,005,000
           Inventories                                                        2,855,000         3,949,000         7,083,000
           Other current assets                                                 166,000           750,000           922,000
           Other assets                                                         915,000            58,000          (333,000)
        Increase (decrease) in:
           Accounts payable                                                    (942,000)         (804,000)       (1,871,000)
           Accruals and other liabilities                                       198,000           112,000        (1,518,000)
-----------------------------------------------------------------------------------------------------------------------------
              NET CASH PROVIDED BY OPERATING ACTIVITIES                       3,316,000         8,758,000        10,074,000
-----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property, plant and equipment                                  (267,000)         (225,000)         (703,000)
   Proceeds from sale of property and equipment                                 621,000           957,000           725,000
   Proceeds from sales of investment securities                              17,441,000        38,650,000                --
   Acquisition of investment securities                                              --                --       (15,681,000)
-----------------------------------------------------------------------------------------------------------------------------
              NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES            17,795,000        39,382,000       (15,659,000)
-----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Purchase of treasury stock                                                        --          (280,000)       (1,050,000)
   Principal repayment on loan to employee stock ownership plan                      --                --           790,000
   Dividends                                                                (20,860,000)      (52,901,000)       (2,108,000)
   Exercise of stock options                                                         --         1,445,000                --
-----------------------------------------------------------------------------------------------------------------------------
              NET CASH USED IN FINANCING ACTIVITIES                         (20,860,000)      (51,736,000)       (2,368,000)
-----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                251,000        (3,596,000)       (7,953,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                  3,146,000         6,742,000        14,695,000
-----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                                     $  3,397,000      $  3,146,000      $  6,742,000
=============================================================================================================================
</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
                                manufacturer of knitted apparel fabrics,
                                including laces and finished home products, as
                                well as laminated fabrics. The Company's sales
                                are primarily made to United States customers.

                                The Company's Board of Directors has determined
                                that it is in the best interests of its
                                stockholders to sell the Company's textile
                                business as a going concern. In order to
                                maximize stockholder value, the Board of
                                Directors adopted resolutions dated March 1,
                                2002, which authorized, subject to stockholder
                                approval, the sale of the Company's business
                                pursuant to a Plan of Liquidation and
                                Dissolution (the "Plan"). The Company's
                                stockholders approved the Plan at the Company's
                                annual meeting on May 30, 2002. The Plan
                                provides the Company's officers and directors
                                will continue to operate the Company's textile
                                business in its current fashion, and pursue a
                                sale of the business as a going concern. The
                                Company's Board of Directors has approved the
                                engagement of McFarland Dewey & Co., LLC
                                financial advisors in November 2002 to assist
                                with the sale of the business. The accompanying
                                financial statements have been prepared on a
                                going concern basis. There can be no assurance,
                                however, that the Company will be successful in
                                selling its business or if it does sell the
                                business, that it will be able to recover the
                                full value of its assets, particularly its
                                property, plant and equipment. On August 1, 2003
                                and May 30, 2002, the Company's Board of
                                Directors declared a liquidating distribution of
                                $4.00 per share and $10.00 per share,
                                respectively, which resulted in a payment to
                                stockholders of $20,860,000 and $52,380,000 in
                                August 2003 and June 2002, respectively.


                                The Company's plan of liquidation provides the
                                Company's officers and directors will continue
                                to operate the Company's textile business in its
                                current fashion and pursue the sale of the
                                business as a going concern. If the Company is
                                not sold by May 2005, all assets will be
                                transferred to a liquidating trust. The
                                liquidating trust would then succeed to all our
                                remaining assets, liabilities and obligations.


                                                                             F-8
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES

================================================================================

 PRINCIPLES OF                  The financial statements include the accounts of
 CONSOLIDATION                  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.

                                Each of Fiscal 2003, 2002, and 2001 had
                                fifty-two 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 and assumptions.

                                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 it cash and cash
                                equivalents with high credit quality financial
                                institutions. The Company is subject to credit
                                risk if brokers are unable to repay balances due
                                or deliver securities in their custody. By
                                policy, the Company limits the amount of credit
                                exposure to any one financial institution. The
                                Company has received confirmation indicating
                                that, with respect to investment securities,
                                each custodian with the exception of one
                                custodian maintains appropriate insurance
                                coverage. During fiscal 2003 and fiscal 2002,
                                that custodian had an average balance of
                                approximately $9.6 million and $13.3 million,
                                respectively, of the Company's cash under
                                investment which from time to time during such
                                periods was invested entirely in equity
                                securities. At November 29, 2003, that custodian
                                had approximately $7.8 million of the Company's
                                cash under investments, which were invested in
                                U.S. Treasury obligations. In August 2003, the
                                Company liquidated $2.5 million from that
                                custodian as part of the liquidating dividend.
                                The Company's investment policy currently
                                permits up to 50% of the Company's portfolio to
                                be held by the custodian.

                                Concentrations of credit risk with respect to
                                trade receivables are limited due to a diverse
                                group of manufacturers, wholesalers and
                                retailers to whom the Company sells. The Company
                                reviews a customer's credit history before
                                extending credit. The Company further reduces
                                its credit risk by factoring, without recourse,
                                a variable amount of trade receivables. As of
                                November 29, 2003 and November 30, 2002, 8% and
                                11%, respectively, of the accounts receivable
                                outstanding were due from factors.

 ACCOUNTS RECEIVABLE AND
 ALLOWANCE FOR DOUBTFUL         The Company's accounts receivable are customer
 ACCOUNTS                       obligations due under normal trade terms,
                                carried at their face value less an allowance
                                for doubtful accounts.

                                The Company evaluates its accounts receivable on
                                an ongoing basis and establishes an allowance
                                for doubtful accounts based on specific customer
                                circumstances and on its historical rate of
                                write-offs. The Company includes any accounts
                                receivable balances that are determined to be
                                uncollectible, along with a general reserve, in
                                an overall allowance for doubtful accounts.
                                After all attempts to collect a receivable have
                                failed, the receivable is written off against
                                the allowance. The Company believes the
                                allowance for doubtful accounts as of November
                                29, 2003 is adequate, however, actual write-offs
                                might exceed the recorded allowance.


                                                                             F-9
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES

================================================================================

 CASH
 EQUIVALENTS                    The Company considers all highly liquid debt
                                instruments with original maturities of three
                                months or less to be cash equivalents.


 INVESTMENTS                    The Company follows Statement of Financial
                                Accounting Standards ("SFAS") No. 115,
                                "Accounting for Certain Investments in Debt and
                                Equity Securities" ("SFAS No. 115"). SFAS No.
                                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.


 INVENTORIES                    Inventories are valued at the lower of cost or
                                market. For a portion 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.


 DERIVATIVE FINANCIAL           The Company is party to equity option contracts
 INSTRUMENTS HELD OR            as part of its investing activities.
 ISSUED                         Option contracts are contractual
                                agreements that give the purchaser the right,
                                but not the obligation, to purchase or sell a
                                financial instrument at a predetermined exercise
                                price. In return for this right, the purchaser
                                pays a premium to the seller of the option. By
                                selling or writing options, the Company receives
                                a premium and becomes obligated during the term
                                of the option to purchase or sell a financial
                                instrument at a predetermined exercise price if
                                the option is exercised, and assumes the risk of
                                not being able to enter into a closing
                                transaction if a liquid secondary market does
                                not exist.

                                In accordance with SFAS 133, the Company's
                                policy is to recognize all derivatives
                                instruments as either assets or liabilities on
                                the balance sheet at fair value. Changes in fair
                                value are recognized in the income statement in
                                the period in which they occur. Derivatives are
                                not used for trading purposes. Derivatives are
                                used to hedge against fluctuations in the market
                                value of equity securities.


                                                                            F-10
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES

================================================================================

 PROPERTY, PLANT AND            Property, plant and equipment are stated at
 EQUIPMENT                      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 and
                                automobiles.


 LONG-LIVED ASSETS              The Company reviews the carrying values of its
                                long-lived and identifiable intangible assets
                                for possible impairment whenever events or
                                changes in circumstances indicate that the
                                carrying amount of the assets may not be
                                recoverable. Any long-lived assets held for
                                disposal are reported at the lower of their
                                carrying amounts or fair value less cost to
                                sell. During fiscal 2003, the Company reviewed
                                assets held for sale and determined an
                                additional charge of $685,000 was required.
                                During fiscal 2001, the Company recorded asset
                                impairment and restructuring charges. See Note
                                12 of the notes to the financial statements.

 RESEARCH AND                   Research and development costs are charged to
 DEVELOPMENT COSTS              expenses in the year incurred and amounted to
                                $850,000, $1,690,000, and $1,999,000 in fiscal
                                2003, 2002 and 2001, respectively.


 ACCOUNTING FOR                 The Company applied Accounting Principles Board
 STOCK-BASED COMPENSATION       Opinion No. 25, "Accounting for Stock Issued to
                                Employees" and related interpretations in
                                accounting for its various stock option plans.
                                The Company has adopted the disclosure-only
                                provisions of SFAS No. 123, "Accounting for
                                Stock-Based Compensation" and SFAS No. 148,
                                "Accounting for Stock-Based
                                Compensation-Transition and Disclosure", which
                                was released in December 2002 as an amendment to
                                SFAS 123. In accordance with SFAS No. 148, the
                                following table illustrates the effect on net
                                income and earnings per share as if the Company
                                had applied the fair value recognition
                                provisions of SFAS No. 123. See Note 6 for
                                disclosure of assumptions utilized in the
                                calculation of fair value. The Company's stock
                                option plans were terminated subsequent to the
                                fiscal year ended November 30, 2002.


                                                                            F-11
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES

================================================================================

<TABLE>
<CAPTION>
                                                                         2003         2002          2001
                                                                         ----         ----          ----
                                                                    (In thousands, except per share data)
<S>                                                                    <C>          <C>        <C>
Net Income (loss) as reported                                          $(1,370)     $1,970     $  (8,623)

Less:  Total stock-based employee compensation expense
determined under fair value based method for all awards, net of
related tax effects                                                         --        (130)          (29)
                                                                     ------------------------------------
Pro forma net income (loss)                                            $(1,370)     $1,840     $  (8,652)

Basic and diluted net income (loss) per share-As reported              $ (0.26)      $0.38     $   (1.64)

Pro forma                                                              $ (0.26)      $0.35     $   (1.65)
=========================================================================================================
</TABLE>

 TAXES ON INCOME                The Company follows the liability method of
                                accounting for income taxes. Accordingly,
                                deferred income taxes reflect the net tax effect
                                of temporary differences between the carrying
                                amounts of assets and liabilities for financial
                                reporting purposes and for income tax purposes.


EARNINGS (LOSS) PER SHARE       Basic earnings (loss) per share is based on the
                                weighted average number of common shares
                                outstanding during the fiscal year. Diluted
                                earnings per share is based on the weighted
                                average number of common shares and dilutive
                                potential common shares outstanding during the
                                fiscal year. There were no dilutive potential
                                common shares outstanding in fiscal 2003. The
                                Company's dilutive potential common shares
                                outstanding during fiscal 2002 and 2001 resulted
                                entirely from dilutive stock options. For fiscal
                                2002 and 2001, potentially dilutive securities
                                that related to shares issuable upon the
                                exercise of stock options granted by the Company
                                were excluded, as their effect was antidilutive.
                                See Note 13 of notes to the financial
                                statements.


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


                                                                            F-12
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES

================================================================================

EFFECT OF RECENTLY              In July 2002, the FASB issued SFAS 146
ISSUED ACCOUNTING               "Accounting for Restructuring Costs". SFAS 146
STANDARDS                       applies to costs associated with an exit
                                activity (including restructuring) or with a
                                disposal of long-lived assets. Those activities
                                can include eliminating or reducing product
                                lines, terminating employees and contracts, and
                                relocating plant facilities or personnel. Under
                                SFAS 146, a company will record a liability for
                                a cost associated with an exit or disposal
                                activity when that liability is incurred and can
                                be measured at fair value. SFAS 146 requires a
                                company to disclose information about its exit
                                and disposal activities, the related costs and
                                changes in those costs in the notes to the
                                interim and annual financial statements that
                                include the period in which an exit activity is
                                initiated and in any subsequent period until the
                                activity is completed. SFAS 146 is effective
                                prospectively for exit or disposal activities
                                initiated after December 31, 2002, with an
                                earlier adoption encouraged. Under SAFS 146, a
                                company may not restate its previously issued
                                financial statements and the new statement
                                grandfathers the accounting for liabilities that
                                a company had previously recorded under Emerging
                                Issues Task Force Issue 94-3. The adoption of
                                this statement did not have a material impact on
                                the Company's financial position or results of
                                operations.


                                In November 2002, the FASB issued FASB
                                Interpretation No. 45, Guarantor's Accounting
                                and Disclosure Requirements for Guarantees,
                                Including Guarantees of the Indebtedness of
                                Others, with addresses the accounting for and
                                disclosure of guarantees. Interpretation No. 45
                                requires a guarantor to recognize a liability
                                for the fair value of a guarantee at inception.
                                The recognition of the liability is required
                                even it is not probable that the payments will
                                be required under the guarantee. The disclosure
                                requirements are effective for interim and
                                annual financial statements ending after
                                December 15, 2002. The initial recognition and
                                measurement provisions are effective on a
                                prospective basis for guarantees issued or
                                modified after December 31, 2002. The Company's
                                adoption of Interpretation No. 45 did not have a
                                material effect on the Company's consolidated
                                financial statements.


                                                                            F-13
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES

================================================================================

                                In December 2002, the FASB issued SFAS No. 148
                                "Accounting for Stock Based Compensation -
                                Transaction and Disclosure". This Statement
                                amends SFAS No. 123, "Accounting for Stock Based
                                Compensation" to provide alternative methods of
                                transition for a voluntary change to fair market
                                value based method of accounting for stock-based
                                employee compensation. In addition, this
                                Statement amends the disclosure requirements of
                                Statement 123 to require prominent disclosures
                                in both the annual and interim financial
                                statements about the method used on reported
                                results. The Statement has varying effective
                                dates commencing with interim periods beginning
                                after December 15, 2002. The Company plans to
                                continue using the intrinsic value method for
                                stock based compensation.

                                In January 2003, the FASB issued FASB
                                Interpretation No. 46, Consolidation of Variable
                                Interest Entities. The objective of this
                                interpretation is to provide guidance on how to
                                identify a variable interest entity ("VIE") and
                                determine when the assets, liabilities,
                                noncontrolling interests, and results of
                                operations of a VIE need to be included in a
                                company's consolidated financial statements. A
                                Company that holds variable interests in an
                                entity will need to consolidate the entity if
                                the company's interest in the VIE is such that
                                the company will absorb a majority of the VIE's
                                expected losses and/or receive a majority of the
                                entity's expected returns if they occur.
                                Interpretation No.46 also requires additional
                                disclosures by primary beneficiaries and other
                                significant variable interest holders. The
                                Interpretation became effective upon issuance.
                                The Company's adoption of this interpretation
                                did not have an effect on its consolidated
                                financial statements.


                                                                            F-14
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES

================================================================================

                                In May 2003, the FASB issued SFAS No. 150,
                                "Accounting for Certain Financial Instruments
                                with Characteristics of both Liabilities and
                                Equity". This statement affects the
                                classification, measurement and disclosure
                                requirements of the following three types of
                                freestanding financial instruments: 1)
                                mandatorily redeemable shares, which the issuing
                                company is obligated to buy back with cash or
                                other assets; 2) instruments that do or may
                                require the issuer to buy back some of its
                                shares in exchange for cash or other assets,
                                which includes put options and forward purchase
                                contracts; and 3) obligations that can be
                                settled with shares, the monetary value of which
                                is fixed, tied solely or predominately to a
                                variable such as a market index, or varies
                                inversely with the value of the issuers' shares.
                                In general, SFAS No. 150 is effective for all
                                financial instruments entered into or modified
                                after May 31, 2003, and otherwise is effective
                                at the beginning of the first interim period
                                beginning after Fiscal 2004. The Company's
                                adoption of SFAS No. 150 did not have an effect
                                on the Company's consolidated financial
                                statements.


RECLASSIFICATIONS               Certain prior fiscal years' accounts have been
                                reclassified for comparative purposes.


                                                                            F-15
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

 1.      CASH AND CASH     Cash and cash equivalents at November 29, 2003 and
         EQUIVALENTS       November 30, 2002 consisted of the following
                           (in thousands):

<TABLE>
<CAPTION>
                                                                              2003                   2002
                           --------------------------------------------------------------------------------
                           <S>                                              <C>                    <C>
                           Cash                                             $  549                 $  526
                           Taxable and tax-free short-term
                             debt instruments                                2,848                  2,620
                           --------------------------------------------------------------------------------
                                                                            $3,397                 $3,146
                           ================================================================================
</TABLE>


2.       INVESTMENT        Investment securities available-for-sale at November
         SECURITIES        29, 2003 and November 30, 2002 consisted of the
                           following (in thousands):

<TABLE>
<CAPTION>
                                                                     GROSS         GROSS
                                                                   UNREALIZED    UNREALIZED
                                                        COST      HOLDING GAIN  HOLDING LOSS   FAIR VALUE
                           --------------------------------------------------------------------------------
                           <S>                        <C>         <C>               <C>         <C>
                           2003:
                              Equities                $     750   $        17       $    --     $     767
                              U.S. Treasury
                                 obligations             27,519           418            --        27,937
                              Corporate bonds               253            --          (250)            3
                              Money market                  297            --            --           297
                           --------------------------------------------------------------------------------
                                                        $28,819       $   435         $(250)      $29,004
                           ================================================================================
                           2002:
                              Equities                $     750   $        --       $    --     $     750
                              U.S. Treasury
                                 obligations             32,411           617            --        33,028
                              Corporate bonds             7,748           194          (254)        7,688
                              Money market                4,085            --            --         4,085
                           --------------------------------------------------------------------------------
                                                        $44,994       $   811         $(254)      $45,551
                           ================================================================================
</TABLE>


                                                                            F-16
<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 29, 2003 and November 30, 2002, by
                           contractual maturity are as shown below:

<TABLE>
<CAPTION>
                                                        NOVEMBER 29, 2003              NOVEMBER 30, 2002
                                                      --------------------          -----------------------
                                                        COST    FAIR VALUE              COST    FAIR VALUE
                           --------------------------------------------------------------------------------
                           <S>                      <C>           <C>               <C>           <C>
                           Maturing in one          $ 14,875      $ 14,978          $ 10,064      $ 10,067
                             year or less
                           Maturing after one
                             year through
                             five years               11,589        11,648            28,054        28,520
                           Maturing after
                             five years
                             through ten years            --            --               259           264
                           Ten years and over          1,308         1,314             1,782         1,865
                           --------------------------------------------------------------------------------
                                                    $ 27,772      $ 27,940          $ 40,159      $ 40,716
                           ================================================================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                                      2003            2002           2001
                           --------------------------------------------------------------------------------
                           <S>                                     <C>             <C>            <C>
                           Gross realized gains                    $ 3,980         $ 6,653        $ 6,619
                           Gross realized losses                    (2,714)         (4,474)        (3,594)
                           --------------------------------------------------------------------------------
                           Net realized gain                       $ 1,266         $ 2,179        $ 3,025
                           ================================================================================
</TABLE>

                           Other comprehensive income (loss) for fiscal 2003,
                           2002, and 2001 consisted of the following (in
                           thousands):

<TABLE>
<CAPTION>
                                                                      2003            2002            2001
                           --------------------------------------------------------------------------------
                           <S>                                       <C>            <C>             <C>
                           Unrealized holding gains
                           arising during the year, net of
                           tax                                       $ 537          $1,307          $2,446

                           Reclassification adjustment,
                           net of tax                                 (760)         (1,307)         (1,815)
                           --------------------------------------------------------------------------------

                           Other comprehensive income
                           (loss), net of tax                        $(233)             --           $ 631
                           ================================================================================
</TABLE>


                                                                            F-17

<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                           During Fiscal 2003, the Company invested a portion of
                           their securities in equity consisting of a portfolio
                           of Standard and Poor's 100 ("S&P 100") common stocks,
                           the fair value of which varies consistently with
                           changes in the S&P 100 index. To hedge against
                           fluctuations in the market value of the portfolio,
                           the Company has purchased short-term S&P 100 index
                           put options and sold short-term S&P 100 call options.
                           At November 29, 2003 and November 30, 2002, the
                           Company had no such investments, but will continue to
                           invest in such equities in the future.

                           Realized gains or (losses) on purchased short-term
                           S&P 100 index put options and sold short-term S&P 100
                           call options during fiscal 2003, 2002, and 2001 were
                           approximately $(874,000), $(1,463,000), and $925,000,
                           respectively.

                           The Company has agreements with various brokerage
                           firms to carry its account as a customer. The brokers
                           have custody of the Company's securities and, from
                           time to time, cash balances which may be due from
                           these brokers.

                           These securities and/or cash positions serve as
                           collateral for any amounts due to brokers or as
                           collateral for securities sold short or securities
                           purchased on margin. The securities and/or cash
                           positions also serve as collateral for potential
                           defaults of the Company.



                                                                            F-18
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

3.       INVENTORIES       Inventories at November 29, 2003 and November 30,
                           2002 consisted of the following (in thousands, except
                           for percentages):

<TABLE>
<CAPTION>
                           --------------------------------------------------------------------------------
                                                                              2003                  2002
                           --------------------------------------------------------------------------------
                           <S>                                            <C>                   <C>
                           Raw materials                                  $  1,446              $  2,131
                           Work-in-process                                   1,867                 2,717
                           Finished goods                                    2,218                 3,538
                           --------------------------------------------------------------------------------
                                                                          $  5,531              $  8,386
                           --------------------------------------------------------------------------------

                           Approximate percentage of
                             inventories valued under LIFO
                             method                                           61%                   62%
                           --------------------------------------------------------------------------------
                           Excess of FIFO valuation over
                             LIFO valuation                               $  1,007              $  1,614
                           ================================================================================
</TABLE>

                           In fiscal 2003, 2002, and 2001 the liquidation of
                           certain LIFO layers increased cost of goods sold by
                           $925,000, $503,000, and $1,909,000 respectively. The
                           inventories in these LIFO layers were acquired at
                           higher costs than current costs.


                                                                            F-19
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

4.       PROPERTY, PLANT   Property, plant and equipment at November 29, 2003
         AND EQUIPMENT     and November 30, 2002 consisted of the following (in
                           thousands):

<TABLE>
<CAPTION>
                                                                                2003                2002
                           --------------------------------------------------------------------------------
                           <S>                                           <C>                 <C>
                              Land and improvements                      $       682         $       682
                              Buildings and improvements                       7,323               8,377
                              Machinery and equipment                         22,255              70,431
                              Trucks and automobiles                             679               1,742
                              Office equipment                                   287                 681
                              Leasehold improvements                             548                 929
                              Assets held for sale (Note 12)                   2,013               2,786
                           --------------------------------------------------------------------------------
                                                                              33,787              85,628
                           Less:  Accumulated depreciation and
                                     amortization                             24,303              73,621
                           --------------------------------------------------------------------------------
                                                                            $  9,484           $  12,007
                           ================================================================================
</TABLE>

5.      OBLIGATIONS UNDER  During fiscal 2002, the capital lease liability was
        CAPITAL LEASES     forgiven by the lessor, resulting in other income of
                           $339,000, which was included in selling, general and
                           administrative expenses for fiscal 2002.


                                                                            F-20
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

6.       STOCK             STOCK OPTION PLAN
         COMPENSATION
         PLANS             In May 2001 and May 1997, the Board of Directors
                           adopted and the shareholders approved two new stock
                           option plans providing for the grant of up to 200,000
                           shares and 175,000 shares of common stock,
                           respectively, at any time over the next ten years
                           from the date such plans were adopted. These stock
                           option plans have been terminated subsequent to the
                           fiscal year ended November 30, 2002.

                           Pursuant to resolutions adopted by the Company's
                           Board of Directors and documentation sent to and
                           returned to the Company by option holders, effective
                           immediately following stockholder approval of the
                           Plan, on May 30, 2002, all outstanding options under
                           the Company's 1997 Stock Incentive Plan became
                           vested, and all options as to which optionees
                           (including employees and directors) had returned to
                           the Company the appropriate forms (representing
                           options held by all but one optionee, who exercised
                           via payment to the Company) were exercised through
                           the issuance of loans from the Company to the
                           optionees, with stock of the optionees held as
                           collateral by the Company until the loans have been
                           satisfied. The amount loaned to the employees and
                           directors to exercise their options was approximately
                           $1,495,000, which was repaid as of June 13, 2003.
                           These options were subject to variable accounting at
                           each reporting period, until the related loans were
                           repaid. In June 2003, the Company repurchased 22,984
                           shares of its common stock at $9.48 per share from
                           employees and directors with outstanding loans from
                           the Company to offset the related payment of the
                           loans due from such employees and directors, which
                           were due as of May 31, 2003 with a one month grace
                           period. The Company purchased the number of shares
                           necessary for the employees and directors to pay off
                           all outstanding loans, including interest. In fiscal
                           2003 and 2002 no compensation costs was recorded
                           related to variable accounting since the market price
                           of the Company's stock did not change significantly
                           from the date the options were exercised to the date
                           the loans were repaid in fiscal 2003 and 2002. Based
                           on the acceleration of certain stock options, the
                           Company recorded a charge of approximately $418,000
                           to compensation expense and an increase to additional
                           paid-in capital in fiscal 2002. As of November 29,
                           2003 there were no outstanding options under either
                           of the 2001 stock option plan or the 1997 stock
                           option plan.


                                                                            F-21
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                           There were no options granted in fiscal 2003 and
                           2002.

                           The weighted average fair value of options granted
                           was $3.67 per share in fiscal 2001.

                           For purposes of pro forma disclosure, the estimated
                           fair value of the options are amortized to expense
                           over the vesting period of the options.

                           The fair value of each option grant is estimated on
                           the date of grant using the Black-Scholes
                           option-pricing model with the following assumptions
                           for fiscal 2001 grants:


                           --------------------------------------------------
                           Dividends                 $.40 to $.70 per share
                           Volatility                        21.4% to 29.2%
                           Risk-free interest                4.54% to 5.00%
                           Expected term                      1 to 10 years
                           --------------------------------------------------


                                                                            F-22
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                           Data regarding the Company's stock option plan
                           follows:

<TABLE>
<CAPTION>
                                                                                        WEIGHTED AVERAGE
                                                                                         EXERCISE PRICE
                                                                               SHARES       PER SHARE
                           -------------------------------------------------------------------------------
                           <S>                                                <C>            <C>
                           Shares under option, December 2, 2000              162,700        $12.47
                           Options granted                                      8,000         12.75
                           Options exercised                                       --            --
                           Options canceled                                   (27,500)       (12.25)
                           -------------------------------------------------------------------------------
                           Shares under option, December 1, 2001              143,200         12.53
                           Options granted                                         --            --
                           Options exercised                                 (133,000)        12.51
                           Options canceled                                   (10,200)        12.70
                           -------------------------------------------------------------------------------
                           Shares under option, November 30, 2002                  --            --
                           -------------------------------------------------------------------------------
                           Shares under option, November 29, 2003                  --            --
                           ===============================================================================

                           -------------------------------------------------------------------------------
                           Options exercisable at:
                              December 01, 2001                                47,280         12.72
                              November 30, 2002                                    --            --
                              November 29, 2003                                    --            --
                           ===============================================================================
</TABLE>


                                                                            F-23
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

7.       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 2003, 2002 and
                           2001 were $118,000, $144,000 and $181,000,
                           respectively.

                           The Company also has a nonqualified, defined
                           contribution retirement plan for key employees who
                           are ineligible for the salaried employees' qualified
                           profit sharing plan. Contributions for fiscal 2003,
                           2002 and 2001 were $41,000, $41,000 and $52,000,
                           respectively. Benefits payable under this plan
                           amounting to $1,925,000 and $1,898,000 at November
                           29, 2003 and November 30, 2002, respectively, are
                           included in other noncurrent liabilities. These
                           liabilities are fully funded by plan assets of equal
                           amounts, which are included in other assets.

                           PENSION PLAN

                           The Company maintains a non-contributory defined
                           benefit pension plan (Fab Industries, Inc. Hourly
                           Employees' Retirement Plan) which covers
                           substantially all hourly employees. The Plan provides
                           benefits based on the participants' years of service.


                                                                            F-24

<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                           The following tables provide a reconciliation of the
                           changes in the Plan's benefit obligations and fair
                           value of assets and a statement of the funded status
                           of the Plan for fiscal 2003 and 2002:

<TABLE>
<CAPTION>
                                                                                       2003               2002
                                                                              -----------------------------------
                           <S>                                                   <C>                <C>
                           RECONCILIATION OF THE BENEFIT OBLIGATION
                           Obligation at beginning of year                       $3,312,000         $3,513,000
                           Service cost                                             163,000            177,000
                           Interest cost                                            218,000            246,000
                           Amendments                                                     -             51,000
                           Curtailment                                                    -             27,000
                           Actuarial loss                                           355,000            267,000
                           Benefit payments                                        (785,000)          (969,000)
                                                                              -----------------------------------
                           Obligation at end of year                             $3,263,000         $3,312,000
                                                                              ===================================

                                                                                       2003               2002
                                                                              -----------------------------------
                           RECONCILIATION OF FAIR VALUE OF PLAN ASSETS
                           Fair value of plan assets at beginning of year        $2,477,000         $3,855,000
                           Actual return on plan assets (net of expenses)           137,000           (409,000)
                           Benefit payments                                        (785,000)          (969,000)
                                                                              -----------------------------------
                           Fair value of plan assets at end of year              $1,829,000         $2,477,000
                                                                              ===================================

                                                                                       2003               2002
                                                                              -----------------------------------
                           FUNDED STATUS
                           Funded status                                        $(1,434,000)         $(835,000)
                           Unrecognized prior service cost                          256,000            293,000
                           Unrecognized actuarial  loss                             464,000            164,000
                                                                              -----------------------------------
                           Net amount recognized                                  $(714,000)         $(378,000)
                                                                              ===================================
</TABLE>


                                                                            F-25
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

         The following table provides the amounts recognized in the consolidated
         balance sheets as of November 29, 2003 and November 30, 2002:

<TABLE>
<CAPTION>
                                                                                           2003               2002
                                                                                  ----------------------------------
                           <S>                                                      <C>                <C>
                           Accrued benefit liability (included in other             $ (1,434,000)      $  (835,000)
                             noncurrent liabilities)
                           Intangible pension asset (included in other assets)           256,000           293,000
                           Accumulated other comprehensive loss (Net of tax
                             effect below)                                               297,000           105,000
                           Deferred tax asset                                            167,000            59,000
                                                                                  ----------------------------------
                           Net amount recognized                                    $   (714,000)      $  (378,000)
                                                                                  ==================================
</TABLE>

         The following table provides the components of the net periodic
         (benefit) cost for the Plan for fiscal 2003 and 2002:

<TABLE>
<CAPTION>
                                                                                            2003              2002
                                                                                  ----------------------------------
                           <S>                                                      <C>                <C>
                           Service cost                                             $    163,000       $   177,000
                           Interest cost on projected benefit obligation                 218,000           246,000
                           Expected return on plan assets                               (191,000)         (300,000)
                           Amortization of prior service cost                             37,000            45,000
                           Amortization of net gain                                           --           (35,000)
                           Recognized loss due to curtailment and settlement             109,000           161,000
                                                                                  ----------------------------------
                           Net periodic pension cost                                $    336,000        $  294,000
                                                                                  ==================================
</TABLE>

         Prior service costs are amortized on a straight-line basis over the
         average remaining service period of active participants. Gains and
         losses in excess of 10% of the greater of the benefit obligations and
         the market-related value of assets are amortized over the average
         remaining service period of active participants.

         The weighted average assumptions used in the measurement of the
         Company's benefit obligations for fiscal 2003 and 2002 are shown in the
         following table:

<TABLE>
<CAPTION>
                                                                                             2003               2002
                                                                                   ---------------------------------
                           <S>                                                               <C>               <C>
                           Discount rate                                                     6.25%             6.75%
                           Expected return on plan assets                                    8.00%             8.00%
</TABLE>


                                                                            F-26

<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                           EMPLOYEE STOCK OWNERSHIP PLAN

                           The Company had an Employee Stock Ownership Plan
                           ("ESOP") which covered all full-time employees who
                           have completed one year of service. In 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 for $11,857,000. The loan was
                           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.

                           The Company accounted for the ESOP shares in
                           accordance with the provisions of the American
                           Institute of Certified Public Accountants' Statement
                           of Position No. 76-3. ESOP contributions were
                           recorded for financial reporting purposes as the ESOP
                           shares became allocable to the plan participants. All
                           ESOP shares were considered outstanding in the
                           determination of earnings (loss) per share.

                           Pursuant to resolutions adopted by the Company's
                           Board of Directors, upon approval of the Plan by the
                           stockholders on May 30, 2002 Employees Stock
                           Ownership Plan (the ESOP) was terminated and all
                           shares of common stock of the Company then held in
                           the ESOP suspense account (86,456 shares) were
                           transferred to the Company, and held as treasury
                           stock, in exchange for the cancellation of the
                           outstanding loan in the amount of $3,957,000 from the
                           Company to the ESOP. The Company recorded the related
                           treasury stock at the fair market value on the date
                           of the termination, which resulted in a $2.4 million
                           charge to additional paid-in-capital in fiscal 2002.

                           For fiscal 2001, the portion of the common stock
                           dividends declared relating to ESOP shares totaled
                           $104,000. Of this amount, $65,000 related to
                           allocated shares and $39,000 related to unallocated
                           shares. The dividends related to the unallocated
                           shares was applied towards the $790,000 annual
                           principal installments referred to above. There were
                           no common stock dividends declared relating to ESOP
                           shares for fiscal 2002.


                                                                            F-27
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                           The net charge to earnings for fiscal 2001 were as
                           follows (in thousands):


                                                                     2001
                           -----------------------------------------------
                           Contribution to ESOP                    $1,048
                           Less:  Interest income on loan
                                     to ESOP                          296
                           -----------------------------------------------
                           Net charge to earnings                 $   752
                           ===============================================


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

                           There was no charge to earnings for fiscal 2003 or
                           2002.


8.       INCOME TAXES      Provisions (benefits) for Federal, state
                           and local income taxes for fiscal 2003,
                           2002 and 2001 consisted of the following
                           components (in thousands):

                                                      2003      2002      2001
                           -----------------------------------------------------
                           Current:
                              Federal              $   313   $   479  $   (469)
                              State and local          150       100       159
                           -----------------------------------------------------
                                                       463       579      (310)
                           Deferred:
                              Federal and state       (638)      461    (6,555)
                           -----------------------------------------------------
                                                   $  (175)   $1,040  $ (6,865)
                           =====================================================


                                                                            F-28
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                           The net deferred tax liability at November 29, 2003
                           and November 30, 2002 consisted of the following (in
                           thousands):

<TABLE>
<CAPTION>
                                                                                   2003        2002
                           -------------------------------------------------------------------------
                           <S>                                              <C>           <C>
                           Long-term portion:
                              Deferred tax liability (asset) for:
                                   Depreciation                             $     1,577   $     619
                                   Employee Benefit Plans                        (1,360)     (1,118)
                                   Pension obligation                              (167)        (59)
                                   Other                                              2          30
                           -------------------------------------------------------------------------
                                         Net long-term liability (asset)             52        (528)
                           -------------------------------------------------------------------------
                           Current portion:
                                   Deferred tax liability (asset) for:
                                   Allowance for doubtful accounts                 (337)       (204)
                                   Net unrealized gain
                                       on investment securities                      74         249
                                   Other                                           (243)        (36)
                           -------------------------------------------------------------------------
                                         Net current liability (asset)             (506)          9
                           -------------------------------------------------------------------------
                           Net deferred tax asset                              $   (454)   $   (519)
                           =========================================================================
</TABLE>


                                                                            F-29
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                           The provision (benefit) for income taxes differed
                           from the amount computed by applying the statutory
                           federal income tax rate of 34.0% for fiscal 2003,
                           2002 and 2001 to income (loss) before income taxes
                           due to the following:

<TABLE>
<CAPTION>
                                                                2003         2002        2001
                           --------------------------------------------------------------------
                                                                  (Tax effect in thousands)
                           <S>                             <C>           <C>         <C>
                           Federal tax expense
                            (benefit) at statutory rate    $   (525)     $   513     $(5,266)
                           State and local income taxes,
                             net of Federal benefit              99           66         105
                           Tax-free interest income and
                             dividends received deduction       (59)        (119)       (147)
                           Change in estimates for tax
                             contingency and other              310          580      (1,557)
                           --------------------------------------------------------------------
                           Income tax expense (benefit)       $(175)      $1,040     $(6,865)
                           =====================================================================
</TABLE>

                           In the fourth quarter of fiscal 2001, the Company
                           reversed approximately $1.5 million of certain tax
                           reserves recorded in prior years, due to changes in
                           estimates for tax contingency items.


                                                                            F-30
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

9.       COMMITMENTS AND   EMPLOYMENT AGREEMENT

         CONTINGENCIES

                           The Company and Mr. Bitensky amended the employment
                           agreement between the Company and Mr. Bitensky dated
                           as of March 1, 1993 to provide that at such time as
                           the Company is sold or liquidated pursuant to the
                           Plan, in lieu of the annual consulting fees due under
                           such an agreement over the five year consulting
                           period provided therein, Mr. Bitensky will receive a
                           lump sum payment equal to the aggregate net present
                           value of each payment due under such agreement, such
                           present value to be determined utilizing the
                           prevailing prime rate at the time of the payment, as
                           determined by the Board. Accordingly, the Company
                           recorded a charge of $856,000, which was included in
                           other expense for fiscal 2003

                           Such amendment to the employment agreement also
                           provides that Mr. Bitensky relinquishes his right
                           under the terms of the original agreement to require
                           the Company to purchase upon his death shares of
                           common stock from his estate equal to the lessor of
                           $7 million or 10% of the book value of the Company at
                           the end of the year immediately following his death,
                           plus $3 million in proceeds from insurance on his
                           life for which the Company was beneficiary. In
                           consideration of Mr. Bitensky's relinquishing the
                           right to have the Company repurchase approximately
                           $10 million of shares of common stock from his
                           estate, the Company agreed to transfer to Mr.
                           Bitensky ownership of the three life insurance
                           policies on Mr. Bitensky's life owned by the Company.
                           The Company transferred these policies having an
                           aggregate cash surrender value at November 29, 2003
                           of approximately $803,000. Accordingly, the Company
                           recorded a charge of $803,000, which was included in
                           other expenses and reclassified the $7 million in
                           redeemable common stock to retained earnings in
                           fiscal 2003.


                                                                            F-31
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

         LEASE

         The Company leases its New York City offices and showrooms until 2005,
         at average minimum annual rentals of $136,000 plus escalation and other
         costs.

         Rental expense for operating leases in fiscal 2003, 2002 and 2001
         aggregated $297,000, $495,000 and $679,000, respectively.

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

         FISCAL YEAR ENDING (IN THOUSANDS)
         -----------------------------------------------------------------------
         2004                                         $135
         2005                                           91
         -----------------------------------------------------------------------
                                                      $226
         =======================================================================

         LITIGATION

         On November 10, 2003, a class action suit was filed against the
         Company. The complaint asserts claims against the Company and certain
         of its officers and directors based on the management buy-out proposal
         at a price allegedly lower than the cash value and book value of the
         Company's shares and which was an allegedly interested transaction, the
         amendment to Mr. Bitensky's employment contract, the Company's failure
         to seek stockholder approval for the management buyout and the
         Company's failure to file a certificate of dissolution with the
         Delaware Secretary of State. The complaint alleges such actions
         constitute violations of defendants fiduciary duties, as well as the
         provisions of the Delaware General Corporation Law.

         The complaint does not seek a specific amount of damages, and seeks to
         enjoin defendants from effectuating the planned management buyout. The
         Company served an answer to the complaint on December 11, 2003.

         On each of November 21 and November 26, 2003 class action lawsuits were
         initiated against the Company asserting the same allegations as those
         described above.

         The Company believes that each of the claims described above is without
         merit. Further, certain of the claims described above have been
         rendered moot by the withdrawal of preliminary offer by the
         management-led buyout to acquire the Company.


                                                                            F-32
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

         A number of claims and lawsuits are pending against the Company. It is
         impossible at this time for the Company to predict with any certainty
         the outcome of such litigation. However, management is of the opinion
         based upon information presently available, that it is unlikely that
         any liability, to the extent not provided for through insurance or
         otherwise, would be material in relation to the Company's consolidated
         financial position, or results of operations.


         OTHER

         The Company had a letter of credit with its insurance provider for $1.0
         million as of November 29, 2003, subsequently reduced to $400,000.


10.      STATEMENT OF      Cash outlays for corporate  income taxes and
         CASH FLOWS        interest for fiscal 2003, 2002 and 2001 were as
                           follows (in thousands):

                                                    CORPORATE INCOME
                                                         TAXES         INTEREST
                           -----------------------------------------------------
                           2003                        $    538          $   --
                           2002                             156              13
                           2001                             438              42
                           =====================================================


                           NONCASH INVESTING AND FINANCING ACTIVITIES

                           In fiscal 2003, 2002 and 2001, net unrealized holding
                           gains (losses) of $(372,000), $0 and $1,051,000,
                           respectively, less related income taxes of
                           $(149,000), $0, and $420,000, on investment
                           securities available-for-sale, were recorded as
                           increases (decreases) in stockholders' equity.

                           In June 2003, the Company repurchased 22,984 shares
                           of its common stock at $9.48 per share from employees
                           and directors in exchange for its notes receivable
                           from those individuals.


                                                                            F-33
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

11.      INTEREST AND      Interest and dividend income for the past three
         DIVIDEND INCOME   fiscal years were as follows (in thousands):

                                        INTEREST INCOME   DIVIDEND INCOME  TOTAL
                              --------------------------------------------------
                              2003           $1,089           $190        $1,279
                              2002           $2,164           $249        $2,413
                              2001            4,123            166         4,289
                              ==================================================


12.      ASSET             In the third quarter of fiscal 2003, the Company
         IMPAIRMENT        reviewed assets held for sale and  determined an
         AND               additional charge of $685,000 was required.
         RESTRUCTURING
         CHARGES           In the second quarter of fiscal 2001, the Company
                           implemented a restructuring plan to consolidate
                           several manufacturing facilities. As a result the
                           Company's fiscal year ended December 1, 2001
                           financial results include a charge for impairment of
                           fixed assets held for sale of $5,958,000 for the
                           writedown of fixed assets held for disposal to their
                           fair value less costs to dispose. The consolidation
                           of manufacturing facilities is an effort to restore
                           the operations to an acceptable level of
                           profitability by eliminating over-capacities at the
                           manufacturing level in response to the continued
                           weakness in the economy and market conditions that
                           have adversely affected the domestic textile
                           industry.

                           The fixed assets held for disposal are comprised of
                           buildings, machinery and equipment from the knitting,
                           dyeing and finishing activities of the business. The
                           marketability of the assets held for disposal are
                           subject to worldwide economic conditions which can
                           affect the sale of such buildings and machinery.

                           During the fiscal year ended December 1, 2001, the
                           Company had expended approximately $1,300,000 to
                           remove and transfer machinery and equipment to the
                           Company's Mohican Mills facility as part of the
                           consolidation of the Company's manufacturing
                           facilities.

                           As a result, in accordance with FAS 121, the Company
                           reviewed long-lived assets to be held and used for
                           impairment and, in the fourth quarter of 2001,
                           recorded an impairment charge of approximately
                           $7,272,000 relating to fixed assets.

                           The Company continues to utilize the majority of its
                           remaining property, plant, and equipment, however,
                           there can be no assurance that the Company will sell
                           its assets or if it does sell its assets, that it
                           will be able to recover the full value of its assets,
                           particularly its property, plant and equipment


                                                                            F-34
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

13.      EARNINGS (LOSS)   Basic and diluted earnings (loss) per share for
         PER SHARE         the fiscal years ended November 29, 2003, November
                           30, 2002 and December 1, 2001 are calculated as
                           follows:

<TABLE>
<CAPTION>
                                                                                    WEIGHTED
                                                                     NET INCOME      AVERAGE       PER SHARE
                                                                        (LOSS)        SHARES        AMOUNT
                           -----------------------------------------------------------------------------------
                           <S>                                      <C>               <C>            <C>
                           Fiscal year ended November 29, 2003:
                              Basic loss per share                  $(1,370,000)      5,226,902      $(  .26)
                                                                                                   ===========
                              Effect of assumed exercise of
                                 employee stock options                      --              --
                           -----------------------------------------------------------------------------------
                              Diluted loss per share                $(1,301,000)      5,226,902      $(  .26)
                           ===================================================================================
                           Fiscal year ended November 30, 2002:
                              Basic earnings per share               $1,970,000       5,222,812      $   .38
                                                                                                   ===========
                              Effect of assumed exercise of
                                 employee stock options                      --              --
                           -----------------------------------------------------------------------------------
                              Diluted earnings per share             $1,970,000       5,222,812      $   .38
                           ===================================================================================
                           Fiscal year ended December 1, 2001:
                              Basic loss per share                  $(8,623,000)      5,258,353       $(1.64)
                                                                                                   ===========
                              Effect of assumed exercise of
                                 employee stock options                      --              --
                           -----------------------------------------------------------------------------------
                              Diluted loss per share                $(8,623,000)      5,258,353       $(1.64)
                           ===================================================================================
</TABLE>


                                                                            F-35
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                           During fiscal 2003, there were no options
                           outstanding. During fiscal 2002, all outstanding
                           options were either exercised or canceled. Options to
                           purchase 143,200 shares of common stock were
                           outstanding during fiscal 2001, but were not included
                           in the computation of diluted earnings per share, as
                           their effect would be anti-dilutive.




                                                                            F-36
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

14.      SEGMENT INFORMATION

         The Company adopted SFAS No. 131 "Disclosure About Segments of an
Enterprise and Related Information" in fiscal 1999. SFAS No. 131 requires
companies to report information on segments using the way management organizes
segments within the company for making operating decisions and assessing
financial performance.

         The Company's chief operating decision-maker is considered to be the
Chief Executive Officer (CEO). The Company's CEO evaluates both consolidated and
disaggregated financial information in deciding how to allocate resources and
assess performance. The Company has identified three reportable segments based
upon the primary markets it serves: Apparel Fabrics, Home Fashions, Industrial
Fabrics and Accessories and Other.

Apparel Fabrics: The Company is a major manufacturer of warp and circular knit
fabrics and raschel laces. 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, including dresses and sportswear, children's sleepwear,
activewear, swimwear, and recreational apparel.

Home Fashions and Accessories: While sales primarily to manufacturers of home
furnishings, we also use our own textile fabrics internally to produce flannel
and satin sheets, blanket products, comforters, and other bedding products which
we sell to specialty stores, catalogue and mail order companies and airlines.

Other: The Company produces a line of ultrasonically, hot melt adhesive, flame
and adhesive bonded products for environmental, health care, industrial and
consumer markets. The Company's textile fabrics are sold to manufacturers
servicing the residential and contract markets. The Company also sells fabrics
to vendors in the over the counter markets.

         The accounting policy of the reportable segments are the same as those
described in Summary of Accounting Policies (Business F-9). The Company neither
allocates to the segments nor bases segment decisions on the following:

                  - Interest and dividend income
                  - Interest and other expense
                  - Net gain on investment securities
                  - Income tax expense or benefit

         Many of the Company's assets are used by multiple segments. While
certain assets such as Inventory and Property, Plant and Equipment are
identifiable by segment, an allocation of the substantial remaining assets is
not meaningful.


                                                                            F-37
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

         For the 52 weeks ended December 1, 2001, charges for the asset
impairment and restructuring charges applies mainly to the apparel segment with
a small portion to the other segment. The 52 weeks ended November 30, 2002
included a litigation settlement in the amount of $750,000, which was included
in the Home Fashions and Accessories segment (see Note 16). The 52 weeks ended
November 29, 2003 included other expenses of $1,659,000, relating to the
amendment to Mr. Bitensky's employment agreement (see Note 9). This amount was
allocated between segments with a majority included in the apparel segment. In
addition, the asset impairment charge in fiscal 2003 applied to the apparel
segment (see Note 12).



                                                                            F-38
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

During all years presented, no single customer or group of affiliated customers
accounted for more than 10% of the year's net sales.


The following are our segment revenues and income (loss) by reportable segments
for the fiscal years 2003, 2002, and 2001.


                                         HOME FASHIONS,
2003                         APPAREL    AND ACCESSORIES       OTHER      TOTAL
----                         -------    ---------------       -----      -----
External sales               $39,143       $ 4,227            $7,803    $51,173
Intersegment sales             3,579            56               306      3,941
Operating income/(loss)       (4,647)         (187)              744     (4,090)
Depreciation expense           1,475            64               364      1,903
Segment assets                11,682           929             2,370     14,981
Capital expenditures              27            38               202        267


                                         HOME FASHIONS,
2002                         APPAREL    AND ACCESSORIES       OTHER      TOTAL
----                         -------    ---------------       -----      -----
External sales               $51,269       $ 4,673            $7,023    $62,965
Intersegment sales             3,860            22               372      4,254
Operating income/(loss)         (679)       (1,085)              195     (1,569)
Depreciation expense           1,600            51               327      1,978
Segment assets                16,629         1,005             2,543     20,177
Capital expenditures              --            --               225        225


                                         HOME FASHIONS,
2001                         APPAREL    AND ACCESSORIES       OTHER      TOTAL
----                         -------    ---------------       -----      -----
External sales               $60,884      $ 10,382            $8,770    $80,036
Intersegment sales             9,781            44               326     10,151
Operating income/(loss)      (22,346)          674            (1,088)   (22,760)
Depreciation expense           3,919            54               477      4,450
Segment assets                21,844         1,454              2,867     26,165
Capital expenditures             374            --               302        676


                                                                            F-39
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

REVENUES                                     2003           2002           2001
                                             ----           ----           ----

Total external sales for segments       $  51,173      $  62,965     $   80,036
Intersegment sales for segments             3,941          4,254         10,151
Elimination of intersegment sales          (3,941)        (4,254)       (10,151)
                                      ------------------------------------------
Total consolidated sales                $  51,173      $  62,965     $   80,036
                                      ==========================================


PROFIT OR LOSS

Total operating loss for segments       $  (4,090)     $  (1,569)    $  (22,760)
Total other income                          2,545          4,579          7,272
                                      ------------------------------------------
Income (loss) before taxes on income    $  (1,545)     $   3,010     $  (15,488)
                                      ==========================================


ASSETS

Total segments assets                   $  14,981      $  20,177     $   26,165
Assets not allocated to segments           43,094         61,052        105,363
                                      ------------------------------------------
Total consolidated assets               $  58,075      $  81,229     $  131,528
                                      ==========================================


OTHER SIGNIFICANT ITEMS

Depreciation expense                    $   1,903      $   1,978     $    4,450
Not allocated to segments                      24            165            159
                                      ------------------------------------------
Consolidated total                      $   1,927      $   2,143     $    4,609
                                      ==========================================


Capital expenditures                    $     267      $     225     $      676
Not allocated to segments                      --             --             27
                                      ------------------------------------------
Consolidated total                      $     267      $     225     $      703
                                      ==========================================


                                                                            F-40
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

15.      QUARTERLY         Quarterly earnings were as follows (in thousands,
         FINANCIAL DATA    except for earnings per share):
         (UNAUDITED)

<TABLE>
<CAPTION>
                                                       FIRST                             THIRD           FOURTH
                                                      QUARTER       SECOND QUARTER      QUARTER          QUARTER           TOTAL
                           ---------------------------------------------------------------------------------------------------------
                           <S>                       <C>              <C>             <C>            <C>              <C>
                           Fiscal 2003:
                              Net sales                 $11,587          $13,646          $13,357         $12,583           $51,173
                              Gross profit                  741            1,353            1,002           1,159             4,255
                              Net income (loss)            (270)             320           (1,252)           (168)           (1,370)
                              Earnings (loss)
                               per share:
                                 Basic               $   (0.05)       $    0.06       $    (0.24)    $     (0.03)     $      (0.26)
                                 Diluted             $   (0.05)       $    0.06       $    (0.24)    $    ( 0.03)     $      (0.26)
                           =========================================================================================================
                           Fiscal 2002:
                              Net sales                 $14,250          $17,362          $17,920         $13,433           $62,965
                              Gross profit                1,107            2,424            2,362             660             6,553
                              Net income (loss)            (677)           1,626            1,010              11             1,970
                            Earnings (loss)
                              per share:
                                 Basic               $    (0.13)      $     0.31      $      0.19    $       0.00     $        0.38
                                 Diluted             $    (0.13)      $     0.31      $      0.19    $       0.00     $        0.38
                           =========================================================================================================
</TABLE>


                                                                            F-41
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

16.      OTHER EXPENSE     During the fall of 1999, San Francisco Network
                           ("SFN") commenced an action in the Superior Court of
                           California, Marin County, against the Company and the
                           Company's Salisbury Manufacturing Corporation
                           ("Salisbury") subsidiary. The action relates to an
                           agreement between SFN and Salisbury (whose
                           performance the Company guaranteed), pursuant to
                           which Salisbury was licensed to use the Karen
                           Neuburger trademark for branded bedding products. The
                           case was removed to the United States District Court
                           of California. Salisbury and the Company denied any
                           wrong doing and asserted affirmative claims against
                           SFN and certain of its principals. On March 14, 2002,
                           at a court ordered conference, the Company settled
                           this issue without admitting liability. On April 12,
                           2002, the Company paid SFN $750,000 in exchange for a
                           compete release of all claims.



                                                                            F-42
<PAGE>

                                                            FAB INDUSTRIES, INC.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

17.      SUBSEQUENT        On Feb 18, 2004 the Company's Board of Directors
         EVENT             declared a liquidating distribution of $3 per share
                           to be payable on March 10, 2004 with a record date of
                           February 28, 2004, which is expected to total
                           approximately $15.6 million.



                                                                            F-43
<PAGE>



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

                   CONSOLIDATED FINANCIAL STATEMENTS SCHEDULES
                                    FORM 10-K

            FISCAL YEARS ENDED NOVEMBER 29, 2003, NOVEMBER 30, 2002,
                              AND DECEMBER 1, 2001




                                       S-1
<PAGE>



                      FAB INDUSTRIES, INC. AND SUBSIDIARIES





                                      INDEX
                                      -----


SCHEDULE:                                                 PAGE

  II. Valuation and Qualifying Accounts                    S-3




                                       S-2
<PAGE>

                                                            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 TO     CHARGED TO
                                 BEGINNING        COSTS AND        OTHER                        BALANCE AT
DESCRIPTION                       OF YEAR          EXPENSES       ACCOUNTS       DEDUCTIONS    END OF YEAR
-----------------------------------------------------------------------------------------------------------
<S>                                 <C>             <C>            <C>          <C>               <C>
Fiscal year ended
   November 29, 2003:
         Allowance for doubtful
              Accounts              $   1,000       $400(i)        $   --       $   (500)(ii)     $    900
Fiscal year ended
   November 30, 2002:
         Allowance for doubtful
              Accounts              $     600       $400(i)        $   --       $         --      $  1,000

Fiscal year ended
   December 1, 2001:
         Allowance for doubtful
              Accounts              $   300         $400(i)        $   --       $   (100)(ii)     $    600

==========================================================================================================
</TABLE>

(i)  Current year's provision.

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



<PAGE>

                                   SIGNATURES

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

                                                     FAB INDUSTRIES, INC.

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

                                                     Date:    February 27, 2004

         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.

<TABLE>
<CAPTION>
SIGNATURE                     DATE                    CAPACITY IN WHICH SIGNED
---------                     ----                    ------------------------
<S>                           <C>                     <C>
/s/ Samson Bitensky           February 27, 2004       Chairman of the Board, Chief Executive Officer,
---------------------------                           and Director (Principal Executive Officer)
Samson Bitensky


/s/ David A. Miller           February 27, 2004       Vice President - Finance, Treasurer, and Chief
---------------------------                           Financial Officer (Principal Financial and
David A. Miller                                       Accounting Officer)


/s/ Martin B. Bernstein       February 27, 2004       Director
---------------------------
Martin B. Bernstein


/s/ Lawrence H. Bober         February 27, 2004       Director
---------------------------
Lawrence H. Bober


/s/ Frank S. Greenberg        February 27, 2004       Director
---------------------------
Frank S. Greenberg


/s/ Susan B. Lerner           February 27, 2004       Director
---------------------------
Susan B. Lerner


/s/ Richard Marlin            February 27, 2004       Director
---------------------------
Richard Marlin


/s/ Steven E. Myers           February 27, 2004       Director, President and Chief Operating
---------------------------                           Officer
Steven E. Myers
</TABLE>

<PAGE>